MUNIYIELD
QUALITY
FUND II, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 2000
<PAGE>
MUNIYIELD QUALITY FUND II, INC.
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.
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 pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
DEAR SHAREHOLDER
For the year ended October 31, 2000, the Common Stock of MuniYield Quality Fund
II, Inc. earned $0.802 per share income dividends, which included earned and
unpaid dividends of $0.067. This represents a net annualized yield of 6.50%,
based on a month-end net asset value of $12.39 per share. During the same
period, the total investment return on the Fund's Common Stock was +8.04%, based
on a change in per share net asset value from $12.31 to $12.39, and assuming
reinvestment of $0.806 per share income dividends.
For the six-month period ended October 31, 2000, the total investment return on
the Fund's Common Stock was +6.04%, based on a change in per share net asset
value from $12.09 to $12.39, and assuming reinvestment of $0.399 per share
income dividends.
For the six-month period ended October 31, 2000, the Fund's Auction Market
Preferred Stock had an average yield of 3.93% for Series A, 3.96% for Series B
and 4.07% for Series C.
The Municipal Market Environment
During the six months ended October 31, 2000, long-term US Treasury bond yields
generally drifted lower. A number of economic indicators, particularly
employment, new home sales and consumer spending, have suggested that US
economic growth, while still strong, has moderated from 1999's robust levels.
Preliminary estimates for third-quarter 2000 US gross domestic product growth
were recently released at 2.7%, well below the first-quarter 2000 rate of 4.8%
and the second-quarter 2000 rate of 5.6%. This decline in economic growth
suggests to some analysts that the Federal Reserve Board has finished raising
interest rates for its current interest rate cycle. The Federal Reserve Board
increased short-term interest rates at its May meeting and has since kept
monetary policy steady at its subsequent meetings. Given the potential for
stable short-term interest rates in the coming months, investor emphasis focused
on the continuing US Treasury debt reduction program and forecasts of sizeable
Federal budgetary surpluses going forward. Many investors have concluded that
there will be a significant future shortage of longer-dated maturity US Treasury
securities. By late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%, their lowest level in more than a year.
However, for the remainder of the period, bond yields were unable to maintain
their earlier gains. Rising oil prices were the major focus behind the decline
in bond prices, as many investors feared that higher oil prices would result in
increased inflationary pressures. Additionally, US corporations issued large
amounts of taxable debt in order to take advantage of the current low interest
rate environment. During the last three months, US corporations issued more than
$100 billion in investment-grade securities, offering yields in the 7.25%-9%
range. Many investors found these taxable issues an attractive and more
plentiful alternative to US Treasury bonds. As the demand for US Treasury issues
weakened, US bond yields rose. Although US Treasury bond yields rose to 5.78% by
the end of October 2000, overall they declined almost 20 basis points during the
last six months.
The six-month period ended October 31, 2000 was one of the few periods in recent
years in which the tax-exempt bond market outperformed its taxable counterpart,
the US Treasury bond market. While municipal bond yields followed the similar
seesaw pattern of Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively narrow range
during much of October 2000. Overall investor demand for municipal bonds
remained strong, allowing tax-exempt bond yields, as measured by the Bond Buyer
Revenue Bond Index, to decline 30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has continued to
decline, albeit at a slower rate than earlier this year. During this period,
more than $53 billion in new long-term municipal bonds was issued, a decline of
3% compared to the same three-month period in 1999. During the last six months,
more than $105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200 billion in new
municipal securities was marketed during the past year, a decline of more than
16% compared to the same 12-month period in 1999.
The demand for municipal bonds came from a number of non-traditional and
conventional sources. Derivative/arbitrage programs and insurance companies
remained the dominant institutional buyers, while individual retail purchases
also remained strong. Traditional, open-end tax-exempt mutual funds have
continued to see significant disintermediation. It was recently reported that
thus far during the 2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately, the
combination of reduced new bond issuance and ongoing demand from non-traditional
sources has been able to more than offset the decline in demand from tax-exempt
mutual funds. This favorable balance has fostered a significant decline in
municipal bond yields in recent months.
Currently, there is no reason to expect that the positive technical position of
the municipal bond market will significantly deteriorate. The steeply positive
yield curve and the relatively high credit quality that the tax-exempt bond
market offers should continue to attract different classes of institutional
buyers. Strong state and local governmental financial conditions also suggest
that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-exempt bond
market. Various tax and spending programs proposed by both candidates have
obvious implications for state and local governments as well as for corporate
and individual taxpayers. Political history has shown that the enactment of
campaign promises, both Republican and Democratic, has very often been a long,
laborious process. This suggests that over the next few months US economic
factors will most likely have a greater effect on bond yields than political
considerations.
Portfolio Strategy
During the six-month period ended October 31, 2000, we continued to pursue our
strategy of seeking to enhance tax-exempt income through the use of leverage, to
the Fund's Common Stock shareholders. We pursued our goal by maintaining our
focus on premium coupon bonds. This focus placed the Fund in a neutral
investment position relative to the municipal market. Throughout the period, we
maintained a strong credit profile. At October 31, 2000, 83.6% of the Fund's net
assets was invested in securities rated A or better by at least one of the major
bond rating agencies. Our focus on seeking to enhance tax-exempt income aided in
offsetting the heightened levels of short-term interest rates experienced during
the period. Despite the Fund's increased cost of borrowing, the leveraging of
the portfolio remained an important income-generating vehicle for the Fund. (For
a complete explanation of the benefits and risks of leveraging, see page 1 of
this report to shareholders.)
Looking ahead, we expect to maintain a fully invested status. We will look for
opportunities provided by new issuance to enhance the structure of the
portfolio. We also expect to retain our current investment structure until we
can better evaluate the ramifications of the presidential and congressional
elections on economic growth, inflation expectations and the municipal market.
In Conclusion
We appreciate your ongoing interest in MuniYield Quality Fund II, Inc., and we
look forward to serving your investment needs in the months and years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Michael Kalinoski
Michael Kalinoski
Vice President and Portfolio Manager
December 5, 2000
We are pleased to announce that Michael Kalinoski is responsible for the
day-to-day management of MuniYield Quality Fund II, Inc. Mr. Kalinoski has been
employed by Merrill Lynch Investment Managers, L.P. since 1999 as Portfolio
Manager. Mr. Kalinoski was previously employed from 1993 to 1999 as a municipal
trader with Strong Capital Management.
2 & 3
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alaska--0.6% A- A2 $ 2,580 Alaska Industrial Development and Export Authority Revenue Bonds
(Revolving Fund), AMT, Series A, 6.375% due 4/01/2008 $ 2,677
===================================================================================================================================
Arizona--3.7% BBB+ Baa1 2,170 Arizona Health Facilities Authority Revenue Bonds
(Catholic Healthcare West), Series A,
6.625% due 7/01/2020 2,184
-------------------------------------------------------------------------------------------------------------
A1 VMIG1@ 2,600 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Southern California Edison Company), VRDN, Series A,
4.60% due 6/01/2035 (m) 2,600
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 Mesa, Arizona, GO, 6.50% due 7/01/2011 (c) 3,146
-------------------------------------------------------------------------------------------------------------
Mesa, Arizona, Utility System Revenue Bonds:
AAA Aaa 5,000 6.50% due 7/01/2010 (c) 5,676
AAA Aaa 2,000 6.50% due 7/01/2010 (i) 2,270
===================================================================================================================================
California--3.5% AAA NR* 2,500 California Health Facilities Finance Authority Revenue Bonds (Kaiser
Permanente), RIB, Series 26, 6.87% due 6/01/2022 (g)(l) 2,533
-------------------------------------------------------------------------------------------------------------
AAA NR* 2,000 California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds, AMT, Series D, 6% due 12/01/2031 (f) 2,058
-------------------------------------------------------------------------------------------------------------
AAA Aaa 8,000 Los Angeles, California, Department of Water and Power, Waterworks
Revenue Refunding Bonds, 4.25% due 10/15/2030 (c) 6,420
-------------------------------------------------------------------------------------------------------------
NR* Aa3 3,650 Sacramento County, California, Sanitation District Financing
Authority, Revenue Refunding Bonds, Trust Receipts, Class R,
Series A, 7.83% due 12/01/2019 (l) 3,995
===================================================================================================================================
Colorado--2.9% AA Aa2 2,000 Colorado HFA, Revenue Bonds, AMT, Senior Series E-2, 7% due 2/01/2030 2,185
-------------------------------------------------------------------------------------------------------------
AAA Aaa 11,000 Denver, Colorado, City and County Airport Revenue Refunding Bonds,
Series B, 5% due 11/15/2025 (g) 9,993
===================================================================================================================================
Connecticut--6.8% AA Aa3 5,550 Connecticut State, GO, Series A, 6% due 4/15/2016 5,947
-------------------------------------------------------------------------------------------------------------
Connecticut State Regional Learning Educational Service Center
Revenue Bonds (Office/Education Center Facility):
NR* NR* 1,075 7.50% due 2/01/2005 1,104
NR* NR* 1,100 7.75% due 2/01/2015 1,164
-------------------------------------------------------------------------------------------------------------
AAA Aaa 9,695 Connecticut State Resource Recovery Authority, Revenue Refunding
Bonds (Mid-Connecticut System), Series A, 5.50% due 11/15/2011 (i) 10,058
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,750 Connecticut State Special Tax Obligation Revenue Bonds, RIB, Series
372, 7.59% due 12/01/2017 (c)(l) 3,092
-------------------------------------------------------------------------------------------------------------
NR* Baa3 8,500 Mashantucket Western Pequot Tribe, Connecticut, Special Revenue
