N-30D 1 ml6858.txt MUNIYIELD FUND, INC. (BULL LOGO) Merrill Lynch Investment Managers Semi-Annual Report April 30, 2002 MuniYield Fund, Inc. www.mlim.ml.com 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 and intends to remain leveraged 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. The Fund may also invest in swap agreements, which are over-the- counter contracts in which one party agrees to make periodic payments based on the change in market value of a specified bond, basket of bonds, or index in return for periodic payments based on a fixed or variable interest rate or the change in market value of a different bond, basket of bonds or index. Swap agreements may be used to obtain exposure to a bond or market without owning or taking physical custody of securities. MuniYield Fund, Inc., April 30, 2002 DEAR SHAREHOLDER For the six-month period ended April 30, 2002, the Common Stock of MuniYield Fund, Inc. earned $0.415 per share income dividends, which included earned and unpaid dividends of $0.077. This represents a net annualized yield of 6.29%, based on a month-end per share net asset value of $13.3. Over the same period, the total investment return on the Fund's Common Stock was +1.65%, based on a change in per share net asset value from $13.55 to $13.30, and assuming reinvestment of $0.460 per share income dividends. For the six-month period ended April 30, 2002, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 1.37%; Series B, 1.68%; Series C, 1.36%; Series D, 2.63%; and Series E, 1.45%; and Series F, 1.39%. The Municipal Market Environment During the six months ended April 30, 2002, long-term fixed-income bond yields generally rose, while exhibiting considerable monthly volatility. However, throughout the period, tax-exempt bond yield volatility was appreciably lower and the overall increase in municipal bond yields was lower than its taxable counterpart. This relative outperformance by the tax-exempt market largely reflected an improving technical position in recent months. Despite additional decreases in the short-term interest rate target to 1.75% by the Federal Reserve Board, long-term fixed-income markets were unable to hold their October 2001 gains. Rapid, significant US military success in Afghanistan, stronger-than-expected retail sales and recovering US equity markets combined to suggest to many investors that US economic recovery was far more imminent than had been anticipated earlier in the fall of 2001. Bond yields rose during November and December 2001 as investors sold securities both to realize recent profits and in anticipation of an early reversal of the Federal Reserve Board's policy. By the end of December, long- term US Treasury bond yields rose more than 50 basis points (0.50%) to approximately 5.45%. During January and February 2002, economic indicators were mixed, signaling some strength in consumer spending and housing-related industries, but with continued declines in manufacturing employment. Interest rates remained in a narrow but volatile range as weak US equity markets generally supported fixed-income products. By the end of January 2002, the Federal Reserve Board ended its aggressive series of short-term interest rate reductions by maintaining its overnight rate target at 1.75%, a 40-year low. The Federal Reserve Board noted that while US economic activity was beginning to strengthen, earlier weakness could easily resume should consumer spending falter. In recent months, however, the index of leading economic indicators has risen, suggesting that economic activity is likely to expand later this year. In its final revision, fourth quarter 2001 US gross domestic product growth was revised higher to 1.6%, signaling improving economic conditions relative to earlier in 2001. By the end of February 2002, long-term US Treasury bond yields stood at 5.42%. In early March, a number of economic indicators, including surging existing home sales, solid consumer spending and positive nonfarm payroll growth following several months of job losses, suggested US economic activity was continuing to strengthen. Also, in Congressional testimony, Federal Reserve Board Chairman Alan Greenspan was cautiously optimistic regarding future US economic growth noting, while any increase in activity was likely to be moderate, "an economic expansion (was) well underway." These factors combined to push US equity prices higher and bond prices sharply lower in expectation of a reversal of the Federal Reserve Board actions taken during the past 15 months. By the end of March 2002, long-term US Treasury bond yields stood at 5.80%, their highest level in more than 18 months. During April 2002, bond yields reversed to move lower as US economic conditions, especially employment trends, weakened and US equity markets solidly declined. Also, first quarter 2002 US gross domestic product growth was initially estimated to have grown 0.6%. This decline in US economic activity from the fourth quarter of 2001 suggested that earlier US economic strength was weakening and the Federal Reserve Board would be unlikely to raise interest rates for much of 2002. US Treasury issue prices were also boosted by erupting Middle East politics that led many international investors to seek the safe haven of US Treasury securities. By April 30, 2002, long- term US Treasury bond yields declined to 5.59%. During the past six months, US Treasury bond yields rose more than 70 basis points. The municipal bond market displayed a similar pattern to its taxable counterpart during the six-month period ended April 2002. The tax- exempt bond market was also unable to maintain the gains made in late September and October 2001. In addition to a modestly stronger financial environment, increased tax-exempt new bond issuance in late 2001 also put upward pressure on municipal bond yields. By year- end 2001, long-term tax-exempt revenue bond yields as measured by the Bond Buyer Revenue Bond Index stood at 5.60%, an increase of approximately 25 basis points during the last two months of 2001. In early 2002, tax-exempt bond yields traded in a relatively narrow range as an increasingly positive technical position supported existing municipal bond prices. However, in March, increased economic activity and associated concerns regarding near-term Federal Reserve Board actions also pushed tax-exempt bond prices lower. By late March, long-term municipal revenue bond yields rose to 5.67%, their highest level in more than a year. Similar to US Treasury issues, tax-exempt bond yields declined throughout April as economic conditions weakened. The municipal bond market's improvement was bolstered by a continued improvement in the market's technical environments. Investor demand strengthened, in part aided by declining equity prices, as issuance levels declined. At April 30, 2002, long-term tax-exempt bond yields stood at 5.52%, an increase of approximately 30 basis points during the last six months. Interest rates are likely to remain near current levels as US economic conditions are expected to remain relatively weak. However, going forward, business activity appears likely to accelerate, perhaps significantly. Immediately after the September 11 attacks, the Federal Government announced a $45 billion package to aid New York City, Washington DC and the airline industry, with additional fiscal aid packages expected. The military response to these attacks will continue to require sizable increases in Defense Department spending. Eventually, this governmental spending should result in increased US economic activity, particularly in the construction and defense industries. This governmental stimulus, in conjunction with the actions already taken by the Federal Reserve Board, can be expected to generate significant increases in US gross domestic product growth some time in mid-to-late 2002. As inflationary pressures are expected to remain well contained going forward, increased economic activity need not result in significant increases in long-term bond yields. Also, throughout much of 2001, the municipal bond market exhibited far less volatility than its taxable counterparts. Since the strong technical position that has supported the tax-exempt bond market's performance for much of 2001 can be expected to continue, any potential increases in municipal bond yields can also be expected to be limited. Portfolio Strategy During the six-month period ended April 30, 2002, we focused on seeking to enhance the Fund's dividend stream and reduce the Fund's net asset value volatility. Market volatility was expected because of conflicting economic signals. Toward the end of 2001, our strategy shifted to a market neutral position, given the low nominal yields that both US Treasury and municipal bonds provided. As interest rates fell further, we shifted to a more defensive position. This strategy worked well as interest rates rose sharply during November and December. However, the economic aftershocks of the September 11, 2001 terrorist attacks negated some of the benefits derived from our recent strategic shifts. The value of the Fund's airport-related holdings was negatively affected, causing the sector to underperform slightly for the period. Going forward, we expect these holdings to regain much of their former value and reverse their underperformance. At this time, we have retained our defensive bias as we expect higher bond yields later in 2002. The 475 basis point decline in short-term interest rates engineered by the Federal Reserve Board in 2001 resulted in a material decrease in the Fund's borrowing cost into the 1% - 1.25% range. This decline, in combination with a steep tax-exempt yield curve, generated a material income benefit to the Fund's Common Stock shareholders from the leveraging of the Preferred Stock. While modest increases in short-term interest rates are expected later this year, these increases are unlikely to result in significantly higher borrowing costs for the Fund. However, should the spread between short-term and long-term interest rates narrow, the benefits of leverage will decline and, as a result, reduce the yield on the Fund's Common Stock. (For a more complete explanation of the benefits and risks of leveraging, see page 1 of this report to shareholders.) MuniYield Fund, Inc., April 30, 2002 In Conclusion At this time, we would like to welcome the shareholders of Merrill Lynch Municipal Strategy Fund, Inc. We appreciate your interest in MuniYield Fund, Inc., and we look forward to serving your investment needs in the months and years ahead. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director (Kenneth A. Jacob) Kenneth A. Jacob Senior Vice President (John M. Loffredo) John M. Loffredo Senior Vice President (Roberto Roffo) Roberto Roffo Vice President and Portfolio Manager May 31, 2002 PROXY RESULTS
