MUNIYIELD
MICHIGAN
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1998
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
Philip M. Mandel, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYM
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
Printed on post-consumer recycled paper
MuniYield Michigan Fund, Inc.
TO OUR SHAREHOLDERS
For the six months ended April 30, 1998, the Common Stock of
MuniYield Michigan Fund, Inc. earned $0.441 per share income
dividends, which included earned and unpaid dividends of $0.071.
This represents a net annualized yield of 5.79%, based on a month-
end net asset value of $15.35 per share. Over the same period, the
total investment return on the Fund's Common Stock was +1.91%, based
on a change in per share net asset value from $15.58 to $15.35, and
assuming reinvestment of $0.445 per share income dividends and
$0.078 per share capital gains distributions.
For the six months ended April 30, 1998, the Fund's Auction Market
Preferred Stock had an average yield of 3.65%.
The Municipal Market Environment
During the six months ended April 30, 1998, bond yields generally
moved lower, and by mid-January 1998 had declined to recent historic
lows. Long-term US Treasury bond yields declined 20 basis points
(0.20%) during the same period and stood at 5.95% by April 30, 1998.
Similarly, long-term uninsured tax-exempt bond yields, as measured
by the Bond Buyer Revenue Bond Index, fell approximately 35 basis
points to 5.25%, a level not seen since the mid-1970s. While low
inflation has supported lower interest rates, much of the decline in
bond yields in late 1997 and early 1998 was driven more by the
turmoil in Asian financial markets than by domestic economic
fundamentals. Weak economic conditions in Asia were expected to
negatively impact US growth through reduced export demand.
Additionally, inflation in the United States was also expected to
decline in response to lower prices on goods imported from Asian
manufacturers.
However, in recent months, many investors have become increasingly
concerned that most of the downturn in Asia, especially in Japan,
has already occurred and any future deterioration will not be severe
enough to constrain US economic growth and inflationary pressures.
These concerns served to push interest rates higher in the latter
part of the period, causing fixed-income yields to retrace much of
their earlier gains.
Thus far in 1998, the municipal bond market has experienced
unexpectedly strong supply pressures. These supply pressures have
prevented tax-exempt bond yields from declining as much as US
Treasury bond yields. Over the last six months, more than
$135 billion in new tax-exempt bonds were underwritten, an increase
of over 40% compared to the same period a year ago. During the last
three months, municipalities issued over $72 billion in new
securities, an increase of more than 60% compared to the same three-
month period in 1997. Additionally, corporate issuers have also
viewed current interest rate levels as an opportunity to issue
significant amounts of taxable securities. Thus far in 1998, over
$100 billion in investment-grade corporate bonds have been
underwritten, an increase of more than 60% relative to the
comparable period a year ago. This sizeable corporate bond issuance
has tended to support generally higher fixed-income yields and
reduce the demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely
to be maintained. Continued increases in bond issuance will require
lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancings.
Preliminary estimates for 1998 total municipal bond issuance are
presently in the $200 billion--$225 billion range. These estimates
suggest that recent supply pressures are likely to abate later in
the year. Municipal bond investors received approximately $30
billion earlier this year in coupon payments, bond maturities and
proceeds from early redemptions. The demand generated by these
assets has helped offset the increase in supply seen thus far this
year. Furthermore, looking ahead, June and July have also tended to
be periods of strong investor demand as seasonal factors are likely
to generate strong income flows similar to those seen earlier this
year.
MuniYield Michigan Fund, Inc.
April 30, 1998
It is also possible that at least some of the recent economic
strength seen in the United States will be reversed in the coming
months. A particularly mild winter has been partially responsible
for a strong housing sector, as well as other construction
industries. This recent strong trend may not be sustained and may
lead to weaker construction growth later this year. Additionally,
strong economic growth in 1997 and the increased use of electronic
tax filing have resulted in larger and earlier Federal and state
income tax refunds to many individuals. These refunds appear to have
supported strong consumer spending in recent months, but may be
borrowing against weaker spending later this year. In addition, the
continued impact of the Asian financial crisis on the US domestic
economy's future growth remains unclear. Barring a dramatic and
unexpected resurgence of domestic inflation, we do not believe that
the Federal Reserve Board will be willing to raise interest rates
until the full impact of the Asian situation can be established.
