MUNIYIELD
QUALITY
FUND, INC.
FUND LOGO
Annual Report
October 31, 1995
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Quality Fund, Inc. for
their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders.
<PAGE>
MuniYield
Quality Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Quality Fund, Inc.
<PAGE>
TO OUR SHAREHOLDERS
For the year ended October 31, 1995, the Common Stock of MuniYield
Quality Fund, Inc. earned $0.889 per share income dividends, which
included earned and unpaid dividends of $0.075. This represents a
net annualized yield of 6.10%, based on a month-end net asset value
of $14.58 per share. Over the same period, the total investment
return on the Fund's Common Stock was +19.34%, based on a change in
per share net asset value from $13.16 to $14.58, and assuming
reinvestment of $0.895 per share income dividends and $0.019 per
share capital gains distributions.
For the six-month period ended October 31, 1995, the total
investment return on the Fund's Common Stock was +8.11%, based on a
change in per share net asset value from $13.96 to $14.58, and
assuming reinvestment of $0.430 per share income dividends.
For the six-month period ended October 31, 1995, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
3.54%; Series B, 3.81%; Series C, 4.12%; and Series D, 3.80%.
The Environment
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
Another significant development has been the strengthening of the US
dollar relative to the yen and the Deutschemark. Improving interest
rate differentials favoring the US currency, combined with
coordinated central bank intervention and more positive investor
sentiment, have helped to bolster the dollar in foreign exchange
markets. Other factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows to the
United States and the prospect of increased capital outflows from
Japan. However, it remains to be seen if the US dollar's
strengthening trend can continue without significant improvements in
the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
<PAGE>
The Municipal Market
Tax-exempt bond yields continued to decline during the six-month
period ended October 31, 1995. As measured by the Bond Buyer Revenue
Bond Index, the yield on uninsured, long-term municipal revenue
bonds fell 30 basis points (0.30%) to end the October period at
approximately 6.00%. While tax-exempt bond yields have declined
dramatically from their highs one year ago, municipal bond yields
have exhibited considerable yield volatility on a weekly basis. In
recent months, tax-exempt bond yields have fluctuated by as much as
20 basis points on a week-to-week basis. US Treasury bond yields
have displayed similar volatility, but the extent of their decline
has been greater. By the end of October, long-term US Treasury bond
yields had declined almost 100 basis points to 6.33%. Proposed
Federal tax restructuring continued to weigh heavily on the tax-
exempt bond market. Thus far in 1995, US Treasury bond yields have
declined approximately 150 basis points. Municipal bond yields have
fallen approximately 95 basis points as the uncertainty surrounding
any changes to the existing Federal income tax structure has
prevented the municipal bond market from rallying as strongly as its
taxable counterpart.
A general view of a moderately expanding domestic economy, supported
by a very favorable inflationary environment, allowed interest rates
to significantly decline from their recent highs in November 1994.
However, this decline was not a smooth downward curve. Conflicting
economic indicators were released during recent months that have
prevented a clear consensus regarding the near-term direction of
interest rates from being reached. The resultant uncertainty has
promoted more of a saw-toothed pattern as interest rate declines
were repeatedly interrupted by indications of stronger-than-expected
economic growth. As these concerns were overcome by subsequent
weaker economic releases, interest rate declines have resumed. These
periods of volatility are likely to continue for the remainder of
1995, or until proposed Federal budget deficit reduction packages
are resolved and any resultant responses by the Federal Reserve
Board have occurred.
However, the municipal bond market's technical position remained
supportive throughout recent quarters. Approximately $82 billion in
long-term municipal securities were issued during the six months
ended October 31, 1995. While this issuance is virtually identical
to underwritings during the October 31, 1994 quarter, tax-exempt
bond issuance over the last 12 months remained approximately 25%
below comparable 1994 levels. The municipal bond market should
maintain this positive technical position well into 1996. Annual
issuance for 1995 is now projected to be approximately $140 billion,
significantly less than last year's already low level of $162
billion. Projected maturities and early redemptions for the
remainder of 1995 and throughout 1996 will lead to a continued
decline in the total outstanding municipal bond supply throughout
1996 and, perhaps, into 1998 should new bond issuance remain at
historically low levels.
<PAGE>
Despite the municipal bond market's relative underperformance
compared to the US Treasury market thus far in 1995, the extent of
the tax-exempt bond market's rally was nonetheless quite impressive.
Municipal bond yields have fallen 135 basis points from their highs
reached in November 1994 and municipal bond prices rose accordingly.
Most tax-exempt products recouped almost all of the losses incurred
in 1994 and are well on their way to posting double-digit total
returns for all of 1995. This relative underperformance so far in
1995 provided long-term investors with the rare opportunity to
purchase tax-exempt securities at yield levels near those of taxable
securities.
