MUNIYIELD
MICHIGAN
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1996
<PAGE>
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
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, 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
MYM
<PAGE>
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Michigan 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
Michigan Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Michigan Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1996, the Common Stock of
MuniYield Michigan Fund, Inc. earned $0.464 per share income
dividends, which included earned and unpaid dividends of $0.078.
This represents a net annualized yield of 6.27%, based on a month-
end per share net asset value of $14.84. Over the same period, the
total investment return on the Fund's Common Stock was +0.88%, based
on a change in per share net asset value from $15.23 to $14.84, and
assuming reinvestment of $0.461 per share income dividends and
$0.041 per share capital gains distributions.
For the six-month period ended April 30, 1996, the Fund's Auction
Market Preferred Stock had an average yield of 3.84%.
The Environment
Investor perceptions regarding the US economy changed over the
course of the six-month period ended April 30, 1996. As 1995 drew to
a close and 1996 began, it appeared that the US economy was losing
momentum. Lackluster retail sales, increases in initial unemployment
claims (along with weak job and income growth), and evidence of
slowing in the manufacturing sector all suggested that the rate of
economic growth was decelerating, with some forecasters even
suggesting the possibility of an imminent recession.
<PAGE>
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is likely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
The Municipal Market
During the six months ended April 30, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended April 30, 1996. At
April 30, 1996, long-term municipal bond yields were approximately
6.30%, an increase of approximately 30 basis points over the last
six months. The rise in US Treasury bond yields was more
substantial. Over the last six months, yields on US Treasury
securities rose approximately 60 basis points to 6.90%. During the
April period, the municipal bond market reversed the trend seen
throughout much of 1995 and significantly outperformed the US
Treasury bond market.
<PAGE>
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income has dissipated. As the negative revenue impact of the
various proposals, such as the flat tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat tax, value-added tax
or any other reform were made. Consequently, fears of losing the
favored tax treatment of municipal bond income declined even
further. As a percentage of Treasury bond yields, tax-exempt bond
yield ratios quickly declined from 95% to approximately 90%. This
allowed the municipal bond market to maintain much of the gains made
since early 1995.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were underwritten, an increase of approximately
45% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $40 billion in long-term tax-exempt securities were
underwritten, an increase of 35% compared to the same period a year
ago. At current interest rate levels large amounts of refundings are
unlikely and the rate of new bond issuance should continue to
decline.
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the six-month period ended April 30,
1996 to absorb the relative increase in bond issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
<PAGE>
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
Throughout most of the six-month period ended April 30, 1996, we
maintained the neutral investment strategy that we adopted toward
the end of 1995. While economic growth was stronger than expected,
and interest rates are correspondingly higher, we expect that growth
will prove short-lived and interest rates may return to lower levels
toward the end of 1996. The Fund remains well positioned to
participate in any market improvement. We expect to maintain the
Fund's cash reserves at low levels to seek to enhance the Fund's
current dividend yield. We used the recent rise in interest rates to
add higher-yielding securities to the Fund's portfolio. We expect to
view any period of volatility as an opportunity to add similar
issues to the Fund.
Short-term tax-exempt interest rates traded in the 3.25%--4.00%
range throughout most of the six-month period ended April 30, 1996.
This scenario continued to generate significant beneficial impact
upon the yield to the Common Stock shareholders. However, should the
spread between short-term and long-term interest rates narrow, the
benefits of the leverage will decline and, as a result, reduce the
yield on the Fund's Common Stock. (For a complete explanation of the
benefits and risks of leveraging, see page 4 of this report to
shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniYield Michigan Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
May 31, 1996
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. 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.
<PAGE>
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 on 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 pick-up 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.
