-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NBTb7L1oyE5GNLjRf1addSzgghzQoO+a1sprtDyqmlziFh416FSe6EC/o7sHryLr k843ltJhcWmgXYLMRwvpHA== 0000900092-96-000159.txt : 19960618 0000900092-96-000159.hdr.sgml : 19960618 ACCESSION NUMBER: 0000900092-96-000159 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960617 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIYIELD FUND INC CENTRAL INDEX KEY: 0000879361 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06414 FILM NUMBER: 96582164 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092822800 MAIL ADDRESS: STREET 1: PO BOX 9011 STREET 2: C/O MERRILL LYNCH ASSET MANAGEMENT CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-30D 1 SEMI-ANNUAL REPORT MUNIYIELD FUND, INC. FUND LOGO Semi-Annual report April 30, 1996 Officers and Directors Arthur Zeikel, President and Director James H. Bodurtha, Director Herbert I. London, Director Robert R. Martin, Director Joseph L. May, Director Andre F. Perold, Director Terry K. Glenn, Executive Vice President Vincent R. Giordano, Senior Vice President Donald C. Burke, Vice President Kenneth A. Jacob, Vice President Theodore R. Jaeckel Jr., Vice President Gerald M. Richard, Treasurer Mark B. Goldfus, Secretary Custodian The Bank of New York 90 Washington Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 NYSE Symbol MYD This report, including the financial information herein, is transmitted to the shareholders of MuniYield Fund, Inc. for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in the report. Past performance results shown in this report should not be considered a representation of future performance. The Fund has leveraged its Common Stock by issuing Preferred Stock to provide the Common Stock shareholders with a potentially higher rate of return. Leverage creates risks for Common Stock shareholders, including the likelihood of greater volatility of net asset value and market price of shares of the Common Stock, and the risk that fluctuations in the short-term dividend rates of the Preferred Stock may affect the yield to Common Stock shareholders. Statements and other information herein are as dated and are subject to change. MuniYield Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MuniYield Fund, Inc. DEAR SHAREHOLDER For the six-month period ended April 30, 1996, the Common Stock of MuniYield Fund, Inc. earned $0.519 per share income dividends, which included earned and unpaid dividends of $0.087. This represents a net annualized yield of 6.84%, based on a month-end per share net asset value of $15.22. Over the same period, the total investment return on the Fund's Common Stock was +1.85%, based on a change in per share net asset value from $15.47 to $15.22, and assuming reinvestment of $0.519 per share income dividends. For the six-month period ended April 30, 1996, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 3.93%; Series B, 3.93%; Series C, 3.93%; Series D, 3.37%; and Series E, 3.72%. The Environment Investor perceptions regarding the US economy changed over the course of the six-month period ended April 30, 1996. As 1995 drew to a close and 1996 began, it appeared that the US economy was losing momentum. Lackluster retail sales, increases in initial unemployment claims (along with weak job and income growth), and evidence of slowing in the manufacturing sector all suggested that the rate of economic growth was decelerating, with some forecasters even suggesting the possibility of an imminent recession. However, the consensus outlook for the rate of future economic growth changed dramatically with the report of stronger-than- expected employment data for February and March. As a result, investors began to anticipate renewed economic growth. Long-term interest rates rose, and the Federal Reserve Board left monetary policy on hold. Adding to investor concerns was the report that the Knight Ridder-Commodity Research Bureau Index was near an eight-year high, largely because of an increase in agricultural prices and an upward spike in the price of crude oil. Investors are likely to continue to focus on the probable direction of economic activity and Federal Reserve Board monetary policy in the weeks ahead. At this time, inflationary pressures do not seem to be building and the capital spending, housing and consumption sectors are still relatively weak, which suggest that the economy is not on the verge of overheating. Nevertheless, it is likely that further indications of stronger economic activity in the weeks ahead may add to investor concerns that accelerating economic activity could lead to higher inflation and interest rates. The Municipal Market During the six months ended April 30, 1996, tax-exempt bond yields rose as investors became increasingly concerned that recent economic growth would reignite