Additionally, many of the factors that led to the relative
underperformance of the tax-exempt bond market thus far in 1995,
namely investor concern regarding Federal budget deficit reductions
and proposed changes in the Federal income tax structure, are
nearing resolution. The Federal budget reconciliation process has
already begun, and may be essentially completed by year-end. Recent
public opinion polls suggest that the majority of American taxpayers
prefer the existing Federal income tax system compared to proposed
changes, such as the flat tax or national sales tax. In an upcoming
election year, neither party is likely to advocate a clearly
unpopular position, particularly one that can be expected to
negatively impact the Federal budget deficit reduction program
through reduced tax revenues. As these factors are resolved, we
believe that much of the resistance that the municipal bond market
met this year should dissipate. This should allow municipal bond
yields to significantly decline from current levels in order to
return to more normal historic yield relationships.
Portfolio Strategy
The Fund's portfolio strategy for the fiscal year ended October 31,
1995 can be divided into two periods. For the period from the
beginning of the fiscal year to June 15, 1995, we focused primarily
on keeping the portfolio fully invested in high-coupon municipal
securities offering attractive yields while holding down duration.
This was done while keeping an emphasis on the accumulation of
income for Common Stock shareholders. The portfolio was primarily
invested in bonds with ratings by at least one of the major rating
services in the BBB--AA range.
<PAGE>
Because of a strong bond market rally and impeding economic
slowdown, we took a more aggressive strategy for the remainder of
the fiscal year. We extended the portfolio's duration, and lower-
quality par bonds were swapped for performance-oriented securities.
This was done so that the Fund could fully benefit from the
tremendous bull rally which occurred in the latter half of the
Fund's fiscal year.
In Conclusion
We appreciate your ongoing interest in MuniYield Quality Fund, Inc.,
and we look forward to assisting you with your financial needs in
the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Hugh T. Hurley III)
Hugh T. Hurley III
Portfolio Manager
December 6, 1995
We are pleased to announce that Hugh T. Hurley III is responsible
for the day-to-day management of MuniYield Quality Fund, Inc. Mr.
Hurley has been employed by Merrill Lynch Asset Management, L.P. (an
affiliate of the Fund's investment adviser) since 1993 as Assistant
Vice President. Prior thereto, he was employed by Titus and
Donnelly Municipal Bond Brokers as Municipal Bond Broker from 1990
to 1993.
<PAGE>
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
Quality Fund, Inc. Common Stock shareholders voted on the following
proposals. The proposals were approved at a special shareholders'
meeting on June 16, 1995. The description of each proposal and
number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Herbert I. London 29,247,012 833,880
Robert R. Martin 29,240,018 840,874
Arthur Zeikel 29,230,884 850,008
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year. 29,364,442 249,203 467,248
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
Quality Fund, Inc. Preferred Stock shareholders (Series A, B, C and
D) voted on the following proposals. The proposals were approved at
a special shareholders' meeting on June 16, 1995. The description of
each proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
1. To elect the Fund's Board of Directors: Herbert I. London, Robert R. Martin,
Joseph L. May, Andre F. Perold and Arthur Zeikel as follows:
<S> <C> <C>
Series A 1,029 0
Series B 1,107 0
Series C 1,032 156
Series D 897 17
<PAGE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year as follows:
<S> <C> <C> <C>
Series A 1,029 0 0
Series B 1,107 0 0
