UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06728
Name of Fund: MuniYield Quality Fund II, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, MuniYield Quality Fund II, Inc., 800 Scudders Mill Road,
Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton, NJ
08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/06
Date of reporting period: 11/01/05 - 04/30/06
Item 1 - Report to Stockholders
Semi-Annual Reports
April 30, 2006
MuniYield Fund, Inc.
MuniYield Quality Fund, Inc.
MuniYield Quality Fund II, Inc.
MuniYield Fund, Inc.
MuniYield Quality Fund, Inc.
MuniYield Quality Fund II, Inc.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined assets
under management as of March 31, 2006). The transaction is expected to close in
the third quarter of 2006, at which time the new company will operate under the
BlackRock name. The Funds' Board of Directors has approved a new investment
advisory agreement with BlackRock Advisors, Inc. or its successor ("BlackRock
Advisors") on substantially the same terms and for the same advisory fee as the
current investment advisory agreement with the Investment Adviser. If the new
agreement is approved by the Funds' shareholders, BlackRock Advisors is expected
to become the Funds' investment adviser upon the closing of the transaction
between Merrill Lynch and BlackRock.
Quality Profiles as of April 30, 2006
--------------------------------------------------------------------------------
Percent of
MuniYield Fund, Inc. by Total
S&P/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 38.9%
AA/Aa ................................................... 11.1
A/A ..................................................... 10.9
BBB/Baa ................................................. 11.3
BB/Ba ................................................... 3.7
B/B ..................................................... 4.1
CCC/Caa ................................................. 2.1
NR (Not Rated) .......................................... 16.9
Other* .................................................. 1.0
--------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments and variable rate
demand notes.
--------------------------------------------------------------------------------
Percent of
MuniYield Quality Fund, Inc. by Total
S&P/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 85.8%
AA/Aa ................................................... 6.3
A/A ..................................................... 5.9
BBB/Baa ................................................. 0.3
NR (Not Rated) .......................................... 0.9
Other* .................................................. 0.8
--------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
--------------------------------------------------------------------------------
Percent of
MuniYield Quality Fund II, Inc. by Total
S&P/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 88.7%
AA/Aa ................................................... 6.0
A/A ..................................................... 4.0
BBB/Baa ................................................. 0.4
Other* .................................................. 0.9
--------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
2 SEMI-ANNUAL REPORTS APRIL 30, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager -- BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our investors.
MLIM is a leading investment management organization with over $576 billion in
assets under management globally and 2,757 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios. BlackRock is one of the largest publicly traded
investment management firms in the United States with $463.1 billion in assets
under management and 1,839 employees. It manages assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, liquidity and alternative investment products.
At the completion of the transaction, which is expected in the third quarter of
this year, the resultant firm will be a top-10 investment manager worldwide with
over $1 trillion in assets under management.* The combined company will provide
a wider selection of high-quality investment solutions across a range of asset
classes and investment styles. MLIM and BlackRock possess complementary
capabilities that together create a well-rounded organization uniting some of
the finest money managers in the industry. At the same time, the firms share
similar values and beliefs -- they are focused on delivering excellence on
behalf of clients, and both make investment performance their single most
important mission. In short, the merger only reinforces our commitment to
shareholders.
Most of MLIM's investment products -- including mutual funds, separately managed
accounts, annuities and variable insurance funds -- eventually will carry the
"BlackRock" name. As a shareholder in one or more MLIM-advised mutual funds, you
will receive a proxy package in the coming weeks in connection with this
transaction. After you receive this information, should you have any questions
or concerns, do not hesitate to contact your financial advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
SEMI-ANNUAL REPORTS APRIL 30, 2006 3
A Discussion With Your Funds' Portfolio Managers
The Funds outperformed their respective Lipper category averages for the
period while also offering shareholders an attractive level of tax-exempt
income.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields rose sharply during the six-month period ended April 30,
2006, with much of the increase occurring in March and April 2006. Bond prices,
which move opposite of yields, declined. Bond prices were pressured as investors
focused on solid economic growth, both globally and in the United States, and
renewed inflationary pressures deriving from rising commodity prices. First
quarter 2006 gross domestic product growth was recently estimated at 4.8%, well
above the 1.7% rate recorded in the fourth quarter of 2005.
The Federal Reserve Board (the Fed) continued to raise short-term interest rates
at each of its meetings during the period, bringing the federal funds target
rate to 4.75% at period-end, and to 5% on May 10. In response, the Treasury
curve continued to flatten, with short-term interest rates rising more than
longer-term interest rates. Over the past six months, 30-year U.S. Treasury bond
yields rose 41 basis points (.41%) to 5.17% and 10-year U.S. Treasury note
yields rose 50 basis points to 5.07%, the highest level since May 2002.
While the municipal yield curve also flattened during the period, the market's
strong technical position provided significant price support. This allowed
municipal bond prices to improve slightly or decline much less than those of
their taxable counterparts. As measured by Municipal Market Data, yields on
AAA-rated issues maturing in 30 years fell six basis points to 4.53%, while
yields on AAA-rated issues maturing in 10 years rose 16 basis points to 4.08%.
For the most part, the tax-exempt market's recent outperformance has been
fostered by a dramatic decline in new bond issuance so far in 2006. In 2005,
more than $408 billion in new long-term tax-exempt bonds was underwritten, a new
annual record and an increase of more than 13% compared to 2004. Over the past
six months, $170 billion in long-term municipal bonds was issued, a decline of
8.6% versus the same period a year earlier. The record new issuance in 2005 was
largely triggered by a 47% increase in refunding activity as issuers took
advantage of historically low bond yields and a flattening yield curve to
refinance outstanding higher-couponed debt. Year-to-date through April 2006,
refunding issuance declined more than 55% relative to the first four months of
2005. This decline already has led some analysts to reduce their forecasts for
2006 new issuance from the $350 billion - $370 billion range to $300 billion -
$325 billion. Lower annual issuance would further solidify the tax-exempt
market's already positive technical position.
The tax-exempt market has continued to enjoy strong investor demand. As reported
by the Investment Company Institute, long-term municipal bond funds received net
new monies of $5.0 billion in 2005 -- a sharp reversal from the $3.7 billion
outflow in 2004. During the first quarter of 2006, tax-exempt mutual funds
received over $9.3 billion, slightly higher than the $8.9 billion inflow during
the same period in 2005. Recent statistics from AMG Data Services indicate that,
thus far in 2006, weekly cash flows into long-term municipal bond funds averaged
over $300 million, a significant improvement from the weekly average of $65
million in December 2005.
Looking ahead, the fundamentals for the tax-exempt bond market appear favorable,
and continued positive cash flows are anticipated. Given their attractive yields
relative to comparable U.S. Treasury bonds, and the prospects for reduced
issuance in 2006, we believe municipal bonds could enjoy solid results in the
coming months.
4 SEMI-ANNUAL REPORTS APRIL 30, 2006
MuniYield Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended April 30, 2006, the Common Stock of MuniYield
Fund, Inc. had net annualized yields of 6.69% and 6.42%, based on a period-end
per share net asset value of $14.57 and a per share market price of $15.18,
respectively, and $.483 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +4.03%, based on a change
in per share net asset value from $14.48 to $14.57, and assuming reinvestment of
all distributions.
The Fund's total return, based on net asset value, significantly exceeded the
+2.60% average return of the Lipper General Municipal Debt Funds (Leveraged)
category for the six-month period. (Funds in this Lipper category invest
primarily in municipal debt issues rated in the top four credit-rating
categories. These funds can be leveraged via use of debt, preferred equity
and/or reverse repurchase agreements.) As in prior periods, Fund performance
continued to be driven by our overweight exposure to lower-rated,
higher-yielding credits. As credit spreads tightened throughout the period,
lower-rated instruments outperformed the broader market and provided both price
appreciation and incremental yield for the Fund. Our exposure to airline-related
debt, in particular, proved to be the most significant factor in the Fund's
outperformance. The airline sector had been the sole laggard in the high yield
space until investors finally took notice of the industry's improving prospects
within the past three months to six months.
Also benefiting Fund performance was our active management of the portfolio's
duration, or its sensitivity to interest rate risk. Entering the period, we had
a neutral duration posture compared to our Lipper peers, with the intention of
lengthening that position slightly going into the end of 2005 -- which we did.
In light of market improvement, we subsequently shortened our duration modestly
in a timely move ahead of the market backup that occurred in the latter half of
the period. We also continued to position the portfolio to take advantage of the
flattening trend in the municipal yield curve. The curve did flatten further
over the past six months, and our strategy contributed to performance.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock may vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
We had anticipated further flattening of the municipal yield curve during the
period and, as such, portfolio activity remained focused on taking advantage of
that trend. To that end, we typically made purchases in the 20-year - 30-year
maturity range using proceeds from the sale of bonds with much shorter
maturities, such as those in the five-year - 10-year area. We also looked to
sell longer-dated bonds that were likely to be called by their issuers in that
five-year - 10-year time frame.
In fact, the problem of longer, higher-coupon issues being called by issuers is
one that has challenged most investors as long-term interest rates declined or
failed to rise as anticipated. As a result, many portfolios have seen a
tremendous influx of cash, which they have opted to invest in lower-rated,
higher-yielding credits. During this period, we sought to take advantage of the
fairly aggressive pricing that this demand has caused by selling some of our
high yield issues, and thereby reducing our overweight position in this sector.
A number of factors have combined to sharply reduce the overall supply of
municipal issues in the early months of 2006. The low interest rate environment
of 2005 may have exhausted much of the potential new-issue supply, and with
interest rates having risen somewhat over the past few months, some issuers may
have been discouraged from coming to market. Despite this dearth of new supply,
our superior research and analysis capabilities allowed the Fund to identify
opportunities in lesser known issues that most other investors may have
overlooked. This activity has helped us to maintain a competitive dividend
distribution rate despite the ill effects of early calls, scant supply and
declining yields.
SEMI-ANNUAL REPORTS APRIL 30, 2006 5
A Discussion With Your Funds' Portfolio Managers (continued)
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock (AMPS) had an average yield of 3.06% for Series A, 2.96% for
Series B, 3.15% for Series C, 3.21% for Series D, 2.96% for Series E, 3.03% for
Series F and 2.99% for Series G. The Fed raised the short-term interest rate
target 100 basis points during the six-month period (and another 25 basis points
on May 10), and this continued to affect the Fund's borrowing costs. We would
expect additional increases in the cost of funds to be more limited as the Fed
nears a pause in its monetary tightening campaign. Despite the rate increases
during the period, the tax-exempt yield curve maintained a positive slope,
allowing us to borrow at a lower rate than where we invest. This continued to
generate an income benefit to the holders of Common Stock from the leveraging of
Preferred Stock. However, should the spread between short-term and long-term
interest rates narrow, the benefits of leveraging will decline and, as a result,
reduce the yield on the Fund's Common Stock. At the end of the period, the
Fund's leverage amount, due to AMPS, was 34.50% of total net assets, before the
deduction of Preferred Stock. (For a more complete explanation of the benefits
and risks of leveraging, see page 10 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
At period-end, the Fund was neutrally positioned in terms of both interest rate
risk and credit quality, having reduced our overweight position in lower-rated
securities somewhat. Our yield curve outlook has changed in response to recent
speculation that the Fed may be closer to the end of its monetary tightening
program. Therefore, we believe the majority of the curve flattening is behind
us, and we are in the early stages of reducing our exposure to the long end of
the curve. We now see the most attractive value closer to the middle of the
curve, around the 10-year -- 15-year range. While we believe there is still some
risk of further Fed tightening, the markets tend to anticipate and react to
those moves before the fact, so we prefer to be at the front end of that trend.
MuniYield Quality Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended April 30, 2006, the Common Stock of MuniYield
Quality Fund, Inc. had net annualized yields of 5.50% and 5.91%, based on a
period-end per share net asset value of $14.89 and a per share market price of
$13.85, respectively, and $.406 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +2.04%, based
on a change in per share net asset value from $15.02 to $14.89, and assuming
reinvestment of all distributions.
The Fund's total return, based on net asset value, outpaced the +1.94% average
return of the Lipper Insured Municipal Debt Funds (Leveraged) category for the
six-month period. (Funds in this Lipper category invest primarily in municipal
debt issues insured as to timely payment. These funds can be leveraged via use
of debt, preferred equity and/or reverse repurchase agreements.)
Overall, the municipal market performed fairly well in this period of rising
interest rates. The yield curve continued to flatten as the long end rallied
slightly while the short end underperformed. Against this backdrop, Fund
performance benefited from our strategy of moving further out on the curve as
opportunities presented themselves. Also contributing to Fund results was our
focus on maintaining an above-average yield and, consistent with that goal,
remaining fully invested.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
6 SEMI-ANNUAL REPORTS APRIL 30, 2006
What changes were made to the portfolio during the period?
We entered the period with a neutral posture as the Fed appeared to be
approaching a pause in its rate-hiking campaign. Although both the Treasury and
the municipal yield curves continued to flatten during the past six months, the
move was not nearly as dramatic as we have seen in prior periods. Notably, the
municipal curve retained a positive slope, particularly relative to the Treasury
curve which actually inverted early in 2006, and this contributed to the
market's and the Fund's positive performance.
The other important dynamic in the municipal market during the six-month period
was the drop in new issuance, especially fixed rate, longer-term issuance. This
decline in supply supported the performance of the municipal market, but also
meant there were fewer options for restructuring the portfolio. Notwithstanding
that fact, we were still able to take advantage of inter-period volatility,
using backups in market yields to selectively book tax losses (that is, taking
losses to offset any gains) and swap into other bonds in instances where we
thought it would be beneficial to the Fund. In addition, we sold some of the
portfolio's premium-coupon, short-call bonds into a strong market inquiry. Given
that there was an interested buyer in the market, we were able to sell the bonds
at very favorable prices. Generally speaking, we redeployed the proceeds from
the sale into bonds with maturities in the 25-year range and with coupons of
approximately 5%.
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 3.09% for Series A, 3.00% for
Series B, 3.23% for Series C, 3.02% for Series D and 3.01% for Series E. The Fed
raised the short-term interest rate target 100 basis points during the six-month
period (and another 25 basis points on May 10), and this continued to affect the
Fund's borrowing costs. We would expect additional increases in the cost of
funds to be more limited as the Fed nears a pause in its monetary tightening
campaign. Despite the rate increases during the period, the tax-exempt yield
curve maintained a positive slope, allowing us to borrow at a lower rate than
where we invest. This continued to generate an income benefit to the holders of
Common Stock from the leveraging of Preferred Stock. However, should the spread
between short-term and long-term interest rates narrow, the benefits of
leveraging will decline and, as a result, reduce the yield on the Fund's Common
Stock. At the end of the period, the Fund's leverage amount, due to AMPS, was
35.57% of total net assets, before the deduction of Preferred Stock. (For a more
complete explanation of the benefits and risks of leveraging, see page 10 of
this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We remain focused on generating an attractive level of tax-exempt income for our
shareholders. The Fund ended the period fully invested and with an overall
neutral market posture, in keeping with our internal Investment Committee's
recommendation. After 16 consecutive interest rate hikes, the Fed may be near a
pause in its monetary tightening program. However, global economies and certain
pockets of the U.S. economy continue to show solid growth, leading us to believe
that it still may be early to become too aggressive. We believe a neutral
posture is prudent in the current environment and should provide for competitive
performance.
On a tactical basis, we recently started to look at opportunities back down the
yield curve in the 15-year - 20-year area, as opposed to the previously favored
25-year - 30-year range. We have found that we can move five years - 10 years
down the yield curve without sacrificing a significant amount of yield. Given
the degree of yield-curve flattening that has occurred over the course of the
Fed's rate-hiking campaign, we believe this maturity range could be ready to
outperform. As always, we will continue to monitor the economy, the Fed and the
municipal market, and stand ready to adjust our approach as needed.
SEMI-ANNUAL REPORTS APRIL 30, 2006 7
A Discussion With Your Funds' Portfolio Managers (concluded)
MuniYield Quality Fund II, Inc.
How did the Fund perform during the period?
