MUNIYIELD
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
October 31, 1997
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 #16190 -- 10/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MuniYield Fund, Inc.
DEAR SHAREHOLDER
For the year ended October 31, 1997, the Common Stock of MuniYield
Fund, Inc. earned $1.017 per share income dividends, which included
earned and unpaid dividends of $0.084. This represents a net
annualized yield of 6.32%, based on a month-end net asset value of
$16.09 per share. Over the same period, the total investment return on
the Fund's Common Stock was +11.11%, based on a change in per share
net asset value from $15.68 to $16.09, and assuming reinvestment of
$1.018 per share income dividends and $0.208 per share capital gains
distributions.
For the six-month period ended October 31, 1997, the total investment
return on the Fund's Common Stock was +8.53%, based on a change in per
share net asset value from $15.30 to $16.09, and assuming reinvestment
of $0.498 per share income dividends.
For the six-month period ended October 31, 1997, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
3.29%; Series B, 3.30%; Series C, 3.85%; Series D, 3.84%; and Series
E, 3.53%.
The Municipal Market Environment
Long-term interest rates generally declined during the six-month
period ended October 31, 1997. The general financial environment has
remained one of solid economic growth tempered by few or no
inflationary pressures. While economic growth has been conducive to
declining bond yields, it has remained strong enough to suggest that
the Federal Reserve Board (FRB) might find it necessary to raise
short-term interest rates. This would be intended to slow economic
growth and ensure that any incipient inflationary pressures would be
curtailed. There were investor concerns that the FRB would be forced
to raise interest rates prior to year-end, thus preventing an even
more dramatic decline in interest rates. Long-term tax-exempt revenue
bonds, as measured by the Bond Buyer Revenue Bond Index, declined over
50 basis points (0.50%) to end the six-month period ended October 31,
1997 at 5.60%.
Similarly, long-term US Treasury bond yields generally moved lower
during most of the six-month period ended October 31, 1997. However,
the turmoil in the world's equity markets during the last week in
October has resulted in a significant rally in the Treasury bond
market. The US Treasury bond market was the beneficiary of a flight to
quality mainly by foreign investors whose own domestic markets have
continued to be very volatile. Prior to the initial decline in Asian
equity markets, long-term US Treasury bond yields were essentially
unchanged. By the end of October, US Treasury bond yields declined 80
basis points to 6.15%, their lowest level of 1997.
The tax-exempt bond market's continued underperformance as compared to
its taxable counterpart has been largely in response to its ongoing
weakening technical position. As municipal bond yields have declined,
municipalities have hurriedly rushed to refinance outstanding higher-
couponed debt with new issues financed at present low rates. During
the last six months, over $118 billion in new long-term tax-exempt
issues were underwritten, an increase of over 25% versus the
comparable period a year ago. As interest rates have continued to
decline, these refinancings have intensified municipal bond issuance.
During the past three months, approximately $60 billion in new long-
term municipal securities were underwritten, an increase of over 34%
as compared to the October 31, 1996 quarter.
The recent trend toward larger and larger bond issues has also
continued. However, issues of such magnitude usually must be
attractively priced to ensure adequate investor interest. Obviously,
the yields of other municipal bond issues are impacted by the yield
premiums such large issuers have been required to pay. Much of the
municipal bond market's recent underperformance can be traced to
market pressures that these large bond issuances have exerted.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline is likely to be generated in part by reduced US
export growth. Additionally, some decline in consumer spending also
can be expected in response to reduced consumer confidence. Perhaps
more importantly, it is likely that barring a dramatic and unexpected
resurgence in domestic growth, the FRB may be unwilling to raise
interest rates until the full impact of the equity market's
corrections can be established.
All of these factors suggest that for at least the near term, interest
rates, including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some pressure as a result of continued strong new-issue
supply. However, the recent pace of municipal bond issuance is likely
to be unsustainable. Continued increases in bond issuance will require
lower tax-exempt bond yields to generate the economic savings
necessary for additional municipal bond refinancing. With tax-exempt
bond yields at already attractive yield ratios relative to US Treasury
bonds (approximately 90% at the end of October), any further pressure
on the municipal market may represent an attractive investment
opportunity.
Portfolio Strategy
The Fund finished the 12-month period ended October 31,1997 with a
stable and competitive dividend yield, a large core position in high-
quality, income-oriented securities, and a conservative allocation of
assets toward higher yielding sub-investment grade bonds. These
elements typify our investment approach and explain the Fund's
outperformance relative to many of its competitors. Our investment
strategy was divided between seeking to improve average call
protection and employing a range-bound approach to interest rate
fluctuations, which entails reducing market exposure during periods of
strength and utilizing times of weakness as an opportunity to lock in
attractive yields. The Fund continued to benefit from a large
concentration in corporate-related tax- exempt debt, which has
outperformed the municipal bond market in general because of favorable
economic fundamentals, positive earnings results and a narrowing of
credit spreads. The Fund's investments in high-yield municipal bonds
also proved beneficial in light of the previously mentioned
contraction in spreads.
A significant development was the defeasance of a large portion of the
Fund's holdings. This occurred as a result of issuers seeking to
capitalize on lower interest rates by refinancing their outstanding
debt. The result provided a positive impact on both the market value
and the credit quality of the existing security. The percentage of
defeased securities held by the Fund increased from 8.5% to nearly 15%
of net assets during the year ended October 31, 1997.
In our April shareholder report, we cited concern over FRB monetary
policy as justification for a more cautious investment outlook. Since
that time, the bond market was buffeted by shifting perceptions over
the sustainability of economic growth and the resurgence of inflation.
While the US economy consistently exhibited surprising strength and
durability at this late stage in the expansion, most inflationary
measures continue to demonstrate an economy operating without any
significant capacity constraints. These circumstances presented a
favorable backdrop for bonds and, as a result, we preferred to keep
the Fund fully invested. Recent evidence of continued solid economic
growth, accompanied by increasingly tight labor markets, suggest that
the need for a more restrictive monetary policy has risen. These
developments would usually cause us to become more cautious and
implement an investment strategy designed to preserve the gains
achieved thus far. However, the recent volatility in world equity
markets resulted in a flight to quality causing long-term interest
rates to decline to their lows of the year. Consequently, the risk of
a further monetary policy tightening has receded. In our view, until
the full impact of the world equity markets' correction can be
determined, our adoption of a more neutral positioning for the Fund
seems appropriate. We will continue to seek to provide and maintain an
attractive dividend.
In Conclusion
We appreciate your ongoing interest in MuniYield Fund, Inc., and we
look forward to assisting you with your financial needs in the months
and years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/THEODORE R. JAECKEL JR.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
December 9, 1997
<TABLE>
<CAPTION>
PROXY RESULTS
During the six-month period ended October 31, 1997, MuniYield Fund, Inc. Common Stock Shareholders voted on the following
proposals. The proposals were approved at a shareholders' meeting on September 18, 1997. The description of each proposal
and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Herbert I. London 35,866,500 680,440
Robert R. Martin 35,859,615 687,325
Andre Perold 35,863,540 683,400
Arthur Zeikel 35,840,000 706,940
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors. 35,834,387 267,469 445,084
During the six-month period ended October 31, 1997, MuniYield Fund, Inc. Preferred Stock shareholders (Series A, B, C, D and E)
voted on the following proposals. The proposals were approved at a shareholders' meeting on September 18, 1997. The description
of each proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Withheld
For From Voting
<S> <C> <C> <C>
1. To elect the Portfolio's Board of Directors:
James H. Bodurtha, Herbert I. London,
Robert R. Martin, Joseph L. May,
Andre F. Perold and Arthur Zeikel
as follows: Series A 1,772 0
Series B 1,622 0
Series C 1,245 40
Series D 1,515 30
Series E 2,315 0
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C> <C>
2. To select Deloitte & Touche LLP as the
Portfolio's independent auditors
as follows: Series A 1,769 0 3
Series B 1,622 0 0
Series C 1,285 0 0
Series D 1,486 0 59
Series E 2,295 0 20
</TABLE>
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Fund, Inc. utilizes leveraging to seek to enhance the yield
and net asset value of its Common Stock. However, these objectives
cannot be achieved in all interest rate environments. To leverage, the
Fund issues Preferred Stock, which pays dividends at prevailing short-
term interest rates, and invests the proceeds in long-term municipal
bonds. The interest earned on these investments is paid to Common
Stock shareholders in the form of dividends, and the value of these
portfolio holdings is reflected in the per share net asset value of
the Fund's Common Stock. However, in order to benefit Common Stock
shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates.
At the same time, a period of generally declining interest rates will
benefit Common Stock shareholders. If either of these conditions
change, then the risks of leveraging will begin to outweigh the
benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock for
an additional $50 million, creating a total value of $150 million
available for investment in long-term municipal bonds. If prevailing
short-term interest rates are approximately 3% and long-term interest
rates are approximately 6%, the yield curve has a strongly positive
slope. The fund pays dividends on the $50 million of Preferred Stock
based on the lower short-term interest rates. At the same time, the
fund's total portfolio of $150 million earns the income based on long-
term interest rates. Of course, increases in short-term interest rates
would reduce (and even eliminate) the dividends of the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term and
long-term interest rates, the incremental yield pickup on the Common
Stock will be reduced or eliminated completely. At the same time, the
market value on the fund's Common Stock (that is, its price as listed
on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net
asset value will reflect the full decline in the price of the
portfolio's investments, since the value of the fund's Preferred Stock
does not fluctuate. In addition to the decline in net asset value, the
market value of the fund's Common Stock may also decline.