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)
DATES Daily Adjustable Tax-Exempt Securities
HDA Housing Development Authority
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--98.3%
<S> <S> <C> <S> <C>
Battle Creek, Michigan, Tax Increment Finance Authority Revenue Bonds:
A- NR* $ 1,320 7.10% due 5/01/2010 $ 1,440
A- NR* 1,000 7.40% due 11/01/2015 1,079
AAA Aaa 3,545 Capital Region Airport Authority, Michigan, Airport Revenue Bonds,
AMT, 6.60% due 7/01/2012 (c) 3,704
NR* P1 2,200 Delta County, Michigan, Economic Development Corp., Environmental Improvement
Revenue Bonds (Mead Escanaba Paper), DATES, Series F, 4.10% due 12/01/2013 (a) 2,200
Detroit, Michigan, Sewage Disposal Revenue Bonds (d)(f):
AAA Aaa 2,005 6.70% due 7/01/2001 2,220
AAA Aaa 3,140 6.625% due 7/01/2001 3,465
AAA Aaa 1,900 6.625% due 7/01/2001 2,097
BBB Baa1 5,000 Dickinson County, Michigan, Economic Development Corp., PCR, Refunding
(Champion International Corporation Project), 5.85% due 10/01/2018 4,709
AAA Aaa 1,720 Ferndale, Michigan, School District, Refunding, UT, 5.375% due 5/01/2021 (d) 1,605
AAA Aaa 2,000 Grand Ledge, Michigan, Public Schools District Revenue Bonds, UT, 6.45%
due 5/01/2014 (c) 2,110
AAA Aaa 5,850 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds,
6.50% due 1/01/2015 (d) 6,196
Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue
Refunding and Improvement Bonds (Bronson Methodist), Series A:
A A1 2,500 6.25% due 5/15/2012 2,527
A A1 1,750 6.375% due 5/15/2017 1,773
AAA Aaa 2,500 Kent, Michigan, Hospital Finance Authority, Hospital Facility, Revenue
Refunding Bonds (Pine Rest Christian Hospital), 6.50% due 11/01/2010 (d) 2,635
Michigan Municipal Bond Authority Revenue Bonds:
A NR* 1,100 (Local Government Loan Program), Series B, 5.80% due 11/01/2013 1,082
AA Aa 2,500 Refunding (Local Government-Qualified School), Series A, 6.50% due 5/01/2016 2,603
AA Aa 4,700 (State Revolving Fund), Series A, 6.55% due 10/01/2013 4,954
AA- A1 4,000 Michigan Public Power Agency, Revenue Refunding Bonds (Belle River Project),
Series B, 5% due 1/01/2019 3,472
AA- A1 10,150 Michigan State Building Authority Revenue Bonds, Series II, 6.75% due
10/01/2011 10,849
<PAGE>
AA Aa 2,500 Michigan State Environmental Protection Program, Refunding, 5.40% due
11/01/2019 2,333
Michigan State HDA, Rental Housing Revenue Bonds:
A+ NR* 4,085 AMT, Series A, 7.15% due 4/01/2010 4,265
A+ NR* 5,370 Series B, 7.10% due 4/01/2021 5,601
Michigan State HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 2,500 Refunding, Series C, 6.50% due 6/01/2016 2,548
AA+ NR* 1,000 Series A, 6.80% due 12/01/2012 1,041
AA+ NR* 3,325 Series A, 6.875% due 6/01/2023 3,434
Michigan State Higher Education Student Loan Authority Revenue Bonds, AMT:
NR* A 1,250 Series XIV-A, 6.75% due 10/01/2006 1,304
A1 VMIG1++ 300 VRDN, Series XII-D, 4.20% due 10/01/2015 (a)(b) 300
</TABLE>
<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 Hospital Finance Authority Revenue Bonds:
AAA Aa $ 1,750 (Henry Ford Health Systems), Series A, 7% due 7/01/2000 (f) $ 1,937
A A 1,000 (Mid-Michigan Obligation Group), 6.90% due 12/01/2024 1,026
AAA Aaa 2,000 (Oakwood Hospital Obligation Group), 7.10% due 7/01/2000 (d)(f) 2,222
A A 2,000 Refunding (Detroit Medical Center Obligation Group), Series A, 6.25%
due 8/15/2013 2,001
A A 5,875 Refunding (Detroit Medical Center Obligation Group), Series A, 6.50% due
8/15/2018 5,935
AA Aa 2,500 Refunding (Henry Ford Health Systems), Series A, 5.25% due 11/15/2020 2,231
NR* A1 1,000 Refunding (McLaren Obligation Group), Series A, 5.375% due 10/15/2013 925
A Aaa 1,250 (Sisters of Mercy Health Corp.), Series J, 7.50% due 2/15/2001 (f) 1,403
Michigan State Strategic Fund, Limited Obligation Revenue Bonds, AMT:
A+ A1 2,500 (Ford Motor Co. Project), Series A, 6.55% due 10/01/2022 2,565
A+ A1 2,500 (Waste Management Inc. Project), 6.625% due 12/01/2012 2,649
Michigan State Strategic Fund, Limited Obligation, Revenue Refunding Bonds:
AAA Aaa 7,500 (Detroit Edison Co. Project), 6.875% due 12/01/2021 (d) 8,078
AAA Aaa 2,500 (Detroit Edison Co. Project), Series CC, 6.95% due 9/01/2021 (d) 2,696
A+ A1 8,000 (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 8,944
<PAGE>
NR* P1 1,200 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project),
VRDN, Series A, 4.10% due 4/15/2018 (a) 1,200
Michigan State Trunk Line, Series A:
AA- A1 1,000 5.625% due 11/15/2013 983
AA- A1 6,370 5.70% due 11/15/2016 6,168
