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