All these factors suggest that over the near term, tax-exempt as
well as taxable bond yields are unlikely to rise by any appreciable
amount. Recent supply pressures have caused municipal bond yield
ratios to rise relative to US Treasury bond yields. At April 30,
1998, long-term tax-exempt bond yields were at attractive yield
ratios relative to comparable US Treasury securities (over 90%), and
well in excess of their expected range of 85%--88%. Any further
pressure upon the municipal market may well represent a very
attractive investment opportunity.
Portfolio Strategy
During the six months ended April 30, 1998, we gradually adopted a
more constructive investment outlook. We believe that the current
absence of inflationary pressures will continue, and further slowing
of US economic growth is likely as a result of the ongoing Asian
financial crisis. In our opinion, slower economic growth, coupled
with minimal inflation, should result in interest rate declines.
Therefore, we have used recent periods of interest rate volatility
to add higher-yielding issues to the Fund's holdings. The Fund has
remained fully invested in order to seek to enhance shareholder
income and participate in improving fixed-income markets that we
expect in the coming months.
During the period, short-term tax-exempt interest rates traded in a
relative narrow range centered around 3.50%. Recently, these
interest rates rose slightly in response to temporary seasonal tax
factors that should abate quickly in the coming weeks. Despite the
recent moderate increase in short-term interest rates, throughout
the period the leveraging of the Fund's Preferred Stock continued to
generate a significant yield enhancement to Common Stock
shareholders. However, should the spread between short-term and long-
term interest rates narrow, the benefits of the leverage will
decline and the yield on the Common Stock will be reduced. (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 29, 1998
MuniYield Michigan Fund, Inc.
April 30, 1998
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.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its
net investment income to its shareholders on a monthly basis.
However, in order to provide shareholders with a more consistent
yield to the current trading price of shares of Common Stock of the
Fund, the Fund may at times pay out less than the entire amount of
net investment income earned in any particular month and may at
times in any month pay out such accumulated but undistributed income
in addition to net investment income earned in that month. As a
result, the dividends paid by the Fund for any particular month may
be more or less than the amount of net investment income earned by
the Fund during such month. The Fund's current accumulated but
undistributed net investment income, if any, is disclosed in the
Statement of Assets, Liabilities and Capital, which comprises part
of the Financial Information included in this report.
MuniYield Michigan Fund, Inc.
April 30, 1998
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
RITR Residual Interest Trust Receipts
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan--93.2%
<S> <S> <S> <C> <C>
Battle Creek, Michigan, Tax Increment Finance Authority Revenue Bonds (f):
A- NR* $ 1,320 7.10% due 5/01/2004 $ 1,515
A- NR* 1,000 7.40% due 5/01/2004 1,163
AAA Aaa 5,000 Brighton, Michigan, Area School District Refunding, UT, Series II,
4.90%** due 5/01/2015 (b) 2,027
AAA Aaa 3,545 Capital Region Airport Authority, Michigan, Airport Revenue Bonds, AMT,
6.60% due 7/01/2012 (c) 3,840
Delta County, Michigan, Economic Development Corporation, Environmental
Improvement Revenue Bonds (Mead Escanaba Paper)(a):
NR* P1 400 DATES, Series F, 4.15% due 12/01/2013 400
AA+ P1 1,400 Refunding, VRDN, Series D, 4.15% due 12/01/2023 1,400
AAA Aaa 1,900 Detroit, Michigan, Sewage Disposal Revenue Bonds, 6.625% due 7/01/2001 (d)(f) 2,066
