-----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, MXnhO8Ppjiuf41ewsB1Gg4i/YtTrSPCpSI5HWuqTnb9qfgu8kdxRlVg1w0fIybL8 C8xIU2p1Ti3h2wIlN5rK2Q== 0000900092-96-000332.txt : 19961219 0000900092-96-000332.hdr.sgml : 19961219 ACCESSION NUMBER: 0000900092-96-000332 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961218 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: 96682742 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 ANNUAL REPORT MUNIYIELD FUND, INC. FUND LOGO Annual Report October 31, 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 year ended October 31, 1996, the Common Stock of MuniYield Fund, Inc. earned $1.036 per share income dividends, which included earned and unpaid dividends of $0.085. This represents a net annualized yield of 6.61%, based on a month-end per share net asset value of $15.68. Over the same period, the total investment return on the Fund's Common Stock was +8.61%, based on a change in per share net asset value from $15.47 to $15.68, and assuming reinvestment of $1.037 per share income dividends. For the six-month period ended October 31, 1996, the total investment return on the Fund's Common Stock was +6.64%, based on a change in per share net asset value from $15.22 to $15.68, and assuming reinvestment of $0.518 per share income dividends. For the six-month period ended October 31, 1996, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 3.21%; Series B, 3.23%; Series C, 4.03%; Series D, 3.72%; and Series E, 3.27%. The Municipal Market Environment Municipal bond yields generally moved lower during the six-month period ended October 31, 1996. Long-term tax-exempt revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, declined approximately 35 basis points (0.35%) to end the October period at approximately 5.94%. The municipal bond market exhibited considerable weekly yield volatility over the last six months with bond yields vacillating as much as 20 basis points. This ongoing volatility was in response to fluctuating evidence regarding the degree to which recent economic growth will result in any significant increase in inflationary pressures. Much of the evidence supporting stronger growth centered around the strong employment growth seen in April and June and bond yields rose in response. Other, more recent, economic indicators suggested that economic growth will not be excessive and inflationary pressures will remain well-contained. This continued benign inflationary environment supported lower tax-exempt bond yields in recent months. US Treasury bond yields exhibited similar, albeit greater, volatility during the period falling over 20 basis points to end the period at 6.64%. Over the past six months, tax-exempt bond yields registered significantly greater declines than shown by the US Treasury bond market. This relative outperformance by the municipal bond market was largely the result of the strong technical support the tax-exempt market enjoyed throughout most of 1996. Perhaps most significantly, the pace of new bond issuance recently slowed. Over the last year, approximately $180 billion in long-term municipal securities was issued, an increase of over 25% compared to the same period a year ago. Much of this increase was the result of issuers seeking to refinance their existing higher-couponed debt as interest rates declined in 1995 and early 1996. As interest rates rose, these financings became increasingly economically impractical, and issuance declined. Over the last six months, approximately $90 billion in long-term, tax-exempt securities was underwritten, an increase of 5% versus the comparable period a year earlier. Only $41 billion in tax-exempt securities was issued in the last three months, a 3% decline in issuance versus the October 31, 1995 quarter. At the same time, investor demand remained consistently strong. With nominal new-issue yields generally above 6%, retail investor interest was steady. Additionally, investors received over $50 billion this June and July in assets derived from coupon income, bond maturities, and proceeds from early redemptions. Annual new bond issuance declined in recent years and is expected to remain below levels seen in the early 