Refunding Bonds, Sub-Series B, 5.75% due 9/01/2027 7,805
===================================================================================================================================
Delaware--1.4% A- A3 6,000 Delaware State, EDA, Exempt Facilities Revenue Refunding Bonds
(Delmarva Power & Light Company), Series C, 5.50% due 7/01/2010 6,085
===================================================================================================================================
Florida--2.1% AAA Aaa 6,565 Florida State Board of Education, Lottery Revenue Bonds, Series B,
5.75% due 7/01/2010 (c) 7,063
-------------------------------------------------------------------------------------------------------------
NR* B1 2,080 Palm Bay, Florida, Lease Revenue Refunding Bonds (Florida Education
and Research Foundation Project), Series A, 7% due 9/01/2024 1,882
===================================================================================================================================
Georgia--5.6% AAA Aaa 7,850 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875%
due 1/01/2017 (c) 8,228
-------------------------------------------------------------------------------------------------------------
A1 VMIG1@ 300 Burke County, Georgia, Development Authority, PCR (Georgia Power
Company Plant--Vogtle Project), VRDN, 4.60% due 9/01/2026 (m) 300
-------------------------------------------------------------------------------------------------------------
AAA Aaa 15,175 Georgia Municipal Electric Authority, Power Revenue Refunding Bonds,
Series Z, 5.50% due 1/01/2020 (i) 15,450
===================================================================================================================================
Idaho--0.1% NR* NR* 465 Idaho Student Loan Fund Marketing Association, Inc., Student Loan
Revenue Refunding Bonds, AMT, Sub-Series 1, 6.80% due 10/01/2006 478
===================================================================================================================================
Illinois--5.2% AAA NR* 3,500 Chicago, Illinois, Gas Supply Revenue Refunding Bonds (People's Gas,
Light & Coke), Series A, 6.10% due 6/01/2025 (a) 3,613
-------------------------------------------------------------------------------------------------------------
A1 VMIG1@ 900 Illinois Health Facilities Authority, Revenue Refunding Bonds
(University of Chicago Hospitals), VRDN, 4.60% due 8/01/2026 (i)(m) 900
-------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Illinois Regional Transportation Authority Revenue Bonds, 6.50% due
7/01/2026 (i) 11,441
-------------------------------------------------------------------------------------------------------------
NR* Aaa 6,000 Illinois Student Assistance Commission, Student Loan Revenue
Refunding Bonds, AMT, Senior Series BB, 6.75% due 3/01/2015 6,218
===================================================================================================================================
Indiana--1.4% AAA NR* 2,675 Indiana Bond Bank Revenue Bonds (State Revolving Fund Program),
Series A, 6.75% due 2/01/2017 2,910
-------------------------------------------------------------------------------------------------------------
AA NR* 3,100 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue
Refunding Bonds, Series D, 6.75% due 2/01/2020 3,271
===================================================================================================================================
Kentucky--1.1% A1 VMIG1@ 1,500 Kentucky Economic Development Finance Authority, Hospital Facilities
Revenue Refunding Bonds (Baptist Healthcare), VRDN, Series C, 4.60%
due 8/15/2031 (i)(m) 1,500
-------------------------------------------------------------------------------------------------------------
NR* NR* 3,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ
International Project), AMT, 7% due 6/01/2024 3,063
===================================================================================================================================
Louisiana--0.8% AAA Aaa 3,000 Louisiana Local Government, Environmental Facilities, Community
Development Authority Revenue Bonds (Capital Projects and Equipment
Acquisition), Series A, 6.30% due 7/01/2030 (a) 3,316
===================================================================================================================================
Massachusetts--1.4% BBB+ Baa2 2,000 Massachusetts Municipal Wholesale Electric Company, Power Supply
System Revenue Refunding Bonds, Series A, 6.75% due 7/01/2011 2,089
-------------------------------------------------------------------------------------------------------------
AA+ Aaa 2,500 Massachusetts State Health and Educational Facilities Authority
Revenue Bonds (Daughters of Charity--Carney), Series D, 6.10% due
7/01/2006 (k) 2,673
-------------------------------------------------------------------------------------------------------------
Massachusetts State Health and Educational Facilities Authority,
Revenue Refunding Bonds (New England Memorial Hospital), Series B (j):
NR* Ca 2,416 6% due 7/01/2008 483
NR* Ca 4,201 6.125% due 7/01/2013 840
===================================================================================================================================
Michigan--0.6% AA+ NR* 2,685 Michigan State, HDA, Revenue Refunding Bonds, Series C, 5.90%
due 12/01/2015 (d) 2,757
===================================================================================================================================
</TABLE>
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
IDB Industrial Development Board
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Minnesota--1.2% A1+ NR* $ 800 Beltrami County, Minnesota, Environmental Control Revenue
Refunding Bonds (Northwood Panelboard Co. Project), VRDN,
4.55% due 12/01/2021 (m) $ 800