Series C 1,180 8 0
Series D 897 17 0
</TABLE>
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Quality Fund, 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, 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)
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
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--1.1% BBB Baa1 $ 3,000 Courtland, Alabama, IDB, IDR, Refunding (Champion
International Corporation), Series A, 7.20% due 12/01/2013 $ 3,211
BBB Baa1 3,640 Courtland, Alabama, IDB, Solid Waste Disposal Revenue
Bonds (Champion International Corporation Project), AMT, 7%
due 6/01/2022 3,792
Alaska--3.9% A- A 5,000 Alaska Industrial Development and Export Authority Revenue
Bonds (Revolving Fund), AMT, Series A, 6.50% due 4/01/2014 5,166
Valdez, Alaska, Marine Terminal Revenue Refunding Bonds:
NR* NR* 6,000 (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 5,705
AA- A1 15,000 (BP Pipelines Inc. Project), Series C, 5.65% due 12/01/2028 14,227
Arizona--2.1% A1 P1 400 Coconino County, Arizona, Pollution Control Corporation. Revenue
Bonds, (Arizona Public Service--Navajo Project), VRDN, AMT,
Series A, 4.10% due 10/01/2029 (a) 400
A1+ VMIG1++ 500 Maricopa County, Arizona, IDA, Hospital Facility Revenue Bonds
(Samaritan Health Service Hospital), VRDN, Series B-2, 4%
due 12/01/2008 (a)(c) 500
A1+ P1 8,000 Maricopa County, Arizona, Pollution Control Corp., PCR,
Refunding (Arizona Public Service Co.),VRDN, Series B,
3.90% due 5/01/2029 (a) 8,000
AA Aa 1,825 Maricopa County, Arizona, Scottsdale Unified School District
No. 48 (Scottsdale School Improvement), UT, 6.60%
due 7/01/2012 2,083
AA P1 900 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont Mining
Corporation), VRDN, 4% due 12/01/2009 (a) 900
AA Aa 2,000 Salt River Project, Arizona, Agricultural Improvement and Power
District, Electric System Revenue Refunding Bonds, Series B,
5.25% due 1/01/2019 1,880
Arkansas-- AAA NR* 2,490 Arkansas State Development Finance Authority, S/F Mortgage
0.5% Revenue Bonds, AMT, Series A, 7.30% due 3/01/2013 (h) 2,651
A1+ P1 100 Clark County, Arkansas, Solid Waste Disposal Revenue Bonds
(Reynolds Metals Co. Project), VRDN, AMT, 4% due 8/01/2022 (a) 100
NR* P1 500 Crosset, Arkansas, PCR (Georgia Pacific Corp. Project),
VRDN, 3.90% due 10/01/2007 (a) 500
California-- California State Public Works Board, Lease Revenue Bonds,
2.4% Series A:
A- A 6,800 (Department of Corrections--Monterey County), 7%
due 11/01/2019 7,397
AAA Aaa 7,000 (Various Universities of California Projects), 6.60%
due 12/01/2002 (i) 7,994
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Colorado--8.0% Colorado Health Facilities Authority, Hospital Revenue Bonds,
Series A:
BBB+ Baa1 $ 1,350 (P/SL Healthcare System Project), 6.875% due 2/15/2023 $ 1,520
BBB+ Baa1 4,550 (Swedish Medical Center Project), 6.80% due 1/01/2023 5,096
Colorado HFA, S/F Program:
NR* Aa 4,500 AMT, Series B-1, 7.90% due 12/01/2025 5,101
NR* Aa 1,500 Senior Series C-2, 7.45% due 6/01/2017 1,669
AA Aa 13,240 Colorado Springs, Colorado, Utilities Revenue Bonds, Series A,
6.10% due 11/15/2024 13,579
Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BB Baa 10,000 Series B, 7.25% due 11/15/2023 10,619
BB Baa 5,000 Series D, 7.75% due 11/15/2013 5,870
BB Baa 7,250 Series D, 7.75% due 11/15/2021 7,982
District of A+ A1 2,500 District of Columbia, Revenue Bonds (Georgetown
Columbia--0.4% University), Series B, 7.15% due 4/01/2021 2,715
Florida--2.5% A+ VMIG1++ 700 Dade County, Florida, IDA, Exempt Facilities Revenue Refunding
Bonds (Florida Power and Light Co.), VRDN, 3.90%
due 6/01/2021 (a) 700
AAA Aaa 5,000 Florida State Municipal Power Agency, Revenue Bonds (All
Requirements Power Supply Project), 5.10% due 10/01/2025 (b) 4,605
NR* Baa 3,405 Palm Bay, Florida, Lease Revenue Refunding Bonds (Florida
Education and Research Foundation Project), Series A, 7%
due 9/01/2024 3,579
