-----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, RtC2MXZ5tcincVdRNzp9Y+tchYepJEatn73qbOSNl933mFOqhAbUf5ZrJ1hfqN6M aS+6WWVoU7I52RVKSniozw== 0000900092-99-000223.txt : 19991217 0000900092-99-000223.hdr.sgml : 19991217 ACCESSION NUMBER: 0000900092-99-000223 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991216 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: SEC FILE NUMBER: 811-06414 FILM NUMBER: 99775757 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, 1999 Officers and Directors Terry K. Glenn, President and Director James H. Bodurtha, Director Herbert I. London, Director Robert R. Martin, Director Joseph L. May, Director Andre F. Perold, Director Arthur Zeikel, Director Vincent R. Giordano, Senior Vice President Kenneth A. Jacob, Vice President Theodore R. Jaeckel Jr., Vice President Donald C. Burke, Vice President and Treasurer Alice A. Pellegrino, Secretary Custodian The Bank of New York 90 Washington Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: The Bank of New York 100Church Street New York, NY 10286 NYSE Symbol MYD 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 Printed on post-consumer recycled paper MuniYield Fund, Inc. TO OUR SHAREHOLDERS For the year ended October 31, 1999, the Common Stock of MuniYield Fund, Inc. earned $0.937 per share income dividends, which included earned and unpaid dividends of $0.077. This represents a net annualized yield of 7.10%, based on a month-end per share net asset value of $13.21. Over the same period, the total investment return on the Fund's Common Stock was -9.92%, based on a change in per share net asset value from $16.27 to $13.21, and assuming reinvestment of $1.087 per share ordinary income dividends and $0.506 per share capital gains distributions. For the six-month period ended October 31, 1999, the total investment return on the Fund's Common Stock was -11.11%, based on a change in per share net asset value from $15.36 to $13.21, and assuming reinvestment of $0.458 per share income dividends. For the six-month period ended October 31, 1999, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 2.98%; Series B, 3.09%; Series C, 3.59%; Series D, 3.57%; and Series E, 3.31%. The Municipal Market Environment The combination of steady strong domestic economic growth, improvement in foreign economies (most notably in Japan) and increasing investor concerns regarding potential increases in US inflation put upward pressure on bond yields throughout the six- month period ended October 31, 1999. Continued strong US employment growth, particularly the decline in the US unemployment rate to 4.2% in early June, was among the reasons the Federal Reserve Board cited for raising short-term interest rates in late June and again in late August. US Treasury bond yields reacted by climbing above 6.375% by late October. However, at October month-end, economic indicators were released suggesting that, despite strong economic and employment growth in the third quarter, inflationary pressures have remained extremely well-contained. This resulted in a significant rally in the US Treasury bond market, pushing US Treasury bond yields downward to end the six-month period at approximately 6.15%. During the period, yields on 30-year US Treasury bonds increased over 50 basis points (0.50%). Long-term tax-exempt bond yields also rose during the six months ended October 31, 1999. Until early May, the municipal bond market was able to withstand much of the upward pressure on bond yields. However, investor concerns of additional moves by the Federal Reserve Board to moderate US economic growth and, more importantly, the loss of the strong technical support that the tax-exempt market enjoyed in early 1999 helped push municipal bond yields significantly higher for the remainder of the period. The yields on long-term tax-exempt revenue bonds rose nearly 90 basis points to 6.18% by October 31, 1999, as measured by the Bond Buyer Revenue Bond Index. In recent months, the significant decline in new tax-exempt bond issuance has remained a positive factor within the municipal bond market, as it had been for much of the past year. During the last six months, more than $110 billion in long-term municipal bonds was issued, a decline of nearly 20% compared to the same period a year ago. During the past three months, $55 billion in municipal bonds was underwritten, representing a decline of nearly 10% compared to the corresponding period in 1998. Additionally, in June and July, investors received more than $40 billion in coupon income and proceeds from bond maturities and early bond redemptions. These proceeds have generated considerable retail investor interest, which has helped absorb the recent diminished supply. Although tax-exempt bond yields are at their highest level in over two years and have attracted significant retail investor interest, institutional demand has declined sharply. Long-term municipal mutual funds have seen consistent outflows in recent months as the yields of individual securities have risen faster than those of larger, more diverse mutual funds. In addition, the demand from property/casualty insurance companies has weakened as a result of the losses, and anticipated losses, incurred as a result of the series of damaging storms across much of the eastern United States. Additionally, many institutional investors who were attracted to the municipal bond market in recent years by historically attractive tax- exempt bond yield ratios of over 90% have found other asset classes even more attractive. Even with a reduced supply position, tax- exempt issuers have been forced to repeatedly raise municipal bond yields in the attempt to attract adequate demand. MuniYield Fund, Inc. October 31, 1999 The recent relative underperformance of the municipal bond market has resulted in an opportunity for long-term investors to purchase tax-exempt issues whose yields are nearly identical with taxable US Treasury securities. At October 31, 1999, long-term uninsured municipal revenue bond yields were 100% of