During the six-month period ended April 30, 2002, MuniYield Fund, Inc.'s Common Stock shareholders voted on the following proposal. The proposal was approved at a shareholders' meeting on April 8, 2002. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Directors: Terry K. Glenn 41,766,125 1,275,848 Joe Grills 41,728,447 1,313,526 Andre F. Perold 41,740,142 1,301,831 Roberta Cooper Ramo 41,729,727 1,312,246 Robert S. Salomon, Jr. 41,732,182 1,309,791 Melvin R. Seiden 41,723,696 1,318,277 Stephen B. Swensrud 41,705,394 1,336,579 During the six-month period ended April 30, 2001, MuniYield Fund, Inc.'s Preferred Stock shareholders (Series A - F) voted on the following proposal. The proposal was approved at a shareholders' meeting on April 8, 2002. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Board of Directors: Terry K. Glenn, James H. Bodurtha, Joe Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo, Robert S. Salomon, Jr., Melvin R. Seiden and Stephen B. Swensrud 8,647 2,139
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Alabama--0.0% A1 VMIG1++ $ 100 Columbia, Alabama, IDB, PCR, Refunding (Alabama Power Company Project), VRDN, Series E, 1.75% due 10/01/2022 (m) $ 100 Alaska--0.9% NR* Baa2 5,050 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 5,059 Arizona--4.8% 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) 1,625 Maricopa County, Arizona, IDA, M/F Housing Revenue Refunding Bonds (CRS Pine Ridge Housing Corporation), Series A-1 (g): AAA NR* 5,000 6% due 10/20/2031 5,345 AAA NR* 5,000 6.05% due 10/20/2036 5,351 A1+ P1 2,000 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (Arizona Public Service Company), VRDN, Series C, 1.70% due 5/01/2029 (m) 2,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines Inc. Project), AMT: NR* Caa2 10,000 6.25% due 6/01/2019 4,366 NR* Caa2 6,900 6.30% due 4/01/2023 3,012 Phoenix, Arizona, IDA, M/F Housing Revenue Bonds (Bay Club Apartments Project)(g): AAA NR* 565 5.80% due 11/20/2021 601 AAA NR* 915 5.90% due 11/20/2031 971 AAA NR* 1,270 5.95% due 11/20/2036 1,349
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) COP Certificates of Participation DRIVERS Derivative Inverse Tax-Exempt Receipts EDA Economic Development Authority GO General Obligation Bonds HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds INFLOS Inverse Floating Rate Municipal Bonds M/F Multi-Family PCR Pollution Control Revenue Bonds RIB Residual Interest Bonds RITR Residual Interest Trust Receipts S/F Single-Family VRDN Variable Rate Demand Notes MuniYield Fund, Inc., April 30, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Arizona Pima County, Arizona, IDA, M/F Housing Revenue Bonds (concluded) (Columbus Village) Series A (g): AAA NR* $ 500 5.90% due 10/20/2021 $ 536 AAA NR* 580 6% due 10/20/2031 625 AAA NR* 2,320 6.05% due 10/20/2041 2,504 California-- A+ A1 13,000 California State, GO, Refunding, 5.125% due 2/01/2027 12,649 3.8% BB B1 7,400 Los Angeles, California, Regional Airports Improvement Corporation, Lease Revenue Bonds (American Airlines Inc.), AMT, Series C, 7.50% due 12/01/2024 7,215 Los Angeles County, California, Schools Regionalized Business Services, COP, Pooled Financing, Series A (c): AAA Aaa 1,430 5.90%** due 8/01/2019 560 AAA Aaa 2,510 6%** due 8/01/2029 534 AA Aa3 1,250 Sacramento County, California, Sanitation District Financing Authority, Revenue Refunding Bonds, Trust Receipts, Class R, Series A, 10.001% due 12/01/2019 (k) 1,470 Colorado--8.4% NR* Aaa 4,680 Broomfield, Colorado, COP (Open Space Park and Recreational Facilities), 5.75% due 12/01/2015 (c) 5,100 NR* Aaa 4,430 Broomfield, Colorado, Open Space Park and Recreational Facilities, COP, 5.75% due 12/01/2014 (c) 4,854 AA Aa2 1,500 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT, Series D-2, 6.90% due 4/01/2029 1,697 Colorado Health Facilities Authority, Health Facilities Revenue Bonds (National Benevolent Association), Series C: NR* Baa2 600 7% due 3/01/2019 618 NR* Baa2 750 7% due 3/01/2024 765 NR* Baa2 1,125 7.125% due 3/01/2030 1,157 A A2 8,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D, 7.75% due 11/15/2013 9,604 NR* NR* 6,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 6,941 Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee), Series A: NR* NR* 1,735 7.10% due 9/01/2014 1,692 NR* NR* 5,065 7.35% due 9/01/2031 4,882 AA NR* 1,985 Interlocken Metropolitan District, Colorado, GO, Refunding, Series A, 5.75% due 12/15/2012 2,152 A1+ VMIG1++ 9,300 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN, 1.75% due 5/01/2013 (c)(m) 9,300 San Miguel County, Colorado (Mountain Village Metropolitan District), GO, Refunding: NR* NR* 240 7.95% due 12/01/2002 (b) 251 NR* NR* 435 7.95% due 12/01/2003 448 Connecticut-- NR* NR* 700 Connecticut State Development Authority, IDR 3.5% (AFCO Cargo BDL-LLC Project), AMT, 7.35% due 4/01/2010 698 BBB A3 5,000 Connecticut State Development Authority, PCR, Refunding (Connecticut Light and Power Company), Series A, 5.85% due 9/01/2028 5,062 AAA Aaa 12,000 Connecticut State, HFA, Revenue Refunding Bonds (Housing Mortgage Finance Program), Series F, Sub-Series F-1, 6% due 5/15/2017 (o) 12,557 NR* Aaa 2,175 Connecticut State Special Tax Obligation Revenue Bonds, RIB, Series 372, 10.07% due 12/01/2017 (h)(k) 2,622 Florida--6.8% AAA Aaa 2,755 Broward County, Florida, Airport System Revenue Bonds, AMT, Series J-1, 5.75% due 10/01/2018 (c) 2,896 Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National Gypsum), AMT: NR* NR* 14,500 Series A, 7.125% due 4/01/2030 12,437 NR* NR* 5,000 Series B, 7.125% due 4/01/2030 4,289 A1+ VMIG1++ 3,500 Jacksonville, Florida, Electric Authority Revenue Bonds (Electric System), VRDN, Sub-Series B, 1.70% due 10/01/2010 (m) 3,500 AAA Aaa 16,700 Pinellas County, Florida, Housing Authority, Housing Revenue Bonds (Affordable Housing Program), 4.60% due 12/01/2010 (i) 17,140 Georgia--3.6% AAA Aaa 12,140 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875% due 1/01/2016 (h) 13,166 NR* NR* 4,600 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station Project), 7.90% due 12/01/2024 4,580 AAA Aa2 3,250 Georgia State, HFA, S/F Mortgage Revenue Refunding Bonds, Series A, Sub-Series A-1, 6.125% due 12/01/2015 (d) 3,323 Idaho--1.5% AA NR* 1,880 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT, Senior Series C-2, 7.15% due 7/01/2023 1,909 BBB- Baa3 7,150 Power County, Idaho, Industrial Development Corporation, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45% due 8/01/2032 6,870 Illinois--5.8% NR* B2 875 Beardstown, Illinois, IDR (Jefferson Smurfit Corp. Project), 8% due 10/01/2016 897 AA+ Aaa 5,000 Chicago, Illinois, Metropolitan Water Reclamation District of Greater Chicago, Capital Improvement, GO, Series A, 5.50% due 12/01/2013 5,476 BB B1 2,135 Chicago, Illinois, O'Hare International Airport, Special Facility Revenue Refunding Bonds (American Airlines Inc. Project), 8.20% due 12/01/2024 2,139 NR* Aaa 1,595 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due 9/01/2027 (f)(g)(l) 1,799 BBB Baa2 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2006 (b) 3,237 AAA Aaa 3,285 Illinois Development Finance Authority Revenue Bonds (Presbyterian Home Lake Project), Series B, 6.30% due 9/01/2022 (i) 3,485 BBB Baa3 2,540 Illinois Development Finance Authority, Revenue Refunding Bonds (Olin Corporation Project), Series D, 6.75% due 3/01/2016 2,539 NR* NR* 2,500 Illinois Educational Facilities Authority, Revenue Refunding Bonds (Chicago Osteopathic Health System), 7.25% due 11/15/2019 (b) 2,913 NR* Ba3 1,250 Illinois Health Facilities Authority Revenue Bonds (Holy Cross Hospital Project), 6.70% due 3/01/2014 1,049 A1 VMIG1++ 500 Illinois Health Facilities Authority, Revenue Refunding Bonds (University of Chicago Hospitals), VRDN, 1.70% due 8/01/2026 (e)(m) 500 AAA Aaa 8,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue Bonds (McCormick Place Convention Center), 7% due 7/01/2026 (a) 10,032
MuniYield Fund, Inc., April 30, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Kentucky--0.7% BBB Baa2 $ 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 $ 4,200 Louisiana--6.9% BBB Baa3 3,010 Calcasieu Parish, Louisiana, IDB, IDR, Refunding (Olin Corporation Project), 6.625% due 2/01/2016 3,009 A1+ P1 3,930 East Baton Rouge Parish, Louisiana, PCR, Refunding (Exxon Project), VRDN, 1.65% due 3/01/2022 (m) 3,930 BBB Baa2 10,000 Morehouse Parish, Louisiana, PCR, Refunding (International Paper Company Project), Series A, 5.25% due 11/15/2013 10,038 BB- NR* 24,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project), 6.50% due 1/01/2017 23,661 Maryland--1.4% NR* NR* 3,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration-AES Warrior Run), AMT, 7.40% due 9/01/2019 3,094 A Baa1 5,000 Maryland State Health and Higher Educational Facilities Authority, Revenue Refunding Bonds (University of Maryland Medical System), 6% due 7/01/2032 5,118 Massachusetts-- NR* VMIG1++ 1,350 Massachusetts State Health and Educational Facilities 0.4% Authority Revenue Bonds (Capital Asset Program), VRDN, Series E, 1.75% due 1/01/2035 (m) 1,350 A1+ VMIG1++ 1,000 Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds (Capital Asset Program), VRDN, Series C, 1.65% due 7/01/2010 (e)(m) 1,000 Michigan--0.5% AAA Aaa 3,100 Michigan State Hospital Finance Authority, Revenue Refunding Bonds, INFLOS, 10.845% due 2/15/2022 (i)(k) 3,237 Minnesota--0.6% Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling Hills Project), Series A (g): NR* Aaa 420 6% due 8/20/2021 454 NR* Aaa 2,000 6.20% due 2/20/2043 2,191 NR* Aa3 1,000 Minneapolis, Minnesota, M/F Housing Revenue Bonds (Gaar Scott Loft Project), AMT, 5.95% due 5/01/2030 1,030 Mississippi--4.0% BBB Baa2 10,000 Lowndes County, Mississippi, Solid Waste Disposal and PCR, Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 10,953 AA Aa3 11,380 Mississippi State, GO, Capital Improvement, 5.75% due 11/01/2010 (b) 12,821 Missouri--1.2% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds (Gravois Bluffs): NR* NR* 1,765 6.75% due 10/01/2015 1,803 NR* NR* 2,800 7% due 10/01/2021 2,860 AAA NR* 2,445 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds, Homeownership, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 2,595 Nevada--1.0% B+ NR* 7,500 Clark County, Nevada, IDR, Refunding (Nevada Power Company Project), Series C, 5.50% due 10/01/2030 5,698 New Jersey-- NR* NR* 3,000 New Jersey EDA, First Mortgage Revenue Bonds (The 5.3% Presbyterian Home), Series A, 6.375% due 11/01/2031 2,979 NR* NR* 3,300 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village Inc. Facility), Series A, 7.25% due 11/15/2031 3,202 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT: BB- B3 3,905 6.25% due 9/15/2019 3,485 BB- B3 13,775 6.25% due 9/15/2029 11,991 AAA Aaa 4,450 New Jersey EDA, Water Facilities Revenue Bonds (New Jersey American Water Company Inc. Project), AMT, 6.50% due 4/01/2022 (h) 4,551 AAA Aaa 5,130 University of Medicine and Dentistry, New Jersey, Revenue Bonds, Series A, 5.50% due 12/01/2027 (c) 5,335 New York--37.1% AAA Aaa 1,865 Dutchess County, New York, Resource Recovery Agency Revenue Bonds (Solid Waste System), Series A, 5.25% due 1/01/2011 (e) 2,013 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) 7,233 BBB+ A3 11,200 New York City, New York, City IDA, Special Facilities Revenue Bonds (Terminal One Group Association Project), AMT, 6.125% due 1/01/2024 11,443 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds (k): AAA NR* 5,000 DRIVERS, Series 198, 9.56% due 6/15/2026 (e) 5,831 NR* Aaa 3,000 RITR, Series 11, 9.82% due 6/15/2026 (i) 3,708 AA Aa2 25,890 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Refunding Bonds, 5.50% due 6/15/2033 26,409 New York City, New York, City Transitional Finance Authority Revenue Bonds, Future Tax Secured: AA+ Aa2 10,000 Series B, 4.75% due 11/15/2023 9,346 A1+ VMIG1++ 6,400 VRDN, Series C, 1.65% due 5/01/2028 (m) 6,400 New York City, New York, GO, Refunding, Series G: AAA Aaa 2,090 5.75% due 2/01/2014 (e) 2,236 AAA Aaa 2,000 5.75% due 2/01/2014 (h) 2,140 AAA Aaa 10,000 New York City, New York, GO, Refunding, Trust Receipts, Series R, 10.761% due 5/15/2014 (h)(k) 12,835 A Aaa 385 New York City, New York, GO, Series C, Sub-Series C-1, 7.50% due 8/01/2002 (b) 397 AA- NR* 24,000 New York State Dormitory Authority, City University System Revenue Bonds, Consolidated 4th Generation, Series A, 5.25% due 7/01/2031 23,786 New York State Dormitory Authority, State University Educational Facilities Revenue Refunding Bonds, Series 1989 (e): AAA Aaa 7,500 6% due 5/15/2015 8,407 AAA Aaa 3,750 6% due 5/15/2016 4,176 AA+ Aaa 17,575 New York State Environmental Facilities Corporation, PCR, Refunding, RITR, Class R, Series 9, 9.751% due 6/15/2014 (k) 20,200 NR* Baa3 2,475 Onondaga County, New York, IDA Revenue Bonds (Air Cargo), AMT, 6.125% due 1/01/2032 2,438 AAA Aaa 44,500 Port Authority of New York and New Jersey, Consolidated Revenue Refunding Bonds, 125th Series, 5% due 4/15/2032 (i) 43,399
MuniYield Fund, Inc., April 30, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value New York AAA NR* $ 4,360 Port Authority of New York and New Jersey Revenue (concluded) Refunding Bonds, DRIVERS, AMT, Series 177, 10.02% due 10/15/2032 (e)(k) $ 4,937 AAA NR* 20,575 Port Authority of New York and New Jersey, Special Obligation Revenue Bonds, DRIVERS, AMT, Series 192, 9.53% due 12/01/2025 (e)(k) 21,839 North BBB Baa3 4,750 North Carolina Eastern Municipal Power Agency, Power Carolina--1.5% System Revenue Bonds, Series D, 6.75% due 1/01/2026 5,017 AA Aa2 960 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 8-A, 6.20% due 7/01/2016 1,011 AA Aa2 1,590 North Carolina HFA, S/F Revenue Bonds, Series II, 6.20% due 3/01/2016 (d) 1,673 NR* NR* 1,000 North Carolina Medical Care Commission, Health Care Facilities, First Mortgage Revenue Bonds (Arbor Acres Community Project), 6.375% due 3/01/2032 980 Ohio--1.8% Bowling Green State University, Ohio, General Receipt Revenue Bonds (h): AAA Aaa 1,125 5.75% due 6/01/2013 1,239 AAA Aaa 1,040 5.75% due 6/01/2014 1,139 Cuyahoga County, Ohio, Mortgage Revenue Bonds (West Tech Apartments Project), AMT (g): AAA Aaa 1,410 5.75% due 9/20/2020 1,427 NR* Aaa 2,250 5.85% due 9/20/2030 2,273 NR* NR* 2,175 Lucas County, Ohio, Health Care Facility Revenue Refunding and Improvement Bonds (Sunset Retirement Communities), Series A, 6.625% due 8/15/2030 2,238 NR* Aaa 1,120 Mad River, Ohio, Local School District, GO, Refunding (Classroom Facilities), 5.75% due 12/01/2019 (h) 1,209 NR* Aaa 945 Monroe, Ohio, Local School District, School Improvement, GO, Refunding, 5.75% due 12/01/2018 (c) 1,047 Oklahoma--0.9% Holdenville, Oklahoma, Industrial Authority, Correctional Facility Revenue Bonds (b)(j): AAA NR* 1,650 6.60% due 7/01/2006 1,886 AAA NR* 3,250 6.70% due 7/01/2006 3,720 Oregon--3.8% Oregon State Department of Administrative Services, COP, Series A (b)(c): AAA Aaa 4,405 6% due 5/01/2010 5,042 AAA Aaa 3,500 6% due 5/01/2010 4,006 AA Aa2 6,785 Oregon State, GO, Refunding (Veterans Welfare), Series 80A, 5.70% due 10/01/2032 7,049 Portland, Oregon, Housing Authority, Housing Revenue Bonds (Pine Square and University Place): NR* NR* 1,830 Series A, 5.875% due 1/01/2022 1,797 NR* NR* 3,580 Series A, 6% due 1/01/2032 3,504 NR* NR* 1,120 Series B, 5.90% due 1/01/2032 1,100 Pennsylvania-- AAA Aaa 5,000 Lehigh County, Pennsylvania, IDA, PCR, Refunding (Pennsylvania 13.6% Power and Light Company Project), Series B, 6.40% due 9/01/2029 (e) 5,436 AAA Aaa 9,675 Pennsylvania Convention Center, Revenue Refunding Bonds, Series A, 6.70% due 9/01/2014 (e) 10,652 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds (National Gypsum Company), AMT: NR* NR* 18,350 Series A, 6.25% due 11/01/2027 14,136 NR* NR* 8,800 Series B, 6.125% due 11/01/2027 6,665 AA+ Aa2 1,720 Pennsylvania HFA, S/F Mortgage Refunding Bonds, AMT, Series 42, 6.85% due 4/01/2025 1,792 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) 17,223 A1+ NR* 600 Philadelphia, Pennsylvania, Authority for IDR (Fox Chase Cancer Center Project), VRDN, 1.70% due 7/01/2025 (m) 600 Philadelphia, Pennsylvania, Authority for IDR, Refunding, Commercial Development: NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,623 NR* NR* 4,000 (Doubletree), Series A, 6.50% due 10/01/2027 3,970 AAA Aaa 10,965 Philadelphia, Pennsylvania, School District, GO, Series A, 5.50% due 2/01/2031 (i) 11,188 A- NR* 5,000 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds (Guthrie Health Issue), Series B, 1% due 12/01/2031 5,010 Rhode Island-- Woonsocket, Rhode Island, GO (h): 0.5% NR* Aaa 1,225 6% due 10/01/2017 1,354 NR* Aaa 1,195 6% due 10/01/2018 1,314 South AAA Aaa 1,000 Fairfield County, South Carolina, PCR (South Carolina Carolina--0.6% Electric and Gas), 6.50% due 9/01/2014 (e) 1,044 BBB Baa2 2,500 Richland County, South Carolina, PCR, Refunding (Union Camp Corporation Project), Series C, 6.55% due 11/01/2020 2,556 South BBB+ Baa2 900 South Dakota State Health and Educational Facilities Dakota--0.2% Authority, Revenue Refunding Bonds (Prairie Lakes), 7.25% due 4/01/2022 926 Tennessee--0.8% NR* NR* 4,610 Hardeman County, Tennessee, Correctional Facilities Corporation Revenue Bonds, 7.75% due 8/01/2017 4,427 Texas--13.6% Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First Tier, Series A: BBB- Baa3 6,000 6.70% due 1/01/2028 6,041 BBB- Baa3 5,000 6.70% due 1/01/2032 5,034 Bell County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Scott & White Memorial Hospital), VRDN (m): A1+ VMIG1++ 6,900 Series 2001-2, 1.70% due 8/15/2031 6,900 A1+ VMIG1++ 5,500 Series B-2, 1.70% due 8/15/2029 (e) 5,500 Bexar County, Texas, Housing Finance Corporation, M/F Housing Revenue Bonds (Water at Northern Hills Apartments), Series A (e): NR* Aaa 1,300 5.80% due 8/01/2021 1,359 NR* Aaa 2,460 6% due 8/01/2031 2,587 NR* Aaa 1,000 6.05% due 8/01/2036 1,053 Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Good Shepherd Medical Center Project): AA Baa2 3,000 6.875% due 10/01/2020 3,367 AA Baa2 2,000 6.375% due 10/01/2025 2,152 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 5,290
MuniYield Fund, Inc., April 30, 2002 SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Texas A1+ VMIG1++ $ 200 Harris County, Texas, Health Facilities Development (concluded) Corporation, Hospital Revenue Bonds (Texas Children's Hospital), VRDN, Series B-1, 1.70% due 10/01/2029 (e)(m) $ 200 Harris County, Texas, Health Facilities Development Corporation, Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN (m): A1+ NR* 700 1.70% due 12/01/2025 700 A1+ NR* 2,400 1.70% due 12/01/2026 2,400 BB- B3 3,000 Houston, Texas, Airport System, Special Facilities Revenue Bonds (Continental Airlines), AMT, Series E, 6.75% due 7/01/2029 2,723 NR* Baa3 1,600 Houston, Texas, Industrial Development Corporation Revenue Bonds (Air Cargo), AMT, 6.375% due 1/01/2023 1,572 Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT: BBB+ Baa2 6,200 6.375% due 4/01/2027 6,169 BBB- Baa2 6,000 6.95% due 4/01/2030 6,209 NR* Aaa 1,200 Magnolia, Texas, Independent School District, GO, 6.50% due 8/15/2011 1,407 BBB+ Baa2 10,280 Sabine River Authority, Texas, PCR, Refunding (TXU Electric Company Project), Series C, 4% due 5/01/2028 10,322 San Antonio, Texas, Water Revenue Refunding Bonds: AA- Aa3 1,000 5.875% due 5/15/2016 1,078 AA- Aa3 1,000 5.875% due 5/15/2017 1,074 AAA Aaa 7,020 Tyler, Texas, Waterworks and Sewer Revenue Bonds, 5.70% due 9/01/2030 (h) 7,245 Utah--0.3% NR* NR* 1,000 Tooele County, Utah, PCR, Refunding (Laidlaw Environmental), AMT, Series A, 7.55% due 7/01/2027 (n) 0 AAA Aaa 1,545 Utah State Board of Regents, Revenue Refunding Bonds (University of Utah Research Facilities), Series A, 5.50% due 4/01/2018 (e) 1,610 AAA NR* 430 Utah State, HFA, S/F Mortgage Revenue Bonds, AMT, Senior-Series E-2, 7.15% due 7/01/2024 (d) 436 Virginia-- BBB NR* 5,000 Amelia County, Virginia, IDA, Solid Waste Disposal Revenue 2.9% Refunding Bonds (Waste Management Project), AMT, 4.90% due 4/01/2027 5,000 AAA Aaa 5,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding Bonds, AMT, Series A, 6.10% due 2/01/2011 (c) 5,612 NR* NR* 5,200 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds (Port Facility-Zeigler Coal), 6.90% due 5/02/2022 (n) 2,889 NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds, Exempt-Facility, AMT, Series A, 7.55% due 1/01/2019 983 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds: NR* Ba1 6,200 First Tier, Sub-Series C, 6.25%** due 8/15/2031 289 BBB- Baa3 24,800 Senior Series B, 6.67%** due 8/15/2029 2,244 West Virginia-- BB+ Ba2 1,000 Princeton, West Virginia, Hospital Revenue Refunding Bonds 0.7% (Community Hospital Association Inc. Project), 6% due 5/01/2019 827 BBB Baa2 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,145 Wisconsin--0.6% NR* Baa3 700 Milwaukee, Wisconsin, Revenue Bonds (Air Cargo), AMT, 6.50% due 1/01/2025 693 AAA Aaa 2,600 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (e) 2,779 Wyoming--0.4% AA NR* 2,500 Wyoming Student Loan Corporation, Student Loan Revenue Refunding Bonds, Series A, 6.20% due 6/01/2024 2,613 Puerto Puerto Rico Commonwealth, Highway and Transportation Rico--8.6% Authority, Transportation Revenue Bonds: A Baa1 20,000 Series D, 5.75% due 7/01/2041 21,083 AAA Aaa 15,000 Trust Receipts, Class R, Series B, 9.811% due 7/01/2035 (e)(k) 17,309 AAA Aaa 2,500 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R, Series 16 HH, 9.542% due 7/01/2013 (i)(k) 3,182 A- Baa3 8,700 Puerto Rico Public Finance Corporation, Commonwealth Appropriation Revenue Bonds, Series E, 5.75% due 8/01/2030 9,047 Total Investments (Cost--$869,213)--149.0% 879,602 Variation Margin on Financial Futures Contracts***--0.0% (96) Other Assets Less Liabilities--0.7% 3,846 Preferred Stock, at Redemption Value--(49.7%) (293,108) ---------- Net Assets Applicable to Common Stock--100.0% $ 590,244 ========== (a)Escrowed to maturity. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. (i)FSA Insured. (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, 2002. (l)FHLMC Collateralized. (m)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, 2002. (n)Non-income producing security. (o)All or a portion of security held as collateral in connection with open financial futures contracts. *Not Rated. **Represents a zero coupon bond; the interest rate shown reflects the effective yield at the time of purchase by the Fund. ***Financial futures contracts sold as of April 30, 2002 were as follows: Number of Expiration Contracts Issue Date Value 880 US Treasury Notes June 2002 $ 92,895,000 ------------ Total Financial Futures Contracts Sold (Total Contract Price--$92,847,031) $ 92,895,000 ============ ++Highest short-term rating by Moody's Investors Services, Inc. See Notes to Financial Statements.
MuniYield Fund, Inc., April 30, 2002 STATEMENT OF NET ASSETS As of April 30, 2002 Assets: Investments, at value (identified cost--$869,213,112) $879,602,488 Cash 64,652 Receivables: Interest $ 14,734,050 Securities sold 232,905 14,966,955 ------------ Prepaid expenses and other assets 128,835 ------------ Total assets 894,762,930 ------------ Liabilities: Payables: Securities purchased 10,322,475 Dividends to shareholders 618,279 Investment adviser 361,171 Variation margin 96,250 11,398,175 ------------ Accrued expenses 12,606 ------------ Total liabilities 11,410,781 ------------ Preferred Preferred Stock, par value $.05 per share (11,720 shares of AMPS* Stock: issued and outstanding at $25,000 per share liquidation preference) 293,107,976 ------------ Net Assets Net assets applicable to Common Stock $590,244,173 Applicable To ============ Common Stock: Analysis of Common Stock, par value $.10 per share (44,385,228 shares Net Assets issued and outstanding) $ 4,438,523 Applicable to Paid-in capital in excess of par 632,235,352 Common Stock: Undistributed investment income--net 8,211,047 Accumulated realized capital losses on investments--net (64,982,156) Unrealized appreciation on investments--net 10,341,407 ------------ Total--Equivalent to $13.30 net asset value per share of Common Stock (market price--$12.94) $590,244,173 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
STATEMENT OF OPERATIONS For the Six Months Ended April 30, 2002 Investment Interest $ 26,348,951 Income: Expenses: Investment advisory fees $ 2,147,371 Commission fees 365,757 Accounting services 135,170 Transfer agent fees 50,169 Professional fees 42,320 Custodian fees 31,716 Directors' fees and expenses 27,560 Printing and shareholder reports 22,202 Pricing fees 15,875 Listing fees 15,452 Other 35,939 ------------ Total expenses 2,889,531 ------------ Investment income--net 23,459,420 ------------ Realized & Realized gain on investments--net 2,611,420 Unrealized Change in unrealized appreciation/depreciation on investments--net (14,440,274) Gain (Loss) on ------------ Investments-- Total realized and unrealized loss on investments--net (11,828,854) Net: ------------ Dividends to Investment income--net (2,204,333) Preferred Stock ------------ Shareholders: Net Increase in Net Assets Resulting from Operations $ 9,426,233 ============ See Notes to Financial Statements.
MuniYield Fund, Inc., April 30, 2002 STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the Months Ended Year Ended April 30, October 31, Increase (Decrease) in Net Assets: 2002 2001++ Operations: Investment income--net $ 23,459,420 $ 39,687,196 Realized gain (loss) on investments--net 2,611,420 (6,837,621) Change in unrealized appreciation/depreciation on investments--net (14,440,274) 26,701,588 Dividends to Preferred Stock shareholders (2,204,333) (8,333,060) ------------ ------------ Net increase in net assets resulting from operations 9,426,233 51,218,103 ------------ ------------ Dividends to Investment income--net (19,718,850) (33,154,288) Common Stock ------------ ------------ Shareholders: Net decrease in net assets resulting from dividends to Common Stock shareholders (19,718,850) (33,154,288) ------------ ------------ Capital Stock Proceeds from issuance of Common Stock resulting from reorganization 73,652,856 -- Transactions: Value of shares issued to Common Stock shareholders in reinvestment of dividends 2,147,135 5,311,917 ------------ ------------ Net increase in net assets derived from capital stock transactions 75,799,991 5,311,917 ------------ ------------ Net Assets Total increase in net assets applicable to Common Stock 65,507,374 23,375,732 Applicable To Beginning of period 524,736,799 501,361,067 Common Stock: ------------ ------------ End of period* $590,244,173 $524,736,799 ============ ============ *Undistributed investment income--net $ 8,211,047 $ 6,318,376 ============ ============ ++Certain prior year amounts have been reclassified to conform to current year presentation. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios For the have been derived from information Six Months provided in the financial statements. Ended April 30, For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 Per Share Net asset value, beginning of period $ 13.55 $ 13.08 $ 13.21 $ 16.27 $ 16.09 Operating --------- --------- --------- --------- --------- Performance:++++ Investment income--net .53 1.03 1.09 1.12 1.19 Realized and unrealized gain (loss) on investments--net (.27) .52 (.08) (2.34) .49 Dividends and distributions to Preferred Stock shareholders: Investment income--net (.05) (.22) (.27) (.17) (.18) Realized gain on investments--net -- -- -- (.04) (.09) In excess of realized gain on investments--net -- -- -- (.03) -- --------- --------- --------- --------- --------- Total from investment operations .21 1.33 .74 (1.46) 1.41 --------- --------- --------- --------- --------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.46) (.86) (.87) (.95) (.97) Realized gain on investments--net -- -- -- (.38) (.26) In excess of realized gain on investments--net -- -- -- (.27) -- --------- --------- --------- --------- --------- Total dividends and distributions to Common Stock shareholders (.46) (.86) (.87) (1.60) (1.23) --------- --------- --------- --------- --------- Net asset value, end of period $ 13.30 $ 13.55 $ 13.08 $ 13.21 $ 16.27 ========= ========= ========= ========= ========= Market price per share, end of period $ 12.94 $ 13.94 $ 12.625 $ 12.875 $ 16.875 ========= ========= ========= ========= ========= Total Investment Based on market price per share (3.87%)+++ 17.79% 5.26% (15.35%) 14.74% Return:** ========= ========= ========= ========= ========= Based on net asset value per share 1.65%+++ 10.51% 6.28% (9.92%) 9.15% ========= ========= ========= ========= ========= Ratios Based on Total expenses*** 1.01%* 1.01% .99% .93% .89% Average Net ========= ========= ========= ========= ========= Assets of Total investment income--net*** 8.19%* 7.74% 8.35% 7.42% 7.43% Common Stock: ========= ========= ========= ========= ========= Amount of dividends to Preferred Stock shareholders .77%* 1.63% 2.07% 1.11% 1.10% ========= ========= ========= ========= ========= Investment income--net, to Common Stock shareholders 7.42%* 6.11% 6.28% 6.31% 6.33% ========= ========= ========= ========= ========= Ratios Based on Total expenses .67%* .68% .66% .65% .63% Average Net ========= ========= ========= ========= ========= Assets of Total investment income--net 5.46%* 5.20% 5.56% 5.17% 5.26% Common & ========= ========= ========= ========= ========= Preferred Stock:*** Ratios Based on Dividends to Preferred Stock Average Net shareholders 1.54%* 3.33% 4.12% 2.55% 2.66% Assets Of ========= ========= ========= ========= ========= Preferred Stock: Supplemental Net assets, net of Preferred Stock, Data: end of period (in thousands) $ 590,244 $ 524,737 $ 501,361 $ 506,030 $ 611,222 ========= ========= ========= ========= ========= Preferred Stock outstanding, end of period (in thousands) $ 293,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 ========= ========= ========= ========= ========= Portfolio turnover 60.59% 83.26% 103.44% 78.42% 91.63% ========= ========= ========= ========= ========= Leverage: Asset coverage per $1,000 $ 3,014 $ 3,099 $ 3,005 $ 3,024 $ 3,445 ========= ========= ========= ========= ========= Dividends Series A--Investment income--net $ 170 $ 816 $ 1,052 $ 588 $ 694 Per Share on ========= ========= ========= ========= ========= Preferred Series B--Investment income--net $ 208 $ 864 $ 1,009 $ 595 $ 687 Stock ========= ========= ========= ========= ========= Outstanding: Series C--Investment income--net $ 169 $ 847 $ 1,032 $ 687 $ 643 ========= ========= ========= ========= ========= Series D--Investment income--net $ 252 $ 850 $ 1,035 $ 694 $ 637 ========= ========= ========= ========= ========= Series E--Investment income--net $ 179 $ 805 $ 1,038 $ 627 $ 656 ========= ========= ========= ========= ========= Series F--Investment income--net $ 155++ -- -- -- -- ========= ========= ========= ========= ========= *Annualized. **Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Total investment returns exclude the effects of sales charges. ***Do not reflect the effect of dividends to Preferred Stock shareholders. ++Series F was issued on November 19, 2001. ++++Certain prior year amounts have been reclassified to conform to current year presentation. +++Aggregate total investment return. See Notes to Financial Statements.
MuniYield Fund, Inc., April 30, 2002 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 conformity 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-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). Realized gains and losses on security transactions are determined on the identified cost basis. Interest income is recognized on the accrual basis. As required, effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $358,119 addition in cost of securities (which, in turn, results in a corresponding $358,119 decrease in net unrealized appreciation and a corresponding $358,119 increase in undistributed net investment income), based on securities held by the Fund as of August 31, 2001. The effect of this change for the six months ended April 30, 2002 was to increase net investment income by $84,764, decrease net unrealized appreciation by $358,119 and decrease net realized capital gains by $40,810. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. (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. 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. For the six months ended April 30, 2002, the Fund reimbursed FAM $17,633 for certain accounting services. 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, 2002 were $501,743,501 and $508,641,034, respectively. Net realized gains for the six months ended April 30, 2002 and net unrealized gains (losses) as of April 30, 2002 were as follows: Unrealized Realized Gains Gains (Losses) Long-term investments $ 2,020,158 $ 10,389,376 Financial futures contracts 674,341 (47,969) ------------ ------------ Total $ 2,694,499 $ 10,341,407 ============ ============ As of April 30, 2002, net unrealized appreciation for Federal income tax purposes aggregated $10,747,495, of which $33,246,511 related to appreciated securities and $22,499,016 related to depreciated securities. The aggregate cost of investments at April 30, 2002 for Federal income tax purposes was $868,854,993. 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 increased by 5,508,829 as a result of issuance of Common Stock from reorganization and 162,082 as a result of dividend reinvestment during the six months ended April 30, 2002. Shares issued and outstanding increased by 397,213 as a result of dividend reinvestment during the year ended October 31, 2001, respectively. MuniYield Fund, Inc., April 30, 2002 NOTES TO FINANCIAL STATEMENTS (concluded) 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, 2002 were as follows: Series A, 1.419%; Series B, 1.55%; Series C, 1.32%, Series D, 2.00%, Series E, 1.55% and Series F, 1.60%. Shares issued and outstanding during the six months ended April 30, 2002 increased by 1,720 as a result of issuance of Preferred Stock from reorganization and during the year ended October 31, 2001 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, 2002, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $238,634 as commissions. 5. Capital Loss Carryforward: At October 31, 2001, the Fund had a net capital loss carryforward of approximately $53,781,000, of which $6,930,000 expires in 2007, $40,851,000 expires in 2008 and $6,000,000 expires in 2009. This amount will be available to offset like amounts of any future taxable gains. 6. Reorganization Plan: On November 19, 2001, the Fund acquired all of the net assets of Merrill Lynch Municipal Strategy Fund, Inc. pursuant to a plan of reorganization. The acquisition was accomplished by a tax-free exchange of 8,033,912 common shares and 1,720 AMPS shares of Merrill Lynch Municipal Strategy Fund, Inc. for 5,508,829 common shares and 1,720 AMPS shares of the Fund. Merrill Lynch Municipal Strategy Fund, Inc.'s net assets on that date of $116,652,857, including $777,188 of unrealized depreciation and $12,079,786 of accumulated net realized capital losses, were combined with those of the Fund. The aggregate net assets of the Fund immediately after the acquisition amounted to $883,788,181. 7. Subsequent Event: On May 8, 2002, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $.077000 per share, payable on May 30, 2002 to shareholders of record as of May 20, 2002. QUALITY PROFILE The quality ratings of securities in the Fund as of April 30, 2002 were as follows: Percent of S&P Rating/Moody's Rating Total Assets AAA/Aaa 42.0% AA/Aa 12.0 A/A 8.8 BBB/Baa 11.8 BB/Ba 6.0 B/B 0.7 CCC/Caa 0.8 NR (Not Rated) 11.1 Other* 5.0 *Temporary investments in short-term municipal securities. MuniYield Fund, Inc., April 30, 2002 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 Net Assets, which comprises part of the Financial Information included in this report. OFFICERS AND DIRECTORS Terry K. Glenn, President and Director James H. Bodurtha, Director Joe Grills, Director Herbert I. London, Director Andre F. Perold, Director Roberta Cooper Ramo, Director Robert S. Salomon, Jr., Director Melvin R. Seiden, Director Stephen B. Swensrud, Director Kenneth A. Jacob, Senior Vice President John M. Loffredo, Senior Vice President Roberto W. Roffo, Vice President Donald C. Burke, Vice President and Treasurer Alice A. Pellegrino, Secretary Joseph L. May, Director and Vincent R. Giordano, Senior Vice President of MuniYield Fund, Inc., have recently retired. The Fund's Board of Directors wishes Messrs. May and Giordano well in their retirements. 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