For the six-month period ended April 30, 2006, the Common Stock of MuniYield
Quality Fund II, Inc. had net annualized yields of 5.51% and 5.85%, based on a
period-end per share net asset value of $13.25 and a per share market price of
$12.47, respectively, and $.362 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +2.11%, based
on a change in per share net asset value from $13.36 to $13.25, and assuming
reinvestment of all distributions.
The Fund's total return, based on net asset value, outpaced the +1.94% average
return of the Lipper Insured Municipal Debt Funds (Leveraged) category for the
six-month period. (Funds in this Lipper category invest primarily in municipal
debt issues insured as to timely payment. These funds can be leveraged via use
of debt, preferred equity and/or reverse repurchase agreements.)
Overall, the municipal market performed fairly well in this period of rising
interest rates. The yield curve continued to flatten as the long end rallied
slightly while the short end underperformed. Against this backdrop, Fund
performance benefited from our strategy of moving further out on the curve as
opportunities presented themselves. Also contributing to Fund results was our
focus on maintaining an above-average yield and, consistent with that goal,
remaining fully invested.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
We entered the period with a neutral posture as the Fed appeared to be
approaching a pause in its rate-hiking campaign. Although both the Treasury and
the municipal yield curves continued to flatten during the past six months, the
move was not nearly as dramatic as we have seen in prior periods. Notably, the
municipal curve retained a positive slope, particularly relative to the Treasury
curve which actually inverted early in 2006, and this contributed to the
market's and the Fund's positive performance.
The other important dynamic in the municipal market during the six-month period
was the drop in new issuance, especially fixed rate, longer-term issuance. This
decline in supply supported the performance of the municipal market, but also
meant there were fewer options for restructuring the portfolio. Notwithstanding
that fact, we were still able to take advantage of inter-period volatility,
using backups in market yields to selectively book tax losses (that is, taking
losses to offset any gains) and swap into other bonds in instances where we
thought it would be beneficial to the Fund. In addition, we sold some of the
portfolio's premium-coupon, short-call bonds into a strong market inquiry. Given
that there was an interested buyer in the market, we were able to sell the bonds
at very favorable prices. Generally speaking, we redeployed the proceeds from
the sale into bonds with maturities in the 25-year range and with coupons of
approximately 5%.
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 3.12% for Series A, 3.33% for
Series B, 2.99% for Series C and 2.99% for Series D. The Fed raised the
short-term interest rate target 100 basis points during the six-month period
(and another 25 basis points on May 10), and this continued to affect the Fund's
borrowing costs. We would expect additional increases in the cost of funds to be
more limited as the Fed nears a pause in its monetary tightening campaign.
Despite the rate increases during the period, the tax-exempt yield curve
maintained a positive slope, allowing us to borrow at a lower rate than where we
invest. This continued to
8 SEMI-ANNUAL REPORTS APRIL 30, 2006
generate an income benefit to the holders of Common Stock from the leveraging of
Preferred Stock. However, should the spread between short-term and long-term
interest rates narrow, the benefits of leveraging will decline and, as a result,
reduce the yield on the Fund's Common Stock. At the end of the period, the
Fund's leverage amount, due to AMPS, was 35.07% of total net assets, before the
deduction of Preferred Stock. (For a more complete explanation of the benefits
and risks of leveraging, see page 10 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We remain focused on generating an attractive level of tax-exempt income for our
shareholders. The Fund ended the period fully invested and with an overall
neutral market posture, in keeping with our internal Investment Committee's
recommendation. After 16 consecutive interest rate hikes, the Fed may be near a
pause in its monetary tightening program. However, global economies and certain
pockets of the U.S. economy continue to show solid growth, leading us to believe
that it still may be early to become too aggressive. We believe a neutral
posture is prudent in the current environment and should provide for competitive
performance.
On a tactical basis, we recently started to look at opportunities back down the
yield curve in the 15-year - 20-year area, as opposed to the previously favored
25-year - 30-year range. We have found that we can move five years - 10 years
down the yield curve without sacrificing a significant amount of yield. Given
the degree of yield-curve flattening that has occurred over the course of the
Fed's rate-hiking campaign, we believe this maturity range could be ready to
outperform. As always, we will continue to monitor the economy, the Fed and the
municipal market, and stand ready to adjust our approach as needed.
Theodore R. Jaeckel Jr., CFA
Vice President and Portfolio Manager
MuniYield Fund, Inc.
Michael A. Kalinoski, CFA
Vice President and Portfolio Manager
MuniYield Quality Fund, Inc.
MuniYield Quality Fund II, Inc.
May 17, 2006
SEMI-ANNUAL REPORTS APRIL 30, 2006 9
The Benefits and Risks of Leveraging
The Funds utilize leveraging to seek to enhance the yield and net asset value of
their Common Stock. However, these objectives cannot be achieved in all interest
rate environments. To leverage, each 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, net of
dividends to Preferred Stock, 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 each 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.
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 their investment strategy, the Funds 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 Funds 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 Funds invest
in inverse floaters, the market value of each Fund's portfolio and the net asset
value of each Fund's shares may also be more volatile than if the Funds did not
invest in these securities. As of April 30, 2006, the percentages of MuniYield
Fund, Inc.'s, MuniYield Quality Fund, Inc.'s and MuniYield Quality Fund II,
Inc.'s total net assets invested in inverse floaters were 6.43%, 12.71% and
12.59%, respectively, before the deduction of Preferred Stock.
Swap Agreements
The Funds may invest in swap agreements, which are over-the-counter contracts in
which one party agrees to make periodic payments based on the change in market
value of a specified bond, basket of bonds, or index in return for periodic
payments based on a fixed or variable interest rate or the change in market
value of a different bond, basket of bonds or index. Swap agreements may be used
to obtain exposure to a bond or market without owning or taking physical custody
of securities. Swap agreements involve the risk that the party with whom each
Fund has entered into a swap will default on its obligation to pay the Fund and
the risk that the Fund will not be able to meet its obligations to pay the other
party to the agreement.
10 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Alabama--1.6%
$ 2,500 Huntsville, Alabama, Health Care Authority Revenue
Bonds, Series B, 5.75% due 6/01/2032 $ 2,621
5,250 Jefferson County, Alabama, Limited Obligation School
Warrants, Series A, 5.50% due 1/01/2022 5,605
2,200 Tuscaloosa, Alabama, Special Care Facilities Financing
Authority, Residential Care Facility Revenue Bonds
(Capstone Village, Inc. Project) Series A, 5.625%
due 8/01/2025 2,202
=================================================================================================
Arizona--9.5%
Arizona State Transportation Board, Highway Revenue
Bonds, Sub-Series A:
5,825 5% due 7/01/2021 6,075
7,030 5% due 7/01/2022 7,321
5,240 5% due 7/01/2023 5,446
3,400 Maricopa County, Arizona, IDA, Education Revenue
Bonds (Arizona Charter Schools Project 1), Series A,
6.75% due 7/01/2029 3,384
Maricopa County, Arizona, IDA, M/F Housing Revenue
Refunding Bonds (CRS Pine Ridge Housing
Corporation), Series A-1 (e)(i):
5,000 6% due 10/20/2031 5,258
5,000 6.05% due 10/20/2036 5,212
Phoenix, Arizona, IDA, Airport Facility, Revenue
Refunding Bonds (America West Airlines Inc.
Project), AMT:
5,800 6.25% due 6/01/2019 5,449
6,900 6.30% due 4/01/2023 6,137
Phoenix, Arizona, IDA, M/F Housing Revenue Bonds
(Summit Apartments LLC Project) (i):
1,610 6.25% due 7/20/2022 1,720
1,425 6.45% due 7/20/2032 1,523
1,305 6.55% due 7/20/2037 1,398
1,400 Pima County, Arizona, IDA, Education Revenue Bonds
(Arizona Charter Schools Project II), Series A,
6.75% due 7/01/2031 1,459
Vistancia Community Facilities District, Arizona, GO:
3,000 5.50% due 7/15/2020 2,997
2,125 5.75% due 7/15/2024 2,143
5,900 Yavapai County, Arizona, IDA, Hospital Facility Revenue
Bonds (Yavapai Regional Medical Center), Series A,
6% due 8/01/2033 6,237
=================================================================================================
Arkansas--0.9%
University of Arkansas, University Construction Revenue
Bonds (UAMS Campus), Series B (k):
2,000 5% due 11/01/2020 2,082
1,600 5% due 11/01/2027 1,653
1,000 University of Arkansas, University Revenue
Refunding Bonds (UAMS Campus), Series A,
5% due 11/01/2014 (k) 1,062
1,000 Washington County, Arkansas, Hospital Construction
Revenue Refunding Bonds (Regional Medical Center),
Series A, 5% due 2/01/2035 978
=================================================================================================
California--14.5%
8,760 California State, GO, 5% due 2/01/2033 8,877
California State Public Works Board, Lease
Revenue Bonds:
2,000 (Department of Corrections), Series C, 5%
due 6/01/2025 2,046
4,500 (Department of Mental Health--Coalinga State
Hospital), Series A, 5.125% due 6/01/2029 4,612
California State, Various Purpose, GO:
6,800 5.25% due 11/01/2025 7,144
10,000 5% due 4/01/2031 (a) 10,276
5,550 5.50% due 11/01/2033 5,971
Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds:
5,500 Series A-3, 7.875% due 6/01/2042 6,546
7,500 Series A-4, 7.80% due 6/01/2042 8,893
Los Angeles, California, Unified School District, GO,
Series A (h):
7,570 5% due 7/01/2022 7,868
18,400 5% due 7/01/2023 19,049
5,145 Santa Clara, California, Subordinated Electric Revenue
Bonds, Series A, 5% due 7/01/2022 (k) 5,336
7,465 University of California Revenue Bonds (Multiple
Purpose Projects), Series Q, 5% due 9/01/2021 (h) 7,746
=================================================================================================
Colorado--5.3%
3,245 Colorado Educational and Cultural Facilities Authority,
Revenue Refunding Bonds (University of Denver
Project), Series B, 5.25% due 3/01/2035 (d) 3,442
355 Colorado HFA, Revenue Refunding Bonds (S/F Program),
AMT, Series D-2, 6.90% due 4/01/2029 362
8,000 Denver, Colorado, City and County Airport Revenue
Bonds, AMT, Series D, 7.75% due 11/15/2013 (a)(p) 9,158
5,050 Denver, Colorado, Urban Renewal Authority, Tax
Increment Revenue Bonds (Pavilions), AMT, 7.75%
due 9/01/2016 5,200
Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee), Series A:
1,735 7.10% due 9/01/2014 1,854
5,065 7.35% due 9/01/2031 5,360
Portfolio Abbreviations
To simplify the listings of portfolio holdings in the Schedules of Investments,
we have abbreviated the names of many of the securities according to the list at
right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
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
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
ROLS Reset Option Long Securities
S/F Single-Family
VRDN Variable Rate Demand Notes
SEMI-ANNUAL REPORTS APRIL 30, 2006 11
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Colorado (concluded)
Plaza Metropolitan District Number 1, Colorado, Tax
Allocation Revenue Bonds (Public Improvement Fees):
$ 6,850 8% due 12/01/2025 $ 7,520
1,885 8.125% due 12/01/2025 1,879
=================================================================================================
Connecticut--0.7%
5,000 Bridgeport, Connecticut, Senior Living Facilities
Revenue Bonds (3030 Park Retirement Community
Project), 7.25% due 4/01/2035 4,212
450 Connecticut State Development Authority, IDR (AFCO
Cargo BDL-LLC Project), AMT, 7.35% due 4/01/2010 469
=================================================================================================
Delaware--0.3%
2,000 New Castle County, Delaware, PCR (General
Motors Corporation Project), VRDN, 7.875%
due 10/01/2008 (n) 2,000
=================================================================================================
Florida--5.7%
Hillsborough County, Florida, IDA, Exempt Facilities
Revenue Bonds (National Gypsum Company), AMT:
11,500 Series A, 7.125% due 4/01/2030 12,690
5,000 Series B, 7.125% due 4/01/2030 5,517
4,705 Lee County, Florida, Revenue Bonds, 5% due
10/01/2022 (a) 4,892
5,450 Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds, Series B,
6.50% due 5/01/2037 6,030
1,100 Orange County, Florida, Health Facilities Authority,
Health Care Revenue Refunding Bonds (Orlando
Lutheran Towers), 5.375% due 7/01/2020 1,077
2,500 Orlando, Florida, Greater Orlando Aviation Authority,
Airport Facilities Revenue Bonds (JetBlue Airways
Corp.), AMT, 6.50% due 11/15/2036 2,506
4,620 Santa Rosa Bay Bridge Authority, Florida, Revenue
Bonds, 6.25% due 7/01/2028 4,680
=================================================================================================
Georgia--1.7%
4,600 Atlanta, Georgia, Tax Allocation Bonds (Atlantic Station
Project), 7.90% due 12/01/2024 5,101
Brunswick & Glynn County, Georgia, Development
Authority, First Mortgage Revenue Bonds (Coastal
Community Retirement Corporation Project), Series A:
2,285 7.125% due 1/01/2025 2,312
3,595 7.25% due 1/01/2035 3,633
=================================================================================================
Idaho--1.7%
290 Idaho Housing Agency, S/F Mortgage Revenue
Refunding Bonds, AMT, Senior Series C-2, 7.15%
due 7/01/2023 291
10,000 Power County, Idaho, Industrial Development
Corporation, Solid Waste Disposal Revenue
Bonds (FMC Corporation Project), AMT, 6.45%
due 8/01/2032 10,675
=================================================================================================