comparable US Treasury securities. In recent months, many taxable asset classes, such as corporate bonds, mortgage-backed securities and US agency debt, have all accelerated debt issuance. This acceleration was initiated largely to avoid issuing securities at year-end and to minimize any associated Year 2000 (Y2K) problems that may develop. However, this increased issuance has also resulted in higher yield levels in the various asset classes as lower bond prices became necessary to attract sufficient investor demand. Going forward, it is believed that the pace of non-US government debt issuance is likely to slow significantly. As the supply of this debt declines, we would expect many institutional investors to return to the municipal bond market and the attractive yield ratios available. Looking ahead, it appears to us that long-term tax-exempt bond yields will remain under pressure, trading in a broad range centered near current levels. Investors are likely to remain concerned about future action by the Federal Reserve Board in November. Y2K considerations may prohibit any further Federal Reserve Board moves through the end of the year and the beginning of 2000. Any improvement in bond prices will probably be contingent upon weakening in both US employment growth and consumer spending. The 100 basis point rise in US Treasury bond yields seen thus far this year may negatively impact US economic growth. The US housing market will be among the first sectors likely to be affected, as some declines have already been evidenced in response to higher mortgage rates. We believe that it is also unrealistic to expect double-digit returns in US equity markets to continue indefinitely. Much of the US consumer's wealth is tied to recent stock market appreciation. Any slowing in these incredible growth rates is likely to reduce consumer spending. We believe that these factors suggest that the worst of the recent increase in bond yields has passed and stable, if not slightly improving, bond prices may be expected. Portfolio Strategy The volatility that characterized the municipal market during the six months ended October 31, 1999 is in sharp contrast to the relative stability that typified the environment for the prior six months. The degree and suddenness of the decline caught many investors by surprise since few anticipated the extent to which tax- exempt yields would climb relative to their taxable counterparts. Much emphasis was placed on the favorable implications of a sharp reduction in new-issue supply coupled with vigorous retail investor demand. Instead, institutional selling proved to be the market's undoing as both mutual funds and casualty insurers moved aggressively to liquidate tax-exempt holdings. As a consequence, yields on long-term municipal bonds once again approached 100% of Treasury bond yields. For this reason, they represented one of the more compelling values in the fixed-income marketplace. At the beginning of the six-month period, our investment outlook called for a fairly stable interest rate environment. We reduced our cash reserve position on the expectation that an income-oriented approach would generate the most favorable return. While we achieved modest success through the use of selective hedging strategies, hindsight suggests that Fund performance would have benefited from a more consistent and prolonged defensive strategy designed to preserve unrealized gains from last year's market rally. More recently, with long-term interest rates at their highest level in over two years, our efforts have turned to seeking to limit tax liabilities through a program designed to offset existing capital gains with the realization of losses incurred in recent months. Despite the volatility experienced on longer-dated maturities, our cost of borrowing remained far more stable as short-term tax-exempt interest rates fluctuated within a relatively narrow range. Since this occurred in the midst of a restrictive monetary policy, the resiliency of this incremental yield pick up remains one of the more attractive aspects of MuniYield Fund, Inc. However, should the spread between short-term and long-term tax-exempt interest rates narrow, the benefits of the leverage will decline and, as a result, reduce the yield on the Fund's Common Stock. (For a complete explanation of the benefits and risks of leverage, see page 4 of this report to shareholders.) MuniYield Fund, Inc. October 31, 1999 We are comfortable with the Fund's current position given the absolute level of long-term interest rates as well as the inherent value in the tax-exempt sector. Economic fundamentals point to a modestly slower pace of economic growth with no solid evidence of a broad-based pickup in inflation. Investors' increased level of comfort with Federal Reserve Board policy combined with a favorable seasonal outlook for municipal bonds suggest that a more constructive outlook may soon be warranted. In Conclusion We appreciate your ongoing interest in MuniYield Fund, Inc., and we look forward to serving your investment needs in the months and years to come. Sincerely, (Terry K. Glenn) Terry K. Glenn President (Vincent R. Giordano) Vincent R. Giordano Senior Vice President (Theodore R. Jaeckel Jr.) Theodore R. Jaeckel Jr. Vice President and Portfolio Manager December 7, 1999 MuniYield Fund, Inc. October 31, 1999 PROXY RESULTS
During the six-month period ended October 31, 1999, MuniYield Fund, Inc.'s Common Stock shareholders voted on the following proposal. Proposal 1 was approved at a shareholders' meeting on May 27, 1999. A description of the proposal and number of shares voted are as follows: Shares Shares Voted Shares Voted Voted For Against Abstain 1. To approve an amendment to the Articles Supplementary of the Fund. 20,296,494 1,159,359 1,008,686 During the six-month period ended October 31, 1999, MuniYield Fund, Inc.'s Preferred Stock shareholders (Series A, B, C, D and E) voted on the following proposal. Proposal 1 was approved at a shareholders' meeting on May 27, 1999. A description of the proposal and number of shares voted are as follows: Shares Shares Voted Shares Voted Voted For Against Abstain 1. To approve an amendment to the Articles Supplementary of the Fund as follows: Series A 809 207 81 Series B 386 23 1 Series C 353 6 0 Series D 1,452 28 4 Series E 2,146 458 132
