-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qvy2WjAzR+lglZ1uUPjfp9K5frEHADLhMtJMr/Nhqm61oKOMTV2GLQg2AHkdQ5xE VdljWIdvbYR2TjUpL1TToA== 0000900092-94-000356.txt : 19940702 0000900092-94-000356.hdr.sgml : 19940702 ACCESSION NUMBER: 0000900092-94-000356 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIYIELD FUND INC CENTRAL INDEX KEY: 0000879361 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06414 FILM NUMBER: 94535264 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092822800 MAIL ADDRESS: STREET 1: PO BOX 9011 STREET 2: C/O MERRILL LYNCH ASSET MANAGEMENT CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-30D 1 SEMI-ANNUAL REPORT MuniYield Fund, Inc. Semi-Annual Report April 30, 1994 Officers and Directors Arthur Zeikel, President and Director Kenneth S. Axelson, Director Herbert I. London, Director Robert R. Martin, Director Joseph L. May, Director Andre F. Perold, Director Terry K. Glenn, Executive Vice President Donald C. Burke, Vice President Vincent R. Giordano, Vice President Kenneth A. Jacob, Vice President Gerald M. Richard, Treasurer Mark B. Goldfus, Secretary Custodian The Bank of New York 110 Washington Street New York, New York 10286 Transfer Agents Common Stock: The Bank of New York 110 Washington Street New York, New York 10286 Preferred Stock: IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 NYSE Symbol MYD This report, including the financial informa- tion herein, is transmitted to the shareholders of MuniYield Fund, Inc. for their information. It is not a prospectus, circular or representa- tion intended for use in the purchase of shares of the Fund or any securities mentioned in the report. Past performance results shown in this report should not be considered a repre- sentation of future performance. The Fund has leveraged its Common Stock by issuing Preferred Stock to provide the Common Stock shareholders with a potentially higher rate of return. Leverage creates risks for Common Stock shareholders, including the likelihood of greater volatility of net asset value and market price of shares of the Common Stock, and the risk that fluctuations in the short-term dividend rates of the Preferred Stock may affect the yield to Common Stock shareholders. MuniYield Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MuniYield Fund, Inc. TO OUR SHAREHOLDERS For the six-month period ended April 30, 1994, the Common Stock of MuniYield Fund, Inc. earned $0.680 per share income dividends, which includes earned and unpaid dividends of $0.085. This represents a net annualized yield of 9.15%, based on a month-end per share net asset value of $14.99. Over the same period, the total investment return on the Fund's Common Stock was -6.29%, based on a change in per share net asset value from $16.80 to $14.99, and assuming reinvestment of $0.690 per share income dividends and $0.090 per share capital gains distributions. For the six-month period ended April 30, 1994, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 2.36%; Series B, 3.07%; Series C, 2.65%; Series D, 2.41%; and Series E, 2.87%. The Environment Inflationary expectations and investor sentiment changed for the worse during the three-month period ended April 30, 1994. Following stronger-than- expected economic results through year-end 1993, the Federal Reserve Board broke with tradition on February 4, 1994 and publicly announced a modest 25 basis point (0.25%) increase in short-term interest rates. At the March 22, 1994 meeting of the Federal Open Market Committee, the Federal Reserve Board again raised the Federal Funds rate by 25 basis points, followed by another 25 basis point increase on April 18, 1994. Rather than view the Federal Reserve Board's first tightening move as a preemptive strike against inflation, fixed-income investors focused on Chairman Greenspan's implicit promise of further tightening should the rate of inflation accelerate, and bond prices declined sharply. The setback in the bond market was also reflected in greater stock market volatility. While the second and third increases in the Federal Funds rate were less of a surprise, investors remained concerned that interest rates would trend upward sharply as the central bank aggressively attempted to contain the inflationary pressures of an improving economy. At the same time, highly leveraged investors were forced to liquidate positions in the face of declining stock and bond prices. Investor confidence was not restored with the announcement of the surprisingly slow 2.6% gross domestic product growth rate for the first calendar quarter of 1994. Instead, investors focused on the higher-than-expected (but still moderate) broad inflation measures, and became concerned that business activity was beginning to stagnate as inflationary pressures were increasing. The volatility in the US capital markets was mirrored in international