-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MwwI6KM+iZvh5yUvVffFOC9sGiC+xJjmKF1TvmkyZIiu7HrUMLTzdgQvI4wlKU0S d9VcnP4YgRYMBp0Im0pP5Q== /in/edgar/work/20000619/0000900092-00-000093/0000900092-00-000093.txt : 20000919 0000900092-00-000093.hdr.sgml : 20000919 ACCESSION NUMBER: 0000900092-00-000093 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000619 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: SEC FILE NUMBER: 811-06414 FILM NUMBER: 656764 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 0001.txt SEMI-ANNUAL REPORT MUNIYIELD FUND, INC. FUND LOGO Semi-Annual Report April 30, 2000 MuniYield Fund, Inc. seeks to provide shareholders with as high a level of current income exempt from Federal income taxes as is consistent with its investment policies and prudent investment management by investing primarily in a portfolio of long-term, investment-grade municipal obligations the interest on which, in the opinion of bond counsel to the issuer, is exempt from Federal income taxes. This report, including the financial information herein, is transmitted to shareholders of MuniYield Fund, Inc. for their information. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Fund has leveraged its Common Stock by issuing Preferred Stock to provide the Common Stock shareholders with a potentially higher rate of return. Leverage creates risks for Common Stock shareholders, including the likelihood of greater volatility of net asset value and market price of shares of the Common Stock, and the risk that fluctuations in the short-term dividend rates of the Preferred Stock may affect the yield to Common Stock shareholders. Statements and other information herein are as dated and are subject to change. MuniYield Fund, Inc. Box 9011 Princeton, NJ 08543-9011 Printed on post-consumer recycled paper MUNIYIELD FUND, INC. 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. Of course, increases in short-term interest rates would reduce (and even eliminate) the dividends of the Common Stock. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pickup on the Common Stock will be reduced or eliminated completely. At the same time, the market value of the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. As a part of its investment strategy, the Fund may invest in certain securities whose potential income return is inversely related to changes in a floating interest rate ("inverse floaters"). In general, income on inverse floaters will decrease when short-term interest rates increase and increase when short-term interest rates decrease. Investments in inverse floaters may be characterized as derivative securities and may subject the Fund to the risks of reduced or eliminated interest payments and losses of invested principal. In addition, inverse floaters have the effect of providing investment leverage and, as a result, the market value of such securities will generally be more volatile than that of fixed- rate, tax-exempt securities. To the extent the Fund invests in inverse floaters, the market value of the Fund's portfolio and the net asset value of the Fund's shares may also be more volatile than if the Fund did not invest in such securities. MuniYield Fund, Inc., April 30, 2000 TO OUR SHAREHOLDERS For the six-month period ended April 30, 2000, the Common Stock of MuniYield Fund, Inc. earned $0.436 per share income dividends, which included earned and unpaid dividends of $0.071. This represents a net annualized yield of 6.75%, based on a month-end per share net asset value of $12.95. Over the same period, the total investment return on the Fund's Common Stock was +1.71%, based on a change in per share net asset value from $13.21 to $12.95, and assuming reinvestment of $0.441 per share income dividends. For the six-month period ended April 30, 2000, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 3.95%; Series B, 4.14%; Series C, 3.64%; Series D, 3.66%; and Series E, 3.90%. The Municipal Market Environment Since October 1999 through mid-January 2000, fixed-income bond yields rose steadily higher. US economic growth, in part intensified by Year 2000 preparations, grew at a 7.3% rate in the fourth quarter of 1999 and at a 4.2% annual rate for all of 1999. Initial estimates for the first quarter of 2000 were reported at 5.4%. However, despite these significant growth rates, no price measure indicator has shown any considerable signs of future price pressures at the consumer level, despite the lowest unemployment rates since January 1970. Given no signs of an economic slowdown, the Federal Reserve Board continued to raise short-term interest rates in November 1999 and again in February and March 2000. In each instance, the Federal Reserve Board cited both the continued growth of US employment and the impressive strength of the US equity markets as reasons for attempting to moderate US economic growth before inflationary price increases are realized. By mid-January 2000, US Treasury bond yields rose 60 basis points (0.60%) to 6.75%. Similarly, as measured by the Bond Buyer Revenue Bond Index, long-term tax-exempt bond yields rose approximately 20 basis points to 6.35%. Since mid-January, fixed-income markets have largely ignored strong economic fundamentals and concentrated on very positive technical supply factors. Declining bond issuance, both current, and more importantly, expected future issuance, helped push bond yields lower from mid-January to mid-April 2000. In late January and early February 2000, the US Treasury announced its intention to reduce the number of issues to be auctioned in the quarterly Treasury note and bond auctions. Furthermore, budgetary surpluses would allow the US Treasury to repurchase outstanding, higher-couponed Treasury issues, primarily in the 15-year and longer-term maturity sectors. Both these actions would result in a significant reduction in the outstanding supply of long-term US Treasury debt. Domestic and international investors quickly began to accumulate what was expected to become a scarce commodity and bond prices quickly rose. By mid-April 2000, US Treasury bond yields had declined over 100 basis points to 5.67%. However, bond yields rose somewhat during the last two weeks of the period as economic statistics were released, indicating that the economic strength seen in late 1999 was continuing into early 2000. The decline in long-term US Treasury bond yields resulted in an inverted taxable yield curve as short- term and intermediate-term interest rates have not fallen proportionately since the Federal Reserve Board is expected to continue to raise short-term interest rates. The current inversion has had much more to do with debt reduction and Treasury buybacks than with investor expectations of slower economic growth. Over the last six months, long-term US Treasury bond yields have fallen almost 20 basis points to close the six-month period ended April 30, 2000 at 5.96%. Tax-exempt bond yields have also declined in recent months. The decline has largely been in response to the rally in US Treasury securities, as well as a continued positive technical supply environment. States such as California and Maryland have announced that their large current and anticipated future budget surpluses will permit the cancellation or postponement of expected bond issuance. Additionally, some issuers have also initiated tenders to repurchase existing debt, reducing the supply of tax-exempt bonds in the secondary market as well. Since their recent peak in January 2000, long-term municipal bond yields declined over 25 basis points to finish the six-month period ended April 30, 2000 at 6.07%. During the last six months, municipal bond yields declined just 10 basis points overall. The relative underperfomance of the municipal bond market in recent months has been especially disappointing given the strong technical position the tax-exempt bond market enjoyed. The issuance of long- term tax-exempt securities has dramatically declined. Over the last year, $203 billion in new long-term municipal securities was issued, a decline of almost 25% compared to the same period a year earlier. For the six months ended April 30, 2000, approximately $90 billion in new tax-exempt bonds was underwritten, a decline of more than 25% compared to the same period in 1999. Although investors received over $30 billion in coupon payments, bond maturities, and the proceeds from early bond redemptions, coupled with the highest municipal bond yields in three years, overall investor demand has diminished. Long-term municipal bond mutual funds have seen consistent outflows in recent months as the yields of individual securities have risen faster than those of larger, more diverse mutual funds. Over the last four months, tax-exempt mutual funds have had net redemptions of more than $8 billion. Also, the demand from property and casualty insurance companies has weakened as a result of the losses and anticipated losses incurred from a series of damaging storms across much of the eastern United States. Additionally, many institutional investors who have in recent years been attracted to the municipal bond market by historically attractive tax-exempt bond yield ratios of over 90% found other asset classes even more attractive. Even with a favorable supply position, tax-exempt municipal bond yields have underperformed their taxable counterparts. Any significantly lower municipal bond yields are still likely to require weaker US employment growth and consumer spending. The actions taken in recent months by the Federal Reserve Board should eventually slow US economic growth. The recent declines in US home sales are perhaps the first sign that consumer spending is being slowed by higher interest rates. Until further signs develop, it is likely that the municipal bond market's current favorable technical position will dampen significant tax-exempt interest rate volatility and provide a stable environment for eventual improvement in municipal bond prices. Portfolio Strategy As a result of significant volatility in the fixed-income market during the six-month period ended April 30, 2000, we turned our efforts toward reducing the Fund's sensitivity to interest rate fluctuations. We sought to insulate the Fund from some of the market volatility while still delivering an attractive and stable monthly dividend income. In order to do this, we kept our cash reserves to a minimum. By keeping the Fund fully invested, we had to take other necessary measures to achieve our investment goal. During recent months, we began restructuring the Fund by shortening the average portfolio maturity without significantly impacting the dividend stream. We reduced many of the Fund's more interest rate-sensitive holdings. Typically, these securities possess long maturity dates that were issued in a lower interest rate environment and, consequently, trade at steep discounts to their face value. The volatility inherent in this structure rendered it unsuitable for our investment strategy moving forward, and we reduced these holdings. We reinvested the proceeds from these sales in bonds that are less prone to interest rate volatility. By investing in bonds possessing maturities of 15 years - 20 years, we may be able to avoid much of the volatility inherent in longer-dated bonds while still capturing approximately 90% of their yield. MuniYield Fund, Inc., April 30, 2000 The high-yield sector of the tax-exempt market remained an integral component of our investment strategy, particularly within our efforts to insulate the Fund from market volatility without sacrificing income. Credit spreads widened considerably in recent months and presented an attractive opportunity to lock in favorable yields on selected issues. Corporate-related debt continued to offer good value, and we believe this sector still warrants a significant allocation of the Fund's assets. We remained cautious with regard to the healthcare industry as poor liquidity and adverse credit fundamentals largely offset what appeared to be attractive valuations. The Fund's cost of borrowing increased somewhat in recent months as short-term tax-exempt interest rates rose along with the adjustment evident in the taxable market. Long-term tax-exempt interest rates have actually declined modestly, causing the municipal yield curve to flatten. While this flattening has reduced the incremental yield enhancement resulting from leveraging the Fund's Common Stock, it is important to note that in contrast to the inverted shape of the US Treasury yield curve, the municipal yield curve remained positively sloped. (For a complete explanation of the benefits and risks of leveraging, see page 1 of this report to shareholders.) Historical analysis of the municipal yield curve demonstrates this resiliency throughout a number of economic cycles. Furthermore, a portion of the recent adjustment in short-term interest rates is attributable to seasonal tax-related factors and, based on historical experience, should be regarded as temporary. Nonetheless, it is likely that the Fund's borrowing costs will remain under pressure while the Federal Reserve Board pursues its current monetary policy. In Conclusion We appreciate your ongoing interest in MuniYield Fund, Inc., and we look forward to serving your investment needs in the months and years to come. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director (Vincent R. Giordano) Vincent R. Giordano Senior Vice President (Theodore R. Jaeckel Jr.) Theodore R. Jaeckel Jr. Vice President and Portfolio Manager May 25, 2000 PROXY RESULTS During the six-month period ended April 30, 2000, MuniYield Fund, Inc.'s Common Stock shareholders voted on the following proposals. The proposals were approved at a shareholders' meeting on April 27, 2000. The description of each proposal and number of shares voted are as follows:
Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Board of Directors: Terry K. Glenn 23,016,903 367,465 Herbert I. London 22,994,012 390,356 Andre F. Perold 22,994,194 390,174 Roberta Cooper Ramo 22,990,818 393,550 Arthur Zeikel 22,973,693 410,675 Shares Voted Shares Voted Shares Voted For Against Abstain 2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent auditors. 23,074,712 103,826 205,830
During the six-month period ended April 30, 2000, MuniYield Fund, Inc.'s Preferred Stock shareholders (Series A, B, C, D and E) voted on the following proposals. The proposals were approved at a shareholders' meeting on April 27, 2000. The description of each proposal and number of shares voted are as follows:
Shares Voted Shares Withheld For From Voting 1. To elect the Portfolio's Board of Directors: Terry K. Glenn, James H. Bodurtha, Herbert I. London, Joseph L. May, Andre F. Perold, Roberta Cooper Ramo and Arthur Zeikel as follows: Series A 1,694 0 Series B 810 9 Series C 1,286 1 Series D 994 4 Series E 2,281 0 Shares Voted Shares Voted Shares Voted For Against Abstain 2. To select Deloitte & Touche LLP as the Fund's independent auditors as follows: Series A 1,692 2 0 Series B 810 9 0 Series C 1,286 0 1 Series D 994 0 4 Series E 2,281 0 0
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 at right. AMT Alternative Minimum Tax (subject to) COP Certificates of Participation EDA Economic Development Authority GO General Obligation Bonds HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds PCR Pollution Control Revenue Bonds RITR Residual Interest Trust Receipts S/F Single-Family VRDN Variable Rate Demand Notes MuniYield Fund, Inc., April 30, 2000 SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Alabama--0.8% A1 VMIG1++ $6,300 Columbia, Alabama, IDB, PCR, Refunding (Alabama Power Company Project), VRDN, Series A, 5.40% due 5/01/2022 (a) $ 6,300 Alaska--0.7% NR* NR* 5,050 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 4,917 Arizona--6.7% Arizona Health Facilities Authority Revenue Bonds (Catholic Healthcare West), Series A: BBB+ Baa1 9,430 6.125% due 7/01/2009 9,259 BBB+ Baa1 6,390 6.625% due 7/01/2020 6,254 AAA Aaa 1,460 Arizona State Wastewater Management Authority, Wastewater Treatment Financial Assistance Revenue Bonds, Series A, 5.60% due 7/01/2006 (b)(c) 1,524 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (Public Service Company of New Mexico Project), Series A: BBB- Baa3 5,475 5.75% due 11/01/2022 4,863 BBB- Baa3 9,000 6.30% due 12/01/2026 8,641 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines Inc. Project), AMT: NR* B1 8,000 6.25% due 6/01/2019 7,069 NR* B1 5,300 6.30% due 4/01/2023 4,666 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson Electric Power Company Project): B+ Ba3 6,600 Series B, 6% due 9/01/2029 5,782 B+ Ba3 2,500 Series C, 6% due 9/01/2029 2,190 California AAA Aaa 8,900 California State University and Colleges, Student Union - --2.6% Revenue Bonds (Chico), Series B, 4.375% due 11/01/2028 (e) 6,908 BBB+ Baa1 5,000 California Statewide Communities Development Authority, COP (Catholic Healthcare West), 6% due 7/01/2009 4,921 AAA Aaa 9,300 San Francisco, California, City and County Airport Commission, International Airport Revenue Refunding Bonds, Second Series, Issue 20, 4.50% due 5/01/2026 (e) 7,444 Colorado--2.6% Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D: BBB+ Aaa 700 7.75% due 11/15/2001 (b) 744 BBB+ Baa1 8,000 7.75% due 11/15/2013 9,221 NR* NR* 5,000 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 5,289 Metropolitan Football Stadium District, Colorado, Sales Tax Revenue Bonds, Series A (e): AAA Aaa 3,700 5.22%** due 1/01/2011 2,026 AAA Aaa 2,000 5.30%** due 1/01/2012 1,027 Mountain Village Metropolitan District, Colorado, San Miguel County, GO, Refunding: NR* NR* 240 7.95% due 12/01/2002 (b) 259 NR* NR* 945 7.95% due 12/01/2003 983 Connecticut BB+ Ba1 35,000 Connecticut State Development Authority, PCR, Refunding - --4.6% (Connecticut Light and Power Company), Series A, 5.85% due 9/01/2028 31,486 NR* B1 2,445 New Haven, Connecticut, Facility Revenue Bonds (Hill Health Corporation Project), 9.25% due 5/01/2017 2,548 District of A1+ VMIG1++ 5,350 District of Columbia, GO (General Fund Recovery), VRDN, Series Columbia--0.7% B-2, 6.10% due 6/01/2003 (a) 5,350 Florida--1.3% AAA Aaa 10,000 Hillsborough County, Florida, School Board, COP, Refunding (Master Lease Program), Series A, 5.375% due 7/01/2021 (e) 9,392 Georgia--1.9% AAA Aaa 12,140 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875% due 1/01/2016 (h) 12,391 BBB- Baa2 1,700 Effingham County, Georgia, Development Authority, Solid Waste Disposal Revenue (Fort James Project), AMT, 5.625% due 7/01/2018 1,524 Idaho--0.4% AA NR* 2,655 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT, Senior Series C-2, 7.15% due 7/01/2023 2,709 Illinois--3.9% AAA Aaa 10,000 Chicago, Illinois, GO, Series A, 6.75% due 1/01/2035 (h) 10,781 NR* Aaa 2,760 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due 9/01/2027 (f)(g)(l) 3,006 BBB+ Baa1 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2021 2,906 NR* NR* 2,500 Illinois Educational Facilities Authority, Revenue Refunding Bonds (Chicago Osteopathic Health System), 7.25% due 11/15/2019 (b) 2,891 AAA Aaa 8,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue Bonds (McCormick Place Convention Center), 7% due 7/01/2026 (i) 9,156 Indiana--0.5% BBB+ Baa1 3,500 East Chicago, Indiana, Solid Waste Disposal Revenue Bonds (USG Corporation Project), AMT, 6.375% due 8/01/2029 3,333 Kentucky--0.6% BBB- Baa3 500 Kenton County, Kentucky, Airport Board, Airport Revenue Bonds (Special Facilities-Delta Airlines Project), AMT, Series A, 6.125% due 2/01/2022 469 NR* NR* 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,071 Louisiana NR* A3 20,000 Lake Charles, Louisiana, Harbor and Terminal District, Port - --6.9% Facilities Revenue Refunding Bonds (Trunkline Long Company Project), 7.75% due 8/15/2022 21,409 AAA Aaa 11,100 Louisiana State, GO, Series A, 6% due 5/15/2014 (e) 11,394 CC NR* 20,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project), 6.50% due 1/01/2017 18,850 Maryland--1.0% NR* NR* 7,050 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 7,185 Massachusetts BBB+ A3 2,500 Massachusetts State Development Finance Agency, Revenue - --2.4% Refunding Bonds (Boston University), Series P, 5.45% due 5/15/2059 2,114 A NR* 11,500 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Schepens Eye Research Project), Series A, 6.50% due 7/01/2028 11,672 NR* Ba2 5,220 Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds (Bay Cove Human Services Issue), Series A, 5.90% due 4/01/2028 4,137
MuniYield Fund, Inc., April 30, 2000 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Michigan BBB Ba1 $1,000 Michigan State Strategic Fund, Limited Obligation Revenue - --3.0% Bonds (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 $ 965 A1 VMIG1++ 2,800 Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds (William Beaumont Hospital), VRDN, Series J, 5.40% due 1/01/2003 (a) 2,800 AAA Aaa 20,000 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit Metropolitan-Wayne County Airport), AMT, Series A, 5.375% due 12/01/2016 (e) 18,857 Minnesota AA+ Aa2 2,465 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, - --0.3% Series A, 7.05% due 7/01/2022 2,497 Mississippi A A2 18,000 Lowndes County, Mississippi, Solid Waste Disposal and PCR, - --3.3% Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 19,393 BBB- Ba1 5,650 Mississippi Business Finance Corporation, Mississippi, PCR, Refunding (System Energy Resources Inc. Project), 5.90% due 5/01/2022 4,901 Missouri--0.6% AAA NR* 4,310 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds, Homeownership, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 4,508 Nevada--1.0% Clark County, Nevada, IDR, Refunding (Nevada Power Company Project): BBB NR* 3,500 AMT, Series B, 5.90% due 10/01/2030 3,029 BBB NR* 5,000 Series C, 5.50% due 10/01/2030 4,130 New Jersey BBB- NR* 3,000 New Jersey EDA, Revenue Bonds, First Mortgage (Fellowship - --4.2% Village Project), Series C, 5.50% due 1/01/2028 2,305 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT: BB Ba2 20,430 6.25% due 9/15/2019 18,959 BB Ba2 10,000 5.50% due 4/01/2028 8,006 BBB- Baa3 3,000 New Jersey Health Care Facilities Financing Authority, Revenue Refunding Bonds (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 2,370 New NR* Baa3 14,500 Farmington, New Mexico, PCR, Series B, 5.80% due 4/01/2022 12,829 Mexico--1.7% New York AAA Aaa 2,675 Dutchess County, New York, Resource Recovery Agency Revenue - --11.7% Bonds (Solid Waste System), Series A, 5.25% due 1/01/2011 (e) 2,634 AAA Aaa 5,000 Long Island Power Authority, New York, Electric System Revenue Refunding Bonds, Series A, 5.25% due 12/01/2026 (c) 4,492 NR* Aaa 5,595 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Bonds, RITR, Series 9, 6.10% due 7/01/2006 (b)(h)(k) 6,357 NR* A 5,500 New York City, New York, City IDA, Special Facilities Revenue Bonds, RITR, AMT, Series RI-5, 6.495% due 1/01/2024 (k) 5,451 AAA Aaa 13,130 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Refunding Bonds, Series D, 4.75% due 6/15/2025 (e) 10,865 New York City, New York, City Transitional Finance Authority Revenue Bonds, Future Tax Secured, Series B: AA Aa3 6,805 6.25% due 11/15/2017 7,169 AA Aa3 6,405 6.25% due 11/15/2018 6,713 New York City, New York, GO, Refunding, Series B (b): A- A3 1,555 7.75% due 2/01/2002 1,652 A- A3 1,150 7.75% due 2/01/2002 1,221 A- Aaa 385 New York City, New York, GO, Series C, Sub-Series C-1, 7.50% due 8/01/2002 (b) 412 New York State Dormitory Authority, Revenue Refunding Bonds (e): AAA Aaa 2,545 (Hamilton College), 4.75% due 7/01/2017 2,214 AAA Aaa 9,750 (State University Educational Facilities), Series A, 4.75% due 5/15/2025 8,060 New York State Dormitory Authority, State University Educational Facilities Revenue Refunding Bonds, Series 1989 (e): AAA NR* 7,500 6% due 5/15/2015 7,800 AAA NR* 3,750 6% due 5/15/2016 3,883 NR* Aa1 17,525 New York State Environmental Facilities Corporation, PCR, Refunding, RITR, Series RI-1, 6.095% due 6/15/2014 (k) 18,199 North BBB Baa3 4,750 North Carolina Eastern Municipal Power Agency, Power System Carolina--0.6% Revenue Bonds, Series D, 6.75% due 1/01/2026 4,778 Ohio--3.7% NR* Baa3 5,500 Franklin County, Ohio, Hospital Revenue Bonds (Doctors of Ohio Health Corp.), Series A, 5.60% due 12/01/2028 3,954 BBB+ Baa1 25,000 Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation Project), AMT, 5.60% due 8/01/2032 21,325 AAA Aaa 2,405 Toledo, Ohio, Sewer System Revenue Refunding & Improvement Bonds, Mortgage, 4.75% due 11/15/2017 (e) 2,103 Oklahoma--0.5% AAA NR* 3,250 Holdenville, Oklahoma, Industrial Authority, Correctional Facility Revenue Bonds, 6.70% due 7/01/2006 (b)(j) 3,525 Oregon--2.9% AAA Aaa 14,000 Oregon Health Sciences University Revenue Refunding Bonds, Series A, 5.16%** due 7/01/2021 (e) 4,029 Oregon State Department of Administrative Services, COP, Series A (c): AAA Aaa 4,405 6% due 5/01/2015 4,574 AAA Aaa 3,500 6% due 5/01/2016 3,617 AAA Aaa 10,000 Portland, Oregon, Sewer System Revenue Refunding Bonds, Series A, 5% due 6/01/2014 (h) 9,439 Pennsylvania A NR* 2,425 Berks County, Pennsylvania, Municipal Authority, College - --7.3% Revenue Refunding Bonds (Alvernia College Project), 6% due 11/15/2018 2,369 AAA Aaa 5,000 Lehigh County, Pennsylvania, IDA, PCR, Refunding (Pennsylvania Power and Light Company Project), Series B, 6.40% due 9/01/2029 (e) 5,120 BBB Baa 9,675 Pennsylvania Convention Center Authority, Revenue Refunding Bonds, Series A, 6.70% due 9/01/2014 9,980 NR* NR* 10,330 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds (National Gypsum Company), AMT, Series A, 6.25% due 11/01/2027 9,390 AA+ Aa2 5,175 Pennsylvania HFA, S/F Mortgage Refunding Bonds, AMT, Series 42, 6.85% due 4/01/2025 5,331 AAA Aaa 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) 16,244 Philadelphia, Pennsylvania, Authority for IDR, Refunding, Commercial Development: NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,462 NR* NR* 3,000 (Doubletree), Series A, 6.50% due 10/01/2027 2,846
MuniYield Fund, Inc., April 30, 2000 SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value South BBB+ Baa1 $2,500 Richland County, South Carolina, PCR, Refunding (Union Carolina--0.6% Camp Corporation Project), Series C, 6.55% due 11/01/2020 $ 2,494 NR* NR* 2,135 South Carolina Jobs EDA, Health Facilities Revenue Refunding Bonds (First Mortgage-Lutheran Homes), 5.70% due 5/01/2026 1,695 South BBB+ Baa3 900 South Dakota State Health and Educational Facilities Dakota--0.1% Authority, Revenue Refunding Bonds (Prairie Lakes), 7.25% due 4/01/2022 910 Tennessee--2.8% Elizabethton, Tennessee, Health and Educational Facilities Board, Hospital Revenue Refunding and Improvement Bonds, First Mortgage, Series B (e): AAA Aaa 2,005 6% due 7/01/2011 2,089 AAA Aaa 2,125 6% due 7/01/2012 2,211 AAA Aaa 2,255 6.25% due 7/01/2013 2,394 AAA Aaa 2,395 6.25% due 7/01/2014 2,539 NR* NR* 3,000 Hardeman County, Tennessee, Correctional Facilities Corporation Revenue Bonds, 7.75% due 8/01/2017 3,067 Johnson City, Tennessee, Health and Educational Facilities Board, Hospital Revenue Refunding Bonds, First