MUNIYIELD
MICHIGAN
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1999
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, 1999, the Common Stock of
MuniYield Michigan Fund, Inc. earned $0.453 per share income
dividends, which included earned and unpaid dividends of $0.069.
This represents a net annualized yield of 6.08%, based on a month-
end per share net asset value of $15.03. Over the same period, the
total investment return on the Fund's Common Stock was +0.42%, based
on a change in per share net asset value from $15.85 to $15.03, and
assuming reinvestment of $0.530 per share ordinary income dividends
and $0.372 per share capital gains distributions.
For the six months ended April 30, 1999, the Fund's Auction Market
Preferred Stock had an average yield of 3.87%.
The Municipal Market Environment
During the six months ended April 30, 1999, long-term bond yields
generally moved higher. From November 1998 through mid-January 1999,
long-term bond yields traded in a relatively narrow range. However,
during February, a number of economic indicators were released that
suggested that economic growth in the United States would likely
remain strong throughout most of 1999. Consequently, long-term US
Treasury bond yields rose more than 60 basis points (0.60%) to 5.70%
by early March. During the remainder of the six-month period, US
Treasury bond yields traded between 5.50% and 5.70% as the lack of
inflationary pressures offset much of the concerns generated by
continued strong economic growth. During most of the period, long-
term, uninsured tax-exempt bond yields exhibited far less volatility
and were largely stable. Also, long-term municipal bond yields rose
just 5 basis points to 5.29% at the end of April 1999, as measured
by the Bond Buyer Revenue Bond Index.
In recent months, the tax-exempt market was better able to withstand
much of the upward pressure on bond yields because of its stronger
technical position. While the continued positive inflationary
environment limited some of the recent increases in taxable bond
yields, a deteriorating supply/demand position helped push taxable
bond yields significantly higher than municipal bond yields. Much of
the US Treasury bond market's underperformance in recent months can
be attributed to the large amounts of taxable corporate issuance.
Large taxable corporate underwritings reduced the demand for US
Government securities in recent months, pushing US Treasury bond
yields higher.
On the other hand, the tax-exempt bond market enjoyed only limited
new-issue supply. During the six months ended April 30, 1999, more
than $123 billion in new long-term tax-exempt securities was
underwritten, a decline of 10% compared to the same period a year
ago. Municipalities issued less than $60 billion in long-term tax-
exempt securities during the three months ended April 30, 1999, a
decline of 25% compared to the April 30, 1998 quarter. More
recently, the rate of new tax-exempt issuance has declined even
further. During April 1999, just over $15 billion in long-term tax-
exempt securities was marketed, a decline of over 33% compared to
April 1998 levels. As municipal bond yields fell and stabilized in
recent quarters, the ability of municipalities to refinance existing
higher-couponed debt declined. This led to a significant decrease in
refunding issuance and an overall drop in new municipal bond supply.
When coupled with ongoing, moderate retail and institutional demand,
the tax-exempt bond market was able to avoid much of the yield
volatility exhibited by US Treasury securities.
Looking ahead, the expected combination of moderate economic growth
in the United States and continued negligible inflation suggests a
relatively stable interest rate environment. However, in recent
years, bond yields reached their annual peaks in early May and
declined for the remainder of the year. A meaningful decline in
fixed-income bond yields would require either evidence of a
significant slowdown in the US economy or the resumption of concerns
regarding renewed shocks to the world's economic system. Currently,
neither condition exists or seems likely in the immediate future. In
our opinion, this suggests a continuation of the narrow trading
ranges seen in recent months.
Portfolio Strategy
During the last several months, we adopted a more neutral investment
strategy, since indicators pointed to a continuation of healthy
domestic economic growth and benign inflation. In addition, we
believed that long-term tax-exempt bond yields would continue to
trade in a relatively narrow range, centered around present levels.
