MUNIYIELD
MICHIGAN
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1997
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.
<PAGE>
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, 1997, the Common Stock of
MuniYield Michigan Fund, Inc. earned $0.442 per share income
dividends, which included earned and unpaid dividends of $0.072.
This represents a net annualized yield of 5.92%, based on a month-
end per share net asset value of $15.07. Over the same period, the
total investment return on the Fund's Common Stock was +1.71%, based
on a change in per share net asset value from $15.29 to $15.07, and
assuming reinvestment of $0.447 per share income dividends.
For the six-month period ended April 30, 1997, the Fund's Auction
Market Preferred Stock had an average yield of 3.42%.
<PAGE>
The Municipal Market Environment
Long-term tax-exempt revenue bonds traded in a relatively narrow
range throughout much of the six months ended April 30, 1997. By mid-
January 1997, municipal bond yields had risen to over 6% as
investors reacted negatively to reports of progressively stronger
domestic economic growth. However, a continued lack of any material
inflationary pressures allowed bond yields to decline to their prior
levels by late February. Bond yields rose again as investors became
increasingly concerned that the US domestic economic strength seen
thus far in 1997 would continue and that the increase in short-term
interest rates administered by the Federal Reserve Board (FRB) in
late March would be the first in a series of such moves designed to
slow the US economy before any dormant inflationary pressures were
awakened. Long-term tax-exempt bond yields rose approximately 15
basis points (0.15%) to almost 6.15% by mid-April. Similarly, long-
term US Treasury bond yields rose over 35 basis points over the same
period to 7.16%. However, in late April economic indicators were
released showing that, despite considerable economic growth, any
inflationary pressures, particularly those associated with wage
increases, were well-contained and of no immediate concern. Fixed-
income bond prices staged a significant rally during the last week
of April with long-term US Treasury bond yields falling nearly 20
basis points to end the month at 6.95%. Municipal bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined nearly 15
basis points to stand at 6.01% by April 30, 1997.
As in recent quarters, the relative stability of long-term tax-
exempt bond yields was supported by low levels of new municipal bond
issuance. Over the past six months, approximately $90 billion in
long-term tax-exempt bonds was underwritten, a decline of more than
6% versus the corresponding period a year earlier. During the three-
month period ended April 30, 1997, $41 billion in new long-term
municipal bonds was issued, also a 6% decline in issuance as
compared to the three months ended April 30, 1996. Overall investor
demand has remained strong, particularly from property and casualty
insurance companies and individual retail investors. In recent
years, investor demand has increased whenever tax-exempt bond yields
have approached or exceeded the 6% level as they have in the past
few months.
Additionally, in recent months much of the new bond issuance was
dominated by a number of larger issues. These included $710 million
in New York City water bonds, $600 million in state of California
bonds, $1 billion in New York City general obligation bonds, $435
million in Dade County, Florida water and sewer revenue bonds, $450
million in Puerto Rico Electric Authority issues, and $930 million
in Port Authority of New York and New Jersey issues. These bonds
have typically been issued in states with relatively high state
income taxes and consequently generally were underwritten at yields
that were relatively unattractive to residents in other states. This
has exacerbated the general decline in overall issuance in recent
years, making the decrease in supply even more dramatic for general
market investors.
<PAGE>
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, sign of a
resurgence in inflation. Recent economic growth generated
considerable unexpected tax revenues for the Federal government.
Forecasts for the 1997 Federal fiscal deficit were reduced to under
$100 billion, a level not seen since the early 1980s. Such a reduced
Federal deficit enhances the prospect for a balanced Federal budget.
All of these factors support a scenario of steady, or even falling,
interest rates in the coming years. Present annual estimates of
future municipal bond issuance remain centered around $175 billion,
indicating that the current relative scarcity of tax-exempt bonds
should continue for at least the remainder of the year. Should
interest rates begin to decline later this year, either as the
result of a balanced Federal budget or continued benign inflation,
investors are unlikely to be able to purchase long-term municipal
bonds at their currently attractive levels.
Portfolio Strategy
During the six-month period ended April 30, 1997, we generally
maintained the neutral strategy we had adopted in late 1996.
However, in recent months we positioned the Fund slightly more
defensively given the FRB's apparent intention to raise short-term
interest rates further to insure that economic growth slows and any
potential inflationary pressures are halted. We expect growth to
slow eventually and interest rates to fall in response.
Under ordinary circumstances, FRB actions impact the economy only
after a considerable period of time, usually measured in quarters,
not months. The action by the FRB was taken in late March, so
typically we would expect the economy to begin to slow by the
beginning of the fourth quarter of 1997, at the earliest. However,
prospects for material progress on reducing the Federal budget
deficit may significantly alter historic patterns of FRB actions and
its consequences. Should significant Federal budget reduction
legislation be enacted quickly, interest rates could fall sooner. We
are prepared to quickly adopt a more aggressive approach to the tax-
exempt bond market in order to more fully participate in the bond
market rally. However, until such legislation is in place, we expect
tax-exempt bond yields to trade in a relatively narrow range, with
perhaps a slight upward bias in yields. We will continue to purchase
higher-couponed, defensively oriented securities whenever they
become available. We may raise cash reserves to further protect the
Fund's principal, but probably not higher than 5% of net assets for
any significant period of time. The scarcity of attractively priced
municipal issues is expected to continue making reinvestment
difficult.
<PAGE>
Short-term tax-exempt interest rates also continued to trade in a
relatively narrow range, mostly between 3.50%--3.75%. However, in
recent weeks short-term interest rates have risen to above 4%,
largely in response to seasonal corporate and individual tax
pressures. Historically, such pressures are short-lived and interest
rates usually begin to decline by mid-May. However, throughout the
six-month period, the leverage of the Preferred Stock was very
favorable and has significantly augmented the yield paid to Common
Stock shareholders. However, should the spread between short-term
and long-term tax-exempt 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 3 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 ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
May 27, 1997
<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. 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 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 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.
<PAGE>
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
<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 $ 1,482
A- NR* 1,000 7.40% due 5/01/2016 1,109
AAA Aaa 3,545 Capital Region Airport Authority, Michigan, Airport Revenue Bonds, AMT,
6.60% due 7/01/2012 (c) 3,770
NR* P1 1,400 Delta County, Michigan, Economic Development Corp., Environmental Improvement
Revenue Bonds, DATES (Mead Escanaba Paper), Series F, 4.40% due 12/01/2013 (a) 1,400
Detroit, Michigan, Sewage Disposal Revenue Bonds (d)(f):
AAA Aaa 5,040 6.625% due 7/01/2001 5,476
AAA Aaa 2,005 6.70% due 7/01/2001 2,184
AAA Aaa 3,125 East Grand Rapids, Michigan, Public School District Building and Site, UT,
5% due 5/01/2016 (c) 2,873
AAA Aaa 2,000 Grand Ledge, Michigan, Public Schools District, UT, 6.45% due 5/01/2014 (c) 2,136
Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds (d):
AAA Aaa 5,850 6.50% due 1/01/2015 6,226
A1+ VMIG1++ 300 VRDN, 4.50% due 1/01/2020 (a) 300
<PAGE>
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 2,611
A A1 1,750 6.375% due 5/15/2017 1,822
AAA Aaa 7,100 Kent, Michigan, Hospital Finance Authority, Health Care Revenue Bonds
(Butterworth Health Systems), Series A, 5.625% due 1/15/2026 (c) 6,812
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) 2,670
Michigan Higher Education Student Loan Authority Revenue Bonds, AMT:
NR* A 1,250 Series XIV-A, 6.75% due 10/01/2006 1,312
A1 VMIG1++ 300 VRDN, Series XII-D, 4.60% due 10/01/2015 (a) (b) 300
Michigan Municipal Bond Authority Revenue Bonds:
A NR* 1,100 (Local Government Loan--Revenue Sharing), Series B, 5.80% due 11/01/2013 1,105
AA Aa2 2,500 Refunding (Local Government--Qualified School), Series A, 6.50% due 5/01/2016 2,647
AA Aa 4,700 (State Revolving Fund), Series A, 6.55% due 10/01/2002 (f) 5,142
Michigan State, HDA, Rental Housing Revenue Bonds:
A+ NR* 4,085 AMT, Series A, 7.15% due 4/01/2010 4,285
A+ NR* 4,375 Series B, 7.10% due 4/01/2021 4,575
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 2,500 Refunding, Series C, 6.50% due 6/01/2016 2,568
AA+ NR* 1,000 Series A, 6.80% due 12/01/2012 1,048
AA+ NR* 3,325 Series A, 6.875% due 6/01/2023 3,438
Michigan State Hospital Finance Authority Revenue Bonds:
AAA Aa2 1,750 (Henry Ford Health System), Series A, 7% due 7/01/2000 (f) 1,898
AAA Aaa 1,000 (Mercy Health Services), Series Q, 5.375% due 8/15/2026 (b) 934
AAA Aaa 2,000 (Mercy Health Services), Series R, 5.375% due 8/15/2026 (b) 1,867
A A 1,000 (Mid-Michigan Obligation Group), 6.90% due 12/01/2024 1,071
AAA Aaa 2,000 (Oakwood Hospital Obligation Group), 7.10% due 7/01/2000 (d) (f) 2,175
A A2 5,875 Refunding (Detroit Medical Center Obligation Group), Series A, 6.50% due 8/15/2018 6,147
AA Aa2 2,500 Refunding (Henry Ford Health System), Series A, 5.25% due 11/15/2020 2,319
AA Aa2 3,500 Refunding (Henry Ford Health System), Series A, 5.25% due 11/15/2025 3,224
AA- Aaa 1,250 (Sisters of Mercy Health Corp.), Series J, 7.50% due 2/15/2001 (f) 1,389
</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 Strategic Fund, Limited Obligation Revenue Bonds, AMT:
A+ A1 $ 2,500 (Ford Motor Co. Project), Series A, 6.55% due 10/01/2022 $ 2,599
A A1 2,500 (Waste Management Inc. Project), 6.625% due 12/01/2012 2,666
<PAGE>
Michigan State Strategic Fund, Limited Obligation, Revenue Refunding Bonds:
AAA Aaa 7,500 (Detroit Edison Co. Plantation Project), 6.875% due 12/01/2021 (d) 8,093
AAA Aaa 2,500 (Detroit Edison Co. Project), Series CC, 6.95% due 9/01/2021 (d) 2,698
A+ A1 8,000 (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 9,113
Michigan State Strategic Fund, PCR, Refunding:
NR* P1 5,700 (Consumers Power Project), VRDN, Series A, 4.30% due 4/15/2018 (a) 5,700
A- A3 2,500 (General Motors Corp.), 6.20% due 9/01/2020 2,541
Michigan State Trunk Line, Series A:
AA- A1 1,000 5.625% due 11/15/2013 996
AA- A1 1,370 5.70% due 11/15/2016 1,349
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) 7,601
AAA Aaa 1,960 Muskegon, Michigan, Public Schools, UT, Series 95, 5.25% due 5/01/2018 (d) 1,828
AAA Aaa 5,000 Oxford, Michigan, Area Community School District (Building and Site), UT, 5.40%
due 5/01/2025 (d) 4,738
AA Aa2 1,370 Plymouth-Canton, Michigan, Community School District, Refunding, UT, Series A,
6.625% due 5/01/2016 1,467
AA Aa2 2,250 Reeths-Puffer, Michigan, Schools Building, UT, Series Q, 6.625% due 5/01/2002 (f) 2,458
AAA Aaa 2,000 Romulus, Michigan, Community Schools, UT, Series I, 6.75% due 5/01/2001 (e) (f) 2,177
Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds
(William Beaumont Hospital):
AA Aa3 2,250 Refunding, Series G, 5.25% due 11/15/2019 2,085
AA Aaa 6,000 Series D, 6.75% due 1/01/2001 (f) 6,502
AA Aa 6,250 Series D, 6.75% due 1/01/2001 (f) 6,764
A1+ VMIG1++ 1,900 VRDN, Series J, 4.40% due 1/01/2003 (a) 1,900
AAA Aaa 2,000 South Redford, Michigan, School District, UT, 5.25% due 5/01/2016 (d) 1,892
AA Aa1 2,510 University of Michigan, University Housing Revenue Bonds, Series A,
5.50% due 11/15/2017 2,468
AAA Aaa 2,400 Western Michigan University, Revenue Refunding Bonds, Series B, 6.50% due
7/15/2021 (b) 2,556
Total Investments (Cost--$159,775)--98.3% 168,506
Other Assets Less Liabilities--1.7% 2,937
--------
Net Assets--100.0% $171,443
========
<PAGE>
<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, 1997.
(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.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$159,775,241) (Note 1a) $168,506,262
Cash 3,940
Interest receivable 3,201,973
Deferred organization expenses (Note 1e) 2,525
Prepaid expenses and other assets 8,887
------------
Total assets 171,723,587
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 175,202
Investment adviser (Note 2) 70,039 245,241
------------
Accrued expenses and other liabilities 35,450
------------
Total liabilities 280,691
------------
Net Assets: Net assets $171,442,896
============
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 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 (7,727,210 shares issued
and outstanding) $ 772,721
Paid-in capital in excess of par 107,755,155
Undistributed investment income--net 1,298,572
Accumulated realized capital losses on investments--net (Note 5) (1,723,183)
Accumulated distributions in excess of realized capital gains--net
(Note 1f) (391,390)
Unrealized appreciation on investments--net 8,731,021
------------
Total--Equivalent to $15.07 net asset value per share of Common
Stock (market price--$14.25) 116,442,896
------------
Total capital $171,442,896
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations
<CAPTION>
For the Six Months Ended April 30, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 5,124,345
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 428,279
Commission fees (Note 4) 68,466
Professional fees 37,377
Accounting services (Note 2) 26,579
Transfer agent fees 22,113
Printing and shareholder reports 20,772
Directors' fees and expenses 11,285
Listing fees 7,946
Custodian fees 6,769
Pricing fees 3,469
Amortization of organization expenses (Note 1e) 1,239
Other 7,368
------------
Total expenses 641,662
------------
Investment income--net 4,482,683
------------
<PAGE>
Realized & Unreal- Realized gain on investments--net 1,119,196
ized Gain (Loss) Change in unrealized appreciation on investments--net (2,915,572)
on Investments-- ------------
Net (Notes 1b, Net Increase in Net Assets Resulting from Operations $ 2,686,307
1d & 3): ============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1997 Oct. 31, 1996
<S> <C> <C> <C>
Operations: Investment income--net $ 4,482,683 $ 9,074,635
Realized gain (loss) on investments--net 1,119,196 (985,746)
Change in unrealized appreciation/depreciation on
investments--net (2,915,572) 1,836,470
------------ ------------
Net increase in net assets resulting from operations 2,686,307 9,925,359
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (3,456,072) (7,166,707)
Shareholders Preferred Stock (933,504) (1,936,440)
(Note 1f): In excess of realized gain on investments--net:
Common Stock -- (315,864)
Preferred Stock -- (75,526)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (4,389,576) (9,494,537)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions -- 115,368
(Note 4): ------------ ------------
Net increase in net assets derived from capital stock transactions -- 115,368
------------ ------------
Net Assets: Total increase (decrease) in net assets (1,703,269) 546,190
Beginning of period 173,146,165 172,599,975
------------ ------------
End of period* $171,442,896 $173,146,165
============ ============
<FN>
*Undistributed investment income--net $ 1,298,572 $ 1,205,465
============ ============
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.29 $ 15.23 $ 14.05 $ 16.59 $ 14.22
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .58 1.18 1.19 1.20 1.21
Realized and unrealized gain (loss) on
investments--net (.23) .11 1.47 (2.44) 2.41
-------- -------- -------- -------- --------
Total from investment operations .35 1.29 2.66 (1.24) 3.62
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.45) (.93) (.92) (.96) (1.00)
Realized gain on investments--net -- -- (.27) (.10) (.05)
In excess of realized gain on
investments--net -- (.04) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.45) (.97) (1.19) (1.06) (1.05)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.12) (.25) (.23) (.22) (.19)
Realized gain on investments--net -- -- (.06) (.02) (.01)
In excess of realized gain on
investments--net -- (.01) -- -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.12) (.26) (.29) (.24) (.20)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.07 $ 15.29 $ 15.23 $ 14.05 $ 16.59
======== ======== ======== ======== ========
Market price per share, end of period $ 14.25 $ 14.50 $ 13.875 $ 12.625 $ 16.625
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 1.41%+++ 11.67% 19.93% (18.40%) 19.54%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 1.71%+++ 7.28% 18.29% (9.00%) 24.78%
======== ======== ======== ======== ========
Ratios to Average Expenses .75%* .75% .76% .76% .74%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 5.23%* 5.26% 5.50% 5.25% 5.32%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $116,443 $118,146 $117,600 $108,467 $128,078
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 10.29% 19.73% 15.47% 18.88% 12.88%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,117 $ 3,148 $ 3,138 $ 2,972 $ 3,329
======== ======== ======== ======== ========
Dividends Investment income--net $ 424 $ 880 $ 806 $ 765 $ 647
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.
++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
<PAGE>
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.
(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.
<PAGE>
* 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions.
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.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1997 were $17,132,779 and
$25,025,588, respectively.
Net realized and unrealized gains as of April 30, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $1,119,196 $8,731,021
---------- ----------
Total $1,119,196 $8,731,021
========== ==========
As of April 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $8,731,021, of which $8,850,125 related to
appreciated securities and $119,104 related to depreciated
securities. The aggregate cost of investments at October 31, 1996
for Federal Federal income tax purposes was $159,775,241.
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, 1997, shares issued and
outstanding remained constant at 7,727,210. At April 30, 1997, total
paid-in capital amounted to $108,527,876.
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, 1997 was 4.05%.
<PAGE>
As of April 30, 1997, there were 2,200 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1997, Merrill Lynch, Pierce Fenner & Smith Inc., an
affiliate of FAM, earned $54,302 as commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a net capital loss carryforward of
approximately $195,000, all of which expires in 2004. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On May 9, 1997, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.072352 per share, payable on May 29, 1997 to shareholders of
record as of May 19, 1997.
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
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
<PAGE>
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYM
