MUNIYIELD
FUND, INC.
FUND LOGO
Annual Report
October 31, 1998
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Fund, Inc. for their
information. It is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund or any
securities mentioned in the report. Past performance results shown
in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock by issuing
Preferred Stock to provide the Common Stock shareholders with a
potentially higher rate of return. Leverage creates risks for Common
Stock shareholders, including the likelihood of greater volatility
of net asset value and market price of shares of the Common Stock,
and the risk that fluctuations in the short-term dividend rates of
the Preferred Stock may affect the yield to Common Stock
shareholders. Statements and other information herein are as dated
and are subject to change.
MuniYield Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MuniYield Fund, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1998, the Common Stock of MuniYield
Fund, Inc. earned $1.095 per share income dividends, which included
earned and unpaid dividends of $0.087. This represents a net
annualized yield of 6.73%, based on a month-end per share net asset
value of $16.27. Over the same period, the total investment return
on the Fund's Common Stock was +9.15%, based on a change in per
share net asset value from $16.09 to $16.27, and assuming
reinvestment of $1.092 per share income dividends and $0.143 per
share capital gains distributions.
For the six-month period ended October 31, 1998, the total
investment return on the Fund's Common Stock was +5.65%, based on a
change in per share net asset value from $15.87 to $16.27, and
assuming reinvestment of $0.487 per share income dividends.
For the six-month period ended October 31, 1998, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
2.82%; Series B, 2.80%; Series C, 3.62%, Series D, 3.62%; and Series
E, 3.15%.
The Municipal Market Environment
During the six months ended October 31, 1998, long-term bond yields
declined significantly. The near absence of any inflationary
pressures in the United States continued to support historic low
interest rates. Additionally, foreign economic factors have
continued to outweigh US domestic fundamentals, as they have for
much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic
factors in these countries have begun to negatively impact US
growth. For example, employment in the US manufacturing sector
declined in recent months as a result of reduced demand for export
goods. Concern that the modest decline in US economic growth seen
thus far would spread and intensify led the Federal Reserve Board to
lower short-term interest rates in late September, in mid-October
and in mid-November. These actions were taken to offset the drag of
foreign economies on future US growth.
US Treasury bond yields continued to benefit from a strong "flight
to quality" as foreign investors were drawn to the relative safe
haven of US Government securities. Additionally, the sharp equity
market correction, which began at the end of August, triggered a
further flight into US Treasury securities. Long-term US Treasury
bond yields fell over 90 basis points (0.90%) to approximately 5% by
the end of September. This is the lowest level since the US Treasury
re-introduced 30-year maturity bond auctions in 1977.
By early October, worldwide investor confidence began to rise,
reducing the demand for the safety and liquidity of US Treasury
securities. Investor confidence was restored by the belief that
major world governments, as well as the International Monetary Fund,
would take the necessary action to support weak domestic economies
in Asia and Latin America. Additionally, rapid recovery in US and
world equity markets caused some investors to reallocate funds from
US debt instruments back to various world equity markets. US
Treasury security yields rose for the remainder of the month to end
October at 5.15%. During the six-month period ended October 31,
1998, long-term Treasury security yields declined approximately 80
basis points.
During the past 12 months, the tax-exempt bond market has contended
with significant new-issue supply pressures. Over the past year,
more than $277 billion in new long-term tax-exempt bonds were
underwritten, an increase of almost 30% compared to the same period
a year ago. During the most recent six-month period, approximately
$140 billion in new long-term municipal bonds were underwritten,
representing an increase of more than 15% over the same six-month
period last year. This increased supply, coupled with the high
returns the US equity market generated for much of 1998, was one of
the major reasons municipal bond yields declined less than their
taxable counterparts during the period.
The continued increase in new bond issuance has required ever-lower
tax-exempt bond yields to generate the economic savings necessary
for additional municipal bond financings. Consequently, the pace of
new bond issuance has slowed in recent months. In fact, the trend
may be reversing. During the three months ended October 31, 1998,
just over $60 billion in new long-term municipal bonds were
underwritten, a decline of 4% compared to the same quarter a year
ago. During the month of October, there were less than $20 billion
in new municipal bond securities issued, a decline of over 10%
compared to October 1997. We will monitor this trend closely in the
coming months to determine if the supply pressures exerted thus far
in 1998 are abating and fostering a more balanced supply/demand
environment.
MuniYield Fund, Inc.
October 31, 1998
Throughout the six-month period ended October 31, 1998, municipal
bond yields followed a pattern that was similar to US Treasury
securities, although the yield declines were more muted. As measured
by the unmanaged Bond Buyer Revenue Bond Index, long-term, uninsured
tax-exempt revenue bond yields declined over 40 basis points to
5.09% by the end of September, their lowest level since the early
1970s. Municipal bond yields rose during October to end the period
at 5.24%. Over the past six months, long-term tax-exempt bond yields
declined almost 30 basis points.
Although municipal bond yields declined during the six-month period,
recent supply pressures and the absence of the safe haven status
enjoyed by US securities caused municipal bond yields to rise
relative to US Treasury bond yields. At October 31, 1998, long-term
tax-exempt bond yield spreads were attractive relative to US
Treasury securities of comparable maturities (over 100%), well in
excess of their historic range of 85%--88%. Tax-exempt bond yield
ratios have rarely exceeded 90% in the 1980s and 1990s.
Historically, yield spreads have been wider than these levels when
there have been potential changes in Federal tax codes that would
have adversely affected the tax-favored status of municipal bonds.
Currently, municipal bond investors find themselves in a unique
investment environment. Previous opportunities to purchase tax-
exempt bonds with yields exceeding that of comparable US Treasury
issues have been limited to relatively brief episodes and then
further limited to a few municipal credits undergoing specific
financial pressures. At present, almost the entire municipal bond
universe, across nearly all maturity and credit sectors, can be
purchased at yields greater than their taxable counterparts.
However, the current opportunity may quickly disappear should tax-
exempt bond supply pressures diminish or the safe-haven status of US
Treasury securities become less desirable. Under these conditions,
municipal bond ratios should quickly revert to more normal historic
percentages, certainly well below their presently attractive levels.
Portfolio Strategy
As a result of our efforts to move from a neutral to a more
constructive market strategy, the Fund generated a competitive
return for the six months ended October 31, 1998. The shift in our
outlook evolved early in the period as the prospect of escalating
global economic and financial market turmoil set the stage for
sharply lower interest rates.
Much of the activity reflecting this shift centered around a
reduction in the Fund's exposure to bonds possessing minimal call
protection. Most of these securities were issued in a higher-
interest rate environment and, consequently, we sold them at
substantial premiums to face value. We invested the proceeds from
these sales in high-quality issues that are well protected from
early redemption and likely to perform well as interest rates
decline. Through these restructuring efforts, the Fund is better
positioned to withstand the likely onslaught of municipal bond
redemptions as issuers reap the benefits of refinancing outstanding
debt. We believe that this active approach to managing the Fund's
average call protection is likely to provide a more stable dividend
over time.
In past reports to shareholders, we have discussed the extent to
which credit spreads have narrowed in the municipal market. Earlier
this year, the tax-exempt high-yield market exhibited few of the
pressures that were emerging within the taxable market. We viewed
this as an opportunity to reduce exposure to some of the Fund's more
vulnerable positions at what proved to be quite favorable prices. In
fact, selected municipal credit spreads have succumbed to financial
market volatility and ensuing uncertainty regarding the health of
the global economy. While the damage in the municipal market in no
way compares to what transpired in the corporate high-yield bond and
emerging markets, a modest widening of credit spreads has
nonetheless occurred. Looking ahead, it seems likely that the
historical imbalance between supply and demand will prevail,
limiting the degree to which tax-exempt high-yield securities are
impacted by global trends.
MuniYield Fund, Inc.
October 31, 1998
Leverage continues to benefit the Fund's Common Stock shareholders,
as the Fund's cost of borrowing, as reflected by short-term tax-
exempt interest rates, remains well below the yields available on
long-term municipal bonds. In fact, borrowing costs actually
declined with the general move toward lower short-term interest
rates brought on by the recent shift toward easier monetary policy.
However, should the spread between short-term and long-term interest
rates narrow, the benefits of leverage will decline, and as a result
reduce the yield to the Fund's Common Stock. (For a complete
explanation of the benefits and risks of leveraging, see the
description provided below.)
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
December 14, 1998
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Fund, Inc. utilizes leveraging to seek to enhance the
yield and net asset value of its Common Stock. However, these
objectives cannot be achieved in all interest rate environments. To
leverage, the Fund issues Preferred Stock, which pays dividends at
prevailing short-term interest rates, and invests the proceeds in
long-term municipal bonds. The interest earned on these investments
is paid to Common Stock shareholders in the form of dividends, and
the value of these portfolio holdings is reflected in the per share
net asset value of the Fund's Common Stock. However, in order to
benefit Common Stock shareholders, the yield curve must be
positively sloped; that is, short-term interest rates must be lower
than long-term interest rates. At the same time, a period of
generally declining interest rates will benefit Common Stock
shareholders. If either of these conditions change, then the risks
of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends of the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, interest rates on inverse floaters will decrease when short-
term interest rates increase and increase when short-term interest
rates decrease. Investments in inverse floaters may be characterized
as derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in such securities.
MuniYield Fund, Inc.
October 31, 1998
PROXY RESULTS
During the six-month period ended October 31, 1998, MuniYield Fund,
Inc. Common Stock shareholders voted on the following proposals. The
proposals were approved at a shareholders' meeting on September 24,
1998. The description of each proposal and number of shares voted
are as follows:
<TABLE>
<CAPTION>
Shares Shares Withheld
Voted For From Voting
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Herbert I. London 36,161,804 579,327
Robert R. Martin 36,149,266 591,865
Andre F. Perold 36,162,738 578,393
Arthur Zeikel 36,152,305 588,826
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors. 36,071,522 178,985 490,623
</TABLE>
During the six-month period ended October 31, 1998, 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 24, 1998. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Shares Withheld
Voted For From Voting
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors:
James H. Bodurtha, Herbert I. London,
Joseph L. May, Robert R. Martin,
Andre F. Perold and Arthur Zeikel
as follows: Series A 1,766 1
Series B 1,747 7
Series C 1,594 0
James H. Bodurtha, Joseph L. May
and Andre F. Perold Series D 1,596 0
Herbert I. London, Robert R. Martin
and Arthur Zeikel Series D 1,592 4
James H. Bodurtha, Joseph L. May
and Andre F. Perold Series E 2,227 0
Herbert I. London, Robert R. Martin
and Arthur Zeikel Series E 2,223 4
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the
Fund's independent auditors as follows: Series A 1,767 0 0
Series B 1,747 7 0
Series C 1,594 0 0
Series D 1,596 0 0
Series E 2,227 0 0
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the
names of many of the securities according to the list below and at
right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
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> <C> <C> <C> <S> <C>
Alabama--0.2% A1 VMIG1++ $ 1,800 Mobile, Alabama, IDB, PCR, Refunding (Alabama Power Co.
Project), VRDN, 3.70% due 6/01/2015 (a) $ 1,800
Alaska--2.0% NR* NR* 10,050 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds
(Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 10,683
Valdez, Alaska, Marine Terminal Revenue Refunding Bonds
(Exxon Pipeline Co. Project), VRDN (a):
A1+ P1 2,900 Series A, 3.70% due 12/01/2033 2,900
A1+ P1 4,000 Series C, 3.70% due 12/01/2033 4,000
Arizona--4.8% Maricopa County, Arizona, Pollution Control Corporation,
PCR, Refunding (Arizona Public Service Co.):
BB+ Ba1 5,275 Series A, 5.75% due 11/01/2022 5,374
A1+ P1 1,500 VRDN, Series A, 3.70% due 5/01/2029 (a) 1,500
A1+ P1 1,000 VRDN, Series F, 3.70% due 5/01/2029 (a) 1,000
BB+ Ba1 9,000 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Public Service Company of New Mexico Project),
Series A, 6.30% due 12/01/2026 9,627
NR* B1 5,300 Phoenix, Arizona, IDA, Airport Facilities Revenue Refunding
Bonds (America West Airlines Inc.), AMT, 6.30% due 4/01/2023 5,495
B B2 18,500 Pima County, Arizona, IDA, Industrial Revenue Bonds (Tucson
Electric Power Co. Project), Series B, 6% due 9/01/2029 18,652
Arkansas--0.3% NR* NR* 2,815 Little Rock, Arkansas, Capital Improvement Revenue Bonds
(Parks and Recreation Projects), Series A, 5.70% due 1/01/2018 2,852
California--4.1% California Foothill/Eastern Transportation Corridor Agency,
Toll Road Revenue Bonds, Senior Lien, Series A**:
AAA Aaa 10,000 5.75% due 1/01/2018 (i) 3,837
AAA Aaa 10,000 5.791% due 1/01/2020 (i) 3,444
BBB- Baa 34,165 6.33% due 1/01/2020 11,150
AAA Aaa 10,000 5.788% due 1/01/2021 (i) 3,260
BBB- Baa 20,245 6.24% due 1/01/2021 6,267
AAA Aaa 10,000 5.783% due 1/01/2022 3,100
BBB- Baa 15,000 6.25% due 1/01/2022 4,404
Colorado--3.1% Denver, Colorado, City and County Airport Revenue Bonds:
BBB Aaa 700 AMT, Series D, 7.75% due 11/15/2001 (b) 794
BBB Baa1 8,000 AMT, Series D, 7.75% due 11/15/2013 10,220
BBB Baa1 2,610 AMT, Series D, 7.75% due 11/15/2021 2,900
AAA NR* 4,900 Series A, 7.25% due 11/15/2002 (b) 5,620
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <S> <C>
Colorado NR* NR* $ 5,000 Denver, Colorado, Urban Renewal Authority, Tax Increment
(concluded) Revenue Bonds (Downtown Denver), AMT, Series A, 7.75%
due 9/01/2016 $ 5,598
Mountain Village, Colorado, Metropolitan District,
Refunding (San Miguel County), UT:
NR* NR* 240 7.95% due 12/01/2002 (b) 279
NR* NR* 1,410 7.95% due 12/01/2003 1,536
Connecticut B+ Ba3 19,750 Connecticut State Developmemt Authority, PCR, Refunding
- --4.5% (Connecticut Light & Power Co.), Series A, 5.85% due
9/01/2028 19,825
A+ NR* 15,000 Connecticut State Development Authority, Water Facility
Revenue Bonds (Bridgeport Hydraulic Co. Project), AMT, 6%
due 9/01/2036 15,973
NR* B1 2,510 New Haven, Connecticut, Facility Revenue Bonds (Hill Health
Corporation Project), 9.25% due 5/01/2017 2,785
Florida--1.3% AAA Aaa 10,000 Hillsborough County, Florida, School Board, COP, RITR,
Series 31, 7.02% due 7/01/2021 (e)(k) 10,763
Georgia--3.6% NR* Aaa 5,450 Atlanta, Georgia, Urban Residential Finance Authority,
College Facilities Revenue Bonds (Morris Brown College
Project), 9.50% due 12/01/2001 (b) 6,502
A+ NR* 2,030 Columbia County, Georgia, Courthouse Detention Center Projects,
UT, 5.625% due 2/01/2021 2,134
BBB- Baa2 12,700 Effingham County, Georgia, Development Authority, Solid Waste
Disposal Revenue Bonds (Fort James Project), AMT, 5.625% due
7/01/2018 12,753
Fulton County, Georgia, Development Authority, Special
Facilities Revenue Bonds (Delta Airlines Inc. Project), AMT:
BBB- Baa3 3,750 5.45% due 5/01/2023 3,697
BBB- Baa3 6,300 5.50% due 5/01/2033 6,148
Idaho--0.4% AA NR* 3,485 Idaho Housing Agency, S/F Mortgage, AMT, Senior Series C-2,
7.15% due 7/01/2023 3,697
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) 5,412
BBB Baa1 2,750 Illinois Development Finance Authority, PCR, Refunding
(Illinois Power Company Project), Series A, 7.375% due
7/01/2021 3,169
NR* NR* 2,500 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health Systems), 7.25% due 11/15/2019 (b) 3,173
Illinois Health Facilities Authority Revenue Bonds (b):
A+ A2 1,500 (Edward Hospital Association Project), 7% due 2/15/2002 1,676
NR* NR* 2,625 Refunding (Saint Elizabeth's Hospital--Chicago), 7.75% due
7/01/2004 3,157
BBB- NR* 8,000 Metropolitan Pier and Exposition Authority, Illinois,
Hospitality Facilities Revenue Bonds (McCormick Place
Convention), 7% due 7/01/2026 9,921
Indiana--0.6% NR* A2 1,150 Indiana Health Facilities Financing Authority, Refunding
Bonds (Saint Anthony Medical Center), Series A, 7% due
10/01/2017 1,251
BBB- Baa3 3,930 Indiana State Development Financial Authority, Environmental
Revenue Refunding and Improvement Bonds (USX Corporation
Project), 6.25% due 7/15/2030 4,228
A1+ Aaa 100 Rockport, Indiana, PCR, Refunding (AEP Generating Co. Project),
VRDN, Series A, 3.70% due 7/01/2025 (a)(c) 100
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <S> <C>
Kentucky--1.2% AAA Aaa $ 5,000 Jefferson County, Kentucky, Health System Revenue Bonds
(Alliant Health Systems Inc.), 5.125% due 10/01/2018 (e) $ 5,011
BBB- Baa3 500 Kenton County, Kentucky, Airport Board, Special Facilities
Airport Revenue Bonds (Delta Airlines Project), AMT, Series A,
6.125% due 2/01/2022 508
NR* NR* 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds
(TJ International Project), AMT, 7% due 6/01/2024 4,419
Louisiana--6.5% NR* A3 30,500 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Company
Project), 7.75% due 8/15/2022 35,108
B+ NR* 20,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Co. Project), 6.50% due 1/01/2017 20,530
Maryland--0.9% NR* NR* 7,050 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration--AES Warrior Run),
AMT, 7.40% due 9/01/2019 7,324
Massachusetts-- A+ Aa 5,970 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
1.3% Series 38, 7.20% due 12/01/2026 6,522
BBB NR* 4,350 Massachusetts State Industrial Finance Agency, Resource
Recovery Revenue Refunding Bonds (Ogden Haverhill Project),
AMT, Series A, 5.60% due 12/01/2019 4,354
Michigan--3.1% Detroit, Michigan, GO, UT, Series A (b):
BBB+ Aaa 2,500 6.70% due 4/01/2005 2,892
BBB+ Aaa 1,500 6.80% due 4/01/2005 1,749
A1+ VMIG1++ 1,000 University of Michigan, University Revenue Refunding Bonds
(Medical Service Plan), VRDN, Series A-1, 3.75% due
12/01/2021 (a) 1,000
AAA Aaa 20,005 Wayne Charter County, Michigan, Airport Revenue Bonds
(Detroit Metropolitan Wayne County), AMT, Series A, 5.375%
due 12/01/2016 (e) 20,752
Minnesota--0.4% AA Aa2 3,350 Minnesota State, HFA, S/F Mortgage, AMT, Series A, 7.05% due
7/01/2022 3,507
Mississippi A A2 17,750 Lowndes County, Mississippi, Solid Waste Disposal and PCR,
- --3.1% Refunding (Weyerhaeuser Company Project), Series A, 6.80%
due 4/01/2022 21,791
BBB- Ba1 5,000 Mississippi Business Finance Corporation, PCR (System Energy
Resource Inc. Project), 5.875% due 4/01/2022 4,988
Missouri--0.8% 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) 6,853
New Jersey BB Ba2 6,000 New Jersey EDA, Special Facility Revenue Bonds (Continental
- --0.7% Airlines Inc. Project), AMT, 5.50% due 4/01/2028 5,905
New Mexico A1+ P1 1,000 Farmington, New Mexico, PCR, Refunding (Arizona Public Service
- --2.9% Company), VRDN, Series B, 3.70% due 9/01/2024 (a) 1,000
Farmington, New Mexico, PCR, Refunding (Public Service Co.):
BB+ Ba1 13,500 Series A, 5.80% due 4/01/2022 13,800
BB+ Ba1 10,000 Series B, 5.80% due 4/01/2022 10,222
New York AAA Aaa 3,075 Dutchess County, New York Resource Recovery Agency Revenue
- --12.3% Bonds (Solid Waste Systems), Series A, 5.25% due 1/01/2011 (e) 3,169
Long Island Power Authority, New York, Electric System
Revenue Bonds:
A- Baa1 10,000 Series A, 5.50% due 12/01/2023 10,435
AAA Aaa 17,750 Series A, 5.50% due 12/01/2029 (e) 18,592
A1+ VMIG1++ 5,100 VRDN, Sub-Series 5, 3.70% due 5/01/2033 (a) 5,100
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <S> <C>
New York AAA Aaa $ 5,595 Metropolitan Transportation Authority, New York, Commuter
(concluded) Facilities Revenue Bonds, RITR, Series 9, 8.47% due
7/01/2026 (k) $ 7,272
New York City, New York, GO, UT:
A- A3 1,555 Series B, 7.75% due 2/01/2002 (b) 1,766
A- A3 13,850 Series B, Fiscal 92, 7.75% due 2/01/2002 (b) 15,709
A- A3 1,150 Series B, Fiscal 92, 7.75% due 2/01/2010 1,295
A- Aaa 325 Series C, Sub-Series C-1, 7.50% due 8/01/2002 (b) 372
A- A3 60 Series C, Sub-Series C-1, 7.50% due 8/01/2021 68
A A 5,500 New York City, New York, IDA, Special Facilities Revenue
Bonds, RITR, AMT, Series RI-5, 8.195% due 1/01/2024 (k) 6,257
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN (a)(h):
A1+ VMIG1++ 600 Series A, 3.70% due 6/15/2025 600
A1+ VMIG1++ 300 Series G, 3.70% due 6/15/2024 300
AA NR* 3,000 New York State Dormitory Authority Revenue Bonds (Hebrew
Home for the Aged--Riverdale), 6.125% due 2/01/2037 (d) 3,281
New York State Environmental Facilities Corporation, PCR:
A- Aa 17,525 RITR, Series RI-1, 7.895% due 6/15/2014 (k) 20,784
AA+ Aaa 1,700 (State Water Revolving Fund), Series E, 6.875% due 6/15/2010 1,860
AA- A1 8,000 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 93rd Series, 6.125% due 6/01/2094 9,381
North North Carolina HFA, S/F Revenue Bonds:
Carolina--2.2% AA Aa 4,680 AMT, Series T, 7.05% due 9/01/2020 4,983
AA Aa 13,180 Refunding, Series S, 6.95% due 3/01/2017 14,141
North A+ Aa2 3,270 North Dakota State, HFA, S/F Mortgage Revenue Bonds, Series A,
Dakota--0.4% 7% due 7/01/2023 3,480
Ohio--7.8% NR* A2 5,000 Butler County, Ohio, Hospital Facilities Revenue Refunding
and Improvement Bonds (Middletown Hospital), 5% due 11/15/2028 4,834
AAA Aaa 5,250 Cleveland, Ohio, Public Power System, Revenue Refunding Bonds
(First Mortgage), Series 1, 5% due 11/15/2024 (e) 5,190
Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation
Project), AMT:
BBB P1 15,000 5.60% due 8/01/2032 15,026
BBB Ba1 16,500 5.65% due 3/01/2033 16,306
AAA Aaa 8,000 Ohio State Water Development Authority, Pollution Control
Facilities Revenue Bonds (Water Control Loan Fund--Water
Quality), 5.125% due 6/01/2019 (e) 8,057
NR* NR* 11,500 Ohio State Water Development Authority, Solid Waste Disposal
Revenue Bonds (Bay Shore Power Project), AMT, Series A, 5.875%
due 9/01/2020 11,601
A- NR* 6,000 Parma, Ohio, Hospital Improvement Revenue Refunding Bonds
(Parma Community General Hospital Association), 5.375% due
11/01/2029 6,040
Oklahoma--1.1% AAA Baa 3,250 Holdenville, Oklahoma, Industrial Authority, Correctional
Facility Revenue Bonds, 6.70% due 7/01/2006 (b)(j) 3,863
BBB- Baa2 5,050 Tulsa, Oklahoma, Municipal Airport Trust, Revenue Refunding
Bonds (American Airlines Project), 6.25% due 6/01/2020 5,384
Oregon--1.2% AAA Aaa 14,000 Oregon Health Sciences University Revenue Bonds, Series A,
5.16%** due 7/01/2021 (e) 4,469
NR* Baa2 2,330 Oregon State Economic Development Revenue Refunding Bonds
(Georgia-Pacific Corporation Project), Series 183, 5.70% due
12/01/2025 2,380
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <S> <C>
Oregon AA- NR* $ 3,245 Salem, Oregon, Hospital Authority, Facility Revenue Bonds
(concluded) (Salem Hospital), 5.25% due 8/15/2014 $ 3,340
Pennsylvania A NR* 2,975 Berks County, Pennsylvania, Municipal Authority, College
- --6.2% Revenue Bonds (Alvernia College Project), 6% due 11/15/2018 3,199
NR* NR* 3,500 Lehigh County, Pennsylvania, General Purpose Authority, Revenue
Refunding Bonds (Kidspeace Obligation Group), 6% due 11/01/2023 3,504
Pennsylvania Convention Center Authority, Revenue Refunding
Bonds, Series A:
BBB Baa 9,675 6.70% due 9/01/2014 10,805
BBB Baa 5,000 6.75% due 9/01/2019 5,607
AA+ Aa 5,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 42, 6.85% due
4/01/2025 5,713
AAA Aaa 16,270 Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue Refunding Bonds (Allegheny, Delaware
Valley), Series C, 5.875% due 11/15/2016 (e) 16,482
A1+ NR* 550 Pennsylvania State Higher Educational Facilities Authority,
Revenue Refunding Bonds (Carnegie Mellon University), VRDN,
Series B, 3.70% due 11/01/2027 (a) 550
Philadelphia, Pennsylvania, Authority for IDR, Refunding
(Commercial Development):
NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,945
NR* NR* 3,000 (Doubletree), Series A, 6.50% due 10/01/2027 3,242
South Carolina A- A1 2,500 Richland County, South Carolina, PCR, Refunding (Union Camp
- --2.0% Corporation Project), Series C, 6.55% due 11/01/2020 2,747
NR* NR* 3,735 South Carolina Jobs, EDA, Health Facilities Revenue Refunding
Bonds (First Mortgage--Lutheran Homes), 5.70% due 5/01/2026 3,742
South Carolina, State Housing Finance and Development
Authority, S/F Mortgage:
NR* Aaa 5,000 5.50% due 7/01/2025 5,400
NR* Aaa 5,000 5% due 7/01/2034 5,006
South BBB Baa2 2,500 South Dakota State Health and Educational Facilities Authority,
Dakota--0.3% Revenue Refunding Bonds (Prairie Lakes Health Care), 7.25% due
4/01/2003 (b) 2,854
Tennessee NR* NR* 3,000 Hardeman County, Tennessee, Correctional Facilities Revenue
- --0.4% Bonds (Correctional Facilities Corp.), 7.75% due 8/01/2017 3,383
Texas--7.7% AA- Aa3 5,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid
Waste Disposal Facility Revenue Bonds (du Pont (E.I.) de
Nemours and Company Project), AMT, 6.40% due 4/01/2026 5,525
AAA VMIG1++ 3,600 Gulf Coast, Texas, Waste Disposal Authority, PCR, Refunding
(Amoco Oil Co. Project), VRDN, 3.70% due 10/01/2017 (a) 3,600
A1+ NR* 8,100 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 3.70% due
12/01/2025 (a) 8,100
BB Ba2 8,305 Harris County, Texas, Industrial Development Corporation,
Airport Facilities Revenue Refunding Bonds (Continental
Airlines Project), AMT, 5.375% due 7/01/2019 7,960
A1+ Aa 10,900 Harris County, Texas, Industrial Development Corporation, PCR,
Refunding (Shell Oil Company Project), VRDN, 3.70% due
4/01/2027 (a) 10,900
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <S> <C>
Texas Houston, Texas, Airport System Revenue Bonds, Special
(concluded) Facilities, AMT:
BB Baa3 $ 9,200 (Continental Airlines Airport Improvement), Series C,
6.125% due 7/15/2027 $ 9,464
BB Baa3 10,300 (Continental Airlines Terminal Improvement), Series B,
6.125% due 7/15/2017 10,596
A1+ VMIG1++ 5,700 Lubbock, Texas, Health Facilities Development Corporation
Revenue Bonds (Saint Joseph Health System), VRDN, Series A,
3.70% due 7/01/2013 (a) 5,700
AAA Aaa 3,500 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 6/01/2005 (b) 4,350
Utah--0.6% NR* NR* 3,900 Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds (Laidlaw Environmental), AMT, Series A, 7.45% due
7/01/2017 4,308
AAA NR* 1,035 Utah State, HFA, S/F Mortgage, AMT, Series E-2, 7.15% due
7/01/2024 1,092
Virginia--7.8% NR* NR* 4,030 Dulles Town Center Community Development Authority, Virginia,
Special Assessment Tax Bonds (Dulles Town Center Project),
6.25% due 3/01/2026 4,137
AA Aa2 15,235 Fairfax County, Virginia, Water Authority, Water Revenue
Refunding Bonds, 6% due 4/01/2022 16,849
NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Revenue Bonds (Multi-trade),
AMT, Series A, 7.55% due 1/01/2019 1,105
Pocahontas Parkway Association, Virginia, Connector Toll Road
Revenue Bonds (Route 895):
BBB- Baa3 16,600 Senior Series A, 5.50% due 8/15/2028 16,613
BBB- Baa3 24,600 Senior Series B, 5.90%** due 8/15/2019 7,528
BBB- Baa3 48,400 Senior Series B, 5.90%** due 8/15/2030 7,700
BBB- Baa3 70,500 Senior Series B, 5.95%** due 8/15/2035 8,285
AA+ Aa1 5,125 Virginia State, HDA, Commonwealth Mortgage, Series A, 7.10%
due 1/01/2025 5,313
West NR* NR* 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue
Virginia--0.4% Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,357
Wisconsin NR* A2 2,710 Wisconsin State Health and Educational Facilities Authority
- --0.3% Revenue Bonds (Mercy Hospital of Janesville Inc.), 6.60%
due 8/15/2022 2,927
Wyoming--0.3% NR* P1 2,900 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc.
Project), VRDN, 3.70% due 8/15/2020 (a) 2,900
Total Investments (Cost--$806,985)--99.9% 860,714
Other Assets Less Liabilities--0.1% 508
--------
Net Assets--100.0% $861,222
========
<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 October 31, 1998.
(b)Prerefunded.
