MUNIYIELD
PENNSYLVANIA
FUND
FUND LOGO
Annual Report
October 31, 1994
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Pennsylvania Fund 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 Shares by issuing Preferred Shares to provide the Common
Shareholders with a potentially higher rate of return. Leverage
creates risks for Common Shareholders, including the likelihood of
greater volatility of net asset value and market price of shares of
the Common Shares, and the risk that fluctuations in the short-term
dividend rates of the Preferred Shares may affect the yield to
Common Shareholders.
MuniYield
Pennsylvania Fund
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MuniYield Pennsylvania Fund
TO OUR SHAREHOLDERS
For the year ended October 31, 1994, the Common Shares of MuniYield
Pennsylvania Fund earned $1.023 per share income dividends, which
includes earned and unpaid dividends of $0.076. This represents a
net annualized yield of 7.40%, based on a month-end net asset value
of $13.86 per share. Over the same period, the total investment
return on the Fund's Common Shares was -9.02%, based on a change in
per share net asset value from $16.37 to $13.86, and assuming
reinvestment of $1.029 per share income dividends.
For the six-month period ended October 31, 1994, the total
investment return on the Fund's Common Shares was -1.53%, based on a
change in per share net asset value from $14.55 to $13.86, and
assuming reinvestment of $0.429 per share income dividends.
The average yield on the Fund's Auction Market Preferred Shares for
the period ended October 31, 1994 was 3.15%.
The Environment
As discussed in our last report to shareholders, the Federal Reserve
Board moved to counteract inflationary pressures by tightening
monetary policy. This trend continued during the May--October period
despite the series of preemptive strikes against inflation by the
central bank, concerns of increasing inflationary pressures
continued to prompt volatility in the US capital markets during the
period. In addition, the weakness of the US dollar in foreign
exchange markets prolonged stock and bond market declines.
Ongoing strength in the manufacturing sector and better-than-
expected economic results continue to fuel speculation that the
Federal Reserve Board will continue to raise short-term interest
rates in the months ahead. However, although consumer spending is
increasing, it is doing so at a lower rate than has been the case in
recent economic recoveries. In the weeks ahead, investors will
continue to assess economic data and inflationary trends in order to
gauge whether further increases in short-term interest rates are
imminent. Continued indications of moderate and sustainable levels
of economic growth would be positive for the US capital markets. At
the same time, greater US dollar stability in foreign exchange
markets would help to dampen expectations of significantly higher
short-term interest rates.
<PAGE>
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
three months ended October 31, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by almost 50 basis points (0.50%) to 6.95%
during the October 31, 1994 quarter. This represents the highest
level in tax-exempt bond yields in over two years. US Treasury bonds
suffered even greater declines during the quarter as Treasury bond
yields rose approximately 60 basis points to end the quarter at
8.00%.
The tax-exempt bond market reacted negatively throughout the October
quarter to indications that, despite a series of interest rate
increases by the Federal Reserve Board, the strength of the domestic
economy seen in recent quarters has not yet been significantly
reduced. While inflationary pressures have remained well contained,
additional Federal Reserve Board actions have been expected both to
ensure that domestic economic growth is eventually confined to
current levels and to assure nervous financial markets of its anti-
inflationary intentions.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the quarter ended October 31, 1994, only $32 billion
in long-term tax-exempt securities were issued, a decline of over
50% versus the October 31, 1993 quarter. Similarly, for the six
months ended October 31, 1994, only $75 billion in municipal
securities were underwritten, a decline of over 50% versus the
comparable period a year earlier. This reduction in issuance in
recent quarters has allowed the municipal bond market to react to
both the decline in investor demand and the rise in fixed-income
yields in a more orderly fashion than in similar situations in the
past, particularly during 1987.
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for long-
term investors.
<PAGE>
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
During the past 12 months, the municipal bond market was extremely
volatile. As measured by the Bond Buyer Revenue Bond Index, long-
term tax-exempt bond yields ranged from a low of 5.50% on January
31, 1994 to a high of 6.95% on October 28, 1994. At year-end October
31, 1994, the Index was at its peak for the period and reached its
highest level in nearly two and a half years. The change in
direction of long-term interest rates occurred because the US
economy heated up during the fourth quarter of 1993 and generated
momentum which carried forward throughout 1994. This led the Federal
Reserve Board to tighten monetary policy in February, in an attempt
to prevent an increase in inflationary pressures on the economy.
