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 811-06660
Name of Fund: MuniYield Quality Fund, 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, 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: 10/31/05
Date of reporting period: 11/01/04 - 04/30/05
Item 1 - Report to Stockholders
MuniYield Fund, Inc.
MuniYield Quality Fund, Inc.
MuniYield Quality Fund II, Inc.
Semi-Annual Reports
April 30, 2005
MuniYield Fund, Inc.
MuniYield Quality Fund, Inc.
MuniYield Quality Fund II, Inc.
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, 2005, 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 8.09%, 14.04% and
13.54%, respectively before the deduction of Preferred Stock.
2 SEMI-ANNUAL REPORTS APRIL 30, 2005
A Letter From the President
Dear Shareholder
Financial markets faced a number of crosscurrents over the past several months,
but most major benchmarks managed to post positive returns for the annual and
semi-annual reporting periods ended April 30, 2005:
Total Returns as of April 30, 2005 6-month 12-month
================================================================================================
U.S. equities (Standard & Poor's 500 Index) +3.28% + 6.34%
------------------------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) -0.15% + 4.71%
------------------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +8.71% +14.95%
------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) +0.98% + 5.26%
------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +1.93% + 6.81%
------------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) +0.65% + 6.92%
------------------------------------------------------------------------------------------------
After expanding at an annualized rate of 4.4% in 2004, U.S. gross domestic
product growth for the first quarter of 2005 came in at an estimated 3.1%
(although that figure was later revised upward to 3.5%). Nevertheless, the
Federal Reserve Board continued increasing interest rates at a measured pace to
combat emergent inflation. The most recent hike came on May 3, and brought the
federal funds rate to 3%. Recently, signs of inflation have taken the form of
rising business costs and increasing consumer prices, particularly in the areas
of gasoline, healthcare, housing and education.
U.S. equities ended 2004 in a strong rally, but stumbled into negative territory
in 2005. The market weakness was largely fueled by the potential for slowing
economic and corporate earnings growth, renewed energy price concerns and a lack
of investor conviction. On the positive side, certain sectors of the market have
been performing well (particularly energy) and corporate transactions, such as
mergers and acquisitions, stock buy-backs and dividend payouts, have all
increased. International equities, especially in Asia, have benefited from
higher economic growth rates.
In the bond market, we witnessed a yield curve flattening trend over the past
several months as short-term yields increased and longer-term interest rates
remained more stable or fell. At the end of April 2005, the two-year Treasury
note yielded 3.66% and the 10-year Treasury note yielded 4.21%, a difference of
55 basis points (.55%). This compared to a spread of 149 basis points six months
earlier and 222 basis points 12 months ago.
Looking ahead, the environment is likely to be a challenging one for investors.
With this in mind, we encourage you to meet with your financial advisor to
review your goals and asset allocation and to rebalance your portfolio, as
necessary, to ensure it remains aligned with your objectives and risk tolerance.
As always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to serving you in the months and years
ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
SEMI-ANNUAL REPORTS APRIL 30, 2005 3
A Discussion With Your Funds' Portfolio Managers
The Funds benefited from a strategic move toward the longer end of the
municipal yield curve, which outperformed the short end as the curve flattening
trend continued over the past six months.
Describe the recent market environment relative to municipal bonds.
Amid significant volatility, long-term bond yields moved lower during the past
six months as shorter-term yields increased. Recently, U.S. gross domestic
product (GDP) for the first quarter of 2005 was preliminarily estimated at 3.1%
-- coming in below many economists' expectations, although that estimate was
later revised upward to 3.5%. However, for all of 2004, real GDP grew at an
annualized rate of 4.4%, well ahead of 2003's annual rate of 3%.
Nevertheless, it appeared that continued economic improvements were generally
disregarded as investors focused on inflationary trends, currency-related demand
for long-term U.S. securities, and interest rate action on the part of the
Federal Reserve Board (the Fed). Over the past six months, 30-year Treasury bond
yields declined 28 basis points (.28%) to 4.51%, while 10-year Treasury note
yields rose 16 basis points to 4.21%. The Fed, in the meantime, continued to
raise short-term interest rates at each of its meetings throughout the period,
and most recently increased the federal funds rate from 2.75% to 3% on May 3. As
short-term interest rates increased while longer-term interest rates fell, the
yield curve continued to flatten.
Tax-exempt bond yields exhibited a similar pattern during the period. Yields on
30-year revenue bonds, as measured by the Bond Buyer Revenue Bond Index, fell 14
basis points to 4.83%. According to Municipal Market Data, yields on AAA-rated
issues maturing in 30 years declined 23 basis points to 4.37%, while AAA-rated
bonds maturing in 10 years saw their yields rise 17 basis points to 3.57%.
During the past six months, more than $186 billion in tax-exempt bonds was
underwritten, an increase of 7.5% versus the same period a year earlier.
Issuance so far in 2005 has been boosted by a 32% increase in refunding issues
as municipalities sought to refinance existing higher-coupon debt. These
refunding issues have been heavily weighted in the 10-year - 20-year maturity
range to lower the overall interest costs. This concentration has put pressure
on intermediate tax-exempt bond yields while supporting longer-term bond prices.
Investor demand for municipal product remained generally positive during the
period. Investment Company Institute statistics indicate that, year-to-date
through March 31, 2005, net new cash flows into long-term municipal bond funds
exceeded $1.3 billion. This represented a significant improvement from the $516
million seen during the same period in 2004. However, AMG Data Services reports
that weekly figures for the month of April have shown a modest reversal in the
positive flows seen in the first three months of the year.
MuniYield Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended April 30, 2005, the Common Stock of MuniYield
Fund, Inc. had net annualized yields of 6.80% and 6.98%, based on a period-end
per share net asset value of $14.70 and a per share market price of $14.34,
respectively, and $.496 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +6.38%, based on a change
in per share net asset value from $14.31 to $14.70, and assuming reinvestment of
all distributions.
The Fund's total return, based on net asset value, significantly exceeded the
+3.83% 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.)
The key contributor to the Fund's outperformance was a strategy we employed
during most of the period, which was based on our view that the municipal yield
curve would flatten. In order to take advantage of that expectation, we moved a
portion of bonds in the 10-year - 15-year maturity range further out on the
curve to the 20-year - 25-year area. As our forecast was realized and the curve
flattened significantly, longer-dated bonds outperformed those with shorter
maturities, and Fund performance benefited accordingly.
We also were able to generate some incremental return for the portfolio through
certain hedging strategies, employing both the swap and futures markets. In
addition, we used about 20% of our permissible 25% exposure to non-investment
grade and non-rated issues, a strategy that significantly benefited relative
performance given the incremental yield generated by these
4 SEMI-ANNUAL REPORTS APRIL 30, 2005
investments as well as the ongoing compression in credit spreads that benefited
lower-quality issues.
In terms of sector exposure, we maintained a fairly large position in
corporate-related tax-exempt debt, a significant portion of that in the
high-yield municipal market (bonds rated BBB and lower or non-rated). We also
had meaningful exposure to long-term care and healthcare-related debt, two areas
that also are of a higher-yielding nature. Finally, we continued to pursue
opportunities in tax-backed debt, bonds issued for development projects in both
residential and commercial districts. Security selection in these areas of the
municipal market requires a great deal of analytical work. For that, we were
able to leverage the skill of our in-house staff of analysts, and were
effectively able to capture much of the spread compression and outperformance
generated by these sectors.
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?
In recognition of the spread compression that has taken place in the municipal
market for the past year or more, we began to reduce our exposure to some of the
riskier, lower-rated credits. This involved some select sales of
corporate-related debt, as well as a decrease in our exposure to tobacco-related
bonds, an area that performed particularly well during the past six months.
While the market fundamentals suggest continued demand for higher-yielding
municipal assets, we believe some of the relative value in this area of the
market has diminished given spreads that are already very tight. These sales
also were made in a continued effort to improve the portfolio's credit profile
and return to a more market-neutral exposure to credit product.
As mentioned earlier (and in our last report to shareholders), we continued to
reposition the portfolio by adding longer-dated insured bonds, especially those
with maturities in the 25-year - 30-year range, and selling some of our
shorter-dated holdings. Investing further out on the yield curve allowed us to
benefit from the curve flattening trend while also accomplishing our goal of
modestly extending the portfolio's average duration.
For the six-month period ended April 30, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had an average yield of 1.59% for Series A, 1.85% for
Series B, 1.53% for Series C, 1.87% for Series D, 1.76% for Series E, 1.70% for
Series F and 1.83% for Series G. At this point in the Fed's monetary tightening
cycle, interest rate increases are having a material impact on the Fund's
borrowing costs. The Fed raised the short-term interest rate target 100 basis
points during the six-month period. Still, the tax-exempt yield curve remained
relatively steep and 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
34.43% of total net assets. (For a more complete explanation of the benefits and
risks of leveraging, see page 2 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 positioned relatively neutral in terms of interest
rate risk -- a posture we are likely to maintain in the near future. In terms of
our view on the yield curve, we believe the majority of the flattening
phenomenon is behind us. We would expect any additional flattening to be minor
relative to the type of move we have seen thus far and, therefore, are not
likely to continue reallocating the Fund's assets further out on the yield
curve.
Overall, we are pleased with the portfolio's current structure and intend to
continue our efforts to upgrade the portfolio's credit profile. We also will
look to maintain our yield advantage, a strategy that has enabled the Fund to
outperform its peers in a relatively stable interest rate environment.
SEMI-ANNUAL REPORTS APRIL 30, 2005 5
A Discussion With Your Funds' Portfolio Managers (continued)
MuniYield Quality Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended April 30, 2005, the Common Stock of MuniYield
Quality Fund, Inc. had net annualized yields of 6.36% and 6.74%, based on a
period-end per share net asset value of $15.41 and a per share market price of
$14.54, respectively, and $.486 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +2.50%, based
on a change in per share net asset value from $15.54 to $15.41, and assuming
reinvestment of all distributions.
The Fund's total return, based on net asset value, fell just short of the +2.67%
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.)
While we maintained our focus on yield and continued to generate above-average
income for our shareholders, the Fund's total return lagged the Lipper average
over the past six months due to our relative underexposure to longer-maturity
bonds that is, bonds with maturities of 25 years and longer. We were
overexposed, relatively, to bonds with maturities of less than 20 years. As the
municipal yield curve flattened over the past six months, longer-maturity bonds
significantly outperformed shorter-maturity issues. While we have been pursuing
a strategy of moving further out on the yield curve, generally into the 25- year
maturity range, we were not able to effect this trade as much as we would have
liked in the current low interest rate environment. Because many of the
shorter-maturity bonds booked in the portfolio have greater yields than those
available in the current environment, we were reluctant to give them up in order
to extend our average portfolio maturity. Although this benefited the Fund's
yield, it detracted from total return during this particular period. Further
compounding our inability to purchase longer-dated bonds was the fact that
recent supply has been largely concentrated in the short-term and
intermediate-term range.
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 did not significantly alter the Fund's structure or our strategy over the
past six months. We continued to favor municipal bonds in the 25-year maturity
range, and with premium coupons, when available. This supports our defensive
market posture in that these bonds offer coupon protection when interest rates
move higher. We generally maintained the Fund's fully invested position
throughout the period, seeking to enhance shareholder income.
As mentioned earlier, the major market phenomenon over the past six months was a
flattening of the yield curve. Yields on shorter-term bonds, specifically those
with maturities under 15 years or 20 years, rose rather significantly. Yields on
longer-term bonds, generally those past the 20-year range, actually declined. At
period-end, the spread between AAA-rated municipal bonds with 10-year maturities
and those with 30-year maturities was approximately 80 basis points. This
compared to a spread of approximately 120 basis points six months ago. Given
that bond prices move in the opposite direction of yields, the result has been
that bonds on the long end of the municipal yield curve performed well while
short-term bonds lagged.
6 SEMI-ANNUAL REPORTS APRIL 30, 2005
In light of this market action, our strategy of targeting new purchases in the
25-year area has been prudent. However, whereas we previously had been active
sellers of bonds in the 10-year range (redeploying the proceeds further out on
the curve), that strategy proved more challenging as the curve flattened.
Essentially, longer-term bond prices were increasing as shorter-term bonds
cheapened. Also, many bonds in the portfolio, although they have shorter
maturities, are booked at much higher yields than could be obtained in the
current low interest rate environment. Thus, we were reluctant to give up the
additional yield and jeopardize our shareholders' income. Nevertheless, our
major investment theme remained intact and any other residual cash in the
portfolio (from coupon payments, maturities or bond calls, for example) was
deployed in the long end.
For the six-month period ended April 30, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had an average yield of 1.71% for Series A, 1.80% for
Series B, 1.95% for Series C and 1.79% for Series D. At this point in the Fed's
monetary tightening cycle, interest rate increases are having a material impact
on the Fund's borrowing costs. The Fed raised the short-term interest rate
target 100 basis points during the six-month period. Still, the tax-exempt yield
curve remained relatively steep and 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 29.90% of total net assets. (For a more complete explanation of the
benefits and risks of leveraging, see page 2 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We remain focused on premium-coupon bonds and continue to favor maturities in
the 25-year range. We maintained a slightly defensive market posture at the
close of the period in recognition of generally healthy economic conditions. We
believe this positioning prepares the Fund for relative outperformance once
long-term market interest rates eventually begin to follow short-term interest
rates higher. In the meantime, our fully invested stance should continue to
provide an income benefit to Common Stock shareholders.
SEMI-ANNUAL REPORTS APRIL 30, 2005 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, 2005, the Common Stock of MuniYield
Quality Fund II, Inc. had net annualized yields of 6.35% and 6.92%, based on a
period-end per share net asset value of $13.71 and a per share market price of
$12.58, respectively, and $.432 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +3.39%, based
on a change in per share net asset value from $13.72 to $13.71, and assuming
reinvestment of all distributions.
The Fund's total return, based on net asset value, exceeded the +2.67% 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.)
The Fund's positive results during the period are primarily attributed to four
factors. First was our ability to continue generating an above-average yield.
Second was the advance refunding of several bonds in the portfolio. When
municipal bonds are advance refunded, or refinanced ahead of their maturity
date, their prices generally increase sharply. Third was an especially strong
performance of a relatively large uninsured credit. Uninsured bonds performed
quite well as credit spreads (versus bonds of higher quality but similar
maturity) continued to narrow over the past several months. Taken together, all
these factors allowed the Fund to outperform the Lipper category average despite
our maintaining a defensive market posture. (That is, we were positioned for
rising interest rates, while long-term interest rates actually declined during
the period.)
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 did not significantly alter the Fund's structure or our strategy over the
past six months. We continued to favor municipal bonds in the 25-year maturity
range, and with premium coupons, when available. This supports our defensive
market posture, in that these bonds offer coupon protection when interest rates
move higher. We generally maintained the Fund's fully invested position
throughout the period, seeking to enhance shareholder income.
The major market phenomenon over the past six months was a flattening of the
yield curve. Yields on shorter-term bonds, specifically those with maturities
under 15 years or 20 years, rose rather significantly. Yields on longer-term
bonds, generally those past the 20-year range, actually declined. At period-end,
the spread between AAA-rated municipal bonds with 10-year maturities and those
with 30-year maturities was approximately 80 basis points. This compared to a
spread of approximately 120 basis points six months ago. Given that bond prices
move in the opposite direction of yields, the result has been that bonds on the
long end of the municipal yield curve did well while short-term bonds lagged.
8 SEMI-ANNUAL REPORTS APRIL 30, 2005
In light of this market action, our strategy of targeting new purchases in the
25-year area has been successful. However, whereas we previously had been active
sellers of bonds in the 10-year range (redeploying the proceeds further out on
the curve), that strategy proved more challenging as the curve flattened.
Essentially, longer-term bond prices were increasing as shorter-term bonds
cheapened. Also, many bonds in the portfolio, although they have shorter
maturities, are booked at much higher yields than could be obtained in the
current low interest rate environment. Thus, we were reluctant to give up the
additional yield and jeopardize our shareholders' income. Nevertheless, our
major investment theme remained intact and any other residual cash in the
portfolio (from coupon payments, maturities or bond calls, for example) was
deployed in the long end.
For the six-month period ended April 30, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had an average yield of 1.69% for Series A, 1.86% for
Series B and 1.79% for Series C. At this point in the Fed's monetary tightening
cycle, interest rate increases are having a material impact on the Fund's
borrowing costs. The Fed raised the short-term interest rate target 100 basis
points during the six-month period. Still, the tax-exempt yield curve remained
relatively steep and 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
32.85% of total net assets. (For a more complete explanation of the benefits and
risks of leveraging, see page 2 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We remain focused on premium-coupon bonds and continue to favor maturities in
the 25-year range. We maintained a slightly defensive market posture at the
close of the period in recognition of generally healthy economic conditions. We
believe this positioning prepares the Fund for relative outperformance once
long-term market rates eventually begin to follow short-term interest rates
higher. In the meantime, our fully invested stance should continue to provide an
income benefit to Common Stock shareholders.
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 26, 2005
SEMI-ANNUAL REPORTS APRIL 30, 2005 9
Portfolio Information
Quality Profiles as of April 30, 2005
Percent of
MuniYield Fund, Inc. by Total
S&P/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 40.4%
AA/Aa ................................................... 6.7
A/A ..................................................... 14.1
BBB/Baa ................................................. 10.4
BB/Ba ................................................... 8.3
B/B ..................................................... 3.1
CCC/Caa ................................................. 2.1
NR (Not Rated) .......................................... 13.0
Other* .................................................. 1.9
--------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes.
--------------------------------------------------------------------------------
Percent of
MuniYield Quality Fund II, Inc. by Total
S&P/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 87.7%
AA/Aa ................................................... 3.2
A/A ..................................................... 5.8
BBB/Baa ................................................. 0.4
BB/Ba ................................................... 1.9
NR (Not Rated) .......................................... 0.2
Other* .................................................. 0.8
--------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes.
Percent of
MuniYield Quality Fund, Inc. by Total
S&P/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 87.2%
AA/Aa ................................................... 3.9
A/A ..................................................... 6.7
BBB/Baa ................................................. 0.4
NR (Not Rated) .......................................... 1.0
Other* .................................................. 0.8
--------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes.
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.
Dividend Policy
The Funds' dividend policy is to distribute all or a portion of their net
investment income to their shareholders 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 Net Assets, which comprises
part of the financial information included in these reports.
10 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments MuniYield Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Alabama--1.3% $ 2,500 Huntsville, Alabama, Health Care Authority Revenue Bonds, Series B, 5.75%
due 6/01/2032 $ 2,675
5,250 Jefferson County, Alabama, Limited Obligation School Warrants, Series A,
5.50% due 1/01/2022 5,733
===================================================================================================================================
Arizona--10.1% Arizona State Transportation Board, Highway Revenue Bonds, Sub-Series A:
5,825 5% due 7/01/2021 6,259
7,030 5% due 7/01/2022 7,531
5,240 5% due 7/01/2023 5,601
3,400 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona
Charter Schools Project 1), Series A, 6.75% due 7/01/2029 3,392
Maricopa County, Arizona, IDA, M/F Housing Revenue Refunding Bonds (CRS Pine
Ridge Housing Corporation), Series A-1 (d)(g):
5,000 6% due 10/20/2031 5,325
5,000 6.05% due 10/20/2036 5,280
Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds
(America West Airlines Inc. Project), AMT:
5,800 6.25% due 6/01/2019 4,711
6,900 6.30% due 4/01/2023 5,175
Phoenix, Arizona, IDA, M/F Housing Revenue Bonds (Summit Apartments LLC
Project) (g):
1,610 6.25% due 7/20/2022 1,754
1,425 6.45% due 7/20/2032 1,546
1,305 6.55% due 7/20/2037 1,420
1,400 Pima County, Arizona, IDA, Education Revenue Bonds (Arizona Charter
Schools Project II), Series A, 6.75% due 7/01/2031 1,461
Pima County, Arizona, IDA, M/F Housing Revenue Bonds (Columbus Village),
Series A (g):
990 5.90% due 10/20/2021 995
1,725 6% due 10/20/2031 1,734
2,295 6.05% due 10/20/2041 2,307
Vistancia Community Facilities District, Arizona, GO:
3,000 5.50% due 7/15/2020 3,042
2,125 5.75% due 7/15/2024 2,156
5,900 Yavapai County, Arizona, IDA, Hospital Facility Revenue Bonds (Yavapai
Regional Medical Center), Series A, 6% due 8/01/2033 6,241
===================================================================================================================================
Arkansas--1.1% University of Arkansas, University Construction Revenue Bonds (UAMS Campus),
Series B (e):
2,000 5% due 11/01/2020 2,157
1,600 5% due 11/01/2027 1,692
2,000 5% due 11/01/2034 2,100
1,000 University of Arkansas, University Revenue Refunding Bonds (UAMS Campus),
Series A, 5% due 11/01/2014 (e) 1,109
===================================================================================================================================
California--18.2% 3,370 Anaheim, California, Union High School District, GO, Series A, 5% due
8/01/2012 (b)(i) 3,741
5,700 California State Department of Water Resources, Power Supply Revenue Bonds,
VRDN, Series B-3, 2.98% due 5/01/2022 (k) 5,700
8,760 California State, GO, 5% due 2/01/2033 9,041
California State Public Works Board, Lease Revenue Bonds:
2,000 (Department of Corrections), Series C, 5% due 6/01/2025 2,081
4,500 (Department of Mental Health--Coalinga State Hospital), Series A, 5.125%
due 6/01/2029 4,691
California State, Various Purpose, GO:
6,800 5.25% due 11/01/2025 7,289
10,000 5% due 4/01/2031 (c) 10,461
5,550 5.50% due 11/01/2033 6,024
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
RITR Residual Interest Trust Receipts
ROLS Reset Option Long Securities
S/F Single-Family
VRDN Variable Rate Demand Notes
SEMI-ANNUAL REPORTS APRIL 30, 2005 11
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
California Golden State Tobacco Securitization Corporation of California, Tobacco Settlement
(concluded) Revenue Bonds:
$ 5,500 Series A-3, 7.875% due 6/01/2042 $ 6,374
7,500 Series A-4, 7.80% due 6/01/2042 8,656
5,000 Series B, 5.50% due 6/01/2018 5,235
5,000 Series B, 5.375% due 6/01/2028 5,245
9,520 Series B, 5.50% due 6/01/2043 10,133
18,400 Los Angeles, California, Unified School District, GO, Series A, 5%
due 7/01/2023 (i) 19,675
1,250 Sacramento County, California, Sanitation District Financing Authority,
Revenue Refunding Bonds, Trust Receipts, Class R, Series A,
8.664% due 12/01/2019 (m) 1,321
5,145 Santa Clara, California, Subordinated Electric Revenue Bonds, Series A,
5% due 7/01/2022 (e) 5,520
7,465 University of California Revenue Bonds (Multiple Purpose Projects), Series Q,
5% due 9/01/2021 (i) 7,928
===================================================================================================================================
Colorado--4.9% 470 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT, Series D-2,
6.90% due 4/01/2029 485
8,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D,
7.75% due 11/15/2013 (c) 9,611
5,325 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds
(Pavilions), AMT, 7.75% due 9/01/2016 5,576
Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee),
Series A:
1,735 7.10% due 9/01/2014 1,876
5,065 7.35% due 9/01/2031 5,417
1,300 Moffat County, Colorado, PCR, Refunding (PacifiCorp Projects), VRDN,
2.98% due 5/01/2013 (c)(k) 1,300
6,850 Plaza Metropolitan District No. 1, Colorado, Tax Allocation Revenue Bonds
(Public Improvement Fees), 8% due 12/01/2025 7,605
===================================================================================================================================
Connecticut--0.9% 5,000 Bridgeport, Connecticut, Senior Living Facilities Revenue Bonds
(3030 Park Retirement Community Project), 7.25% due 4/01/2035 5,165
525 Connecticut State Development Authority, IDR (AFCO Cargo BDL-LLC Project), AMT,
7.35% due 4/01/2010 533
===================================================================================================================================
Florida--4.1% Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National
Gypsum), AMT:
11,500 Series A, 7.125% due 4/01/2030 12,922
5,000 Series B, 7.125% due 4/01/2030 5,618
5,450 Midtown Miami, Florida, Community Development District, Special Assessment
Revenue Bonds, Series B, 6.50% due 5/01/2037 5,703
3,000 Santa Rosa Bay Bridge Authority, Florida, Revenue Bonds, 6.25% due 7/01/2028 2,865
===================================================================================================================================
Georgia--4.0% 12,140 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875%
due 1/01/2016 (h) 13,559
4,600 Atlanta, Georgia, Tax Allocation Bonds (Atlantic Station Project), 7.90%
due 12/01/2024 5,014
1,400 Atlanta, Georgia, Water and Wastewater Revenue Bonds, VRDN, Series C,
3% due 11/01/2041 (i)(k) 1,400
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 2,399
3,305 7.25% due 1/01/2035 3,480
===================================================================================================================================
Idaho--1.6% 425 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT, Senior
Series C-2, 7.15% due 7/01/2023 425
10,000 Power County, Idaho, Industrial Development Corporation, Solid Waste
Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45% due 8/01/2032 10,278
===================================================================================================================================
Illinois--4.1% 745 Beardstown, Illinois, IDR (Jefferson Smurfit Corp. Project), 8% due 10/01/2016 785
13,200 Chicago, Illinois, O'Hare International Airport Revenue Bonds, 3rd Lien, AMT,
Series B-2, 6% due 1/01/2029 (j) 14,819
150 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due
9/01/2027 (f)(g)(l) 152
3,285 Illinois Development Finance Authority Revenue Bonds (Presbyterian Home
Lake Project), Series B, 6.30% due 9/01/2022 (i) 3,490
2,925 Illinois Health Facilities Authority, Revenue Refunding Bonds (Resurrection
Health Care), VRDN, Series A, 2.98% due 5/15/2029 (i)(k) 2,925
4,000 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax
Revenue Bonds (McCormick Place Expansion), Series A, 5.50% due 6/15/2023 (e) 4,410
12 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Indiana--1.2% Indiana Municipal Power Agency, Power Supply System Revenue Bonds, Series A (h):
$ 2,850 5% due 1/01/2029 $ 2,983
4,350 5% due 1/01/2032 4,550
===================================================================================================================================
Kansas--0.2% 1,250 Lenexa, Kansas, Health Care Facility Revenue Bonds (Lakeview Village Inc.),
Series C, 6.875% due 5/15/2032 1,338
===================================================================================================================================
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 3,289
===================================================================================================================================
Louisiana--3.0% 19,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project),
6.50% due 1/01/2017 19,521
===================================================================================================================================
Maryland--1.1% 3,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds
(Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 3,065
4,000 Maryland State Health and Higher Educational Facilities Authority, Revenue
Refunding Bonds (University of Maryland Medical System), 6% due 7/01/2032 4,359
===================================================================================================================================
Massachusetts--2.7% 6,640 Massachusetts Bay Transportation Authority, Sales Tax Revenue Refunding Bonds,
Senior Series A, 5% due 7/01/2032 6,905
10,000 Massachusetts State Special Obligation Dedicated Tax Revenue Bonds, 5.25%
due 1/01/2029 (h) 10,771
===================================================================================================================================
Michigan--0.9% 6,060 Macomb County, Michigan, Hospital Finance Authority, Hospital Revenue Bonds
(Mount Clemens General Hospital), Series B, 5.875% due 11/15/2034 6,051
===================================================================================================================================
Minnesota--0.5% Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling Hills Project),
Series A (g):
420 6% due 8/20/2021 462
2,000 6.20% due 2/20/2043 2,169
965 Minneapolis, Minnesota, M/F Housing Revenue Bonds (Gaar Scott Loft Project), AMT,
5.95% due 5/01/2030 1,011
===================================================================================================================================
Missouri--2.0% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds
(Gravois Bluffs):
380 6.75% due 10/01/2015 383
2,800 7% due 10/01/2021 3,025
Kansas City, Missouri, Municipal Assistance Corporation, Leasehold
Improvement Revenue Bonds (H. Roe Bartle Convention Center), Series B-1 (c):
15,000 5.383%* due 4/15/2028 4,794
5,000 5.28%* due 4/15/2029 1,510
5,000 5.31%* due 4/15/2030 1,429
5,000 5.32%* due 4/15/2031 1,349
525 Missouri Development Finance Board, Cultural Facilities Revenue Bonds
(Nelson Gallery Foundation), VRDN, Series B, 2.97% due 12/01/2031 (e)(k) 525
335 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds,
Homeownership, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 339
===================================================================================================================================
New Hampshire--0.6% 3,425 New Hampshire Health and Education Facilities Authority, Revenue Refunding Bonds
(Elliot Hospital), Series B, 5.60% due 10/01/2022 3,597
===================================================================================================================================
New Jersey--24.8% 11,435 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50% due 6/15/2024 12,097
3,000 New Jersey EDA, First Mortgage Revenue Bonds (The Presbyterian Home), Series A,
6.375% due 11/01/2031 3,093
20,000 New Jersey EDA, Motor Vehicle Surcharge Revenue Bonds, Series A, 5% due
7/01/2029 (e) 21,035
4,400 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village Inc.
Facility), Series A, 7.25% due 11/15/2031 4,675
8,750 New Jersey EDA, School Facility Construction Revenue Bonds, Series I, 5.25%
due 9/01/2029 9,356
17,300 New Jersey EDA, School Facility Construction, Revenue Refunding Bonds, Series K,
5.50% due 12/15/2019 (c) 20,089
New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc.
Project), AMT:
3,905 6.25% due 9/15/2019 3,312
16,195 6.25% due 9/15/2029 13,101
3,680 New Jersey Health Care Facilities Financing Authority Revenue Bonds
(Pascack Valley Hospital Association), 6.625% due 7/01/2036 3,642
1,500 New Jersey Health Care Facilities Financing Authority, Revenue Refunding
Bonds (Pascack Valley Hospital Association), 5.125% due 7/01/2028 1,210
10,000 New Jersey State Transportation Trust Fund Authority, Transportation System
Revenue Refunding Bonds, Series B, 5.25% due 12/15/2015 (c) 11,250
20,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds, Series
C-2, 5.50% due 1/01/2025 (c) 23,486
SEMI-ANNUAL REPORTS APRIL 30, 2005 13
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
New Jersey $ 4,360 Port Authority of New York and New Jersey, Revenue Refunding Bonds, DRIVERS, AMT,
(concluded) Series 177, 8.681% due 10/15/2032 (e)(m) $ 5,010
20,575 Port Authority of New York and New Jersey, Special Obligation Revenue Bonds,
DRIVERS, AMT, Series 192, 8.191% due 12/01/2025 (e)(m) 22,993
7,500 Tobacco Settlement Financing Corporation of New Jersey, Asset-Backed
Revenue Refunding Bonds, 6% due 6/01/2037 7,504
===================================================================================================================================
New York--18.5% 2,200 Dutchess County, New York, IDA, Civic Facility Revenue Refunding Bonds
(Saint Francis Hospital), Series A, 7.50% due 3/01/2029 2,278
5,595 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue
Bonds, RITR, Series 9, 6.10% due 7/01/2006 (b)(h)(m) 6,246
New York City, New York, City IDA, Special Facilities Revenue Bonds, AMT:
1,250 (British Airways Plc Project), 7.625% due 12/01/2032 1,311
10,000 (Terminal One Group Association Project), 6.125% due 1/01/2024 10,143
5,000 New York City, New York, City Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, DRIVERS, Series 198, 8.211% due 6/15/2026 (e)(m) 5,438
14,000 New York City, New York, City Municipal Water Finance Authority, Water and
Sewer System, Revenue Refunding Bonds, 5.50% due 6/15/2033 15,226
New York City, New York, GO, Refunding (h):
2,000 Series G, 5.75% due 2/01/2006 (b) 2,076
10,000 Trust Receipts, Series R, 9.432% due 5/15/2014 (m) 12,963
10,000 New York City, New York, GO, Series M, 5% due 4/01/2021 10,569
9,375 New York City, New York, Sales Tax Asset Receivable Corporation Revenue Bonds,
Series A, 5% due 10/15/2029 (c) 9,940
New York State Dormitory Authority, Revenue Refunding Bonds (Mount Sinai
Health), Series A:
5,000 6.75% due 7/01/2020 5,353
315 6.50% due 7/01/2025 332
8,360 New York State Dormitory Authority, Supported Debt Revenue Refunding Bonds
(Department of Health), Series A, 5% due 7/01/2023 (n) 8,930
2,500 Suffolk County, New York, IDA, IDR, Refunding (Nissequogue Cogeneration Partners
Facility),
AMT, 5.50% due 1/01/2023 2,432
9,400 Tobacco Settlement Financing Corporation of New York Revenue Bonds, Series C-1,
5.50% due 6/01/2021 10,318
10,000 Triborough Bridge and Tunnel Authority, New York, Subordinate Revenue Bonds,
5.25% due 11/15/2030 10,651
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 3,518
2,895 6.50% due 1/01/2034 2,940
===================================================================================================================================
North Carolina--1.9% 2,710 Charlotte, North Carolina, Airport Revenue Bonds, Series A, 5% due 7/01/2029 (e) 2,833
4,750 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds,
Series D, 6.75% due 1/01/2026 5,306
290 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 8-A, 6.20%
due 7/01/2016 301
885 North Carolina HFA, S/F Revenue Bonds, Series II, 6.20% due 3/01/2016 (d) 920
1,000 North Carolina Medical Care Commission, Health Care Facilities, First Mortgage
Revenue Bonds (Arbor Acres Community Project), 6.375% due 3/01/2032 1,041
2,000 North Carolina Medical Care Commission, Health Care Housing Revenue Bonds
(The ARC of North Carolina Projects), Series A, 5.80% due 10/01/2034 2,025
===================================================================================================================================
Ohio--2.8% Cuyahoga County, Ohio, Mortgage Revenue Bonds (West Tech Apartments Project),
AMT (g):
1,410 5.75% due 9/20/2020 1,488
2,250 5.85% due 9/20/2030 2,369
2,175 Lucas County, Ohio, Health Care Facility Revenue Refunding and Improvement Bonds
(Sunset Retirement Communities), Series A, 6.625% due 8/15/2030 2,287
5,000 Mason, Ohio, City School District, GO (School Improvement), 5% due 12/01/2031
(i) 5,253
2,495 Mason, Ohio, Sewer System Revenue Refunding and Improvement Bonds,
5% due 12/01/2028 (e) 2,629
970 Port of Greater Cincinnati Development Authority, Ohio, Special Assessment Revenue
Bonds (Cooperative Public Parking Infrastructure Project), 6.30% due 2/15/2024 1,039
Toledo-Lucas County, Ohio, Port Authority Revenue Bonds (Saint Mary Woods Project),
Series A:
750 6% due 5/15/2024 750
2,250 6% due 5/15/2034 2,183
14 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Oklahoma--0.1% $ 900 Oklahoma State Industries Authority, Revenue Refunding Bonds (Integris Baptist),
VRDN, Series B, 2.98% due 8/15/2029 (e)(k) $ 900
===================================================================================================================================
Oregon--1.6% 4,405 Oregon State Department of Administrative Services, COP, Series A, 6%
due 5/01/2010 (b)(c) 5,041
3,460 Oregon State, GO, Refunding (Veterans Welfare), Series 80A, 5.70% due 10/01/2032 3,486
1,830 Portland, Oregon, Housing Authority, Housing Revenue Bonds (Pine Square and
University Place), Series A, 5.875% due 1/01/2022 1,789
===================================================================================================================================
Pennsylvania--5.8% 200 Geisinger Authority, Pennsylvania, Health System Revenue Refunding Bonds (Geisinger
Health Systems), VRDN, 2.98% due 8/01/2028 (k) 200
5,270 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue
Bonds (National Gypsum Company), AMT, Series A, 6.25% due 11/01/2027 5,672
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 (e) 17,164
Philadelphia, Pennsylvania, Authority for IDR, Commercial Development:
1,265 7.75% due 12/01/2017 1,293
3,650 (Days Inn), Refunding, Series B, 6.50% due 10/01/2027 3,763
4,000 (Doubletree), Refunding, Series A, 6.50% due 10/01/2027 4,124
5,000 Sayre, Pennsylvania, Health Care Facilities Authority, Revenue Bonds (Guthrie
Healthcare System), Series B, 7.125% due 12/01/2031 5,907
===================================================================================================================================
Rhode Island--0.4% Woonsocket, Rhode Island, GO (h):
1,225 6% due 10/01/2017 1,395
1,195 6% due 10/01/2018 1,359
===================================================================================================================================
Tennessee--2.3% 4,610 Hardeman County, Tennessee, Correctional Facilities Corporation Revenue Bonds,
7.75% due 8/01/2017 4,810
10,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling
Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 10,051
===================================================================================================================================
Texas--16.7% 5,000 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue Bonds (American
Airlines Inc. Project), AMT, 7.50% due 12/01/2029 3,913
Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.),
First Tier, Series A:
5,000 6.70% due 1/01/2028 5,351
5,000 6.70% due 1/01/2032 5,314
Bexar County, Texas, Housing Finance Corporation, M/F Housing Revenue Bonds
(Water at Northern Hills Apartments), Series A (e):
1,300 5.80% due 8/01/2021 1,372
2,460 6% due 8/01/2031 2,570
1,000 6.05% due 8/01/2036 1,045
6,650 Brazos River Authority, Texas, PCR, Refunding (Utilities Electric Company), AMT,
Series B, 5.05% due 6/01/2030 6,751
3,755 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant Energy Inc.
Project), Series B, 7.75% due 12/01/2018 4,176
2,000 Dallas-Fort Worth, Texas, International Airport Facility, Improvement Corporation
Revenue Bonds (Learjet Inc.), AMT, Series 2001-A-1, 6.15% due 1/01/2016 2,009
7,500 Dallas-Fort Worth, Texas, International Airport Facility, Improvement Corporation
Revenue Refunding Bonds (American Airlines), AMT, Series B, 6.05% due 5/01/2029 7,416
Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue
Bonds (Good Shepherd Medical Center Project) (a):
3,000 6.875% due 10/01/2020 3,457
2,000 6.375% due 10/01/2025 2,256
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 5,225
3,900 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo Petroleum
Corporation Project), AMT, 7.50% due 5/01/2025 4,367
265 Harris County, Texas, Health Facilities Development Corporation, Hospital Revenue
Bonds (Texas Children's Hospital), VRDN, Series B-1, 2.98% due 10/01/2029 (e)(k) 265
5,200 Harris County, Texas, Health Facilities Development Corporation, Revenue Refunding
Bonds (Methodist Hospital), VRDN, 5% due 5/06/2005 (b)(k) 5,200
1,600 Houston, Texas, Industrial Development Corporation Revenue Bonds (Air Cargo), AMT,
6.375% due 1/01/2023 1,655
Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT:
4,830 6.375% due 4/01/2027 5,179
3,330 6.95% due 4/01/2030 3,802
SEMI-ANNUAL REPORTS APRIL 30, 2005 15
Schedule of Investments (continued) MuniYield Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Texas $ 7,030 Matagorda County, Texas, Navigation District Number 1, Revenue Refunding Bonds
(concluded) (Reliant Energy Inc.), Series C, 8% due 5/01/2029 $ 7,756
5,200 Nueces River Authority, Texas, Water Supply Facilities, Revenue Refunding Bonds
(Corpus Christi Lake Project), 5% due 7/15/2026 (i) 5,464
3,900 Port Corpus Christi, Texas, Individual Development Corporation, Environmental
Facilities Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 8.25%
due 11/01/2031 4,187
5,000 Red River Authority, Texas, PCR, Refunding (Celanese Project), AMT, Series B,
6.70% due 11/01/2030 5,275
6,500 Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First
Tier, Series A, 5.50% due 8/15/2039 (c) 7,150
7,020 Tyler, Texas, Waterworks and Sewer Revenue Bonds, 5.70% due 9/01/2010 (b)(h) 7,850
===================================================================================================================================
Utah--0.3% 400 Salt Lake County, Utah, PCR, Refunding (Service Station Holdings Project), VRDN,
Series B, 2.97% due 8/01/2007 (k) 400
1,545 Utah State Board of Regents, Revenue Refunding Bonds (University of Utah Research
Facilities), Series A, 5.50% due 4/01/2018 (e) 1,700
===================================================================================================================================
Virginia--2.9% 5,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding Bonds, AMT,
Series A, 6.10% due 2/01/2011 (c) 5,633
Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds:
7,500 Senior-Series A, 5.50% due 8/15/2028 7,337
24,800 Senior-Series B, 6.67%* due 8/15/2029 5,822
===================================================================================================================================
Washington--0.3% Vancouver, Washington, Housing Authority, Housing Revenue Bonds (Teal Pointe
Apartments Project), AMT:
945 6% due 9/01/2022 910
1,250 6.20% due 9/01/2032 1,195
===================================================================================================================================
West Virginia--0.6% 1,000 Princeton, West Virginia, Hospital Revenue Refunding Bonds (Community Hospital
Association Inc. Project), 6% due 5/01/2019 829
3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds (TJ International
Project), AMT, 7% due 7/15/2025 3,094
===================================================================================================================================
Wisconsin--0.7% 700 Milwaukee, Wisconsin, Revenue Bonds (Air Cargo), AMT, 6.50% due 1/01/2025 737
Wisconsin Health and Educational Facilities Authority, Revenue Refunding Bonds
(Eastcastle Place Inc. Project):
1,000 6% due 12/01/2024 1,001
1,800 6.125% due 12/01/2034 1,757
965 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (e) 973
===================================================================================================================================
Wyoming--0.8% 2,550 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corporation
Project), AMT, Series A, 7% due 6/01/2024 2,587
2,500 Wyoming Student Loan Corporation, Student Loan Revenue Refunding Bonds, Series A,
6.20% due 6/01/2024 2,699
16 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (concluded) MuniYield Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Puerto Rico--6.9% $15,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Transportation
Revenue Bonds, Trust Receipts, Class R, Series B, 8.463% due 7/01/2035 (e)(m) $ 18,695
16,360 Puerto Rico Commonwealth, Highway and Transportation Authority, Transportation
Revenue Refunding Bonds, Series D, 5.75% due 7/01/2041 18,269
2,500 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R,
Series 16 HH, 8.193% due 7/01/2013 (i)(m) 3,135
4,350 Puerto Rico Public Finance Corporation Revenue Bonds, DRIVERS, Series 272,
8.069% due 8/01/2030 (m) 4,793
===================================================================================================================================
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 6,845
===================================================================================================================================
Total Investments (Cost--$929,603**)--151.4% 989,059
Other Assets Less Liabilities--1.1% 7,308
Preferred Stock, at Redemption Value--(52.5%) (343,024)
---------
Net Assets Applicable to Common Stock--100.0% $ 653,343
=========
* Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
** The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2005, as computed for federal income tax purposes, were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ............................................... $929,068
========
Gross unrealized appreciation ................................ $ 63,493
Gross unrealized depreciation ................................ (3,502)
--------
Net unrealized appreciation .................................. $ 59,991
========
(a) Radian Insured.
(b) Prerefunded.
(c) AMBAC Insured.
(d) FHA Insured.
(e) MBIA Insured.
(f) FNMA Collateralized.
(g) GNMA Collateralized.
(h) FGIC Insured.
(i) FSA Insured.
(j) XL Capital Insured.
(k) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features which qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(l) FHLMC Collateralized.
(m) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(n) CIFG Insured.
Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund (9,413) $34
--------------------------------------------------------------------------
Financial futures contracts sold as of April 30, 2005 were as follows:
(in Thousands)
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
1,500 10-Year U.S.
Treasury Notes June 2005 $164,767 $(2,366)
--------------------------------------------------------------------------
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 17
Schedule of Investments
MuniYield Quality Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Alaska--0.5% $ 2,100 Alaska State International Airports Revenue Bonds, Series B, 5.75%
due 10/01/2019 (a) $ 2,371
===================================================================================================================================
Arizona--0.6% 2,345 Maricopa County, Arizona, Public Finance Corporation, Lease Revenue Bonds, RIB,
Series 511X, 7.74% due 7/01/2014 (a)(i) 2,873
===================================================================================================================================
California--20.8% 1,250 Alameda Corridor Transportation Authority, California, Capital Appreciation Revenue
Refunding Bonds, Subordinate Lien, Series A, 4.738%** due 10/01/2023 (a) 921
4,150 Alameda Corridor Transportation Authority, California, Revenue Refunding Bonds,
Subordinated Lien, Series A, 5.525%** due 10/01/2025 (a) 3,040
California State Department of Water Resources, Power Supply Revenue Bonds,
Series A:
1,400 5.375% due 5/01/2021 1,525
1,000 5.375% due 5/01/2022 (g) 1,108
California State, GO, Refunding:
5,700 5.25% due 9/01/2026 6,095
6,000 5.25% due 2/01/2030 (b) 6,434
7,700 5.25% due 2/01/2030 (g) 8,256
2,850 California State, GO, Refunding, ROLS, Series II-R-272, 7.356% due 2/01/2033 (i)(j)3,180
California State, Various Purpose, GO:
3,300 5.50% due 4/01/2028 3,609
2,500 5.25% due 11/01/2029 2,660
3,200 5.50% due 11/01/2033 3,474
Golden State Tobacco Securitization Corporation of California, Tobacco Settlement
Revenue Bonds:
5,000 RIB, Series RR II R 285X, 7.883% due 6/01/2043 (b)(i) 5,833
7,080 RIB, Series RR II R 287X, 8.136% due 6/01/2038 (i)(k) 8,370
4,050 Series B, 5.60% due 6/01/2028 4,319
3,000 Series B, 5.50% due 6/01/2033 (b) 3,256
1,870 Series B, 5.625% due 6/01/2033 (b) 2,052
1,600 Series B, 5.50% due 6/01/2043 (b) 1,733
7,300 Los Angeles, California, Unified School District, GO, Series A, 5% due 1/01/2028
(g) 7,669
2,000 Mount Diablo, California, Unified School District, GO (Election of 2002), 5%
due 7/01/2027 (d) 2,101
2,000 Poway, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Paguay
Redevelopment Project), 5.125% due 6/15/2033 (a) 2,094
16,895 San Francisco, California, City and County, COP (San Bruno Jail No. 3),
5.25% due 10/01/2033 (a) 17,931
1,950 Tamalpais, California, Union High School District, GO (Election of 2001), 5%
due 8/01/2028 (f) 2,047
===================================================================================================================================
Colorado--6.7% Colorado Health Facilities Authority Revenue Bonds, Series A:
1,650 (Catholic Health Initiatives), 5.50% due 3/01/2032 (c) 1,839
1,600 (Covenant Retirement Communities Inc.), 5.50% due 12/01/2027 (j) 1,716
1,000 (Covenant Retirement Communities Inc.), 5.50% due 12/01/2033 (j) 1,068
Colorado Housing and Finance Authority, Revenue Refunding Bonds, AMT:
1,530 (S/F Program), Series B-2, 6.80% due 2/01/2031 (g) 1,582
695 (S/F Program),Series C-2, 8.40% due 10/01/2021 (e)(g) 725
945 Series C-2, 7.05% due 4/01/2031 (e)(g) 976
1,400 Series C-2, 7.25% due 10/01/2031 (a) 1,447
465 Series E-2, 7% due 2/01/2030 (g) 485
6,405 Denver, Colorado, City and County, COP, Series B, 5.75% due 12/01/2010 (a)(h) 7,288
9,000 E-470 Public Highway Authority, Colorado, Capital Appreciation Revenue Refunding
Bonds, Series B, 5.485%** due 9/01/2029 (g) 2,429
14,800 Northwest Parkway, Colorado, Public Highway Authority, Capital Appreciation Revenue
Bonds, Senior Convertible, Series C, 5.345%** due 6/15/2025 (f) 11,991
18 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (continued)
MuniYield Quality Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
District of $ 2,500 District of Columbia Revenue Refunding Bonds (Catholic University of America
Columbia--0.6% Project), 5.625% due 10/01/2029 (a) $ 2,725
===================================================================================================================================
Florida--0.5% 2,240 Beacon Tradeport Community Development District, Florida, Special Assessment Revenue
Refunding Bonds (Commercial Project), Series A, 5.625% due 5/01/2032 (j) 2,436
===================================================================================================================================
Georgia--2.1% 1,800 Atlanta, Georgia, Water and Wastewater Revenue Bonds, VRDN, Series C,
3% due 11/01/2041 (f)(m) 1,800
2,800 Augusta, Georgia, Water and Sewer Revenue Bonds, 5.25% due 10/01/2039 (f) 3,000
4,785 Monroe County, Georgia, Development Authority, PCR, Refunding (Oglethorpe Power
Corporation--Scherer), Series A, 6.80% due 1/01/2011 5,559
===================================================================================================================================
Hawaii--0.5% 2,000 Hawaii State, GO, Series CX, 5.50% due 2/01/2021 (f) 2,196
===================================================================================================================================
Illinois--26.0% Chicago, Illinois, Board of Education, GO (a):
1,750 (Chicago School Reform Project), Series A, 5.25% due 12/01/2030 1,855
5,000 RIB, Series 467, 8.24% due 12/01/2027 (i) 5,813
Chicago, Illinois, Capital Appreciation, GO, Project and Refunding, Series A (g):
1,000 5.35%** due 1/01/2027 812
1,000 5.363%** due 1/01/2028 810
1,000 5.376%** due 1/01/2029 808
1,000 5.387%** due 1/01/2030 807
Chicago, Illinois, GO (Lakefront Millennium Parking Facilities) (g):
5,000 5.125% due 1/01/2028 5,183
2,500 5.372%** due 1/01/2029 2,561
Chicago, Illinois, O'Hare International Airport Revenue Bonds, 3rd Lien, AMT, Series B-2:
3,400 5.75% due 1/01/2023 (f) 3,769
4,000 5.75% due 1/01/2024 (f) 4,437
3,300 6% due 1/01/2029 (b) 3,705
Chicago, Illinois, O'Hare International Airport Revenue Refunding Bonds, AMT:
2,665 3rd Lien, Series A-2, 5.75% due 1/01/2021 (f) 2,958
6,835 DRIVERS, Series 250, 8.159% due 1/01/2021 (g)(i) 8,114
2,500 DRIVERS, Series 844Z, 7.382% due 7/01/2010 (g)(i) 2,821
6,250 RIB, Series 994X, 7.43% due 1/01/2032 (g)(i) 6,822
6,200 Cook County, Illinois, Capital Improvement, GO, Series C, 5.50% due 11/15/2026 (a) 6,843
2,130 Illinois Development Finance Authority Revenue Bonds (Presbyterian Home Lake
Project), Series B, 6.25% due 9/01/2017 (f) 2,253
3,800 Illinois Health Facilities Authority, Revenue Refunding Bonds (University of Chicago
Hospitals), VRDN, 2.98% due 8/01/2026 (g)(m) 3,800
Illinois Sports Facilities Authority, State Tax Supported Revenue Bonds (a):
31,350 5.224%** due 6/15/2030 25,702
5,500 5% due 6/15/2032 5,714
10,000 Illinois State, GO, First Series, 5.50% due 8/01/2018 (f) 10,930
3,750 Illinois Student Assistance Commission, Student Loan Revenue Refunding Bonds, AMT,
Sub-Series CC, 6.875% due 3/01/2015 3,757
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) 7,650
3,500 Series B, 5.75% due 6/15/2023 (g) 3,947
===================================================================================================================================
Indiana--1.5% 4,500 Indiana Transportation Finance Authority, Highway Revenue Bonds, Series A,
5.25% due 6/01/2029 (d) 4,847
2,000 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue Bonds (Waterworks
Project), Series A, 5.25% due 7/01/2033 (g) 2,138
===================================================================================================================================
Louisiana--5.1% 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) 9,331
New Orleans, Louisiana, Ernest N. Morial Exhibit Hall Authority, Special Tax, Sub-Series A
(a):
6,800 5.25% due 7/15/2028 7,245
5,000 5% due 7/15/2033 5,182
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) 2,065
SEMI-ANNUAL REPORTS APRIL 30, 2005 19
Schedule of Investments (continued)
MuniYield Quality Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Massachusetts--5.5% Massachusetts Bay, Massachusetts, Transportation Authority, General Transportation
System Revenue Refunding Bonds, Series A (g):
$ 3,730 7% due 3/01/2011 $ 4,448
3,550 7% due 3/01/2014 4,382
Massachusetts Bay Transportation Authority, Sales Tax Revenue Refunding Bonds,
Senior Series A:
1,800 5% due 7/01/2032 1,872
2,000 5% due 7/01/2035 2,060
7,005 Massachusetts State HFA, Rental Housing Mortgage Revenue Bonds, AMT, Series C,
5.60% due 1/01/2045 (f) 7,259
1,915 Massachusetts State Port Authority, Special Facilities Revenue Bonds, DRIVERS, AMT,
Series 501, 7.654% due 7/01/2009 (a)(i) 2,144
2,400 Massachusetts State Special Obligation Dedicated Tax Revenue Bonds,
5.25% due 1/01/2028 (d) 2,589
800 Massachusetts State Water Resource Authority, General Revenue Refunding Bonds,
Series B, 5.125% due 8/01/2027 (g) 843
===================================================================================================================================
Michigan--4.9% Detroit, Michigan, City School District, GO, Series A (f):
4,000 5.50% due 5/01/2019 4,441
3,625 5.50% due 5/01/2020 3,992
3,040 Michigan Higher Education Student Loan Authority, Student Loan Revenue Refunding
Bonds, AMT, Series XVII-G, 5.20% due 9/01/2020 (a) 3,194
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 1,821
3,300 Series C, 5.65% due 9/01/2029 3,525
5,800 Series C, 5.45% due 12/15/2032 6,137
===================================================================================================================================
Nebraska--0.5% 2,300 Washington County, Nebraska, Wastewater Facilities Revenue Bonds (Cargill Inc.
Project), AMT, 5.90% due 11/01/2027 2,517
===================================================================================================================================
Nevada--5.6% 4,100 Carson City, Nevada, Hospital Revenue Bonds (Carson-Tahoe Hospital Project),
Series A, 5.50% due 9/01/2033 (j) 4,394
Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds (d):
2,000 Series A-2, 5% due 7/01/2030 2,082
4,100 Series A-2, 5% due 7/01/2036 4,256
3,000 Series B, 5.25% due 7/01/2034 3,146
Director of the State of Nevada, Department of Business and Industry Revenue Bonds
(Las Vegas Monorail Company Project), First Tier (a):
1,000 5.625% due 1/01/2032 1,098
4,400 5.375% due 1/01/2040 4,661
5,710 Washoe County, Nevada, School District, GO, 5.875% due 12/01/2009 (f)(h) 6,383
===================================================================================================================================
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) 11,035
5,000 New Hampshire State Business Finance Authority, PCR, Refunding (Public Service
Company), AMT, Series D, 6% due 5/01/2021 (g) 5,449
===================================================================================================================================
New Jersey--2.8% New Jersey EDA, Cigarette Tax Revenue Bonds:
910 5.75% due 6/15/2029 975
1,385 5.50% due 6/15/2031 1,447
2,750 New Jersey EDA, Motor Vehicle Surcharge Revenue Bonds, Series A, 5.25%
due 7/01/2031 (g) 2,969
New Jersey EDA Revenue Bonds, ROLS (i)(l):
3,575 Series II-R-309-1, 7.883% due 6/15/2024 4,183
3,000 Series II-R-309-2, 7.883% due 6/15/2031 3,529
===================================================================================================================================
New York--7.9% 3,500 Erie County, New York, IDA, School Facility Revenue Bonds (City of Buffalo Project),
5.75% due 5/01/2024 (f) 4,005
100 New York City, New York, City Municipal Water Finance Authority, Water and Sewer
System Revenue Refunding Bonds, VRDN, Series G, 2.97% due 6/15/2024 (d)(m) 100
20 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (continued)
MuniYield Quality Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
New York New York City, New York, GO:
(concluded) $ 6,920 RIB, Series 394, 8.464% due 8/01/2016 (g)(i) $ 8,683
2,410 Series B, 5.875% due 8/15/2006 (b)(h) 2,542
2,590 Series B, 5.875% due 8/15/2013 (b) 2,724
1,255 Series F, 5.75% due 2/01/2019 (b) 1,301
9,325 New York City, New York, GO, Refunding, Series G, 5.75% due 2/01/2006 (f)(h) 9,667
7,320 Tobacco Settlement Financing Corporation of New York Revenue Bonds, Series A-1,
5.25% due 6/01/2022 (a) 7,884
===================================================================================================================================
Ohio--1.1% 2,500 Columbus, Ohio, City School District, GO (School Facilities Construction and
Improvements), 5.25% due 12/01/2027 (f) 2,716
2,000 Jackson, Ohio, Hospital Facilities Revenue Bonds (Consolidated Health System--Jackson
Hospital), 6.125% due 10/01/2009 (h)(j) 2,265
===================================================================================================================================
Oklahoma--0.8% Tulsa, Oklahoma, Airports Improvement Trust, General Revenue Bonds (Tulsa
International Airport), AMT (d):
1,250 Series A, 6% due 6/01/2020 1,473
1,000 Series B, 6% due 6/01/2019 1,099
1,000 Series B, 6.125% due 6/01/2026 1,105
===================================================================================================================================
Oregon--2.0% 7,500 Portland, Oregon, Sewer System Revenue Bonds, RIB, Series 386,
9.96% due 8/01/2020 (d)(i) 9,143
===================================================================================================================================
Pennsylvania--7.9% 2,000 Allegheny County, Pennsylvania, Port Authority, Special Transportation Revenue Bonds,
6% due 3/01/2009 (g)(h) 2,235
800 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds,
5.50% due 12/01/2030 (g) 897
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 6,541
11,750 5% due 6/01/2033 12,212
6,250 Philadelphia, Pennsylvania, Authority for Industrial Development, Lease Revenue
Bonds, Series B, 5.50% due 10/01/2021 (f) 6,889
7,170 Philadelphia, Pennsylvania, School District, GO, Series B, 5.625%
due 8/01/2012 (d)(h) 8,196
===================================================================================================================================
Rhode Island--0.6% 2,500 Providence, Rhode Island, GO, Series A, 5.70% due 7/15/2007 (f)(h) 2,673
===================================================================================================================================
South Carolina--2.9% 20,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue Refunding Bonds,
Sub-Series A-2, 4.915%** due 1/01/2028 (a) 6,399
3,045 South Carolina State Public Service Authority, Revenue Refunding Bonds, DRIVERS,
Series 277, 8.188% due 1/01/2022 (g)(i) 3,277
3,800 Spartanburg County, South Carolina, Solid Waste Disposal Facilities Revenue Bonds
(BMW Project), AMT, 7.55% due 11/01/2024 3,956
===================================================================================================================================
Tennessee--6.2% 17,000 Chattanooga, Tennessee, IDB, Lease Rent Revenue Bonds (Southside Redevelopment
Corporation), 5.875% due 10/01/2024 (a) 18,907
5,000 Memphis--Shelby County, Tennessee, Airport Authority, Airport Revenue Bonds, AMT,
Series D, 6.25% due 3/01/2018 (a) 5,569
Tennessee HDA, Homeownership Revenue Bonds, AMT, Series 2-C (a):
2,075 6.10% due 7/01/2013 2,143
2,390 6.20% due 7/01/2015 2,487
===================================================================================================================================
SEMI-ANNUAL REPORTS APRIL 30, 2005 21
Schedule of Investments (continued)
MuniYield Quality Fund, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Texas--13.8% Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.),
Trust Certificates, Second Tier, Series B:
$ 4,000 6% due 1/01/2023 $ 4,307
1,400 5.75% due 1/01/2032 1,447
1,000 Bell County, Texas, Health Facilities Development Revenue Bonds (Lutheran General
Health Care System), 6.50% due 7/01/2019 (c) 1,229
Dallas-Fort Worth, Texas, International Airport Revenue Refunding and Improvement
Bonds, AMT, Series A (d):
1,835 5.875% due 11/01/2017 2,036
2,145 5.875% due 11/01/2018 2,380
2,385 5.875% due 11/01/2019 2,646
5,235 Denton, Texas, Utility System Revenue Bonds, RIB, Series 369, 8.69%
due 12/01/2017 (f)(i) 6,606
Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue
Bonds (Good Shepherd Medical Center Project) (j):
6,000 6.875% due 10/01/2020 6,913
2,600 6.375% due 10/01/2025 2,933
4,000 Harris County, Houston, Texas, Sports Authority, Revenue Refunding Bonds, Senior
Lien, Series G, 5.75% due 11/15/2020 (g) 4,416
2,700 Houston, Texas, Airport System Revenue Refunding Bonds, Sub-Lien, Series B,
5.50% due 7/01/2030 (f) 2,910
10,000 Houston, Texas, Hotel Occupancy Tax and Special Revenue Refunding Bonds (Convention
Center), Series B, 5.14%** due 9/01/2027 (a) 3,282
9,250 Leander, Texas, Independent School District, Capital Appreciation, GO, Refunding
(School Building), 5.46%** due 8/15/2028 (d) 2,661
7,150 North Harris County, Texas, Regional Water Authority, Senior Lien Revenue Bonds,
5.125% due 12/15/2035 (g) 7,526
7,200 Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds,
First Tier, Series A, 5.75% due 8/15/2038 (a) 8,058
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) 5,231
===================================================================================================================================
Utah--3.8% 15,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds (IHC Hospitals Inc.),
6.30% due 2/15/2015 (g) 17,751
===================================================================================================================================
Virginia--2.1% 6,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding Bonds, AMT,
Series A, 6.05% due 2/01/2009 (a) 6,573
3,100 Halifax County, Virginia, IDA, Exempt Facility Revenue Refunding Bonds (Old Dominion
Electric Cooperative Project), AMT, 5.625% due 6/01/2028 (a) 3,400
===================================================================================================================================
Washington--5.7% 10,000 Energy Northwest, Washington, Electric Revenue Bonds, DRIVERS, Series 242,
8.19% due 7/01/2017 (g)(i) 12,507
2,835 King County, Washington, Sewer Revenue Refunding Bonds, Series B, 5.50%
due 1/01/2027 (f) 3,090
2,400 Port of Tacoma, Washington, Revenue Refunding Bonds, Series A, 5.25%
due 12/01/2034 (a) 2,570
7,500 Washington State, GO, Series A and AT-6, 6.25% due 2/01/2011 (f) 8,367
===================================================================================================================================
Wisconsin--0.2% 1,000 Milwaukee County, Wisconsin, Airport Revenue Bonds, AMT, Series A, 5.75%
due 12/01/2025 (d) 1,087
22 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (concluded)
MuniYield Quality Fund, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Puerto Rico--0.3% $ 1,475 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series II, 5.25%
due 7/01/2031 $ 1,567
===================================================================================================================================
Total Investments (Cost--$624,919*)--143.0% 670,304
Liabilities in Excess of Other Assets--(0.3%) (1,310)
Preferred Stock, at Redemption Value--(42.7%) (200,024)
---------
Net Assets Applicable to Common Stock--100.0% $ 468,970
=========
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2005, as computed for federal income tax purposes, were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ............................................. $624,864
========
Gross unrealized appreciation .............................. $ 46,021
Gross unrealized depreciation .............................. (581)
--------
Net unrealized appreciation ................................ $ 45,440
========
** Represents a zero coupon or step bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
(a) AMBAC Insured.
(b) XL Capital Insured.
(c) Escrowed to maturity.
(d) FGIC Insured.
(e) FHA 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) Assured Guaranty Insured.
(m) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features which qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund (4,970) $26
--------------------------------------------------------------------------
Forward interest rate swaps outstanding as of April 30, 2005 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
--------------------------------------------------------------------------
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate of 3.558%
Broker, JPMorgan Chase Bank
Expires May 2015 $48,000 $ 94
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate of 3.88%
Broker, JPMorgan Chase Bank
Expires July 2015 $22,000 (412)
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate of 4.187%
Broker, Morgan Stanley Capital
Services, Inc.
Expires June 2025 $14,000 (469)
--------------------------------------------------------------------------
Total $(787)
=====
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 23
Schedule of Investments
MuniYield Quality Fund II, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Alaska--0.5% $ 1,400 Alaska State International Airports Revenue Bonds, Series B, 5.75%
due 10/01/2019 (a) $ 1,581
===================================================================================================================================
Arizona--1.0% 2,700 Northern Arizona University System Revenue Bonds, 5.50% due 6/01/2034 (c) 2,982
===================================================================================================================================
California--23.6% 8,150 Alameda Corridor Transportation Authority, California, Revenue Refunding Bonds,
Subordinated Lien, Series A, 5.319%** due 10/01/2025 (a) 5,971
2,500 California Health Facilities Financing Authority Revenue Bonds (Kaiser Permanente),
RIB, Series 26, 7.69% due 6/01/2022 (f)(l) 2,860
2,490 California State Department of Water Resources, Power Supply Revenue Bonds,
Series A, 5.375% due 5/01/2022 (i) 2,759
California State, GO, Refunding:
2,800 5.25% due 9/01/2026 2,994
5,300 5.25% due 2/01/2030 (i) 5,683
1,780 5.25% due 2/01/2030 (h) 1,909
1,950 ROLS, Series II-R-272, 7.356% due 2/01/2033 (k)(l) 2,176
California State, Various Purpose, GO:
2,750 5.25% due 11/01/2029 2,926
6,500 5.50% due 11/01/2033 7,055
2,770 Fairfield-Suisun, California, Unified School District, GO (Election of 2002),
5.50% due 8/01/2028 (i) 3,070
Golden State Tobacco Securitization Corporation of California, Tobacco Settlement
Revenue Bonds, Series B:
2,750 5.60% due 6/01/2028 2,932
2,050 5.50% due 6/01/2033 (h) 2,225
1,300 5.625% due 6/01/2033 (h) 1,427
7,075 5.625% due 6/01/2038 (b) 7,720
2,300 5.50% due 6/01/2043 (h) 2,492
2,815 John Swett Unified School District, California, GO, Series A, 5.50%
due 8/01/2026 (f) 3,090
4,900 Los Angeles, California, Unified School District, GO, Series A, 5%
due 1/01/2028 (i) 5,148
2,900 Palm Springs, California, Financing Authority, Lease Revenue Refunding Bonds
(Convention Center Project), Series A, 5.50% due 11/01/2029 (i) 3,239
1,250 Poway, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Paguay
Redevelopment Project), 5.125% due 6/15/2033 (a) 1,309
3,650 Sacramento County, California, Sanitation District Financing Authority, Revenue
Refunding Bonds, Trust Receipts, Class R, Series A, 8.664% due 12/01/2019 (l) 3,858
1,325 Tamalpais, California, Union High School District, GO (Election of 2001), 5%
due 8/01/2028 (f) 1,391
===================================================================================================================================
Colorado--11.2% 11,020 Colorado Department of Transportation Revenue Bonds, DRIVERS, Series 249,
8.69% due 6/15/2014 (a)(l) 14,087
Colorado Health Facilities Authority Revenue Bonds, Series A:
1,150 (Catholic Health Initiatives), 5.50% due 3/01/2032 (o) 1,282
1,200 (Covenant Retirement Communities Inc.), 5.50% due 12/01/2027 (k) 1,287
675 (Covenant Retirement Communities Inc.), 5.50% due 12/01/2033 (k) 721
Colorado Housing and Finance Authority Revenue Refunding Bonds, AMT (i):
1,775 (S/F Program), Series B-2, 6.80% due 2/01/2031 1,836
20 (S/F Program), Series C-1, 7.65% due 12/01/2025 (d) 20
710 Series E-2, 7% due 2/01/2030 741
7,500 E-470 Public Highway Authority, Colorado, Capital Appreciation Revenue Refunding
Bonds, Series B, 5.607%** due 9/01/2032 (i) 1,696
13,250 Northwest Parkway, Colorado, Public Highway Authority, Capital Appreciation Revenue
Bonds, Senior Convertible, Series C, 5.33%** due 6/15/2025 (f) 10,735
1,735 Northwest Parkway, Colorado, Public Highway Authority Revenue Bonds, Series A,
5.50% due 6/15/2021 (a) 1,920
24 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (continued)
MuniYield Quality Fund II, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Connecticut--3.8% $ 1,100 Connecticut State Regional Learning Educational Service Center Revenue Bonds
(Office/Education Center Facility), 7.75% due 2/01/2006 (j) $ 1,160
9,325 Connecticut State Resource Recovery Authority, Revenue Refunding Bonds, DRIVERS,
Series 187, 7.72% due 11/15/2011 (i)(l) 10,393
===================================================================================================================================
Georgia--4.2% 5,000 Atlanta, Georgia, Airport General Revenue Refunding Bonds, Series B, 5.25%
due 1/01/2033 (f) 5,349
5,000 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875%
due 1/01/2017 (c) 5,580
1,900 Augusta, Georgia, Water and Sewer Revenue Bonds, 5.25% due 10/01/2039 (f) 2,035
===================================================================================================================================
Illinois--21.2% 3,250 Chicago, Illinois, Board of Education, GO (Chicago School Reform Project), Series A,
5.25% due 12/01/2030 (a) 3,444
3,500 Chicago, Illinois, Gas Supply Revenue Refunding Bonds (People's Gas, Light & Coke),
Series A, 6.10% due 6/01/2025 (a) 3,581
Chicago, Illinois, O'Hare International Airport Revenue Bonds, 3rd Lien, AMT,
Series B-2:
5,200 5.75% due 1/01/2023 (f) 5,764
2,200 6% due 1/01/2029 (h) 2,470
4,750 Chicago, Illinois, O'Hare International Airport, Revenue Refunding Bonds, DRIVERS,
VRDN, AMT, Series 844Z, 7.382% due 7/01/2010 (i)(l) 5,360
2,830 Chicago, Illinois, Park District, GO, Refunding, Series C, 5.50% due 1/01/2021 (c) 3,109
3,000 Cook County, Illinois, Capital Improvement, GO, Series C, 5.50% due 11/15/2026 (a) 3,311
900 Illinois Health Facilities Authority, Revenue Refunding Bonds (University of Chicago
Hospitals), VRDN, 2.98% due 8/01/2026 (i)(n) 900
10,000 Illinois Regional Transportation Authority Revenue Bonds, 6.50% due 7/01/2026 (i) 13,070
23,850 Illinois Sports Facilities Authority, State Tax Supported Revenue Bonds,
5.274%** due 6/15/2030 (a) 19,553
3,625 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax, Revenue
Refunding Bonds, DRIVERS, Series 269, 8.064% due 6/15/2023 (i)(l) 4,551
===================================================================================================================================
Indiana--2.9% Indiana Transportation Finance Authority, Highway Revenue Bonds, Series A (c):
3,750 5.25% due 6/01/2028 4,045
3,000 5.25% due 6/01/2029 3,232
1,500 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue Bonds (Waterworks
Project), Series A, 5.25% due 7/01/2033 (i) 1,604
===================================================================================================================================
Kansas--1.7% 1,370 Sedgwick and Shawnee Counties, Kansas, S/F Mortgage-Backed Revenue Bonds, AMT,
Series A-2, 7.60% due 12/01/2031 (g)(i) 1,451
2,295 Sedgwick and Shawnee Counties, Kansas, S/F Mortgage-Backed Revenue Refunding Bonds,
AMT, Series A-2, 6.45% due 12/01/2033 (e)(i) 2,420
1,240 Sedgwick and Shawnee Counties, Kansas, S/F Revenue Bonds (Mortgage-Backed Securities
Program), AMT, Series A-1, 6.875% due 12/01/2026 (g)(i) 1,283
===================================================================================================================================
Louisiana--4.3% 2,555 Jefferson Parish, Louisiana, Home Mortgage Authority, S/F Mortgage Revenue Bonds,
AMT, Series B-1, 6.65% due 12/01/2033 (e)(i) 2,628
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) 4,281
4,650 New Orleans, Louisiana, Ernest N. Morial Exhibit Hall Authority, Special Tax,
Sub-Series A, 5.25% due 7/15/2028 (a) 4,955
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) 1,413
===================================================================================================================================
Massachusetts--2.7% Massachusetts Bay Transportation Authority, Sales Tax Revenue Refunding Bonds,
Senior Series A:
1,265 5% due 7/01/2032 1,316
1,375 5% due 7/01/2035 1,417
2,785 Massachusetts State Port Authority, Special Facilities Revenue Bonds, DRIVERS, VRDN,
AMT, Series 501, 7.654% due 7/01/2009 (a)(l) 3,117
1,800 Massachusetts State Special Obligation Dedicated Tax Revenue Bonds,
5.25% due 1/01/2028 (c) 1,942
550 Massachusetts State Water Resource Authority, General Revenue Refunding Bonds,
Series B, 5.125% due 8/01/2027 (i) 580
SEMI-ANNUAL REPORTS APRIL 30, 2005 25
Schedule of Investments (continued)
MuniYield Quality Fund II, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Michigan--6.0% $ 8,900 Detroit, Michigan, Water Supply System Revenue Bonds, Series B, 5.25%
due 7/01/2032 (i) $ 9,493
1,300 Michigan Higher Education Student Loan Authority, Student Loan Revenue Refunding
Bonds, AMT, Series XVII-G, 5.20% due 9/01/2020 (a) 1,366
2,685 Michigan State, HDA, Revenue Refunding Bonds, Series C, 5.90% due 12/01/2015 (d)(f) 2,803
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 1,071
3,900 Series C, 5.45% due 12/15/2032 4,127
===================================================================================================================================
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 4,512
1,500 6% due 3/01/2010 1,709
===================================================================================================================================
Nevada--3.5% 2,800 Carson City, Nevada, Hospital Revenue Bonds (Carson--Tahoe Hospital Project), Series
A, 5.50% due 9/01/2033 (k) 3,001
Clark County, Nevada, Airport System Subordinate Lien Revenue Bonds,
Series A-2 (c):
1,500 5% due 7/01/2030 1,561
2,700 5% due 7/01/2036 2,802
3,300 Director of the State of Nevada, Department of Business and Industry Revenue Bonds
(Las Vegas Monorail Company Project), First Tier, 5.375% due 1/01/2040 (a) 3,496
===================================================================================================================================
New Jersey--5.8% 3,000 Garden State Preservation Trust of New Jersey, Open Space and Farmland Preservation
Revenue Bonds, Series A, 5.80% due 11/01/2021 (f) 3,407
New Jersey EDA, Cigarette Tax Revenue Bonds:
1,070 5.75% due 6/15/2029 1,147
500 5.50% due 6/15/2031 522
New Jersey EDA, Motor Vehicle Surcharge Revenue Bonds, Series A (i):
2,400 5% due 7/01/2029 2,524
4,800 5.25% due 7/01/2033 5,176
New Jersey EDA Revenue Bonds, ROLS (l)(m):
2,300 Series II-R-309-1, 7.883% due 6/15/2024 2,691
2,000 Series II-R-309-2, 7.883% due 6/15/2031 2,353
===================================================================================================================================
New Mexico--2.4% 6,295 New Mexico State Highway Commission, Tax Revenue Bonds, Senior Sub-Lien, Series A,
6% due 6/15/2010 (f)(j) 7,144
===================================================================================================================================
New York--10.6% 2,500 Erie County, New York, IDA, School Facility Revenue Bonds (City of Buffalo Project),
5.75% due 5/01/2026 (f) 2,842
9,280 Nassau Health Care Corporation, New York, Health System Revenue Bonds,
5.75% due 8/01/2009 (f)(j) 10,459
2,500 New York City, New York, City Transitional Finance Authority Revenue Refunding Bonds,
Future Tax Secured, Series C, 5.50% due 11/01/2024 2,739
2,720 New York City, New York, GO, Series D, 5.875% due 6/01/2021 (i) 3,070
5,000 New York State Dormitory Authority, Revenue Refunding Bonds (State University
Educational Facilities), 5.75% due 5/15/2010 (c)(j) 5,671
7,115 Tobacco Settlement Financing Corporation of New York Revenue Bonds, Series A-1,
5.25% due 6/01/2022 (a) 7,663
===================================================================================================================================
Ohio--2.4% Plain, Ohio, Local School District, GO, Refunding (c):
5,120 6% due 6/01/2011 (j) 5,887
1,170 6% due 12/01/2020 1,320
===================================================================================================================================
Pennsylvania--6.5% 600 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue Bonds,
5.50% due 12/01/2030 (i) 672
3,335 Delaware River Port Authority of Pennsylvania and New Jersey Revenue Bonds, RIB,
Series 396, 8.713% due 1/01/2019 (f)(l) 4,098
5,500 Pennsylvania State Public School Building Authority, School Lease Revenue Bonds (The
School District of Philadelphia Project), 5% due 6/01/2033 (f) 5,716
3,230 Philadelphia, Pennsylvania, Authority for Industrial Development, Lease Revenue
Bonds, Series B, 5.50% due 10/01/2020 (f) 3,560
4,500 Philadelphia, Pennsylvania, School District, GO, Series B, 5.625%
due 8/01/2012 (c)(j) 5,144
300 Philadelphia, Pennsylvania, Water and Wastewater Revenue Refunding Bonds, VRDN,
2.99% due 6/15/2023 (f)(n) 300
26 SEMI-ANNUAL REPORTS APRIL 30, 2005
Schedule of Investments (continued)
MuniYield Quality Fund II, Inc. (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
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 9/15/2024 (i) $ 4,411
===================================================================================================================================
South Carolina--1.6% 2,250 South Carolina State Public Service Authority, Revenue Refunding Bonds, DRIVERS,
Series 277, 8.188% due 1/01/2022 (i)(l) 2,422
2,500 Spartanburg County, South Carolina, Solid Waste Disposal Facilities Revenue Bonds
(BMW Project), AMT, 7.55% due 11/01/2024 2,603
===================================================================================================================================
Tennessee--2.7% 7,365 Chattanooga, Tennessee, IDB, Lease Rent Revenue Bonds (Southside Redevelopment
Corporation), 5.875% due 10/01/2024 (a) 8,191
===================================================================================================================================
Texas--15.3% 4,000 Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), Trust
Certificates, Second Tier, Series B, 5.75% due 1/01/2032 4,133
2,400 Bell County, Texas, Health Facilities Development Corporation, Hospital Revenue
Bonds (Scott & White Memorial Hospital), VRDN, Series 2001-1, 2.98%
due 8/15/2031 (i)(n) 2,400
2,730 Corpus Christi, Texas, Utility System Revenue Refunding Bonds, Series A,
6% due 7/15/2010 (f)(j) 3,088
3,250 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, DRIVERS, AMT,
Series 202, 8.67% due 11/01/2028 (c)(l) 3,855
Dickinson, Texas, Independent School District, GO, Refunding (i):
1,180 6% due 2/15/2017 1,316
1,250 6% due 2/15/2018 1,393
4,000 Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue
Bonds (Good Shepherd Medical Center Project), 6.875% due 10/01/2020 (k) 4,609
1,900 Houston, Texas, Airport System Revenue Refunding Bonds, Sub-Lien, Series B,
5.50% due 7/01/2030 (f) 2,047
6,655 Houston, Texas, Hotel Occupancy Tax and Special Revenue Refunding Bonds (Convention
Center), Series B, 5.14%** due 9/01/2027 (a) 2,184
9,345 Leander, Texas, Independent School District, Capital Appreciation, GO, Refunding
(School Building), 5.51%** due 8/15/2030 (c) 2,387
3,500 Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT,
6.375% due 4/01/2027 3,753
4,925 North Harris County, Texas, Regional Water Authority, Senior Lien Revenue Bonds,
5.125% due 12/15/2035 (i) 5,184
Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First
Tier, Series A (a):
4,800 5.75% due 8/15/2038 5,372
3,600 5.50% due 8/15/2039 3,960
1,000 University of Houston, Texas, University Revenue Bonds, 5.50% due 2/15/2030 (i) 1,075
===================================================================================================================================
Virginia--3.5% 2,100 Halifax County, Virginia, IDA, Exempt Facility Revenue Refunding Bonds (Old Dominion
Electric Cooperative Project), AMT, 5.625% due 6/01/2028 (a) 2,303
26,500 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds, Senior-Series B,
5.875%** due 8/15/2024 8,606
===================================================================================================================================
Washington--6.3% 2,150 King County, Washington, Sewer Revenue Refunding Bonds, Series B, 5.50%
due 1/01/2027 (f) 2,344
1,600 Port of Tacoma, Washington, Revenue Refunding Bonds, Series A, 5.25%
due 12/01/2034 (a) 1,713
7,470 Port Seattle, Washington, Revenue Bonds, AMT, Series B, 6% due 2/01/2016 (i) 8,264
6,150 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6%
due 10/01/2009 (i)(j) 6,946
SEMI-ANNUAL REPORTS APRIL 30, 2005 27
Schedule of Investments (concluded)
MuniYield Quality Fund II, Inc. (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Puerto Rico--1.7% $ 2,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Transportation
Revenue Bonds, Series B, 6% due 7/01/2005 (i)(j) $ 2,540
2,500 Puerto Rico Municipal Finance Agency, GO, Series A, 5.50% due 8/01/2023 (f) 2,719
===================================================================================================================================
Total Investments (Cost--$428,626*)--148.8% 456,300
Other Assets Less Liabilities--0.1% 305
Preferred Stock, at Redemption Value--(48.9%) (150,023)
---------
Net Assets Applicable to Common Stock--100.0% $ 306,582
=========
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2005, as computed for federal income tax purposes, were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ................................................ $428,626
========
Gross unrealized appreciation ................................. $ 28,260
Gross unrealized depreciation ................................. (586)
--------
Net unrealized appreciation ................................... $ 27,674
========
** Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
(a) AMBAC Insured.
(b) CIFG Insured.
(c) FGIC Insured.
(d) FHA Insured.
(e) FNMA/GNMA Collateralized.
(f) FSA Insured.
(g) GNMA Collateralized.
(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) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features which 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) Escrowed to maturity.
Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund (2,866) $11
--------------------------------------------------------------------------
Forward interest rate swaps outstanding as of April 30, 2005 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
--------------------------------------------------------------------------
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate of 3.558%
Broker, JPMorgan Chase Bank
Expires May 2015 $20,000 $ 39
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate of 3.88%
Broker, JPMorgan Chase Bank
Expires July 2015 $15,000 (559)
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate of 4.187%
Broker, Morgan Stanley Capital
Services, Inc.
Expires June 2025 $19,000 (320)
--------------------------------------------------------------------------
Total $(840)
=====
See Notes to Financial Statements.
28 SEMI-ANNUAL REPORTS APRIL 30, 2005
Statements of Net Assets
MuniYield MuniYield
MuniYield Quality Quality
As of April 30, 2005 Fund, Inc. Fund, Inc. Fund II, Inc.
===================================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value* ...... $ 989,059,281 $ 670,304,249 $ 456,299,610
Cash ................................................... 159,502 45,935 7,558
Interest receivable .................................... 17,061,139 10,138,254 7,404,147
Receivable for variation margin ........................ 375,000 -- --
Receivable for securities sold ......................... 126,619 2,570,064 6,827,237
Prepaid expenses and other assets ...................... 17,638 10,839 16,151
-------------------------------------------------------
Total assets ........................................... 1,006,799,179 683,069,341 470,554,703
-------------------------------------------------------
===================================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps . -- 786,792 839,756
Payable for securities purchased ....................... 9,472,029 12,698,679 12,674,300
Dividends payable to Common Stock shareholders ......... 470,121 274,805 208,846
Payable to investment adviser .......................... 380,119 254,958 174,081
Payable to other affiliates ............................ 10,329 7,037 4,787
Accrued expenses and other liabilities ................. 99,607 52,536 47,775
-------------------------------------------------------
Total liabilities ...................................... 10,432,205 14,074,807 13,949,545
-------------------------------------------------------
===================================================================================================================================
Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.05 per
share** of AMPS@ at $25,000 per share liquidation
preference ............................................ 343,023,980 200,024,220 150,023,040
-------------------------------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock .................. $ 653,342,994 $ 468,970,314 $ 306,582,118
=======================================================
===================================================================================================================================
Analysis of Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Undistributed investment income--net ................... $ 13,226,278 $ 5,870,848 $ 4,835,663
Accumulated realized capital losses--net ............... (53,585,991) (8,409,058) (39,087,186)
Unrealized appreciation--net ........................... 57,090,201 44,598,613 26,833,656
-------------------------------------------------------
Total accumulated earnings (losses)--net ............... 16,730,488 42,060,403 (7,417,867)
Common Stock, par value $.10 per share+ ................ 4,443,063 3,042,526 2,236,693
Paid-in capital in excess of par ....................... 632,169,443 423,867,385 311,763,292
-------------------------------------------------------
Net assets ............................................. $ 653,342,994 $ 468,970,314 $ 306,582,118
=======================================================
Net asset value per share of Common Stock .............. $ 14.70 $ 15.41 $ 13.71
=======================================================
Market price ........................................... $ 14.34 $ 14.54 $ 12.58
=======================================================
* Identified cost ..................................... $ 929,602,926 $ 624,918,844 $ 428,626,198
=======================================================
** Preferred Stock authorized, issued and outstanding:
Series A Shares ................................. 1,800 2,000 2,000
=======================================================
Series B Shares ................................. 1,800 2,000 2,000
=======================================================
Series C Shares ................................. 1,800 2,000 2,000
=======================================================
Series D Shares ................................. 1,800 2,000 --
=======================================================
Series E Shares ................................. 2,800 -- --
=======================================================
Series F Shares ................................. 1,720 -- --
=======================================================
Series G Shares ................................. 2,000 -- --
=======================================================
+ Common Stock issued and outstanding .................. 44,430,631 30,425,258 22,366,930
=======================================================
@ Auction Market Preferred Stock.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 29
Statements of Operations
MuniYield MuniYield
MuniYield Quality Quality
For the Six Months Ended April 30, 2005 Fund, Inc. Fund, Inc. Fund II, Inc.
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Interest ............................................... $ 27,863,114 $ 17,494,477 $ 11,747,380
Dividends from affiliates .............................. 34,463 26,267 10,666
-------------------------------------------------------
Total income ........................................... 27,897,577 17,520,744 11,758,046
-------------------------------------------------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................... 2,459,487 1,667,534 1,135,612
Commission fees ........................................ 429,943 252,977 194,702
Accounting services .................................... 139,045 106,918 78,645
Transfer agent fees .................................... 63,151 45,075 31,306
Professional fees ...................................... 30,097 27,373 25,702
Printing and shareholder reports ....................... 22,505 24,779 22,422
Custodian fees ......................................... 22,496 17,323 11,737
Directors' fees and expenses ........................... 17,332 13,256 10,581
Listing fees ........................................... 16,970 11,702 10,389
Pricing fees ........................................... 14,126 13,217 10,760
Other .................................................. 31,756 27,719 25,138
-------------------------------------------------------
Total expenses before reimbursement .................... 3,246,908 2,207,873 1,556,994
Reimbursement of expenses .............................. (4,595) (3,488) (1,491)
-------------------------------------------------------
Total expenses after reimbursement ..................... 3,242,313 2,204,385 1,555,503
-------------------------------------------------------
Investment income--net ................................. 24,655,264 15,316,359 10,202,543
-------------------------------------------------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
-----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net .................................... 10,918,964 4,012,559 709,435
Futures contracts and forward interest rate
swaps--net ......................................... 5,840,081 (1,907,920) (753,833)
-------------------------------------------------------
Total realized gain (loss)--net ........................ 16,759,045 2,104,639 (44,398)
Change in unrealized appreciation/depreciation on:
Investments--net .................................... 3,195,894 (5,307,026) 712,017
Futures contracts and forward interest rate
swaps--net ......................................... (2,366,154) 604,706 (59,305)
-------------------------------------------------------
Total change in unrealized
appreciation/depreciation--net ........................ 829,740 (4,702,320) 652,712
-------------------------------------------------------
Total realized and unrealized gain (loss)--net ......... 17,588,785 (2,597,681) 608,314
-------------------------------------------------------
===================================================================================================================================
Dividends to Preferred Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................. (2,971,139) (1,809,260) (1,330,360)
-------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ... $ 39,272,910 $ 10,909,418 $ 9,480,497
=======================================================
See Notes to Financial Statements.
30 SEMI-ANNUAL REPORTS APRIL 30, 2005
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: 2005 2004
====================================================================================================================
Operations
--------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... $ 24,655,264 $ 47,961,143
Realized gain--net ....................................... 16,759,045 1,490,339
Change in unrealized appreciation/depreciation--net ...... 829,740 17,986,132
Dividends to Preferred Stock shareholders ................ (2,971,139) (3,152,152)
-------------------------------
Net increase in net assets resulting from operations ..... 39,272,910 64,285,462
-------------------------------
====================================================================================================================
Dividends to Common Stock Shareholders
--------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... (21,948,732) (42,786,698)
-------------------------------
Net decrease in net assets resulting from dividends to
Common Stock shareholders ............................... (21,948,732) (42,786,698)
-------------------------------
====================================================================================================================
Stock Transactions
--------------------------------------------------------------------------------------------------------------------
Offering and underwriting costs resulting from the
issuance of Preferred Stock ............................. -- (648,585)
-------------------------------
Net decrease in net assets derived from stock transactions -- (648,585)
-------------------------------
====================================================================================================================
Net Assets Applicable to Common Stock
--------------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to Common Stock .. 17,324,178 20,850,179
Beginning of period ...................................... 636,018,816 615,168,637
-------------------------------
End of period* ........................................... $ 653,342,994 $ 636,018,816
===============================
* Undistributed investment income--net ................ $ 13,226,278 $ 13,490,885
===============================
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 31
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: 2005 2004
====================================================================================================================
Operations
--------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... $ 15,316,359 $ 31,467,544
Realized gain--net ....................................... 2,104,639 112,652
Change in unrealized appreciation/depreciation--net ...... (4,702,320) 5,545,913
Dividends to Preferred Stock shareholders ................ (1,809,260) (2,075,540)
-------------------------------
Net increase in net assets resulting from operations ..... 10,909,418 35,050,569
-------------------------------
====================================================================================================================
Dividends to Common Stock Shareholders
--------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... (14,786,675) (29,573,351)
-------------------------------
Net decrease in net assets resulting from dividends to
Common Stock shareholders ............................... (14,786,675) (29,573,351)
-------------------------------
====================================================================================================================
Net Assets Applicable to Common Stock
--------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to
Common Stock ............................................ (3,877,257) 5,477,218
Beginning of period ...................................... 472,847,571 467,370,353
-------------------------------
End of period* ........................................... $ 468,970,314 $ 472,847,571
===============================
* Undistributed investment income--net ................ $ 5,870,848 $ 7,150,424
===============================
See Notes to Financial Statements.
32 SEMI-ANNUAL REPORTS APRIL 30, 2005
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: 2005 2004
====================================================================================================================
Operations
--------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... $ 10,202,543 $ 21,097,310
Realized loss--net ....................................... (44,398) (4,603,827)
Change in unrealized appreciation/depreciation--net ...... 652,712 10,444,599
Dividends to Preferred Stock shareholders ................ (1,330,360) (1,551,920)
-------------------------------
Net increase in net assets resulting from operations ..... 9,480,497 25,386,162
-------------------------------
====================================================================================================================
Dividends to Common Stock Shareholders
--------------------------------------------------------------------------------------------------------------------
Investment income--net ................................... (9,662,514) (19,123,725)
-------------------------------
Net decrease in net assets resulting from dividends to
Common Stock shareholders ............................... (9,662,514) (19,123,725)
-------------------------------
====================================================================================================================
Net Assets Applicable to Common Stock
--------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to
Common Stock ............................................ (182,017) 6,262,437
Beginning of period ...................................... 306,764,135 300,501,698
-------------------------------
End of period* ........................................... $ 306,582,118 $ 306,764,135
===============================
* Undistributed investment income--net ................ $ 4,835,663 $ 5,625,994
===============================
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 33
Financial Highlights MuniYield Fund, Inc.
For the
Six Months For the Year Ended
Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........ $ 14.31 $ 13.85 $ 13.28 $ 13.55 $ 13.08
--------------------------------------------------------------------
Investment income--net ...................... .55@ 1.09@ 1.06@ 1.04 1.03
Realized and unrealized gain (loss)--net .... .40 .41 .52 (.31) .52
Less dividends to Preferred Stock shareholders
from investment income--net ................ (.07) (.07) (.07) (.08) (.22)
--------------------------------------------------------------------
Total from investment operations ............ .88 1.43 1.51 .65 1.33
--------------------------------------------------------------------
Less dividends to Common Stock shareholders
from investment income--net ................ (.49) (.96) (.94) (.92) (.86)
--------------------------------------------------------------------
Offering and underwriting costs resulting
from issuance of Preferred Stock ........... -- (.01) -- -- --
--------------------------------------------------------------------
Net asset value, end of period .............. $ 14.70 $ 14.31 $ 13.85 $ 13.28 $ 13.55
====================================================================
Market price per share, end of period ....... $ 14.34 $ 13.74 $ 13.29 $ 12.88 $ 13.940
====================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .......... 6.38%@@ 11.04% 11.99% 5.07% 10.51%
====================================================================
Based on market price per share ............. 8.08%@@ 11.11% 10.80% (.94%) 17.79%
====================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement*** ..... 1.01%* .97% .99% 1.01% 1.01%
====================================================================
Total expenses*** ........................... 1.01%* .98% .99% 1.01% 1.01%
====================================================================
Total investment income--net*** ............. 7.68%* 7.75% 7.86% 7.97% 7.74%
====================================================================
Amount of dividends to Preferred Stock
shareholders ............................... .92%* .51% .50% .74% 1.63%
====================================================================
Investment income--net, to Common Stock
shareholders ............................... 6.76%* 7.24% 7.36% 7.23% 6.11%
====================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ... 1.74%* 1.05% 1.02% 1.50% 3.33%
====================================================================
34 SEMI-ANNUAL REPORTS APRIL 30, 2005
Financial Highlights (concluded) MuniYield Fund, Inc.
For the
Six Months For the Year Ended
Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of
period (in thousands) ...................... $653,343 $636,019 $615,169 $590,101 $524,737
====================================================================
Preferred Stock outstanding, end of
period (in thousands) ...................... $343,000 $343,000 $293,000 $293,000 $250,000
====================================================================
Portfolio turnover .......................... 15.53% 23.62% 61.95% 104.63% 83.26%
====================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ................... $ 2,905 $ 2,854 $ 3,100 $ 3,014 $ 3,099
====================================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ............ $ 199 $ 266 $ 256 $ 346 $ 816
====================================================================
Series B--Investment income--net ............ $ 231 $ 268 $ 274 $ 369 $ 864
====================================================================
Series C--Investment income--net ............ $ 191 $ 268 $ 261 $ 353 $ 847
====================================================================
Series D--Investment income--net ............ $ 233 $ 260 $ 281 $ 504 $ 850
====================================================================
Series E--Investment income--net ............ $ 220 $ 244 $ 236 $ 346 $ 805
====================================================================
Series F+--Investment income--net ........... $ 212 $ 253 $ 247 $ 324 --
====================================================================
Series G++--Investment income--net .......... $ 228 $ 60 -- -- --
====================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Series F was issued on November 19, 2001.
++ Series G was issued on August 31, 2004.
@ Based on average shares outstanding.
@@ Aggregate total investment return.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 35
Financial Highlights MuniYield Quality Fund, Inc.
For the
Six Months For the Year Ended
Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........ $ 15.54 $ 15.36 $ 15.19 $ 15.27 $ 14.18
--------------------------------------------------------------------
Investment income--net ...................... .50+ 1.03+ 1.07+ 1.06 1.06
Realized and unrealized gain (loss)--net .... (.08) .19 .13 (.13) 1.08
Less dividends and distributions to Preferred
Stock shareholders:
Investment income--net ................... (.06) (.07) (.07) (.09) (.21)
Realized gain--net ....................... -- -- -- --@@ --
--------------------------------------------------------------------
Total from investment operations ............ .36 1.15 1.13 .84 1.93
--------------------------------------------------------------------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net ................... (.49) (.97) (.96) (.91) (.84)
Realized gain--net ....................... -- -- -- (.01) --
--------------------------------------------------------------------
Total dividends and distributions to Common
Stock shareholders ......................... (.49) (.97) (.96) (.92) (.84)
--------------------------------------------------------------------
Net asset value, end of period .............. $ 15.41 $ 15.54 $ 15.36 $ 15.19 $ 15.27
====================================================================
Market price per share, end of period ....... $ 14.54 $ 14.83 $ 14.35 $ 13.74 $ 14.24
====================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .......... 2.50%@ 8.26% 8.13% 6.12% 14.46%
====================================================================
Based on market price per share ............. 1.34%@ 10.58% 11.68% 2.94% 25.47%
====================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement*** ..... .94%* .94% .94% .96% .98%
====================================================================
Total expenses*** ........................... .94%* .95% .95% .96% .98%
====================================================================
Total investment income--net*** ............. 6.55%* 6.74% 6.89% 7.03% 7.18%
====================================================================
Amount of dividends to Preferred Stock
shareholders ............................... .77%* .45% .42% .61% 1.45%
====================================================================
Investment income--net, to Common Stock
shareholders ............................... 5.78%* 6.29% 6.47% 6.42% 5.73%
====================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ... 1.81%* 1.04% .99% 1.40% 3.27%
====================================================================
36 SEMI-ANNUAL REPORTS APRIL 30, 2005
Financial Highlights (concluded) MuniYield Quality Fund, Inc.
For the
Six Months For the Year Ended
Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end
of period (in thousands) ................... $468,970 $472,848 $467,370 $462,156 $464,522
====================================================================
Preferred Stock outstanding, end of
period (in thousands) ...................... $200,000 $200,000 $200,000 $200,000 $200,000
====================================================================
Portfolio turnover .......................... 14.76% 32.87% 33.92% 46.29% 89.58%
====================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ................... $ 3,345 $ 3,364 $ 3,337 $ 3,311 $ 3,323
====================================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ............ $ 213 $ 271 $ 273 $ 370 $ 852
====================================================================
Series B--Investment income--net ............ $ 225 $ 255 $ 238 $ 337 $ 792
====================================================================
Series C--Investment income--net ............ $ 243 $ 261 $ 253 $ 349 $ 832
====================================================================
Series D--Investment income--net ............ $ 224 $ 251 $ 228 $ 339 $ 791
====================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 37
Financial Highlights MuniYield Quality Fund II, Inc.
For the
Six Months For the Year Ended
Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........ $ 13.72 $ 13.44 $ 13.27 $ 13.21 $ 12.39
--------------------------------------------------------------------
Investment income--net ...................... .46+ .94+ .97+ .94 .94
Realized and unrealized gain--net ........... .02 .27 .09 --++ .84
Less dividends to Preferred Stock
shareholders from investment income--net ... (.06) (.07) (.07) (.10) (.22)
--------------------------------------------------------------------
Total from investment operations ............ .42 1.14 .99 .84 1.56
--------------------------------------------------------------------
Less dividends to Common Stock shareholders
from investment income--net ................ (.43) (.86) (.82) (.78) (.74)
--------------------------------------------------------------------
Net asset value, end of period .............. $ 13.71 $ 13.72 $ 13.44 $ 13.27 $ 13.21
====================================================================
Market price per share, end of period ....... $ 12.58 $ 12.69 $ 12.18 $ 11.75 $ 12.07
====================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .......... 3.39%@ 9.32% 8.28% 7.27% 13.47%
====================================================================
Based on market price per share ............. 2.57%@ 11.57% 10.83% 3.95% 11.70%
====================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement*** ..... 1.02%* 1.01% 1.03% 1.06% 1.07%
====================================================================
Total expenses*** ........................... 1.02%* 1.02% 1.03% 1.06% 1.07%
====================================================================
Total investment income--net*** ............. 6.70%* 7.00% 7.17% 7.26% 7.36%
====================================================================
Amount of dividends to Preferred Stock
shareholders ............................... .87%* .51% .50% .78% 1.74%
====================================================================
Investment income--net, to Common Stock
shareholders ............................... 5.83%* 6.49% 6.67% 6.48% 5.62%
====================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ... 1.78%* 1.04% 1.00% 1.51% 3.31%
====================================================================
38 SEMI-ANNUAL REPORTS APRIL 30, 2005
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. 2005 2004 2003 2002 2001
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of
period (in thousands) ...................... $306,582 $306,764 $300,502 $296,847 $295,457
====================================================================
Preferred Stock outstanding, end of
period (in thousands) ...................... $150,000 $150,000 $150,000 $150,000 $150,000
====================================================================
Portfolio turnover .......................... 10.58% 32.30% 42.06% 42.89% 98.99%
====================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ................... $ 3,044 $ 3,045 $ 3,003 $ 2,979 $ 2,970
====================================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ............ $ 210 $ 271 $ 276 $ 390 $ 855
====================================================================
Series B--Investment income--net ............ $ 231 $ 253 $ 240 $ 388 $ 853
====================================================================
Series C--Investment income--net ............ $ 223 $ 252 $ 235 $ 351 $ 777
====================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2005 39
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,
40 SEMI-ANNUAL REPORTS APRIL 30, 2005
Notes to Financial Statements (continued)
unless terminated earlier. When the agreement is closed, 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. Divided 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
MuniYield Fund, Inc.'s Preferred Stock were charged to capital at the time of
issuance of the shares.
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, 2005, FAM reimbursed each
Fund as follows:
--------------------------------------------------------------------------------
Fund Reimbursement
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ...................................... $4,595
MuniYield Quality Fund, Inc. .............................. $3,488
MuniYield Quality Fund II, Inc. ........................... $1,491
--------------------------------------------------------------------------------
For the six months ended April 30, 2005, the Funds reimbursed FAM for certain
accounting services. The reimbursements were as follows:
--------------------------------------------------------------------------------
Fund Reimbursement
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ..................................... $10,663
MuniYield Quality Fund, Inc. ............................. $ 6,997
MuniYield Quality Fund II, Inc. .......................... $ 4,794
--------------------------------------------------------------------------------
Certain officers and/or directors of the Funds are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 2005 were as follows:
--------------------------------------------------------------------------------
MuniYield MuniYield
MuniYield Quality Quality
Fund, Inc. Fund, Inc. Fund II, Inc.
--------------------------------------------------------------------------------
Total Purchases ....... $148,359,735 $103,121,997 $ 49,479,581
Total Sales ........... $168,120,633 $ 96,691,901 $ 47,235,177
--------------------------------------------------------------------------------
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.
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred Stock of the
Funds, with a par value of $.05 per share and 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, 2005 were as follows:
--------------------------------------------------------------------------------
MuniYield MuniYield
MuniYield Quality Quality
Fund, Inc. Fund, Inc. Fund II, Inc.
--------------------------------------------------------------------------------
Series A 2.31% 2.35% 2.30%
Series B 2.31% 2.525% 2.54%
Series C 2.25% 2.739% 2.402%
Series D 2.55% 2.80% --
Series E 2.54% -- --
Series F 2.40% -- --
Series G 2.50% -- --
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORTS APRIL 30, 2005 41
Notes to Financial Statements (concluded)
MuniYield Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2005
remained constant. Shares issued and outstanding during the year ended October
31, 2004 increased by 2,000 shares from the issuance of an additional series of
Preferred Stock.
MuniYield Quality Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2005 and the
year ended October 31, 2004 remained constant.
MuniYield Quality Fund II, Inc.
Shares issued and outstanding during the six months ended April 30, 2005 and the
year ended October 31, 2004 remained constant.
The Funds pay 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, 2005, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, an affiliate of FAM, earned commissions as follows:
--------------------------------------------------------------------------------
Fund Commissions
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ..................................... $198,358
MuniYield Quality Fund, Inc. ............................. $112,045
MuniYield Quality Fund II, Inc. .......................... $103,601
--------------------------------------------------------------------------------
5. Capital Loss Carryforward:
MuniYield Fund, Inc.
On October 31, 2004, the Fund had a net capital loss carryforward of
$63,838,397, of which $3,650,202 expires in 2006, $13,147,684 expires in 2007,
$40,851,001 expires in 2008, $6,000,235 expires in 2009 and $189,275 expires in
2010. This amount will be available to offset like amounts of any future taxable
gains.
MuniYield Quality Fund, Inc.
On October 31, 2004, the Fund had a net capital loss carryforward of $6,711,574,
of which $1,093,528 expires in 2008, $3,278,904 expires in 2010 and $2,339,142
expires in 2012. This amount will be available to offset like amounts of any
future taxable gains.
MuniYield Quality Fund II, Inc.
On October 31, 2004, the Fund had a net capital loss carryforward of
$37,686,418, of which $4,975,019 expires in 2007, $26,079,903 expires in 2008,
$1,096,837 expires in 2010 and $5,534,659 expires in 2012. This amount 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
27, 2005 to shareholders of record on May 13, 2005. The amount of the tax-exempt
income dividend was as follows:
--------------------------------------------------------------------------------
Per Share
Fund Amount
--------------------------------------------------------------------------------
MuniYield Fund, Inc. ..................................... $.083000
MuniYield Quality Fund, Inc. ............................. $.081000
MuniYield Quality Fund II, Inc. .......................... $.072000
--------------------------------------------------------------------------------
42 SEMI-ANNUAL REPORTS APRIL 30, 2005
Proxy Results MuniYield Fund, Inc.
During the six-month period ended April 30, 2005, MuniYield Fund, Inc.'s Common
Stock shareholders voted on the following proposals. Proposal 1 was approved at
a shareholders' meeting on April 28, 2005. With respect to Proposal 2, the
proposal was adjourned until May 27, 2005, at which time it passed. A
description of the proposals and number of shares voted were as follows:
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 23,061,991 425,332
Joe Grills 23,029,064 458,259
Roberta Cooper Ramo 23,047,168 440,155
Robert S. Salomon, Jr. 23,056,667 430,656
Stephen B. Swensrud 23,021,719 465,604
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to fundamental investment restrictions. 17,509,849 628,341 675,057
------------------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2005, MuniYield Fund, Inc.'s
Preferred Stock shareholders (Series A - G) voted on the following proposals.
Proposal 1 was approved at a shareholders' meeting on April 28, 2005. With
respect to Proposal 2, the proposal was adjourned until May 27, 2005, at which
time it passed. A description of the proposals and number of shares voted were
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, Joe Grills, Herbert I. London, Roberta Cooper Ramo,
Robert S. Salomon, Jr. and Stephen B. Swensrud 10,390 95
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to fundamental investment restrictions. 13,035 465 121
------------------------------------------------------------------------------------------------------------------
SEMI-ANNUAL REPORTS APRIL 30, 2005 43
Proxy Results MuniYield Quality Fund, Inc.
During the six-month period ended April 30, 2005, MuniYield Quality Fund, Inc.'s
Common Stock shareholders voted on the following proposals. Proposals 1 and 2
were approved at a shareholders' meeting on April 28, 2005. With respect to
Proposal 3, the proposal was adjourned until June 27, 2005. A description of the
proposals and number of shares voted were as follows:
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 15,864,587 359,401
James H. Bodurtha 15,860,505 363,483
Joe Grills 15,840,375 383,613
Roberta Cooper Ramo 15,840,265 383,723
Stephen B. Swensrud 15,836,416 387,572
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to fundamental investment restriction. 12,278,215 547,266 384,877
------------------------------------------------------------------------------------------------------------------
3. To approve an amendment to articles supplementary or
certificate of designation. Adjourned Adjourned Adjourned
------------------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2005, MuniYield Quality Fund, Inc.'s
Preferred Stock shareholders (Series A - D) voted on the following proposals.
Proposals 1 and 2 were approved at a shareholders' meeting on April 28, 2005.
With respect to Proposal 3, the proposal was adjourned until June 27, 2005. A
description of the proposals and number of shares voted were 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, Joe Grills, Herbert I. London, Roberta Cooper Ramo, Robert
S. Salomon, Jr. and Stephen B. Swensrud 7,347 20
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to fundamental investment restriction. 5,886 410 39
------------------------------------------------------------------------------------------------------------------
3. To approve an amendment to articles supplementary or
certificate of designation. Adjourned Adjourned Adjourned
------------------------------------------------------------------------------------------------------------------
44 SEMI-ANNUAL REPORTS APRIL 30, 2005
Proxy Results MuniYield Quality Fund II, Inc.
During the six-month period ended April 30, 2005, MuniYield Quality Fund II,
Inc.'s Common Stock shareholders voted on the following proposals. Proposals 1
and 2 were approved at a shareholders' meeting on April 28, 2005. With respect
to Proposal 3, the proposal was adjourned until June 27, 2005. A description of
the proposals and number of shares voted were as follows:
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 11,632,916 310,197
Joe Grills 11,629,177 313,936
Roberta Cooper Ramo 11,626,976 316,137
Robert S. Salomon, Jr. 11,632,993 310,120
Stephen B. Swensrud 11,624,713 318,400
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to fundamental investment restriction. 9,001,194 432,544 234,556
------------------------------------------------------------------------------------------------------------------
3. To approve an amendment to articles supplementary or
certificate of designation. Adjourned Adjourned Adjourned
------------------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2005, MuniYield Quality Fund II,
Inc.'s Preferred Stock shareholders (Series A - C) voted on the following
proposals. Proposals 1 and 2 were approved at a shareholders' meeting on April
28, 2005. With respect to Proposal 3, the proposal was adjourned until June 27,
2005. A description of the proposals and number of shares voted were 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, Joe Grills, Herbert I. London, Roberta Cooper Ramo, Robert
S. Salomon, Jr. and Stephen B. Swensrud 5,131 34
------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
------------------------------------------------------------------------------------------------------------------
2. To approve an amendment to fundamental investment restriction. 4,497 33 43
------------------------------------------------------------------------------------------------------------------
3. To approve an amendment to articles supplementary or
certificate of designation. Adjourned Adjourned Adjourned
------------------------------------------------------------------------------------------------------------------
SEMI-ANNUAL REPORTS APRIL 30, 2005 45
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Theodore R. Jaeckel Jr., Vice President
Michael A. Kalinoski, Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
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:
EquiServe
P.O. Box 43010
Providence, RI 02940-3010
Preferred Stock:
The Bank of New York
101 Barclay Street--7 West
New York, NY 10286
--------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn retired as President and Director of
MuniYield Fund, Inc., MuniYield Quality Fund, Inc. and MuniYield Quality Fund
II, Inc. The Funds' Board of Directors wishes Mr. Glenn well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Director of
the Funds.
--------------------------------------------------------------------------------
Investment Objectives
NYSE Symbol MuniYield Fund, Inc. seeks to provide shareholders with as
MYD 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, 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
MQY with as high a level of current income exempt from federal
income taxes as is consistent with its investment policies and
prudent investment management by investing primarily in a
portfolio of long-term, high-grade municipal obligations the
interest on which is exempt from federal income taxes in the
opinion of bond counsel to the issuer.
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 is exempt from federal income taxes in the
opinion of bond counsel to the issuer. The Fund invests
primarily in insured municipal bonds.
46 SEMI-ANNUAL REPORTS APRIL 30, 2005
Availability of Quarterly Schedules of Investments
The Funds file their complete schedules 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, 2005 47
[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-MER-FUND (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 -- 4/05
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, Inc.
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Quality Fund, Inc.
Date: June 20, 2005
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, Inc.
Date: June 20, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield Quality Fund, Inc.
Date: June 20, 2005