1990s. Consequently, as the higher- couponed bonds issued in the early-to-mid 1980s were redeemed at their first optional call dates, the total number of outstanding tax- exempt bonds has declined. This combination of a declining net supply and significant amounts of assets available for investment helped maintain investor demand in recent months. It is unlikely that the municipal bond market will continue to significantly outperform US Treasury securities in the near future. The tax-exempt bond market's recent performance led to the yield ratio between long-term taxable and tax-exempt securities falling from in excess of 90% to approximately 85%. While historically still very attractive, some institutional investors, particularly short- term traders, began to view the tax-exempt bond market's recent outperformance as an opportunity to sell a relatively expensive asset. However, to the long-term investor such a sale would represent the loss of an attractively priced asset which may not be easily replaced given the relative scarcity of municipal bonds under present supply conditions. Looking ahead, no clear consensus for the direction of interest rates currently exists. Perhaps, the primary focus going forward will be the extent to which the increase in interest rates seen thus far in 1996 will negatively impact future economic growth. Should growth slow in the interest rate-sensitive sectors of the economy, like housing, auto, and consumer spending, as many economists assert is likely, then bond yields are likely to decline. Under such a scenario, the municipal bond market's performance is likely to closely mirror that of the US Treasury bond market. Portfolio Strategy Despite the continued volatility in the fixed-income markets this past year, MuniYield Fund, Inc.'s net asset value appreciated while consistently providing an attractive level of tax-exempt income to shareholders. In our April shareholder report, we discussed our more constructive market outlook and an investment strategy designed to position the Fund more advantageously. For the last six months, our efforts were directed toward increasing the portfolio's interest rate sensitivity without negatively impacting the monthly dividend. To a large degree, these efforts were successful, since the Fund provided superior performance in a period of stable to declining interest rates while sustaining a competitive yield throughout. A positive byproduct of this strategy was the gradual extension in the average call protection for all the holdings. For the long-term investor, the possibility of early redemption prior to maturity represents a serious threat to a reliable and constant stream of interest income. Since most tax-exempt investors rely on that steady stream of income, the maintenance of stable call protection over the long term remains a priority for us. Apart from the shift in our market outlook, there was no appreciable change in portfolio composition in terms of either credit rating or sector diversification. Approximately 90% of the Fund's holdings are rated investment grade by at least one of the major rating agencies, while fully 20% are classified as corporate-related industrial development bonds. We currently maintain a significant amount of New York securities in the Fund's portfolio, since this sector had declined to attractive levels because of substantial new- issue supply within a fairly brief time frame. This supply imbalance should correct itself shortly, affording the opportunity to lock in a profit and return a more balanced market weighting in the New York sector. In the upcoming months, we will continue to closely follow economic releases for renewed signs of economic vigor. However, currently the economy appears to have slowed to trend growth from the outsized gain registered during the second quarter. Investor concerns of a restrictive monetary policy subsided, thereby alleviating near-term concerns about an increase in short-term interest rates. Therefore, the current environment appears quite favorable for leveraged products such as MuniYield Fund, Inc. (For a complete explanation of the benefits and risks of leveraging, see page 4 of this report to shareholders.) 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 December 4, 1996 PROXY RESULTS
During the six-month period ended October 31, 1996, MuniYield Fund, Inc. Common Stock shareholders voted on the following proposals. The proposals were approved at a special shareholders' meeting on September 19, 1996. The description of each proposal and number of shares voted are as follows: Shares Voted Shares Voted For Without Authority 1.To elect the Fund's Board of Directors: Herbert I. London 35,777,286 621,370 Robert R. Martin 35,771,493 627,163 Andre F. Perold 35,763,243 635,413 Arthur Zeikel 35,759,438 639,218 Shares Voted Shares Voted Shares Voted For Against Abstain 2.To ratify the selection of Deloitte & Touche LLP as the Fund's independent auditors. 35,613,171 207,178 578,307 During the six-month period ended October 31, 1996, MuniYield Fund, Inc. Preferred Stock shareholders (Series A, B, C, D and E) voted on the following proposals. The proposals were approved at a special shareholders' meeting on September 19, 1996. The description of each proposal and number of shares voted are as follows: Shares Voted Shares Voted For Without Authority 1.To elect the Fund's Board of Directors: James H. Bodurtha, Herbert I. London, Robert R. Martin, Joseph L. May, Andre F. Perold and Arthur Zeikel as follows: Series A 1,688 0 Series B 977 0 Series C 1,662 96 Series D 1,557 0 Series E 2,281 0 Shares Voted Shares Voted Shares Voted For Against Abstain 2.To select Deloitte & Touche LLP as the Fund's independent auditors as follows: Series A 1,688 0 0 Series B 977 0 0 Series C 1,662 0 96 Series D 1,557 0 0 Series E 2,281 0 0
THE BENEFITS AND RISKS OF LEVERAGING MuniYield Fund, Inc. utilizes leveraging to seek to enhance the yield and net asset value of its Common Stock. However, these objectives cannot be achieved in all interest rate environments. To leverage, the Fund issues Preferred Stock, which pays dividends at prevailing short-term interest rates, and invests the proceeds in long-term municipal bonds. The interest earned on these investments is paid to Common Stock shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share net asset value of the Fund's Common Stock. However, in order to benefit Common Stock shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. At the same time, a period of generally declining interest rates will benefit Common Stock shareholders. If either of these conditions change, then the risks of leveraging will begin to outweigh the benefits. To illustrate these concepts, assume a fund's Common Stock capitalization of $100 million and the issuance of Preferred Stock for an additional $50 million, creating a total value of $150 million available for investment in long-term municipal bonds. If prevailing short-term interest rates are approximately 3% and long- term interest rates are approximately 6%, the yield curve has a strongly positive slope. The fund pays dividends on the $50 million of Preferred Stock based on the lower short-term interest rates. At the same time, the fund's total portfolio of $150 million earns the income based on long-term interest rates. Of course, increases in short-term interest rates would reduce (and even eliminate) the dividends of the Common Stock. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pickup on the Common Stock will be reduced or eliminated completely. At the same time, the market value 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) GO General Obligation Bonds HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds M/F Multi-Family PCR Pollution Control Revenue Bonds S/F Single-Family UT Unlimited Tax VRDN Variable Rate Demand Notes SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Alabama--1.1% BBB Baa1 $ 8,750 Courtland, Alabama, IDB, IDR, Refunding (Champion International Corporation), Series A, 7.20% due 12/01/2013 $ 9,447 Alaska--5.2% A+ Aa 12,285 Alaska State Housing Finance Corporation, GO, Series B, 7% due 12/01/2027 12,826 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds: NR* NR* 10,050 (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 9,845 AA Aa3 8,000 (British Petroleum Pipeline), Series B, 7% due 12/01/2025 8,735 AA Aa3 10,635 (Sohio Pipeline--British Petroleum Oil), 7.125% due 12/01/2025 11,737 Arizona--0.5% A A1 5,095 Phoenix, Arizona, Civic Improvement Corporation, Wastewater System, Lease Revenue Refunding Bonds, 4.75% due 7/01/2023 4,370 California--3.1% Foothill/Eastern Transportation Corridor Agency, California, Toll Road Revenue Bonds, Senior Lien, Series A: BBB- Baa 10,000 6.25%** due 1/01/2018 2,609 BBB- Baa 24,250 6.24%** due 1/01/2020 5,572 BBB- Baa 30,245 6.24%** due 1/01/2021 6,522 BBB- Baa 25,000 6.25%** due 1/01/2022 5,035 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) 5,818 Colorado--4.5% Denver, Colorado, City and County Airport Revenue Bonds: BBB Baa 8,000 AMT, Series D, 7.75% due 11/15/2013 9,510 BBB Baa 3,310 AMT, Series D, 7.75% due 11/15/2021 3,666 BBB Baa 14,350 Series A, 7.25% due 11/15/2002 (b) 16,545 AAA NR* 4,900 Series A, 7.25% due 11/15/2002 (b) 5,661 NR* NR* 1,650 Mountain Village, Colorado, Metropolitan District, Refunding (San Miguel County), UT, 7.95% due 12/01/2003 1,836 Connecticut NR* B1 2,605 New Haven, Connecticut, Facilities Revenue Bonds - --0.3% (Hill Health Corporation Project), 9.25% due 5/01/2017 2,829 District of A+ A3 4,940 District of Columbia Revenue Bonds (Howard University), Columbia--0.6% Series B, 6.75% due 10/01/2012 5,230 Florida--2.9% AA Aa 19,285 Florida State Department of Transportation (Right of Way Acquisition and Bridge), 5.375% due 7/01/2026 18,551 AAA Aaa 6,060 Sarasota County, Florida, Utility System Revenue Refunding Bonds, Series A, 5.25% due 10/01/2025 (h) 5,766 Georgia--1.4% NR* NR* 5,620 Atlanta, Georgia, Urban Residential Finance Authority, College Facilities Revenue Bonds (Morris Brown College Project), 9.50% due 12/01/2001 (b) 6,991 AAA Aaa 4,200 Municipal Electric Authority, Georgia, Special Obligation Bonds (Fifth Crossover Series, Project One), 6.40% due 1/01/2013 (c)(j) 4,610 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 2,033 A Aa 870 AMT, Series A, 7.10% due 7/01/2024 911 A Aa 3,040 Series B, 6.90% due 7/01/2016 3,199 A Aa 1,110 Series B, 7% due 7/01/2031 1,166 Idaho--0.5% AA NR* 4,030 Idaho Housing Agency, S/F Mortgage, AMT, Senior Series C-2, 7.15% due 7/01/2023 4,244 Illinois--4.4% AAA Aaa 10,000 Chicago, Illinois, Refunding, Series B, 5.125% due 1/01/2025 (h) 9,158 NR* Aaa 5,000 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due 9/01/2027 (f)(g) 5,547 AAA Aaa 3,000 Chicago, Illinois, Water Revenue Bonds, 5% due 11/01/2025 (h) 2,692 BBB Baa1 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2021 3,056
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Illinois NR* NR* $ 2,500 Illinois Educational Facilities Authority Revenue Bonds (concluded) (Chicago Osteopathic Health Systems), 7.25% due 11/15/2019 (b) $ 2,957 Illinois Health Facilities Authority Revenue Bonds: A A 1,500 (Edward Hospital Association Project), 7% due 2/15/2022 1,592 BBB NR* 2,625 Refunding (Saint Elizabeth's Hospital of Chicago), 7.75% due 7/01/2016 2,884 BBB- NR* 8,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue Bonds (McCormick Place Convention), 7% due 7/01/2026 8,807 A1+ VMIG1++ 100 Southwestern Illinois Development Authority, Solid Waste Disposal Revenue Bonds (Shell Oil Co.--Wood River Project), VRDN, AMT, 3.65% due 4/01/2022 (a) 100 Indiana--3.0% NR* A 1,150 Indiana Health Facilities Finance Authority, Hospital Revenue Refunding Bonds (Saint Anthony Medical Center), Series A, 7% due 10/01/2017 1,234 BBB Baa2 10,000 Indianapolis, Indiana, Airport Authority, Special Facilities Revenue Bonds (Federal Express Corporation Project), AMT, 7.10% due 1/15/2017 10,693 A+ NR* 11,775 Indianapolis, Indiana, Local Public Improvement Bond Bank, Refunding, Series D, 6.75% due 2/01/2020 12,711 Kansas--1.1% AAA Aaa 8,300 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric Company Project), 7% due 6/01/2031 (e) 9,148 Kentucky--1.2% 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 6,214 NR* NR* 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,133 Louisiana--4.9% 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 39,482 Saint Charles Parish, Louisiana, PCR, VRDN, AMT (a): A1+ VMIG1++ 400 (Shell Oil Company--Norco Project), 3.65% due 11/01/2021 400 A1+ VMIG1++ 1,200 (Shell Oil