MuniYield Michigan Fund, Inc.
Semi-Annual
Report
April 30, 1994
Officers and Directors
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
110 Washington Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MYM
<PAGE>
This report, including the financial information
herein, is transmitted to the shareholders of Muni-
Yield Michigan Fund, Inc. for their information.
It is not a prospectus, circular or representa-
tion intended for use in the purchase of shares
of the Fund or any securities mentioned in the re-
port. Past performance results shown in this re-
port should not be considered a representation of
future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to pro-
vide the Common Stock shareholders with a poten-
tially 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.
MuniYield Michigan Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Michigan Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield Michigan Fund, Inc. earned $0.579 per share income
dividends, which includes earned and unpaid dividends of $0.077.
This represents a net annualized yield of 7.89%, based on a
month-end per share net asset value of $14.80. Over the same
period, the total investment return on the Fund's Common Stock
was -7.37%, based on a change in per share net asset value from
$16.59 to $14.80, and assuming reinvestment of $0.587 per share
income dividends.
The average yield on the Fund's Auction Market Preferred Stock
for the six-month period ended April 30, 1994 was 3.19%.
The Environment
Inflationary expectations and investor sentiment changed for the
worse during the three-month period ended April 30, 1994.
Following stronger-than-expected economic results through year-
end 1993, the Federal Reserve Board broke with tradition on
February 4, 1994 and publicly announced a modest 25 basis point
(0.25%) increase in short-term interest rates. At the March 22
meeting of the Federal Open Market Committee, the Federal Reserve
Board again raised the Federal Funds rate by 25 basis points,
followed by another 25 basis point increase on April 18.
<PAGE>
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income
investors focused on Chairman Greenspan's implicit promise of
further tightening should the rate of inflation accelerate, and
bond prices declined sharply. The setback in the bond market was
also reflected in greater stock market volatility. While the
second and third increases in the Federal Funds rate were less
of a surprise, investors remained concerned that interest rates
would trend upward sharply as the central bank aggressively
attempted to contain the inflationary pressures of an improving
economy. At the same time, highly leveraged investors were forced
to liquidate positions in the face of declining stock and bond
prices. Investor confidence was not restored with the announce-
ment of the surprisingly slow 2.6% gross domestic product growth
rate for the first calendar quarter of 1994. Instead, investors
focused on the higher-than-expected (but still moderate) broad
inflation measures and became concerned that business activity
was beginning to stagnate as inflationary pressures were in-
creasing.
The volatility in the US capital markets was mirrored in inter-
national markets during the period. Political and economic
developments, along with concerns of heightened global infla-
tionary pressures, led to a sell-off in most capital markets,
especially the emerging markets that had appreciated strongly
in 1993.
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond
yields exhibited considerable volatility as they rose to their
highest level in the past two years. As measured by the Bond
Buyer Revenue Bond Index, the yield on newly issued municipal
bonds maturing in 30 years rose over 90 basis-points to 6.42%
by the end of April. Yields on seasoned municipal revenue bonds
rose by over 100 basis points in sympathy with the equally drama-
tic increase in long-term US Treasury bond yields. By the end
of April, yields on US Treasury securities rose by over 95 basis
points to approximately 7.30%.
<PAGE>
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid
economic growth seen late last year with continued low inflation.
Following the initial interest rate increase by the Federal
Reserve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began to
sell securities in anticipation of further interest rate
increases. This fear led investors to withdraw from the tax-
exempt market. From early February to the end of March, total
assets of all tax-exempt bond funds declined by $14 billion to
$247 billion. This decline in investor demand, coupled with fears
that the robust economic recovery seen during the fourth quarter
of 1993 would continue well into 1994, helped push municipal bond
yields higher in February and March. Attracted by tax-exempt
yields in excess of 6.25%, investor demand returned in April,
allowing yields to decline approximately 15 basis points to end
the April period at approximately 6.40%.
The magnitude of the rise in tax-exempt bond yields experienced
these past six months has not been seen since 1987 when municipal
bond rates rose 250 basis points between March and October of
that year. It is very important to note that the recent municipal
bond price declines were largely the result of consistent and
insistent selling pressures over the last two months. In 1987,
the tax-exempt bond market was much more volatile and, at times,
chaotic as investors sought to liquidate positions without
concern for fundamental value. For the most part, the recent
price deterioration has been orderly, and the municipal bond
market's liquidity and integrity have not been challenged or
jeopardized.