Illinois--4.9%
725 Beardstown, Illinois, IDR (Jefferson Smurfit Corp.
Project), 8% due 10/01/2016 745
1,000 Bolingbrook, Illinois, Special Services Area Number 1,
Special Tax Bonds (Forest City Project), 5.90%
due 3/01/2027 (r) 927
13,200 Chicago, Illinois, O'Hare International Airport
Revenue Bonds, Third Lien, AMT, Series B-2, 6%
due 1/01/2029 (q) 14,544
3,915 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American Airlines
Inc. Project), 8.20% due 12/01/2024 3,931
20 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT,
Series B, 7.625% due 9/01/2027 (f)(g)(i) 20
3,285 Illinois Development Finance Authority Revenue Bonds
(Presbyterian Home Lake Project), Series B, 6.30%
due 9/01/2022 (h) 3,376
Illinois State Finance Authority Revenue Bonds,
Series A:
1,750 (Friendship Village of Schaumburg), 5.625%
due 2/15/2037 1,766
2,155 (Landing At Plymouth Place Project), 6%
due 5/15/2037 2,212
4,000 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds (McCormick
Place Expansion), Series A, 5.50% due 6/15/2023 (k) 4,286
=================================================================================================
Indiana--1.0%
2,850 Indiana Municipal Power Agency, Power Supply System
Revenue Bonds, Series A, 5% due 1/01/2029 (d) 2,926
3,750 Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A, 5% due 6/01/2028 (h) 3,844
=================================================================================================
Kansas--0.2%
1,250 Lenexa, Kansas, Health Care Facility Revenue Bonds
(Lakeview Village Inc.), Series C, 6.875%
due 5/15/2032 1,333
=================================================================================================
Kentucky--0.5%
3,000 Kentucky Economic Development Finance Authority,
Health System Revenue Refunding Bonds (Norton
Healthcare Inc.), Series A, 6.625% due 10/01/2028 3,231
=================================================================================================
Louisiana--5.8%
6,750 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Franciscan Missionaries of Our Lady Health
System, Inc.), Series A, 5.25% due 8/15/2036 6,859
1,000 Louisiana Public Facilities Authority, Revenue
Refunding Bonds (Pennington Medical Foundation
Project), 5% due 7/01/2031 1,001
10,000 Louisiana State Citizens Property Insurance
Corporation, Assessment Revenue Bonds, Series B,
5% due 6/01/2020 (a) 10,426
19,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project), 6.50%
due 1/01/2017 19,377
=================================================================================================
Maryland--3.6%
Baltimore, Maryland, Convention Center Hotel
Revenue Bonds:
5,615 Senior Series A, 5.25% due 9/01/2039 (q) 5,927
1,920 Sub-Series B, 5.875% due 9/01/2039 1,999
3,000 Maryland State Energy Financing Administration,
Limited Obligation Revenue Bonds (Cogeneration --
AES Warrior Run), AMT, 7.40% due 9/01/2019 3,031
Maryland State Health and Higher Educational Facilities
Authority, Revenue Refunding Bonds:
6,375 (Peninsula Regional Medical Center), 5%
due 7/01/2036 6,435
4,000 (University of Maryland Medical System), 6%
due 7/01/2032 4,289
12 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Maryland (concluded)
$ 500 Maryland State Industrial Development Financing
Authority, Economic Development Revenue Bonds
(Our Lady of Good Counsel School), Series A, 6%
due 5/01/2035 $ 530
1,500 Prince Georges County, Maryland, Special Obligation
Bonds (National Harbor Project), 5.20%
due 7/01/2034 1,504
=================================================================================================
Massachusetts--9.4%
6,640 Massachusetts Bay Transportation Authority, Sales Tax
Revenue Refunding Bonds, Senior Series A, 5% due
7/01/2012 (l) 7,045
1,410 Massachusetts State College Building Authority, Project
Revenue Bonds, Series A, 5% due 5/01/2031 (a) 1,458
10,000 Massachusetts State, Consolidated Loan, GO, Series C,
5% due 9/01/2022 10,424
3,500 Massachusetts State Development Finance Agency,
Human Service Provider Revenue Bonds (Seven Hills
Foundation & Affiliates), 5% due 9/01/2035 (m) 3,536
1,700 Massachusetts State Development Finance Agency
Revenue Bonds (WGBH Educational Foundation),
Series A, 5.375% due 1/01/2012 (a)(l) 1,846
2,750 Massachusetts State Development Finance Agency,
Revenue Refunding Bonds (Western New England
College), Series A, 5% due 9/01/2033 (b) 2,810
3,125 Massachusetts State Health and Educational
Facilities Authority, Revenue Bonds (University of
Massachusetts Memorial Healthcare), Series D,
5% due 7/01/2033 3,088
19,330 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A,
5% due 8/15/2030 (h) 20,027
10,000 Massachusetts State Special Obligation Dedicated Tax
Revenue Bonds, 5.25% due 1/01/2014 (d)(l) 10,723
=================================================================================================
Michigan--1.3%
6,060 Macomb County, Michigan, Hospital Finance Authority,
Hospital Revenue Bonds (Mount Clemens General
Hospital), Series B, 5.875% due 11/15/2034 6,380
2,500 Michigan State Strategic Fund, PCR, Refunding
(General Motors Corp.), 6.20% due 9/01/2020 2,158
=================================================================================================
Minnesota--1.2%
Eden Prairie, Minnesota, M/F Housing Revenue Bonds
(Rolling Hills Project), Series A (i):
420 6% due 8/20/2021 455
2,000 6.20% due 2/20/2043 2,147
960 Minneapolis, Minnesota, M/F Housing Revenue Bonds
(Gaar Scott Loft Project), AMT, 5.95% due 5/01/2030 992
Minnesota State Municipal Power Agency, Electric
Revenue Bonds:
1,000 5% due 10/01/2030 1,019
3,340 5% due 10/01/2035 3,398
=================================================================================================
Missouri--0.5%
2,690 Fenton, Missouri, Tax Increment Revenue Refunding
and Improvement Bonds (Gravois Bluffs), 7%
due 10/01/2011 (l) 3,071
110 Missouri State Housing Development Commission,
S/F Mortgage Revenue Bonds, Homeownership, AMT,
Series B, 7.55% due 9/01/2027 (g)(i) 111
=================================================================================================
Nebraska--0.3%
Lincoln, Nebraska, Sanitation and Sewer
Revenue Bonds:
865 4.25% due 6/15/2024 823
905 4.25% due 6/15/2025 858
=================================================================================================
New Hampshire--0.5%
3,425 New Hampshire Health and Education Facilities
Authority, Revenue Refunding Bonds (Elliot Hospital),
Series B, 5.60% due 10/01/2022 3,605
=================================================================================================
New Jersey--19.0%
11,435 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50%
due 6/15/2024 11,843
New Jersey EDA, First Mortgage Revenue Bonds,
Series A:
710 (Lions Gate Project), 5.75% due 1/01/2025 722
230 (Lions Gate Project), 5.875% due 1/01/2037 234
3,000 (The Presbyterian Home), 6.375% due 11/01/2031 3,116
20,000 New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5% due 7/01/2029 (k) 20,621
4,400 New Jersey EDA, Retirement Community Revenue
Bonds (Cedar Crest Village Inc. Facility), Series A,
7.25% due 11/15/2031 4,746
New Jersey EDA, School Facilities Construction
Revenue Bonds, Series O:
8,825 5.25% due 3/01/2023 9,349
1,585 5.25% due 3/01/2026 1,673
New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT:
3,905 6.25% due 9/15/2019 3,842
14,000 6.25% due 9/15/2029 13,646
3,680 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (Pascack Valley Hospital Association),
6.625% due 7/01/2036 3,785
1,400 New Jersey Health Care Facilities Financing Authority,
Revenue Refunding Bonds (Pascack Valley Hospital
Association), 5.125% due 7/01/2028 1,240
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series D:
9,715 5% due 6/15/2019 (h) 10,141
9,410 5% due 6/15/2020 9,723
7,000 5% due 6/15/2020 (h) 7,286
20,575 Port Authority of New York and New Jersey, Special
Obligation Revenue Bonds, DRIVERS, AMT,
Series 192, 7.343% due 12/01/2025 (k)(o) 21,725
=================================================================================================
New York--20.2%
2,200 Dutchess County, New York, IDA, Civic Facility Revenue
Refunding Bonds (Saint Francis Hospital), Series A,
7.50% due 3/01/2029 2,389
11,390 Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Bonds, Series A,
6.10% due 7/01/2006 (d)(l) 11,664
11,000 Metropolitan Transportation Authority, New York,
Transportation Revenue Refunding Bonds, Series F,
5% due 11/15/2035 11,226
1,250 New York City, New York, City IDA, Special Facility
Revenue Bonds (British Airways Plc Project), AMT,
7.625% due 12/01/2032 1,356
14,000 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System, Revenue
Refunding Bonds, 5.50% due 6/15/2010 (l) 15,072
SEMI-ANNUAL REPORTS APRIL 30, 2006 13
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
New York (concluded)
New York City, New York, GO:
$10,000 Series M, 5% due 4/01/2021 $ 10,334
2,500 Series O, 5% due 6/01/2033 2,551
10,000 New York City, New York, GO, Refunding, Trust Receipts,
Series R, 8.629% due 5/15/2014 (d)(o) 12,055
6,500 New York Liberty Development Corporation, Revenue
Bonds (Goldman Sachs Headquarters), 5.25%
due 10/01/2035 7,012
New York State Dormitory Authority, Revenue
Refunding Bonds (Mount Sinai Health), Series A:
5,000 6.75% due 7/01/2020 5,398
315 6.50% due 7/01/2025 336
5,000 New York State Dormitory Authority, State Personal
Income Tax Revenue Bonds (Education), Series F,
5% due 3/15/2035 5,144
8,360 New York State Dormitory Authority, Supported Debt
Revenue Refunding Bonds (Department of Health),
Series A, 5% due 7/01/2023 (c) 8,652
8,725 Port Authority of New York and New Jersey, Revenue
Refunding Bonds, AMT, 120th Series, 6% due
10/15/2032 (k) 9,070
2,500 Suffolk County, New York, IDA, IDR, Refunding
(Nissequogue Cogeneration Partners Facility), AMT,
5.50% due 1/01/2023 2,304
9,400 Tobacco Settlement Financing Corporation of New York
Revenue Bonds, Series C-1, 5.50% due 6/01/2021 10,053
10,000 Triborough Bridge and Tunnel Authority, New York,
Subordinate Revenue Bonds, 5.25% due 11/15/2030 10,456
Westchester County, New York, IDA, Continuing Care
Retirement Mortgage Revenue Bonds (Kendal on
Hudson Project), Series A:
3,450 6.375% due 1/01/2024 3,657
2,895 6.50% due 1/01/2034 3,075
=================================================================================================
North Carolina--1.1%
4,750 North Carolina Eastern Municipal Power Agency,
Power System Revenue Bonds, Series D, 6.75%
due 1/01/2026 5,165
215 North Carolina HFA, Home Ownership Revenue Bonds,
AMT, Series 8-A, 6.20% due 7/01/2016 221
815 North Carolina, HFA, S/F Revenue Bonds, Series II,
6.20% due 3/01/2016 (e) 834
1,000 North Carolina Medical Care Commission, Health Care
Facilities, First Mortgage Revenue Bonds (Arbor Acres
Community Project), 6.375% due 3/01/2032 1,048
=================================================================================================
Ohio--3.6%
Cuyahoga County, Ohio, Mortgage Revenue Bonds
(West Tech Apartments Project), AMT (i):
1,410 5.75% due 9/20/2020 1,463
2,250 5.85% due 9/20/2030 2,334
5,065 Hamilton County, Ohio, Sewer System Improvement
Revenue Bonds (The Metropolitan Sewer District of
Greater Cincinnati), Series B, 5% due 12/01/2028 (k) 5,248
2,175 Lucas County, Ohio, Health Care Facility Revenue
Refunding and Improvement Bonds (Sunset
Retirement Communities), Series A, 6.625%
due 8/15/2030 2,307
5,000 Mason, Ohio, City School District, GO (School
Improvement), 5% due 12/01/2031 (h) 5,147
2,495 Mason, Ohio, Sewer System Revenue Refunding and
Improvement Bonds, 5% due 12/01/2028 (k) 2,575
970 Port of Greater Cincinnati Development Authority,
Ohio, Special Assessment Revenue Bonds
(Cooperative Public Parking Infrastructure Project),
6.30% due 2/15/2024 1,043
Toledo-Lucas County, Ohio, Port Authority Revenue
Bonds (Saint Mary Woods Project), Series A:
750 6% due 5/15/2024 761
2,250 6% due 5/15/2034 2,263
=================================================================================================
Oklahoma--0.6%
4,080 Norman, Oklahoma, Regional Hospital Authority,
Hospital Revenue Bonds, 5.375% due 9/01/2036 4,081
=================================================================================================
Oregon--1.5%
4,405 Oregon State Department of Administrative Services,
COP, Series A, 6% due 5/01/2010 (a)(l) 4,806
2,870 Oregon State, GO, Refunding (Veterans Welfare),
Series 80A, 5.70% due 10/01/2032 2,887
1,830 Portland, Oregon, Housing Authority, Housing Revenue
Bonds (Pine Square and University Place), Series A,
5.875% due 1/01/2022 1,814
=================================================================================================
Pennsylvania--6.2%
2,570 Allegheny County, Pennsylvania, IDA, Environmental
Improvement Revenue Refunding Bonds, 5.50%
due 11/01/2016 2,659
5,270 Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds
(National Gypsum Company), AMT, Series A,
6.25% due 11/01/2027 5,594
16,270 Pennsylvania State Higher Educational Facilities
Authority, Health Services Revenue Refunding Bonds
(Allegheny Delaware Valley Obligation), Series C,
5.875% due 11/15/2016 (k) 16,770
Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development:
1,265 7.75% due 12/01/2017 1,280
3,650 (Days Inn), Refunding, Series B, 6.50%
due 2/01/2007 (l) 3,781
4,000 (Doubletree), Refunding, Series A, 6.50%
due 2/01/2007 (l) 4,144
5,000 Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Bonds (Guthrie Healthcare System),
Series B, 7.125% due 12/01/2031 5,856
=================================================================================================
14 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Rhode Island--1.1%
$ 4,240 Central Falls, Rhode Island, Detention Facility
Corporation, Detention Facility, Revenue Refunding
Bonds, 7.25% due 7/15/2035 $ 4,630
Woonsocket, Rhode Island, GO (d):
1,225 6% due 10/01/2017 1,340
1,195 6% due 10/01/2018 1,305
=================================================================================================
South Carolina--1.5%
Charleston Educational Excellence Financing
Corporation, South Carolina, Revenue Bonds,
ROLS (b)(o):
3,898 Series II-R-481X-1, 6.586% due 12/01/2028 4,317
3,460 Series II-R-481X-2, 6.586% due 12/01/2029 3,827
1,255 Series II-R-481X-3, 6.586% due 12/01/2030 1,386
=================================================================================================
Tennessee--2.3%
4,610 Hardeman County, Tennessee, Correctional Facilities
Corporation Revenue Bonds, 7.75% due 8/01/2017 4,758
10,000 McMinn County, Tennessee, IDB, Solid Waste Revenue
Bonds (Recycling Facility--Calhoun Newsprint),
AMT, 7.40% due 12/01/2022 10,028
=================================================================================================
Texas--12.7%
5,000 Alliance Airport Authority, Inc., Texas, Special Facilities
Revenue Bonds (American Airlines Inc. Project),
AMT, 7.50% due 12/01/2029 4,834
Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), First Tier, Series A:
5,000 6.70% due 1/01/2028 5,316
5,000 6.70% due 1/01/2032 5,275
Bexar County, Texas, Housing Finance Corporation,
M/F Housing Revenue Bonds (Water at Northern
Hills Apartments), Series A (k):
1,300 5.80% due 8/01/2021 1,320
2,460 6% due 8/01/2031 2,497
1,000 6.05% due 8/01/2036 1,015
6,650 Brazos River Authority, Texas, PCR, Refunding
(Utilities Electric Company), AMT, Series B,
5.05% due 6/01/2030 6,656
3,755 Brazos River Authority, Texas, Revenue Refunding
Bonds (Reliant Energy Inc. Project), Series B,
7.75% due 12/01/2018 4,070
Gregg County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Good
Shepherd Medical Center Project) (m):
3,000 6.875% due 10/01/2020 3,333
2,000 6.375% due 10/01/2025 2,182
5,000 Guadalupe-Blanco River Authority, Texas, Sewage and
Solid Waste Disposal Facility Revenue Bonds (E. I. du
Pont de Nemours and Company Project), AMT,
6.40% due 4/01/2026 5,108
3,900 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue
Bonds (Citgo Petroleum Corporation Project), AMT,
7.50% due 5/01/2025 4,382
1,600 Houston, Texas, Industrial Development Corporation
Revenue Bonds (Air Cargo), AMT, 6.375%
due 1/01/2023 1,707
Lower Colorado River Authority, Texas, PCR (Samsung
Austin Semiconductor), AMT:
4,830 6.375% due 4/01/2027 5,036
3,330 6.95% due 4/01/2030 3,686
7,030 Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (Reliant Energy Inc.),
Series C, 8% due 5/01/2029 7,557
3,900 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds
(Citgo Petroleum Corporation Project), AMT,
8.25% due 11/01/2031 4,083
6,500 Texas State Turnpike Authority, Central Texas Turnpike
System Revenue Bonds, First Tier, Series A, 5.50%
due 8/15/2039 (a) 6,971
7,020 Tyler, Texas, Waterworks and Sewer Revenue Bonds,
5.70% due 9/01/2010 (d)(l) 7,558
=================================================================================================
Utah--0.3%
1,545 Utah State Board of Regents, Revenue Refunding
Bonds (University of Utah Research Facilities),
Series A, 5.50% due 4/01/2010 (k)(l) 1,656
=================================================================================================
Virginia--2.7%
James City County, Virginia, EDA, Residential Care
Facility, First Mortgage Revenue Refunding Bonds
(Williamsburg Landing, Inc.), Series A:
1,500 5.35% due 9/01/2026 1,516
2,000 5.50% due 9/01/2034 2,026
Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds:
6,750 Senior Series A, 5.50% due 8/15/2028 6,876
24,800 Senior Series B, 6.67% due 8/15/2029 (r) 6,510
1,000 Winchester, Virginia, IDA, Residential Care Facilities,
Revenue Bonds (Westminster-Canterbury), Series A,
5.20% due 1/01/2027 1,001
=================================================================================================
Washington--0.3%
Vancouver, Washington, Housing Authority,
Housing Revenue Bonds (Teal Pointe Apartments
Project), AMT:
945 6% due 9/01/2022 948
1,250 6.20% due 9/01/2032 1,254
=================================================================================================
SEMI-ANNUAL REPORTS APRIL 30, 2006 15
Schedule of Investments (concluded) MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Wisconsin--0.7%
$ 695 Milwaukee, Wisconsin, Revenue Bonds (Air Cargo),
AMT, 6.50% due 1/01/2025 $ 746
Wisconsin Health and Educational Facilities
Authority, Revenue Refunding Bonds (Eastcastle
Place Inc. Project):
1,000 6% due 12/01/2024 1,022
1,800 6.125% due 12/01/2034 1,829
700 Wisconsin State, GO, AMT, Series B, 6.20%
due 11/01/2026 (k) 701
=================================================================================================
Wyoming--0.4%
2,500 Wyoming Student Loan Corporation, Student Loan
Revenue Refunding Bonds, Series A, 6.20%
due 6/01/2024 2,648
=================================================================================================
Puerto Rico--3.2%
15,000 Puerto Rico Commonwealth Highway and
Transportation Authority, Transportation Revenue
Bonds, Trust Receipts, Class R, Series B, 7.659%
due 7/01/2035 (k)(o) 17,721
2,500 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Trust Receipts, Class R, Series 16 HH,
7.405% due 7/01/2013 (h)(o) 2,928
=================================================================================================
U.S. Virgin Islands--1.0%
6,250 Virgin Islands Public Finance Authority, Refinery
Facilities Revenue Bonds (Hovensa Refinery), AMT,
6.125% due 7/01/2022 6,854
-------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$930,972)--149.5% 973,669
=================================================================================================
Shares
Held Short-Term Securities
=================================================================================================
8,238 Merrill Lynch Institutional Tax-Exempt Fund,
3.49% (j)(s) 8,238
-------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$8,238)--1.3% 8,238
=================================================================================================
Total Investments (Cost--$939,210*)--150.8% 981,907
Other Assets Less Liabilities--1.9% 12,666
Preferred Stock, at Redemption Value--(52.7%) (343,344)
---------
Net Assets Applicable to Common Stock--100.0% $ 651,229
=========
-------------------------------------------------------------------------------------------------
* The cost and unrealized appreciation (depreciation) on investments as of
April 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................. $ 938,575
=========
Gross unrealized appreciation .................. $ 47,762
Gross unrealized depreciation .................. (4,430)
---------
Net unrealized appreciation .................... $ 43,332
=========
(a) AMBAC Insured.
(b) Assured Guaranty Insured.
(c) CIFG Insured.
(d) FGIC Insured.
(e) FHA Insured.
(f) FHLMC Collateralized.
(g) FNMA Collateralized.
(h) FSA Insured.
(i) GNMA Collateralized.
(j) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 5,738 $231
--------------------------------------------------------------------------
(k) MBIA Insured.
(l) Prerefunded.
(m) Radian Insured.
(n) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(o) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(p) Tradable Custodial Receipts (TRACERS).
(q) XL Capital Insured.
(r) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(s) Represents the current yield as of 4/30/2006.
o Forward interest rate swaps outstanding as of April 30, 2006 were as
follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Pay a fixed rate of 4.069% and receive a
floating rate based on 1-week Bond
Market Association Rate
Broker, JPMorgan Chase Bank
Expires June 2021 $35,000 $611
--------------------------------------------------------------------------
See Notes to Financial Statements.
16 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments MuniYield Quality Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Arizona--1.1%
$ 2,350 Downtown Phoenix Hotel Corporation, Arizona,
Revenue Bonds, Sub-Series B, 5% due 7/01/2036 (d) $ 2,404
2,345 Maricopa County, Arizona, Public Finance Corporation,
Lease Revenue Bonds, RIB, Series 511X, 6.93%
due 7/01/2014 (a)(i) 2,693
=================================================================================================
California--22.4%
4,150 Alameda Corridor Transportation Authority, California,
Capital Appreciation Revenue Refunding Bonds,
Subordinate Lien, Series A, 5.45% due
10/01/2025 (a)(m) 3,161
1,250 Anaheim, California, Public Financing Authority, Electric
System Distribution Facilities Revenue Bonds, Series A,
5% due 10/01/2031 (f) 1,281
California State, GO, Refunding:
4,450 5.25% due 9/01/2010 (h) 4,708
2,850 ROLS, Series II-R-272, 6.566% due 2/01/2033 (i)(j) 3,093
3,450 California State University, Systemwide Revenue Bonds,
Series A, 5% due 11/01/2035 (d) 3,538
California State, Various Purpose, GO:
3,300 5.50% due 4/01/2028 3,570
12,500 5.25% due 11/01/2029 13,051
3,200 5.50% due 11/01/2033 3,443
2,100 California State, Various Purpose, GO, Refunding, 5%
due 12/01/2031 (g) 2,159
1,200 Chino Valley, California, Unified School District, GO
(Election of 2002), Series C, 5.25% due 8/01/2030 (g) 1,278
Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds:
5,000 RIB, Series RR II R 285X, 7.073% due 6/01/2043 (b)(i) 5,924
7,080 RIB, Series RR II R 287X, 7.326% due 6/01/2038 (i)(k) 8,497
1,600 Series B, 5.50% due 6/01/2013 (b)(h) 1,748
10,650 Los Angeles, California, Unified School District, GO,
Series A, 5% due 1/01/2028 (g) 11,007
4,000 Metropolitan Water District of Southern California,
Waterworks Revenue Bonds, Series B-1, 5%
due 10/01/2029 (d) 4,123
2,000 Mount Diablo, California, Unified School District, GO
(Election of 2002), 5% due 7/01/2027 (d) 2,059
2,000 Poway, California, Redevelopment Agency, Tax
Allocation Refunding Bonds (Paguay Redevelopment
Project), 5.125% due 6/15/2033 (a) 2,059
2,225 San Diego, California, Community College District, GO
(Election of 2002), 5% due 5/01/2030 (f) 2,300
9,000 San Diego County, California, Water Authority, Water
Revenue Refunding Bonds, COP, Series A, 5%
due 5/01/2032 (g) 9,233
5,655 San Ramon Valley, California, Unified School District,
GO (Election of 2002), 5% due 8/01/2024 (f) 5,872
1,950 Tamalpais, California, Union High School District, GO
(Election of 2001), 5% due 8/01/2028 (f) 2,007
1,700 University of California, Limited Project Revenue Bonds,
Series B, 5% due 5/15/2033 (f) 1,753
2,100 University of California Revenue Bonds (Multiple
Purpose Projects), Series Q, 5% due 9/01/2034 (f) 2,160
3,150 Ventura County, California, Community College District,
GO (Election of 2002), Series B, 5% due 8/01/2030 (g) 3,258
=================================================================================================
Colorado--4.1%
Colorado Health Facilities Authority Revenue Bonds,
Series A:
1,650 (Catholic Health Initiatives), 5.50%
due 3/01/2032 (c) 1,774
1,600 (Covenant Retirement Communities Inc.), 5.50%
due 12/01/2027 (j) 1,683
1,000 (Covenant Retirement Communities Inc.), 5.50%
due 12/01/2033 (j) 1,046
Colorado Housing and Finance Authority, Revenue
Refunding Bonds, AMT:
1,265 (S/F Program), Series B-2, 6.80% due 2/01/2031 (g) 1,302
875 Series C-2, 7.25% due 10/01/2031 (a) 885
9,000 E-470 Public Highway Authority, Colorado, Capital
Appreciation Revenue Refunding Bonds, Series B,
5.485% due 9/01/2029 (g)(m) 2,617
11,125 Northwest Parkway, Colorado, Public Highway Authority,
Capital Appreciation Revenue Bonds, Senior
Convertible, Series C, 5.345% due 6/15/2025 (f)(m) 9,497
=================================================================================================
District of Columbia--0.6%
2,500 District of Columbia, Revenue Refunding Bonds
(Catholic University of America Project), 5.625%
due 10/01/2029 (a) 2,646
=================================================================================================
Florida--2.2%
2,240 Beacon Tradeport Community Development District,
Florida, Special Assessment Revenue Refunding
Bonds (Commercial Project), Series A, 5.625%
due 5/01/2032 (j) 2,401
5,200 Orange County, Florida, Sales Tax Revenue Refunding
Bonds, Series B, 5.125% due 1/01/2032 (d) 5,377
2,100 Pasco County, Florida, School Board, COP, Series A,
5% due 8/01/2030 (a) 2,159
=================================================================================================
Georgia--6.0%
3,500 Atlanta, Georgia, Airport Passenger Facility, Charge
and Subordinate Lien General Revenue Refunding
Bonds, Series C, 5% due 1/01/2033 (f) 3,580
5,000 Atlanta, Georgia, Airport Passenger Facility, Charge
Revenue Refunding Bonds, ROLS, Series II-R-517X,
6.079% due 1/01/2033 (f)(i) 5,228
4,200 Atlanta, Georgia, Water and Wastewater Revenue
Bonds, 5% due 11/01/2034 (f) 4,302
Augusta, Georgia, Water and Sewer Revenue Bonds (f):
5,000 5.25% due 10/01/2034 5,286
3,220 5.25% due 10/01/2039 3,388
4,785 Monroe County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Corporation--Scherer),
Series A, 6.80% due 1/01/2011 5,331
=================================================================================================
Hawaii--0.5%
2,000 Hawaii State, GO, Series CX, 5.50% due 2/01/2021 (f) 2,137
=================================================================================================
Illinois--21.6%
5,000 Chicago, Illinois, Board of Education, GO, RIB,
Series 467, 7.43% due 12/01/2027 (a)(i) 5,506
Chicago, Illinois, GO (Lakefront Millennium Parking
Facilities) (g):
5,000 5.125% due 1/01/2028 5,120
2,500 5.372% due1/01/2029 (m) 2,694
SEMI-ANNUAL REPORTS APRIL 30, 2006 17
Schedule of Investments (continued)
MuniYield Quality Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Illinois (concluded)
Chicago, Illinois, O'Hare International Airport Revenue
Bonds, Third Lien, AMT, Series B-2:
$ 3,400 5.75% due 1/01/2023 (f) $ 3,696
4,000 5.75% due 1/01/2024 (f) 4,348
3,300 6% due 1/01/2029 (b) 3,636
Chicago, Illinois, O'Hare International Airport Revenue
Refunding Bonds, AMT:
2,665 3rd Lien, Series A-2, 5.75% due 1/01/2021 (f) 2,897
6,835 DRIVERS, Series 250, 7.343% due 1/01/2021 (g)(i) 7,731
2,500 DRIVERS, Series 844Z, 6.838%
due 7/01/2010 (g)(i) 2,741
6,250 RIB, Series 994X, 6.65% due 1/01/2032 (g)(i) 6,611
5,080 Cook County, Illinois, Capital Improvement, GO,
Series C, 5.50% due 11/15/2012 (a)(h) 5,547
2,130 Illinois Development Finance Authority Revenue Bonds
(Presbyterian Home Lake Project), Series B, 6.25%
due 9/01/2017 (f) 2,187
Illinois Sports Facilities Authority, State Tax Supported
Revenue Bonds (a):
28,525 5.212% due 6/15/2030 (m) 24,722
5,500 5% due 6/15/2032 5,629
3,750 Illinois Student Assistance Commission, Student Loan
Revenue Refunding Bonds, AMT, Sub-Series CC,
6.875% due 3/01/2015 3,756
Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Refunding Bonds
(McCormick Place Expansion Project):
7,000 5.50% due 12/15/2024 (d) 7,409
3,500 Series B, 5.75% due 6/15/2023 (g) 3,824
=================================================================================================
Indiana--5.3%
Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A:
3,750 5% due 6/01/2028 (f) 3,844
7,500 5.25% due 6/01/2029 (d) 7,914
Indianapolis, Indiana, Local Public Improvement Bond
Bank, Revenue Refunding Bonds (Indianapolis Airport
Authority Project), AMT, Series B (g):
6,470 5.25% due 1/01/2028 6,754
5,055 5.25% due 1/01/2030 5,269
=================================================================================================
Louisiana--6.2%
8,500 Louisiana Local Government, Environmental Facilities,
Community Development Authority Revenue Bonds
(Capital Projects and Equipment Acquisition),
Series A, 6.30% due 7/01/2030 (a) 9,413
2,800 Louisiana State Citizens Property Insurance
Corporation, Assessment Revenue Bonds, Series B,
5% due 6/01/2023 (a) 2,906
4,675 Louisiana State Transportation Authority, Senior Lien
Toll Revenue Capital Appreciation Bonds, Series B,
5.31% due 12/01/2027 (a)(m) 1,512
New Orleans, Louisiana, Ernest N. Morial Exhibit Hall
Authority, Special Tax, Sub-Series A (a):
6,800 5.25% due 7/15/2028 6,997
5,000 5% due 7/15/2033 5,048
1,900 Terrebonne Parish, Louisiana, Hospital Service District
Number 1, Hospital Revenue Bonds (Terrebonne General
Medical Center Project), 5.50% due 4/01/2033 (a) 2,034
=================================================================================================
Maryland--1.3%
5,615 Baltimore, Maryland, Convention Center Hotel Revenue
Bonds, Senior Series A, 5.25% due 9/01/2039 (b) 5,927
=================================================================================================
Massachusetts--9.3%
Massachusetts Bay, Massachusetts, Transportation
Authority, General Transportation System, Revenue
Refunding Bonds, Series A (g):
3,730 7% due 3/01/2011 4,245
3,550 7% due 3/01/2014 4,173
2,000 Massachusetts Bay Transportation Authority, Sales Tax
Revenue Refunding Bonds, Senior Series A, 5%
due 7/01/2035 2,046
900 Massachusetts Bay Transportation Authority, Special
Assessment Revenue Refunding Bonds, Series A, 5%
due 7/01/2031 929
3,400 Massachusetts State, Consolidated Loan, GO, Series C,
5% due 9/01/2025 3,528
4,000 Massachusetts State HFA, Rental Housing Mortgage
Revenue Bonds, AMT, Series C, 5.60%
due 1/01/2045 (f) 4,188
1,915 Massachusetts State Port Authority, Special Facilities
Revenue Bonds, DRIVERS, AMT, Series 501, 6.838%
due 7/01/2009 (a)(i) 2,080
12,300 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (f) 12,743
2,400 Massachusetts State Special Obligation Dedicated Tax
Revenue Bonds, 5.25% due 1/01/2014 (d)(h) 2,574
1,210 Massachusetts State Water Resource Authority,
General Revenue Refunding Bonds, Series B, 5.125%
due 8/01/2027 (g) 1,255
4,200 University of Massachusetts Building Authority,
Facilities Revenue Bonds, Senior Series 4-A, 5.125%
due 11/01/2014 (g)(h) 4,509
=================================================================================================
Michigan--4.2%
5,000 Detroit, Michigan, Water Supply System Revenue
Bonds, Series B, 5.25% due 7/01/2032 (g) 5,249
2,300 Michigan Higher Education Student Loan Authority,
Student Loan Revenue Refunding Bonds, AMT,
Series XVII-G, 5.20% due 9/01/2020 (a) 2,373
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Project), AMT (b):
1,700 Series A, 5.50% due 6/01/2030 1,797
3,300 Series C, 5.65% due 9/01/2029 3,473
5,800 Series C, 5.45% due 12/15/2032 6,069
=================================================================================================
Nebraska--2.0%
6,315 Municipal Energy Agency of Nebraska, Power Supply
System Revenue Bonds, Series A, 5%
due 4/01/2033 (f) 6,471
2,300 Washington County, Nebraska, Wastewater Facilities
Revenue Bonds (Cargill Inc. Project), AMT, 5.90%
due 11/01/2027 2,466
=================================================================================================
Nevada--7.0%
4,100 Carson City, Nevada, Hospital Revenue Bonds
(Carson-Tahoe Hospital Project), Series A, 5.50%
due 9/01/2033 (j) 4,309
Clark County, Nevada, Airport System Subordinate
Lien Revenue Bonds, Series A-2 (d):
2,000 5% due 7/01/2030 2,044
19,100 5% due 7/01/2036 19,458
5,710 Washoe County, Nevada, School District, GO, 5.875%
due 12/01/2009 (f)(h) 6,112
=================================================================================================
18 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued)
MuniYield Quality Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
New Hampshire--3.5%
$10,000 New Hampshire Health and Education Facilities
Authority Revenue Bonds (Dartmouth-Hitchcock
Obligation Group, 5.50% due 8/01/2027 (f) $ 10,726
5,000 New Hampshire State Business Finance Authority,
PCR, Refunding (Public Service Company), AMT,
Series D, 6% due 5/01/2021 (g) 5,279
=================================================================================================
New Jersey--6.0%
New Jersey EDA, Cigarette Tax Revenue Bonds:
910 5.75% due 6/15/2029 961
1,385 5.50% due 6/15/2031 1,434
5,500 New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5.25% due 7/01/2031 (g) 5,826
New Jersey EDA, Revenue Bonds, ROLS (e)(i):
3,575 Series II-R-309-1, 7.073% due 6/15/2024 4,017
3,000 Series II-R-309-2, 7.073% due 6/15/2031 3,383
New Jersey EDA, School Facilities Construction
Revenue Bonds, Series O:
3,860 5.125% due 3/01/2028 4,006
7,500 5.125% due 3/01/2030 7,766
=================================================================================================
New York--9.3%
8,990 Metropolitan Transportation Authority, New York,
Transportation Revenue Bonds, Series A, 5%
due 11/15/2032 (d) 9,234
3,150 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System, Revenue
Refunding Bonds, Series A, 5% due 6/15/2035 (g) 3,228
New York City, New York, GO:
6,920 RIB, Series 394, 7.654% due 8/01/2016 (g)(i) 8,128
5,000 Series B, 5.875% due 8/15/2006 (b)(h) 5,106
140 Series F, 5.75% due 2/01/2019 (b) 142
265 New York City, New York, GO, Refunding, Series G,
5.75% due 2/01/2017 (f) 269
8,000 New York State Thruway Authority, General Revenue
Refunding Bonds, Series G, 5% due 1/01/2032 (f) 8,273
7,320 Tobacco Settlement Financing Corporation of
New York Revenue Bonds, Series A-1, 5.25%
due 6/01/2022 (a) 7,723
=================================================================================================
Ohio--1.1%
2,500 Columbus, Ohio, City School District, GO (School
Facilities Construction and Improvements), 5.25%
due 12/01/2027 (f) 2,656
2,000 Jackson, Ohio, Hospital Facilities Revenue Bonds
(Consolidated Health System--Jackson Hospital),
6.125% due 10/01/2009 (h)(j) 2,162
=================================================================================================
Oklahoma--0.5%
Tulsa, Oklahoma, Airports Improvement Trust, General
Revenue Bonds (Tulsa International Airport), AMT,
Series B (d):
1,000 6% due 6/01/2019 1,064
1,000 6.125% due 6/01/2026 1,069
=================================================================================================
Oregon--1.9%
7,500 Portland, Oregon, Sewer System Revenue Bonds, RIB,
Series 386, 7.38% due 8/01/2020 (d)(i) 8,664
=================================================================================================
Pennsylvania--6.7%
Pennsylvania State Public School Building Authority,
School Lease Revenue Bonds (The School District of
Philadelphia Project) (f):
6,000 5.25% due 6/01/2025 6,355
16,725 5% due 6/01/2033 17,105
6,250 Philadelphia, Pennsylvania, Authority for Industrial
Development, Lease Revenue Bonds, Series B, 5.50%
due 10/01/2021 (f) 6,694
=================================================================================================
Rhode Island--0.6%
2,500 Providence, Rhode Island, GO, Series A, 5.70%
due 7/15/2007 (f)(h) 2,583
=================================================================================================
South Carolina--2.0%
8,900 South Carolina Transportation Infrastructure Bank
Revenue Bonds, Series A, 5% due 10/01/2033 (a) 9,101
=================================================================================================
Tennessee--4.1%
7,850 Chattanooga, Tennessee, IDB, Lease Rent Revenue
Bonds (Southside Redevelopment Corporation),
5.875% due 10/01/2024 (a) 8,436
5,000 Memphis-Shelby County, Tennessee, Airport Authority,
Airport Revenue Bonds, AMT, Series D, 6.25%
due 3/01/2018 (a) 5,389
Tennessee HDA, Homeownership Revenue Bonds,
AMT, Series 2-C (a):
2,075 6.10% due 7/01/2013 2,094
2,390 6.20% due 7/01/2015 2,439
=================================================================================================
Texas--11.8%
2,000 Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), Trust Certificates,
Second Tier, Series B, 6% due 1/01/2023 2,118
1,000 Bell County, Texas, Health Facilities Development
Revenue Bonds (Lutheran General Health Care
System), 6.50% due 7/01/2019 (c) 1,190
Dallas-Fort Worth, Texas, International Airport Revenue
Refunding and Improvement Bonds, AMT, Series A (d):
1,835 5.875% due 11/01/2017 1,969
2,145 5.875% due 11/01/2018 2,302
2,385 5.875% due 11/01/2019 2,559
5,235 Denton, Texas, Utility System Revenue Bonds, RIB,
Series 369, 7.88% due 12/01/2017 (f)(i) 6,203
Gregg County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Good
Shepherd Medical Center Project) (j):
6,000 6.875% due 10/01/2020 6,667
2,600 6.375% due 10/01/2025 2,837
4,000 Harris County-Houston Sports Authority, Texas,
Revenue Refunding Bonds, Senior Lien, Series G,
5.75% due 11/15/2020 (g) 4,314
9,250 Leander, Texas, Independent School District, Capital
Appreciation, GO, Refunding (School Building),
5.46% due 8/15/2028 (d)(m) 2,847
7,150 North Harris County, Texas, Regional Water Authority,
Senior Lien Revenue Bonds, 5.125%
due 12/15/2035 (g) 7,391
7,200 Texas State Turnpike Authority, Central Texas Turnpike
System Revenue Bonds, First Tier, Series A, 5.75%
due 8/15/2038 (a) 7,828
4,600 Travis County, Texas, Health Facilities Development
Corporation, Revenue Refunding Bonds (Ascension
Health Credit), Series A, 6.25% due 11/15/2009 (g)(h) 5,008
=================================================================================================
SEMI-ANNUAL REPORTS APRIL 30, 2006 19
Schedule of Investments (concluded)
MuniYield Quality Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Utah--3.7%
$15,000 Salt Lake City, Utah, Hospital Revenue Refunding
Bonds (IHC Hospitals Inc.), 6.30% due
2/15/2015 (g) $ 16,955
=================================================================================================
Virginia--0.7%
3,100 Halifax County, Virginia, IDA, Exempt Facility
Revenue Refunding Bonds (Old Dominion Electric
Cooperative Project), AMT, 5.625% due
6/01/2028 (a) 3,335
=================================================================================================
Washington--5.8%
7,500 Energy Northwest, Washington, Electric Revenue
Bonds, DRIVERS, Series 242, 7.373% due
7/01/2017 (g)(i) 8,841
2,400 Port of Tacoma, Washington, Revenue Refunding
Bonds, Series A, 5.25% due 12/01/2034 (a) 2,527
4,475 Seattle, Washington, Municipal Light and Power
Revenue Refunding Bonds, 5% due 11/01/2028 (f) 4,590
5,100 Tacoma, Washington, Regional Water Supply System,
Water Revenue Bonds, 5% due 12/01/2032 (g) 5,206
5,000 Washington State, GO, Series A and AT-6, 6.25%
due 2/01/2011 (f) 5,325
=================================================================================================
Puerto Rico--1.7%
Puerto Rico Electric Power Authority, Power
Revenue Bonds:
1,475 Series II, 5.25% due 7/01/2031 1,527
6,000 Series NN, 5.125% due 7/01/2029 6,164
-------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$670,895)--153.2% 693,796
=================================================================================================
Shares
Held Short-Term Securities
=================================================================================================
5,713 Merrill Lynch Institutional Tax-Exempt Fund, 3.49% (l)(n) 5,713
-------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$5,713)--1.3% 5,713
=================================================================================================
Total Investments (Cost--$676,608*)--154.5% 699,509
Other Assets Less Liabilities--0.8% 3,622
Preferred Stock, at Redemption Value--(55.3%) (250,234)
---------
Net Assets Applicable to Common Stock--100.0% $ 452,897
=========
-------------------------------------------------------------------------------------------------
* The cost and unrealized appreciation (depreciation) on investments as of
April 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................. $ 676,540
=========
Gross unrealized appreciation .................. $ 25,175
Gross unrealized depreciation .................. (2,206)
---------
Net unrealized appreciation .................... $ 22,969
=========
(a) AMBAC Insured.
(b) XL Capital Insured.
(c) Escrowed to maturity.
(d) FGIC Insured.
(e) Assured Guaranty Insured.
(f) FSA Insured.
(g) MBIA Insured.
(h) Prerefunded.
(i) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(j) Radian Insured.
(k) CIFG Insured.
(l) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund (5,787) $69
--------------------------------------------------------------------------
(m) Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase.
(n) Represents the current yield as of 4/30/2006.
o Forward interest rate swaps outstanding as of April 30, 2006 were as
follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Pay a fixed rate of 3.844% and receive a
floating rate based on 1-week Bond
Market Association Rate
Broker, JPMorgan Chase Bank
Expires May 2016 $40,000 $ 635
Pay a fixed rate of 4.034% and receive a
floating rate based on 1-week Bond
Market Association Rate
Broker, JPMorgan Chase Bank
Expires July 2016 $15,000 37
--------------------------------------------------------------------------
Total $ 672
=======
See Notes to Financial Statements.
20 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments MuniYield Quality Fund II, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Arizona--1.5%
$ 1,500 Downtown Phoenix Hotel Corporation, Arizona,
Revenue Bonds, Sub-Series B, 5% due 7/01/2036 (c) $ 1,535
2,700 Northern Arizona University System Revenue Bonds,
5.50% due 6/01/2034 (c) 2,914
=================================================================================================
California--26.3%
8,150 Alameda Corridor Transportation Authority, California,
Capital Appreciation Revenue Refunding Bonds,
Subordinate Lien, Series A, 5.319%
due 10/01/2025 (a)(p) 6,207
3,800 Anaheim, California, Public Financing Authority,
Electric System Distribution Facilities Revenue Bonds,
Series A, 5% due 10/01/2031 (f) 3,894
2,500 California Health Facilities Financing Authority Revenue
Bonds (Kaiser Permanente), RIB, Series 26, 6.89%
due 6/01/2022 (f)(l) 2,763
California State, GO, Refunding:
2,200 5.25% due 9/01/2010 (j) 2,327
1,950 ROLS, Series II-R-272, 6.566% due 2/01/2033 (k)(l) 2,116
California State, Various Purpose, GO:
2,750 5.25% due 11/01/2029 2,871
6,500 5.50% due 11/01/2033 6,993
1,350 California State, Various Purpose, GO, Refunding, 5%
due 12/01/2031 (i) 1,388
2,200 California State University, Systemwide Revenue
Bonds, Series A, 5% due 11/01/2035 (c) 2,256
15,000 East Side Union High School District, California, Santa
Clara County, Capital Appreciation, GO (Election of
2002), Series E, 5.15% due 8/01/2029 (h)(p) 4,539
2,770 Fairfield-Suisun, California, Unified School District, GO
(Election of 2002), 5.50% due 8/01/2028 (i) 3,005
Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds,
Series B (j):
2,300 5.50% due 6/01/2013 (h) 2,513
3,725 5.625% due 6/01/2013 (b)(q) 4,098
2,815 John Swett Unified School District, California, GO,
Series A, 5.50% due 8/01/2026 (f) 3,019
9,300 Los Angeles, California, Unified School District, GO,
Series A, 5% due 1/01/2028 (i) 9,612
2,600 Metropolitan Water District of Southern California,
Waterworks Revenue Bonds, Series B-1, 5%
due 10/01/2029 (c) 2,680
2,900 Palm Springs, California, Financing Authority, Lease
Revenue Refunding Bonds (Convention Center
Project), Series A, 5.50% due 11/01/2029 (i) 3,170
1,250 Poway, California, Redevelopment Agency, Tax
Allocation Refunding Bonds (Paguay Redevelopment
Project), 5.125% due 6/15/2033 (a) 1,287
6,000 Sacramento, California, Municipal Utility District,
Electric Revenue Bonds, Series N, 5%
due 8/15/2028 (i) 6,141
1,000 San Diego, California, Community College District, GO
(Election of 2002), 5% due 5/01/2030 (f) 1,034
1,325 Tamalpais, California, Union High School District, GO
(Election of 2001), 5% due 8/01/2028 (f) 1,364
1,000 University of California, Limited Project Revenue Bonds,
Series B, 5% due 5/15/2033 (f) 1,031
1,350 University of California Revenue Bonds (Multiple
Purpose Projects), Series Q, 5% due 9/01/2034 (f) 1,389
2,025 Ventura County, California, Community College District,
GO (Election of 2002), Series B, 5% due 8/01/2030 (i) 2,095
=================================================================================================
Colorado--6.0%
Colorado Health Facilities Authority Revenue Bonds,
Series A:
1,150 (Catholic Health Initiatives), 5.50%
due 3/01/2032 (n) 1,236
1,200 (Covenant Retirement Communities Inc.), 5.50%
due 12/01/2027 (k) 1,262
675 (Covenant Retirement Communities Inc.), 5.50%
due 12/01/2033 (k) 706
1,475 Colorado Housing and Finance Authority, Revenue
Refunding Bonds (S/F Program), AMT, Series B-2,
6.80% due 2/01/2031 (i) 1,518
7,500 E-470 Public Highway Authority, Colorado, Capital
Appreciation Revenue Refunding Bonds, Series B,
5.607% due 9/01/2032 (i)(p) 1,838
10,975 Northwest Parkway, Colorado, Public Highway
Authority, Capital Appreciation Revenue Bonds,
Senior Convertible, Series C, 5.327%
due 6/15/2025 (f)(p) 9,369
1,735 Northwest Parkway, Colorado, Public Highway
Authority Revenue Bonds, Series A, 5.50%
due 6/15/2021 (a) 1,868
=================================================================================================
Florida--2.4%
Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A (i)(p):
4,575 5.21% due 10/01/2034 1,006
4,495 5.22% due 10/01/2035 930
3,575 Orange County, Florida, Sales Tax Revenue Refunding
Bonds, Series B, 5.125% due 1/01/2032 (c) 3,697
1,350 Pasco County, Florida, School Board, COP, Series A, 5%
due 8/01/2030 (a) 1,388
=================================================================================================
Georgia--8.3%
5,000 Atlanta, Georgia, Airport General Revenue Refunding
Bonds, Series B, 5.25% due 1/01/2033 (f) 5,250
8,500 Atlanta, Georgia, Airport Passenger Facility Charge
Revenue Refunding Bonds, ROLS, Series II-R-517X,
6.079% due 1/01/2033 (f)(l) 8,888
5,000 Atlanta, Georgia, Airport Revenue Refunding Bonds,
Series A, 5.875% due 1/01/2017 (c) 5,366
2,700 Atlanta, Georgia, Water and Wastewater Revenue
Bonds, 5% due 11/01/2034 (f) 2,766
2,170 Augusta, Georgia, Water and Sewer Revenue Bonds,
5.25% due 10/01/2039 (f) 2,283
=================================================================================================
Illinois--19.3%
Chicago, Illinois, O'Hare International Airport, General
Revenue Bonds, Third Lien, Series A:
2,300 5.25% due 1/01/2026 (i) 2,441
2,900 5% due 1/01/2033 (c) 2,983
Chicago, Illinois, O'Hare International Airport Revenue
Bonds, Third Lien, AMT, Series B-2:
5,200 5.75% due 1/01/2023 (f) 5,653
2,200 6% due 1/01/2029 (h) 2,424
4,750 Chicago, Illinois, O'Hare International Airport, Revenue
Refunding Bonds, DRIVERS, AMT, Series 844Z, 6.838%
due 7/01/2010 (i)(l) 5,208
2,460 Cook County, Illinois, Capital Improvement, GO,
Series C, 5.50% due 11/15/2012 (a)(j) 2,686
10,000 Illinois Regional Transportation Authority Revenue
Bonds, 6.50% due 7/01/2026 (i) 12,586
SEMI-ANNUAL REPORTS APRIL 30, 2006 21
Schedule of Investments (continued)
MuniYield Quality Fund II, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
Illinois (concluded)
$21,675 Illinois Sports Facilities Authority, State Tax Supported
Revenue Bonds, 5.264% due 6/15/2030 (a)(p) $ 18,785
3,625 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax, Revenue Refunding Bonds,
DRIVERS, Series 269, 7.363% due 6/15/2023 (i)(l) 4,295
=================================================================================================
Indiana--4.3%
Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A:
3,350 5% due 6/01/2028 (f) 3,434
3,750 5.25% due 6/01/2028 (c) 3,960
5,000 5.25% due 6/01/2029 (c) 5,276
=================================================================================================
Kansas--0.6%
1,680 Sedgwick and Shawnee Counties, Kansas, S/F
Mortgage-Backed Revenue Refunding Bonds, AMT,
Series A-2, 6.45% due 12/01/2033 (e)(i) 1,733
=================================================================================================
Louisiana--7.2%
2,330 Jefferson Parish, Louisiana, Home Mortgage Authority,
S/F Mortgage Revenue Bonds, AMT, Series B-1,
6.65% due 12/01/2033 (e)(i) 2,382
5,500 Lafayette, Louisiana, Utilities Revenue Bonds, 5%
due 11/01/2028 (i) 5,661
3,900 Louisiana Local Government, Environmental Facilities,
Community Development Authority Revenue Bonds
(Capital Projects and Equipment Acquisition),
Series A, 6.30% due 7/01/2030 (a) 4,319
1,800 Louisiana State Citizens Property Insurance
Corporation, Assessment Revenue Bonds, Series B,
5% due 6/01/2023 (a) 1,868
3,185 Louisiana State Transportation Authority, Senior Lien
Toll Revenue Capital Appreciation Bonds, Series B,
5.31% due 12/01/2027 (a)(p) 1,030
4,650 New Orleans, Louisiana, Ernest N. Morial Exhibit Hall
Authority, Special Tax, Sub-Series A, 5.25%
due 7/15/2028 (a) 4,785
1,300 Terrebonne Parish, Louisiana, Hospital Service District
Number 1, Hospital Revenue Bonds (Terrebonne
General Medical Center Project), 5.50%
due 4/01/2033 (a) 1,392
=================================================================================================
Massachusetts--12.2%
1,375 Massachusetts Bay Transportation Authority, Sales Tax
Revenue Refunding Bonds, Senior Series A, 5%
due 7/01/2035 1,407
8,600 Massachusetts Bay Transportation Authority, Special
Assessment Revenue Refunding Bonds, Series A, 5%
due 7/01/2031 8,874
2,100 Massachusetts State, Consolidated Loan, GO, Series C,
5% due 9/01/2025 2,179
10,000 Massachusetts State, HFA, Housing Revenue Bonds,
DRIVERS, AMT, Series 982, 6.358%
due 1/01/2011 (f)(l) 10,322
2,785 Massachusetts State Port Authority, Special Facilities
Revenue Bonds, DRIVERS, AMT, Series 501, 6.838%
due 7/01/2009 (a)(l) 3,024
4,450 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (f) 4,610
1,800 Massachusetts State Special Obligation Dedicated Tax
Revenue Bonds, 5.25% due 1/01/2014 (c)(j) 1,930
840 Massachusetts State Water Resource Authority,
General Revenue Refunding Bonds, Series B, 5.125%
due 8/01/2027 (i) 871