NR* VMIG1++ 3,800 Palm Beach County, Florida, Water and Sewer Revenue Bonds,
VRDN, 4% due 10/01/2011 (a) 3,800
BBB+ A 3,250 Saint John's County, Florida, IDA, Hospital Revenue Bonds
(Flagler Hospital Project), 6% due 8/01/2022 3,153
Georgia--0.8% A+ A3 4,785 Monroe County, Georgia, Development Authority, PCR, Refunding
(Oglethorpe Power Scherer), Series A, 6.80% due 1/01/2011 5,361
Hawaii--1.5% AA Aa 8,820 Honolulu, Hawaii, City and County, UT, Series A, 6.25%
due 4/01/2014 9,515
Illinois--7.5% AAA Aaa 17,000 Chicago, Illinois, Metropolitan Housing Development Corporation,
Mortgage Revenue Refunding Bonds (Housing Development),
Series A, 6.85% due 7/01/2022 (b)(f) 17,812
BBB Baa2 21,000 Illinois Development Finance Authority, PCR, Refunding (Illinois
Power Company Project), Series A, 7.375% due 7/01/2021 22,777
Illinois Health Facilities Authority Revenue Bonds (Mercy Center
for Health Care Services):
NR* Baa1 1,300 6.625% due 10/01/2012 1,320
NR* Baa1 2,330 6.65% due 10/01/2022 2,355
NR* A 3,750 Illinois Student Assistance Commission, Student Loan Revenue
Bonds, AMT, Sub-Series CC, 6.875% due 3/01/2015 3,912
<PAGE>
Indiana--5.2% De Kalb County, Indiana, Redevelopment Authority (Mini-Mill
Local Public Improvement Project), Series A:
A NR* 3,000 6.50% due 1/15/2014 3,072
A NR* 3,220 6.625% due 1/15/2017 3,311
A NR* 2,500 Indiana Bond Bank, Revenue Guarantee (State Revolving Fund
Program), Series A, 6.875% due 2/01/2012 2,688
BBB Baa2 7,800 Indianapolis, Indiana, Airport Authority, Special Facilities
Revenue Bonds (Federal Express Corporation Project),
AMT, 7.10% due 1/15/2017 8,280
A+ NR* 15,000 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Revenue Refunding Bonds, Series D, 6.75% due 2/01/2020 16,007
</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>
Iowa--0.7% NR* A $ 4,070 Iowa Student Loan Liquidity Corporation, Student Loan Revenue
Bonds (Iowa Partnership), AMT, 6.60% due 7/01/2008 $ 4,317
Kansas--0.7% AAA Aaa 4,000 Kansas City, Kansas, Utility System Revenue Refunding and
Improvement Bonds, 6.375% due 9/01/2023 (e) 4,269
Kentucky--4.4% NR* Baa1 5,000 Ashland, Kentucky, PCR, Refunding (Ashland Oil Incorporated
Project), 6.65% due 8/01/2009 5,263
AAA Aaa 5,000 Kentucky Housing Corporation Revenue Bonds, AMT, Series B,
6.625% due 7/01/2026 (f) 5,157
AAA Aaa 6,570 Lexington-Fayette Urban County Government, Kentucky
Governmental Project, Revenue Bonds (University of Kentucky
Alumni Association Inc. Project), 6.75% due 11/01/2020 (c) 7,257
NR* NR* 5,250 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds
(TJ International Project), AMT, 7% due 6/01/2024 5,376
AA Aa2 5,000 Trimble County, Kentucky, PCR (Louisville Gas and Electric
Company), AMT, Series B, 6.55% due 11/01/2020 5,237
Louisiana--1.9% NR* Baa2 11,115 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Company
Project), 7.75% due 8/15/2022 12,528
Maryland--0.5% NR* VMIG1++ 900 Maryland State Health and Higher Educational Facilities Authority
Revenue Bonds (Pooled Loan Program), VRDN, Series A,
3.85% due 4/01/2035 (a) 900
NR* Aaa 1,950 Prince Georges County, Maryland, Hospital Revenue Bonds
(Dimensions Health Corporation), 7% due 7/01/2002 (i) 2,251
<PAGE>
Massachusetts Massachusetts Bay Transportation Authority, General
- --9.3% Transportation Systems Revenue Bonds:
A+ A1 3,730 Refunding, Series A, 7% due 3/01/2011 4,294
A+ A1 3,550 Refunding, Series A, 7% due 3/01/2014 4,106
AAA Aaa 17,500 Series B, 5.375% due 3/01/2025 (b) 16,789
BBB+ Aaa 1,045 Massachusetts Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, Series B, 6.75% due 7/01/2002 (i) 1,191
Massachusetts State Health and Educational Facilities Authority
Revenue Bonds:
A A1 3,595 (Brigham and Women's Hospital), Series C, 7% due 6/01/2018 3,883
BBB Baa1 9,500 (Sisters of Providence Health System), Series A, 6.625% due
11/15/2022 9,070
AAA Aaa 3,000 Massachusetts State HFA, Residential Development, Series D,
6.80% due 11/15/2012 (j) 3,148