markets during the period. Political and economic developments, along with concerns of heightened global inflationary pressures, led to a sell- off in most capital markets, especially the emerging markets that had appreciated strongly in 1993. The Municipal Market During the six months ended April 30, 1994, tax- exempt bond yields exhibited considerable volatility as they rose to their highest level in the past two years. As measured by the Bond Buyer Revenue Bond Index, the yield on newly issued municipal bonds maturing in 30 years rose over 90 basis points to 6.42% by the end of April. Yields on seasoned municipal revenue bonds rose by over 100 basis points in sympathy with the equally dramatic increase in long-term US Treasury bond yields. By the end of April, yields on US Treasury securities rose by over 95 basis points to approximately 7.30%. Long-term tax-exempt bond yields were essentially unchanged from the end of October 1993 to the end of January 1994. However, on a weekly basis, tax-exempt bond yields fluctuated by as much as 15 basis points as investors were unable to reconcile the rapid economic growth seen late last year with continued low inflation. Following the initial interest rate in- crease by the Federal Reserve Board in early Febru- ary, municipal bond prices began to erode in concert with taxable bond prices as investors began to sell securities in anticipation of further interest rate increases. This fear led investors to withdraw from the tax-exempt market. From early February to the end of March, total assets of all tax-exempt bond funds declined by $14 billion to $247 billion. This decline in investor demand, coupled with fears that the robust economic recovery seen during the fourth quarter of 1993 would continue well into 1994, helped push municipal bond yields higher in February and March. Attracted by tax-exempt yields in excess of 6.25%, investor demand returned in April, allowing yields to decline approximately 15 basis points to end the April period at approximately 6.40%. A rise in tax-exempt bond yields the magnitude of that experienced over the past six months has not been seen since 1987 when municipal bond rates rose 250 basis points between March and October of that year. It is very important to note that the recent municipal bond price declines were largely the result of consistent and insistent selling pressures over the last two months. In 1987, the tax-exempt bond market was much more volatile and, at times, chaotic as investors sought to liquidate positions without con- cern for fundamental value. For the most part, the recent price deterioration has been orderly, and the municipal bond market's liquidity and integrity have not been challenged or jeopardized. To a large extent, the municipal bond market has continued to be supported by its strong technical position. New-issue volume for the last six months has been less than $105 billion. This represents a decline of approximately 20% versus the comparable period a year ago. This decline was expected and has been discussed in previous shareholder reports. This reduced issuance has minimized potential selling pressure in recent months since institutional inves- tors have been wary of selling appreciable amounts of securities that they may be unable to replace later this year at any price level. We expect this decline in issuance to continue since we anticipate recent yield increases to significantly impact future municipal bond issuance. Just as higher mortgage rates slow home mortgage refinancings, the recent rise in bond yields will prevent bond refinancings from becoming the driving force in bond issuance in 1994 as they were in 1993. Despite recent price declines, tax-exempt securities remain among the most attractive investment alterna- tives available. After the recent yield increases, longer- term municipal securities yielded approximately 90% of comparable US Treasury yields. Purchasers of these municipal bonds also accrue substantial after-tax yield advantages. To investors in the 39% marginal Federal income tax bracket, the purchase of a municipal bond yielding 6.50% represents an after-tax equivalent of 10.65%. With prevailing esti- mates of 1994 inflation at no more than 3%--4%, real after-tax rates in excess of 6.50% easily compensate longer-term investors for much of the price volatility recently experienced. Portfolio Strategy During the six months ended April 30, 1994, our portfolio strategy concentrated on modestly restruc- turing the Fund to adopt a more defensive posture in the marketplace. We sold deeply discounted securi- ties that we had purchased during the prior year in anticipation of lower interest rates, replacing them with investment-grade tax-exempt bonds priced over par. Such securities tend to exhibit less volatility and can therefore be expected to perform relatively