MuniYield Fund, Inc. October 31, 1999 THE BENEFITS AND RISKS OF LEVERAGING MuniYield Fund, Inc. utilizes leveraging to seek to enhance the yield and net asset value of its Common Stock. However, these objectives cannot be achieved in all interest rate environments. To leverage, the Fund issues Preferred Stock, which pays dividends at prevailing short-term interest rates, and invests the proceeds in long-term municipal bonds. The interest earned on these investments is paid to Common Stock shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share net asset value of the Fund's Common Stock. However, in order to benefit Common Stock shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. At the same time, a period of generally declining interest rates will benefit Common Stock shareholders. If either of these conditions change, then the risks of leveraging will begin to outweigh the benefits. To illustrate these concepts, assume a fund's Common Stock capitalization of $100 million and the issuance of Preferred Stock for an additional $50 million, creating a total value of $150 million available for investment in long-term municipal bonds. If prevailing short-term interest rates are approximately 3% and long- term interest rates are approximately 6%, the yield curve has a strongly positive slope. The fund pays dividends on the $50 million of Preferred Stock based on the lower short-term interest rates. At the same time, the fund's total portfolio of $150 million earns the income based on long-term interest rates. Of course, increases in short-term interest rates would reduce (and even eliminate) the dividends of the Common Stock. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pickup on the Common Stock will be reduced or eliminated completely. At the same time, the market value of the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. As a part of its investment strategy, the Fund may invest in certain securities whose potential income return is inversely related to changes in a floating interest rate ("inverse floaters"). In general, income on inverse floaters will decrease when short-term interest rates increase and increase when short-term interest rates decrease. Investments in inverse floaters may be characterized as derivative securities and may subject the Fund to the risks of reduced or eliminated interest payments and losses of invested principal. In addition, inverse floaters have the effect of providing investment leverage and, as a result, the market value of such securities will generally be more volatile than that of fixed- rate, tax-exempt securities. To the extent the Fund invests in inverse floaters, the market value of the Fund's portfolio and the net asset value of the Fund's shares may also be more volatile than if the Fund did not invest in such securities. MANAGED DIVIDEND POLICY The Fund's dividend policy is to distribute substantially all of its net investment income to its shareholders on a monthly basis. However, in order to provide shareholders with a more consistent yield to the current trading price of shares of Common Stock of the Fund, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Fund for any particular month may be more or less than the amount of net investment income earned by the Fund during such month. The Fund's current accumulated but undistributed net investment income, if any, is disclosed in the Statement of Assets, Liabilities and Capital, which comprises part of the Financial Information included in this report. MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Alabama--1.0% AA- Aa3 $ 8,000 Birmingham, Alabama, Water and Sewer Revenue Refunding Bonds, Series A, 4.75% due 1/01/2029 $ 6,471 A1 VMIG1++ 1,100 Columbia, Alabama, IDB, PCR, Refunding (Alabama Power Company Project), VRDN, Series C, 3.55% due 10/01/2022 (a) 1,100 Alaska--1.5% NR* NR* 10,050 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 10,089 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon Pipeline Company Project), VRDN (a): A1+ VMIG1++ 1,000 Series A, 3.50% due 12/01/2033 1,000 A1+ VMIG1++ 500 Series B, 3.50% due 12/01/2033 500 Arizona--4.9% AAA Aaa 3,400 Arizona State Wastewater Management Authority, Wastewater Treatment Final Assessment Revenue Bonds, Series A, 5.60% due 7/01/2012 (c) 3,428 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (Public Service Company of New Mexico Project), Series A: BBB- Baa3 5,475 5.75% due 11/01/2022 4,866 BBB- Baa3 9,000 6.30% due 12/01/2026 8,547 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines Inc. Project), AMT: NR* B1 8,000 6.25% due 6/01/2019 7,371 NR* B1 5,300 6.30% due 4/01/2023 4,885 B B2 7,950 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson Electric Power Company Project), Series B, 6% due 9/01/2029 7,113 California Anaheim, California, Public Financing Authority, Lease Revenue - --9.1% Bonds (Public Improvements Project), Sub-Series C (i): AAA Aaa 14,000 5.95%** due 9/01/2036 1,473 AAA Aaa 16,080 5.65%** due 3/01/2037 1,640 NR* A2 15,000 California Health Facilities Finance Authority Revenue Bonds (Cedars-Sinai Medical Center), Series A, 6.25% due 12/01/2034 14,785 AAA Aaa 8,500 California State, GO, 4.50% due 12/01/2024 (h) 6,782 AA- Aa3 5,000 California State, GO, Refunding, 4.75% due 4/01/2029 4,071 AAA Aaa 10,600 California State University and Colleges, Student Union Revenue Bonds (Chico), Series B, 4.375% due 11/01/2028 (e) 8,139
PORTFOLIO ABBREVIATIONS To simplify the listings of MuniYield Fund, Inc.'s portfolio holdings in the Schedule of Investments, we have abbreviated the names of many of the securities according to the list below and at right. AMT Alternative Minimum Tax (subject to) COP Certificates of Participation EDA Economic Development Authority GO General Obligation Bonds HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds PCR Pollution Control Revenue Bonds RIB Residual Interest Bonds RITR Residual Interest Trust Receipts S/F Single-Family VRDN Variable Rate Demand Notes MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) California Foothill/Eastern Corridor Agency, California, Toll Road Revenue (concluded) Bonds, Senior Lien, Series A (m): BBB- Aaa $34,165 6.33%** due 1/01/2020 $ 10,286 BBB- Aaa 20,245 6.24%** due 1/01/2021 5,732 BBB- Aaa 15,000 6.25%** due 1/01/2022 3,992 Foothill/Eastern Corridor Agency, California, Toll Road Revenue Bonds, Series A (i): AAA Aaa 10,000 5.75%** due 1/01/2018 3,421 AAA Aaa 10,000 5.791%** due 1/01/2020 3,011 AAA Aaa 10,000 5.788%** due 1/01/2021 2,831 AAA Aaa 10,000 5.783%** due 1/01/2022 2,662 Colorado--2.6% Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D: BBB+ Aaa 700 7.75% due 11/15/2001 (b) 760 BBB+ Baa1 8,000 7.75% due 11/15/2013 9,385 NR* NR* 5,000 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 5,467 Metropolitan Football Stadium District, Colorado, Sales Tax Revenue Bonds, Series A (e): AAA Aaa 3,700 5.22%** due 1/01/2011 1,979 AAA Aaa 2,000 5.30%** due 1/01/2012 1,000 Mountain Village Metropolitan District, Colorado, San Miguel County, GO, Refunding: NR* NR* 240 7.95% due 12/01/2002 (b) 266 NR* NR* 945 7.95% due 12/01/2003 992 Connecticut BB- Ba1 27,750 Connecticut State Development Authority, PCR, Refunding - --3.7% (Connecticut Light & Power Company), Series A, 5.85% due 9/01/2028 25,361 NR* B1 2,445 New Haven, Connecticut, Facility Revenue Bonds (Hill Health Corporation Project), 9.25% due 5/01/2017 2,599 District of A1+ VMIG1++ 1,000 District of Columbia, GO (General Fund Recovery), VRDN, Columbia--0.1% Series B-2, 3.55% due 6/01/2003 (a) 1,000 Florida--1.7% NR* Aaa 10,000 Hillsborough County, Florida, School Board, COP, RITR, Series 31, 6.82% due 7/01/2021 (e)(k) 8,585 A1+ VMIG1++ 4,600 Saint Lucie County, Florida, PCR, Refunding (Florida Power and Light Company Project), VRDN, 3.50% due 1/01/2026 (a) 4,600 Georgia--1.6% AAA Aaa 1,000 Burke County, Georgia, Development Authority, PCR, Refunding (Georgia Power Company Plant--Vogtle), 2nd Series, 5.25% due 5/01/2034 (c) 872 AA Aa2 2,000 De Kalb County, Georgia, Water and Sewer Revenue Bonds, 5% due 10/01/2024 1,731 BBB- Baa2 10,700 Effingham County, Georgia, Development Authority, Solid Waste Disposal Revenue (Fort James Project), AMT, 5.625% due 7/01/2018 9,510 Idaho--0.4% AA NR* 2,875 Idaho Housing Agency, Revenue Refunding Bonds, S/F Mortgage, AMT, Senior Series C-2, 7.15% due 7/01/2023 2,957 Illinois--3.4% NR* Aaa 3,060 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due 9/01/2027 (f)(g)(l) 3,372 East Chicago, Indiana, Solid Waste Disposal Revenue Bonds (USG Corporation Project), AMT: BBB+ Baa3 4,750 5.50% due 9/01/2028 3,997 BBB+ Baa2 3,500 6.375% due 8/01/2029 3,307
MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Illinois BBB Baa1 $ 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois (concluded) Power Company Project), Series A, 7.375% due 7/01/2021 $ 2,976 NR* NR* 2,500 Illinois Educational Facilities Authority, Revenue Refunding Bonds (Chicago Osteopathic Health System), 7.25% due 11/15/2019 (b) 2,846 BBB- NR* 8,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue Bonds (McCormick Place Convention Center), 7% due 7/01/2026 (m) 9,102 Indiana--0.2% A1 VMIG1++ 1,500 Jasper County, Indiana, PCR, Refunding (Northern Indiana Public Service), VRDN, Series C, 3.50% due 4/01/2019 (a) 1,500 Kentucky--0.6% BBB- Baa3 500 Kenton County, Kentucky, Airport Board, Airport Revenue Bonds (Special Facilities-Delta Airlines Project), AMT, Series A, 6.125% due 2/01/2022 469 NR* NR* 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,124 Louisiana--5.9% A1+ P1 4,000 East Baton Rouge Parish, Louisiana, PCR, Refunding (Exxon Project), VRDN, 3.45% due 3/01/2022 (a) 4,000 NR* A3 20,000 Lake Charles, Louisiana, Harbor and Terminal District, Port Facilities Revenue Refunding Bonds (Trunkline Long Company Project), 7.75% due 8/15/2022 21,869 CC NR* 20,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project), 6.50% due 1/01/2017 19,000 Maryland--1.0% NR* NR* 7,050 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 7,357 Massachusetts AAA Aaa 2,500 Boston, Massachusetts, Water and Sewer Commission Revenue - --3.0% Bonds, Senior-Series D, 5% due 11/01/2028 (h) 2,128 BBB+ A3 2,500 Massachusetts State Development Finance Agency, Revenue Refunding Bonds (Boston University), Series P, 5.45% due 5/15/2059 2,161 AAA Aaa 2,000 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Northeastern University), Series I, 5% due 10/01/2029 (e) 1,699 NR* Ba2 5,220 Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds (Bay Cove Human Services Issue), Series A, 5.90% due 4/01/2028 4,533 BBB NR* 4,350 Massachusetts State Industrial Financial Agency, Resource Recovery Revenue Refunding Bonds (Ogden Haven Hill Project), AMT, Series A, 5.60% due 12/01/2019 3,802 Massachusetts State Turnpike Authority, Metropolitan Highway System, Revenue Refunding Bonds, Senior-Series A (e): AAA Aaa 6,350 5% due 1/01/2027 5,428 AAA Aaa 3,250 5% due 1/01/2037 2,707 Michigan--1.3% BBB Ba1 1,000 Michigan State Strategic Fund, Limited Obligation Revenue Bonds (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 1,007 NR* Aaa 10,000 Wayne Charter County, Michigan, Airport Revenue Bonds, RIB, AMT, Series 68, 6.845% due 12/01/2017 (e)(k) 8,457
MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Minnesota--0.3% AA Aa2 $ 2,465 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, Series A, 7.05% due 7/01/2022 $ 2,514 Mississippi A A2 18,000 Lowndes County, Mississippi, Solid Waste Disposal and PCR, - --2.5% Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 19,184 Missouri--0.7% AAA NR* 4,675 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds, Homeownership, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 4,964 Nevada--0.4% BBB NR* 3,500 Clark County, Nevada, IDR, Refunding (Nevada Power Company Project), AMT, Series B, 5.90% due 10/01/2030 3,073 New Jersey BBB- NR* 3,000 New Jersey EDA, Revenue Bonds, First Mortgage (Fellowship - --4.0% Village Project), Series C, 5.50% due 1/01/2028 2,522 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT: BB Ba2 7,530 6.25% due 9/15/2019 7,128 BB Ba2 10,000 5.50% due 4/01/2028 8,450 BB Ba2 13,000 6.25% due 9/15/2029 12,105 New Mexico A1+ P1 1,100 Farmington, New Mexico, PCR, Refunding (Arizona Public Service - --3.0% Company), VRDN, Series A, 3.55% due 5/01/2024 (a) 1,100 NR* Baa3 10,000 Farmington, New Mexico, PCR, Refunding (Public Service Company), Series A, 5.80% due 4/01/2022 8,904 NR* Baa3 14,500 Farmington, New Mexico, PCR, Series B, 5.80% due 4/01/2022 12,911 New York AAA Aaa 3,075 Dutchess County, New York, Resource Recovery Agency Revenue - --12.9% Bonds (Solid Waste System-Forward), Series A, 5.25% due 1/01/2011 (e) 3,014 A1+ VMIG1++ 1,200 Long Island Power Authority, New York, Electric System Revenue Bonds, VRDN, Sub-Series 5, 3.50% due 5/01/2033 (a) 1,200 AAA Aaa 17,750 Long Island Power Authority, New York, Electric System Revenue Refunding Bonds, Series A, 5.50% due 12/01/2029 (e) 16,427 NR* Aaa 5,595 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Bonds, RITR, Series 9, 8.22% due 7/01/2006 (b)(h)(k) 6,518 AAA Aaa 22,430 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Refunding Bonds, Series B, 4.75% due 7/01/2026 (h) 18,362 AAA Aaa 10,000 Metropolitan Transportation Authority, New York, Transportation Facilities Revenue Refunding Bonds, Series C, 4.75% due 7/01/2016 (i) 8,589 NR* A 5,500 New York City, New York, City IDA, Special Facilities Revenue Bonds, RITR, AMT, Series RI-6, 7.995% due 1/01/2024 (k) 5,478 AA Aa3 11,500 New York City, New York, City Transitional Finance Authority Revenue Bonds, Future Tax Secured, Series C, 5% due 5/01/2029 9,737 New York City, New York, GO, Refunding, Series B(b): A- A3 1,150 7.75% due 2/01/2002 1,247 A- A3 1,555 7.75% due 2/01/2002 1,687 A- Aaa 385 New York City, New York, GO, Series C, Sub-Series C-1, 7.50% due 8/01/2002 (b) 421 AAA Aaa 2,545 New York State Dormitory Authority, Revenue Refunding Bonds (Hamilton College), 4.75% due 7/01/2017 (e) 2,179 NR* Aa1 17,525 New York State Environmental Facilities Corporation, PCR, Refunding, RITR, Series RI-1, 7.645% due 6/15/2014 (k) 17,876 AA- A1 5,000 Port Authority of New York and New Jersey, Consolidated Revenue Bonds, 93rd Series, 6.125% due 6/01/2094 5,118
MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) Ohio--5.6% NR* A2 $ 2,500 Butler County, Ohio, Hospital Facilities Revenue Refunding and Improvement Bonds (Middletown Hospital), 5% due 11/15/2028 $ 1,989 NR* Baa3 5,500 Franklin County, Ohio, Hospital Revenue Bonds (Doctors Ohio Health Corp.), Series A, 5.60% due 12/01/2028 4,616 Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation Project), AMT: BBB+ Baa2 17,000 5.60% due 8/01/2032 14,421 BBB+ Baa2 15,000 5.65% due 3/01/2033 12,883 AA+ Aa1 7,000 Orange, Ohio, City School District, GO, 5% due 12/01/2023 6,130 AAA Aaa 2,405 Toledo, Ohio, Sewer System Revenue Refunding & Improvement Bonds, Mortgage, 4.75% due 11/15/2017 (e) 2,074 Oklahoma--0.5% AAA NR* 3,250 Holdenville, Oklahoma, Industrial Authority, Correctional Facility Revenue Bonds, 6.70% due 7/01/2006 (b)(j) 3,575 Oregon--1.5% AAA Aaa 14,000 Oregon Health Sciences University Revenue Refunding Bonds, Series A, 5.16%** due 7/01/2021 (e) 3,896 AAA Aaa 3,500 Port of Portland, Oregon, Airport Revenue Bonds (Portland International Airport), Series A, 5.50% due 7/01/2024 (c) 3,284 NR* Aaa 5,000 Portland, Oregon, Sewer System Revenue Refunding Bonds, RIB, Series 134, 6.17% due 6/01/2014 (h)(k) 4,257 Pennsylvania A NR* 2,975 Berks County, Pennsylvania, Municipal Authority, College - --7.6% Revenue Refunding Bonds (Alvernia College Project), 6% due 11/15/2018 2,909 Chester County, Pennsylvania, Health and Education Facilities Authority Revenue Bonds (Devereux Foundation): A- NR* 2,000 6% due 11/01/2019 1,919 A- NR* 2,000 6% due 11/01/2029 1,871 A1+ VMIG1++ 1,000 Geisinger Authority, Pennsylvania, Health System Revenue Refunding Bonds (Penn State-Geisinger Health), VRDN, Series B, 3.50% due 8/15/2028 (a) 1,000 Pennsylvania Convention Center Authority, Revenue Refunding Bonds, Series A: BBB Baa 9,675 6.70% due 9/01/2014 10,264 BBB Baa 5,000 6.75% due 9/01/2019 5,306 NR* NR* 5,000 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds (National Gypsum Company), AMT, Series A, 6.25% due 11/01/2027 4,746 AA+ Aa2 5,250 Pennsylvania HFA, S/F Mortgage Refunding Bonds, AMT, Series 42, 6.85% due 4/01/2025 5,463 AAA Aaa 16,270 Pennsylvania State Higher Educational Facilities Authority, Health Services Revenue Refunding Bonds (Allegheny Delaware Valley Obligation), Series C, 5.875% due 11/15/2016 (e) 15,998 Philadelphia, Pennsylvania, Authority for IDR, Refunding, Commercial Development: NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,625 NR* NR* 3,000 (Doubletree), Series A, 6.50% due 10/01/2027 2,979 AAA Aaa 2,000 Southeastern Pennsylvania Transportation Authority, Pennsylvania, Special Revenue Bonds, Series A, 4.75% due 3/01/2024 (h) 1,653 South Carolina BBB+ A3 2,500 Richland County, South Carolina, PCR, Refunding (Union Camp - --0.6% Corporation Project), Series C, 6.55% due 11/01/2020 2,510 NR* NR* 2,135 South Carolina Jobs EDA, Health Facilities Revenue Refunding Bonds (First Mortgage--Lutheran Homes), 5.70% due 5/01/2026 1,810
MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) South BBB+ Baa3 $ 900 South Dakota State Health and Educational Facilities Authority, Dakota--0.1% Revenue Refunding Bonds (Prairie Lakes), 7.25% due 4/01/2022 $ 960 Tennessee--1.1% NR* NR* 3,000 Hardeman County, Tennessee, Correctional Facilities Corporation Revenue Bonds, 7.75% due 8/01/2017 3,156 AA Aa3 5,630 Metropolitan Government, Nashville and Davidson County, Tennessee, Electric Revenue Bonds, Series A, 5.20% due 5/15/2023 4,988 Texas--6.5% AA- Aa3 5,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste Disposal Facility Revenue Bonds (E. I. du Pont de Nemours and Company Project), AMT, 6.40% due 4/01/2026 5,058 A1+ VMIG1++ 3,550 Gulf Coast Waste Disposal Authority, Texas, PCR, Refunding (Amoco Oil Company Project), VRDN, 3.50% due 10/01/2017 (a) 3,550 A1+ NR* 700 Harris County, Texas, Health Facilities Development Corporation, Hospital Revenue Refunding Bonds (Methodist Hospital), VRDN, 3.55% due 12/01/2025 (a) 700 Houston, Texas, Airport System Revenue Bonds (Special Facilities--Continental Airlines), AMT: BB Ba1 10,300 Series B, 6.125% due 7/15/2017 9,609 BB Ba1 9,200 Series C, 6.125% due 7/15/2027 8,439 BB Ba1 5,575 Series C, 5.70% due 7/15/2029 4,802 AAA Aaa 2,750 Houston, Texas, Water and Sewer System Revenue Refunding Bonds, Junior Lien, Series D, 6.125% due 12/01/2029 (e) 2,722 AAA Aaa 5,000 Keller, Texas, Independent School District, GO, Refunding, 5% due 8/15/2030 4,215 San Antonio, Texas, Electric and Gas Revenue Refunding Bonds: NR* Aa1 8,500 RIB, Series 76, 6.645% due 2/01/2015 (k) 7,397 AA Aa1 2,000 Series A, 4.50% due 2/01/2021 1,603 AAA Aaa 1,000 Texas Technology University Revenue Refunding and Improvement Bonds, Financing System, 6th Series, 5% due 2/15/2029 (c) 847 Utah--0.6% NR* NR* 3,900 Carbon County, Utah, Solid Waste Disposal Revenue Refunding Bonds (Laidlaw Environmental), AMT, Series A, 7.45% due 7/01/2017 4,063 AAA NR* 635 Utah State, HFA, S/F Mortgage Revenue Bonds, AMT, Senior-Series E-2, 7.15% due 7/01/2024 (d) 651 Virginia--8.3% NR* NR* 7,030 Dulles Town Center Community Development Authority, Virginia, Special Assessment Tax (Dulles Town Center Project), 6.25% due 3/01/2026 6,640 AA Aa2 8,815 Fairfax County, Virginia, Water Authority, Revenue Refunding Bonds, 6% due 4/01/2022 8,827 NR* NR* 8,650 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds (Port Facility--Zeigler Coal), 6.90% due 5/02/2022 8,363 NR* NR* 1,000 Pittsylvania County, Virginia, IDA Revenue Bonds, Exempt- Facility, AMT, Series A, 7.55% due 1/01/2019 1,050 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds: BBB- Baa3 16,600 Senior Series A, 5.50% due 8/15/2028 14,201 BBB- Baa3 24,600 Senior Series B, 5.90%** due 8/15/2019 6,387 BBB- Baa3 48,400 Senior Series B, 5.90%** due 8/15/2030 5,852 BBB- Baa3 70,500 Senior Series B, 5.95%** due 8/15/2035 6,048 AA+ Aa1 5,125 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds, Series A, 7.10% due 1/01/2025 5,245
MuniYield Fund, Inc. October 31, 1999 SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value State Ratings Ratings Amount Issue (Note 1a) West NR* NR* $ 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Virginia--0.4% Bonds (TJ International Project), AMT, 7% due 7/15/2025 $ 3,182 Wisconsin--0.7% AAA Aaa 6,000 Wisconsin Center District, Wisconsin, Tax Revenue Refunding Bonds, Junior Dedicated, 5.25% due 12/15/2027 (i) 5,355 Wyoming--0.2% NR* VMIG1++ 1,300 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc. Project), VRDN, 3.50% due 12/01/2022 (a) 1,300 Total Investments (Cost--$787,865)--99.5% 752,196 Other Assets Less Liabilities--0.5% 3,834 -------- Net Assets--100.0% $756,030 ======== (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, 1999. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. (i)FSA Insured. (j)Connie Lee Insured. (k)The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate in effect at October 31, 1999. (l)FHLMC Collateralized. (m)Escrowed to maturity. *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. Ratings of issues shown have not been audited by Deloitte & Touche LLP. See Notes to Financial Statements.
QUALITY PROFILE The quality ratings of securities in the Fund as of October 31, 1999 were as follows: Percent of S&P Rating/Moody's Rating Net Assets AAA/Aaa 26.4% AA/Aa 12.6 A/A 10.3 BBB/Baa 21.9 BB/Ba 10.6 B/B 2.9 CC/Ca 2.5 NR (Not Rated) 9.3 Other++ 3.0 [FN] ++Temporary investments in short-term municipal securities. MuniYield Fund, Inc. October 31, 1999 FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1999 Assets: Investments, at value (identified cost--$787,864,702) (Note 1a) $752,196,452 Cash 906,499 Receivables: Securities sold $ 16,958,575 Interest 11,879,395 28,837,970 ------------ Prepaid expenses and other assets 23,883 ------------ Total assets 781,964,804 ------------ Liabilities: Payables: Securities purchased 24,690,450 Dividends to shareholders (Note 1e) 750,303 Investment adviser (Note 2) 367,873 25,808,626 ------------ Accrued expenses and other liabilities 125,845 ------------ Total liabilities 25,934,471 ------------ Net Assets: Net assets $756,030,333 ============ 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 (38,317,103 shares issued and outstanding) $ 3,831,710 Paid-in capital in excess of par 538,873,283 Undistributed investment income--net 10,014,289 Accumulated distributions in excess of realized capital gains on investments--net (Note 1e) (11,020,699) Unrealized depreciation on investments--net (35,668,250) ------------ Total--Equivalent to $13.21 net asset value per share of Common Stock (market price--$12.875) 506,030,333 ------------ Total capital $756,030,333 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
MuniYield Fund, Inc. October 31, 1999 FINANCIAL INFORMATION (continued) Statement of Operations
For the Year Ended October 31, 1999 Investment Income Interest and amortization of premium and discount earned $ 47,925,885 (Note 1d): Expenses: Investment advisory fees (Note 2) $ 4,104,482 Commission fees (Note 4) 632,194 Transfer agent fees 191,848 Accounting services (Note 2) 103,026 Professional fees 85,554 Custodian fees 59,314 Directors' fees and expenses 41,940 Printing and shareholder reports 41,167 Listing fees 34,780 Pricing fees 18,541 Other 36,809 ------------ Total expenses 5,349,655 ------------ Investment income--net 42,576,230 ------------ Realized & Realized loss on investments--net (545,814) Unrealized Loss on Change in unrealized appreciation/depreciation on Investments--Net investments--net (89,396,899) (Notes 1b, 1d & 3): ------------ Net Decrease in Net Assets Resulting from Operations $(47,366,483) ============ See Notes to Financial Statements.
MuniYield Fund, Inc. October 31, 1999 FINANCIAL INFORMATION (continued) Statements of Changes in Net Assets
For the Year Ended October 31, Increase (Decrease) in Net Assets: 1999 1998 Operations: Investment income--net $ 42,576,230 $ 44,789,520 Realized gain (loss) on investments--net (545,814) 30,241,513 Change in unrealized appreciation/depreciation on investments--net (89,396,899) (12,286,231) ------------ ------------ Net increase (decrease) in net assets resulting from operations (47,366,483) 62,744,802 ------------ ------------ Dividends & Investment income--net: Distributions to Common Stock (36,119,916) (36,306,077) Shareholders Preferred Stock (6,368,964) (6,658,668) (Note 1e): Realized gain on investments--net: Common Stock (14,409,079) (9,726,657) Preferred Stock (1,619,668) (3,428,543) In excess of realized gain on investments--net: Common Stock (9,906,186) -- Preferred Stock (1,113,516) -- ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (69,537,329) (56,119,945) ------------ ------------ Capital Stock Value of shares issued to Common Stock shareholders Transactions in reinvestment of dividends and distributions 11,711,691 8,278,056 (Note 4): ------------ ------------ Net Assets: Total increase (decrease) in net assets (105,192,121) 14,902,913 Beginning of year 861,222,454 846,319,541 ------------ ------------ End of year* $756,030,333 $861,222,454 ============ ============ *Undistributed investment income--net (Note 1f) $ 10,014,289 $ 9,925,942 ============ ============ See Notes to Financial Statements.
MuniYield Fund, Inc. October 31, 1999 FINANCIAL INFORMATION (concluded) Financial Highlights
The following per share data and ratios have been derived from information provided in the financial statements. For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995 Per Share Net asset value, beginning of year $ 16.27 $ 16.09 $ 15.68 $ 15.47 $ 14.35 Operating -------- -------- -------- -------- -------- Performance: Investment income--net 1.12 1.19 1.24 1.26 1.27 Realized and unrealized gain (loss) on investments--net (2.34) .49 .65 .23 1.34 -------- -------- -------- -------- -------- Total from investment operations (1.22) 1.68 1.89 1.49 2.61 -------- -------- -------- -------- -------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.95) (.97) (1.00) (1.04) (1.00) Realized gain on investments--net (.38) (.26) (.22) -- (.22) In excess of realized gain on investments--net (.27) -- (.01) -- -- -------- -------- -------- -------- -------- Total dividends and distributions to Common Stock shareholders (1.60) (1.23) (1.23) (1.04) (1.22) -------- -------- -------- -------- -------- Effect of Preferred Stock activity: Dividends and distributions to Preferred Stock shareholders: Investment income--net (.17) (.18) (.20) (.24) (.23) Realized gain on investments--net (.04) (.09) (.05) -- (.04) In excess of realized gain on investments--net (.03) -- --++++ -- -- -------- -------- -------- -------- -------- Total effect of Preferred Stock activity (.24) (.27) (.25) (.24) (.27) -------- -------- -------- -------- -------- Net asset value, end of year $ 13.21 $ 16.27 $ 16.09 $ 15.68 $ 15.47 ======== ======== ======== ======== ======== Market price per share, end of year $ 12.875 $ 16.875 $ 15.875 $ 14.875 $ 14.375 ======== ======== ======== ======== ======== Total Investment Based on market price per share (15.35%) 14.74% 15.56% 10.88% 29.76% Return:* ======== ======== ======== ======== ======== Based on net asset value per share (9.92%) 9.15% 11.11% 8.61% 18.00% ======== ======== ======== ======== ======== Ratios Based on Total expenses** .93% .89% .91% .92% .96% Average Net Assets ======== ======== ======== ======== ======== Of Common Stock: Total investment income--net** 7.42% 7.43% 7.81% 8.06% 8.67% ======== ======== ======== ======== ======== Amount of dividends to Preferred Stock shareholders 1.11% 1.10% 1.28% 1.57% 1.54% ======== ======== ======== ======== ======== Investment income--net, to Common Stock shareholders 6.31% 6.33% 6.53% 6.49% 7.13% ======== ======== ======== ======== ======== Ratios Based Total expenses .65% .63% .64% .64% .66% On Total Average ======== ======== ======== ======== ======== Net Assets:++** Total investment income--net 5.17% 5.26% 5.48% 5.64% 5.91% ======== ======== ======== ======== ======== Ratios Based on Dividends to Preferred Stock shareholders 2.55% 2.66% 3.02% 3.63% 3.34% Average Net ======== ======== ======== ======== ======== Assets Of Preferred Stock: Supplemental Net assets, net of Preferred Stock, Data: end of year (in thousands) $506,030 $611,222 $596,320 $581,124 $573,400 ======== ======== ======== ======== ======== Preferred Stock outstanding, end of year (in thousands) $250,000 $250,000 $250,000 $250,000 $250,000 ======== ======== ======== ======== ======== Portfolio turnover 78.42% 91.63% 111.45% 96.74% 52.99% ======== ======== ======== ======== ======== Leverage: Asset coverage per $1,000 $ 3,024 $ 3,445 $ 3,385 $ 3,324 $ 3,294 ======== ======== ======== ======== ======== Dividends Series A--Investment income--net $ 588 $ 694 $ 747 $ 894 $ 887 Per Share on ======== ======== ======== ======== ======== Preferred Stock Series B--Investment income--net $ 595 $ 687 $ 751 $ 897 $ 850 Outstanding: ======== ======== ======== ======== ======== Series C--Investment income--net $ 687 $ 643 $ 763 $ 998 $ 827 ======== ======== ======== ======== ======== Series D--Investment income--net $ 694 $ 637 $ 762 $ 888 $ 897 ======== ======== ======== ======== ======== Series E--Investment income--net $ 627 $ 656 $ 752 $ 875 $ 759 ======== ======== ======== ======== ======== *Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Total investment returns exclude the effects of sales charges. **Do not reflect the effect of dividends to Preferred Stock shareholders. ++Includes Common and Preferred Stock average net assets. ++++Amount is less than $.01 per share. See Notes to Financial Statements.
MuniYield Fund, Inc. October 31, 1999 NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: MuniYield Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non-diversified, closed-end management investment company. The Fund's financial statements are prepared in accordance with generally accepted accounting principles, which may require the use of management accruals and estimates. The Fund determines and makes available for publication the net asset value of its Common Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock Exchange under the symbol MYD. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Municipal bonds are traded primarily in the over-the-counter markets and are valued at the most recent bid price or yield equivalent as obtained by the Fund's pricing service from dealers that make markets in such securities. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their closing price as of the close of such exchanges. Options written or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-counter-market, valuation is the last asked price (options written) or the last bid price (options purchased). Securities with remaining maturities of sixty days or less are valued at amortized cost, which approximates market value. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith by or under the direction of the Board of Directors of the Fund, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the fund under the general supervision of the Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio 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 financial futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Interest income is recognized on the accrual basis. Discounts and market premiums are amortized into interest income. Realized gains and losses on security transactions are determined on the identified cost basis. MuniYield Fund, Inc. October 31, 1999 (e) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. Distributions in excess of realized capital gains are due primarily to differing tax treatments for futures transactions. (f) Reclassification--Generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, current year's permanent book/tax differences of $997 have been reclassified between accumulated distributions in excess of net realized capital gains and undistributed net investment income. These reclassifications have no effect on net assets or net asset value per share. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee at an annual rate of .50% of the Fund's average weekly net assets, including proceeds from the issuance of Preferred Stock. Accounting services are provided to the Fund by FAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of FAM, PSI, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended October 31, 1999 were $639,077,359 and $629,384,170, respectively. Net realized gains (losses) for the year ended October 31, 1999 and net unrealized losses as of October 31, 1999 were as follows: Realized Unrealized Gains (Losses) Losses Long-term investments $(3,472,553) $(35,668,250) Financial futures contracts 2,926,739 -- ----------- ------------ Total $ (545,814) $(35,668,250) =========== ============ As of October 31, 1999, net unrealized depreciation for Federal income tax purposes aggregated $35,675,252, of which $12,957,014 related to appreciated securities and $48,632,266 related to depreciated securities. The aggregate cost of investments at October 31, 1999 for Federal income tax purposes was $787,871,704. 4. Capital Stock Transactions: The Fund is authorized to issue 200,000,000 shares of capital stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of capital stock without approval of the holders of Common Stock. Common Stock Shares issued and outstanding during the years ended October 31, 1999 and October 31, 1998 increased by 742,979 and 512,710, respectively, as a result of dividend reinvestment. Preferred Stock Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the Fund, with a par value of $.05 per share and a liquidation preference of $25,000 per share, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at October 31, 1999 were as follows: Series A, 3.40%; Series B, 3.60%; Series C, 3.45%, Series D, 3.45%; and Series E, 3.25%. Shares issued and outstanding during the years ended October 31, 1999 and October 31, 1998 remained constant. The Fund pays commissions to certain broker-dealers at the end of each auction at an annual rate ranging from .25% to .375%, calculated on the proceeds of each auction. For the year ended October 31, 1999, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $235,465 as commissions. MuniYield Fund, Inc. October 31, 1999 NOTES TO FINANCIAL STATEMENTS (concluded) 5. Capital Loss Carryforward: At October 31, 1999, the Fund had a net capital loss carryforward of approximately $6,930,000, all of which expires in 2007. This amount will be available to offset like amounts of any future taxable gains. 6. Subsequent Event: On November 8, 1999, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $.077000 per share, payable on November 29, 1999 to shareholders of record as of November 22, 1999. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, 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, 1999, the related statement 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 five-year period then ended. 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, 1999 by correspondence with the custodian and brokers. 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, 1999, 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 10, 1999 MuniYield Fund, Inc. October 31, 1999 IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield Fund, Inc. during its taxable year ended October 31, 1999 qualify as tax-exempt interest dividends for Federal income tax purposes. Additionally, the following table summarizes the taxable distributions paid by the Fund during the year: Payable Ordinary Long-Term Date Income Capital Gains* Common Stock Shareholders 12/30/98 $.140334 $.505848 Preferred Stock Shareholders: Series A 11/04/98 -- $99.43 12/02/98 $41.11 $57.11 12/30/98 $42.00 $58.34 1/27/99 $12.98 $28.22 Series B 11/12/98 $30.36 $73.54 12/09/98 $28.23 $70.51 1/06/99 $29.02 $76.29 2/03/99 $ 9.94 $33.90 Series C 11/25/98 $44.32 $54.42 12/23/98 $44.40 $58.32 1/20/99 $ 0.31 $ 4.89 Series D 11/25/98 $45.93 $54.69 12/23/98 $42.33 $58.39 Series E 11/04/98 -- $23.23 11/12/98 $10.55 $16.75 11/18/98 $ 8.58 $13.78 11/25/98 $ 8.68 $14.06 12/02/98 $ 7.91 $12.92 12/09/98 $ 8.29 $13.68 12/16/98 $ 8.48 $14.18 12/23/98 $10.10 $17.17 12/30/98 $ 9.55 $16.65 1/06/99 $ 8.64 $15.57 1/13/99 $ 8.54 $16.32 1/20/99 $ 1.56 $ 4.46 *All of these distributions are subject to the 20% tax rate. Please retain this information for your records.
YEAR 2000 ISSUES Many computer systems were designed using only two digits to designate years. These systems may not be able to distinguish the Year 2000 from the Year 1900 (commonly known as the "Year 2000 Problem"). The Fund could be adversely affected if the computer systems used by the Fund's management or other Fund service providers do not properly address this problem before January 1, 2000. The Fund's management expects to have addressed this problem before then, and does not anticipate that the services it provides will be adversely affected. The Fund's other service providers have told the Fund's management that they also expect to resolve the Year 2000 Problem, and the Fund's management will continue to monitor the situation as the Year 2000 approaches. However, if the problem has not been fully addressed, the Fund could be negatively affected. The Year 2000 Problem could also have a negative impact on the securities in which the Fund invests, and this could hurt the Fund's investment returns. -----END PRIVACY-ENHANCED MESSAGE-----