Massachusetts State HFA, S/F Housing Revenue Bonds:
A+ Aa 4,090 Series 33, 6.35% due 6/01/2017 4,161
A+ Aa 3,035 Series 37, 6.35% due 6/01/2017 3,088
AAA Aaa 5,000 Massachusetts State Turnpike Authority, Turnpike Revenue
Refunding Bonds, Series A, 5.125% due 1/01/2023 (e) 4,579
AAA Aaa 5,000 Massachusetts State Water Resources Authority, Series A,
6.50% due 12/01/2001 (i) 5,617
Michigan--3.5% BBB Baa1 12,650 Dickinson County, Michigan, Economic Development Corporation,
PCR, Refunding (Champion International Corporation Project),
5.85% due 10/01/2018 12,037
A1+ VMIG1++ 500 Grand Rapids, Michigan, Water Supply Systems Revenue
Refunding Bonds, VRDN, 3.90% due 1/01/2020 (a)(e) 500
A A 4,375 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Detroit Medical Center Obligation Group), Series A,
6.50% due 8/15/2018 4,441
AA Aa 5,000 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds
(William Beaumont Hospital), Series D, 6.75% due 1/01/2020 5,269
</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>
Missouri--0.7% AA- Aa3 $ 4,000 Saint Louis, Missouri, Parking Facility Revenue Bonds, 6.625%
due 12/15/2021 $ 4,214
Nebraska--1.4% Nebraska Public Power District Revenue Bonds:
A+ A1 5,000 Refunding, 6.125% due 1/01/2015 5,139
AAA Aaa 4,000 Series A, 5.25% due 1/01/2022 (c) 3,809
New Hampshire NR* Baa1 4,290 New Hampshire Higher Educational and Health Facilities Authority
- --0.7% Revenue Refunding Bonds (Saint Anselm College), 6.20%
due 7/01/2013 4,317
New Mexico-- A A2 5,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
0.8% Corporate Project), 6.50% due 4/01/2013 5,196
<PAGE>
New York--7.3% BBB+ Baa1 5,000 New York City, New York, GO, UT, Series A, 7.75% due 8/15/2017 5,558
AAA VMIG1++ 5,200 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN, Series G, 3.90%
due 6/15/2024 (a)(e) 5,200
BBB+ Baa1 3,250 New York State Dormitory Authority, Educational Facilities
Revenue Bonds (State University), Series B, 5.75% due 5/15/2024 3,114
A Aa 2,500 New York State Environmental Facilities Corporation, PCR
(State Water Revolving Fund), Series E, 6.50% due 6/15/2014 2,667
New York State Local Government Assistance Corporation Revenue
Bonds, Series A:
A Aaa 10,000 7.125% due 4/01/2002 (i) 11,611
A A 13,450 6.50% due 4/01/2020 14,159
BBB Baa1 5,000 New York State Urban Development Corporation, Revenue Refunding
Bonds (Correctional Capital Facilities), 5.75% due 1/01/2013 4,841
North A A2 4,500 Martin County, North Carolina, Industrial Facilities
Carolina--0.8% and Pollution Control Financing Authority Revenue Bonds
(Solid Waste--Weyerhaeuser Company), AMT, 5.65% due 12/01/2023 4,258
NR* VMIG1++ 200 North Carolina Educational Facilities Finance Agency Revenue
Bonds (Bowman Grey School of Medicine Project),
VRDN, 3.90% due 9/01/2020 (a) 200
NR* VMIG1++ 1,000 Person County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority, Solid Waste Disposal Revenue Bonds
(Carolina Power and Light Company), DATES, AMT, 4%
due 11/01/2016 (a) 1,000
Ohio--1.6% AA- Aa3 10,000 Ohio State Air Quality Development Authority, Revenue Refunding
Bonds (Dayton Power and Light Project), Series B, 6.40% due
8/15/2027 10,380
Pennsylvania AAA Aaa 10,000 Philadelphia, Pennsylvania, School District, Series B, 5.50%
- --1.5% due 9/01/2025 (b) 9,658
Rhode AAA Aaa 2,500 Cranston, Rhode Island, GO, UT, 6.10% due 6/15/2015 (c) 2,558
Island--0.4%
South A A1 12,000 Fairfield County, South Carolina, PCR (South Carolina
Carolina--7.5% Electric and Gas Company), 6.50% due 9/01/2014 12,662
A- A1 8,000 Richland County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (Union Camp Corporation Project),
AMT, Series A, 6.75% due 5/01/2022 8,314
BBB Baa1 5,000 South Carolina Jobs, EDA, Economic Development Revenue Bonds
(Saint Francis Hospital--Franciscan Sisters), 7% due 7/01/2015 5,123
South Carolina State Public Service Authority Revenue Bonds
(Santee Cooper), Series D (i):
AAA Aaa 6,590 6.50% due 7/01/2002 (b) 7,419
AAA Aaa 9,500 6.625% due 7/01/2002 10,763
NR* NR* 3,800 Spartanburg County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (BMW Project), AMT, 7.55% due
11/01/2024 4,150
</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>
South AA+ Aa1 $ 5,500 South Dakota, HDA, Homeownership Mortgage Revenue Refunding
Dakota--0.9% Bonds, Series A, 6.45% due 5/01/2022 $ 5,597
Tennessee--0.4% BBB Baa1 2,500 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds
(Recycling Facility--Calhoun Newsprint--Bowater), AMT, 7.40%
due 12/01/2022 2,699
Texas--5.0% BB+ Baa2 5,000 Alliance Airport Authority Incorporated, Texas, Special
Facilities Revenue Bonds (American Airlines Incorporated
Project), AMT, 7.50% due 12/01/2029 5,300
NR* Aaa 1,000 Bell County, Texas, Health Facilities Development Corporation
Revenue Bonds (Lutheran General Health Care System--Parkside
Medical Services Corporation), 6.50% due 7/01/2019 (g) 1,079
BBB Baa1 1,840 Gulf Coast Waste Disposal Authority, Texas, Revenue Bonds
(Champion International Corporation), AMT, 7.45% due 5/01/2026 1,967
A- A 5,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Memorial Hospital Systems Project),
Series A, 6.60% due 6/01/2014 5,145
AA Aa 5,000 Harris County, Texas, Toll Road Sub-Lien, Revenue Refunding
Bonds, UT, 6.75% due 8/01/2014 5,387
A+ Aa 8,005 Texas Housing Agency, Residential Development Mortgage
Revenue Bonds, Series A, 7.50% due 7/01/2015 (h) 8,523
SP-1+ MIG1++ 5,000 Texas State, TRAN, Series A, 4.75% due 8/30/1996 5,039
Utah--4.1% AA- Aa 11,500 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series B, 5.25% due 7/01/2017 10,751
AA Aa 15,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals Inc.), 6.30% due 2/15/2015 15,826
Vermont--0.4% AAA Aaa 2,500 Vermont State Student Assistance Corporation, Educational Loan
Revenue Bonds (Financing Program), AMT, Series B, 6.70%
due 12/15/2012 (d) 2,627
Virginia--8.2% Big Stone Gap, Virginia, Redevelopment and Housing Authority,
Correctional Facility Lease Revenue Bonds (Wallens Ridge
Development Project):
AA Aa 7,600 5.25% due 9/01/2010 7,446
AA Aa 5,000 5.50% due 9/01/2015 4,876
Virginia State HDA, Commonwealth Mortgage Revenue Bonds:
AA+ Aa1 22,000 Series A, 7.15% due 1/01/2033 23,163
AA+ Aa1 5,000 Series B, Sub-Series B-1, 6.875% due 7/01/2011 5,369
Virginia State, Transportation Board, Transportation Contract
Revenue Bonds:
AA Aa 10,000 Refunding (Route 28 Program), 6.50% due 4/01/2018 10,604
AA Aa 1,500 (US Route 58 Corridor Development Project), Series B,
5.50% due 5/15/2018 1,457
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Washington AA Aaa $ 6,250 Lewis County, Washington, Public Utility Revenue Bonds,
- --1.1% District No. 001 (Cowlitz Falls Hydroelectric Project),
7% due 10/01/2001 (i) $ 7,167
West A1 P1 5,000 Braxton County, West Virginia, Solid Waste Disposal Revenue
Virginia--1.7% Bonds (Weyerhaeuser Company Project), AMT, 6.50%
due 4/01/2025 5,088
BBB+ A3 5,600 Putnam County, West Virginia, PCR, Refunding (Appalachian
Power Company Project), Series C, 6.60% due 7/01/2019 5,778
Wisconsin--0.8% A A1 3,800 Wisconsin Housing and EDA, Housing Revenue Bonds, AMT,
Series D, 7.20% due 11/01/2013 4,049
NR* A 1,100 Wisconsin State Health and Educational Facilities Authority
Revenue Bonds (Mercy Hospital of Janesville Incorporated),
6.60% due 8/15/2022 1,138
Puerto A1+ VMIG1++ 600 Puerto Rico Commonwealth, Government Development Bank,
Rico--0.1% Revenue Refunding Bonds, VRDN, 3.65% due 12/01/2015 (a) 600
Total Investments (Cost--$631,709)--102.3% 658,617
Liabilities in Excess of Other Assets--(2.3%) (14,899)
--------
Net Assets--100.0% $643,718
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1995.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FSA Insured.
(e)FGIC Insured.
(f)FHA Insured.
(g)Escrowed to Maturity.
(h)GNMA Collateralized.
(i)Prerefunded.
(j)FNMA Collateralized.
++Highest short-term rating by Moody's Investors Service, Inc.