AAA Aaa 2,500 Detroit, Michigan, Water Supply System Revenue Bonds, Series A, 5% due
7/01/2027 (c) 2,375
AAA Aaa 2,000 Ferris State University, Michigan, General Revenue Refunding Bonds,
5% due 10/01/2023 (b) 1,906
AAA Aaa 2,000 Grand Ledge, Michigan, Public Schools District, UT, 6.45% due 5/01/2014 (c) 2,206
AAA Aaa 5,850 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds,
6.50% due 1/01/2015 (d) 6,237
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 2,708
A A1 1,750 6.375% due 5/15/2017 1,877
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) 7,197
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) 2,687
Michigan Higher Education Student Loan Authority Revenue Bonds, AMT:
NR* A 1,250 Series XIV-A, 6.75% due 10/01/2006 1,338
A1 VMIG1++ 300 VRDN, Series XII-D, 4.10% 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 1,147
AA+ Aa2 2,500 Refunding (Local Government--Qualified School), Series A, 6.50% due 5/01/2016 2,738
AA+ Aa1 4,700 (State Revolving Fund), Series A, 6.55% due 10/01/2002 (f) 5,184
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan (continued)
<S> <S> <S> <C> <C>
Michigan State Building Authority Revenue Bonds (College Savings),
Facilities Program, Series II (b):
AAA Aaa $ 1,185 4.67%** due 10/15/2009 $ 678
AAA Aaa 1,675 4.77%** due 10/15/2010 897
Michigan State, HDA, Rental Housing Revenue Bonds:
AA- NR* 2,915 AMT, Series A, 7.15% due 4/01/2010 3,137
AA- NR* 3,410 Series B, 7.10% due 4/01/2021 3,652
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 2,500 Refunding, Series C, 6.50% due 6/01/2016 2,604
AA+ NR* 1,000 Series A, 6.80% due 12/01/2012 1,057
AA+ NR* 3,325 Series A, 6.875% due 6/01/2023 3,491
Michigan State Hospital Finance Authority Revenue Bonds:
AAA Aaa 2,000 (Mercy Health Services), Series R, 5.375% due 8/15/2026 (b) 1,981
AAA A1 1,000 (Mid-Michigan Obligation Group), 6.90% due 12/01/2002 (f) 1,120
AAA Aaa 2,000 (Oakwood Hospital Obligation Group), 7.10% due 7/01/2000 (d)(f) 2,159
A A2 5,875 Refunding (Detroit Medical Center Obligation Group), Series A, 6.50% due
8/15/2018 6,359
AA Aa2 2,500 Refunding (Henry Ford Health Systems), Series A, 5.25% due 11/15/2020 2,423
AA Aa2 3,500 Refunding (Henry Ford Health Systems), Series A, 5.25% due 11/15/2025 3,401
AA- Aaa 1,250 (Sisters of Mercy Health Corp.), Series J, 7.50% due 2/15/2001 (f) 1,378
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 2,683
BBB Baa1 2,500 (Waste Management Inc. Project), 6.625% due 12/01/2012 2,696
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) 8,146
AAA Aaa 2,500 (Detroit Edison Co. Project), Series CC, 6.95% due 9/01/2021 (d) 2,710
A A1 8,000 (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 9,250
A A3 2,500 Michigan State Strategic Fund, PCR, Refunding (General Motors Corp.), 6.20%
due 9/01/2020 2,690
Michigan State Trunk Line, Series A:
AA- A1 1,000 5.625% due 11/15/2013 1,037
AA- A1 1,370 5.70% due 11/15/2016 1,434
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) 8,009
AAA Aaa 1,000 Northern Michigan University Revenue Bonds, 5% due 12/01/2025 (c) 951
AAA Aaa 5,000 Oxford, Michigan, Area Community School District (Building and Site), UT,
5.40% due 5/01/2025 (d) 5,012
AA+ Aa2 1,370 Plymouth-Canton, Michigan, Community School District, Refunding, UT, Series A,
6.625% due 5/01/2016 1,463
AA+ Aa2 2,250 Reeths-Puffer, Michigan, Schools Building, UT, Series Q, 6.625% due 5/01/2002 (f) 2,473
AAA Aaa 2,000 Romulus, Michigan, Community Schools, UT, Series I, 6.75% due 5/01/2001 (e)(f) 2,176
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 2,202
AA Aa2 6,250 Series O, 6.75% due 1/01/2001 (f) 6,750
AA Aaa 3,500 Series O, 6.75% due 1/01/2001 (f) 3,784
AAA Aaa 2,000 South Redford, Michigan, School District, UT, 5.25% due 5/01/2016 (d) 1,998
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan (concluded)
<S> <S> <S> <C> <C>
AAA Aaa $ 1,000 Three Rivers, Michigan, Community Schools, Revenue Refunding Bonds, UT,
5% due 5/01/2023 (e) $ 953
A1+ VMIG1++ 200 University of Michigan, University Hospital Revenue Bonds, VRDN, Series A,
4.10% due 12/01/2027 (a) 200
AA Aa1 2,510 University of Michigan, University Housing Revenue Bonds, Series A, 5.50% due
11/15/2017 2,568
A1+ VMIG1++ 4,855 University of Michigan, University Medical Revenue Bonds (Service Plan),
VRDN, Series A, 4.10% due 12/01/2027 (a) 4,855
AAA Aaa 3,500 Western Michigan University, General Revenue Refunding Bonds, 5.125% due
11/15/2022 (d) 3,388
Puerto Rico--4.4%
AAA Aaa 7,500 Puerto Rico, RITR, Series 14, 6.37% due 7/01/2027 (c)(g) 7,650
Total Investments (Cost--$159,058)--97.6% 169,726
Other Assets Less Liabilities--2.4% 4,229
--------
Net Assets--100.0% $173,955
========
<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, 1998.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FSA Insured.
(f)Prerefunded.
(g)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1998.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 1998
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 48.0%
AA/Aa 26.2
A/A 17.7
BBB/Baa 1.6
Other++ 4.1
[FN]
++Temporary investments in short-term municipal investments.
MuniYield Michigan Fund, Inc.
April 30, 1998
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$159,058,033) (Note 1a) $169,725,611
Cash 44,312
Receivables:
Interest $ 3,040,185
Securities sold 1,414,133 4,454,318
------------
Prepaid expenses and other assets 9,174
------------
Total assets 174,233,415
------------
Liabilities: Payables:
Dividends to shareholders (Note 1e) 166,808
Investment adviser (Note 2) 72,206 239,014
------------
Accrued expenses and other liabilities 38,921
------------
Total liabilities 277,935
------------
Net Assets: Net assets $173,955,480
============
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 (7,747,674 shares
issued and outstanding) $ 774,767
Paid-in capital in excess of par 108,074,970
Undistributed investment income--net 1,355,247
Accumulated realized capital losses on investments--net (1,917,082)
Unrealized appreciation on investments--net 10,667,578
------------
Total--Equivalent to $15.35 net asset value per share of
Common Stock (market price--$14.8125) 118,955,480
------------
Total capital $173,955,480
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended April 30, 1998
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,950,421
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 431,842
Commission fees (Note 4) 69,406
Professional fees 40,893
Accounting services (Note 2) 17,106
Transfer agent fees 15,761
Printing and shareholder reports 15,311
Directors' fees and expenses 11,339
Listing fees 8,043
Custodian fees 6,909
Pricing fees 3,672
Other 10,442
------------
Total expenses 630,724
------------
Investment income--net 4,319,697
------------
Realized & Unreal- Realized gain on investments--net 1,545,409
ized Gain Change in unrealized appreciation on investments--net (2,594,141)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,270,965
(Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</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, 1998 Oct. 31, 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 4,319,697 $ 8,987,506
Realized gain on investments--net 1,545,409 541,037
Change in unrealized appreciation on investments--net (2,594,141) 1,615,126
------------ ------------
Net increase in net assets resulting from operations 3,270,965 11,143,669
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (3,443,828) (6,932,397)
Shareholders Preferred Stock (815,430) (1,965,766)
(Note 1e): Realized gain on investments--net:
Common Stock (601,393) --
Preferred Stock (168,366) --
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (5,029,017) (8,898,163)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions 321,861 --
(Note 4): ------------ ------------
Net increase in net assets derived from capital stock
transactions 321,861 --
------------ ------------
Net Assets: Total increase (decrease) in net assets (1,436,191) 2,245,506
Beginning of period 175,391,671 173,146,165
------------ ------------
End of period* $173,955,480 $175,391,671
============ ============
<FN>
*Undistributed investment income--net $ 1,355,247 $ 1,294,808
============ ============
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1998
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: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.58 $ 15.29 $ 15.23 $ 14.05 $ 16.59
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .56 1.16 1.18 1.19 1.20
Realized and unrealized gain (loss) on
investments--net (.13) .28 .11 1.47 (2.44)
-------- -------- -------- -------- --------
Total from investment operations .43 1.44 1.29 2.66 (1.24)
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.45) (.90) (.93) (.92) (.96)
Realized gain on investments--net (.08) -- -- (.27) (.10)
In excess of realized gain on
investments--net -- -- (.04) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.53) (.90) (.97) (1.19) (1.06)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.11) (.25) (.25) (.23) (.22)
Realized gain on investments--net (.02) -- -- (.06) (.02)
In excess of realized gain on
investments--net -- -- (.01) -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.13) (.25) (.26) (.29) (.24)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.35 $ 15.58 $ 15.29 $ 15.23 $ 14.05
======== ======== ======== ======== ========
Market price per share, end of period $14.8125 $ 15.125 $ 14.50 $ 13.875 $ 12.625
======== ======== ======== ======== ========
Total Investment Based on market price per share 1.30%+++ 10.92% 11.67% 19.93% (18.40%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 1.91%+++ 8.35% 7.28% 18.29% (9.00%)
======== ======== ======== ======== ========
Ratios to Average Expenses .73%* .74% .75% .76% .76%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 5.00%* 5.15% 5.26% 5.50% 5.25%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of period (in thousands) $118,955 $120,392 $118,146 $117,600 $108,467
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 17.08% 16.06% 19.73% 15.47% 18.88%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,163 $ 3,189 $ 3,148 $ 3,138 $ 2,972
======== ======== ======== ======== ========
Dividends Investment income--net $ 371 $ 894 $ 880 $ 806 $ 765
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>
MuniYield Michigan Fund, Inc.
April 30, 1998
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.
(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 and assets for
which market quotations are not readily available are valued at
their fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
MuniYield Michigan Fund, Inc.
April 30, 1998
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1998 were $28,930,530 and
$44,293,252, respectively.
Net realized gains for the six months ended April 30, 1998 and net
unrealized gains as of April 30, 1998 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $1,545,409 $10,667,578
---------- -----------
Total $1,545,409 $10,667,578
========== ===========
As of April 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $10,667,578, of which $11,293,927 related to
appreciated securities and $626,349 related to depreciated
securities. The aggregate cost of investments at April 30, 1998 for
Federal income tax purposes was $159,058,033.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended April 30,
1998 increased by 20,464 as a result of a dividend reinvestment and
during the year ended October 31, 1997 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund 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, 1998 was 4.00%.
As of April 30, 1998, 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, 1998, Merrill Lynch, Pierce Fenner & Smith Inc., an
affiliate of FAM, earned $52,222 as commissions.
5. Subsequent Event:
On May 7, 1998, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.071311 per share, payable on May 28, 1998 to shareholders of
record as of May 21, 1998.
