MUNIYIELD
PENNSYLVANIA
FUND
FUND LOGO
Annual Report
October 31, 1996
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 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. Statements and other information herein are as dated
and are subject to change.
<PAGE>
MuniYield
Pennsylvania Fund
Box 9011
Princeton, NJ
08543-9011
MuniYield Pennsylvania Fund
TO OUR SHAREHOLDERS
For the year ended October 31, 1996, the Common Shares of MuniYield
Pennsylvania Fund earned $0.914 per share income dividends, which
included earned and unpaid dividends of $0.075. This represents a
net annualized yield of 5.96%, based on a month-end net asset value
of $15.32 per share. Over the same period, the total investment
return on the Fund's Common Shares was +6.30%, based on a change in
per share net asset value from $15.36 to $15.32, and assuming
reinvestment of $0.915 per share income dividends.
For the six-month period ended October 31, 1996, the total
investment return on the Fund's Common Shares was +5.28%, based on a
change in per share net asset value from $15.02 to $15.32, and
assuming reinvestment of $0.454 per share income dividends.
<PAGE>
For the six-month period ended October 31, 1996, the Fund's Auction
Market Preferred Shares had an average yield of 3.46%.
The Environment
Investor perceptions regarding the direction of the US economy
shifted over the course of the six-month period ended October 31,
1996. Throughout the summer months, concerns of an overheating
economy and spiraling inflation dominated the financial markets as
investors focused on the increasing possibility of monetary policy
tightening by the Federal Reserve Board. However, as it became
apparent that inflationary pressures were still under control--and
when the Federal Reserve Board did not tighten monetary policy at
its September 24 meeting--the investment outlook became more
positive. These developments, coupled with several economic data
releases that showed growth was at or below expectations, helped to
assuage investors' concerns about an overheating economy. Stock and
bond prices improved, with most broad-based stock market averages
reaching historic high levels. However, one factor potentially
overshadowing investor enthusiasm is the possibility that corporate
profits may have peaked for this economic cycle.
The US economy clearly has slowed from its strong growth rate during
the first half of 1996. Gross domestic product growth is slowing,
labor-cost pressures are subsiding, consumer confidence is easing,
and commodity prices are dropping. Investors are also anticipating
that President Clinton's re-election, combined with continued
Republican majorities in the House of Representatives and the
Senate, will prove positive for the nation's budget deficit. As 1996
draws to a close, investors are likely to continue to focus on the
economy. Evidence of continued growth at a non-inflationary pace
would be positive for the US capital markets.
The Municipal Market and 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 5.63% on January 4,
1996 to a high of 6.34% on June 13, 1996. At year-end October 31,
1996, the Index was roughly back to the levels at which it began the
period, having retraced the losses associated with a surge in
economic growth during the first six months of the calendar year.
The change in direction of long-term interest rates occurred as a
result of the slower economic pace exhibited during the third
quarter of 1996. The change of pace led investors to alter the con-
sensus view of future monetary policy from that of a tightening to
no change. Since August, prices of long-term fixed-income securities
have risen mod-estly while short-term securities have reacted more
dramatically.
<PAGE>
During the 12 months ended October 31, 1996, we sought to provide a
generous level of tax-exempt income for shareholders without
sacrificing the strong credit quality characteristics of the
portfolio. We ended the prior year constructive on the interest rate
environment and extended the duration of the portfolio by purchasing
securities which we believed would enhance the total return to
shareholders in a period of declining interest rates. However,
strong job growth led an economic revival from February through July
which forced a major change in investor psychology. We shifted the
portfolio to a more defensive posture to seek to protect the Fund's
net asset value as yields on long-term municipal bonds surged
approximately 0.75% between January and mid-June. Since peaking in
June, interest rates have declined somewhat as the economy has shown
early signs of cooling. We shifted to a more neutral posture once
again. By remaining fully invested during the period, we were able
to provide an attractive dividend while limiting interest rate risk.
For the 12-month period ended October 31, 1996, the Fund experienced
a 5.88% increase in cumulative total return versus an average
increase of 5.95% for all Pennsylvania tax-exempt closed-end
leveraged bond funds as reported by Lipper Analytical Services, Inc.
The Fund's Common Shares also produced a 5.97% yield for the 12-
month period ended October 31, 1996 as compared to the industry
average of 5.84% as reported by Lipper Analytical Services, Inc.
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
Senior Vice President
<PAGE>
(William M. Petty)
William M. Petty
Portfolio Manager
November 27, 1996
PROXY RESULTS
<TABLE>
During the six-month period ended October 31, 1996, MuniYield
Pennsylvania Fund Common Shareholders voted on the following
proposals. The proposals were approved at a special shareholders'
meeting on September 19, 1996. The description of each proposal and
number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Trustees: Edward H. Meyer 5,540,302 84,440
Jack B. Sunderland 5,540,648 84,094
J. Thomas Touchton 5,541,012 83,730
Arthur Zeikel 5,542,316 82,426
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte &
Touche LLP as the Fund's independent
auditors for the current fiscal year. 5,503,258 31,187 90,297
<CAPTION>
During the six-month period ended October 31, 1996, MuniYield
Pennsylvania Fund Preferred Shareholders voted on the following
proposals. The proposals were approved at a special shareholders'
meeting on September 6, 1996. The description of each proposal and
number of shares voted are as follows:
<PAGE>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Trustees: Donald Cecil 1,600 0
M. Colyer Crum 1,600 0
Edward H. Meyer 1,600 0
Jack B. Sunderland 1,600 0
J. Thomas Touchton 1,600 0
Arthur Zeikel 1,600 0
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche
LLP as the Fund's independent auditors for the
current fiscal year. 1,440 160 0
</TABLE>
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.
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. Of course, increases
in short-term interest rates would reduce (and even eliminate) the
dividends on the Common Shares.
<PAGE>
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 pickup on the
Common Shares will be reduced or eliminated completely. 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 does 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 Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
S/F Single-Family
UPDATES Unit Priced Demand Adjustable
Tax-Exempt Securities
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)
Pennsylvania--96.6%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 Allegheny County, Pennsylvania, Hospital Development Authority, Health
Center Revenue Bonds (University of Pittsburgh Medical Center System),
5.375% due 12/01/2025 (c) $ 951
Allegheny County, Pennsylvania, Hospital Development Authority Revenue
Bonds, Series A:
AAA Aaa 2,000 (Allegheny General Hospital Project), 6.25% due 9/01/2020 (c) 2,108
NR* A 3,000 (South Hills Health System), 6.50% due 5/01/2014 3,081
<PAGE>
AAA Aaa 5,000 Beaver County, Pennsylvania, Hospital Authority, Revenue Refunding Bonds
(Medical Center of Beaver County, Inc.), 6.625% due 7/01/2010 (b) 5,387
AAA Aaa 4,275 Bethlehem, Pennsylvania, Water Authority, Revenue Refunding Bonds, 6.25% due
11/15/2001 (c)(e) 4,613
AAA NR* 1,380 Delaware County, Pennsylvania, College Authority Revenue Bonds (Neumann
College), 5.625% due 10/01/2025 (f) 1,329
A1+ P1 1,000 Delaware County, Pennsylvania, IDA, PCR (BP Oil Inc. Project), UPDATES, 3.60%
due 12/01/2009 (a) 1,000
AAA Aaa 5,250 Harrisburg, Pennsylvania, Authority Revenue Bonds (Pooled Bond Program),
Series I, 5.625% due 4/01/2019 (c) 5,187
NR* Baa1 1,785 Latrobe, Pennsylvania, IDA, College Revenue Bonds (Saint Vincent College
Project), 6.75% due 5/01/2014 1,852
AAA Aaa 3,000 Lehigh County, Pennsylvania, IDA, PCR, Refunding (Pennsylvania Power and
Light Company Project), Series A, 6.40% due 11/01/2021 (c) 3,197
Luzerne County, Pennsylvania, IDA, Exempt Facilities Revenue Bonds
(Pennsylvania Gas and Water Company Project), AMT:
BBB Baa3 2,500 Refunding, Series A, 7.20% due 10/01/2017 2,672
AAA Aaa 2,000 Refunding, Series A, 7% due 12/01/2017 (b) 2,250
BBB Baa3 1,500 Series B, 7.125% due 12/01/2022 1,588
Montgomery County, Pennsylvania, Higher Education and Health Authority Revenue
Bonds:
BBB NR* 2,050 (Northwestern Corporation), 7.125% due 6/01/2018 2,135
AAA NR* 1,800 Refunding (Saint Joseph's University), 6.50% due 12/15/2012 (f) 1,944
AAA NR* 2,500 Refunding (Saint Joseph's University), 6.50% due 12/15/2022 (f) 2,699
Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company):
BBB+ Baa2 1,800 AMT, Series A, 7.60% due 4/01/2021 1,933
AAA Aaa 4,400 Series B, 6.70% due 12/01/2021 (c) 4,809
AAA Aaa 1,260 North Penn, Pennsylvania, Water Authority, Water Revenue Bonds, 6.875% due
11/01/2004 (d)(e) 1,438
AAA Aaa 1,000 North Wales, Pennsylvania, Water Authority, Water Revenue Bonds, 6.75% due
11/01/2004 (d)(e) 1,129
<PAGE>
BBB- Baa2 1,500 Pennsylvania Economic Development Financing Authority, Exempt Facilities
Revenue Bonds (MacMillan Limited Partnership Project), AMT, 7.60% due 12/01/2020 1,670
BBB+ Baa1 4,000 Pennsylvania Economic Development Financing Authority, Wastewater Treatment
Revenue Bonds (Sun Company Inc., R & M Project), AMT, Series A, 7.60% due
12/01/2024 4,453
AAA Aaa 4,000 Pennsylvania HFA, Refunding (Rental Housing), 6.50% due 7/01/2023 (g) 4,131
Pennsylvania HFA, S/F Mortgage, AMT:
AA+ Aa 2,630 Series 34B, 7% due 4/01/2024 2,755
AA+ Aa 3,000 Series 41B, 6.65% due 4/01/2025 3,114
AAA Aaa 6,000 Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue Bonds
(City of Philadelphia Funding Program), 5.625% due 6/15/2023 (c) 5,898
A NR* 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds (Municipal Capital
Improvements Program), 6.60% due 11/01/2009 2,134
AA- A1 5,000 Pennsylvania State, GO, UT, Second Series A, 6.60% due 11/01/2011 5,370
AAA Aaa 2,000 Pennsylvania State Higher Education Assistance Agency, Student Loan Revenue
Bonds, AMT, Series C, 7.15% due 9/01/2021 (b) 2,134
</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>
Pennsylvania State Higher Educational Facilities Authority, College and
University Revenue Bonds:
AAA Aaa $ 1,255 Refunding (Duquesne University), Series A, 6.75% due 4/01/2020 (c) $ 1,354
NR* VMIG1++ 4,000 (Temple University), VRDN, 3.60% due 10/01/2009 (a) 4,000
AAA Aaa 2,000 Pennsylvania State Higher Educational Facilities Authority, Health Services
Revenue Refunding Bonds (Allegheny Delaware Valley), Series A, 5.875% due
11/15/2021 (c) 2,018
A1+ NR* 1,000 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Carnegie Mellon University), VRDN, Series C, 3.60% due
11/01/2029 (a) 1,000
A- NR* 2,050 Pennsylvania State, IDA, Economic Development Revenue Bonds, Series A, 7%
due 7/01/2001 (e) 2,289
<PAGE>
AAA Aaa 5,665 Pennsylvania State, Refunding, GO, UT, 5.375% due 11/15/2003 (d) 5,906
Pennsylvania State University, Refunding:
AA- A1 2,500 6.25% due 3/01/2011 2,616
AA- A1 1,750 Series A, 5.10% due 3/01/2018 1,629
Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities
Authority, Hospital Revenue Bonds:
A- NR* 1,000 (Children's Seashore House), Series B, 7% due 8/15/2022 1,063
AAA NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 (h) 3,364
BBB NR* 1,630 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities Authority
Revenue Bonds (Northwestern Corporation), 7% due 6/01/2012 1,692
AAA Aaa 2,000 Philadelphia, Pennsylvania, School District, Series B, 5.50% due 9/01/2025 (b) 1,944
AAA Aaa 1,000 Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds, 5.50% due
8/01/2014 (c) 988
AAA Aaa 2,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water and Sewer System
Revenue Bonds (First Lien), Series A, 5.65% due 9/01/2025 (d) 1,986
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 2,651
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 1,047
AA+ Aa1 3,550 Swarthmore Boro Authority, Pennsylvania, College Revenue Refunding Bonds, 6%
due 9/15/2020 3,605
AAA Aaa 1,550 Washington County, Pennsylvania, Hospital Authority, Hospital Revenue Bonds
(The Washington Hospital Project), 5.625% due 7/01/2023 (b) 1,507
Puerto Rico--1.6%
Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds (e):
AAA NR* 900 Series S, 6.50% due 7/01/2002 1,003
AAA NR* 1,000 Series T, 6.50% due 7/01/2002 1,114
Total Investments (Cost--$118,690)--98.2% 125,737
Other Assets Less Liabilities--1.8% 2,264
--------
Net Assets--100.0% $128,001
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)Prerefunded.
(f)Connie Lee Insured.
(g)FNMA Collateralized.
(h)Escrowed to maturity.
++Highest short-term rating by Moody's Investors Service, Inc.
*Not Rated.