Prices of long-term fixed-income securities fell sharply in response
to the rapidly changing investment climate.
MuniYield Pennsylvania Fund altered its portfolio strategy during
the past 12 months as market psychology changed. We entered the year
with the Fund fully invested and took advantage of the decline in
interest rates through the start of 1994. As evidence of a booming
economy emerged early in 1994, however, our investment outlook
became cautious. Our strategy centered on raising cash reserves to
approximately 10% of net assets and restructuring the portfolio's
holdings to include a greater percentage of defensive bonds. This
entailed selling discount coupons and buying higher-coupon bonds
which are priced to call. As a result, we were able to mute some of
the Fund's volatility that occurred during this very difficult
period.
<PAGE>
In Conclusion
We appreciate your ongoing interest in MuniYield Pennsylvania Fund,
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
Vice President and Portfolio Manager
December 1, 1994
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Pennsylvania Fund utilizes leveraging to seek to enhance
the yield and net asset value of its Common Shares. However, these
objectives cannot be achieved in all interest rate environments. To
leverage, the Fund issues Preferred Shares, which pay 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 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 Shares. However, in order to
benefit Common 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 Shareholders. If either
of these conditions change, then the risks of leveraging will begin
to outweigh the benefits.
<PAGE>
To illustrate these concepts, assume a fund's Common Share
capitalization of $100 million and the issuance of Preferred Shares
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 Shares based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates.
In this case, the dividends paid to Preferred Shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Shares will be reduced. At the same time, the market value of
the fund's Common Shares (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 Shares' net asset value will
reflect the full decline in the price of the portfolio's
investments, since the value of the fund's Preferred Shares do not
fluctuate. In addition to the decline in net asset value, the market
value of the fund's Common Shares may also decline.
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield Pennsylvania Fund's portfolio
holdings in the Schedule of Investments, we have abbreviated the
names of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Authority
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania--92.0%
<S> <S> <C> <S> <C>
AAA Aaa $4,000 Allegheny County, Pennsylvania, Hospital Development Authority, Health Center
Revenue Bonds (Presbyterian University Hospital), Series A, 6.25% due 11/01/2023
(c) $ 3,718
Allegheny County, Pennsylvania, Hospital Development Authority Revenue Bonds
(Presbyterian Health Center), VRDN (a)(c):
A1+ VMIG1 1,800 Series A, 3.45% due 3/01/2020 1,800
A1+ VMIG1 500 Series B, 3.45% due 3/01/2020 500
A1+ VMIG1 400 Series C, 3.45% due 3/01/2020 400
NR* VMIG1 100 Allegheny County, Pennsylvania, Hospital Development Authority Revenue Bonds
(Presbyterian University Hospital), VRDN, Series B3, 3.45% due 3/01/2018 (a) 100
NR* A 3,000 Allegheny County, Pennsylvania, Hospital Development Authority Revenue Bonds
(South Hills Health System), Series A, 6.50% due 5/01/2014 2,767
AAA Aaa 5,000 Beaver County, Pennsylvania, Hospital Authority, Revenue Refunding Bonds (Medical
Center Beaver County, Inc.), 6.625% due 7/01/2010 (b) 5,022
AAA Aaa 3,000 Bethlehem, Pennsylvania, Water Authority, Revenue Refunding Bonds, 6.25% due
11/15/2021 (c)(e) 3,110
AAA Aaa 2,750 Bucks County, Pennsylvania, Water and Sewer Authority Revenue Bonds (Water
System), Series B, 6.50% due 12/01/2012 (d)(e) 2,891
NR* Baa1 1,785 Latrobe, Pennsylvania, IDA, Revenue Bonds (Saint Vincent College Project), 6.75%
due 5/01/2014 1,721
AAA Aaa 3,750 Lehigh County, Pennsylvania, IDA, PCR, Refunding (Pennsylvania Power and Light
Company Project), Series A, 6.40% due 11/01/2021 (c) 3,615
BBB- Baa3 4,000 Luzerne County, Pennsylvania, IDA, Exempt Facilities Revenue Bonds (Pennsylvania
Gas and Water Company Project), AMT, Series B, 7.125% due 12/01/2022 3,838
BBB NR* 2,050 Montgomery County, Pennsylvania, Higher Education and Health Authority Revenue
Bonds (Northwestern Corporation), 7.125% due 6/01/2018 1,948
Montgomery County, Pennsylvania, Higher Education and Health Authority, Revenue
Refunding Bonds (Saint Joseph University)(f):
AAA NR* 1,800 6.50% due 12/15/2012 1,749
AAA NR* 3,000 6.50% due 12/15/2022 2,866
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania (continued)
<S> <S> <C> <S> <C>
AAA Aaa $4,400 Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company), Series B, 6.70% due 12/01/2021 (c) $ 4,389
AAA Aaa 2,000 North Penn, Pennsylvania, Water Authority Revenue Bonds, 6.20% due 11/01/2022 (d) 1,881
AAA Aaa 5,000 Pennsylvania HFA, Revenue Refunding Bonds (Rental Housing), 6.50% due 7/01/2023 4,751
Pennsylvania HFA, S/F Mortgage Revenue Bonds, AMT:
AA Aa 2,630 Series 34B, 7% due 4/01/2024 2,601
AA Aa 3,000 Series 41B, 6.65% due 4/01/2025 2,824
NR* Baa 3,965 Pennsylvania Intergovernmental Co-op Authority, Special Tax Revenue Bonds (City
of Philadelphia Funding Program), 6.80% due 6/15/2012 (e)(g) 4,226
A NR* 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds (Municipal Capital
Improvements Program), 6.60% due 11/01/2009 1,972
AA- A1 5,000 Pennsylvania State GO, UT, Second Series A, 6.60% due 11/01/2011 5,018
AAA Aaa 5,100 Pennsylvania State Higher Educational Assistance Agency, Student Loan Revenue
Bonds, AMT, Series C, 6.40% due 3/01/2022 (b) 4,803
Pennsylvania State Higher Educational Facilities Authority, College and
University Revenue Bonds:
AAA Aaa 1,750 (Hahnemann University Project), 6.90% due 7/01/2021 (c) 1,771
AAA Aaa 1,255 Refunding (Duquesne University), Series A, 6.75% due 4/01/2020 (c) 1,255
NR* P1 3,000 (Temple University), VRDN, 3.40% due 10/01/2009 (a) 3,000
A+ Aa 5,000 Pennsylvania State Higher Educational Facilities Authority, Revenue Refunding
Bonds (Thomas Jefferson University), Series A, 6.625% due 8/15/2009 5,062
Pennsylvania State IDA, Revenue Bonds (Economic Development):
A- A 2,050 Series A, 7% due 1/01/2011 (e) 2,229
AAA Aaa 3,500 6% due 1/01/2012 (b) 3,306
<PAGE>
AAA Aaa 2,750 Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds, Series L, 6.25%
due 6/01/2011 (b) 2,697
AA- A1 3,500 Pennsylvania State University, Revenue Refunding Bonds, 6.25% due 3/01/2011 3,395
BBB Baa1 2,390 Philadelphia, Pennsylvania, Gas Works Revenue Refunding Bonds, Fourteenth, Series
A, 6.375% due 7/01/2026 2,159
Philadelphia, Pennsylvania, Hospital and Higher Educational Facilities Authority,
Hospital Revenue Bonds:
A- NR* 1,000 (Children's Seashore House), Series B, 7% due 8/15/2022 977
BBB Baa1 1,000 (Frankford Hospital), Series A, 6% due 6/01/2014 850
A- A 1,000 Refunding (Chestnut Hill Hospital), 6.50% due 11/15/2022 924
A- NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 2,777
BBB+ Baa1 2,500 Refunding (Temple University Hospital), Series A, 6.625% due 11/15/2023 2,226
BBB NR* 1,630 Philadelphia, Pennsylvania, Hospital and Higher Educational Facilities Authority,
Revenue Bonds (Northwestern Corporation), 7% due 6/01/2012 1,610
BBB Baa 2,000 Ridley Park, Pennsylvania, Hospital Authority, Revenue Refunding Bonds (Taylor
Hospital), Series A, 6% due 12/01/2013 1,696
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Pennsylvania (concluded)
<S> <S> <C> <S> <C>
A1 NR* $1,500 Schuylkill County, Pennsylvania, IDA, Resource Recovery Revenue Bonds (North-
eastern Power Company), VRDN, 3.60% due 12/01/2011 (a) $ 1,500
A- NR* 2,520 Scranton-Lackawanna, Pennsylvania, Health and Welfare Authority, Revenue Refunding
Bonds (University of Scranton Project), Series B, 6.50% due 3/01/2015 2,410
BBB+ NR* 1,000 Sharon, Pennsylvania, Regional Health System Authority, Hospital Revenue Refunding
Bonds (Sharon Regional Health System Project), Series A, 6.875% due 12/01/2009 969
A1+ NR* 700 Washington County, Pennsylvania, Authority Lease, Revenue Bonds, VRDN, Series B-1,
Subseries D, 3.45% due 12/15/2018 (a) 700
Puerto Rico--1.7%
Puerto Rico Commonwealth, Highway and Transportation Authority, Highway
Revenue Bonds (e):
AAA NR* 900 Series S, 6.50% due 7/01/2022 959
AAA NR* 1,000 Series T, 6.50% due 7/01/2022 1,065
<PAGE>
Total Investments (Cost--$114,088)--93.7% 112,047
Variation Margin on Financial Futures Contracts--0.0%** 8
Other Assets Less Liabilities--6.3% 7,554
--------
Net Assets--100.0% $119,609
========
<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 October 31, 1994.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)Prerefunded.
(f)Connie Lee.
(g)Portion of security held in connection
with open futures contract.
*Not Rated.
**Financial futures contracts sold as of October 31, 1994 were as
follows:
Value
Number of Expiration (in thousands)
Contracts Issue Date (Note 1a)
248 US Treasury Bonds Dec. 1994 $(25,207)
(Total Contract Price--$25,558) $(25,207)
========
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$114,087,746) (Note 1a) $112,047,168
Cash 1,548,172
Receivables:
Securities sold $ 3,821,698
Interest 2,529,630
Variation margin (Note 1b) 7,750 6,359,078
------------
Deferred organization expense (Note 1e) 21,681
Prepaid expenses and other assets 50,314
------------
Total assets 120,026,413
============
<PAGE>
Liabilities: Payables:
Dividends to shareholders (Note 1g) 283,191
Investment adviser (Note 2) 51,476 334,667
------------
Accrued expenses and other liabilities 83,173
------------
Total liabilities 417,840
------------
Net Assets: Net assets $119,608,573
============
Capital: Capital Shares (unlimited number of shares authorized) (Note 4):
Preferred Shares, par value $.10 per share (800 shares of AMPS*
issued and outstanding at $50,000 per liquidation preference) $ 40,000,000
Common Shares, par value $.10 per share (5,743,422 shares issued
and outstanding) $ 574,342
Paid-in capital in excess of par 80,027,116
Undistributed investment income--net 710,074
Accumulated realized capital losses on investments--net (13,178)
Unrealized depreciation on investments--net (1,689,781)
------------
Total--Equivalent to $13.86 net asset value per Common Share
(market price--$11.00) 79,608,573
------------
Total capital $119,608,573
============
<FN>
*Auction Market Preferred Shares.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (CONTINUED)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 7,561,427
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 635,770
Commission fees (Note 4) 137,360
Professional fees 77,063
Printing and shareholder reports 46,314
Transfer agent fees 43,825
Accounting services (Note 2) 29,632
Trustees' fees and expenses 22,973
Listing fees 16,592
Amortization of organization expenses (Note 1e) 7,201
Pricing fees 6,132
Custodian fees 5,996
Other 14,632
------------
Total expenses 1,043,490
------------
Investment income--net 6,517,937
------------
Realized & Realized loss on investments--net (13,177)
Unrealized Change in unrealized appreciation/depreciation on investments--net (13,727,541)
Loss on ------------
Investments Net Decrease in Net Assets Resulting from Operations $ (7,222,781)
- --Net ============
(Notes 1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 6,517,937 $ 6,279,837
Realized gain (loss) on investments--net (13,177) 836,352
Change in unrealized appreciation/depreciation on investments--net (13,727,541) 12,037,760
------------ ------------
Net increase (decrease) in net assets resulting from operations (7,222,781) 19,153,949
------------ ------------
Dividends & Investment income--net:
Distributions Common Shares (5,185,019) (4,773,353)
to Shareholders Preferred Shares (1,099,664) (1,029,664)
(Note 1g): Realized gain on investments--net:
Common Shares (699,225) --
Preferred Shares (137,128) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (7,121,036) (5,803,017)
------------ ------------
Common & Proceeds from issuance of Preferred Shares -- 40,000,000
Preferred Share Total offering and underwriting costs resulting from the issuance
Transactions of Preferred Shares -- (851,884)
(Notes 1e & 4): Value of shares issued to Common Shareholders in reinvestment of
dividends and distributions 1,297,939 1,840,212
------------ ------------
Net increase in net assets derived from capital share transactions 1,297,939 40,988,328
------------ ------------
Net Assets: Total increase (decrease) in net assets (13,045,878) 54,339,260
Beginning of year 132,654,451 78,315,191
------------ ------------
End of year* $119,608,573 $132,654,451
============ ============
*Undistributed investment income--net $ 710,074 $ 476,820
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived October 30,
from information provided in the financial statements. For the Year Ended 1992++ to
October 31, October 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.37 $ 14.13 $ 14.18
Operating --------- --------- ---------
Performance: Investment income--net 1.15 1.12 --
Realized and unrealized gain (loss) on investments--net (2.41) 2.30 --
--------- --------- ---------
Total from investment operations (1.26) 3.42 --
--------- --------- ---------
Less dividends and distributions to Common Shareholders:
Investment income--net (.91) (.85) --
Realized gain on investments--net (.12) -- --
--------- --------- ---------
Total dividends and distributions (1.03) (.85) --
--------- --------- ---------
Capital charge resulting from issuance of Common Shares -- -- (.05)
--------- --------- ---------
Effect of Preferred Share activity:
Dividends and distributions to Preferred Shareholders:
Investment income--net (.20) (.18) --
Realized gain on investments--net (.02) (.15) --
--------- --------- ---------
Total effect of Preferred Share activity (.22) (.33) --
--------- --------- ---------
Net asset value, end of period $ 13.86 $ 16.37 $ 14.13
========= ========= =========
Market price per share, end of period $ 11.00 $ 16.375 $ 15.00
========= ========= =========
Total Investment Based on market price per share (27.82%) 15.30% 0.00%+++
Return:** ========= ========= =========
Based on net asset value per share (9.02%) 22.36% (0.35%)+++
========= ========= =========
<PAGE>
Ratios to Expenses, net of reimbursement .82% .64% --*
Average ========= ========= =========
Net Assets:*** Expenses .82% .78% --*
========= ========= =========
Investment income--net 5.12% 5.20% --*
========= ========= =========
Supplemental Net assets, net of Preferred Shares, end of period
Data: (in thousands) $ 79,609 $ 92,654 $ 78,315
========= ========= =========
Preferred Shares outstanding, at end of period (in
thousands) $ 40,000 $ 40,000 --
========= ========= =========
Portfolio turnover 18.64% 14.03% --
========= ========= =========
Dividends Per Investment income--net $ 1,375 $ 1,287 $ --
Share On
Preferred Shares
Outstanding:
<FN>
*Annualized.
**Total investment returns based on market value, which can be significantly greater
or lesser than the net asset value, result in substantially different returns.
Total investment returns exclude the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Shareholders.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Pennsylvania Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund determines and makes
available for publication the net asset value of its Common Shares
on a weekly basis. The Fund's Common Shares are listed on the New
York Stock Exchange under the symbol MPA. The following is a summary
of significant accounting policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts, which are traded on exchanges, are valued at
their closing prices 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 Trustees of the Fund.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and offering expenses--Deferred
organization expenses are amortized on a straight-line basis over a
five-year period. Direct expenses relating to the public offering of
the Common and Preferred Shares were charged to capital at the time
of issuance.
<PAGE>
(f) Non-income producing investments--Written and purchased options
are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), which is also an indirect wholly-
owned subsidiary of ML & Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $21,942,994 and
$30,499,573, respectively.
Net realized and unrealized gains (losses) as of October 31, 1994
were as follows:
<PAGE>
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 116,828 $(2,040,578)
Financial futures contracts (130,005) 350,797
----------- -----------
Total $ (13,177) $(1,689,781)
=========== ===========
As of October 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $2,040,578, of which $967,012 related
to appreciated securities and $3,007,590 related to depreciated
securities. The aggregate cost of investments at October 31, 1994,
for Federal income tax purposes was $114,087,746.
4. Capital Share Transactions:
The Fund is authorized to issue an unlimited number of shares of
beneficial interest, including Preferred Shares, par value $.10 per
share, all of which were initially classified as Common Shares. The
Board of Trustees is authorized, however, to reclassify any unissued
shares of capital without approval of the holders of Common Shares.
Common Shares
For the year ended October 31, 1994, shares issued and outstanding
increased by 81,973 to 5,743,422 as a result of dividend
reinvestment. At October 31, 1994, total paid-in capital amounted to
$80,601,458.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares 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 October 31, 1994 was 3.15%.
In connection with the offering of AMPS, the Board of Trustees
reclassified 800 shares of unissued capital shares as AMPS. For the
year ended October 31, 1994, there were 800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $50,000 per
share, plus accumulated and unpaid dividends of $78,216. Effective
December 1, 1994, as a result of a two-for-one stock split, there will
be 1,600 AMPS shares 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 year ended
October 31, 1994, MLPF&S, an affiliate of FAMI, earned $83,107
as commissions.
<PAGE>
5. Subsequent Event:
On November 8, 1994, the Fund's Board of Trustees declared an
ordinary income dividend to Common Shareholders in the amount
of $0.076439 per share, payable on November 29, 1994 to shareholders
of record as of November 18, 1994.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
MuniYield Pennsylvania Fund:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
Pennsylvania Fund as of October 31, 1994, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended and the
financial highlights for the two-year period then ended and the
period October 30, 1992 (commencement of operations) to October 31,
1992. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield Pennsylvania Fund as of October 31, 1994, the results of
its operatons, the changes in its net assets and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 5, 1994
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
MuniYield Pennsylvania Fund during its taxable year ended October
31, 1994 qualify as tax-exempt interest dividends for Federal income
tax purposes. Additionally, the following table summarizes the per
share capital gains distributions paid by the Fund during
the year:
<TABLE>
<CAPTION>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <C> <C> <C>
Common Shareholders 12/30/93 $ 0.123176 --
Preferred Shareholders 12/01/93 $171.41 --
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (unaudited)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Period Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $.25 -- $ .58 $.13 $.04 -- --
February 1, 1993 to April 30, 1993 .29 $ .03 .54 .24 .05 -- --
May 1, 1993 to July 31, 1993 .29 .09 .32 .24 .05 -- --
August 1, 1993 to October 31, 1993 .29 .04 .70 .24 .04 -- --
November 1, 1993 to January 31, 1994 .30 -- .10 .24 .05 $.12 $.02
February 1, 1994 to April 30, 1994 .28 .06 (1.84) .24 .05 -- --
May 1, 1994 to July 31, 1994 .28 .07 2.30 .27 .05 -- --
August 1, 1994 to October 31, 1994 .29 (.14) (2.96) .16 .05 -- --
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $14.64 $14.13 $15.00 $15.00 161
February 1, 1993 to April 30, 1993 15.66 14.64 14.875 14.875 437
May 1, 1993 to July 31, 1993 15.78 15.18 14.875 14.875 288
August 1, 1993 to October 31, 1993 16.66 15.63 15.625 15.625 593
November 1, 1993 to January 31, 1994 16.35 15.89 15.00 15.00 370
February 1, 1994 to April 30, 1994 16.32 14.03 13.50 13.50 354
May 1, 1994 to July 31, 1994 15.13 14.26 14.375 13.125 357
August 1, 1994 to October 31, 1994 14.85 13.86 13.375 11.125 668
<FN>
++Commencement of Operations.
*Calculations are based upon Common Shares outstanding at the end of
each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
M. Colyer Crum, Trustee
Edward H. Meyer, Trustee
Jack B. Sunderland, Trustee
J. Thomas Touchton, Trustee
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
<PAGE>
Transfer Agents
Common Shares:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Preferred Shares:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MPA