*Not Rated.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$631,708,589) (Note 1a) $658,617,138
Interest $ 11,561,130
Securities sold 5,834,228 17,395,358
------------
Deferred organization expense (Note 1e) 12,478
Prepaid expenses and other assets 13,044
------------
Total assets 676,038,018
------------
Liabilities: Payables:
Securities purchased 21,818,875
Dividends to shareholders (Note 1f) 604,338
Investment adviser (Note 2) 281,368 22,704,581
------------
Accrued expenses and other liabilities 9,615,186
------------
Total liabilities 32,319,767
------------
Net Assets: Net assets $643,718,251
============
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (8,000 shares
of AMPS* issued and outstanding at $25,000 per share liquidation
preference) $200,000,000
Common Stock, par value $.10 per share (30,425,258 shares
issued and outstanding) $ 3,042,526
Paid-in capital in excess of par 423,867,420
Undistributed investment income--net 4,084,082
Accumulated realized capital losses on investments--net (Note 5) (14,105,440)
Accumulated distributions in excess of realized capital
gains--net (78,886)
Unrealized appreciation on investments--net 26,908,549
------------
Total--Equivalent to $14.58 net asset value per share of
Common Stock (market price--$12.625) 443,718,251
------------
Total capital $643,718,251
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 39,240,784
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 3,110,934
Commission fees (Note 4) 548,887
Transfer agent fees 114,665
Professional fees 81,660
Accounting services (Note 2) 64,680
Printing and shareholder reports 59,228
Custodian fees 34,389
Listing fees 27,575
Directors' fees and expenses 23,707
Pricing fees 15,103
Amortization of organization expenses (Note 1e) 7,541
Other 32,602
------------
Total expenses 4,120,971
------------
Investment income--net 35,119,813
------------
<PAGE>
Realized & Realized loss on investments--net (14,104,541)
Unrealized Gain Change in unrealized appreciation/depreciation on
(Loss) on investments--net 57,751,325
Investments--Net ------------
(Notes 1b, Net Increase in Net Assets Resulting from Operations $ 78,766,597
1d & 3): ============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 35,119,813 $ 35,664,322
Realized gain (loss) on investments--net (14,104,541) 582,012
Change in unrealized appreciation/depreciation on
investments--net 57,751,325 (79,089,878)
------------ ------------
Net increase (decrease) in net assets resulting from operations 78,766,597 (42,843,544)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (27,222,513) (29,359,370)
Shareholders Preferred Stock (7,552,050) (4,942,790)
(Note 1f): Realized gain on investments--net:
Common Stock (501,333) (6,545,051)
Preferred Stock (80,648) (1,298,020)
In excess of realized gain--net:
Common Stock (67,954) --
Preferred Stock (10,932) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (35,435,430) (42,145,231)
------------ ------------
Net Assets: Total increase (decrease) in net assets 43,331,167 (84,988,775)
Beginning of year 600,387,084 685,375,859
------------ ------------
End of year* $643,718,251 $600,387,084
============ ============
<FN>
*Undistributed investment income--net (Note 1g) $ 4,084,082 $ 3,737,933
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived June 26,
from information provided in the financial statements. 1992++ to
For the Year Ended 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 $ 13.16 $ 15.95 $ 13.38 $ 14.18
Operating -------- -------- -------- --------
Performance: Investment income--net 1.15 1.16 1.18 .32
Realized and unrealized gain (loss) on
investments--net 1.43 (2.57) 2.58 (.75)
-------- -------- -------- --------
Total from investment operations 2.58 (1.41) 3.76 (.43)
-------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.89) (.96) (.99) (.20)
Realized gain on investments--net (.02) (.22) -- --
In excess of realized gain--net --+++++ -- -- --
-------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.91) (1.18) (.99) (.20)
-------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- -- -- (.01)
-------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.25) (.16) (.20) (.03)
Realized gain on investments--net --+++++ (.04) -- --
In excess of realized gain--net --+++++ -- -- --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.13)
-------- -------- -------- --------
Total effect of Preferred Stock activity (.25) (.20) (.20) (.16)
-------- -------- -------- --------
Net asset value, end of period $ 14.58 $ 13.16 $ 15.95 $ 13.38
======== ======== ======== ========
Market price per share, end of period $ 12.625 $ 11.00 $ 15.25 $ 13.625
======== ======== ======== ========
Total Based on market price per share 23.63% (21.32%) 19.68% (7.83%)+++
Investment ======== ======== ======== ========
Return:** Based on net asset value per share 19.34% (10.00%) 27.46% (4.25%)+++
======== ======== ======== ========
<PAGE>
Ratios to Expenses, net of reimbursement .66% .66% .60% .14%*
Average ======== ======== ======== ========
Net Assets:*** Expenses .66% .66% .61% .59%*
======== ======== ======== ========
Investment income--net 5.65% 5.50% 5.52% 5.71%*
======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $443,718 $400,387 $485,376 $403,538
======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $200,000 $200,000 $200,000 $200,000
======== ======== ======== ========
Portfolio turnover 57.56% 42.31% 66.14% 10.12%
======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 961 $ 571 $ 713 $ 94
Share on Series B--Investment income--net 917 627 685 97
Preferred Stock Series C--Investment income--net 977 577 747 100
Outstanding:++++++ Series D--Investment income--net 921 698 832 103
<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 September 16, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
<PAGE>
1. Significant Accounting Policies:
MuniYield Quality Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund determines and makes
available for publication the net asset value of its Common Stock on
a weekly basis. The Fund's Common Stock is listed on the New York
Stock Exchange under the symbol MQY. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Finan-
cial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities for which market
quotations are not readily available are valued at their fair value
as determined in good faith by or under the direction of the Board
of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions and post-October losses.