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, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$118,689,844) (Note 1a) $125,737,315
Cash 129,878
Interest receivable 2,398,918
Deferred organization expense (Note 1e) 7,260
Prepaid expenses and other assets 6,769
------------
Total assets 128,280,140
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 148,063
Investment adviser (Note 2) 54,071 202,134
------------
Accrued expenses and other liabilities 77,382
------------
Total liabilities 279,516
------------
Net Assets: Net assets $128,000,624
============
<PAGE>
Capital: Capital Shares (unlimited number of shares of beneficial
interest authorized) (Note 4):
Preferred Shares, par value $.05 per share (1,600 shares
of AMPS* issued and outstanding at $25,000 per share
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 778,589
Accumulated realized capital losses on investments--net (426,894)
Unrealized appreciation on investments--net 7,047,471
------------
Total--Equivalent to $15.32 net asset value per Common Share
(market price--$14.125) 88,000,624
------------
Total capital $128,000,624
============
<FN>
*Auction Market Preferred Shares.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 7,601,356
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 639,390
Commission fees (Note 4) 101,504
Professional fees 64,068
Accounting services (Note 2) 51,574
Transfer agent fees 45,189
Printing and shareholder reports 31,298
Trustees' fees and expenses 22,648
Listing fees 13,725
Custodian fees 9,377
Pricing fees 8,058
Amortization of organization expenses (Note 1e) 7,221
Other 10,213
------------
Total expenses 1,004,265
------------
Investment income--net 6,597,091
------------
Realized & Realized gain on investments--net 865,693
Unrealized Gain Change in unrealized appreciation on investments--net (993,735)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 6,469,049
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 6,597,091 $ 6,733,495
Realized gain (loss) on investments--net 865,693 (941,783)
Change in unrealized appreciation/depreciation on investments--net (993,735) 9,730,987
------------ ------------
Net increase in net assets resulting from operations 6,469,049 15,522,699
------------ ------------
Dividends & Investment income--net:
Distributions to Common Shares (5,252,664) (5,124,407)
Shareholders Preferred Shares (1,441,936) (1,443,064)
(Note 1f): In excess of realized gain on investments--net:
Common Shares -- (280,658)
Preferred Shares -- (56,968)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (6,694,600) (6,905,097)
------------ ------------
Net Assets: Total increase (decrease) in net assets (225,551) 8,617,602
Beginning of year 128,226,175 119,608,573
------------ ------------
End of year* $128,000,624 $128,226,175
============ ============
<FN>
*Undistributed investment income--net $ 778,589 $ 876,098
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
The following per share data and ratios have been derived Period
from information provided in the financial statements. For the Oct. 30, 1992++
Year Ended October 31, to Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.36 $ 13.86 $ 16.37 $ 14.13 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.15 1.17 1.15 1.12 --
Realized and unrealized gain (loss) on
investments--net (.03) 1.53 (2.41) 2.30 --
-------- -------- -------- -------- --------
Total from investment operations 1.12 2.70 (1.26) 3.42 --
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Shareholders:
Investment income--net (.91) (.89) (.91) (.85) --
Realized gain on investments--net -- -- (.12) -- --
In excess of realized gain on investments
--net -- (.05) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Shareholders (.91) (.94) (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 (.25) (.25) (.20) (.18) --
Realized gain on investments--net -- -- (.02) -- --
In excess of realized gain on investments
--net -- (.01) -- -- --
Capital charge resulting from issuance of
Preferred Shares -- -- -- (.15) --
-------- -------- -------- -------- --------
Total effect of Preferred Share activity (.25) (.26) (.22) (.33) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.32 $ 15.36 $ 13.86 $ 16.37 $ 14.13
======== ======== ======== ======== ========
Market price per share, end of period $ 14.125 $ 13.75 $ 11.00 $ 16.375 $ 15.00
======== ======== ======== ======== ========
Total Investment Based on market price per share 9.48% 34.17% (27.82%) 15.30% .00%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 6.30% 18.95% (9.02%) 22.36% (.35%)+++
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .78% .82% .82% .64% --
Net Assets:*** ======== ======== ======== ======== ========
Expenses .78% .82% .82% .78% --
======== ======== ======== ======== ========
Investment income--net 5.14% 5.44% 5.12% 5.20% --
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, net of Preferred Shares, end
Data: of period (in thousands) $ 88,001 $ 88,226 $ 79,609 $ 92,654 $ 78,315
======== ======== ======== ======== ========
Preferred Shares outstanding, end of
period (in thousands) $ 40,000 $ 40,000 $ 40,000 $ 40,000 --
======== ======== ======== ======== ========
Portfolio turnover 75.83% 43.59% 18.64% 14.03% --
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,200 $ 3,206 $ 2,990 $ 3,316 --
======== ======== ======== ======== ========
Dividends Per Share Investment income--net $ 901 $ 902 $ 688 $ 644 --
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, may 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.
++++The Fund's Preferred Shares were issued on November 30, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split that occurred on December 1, 1994.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield 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 and options thereon, 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, 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 the general
supervision of the Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to write 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.
<PAGE>
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
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.
<PAGE>
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, 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, 1996 were $92,996,584 and
$98,051,202, respectively.
Net realized and unrealized gains (losses) as of October 31, 1996
were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $1,453,681 $7,047,471
Financial futures contracts (587,988) --
---------- ----------
Total $ 865,693 $7,047,471
========== ==========
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $7,047,471, of which $7,049,986
related to appreciated securities and $2,515 related to depreciated
securities. The aggregate cost of investments at October 31, 1996
for Federal income tax purposes was $118,689,844.
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 beneficial interest without approval of the holders of
Common Shares.
Common Shares
For the year ended October 31, 1996, shares issued and outstanding
remained constant at 5,743,422. At October 31, 1996, 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, 1996 was 3.35%.
<PAGE>
As of October 31, 1996, there were 1,600 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 year ended
October 31, 1996, MLPF&S, an affiliate of FAM, earned $68,591 as
commissions.
5. Subsequent Event:
On November 8, 1996, the Fund's Board of Trustees declared an
ordinary income dividend to holders of Common Shares in the amount
of $.075435 per share, payable on November 27, 1996 to shareholders
of record as of November 18, 1996.
<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, 1996, 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 each of the years in the four-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, 1996 by correspondence with the custodian. 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.
<PAGE>
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, 1996, the results of
its operations, 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 3, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield
Pennsylvania Fund during its taxable year ended October 31, 1996
qualify as tax-exempt interest dividends for Federal income tax
purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
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
Vincent R. Giordano, Senior Vice President
Donald C. Burke, 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