Consequently, we focused on income-producing securities rather than
those issues with the potential for capital gains. Should the tax-
exempt bond market perform as expected, coupon income will be the
more important component of the Fund's performance. MuniYield
Michigan Fund, Inc. remained fully invested for most of the past
several months. We expect to maintain this position going forward in
order to seek to enhance shareholder income.
Short-term tax-exempt yields exhibited considerable volatility in
recent months. Interest rates paid to the Fund's Preferred Stock
shareholders traded below 3% in December 1998, reflecting heightened
investor demand at year-end. Current short-term interest rate levels
reflect tax season-related pressures, which we expect to abate soon.
During the six-month period ended April 30, 1999, leveraging
generated a significant incremental yield to the Fund's Common Stock
shareholders. Because we believe that the Federal Reserve Board's
monetary policy is likely to remain in a narrow range for the
remainder of the year, we expect short-term tax-exempt interest
rates to remain at, or slightly below, current levels. 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 to 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 serving your investment needs in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
June 7, 1999
MuniYield Michigan Fund, Inc.
April 30, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on MuniYield Michigan Fund, Inc.'s
Board of Directors. We are pleased to announce that Terry K. Glenn
has been elected President and Director of the Fund. Mr. Glenn has
held the position of Executive Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
MuniYield Michigan Fund, Inc.
April 30, 1999
PROXY RESULTS
During the six-month period ended April 30, 1999, MuniYield Michigan
Fund Inc.'s Common Stock shareholders voted on the following
proposals. Proposals 1 and 2 were approved at a shareholders'
meeting on April 21, 1999. The meeting was adjourned with respect to
Proposal 3. The description of each proposal and number of shares
voted are as follows:
<TABLE>
<CAPTION>
Shares Shares Withheld
Voted For From Voting
<S> <S> <C> <C>
1. To elect the Fund's Directors: Terry K. Glenn 7,484,604 107,941
James H. Bodurtha 7,482,771 109,774
Herbert I. London 7,483,871 108,674
Robert R. Martin 7,469,532 123,013
Arthur Zeikel 7,467,276 125,269
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent auditors. 7,433,779 29,623 129,143
3. To approve an amendment to the Articles Supplementary of the Fund. Adjourned Adjourned Adjourned
</TABLE>
During the six-month period ended April 30, 1999, MuniYield Michigan
Fund Inc.'s Preferred Stock shareholders voted on the following
proposals. Proposals 1 and 2 were approved at a shareholders'
meeting on April 21, 1999. The meeting was adjourned with respect to
Proposal 3. The description of each proposal and number of shares
voted are as follows:
<TABLE>
<CAPTION>
Shares Shares Withheld
Voted For From Voting
<S> <C> <C>
1. To elect the Fund's Board of Directors: Terry K. Glenn,
James H. Bodurtha, Herbert I. London, Robert R. Martin,
Joseph L. May, Andre F. Perold and Arthur Zeikel 2,167 0
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent auditors. 2,167 0 0
3. To approve an amendment to the Articles Supplementary of the Fund. Adjourned Adjourned Adjourned
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
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 share-
holders. 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.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, income on inverse floaters will decrease when short-term
interest rates increase and increase when short-term interest rates
decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in these securities.
MuniYield Michigan Fund, Inc.
April 30, 1999
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to
designate years. These systems may not be able to distinguish the
Year 2000 from the Year 1900 (commonly known as the "Year 2000
Problem"). The Fund could be adversely affected if the computer
systems used by the Fund's management or other Fund service
providers do not properly address this problem before January 1,
2000. The Fund's management expects to have addressed this problem
before then, and does not anticipate that the services it provides
will be adversely affected. The Fund's other service providers have
told the Fund's management that they also expect to resolve the Year
2000 Problem, and the Fund's management will continue to monitor the
situation as the Year 2000 approaches. However, if the problem has
not been fully addressed, the Fund could be negatively affected. The
Year 2000 Problem could also have a negative impact on the
securities in which the Fund invests and this could hurt the Fund's
investment returns.