2,700 University of Massachusetts Building Authority,
Facilities Revenue Bonds, Senior Series 4-A, 5.125%
due 11/01/2014 (i)(j) 2,898
=================================================================================================
Michigan--6.2%
8,900 Detroit, Michigan, Water Supply System Revenue
Bonds, Series B, 5.25% due 7/01/2032 (i) 9,344
1,000 Michigan Higher Education Student Loan Authority,
Student Loan Revenue Refunding Bonds, AMT,
Series XVII-G, 5.20% due 9/01/2020 (a) 1,032
2,685 Michigan State, HDA, Revenue Refunding Bonds,
Series C, 5.90% due 12/01/2015 (d)(f) 2,744
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Project), AMT (h):
1,000 Series A, 5.50% due 6/01/2030 1,057
3,900 Series C, 5.45% due 12/15/2032 4,081
=================================================================================================
Missouri--2.0%
Saint Louis County, Missouri, Pattonville R-3 School
District, GO (Missouri Direct Deposit Program) (c)(j):
4,000 5.75% due 3/01/2010 4,318
1,500 6% due 3/01/2010 1,632
=================================================================================================
Nebraska--0.4%
1,300 Municipal Energy Agency of Nebraska, Power Supply
System Revenue Bonds, Series A, 5% due 4/01/2033 (f) 1,332
=================================================================================================
Nevada--2.4%
2,800 Carson City, Nevada, Hospital Revenue Bonds
(Carson-Tahoe Hospital Project), Series A, 5.50%
due 9/01/2033 (k) 2,943
Clark County, Nevada, Airport System Subordinate
Lien Revenue Bonds, Series A-2 (c):
1,500 5% due 7/01/2030 1,533
2,700 5% due 7/01/2036 2,751
=================================================================================================
New Jersey--7.0%
New Jersey EDA, Cigarette Tax Revenue Bonds:
1,070 5.75% due 6/15/2029 1,130
500 5.50% due 6/15/2031 518
New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A (i):
2,400 5% due 7/01/2029 2,475
4,800 5.25% due 7/01/2033 5,081
New Jersey EDA, Revenue Bonds, ROLS (g)(l)(m):
2,300 Series II-R-309-1, 7.073% due 6/15/2024 2,584
2,000 Series II-R-309-2, 7.073% due 6/15/2031 2,256
New Jersey EDA, School Facilities Construction
Revenue Bonds:
2,600 Series O, 5.125% due 3/01/2028 2,698
4,000 Series P, 5.125% due 9/01/2028 4,158
=================================================================================================
22 SEMI-ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued)
MuniYield Quality Fund II, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
=================================================================================================
New Mexico--2.3%
$ 6,295 New Mexico State Highway Commission, Tax Revenue
Bonds, Senior Sub-Lien, Series A, 6%
due 6/15/2010 (f)(j) $ 6,817
=================================================================================================
New York--9.1%
1,800 Metropolitan Transportation Authority, New York,
Transportation Revenue Bonds, Series A, 5%
due 11/15/2032 (c) 1,849
9,280 Nassau Health Care Corporation, New York, Health
System Revenue Bonds, 5.75% due 8/01/2009 (f)(j) 10,032
2,025 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System, Revenue
Refunding Bonds, Series A, 5% due 6/15/2035 (i) 2,075
5,000 New York State Dormitory Authority Revenue
Refunding Bonds (State University Educational
Facilities), 5.75% due 5/15/2010 (c)(j) 5,432
7,115 Tobacco Settlement Financing Corporation of New York
Revenue Bonds, Series A-1, 5.25% due 6/01/2022 (a) 7,506
=================================================================================================
Ohio--2.3%
Plain, Ohio, Local School District, GO, Refunding (c):
5,120 6% due 6/01/2011 (j) 5,639
1,170 6% due 12/01/2020 1,278
=================================================================================================
Pennsylvania--4.9%
3,335 Delaware River Port Authority of Pennsylvania and
New Jersey Revenue Bonds, RIB, Series 396, 7.903%
due 1/01/2019 (f)(l) 3,811
7,075 Pennsylvania State Public School Building Authority,
School Lease Revenue Bonds (The School District of
Philadelphia Project), 5% due 6/01/2033 (f) 7,236
3,230 Philadelphia, Pennsylvania, Authority for Industrial
Development, Lease Revenue Bonds, Series B, 5.50%
due 10/01/2020 (f) 3,473
=================================================================================================
Rhode Island--1.4%
4,010 Rhode Island State Health and Educational Building
Corporation, Higher Education Facilities Revenue
Bonds (University of Rhode Island), Series A, 5.70%
due 9/15/2009 (i)(j) 4,294
=================================================================================================
South Carolina--5.0%
Charleston Educational Excellence Financing Corporation,
South Carolina, Revenue Bonds, ROLS (l)(m):
1,362 Series II-R-481X-1, 6.586% due 12/01/2028 1,509
1,213 Series II-R-481X-2, 6.586% due 12/01/2029 1,341
440 Series II-R-481X-3, 6.586% due 12/01/2030 486
South Carolina Transportation Infrastructure Bank
Revenue Bonds (a):
5,000 DRIVERS, Series 1285Z, 5.879% due 4/01/2011 (l) 5,226
6,100 Series A, 5% due 10/01/2033 6,238
=================================================================================================
Tennessee--0.8%
2,150 Chattanooga, Tennessee, IDB, Lease Rent Revenue
Bonds (Southside Redevelopment Corporation),
5.875% due 10/01/2024 (a) 2,311
=================================================================================================
Texas--11.1%
2,000 Corpus Christi, Texas, Utility System Revenue
Refunding Bonds, Series A, 6% due 7/15/2010 (f)(j) 2,171
3,250 Dallas-Fort Worth, Texas, International Airport
Revenue Bonds, DRIVERS, AMT, Series 202, 7.843%
due 11/01/2028 (c)(l) 3,630
4,000 Gregg County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Good Shepherd
Medical Center Project), 6.875% due 10/01/2020 (k) 4,445
9,345 Leander, Texas, Independent School District, Capital
Appreciation, GO, Refunding (School Building),
5.51% due 8/15/2030 (c)(p) 2,570
3,500 Lower Colorado River Authority, Texas, PCR (Samsung
Austin Semiconductor), AMT, 6.375% due 4/01/2027 3,650
4,925 North Harris County, Texas, Regional Water Authority,
Senior Lien Revenue Bonds, 5.125%
due 12/15/2035 (i) 5,091
2,300 Texas State Transportation Commission, GO (Mobility
Fund), Series A, 5% due 4/01/2028 2,370
Texas State Turnpike Authority, Central Texas Turnpike
System Revenue Bonds, First Tier, Series A (a):
4,800 5.75% due 8/15/2038 5,219
3,600 5.50% due 8/15/2039 3,861
=================================================================================================
Virginia--0.8%
2,100 Halifax County, Virginia, IDA, Exempt Facility Revenue
Refunding Bonds (Old Dominion Electric Cooperative
Project), AMT, 5.625% due 6/01/2028 (a) 2,259
=================================================================================================
Washington--6.6%
7,470 Port of Seattle, Washington, Revenue Bonds, AMT,
Series B, 6% due 2/01/2016 (i) 8,005
1,600 Port of Tacoma, Washington, Revenue Refunding
Bonds, Series A, 5.25% due 12/01/2034 (a) 1,685
6,150 Seattle, Washington, Municipal Light and Power
Revenue Bonds, 6% due 10/01/2009 (i)(j) 6,643
3,100 Seattle, Washington, Municipal Light and Power
Revenue Refunding Bonds, 5% due 11/01/2028 (f) 3,180
=================================================================================================
Puerto Rico--1.6%
Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series NN:
2,500 5.125% due 7/01/2024 2,591
2,000 5.125% due 7/01/2029 2,055
-------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$436,371)--152.0% 450,273
=================================================================================================
Shares
Held Short-Term Securities
=================================================================================================
4,209 Merrill Lynch Institutional Tax-Exempt Fund, 3.49% (o)(r) 4,209
-------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$4,209)--1.4% 4,209
=================================================================================================
Total Investments (Cost--$440,580*)--153.4% 454,482
Other Assets Less Liabilities--0.7% 1,922
Preferred Stock, at Redemption Value--(54.1%) (160,139)
---------
Net Assets Applicable to Common Stock--100.0% $ 296,265
=========
SEMI-ANNUAL REPORTS APRIL 30, 2006 23
Schedule of Investments (concluded)
MuniYield Quality Fund II, Inc. (in Thousands)
* The cost and unrealized appreciation (depreciation) on investments as of
April 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................. $ 440,580
=========
Gross unrealized appreciation .................. $ 15,607
Gross unrealized depreciation .................. (1,705)
---------
Net unrealized appreciation .................... $ 13,902
=========
(a) AMBAC Insured.
(b) CIFG Insured.
(c) FGIC Insured.
(d) FHA Insured.
(e) FNMA/GNMA Collateralized.
(f) FSA Insured.
(g) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(h) XL Capital Insured.
(i) MBIA Insured.
(j) Prerefunded.
(k) Radian Insured.
(l) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(m) Assured Guaranty Insured.
(n) Escrowed to maturity.
(o) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 2,809 $47
--------------------------------------------------------------------------
(p) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(q) Tradable Custodial Receipts (TRACERS).
(r) Represents the current yield as of 4/30/2006.
o Forward interest rate swaps outstanding as of April 30, 2006 were as
follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Pay a fixed rate of 3.844% and receive a
floating rate based on 1-week Bond
Market Association rate
Broker, JPMorgan Chase Bank
Expires May 2016 $30,000 $ 476
Pay a fixed rate of 4.034% and receive a
floating rate based on 1-week Bond
Market Association rate
Broker, JPMorgan Chase Bank
Expires July 2016 $15,000 37
--------------------------------------------------------------------------
Total $ 513
=======
See Notes to Financial Statements.
24 SEMI-ANNUAL REPORTS APRIL 30, 2006
Statements of Net Assets
MuniYield MuniYield
MuniYield Quality Quality
As of April 30, 2006 Fund, Inc. Fund, Inc. Fund II, Inc.
===================================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value* ............... $ 973,668,905 $ 693,795,716 $ 450,272,939
Investments in affiliated securities, at value** ................ 8,238,248 5,712,828 4,208,800
Unrealized appreciation on interest rate swaps .................. 611,310 672,055 513,405
Cash ............................................................ 157,323 3,220 90,098
Interest receivable ............................................. 16,325,639 10,872,720 6,697,065
Receivable for securities sold .................................. 50,629 8,598,690 15,108,828
Prepaid expenses and other assets ............................... 24,092 46,552 40,249
----------------------------------------------
Total assets .................................................... 999,076,146 719,701,781 476,931,384
----------------------------------------------
===================================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased ................................ 3,924,791 16,071,416 20,104,920
Payable to investment adviser ................................... 379,631 269,313 174,866
Payable for offering costs ...................................... -- -- 10,000
Dividends payable to Common Stock shareholders .................. 13 124,723 163,037
Payable to other affiliates ..................................... 11,920 8,690 5,586
Accrued expenses and other liabilities .......................... 186,513 96,558 68,849
----------------------------------------------
Total liabilities ............................................... 4,502,868 16,570,700 20,527,258
----------------------------------------------
===================================================================================================================================
Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.05 and
$.10 per share*** of AMPS@ at $25,000 per share
liquidation preference ......................................... 343,343,937 250,233,880 160,139,034
----------------------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ........................... $ 651,229,341 $ 452,897,201 $ 296,265,092
==============================================
===================================================================================================================================
Net Assets Consist of
-----------------------------------------------------------------------------------------------------------------------------------
Undistributed investment income--net ............................ $ 8,500,722 $ 2,405,185 $ 2,119,438
Undistributed (accumulated) realized capital gains (losses)--net (41,335,288) 659,304 (34,081,807)
Unrealized appreciation--net .................................... 43,308,061 23,573,152 14,415,042
----------------------------------------------
Total accumulated earnings (losses)--net ........................ 10,473,495 26,637,641 (17,547,327)
Common Stock, par value $.10 per share+ ......................... 4,471,018 3,042,526 2,236,693
Paid-in capital in excess of par ................................ 636,284,828 423,217,034 311,575,726
----------------------------------------------
Net assets ...................................................... $ 651,229,341 $ 452,897,201 $ 296,265,092
==============================================
Net asset value per share of Common Stock ....................... $ 14.57 $ 14.89 $ 13.25
==============================================
Market price .................................................... $ 15.18 $ 13.85 $ 12.47
==============================================
* Identified cost for unaffiliated securities ................ $ 930,972,154 $ 670,894,619 $ 436,371,302
==============================================
** Identified cost for affiliated securities .................. $ 8,238,248 $ 5,712,828 $ 4,208,800
==============================================
*** Preferred Stock authorized, issued and outstanding:
Series A Shares, $.05 per share .......................... 1,800 2,000 2,000
==============================================
Series B Shares, $.05 per share .......................... 1,800 2,000 2,000
==============================================
Series C Shares, $.05 per share .......................... 1,800 2,000 2,000
==============================================
Series D Shares, $.05 per share .......................... 1,800 2,000 --
==============================================
Series D Shares, $.10 per share .......................... -- -- 400
==============================================
Series E Shares, $.05 per share .......................... 2,800 2,000 --
==============================================
Series F Shares, $.05 per share .......................... 1,720 -- --
==============================================
Series G Shares, $.05 per share .......................... 2,000 -- --
==============================================
+ Common Stock issued and outstanding ........................ 44,710,184 30,425,258 22,366,930
==============================================
@ Auction Market Preferred Stock.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2006 25
Statements of Operations
MuniYield MuniYield
MuniYield Quality Quality
For the Six Months Ended April 30, 2006 Fund, Inc. Fund, Inc. Fund II, Inc.