Company Project), Series A, 3.65% due 10/01/2022 1,200 Maine--0.3% BBB- NR* 2,100 Maine Finance Authority, Solid Waste Disposal Revenue Bonds (Boise Cascade Corporation Project), AMT, 7.90% due 6/01/2015 2,277 Maryland--1.3% NR* NR* 3,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 3,149 A- NR* 2,500 Maryland State Energy Financing Administration, Solid Waste Disposal and Limited Obligation Revenue Bonds (Wheelabrator Water Projects), AMT, 6.30% due 12/01/2010 2,599 NR* Aaa 4,500 Prince Georges County, Maryland, Hospital Revenue Bonds (Dimensions Health Corporation Issue), 7.25% due 7/01/2002 (b) 5,178 Massachusetts AAA Aaa 5,000 Massachusetts State, HFA, Residential Development Bonds, - --1.4% Series C, 6.90% due 11/15/2021 (f) 5,266 A+ Aa 5,970 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT, Series 38, 7.20% due 12/01/2026 6,386 Michigan--1.8% Detroit, Michigan, GO, UT, Series A: BBB Baa 2,500 6.70% due 4/01/2010 2,621 BBB Baa 1,500 6.80% due 4/01/2015 1,580 AAA Aaa 4,935 Detroit, Michigan, Water Supply System Revenue Bonds, Second Lien, Series A, 5.50% due 7/01/2025 (e) 4,789 AA- A1 5,575 Michigan State Building Authority, Revenue Refunding Bonds, Series I, 6.75% due 10/01/2011 5,964 NR* VMIG1++ 100 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds Grayling Generating Project), VRDN, AMT, 3.60% due 1/01/2014 (a) 100
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Minnesota AA+ A1 $10,000 Minnesota State, HFA, Housing Development, Series A, 6.95% - --2.5% due 2/01/2014 $ 10,568 AA+ Aa 3,410 Minnesota State, HFA, S/F Mortgage, AMT, Series A, 7.05% due 7/01/2022 3,549 AA- A1 600 Red Wing, Minnesota, PCR (Northern States Power Company Project), VRDN, 3.65% due 3/01/2011 (a) 600 BBB Baa1 5,700 Sartell, Minnesota, PCR, Refunding (Champion International Corporation), 6.95% due 10/01/2012 6,073 Mississippi A A2 17,750 Lowndes County, Mississippi, Solid Waste Disposal and PCR, - --2.4% Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 20,158 Missouri--1.3% BBB- NR* 2,885 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding and Improvement Bonds (Tri-State Osteopathic), 8.25% due 12/15/2014 3,119 AAA NR* 6,500 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 7,220 New Jersey AAA NR* 9,500 New Jersey State Housing and Mortgage Finance Agency, - --2.9% M/F Housing Revenue Refunding Bonds (Presidential Plaza), 7% due 5/01/2030 (d) 10,191 AAA Aaa 15,000 New Jersey State Transportation Trust Fund Authority, Transportation System, Series A, 4.75% due 12/15/2016 (e) 13,522 New Mexico--2.6% Farmington, New Mexico, PCR, Refunding, Series A: BB+ Ba1 15,000 (Public Service Company--San Juan Project), 6.40% due 8/15/2023 15,029 A+ A2 5,850 (Southern California Edison Company), 7.20% due 4/01/2021 6,364 New York--23.6% New York City, New York, GO, UT: BBB+ Baa1 7,500 Refunding, Series C, 5.875% due 2/01/2016 7,252 BBB+ Baa1 5,000 Refunding, Series C, 6% due 2/01/2022 4,854 BBB+ Baa1 2,825 Series A, 7.75% due 8/15/2001 (b) 3,236 AAA Aaa 2,740 Series A, 7.75% due 8/15/2001 (b) 3,159 BBB+ Baa1 305 Series A, 7.75% due 8/15/2008 340 BBB+ Baa1 3,470 Series A, 7.75% due 8/15/2012 3,870 BBB+ Baa1 2,260 Series A, 7.75% due 8/15/2016 2,521 BBB+ Baa1 110 Series B, 7% due 6/01/2001 (b) 122 BBB+ Baa1 8,970 Series B, 5.875% due 8/15/2013 8,722 BBB+ Baa1 4,390 Series B, 7% due 6/01/2016 4,664 BBB+ Baa1 15,000 Series B, Fiscal 92, 7.75% due 2/01/2010 16,783 BBB+ Baa1 1,555 Series B, Fiscal 92, 7.75% due 2/01/2013 1,732 BBB+ Baa1 6,400 Series B, Sub-Series B-1, 7% due 8/15/2016 6,887 BBB+ Baa1 5,000 Series C, Sub-Series C-1, 7.50% due 8/01/2021 5,562 New York State Dormitory Authority Revenue Bonds: BBB Baa1 5,225 (Department of Health), 5.50% due 7/01/2025 4,849 BBB+ Baa1 14,000 (State University Educational Facilities), 5.50% due 5/15/2026 13,036 BBB+ Baa1 20,000 (State University Educational Facilities), Series B, 5.75% due 5/15/2024 19,071 New York State Environmental Facilities Corporation, PCR (State Water, Revolving Fund): A- Aa 17,000 Refunding, Series A, 5.875% due 6/15/2014 17,343 A Aa 24,400 Series E, 6.875% due 6/15/2010 26,803 New York State Local Government Assistance Corporation Revenue Bonds: A A 9,000 Refunding, Series C, 5.50% due 4/01/2017 8,880 A A 5,000 Refunding, Series E, 5% due 4/01/2021 4,554 A A 6,000 Series A, 6.50% due 4/01/2020 6,365 AAA Aaa 5,000 Series D, 7% due 4/01/2002 (b) 5,666 A A 7,000 Series D, 5% due 4/01/2023 6,239