AAA Aaa 6,500 Monroe County, Michigan, Economic Development Corp., Limited Obligation,
Revenue Refunding Bonds (Detroit Edison Co. Project), Series AA, 6.95%
due 9/01/2022 (d) 7,425
BBB Baa1 2,500 Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT,
Series A, 7.75% due 12/01/2019 2,702
AA Aa 1,370 Plymouth-Canton, Michigan, Community School District, Revenue Refunding
Bonds, UT, Series A, 6.625% due 5/01/2016 1,442
AA Aa 2,250 Reeths-Puffer, Michigan, Schools Building Revenue Bonds, UT, Series Q,
6.625% due 5/01/2002 (f) 2,477
AAA Aaa 2,000 Romulus, Michigan, Community School District, UT, Series I, 6.75%
due 5/01/2001 (e)(f) 2,214
Royal Oak, Michigan, Hospital Finance Authority, Revenue Bonds
(William Beaumont Hospital):
AA Aa 2,250 Refunding, Series G, 5.25% due 11/15/2019 2,015
AA Aa 6,250 Series D, 6.75% due 1/01/2011 6,514
AA Aa 6,000 Series D, 6.75% due 1/01/2020 6,254
A1+ VMIG1++ 600 University of Michigan, University Hospital Revenue Refunding Bonds, VRDN,
Series A, 4.10% due 12/01/2019 (a) 600
AAA Aaa 2,400 Western Michigan University, Revenue Refunding Bonds, Series B, 6.50% due
7/15/2021 (b) 2,553
Total Investments (Cost--$159,423)--98.3% 166,705
Other Assets Less Liabilities--1.7% 2,822
--------
Net Assets--100.0% $169,527
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FSA Insured.
(f)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$159,423,273) (Note 1a) $166,704,941
Cash 65,391
Interest receivable 3,053,246
Deferred organization expenses (Note 1e) 10,425
Prepaid expenses and other assets 14,017
------------
Total assets 169,848,020
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 200,584
Investment adviser (Note 2) 74,523 275,107
------------
Accrued expenses and other liabilities 45,718
------------
Total liabilities 320,825
------------
Net Assets: Net assets $169,527,195
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,200 shares
of AMPS* issued and outstanding at $25,000 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 107,640,565
Undistributed investment income--net 1,242,789
Accumulated realized capital losses on investments--net (2,409,770)
Unrealized appreciation on investments--net 7,281,668
------------
Total--Equivalent to $14.84 net asset value per share of
Common Stock (market price--$14.75) 114,527,195
------------
Total capital $169,527,195
============
<FN>
*Auction Market Preferred Stock.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended April 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 5,194,578
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 432,083
Commission fees (Note 4) 68,914
Professional fees 38,475
Accounting services (Note 2) 25,319
Transfer agent fees 21,149
Printing and shareholder reports 18,255
Directors' fees and expenses 11,363
Listing fees 9,419
Custodian fees 6,891
Pricing fees 3,910
Amortization of organization expenses (Note 1e) 3,889
Other 8,447
------------
Total expenses 648,114
------------
Investment income--net 4,546,464
------------
Realized & Realized loss on investments--net (161,747)
Unrealized Loss on Change in unrealized appreciation on investments--net (2,528,456)
Investments--Net ------------
(Notes 1b, Net Increase in Net Assets Resulting from Operations $ 1,856,261
1d & 3): ============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1996 Oct. 31, 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 4,546,464 $ 9,188,829
Realized loss on investments--net (161,747) (1,856,607)
Change in unrealized appreciation/depreciation on
investments--net (2,528,456) 13,164,665
------------ ------------
Net increase in net assets resulting from operations 1,856,261 20,496,887
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (3,559,862) (7,076,009)
Shareholders Preferred Stock (977,790) (1,773,222)
(Note 1f): Realized gain on investments--net:
Common Stock (315,863) (2,053,090)
Preferred Stock (75,526) (461,109)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (4,929,041) (11,363,430)
------------ ------------
Net Assets: Total increase (decrease) in net assets (3,072,780) 9,133,457
Beginning of period 172,599,975 163,466,518
------------ ------------
End of period* $169,527,195 $172,599,975
============ ============
<FN>
*Undistributed investment income--net $ 1,242,789 $ 1,233,977
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the For the Period
The following per share data and ratios have been derived Six Months Feb. 28,
from information provided in the financial statements. Ended For the 1992++ to
April 30, Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.23 $ 14.05 $ 16.59 $ 14.22 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .59 1.19 1.20 1.21 .77
Realized and unrealized gain (loss) on
investments--net (.34) 1.47 (2.44) 2.41 .14
-------- -------- -------- -------- --------
Total from investment operations .25 2.66 (1.24) 3.62 .91
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.46) (.92) (.96) (1.00) (.56)
Realized gain on investments--net (.04) (.27) (.10) (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.50) (1.19) (1.06) (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 (.13) (.23) (.22) (.19) (.13)
Realized gain on investments--net (.01) (.06) (.02) (.01) --
Capital charge resulting from issuance of
Preferred Stock -- -- -- -- (.15)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.14) (.29) (.24) (.20) (.28)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.84 $ 15.23 $ 14.05 $ 16.59 $ 14.22
======== ======== ======== ======== ========
Market price per share, end of period $ 14.75 $ 13.875 $ 12.625 $ 16.625 $ 14.875
======== ======== ======== ======== ========
Total Investment Based on market price per share 10.06%+++ 19.93% (18.40%) 19.54% 3.05%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .88%+++ 18.29% (9.00%) 24.78% 4.21%+++
======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .75%* .76% .76% .74% .54%*
Average ======== ======== ======== ======== ========
Net Assets:*** Expenses .75%* .76% .76% .74% .72%*
======== ======== ======== ======== ========
Investment income--net 5.24%* 5.50% 5.25% 5.32% 5.66%*
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $114,527 $117,600 $108,467 $128,078 $106,938
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 8.24% 15.47% 18.88% 12.88% 22.49%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,082 $ 3,138 $ 2,972 $ 3,329 $ 2,944
======== ======== ======== ======== ========
Dividends Investment income--net $ 444 $ 806 $ 765 $ 647 $ 444
Per Share ======== ======== ======== ======== ========
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, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 10, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split that occurred on December 1, 1994.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
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.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing price as of the close of such
exchanges. Options, which are traded on exchanges, are valued at
their last sale price as of the close of such exchanges or, lacking
any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities for which market
quotations are not readily available are valued at their fair value
as determined in good faith by or under the direction of the Board
of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under 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
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to write cov-ered 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.
<PAGE>
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1996 were $13,952,687 and
$18,067,180, respectively.
Net realized and unrealized gains (losses) as of April 30, 1996 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 164,578 $7,281,668
Financial futures contracts (326,325) --
--------- ----------
Total $(161,747) $7,281,668
========= ==========
As April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $7,281,668, of which $7,795,342 related to
appreciated securities and $513,674 related to depreciated
securities. The aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $159,423,273.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
Common Stock
For the six months ended April 30, 1996, shares issued and
outstanding remained constant at 7,719,431. At April 30, 1996, total
paid-in capital amounted to $108,412,508.
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, 1996 was 3.875%.
As of April 30, 1996, there were 2,200 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
<PAGE>
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1996, MLPF&S, an affiliate of FAM, earned $53,564 as
commissions.
5. Subsequent Event:
On May 10, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.077993 per share, payable on May 30, 1996 to shareholders of
record as of May 21, 1996.