well in an uncertain interest rate environment. Addition- ally, the higher coupons associated with these premium bonds generate a significant amount of tax-exempt income for Common Stock shareholders. In spite of our more cautious market outlook, we have been reluctant to increase cash reserves substantially above 5% of net assets. Any significant effort to raise the Fund's cash position through the liquidation of the portfolio's long-term holdings would have an adverse impact on the dividends to Common Stock shareholders. In addition, the expectation of declin- ing volume in the tax-exempt marketplace may make it exceedingly difficult to reinvest the proceeds in the months ahead. Volume for the quarter ended April 30, 1994 totaled $42.2 billion, representing a 40% de- crease from levels one year ago. Furthermore, while cautious, our outlook is not overly negative and does in fact leave open the possibility for interest rates to resume their downward trend, perhaps as early as in the second half of 1994. For now we consider it prudent to maintain a relatively unaggressive invest- ment strategy, focusing our efforts on sustaining the current level of tax-exempt income. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Vincent R. Giordano) Vincent R. Giordano Vice President and Portfolio Manager June 2, 1994 THE BENEFITS AND RISKS OF LEVERAGING MuniYield Fund, Inc. utilizes leveraging to seek to enhance the yield and net asset value of its Common Stock. However, these objectives cannot be achieved in all interest rate environments. To leverage, the Fund issues Preferred Stock, which pays dividends at prevailing short-term interest rates, and invests the proceeds in long-term municipal bonds. The interest earned on these investments is paid to Common Stock shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share net asset value of the Fund's Common Stock. However, in order to benefit Common Stock shareholders, the yield curve must be positively sloped; that is, short- term interest rates must be lower than long-term interest rates. At the same time, a period of generally declining interest rates will benefit Common Stock shareholders. If either of these conditions change, then the risks of leveraging will begin to outweigh the benefits. To illustrate these concepts, assume a fund's Common Stock capitalization of $100 million and the issuance of Preferred Stock for an additional $50 million, creating a total value of $150 million available for investment in long-term municipal bonds. If prevailing short-term interest rates are approximately 3% and long-term interest rates are approximately 6%, the yield curve has a strongly positive slope. The fund pays dividends on the $50 million of Preferred Stock based on the lower short-term interest rates. At the same time, the fund's total portfolio of $150 million earns the income based on long-term interest rates. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pick-up on the Common Stock will be reduced. At the same time, the market value on the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. PORTFOLIO ABBREVIATIONS To simplify the listings of MuniYield Fund, Inc.'s portfolio holdings in the Schedule of Investments, we have abbreviated the names of many of the securities according to the list below and at right. AMT Alternative Minimum Tax (subject to) BAN Bond Anticipation Notes DATES Daily Adjustable Tax-Exempt Securities GO General Obligation Bonds HFA Housing Finance Authority IDA Industrial Development Authority M/F Multi-Family PCR Pollution Control Revenue Bonds S/F Single-Family UT Unlimited Tax VRDN Variable Rate Demand Notes SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Alabama--1.1% BBB Baa1 $ 8,750 Courtland, Alabama, Industrial Development Board, Industrial Development Revenue Refunding Bonds (Champion International Corporation), Series A, 7.20% due 12/01/2013 $ 8,944 Alaska--3.9% A+ Aa 12,285 Alaska State, Housing Finance Corporation, GO, Series B, 7% due 12/01/2027 12,603 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds: AA- A1 8,000 (British Petroleum Pipeline), Series B, 7% due 12/01/2025 8,399 AA- A1 9,635 (Sohio Pipeline), 7.125% due 12/01/2025 10,158 Arizona--0.2% AA P1 1,800 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont Mining Corp.), VRDN, 2.95% due 12/01/2009 (b) 1,800 California--4.6% AAA Aaa 9,975 California State, GO, 5.50% due 3/01/2020 (h) 8,927 Los Angeles, California, Department of Water and Power, Revenue Refunding Bonds (Electric Plant): AA Aa 5,750 6.375% due 2/01/2020 5,746 AA Aa 5,500 Second Issue, 4.75% due 11/15/2019 4,406 Los Angeles, California, Wastewater System Revenue Refunding Bonds: A A1 7,730 Series C, 7.10% due 6/01/2018 8,247 AAA Aaa 4,000 Series D, 4.70% due 11/01/2017 (i) 3,208 NR NR 7,000 Orange County, California, Community Facilities District, Special Tax No. 88-1 Revenue Bonds (Aliso Viejo Project), Series A, 7.35% due 8/15/2018 7,024 Colorado--2.7% BBB+ Baa1 4,000 Colorado Health Facilities Authority Revenue Bonds (P/SL Healthcare System Project), Series A, 6.875% due 2/15/2023 3,894 Denver, Colorado, City and County Airport Revenue Bonds: BBB Baa1 5,000 Series A, 7.25% due 11/15/2025 4,933 BBB Baa1 8,000 Series D, AMT, 7.75% due 11/15/2013 8,236 BBB Baa1 3,310 Series D, AMT, 7.75% due 11/15/2021 3,330 NR NR 1,650 Mountain Village, Colorado, Metropolitan District, San Miguel County Refunding Bonds, UT, 7.95% due 12/01/2003 1,796 Connecticut--0.7% NR Baa1 1,000 Connecticut State, Health and Educational Facilities Authority Revenue Bonds (The Griffin Hospital), Series A, 5.75% due 7/01/2023 846 AA- A1 1,500 Connecticut State, Special Tax Obligation Revenue Refunding Bonds (Transportation Infrastructure), Series A, 5.25% due 9/01/2006 1,429 NR NR 2,720 New Haven, Connecticut, Facilities Revenue Bonds (Hill Health Corporation Project), 9.25% due 5/01/2017 2,957 District of BBB Baa1 1,890 District of Columbia, Hospital Revenue Refunding Bonds Columbia--0.2% (Metlantic--Washington Hospital Center), Series A, 7.125% due 8/15/2019 1,928 Florida--0.8% A1+ VMIG1 1,100 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric Company Project), VRDN, 3% due 5/15/2018 (b) 1,100 A- NR 5,000 Palm Beach County, Florida, Health Facilities Authority, Hospital Revenue Bonds (Good Samaritan Health System), 6.20% due 10/01/2011 4,809 NR VMIG1 100 Palm Beach County, Florida, Water and Sewer Revenue Bonds, VRDN, 2.95% due 10/01/2011 (b) 100 A-1 VMIG1 400 Pinellas County, Florida, Health Facilities Revenue Refunding Bonds (Pooled Hospital Loan Program), DATES, 3.10% due 12/01/2015 (b) 400
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Georgia--2.4% NR NR $ 5,850 Atlanta, Georgia, Urban Residential Finance Authority, College Facilities Revenue Bonds (Morris Brown College Project), 9.50% due 6/01/2011 $ 5,499 AAA Aaa 10,000 Cobb-Marietta, Georgia, Coliseum and Exhibit Hall Authority Revenue Bonds, 6.75% due 10/01/2001 (a)(e) 11,041 BBB+ NR 3,000 Tri-City Hospital Authority, Georgia, Hospital Revenue Bonds (South Fulton Medical Center), 6.375% due 7/01/2016 2,746 Hawaii--2.0% Hawaii State, Housing, Finance and Development Corporation, S/F Mortgage Purchase Revenue Bonds: A Aa 5,500 AMT, Series A, 7% due 7/01/2011 5,600 A Aa 2,500 AMT, Series A, 7.10% due 7/01/2024 2,540 A Aa 5,500 Series B, 6.90% due 7/01/2016 5,585 A Aa 2,000 Series B, 7% due 7/01/2031 2,036 Idaho--0.6% AA NR 4,480 Idaho Housing Agency, S/F Mortgage Revenue Bonds, AMT, Series C-2, 7.15% due 7/01/2023 4,641 Illinois--1.5% BBB Baa2 2,750 Illinois Development Financing Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2021 2,911 BBB+ NR 2,500 Illinois Educational Facilities Authority Revenue Bonds (Chicago Osteopathic Health Systems), 7.25% due 5/15/2022 2,537 Illinois Health Facilities Authority Revenue Bonds: A A 1,500 (Edward Hospital Association Project), 7% due 2/15/2022 1,539 A+ A1 5,000 Refunding (OSF Healthcare Systems), 6% due 11/15/2023 4,528 Indiana--1.1% A+ A1 7,000 Fort Wayne, Indiana, Hospital Authority, Revenue Refunding Bonds (Parkview Memorial Hospital Inc. Project), 6.40% due 11/15/2022 6,830 NR A 2,500 Indiana Health Facilities Financing Authority, Hospital Revenue Refunding Bonds (Saint Anthony Medical Center), Series A, 7% due 10/01/2017 2,548 Iowa--1.3% A1+ NR 10,400 Iowa Finance Authority, Solid Waste Disposal Revenue Bonds (Cedar River Paper Company Project), Series A, VRDN, 3.15% due 7/01/2023 (b) 10,400 Kansas--1.1% AAA Aaa 8,300 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric Company Project), 7% due 6/01/2031 (e) 8,818 Kentucky--2.7% BBB Baa1 2,500 Ashland, Kentucky, Solid Waste Revenue Bonds (Ashland Oil Incorporated Project), AMT, 7.20% due 10/01/2020 2,586 AA- Aa2 2,000 Carroll County, Kentucky, Solid Waste Disposal Facilities Revenue Bonds (Kentucky Utility Company Project), Series A, AMT, 5.75% due 12/01/2023 1,814 Kenton County, Kentucky, Airport Board, Airport Special Facilities Revenue Bonds (Delta Airlines Project), AMT, Series A: BB Ba1 10,575 7.125% due 2/01/2021 10,153 BB Ba1 3,000 6.125% due 2/01/2022 2,564 Trimble County, Kentucky, PCR (Louisville Gas and Electric Company), AMT, Series A: AA Aa2 750 7.625% due 11/01/2000 (a) 861 AA Aa2 3,775 7.625% due 11/01/2020 4,087 Louisiana--4.6% NR Ba1 35,000 Lake Charles, Louisiana, Harbor and Terminal District, Port Facilities Revenue Refunding Bonds (Trunkline Company Project), 7.75% due 8/15/2022 37,217 Maine--1.3% AA- Aa 10,460 Maine Housing Authority, S/F Mortgage Acquisition Bonds, Series 1, 7.15% due 11/01/2021 10,706