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Interest ........................................................ $ 27,193,077 $ 17,392,470 $ 11,121,311
Dividends from affiliates ....................................... 230,977 69,045 47,188
----------------------------------------------
Total income .................................................... 27,424,054 17,461,515 11,168,499
----------------------------------------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ........................................ 2,467,805 1,756,833 1,140,889
Accounting services ............................................. 139,393 110,299 77,254
Commission fees ................................................. 440,866 318,692 208,319
Transfer agent fees ............................................. 64,952 52,773 32,599
Professional fees ............................................... 35,248 31,734 27,758
Custodian fees .................................................. 24,170 18,231 13,358
Printing and shareholder reports ................................ 29,904 20,329 13,801
Pricing fees .................................................... 16,496 12,649 10,150
Directors' fees and expenses .................................... 19,442 14,977 11,667
Listing fees .................................................... 13,949 9,383 8,277
Other ........................................................... 47,874 33,887 27,478
----------------------------------------------
Total expenses before reimbursement ............................. 3,300,099 2,379,787 1,571,550
Reimbursement of expenses ....................................... (15,691) (4,760) (3,113)
----------------------------------------------
Total expenses after reimbursement .............................. 3,284,408 2,375,027 1,568,437
----------------------------------------------
Investment income--net .......................................... 24,139,646 15,086,488 9,600,062
----------------------------------------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
-----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ............................................. 6,078,458 4,836,072 2,306,469
Futures contracts and forward interest rate swaps--net ....... 1,541,415 (340,457) (68,556)
----------------------------------------------
Total realized and unrealized gain--net ......................... 7,619,873 4,495,615 2,237,913
----------------------------------------------
Change in unrealized appreciation on:
Investments--net ............................................. (1,701,556) (7,361,249) (3,838,065)
Forward interest rate swaps--net ............................. 611,310 258,550 254,400
----------------------------------------------
Total change in unrealized appreciation--net .................... (1,090,246) (7,102,699) (3,583,665)
----------------------------------------------
Total realized and unrealized gain (loss)--net .................. 6,529,627 (2,607,084) (1,345,752)
----------------------------------------------
===================================================================================================================================
Dividends & Distributions to Preferred Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .......................................... (5,179,258) (3,807,600) (2,489,390)
Realized gain--net .............................................. (23,326) -- --
----------------------------------------------
Total dividends and distributions to Preferred Stock shareholders (5,202,584) (3,807,600) (2,489,390)
----------------------------------------------
Net Increase in Net Assets Resulting from Operations ............ $ 25,466,689 $ 8,671,804 $ 5,764,920
==============================================
See Notes to Financial Statements.
26 SEMI-ANNUAL REPORTS APRIL 30, 2006
Statements of Changes in Net Assets MuniYield Fund, Inc.
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................. $ 24,139,646 $ 49,171,909
Realized gain--net ...................................................... 7,619,873 21,389,966
Change in unrealized appreciation--net .................................. (1,090,246) (11,862,154)
Dividends and distributions to Preferred Stock shareholders ............. (5,202,584) (7,182,793)
----------------------------------
Net increase in net assets resulting from operations .................... 25,466,689 51,516,928
----------------------------------
===================================================================================================================================
Dividends and Distributions to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................. (21,680,230) (44,098,403)
Realized gain--net ...................................................... (137,799) --
----------------------------------
Net decrease in net assets resulting from dividends and
distributions to Common Stock shareholders ............................. (21,818,029) (44,098,403)
----------------------------------
===================================================================================================================================
Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in
reinvestment of dividends .............................................. 2,725,701 1,390,397
Offering and underwriting costs resulting from the issuance of
Preferred Stock ........................................................ -- (3,155)
Adjustment of offering costs resulting from the issuance of
Preferred Stock ........................................................ 30,397 --
----------------------------------
Net increase in net assets derived from stock transactions .............. 2,756,098 1,387,242
----------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to Common Stock ................. 6,404,758 8,805,767
Beginning of period ..................................................... 644,824,583 636,018,816
----------------------------------
End of period* .......................................................... $ 651,229,341 $ 644,824,583
==================================
* Undistributed investment income--net ............................... $ 8,500,722 $ 11,220,564
==================================
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2006 27
Statements of Changes in Net Assets MuniYield Quality Fund, Inc.
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................. $ 15,086,488 $ 30,267,716
Realized gain--net ...................................................... 4,495,615 6,677,386
Change in unrealized appreciation--net .................................. (7,102,699) (18,625,082)
Dividends to Preferred Stock shareholders ............................... (3,807,600) (4,365,838)
----------------------------------
Net increase in net assets resulting from operations .................... 8,671,804 13,954,182
----------------------------------
===================================================================================================================================
Dividends to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................. (12,656,907) (29,269,098)
----------------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders ..................................................... (12,656,907) (29,269,098)
----------------------------------
===================================================================================================================================
Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Offering and underwriting costs resulting from the issuance of
Preferred Stock ........................................................ -- (646,275)
Adjustment of offering costs resulting from the issuance of
Preferred Stock ........................................................ (4,076) --
----------------------------------
Net decrease in net assets derived from stock transactions .............. (4,076) (646,275)
----------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock ................. (3,989,179) (15,961,191)
Beginning of period ..................................................... 456,886,380 472,847,571
----------------------------------
End of period* .......................................................... $ 452,897,201 $ 456,886,380
==================================
* Undistributed investment income--net ............................... $ 2,405,185 $ 3,783,204
==================================
See Notes to Financial Statements.
28 SEMI-ANNUAL REPORTS APRIL 30, 2006
Statements of Changes in Net Assets MuniYield Quality Fund II, Inc.
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................. $ 9,600,062 $ 19,907,110
Realized gain--net ...................................................... 2,237,913 2,723,150
Change in unrealized appreciation--net .................................. (3,583,665) (8,182,237)
Dividends to Preferred Stock shareholders ............................... (2,489,390) (3,147,298)
----------------------------------
Net increase in net assets resulting from operations .................... 5,764,920 11,300,725
----------------------------------
===================================================================================================================================
Dividends to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net .................................................. (8,275,764) (19,101,358)
----------------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders ..................................................... (8,275,764) (19,101,358)
----------------------------------
===================================================================================================================================
Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Offering and underwriting costs resulting from the issuance of
Preferred Stock ........................................................ -- (241,567)
Adjustment of offering costs resulting from the issuance of
Preferred Stock ........................................................ 54,001 --
----------------------------------
Net increase (decrease) in net assets derived from stock
transactions ........................................................... 54,001 (241,567)
----------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock ................. (2,456,843) (8,042,200)
Beginning of period ..................................................... 298,721,935 306,764,135
----------------------------------
End of period* .......................................................... $ 296,265,092 $ 298,721,935
==================================
* Undistributed investment income--net ............................... $ 2,119,438 $ 3,284,530
==================================
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2006 29
Financial Highlights MuniYield Fund, Inc.
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................... $14.48 $14.31 $13.85 $13.28 $13.55
-------------------------------------------------
Investment income--net ....................................... .54+ 1.11+ 1.09+ 1.06+ 1.04
Realized and unrealized gain (loss)--net ..................... .16 .21 .41 .52 (.31)
Dividends and distributions to Preferred Stock shareholders
from:
Investment income--net .................................... (.12) (.16) (.07) (.07) (.08)
Realized gain--net ........................................ --++ -- -- -- --
-------------------------------------------------
Total from investment operations ............................. .58 1.16 1.43 1.51 .65
-------------------------------------------------
Less dividends and distributions to Common Stock shareholders
from:
Investment income--net .................................... (.49) (.99) (.96) (.94) (.92)
Realized gain--net ........................................ --++ -- -- -- --
-------------------------------------------------
Total dividends and distributions to Common Stock shareholders (.49) (.99) (.96) (.94) (.92)
-------------------------------------------------
Offering and underwriting costs resulting from
issuance of Preferred Stock ................................. -- --++ (.01) -- --
-------------------------------------------------
Adjustment of offering costs resulting from the issuance of
Preferred Stock ............................................. --@ -- -- -- --
-------------------------------------------------
Net asset value, end of period ............................... $14.57 $14.48 $14.31 $13.85 $13.28
=================================================
Market price per share, end of period ........................ $15.18 $14.20 $13.74 $13.29 $12.88
=================================================
==================================================================================================================================
Total Investment Return*
----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........................... 4.03%@@ 8.38% 11.04% 11.99% 5.07%
=================================================
Based on market price per share .............................. 10.52%@@ 10.69% 11.11% 10.80% (.94%)
=================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement** ....................... 1.02%*** 1.02% .97% .99% 1.01%
=================================================
Total expenses** ............................................. 1.02%*** 1.02% .98% .99% 1.01%
=================================================
Total investment income--net** ............................... 7.46%*** 7.55% 7.75% 7.86% 7.97%
=================================================
Amount of dividends to Preferred Stock shareholders .......... 1.60%*** 1.10% .51% .50% .74%
=================================================
Investment income--net, to Common Stock shareholders ......... 5.86%*** 6.45% 7.24% 7.36% 7.23%
=================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders .................... 3.05%*** 2.09% 1.05% 1.02% 1.50%
=================================================
30 SEMI-ANNUAL REPORTS APRIL 30, 2006
Financial Highlights (concluded) MuniYield Fund, Inc.
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, --------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) ......................................... $651,229 $644,825 $636,019 $615,169 $590,101
=======================================================
Preferred Stock outstanding, end of period (in thousands) $343,000 $343,000 $343,000 $293,000 $293,000
=======================================================
Portfolio turnover ...................................... 16.10% 32.66% 23.62% 61.95% 104.63%
=======================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............................... $ 2,899 $ 2,880 $ 2,854 $ 3,100 $ 3,014
=======================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ........................ $ 380 $ 524 $ 266 $ 256 $ 346
=======================================================
Series B--Investment income--net ........................ $ 367 $ 549 $ 268 $ 274 $ 369
=======================================================
Series C--Investment income--net ........................ $ 390 $ 531 $ 268 $ 261 $ 353
=======================================================
Series D--Investment income--net ........................ $ 398 $ 509 $ 260 $ 281 $ 504
=======================================================
Series E--Investment income--net ........................ $ 367 $ 522 $ 244 $ 236 $ 346
=======================================================
Series F--Investment income--net ........................ $ 376 $ 494 $ 253 $ 247 $ 324
=======================================================
Series G+++--Investment income--net ..................... $ 371 $ 533 $ 60 -- --
=======================================================
* 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.
*** Annualized.
+ Based on average shares outstanding.
++ Amount is less than $(.01) per share.
+++ Series G was issued on August 31, 2004.
@ Amount is less than $.01 per share.
@@ Aggregate total investment return.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2006 31
Financial Highlights MuniYield Quality Fund, Inc.
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, -------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................... $15.02 $15.54 $15.36 $15.19 $15.27
--------------------------------------------------
Investment income--net ....................................... .50+ .99+ 1.03+ 1.07+ 1.06
Realized and unrealized gain (loss)--net ..................... (.08) (.39) .19 .13 (.13)
Dividends and distributions to Preferred Stock shareholders:
Investment income--net .................................... (.13) (.14) (.07) (.07) (.09)
Realized gain--net ........................................ -- -- -- -- --@
--------------------------------------------------
Total from investment operations ............................. .29 .46 1.15 1.13 .84
--------------------------------------------------
Less dividends and distributions to Common Stock shareholders:
Investment income--net .................................... (.42) (.96) (.97) (.96) (.91)
Realized gain--net ........................................ -- -- -- -- (.01)
--------------------------------------------------
Total dividends and distributions to Common Stock shareholders (.42) (.96) (.97) (.96) (.92)
--------------------------------------------------
Offering and underwriting costs resulting from the issuance of
Preferred Stock ............................................. -- (.02) -- -- --
--------------------------------------------------
Adjustment of offering costs resulting from the
issuance of Preferred Stock ................................. --@ -- -- -- --
--------------------------------------------------
Net asset value, end of period ............................... $14.89 $15.02 $15.54 $15.36 $15.19
==================================================
Market price per share, end of period ........................ $13.85 $14.27 $14.83 $14.35 $13.74
==================================================
===================================================================================================================================
Total Investment Return*
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........................... 2.04%@@ 3.10% 8.26% 8.13% 6.12%
==================================================
Based on market price per share .............................. (.10%)@@ 2.64% 10.58% 11.68% 2.94%
==================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement** ....................... 1.04%*** .96% .94% .94% .96%
==================================================
Total expenses** ............................................. 1.05%*** .96% .95% .95% .96%
==================================================
Total investment income--net** ............................... 6.63%*** 6.46% 6.74% 6.89% 7.03%
==================================================
Amount of dividends to Preferred Stock shareholders .......... 1.67%*** .93% .45% .42% .61%
==================================================
Investment income--net, to Common Stock shareholders ......... 4.96%*** 5.53% 6.29% 6.47% 6.42%
==================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders .................... 3.07%*** 2.12% 1.04% .99% 1.40%
==================================================
32 SEMI-ANNUAL REPORTS APRIL 30, 2006
Financial Highlights (concluded) MuniYield Quality Fund, Inc.
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, --------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) ......................................... $452,897 $456,886 $472,848 $467,370 $462,156
=======================================================
Preferred Stock outstanding, end of period (in thousands) $250,000 $250,000 $200,000 $200,000 $200,000
=======================================================
Portfolio turnover ...................................... 27.34% 35.62% 32.87% 33.92% 46.29%
=======================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............................... $ 2,812 $ 2,828 $ 3,364 $ 3,337 $ 3,311
=======================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ........................ $ 383 $ 540 $ 271 $ 273 $ 370
=======================================================
Series B--Investment income--net ........................ $ 372 $ 520 $ 255 $ 238 $ 337
=======================================================
Series C--Investment income--net ........................ $ 401 $ 536 $ 261 $ 253 $ 349
=======================================================
Series D--Investment income--net ........................ $ 375 $ 514 $ 251 $ 228 $ 339
=======================================================
Series E++--Investment income--net ...................... $ 373 $ 72 -- -- --
=======================================================
* 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.
*** Annualized.
+ Based on average shares outstanding.
++ Series E was issued on September 21, 2005.
@ Amount is less than $(.01) per share.
@@ Aggregate total investment return.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2006 33
Financial Highlights MuniYield Quality Fund II, Inc.
