N-CSR 1 ml7140.txt MUNIYIELD UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6414 Name of Fund: MuniYield Fund, Inc. Fund Address: P.O. Box 9011 Princeton, NJ 08543-9011 Name and address of agent for service: Terry K. Glenn, President, MuniYield Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011 Registrant's telephone number, including area code: (609) 282-2800 Date of fiscal year end: 10/31/04 Date of reporting period: 11/01/03 - 04/30/04 Item 1 - Report to Stockholders (BULL LOGO) Merrill Lynch Investment Managers www.mlim.ml.com MuniYield Fund, Inc. Semi-Annual Report April 30, 2004 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. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's website at http://www.sec.gov. MuniYield Fund, Inc. Box 9011 Princeton, NJ 08543-9011 (GO PAPERLESS LOGO) It's Fast, Convenient, & Timely! To sign up today, go to www.icsdelivery.com/live. 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, net of dividends to Preferred Stock, is paid to Common Stock shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share net asset value of 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. As of April 30, 2004, the percentage of the Fund's total net assets invested in inverse floaters was 9.41%. Swap Agreements 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, 2004 A Letter From the President Dear Shareholder For the six-month and 12-month periods ended April 30, 2004, the Lehman Brothers Municipal Bond Index posted returns of +1.19% and +2.68%, respectively. Its taxable counterpart, the Lehman Brothers Aggregate Bond Index, had returns of +1.25% and +1.82% for the same periods. Amid considerable month-to-month volatility, tax-exempt bond yields rose over the past year, although not to the same extent as 10-year U.S. Treasury yields. In all, tax-exempt securities continued to be an attractive fixed income investment alternative. As of April month-end, the Federal Reserve Board maintained its accommodative policy stance, although a better-than-expected employment report for the month of March prompted speculation that an interest rate increase could come sooner than many had expected. On April 2, 2004, the good news on the employment front - previously the one dim spot in an otherwise bright economic picture - helped prompt the yield on the 10-year Treasury bond to spike nearly 25 basis points (.25%), from 3.91% to 4.15%. Market watchers continue to monitor the economic data and Federal Reserve Board language for indications of interest rate direction. If economic growth maintains its recent pace and employment figures continue to improve, many believe it is just a matter of time before interest rates move upward. Equity markets, in the meantime, gleaned support from the improving economic environment and provided attractive returns. For the six-month and 12-month periods ended April 30, 2004, the Standard & Poor's 500 Index returned +6.27% and +22.88%, respectively. Significant fiscal and monetary stimulus in 2003, including low interest rates and tax cuts, has opened the door to consumer spending, capital spending, increases in exports and long-awaited job growth. As expected, these developments have led the way to improvements in corporate earnings - a positive for stock markets. The events and efforts of the past year leave us with a much stronger economy today. Of course, markets will always fluctuate, and there are many uncertainties - not the least of which are geopolitical in nature - which can translate into negative market movements. Keeping this in mind, we encourage you to revisit your portfolio and your asset allocation strategy to ensure you are well positioned to take advantage of the opportunities that lie ahead. Importantly, your financial advisor can help you develop a strategy most suitable for your circumstances through all types of market and economic cycles. We thank you for trusting Merrill Lynch Investment Managers with your investment assets, and we look forward to serving you in the months and years ahead. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director MUNIYIELD FUND, INC., APRIL 30, 2004 A Discussion With Your Fund's Portfolio Manager The Fund continued to benefit from an above-average exposure to lower-rated and nonrated bonds, allowing it to outperform its Lipper category average for the period. Describe the market environment relative to municipal bonds during the fiscal year. For much of the six-month period, a positive economic backdrop helped bond prices to move higher as yields, which typically move opposite of prices, declined. In early April, however, a surprisingly strong monthly employment report triggered fears that the long-accommodative Federal Reserve Board might raise interest rates sooner than many had expected. As a result, bond yields rose (prices fell) sharply for the remainder of the period. At the end of April, long-term U.S. Treasury bond yields had climbed to 5.13%, representing an increase of approximately 15 basis points (.15%) over the past six months. Ten-year U.S. Treasury note yields stood at 4.30% as of period-end, an increase of more than 20 basis points. Tax-exempt bond yields generally mimicked the movement of their taxable counterparts, although volatility in the municipal market was more subdued. Long-term revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, rose just four basis points over the past six months. For the same period, yields on AAA-rated issues maturing in 30 years rose approximately 10 basis points to 4.93% while yields on 10-year, AAA-rated issues increased more than 16 basis points to nearly 4%, according to Municipal Market Data. The more marked increase in 10-year bond yields may be attributed to the fact that recent issuance has been heavily concentrated in the 10-year - 20-year range. The resulting supply imbalance prompted higher intermediate bond yields (and lower prices). Longer-maturity and lower-rated issues continued to benefit from more favorable supply/demand factors and, therefore, have seen less price depreciation. For the six-month period as a whole, municipal bond supply declined approximately 5% compared to the same period a year ago. While investor enthusiasm for stocks has taken some attention away from fixed income markets, overall demand for tax-exempt municipal bonds has remained positive. Recent Federal Reserve Board statistics showed that U.S. household holdings of municipal securities increased by more than $25 billion during the fourth quarter of 2003 to approximately $680 billion. In addition, data from the Investment Company Institute indicates that, in just the first three months of 2004, tax-exempt bond funds have seen net new cash flows of almost $640 million. How did the Fund perform during the period? For the six-month period ended April 30, 2004, the Common Stock of MuniYield Fund, Inc. had net annualized yields of 7.01% and 7.70%, based on a period-end per share net asset value of $13.73 and a per share market price of $12.50, respectively, and $.480 per share income dividends. Over the same period, the total investment return on the Fund's Common Stock was +2.71%, based on a change in per share net asset value from $13.85 to $13.73, and assuming reinvestment of $.477 per share ordinary income dividends. The average yields for the Fund's Auction Market Preferred Stock (AMPS) for the six months ended April 30, 2004 were: .84% for Series A; 1.02% for Series B; .85% for Series C; .86% for Series D; .88% for Series E; and .92% for Series F. The Fund's total return, based on net asset value, exceeded that of its comparable Lipper category of General Municipal Debt Funds (Leveraged), which had a return of +2.20% for the same six-month period. (Funds in this Lipper category invest primarily in municipal debt issues rated in the top four credit-rating categories. These funds can be leveraged via use of debt, preferred equity and/or reverse repurchase agreements.) The Fund's outperformance is primarily attributed to our overweight exposure to lower-rated and nonrated bonds, both of which responded well as investors became increasingly comfortable with accepting risk in pursuit of higher yields. The Fund benefited from tightening credit spreads and from the extra income provided by these below investment grade securities. Specific sector concentrations that contributed to Fund results include health care and tax-backed debt - especially corporate-related tax-backed debt, with a focus on such cyclical industries as forest products, chemicals and airlines. MUNIYIELD FUND, INC., APRIL 30, 2004 For a description of the Fund's total investment return based on a change in the per share market value of the Fund's Common Stock (as measured by the trading price of the Fund's shares on the New York Stock Exchange), and assuming reinvestment of dividends, please refer to the Financial Highlights section included in this report. As a closed-end fund, the Fund's shares may trade in the secondary market at a premium or discount to the Fund's net asset value. As a result, total investment returns based on changes in the market value of the Fund's Common Stock can vary significantly from total investment return based on changes in the Fund's net asset value. What changes were made to the portfolio during the period? Our strategy centered on modestly extending the Fund's average portfolio maturity by shifting our focus from higher-quality investments maturing in approximately 15 years to those with maturities in the 20-year - 25-year range. The goal was to capitalize on the relative value and reduced volatility that we have observed in this portion of the yield curve. We also sought to capture relative value in the high yield sector as a means to enhance Fund returns over time. To this end, our investment process was geared toward improving diversification and carefully choosing securities we believed to be fundamentally sound. Specifically, we established new positions or added to existing holdings in the transportation, education and health care sectors, as well as general obligation (GO) bonds. Our GO investments included an increase in exposure to California bonds. The state's recent fiscal problems have afforded us an opportunity to add attractively priced state-backed issues to the Fund's holdings. Our new purchases enabled us to satisfy a larger goal of bringing the Fund's GO weighting in line with the market average. For some time we had underweighted this sector because we had concerns about issuers' deteriorating fiscal health. Recent evidence of a gradual, broad-based increase in tax revenues, however, has caused us to revisit this stance. In terms of leverage, the Fund's borrowing costs remained around 1% throughout most of the six-month period. These attractive funding levels, in combination with the steep municipal yield curve, continued to generate significant income to the Fund's Common Stock shareholders. The Federal Reserve Board appears poised to begin raising short-term interest rates, most likely later in 2004. The increase, however, is expected to be gradual and should not have a material impact on the positive advantage leverage has had on the Fund's Common Stock yield. However, should the spread between short- term and long-term interest rates narrow, the benefits of leveraging will decline and, as a result, reduce the yield on the Fund's Common Stock. At the end of the period, the Fund's leverage amount, due to AMPS, was 32.45% of total assets. (For a more complete explanation of the benefits and risks of leveraging, see page 2 of this report to shareholders.) How would you characterize the portfolio's position at the close of the period? Late in the period, as interest rates rose modestly, we elected to moderate the portfolio's defensive stance and position the Fund more neutrally. We also remained fully invested to enhance investment income for shareholders. Against a backdrop of continuing geopolitical and economic uncertainty, we anticipate significant market volatility ahead. Until some of this uncertainty dissipates, we believe that maintaining the Fund's generally conservative investment strategy remains appropriate. Theodore R. Jaeckel Jr. Vice President and Portfolio Manager May 14, 2004 MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Alabama--0.4% NR* A2 $ 2,500 Huntsville, Alabama, Health Care Authority Revenue Bonds, Series B, 5.75% due 6/01/2032 $ 2,594 Alaska--0.3% NR* Ba1 2,050 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 2,072 Arizona--9.0% Arizona State Transportation Board, Highway Revenue Bonds, Sub-Series A: AA Aa2 5,825 5% due 7/01/2021 6,007 AA Aa2 7,030 5% due 7/01/2022 7,199 AA Aa2 5,240 5% due 7/01/2023 5,336 NR* Baa3 2,300 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools Project 1), SeriesA, 6.75% due 7/01/2029 2,297 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 5,155 AAA NR* 5,000 6.05% due 10/20/2036 5,157 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines Inc. Project), AMT: NR* Caa2 5,800 6.25% due 6/01/2019 4,600 NR* Caa2 6,900 6.30% due 4/01/2023 5,353 Phoenix, Arizona, IDA, M/F Housing Revenue Bonds (Summit Apartments LLC Project) (g): AAA NR* 1,610 6.25% due 7/20/2022 1,682 AAA NR* 1,425 6.45% due 7/20/2032 1,484 AAA NR* 1,305 6.55% due 7/20/2037 1,364 NR* Baa3 1,400 Pima County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools Project II), Series A, 6.75% due 7/01/2031 1,411 Pima County, Arizona, IDA, M/F Housing Revenue Bonds (Columbus Village), Series A (g): AAA NR* 990 5.90% due 10/20/2021 997 AAA NR* 1,725 6% due 10/20/2031 1,738 AAA NR* 2,295 6.05% due 10/20/2041 2,312 NR* Baa2 2,500 Yavapai County, Arizona, IDA, Hospital Facility Revenue Bonds (Yavapai Regional Medical Center), Series A, 6% due 8/01/2033 2,528 California-- AAA Aaa 1,360 Anaheim, California, Union High School District, GO, Series A, 22.8% 5% due 8/01/2022 (i) 1,387 BBB Baa1 8,760 California State, GO, 5% due 2/01/2033 8,324 California State Public Works Board, Lease Revenue Bonds: BBB- Baa2 2,000 (Department of Corrections), Series C, 5% due 6/01/2025 1,907 BBB- Baa2 4,500 (Department of Mental Health--Coalinga State Hospital), Series A, 5.125% due 6/01/2029 4,313 California State, Various Purpose, GO: BBB Baa1 6,800 5.25% due 11/01/2025 6,748 AAA Aaa 10,000 5% due 4/01/2031 (c) 9,854 BBB Baa1 5,550 5.50% due 11/01/2033 5,669 Golden State Tobacco Securitization Corporation of California, Tobacco Settlement Revenue Bonds: BBB Baa3 5,500 Series A-3, 7.875% due 6/01/2042 5,838 BBB Baa3 7,500 Series A-4, 7.80% due 6/01/2042 7,924 BBB- Baa2 5,000 Series B, 5.50% due 6/01/2018 5,135 BBB- Baa2 5,000 Series B, 5.375% due 6/01/2028 4,865 BBB- Aaa 9,520 Series B, 5.50% due 6/01/2043 9,310
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 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 M/F Multi-Family PCR Pollution Control Revenue Bonds RITR Residual Interest Trust Receipts S/F Single-Family VRDN Variable Rate Demand Notes MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value California AAA Aaa $10,000 Los Angeles, California, Community Redevelopment Agency, Community (concluded) Redevelopment Financing Authority Revenue Bonds (Bunker Hill Project), Series A, 5% due 12/01/2027 (i) $ 9,972 AAA Aaa 18,400 Los Angeles, California, Unified School District, GO, Series A, 5% due 7/01/2023 (i) 18,696 AAA Aaa 6,160 Los Angeles, California, Water and Power Revenue Refunding Bonds (Power System), Series A, Sub-Series A-2, 5% due 7/01/2022 (e) 6,278 Los Angeles County, California, Schools Regionalized Business Services, COP, Pooled Financing, Series A (c): AAA Aaa 1,430 5.90%** due 8/01/2019 649 AAA Aaa 2,510 6%** due 8/01/2029 601 AA Aa3 1,250 Sacramento County, California, Sanitation District, Financing Authority, Revenue Refunding Bonds, Trust Receipts, Class R, Series A, 10.56% due 12/01/2019 (k) 1,426 AAA Aaa 5,145 Santa Clara, California, Subordinated Electric Revenue Bonds, Series A, 5% due 7/01/2022 (e) 5,243 AAA Aaa 10,000 University of California Hospital Revenue Bonds (UCLA Medical Center), Series A, 5% due 5/15/2039 (c) 9,783 AAA Aaa 7,465 University of California Revenue Bonds (Multiple Purpose Projects), Series Q, 5% due 9/01/2021 (i) 7,661 University of California, Revenue Refunding Bonds, Series A (c): AAA Aaa 3,000 5.125% due 5/15/2019 3,147 AAA Aaa 2,500 5.125% due 5/15/2020 2,609 BBB+ Aaa 1,675 Vernon, California, Electric System Revenue Bonds (Malburg Generating Station Project), 5.30% due 4/01/2026 1,668 Colorado-- AA Aa2 650 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT, 5.2% Series D-2, 6.90% due 4/01/2029 661 AAA Aaa 8,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D, 7.75% due 11/15/2013 (c) 9,740 NR* Baa2 5,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 5,823 Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee), Series A: NR* NR* 1,735 7.10% due 9/01/2014 1,786 NR* NR* 5,065 7.35% due 9/01/2031 5,212 BB+ Ba1 1,750 Northwest Parkway, Colorado, Public Highway Authority Revenue Bonds, First Tier, Sub-Series D, 7.125% due 6/15/2041 1,804 NR* NR* 6,850 Plaza Metropolitan District No. 1, Colorado, Tax Allocation Revenue Bonds (Public Improvement Fees), 8% due 12/01/2025 6,955 Connecticut-- NR* NR* 600 Connecticut State Development Authority, IDR (AFCO Cargo BDL-LLC 0.1% Project), AMT, 7.35% due 4/01/2010 603 Florida--4.1% NR* NR* 880 Bonnet Creek Resort, Florida, Community Development District, Special Assessment Revenue Bonds, 7.50% due 5/01/2034 923 Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National Gypsum), AMT: NR* NR* 11,500 Series A, 7.125% due 4/01/2030 12,261 NR* NR* 5,000 Series B, 7.125% due 4/01/2030 5,331 AAA Aaa 1,115 Miami-Dade County, Florida, Aviation Revenue Bonds (Miami International Airport), AMT, Series A, 5% due 10/01/2033 (h) 1,088 Saint Lucie County, Florida, Sales Tax Revenue Refunding and Improvement Bonds (e): AAA Aaa 2,140 5.25% due 10/01/2022 2,245 AAA Aaa 500 5.25% due 10/01/2023 521 B- B1 3,000 Santa Rosa Bay Bridge Authority, Florida, Revenue Bonds, 6.25% due 7/01/2028 2,464 Georgia--3.0% AAA Aaa 12,140 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875% due 1/01/2016 (h) 13,455 NR* NR* 4,600 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station Project), 7.90% due 12/01/2024 4,773 Idaho--2.1% AA NR* 635 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT, Senior Series C-2, 7.15% due 7/01/2023 635 BB+ Ba3 12,125 Power County, Idaho, Industrial Development Corporation, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45% due 8/01/2032 12,151
MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Illinois-- NR* B2 $ 795 Beardstown, Illinois, IDR (Jefferson Smurfit Corp. Project), 4.9% 8% due 10/01/2016 $ 826 AAA Aaa 13,200 Chicago, Illinois, O'Hare International Airport Revenue Bonds, 3rd Lien, AMT, Series B-2, 6% due 1/01/2029 (j) 14,233 NR* Aaa 285 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due 9/01/2027 (f)(g)(l) 290 B B1 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2006 (b) 3,099 AAA Aaa 3,285 Illinois Development Finance Authority Revenue Bonds (Presbyterian Home Lake Project), Series B, 6.30% due 9/01/2022 (i) 3,604 NR* NR* 2,500 Illinois Educational Facilities Authority, Revenue Refunding Bonds (Chicago Osteopathic Health System), 7.25% due 11/15/2019 (b) 2,506 NR* B2 1,250 Illinois Health Facilities Authority Revenue Bonds (Holy Cross Hospital Project), 6.70% due 3/01/2014 975 A1 VMIG1++ 10 Illinois Health Facilities Authority, Revenue Refunding Bonds (University of Chicago Hospitals), VRDN, 1.07% due 8/01/2026 (e)(m) 10 AAA Aaa 4,000 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax Revenue Bonds (McCormick Place Expansion), Series A, 5.50% due 6/15/2023 (e) 4,263 Kansas--0.2% BB+ NR* 1,250 Lenexa, Kansas, Health Care Facility Revenue Bonds (Lakeview Village Inc.), Series C, 6.875% due 5/15/2032 1,306 Kentucky--0.7% NR* Baa2 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,091 Louisiana-- B NR* 4,125 Hodge, Louisiana, Utility Revenue Refunding Bonds (Stone Container 3.8% Corporation), AMT, 7.45% due 3/01/2024 4,167 BB- NR* 19,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project), 6.50% due 1/01/2017 19,234 Maryland--1.5% NR* NR* 3,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 3,036 Maryland State Health and Higher Educational Facilities Authority Revenue Bonds (Johns Hopkins University), Series A: AA Aa2 1,250 5% due 7/01/2024 1,268 AA Aa2 1,000 5% due 7/01/2033 1,005 A A3 4,000 Maryland State Health and Higher Educational Facilities Authority, Revenue Refunding Bonds (University of Maryland Medical System), 6% due 7/01/2032 4,189 Michigan-- BBB- NR* 3,325 Macomb County, Michigan, Hospital Finance Authority, Hospital 0.5% Revenue Bonds (Mount Clemens General Hospital), Series B, 5.875% due 11/15/2034 3,058 Minnesota-- Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling Hills 0.6% Project), Series A (g): NR* A1 420 6% due 8/20/2021 455 NR* A1 2,000 6.20% due 2/20/2043 2,145 NR* Aa2 985 Minneapolis, Minnesota, M/F Housing Revenue Bonds (Gaar Scott Loft Project), AMT, 5.95% due 5/01/2030 1,037 Missouri--0.7% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds (Gravois Bluffs): NR* NR* 635 6.75% due 10/01/2015 646 NR* NR* 2,800 7% due 10/01/2021 2,999 AAA NR* 475 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds, Homeownership, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 479 New BBB+ Baa1 3,425 New Hampshire Health and Education Facilities Authority, Revenue Hampshire--0.6% Refunding Bonds (Elliot Hospital), Series B, 5.60% due 10/01/2022 3,430 New Jersey-- NR* NR* 3,000 New Jersey EDA, First Mortgage Revenue Bonds (The Presbyterian Home), 10.7% Series A, 6.375% due 11/01/2031 3,015 NR* NR* 4,400 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village Inc. Facility), Series A, 7.25% due 11/15/2031 4,467 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT: B Caa2 3,905 6.25% due 9/15/2019 3,207 B Caa2 16,195 6.25% due 9/15/2029 12,659 BB+ NR* 3,680 New Jersey Health Care Facilities Financing Authority Revenue Bonds (Pascack Valley Hospital Association), 6.625% due 7/01/2036 3,811 AAA NR* 4,360 Port Authority of New York and New Jersey Revenue Refunding Bonds, DRIVERS, AMT, Series 177, 10.607% due 10/15/2032 (e)(k) 5,063
MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value New Jersey AAA NR* $20,575 Port Authority of New York and New Jersey, Special Obligation (concluded) Revenue Bonds, DRIVERS, AMT, Series 192, 10.106% due 12/01/2025 (e)(k) $ 22,557 BBB Baa3 7,500 Tobacco Settlement Financing Corporation of New Jersey, Asset-Backed Revenue Refunding Bonds, 6% due 6/01/2037 6,370 BBB Baa3 4,500 Tobacco Settlement Financing Corporation of New Jersey Revenue Bonds, 6.75% due 6/01/2039 4,215 New York-- NR* NR* 2,240 Dutchess County, New York, IDA, Civic Facility Revenue Refunding 21.4% Bonds (Saint Francis Hospital), Series A, 7.50% due 3/01/2029 2,174 A- Baa1 2,405 Long Island Power Authority, New York, Electric System Revenue Bonds, Series C, 5% due 9/01/2022 2,410 AAA Aaa 5,595 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Bonds, RITR, Series 9, 6.10% due 7/01/2006 (b)(h)(k) 6,806 New York City, New York, City IDA, Special Facilities Revenue Bonds, AMT: BB- Ba2 1,250 (British Airways PLC Project), 7.625% due 12/01/2032 1,228 BBB+ A3 10,000 (Terminal One Group Association Project), 6.125% due 1/01/2024 10,236 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds (k): AAA NR* 5,000 DRIVERS, Series 198, 10.157% due 6/15/2026 (e) 5,768 AAA Aaa 3,000 RITR, Series 11, 10.30% due 6/15/2026 (i) 3,518 AA Aa2 14,000 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Refunding Bonds, 5.50% due 6/15/2033 14,561 New York City, New York, GO, Refunding, Series G (b): AAA Aaa 2,090 5.75% due 2/01/2014 (e) 2,243 AAA Aaa 2,000 5.75% due 2/01/2014 (h) 2,147 NR* Aaa 10,000 New York City, New York, GO, Refunding, Trust Receipts, Series R, 11.34% due 5/15/2014 (h)(k) 13,149 AA- NR* 6,795 New York State Dormitory Authority, Hospital Revenue Refunding Bonds (North General Hospital), 5.75% due 2/15/2015 7,515 New York State Dormitory Authority, Revenue Refunding Bonds (Mount Sinai Health), Series A: BB Ba1 5,000 6.75% due 7/01/2020 5,128 BB Ba1 315 6.50% due 7/01/2025 318 AA A1 10,000 New York State Urban Development Corporation, Personal Income Tax Revenue Bonds (State Facilities), Series A, 5.50% due 3/15/2032 10,393 NR* NR* 2,500 Suffolk County, New York, IDA, IDR, Refunding (Nissequogue Cogeneration Partners Facility), AMT, 5.50% due 1/01/2023 2,323 Tobacco Settlement Financing Corporation of New York Revenue Bonds: AAA Aaa 13,875 Series A-1, 5.25% due 6/01/2022 (c) 14,350 AA- A3 9,400 Series C-1, 5.50% due 6/01/2021 9,915 A+ A1 10,000 Triborough Bridge and Tunnel Authority, New York, Subordinate Revenue Bonds, 5.25% due 11/15/2030 10,180 Westchester County, New York, IDA, Continuing Care Retirement Mortgage Revenue Bonds (Kendal on Hudson Project), Series A: NR* NR* 3,450 6.375% due 1/01/2024 3,472 NR* NR* 2,895 6.50% due 1/01/2034 2,864 North BBB Baa3 4,750 North Carolina Eastern Municipal Power Agency, Power System Revenue Carolina--1.3% Bonds, Series D, 6.75% due 1/01/2026 5,206 AA Aa2 380 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 8-A, 6.20% due 7/01/2016 398 AA Aa2 1,055 North Carolina HFA, S/F Revenue Bonds, Series II, 6.20% due 3/01/2016 (d) 1,100 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 1,010 Ohio--3.2% Cuyahoga County, Ohio, Mortgage Revenue Bonds (West Tech Apartments Project), AMT (g): NR* Aaa 1,410 5.75% due 9/20/2020 1,473 NR* Aaa 2,250 5.85% due 9/20/2030 2,325 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 2,245 NR* Aaa 5,000 Mason, Ohio, City School District, GO (School Improvement), 5% due 12/01/2031 (i) 5,000 Mason, Ohio, Sewer System Revenue Refunding and Improvement Bonds (e): NR* Aaa 350 4.625% due 12/01/2025 334 NR* Aaa 2,495 5% due 12/01/2028 2,501 NR* Aaa 1,000 Montgomery County, Ohio, Water System Revenue Refunding Bonds (Greater Moraine Beaver), 5.375% due 11/15/2015 (c) 1,085
MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Ohio Port of Greater Cincinnati Development Authority, Ohio, Special (concluded) Assessment Revenue Bonds (Cooperative Public Parking Infrastructure Project): NR* NR* $ 970 6.30% due 2/15/2024 $ 941 NR* NR* 410 6.40% due 2/15/2034 396 Princeton, Ohio, City School District, GO (e): AAA Aaa 1,575 5% due 12/01/2024 1,592 AAA Aaa 1,710 5% due 12/01/2025 1,724 Oregon--2.5% AAA Aaa 7,905 Oregon State Department of Administrative Services, COP, Series A, 6% due 5/01/2010 (b)(c) 9,140 AA- Aa3 4,305 Oregon State, GO, Refunding (Veterans Welfare), Series 80A, 5.70% due 10/01/2032 4,476 NR* NR* 1,830 Portland, Oregon, Housing Authority, Housing Revenue Bonds (Pine Square and University Place), Series A, 5.875% due 1/01/2022 1,753 Pennsylvania-- AAA Aaa 5,000 Lehigh County, Pennsylvania, IDA, PCR, Refunding (Pennsylvania 11.5% Power and Light Company Project), Series B, 6.40% due 9/01/2029 (e) 5,171 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds (National Gypsum Company), AMT: NR* NR* 12,100 Series A, 6.25% due 11/01/2027 12,251 NR* NR* 8,800 Series B, 6.125% due 11/01/2027 8,847 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) 17,490 NR* NR* 1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial Development, 7.75% due 12/01/2017 1,276 Philadelphia, Pennsylvania, Authority for IDR, Refunding, Commercial Development: NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,684 NR* NR* 4,000 (Doubletree), Series A, 6.50% due 10/01/2027 4,038 AAA Aaa 10,965 Philadelphia, Pennsylvania, School District, GO, Series A, 5.50% due 2/01/2031 (i) 11,456 A- NR* 5,000 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds (Guthrie Health Issue), Series B, 1% due 12/01/2031 5,680 Rhode Island-- Woonsocket, Rhode Island, GO (h): 0.5% NR* Aaa 1,225 6% due 10/01/2017 1,394 NR* Aaa 1,195 6% due 10/01/2018 1,362 Tennessee-- NR* NR* 4,610 Hardeman County, Tennessee, Correctional Facilities Corporation 2.4% Revenue Bonds, 7.75% due 8/01/2017 4,788 BB Ba2 10,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 10,060 Texas--18.0% Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First Tier, Series A: BBB- Baa3 5,000 6.70% due 1/01/2028 5,255 BBB- Baa3 5,000 6.70% due 1/01/2032 5,241 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 1,343 NR* Aaa 2,460 6% due 8/01/2031 2,525 NR* Aaa 1,000 6.05% due 8/01/2036 1,027 BBB Baa2 6,850 Brazos River Authority, Texas, PCR, Refunding (Utilities Electric Company), AMT, Series B, 5.05% due 6/01/2030 7,094 BBB- NR* 3,755 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant Energy Inc. Project), Series B, 7.75% due 12/01/2018 4,082 BBB- Baa3 6,230 Dallas-Fort Worth, Texas, International Airport Facility, Improvement Corporation Revenue Bonds (Learjet Inc.), AMT, Series 2001-A-1, 6.15% due 1/01/2016 6,230 CCC Caa2 6,500 Dallas-Fort Worth, Texas, International Airport Facility, Improvement Corporation Revenue Refunding Bonds (American Airlines), AMT, Series B, 6.05% due 5/01/2029 6,159 AAA Aaa 15,000 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, AMT, Series A, 5.50% due 11/01/2033 (e) 15,402 Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Good Shepherd Medical Center Project) (a): AA Baa2 3,000 6.875% due 10/01/2020 3,478 AA Baa2 2,000 6.375% due 10/01/2025 2,205
MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Texas AA- Aa3 $ 5,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste (concluded) Disposal Facility Revenue Bonds (E. I. du Pont de Nemours and Company Project), AMT, 6.40% due 4/01/2026 $ 5,286 BB Ba3 3,900 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 7.50% due 5/01/2025 4,088 NR* Baa3 1,600 Houston, Texas, Industrial Development Corporation Revenue Bonds (Air Cargo), AMT, 6.375% due 1/01/2023 1,608 Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT: A- A3 6,200 6.375% due 4/01/2027 6,641 A- A3 3,330 6.95% due 4/01/2030 3,747 BBB- Ba2 7,030 Matagorda County, Texas, Navigation District Number 1 Revenue Refunding Bonds (Reliant Energy Inc.), Series C, 8% due 5/01/2029 7,624 BB Ba3 3,900 Port Corpus Christi, Texas, Individual Development Corporation, Environmental Facilities Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 8.25% due 11/01/2031 4,061 San Antonio, Texas, Water Revenue Refunding Bonds: AA- Aa3 1,000 5.875% due 5/15/2016 1,119 AA- Aa3 1,000 5.875% due 5/15/2017 1,118 AAA Aaa 6,500 Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First Tier, Series A, 5.50% due 8/15/2039 (c) 6,761 AAA Aaa 7,020 Tyler, Texas, Waterworks and Sewer Revenue Bonds, 5.70% due 9/01/2030 (h) 7,488 Utah--0.3% 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) 1,675 Virginia-- BBB NR* 5,000 Amelia County, Virginia, IDA, Solid Waste Disposal Revenue Refunding 3.4% Bonds (Waste Management Project), VRDN, AMT, 4.90% due 4/01/2027 (m) 5,111 AAA Aaa 5,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding Bonds, AMT, Series A, 6.10% due 2/01/2011 (c) 5,583 NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds, Exempt Facility, AMT, Series A, 7.55% due 1/01/2019 970 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds: NR* B1 6,200 First Tier, Sub-Series C, 6.25%** due 8/15/2031 438 BB Ba2 6,500 Senior Series A, 5.50% due 8/15/2028 5,355 BB Ba2 24,800 Senior Series B, 6.67%** due 8/15/2029 3,546 Washington-- Vancouver, Washington, Housing Authority, Housing Revenue Bonds 0.3% (Teal Pointe Apartments Project), AMT: NR* NR* 945 6% due 9/01/2022 892 NR* NR* 1,250 6.20% due 9/01/2032 1,167 West B- B2 1,000 Princeton, West Virginia, Hospital Revenue Refunding Bonds Virginia--0.6% (Community Hospital Association Inc.Project), 6% due 5/01/2019 763 BBB Baa2 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,185 Wisconsin-- NR* Baa3 700 Milwaukee, Wisconsin, Revenue Bonds (Air Cargo), AMT, 6.50% due 0.3% 1/01/2025 709 AAA Aaa 1,140 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (e) 1,197 Wyoming--0.9% BB+ Ba3 2,550 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, Series A, 7% due 6/01/2024 2,576 AA NR* 2,500 Wyoming Student Loan Corporation, Student Loan Revenue Refunding Bonds, Series A, 6.20% due 6/01/2024 2,656 Puerto Rico-- AAA Aaa 15,000 Puerto Rico Commonwealth, Highway and Transportation Authority, 7.2% Transportation Revenue Bonds, Trust Receipts, Class R, Series B, 10.34% due 7/01/2035 (e)(k) 18,648 A Baa1 16,360 Puerto Rico Commonwealth, Highway and Transportation Authority, Transportation Revenue Refunding Bonds, Series D, 5.75% due 7/01/2041 17,270 AAA Aaa 2,500 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R, Series 16 HH, 10.07% due 7/01/2013 (i)(k) 3,228 AAA NR* 4,350 Puerto Rico Public Finance Corporation Revenue Bonds, DRIVERS, Series 272, 9.975% due 8/01/2030 (k) 4,824 Virgin BBB- Baa3 6,250 Virgin Islands Public Finance Authority, Refinery Facilities Revenue Islands--1.1% Bonds (Hovensa Refinery), AMT, 6.125% due 7/01/2022 6,482 Total Municipal Bonds (Cost--$858,109)--146.1% 891,190
MUNIYIELD FUND, INC., APRIL 30, 2004 Schedule of Investments (concluded) (In Thousands)
Shares Held Short-Term Securities Value 613 Merrill Lynch Institutional Tax-Exempt Fund++++ $ 613 Total Short-Term Securities (Cost--$613)--0.1% 613 Total Investments (Cost--$858,722)--146.2% 891,803 Other Assets Less Liabilities--1.8% 11,037 Preferred Stock, at Redemption Value--(48.0%) (293,000) --------- Net Assets Applicable to Common Stock--100.0% $ 609,840 ========= (a)Radian Insured. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. (i)FSA Insured. (j)XL Capital Insured. (k)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, 2004. (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, 2004. ++Highest short-term rating by Moody's Investors Service, Inc. ++++Investments in companies considered to be an affiliate of the Fund (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) are as follows: (in Thousands) Net Dividend Affiliate Activity Income Merrill Lynch Institutional Tax-Exempt Fund (16,000) $82 *Not Rated. **Represents a zero coupon bond; the interest rate shown reflects the effective yield at the time of purchase by the Fund. See Notes to Financial Statements.
MUNIYIELD FUND, INC., APRIL 30, 2004 Statement of Net Assets
As of April 30, 2004 Assets Investments in unaffiliated securities, at value (identified cost--$858,109,084) $ 891,190,397 Investments in affiliated securities, at value (identified cost--$612,782) 612,782 Cash 43,322 Receivables: Securities sold $ 20,722,608 Interest 17,296,804 Dividends from affiliates 15 38,019,427 --------------- Prepaid expenses 9,449 --------------- Total assets 929,875,377 --------------- Liabilities Payables: Securities purchased 26,012,500 Dividends to Common Stock shareholders 509,249 Investment adviser 435,367 Other affiliates 6,312 26,963,428 --------------- Accrued expenses and other liabilities 71,945 --------------- Total liabilities 27,035,373 --------------- Preferred Stock Preferred Stock, at redemption value, par value $.05 per share (1,800 Series A Shares, 1,800 Series B Shares, 1,800 Series C Shares, 1,800 Series D Shares, 2,800 Series E Shares and 1,720 Series F Shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) 293,000,000 --------------- Net Assets Applicable to Common Stock Net assets applicable to Common Stock $ 609,840,004 =============== Analysis of Net Assets Applicable to Common Stock Common Stock, par value $.10 per share (44,430,631 shares issued and outstanding) $ 4,443,063 Paid-in capital in excess of par 632,818,026 Undistributed investment income--net $ 12,555,461 Accumulated realized capital losses on investments--net (73,057,859) Unrealized appreciation on investments--net 33,081,313 --------------- Total accumulated losses--net (27,421,085) --------------- Total--Equivalent to $13.73 net asset value per share of Common Stock (market price--$12.50) $ 609,840,004 =============== *Auction Market Preferred Stock. See Notes to Financial Statements.
MUNIYIELD FUND, INC., APRIL 30, 2004 Statement of Operations
For the Six Months Ended April 30, 2004 Investment Income Interest $ 26,499,130 Dividends from affiliates 82,456 --------------- Total income 26,581,586 --------------- Expenses Investment advisory fees $ 2,291,512 Commission fees 374,171 Accounting services 131,572 Transfer agent fees 55,311 Professional fees 38,406 Printing and shareholder reports 23,806 Custodian fees 23,298 Listing fees 17,514 Pricing fees 16,218 Directors' fees and expenses 15,595 Other 28,343 --------------- Total expenses before reimbursement 3,015,746 Reimbursement of expenses (19,446) --------------- Total expenses after reimbursement 2,996,300 --------------- Investment income--net 23,585,286 --------------- Realized & Unrealized Loss on Investments--Net Realized loss on investments--net (1,222,485) Change in unrealized appreciation on investments--net (5,193,016) --------------- Total realized and unrealized loss on investments--net (6,415,501) --------------- Dividends to Preferred Stock Shareholders Investment income--net (1,305,007) --------------- Net Increase in Net Assets Resulting from Operations $ 15,864,778 =============== See Notes to Financial Statements.
MUNIYIELD FUND, INC., APRIL 30, 2004 Statements of Changes in Net Assets
For the For the Six Months Year Ended Ended April 30, October 31, Increase (Decrease) in Net Assets: 2004 2003 Operations Investment income--net $ 23,585,286 $ 47,140,570 Realized loss on investments--net (1,222,485) (749,067) Change in unrealized appreciation on investments--net (5,193,016) 23,276,447 Dividends to Preferred Stock shareholders (1,305,007) (3,013,368) --------------- --------------- Net increase in net assets resulting from operations 15,864,778 66,654,582 --------------- --------------- Dividends to Common Stock Shareholders Investment income--net (21,193,411) (41,587,071) --------------- --------------- Net decrease in net assets resulting from dividends to Common Stock shareholders (21,193,411) (41,587,071) --------------- --------------- Net Assets Applicable to Common Stock Total increase (decrease) in net assets applicable to Common Stock (5,328,633) 25,067,511 Beginning of period 615,168,637 590,101,126 --------------- --------------- End of period* $ 609,840,004 $ 615,168,637 =============== =============== *Undistributed investment income--net $ 12,555,461 $ 11,468,593 =============== =============== See Notes to Financial Statements.
MUNIYIELD FUND, INC., APRIL 30, 2004 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: 2004 2003 2002 2001++++ 2000++++ Per Share Operating Performance Net asset value, beginning of period $ 13.85 $ 13.28 $ 13.55 $ 13.08 $ 13.21 ------------ ---------- ---------- ---------- ---------- Investment income--net .53+++ 1.06+++ 1.04 1.03 1.09 Realized and unrealized gain (loss) on investments--net (.14) .52 (.31) .52 (.08) Dividends to Preferred Stock shareholders from investment income--net (.03) (.07) (.08) (.22) (.27) ------------ ---------- ---------- ---------- ---------- Total from investment operations .36 1.51 .65 1.33 .74 ------------ ---------- ---------- ---------- ---------- Less dividends to Common Stock shareholders from investment income--net (.48) (.94) (.92) (.86) (.87) ------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 13.73 $ 13.85 $ 13.28 $ 13.55 $ 13.08 ============ ========== ========== ========== ========== Market price per share, end of period $ 12.50 $ 13.29 $ 12.88 $ 13.94 $ 12.625 ============ ========== ========== ========== ========== Total Investment Return** Based on market price per share (2.55%)+++++ 10.80% (.94%) 17.79% 5.26% ============ ========== ========== ========== ========== Based on net asset value per share 2.71%+++++ 11.99% 5.07% 10.51% 6.28% ============ ========== ========== ========== ========== Ratios Based on Average Net Assets of Common Stock Total expenses, net of reimbursement*** .96%* .99% 1.01% 1.01% .99% ============ ========== ========== ========== ========== Total expenses*** .96%* .99% 1.01% 1.01% .99% ============ ========== ========== ========== ========== Total investment income--net*** 7.54%* 7.86% 7.97% 7.74% 8.35% ============ ========== ========== ========== ========== Amount of dividends to Preferred Stock shareholders .42%* .50% .74% 1.63% 2.07% ============ ========== ========== ========== ========== Investment income--net, to Common Stock shareholders 7.12%* 7.36% 7.23% 6.11% 6.28% ============ ========== ========== ========== ========== Ratios Based on Average Net Assets of Common & Preferred Stock*** Total expenses, net of reimbursement .65%* .66% .67% .68% .66% ============ ========== ========== ========== ========== Total expenses .66%* .66% .67% .68% .66% ============ ========== ========== ========== ========== Total investment income--net 5.14%* 5.27% 5.33% 5.20% 5.56% ============ ========== ========== ========== ==========
MUNIYIELD FUND, INC., APRIL 30, 2004 Financial Highlights (concluded)
For the Six Months Ended The following per share data and ratios have been derived April 30, For the Year Ended October 31, from information provided in the financial statements. 2004 2003 2002 2001++++ 2000++++ Ratios Based on Average Net Assets of Preferred Stock Dividends to Preferred Stock shareholders .89%* 1.02% 1.50% 3.33% 4.12% ============ ========== ========== ========== ========== Supplemental Data Net assets applicable to Common Stock, end of period (in thousands) $ 609,840 $ 615,169 $ 590,101 $ 524,737 $ 501,361 ============ ========== ========== ========== ========== Preferred Stock outstanding, end of period (in thousands) $ 293,000 $ 293,000 $ 293,000 $ 250,000 $ 250,000 ============ ========== ========== ========== ========== Portfolio turnover 13.32% 61.95% 104.63% 83.26% 103.44% ============ ========== ========== ========== ========== Leverage Asset coverage per $1,000 $ 3,081 $ 3,100 $ 3,014 $ 3,099 $ 3,005 ============ ========== ========== ========== ========== Dividends Per Share on Preferred Stock Outstanding Series A--Investment income--net $ 105 $ 256 $ 346 $ 816 $ 1,052 ============ ========== ========== ========== ========== Series B--Investment income--net $ 128 $ 274 $ 369 $ 864 $ 1,009 ============ ========== ========== ========== ========== Series C--Investment income--net $ 105 $ 261 $ 353 $ 847 $ 1,032 ============ ========== ========== ========== ========== Series D--Investment income--net $ 107 $ 281 $ 504 $ 850 $ 1,035 ============ ========== ========== ========== ========== Series E--Investment income--net $ 109 $ 236 $ 346 $ 805 $ 1,038 ============ ========== ========== ========== ========== Series F--Investment income--net $ 114 $ 247 $ 324++ -- -- ============ ========== ========== ========== ========== *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. +++Based on average shares outstanding. +++++Aggregate total investment return. See Notes to Financial Statements.
MUNIYIELD FUND, INC., APRIL 30, 2004 Notes to Financial Statements 1. Significant Accounting Policies: MuniYield Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, 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. Actual results may differ from these 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 last available bid price in the over-the-counter market or on the basis of yield equivalents as obtained by the Fund's pricing service from one or more dealers that make markets in such securities. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their closing prices as of the close of such exchanges. Options written or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued by quoted fair values received daily by the Fund from the counterparty. Short-term investments with a remaining maturity 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 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 both to increase the return of the Fund and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Financial futures contracts--The Fund may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund may purchase and write call and put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). MUNIYIELD FUND, INC., APRIL 30, 2004 Notes to Financial Statements (continued) Written and purchased options are non-income producing investments. * Forward interest rate swaps--The Fund may enter into forward interest rate swaps. In a forward interest rate swap, the Fund and the counterparty agree to make periodic net payments on a specified notional contract amount, commencing on a specified future effective date, unless terminated earlier. When the agreement is closed, the Fund records a realized gain or loss in an amount equal to the value of the agreement. (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. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. The Fund amortizes all premiums and discounts on debt securities. (e) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. 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, 2004, FAM reimbursed the Fund in the amount of $19,446. For the six months ended April 30, 2004, the Fund reimbursed FAM $9,331 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, 2004 were $130,677,008 and $118,712,198, respectively. Net realized gains (losses) for the six months ended April 30, 2004 and net unrealized appreciation as of April 30, 2004 were as follows: Realized Unrealized Gains (Losses) Appreciation Long-term investments $ 633,096 $ 33,081,313 Forward interest rate swaps (1,855,581) -- -------------- -------------- Total $ (1,222,485) $ 33,081,313 ============== ============== As of April 30, 2004, net unrealized appreciation for Federal income tax purposes aggregated $33,495,161, of which $42,657,194 related to appreciated securities and $9,162,033 related to depreciated securities. The aggregate cost of investments at April 30, 2004 for Federal income tax purposes was $858,308,018. 4. Stock Transactions: The Fund is authorized to issue 200,000,000 shares of stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of stock without approval of the holders of Common Stock. MUNIYIELD FUND, INC., APRIL 30, 2004 Notes to Financial Statements (concluded) Preferred Stock Auction Market Preferred Stock are redeemable shares of Preferred Stock of the Fund, with a par value of $.05 per share and a liquidation preference of $25,000 per share, plus accrued and unpaid dividends, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 2004 were as follows: Series A, .97%, Series B, 1.05%, Series C, .83%, Series D, .87%, Series E, .97% and Series F, .97%. 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, 2004, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $135,927 as commissions. 5. Capital Loss Carryforward: On October 31, 2003, the Fund had a net capital loss carryforward of $65,210,507, of which $3,822,310 expires in 2006; $14,347,687 expires in 2007; $40,851,001 expires in 2008; $6,000,235 expires in 2009 and $189,274 expires in 2010. This amount will be available to offset like amounts of any future taxable gains. 6. Subsequent Event: The Fund paid a tax-exempt income dividend to holders of Common Stock in the amount of $.081000 per share on May 27, 2004 to shareholders of record on May 14, 2004. MUNIYIELD FUND, INC., APRIL 30, 2004 Quality Profile The quality ratings of securities in the Fund as of April 30, 2004 were as follows: Percent of Total S&P Rating/Moody's Rating Investments AAA/Aaa 40.8% AA/Aa 8.2 A/A 8.5 BBB/Baa 16.5 BB/Ba 8.6 B/B 3.2 CCC/Caa 1.8 NR (Not Rated) 12.4 Other* --++ *Temporary investments in short-term variable rate municipal securities. ++Holdings are less than 0.1%. 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 stable level of dividend distributions, 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 particular 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. MUNIYIELD FUND, INC., APRIL 30, 2004 Proxy Results
During the six-month period ended April 30, 2004, MuniYield Fund, Inc.'s Common Stock shareholders voted on the following proposal. The proposal was approved at a shareholders' meeting on April 27, 2004. 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: Joe Grills 41,882,206 964,043 Andre F. Perold 41,887,035 959,214 Roberta Cooper Ramo 41,894,596 951,653 Robert S. Salomon, Jr. 41,899,384 946,865 Stephen B. Swensrud 41,848,597 997,652 During the six-month period ended April 30, 2004, 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 27, 2004. 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: James H. Bodurtha, Joe Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo, Robert S. Salomon, Jr. and Stephen B. Swensrud 10,091 48
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 Stephen B. Swensrud, Director Kenneth A. Jacob, Senior Vice President John M. Loffredo, Senior Vice President Theodore R. Jaeckel Jr., Vice President Donald C. Burke, Vice President and Treasurer Phillip S. Gillespie, Secretary Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: The Bank of New York 101 Barclay Street - 7 West New York, NY 10286 NYSE Symbol MYD MUNIYIELD FUND, INC., APRIL 30, 2004 Electronic Delivery The Fund offers electronic delivery of communications to its shareholders. In order to receive this service, you must register your account and provide us with e-mail information. To sign up for this service, simply access this website http://www.icsdelivery.com/live and follow the instructions. When you visit this site, you will obtain a personal identification number (PIN). You will need this PIN should you wish to update your e-mail address, choose to discontinue this service and/or make any other changes to the service. This service is not available for certain retirement accounts at this time. MUNIYIELD FUND, INC., APRIL 30, 2004 Item 2 - Code of Ethics - Not Applicable to this semi-annual report Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual report Item 4 - Principal Accountant Fees and Services - Not Applicable to this semi-annual report Item 5 - Audit Committee of Listed Registrants - Not Applicable to this semi-annual report Item 6 - Schedule of Investments - Not Applicable Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies - Not Applicable to this semi-annual report Item 8 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers - Not Applicable Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable Item 10 - Controls and Procedures 10(a) - The registrant's certifying officers have reasonably designed such disclosure controls and procedures to ensure material information relating to the registrant is made known to us by others particularly during the period in which this report is being prepared. The registrant's certifying officers have determined that the registrant's disclosure controls and procedures are effective based on our evaluation of these controls and procedures as of a date within 90 days prior to the filing date of this report. 10(b) - There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11 - Exhibits attached hereto 11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report 11(a)(2) - Certifications - Attached hereto 11(a)(3) - Not Applicable 11(b) - Certifications - Attached hereto Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MuniYield Fund, Inc. By: _/s/ Terry K. Glenn_______ Terry K. Glenn, President of MuniYield Fund, Inc. Date: June 18, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: _/s/ Terry K. Glenn________ Terry K. Glenn, President of MuniYield Fund, Inc. Date: June 18, 2004 By: _/s/ Donald C. Burke________ Donald C. Burke, Chief Financial Officer of MuniYield Fund, Inc. Date: June 18, 2004