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Maryland--2.4% AA+ Aa $ 600 Anne Arundel County, Maryland, Refunding Bonds (Consolidated Water and Sewer), 5.30% due 4/15/2017 $ 540 A-1+ VMIG1 400 Howard County, Maryland, BAN, VRDN, 3.10% due 7/01/1995 (b) 400 NR VMIG1 900 Maryland State, Health and Higher Education Revenue Bonds (Pooled Loan Program), Series A, VRDN, 3.10% due 4/01/2035 (b) 900 A+ A1 7,000 Montgomery County, Maryland, PCR, Refunding (Potomac Electric Power Company), 5.375% due 2/15/2024 6,083 Prince Georges County, Maryland, Hospital Revenue Bonds: NR Aaa 4,500 (Dimensions Health Corporation), 7.25% due 7/01/2017 (a) 5,092 NR Baa 2,865 (Greater Southeast Healthcare Systems), 6.20% due 1/01/2008 2,760 NR Baa 3,500 (Greater Southeast Healthcare Systems), 6.375% due 1/01/2023 3,255 Massachusetts--5.3% A+ Aaa 8,500 Massachusetts Bay Transportation Authority, Massachusetts, General Transportation Systems Revenue Bonds, Series A, 7% due 3/01/2001 (a) 9,438 Massachusetts State, Health and Educational Facilities Authorities Revenue Refunding Bonds: A+ A1 3,850 (Boston College), Series K, 5.25% due 6/01/2023 3,280 A- NR 2,000 (Jordan Hospital), Series B, 6.875% due 10/01/2015 1,999 AAA Aaa 5,000 Massachusetts State, HFA, Residential Development Bonds, Series C, 6.90% due 11/15/2021 (f) 5,109 BBB+ A 10,000 Massachusetts State, Municipal Wholesale Electric Company, Power Supply System Revenue Bonds, Series D, 6.125% due 7/01/2019 9,537 A A 17,000 Massachusetts State, Water Reserve Authority, GO, Refunding, Series B, 5% due 3/01/2022 13,773 Michigan--0.7% AA- A 5,575 Michigan State, Building Authority Revenue Refunding Bonds, Series I, 6.75% due 10/01/2011 5,807 Minnesota--3.6% A+ A1 10,000 Minnesota State, HFA, Housing Development Bonds, Series A, 6.95% due 2/01/2014 10,212 AA+ Aa 3,495 Minnesota State, HFA, S/F Mortgage Bonds, AMT, Series A, 7.05% due 7/01/2022 3,572 Saint Paul, Minnesota, Housing and Redevelopment Authority, Hospital Revenue Bonds (Healtheast Project): BBB- Baa 4,000 Refunding, Series A, 6.625% due 11/01/2017 3,780 BBB- Baa 6,000 Series B, 6.625% due 11/01/2017 5,670 BBB Baa1 5,700 Sartell, Minnesota, PCR, Refunding (Champion International Corporation), 6.95% due 10/01/2012 5,816 Mississippi--2.6% A A2 17,750 Lowndes County, Mississippi, Solid Waste Disposal and PCR, Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 18,596 NR Baa 2,615 Mississippi Hospital Equipment and Facilities Authority Revenue Bonds (Riley Memorial Hospital), Series B, 7.125% due 5/01/2022 2,627 Missouri--0.4% BBB- NR 3,000 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding and Improvement Bonds (Tri-State Osteopathic), 8.25% due 12/15/2014 3,239 New Jersey--3.8% NR Baa 4,050 Atlantic County, New Jersey, Utilities Authority, Solid Waste Revenue Bonds, 7.125% due 3/01/2016 4,091 Camden County, New Jersey, Pollution Control Financing Authority, Solid Waste Resource Recovery Revenue Bonds, AMT: BBB+ Baa1 2,500 Series A, 7.50% due 12/01/2010 2,556 BBB+ Baa1 7,000 Series B, 7.50% due 12/01/2009 7,158 AAA NR 9,500 New Jersey State, Housing and Mortgage Financing Agency, M/F Housing Revenue Refunding Bonds (Presidential Plaza), 7% due 5/01/2030 (d) 9,874 AA- A1 8,000 Port Authority of New York and New Jersey, Consolidated Revenue Bonds, Ninety-First Series, 5.20% due 11/15/2016 6,965
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) New Mexico--1.5% Farmington, New Mexico, PCR, Refunding, Series A: BB Ba2 $ 5,000 (Public Service Company--San Juan Project), 6.40% due 8/15/2023 $ 4,491 A+ Aa3 6,850 (Southern California Edison Company), 7.20% due 4/01/2021 7,261 New York--15.4% BBB Aaa 7,000 Metropolitan Transportation Authority, New York, Service Contract Bonds (Commuter Facilities), 7.125% due 7/01/2001 (a) 7,858 Metropolitan Transportation Authority, New York, Service Contract Revenue Refunding Bonds, Series 5: BBB Baa1 3,590 (Commuter Facilities), 6.90% due 7/01/2005 3,761 BBB Baa1 6,100 (Transit Facilities), 6.90% due 7/01/2005 6,390 New York City, New York, GO: A- Baa1 2,000 Series A, UT, 7.75% due 8/15/2008 2,202 A- Baa1 4,600 Series A, UT, 7.75% due 8/15/2012 5,051 A- Baa1 5,000 Series A, UT, 7.75% due 8/15/2016 5,490 A- Baa1 15,000 Series B, UT, 7.75% due 2/01/2010 16,484 A- Baa1 1,555 Series B, UT, 7.75% due 2/01/2013 1,709 A- Baa1 5,000 Series C, Subseries C-1, 7.50% due 8/01/2021 5,436 NR NR 1,800 New York City, New York, Industrial Development Agency Revenue Bonds, AMT, VRDN, 3.05% due 11/01/2015 (b) 1,800 SP-1 MIG1++ 3,000 New York City, New York, Municipal Water Finance Authority, Water and Sewer System, BAN, Series A, 3.75% due 12/15/1994 3,009 New York State, Energy Research and Development Authority, Electric Facilities Revenue Bonds (Con Edison Co. of New York, Inc. Project), AMT: A+ Aa3 5,000 Series A, 7.50% due 1/01/2026 5,337 A+ Aa3 7,000 Series C, 7.25% due 11/01/2024 7,434 A Aa 24,200 New York State, Environmental Facilities Corporation, PCR (State Water Revolving Fund), Series E, 6.875% due 6/15/2010 25,409 New York State, Local Government Assistance Corporation Revenue Bonds: A A 14,360 Series B, 6.25% due 4/01/2021 14,084 AAA Aaa 5,000 Series C, 7% due 4/01/2001 (a) 5,590 NR Aaa 5,000 Series D, 7% due 4/01/2002 (a) 5,613 North Carolina--3.9% North Carolina HFA, S/F Revenue Bonds: A+ Aa 15,520 Refunding, Series S, 6.95% due 3/01/2017 16,031 A+ Aa 5,385 Series T, AMT, 7.05% due 9/01/2020 5,522 A A 10,085 North Carolina Municipal Power Agency No. 1, Electric Revenue Refunding Bonds (Catawba), 6.25% due 1/01/2017 9,892 North Dakota--0.5% A+ Aa 4,090 North Dakota State, HFA, S/F Mortgage Revenue Bonds, Series A, 7% due 7/01/2023 4,223 Ohio--0.3% BBB- Baa 2,000 Montgomery County, Ohio, Health Systems Revenue Bonds (Franciscan Sisters of the Poor), Series B-1, 8.10% due 7/01/2018 2,167 Oregon--0.0% A-1 VMIG1 200 Medford, Oregon, Hospital Facilities Authority Revenue Bonds (Gross-Rogue Health Services), VRDN, 3.05% due 10/01/2016 (b) 200 Pennsylvania--1.1% AA- A1 10,000 Pennsylvania State University, Revenue Refunding Bonds, Second Series, 5.50% due 8/15/2016 9,026 South Carolina--3.7% A- A1 7,000 Richland County, South Carolina, PCR, Refunding (Union Camp Corporation Project), Series C, 6.55% due 11/01/2020 7,047 A+ Aaa 20,125 South Carolina State, Public Service Authority, Revenue Refunding Bonds (Santee Cooper), Series B, 7.10% due 7/01/2001 (a) 22,563 South Dakota--0.3% BBB Baa 2,500 South Dakota State, Health and Educational Facilities Authority, Revenue Refunding Bonds (Prairie Lakes Health Care), 7.25% due 4/01/2022 2,532
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Tennessee--0.3% NR NR $ 1,885 Knox County, Tennessee, Health, Educational, and Housing Facilities Board, Hospital Facilities Revenue Bonds (Baptist Health Systems of East Tennessee), 8.50% due 4/15/2004 $ 2,018 Texas--11.8% BBB Baa2 5,000 Brazos River Authority, Texas, PCR (Texas Utilities Electric Company Project), Series A, AMT, 7.875% due 3/01/2021 5,375 BBB A 3,900 Ector County, Texas, Hospital District Revenue Bonds (Medical Center Hospital), 7.30% due 4/15/2012 3,991 BBB Baa1 8,400 Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds (Champion International Corporation), AMT, 7.45% due 5/01/2026 8,710 A A2 7,000 Matagorda County, Texas, Navigational District No. 1, PCR (Central Power and Light Company Project), 7.50% due 12/15/2014 7,530 AAA VMIG1 7,800 North Texas, Higher Education Authority Incorporated, Student Loan Revenue Bonds, Series C, AMT, VRDN, 3.35% due 4/01/2020 (b)(c) 7,800 Port Corpus Christi Authority, Texas, Nueces County, PCR (Hoechst Celanese Corporation Project): AA- A2 10,000 AMT, 6.875% due 4/01/2017 10,248 AA- A2 9,600 Refunding, 7.50% due 8/01/2012 10,424 AA- A2 5,000 Red River Authority, Texas, PCR (Hoechst Celanese Corporation Project), AMT, 6.875% due 4/01/2017 5,124 Texas National Research Laboratory, Community Financing Corporation, Lease Revenue Bonds (Superconducting Super Collider Project): A- A 10,000 6.95% due 12/01/2012 10,250 A- A 16,900 7.10% due 12/01/2021 17,323 Travis County, Texas, Housing Finance Corporation, Residential Mortgage Revenue Refunding Bonds, Series A (f)(g): AAA NR 1,965 7% due 12/01/2011 2,018 AAA NR 5,070 7.05% due 12/01/2025 5,214 Utah--0.3% AA NR 2,440 Utah State, HFA, S/F Mortgage Revenue Bonds, AMT, Series E-2, 7.15% due 7/01/2024 2,513 Virginia--1.0% AA+ Aa 8,125 Virginia State, Housing Development Authority, Commonwealth Mortgage Revenue Bonds, Series A, 7.10% due 1/01/2025 8,405 Washington--4.9% Washington State, Public Power Supply Systems Revenue Refunding Bonds: AA Aa 9,235 (Nuclear Project No. 1), Series A, 7% due 7/01/2011 9,636 AA Aa 19,775 (Nuclear Project No. 1), Series A, 6.875% due 7/01/2017 20,210 AA Aa 5,000 (Nuclear Project No. 2), Series A, 6.30% due 7/01/2012 4,920 AA Aa 5,000 (Nuclear Project No. 2), Series B, 7% due 7/01/2012 5,165 West Virginia--1.6% BBB+ A3 7,500 Mason County, West Virginia, PCR, Refunding (Appalachian Power Company Project), Series I, 6.85% due 6/01/2022 7,526 BBB+ Baa1 5,500 Randolph County, West Virginia, Building Community Hospital Revenue Refunding and Improvement Bonds (Davis Memorial Hospital Project), Series A, 7.65% due 11/01/2021 5,772 Wisconsin--0.8% NR A 6,960 Wisconsin State, Health and Educational Facilities Authority Revenue Bonds (Mercy Hospital of Janesville Incorporated), 6.60% due 8/15/2022 6,743 Total Investments (Cost--$781,102)--99.0% 797,663 Other Assets Less Liabilities--1.0% 7,849 -------- Net Assets--100.0% $805,512 ======== (a) Prerefunded. (b) The interest rate is subject to change periodically based upon the prevailing market rate. The interest rates shown are the rates in effect at April 30, 1994. (c) AMBAC Insured. (d) FHA Insured. (e) MBIA Insured. (f) FNMA Collateralized. (g) GNMA Collateralized. (h) FSA Insured. (i) FGIC Insured. ++ Highest short-term rating by Moody's Investors Service, Inc. See Notes to Financial Statements.