<TABLE>
<CAPTION>
MuniYield Fund, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Alabama -- 1.2% BBB Baa1 $8,750 Courtland, Alabama, IDB, IDR, Refunding (Champion
International Corporation), Series A, 7.20% due 12/01/2013 $9,728
Alaska -- 3.5% Valdez, Alaska, Marine Terminal Revenue Refunding Bonds:
NR* NR* 10,050 (Amerada Hess Pipleline Corporation), 6.10% due 2/01/2024 10,293
AA Aa2 8,000 (British Petroleum Pipeline), Series B, 7% due 12/01/2025 8,857
AA Aa3 9,635 (Sohio Pipeline -- British Petroleum Oil),
7.125% due 12/01/2025 10,790
Arizona -- 3.0% Maricopa County, Arizona, Pollution Control Corporation,
PCR, Refunding:
A1+ P1 1,100 (Arizona Public Service Co.), VRDN, Series B,
3.65% due 5/01/2029 (a) 1,100
BB+ Ba1 9,000 (Public Service Company of New Mexico Project), Series A,
6.30% due 12/01/2026 9,469
B B2 15,000 Pima County, Arizona, IDA, Industrial Revenue Bonds
(Tucson Electric Power Co. Project), Series B, 6% due
9/01/2029 15,145
California -- 4.3% California Foothill/Eastern Transportation Corridor Agency,
Toll Road Revenue Bonds, Senior Lien, Series A**:
AAA Aaa 10,000 6.25% due 1/01/2018 (i) 3,368
AAA Aaa 10,000 5.791% due 1/01/2020 (i) 2,997
BBB- Baa 34,165 6.33% due 1/01/2020 9,724
AAA Aaa 10,000 5.788% due 1/01/2021 (i) 2,839
BBB- Baa 20,245 6.24% due 1/01/2021 5,444
AAA Aaa 10,000 5.783% due 1/01/2022 (i) 2,720
BBB- Baa 15,000 6.25% due 1/01/2022 3,812
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) 5,770
Colorado -- 5.1% Denver, Colorado, City and County Airport Revenue Bonds:
BBB Baa1 700 AMT, Series D, 7.75% due 11/15/2001 (b) 802
BBB Baa1 8,000 AMT, Series D, 7.75% due 11/15/2013 10,000
BBB Baa1 2,610 AMT, Series D, 7.75% due 11/15/2021 2,922
AAA Baa1 14,350 Series A, 7.25% due 11/15/2002 (b) 16,474
AAA NR* 4,900 Series A, 7.25% due 11/15/2002 (b) 5,625
NR* NR* 5,000 Denver, Colorado, Urban Renewal Authority, Tax Increment
Revenue Bonds (Downtown Denver), AMT, Series A,
7.75% due 9/01/2016 5,505
NR* NR* 1,650 Mountain Village, Colorado, Metropolitan District, Refunding
(San Miguel County), UT, 7.95% due 12/01/2003 1,851
Connecticut -- 2.8% A+ NR* 15,000 Connecticut State Development Authority, Water Facilities
Revenue Bonds (Bridgeport Hydraulic Co. Project), AMT,
6% due 9/01/2036 15,580
NR* Baa3 5,000 Mashantucket Western Pequot Tribe, Connecticut, Special
Revenue Bonds, Sub 144A, Series B, 5.75% due 9/01/2027 5,047
NR* B1 2,550 New Haven, Connecticut, Facilities Revenue Bonds
(Hill Health Corporation Project), 9.25% due 5/01/2017 2,845
District of A+ A3 4,940 District of Columbia, Revenue Bonds (Howard University),
Columbia -- 0.6% Series B, 6.75% due 10/01/2012 5,429
Florida -- 1.1% A1+ VMIG1+ 200 Dade County, Florida, IDA, IDR (Dolphins Stadium Project),
VRDN, Series D, 3.65% due 1/01/2016 (a) 200
NR* NR* 9,100 Grand Haven, Florida, Community Development District,
Special Assessment, Series A, 6.30% due 5/01/2002 9,296
Georgia -- 0.9% NR* Aaa 5,535 Atlanta, Georgia, Urban Residential Finance Authority,
College Facilities Revenue Bonds (Morris Brown College
Project), 9.50% due 12/01/2001 (b) 6,738
A1 VMIG1+ 1,000 Burke County, Georgia, Development Authority, PCR
(Georgia Power Company -- Plant Vogtle Project), VRDN,
2nd Series, 3.65% due 4/01/2025 (a) 1,000
Hawaii -- 0.9% Hawaii State Housing Finance and Development Corporation,
S/F Mortgage Purchase Revenue Bonds:
AA Aa1 1,945 AMT, Series A, 7% due 7/01/2011 2,044
AA Aa1 870 AMT, Series A, 7.10% due 7/01/2024 917
AA Aa1 3,040 Series B, 6.90% due 7/01/2016 3,209
AA Aa1 1,110 Series B, 7% due 7/01/2031 1,171
Idaho -- 0.5% NR* VMIG1+ 500 Idaho Health Facilities Authority Revenue Bonds
(Pooled Financing Program), ACES, 3.65% due 10/01/2010 (a) 500
AA NR* 3,755 Idaho Housing Agency, S/F Mortgage, AMT, Senior Series C-2,
7.15% due 7/01/2023 3,975
Illinois -- 3.1% NR* Aaa 4,715 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B,
7.625% due 9/01/2027 (f)(g) 5,324
BBB Baa1 2,750 Illinois Development Finance Authority, PCR, Refunding
(Illinois Power Company Project), Series A, 7.375% due
7/01/2021 3,163
NR* NR* 2,500 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health Systems), 7.25% due 11/15/2019 (b) 3,076
Illinois Health Facilities Authority Revenue Bonds:
A+ A2 1,500 (Edward Hospital Association Project), 7% due 2/15/2002 (b) 1,680
NR* NR* 2,625 Refunding (Saint Elizabeth's Hospital -- Chicago),
7.75% due 7/01/2016 2,960
BBB- NR* 8,000 Metropolitan Pier and Exposition Authority, Illinois,
Hospitality Facilities Revenue Bonds (McCormick Place
Convention), 7% due 7/01/2026 9,595
Indiana -- 1.7% Indiana Health Facilities Financing Authority Revenue Bonds,
Series A:
NR* NR* 2,000 (Community -- Hartsfield Village Project), 6.375%
due 8/15/2027 2,012
NR* A2 1,150 Refunding (Saint Anthony Medical Center), 7% due
10/01/2017 1,251
BBB- Baa3 3,930 Indiana State Development Finance Authority, Environmental
Revenue Refunding and Improvement Bonds (USX Corporation
Project), 6.25% due 7/15/2030 4,133
A+ NR* 6,000 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D, 6.75% due 2/01/2020 6,627
A1+ Aaa 200 Rockport, Indiana, PCR, Refunding, (AEP Generating Co.
Project), VRDN, Series A, 3.65% due 7/01/2025 (a)(c) 200
Iowa -- 0.0% A1+ NR* 200 Iowa, Financing Authority, Solid Waste Disposal Revenue Bonds
(Cedar River Paper Co. Project), VRDN, AMT 3.75%
due 2/01/2032 (a) 200
Kansas -- 1.1% AAA Aaa 8,300 Burlington, Kansas, PCR, Refunding (Kansas Gas and
Electric Company Project), 7% due 6/01/2031 (e) 9,066
Kentucky -- 1.3% Kenton County, Kentucky, Airport Board, Special Facilities
Airport Revenue Bonds (Delta Airlines Project), AMT, Series A:
BBB- Baa3 5,785 7.50% due 2/01/2020 6,395
BBB- Baa3 500 6.125% due 2/01/2022 510
NR* NR* 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds
(TJ International Project), AMT, 7% due 6/01/2024 4,343
Louisiana -- 6.6% NR* A3 35,000 Lake Charles, Louisiana, Harbor and Terminal District,
Port Facilities Revenue Refunding Bonds (Trunkline Long
Company Project), 7.75% due 8/15/2022 40,111
BB NR* 15,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project), 6.50% due 1/01/2017 15,872
Maryland -- 1.0% NR* NR* 3,000 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration -- AES Warrior Run),
AMT, 7.40% due 9/01/2019 3,292
NR* Aaa 4,500 Prince Georges County, Maryland, Hospital Revenue Bonds
(Dimensions Health Corporation Issue), 7.25% due 7/01/2002 (b) 5,131
Massachusetts -- AAA Aaa 5,000 Massachusetts State, HFA, Residential Development Bonds,
1.4% Series C, 6.90% due 11/15/2021 (f) 5,440
A+ Aa 5,970 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
Series 38, 7.20% due 12/01/2026 6,457
Michigan -- 0.5% Detroit, Michigan, GO, UT, Series A:
BBB Aaa 1,500 6.80% due 4/01/2005 (b) 1,729
BBB Baa2 2,500 6.70% due 4/01/2010 2,742
Minnesota -- 2.6% A1+ VMIG1+ 200 Duluth, Minnesota, Tax Increment Revenue Bonds
(Lake Superior Paper), VRDN, 3.60% due 9/01/2010 (a) 200
AA A1 100 Minneapolis, Minnesota, Community Development Agency,
PCR (Northern State Power Company Project), VRDN,
3.75% due 3/01/2011 (a) 100
AA+ Aa2 10,000 Minnesota State, HFA, Housing Development, Series A,
6.95% due 2/01/2014 10,541
AA+ Aa2 3,410 Minnesota State, HFA, S/F Mortgage, AMT, Series A,
7.05% due 7/01/2022 3,567
AA A1 1,400 Red Wing, Minnesota, PCR (Northern States Power
Company Project), VRDN, 3.75% due 3/01/2011 (a) 1,400
BBB Baa1 5,700 Sartell, Minnesota, PCR, Refunding (Champion International
Corporation), 6.95% due 10/01/2012 6,222
Mississippi -- 2.5% A A2 17,750 Lowndes County, Mississippi, Solid Waste Disposal and PCR,
Refunding (Weyerhaeuser Company Project), Series A,
6.80% due 4/01/2022 21,044
Missouri -- 1.2% BBB- NR* 2,800 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding
and Improvement Bonds (Tri-State Osteopathic), 8.25%
due 12/15/2014 3,099
AAA NR* 5,965 Missouri State Housing Development Commission, S/F Mortgage
Revenue Bonds, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 6,740
New Jersey -- 4.5% Bernards Township, New Jersey, School District Revenue
Refunding Bonds, UT:
AA NR* 2,040 5.30% due 1/01/2021 2,041
AA NR* 3,205 5.30% due 1/01/2022 3,205
AA NR* 3,370 5.30% due 1/01/2023 3,369
NR* Aaa 2,000 Cumberland County, New Jersey, Utilities Authority, Sewer
Revenue Refunding Bonds, 5% due 3/01/2017 (c) 1,940
New Jersey Health Care Facilities Financing Authority,
Revenue Refunding Bonds:
AAA Aaa 2,735 (AHS Hospital Corporation), Series A, 5% due 7/01/2016 (c) 2,670
BBB Baa2 6,130 (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 6,309
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) 10,265
AAA Aaa 5,500 New Jersey State Transportation Trust Fund Authority
(Transportation System), Series A, 4.75% due 12/15/2016 (e) 5,164
AA A1 3,500 Rutgers State University, New Jersey, GO, Series A,
5.20% due 5/01/2027 3,463
New York -- 17.0% A A2 10,000 Battery Park City Authority, New York, Revenue Refunding
Bonds, Series A, 5.80% due 11/01/2022 10,270
AAA Aaa 5,595 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, RITR, Series 9, 8.22% due 7/01/2026
(k) 6,476
AAA Aaa 2,000 Metropolitan Transportation Authority, New York
(Dedicated Tax Fund), Series A, 5.50% due 4/01/2016 (e) 2,036
New York City, New York, GO, UT:
BBB+ Aaa 1,695 Series A, 7.75% due 8/15/2001 (b) 1,930
BBB+ Aaa 3,910 Series A, 7.75% due 8/15/2001 (b) 4,452
AAA Aaa 1,930 Series A, 7.75% due 8/15/2001 (b) 2,197
BBB+ Aaa 3,970 Series B, 7% due 6/01/2001 (b) 4,397
BBB+ Baa1 420 Series B, 7% due 6/01/2016 454
BBB+ Baa1 15,000 Series B, Fiscal 92, 7.75% due 2/01/2010 16,964
BBB+ Baa1 1,555 Series B, Fiscal 92, 7.75% due 2/01/2013 1,755
BBB+ Aaa 885 Series B, Sub-Series B-1, 7% due 8/15/2004 (b) 1,029
BBB+ Baa1 5,515 Series B, Sub-Series B-1, 7% due 8/15/2016 6,230
BBB+ Aaa 4,615 Series C, Sub-Series C-1, 7.50% due 8/01/2002 (b) 5,319
BBB+ Baa1 385 Series C, Sub-Series C-1, 7.50% due 8/01/2021 433
A A 5,500 New York City, New York, IDA, Special Facilities Revenue
Bonds, RITR, AMT, Series RI-5, 7.895% due 1/01/2024 (k) 6,022
A1+ VMIG1+ 200 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN, Series G,
3.70% due 6/15/2024 (a)(h) 200
A1+ VMIG1+ 400 New York City, New York, UT, Series B, Sub-Series B-6, VRDN,
3.65% due 8/01/2005 (a)(e) 400
New York State Dormitory Authority Revenue Bonds:
AA NR* 3,000 (Hebrew Home for the Aged -- Riverdale), 6.125% due
2/01/2037 (d) 3,215
AAA Aaa 3,500 Refunding (City University Systems), 3rd Generation
Resources, 5.50% due 7/01/2016 (c) 3,568
AAA Aaa 4,000 Refunding (Rochester Instition Technology),
5.30% due 7/01/2017 (e) 4,012
New York State Environmental Facilities Corporation, PCR:
A- Aa 17,525 RITR, Series RI-1, 7.445% due 6/15/2014 (k) 19,628
A Aa 22,700 (State Water Revolving Fund), Series E, 6.875% due
6/15/2001 (b) 25,126
A Aa 1,700 (State Water Revolving Fund), Series E, 6.875% due
6/15/2010 1,871
A+ A3 6,000 New York State Local Government Assistance Corporation
Revenue Bond, Series A, 6.50% due 4/01/2020 6,453
AA- A1 8,000 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 93rd Series, 6.125% due 6/01/2094 8,898
North Carolina -- 2.5% North Carolina HFA, S/F Revenue Bonds:
AA Aa 5,180 AMT, Series T, 7.05% due 9/01/2020 5,522
AA Aa 14,560 Refunding, Series S, 6.95% due 3/01/2017 15,634
North Dakota -- 0.5% A+ Aa2 3,770 North Dakota State, HFA, S/F Mortgage Revenue Bonds,
Series A, 7% due 7/01/2023 3,984
Ohio -- 1.0% AAA Aaa 1,000 Greater Cleveland Regional Transit Authority (Ohio Capital
Improvement), 5.65% due 12/01/2016 (h) 1,031
NR* Baa3 3,600 Hilliard, Ohio, IDR, Refunding (Kroger Co.), 8.10% due
7/01/2012 4,116
AAA Aaa 3,000 Ohio State Higher Educational Facilities Commission
Revenue Bonds (Xavier University), 5.375% due 5/15/2022 (e) 2,998
Oklahoma -- 1.1% AAA Baa 3,250 Holdenville, Oklahoma, Industrial Authority, Correctional
Facility Revenue Bonds, 6.70% due 7/01/2015 (j) 3,630
BBB- Baa2 5,050 Tulsa, Oklahoma, Municipal Airport Trust, Revenue Refunding
Bonds (American Airlines Project), 6.25% due 6/01/2020 5,356
Oregon -- 0.3% AAA Aaa 10,000 Oregon Health Sciences University Revenue Bonds, Series A,
5.93%** due 7/01/2021 (e) 2,791
Pennsylvania -- 4.3% AAA Aaa 3,000 Bucks County, Pennsylvania, Water and Sewer Authority,
Revenue Refunding Bonds (Collection Sewer Systems),
5.55% due 12/01/2017 (h) 3,061
NR* Baa3 1,905 McCandless, Pennsylvania, IDA, IDR, Refunding (Kroger Co.),
7.375% due 10/15/2007 2,148
Pennsylvania Convention Center Authority, Revenue Refunding
Bonds, Series A:
BBB Baa 9,675 6.70% due 9/01/2014 10,613
BBB Baa 5,000 6.75% due 9/01/2019 5,490
AA+ Aa 5,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 42, 6.85%
due 4/01/2025 5,678
Philadelphia, Pennsylvania, Authority for IDR, Refunding
(Commercial Development):
NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,811
NR* NR* 3,000 (Doubletree), Series A, 6.50% due 10/01/2027 3,132
AAA Aaa 2,515 Southeastern Pennsylvania Transportation Authority (SEPTA),
Special Revenue Bonds, 5.55% due 3/01/2014 (h) 2,586
South Carolina -- AA Aa1 1,500 Greenville, South Carolina, Waterworks Revenue Bonds,
0.5% 5.50% due 2/01/2022 1,526
A- A1 2,500 Richland County, South Carolina, PCR, Refunding (Union Camp
Corporation Project), Series C, 6.55% due 11/01/2020 2,708
South Dakota -- 0.3% BBB Baa3 2,500 South Dakota State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Prairie Lakes Health Care),
7.25% due 4/01/2022 2,740
Tennessee -- 5.6% NR* NR* 3,000 Hardeman County, Tennessee, Correctional Facilities
Corporation Revenue Bonds, 7.75% due 8/01/2017 3,340
NR* Aaa 1,475 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health Systems of East Tennessee), 8.50% due 4/15/1999 (b) 1,594
AAA Aaa 5,055 Metropolitan Government, Nashville and Davidson County,
Tennessee, Sports Authority, Revenue Public Improvement Bonds
(Stadium Project), 5.875% due 7/01/2021 (c) 5,287
AA Aa2 15,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, UT, 6.15% due 5/15/2002 (b) 16,374
Tennessee State, GO:
AA+ Aaa 7,000 Refunding, Series A, 5.25% due 5/01/2014 7,103
AA+ Aaa 7,755 Series B, 5.50% due 5/01/2023 7,967
AA+ Aaa 5,830 Series B, 5.50% due 5/01/2027 5,962
Texas -- 6.4% A1+ VMIG1+ 100 Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company), VRDN, AMT, Series A, 3.80% due 4/01/2030 (a) 100
NR* Aaa 3,800 Ector County, Texas, Hospital District, Hospital Revenue Bonds
(Medical Center Hospital), 7.30% due 4/15/2002 (b) 4,319
AA- Aa3 5,000 Guadalupe -- Blanco River Authority, Texas, Sewage and
Solid Waste Disposal Facilities Revenue Bonds (du Pont (E.I.)
de Nemours and Company Project), AMT, 6.40% due 4/01/2026 5,439
BBB Baa1 8,400 Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds
(Champion International Corporation), AMT, 7.45%
due 5/01/2026 9,269
A1+ VMIG1+ 1,900 Gulf Coast, Texas, Waste Disposal Authority, Solid Waste
Disposal Revenue Refunding Bonds (Amoco Oil Co. Project),
VRDN, AMT, 3.75% due 8/01/2023 (a) 1,900
A1+ NR* 3,300 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Methodist Hospital),
VRDN, 3.70% due 12/01/2025 (a) 3,300
Houston, Texas, Airport Systems Revenue Bonds,
Special Facilities, AMT:
BB Ba2 9,200 (Continental Airline Airport Improvement), Series C,
6.125% due 7/15/2027 9,474
BB Ba2 5,300 (Continental Airline Terminal Improvement), Series B,
6.125% due 7/15/2017 5,470
AAA Aaa 4,050 Houston, Texas, Water and Sewer Systems Revenue Bonds,
Junior Lien, Series A, 6.375% due 12/01/2022 (e) 4,433
BB Ba2 3,500 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 3,975
A+ A2 5,000 Red River Authority, Texas, PCR (Hoechst Celanese
Corporation Project), AMT, 6.875% due 4/01/2017 5,431
AAA NR* 880 Travis County, Texas, Housing Finance Corporation, Residential
Mortgage Revenue Refunding Bonds, Series A, 7% due
12/01/2011 (f)(g) 938
Utah -- 1.1% Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds, AMT, Series A:
NR* NR* 3,900 (Laidlaw Environmental), 7.45% due 7/01/2017 4,247
BBB+ Baa2 3,300 (Laidlaw Inc. -- ECDC Project), 7.50% due 2/01/2010 3,780
AA NR* 1,460 Utah State, HFA, S/F Mortgage, AMT, Senior Series E-2, 7.15%
due 7/01/2024 1,536
Virginia -- 4.3% Fairfax County, Virginia, Water Authority, Revenue Refunding
Bonds:
AA Aa2 9,370 6% due 4/01/2007 (b) 10,485
AA Aa2 15,235 6% due 4/01/2022 16,247
NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Revenue Bonds
(Multi-trade), AMT, Series A, 7.55% due 1/01/2019 1,094
AA+ Aa1 8,125 Virginia State, HDA, Commonwealth Mortgage, Series A,
7.10% due 1/01/2025 8,595
West Virginia -- 1.6% A A2 2,000 Braxton County, West Virginia, Solid Waste Disposal Revenue
Bonds (Weyerhaeuser Company Project), AMT, 6.50%
due 4/01/2025 2,160
BBB+ Baa1 7,500 Mason County, West Virginia, PCR, Refunding (Appalachian
Power Company Project), Series I, 6.85% due 6/01/2022 8,215
NR* NR* 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue
Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,284
Wisconsin -- 0.4% NR* A2 2,710 Wisconsin State Health and Educational Facilities Authority
Revenue Bonds (Mercy Hospital of Janesville Inc.),
6.60% due 8/15/2022 2,891
---------
Total Investments (Cost -- $765,918) -- 98.3% 831,933
Other Assets Less Liabilities -- 1.7% 14,387
---------
Net Assets -- 100.0% $846,320
=========
(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, 1997.