To a large extent, the municipal bond market has continued to
be supported by its strong technical position. New-issue volume
for the last six months has been less than $105 billion. This
represents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been dis-
cussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issu-
ance to continue since we anticipate recent yield increases to
significantly impact future municipal bond issuance. Just as
higher mortgage rates slow home mortgage refinancings, the recent
rise in bond yields will prevent bond refinancings from becoming
the driving force in bond issuance in 1994 as they were in 1993.
<PAGE>
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yielded
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield
advantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50% repre-
sents an after-tax equivalent of 10.65%. With prevailing esti-
mates of 1994 inflation at no more than 3%--4%, real after-tax
rates in excess of 6.50% easily compensate longer-term investors
for much of the price volatility recently experienced.
Portfolio Strategy
We remain constructive on the municipal bond market and continue
to believe that tax-exempt bond yields will decline by late 1994
and into 1995. However, we expect the volatility the tax-exempt
bond market has exhibited in recent months to continue into mid-
year. This volatility led the Fund to become more defensive dur-
ing March and April. This defensive posture will be maintained
until either the Federal Reserve Board concludes its current
round of interest rate increases or until there are consistent
indications that recent yield increases have had a negative
impact on economic growth. It is likely that until either of
these two conditions are met, the financial markets' current
uncertainty will continue and interest rates will remain
volatile.
During the April period, we increased the Fund's cash reserve
position to approximately 10% of net assets. This defensive
position has two principal benefits. First, additional capital
depreciation as a result of rising interest rates will be limited
to some degree. Second, this increased liquidity will enable the
Fund to more quickly respond to those attractive market oppor-
tunities recent periods of volatility have presented. These
episodes of market uncertainty have allowed the Fund to add
attractively priced higher-coupon, noncallable issues to its
holdings. These issues will enhance the Fund's level of tax-
exempt income in the coming years. Also, while we reduced the
Fund's position in more performance-oriented issues, the Fund
remains well-positioned to take advantage of interest rate
declines later this year.
<PAGE>
Short-term tax-exempt interest rates continue to trade in the
2.25%--3.00% range, despite the increases in short-term taxable
rates by the Federal Reserve Board in recent months. The demand
for municipal cash equivalents has been very strong for much of
the past year and is expected to remain strong. The leverage of
the Fund's Preferred Stock continues to have a positive impact on
the yield spread to the Common Stock shareholder. 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 in-
cremental yield. Should the interest rate differential between
short-term and long-term interest rates narrow because of a rise
in short-term interest rates, the incremental yield "pick up" on
the Common Stock will be reduced. Furthermore, if long-term in-
terest rates rise, the Common Stock's net asset value will re-
flect the full decline in the entire portfolio holdings, since
the value of the Fund's Preferred Stock does not fluctuate.
During the six-month period ended April 30, 1994, long-term
interest rates rose, reflected in the decline in the net asset
value of the Fund's Common Stock. For a complete explanation
of leveraging, see the description below.
We appreciate your ongoing interest in MuniYield Michigan Fund,
Inc., and we look forward to serving your investment needs and
objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
June 1, 1994
<PAGE>
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Michigan Fund, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. How-
ever, 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 in-
vests 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 hold-
ings is reflected in the per share net asset value of the Fund's
Common Stock. However, in order to benefit Common Stock share-
holders, 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 inter-
est 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.
In this case, the dividends paid to Preferred Stock shareholders
are significantly lower than the income earned on the fund's long-
term investments, and therefore the Common Stock shareholders
are the beneficiaries of the incremental yield. However, if short-
term interest rates rise, narrowing the differential between
short-term and long-term interest rates, the incremental yield
pick-up on the Common Stock will be reduced. 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, de-
cline. 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 Pre-
ferred 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.
<PAGE>
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Unrealized Dividends/Distributions
Investment Realized Gains Net Investment Income Capital Gains
For the Quarter Income Gains (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1992 to July 31, 1992 $ .32 $ .01 $ 1.18 $ .30 $ .07 -- --
August 1, 1992 to October 31, 1992 .30 .05 (1.12) .26 .05 -- --
November 1, 1992 to January 31, 1993 .31 .06 .75 .25 .05 $.05 $.01
February 1, 1993 to April 30, 1993 .30 .05 .59 .25 .04 -- --
May 1, 1993 to July 31, 1993 .30 .01 .36 .25 .05 -- --
August 1, 1993 to October 31, 1993 .30 -- .59 .25 .05 -- --
November 1, 1993 to January 31, 1994 .31 -- .15 .25 .05 -- --
February 1, 1994 to April 30, 1994 .29 .28 (2.11) .24 .05 .10 .02
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
May 1, 1992 to July 31, 1992 $15.42 $14.17 $15.75 $14.625 440
August 1, 1992 to October 31, 1992 15.26 14.11 15.875 14.40 355
November 1, 1992 to January 31, 1993 14.98 14.23 15.625 14.875 408
February 1, 1993 to April 30, 1993 16.06 14.70 16.375 15.125 588
May 1, 1993 to July 31, 1993 16.16 15.56 16.625 15.00 402
August 1, 1993 to October 31, 1993 16.83 16.01 17.125 16.00 430
November 1, 1993 to January 31, 1994 16.64 16.12 16.375 15.00 528
February 1, 1994 to April 30, 1994 16.60 14.30 16.625 13.75 548
<FN>
* Calculations are based upon shares of Common Stock outstanding
at the end of each quarter.
** As reported in the consolidated transaction reporting system.
*** In thousands.
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield Michigan Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to
the list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan--98.6%
<S> <S> <C> <S> <C>
AAA Aaa $ 3,545 Capital Region Airport Authority, Michigan, Airport Revenue Bonds, AMT, 6.60% due
7/01/2012 (c) $ 3,642
AAA Aaa 3,545 Central Michigan University, Revenue Refunding Bonds, 6% due 10/01/2013 (c) 3,485
AA A1 1,325 Clarkston, Michigan, Community Schools, Revenue Refunding Bonds, UT, 5.90% due
5/01/2016 1,279
Detroit, Michigan, Sewer Disposal Revenue Bonds (d):
AAA Aaa 2,005 6.70% due 7/01/2008 2,113
AAA Aaa 3,140 6.625% due 7/01/2011 3,263
AAA Aaa 1,400 6.625% due 7/01/2021 1,432
A-1 NR 200 Detroit, Michigan, Tax Increment Finance Authority Reserve Fund (Central Industrial
Park Project), VRDN, 2.90% due 10/01/2010 (a) 200
AAA Aaa 1,000 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds, 6.25% due
7/01/2012 (d) 1,004
BBB Baa1 2,000 Dickinson County, Michigan, Economic Development Corporation, PCR, Refunding
(Champion International Corporation Project), 5.85% due 10/01/2018 1,773
AA A1 1,750 Gaylord, Michigan, Community Schools, GO, Refunding, UT, 6.60% due 5/01/2021 (f) 1,902
AA- A1 1,000 Grand Rapids, Michigan, Sanitation Sewer Systems Revenue Bonds, 6% due 1/01/2022 950
Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds (d):
AAA Aaa 5,850 6.50% due 1/01/2015 5,954
AAA Aaa 1,250 5.75% due 1/01/2018 1,167
A1+ VMIG1 3,100 VRDN, 2.95% due 1/01/2020 (a) 3,100
Kalamazoo, Michigan, Hospital Finance Authority, Revenue Refunding and Improvement
Bonds (Bronson Methodist), Series A:
A+ A1 2,500 6.25% due 5/15/2012 2,437
A+ A1 1,750 6.375% due 5/15/2017 1,694
AAA Aaa 2,500 Kent Hospital Financing Authority, Michigan, Hospital Facility, GO, Revenue Refunding
Bonds (Pine Rest Christian Hospital), 6.50% due 11/01/2010 (d) 2,579
<PAGE>
Michigan Higher Education Student Loan Authority Revenue Bonds, AMT:
AAA VMIG1 400 Series XII-F, VRDN, 3.15% due 10/01/2020 (a)(b) 400
NR A 1,250 Series XIV-A, 6.75% due 10/01/2006 1,314
Michigan Municipal Bond Authority Revenue Bonds, Series A:
AA A1 2,500 Refunding (Local Government-Qualified Schedule), 6.50% due 5/01/2016 2,559
AA Aa 4,700 Revolving Fund, 6.55% due 10/01/2013 4,762
AA- A1 3,500 Michigan Public Power Agency, Revenue Refunding Bonds (Belle River Project),
Series A, 5.25% due 1/01/2018 3,035
AA- A 10,150 Michigan State Building Authority Revenue Bonds, Series II, 6.75% due 10/01/2011 10,565
Michigan State Hospital Finance Authority Revenue Bonds:
NR VMIG1 900 (Chelsea Community Hospital), VRDN, 3.20% due 12/01/2011 (a) 900
A A 1,000 (Mid-Michigan Obligation Group), 6.90% due 12/01/2024 1,066
AAA Aaa 2,000 (Oakwood Hospital-Obligated Group), 7.10% due 7/01/2000 (d)(f) 2,226
A- A 1,250 (Sisters of Mercy Health Corp.), Series J, 7.50% due 2/15/2000 (f) 1,420
Michigan State Hospital Finance Authority Revenue Bonds (Henry Ford Health
Systems):
AA Aa 2,500 (Mercy Mount Clemens Corp.), 6.25% due 5/15/2011 2,419
AA Aa 1,750 Series A, 7% due 7/01/2010 1,818
Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Detroit Medical
Center Obligation Group), Series A:
A- A 2,000 6.25% due 8/15/2013 1,917
A- A 4,375 6.50% due 8/15/2018 4,255
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan (concluded)
<S> <S> <C> <S> <C>
Michigan State Housing Development Authority, Rental Housing Revenue Bonds:
AAA Aaa $ 2,000 Refunding, Series A, 5.90% due 4/01/2023 (b) $ 1,830
A+ NR 5,000 Series A, AMT, 7.15% due 4/01/2010 5,122
A+ NR 6,000 Series B, 7.10% due 4/01/2021 6,164
Michigan State Housing Development Authority, S/F Mortgage Revenue Bonds, Series A:
AA NR 1,000 6.80% due 12/01/2012 1,019
AA NR 3,325 6.875% due 6/01/2023 3,391
Michigan State Strategic Fund, Limited Obligation Revenue Refunding Bonds:
AAA Aaa 7,500 (Detroit Edison Co. Pollution Project), 6.875% due 12/01/2021 (d) 7,806
A A2 8,000 (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 8,663
NR P1 2,900 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project), Series A,
VRDN, 3.05% due 4/15/2018 (a) 2,900
Michigan State, Trunk Line Revenue Bonds, Series A:
AA- A1 2,500 5.625% due 11/15/2014 2,312
AA- A1 2,875 6% due 8/15/2019 2,749
AAA Aaa 2,500 5.75% due 11/15/2020 (d) 2,327
AA- A1 3,000 5.50% due 10/01/2021 2,649
A P1 4,000 Midland County, Michigan, Economic Development Corp., Limited Obligation Revenue
Refunding Bonds (Dow Chemical Co. Project), Series B, VRDN, 3.15% due 2/01/2015 (a) 4,000
Monroe County, Michigan, Economic Development Corp., Limited Obligation Revenue
Refunding Bonds (Detroit Edison Co.):
AAA Aaa 4,500 Series AA, 6.95% due 9/01/2022 (d) 4,960
NR P1 4,200 Series CC, VRDN, 3% due 10/01/2024 (a) 4,200
BBB Baa1 2,500 Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT, Series A, 7.75% due
12/01/2019 2,697
AA A1 1,650 North Branch, Michigan, Area Schools, Lapeer County, GO, Refunding (Building
and Site), UT, 6.60% due 5/01/2002 (f) 1,793
AA A1 1,370 Plymouth Canton, Michigan, Community School District, GO, UT, Refunding Bonds,
Series A, 6.625% due 5/01/2016 1,392
AA A1 2,250 Reeths-Puffer, Michigan, School Building, GO, UT, 6.625% due 5/01/2012 2,310
AA A1 2,500 Rockford, Michigan, Public Schools, GO, 5.875% due 5/01/2012 2,384
<PAGE>
AAA Aaa 2,000 Romulus Township, Michigan, Community School District, GO, Series I, 6.75% due
5/01/2001 (e)(f) 2,201
Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds (William
Beaumont Hospital), Series D:
AA Aa 6,250 6.75% due 1/01/2011 6,452
AA Aa 1,000 6.75% due 1/01/2020 1,020
AA Aa 7,500 University of Michigan, University Hospital Revenue Bonds, 6.375% due 12/01/2024 7,385
AAA Aaa 2,400 Western Michigan University Revenue Bonds, Series B, 6.50% due 7/15/2021 (b) 2,436
Total Investments (Cost--$163,961)--98.6% 166,792
Other Assets Less Liabilities--1.4% 2,440
--------
Net Assets--100.0% $169,232
========
<FN>
(a) The interest rate is subject to change periodically
based upon the prevailing market rate. The interest
rates shown are the rates in effect at April 30, 1994.
(b) AMBAC Insured.
(c) MBIA Insured.
(d) FGIC Insured.
(e) FSA Insured.
(f) Prerefunded.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$163,961,129) (Note 1a) $166,792,563
Cash 15,847
Interest receivable 2,761,380
Deferred organization expenses (Note 1e) 26,181
Prepaid expenses and other assets 256,030
------------
Total assets 169,852,001
------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) $ 384,758
Investment adviser (Note 2) 67,055 451,813
------------
Accrued expenses and other liabilities 167,909
------------
Total liabilities 619,722
------------
<PAGE>
Net Assets: Net assets $169,232,279
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (1,100 shares of AMPS*
issued and outstanding at $50,000 per share liquidation preference) $ 55,000,000
Common Stock, par value $.10 per share (7,719,431 shares issued and
outstanding) $ 771,943
Paid-in capital in excess of par 107,640,564
Undistributed investment income--net 825,212
Undistributed realized capital gains--net 2,163,126
Unrealized appreciation on investments--net 2,831,434
------------
Total--Equivalent to $14.80 net asset value per share of Common Stock
(market price--$14.75) 114,232,279
------------
Total capital $169,232,279
============
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 5,287,012
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 443,662
Commission fees (Note 4) 97,813
Professional fees 34,168
Transfer agent fees 20,355
Accounting services (Note 2) 19,769
Printing and shareholder reports 17,377
Directors' fees and expenses 11,561
Listing fees 7,879
Custodian fees 6,613
Amortization of organization expenses (Note 1e) 3,940
Pricing fees 3,259
Other 11,772
------------
Total expenses 678,168
------------
Investment income--net 4,608,844
------------
Realized & Unreal- Realized gain on investments--net 2,163,130
ized Gain (Loss) on Change in unrealized appreciation on investments--net (15,194,192)
Investments--Net ------------
(Notes 1d & 3): Net Decrease in Net Assets Resulting from Operations $ (8,422,218)
============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: April 30, 1994 Oct. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 4,608,844 $ 9,254,546
Realized gain on investments--net 2,163,130 886,648
Change in unrealized appreciation on investments--net (15,194,192) 17,500,589
------------ ------------
Net increase (decrease) in net assets resulting from operations (8,422,218) 27,641,783
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (3,767,129) (7,654,103)
Shareholders Preferred Stock (810,029) (1,422,740)
(Note 1g): Realized gain on investments--net:
Common Stock (761,499) (407,102)
Preferred Stock (125,147) (94,952)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (5,463,804) (9,578,897)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends -- 3,077,074
(Notes 1e & 4): Offering costs resulting from the issuance of shares 39,940 --
------------ ------------
Net increase in net assets derived from capital stock transactions 39,940 3,077,074
------------ ------------
Net Assets: Total increase (decrease) in net assets (13,846,082) 21,139,960
Beginning of period 183,078,361 161,938,401
------------ ------------
End of period* $169,232,279 $183,078,361
------------ ------------
<FN>
* Undistributed investment income--net $ 825,212 $ 793,526
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
For the Six Period
The following per share data and ratios have been derived Months For the February 28,
from information provided in the financial statements. Ended Year Ended 1992+ to
April 30, October 31, October 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.59 $ 14.22 $ 14.18
Operating ---------- ---------- ----------
Performance: Investment income--net .60 1.21 .77
Realized and unrealized gain (loss) on investments--net (1.68) 2.41 .14
---------- ---------- ----------
Total from investment operations (1.08) 3.62 .91
---------- ---------- ----------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.49) (1.00) (.56)
Realized gain on investments--net (.10) (.05) --
---------- ---------- ----------
Total dividends and distributions to Common Stock
shareholders (.59) (1.05) (.56)
---------- ---------- ----------
Capital charge resulting from issuance of Common Stock -- -- (.03)
---------- ---------- ----------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net (.10) (.19) (.13)
Realized gain on investments--net (.02) (.01) --
Capital charge resulting from issuance of Preferred Stock -- -- (.15)
---------- ---------- ----------
Total effect of Preferred Stock activity (.12) (.20) (.28)
---------- ---------- ----------
Net asset value, end of period $ 14.80 $ 16.59 $ 14.22
========== ========== ==========
Market price per share, end of period $ 14.75 $ 16.625 $ 14.875
========== ========== ==========
Total Investment Based on market price per share (7.88%)+++ 19.54% 3.05%+++
Return:** ========== ========== ==========
Based on net asset value per share (7.37%)+++ 24.78% 4.21%+++
========== ========== ==========
<PAGE>
Ratios to Average Expenses, net of reimbursement .76%* .74% .54%*
Net Assets:*** ========== ========== ==========
Expenses .76%* .74% .72%*
========== ========== ==========
Investment income--net 5.18%* 5.32% 5.66%*
========== ========== ==========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 114,232 $ 128,078 $ 106,938
========== ========== ==========
Preferred Stock outstanding, end of period (in thousands) $ 55,000 $ 55,000 $ 55,000
========== ========== ==========
Portfolio turnover 5.61% 12.88% 22.49%
========== ========== ==========
Dividends Per Share Investment income--net $ 736 $ 1,293 $ 888
On Preferred Stock
Outstanding:
<FN>
* Annualized.
** Total investment returns based on market value, which
can be significantly greater or lesser than the net
asset value, result in substantially different returns.
Total investment returns exclude the effects of sales
loads.
*** Do not reflect the effect of dividends to Preferred Stock
shareholders.
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on April 10, 1992.
+++ Aggregate total investment returns.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Michigan 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 MYM. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded pri-
marily 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 secur-
ities. Financial futures contracts, which are traded on exchanges,
are valued at their closing prices as of the close of such ex-
changes. Options, which are traded on exchanges, are valued at
their last sale price as of the close of such exchanges or, lack-
ing any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amor-
tized cost, which approximates market value. Securities for
which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund.
(b) 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.
(c) Income taxes--It is the Fund's policy to comply with the re-
quirements 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.
<PAGE>
(d) Security transactions and investment income--Security trans-
actions 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 trans-
actions are determined on the identified cost basis.
(e) Deferred organization and offering expenses--Deferred
organization expenses are amortized on a straight-line basis
over a five year period. Direct expenses relating to the public
offering of the Common and Preferred Stock were charged to
capital at the time of issuance.
(f) Non-income producing investments--Written and purchased
options are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership.
Both prior to and after the reorganization, ultimate control of
FAM was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The
general partner of FAM is Princeton Services, Inc., an indirect
wholly-owned subsidiary of ML & Co. The limited partners are ML &
Co. and Merrill Lynch Investment Management, Inc. ("MLIM"), which
is also an indirect wholly-owned subsidiary of ML & Co.
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, MLIM, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term secur-
ities, for the six months ended April 30, 1994 were $9,489,410
and $23,702,356, respectively.
<PAGE>
Net realized and unrealized gains as of April 30, 1994 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $2,163,130 $ 2,831,434
---------- -----------
Total $2,163,130 $ 2,831,434
========== ===========
As of April 30, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $2,831,434, of which $4,003,381
related to appreciated securities and $1,171,947 related to
depreciated securities. The aggregate cost of investments at
April 30, 1994 for Federal income tax purposes was $163,961,129.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital
stock, including Preferred Stock, par value $.10 per share, all
of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to reclassify any unissued
shares of capital stock without approval of the holders of Common
Stock.
Common Stock
For the six months ended April 30, 1994, shares issued and
outstanding remained constant at 7,719,431. At April 30, 1994,
total paid-in capital amounted to $108,412,507.
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 yield in effect at April 30, 1994 was
3.19%.
For the six months ended April 30, 1994, there were 1,100 AMPS
shares authorized, issued and outstanding with a liquidation
preference of $50,000 per share, plus accumulated and unpaid
dividends of $62,368.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated on
the proceeds of each auction.
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the
amount of $.076931 per share, payable on May 27, 1994 to
shareholders of record as of May 17, 1994.