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,400 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports
Commission, Airport Revenue Bonds, Series A, 5.20% due 1/01/2024 (a) 4,162
===================================================================================================================================
Mississippi--3.5% A A3 6,000 Lowndes County, Mississippi, Solid Waste Disposal and PCR, Refunding
(Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 6,686
-------------------------------------------------------------------------------------------------------------
BBB- Ba1 9,000 Mississippi Business Finance Corporation, Mississippi, PCR,
Refunding (System Energy Resources Inc. Project), 5.875% due
4/01/2022 8,257
===================================================================================================================================
Missouri--1.4% Saint Louis County, Missouri, Pattonville R-3 School District, GO
(Missouri Direct Deposit Program) (c):
AAA Aaa 2,000 5.75% due 3/01/2015 2,102
AAA Aaa 2,000 5.75% due 3/01/2016 2,092
AAA Aaa 1,500 6% due 3/01/2019 1,583
===================================================================================================================================
New Jersey--6.4% AAA Aaa 5,000 Cape May County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds (Atlantic City Electric Company
Project), Series B, 7% due 11/01/2029 (i) 5,475
-------------------------------------------------------------------------------------------------------------
AAA Aaa 16,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series A, 5.25% due 1/01/2005 (i) 16,438
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Salem County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds (Public Service Electric & Gas),
RIB, Series 380, 7.94% due 6/01/2031 (i)(l) 5,452
===================================================================================================================================
New Mexico--4.8% BBB A3 5,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge Corporation
Project), 6.50% due 4/01/2013 5,115
-------------------------------------------------------------------------------------------------------------
AAA NR* 2,330 New Mexico Mortgage Finance Authority Revenue Bonds (S/F Mortgage
Program), AMT, Series E-2, 6.25% due 7/01/2029 (e)(f) 2,435
-------------------------------------------------------------------------------------------------------------
New Mexico State Highway Commission, Tax Revenue Bonds, Senior
Sub-Lien, Series A:
AA+ Aa2 7,295 6% due 6/15/2014 7,806
AA+ Aa2 4,995 6% due 6/15/2015 5,314
===================================================================================================================================
New York--15.7% AAA Aaa 9,280 Nassau Health Care Corporation, New York, Health System Revenue
Bonds, 5.75% due 8/01/2022 (g) 9,405
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,175 New York City, New York, GO, Series I, 6.25% due 4/15/2007 (i) 5,644
-------------------------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue Bonds (i):
AAA Aaa 3,400 (Saint John's University), 5.60% due 7/01/2016 3,462
AAA Aaa 7,000 (State University Educational Facilities), Series C, 7.375% due
5/15/2010 8,132
-------------------------------------------------------------------------------------------------------------
New York State Dormitory Authority, Revenue Refunding Bonds:
AAA Aaa 2,485 (Saint John's University), 5.25% due 7/01/2025 (i) 2,372
AAA Aaa 9,000 (State University Educational Facilities), 5.75% due 5/15/2024 9,129
AAA Aaa 4,000 (State University Educational Facilities), Series C,
5.75% due 5/15/2016 (g) 4,254
-------------------------------------------------------------------------------------------------------------
NR* Aaa 9,825 New York State Mortgage Agency Revenue Bonds, AMT, 24th Series,
5.875% due 10/01/2015 10,024
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,500 New York State Thruway Authority, Local Highway and Bridge Service
Contract Revenue Refunding Bonds, 6% due 4/01/2012 3,761
-------------------------------------------------------------------------------------------------------------
AAA Baa1 10,505 New York State Thruway Authority, Service Contract Revenue Bonds
(Local Highway and Bridge), 5.625% due 4/01/2013 (i) 10,998
===================================================================================================================================
North Carolina--4.3% NR* Aaa 3,265 Appalachian State University, North Carolina, Housing and Student
Center System Revenue Bonds, 5.60% due 7/15/2020 (g) 3,311
-------------------------------------------------------------------------------------------------------------
A A3 14,750 Martin County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Solid Waste
Disposal--Weyerhaeuser Company), AMT, 6.80% due 5/01/2024 15,147
===================================================================================================================================
Ohio--4.4% NR* Aaa 4,065 Ohio HFA, Residential Mortgage Revenue Refunding Bonds, Series F,
5.625% due 9/01/2016 (h) 4,103
-------------------------------------------------------------------------------------------------------------
BBB Baa1 10,000 Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation
Project), AMT, 5.65% due 3/01/2033 7,961
-------------------------------------------------------------------------------------------------------------
NR* Aaa 6,290 Plain, Ohio, Local School District, GO, Refunding, 6% due 12/01/2020 (c) 6,600
===================================================================================================================================
Oregon--0.5% BBB+ Baa1 2,000 Port Umpqua, Oregon, PCR, Refunding (International Paper Co.
Projects), Series B, 5.20% due 6/01/2011 2,000
===================================================================================================================================
Pennsylvania--1.6% NR* Aaa 3,335 Delaware River Port Authority of Pennsylvania and New Jersey Revenue
Bonds, RIB, Series 396, 7.44% due 1/01/2019 (g)(l) 3,704
-------------------------------------------------------------------------------------------------------------
NR* NR* 4,000 Pennsylvania Economic Development Financing Authority, Exempt
Facilities Revenue Bonds (National Gypsum Company), AMT, Series A,
6.25% due 11/01/2027 3,345
===================================================================================================================================
Rhode Island--1.7% A- Baa1 3,000 Rhode Island Depositors Economic Protection Corporation, Special
Obligation Revenue Refunding Bonds, Series A, 5.75% due 8/01/2021 (b) 3,080
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,010 Rhode Island State Health and Educational Building Corporation,
Higher Education Facilities Revenue Bonds (University of Rhode
Island), Series A, 5.70% due 9/15/2024 (i) 4,026
===================================================================================================================================
South Carolina--2.8% A- A2 5,765 Berkeley County, South Carolina, Pollution Control Facilities
Revenue Refunding Bonds (South Carolina Electric and Gas
Company), 6.50% due 10/01/2014 6,051
-------------------------------------------------------------------------------------------------------------
A A1 2,950 Fairfield County, South Carolina, PCR (South Carolina Electric and
Gas Company), 6.50% due 9/01/2014 3,110
-------------------------------------------------------------------------------------------------------------
NR* NR* 2,500 Spartanburg County, South Carolina, Solid Waste Disposal Facilities
Revenue Bonds (BMW Project), AMT, 7.55% due 11/01/2024 2,647
===================================================================================================================================
Tennessee--1.2% BBB Baa3 5,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling
Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 5,155
===================================================================================================================================
Texas--6.0% AAA Aaa 2,730 Corpus Christi, Texas, Utility System Revenue Refunding Bonds,
Series A, 6% due 7/15/2016 (g) 2,884
-------------------------------------------------------------------------------------------------------------
Dickinson, Texas, Independent School District, GO, Refunding:
AAA Aaa 1,180 6% due 2/15/2017 1,235
AAA Aaa 1,250 6% due 2/15/2018 1,303
-------------------------------------------------------------------------------------------------------------
BBB+ Baa1 4,200 Gulf Coast Waste Disposal Authority, Texas, Revenue Bonds (Champion
International Corporation), AMT, 7.375% due 10/01/2025 4,358
-------------------------------------------------------------------------------------------------------------
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN (m):
A1+ NR* 2,300 4.60% due 12/01/2025 2,300
A1+ NR* 300 4.60% due 12/01/2026 300
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Houston, Texas, Water and Sewer System Revenue Bonds, Junior Lien,
Series C, 5.375% due 12/01/2027 (c) 4,824
-------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Texas AAA Aaa $ 3,000 Houston, Texas, Water and Sewer System Revenue Refunding Bonds,
(concluded) Junior Lien, Series A, 5.375% due 12/01/2027 (c) $ 2,866
-------------------------------------------------------------------------------------------------------------
BBB- Baa3 4,000 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 3,844
-------------------------------------------------------------------------------------------------------------
A1+c VMIG1@ 500 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), VRDN, Series A, 4.60% due 3/01/2026 (a)(m) 500
-------------------------------------------------------------------------------------------------------------
NR* VMIG1@ 1,100 Southwest Texas, Higher Education Authority Incorporated Revenue
Refunding Bonds (Southern Methodist University), VRDN, 4.60% due
7/01/2015 (m) 1,100
===================================================================================================================================
Utah--0.2% A1c VMIG1@ 700 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN,
4.60% due 11/01/2024 (a)(m) 700
===================================================================================================================================
Virginia--1.1% BBB- Baa3 26,500 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds,
Senior-Series B, 5.875%** due 8/15/2024 4,881
===================================================================================================================================
Washington--5.9% AAA Aaa 3,700 King County, Washington, Sewer, GO, Refunding, Series C, 5.25% due
1/01/2030 (i) 3,499
-------------------------------------------------------------------------------------------------------------
Port Seattle, Washington, Revenue Bonds, AMT, Series B (i):
AAA Aaa 1,600 6% due 2/01/2015 1,704
AAA Aaa 7,470 6% due 2/01/2016 7,771
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 Seattle, Washington, Municipal Light and Power Revenue Bonds,
6% due 10/01/2019 (i) 6,776
-------------------------------------------------------------------------------------------------------------
AA+ Aa1 5,000 Washington State, GO, Series B and Series AT-7, 6.25% due 6/01/2010 5,531
===================================================================================================================================
Wyoming--0.5% NR* P1 2,100 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc. Project),
VRDN, 4.55% due 8/15/2020 (m) 2,100
===================================================================================================================================
Puerto Rico--1.2% A Baa1 5,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B, 6% due 7/01/2026 5,144
===================================================================================================================================
Total Investments (Cost--$431,212)--101.6% 434,225
Liabilities in Excess of Other Assets--(1.6%) (6,996)
--------
Net Assets--100.0% $427,229
========
===================================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) Escrowed to maturity.
(c) FGIC Insured.
(d) FHA Insured.
(e) FHLMC Collateralized.
(f) FNMA/GNMA Collateralized.
(g) FSA Insured.
(h) GNMA Collateralized.
(i) MBIA Insured.
(j) Non-income producing security.
(k) Prerefunded.
(l) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at October 31, 2000.
(m) 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,
2000.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
@ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of October 31, 2000
===================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$431,212,285) ........................ $434,225,396
Cash ......................................................................... 18,122
Receivables:
Interest ................................................................... $ 6,855,998
Securities sold ............................................................ 3,047,839 9,903,837
------------
Prepaid expenses and other assets ............................................ 86,327
------------
Total assets ................................................................. 444,233,682
------------
===================================================================================================================================
Liabilities: Payables:
Securities purchased ....................................................... 16,377,249
Dividends to shareholders .................................................. 280,570
Investment adviser ......................................................... 174,619 16,832,438
------------
Accrued expenses ............................................................. 172,023
------------
Total liabilities ............................................................ 17,004,461
------------
===================================================================================================================================
Net Assets: Net assets ................................................................... $427,229,221
============
===================================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.05 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 (22,366,930 shares issued
and outstanding) ........................................................... $ 2,236,693
Paid-in capital in excess of par ............................................. 311,763,292
Undistributed investment income--net ......................................... 2,478,854
Accumulated realized capital losses on investments--net ...................... (30,183,530)
Accumulated distributions in excess of realized capital gains on
investments--net ........................................................... (12,079,199)
Unrealized appreciation on investments--net .................................. 3,013,111
------------
Total--Equivalent to $12.39 net asset value per share of Common Stock
(market price--$11.50) ....................................................... 277,229,221
------------
Total capital ................................................................ $427,229,221
============
===================================================================================================================================
</TABLE>
*Auction Market Preferred Stock
See Notes to Financial Statements
8 & 9
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 2000
===================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ................. $ 24,985,983
Income:
===================================================================================================================================
Expenses: Investment advisory fees ................................................. $ 2,115,800
Commission fees .......................................................... 381,940
Accounting services ...................................................... 97,896
Professional fees ........................................................ 97,891
Transfer agent fees ...................................................... 85,015
Listing fees ............................................................. 38,665
Directors' fees and expenses ............................................. 32,302
Printing and shareholder reports ......................................... 30,885
Custodian fees ........................................................... 25,402
Pricing fees ............................................................. 12,461
Other .................................................................... 38,181
-----------
Total expenses ........................................................... 2,956,438
-------------
Investment income--net ................................................... 22,029,545
-------------
===================================================================================================================================
Realized & Realized loss on investments--net ........................................ (25,891,907)
Unrealized Gain (Loss) Change in unrealized appreciation/depreciation on investments--net ....... 29,880,898
On Investments--Net: -------------
Net Increase in Net Assets Resulting from Operations ..................... $ 26,018,536
=============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended
October 31,
----------------------------------
Increase (Decrease) in Net Assets: 2000 1999
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ..................................................... $ 22,029,545 $ 23,189,221
Realized loss on investments--net .......................................... (25,891,907) (9,987,837)
Change in unrealized appreciation/depreciation on investments--net ......... 29,880,898 (49,375,676)
------------ ------------
Net increase (decrease) in net assets resulting from operations ............ 26,018,536 (36,174,292)
------------ ------------
===================================================================================================================================
Dividends & Investment income--net:
Distributions to Common Stock ............................................................. (18,016,562) (19,226,452)
Shareholders: Preferred Stock .......................................................... (6,054,040) (4,115,440)
In excess of realized gain on investments--net:
Common Stock ............................................................. -- (10,757,359)
Preferred Stock .......................................................... -- (1,321,840)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ............................................................ (24,070,602) (35,421,091)
------------ ------------
===================================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions: of dividends and distributions ............................................. -- 4,380,299
------------ ------------
===================================================================================================================================
Net Assets: Total increase (decrease) in net assets .................................... 1,947,934 (67,215,084)
Beginning of year ........................................................ 425,281,287 492,496,371
------------ ------------
End of year* ............................................................. $427,229,221 $425,281,287
============ ============
===================================================================================================================================
*Undistributed investment income--net ....................................... $ 2,478,854 $ 4,519,911
============ ============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 12.31 $ 15.52 $ 15.46 $ 14.86 $ 14.64
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .................................. .99 1.04 1.10 1.15 1.16
Realized and unrealized gain (loss) on investments--
net ..................................................... .17 (2.65) .46 .64 .23
-------- -------- -------- -------- --------
Total from investment operations ........................ 1.16 (1.61) 1.56 1.79 1.39
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ................................. (.81) (.86) (.87) (.91) (.92)
Realized gain on investments--net ...................... -- -- (.34) (.03) --
In excess of realized gain on investments--net ......... -- (.49) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders ............................................ (.81) (1.35) (1.21) (.94) (.92)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ............................... (.27) (.19) (.17) (.24) (.25)
Realized gain on investments--net .................... -- -- (.12) (.01) --
In excess of realized gain on investments--net ....... -- (.06) -- -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity ................ (.27) (.25) (.29) (.25) (.25)
-------- -------- -------- -------- --------
Net asset value, end of year ............................ $ 12.39 $ 12.31 $ 15.52 $ 15.46 $ 14.86
======== ======== ======== ======== ========
Market price per share, end of year ..................... $ 11.50 $ 11.50 $15.1875 $ 14.375 $13.50
======== ======== ======== ======== ========
===================================================================================================================================
Total Investment Based on market price per share ......................... 7.35% (16.70%) 14.51% 13.86% 14.50%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share ...................... 8.04% (12.74%) 8.80% 11.24% 8.68%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios Based on Total expenses** ........................................ 1.08% .99% .95% .95% .98%
Average Net Assets ======== ======== ======== ======== ========
Of Common Stock: Total investment income--net** .......................... 8.04% 7.31% 7.21% 7.50% 7.88%
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock shareholders ..... 2.21% 1.30% 1.12% 1.55% 1.67%
======== ======== ======== ======== ========
Investment income--net, to Common Stock shareholders .... 5.83% 6.01% 6.09% 5.95% 6.21%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios Based on Total expenses .......................................... .70% .67% .66% .66% .67%
Total Average Net ======== ======== ======== ======== ========
Assets:**+ Total investment income--net ............................ 5.19% 4.97% 4.98% 5.22% 5.36%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ............... 4.02% 2.75% 2.53% 3.48% 3.61%
Average Net Assets ======== ======== ======== ======== ========
Of Preferred Stock:
===================================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) .......................................... $277,229 $275,281 $342,496 $341,230 $327,881
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) .......................................... $150,000 $150,000 $150,000 $150,000 $150,000
======== ======== ======== ======== ========
Portfolio turnover ...................................... 142.46% 164.45% 154.08% 201.87% 95.49%
======== ======== ======== ======== ========
===================================================================================================================================
Leverage: Asset coverage per $1,000 ............................... $ 2,848 $ 2,835 $ 3,283 $ 3,275 $ 3,186
======== ======== ======== ======== ========
===================================================================================================================================
Dividends Per Share Series A--Investment income--net ........................ $ 1,017 $ 706 $ 629 $ 869 $ 897
On Preferred Stock ======== ======== ======== ======== ========
Outstanding: Series B--Investment income--net ........................ $ 1,024 $ 702 $ 634 $ 868 $ 899
======== ======== ======== ======== ========
Series C--Investment income--net ........................ $ 986 $ 650 $ 634 $ 872 $ 910
======== ======== ======== ======== ========
===================================================================================================================================
</TABLE>
* 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
charges.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Includes Common and Preferred Stock average net assets.
See Notes to Financial Statements.
12 & 13
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
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's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. 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 written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts--The Fund may purchase or sell financial 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.
o 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) 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.
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 .50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2000 were $582,749,947 and $581,919,207, respectively.
Net realized losses for the year ended October 31, 2000 and net unrealized gains
as of October 31, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
--------------------------------------------------------------------------------
Long-term investments ................... $(23,139,522) $3,013,111
Financial futures contracts ............. (2,752,385) --
------------ ----------
Total ................................... $(25,891,907) $3,013,111
============ ==========
--------------------------------------------------------------------------------
As of October 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $3,013,111, of which $11,059,785 related to appreciated
securities and $8,046,674 related to depreciated securities. The aggregate cost
of investments at October 31, 2000 for Federal income tax purposes was
$431,212,285.
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
Shares issued and outstanding during the year ended October 31, 2000 remained
constant and during the year ended October 31, 1999 increased by 296,045 as a
result of dividend reinvestment.
14 & 15
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.05 per share and a liquidation preference of $25,000
per share, 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, 2000 were as follows: Series A, 4.18%; Series B, 4.20%; and Series
C, 4.05%.
Shares issued and outstanding during the years ended October 31, 2000 and
October 31, 1999 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the year ended October 31, 2000, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $192,356 as commissions.
5. Capital Loss Carryforward:
At October 31, 2000, the Fund had a net capital loss carryfoward of
approximately $40,642,000, of which $14,562,000 expires in 2007 and $26,080,000
expires in 2008. This amount will be available to offset like amounts of any
future taxable gains.
6. Subsequent Event:
On November 8, 2000, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.066500 per share,
payable on November 29, 2000 to shareholders of record as of November 20, 2000.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders, MuniYield Quality Fund II, Inc.:
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, 2000, 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 five-year
period then ended. 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 auditing standards generally accepted
in the United States of America. 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, 2000 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, 2000, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 6, 2000
16 & 17
<PAGE>
MuniYield Quality Fund II, Inc., October 31, 2000
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of October 31, 2000 were as
follows:
-------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
-------------------------------------------------------------------------------
AAA/Aaa ............................................................. 62.6%
AA/Aa ............................................................... 8.6
A/A ................................................................. 12.4
BBB/Baa ............................................................. 11.4
B/B ................................................................. 0.4
C/C ................................................................. 0.3
NR (Not Rated) ...................................................... 2.8
Other* .............................................................. 3.1
-------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of shares
of Common Stock of the Fund, the Fund may at times pay out less than the entire
amount of net investment income earned in any particular month and may at times
in any month pay out such accumulated but undistributed income in addition to
net investment income earned in that month. As a result, the dividends paid by
the Fund for any particular month may be more or less than the amount of net
investment income earned by the Fund during such month. The Fund's current
accumulated but undistributed net investment income, if any, is disclosed in the
Statement of Assets, Liabilities and Capital, which comprises part of the
Financial Information included in this report.
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield Quality Fund
II, Inc. during its taxable year ended October 31, 2000 qualify as tax-exempt
interest dividends for Federal income tax purposes. Additionally, there were no
capital gains distributions paid by the Fund during the year.
Please retain this information for your records.
18 & 19
<PAGE>
Officers and Directors
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Joseph L. May, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Michael A. Kalinoski, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MQT
MuniYield Quality Fund II, Inc. seeks to provide shareholders with as high a
level of current income exempt from Federal income taxes as is consistent with
its investment policies and prudent investment management by investing primarily
in a portfolio of long-term, high-grade municipal obligations, the interest on
which is exempt from Federal income taxes in the opinion of bond counsel to the
issuer.
This report, including the financial information herein, is transmitted to
shareholders of MuniYield Quality Fund II, Inc. for their information. It is not
a prospectus. Past performance results shown in this report should not be
considered a representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock shareholders
with a potentially higher rate of return. Leverage creates risks for Common
Stock shareholders, including the likelihood of greater volatility of net asset
value and market price of shares of the Common Stock, and the risk that
fluctuations in the short-term dividend rates of the Preferred Stock may affect
the yield to Common Stock shareholders. Statements and other information herein
are as dated and are subject to change.
MuniYield Quality Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011 #16433--10/00
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