(b) Prerefunded.
(c) AMBAC Insured.
(d) FHA Insured.
(e) MBIA Insured.
(f) FNMA Collateralized.
(g) GNMA Collateralized.
(h) FGIC Insured.
(i) FSA Insured.
(j) Insured by Connie Lee.
(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, 1997.
* 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 Services, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
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.
ACESSM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RITR Residual Interest Tax Receipts
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $765,917,778) (Note 1a) $831,932,658
Cash 62,086
Receivables:
Interest $14,818,228
Securities sold 900,000
Variation margin (Note 1b) 8,063 15,726,291
-------------
Prepaid expenses and other assets 20,558
-------------
Total assets 847,741,593
-------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 872,129
Investment adviser (Note 2) 381,635 1,253,764
-------------
Accrued expenses and other liabilities 168,288
-------------
Total liabilities 1,422,052
-------------
Net Assets: Net assets $846,319,541
=============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (10,000 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $250,000,000
Common Stock, par value $.10 per share (37,061,414 shares issued
and outstanding) $3,706,141
Paid-in capital in excess of par 519,009,869
Undistributed investment income -- net 8,098,422
Accumulated distributions in excess of realized capital gains -- net
(Note 1f) (509,771)
Unrealized appreciation on investments -- net 66,014,880
-------------
Total -- Equivalent to $16.09 net asset value per Share of Common
Stock (market price -- $15.875) 596,319,541
-------------
Total capital $846,319,541
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended
October 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $51,223,032
(Note 1d):
Expenses: Investment advisory fees (Note 2) $4,184,351
Commission fees (Note 4) 640,628
Accounting services (Note 2) 103,890
Transfer agent fees 100,492
Professional fees 83,245
Custodian fees 59,578
Directors' fees and expenses 45,500
Printing and shareholder reports 45,396
Listing fees 32,401
Pricing fees 21,314
Amortization of organization expenses (Note 1e) 886
Other 39,708
-----------
Total expenses 5,357,389
-----------
Investment income -- net 45,865,643
-----------
Realized & Realized gain on investments -- net 7,007,842
Unrealized Change in unrealized appreciation on investments -- net 17,329,366
Gain on -----------
Investments -- Net Net Increase in Net Assets Resulting from Operations $70,202,851
(Notes 1b, 1d & 3): ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $45,865,643 $46,616,111
Realized gain on investments -- net 7,007,842 12,497,013
Change in unrealized appreciation/depreciation on investments -- net 17,329,366 (3,902,288)
------------- -------------
Net increase in net assets resulting from operations 70,202,851 55,210,836
------------- -------------
Dividends & Investment income -- net:
Distributions to Common Stock (37,067,233) (38,420,345)
Shareholders Preferred Stock (7,546,880) (9,067,052)
(Note 1f): Realized gain on investments -- net:
Common Stock (7,968,243) --
Preferred Stock (1,923,648) --
In excess of realized gain on investments -- net:
Common Stock (403,449) --
Preferred Stock (97,398) --
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (55,006,851) (47,487,397)
------------- -------------
Net Assets: Total increase in net assets 15,196,000 7,723,439
Beginning of year 831,123,541 823,400,102
------------- -------------
End of year* $846,319,541 $831,123,541
============= =============
* Undistributed investment income -- net (Note 1g) $8,098,422 $6,837,968
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
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,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $15.68 $15.47 $14.35 $16.80 $14.69
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net 1.24 1.26 1.27 1.29 1.31
Realized and unrealized gain (loss) on
investments -- net .65 .23 1.34 (2.23) 2.27
--------- --------- --------- --------- ---------
Total from investment operations 1.89 1.49 2.61 (.94) 3.58
--------- --------- --------- --------- ---------
Less dividends and distributions to Common
Stock shareholders:
Investment income -- net (1.00) (1.04) (1.00) (1.07) (1.11)
Realized gain on investments -- net (.22) -- (.22) (.23) (.16)
In excess of realized gain on
investments -- net (.01) -- -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions to Common
Stock shareholders (1.23) (1.04) (1.22) (1.30) (1.27)
--------- --------- --------- --------- ---------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income -- net (.20) (.24) (.23) (.18) (.17)
Realized gain on investments -- net (.05) -- (.04) (.03) (.03)
In excess of realized gain on
investments -- net --++ -- -- -- --
--------- --------- --------- --------- ---------
Total effect of Preferred Stock activity (.25) (.24) (.27) (.21) (.20)
--------- --------- --------- --------- ---------
Net asset value, end of year $16.09 $15.68 $15.47 $14.35 $16.80
========= ========= ========= ========= =========
Market price per share,end of year $15.875 $14.875 $14.375 $12.125 $16.75
========= ========= ========= ========= =========
Total Investment Based on market price per share 15.56% 10.88% 29.76% (20.94%) 19.91%
Return:* ========= ========= ========= ========= =========
Based on net asset value per share 11.11% 8.61% 18.00% (6.71%) 23.83%
========= ========= ========= ========= =========
Ratios to Average Expenses .64% .64% .66% .66% .64%
Net Assets:** ========= ========= ========= ========= =========
Investment income -- net 5.48% 5.64% 5.91% 5.76% 5.72%
========= ========= ========= ========= =========
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) $596,320 $581,124 $573,400 $531,657 $619,775
========= ========= ========= ========= =========
Preferred Stock outstanding, end of year
(in thousands) $250,000 $250,000 $250,000 $250,000 $250,000
========= ========= ========= ========= =========
Portfolio turnover 111.45% 96.74% 52.99% 44.27% 25.58%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $3,385 $3,324 $3,294 $3,127 $3,479
========= ========= ========= ========= =========
Dividends Per Series A -- Investment income -- net $747 $894 $887 $598 $560
Share on ========= ========= ========= ========= =========
Preferred Stock Series B -- Investment income -- net $751 $897 $850 $733 $554
Outstanding:+ ========= ========= ========= ========= =========
Series C -- Investment income -- net $763 $998 $827 $647 $566
========= ========= ========= ========= =========
Series D -- Investment income -- net $762 $888 $897 $659 $556
========= ========= ========= ========= =========
Series E -- Investment income -- net $752 $875 $759 $707 $542
========= ========= ========= ========= =========
* 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.
+ Dividends per share have been adjusted to reflect a two-for-one stock split that occurred on December 1,
1994.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
MuniYield Fund, Inc. October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund determines and makes available for
publication the net asset value of its Common Stock on a weekly basis.
The Fund's Common Stock is listed on the New York Stock Exchange under
the symbol MYD. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent bid
price or yield equivalent as obtained by the Fund's pricing service
from dealers that make markets in such securities. Financial futures
contracts and options thereon, which are traded on exchanges, are
valued at their closing price as of the close of such exchanges.
Options, which are traded on exchanges, are valued at their last sale
price as of the close of such exchanges or, lacking any sales, at the
last available bid price. Securities with remaining maturities of
sixty days or less are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily
available are valued at their fair value as determined in good faith
by or under the direction of the Board of Directors of the Fund,
including valuations furnished by a pricing service retained by the
Fund, which may utilize a matrix system for valuations. The procedures
of the pricing service and its valuations are reviewed by the officers
of the fund under the general supervision of the Board of Directors.
(b) Derivative financial instrument -- 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.
[bullet] 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.
[bullet] Options -- The Fund is authorized to write covered call
options and purchase put options. When the Fund writes an option, an
amount equal to the premium received by the Fund is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an option,
the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund
enters into a closing transaction), the Fund realizes a gain or loss
on the option to the extent of the premiums received or paid (or gain
or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses -- Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions -- Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions.
(g) 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 $8,924
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 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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1997 were $907,131,105 and
$937,497,090, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $13,784,477 $66,014,880
Financial futures contracts (6,776,635) --
------------- -------------
Total $7,007,842 $66,014,880
============= =============
As of October 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $66,007,878, of which $66,081,459 related to
appreciated securities and $73,581 related to depreciated securities.
The aggregate cost of investments at October 31, 1997 for Federal
income tax purposes was $765,924,780.
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, 1997
and October 31, 1996 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock
of the Fund that entitle their holders to receive cash dividends at an
annual rate that may vary for the successive dividend periods. The
yields in effect at October 31, 1997 were as follows: Series A,
3.504%; Series B, 3.585%; Series C, 3.658%; Series D, 3.658%; and
Series E, 3.58%.
For the year ended October 31, 1997, there were 10,000 AMPS shares
authorized, issued and outstanding with a liquidation preference of
$25,000 per share.
The Fund pays commissions to certain broker-dealers at the end of each
auction at an annual rate ranging from 0.25% to 0.375%, calculated on
the proceeds of each auction. For the year ended October 31, 1997,
Merrill Lynch, Pierce, Fenner & Smith Inc., an affiliate of FAM,
earned $312,588 as commissions.
5. Subsequent Event:
On November 6, 1997, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount of
$.083737 per share, payable on November 26, 1997 to shareholders of
record as of November 17, 1997.
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, 1997, the related statements of operations for
the year then ended and changes in net assets for each of the years in
the two-year period then ended, and the financial highlights for each
of the years in the 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, 1997 by
correspondence with the custodian. 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, 1997, 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 9, 1997
<TABLE>
<CAPTION>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield Fund, Inc. during its taxable year ended October 31, 1997
qualify as tax-exempt interest dividends for Federal income tax purposes. Additionally, the following summarizes the per
share capital gains distributions paid by the Fund during the year:
Payable Long-Term Short-Term
Date Capital Gains Capital Gains
<S> <C> <C> <C> <C>
Common Stock Shareholders 12/31/96 $.207763 $.018124
Preferred Stock Shareholders: Series A 12/04/96 $91.97 $8.63
1/02/97 $91.24 $7.35
Series B 12/11/96 $92.00 $8.63
1/08/97 $91.85 $7.41
Series C 12/02/96 $112.66 $10.58
1/02/97 $86.63 $6.81
Series D 11/27/96 $93.55 $8.77
12/26/97 $88.54 $7.11
Series E 11/20/96 $23.06 $2.17
11/27/96 $22.28 $2.07
12/04/96 $22.77 $2.09
12/11/96 $22.46 $2.02
12/18/96 $21.80 $1.94
12/26/96 $27.69 $2.40
1/02/97 $27.08 $2.22
1/08/97 $15.61 $1.03
Please retain this information for your records.
</TABLE>
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
Philip M. Mandel, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYD