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of April 30, 1994 Assets: Investments, at value (identified cost--$781,102,373) (Note 1a) $797,662,913 Cash 38,014 Receivables: Interest $ 15,615,922 Securities sold 2,799,550 18,415,472 ------------ Deferred organization expenses (Note 1e) 33,322 Prepaid expenses and other assets 394,259 ------------ Total assets 816,543,980 ------------ Liabilities: Payables: Securities purchased 8,839,474 Dividends to shareholders (Note 1g) 1,842,814 Investment adviser (Note 2) 319,540 11,001,828 ------------ Accrued expenses 30,500 ------------ Total liabilities 11,032,328 ------------ Net Assets: Net assets $805,511,652 ============ Capital: Capital Stock (200,000,000 shares authorized) (Note 4): Preferred Stock, par value $.10 per share (5,000 shares of AMPS* issued and outstanding at $50,000 per share liquidation preference) $250,000,000 Common Stock, par value $.10 per share (37,061,414 shares issued and outstanding) $ 3,706,141 Paid-in capital in excess of par 518,979,369 Undistributed investment income--net 5,503,638 Undistributed realized capital gains--net 10,761,964 Unrealized appreciation on investments--net 16,560,540 ------------ Total--Equivalent to $14.99 net asset value per share of Common Stock (market price--$14.00) 555,511,652 ------------ Total capital $805,511,652 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations
For the Six Months Ended April 30, 1994 Investment Income Interest and amortization of premium and discount earned $ 26,437,070 (Note 1d): Expenses: Investment advisory fees (Note 2) $ 2,108,151 Commission fees (Note 4) 359,634 Transfer agent fees 61,616 Professional fees 41,057 Accounting services (Note 2) 32,174 Custodian fees 29,442 Printing and shareholder reports 26,274 Directors' fees and expenses 21,429 Listing fees 16,833 Pricing fees 7,826 Amortization of organization expenses (Note 1e) 5,093 Other 19,752 ------------ Total expenses 2,729,281 ------------ Investment income--net 23,707,789 ------------ Realized & Realized gain on investments--net 10,762,014 Unrealized Gain Change in unrealized appreciation/depreciation on investments--net (68,820,719) (Loss)on ------------ Investments--Net Net Decrease in Net Assets Resulting from Operations $(34,350,916) (Notes 1d & 3): ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statements of Changes in Net Assets
For the Six For the Year Months Ended Ended Increase (Decrease) in Net Assets: April 30, 1994 Oct. 31, 1993 Operations: Investment income--net $ 23,707,789 $ 47,354,528 Realized gain on investments--net 10,762,014 9,699,758 Change in unrealized appreciation/depreciation on investments--net (68,820,719) 72,689,721 ------------ ------------ Net increase (decrease) in net assets resulting from operations (34,350,916) 129,744,007 ------------ ------------ Dividends & Investment income--net: Distributions Common Stock (20,155,717) (40,472,606) to Shareholders Preferred Stock (2,884,932) (5,537,729) (Note 1g): Realized gain on investments--net: Common Stock (8,671,336) (5,767,714) Preferred Stock (1,008,475) (1,226,622) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (32,720,460) (53,004,671) ------------ ------------ Capital Stock Value of shares issued to Common Stock shareholders in reinvestment of Transactions dividends and distributions 2,807,655 16,748,873 (Note 4): ------------ ------------ Net increase in net assets derived from capital stock transactions 2,807,655 16,748,873 ------------ ------------ Net Assets: Total increase (decrease) in net assets (64,263,721) 93,488,209 Beginning of period 869,775,373 776,287,164 ------------ ------------ End of period* $805,511,652 $869,775,373 ============ ============ *Undistributed investment income--net $ 5,503,638 $ 4,836,498 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlights
The following per share data and ratios have been derived from information provided in the financial statements. For the Six For the For the Period Months Ended Year Ended Nov. 29, 1991++ Increase (Decrease) in Net Asset Value: April 30, 1994 Oct. 31, 1993 to Oct. 31, 1992 Per Share Operating Net asset value, beginning of period $ 16.80 $ 14.69 $ 14.18 Performance: ------------ ------------ ------------ Investment income--net .64 1.31 1.18 Realized and unrealized gain (loss) on investments--net (1.55) 2.27 .57 ------------ ------------ ------------ Total from investment operations (.91) 3.58 1.75 ------------ ------------ ------------ Less dividends and distributions to Common Stock shareholders: Investment income--net (.54) (1.11) (.89) Realized gain on investments--net (.24) (.16) -- ------------ ------------ ------------ Total dividends and distributions to Common Stock shareholders (.78) (1.27) (.89) ------------ ------------ ------------ Capital charge resulting from issuance of Common Stock -- -- (.02) ------------ ------------ ------------ Effect of Preferred Stock activity++++: Dividends and distributions to Preferred Stock shareholders: Investment income--net (.09) (.17) (.19) Realized gain on investments--net (.03) (.03) -- Capital charge resulting from issuance of Preferred Stock -- -- (.14) ------------ ------------ ------------ Total effect of Preferred Stock activity (.12) (.20) (.33) ------------ ------------ ------------ Net asset value, end of period $ 14.99 $ 16.80 $ 14.69 ============ ============ ============ Market price per share, end of period $ 14.00 $ 16.75 $ 15.125 ============ ============ ============ Total Investment Based on market price per share (12.22%)+++ 19.91% 7.06%+++ Return:** ============ ============ ============ Based on net asset value per share (6.29%)+++ 23.83% 9.99%+++ ============ ============ ============ Ratios to Average Expenses, net of reimbursement .65%* .64% .58%* Net Assets:*** ============ ============ ============ Expenses .65%* .64% .65%* ============ ============ ============ Investment income--net 5.67%* 5.72% 6.08%* ============ ============ ============ Supplemental Net assets, net of Preferred Stock, end of period Data: (in thousands) $ 555,512 $ 619,775 $ 526,287 ============ ============ ============ Preferred Stock outstanding, end of period (in thousands) $ 250,000 $ 250,000 $ 250,000 ============ ============ ============ Portfolio turnover 19.92% 25.58% 66.45% ============ ============ ============ Dividends Per Share Series A--Investment income--net $ 512 $ 1,119 $ 1,360 On Preferred Stock Series B--Investment income--net 680 1,108 1,379 Outstanding: Series C--Investment income--net 535 1,131 1,369 Series D--Investment income--net 519 1,111 1,375 Series E--Investment income--net 618 1,083 1,376 *Annualized. **Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, result in substantially different returns. Total investment returns exclude the effects of sales loads. ***Do not reflect the effect of dividends to Preferred Stock shareholders. +++Aggregate total investment return. ++Commencement of Operations. ++++The Fund's Preferred Stock was issued on December 23, 1991. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: MuniYield Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non- diversified, closed-end management investment company. The Fund determines and makes available for publication the net asset value of its Common Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock Exchange under the symbol MYD. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Municipal bonds are traded primarily in the over-the-counter markets and are valued at the most recent bid price or yield equivalent as obtained by the Fund's pricing service from dealers that make markets in such securities. Financial futures contracts, which are traded on exchanges, are valued at their closing prices as of the close of such exchanges. Options, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges or, lacking any sales, at the last available bid price. Short-term investments with remaining maturities of sixty days or less are valued at amortized cost, which approximates market. Securi- ties for which market quotations are not readily avail- able are valued at their fair value as determined in good faith by or under the direction of the Board of Directors of the Fund. (b) Financial futures contracts--The Fund may purchase or sell interest rate futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income-- Security transactions are recorded on the dates the transactions are entered into (the trade dates). Interest income is recognized on the accrual basis. Discounts and market premiums are amortized into interest income. Realized gains and losses on security trans- actions are determined on the identified cost basis. (e) Deferred organization expenses and offering expenses--Deferred organization expenses are amor- tized on a straight-line basis over a five-year period. (f) Non-income producing investments--Written and purchased options are non-income producing investments. (g) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994, the investment advisory business of FAM was reorganized from a corporation to a limited partnership. Both prior to and after the reorganization, ultimate control of FAM was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is Princeton Services, Inc., an indirect wholly-owned subsidiary of ML & Co. The limited partners are ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"), which is also an indirect wholly-owned subsidiary of ML & Co. FAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facil- ities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee at an annual rate of 0.50% of the Fund's average weekly net assets. Accounting services are provided to the Fund by FAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of FAM, MLIM, Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), and/or ML & Co. NOTES TO FINANCIAL STATEMENTS (concluded) 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended April 30, 1994 were $169,829,764 and $162,282,339, respectively. Net realized and unrealized gains (losses) as of April 30, 1994 were as follows: Realized Unrealized Gains Gains (Losses) Long-term investments $ 8,210,727 $ 16,568,496 Short-term investments -- (7,956) Financial futures contracts 2,551,287 -- ----------- ------------ Total $10,762,014 $ 16,560,540 =========== ============ As of April 30, 1994, net unrealized appreciation for Federal income tax purposes aggregated $16,560,540, of which $28,370,830 related to appreciated securities and $11,810,290 related to depreciated securities. The aggregate cost of investments at April 30, 1994 for Federal income tax purposes was $781,102,373. 4. Capital Stock Transactions: The Fund is authorized to issue 200,000,000 shares of capital stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of capital stock without approval of the holders of Common Stock. Common Stock For the six months ended April 30, 1994, shares issued and outstanding increased by 169,647 to 37,061,414 as a result of dividend reinvestment. At April 30, 1994, total paid-in capital amounted to $522,685,510. Preferred Stock Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the Fund that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 1994 were as follows: Series A, 2.90%; Series B, 3.14%; Series C, 3.03%; Series D, 2.68%; and Series E, 3.20%. For the six months ended April 30, 1994, there were 5,000 AMPS shares authorized, issued and outstanding with a liquidation preference of $50,000 per share, plus accumu- lated and unpaid dividends of $639,675. The Fund pays commissions to certain broker-dealers at the end of each auction at the annual rate of one-quarter of 1% calculated on the proceeds of each auction. For the six months ended April 30, 1994, MLPF&S, an affiliate of MLIM, earned $418,783 as commissions. 5. Subsequent Event: On May 6, 1994, the Fund's Board of Directors de- clared an ordinary income dividend to Common Stock shareholders in the amount of $0.084517 per share, payable on May 27, 1994 to shareholders of record as of May 17, 1994. PER SHARE INFORMATION Per Share Selected Quarterly Financial Data*
Net Unrealized Dividends/Distributions Investment Realized Gains Net Investment Income Capital Gains For the Quarter Income Gains (Losses) Common Preferred Common Preferred May 1, 1992 to July 31, 1992 $.33 $ .09 $ 1.21 $.27 $.06 -- -- August 1, 1992 to October 31, 1992 .33 -- (1.07) .28 .05 -- -- November 1, 1992 to January 31, 1993 .34 .05 .69 .28 .05 $.16 $.03 February 1, 1993 to April 30, 1993 .33 .11 .55 .27 .04 -- -- May 1, 1993 to July 31, 1993 .32 .04 .32 .28 .04 -- -- August 1, 1993 to October 31, 1993 .32 .07 .44 .28 .04 -- -- November 29, 1993 to January 31, 1994 .33 .20 (.06) .27 .05 .24 .03 February 1, 1994 to April 30, 1994 .31 .10 (1.79) .27 .04 -- -- Net Asset Value Market Price** For the Quarter High Low High Low Volume*** May 1, 1992 to July 31, 1992 $15.91 $14.48 $15.75 $14.75 2,248 August 1, 1992 to October 31, 1992 15.69 14.58 16.125 14.75 2,759 November 1, 1992 to January 31, 1993 15.31 14.71 15.875 14.75 2,406 February 1, 1993 to April 30, 1993 16.32 15.24 16.375 15.50 3,060 May 1, 1993 to July 31, 1993 16.45 15.85 16.75 15.625 3,166 August 1, 1993 to October 31, 1993 16.99 16.28 16.875 16.25 3,357 November 29, 1993 to January 31, 1994 16.82 16.35 16.75 15.125 3,287 February 1, 1994 to April 30, 1994 16.65 14.63 16.50 13.50 3,670 *Calculations are based upon shares of Common Stock outstanding at the end of each quarter. **As reported in the consolidated transaction reporting system. ***In thousands.
-----END PRIVACY-ENHANCED MESSAGE-----