(c)AMBAC Insured.
(d)FHA Insured.
(e)MBIA Insured.
(f)FNMA Collateralized.
(g)GNMA Collateralized.
(h)FGIC Insured.
(i)FSA Insured.
(j)Connie Lee Insured.
(k)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 1998.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of October 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$806,985,168) (Note 1a) $860,713,817
Cash 35,647
Receivables:
Interest $ 12,248,328
Securities sold 133,034 12,381,362
------------
Prepaid expenses and other assets 24,531
------------
Total assets 873,155,357
------------
Liabilities: Payables:
Securities purchased 11,415,267
Investment adviser (Note 2) 379,972 11,795,239
------------
Accrued expenses and other liabilities 137,664
------------
Total liabilities 11,932,903
------------
Net Assets: Net assets $861,222,454
============
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 (37,574,124 shares
issued and outstanding) $ 3,757,412
Paid-in capital in excess of par 527,235,890
Undistributed investment income--net 9,925,942
Undistributed realized capital gains on investments--net 16,574,561
Unrealized appreciation on investments--net 53,728,649
------------
Total--Equivalent to $16.27 net asset value per share of
Common Stock (market price--$16.875) 611,222,454
------------
Total capital $861,222,454
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1998
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 50,162,251
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 4,261,373
Commission fees (Note 4) 636,584
Transfer agent fees 90,618
Accounting services (Note 2) 86,625
Professional fees 81,808
Custodian fees 59,479
Directors' fees and expenses 45,665
Listing fees 32,401
Printing and shareholder reports 24,248
Pricing fees 22,159
Other 31,771
------------
Total expenses 5,372,731
------------
Investment income--net 44,789,520
------------
Realized & Realized gain on investments--net 30,241,513
Unrealized Gain Change in unrealized appreciation on investments--net (12,286,231)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 62,744,802
(Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 44,789,520 $ 45,865,643
Realized gain on investments--net 30,241,513 7,007,842
Change in unrealized appreciation on investments--net (12,286,231) 17,329,366
------------ ------------
Net increase in net assets resulting from operations 62,744,802 70,202,851
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (36,306,077) (37,067,233)
Shareholders Preferred Stock (6,658,668) (7,546,880)
(Note 1e): Realized gain on investments--net:
Common Stock (9,726,657) (7,968,243)
Preferred Stock (3,428,543) (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 (56,119,945) (55,006,851)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions 8,278,056 --
(Note 4): ------------ ------------
Net increase in net assets derived from capital stock
transactions 8,278,056 --
------------ ------------
Net Assets: Total increase in net assets 14,902,913 15,196,000
Beginning of year 846,319,541 831,123,541
------------ ------------
End of year* $861,222,454 $846,319,541
============ ============
<FN>
*Undistributed investment income--net (Note 1f) $ 9,925,942 $ 8,098,422
============ ============
See Notes to Financial Statements.
</TABLE>
MuniYield Fund, Inc.
October 31, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 16.09 $ 15.68 $ 15.47 $ 14.35 $ 16.80
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.19 1.24 1.26 1.27 1.29
Realized and unrealized gain (loss) on
investments--net .49 .65 .23 1.34 (2.23)
-------- -------- -------- -------- --------
Total from investment operations 1.68 1.89 1.49 2.61 (.94)
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.97) (1.00) (1.04) (1.00) (1.07)
Realized gain on investments--net (.26) (.22) -- (.22) (.23)
In excess of realized gain on
investments--net -- (.01) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (1.23) (1.23) (1.04) (1.22) (1.30)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.18) (.20) (.24) (.23) (.18)
Realized gain on investments--net (.09) (.05) -- (.04) (.03)
In excess of realized gain on
investments--net -- --++++ -- -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.27) (.25) (.24) (.27) (.21)
-------- -------- -------- -------- --------
Net asset value, end of year $ 16.27 $ 16.09 $ 15.68 $ 15.47 $ 14.35
======== ======== ======== ======== ========
Market price per share, end of year $ 16.875 $ 15.875 $ 14.875 $ 14.375 $ 12.125
======== ======== ======== ======== ========
Total Investment Based on market price per share 14.74% 15.56% 10.88% 29.76% (20.94%)
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 9.15% 11.11% 8.61% 18.00% (6.71%)
======== ======== ======== ======== ========
Average Net Expenses .63% .64% .64% .66% .66%
Assets:** ======== ======== ======== ======== ========
Investment income--net 5.26% 5.48% 5.64% 5.91% 5.76%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: year (in thousands) $611,222 $596,320 $581,124 $573,400 $531,657
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) $250,000 $250,000 $250,000 $250,000 $250,000
======== ======== ======== ======== ========
Portfolio turnover 91.63% 111.45% 96.74% 52.99% 44.27%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,445 $ 3,385 $ 3,324 $ 3,294 $ 3,127
======== ======== ======== ======== ========
Dividends Series A--Investment income--net $ 694 $ 747 $ 894 $ 887 $ 598
Per Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 687 $ 751 $ 897 $ 850 $ 733
Outstanding:++ ======== ======== ======== ======== ========
Series C--Investment income--net $ 643 $ 763 $ 998 $ 827 $ 647
======== ======== ======== ======== ========
Series D--Investment income--net $ 637 $ 762 $ 888 $ 897 $ 659
======== ======== ======== ======== ========
Series E--Investment income--net $ 656 $ 752 $ 875 $ 759 $ 707
======== ======== ======== ======== ========
<FN>
*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, 1998
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 written or purchased are valued at the last sale
price in the case of exchange-traded options. In the case of options
traded in the over-the-counter market, valuation is the last asked
price (options written) or the last bid price (options purchased).
Securities with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at their fair value as determined in good faith
by or under the direction of the Board of Directors of the Fund,
including valuations furnished by a pricing service retained by the
Fund, which may utilize a matrix system for valuations. The
procedures of the pricing service and its valuations are reviewed by
the officers of the fund under the general supervision of the Board
of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
MuniYield Fund, Inc.
October 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of $2,052
have been reclassified between undistributed net realized capital
gains and undistributed net investment income, $72 has been
reclassified between paid-in capital in excess of par and
undistributed net realized capital gains, and $693 has been
reclassified between paid-in capital in excess of par 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, including proceeds from the
issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1998 were $767,466,034 and
$798,498,487, respectively.
Net realized gains for the year ended October 31, 1998 and net
unrealized gains as of October 31, 1998 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $30,241,512 $53,728,649
Short-term investments 1 --
----------- -----------
Total $30,241,513 $53,728,649
=========== ===========
As of October 31, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $53,721,647, of which $54,492,154
related to appreciated securities and $770,507 related to
depreciated securities. The aggregate cost of investments at October
31, 1998 for Federal income tax purposes was $806,992,170.
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 year ended October 31, 1998
increased by 512,710 as a result of dividend reinvestment and during
the year ended October 31, 1997 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.05 per share and a
liquidation preference of $25,000 per share, that entitle their
holders to receive cash dividends at an annual rate that may vary
for the successive dividend periods. The yields in effect at October
31, 1998 were as follows: Series A, 3.37%; Series B, 3.33%; Series
C, 3.24%, Series D, 3.30%; and Series E, 3.15%.
Shares issued and outstanding during the years ended October 31,
1998 and October 31, 1997 remained constant.
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, 1998, Merrill Lynch, Pierce, Fenner & Smith Inc., an
affiliate of FAM, earned $272,054 as commissions.
5. Subsequent Event:
On November 5, 1998, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.086596 per share, payable on November 27, 1998 to shareholders
of record as of November 20, 1998.
MuniYield Fund, Inc.
October 31, 1998
<AUDIT-REPORT>
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, 1998, the related statement of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield Fund, Inc. as of October 31, 1998, 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 17, 1998
</AUDIT-REPORT>
MuniYield Fund, Inc.
October 31, 1998
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield
Fund, Inc. during its taxable year ended October 31, 1998 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Additionally, the following table summarizes the taxable
distributions paid by the Fund during the year:
<TABLE>
<CAPTION>
Payable Ordinary Long-Term
Date Income Capital Gains
<S> <S> <C> <C> <C>
Common Stock Shareholders 12/30/97 $ .119756 $ .142691
Preferred Stock Shareholders: Series A 11/05/97 $86.48 $24.78*
12/03/97 -- $78.26*
10/07/98 -- $103.26**
Series B 11/12/97 $51.94 $57.51*
12/10/97 $35.00 $46.09*
10/14/98 -- $97.37**
Series C 11/26/97 $53.00 $58.68*
12/24/97 $35.36 $46.62*
9/30/98 -- $100.02**
10/28/98 -- $103.26**
Series D 11/26/97 $53.00 $58.68*
12/24/97 $35.31 $46.54*
9/30/98 -- $101.78**
10/28/98 -- $103.26**
Series E 11/05/97 $23.13 $5.28*
11/12/97 $12.96 $14.35*
11/19/97 $13.01 $14.62*
11/26/97 $12.88 $14.74*
12/03/97 $12.98 $15.23*
12/10/97 $12.17 $14.88*
12/17/97 -- $24.71*
9/23/98 -- $24.52**
9/30/98 -- $27.11**
10/07/98 -- $26.18**
10/14/98 -- $23.97**
10/21/98 -- $23.83**
10/28/98 -- $23.23**
<FN>
*The entire distribution is subject to the 28% tax rate.
**The entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
</TABLE>
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its
net investment income to its shareholders on a monthly basis.
However, in order to provide shareholders with a more consistent
yield to the current trading price of shares of Common Stock of the
Fund, the Fund may at times pay out less than the entire amount of
net investment income earned in any particular month and may at
times in any month pay out such accumulated but undistributed income
in addition to net investment income earned in that month. As a
result, the dividends paid by the Fund for any particular month may
be more or less than the amount of net investment income earned by
the Fund during such month. The Fund's current accumulated but
undistributed net investment income, if any, is disclosed in the
Statement of Assets, Liabilities and Capital, which comprises part
of the Financial Information included in this report.
Deloitte & Touche LLP
MuniYield Fund, Inc.
October 31, 1998
QUALITY PROFILE
The quality ratings of securities in the Fund as of October 31, 1998
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 19.2%
AA/Aa 12.4
A/A 16.6
BBB/Baa 18.4
BB/Ba 13.1
B/B 3.1
NR (Not Rated) 9.4
Other* 7.7
[FN]
*Temporary investments in short-term municipal securities.
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