inflationary pressures. Through early February 1996, municipal bond yields continued their earlier declines supported by continued moderate economic growth and favorable inflationary expectations. As measured by the Bond Buyer Revenue Bond Index, yields on uninsured, A-rated municipal revenue bonds declined an additional 30 basis points (0.30%) to 5.70% by early February. As signs of emerging economic growth became more numerous, particularly with the release of the strong March employment figures, inflation fears increased and bond yields rose in response for the remainder of the six-month period ended April 30, 1996. At April 30, 1996, long-term municipal bond yields were approximately 6.30%, an increase of approximately 30 basis points over the last six months. The rise in US Treasury bond yields was more substantial. Over the last six months, yields on US Treasury securities rose approximately 60 basis points to 6.90%. During the April period, the municipal bond market reversed the trend seen throughout much of 1995 and significantly outperformed the US Treasury bond market. The municipal bond market's recent outperformance was largely the result of two principal factors. First, and perhaps more important, much of the earlier concern regarding proposed changes in Federal income tax codes and their effect on the tax treatment of tax-exempt bond income has dissipated. As the negative revenue impact of the various proposals, such as the flat tax, became apparent, the likelihood of immediate reform quickly diminished. When the Kemp Commission dealing with Federal income tax reform released its findings early in 1996, the obvious need for reform was highlighted. However, no specific recommendations of a flat tax, value-added tax or any other reform were made. Consequently, fears of losing the favored tax treatment of municipal bond income declined even further. As a percentage of Treasury bond yields, tax-exempt bond yield ratios quickly declined from 95% to approximately 90%. This allowed the municipal bond market to maintain much of the gains made since early 1995. The second major factor leading to the municipal bond market's recent improvement was the return of a more favorable technical environment. Over the past six months, approximately $90 billion in municipal securities were underwritten, an increase of approximately 45% versus the comparable period a year earlier. However, much of this increase was biased by recent underwritings dedicated toward refinancing. Like individual homeowners, municipal issuers sought to refinance their existing higher-couponed debt as tax-exempt bond yields declined from their highs in 1995. In recent months such refinancings were estimated to represent at least 50% of total issuance. However, the recent rise in tax-exempt interest rates slowed the pace of such refinancings. Over the last three months approximately $40 billion in long-term tax-exempt securities were underwritten, an increase of 35% compared to the same period a year ago. At current interest rate levels large amounts of refundings are unlikely and the rate of new bond issuance should continue to decline. Additionally, investors continue to receive significant amounts of assets derived from coupon income, bond maturities, and proceeds from early redemptions. In recent months investors received over $30 billion in such assets. These cash flows helped maintain individual retail investor demand in recent months. Additionally, major institutional investors, such as certain insurance companies whose underwriting profits were cyclically high, demonstrated significant ongoing interest in the tax-exempt bond market, particularly on higher-quality securities. Individual and institutional investor demand was strong enough during the six-month period ended April 30, 1996 to absorb the relative increase in bond issuance. Looking ahead, we believe the municipal bond market is likely to continue to outperform the US Treasury market. Investor demand should remain adequate to absorb new bond issuance. It is also unlikely that the rapid pace of issuance seen thus far in 1996 will be maintained. The recent rise in yields made further bond refinancings economically unfeasible. Since these refinancings were the driving force of recent bond issuance, as the amount of these refundings decline, overall issuance should decline. This should allow the current demand/supply balance to be easily maintained in upcoming months. Additionally, as a percentage of US Treasury bond yields, long-term municipal bond yields remain historically attractive. It is likely that recent interest rate increases will have a negative impact on economic growth, perhaps as early as late summer 1996. With long- term mortgage rates above 8%, the domestic housing sector has