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, 1999
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
GO General Obligation Bonds
HDA Housing Development Authority
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Michigan--94.2%
Battle Creek, Michigan, Tax Increment Finance Authority (f):
A- NR* $ 1,320 7.10% due 5/01/2004 $ 1,524
A- NR* 1,000 7.40% due 5/01/2004 1,168
AAA Aaa 1,210 Big Rapids, Michigan, Public Schools District, GO, Refunding, 5% due
5/01/2019 (e) 1,193
AA+ Aa2 3,500 Birmingham, Michigan, City School District, GO, 5.25% due 11/01/2012 3,641
AAA Aaa 3,545 Capital Region Airport Authority, Michigan, Airport Revenue Bonds, AMT, 6.60%
due 7/01/2012 (c) 3,865
AAA Aaa 2,500 Clarkston, Michigan, Community Schools, GO, 5.25% due 5/01/2023 (c) 2,515
NR* P1 4,300 Delta County, Michigan, Economic Development Corporation, Environmental
Improvement Revenue Refunding Bonds (Mead-Escanaba Paper), DATES, Series D,
4.20% due 12/01/2023 (a) 4,300
NR* Aaa 1,600 Fruitport, Michigan, Community Schools, GO, 5.30% due 5/01/2022 (d) 1,617
AAA Aaa 2,000 Grand Ledge, Michigan, Public Schools District, GO, 6.45% due 5/01/2004 (c)(f) 2,262
AAA Aaa 1,750 Grand Ledge, Michigan, Public Schools District, GO, Refunding, 5.375% due
5/01/2024 (c) 1,782
AAA Aaa 1,500 Grand Traverse County, Michigan, Hospital Revenue Refunding Bonds (Munson
Healthcare), Series A, 5.50% due 7/01/2018 (b) 1,549
AAA Aaa 1,970 Holly, Michigan, Area School District, GO, Refunding, 5% due 5/01/2019 (d) 1,943
AAA Aaa 2,000 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue
Bonds (Borgess Medical Center), Series A, 5.625% due 6/01/2014 (b) 2,120
Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue
Refunding and Improvement Bonds (Bronson Methodist), Series A (f):
A A1 2,500 6.25% due 5/15/2003 2,763
A A1 1,750 6.375% due 5/15/2003 1,942
Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue
Refunding Bonds (Bronson Methodist Hospital) (c):
NR* Aaa 3,500 5.25% due 5/15/2018 3,512
NR* Aaa 5,500 5.50% due 5/15/2028 5,712
Kent County, Michigan, Airport Facility Revenue Refunding Bonds (Kent
County International Airport):
AAA Aa1 1,205 4.50% due 1/01/2008 1,222
AAA Aa1 1,305 4.50% due 1/01/2010 1,302
AAA Aaa 7,100 Kent, Michigan, Hospital Finance Authority, Health Care Revenue Bonds
(Butterworth Health Systems), Series A, 5.625% due 1/15/2006 (c)(f) 7,811
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Michigan (continued)
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) $ 2,691
Michigan Higher Education, Student Loan Revenue Bonds, AMT:
NR* A 1,250 Series XIV-A, 6.75% due 10/01/2006 1,319
AAA VMIG1++ 300 VRDN, Series XII-D, 3.95% due 10/01/2015 (a)(b) 300
Michigan Municipal Bond Authority Revenue Bonds:
AA+ Aa1 1,500 (Drinking Water Revolving Fund), 4.75% due 10/01/2020 1,419
A NR* 1,100 (Local Government Loan--Revenue Sharing), Series B, 5.80% due 11/01/2013 1,167
AA+ Aa1 3,650 (State Revolving Fund), Series A, 6.55% due 10/01/2002 (f) 4,046
AA+ Aa2 2,500 Michigan Municipal Bond Authority, Revenue Refunding Bonds (Local Government
--Qualified School), Series A, 6.50% due 5/01/2016 2,739
Michigan State Building Authority Revenue Bonds (Facilities Program):
AA A2 5,000 Series I, 5.125% due 10/15/2011 5,177
AAA Aaa 1,185 Series II, 4.67%** due 10/15/2009 (b) 736
AAA Aaa 1,675 Series II, 4.77%** due 10/15/2010 (b) 981
Michigan State Building Authority, Revenue Refunding Bonds (Facilities Program):
AA Aa2 1,000 Series 1, 4.75% due 10/15/2021 943
AAA Aaa 1,400 Series I, 5.50% due 10/01/2006 (b) 1,517
Michigan State, HDA, Rental Housing Revenue Bonds:
AA- NR* 1,945 AMT, Series A, 7.15% due 4/01/2010 2,086
AAA Aaa 1,000 AMT, Series A, 5.30% due 10/01/2037 (c) 993
AAA Aaa 1,950 Series B, 5.10% due 10/01/2019 (c) 1,945
AA- NR* 2,245 Series B, 7.10% due 4/01/2021 2,391
Michigan State, HDA, Revenue Refunding Bonds:
AA+ NR* 1,000 Series A, 6.80% due 12/01/2012 1,041
AA+ NR* 1,985 Series A, 6.875% due 6/01/2023 2,040
AA+ NR* 2,500 Series C, 6.50% due 6/01/2016 (h) 2,619
Michigan State Hospital Finance Authority Revenue Bonds:
BBB Baa2 3,500 (Detroit Medical Center Obligation Group), Series A, 5.25% due 8/15/2028 3,162
AAA Aaa 2,000 (Mercy Health Services), Series R, 5.375% due 8/15/2026 (b) 2,024
AAA Aaa 1,000 (Mid-Michigan Obligation Group), 6.90% due 12/01/2002 (f) 1,124
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
BBB Baa2 5,875 (Detroit Medical Center Obligation Group), Series A, 6.50% due 8/15/2018 6,054
AA- Aa3 2,500 (Henry Ford Health Systems), Series A, 5.25% due 11/15/2020 2,465
NR* A1 3,000 (McLaren Health Care Corp.), Series A, 5% due 6/01/2028 2,779
BBB+ Baa3 2,500 Michigan State Strategic Fund, Limited Obligation Revenue Bonds (Waste
Management Inc. Project), AMT, 6.625% due 12/01/2012 2,681
A A1 5,000 Michigan State Strategic Fund, Limited Obligation, Revenue Refunding Bonds
(Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 5,819
A A2 2,500 Michigan State Strategic Fund, PCR, Refunding (General Motors Corp.), 6.20%
due 9/01/2020 2,686
Michigan State Trunk Line, Revenue Bonds, Series A (f):
AA- Aa3 1,000 5.625% due 11/15/2004 1,101
AA- Aa3 1,370 5.70% due 11/15/2004 1,513
AAA Aaa 3,750 Michigan State Trunk Line, Revenue Refunding Bonds, Series A, 4.75% due
11/01/2020 (c) 3,561
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) 8,171
AAA Aaa 5,000 Oxford, Michigan, Area Community School District, GO, 5.40% due 5/01/2025 (d) 5,111
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
Michigan (concluded)
AA+ Aa2 $ 1,370 Plymouth-Canton, Michigan, Community School District, Refunding, GO, Series A,
6.625% due 5/01/2001 (f) $ 1,462
AA+ Aa2 2,250 Reeths-Puffer, Michigan, Schools Building, GO, Series Q, 6.625% due 5/01/2002 (f) 2,476
AAA Aaa 1,635 Richmond, Michigan, Community School District, GO, Refunding, 4.75% due
5/01/2022 (d) 1,545
AAA Aaa 2,000 Romulus, Michigan, Community Schools, Series I, 6.75% due 5/01/2001 (e)(f) 2,159
AA VMIG1++ 5,700 Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds
(William Beaumont Hospital), VRDN, Series L, 4.20% due 1/01/2027 (a)(c) 5,700
A1+ VMIG1++ 2,150 University of Michigan, University Hospital Revenue Bonds, VRDN, Series A,
4.15% due 12/01/2027(a) 2,150
A1+ VMIG1++ 2,950 University of Michigan, University Hospital Revenue Refunding Bonds, VRDN,
Series A, 4.15% due 12/01/2019 (a) 2,950
AA Aa1 2,510 University of Michigan, University Housing Revenue Bonds, Series A, 5.50%
due 11/15/2017 2,634
A1+ VMIG1++ 300 University of Michigan, University Revenue Bonds (Medical Service Plan),
VRDN, Series A, 4.15% due 12/01/2027 (a) 300
NR* NR* 3,750 Wayne Charter County, Michigan, Airport Revenue Bonds, RIB, AMT, Series 68,
6.795% due 12/01/2017 (c)(g) 3,923
Puerto Rico--4.6%
NR* NR* 7,500 Puerto Rico, Insured Trust Receipts, RITR, 6.42% due 7/01/2027(c)(g) 7,941
Total Investments (Cost--$163,349)--98.8% 171,384
Other Assets Less Liabilities--1.2% 2,045
--------
Net Assets--100.0% $173,429
========
<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, 1999.
(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, 1999
(h)FHA Insured.
*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>
MuniYield Michigan Fund, Inc.
April 30, 1999
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$163,348,934) (Note 1a) $171,383,577
Cash 31,864
Interest receivable 2,988,513
Prepaid expenses and other assets 11,156
------------
Total assets 174,415,110
------------
Liabilities: Payables:
Securities purchased $ 707,748
Distributions to shareholders (Note 1e) 198,204
Investment adviser (Note 2) 76,253 982,205
------------
Accrued expenses and other liabilities 3,666
------------
Total liabilities 985,871
------------
Net Assets: Net assets $173,429,239
============
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 (7,880,657 shares issued
and outstanding) $ 788,066
Paid-in capital in excess of par 110,144,723
Undistributed investment income--net 1,510,968
Accumulated realized capital losses on investments--net (2,049,161)
Unrealized appreciation on investments--net 8,034,643
------------
Total--Equivalent to $15.03 net asset value per share of
Common Stock (market price--$15.00) 118,429,239
------------
Total capital $173,429,239
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended April 30, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,787,238
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 437,317
Commission fees (Note 4) 65,929
Professional fees 35,745
Accounting services (Note 2) 35,192
Transfer agent fees 21,788
Printing and shareholder reports 13,346
Directors' fees and expenses 10,839
Listing fees 7,723
Custodian fees 6,681
Pricing fees 4,568
Other 8,552
------------
Total expenses 647,680
------------
Investment income--net 4,139,558
------------
Realized & Realized gain on investments--net 1,423,183
Unrealized Change in unrealized appreciation on investments--net (3,917,177)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,645,564
(Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1999 Oct. 31, 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 4,139,558 $ 8,721,288
Realized gain on investments--net 1,423,183 4,168,067
Change in unrealized appreciation on investments--net (3,917,177) (1,309,899)
------------ ------------
Net increase in net assets resulting from operations 1,645,564 11,579,456
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (3,653,486) (6,872,146)
Shareholders Preferred Stock (498,410) (1,633,213)
(Note 1e): Realized gain on investments--net:
Common Stock (3,385,535) (601,394)
Preferred Stock (562,276) (385,924)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (8,099,707) (9,492,677)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions 1,764,464 640,468
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets (4,689,679) 2,727,247
Beginning of period 178,118,918 175,391,671
------------ ------------
End of period* $173,429,239 $178,118,918
============ ============
<FN>
*Undistributed investment income--net $ 1,510,968 $ 1,523,306
============ ============
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.85 $ 15.58 $ 15.29 $ 15.23 $ 14.05
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .52 1.12 1.16 1.18 1.19
Realized and unrealized gain (loss) on
investments--net (.30) .38 .28 .11 1.47
-------- -------- -------- -------- --------
Total from investment operations .22 1.50 1.44 1.29 2.66
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.47) (.89) (.90) (.93) (.92)
Realized gain on investments--net (.44) (.08) -- -- (.27)
In excess of realized gain on
investments--net -- -- -- (.04) --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.91) (.97) (.90) (.97) (1.19)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.06) (.21) (.25) (.25) (.23)
Realized gain on investments--net (.07) (.05) -- -- (.06)
In excess of realized gain on
investments--net -- -- -- (.01) --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.13) (.26) (.25) (.26) (.29)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.03 $ 15.85 $ 15.58 $ 15.29 $ 15.23
======== ======== ======== ======== ========
Market price per share, end of period $ 15.00 $ 16.00 $ 15.125 $ 14.50 $ 13.875
======== ======== ======== ======== ========
Total Investment Based on market price per share (.72%)++ 12.56% 10.92% 11.67% 19.93%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .42%++ 8.25% 8.35% 7.28% 18.29%
======== ======== ======== ======== ========
Ratios to Average Expenses .74%* .72% .74% .75% .76%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 4.73%* 4.96% 5.15% 5.26% 5.50%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $118,429 $123,119 $120,392 $118,146 $117,600
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
======== ======== ======== ======== ========
Portfolio turnover 30.23% 40.41% 16.06% 19.73% 15.47%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,153 $ 3,239 $ 3,189 $ 3,148 $ 3,138
======== ======== ======== ======== ========
Dividends Investment income--net $ 227 $ 742 $ 894 $ 880 $ 806
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.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Fund, Inc.
April 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Michigan Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles
which may require the use of management accruals and estimates.
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 written or purchased are valued at the last sale
price in the case of exchange-traded options. In the case of options
traded in the over-counter-market, valuation is the last asked price
(options written) or the last bid price (options purchased).
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, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
(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, 1999 were $49,218,927 and
$55,907,429, respectively.
Net realized gains for the six months ended April 30, 1999 and net
unrealized gains as of April 30, 1999 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $1,423,183 $ 8,034,643
---------- -----------
Total $1,423,183 $ 8,034,643
========== ===========
As of April 30, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $8,034,643, of which $8,647,310 related to
appreciated securities and $612,667 related to depreciated
securities. The aggregate cost of investments at April 30, 1999 for
Federal income tax purposes was $163,348,934.
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 the six months ended April
30, 1999 and the year ended October 31, 1998 increased by 112,952
and 40,495, respectively, as a result of dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.05 per share and a
liquidation preference of $25,000 per share, that entitle their
holders to receive cash dividends at an annual rate that may vary
for the successive dividend periods. The yield in effect at April
30, 1999 was 3.55%.
Shares issued and outstanding during the six months ended April 30,
1999 and the year ended October 31, 1998 remained constant.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1999, Merrill Lynch, Pierce Fenner & Smith Incorporated,
an affiliate of FAM, earned $52,875 as commissions.
5. Subsequent Event:
On May 6, 1999, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.069202 per share, payable on May 27, 1999 to shareholders of
record as of May 21, 1999.
MuniYield Michigan Fund, Inc.
April 30, 1999
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 1999
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 40.9%
AA/Aa 22.9
A/A 12.2
BBB/Baa 6.9
NR (Not Rated) 6.8
Other++ 9.1
[FN]
++Temporary investments in short-term municipal
securities.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Gerald M. Richard, Treasurer and Philip M. Mandel, Secretary of
MuniYield Michigan Fund, Inc. have recently retired. Their
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's
Board of Directors in wishing Mr. Richard and Mr. Mandel well in
their retirements.
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 Whitehall Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYM