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................... $13.36 $13.72 $13.44 $13.27 $13.21
-------------------------------------------------
Investment income--net ....................................... .43+ .89+ .94+ .97+ .94
Realized and unrealized gain (loss)--net ..................... (.06) (.25) .27 .09 --++
Dividends to Preferred Stock shareholders from investment
income--net ................................................. (.11) (.14) (.07) (.07) (.10)
-------------------------------------------------
Total from investment operations ............................. .26 .50 1.14 .99 .84
-------------------------------------------------
Less dividends to Common Stock shareholders from investment
income--net ................................................. (.37) (.85) (.86) (.82) (.78)
-------------------------------------------------
Offering and underwriting costs resulting from
issuance of Preferred Stock ................................. -- (.01) -- -- --
-------------------------------------------------
Adjustment of offering costs resulting from the
issuance of Preferred Stock ................................. --++ -- -- -- --
-------------------------------------------------
Net asset value, end of period ............................... $13.25 $13.36 $13.72 $13.44 $13.27
=================================================
Market price per share, end of period ........................ $12.47 $12.86 $12.69 $12.18 $11.75
=================================================
==================================================================================================================================
Total Investment Return*
----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........................... 2.11%@ 3.98% 9.32% 8.28% 7.27%
=================================================
Based on market price per share .............................. (.16%)@ 8.21% 11.57% 10.83% 3.95%
=================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement** ....................... 1.05%*** 1.03% 1.01% 1.03% 1.06%
=================================================
Total expenses** ............................................. 1.06%*** 1.03% 1.02% 1.03% 1.06%
=================================================
Total investment income--net** ............................... 6.45%*** 6.51% 7.00% 7.17% 7.26%
=================================================
Amount of dividends to Preferred Stock shareholders .......... 1.67%*** 1.03% .51% .50% .78%
=================================================
Investment income--net, to Common Stock shareholders ......... 4.78%*** 5.48% 6.49% 6.67% 6.48%
=================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders .................... 3.14%*** 2.08% 1.04% 1.00% 1.51%
=================================================
34 SEMI-ANNUAL REPORTS APRIL 30, 2006
Financial Highlights (concluded) MuniYield Quality Fund II, Inc.
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, --------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) ......................................... $296,265 $298,722 $306,764 $300,502 $296,847
=======================================================
Preferred Stock outstanding, end of period (in thousands) $160,000 $160,000 $150,000 $150,000 $150,000
=======================================================
Portfolio turnover ...................................... 28.37% 37.55% 32.30% 42.06% 42.89%
=======================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............................... $ 2,852 $ 2,867 $ 3,045 $ 3,003 $ 2,979
=======================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ........................ $ 387 $ 536 $ 271 $ 276 $ 390
=======================================================
Series B--Investment income--net ........................ $ 413 $ 514 $ 253 $ 240 $ 388
=======================================================
Series C--Investment income--net ........................ $ 371 $ 510 $ 252 $ 235 $ 351
=======================================================
Series D+++--Investment income--net ..................... $ 371 $ 71 -- -- --
=======================================================
* 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.
*** Annualized.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
+++ Series D was issued on September 21, 2005.
@ Aggregate total investment return.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2006 35
Notes to Financial Statements
1. Significant Accounting Policies:
MuniYield Fund, Inc., MuniYield Quality Fund, Inc. and MuniYield Quality Fund
II, Inc. (the "Funds" or individually as the "Fund") are registered under the
Investment Company Act of 1940, as amended, as non-diversified, closed-end
management investment companies. The Funds' financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. The Funds determine and make available for publication the net
asset value of their Common Stock on a daily basis. The Funds' Common Stock
shares are listed on the New York Stock Exchange under the symbol MYD for
MuniYield Fund, Inc., MQY for MuniYield Quality Fund, Inc. and MQT for MuniYield
Quality Fund II, Inc. The following is a summary of significant accounting
policies followed by the Funds.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Funds under the general direction
of the Board of Directors. Such valuations and procedures are reviewed
periodically by the Board of Directors of the Funds. 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 OTC market, valuation is the last asked price
(options written) or the last bid price (options purchased). Swap agreements are
valued by quoted fair values received daily by the Funds' pricing service.
Short-term investments with a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market value, under which method the
investment is valued at cost and any premium or discount is amortized on a
straight line basis to maturity. Investments in open-end investment companies
are valued at their net asset value each business day. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Directors of the Funds.
(b) Derivative financial instruments -- Each Fund may engage in various
portfolio investment strategies both to increase the return of each Fund and to
hedge, or protect, its exposure to interest rate movements and movements in the
securities markets. 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 -- Each Fund may purchase or sell financial
futures contracts and options on such futures contracts. 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 -- Each Fund may purchase and write call and 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.
o Forward interest rate swaps -- Each Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed,
36 SEMI-ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (continued)
the Fund records a realized gain or loss in an amount equal to the value
of the agreement.
(c) Income taxes -- It is each 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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Funds amortize all
premiums and discounts on debt securities.
(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.
(f) Offering expenses -- Direct expenses relating to the public offering of each
Fund's Preferred Stock were charged to capital at the time of issuance of the
shares. Any adjustments to estimates of offering costs were recorded back to
capital.
2. Investment Advisory Agreement and Transactions with Affiliates:
Each 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 Funds' portfolios and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Funds. For such services, each 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. The Investment Adviser has agreed
to reimburse its management fee by the amount of management fees each Fund pays
to FAM indirectly through its investment in Merrill Lynch Institutional
Tax-Exempt Fund. For the six months ended April 30, 2006, FAM reimbursed each
Fund as follows:
--------------------------------------------------------------------------------
Reimbursement
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ....................................... $15,691
MuniYield Quality Fund, Inc. ............................... $ 4,760
MuniYield Quality Fund II, Inc. ............................ $ 3,113
--------------------------------------------------------------------------------
For the six months ended April 30, 2006, the Funds reimbursed FAM for certain
accounting services. The reimbursements were as follows:
--------------------------------------------------------------------------------
Reimbursement
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ....................................... $10,595
MuniYield Quality Fund, Inc. ............................... $ 7,902
MuniYield Quality Fund II, Inc. ............................ $ 5,025
--------------------------------------------------------------------------------
Certain officers and/or directors of the Funds are officers and/or directors of
FAM, PSI, and/or ML & Co.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 2006 were as follows:
--------------------------------------------------------------------------------
MuniYield MuniYield
MuniYield Quality Quality
Fund, Inc. Fund, Inc. Fund II, Inc.
--------------------------------------------------------------------------------
Total Purchases ....... $170,256,735 $192,111,191 $128,867,595
Total Sales ........... $155,960,946 $191,225,197 $129,124,261
--------------------------------------------------------------------------------
4. Stock Transactions:
Each Fund is authorized to issue 200,000,000 shares of 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 stock without approval of the holders of Common Stock.
Common Stock
MuniYield Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2006 and the
year ended October 31, 2005, increased by 186,342 and 93,211, respectively, as a
result of dividend reinvestment.
MuniYield Quality Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2006 and the
year ended October 31, 2005 remained constant.
MuniYield Quality Fund II, Inc.
Shares issued and outstanding during the six months ended April 30, 2006 and the
year ended October 31, 2005 remained constant.
SEMI-ANNUAL REPORTS APRIL 30, 2006 37
Notes to Financial Statements (concluded)
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred Stock of the
Funds, with a liquidation preference of $25,000 per share, plus accrued and
unpaid dividends that entitle their holders to receive cash dividends at an
annual rate that may vary for the successive dividend periods. The yields in
effect at April 30, 2006 were as follows:
--------------------------------------------------------------------------------
MuniYield MuniYield
MuniYield Quality Quality
Fund, Inc. Fund, Inc. Fund II, Inc.
--------------------------------------------------------------------------------
Series A ..................... 3.40% 3.52% 3.35%
Series B ..................... 3.36% 3.75% 3.39%
Series C ..................... 3.275% 3.60% 3.775%
Series D ..................... 3.65% 3.60% 3.70%
Series E ..................... 3.65% 3.60% --
Series F ..................... 3,65% -- --
Series G ..................... 3.64% -- --
--------------------------------------------------------------------------------
MuniYield Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2006 and the
year ended October 31, 2005 remained constant.
MuniYield Quality Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2006
remained constant and during the year ended October 31, 2005 increased by 2,000
shares from the issuance of an additional series of Preferred Stock.
MuniYield Quality Fund II, Inc.
Shares issued and outstanding during the six months ended April 30, 2006
remained constant and during the year ended October 31, 2005 increased by 400
shares from the issuance of an additional series of Preferred Stock.
Each 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 six months ended April 30, 2006, MLPF&S earned commissions as
follows:
--------------------------------------------------------------------------------
Commissions
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ...................................... $184,769
MuniYield Quality Fund, Inc. .............................. $168,821
MuniYield Quality Fund II, Inc. ........................... $ 96,323
--------------------------------------------------------------------------------
5. Capital Loss Carryforward:
MuniYield Fund, Inc.
At October 31, 2005, the Fund had a net capital loss carryforward of
$43,211,705, of which $3,242,729 expires in 2006, $7,973,446 expires in 2007,
$25,806,020 expires in 2008, $6,000,235 expires in 2009 and $189,275 expires in
2010. These amounts will be available to offset like amounts of any future
taxable gains.
MuniYield Quality Fund, Inc.
At October 31, 2005, the Fund had a net capital loss carryforward of $2,453,619,
of which $114,477 expires in 2010 and $2,339,142 expires in 2012. These amounts
will be available to offset like amounts of any future taxable gains.
MuniYield Quality Fund II, Inc.
At October 31, 2005, the Fund had a net capital loss carryforward of
$35,441,922, of which $2,730,523 expires in 2007, $26,079,903 expires in 2008,
$1,096,837 expires in 2010 and $5,534,659 expires in 2012. These amounts will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
Each Fund paid a tax-exempt income dividend to holders of Common Stock on May
30, 2006 to shareholders of record on May 15, 2006. The amount of the tax-exempt
income dividend was as follows:
--------------------------------------------------------------------------------
Per Share
Amount
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ...................................... $.080000
MuniYield Quality Fund, Inc. .............................. $.066000
MuniYield Quality Fund II, Inc. ........................... $.059000
--------------------------------------------------------------------------------
38 SEMI-ANNUAL REPORTS APRIL 30, 2006
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Kenneth A. Froot, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Donald C. Burke, Vice President and Treasurer
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Theodore R. Jaeckel Jr., Vice President
Michael A. Kalinoski, Vice President
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
--------------------------------------------------------------------------------
Effective January 1, 2006, Stephen B. Swensrud retired as Director of MuniYield
Fund, Inc., MuniYield Quality Fund, Inc. and MuniYield Quality Fund II, Inc. The
Funds' Board of Directors wishes Mr. Swensrud well in his retirement.
--------------------------------------------------------------------------------
MuniYield Fund, Inc. and
MuniYield Quality Fund II, Inc.:
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
MuniYield Quality Fund, Inc.:
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agents
Common Stock:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
800-426-5523
Preferred Stock:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
Investment Objectives
NYSE Symbol MuniYield Fund, Inc. seeks to provide shareholders with as high
MYD 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,
investment grade municipal obligations the interest on which, in
the opinion of bond counsel to the issuer, is exempt from
federal income taxes.
NYSE Symbol MuniYield Quality Fund, Inc. seeks to provide shareholders with
MQY 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, in the opinion of bond counsel to the issuer, is exempt
from federal income taxes.
NYSE Symbol MuniYield Quality Fund II, Inc. seeks to provide shareholders
MQT 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, in the opinion of bond counsel to the issuer,
is exempt from federal income taxes. The Fund invests primarily
in insured municipal bonds.
SEMI-ANNUAL REPORTS APRIL 30, 2006 39
Proxy Results MuniYield Fund, Inc.
During the six-month period ended April 30, 2006, MuniYield Fund, Inc.'s Common
Stock shareholders voted on the following proposal. The proposal was approved at
a shareholders' meeting on April 27, 2006. A description of the proposal and
number of shares voted are as follows:
---------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 42,882,365 877,186
Kenneth A. Froot 42,912,916 846,635
Joe Grills 42,842,249 917,302
Roberta Cooper Ramo 42,908,788 850,763
Robert S. Salomon, Jr. 42,911,254 848,297
---------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2006, MuniYield Fund, Inc.'s
Preferred Stock shareholders (Series A - G) voted on the following proposal. The
proposal was approved at a shareholders' meeting on April 27, 2006. A
description of the proposal and number of shares voted are as follows:
---------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr. 13,160 73
James H. Bodurtha 13,160 73
Kenneth A. Froot 13,160 73
Joe Grills 13,156 77
Herbert I. London 13,160 73
Roberta Cooper Ramo 13,160 73
Robert S. Salomon, Jr. 13,148 85
---------------------------------------------------------------------------------------------------------
40 SEMI-ANNUAL REPORTS APRIL 30, 2006
Proxy Results (continued) MuniYield Quality Fund, Inc.
During the six-month period ended April 30, 2006, MuniYield Quality Fund, Inc.'s
Common Stock shareholders voted on the following proposal. The proposal was
approved at a shareholders' meeting on April 27, 2006. A description of the
proposal and number of shares voted are as follows:
---------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 28,353,448 511,748
James H. Bodurtha 28,354,859 510,337
Kenneth A. Froot 28,346,128 519,068
Joe Grills 28,345,286 519,910
Roberta Cooper Ramo 28,349,552 515,644
---------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2006, MuniYield Quality Fund, Inc.'s
Preferred Stock shareholders (Series A - E) voted on the following proposal. The
proposal was approved at a shareholders' meeting on April 27, 2006. A
description of the proposal and number of shares voted are as follows:
---------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr.,
James H. Bodurtha, Kenneth A. Froot, Joe Grills,
Herbert I. London, Roberta Cooper Ramo and Robert S. Salomon, Jr. 9,108 12
---------------------------------------------------------------------------------------------------------
SEMI-ANNUAL REPORTS APRIL 30, 2006 41
Proxy Results (concluded) MuniYield Quality Fund II, Inc.
During the six-month period ended April 30, 2006, MuniYield Quality Fund II,
Inc.'s Common Stock shareholders voted on the following proposal. The proposal
was approved at a shareholders' meeting on April 27, 2006. A description of the
proposal and number of shares voted are as follows:
---------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 21,062,253 565,847
James H. Bodurtha 21,061,304 566,796
Kenneth A. Froot 21,052,448 575,652
Joe Grills 21,063,501 564,599
Roberta Cooper Ramo 21,059,752 568,348
---------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2006, MuniYield Quality Fund II,
Inc.'s Preferred Stock shareholders (Series A - D) voted on the following
proposal. The proposal was approved at a shareholders' meeting on April 27,
2006. A description of the proposal and number of shares voted are as follows:
---------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr.,
James H. Bodurtha, Kenneth A. Froot, Joe Grills,
Herbert I. London, Roberta Cooper Ramo and Robert S. Salomon, Jr. 6,137 67
---------------------------------------------------------------------------------------------------------
Dividend Policy
The Funds' dividend policy is to distribute all or a portion of their net
investment income to its share holders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Funds 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 Funds for any particular month may be
more or less than the amount of net investment income earned by the Funds during
such month. The Funds' 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.
42 SEMI-ANNUAL REPORTS APRIL 30, 2006
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Funds' Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Funds' Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Funds offer electronic delivery of communications to their shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
SEMI-ANNUAL REPORTS APRIL 30, 2006 43
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
--------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
These reports, including the financial information herein, are transmitted to
shareholders of MuniYield Fund, Inc., MuniYield Quality Fund, Inc. and MuniYield
Quality Fund II, Inc. for their information. This is not a prospectus. Past
performance results shown in these reports should not be considered a
representation of future performance. The Funds have leveraged their Common
Stock and intend to remain leveraged by issuing Preferred Stock to provide the
Common Stock shareholders with potentially higher rates 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.
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Funds voted proxies
relating to securities held in the Funds' portfolios during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniYield Fund, Inc.
MuniYield Quality Fund, Inc.
MuniYield Quality Fund II, Inc.
Box 9011
Princeton, NJ 08543-9011
#MYQII -- 4/06
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MuniYield Quality Fund II, Inc.
By: /s/ Robert C. Doll, Jr.
------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Quality Fund II, Inc.
Date: June 22, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Quality Fund II, Inc.
Date: June 22, 2006
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield Quality Fund II, Inc.
Date: June 22, 2006