NOTES TO FINANCIAL STATEMENTS (concluded)
(g) Reclassification--Generally accepted accounting principles
require that certain differences between accumulated net realized
capital losses for financial reporting and tax purposes, if
permanent, be reclassified to undistributed net investment income.
Accordingly, current year's permanent book/tax differences of $899
have been reclassified from accumulated net realized capital losses
to undistributed net investment income. These reclassifications have
no effect on net assets or net asset value per share.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $338,522,668 and
$334,758,744, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ (5,404,443) $26,913,904
Short-term investments 150,422 (5,355)
Financial futures contracts (8,850,520) --
------------ -----------
Total $(14,104,541) $26,908,549
============ ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $26,908,549, of which $27,340,655
related to appreciated securities and $432,106 related to
depreciated securities. The aggregate cost of investments at October
31, 1995 for Federal income tax purposes was $631,708,589.
<PAGE>
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
Common Stock
For the year ended October 31, 1995, shares issued and outstanding
remained constant at 30,425,258. At October 31, 1995, total paid-in
capital amounted to $426,909,946.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at October 31, 1995 were as
follows: Series A, 3.776%; Series B, 3.84%; Series C, 3.724%; and
Series D, 3.82%.
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 8,000 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $193,935.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1995, MLPF&S, an affiliate of FAM, earned $276,536 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a capital loss carryforward of
approximately $7,048,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 13, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.075165 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
MuniYield Quality Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
Quality Fund, Inc. as of October 31, 1995, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the three-year period
then ended and the period June 26, 1992 (commencement of operations)
to October 31, 1992. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield Quality Fund, Inc. as of October 31, 1995, the results of
its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 6, 1995
</AUDIT-REPORT>
<PAGE>
PER SHARE INFORMATION (unaudited)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
November 1, 1993 to January 31, 1994 $.30 $ .03 $ .13 $.25 $.01 $.22 $.04
February 1, 1994 to April 30, 1994 .28 .07 (1.97) .24 .05 -- --
May 1, 1994 to July 31, 1994 .29 (.09) .33 .23 .05 -- --
August 1, 1994 to October 31, 1994 .29 .01 (1.08) .24 .05 -- --
November 1, 1994 to January 31, 1995 .30 (.28) .69 .24 .05 .02 --++
February 1, 1995 to April 30, 1995 .27 (.16) .59 .22 .07 -- --
May 1, 1995 to July 31, 1995 .29 (.02) .28 .21 .06 -- --
August 1, 1995 to October 31, 1995 .29 (.01) .34 .22 .07 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
November 1, 1993 to January 31, 1994 $15.96 $15.44 $15.50 $14.00 3,394
February 1, 1994 to April 30, 1994 15.85 13.48 15.375 12.50 2,781
May 1, 1994 to July 31, 1994 14.61 13.67 13.125 12.25 3,406
August 1, 1994 to October 31, 1994 14.25 13.16 13.00 10.75 4,978
November 1, 1994 to January 31, 1995 13.53 12.18 12.25 10.125 8,159
February 1, 1995 to April 30, 1995 14.25 13.54 12.75 12.125 2,805
May 1, 1995 to July 31, 1995 14.69 13.94 12.75 11.875 3,466
August 1, 1995 to October 31, 1995 14.69 14.04 12.625 12.00 2,538
<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.
++Amount is less than .01 per share.
</TABLE>
IMPORTANT TAX INFORMATION (UNAUDITED)
All of the net investment income distributions paid monthly by
MuniYield Quality Fund, Inc. during its taxable year ended October
31, 1995 qualify as tax-exempt interest dividends for Federal income
tax purposes. Additionally, the following table summarizes the per
share capital gains distributions paid by the Fund during
the year:
<PAGE>
<TABLE>
<CAPTION>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <S> <C> <C> <C>
Common Stock Shareholders 12/29/94 -- $ .018711
Preferred Stock Shareholders: Series A 12/13/94 -- $10.57
Series B 12/01/94 -- $23.22
Series C 11/25/94 -- $21.38
Series D 12/01/94 -- $25.84
Please retain this information for your records.
</TABLE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
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Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MQY