Mortgage (Mountain States Health), Series A (e): AAA Aaa 1,960 6% due 7/01/2011 2,042 AAA Aaa 2,875 6% due 7/01/2012 2,991 AAA Aaa 3,465 6.25% due 7/01/2015 3,667 Texas--8.1% Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Good Shepherd Medical Center Project): AA NR* 3,000 6.875% due 10/01/2020 3,161 AA NR* 2,000 6.375% due 10/01/2025 2,006 AA- Aa3 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 5,095 A1+ NR* 100 Harris County, Texas, Health Facilities Development Corporation, Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN, 5.80% due 12/01/2025 (a) 100 Houston, Texas, Airport System Revenue Bonds (Special Facilities- Continental Airlines), AMT: BB Ba1 10,300 Series B, 6.125% due 7/15/2017 9,310 BB Ba1 9,700 Series C, 6.125% due 7/15/2027 8,462 Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT: BB Baa3 6,500 6.375% due 4/01/2027 6,014 BB Baa3 4,000 6.95% due 4/01/2030 3,970 AA Aa1 20,000 San Antonio, Texas, Electric and Gas Revenue Refunding Bonds, Series A, 5.25% due 2/01/2015 19,070 San Antonio, Texas, Water Revenue Refunding Bonds: AA- Aa3 1,000 5.875% due 5/15/2016 1,015 AA- Aa3 2,430 5.875% due 5/15/2017 2,457 Utah--0.5% NR* NR* 3,900 Carbon County, Utah, Solid Waste Disposal Revenue Refunding Bonds (Laidlaw Environmental), AMT, Series A, 7.45% due 7/01/2017 3,507 AAA NR* 555 Utah State, HFA, S/F Mortgage Revenue Bonds, AMT, Senior- Series E-2, 7.15% due 7/01/2024 (d) 565 Virginia--6.4% NR* NR* 7,030 Dulles Town Center, Virginia, Community Development Authority, Special Assessment Tax (Dulles Town Center Project), 6.25% due 3/01/2026 6,526 AA Aa2 10,515 Fairfax County, Virginia, Water Authority, Revenue Refunding Bonds, 6% due 4/01/2022 10,659 NR* NR* 8,650 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds (Port Facility-Zeigler Coal), 6.90% due 5/02/2022 7,060 NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds, Exempt-Facility, AMT, Series A, 7.55% due 1/01/2019 1,020 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds: BBB- Baa3 16,600 Senior Series A, 5.50% due 8/15/2028 13,601 BBB- Baa3 9,100 Senior Series B, 5.90%** due 8/15/2019 2,337 BBB- Baa3 12,840 Senior Series B, 7.35%** due 8/15/2029 1,594 AA+ Aa1 5,125 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds, Series A, 7.10% due 1/01/2025 5,208 West NR* NR* 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Virginia--0.4% Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,049 Wisconsin--0.3% AA NR* 2,760 Wisconsin State Health and Educational Facilities Authority Revenue Bonds (Howard Young Medical Center Inc. Project), 5.125% due 8/15/2028 2,251 Total Investments (Cost--$743,593)--97.6% 727,954 Other Assets Less Liabilities--2.4% 18,181 -------- Net Assets--100.0% $746,135 ======== (a)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 2000. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. (i)Escrowed to maturity. (j)Connie Lee Insured. (k)The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 2000. (l)FHLMC Collateralized. *Not Rated. **Represents a zero coupon bond; the interest rate shown is the effective yield at the time of purchase by the Fund. ++Highest short-term rating by Moody's Investors Service, Inc. See Notes to Financial Statements.
MuniYield Fund, Inc., April 30, 2000 STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of April 30, 2000 Assets: Investments, at value (identified cost--$743,592,522) $727,953,920 Cash 79,614 Receivables: Interest $ 12,516,997 Securities sold 8,571,743 21,088,740 ------------ Prepaid expenses and other assets 23,883 ------------ Total assets 749,146,157 ------------ Liabilities: Payables: Securities purchased 2,008,024 Dividends to shareholders 602,882 Investment adviser 288,587 2,899,493 ------------ Accrued expenses 111,362 ------------ Total liabilities 3,010,855 ------------ Net Assets: Net assets $746,135,302 ============ Capital: Capital Stock (200,000,000 shares authorized): Preferred Stock, par value $.05 per share (10,000 shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) $250,000,000 Common Stock, par value $.10 per share (38,317,103 shares issued and outstanding) $ 3,831,710 Paid-in capital in excess of par 538,873,283 Undistributed investment income--net 9,296,901 Accumulated realized capital losses on investments--net (29,207,291) Accumulated distributions in excess of realized capital gains on investments--net (11,020,699) Unrealized depreciation on investments--net (15,638,602) ------------ Total--Equivalent to $12.95 net asset value per share of Common Stock (market price--$11.875) 496,135,302 ------------ Total capital $746,135,302 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2000 Investment Interest and amortization of premium and discount earned $ 23,476,655 Income: Expenses: Investment advisory fees $ 1,857,483 Commission fees 313,306 Transfer agent fees 84,042 Accounting services 51,030 Professional fees 45,659 Custodian fees 26,647 Directors' fees and expenses 22,263 Listing fees 20,361 Printing and shareholder reports 18,403 Pricing fees 8,750 Other 26,047 ------------ Total expenses 2,473,991 ------------ Investment income--net 21,002,664 ------------ Realized & Realized loss on investments--net (29,207,291) Unrealized Change in unrealized depreciation on investments--net 20,029,648 Gain (Loss) on ------------ Investments Net Increase in Net Assets Resulting from Operations $ 11,825,021 - --Net: ============ See Notes to Financial Statements.
MuniYield Fund, Inc., April 30, 2000 STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the Months Ended Year Ended April 30, October 31, Increase (Decrease) in Net Assets: 2000 1999 Operations: Investment income--net $ 21,002,664 $ 42,576,230 Realized loss on investments--net (29,207,291) (545,814) Change in unrealized appreciation/depreciation on investments--net 20,029,648 (89,396,899) ------------ ------------ Net increase (decrease) in net assets resulting from operations 11,825,021 (47,366,483) ------------ ------------ Dividends & Investment income--net: Distributions to Common Stock (16,905,506) (36,119,916) Shareholders: Preferred Stock (4,814,546) (6,368,964) Realized gain on investments--net: Common Stock -- (14,409,079) Preferred Stock -- (1,619,668) In excess of realized gain on investments--net: Common Stock -- (9,906,186) Preferred Stock -- (1,113,516) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (21,720,052) (69,537,329) ------------ ------------ Capital Stock Value of shares issued to Common Stock shareholders Transactions: in reinvestment of dividends and distributions -- 11,711,691 ------------ ------------ Net Assets: Total decrease in net assets (9,895,031) (105,192,121) Beginning of period 756,030,333 861,222,454 ------------ ------------ End of period* $746,135,302 $756,030,333 ============ ============ *Undistributed investment income--net $ 9,296,901 $ 10,014,289 ============ ============ See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived For the Six from information provided in the financial statements. Months Ended April 30, For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996 Per Share Net asset value, beginning of period $ 13.21 $ 16.27 $ 16.09 $ 15.68 $ 15.47 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .55 1.12 1.19 1.24 1.26 Realized and unrealized gain (loss) on investments--net (.24) (2.34) .49 .65 .23 -------- -------- -------- -------- -------- Total from investment operations .31 (1.22) 1.68 1.89 1.49 -------- -------- -------- -------- -------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.44) (.95) (.97) (1.00) (1.04) Realized gain on investments--net -- (.38) (.26) (.22) -- In excess of realized gain on investments --net -- (.27) -- (.01) -- -------- -------- -------- -------- -------- Total dividends and distributions to Common Stock shareholders (.44) (1.60) (1.23) (1.23) (1.04) -------- -------- -------- -------- -------- Effect of Preferred Stock activity: Dividends and distributions to Preferred Stock shareholders: Investment income--net (.13) (.17) (.18) (.20) (.24) Realized gain on investments--net -- (.04) (.09) (.05) -- In excess of realized gain on invest- ments--net -- (.03) -- --++++ -- -------- -------- -------- -------- -------- Total effect of Preferred Stock activity (.13) (.24) (.27) (.25) (.24) -------- -------- -------- -------- -------- Net asset value, end of period $ 12.95 $ 13.21 $ 16.27 $ 16.09 $ 15.68 ======== ======== ======== ======== ======== Market price per share, end of period $ 11.875 $ 12.875 $ 16.875 $ 15.875 $ 14.875 ======== ======== ======== ======== ======== Total Investment Based on market price per share (4.30%)+++(15.35%) 14.74% 15.56% 10.88% Return:** ======== ======== ======== ======== ======== Based on net asset value per share 1.71%+++ (9.92%) 9.15% 11.11% 8.61% ======== ======== ======== ======== ======== Ratios Based on Total expenses*** 1.00%* .93% .89% .91% .92% Average Net ======== ======== ======== ======== ======== Assets of Total investment income--net*** 8.47%* 7.42% 7.43% 7.81% 8.06% Common Stock: ======== ======== ======== ======== ======== Amount of dividends to Preferred Stock shareholders 1.94%* 1.11% 1.10% 1.28% 1.57% ======== ======== ======== ======== ======== Investment income--net, to Common Stock shareholders 6.53%* 6.31% 6.33% 6.53% 6.49% ======== ======== ======== ======== ======== Ratios Based on Total expenses .66%* .65% .63% .64% .64% Total Average Net ======== ======== ======== ======== ======== Assets:***++ Total investment income--net 5.64%* 5.17% 5.26% 5.48% 5.64% ======== ======== ======== ======== ======== Ratios Based on Dividends to Preferred Stock shareholders 3.86%* 2.55% 2.66% 3.02% 3.63% Average Net ======== ======== ======== ======== ======== Assets of Preferred Stock: Supplemental Net assets, net of Preferred Stock, end Data: of period (in thousands) $496,135 $506,030 $611,222 $596,320 $581,124 ======== ======== ======== ======== ======== Preferred Stock outstanding, end of period (in thousands) $250,000 $250,000 $250,000 $250,000 $250,000 ======== ======== ======== ======== ======== Portfolio turnover 50.35% 78.42% 91.63% 111.45% 96.74% ======== ======== ======== ======== ======== Leverage: Asset coverage per $1,000 $ 2,985 $ 3,024 $ 3,445 $ 3,385 $ 3,324 ======== ======== ======== ======== ======== Dividends Series A--Investment income--net $ 492 $ 588 $ 694 $ 747 $ 894 Per Share on ======== ======== ======== ======== ======== Preferred Stock Series B--Investment income--net $ 516 $ 595 $ 687 $ 751 $ 897 Outstanding: ======== ======== ======== ======== ======== Series C--Investment income--net $ 454 $ 687 $ 643 $ 763 $ 998 ======== ======== ======== ======== ======== Series D--Investment income--net $ 456 $ 694 $ 637 $ 762 $ 888 ======== ======== ======== ======== ======== Series E--Investment income--net $ 487 $ 627 $ 656 $ 752 $ 875 ======== ======== ======== ======== ======== *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. ++Includes Common and Preferred Stock average net assets. ++++Amount is less than $.01 per share. +++Aggregate total investment return. See Notes to Financial Statements.
MuniYield Fund, Inc., April 30, 2000 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's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. 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 and options thereon, which are traded on exchanges, are valued at their closing price as of the close of such exchanges. Options written or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). Securities with remaining maturities of sixty days or less are valued at amortized cost, which approximates market value. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith by or under the direction of the Board of Directors of the Fund, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Fund under the general supervision of the Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio investment strategies to increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than transactions in other types of instruments. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Financial futures contracts--The Fund may purchase or sell financial futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Interest income is recognized on the accrual basis. Discounts and market premiums are amortized into interest income. Realized gains and losses on security transactions are determined on the identified cost basis. (e) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. Distributions in excess of realized capital gains are due primarily to differing tax treatments for futures transactions. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee at an annual rate of .50% of the Fund's average weekly net assets, including proceeds from the issuance of Preferred Stock. Accounting services are provided to the Fund by FAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of FAM, PSI, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended April 30, 2000 were $368,663,632 and $377,782,671, respectively. Net realized losses for the six months ended April 30, 2000 and net unrealized losses as of April 30, 2000 were as follows: Realized Unrealized Losses Losses Long-term investments $(27,784,965) $(15,638,602) Financial futures contracts (1,422,326) -- ------------ ------------ Total $(29,207,291) $(15,638,602) ============ ============ As of April 30, 2000, net unrealized depreciation for Federal income tax purposes aggregated $15,638,602, of which $12,495,843 related to appreciated securities and $28,134,445 related to depreciated securities. The aggregate cost of investments at April 30, 2000 for Federal income tax purposes was $743,592,522. 4. Capital Stock Transactions: The Fund is authorized to issue 200,000,000 shares of capital stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of capital stock without approval of the holders of Common Stock. Common Stock Shares issued and outstanding during the six months ended April 30, 2000 remained constant and during the year ended October 31, 1999 increased by 742,979 as a result of dividend reinvestment. Preferred Stock Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the Fund, with a par value of $.05 per share and a liquidation preference of $25,000 per share, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 2000 were as follows: Series A, 3.85%; Series B, 4.10%; Series C, 4.00%; Series D, 4.00%; and Series E, 4.60%. Shares issued and outstanding during the six months ended April 30, 2000 and during the year ended October 31, 1999 remained constant. The Fund pays commissions to certain broker-dealers at the end of each auction at an annual rate ranging from .25% to .375%, calculated on the proceeds of each auction. For the six months ended April 30, 2000, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $129,733 as commissions. 5. Capital Loss Carryforward: At October 31, 1999, the Fund had a net capital loss carryforward of approximately $6,930,000, all of which expires in 2007. This amount will be available to offset like amounts of any future taxable gains. 6. Subsequent Event: On May 5, 2000, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $.071400 per share, payable on May 30, 2000 to shareholders of record as of May 16, 2000. MuniYield Fund, Inc., April 30, 2000 MANAGED DIVIDEND POLICY The Fund's dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more consistent yield to the current trading price of shares of Common Stock of the Fund, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Fund for any particular month may be more or less than the amount of net investment income earned by the Fund during such month. The Fund's current accumulated but undistributed net investment income, if any, is disclosed in the Statement of Assets, Liabilities and Capital, which comprises part of the Financial Information included in this report. QUALITY PROFILE The quality ratings of securities in the Fund as of April 30, 2000 were as follows: Percent of S&P Rating/Moody's Rating Net Assets AAA/Aaa 28.6% AA/Aa 12.5 A/A 8.7 BBB/Baa 20.5 BB/Ba 11.9 B/B 1.9 CC/Ca 2.5 NR (Not Rated) 9.0 Other++ 2.0 ++Temporary investments in short-term municipal securities. OFFICERS AND DIRECTORS Terry K. Glenn, President and Director James H. Bodurtha, Director Herbert I. London, Director Joseph L. May, Director Andre F. Perold, Director Roberta Cooper Ramo, Director Arthur Zeikel, Director Vincent R. Giordano, Senior Vice President Kenneth A. Jacob, Vice President Theodore R. Jaeckel Jr., Vice President Donald C. Burke, Vice President and Treasurer Alice A. Pellegrino, Secretary Custodian The Bank of New York 90 Washington Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: The Bank of New York 100Church Street New York, NY 10286 NYSE Symbol MYD Robert R. Martin, Director of MuniYield Fund, Inc., has recently retired. The Fund's Board of Directors wishes Mr. Martin well in his retirement. -----END PRIVACY-ENHANCED MESSAGE-----