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) New York AAA Aaa $ 8,500 New York State Thruway Authority, Highway and Bridge (concluded) Trust Fund, Series B, 5.125% due 4/01/2015 (e) $ 8,077 AAA Aaa 5,000 Triborough Bridge and Tunnel Authority, New York, General Purpose Revenue Refunding Bonds, Series Y, 6.125% due 1/01/2021 (i) 5,387 North Carolina A A2 4,540 Martin County, North Carolina, Industrial Facilities and Pollution - --3.2% Control Financing Authority, Solid Waste Revenue Bonds (Weyerhaeuser Company Project), AMT, 6% due 11/01/2025 4,578 North Carolina HFA, S/F Revenue Bonds: AA Aa 5,300 AMT, Series T, 7.05% due 9/01/2020 5,540 AA Aa 15,280 Refunding, Series S, 6.95% due 3/01/2017 16,176 North Dakota A+ Aa 3,770 North Dakota State, HFA, S/F Mortgage Revenue Bonds, - --0.5% Series A, 7% due 7/01/2023 3,962 Ohio--1.2% NR* Ba1 3,600 Hilliard, Ohio, IDR, Refunding (Kroger Co.), 8.10% due 7/01/2012 3,981 NR* Ba1 3,600 Lucas County, Ohio, IDR, Refunding (Kroger Co.), 8.50% due 7/01/2011 3,992 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 2,289 Oklahoma--0.4% BBB Baa 3,250 Holdenville, Oklahoma, Industrial Authority, Correctional Facility Revenue Bonds, 6.70% due 7/01/2015 3,353 Pennsylvania BB Ba2 2,500 Beaver County, Pennsylvania, IDA, PCR, Refunding - --4.1% (Cleveland Electric Co. Project), 7.625% due 5/01/2025 2,678 AAA Aaa 8,700 Bethlehem, Pennsylvania, Water Authority, Revenue Refunding Bonds, 4.875% due 11/15/2014 (e) 7,980 NR* Ba1 1,995 McCandless, Pennsylvania, IDA, IDR, Refunding (Kroger Co.), 7.375% due 10/15/2007 2,142 Pennsylvania Convention Center Authority, Revenue Refunding Bonds, Series A: BBB- Baa 9,675 6.70% due 9/01/2014 10,417 BBB- Baa 5,000 6.75% due 9/01/2019 5,383 AA+ Aa 5,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 42, 6.85% due 4/01/2025 5,527 South Carolina A- A1 2,500 Richland County, South Carolina, PCR, Refunding (Union Camp - --0.3% Corporation Project), Series C, 6.55% due 11/01/2020 2,655 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 2,635 Tennessee--0.4% NR* NR* 1,630 Knox County, Tennessee, Health, Educational, and Housing Facilities Board, Hospital Facilities Revenue Bonds (Baptist Health Systems of East Tennessee), 8.50% due 4/15/2004 1,730 AAA Aaa 4,250 Metropolitan Government, Nashville and Davidson County, Tennessee, Electric Revenue Bonds, Series A, 5.90%** due 5/15/2011 (e) 1,904 Texas--6.6% BBB Baa2 3,450 Alliance Airport Authority, Inc., Texas, Special Facilities Revenue Bonds (Federal Express Corporation Project), AMT, 6.375% due 4/01/2021 3,455 A- A 3,800 Ector County, Texas, Hospital District, Hospital Revenue Bonds (Medical Center Hospital), 7.30% due 4/15/2012 4,186 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 5,204 A1+ VMIG1++ 500 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo Petroleum Corp. Project), VRDN, AMT, 3.70% due 4/01/2026 (a) 500 BBB Baa1 8,400 Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds (Champion International Corporation), AMT, 7.45% due 5/01/2026 9,032
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Texas A1+ NR* $ 200 Gulf Coast, Texas, Waste Disposal Authority, Pollution Control (concluded) and Solid Waste Disposal, Revenue Refunding Bonds (Amoco Oil Co. Project), VRDN, AMT, 3.65% due 5/01/2024 (a) $ 200 AAA Aaa 5,500 Harris County, Texas, Toll Road, Refunding, Senior Lien, 5% due 8/15/2016 (h) 5,089 AAA Aaa 5,125 Houston, Texas, Water and Sewer System Revenue Bonds, Junior Lien, Series A, 6.375% due 12/01/2022 (e) 5,455 BB Ba 5,000 Odessa, Texas, Junior College District, Revenue Refunding Bonds, Series A, 8.125% due 12/01/2018 5,409 A+ A2 5,000 Port Corpus Christi Authority, Texas, Nueces County, PCR (Hoechst Celanese Corporation Project), AMT, 6.875% due 4/01/2017 5,354 A+ A2 5,000 Red River Authority, Texas, PCR (Hoechst Celanese Corporation Project), AMT, 6.875% due 4/01/2017 5,355 Travis County, Texas, Housing Finance Corporation, Residential Mortgage Revenue Refunding Bonds, Series A (f)(g): AAA NR* 880 7% due 12/01/2011 929 AAA NR* 2,805 7.05% due 12/01/2025 2,960 A1+ Aa3 1,500 West Side Calhoun County, Texas, Navigational District, Sewer and Solid Waste Disposal Revenue Bonds (BP Chemicals Inc. Project), VRDN, AMT, 3.65% due 4/01/2031 (a) 1,500 Utah--0.7% 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 3,635 AA NR* 1,890 Utah State, HFA, S/F Mortgage, AMT, Series E-2, 7.15% due 7/01/2024 1,974 Virginia--1.0% AA+ Aa1 8,125 Virginia State, HDA, Commonwealth Mortgage, Series A, 7.10% due 1/01/2025 8,523 Washington BBB+ Baa1 2,420 Pilchuck Development Public Corporation, Washington, - --2.9% Special Facilities Airport Revenue Bonds (Tramco Inc. Project--BF Goodrich), AMT, 6% due 8/01/2023 2,340 Washington State Public Power Supply System, Revenue Refunding Bonds (b): AA- Aa1 9,235 (Nuclear Project No. 1), Series A, 7% due 7/01/2000 10,203 AA- Aa1 5,000 (Nuclear Project No. 1), Series A, 6.875% due 7/01/2001 5,549 AA- Aa1 5,000 (Nuclear Project No. 2), Series B, 7% due 7/01/2000 5,524 West Virginia BBB+ Baa1 7,500 Mason County, West Virginia, PCR, Refunding (Appalachian - --1.4% Power Company Project), Series I, 6.85% due 6/01/2022 8,101 NR* NR* 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,108 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 2,822 Total Investments (Cost--$774,191)--99.0% 822,877 Other Assets Less Liabilities--1.0% 8,247 -------- Net Assets--100.0% $831,124 ======== (a)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at October 31, 1996. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. (i)CAPMAC Insured. (j)Escrow to Maturity. ++Highest short-term rating by Moody's Investors Service, Inc. *Not Rated. **Represents a zero coupon bond; the interest rate shown is the effective yield at the time of purchase by the Fund. Ratings of issues shown have not been audited by Deloitte & Touche LLP. See Notes to Financial Statements.
FINANCIAL INFORMATION Statement of Assets, Liabilities and Capital as of October 31, 1996 Assets: Investments, at value (identified cost--$774,191,006) (Note 1a) $822,876,520 Cash 38,614 Interest receivable 14,699,181 Deferred organization expenses (Note 1e) 886 Prepaid expenses and other assets 58,541 Total assets 837,673,742 ------------ Liabilities: Payables: Securities purchased $ 4,974,438 Dividends to shareholders (Note 1f) 1,073,535 Investment adviser (Note 2) 350,832 6,398,805 ------------ Accrued expenses and other liabilities 151,396 ------------ Total liabilities 6,550,201 ------------ Net Assets: Net assets $831,123,541 ============ Capital: Capital Stock (200,000,000 shares authorized) (Note 4): Preferred Stock, par value $.05 per share (10,000 shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) $250,000,000 Common Stock, par value $.10 per share (37,061,414 shares issued and outstanding) $ 3,706,141 Paid-in capital in excess of par 519,009,869 Undistributed investment income--net 6,837,968 Undistributed realized capital gains on investments--net 2,884,049 Unrealized appreciation on investments--net 48,685,514 ------------ Total--Equivalent to $15.68 net asset value per share of Common Stock (market price--$14.875) 581,123,541 ------------ Total capital $831,123,541 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations
For the Year Ended October 31, 1996 Investment Income Interest and amortization of premium and discount earned $ 51,919,151 (Note 1d): Expenses: Investment advisory fees (Note 2) $ 4,120,747 Commission fees (Note 4) 643,106 Transfer agent fees 119,479 Accounting services (Note 2) 88,453 Professional fees 83,137 Custodian fees 58,318 Directors' fees and expenses 45,397 Printing and shareholder reports 43,603 Listing fees 32,500 Pricing fees 20,367 Amortization of organization expenses (Note 1e) 10,812 Other 37,121 ------------ Total expenses 5,303,040 ------------ Investment income--net 46,616,111 ------------ Realized & Realized gain on investments--net 12,497,013 Unrealized Gain Change in unrealized appreciation on investments--net (3,902,288) (Loss) on ------------ Investments--Net Net Increase in Net Assets Resulting from Operations $ 55,210,836 (Notes 1b, 1d & 3): ============ See Notes to Financial Statements.
Statements of Changes in Net Assets
For the Year Ended October 31, Increase (Decrease) in Net Assets: 1996 1995 Operations: Investment income--net $ 46,616,111 $ 47,009,858 Realized gain (loss) on investments--net 12,497,013 (9,612,893) Change in unrealized appreciation/depreciation on investments--net (3,902,288) 59,252,744 ------------ ------------ Net increase in net assets resulting from operations 55,210,836 96,649,709 ------------ ------------ Dividends & Investment income--net: Distributions to Common Stock (38,420,345) (37,084,429) Shareholders Preferred Stock (9,067,052) (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 (47,487,397) (54,907,028) ------------ ------------ Net Assets: Total increase in net assets 7,723,439 41,742,681 Beginning of year 823,400,102 781,657,421 ------------ ------------ End of year* $831,123,541 $823,400,102 ============ ============ *Undistributed investment income--net $ 6,837,968 $ 7,709,254 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlights
For the Period The following per share data and ratios have been derived Nov. 29, from information provided in the financial statements. 1991++ to 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 1.26 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 1.49 2.61 (.94) 3.58 1.75 -------- -------- -------- -------- -------- Less dividends and distributions to Common Stock shareholders: Investment income--net (1.04) (1.00) (1.07) (1.11) (.89) Realized gain on investments--net -- (.22) (.23) (.16) -- -------- -------- -------- -------- -------- Total dividends and distributions to Common Stock shareholders (1.04) (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 (.24) (.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 (.24) (.27) (.21) (.20) (.33) -------- -------- -------- -------- -------- Net asset value, end of period $ 15.68 $ 15.47 $ 14.35 $ 16.80 $ 14.69 ======== ======== ======== ======== ======== Market price per share, end of period $ 14.875 $ 14.375 $ 12.125 $ 16.75 $ 15.125 ======== ======== ======== ======== ======== Total Investment Based on market price per share 10.88% 29.76% (20.94%) 19.91% 7.06%+++ Return:** ======== ======== ======== ======== ======== Based on net asset value per share 8.61% 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 5.64% 5.91% 5.76% 5.72% 6.08%* ======== ======== ======== ======== ======== Supplemental Net assets, net of Preferred Stock, end of Data: period (in thousands) $581,124 $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 96.74% 52.99% 44.27% 25.58% 66.45% ======== ======== ======== ======== ======== Leverage: Asset coverage per $1,000 $ 3,324 $ 3,294 $ 3,127 $ 3,479 $ 3,105 ======== ======== ======== ======== ======== Dividends Per Series A--Investment income--net $ 894 $ 887 $ 598 $ 560 $ 680 Share on ======== ======== ======== ======== ======== Preferred Stock Series B--Investment income--net $ 897 $ 850 $ 733 $ 554 $ 690 Outstanding:++++++ ======== ======== ======== ======== ======== Series C--Investment income--net $ 998 $ 827 $ 647 $ 566 $ 685 ======== ======== ======== ======== ======== Series D--Investment income--net $ 888 $ 897 $ 659 $ 556 $ 688 ======== ======== ======== ======== ======== Series E--Investment income--net $ 875 $ 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. 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. NOTES TO FINANCIAL STATEMENTS (concluded) (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. 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 year ended October 31, 1996 were $783,928,774 and $780,107,439, respectively. Net realized and unrealized gains (losses) as of October 31, 1996 were as follows: Realized Gains Unrealized (Losses) Gains Long-term investments $13,314,243 $48,685,514 Short-term investments (1,849) -- Financial futures contracts (815,381) -- ----------- ----------- Total $12,497,013 $48,685,514 =========== =========== As of October 31, 1996, net unrealized appreciation for Federal income tax purposes aggregated $48,501,329, of which $50,028,982 related to appreciated securities and $1,527,653 related to depreciated securities. The aggregate cost of investments at October 31, 1996 for Federal income tax purposes was $774,375,191. 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 As of October 31, 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 October 31, 1996 were as follows: Series A, 3.35%; Series B, 3.45%; Series C, 3.75%, Series D, 3.447%; and Series E, 3.075%. For the year ended October 31, 1996, there were 10,000 AMPS shares authorized, issued and outstanding with a liquidation preference of $25,000 per share. 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 October 31, 1996, MLPF&S, an affiliate of FAM, earned $355,197 as commissions. 5. Subsequent Event: On November 8, 1996, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $.085115 per share, payable on November 27, 1996 to shareholders of record as of November 18, 1996. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of MuniYield Fund, Inc.: We have audited the accompanying statement of assets, liabilities and capital, including the schedule of investments, of MuniYield Fund, Inc. as of October 31, 1996, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the four-year period then ended and the period November 29, 1991 (commencement of operations) to October 31, 1992. These financial statements and the financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at October 31, 1996 by correspondence with the custodian and broker. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of MuniYield Fund, Inc. as of October 31, 1996, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with generally accepted accounting principles. Deloitte & Touche LLP Princeton, New Jersey December 4, 1996 IMPORTANT TAX INFORMATION (unaudited) All of the net investment income distributions paid by MuniYield Fund, Inc. during its taxable year ended October 31, 1996 qualify as tax-exempt interest dividends for Federal income tax purposes. Additionally, there were no capital gains distributed by the Fund during the year. Please retain this information for your records. -----END PRIVACY-ENHANCED MESSAGE-----