already indicated signs of slower growth. If other interest rate sectors of the economy, such as the automobile industry, begin to show similar adverse effects, taxable interest rates would be poised to resume their decline. With long-term tax-exempt revenue bonds yielding approximately 90% of their taxable counterparts, municipal bond yields are poised to decline further. Portfolio Strategy During the six-month period ended April 30, 1996, the market volatility experienced throughout most of 1995 continued. Our defensive portfolio strategy earlier in 1996 enabled the Fund to weather the ensuing back up in long-term yields. Contributing to the Fund's outperformance were the insular qualities of its large core portfolio holdings of high-coupon, premium tax-exempt securities. In addition to providing a generous level of tax-exempt income, such bonds tend to retain their value better than most other long-term municipal bonds in a declining market. Despite adverse market conditions, the resiliency of these securities facilitated a fully invested approach that enhanced the Fund's income and shareholder dividends. In recent weeks, our portfolio strategy became more constructive. While evidence of a strengthening economy mounted, long-term interest rates appeared to discount an unlikely increase in inflation. Wage pressures demonstrated few signs of building, while the recent spike in commodity prices should have limited impact on inflation as measured by the Consumer Price Index. In addition, the economy's staying power remained suspect in light of strained consumer balance sheets, reduced capital spending plans, and the contractionary effect of higher interest rates. Long-term, tax- exempt yields appeared attractive at current levels and therefore represented an opportunity to reposition the Fund in anticipation of lower long-term interest rates in upcoming months. A more aggressive restructuring of the portfolio at this juncture also fits very well with our long-term goal of extending the overall call protection of the portfolio. While our efforts toward this goal may prove to be somewhat premature, the economic data points to a more positive bond market environment during the latter half of 1996. Therefore we are comfortable maintaining our current portfolio strategy. In Conclusion We appreciate your ongoing interest in MuniYield Fund, Inc., and we look forward to serving your investment needs in the months and years to come. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Vincent R. Giordano) Vincent R. Giordano Senior Vice President (Theodore R. Jaeckel Jr.) Theodore R. Jaeckel Jr. Vice President and Portfolio Manager June 5, 1996 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 pick-up on the Common Stock will be reduced or eliminated completely. At the same time, the market value on the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. PORTFOLIO ABBREVIATIONS To simplify the listings of MuniYield Fund, Inc.'s portfolio holdings in the Schedule of Investments, we have abbreviated the names of many of the securities according to the list below and at right. AMT Alternative Minimum Tax (subject to) CP Commercial Paper GO General Obligation Bonds HDA Housing Development AuthorityHFAHousing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds M/F Multi-Family PCR Pollution Control Revenue Bonds S/F Single-Family TAN Tax Anticipation Notes UT Unlimited Tax VRDN Variable Rate Demand Notes SCHEDULE OF INVESTMENTS (In Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Alabama--1.2% BBB Baa1 $ 8,750 Courtland, Alabama, IDB, IDR, Refunding (Champion International Corporation), Series A, 7.20% due 12/01/2013 $ 9,510 Alaska--5.2% A+ Aa 12,285 Alaska State Housing Finance Corporation, GO, Series B, 7% due 12/01/2027 12,692 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds: NR* NR* 5,000 (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 4,719 AA- Aa3 8,000 (British Petroleum Pipeline Inc. Project), Series B, 7% due 12/01/2025 8,673 AA- Aa3 5,000 (British Petroleum Pipeline Inc. Project), Series B, 5.50% due 10/01/2028 4,547 AA- Aa3 10,635 (Sohio Pipeline), 7.125% due 12/01/2025 11,481 Arizona--0.4% SP1 MIG1++ 100 Maricopa County, Arizona, TAN, 4.50% due 7/31/1996 100 A A1 3,500 Phoenix, Arizona, Civic Improvement Corporation, Wastewater System, Lease Revenue Refunding Bonds, 4.75% due 7/01/2023 2,897 California--4.7% Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Bonds, Senior Lien, Series A: BBB- Baa 10,000 6.25%** due 1/01/2018 2,319 BBB- Baa 24,250 6.24%** due 1/01/2020 4,880 BBB- Baa 30,245 6.24%** due 1/01/2021 5,687 BBB- Baa 25,000 6.25%** due 1/01/2022 4,393 AAA Aaa 10,000 Los Angeles, California, Convention and Exhibition Center Authority, Lease Revenue Refunding Bonds, Series A, 5.125% due 8/15/2021 (e) 8,774 AAA NR* 5,000 Orange County, California, Community Facilities District, Special Tax No. 88-1 (Aliso Viejo Project), Series A, 7.35% due 8/15/2002 (b) 5,775 AAA Aaa 7,345 San Diego, California, Public Facilities Financing Authority, Sewer Revenue Bonds, 5% due 5/15/2020 (h) 6,450 Colorado--4.7% Denver, Colorado, City and County Airport Revenue Bonds, Series A: NR* NR* 4,900 7.25% due 11/15/2002 (b) 5,594 BBB Baa 14,350 7.25% due 11/15/2025 15,749 BBB Baa 2,000 AMT, 7.50% due 11/15/2023 2,190 Denver, Colorado, City and County Airport Revenue Bonds, Series D, AMT: BBB Baa 8,000 7.75% due 11/15/2013 9,239 BBB Baa 3,310 7.75% due 11/15/2021 3,627 NR* NR* 1,650 Mountain Village, Colorado, Metropolitan District Refunding Bonds (San Miguel County), UT, 7.95% due 12/01/2003 1,808
SCHEDULE OF INVESTMENTS (continued) (In Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Connecticut NR* B1 $ 2,645 New Haven, Connecticut, Facilities Revenue Bonds (Hill - --0.4% Health Corporation Project), 9.25% due 5/01/2017 $ 2,843 District of A1+ VMIG1++ 100 District of Columbia, General Fund Recovery Bonds, Columbia--0.6% VRDN, UT, Series B-3, 4.30% due 6/01/2003 (a) 100 A+ A 4,940 District of Columbia Revenue Bonds (Howard University), Series B, 6.75% due 10/01/2012 5,100 Florida--0.3% AAA Aaa 3,035 Sarasota County, Florida, Utility System Revenue Refunding Bonds, Series A, 5.25% due 10/01/2025 (h) 2,769 Georgia--1.4% NR* NR* 5,680 Atlanta, Georgia, Urban Residential Finance Authority, College Facilities Revenue Bonds (Morris Brown College Project), 9.50% due 6/01/2011 6,726 AAA Aaa 4,200 Municipal Electric Authority, Georgia, Special Obligation Bonds (Fifth Crossover Series, Project One), 6.40% due 1/01/2013 (c) 4,509 Hawaii--0.9% Hawaii State Housing Finance and Development Corporation, S/F Mortgage Purchase Revenue Bonds: A Aa 1,945 AMT, Series A, 7% due 7/01/2011 2,013 A Aa 870 AMT, Series A, 7.10% due 7/01/2024 902 A Aa 3,040 Series B, 6.90% due 7/01/2016 3,171 A Aa 1,110 Series B, 7% due 7/01/2031 1,155 Idaho--0.5% AA NR* 4,075 Idaho Housing Agency, S/F Mortgage, AMT, Senior Series C-2, 7.15% due 7/01/2023 4,237 Illinois--4.4% AAA Aaa 3,000 Chicago, Illinois, Board of Education, School Reform, UT, 6% due 12/01/2016 (e) 2,968 AAA Aaa 17,650 Chicago, Illinois, Refunding, Series B, 5.125% due 1/01/2025 (h) 15,417 BBB Baa2 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2021 3,032 NR* NR* 2,500 Illinois Educational Facilities Authority Revenue Bonds (Chicago Osteopathic Health Systems), 7.25% due 11/15/2019 (b) 2,864 Illinois Health Facilities Authority Revenue Bonds: A A 1,500 (Edward Hospital Association Project), 7% due 2/15/2022 1,548 BBB NR* 2,625 Refunding (Saint Elizabeth's Hospital of Chicago), 7.75% due 7/01/2016 2,814 BBB- NR* 7,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue Bonds (McCormick Place Convention), 7% due 7/01/2026 7,467 Indiana--1.7% NR* A 1,150 Indiana Health Facilities Finance Authority, Hospital Revenue Refunding Bonds (Saint Anthony Medical Center), Series A, 7% due 10/01/2017 1,200 A+ NR* 11,775 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue Refunding Bonds, Series D, 6.75% due 2/01/2020 12,483 Kansas--1.1% AAA Aaa 8,300 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric Company Project), 7% due 6/01/2031 (e) 9,084 Kentucky--1.3% BB+ Baa3 5,785 Kenton County, Kentucky, Airport Board, Special Facilities Airport Revenue Bonds (Delta Airlines Project), AMT, Series A, 7.50% due 2/01/2020 6,149 NR* NR* 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,043 Louisiana--4.8% NR* Baa2 35,000 Lake Charles, Louisiana, Harbor and Terminal District, Port Facilities Revenue Refunding Bonds (Trunkline Company Project), 7.75% due 8/15/2022 38,915
SCHEDULE OF INVESTMENTS (continued) (In Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Maine--1.5% BBB- NR* $11,300 Maine Finance Authority, Solid Waste Disposal Revenue Bonds (Boise Cascade Corporation Project), AMT, 7.90% due 6/01/2015 $ 12,089 Maryland--1.3% NR* NR* 5,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 5,146 NR* Aaa 4,500 Prince Georges County, Maryland, Hospital Revenue Bonds (Dimensions Health Corporation Issue), 7.25% due 7/01/2002 (b) 5,150 Massachusetts A+ A1 3,460 Massachusetts Bay Transportation Authority Revenue Bonds - --1.8% (Massachusetts General Transportation Systems), Series A, 5.75% due 3/01/2025 3,319 BBB+ A 6,030 Massachusetts Municipal Wholesale Electric Company, Power Supply System Revenue Bonds, Series B, 6.75% due 7/01/2017 6,382 AAA Aaa 5,000 Massachusetts State, HFA, Residential Development Bonds, Series C, 6.90% due 11/15/2021 (f) 5,203 Michigan--1.8% Detroit, Michigan, GO, UT, Series A: BBB Ba1 2,500 6.70% due 4/01/2010 2,592 BBB Ba1 1,500 6.80% due 4/01/2015 1,555 AAA Aaa 5,000 Holly, Michigan, Area School District, UT, 5.625% due 5/01/2025 (h) 4,790 AA- A1 5,575 Michigan State Building Authority, Revenue Refunding Bonds, Series I, 6.75% due 10/01/2011 5,959 NR* VMIG1++ 100 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds (Grayling Generating Project), VRDN, AMT, 4.20% due 1/01/2014 (a) 100 Minnesota AA+ A1 10,000 Minnesota State, HFA, Housing Development, Series A, - --2.4% 6.95% due 2/01/2014 10,492 AA+ Aa 3,410 Minnesota State, HFA, S/F Mortgage, AMT, Series A, 7.05% due 7/01/2022 3,517 BBB Baa1 5,700 Sartell, Minnesota, PCR, Refunding (Champion International Corporation), 6.95% due 10/01/2012 6,016 Mississippi A A2 17,750 Lowndes County, Mississippi, Solid Waste Disposal and - --2.4% PCR, Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 19,364 Missouri BBB- NR* 2,885 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding - --0.4% and Improvement Bonds (Tri-State Osteopathic), 8.25% due 12/15/2014 3,041 New Jersey NR* Ba 4,050 Atlantic County, New Jersey, Utilities Authority, Solid - --4.9% Waste Revenue Bonds, 7.125% due 3/01/2016 3,825 AAA Aaa 200 New Jersey Health Care Facilities Financing Authority Revenue Bonds (Carrier Foundation), VRDN, Series C, 4.10% due 7/01/2005 (a)(h) 200 AAA NR* 9,500 New Jersey State Housing and Mortgage Finance Agency, M/F Housing Revenue Refunding Bonds (Presidential Plaza), 7% due 5/01/2030 (d) 9,864 New Jersey State Transportation Trust Fund Authority (Transportation System), Series A (e): AAA Aaa 10,000 5.125% due 12/15/2014 9,238 AAA Aaa 15,000 4.75% due 12/15/2016 12,877 AAA Aaa 5,000 Port Authority of New York and New Jersey, Consolidated Revenue Bonds, 104th Series, 3rd Installment, 4.75% due 1/15/2026 (c) 4,162
SCHEDULE OF INVESTMENTS (continued) (In Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) New Mexico Farmington, New Mexico, PCR, Refunding, Series A: - --2.5% BB Ba2 $15,000 (Public Service Company, San Juan Project), 6.40% due 8/15/2023 $ 14,398 A+ A2 5,850 (Southern California Edison Company), 7.20% due 4/01/2021 6,357 New York AAA Aaa 8,645 Battery Park City Authority, New York, Revenue Refunding - --19.8% Bonds, Senior Series A, 5% due 11/01/2013 (e) 7,900 New York City, New York, GO, UT: BBB+ Baa1 2,740 Series A, 7.75% due 8/15/2001 (b) 3,164 BBB+ Baa1 2,000 Series A, 7.75% due 8/15/2008 2,206 BBB+ Baa1 4,600 Series A, 7.75% due 8/15/2012 5,056 BBB+ Baa1 2,260 Series A, 7.75% due 8/15/2016 2,509 BBB+ Baa1 4,500 Series B, 7% due 6/01/2016 4,659 BBB+ Baa1 15,000 Series B, Fiscal 92, 7.75% due 2/01/2010 16,504 BBB+ Baa1 1,555 Series B, Fiscal 92, 7.75% due 2/01/2013 1,711 BBB+ Baa1 6,400 Series B, Sub-Series B-1, 7% due 8/15/2016 6,694 BBB+ Baa1 5,000 Series C, Sub-Series C-1, 7.50% due 8/01/2021 5,479 BBB+ Baa1 8,500 Series G, 5.75% due 2/01/2014 7,909 New York State Dormitory Authority Revenue Bonds: BBB Baa1 3,550 (City University System, Consolidated), Series A, 5.625% due 7/01/2016 3,324 BBB+ Baa1 10,000 (Court Facilities Lease), Series A, 5.70% due 5/15/2022 9,165 BBB+ Baa1 5,870 (Mental Health Services Facilities Improvement), Series B, 5.375% due 2/15/2026 5,122 BBB+ Baa1 20,000 (State University Educational Facilities), Series B, 5.75% due 5/15/2024 18,437 A Aa 24,400 New York State Environmental Facilities Corporation, PCR (State Water, Revolving Fund), Series E, 6.875% due 6/15/2010 26,572 New York State Local Government Assistance Corporation Revenue Bonds: A A 5,000 Series A, 6.50% due 4/01/2020 5,125 AAA Aaa 5,000 Series D, 7% due 4/01/2002 (b) 5,656 A A 5,000 Series D, 5% due 4/01/2023 4,283 AAA Aaa 12,175 New York State Medical Care Facilities, Finance Agency Revenue Refunding Bonds (Mental Health Services), Series F, 5.25% due 2/15/2019 (h) 10,992 BBB Baa1 10,000 New York State Urban Development Corporation, Revenue Refunding Bonds (Correctional Capital Facilities), Series A, 5.25% due 1/01/2021 8,615 North A A2 10,000 Martin County, North Carolina, Industrial Facilities Carolina--3.9% and Pollution Control Financing Authority, Solid Waste Revenue Bonds(Weyerhaeuser Company Project), AMT, 6% due 11/01/2025 9,669 North Carolina HFA, S/F Revenue Bonds: A+ Aa 5,385 AMT, Series T, 7.05% due 9/01/2020 5,591 A+ Aa 15,520 Refunding, Series S, 6.95% due 3/01/2017 16,271 North A+ Aa 3,945 North Dakota State, HFA, S/F Mortgage Revenue Bonds, Dakota--0.5% Series A, 7% due 7/01/2023 4,098 Ohio--1.3% NR* Ba1 3,600 Hilliard Ohio, IDR, Refunding (Kroger Co.), 8.10% due 7/01/2012 3,957 NR* Ba1 3,600 Lucas County, Ohio, IDR, Refunding (Kroger Co.), 8.50% due 7/01/2011 3,980 BBB Baa1 2,000 Montgomery County, Ohio, Health Systems Revenue Bonds (Franciscan Sisters of the Poor), Series B-1, 8.10% due 7/01/2018 2,213
SCHEDULE OF INVESTMENTS (continued) (In Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Pennsylvania BB Ba2 $ 2,500 Beaver County, Pennsylvania, IDA, PCR, Refunding - --3.4% (Cleveland Electric Co. Project), 7.625% due 5/01/2025 $ 2,551 Pennsylvania Convention Center Authority, Revenue Refunding Bonds, Series A: BBB- Baa 9,675 6.70% due 9/01/2014 10,144 BBB- Baa 5,000 6.75% due 9/01/2019 5,262 AA Aa 10,000 Pennsylvania State Higher Educational Facilities Authority, Health Services Revenue Refunding Bonds (University of Pennsylvania), Series A, 5.75% due 1/01/2022 9,536 South A- A1 2,500 Richland County, South Carolina, PCR, Refunding (Union Carolina--0.3% Camp Corporation Project), Series C, 6.55% due 11/01/2020 2,591 South Dakota BBB Baa 2,500 South Dakota State Health and Educational Facilities Authority, - --0.3% Revenue Refunding Bonds (Prairie Lakes Health Care), 7.25% due 4/01/2022 2,589 Tennessee NR* NR* 1,630 Knox County, Tennessee, Health, Educational, and Housing - --0.2% Facilities Board, Hospital Facilities Revenue Bonds (Baptist Health Systems of East Tennessee), 8.50% due 4/15/2004 1,733 Texas--8.5% BBB Baa2 9,250 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue Bonds (Federal Express Corporation Project), AMT, 6.375% due 4/01/2021 9,091 A1+ VMIG1++ 300 Brazos River Authority, Texas, PCR (Texas Utilities Electric Company), VRDN, AMT, Series A, 4.25% due 6/01/2030 (a) 300 A- A 3,800 Ector County, Texas, Hospital District, Hospital Revenue Bonds (Medical Center Hospital), 7.30% due 4/15/2012 4,172 AA- Aa3 5,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste Disposal Facilities Revenue Bonds (du Pont (E.I.) de Nemours and Co. Project), AMT, 6.40% due 4/01/2026 5,074 NR* VMIG1++ 1,100 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo Petroleum Corp. Project), VRDN, AMT, 4.30% due 5/01/2025 (a) 1,100 BBB Baa1 8,400 Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds (Champion International Corporation), AMT, 7.45% due 5/01/2026 9,005 AA Aa 10,000 Harris County, Texas, Toll Road Sub-Lien, Revenue Refunding Bonds, UT, 6.75% due 8/01/2014 10,732 BB Ba 5,000 Odessa, Texas, Junior College District, Revenue Refunding Bonds, Series A, 8.125% due 12/01/2018 5,323 A+ A2 5,000 Port Corpus Christi Authority, Texas, Nueces County, PCR (Hoechst Celanese Corporation Project), AMT, 6.875% due 4/01/2017 5,265 A+ A2 5,000 Red River Authority, Texas, PCR (Hoechst Celanese Corporation Project), AMT, 6.875% due 4/01/2017 5,265 AAA Aaa 9,250 Texas State Municipal Power Agency, Revenue Refunding Bonds, 6.25%** due 9/01/2016 (e) 2,693 AAA Aa1 7,650 Texas Water Development Board Revenue Bonds (State Revolving), Senior Lien, Series A, 5.25% due 7/15/2017 7,069 Travis County, Texas, Housing Finance Corporation, Residential Mortgage Revenue Refunding Bonds, Series A (f)(g): AAA NR* 905 7% due 12/01/2011 940 AAA NR* 2,805 7.05% due 12/01/2025 2,926 A1 VMIG1++ 200 Trinity River Authority, Texas, PCR (Texas Utilities--Electric), VRDN, AMT, Series 96A, 4.25% due 3/01/2026 (a)(c) 200
SCHEDULE OF INVESTMENTS (concluded) (In Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Utah--1.3% BBB+ Baa2 $ 3,300 Carbon County, Utah, Solid Waste Disposal Revenue Refunding Bonds (Laidlaw Inc.--ECDC Project), AMT, Series A, 7.50% due 2/01/2010 $ 3,601 AA- Aa 5,200 Intermountain Power Agency, Utah, Power Supply Revenue Refunding Bonds, Series D, 5% due 7/01/2021 4,490 AA NR* 2,055 Utah State, HFA, S/F Mortgage Revenue Bonds, AMT, Insured Series E-2, 7.15% due 7/01/2024 2,122 Vermont--0.4% AA NR* 3,585 Vermont Educational and Health Buildings Financing Agency Revenue Bonds (Middlebury College Project), 6% due 11/01/2022 3,538 Virginia--1.0% AA+ Aa1 8,125 Virginia State, HDA, Commonwealth Mortgage, Series A, 7.10% due 1/01/2025 8,539 Washington Washington State Public Power Supply System, Revenue - --2.5% Refunding Bonds: AA Aa 9,235 (Nuclear Project No. 1), Series A, 7% due 7/01/2011 9,806 AA Aa 5,000 (Nuclear Project No. 1), Series A, 6.875% due 7/01/2017 5,281 AA Aa 5,000 (Nuclear Project No. 2), Series B, 7% due 7/01/2012 5,311 West Virginia BBB+ A3 7,500 Mason County, West Virginia, PCR, Refunding (Appalachian - --1.4% Power Company Project), Series I, 6.85% due 6/01/2022 7,986 NR* NR* 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,034 Wisconsin--0.3% NR* A 2,710 Wisconsin State Health and Educational Facilities Authority Revenue Bonds (Mercy Hospital of Janesville Incorporated), 6.60% due 8/15/2022 2,763 Total Investments (Cost--$765,344)--97.7% 795,142 Other Assets Less Liabilities--2.3% 19,052 -------- Net Assets--100.0% $814,194 ======== (a)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 1996. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. *Not Rated. **Represents a zero coupon bond; the interest rate shown is the effective yield at the time of purchase by the Fund. ++Highest short-term rating by Moody's Investors Service, Inc. See Notes to Financial Statements.
FINANCIAL INFORMATION Statement of Assets, Liabilities and Capital as of April 30, 1996 Assets: Investments, at value (identified cost--$765,343,948) (Note 1a) $795,141,758 Receivables: Securities sold $ 14,938,826 Interest 14,469,756 29,408,582 ------------ Deferred organization expenses (Note 1e) 11,698 Prepaid expenses and other assets 23,058 ------------ Total assets 824,585,096 ------------ Liabilities: Payables: Custodian bank (Note 1g) 5,332,281 Securities purchased 3,353,130 Dividends to shareholders (Note 1f) 1,226,584 Investment adviser (Note 2) 357,677 10,269,672 ------------ Accrued expenses and other liabilities 121,846 ------------ Total liabilities 10,391,518 ------------ Net Assets: Net assets $814,193,578 ============ Capital: Capital Stock (200,000,000 shares authorized) (Note 4): Preferred Stock, par value $.10 per share (10,000 shares of AMPS*issued and outstanding at $25,000 per share liquidation preference) $250,000,000 Common Stock, par value $.10 per share (37,061,414 shares issued and outstanding) $ 3,706,141 Paid-in capital in excess of par 519,009,869 Undistributed investment income--net 7,076,125 Undistributed realized capital gains on investments--net 4,603,633 Unrealized appreciation on investments--net 29,797,810 ------------ Total--Equivalent to $15.22 net asset value per share of Common Stock (market price--$15.00) 564,193,578 ------------ Total capital $814,193,578 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations
For the Six Months Ended April 30, 1996 Investment Income Interest and amortization of premium and discount earned $ 25,953,301 (Note 1d): Expenses: Investment advisory fees (Note 2) $ 2,065,089 Commission fees (Note 4) 319,810 Transfer agent fees 65,409 Accounting services (Note 2) 50,280 Professional fees 42,197 Custodian fees 28,679 Printing and shareholder reports 27,318 Directors' fees and expenses 22,817 Listing fees 16,209 Pricing fees 9,431 Amortization of organization expenses (Note 1e) 5,392 Other 17,669 ------------ Total expenses 2,670,300 ------------ Investment income--net 23,283,001 ------------ Realized & Realized gain on investments--net 14,216,598 Unrealized Gain Change in unrealized appreciation on investments--net (22,789,993) (Loss) on ------------ Investments--Net Net Increase in Net Assets Resulting from Operations $ 14,709,606 (Notes 1b, 1d & 3): ============ See Notes to Financial Statements.
Statements of Changes in Net Assets
For the Six For the Months Ended Year Ended April 30, October 31, Increase (Decrease) in Net Assets: 1996 1995 Operations: Investment income--net $ 23,283,001 $ 47,009,858 Realized gain (loss) on investments--net 14,216,598 (9,612,893) Change in unrealized appreciation/depreciation on investments--net (22,789,993) 59,252,744 ------------ ------------ Net increase in net assets resulting from operations 14,709,606 96,649,709 ------------ ------------ Dividends & Investment income--net: Distributions to Common Stock (19,219,308) (37,084,429) Shareholders Preferred Stock (4,696,822) (8,354,970) (Note 1f): Realized gain on investments--net: Common Stock -- (8,130,978) Preferred Stock -- (1,336,651) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (23,916,130) (54,907,028) ------------ ------------ Net Assets: Total increase (decrease) in net assets (9,206,524) 41,742,681 Beginning of period 823,400,102 781,657,421 ------------ ------------ End of period* $814,193,578 $823,400,102 ============ ============ *Undistributed investment income--net $ 7,076,125 $ 7,709,254 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlights
For the For the Period The following per share data and ratios have been derived Six Months Nov. 29, from information provided in the financial statements. Ended 1991++ to April 30, For the Year Ended October 31, Oct. 31, Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992 Per Share Net asset value, beginning of period $ 15.47 $ 14.35 $ 16.80 $ 14.69 $ 14.18 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .63 1.27 1.29 1.31 1.18 Realized and unrealized gain (loss) on investments--net (.23) 1.34 (2.23) 2.27 .57 -------- -------- -------- -------- -------- Total from investment operations .40 2.61 (.94) 3.58 1.75 -------- -------- -------- -------- -------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.52) (1.00) (1.07) (1.11) (.89) Realized gain on investments--net -- (.22) (.23) (.16) -- -------- -------- -------- -------- -------- Total dividends and distributions to Common Stock shareholders (.52) (1.22) (1.30) (1.27) (.89) -------- -------- -------- -------- -------- Capital charge resulting from issuance of Common Stock -- -- -- -- (.02) -------- -------- -------- -------- -------- Effect of Preferred Stock activity:++++ Dividends and distributions to Preferred Stock shareholders: Investment income--net (.13) (.23) (.18) (.17) (.19) Realized gain on investments--net -- (.04) (.03) (.03) -- Capital charge resulting from issuance of Preferred Stock -- -- -- -- (.14) -------- -------- -------- -------- -------- Total effect of Preferred Stock activity (.13) (.27) (.21) (.20) (.33) -------- -------- -------- -------- -------- Net asset value, end of period $ 15.22 $ 15.47 $ 14.35 $ 16.80 $ 14.69 ======== ======== ======== ======== ======== Market price per share, end of period $ 15.00 $ 14.375 $ 12.125 $ 16.75 $ 15.125 ======== ======== ======== ======== ======== Total Investment Based on market price per share 8.02%+++ 29.76% (20.94%) 19.91% 7.06%+++ Return:** ======== ======== ======== ======== ======== Based on net asset value per share 1.85%+++ 18.00% (6.71%) 23.83% 9.99%+++ ======== ======== ======== ======== ======== Ratios to Average Expenses, net of reimbursement .64%* .66% .66% .64% .58%* Net Assets:*** ======== ======== ======== ======== ======== Expenses .64%* .66% .66% .64% .65%* ======== ======== ======== ======== ======== Investment income--net 5.62%* 5.91% 5.76% 5.72% 6.08%* ======== ======== ======== ======== ======== Supplemental Net assets, net of Preferred Stock, end of Data: period(in thousands) $564,194 $573,400 $531,657 $619,775 $526,287 ======== ======== ======== ======== ======== Preferred Stock outstanding, end of period (in thousands) $250,000 $250,000 $250,000 $250,000 $250,000 ======== ======== ======== ======== ======== Portfolio turnover 57.57% 52.99% 44.27% 25.58% 66.45% ======== ======== ======== ======== ======== Leverage: Asset coverage per $1,000 $ 3,257 $ 3,294 $ 3,127 $ 3,479 $ 3,105 ======== ======== ======== ======== ======== Dividends Per Series A--Investment income--net $ 490 $ 887 $ 598 $ 560 $ 680 Share on ======== ======== ======== ======== ======== Preferred Stock Series B--Investment income--net $ 490 $ 850 $ 733 $ 554 $ 690 Outstanding:++++++ ======== ======== ======== ======== ======== Series C--Investment income--net $ 490 $ 827 $ 647 $ 566 $ 685 ======== ======== ======== ======== ======== Series D--Investment income--net $ 420 $ 897 $ 659 $ 556 $ 688 ======== ======== ======== ======== ======== Series E--Investment income--net $ 463 $ 759 $ 707 $ 542 $ 688 ======== ======== ======== ======== ======== *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 loads. ***Do not reflect the effect of dividends to Preferred Stock shareholders. ++Commencement of Operations. ++++The Fund's Preferred Stock was issued on December 23, 1991. ++++++Dividends per share have been adjusted to reflect a two-for- one stock split that occurred on December 1, 1994. +++Aggregate total investment return. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: MuniYield Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non-diversified, closed-end management investment company. 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. 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, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges or, lacking any sales, at the last available bid price. Securities with remaining maturities of sixty days or less are valued at amortized cost, which approximates market value. Securities 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 strategies to seek to increase its return by hedging its portfolio against adverse movements in the debt 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 interest rate futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Interest income is recognized on the accrual basis. Discounts and market premiums are amortized into interest income. Realized gains and losses on security transactions are determined on the identified cost basis. (e) Deferred organization expenses--Deferred organization expenses are amortized on a straight-line basis over a five-year period. (f) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. (g) Custodian bank--The Fund recorded an amount payable to the Custodian Bank reflecting an overnight overdraft resulting from a failed trade which settled the next day. 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 0.50% of the Fund's average weekly net assets. Accounting services are provided to the Fund by FAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended April 30, 1996 were $465,479,318 and $466,791,983, respectively. Net realized and unrealized gains (losses) as of April 30, 1996 were as follows: Unrealized Realized Gains Gains (Losses) Long-term investments $12,585,336 $29,797,844 Short-term investments -- (34) Financial futures contracts 1,631,262 -- ----------- ----------- Total $14,216,598 $29,797,810 =========== =========== As of April 30, 1996, net unrealized appreciation for Federal income tax purposes aggregated $29,797,810, of which $37,608,948 related to appreciated securities and $7,811,138 related to depreciated securities. The aggregate cost of investments at April 30, 1996 for Federal income tax purposes was $765,343,948. 4. Capital Stock Transactions: The Fund is authorized to issue 200,000,000 shares of capital stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of capital stock without approval of the holders of Common Stock. Common Stock For the six months ended April 30, 1996, shares issued and outstanding remained constant at 37,061,414. At April 30, 1996, total paid-in capital amounted to $522,716,010. Preferred Stock Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the Fund that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 1996 were as follows: Series A, 3.74%; Series B, 3.446%; Series C, 3.76%; Series D, 3.56%; and Series E, 3.75%. As of April 30, 1996, there were 10,000 AMPS shares authorized, issued and outstanding with a liquidation preference of $25,000 per share, plus accumulated and unpaid dividends of $126,170. The Fund pays commissions to certain broker-dealers at the end of each auction at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of each auction. For the six months ended April 30, 1996, MLPF&S, an affiliate of FAM, earned $189,794 as commissions. 5. Subsequent Event: On May 10, 1996, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $0.086581 per share, payable on May 30, 1996 to shareholders of record as of May 21, 1996. -----END PRIVACY-ENHANCED MESSAGE-----