MUNIYIELD
PENNSYLVANIA
FUND
FUND LOGO
Semi-Annual Report
April 30, 1996
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, MA 02110
<PAGE>
Transfer Agents
Common Shares:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Shares:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MPA
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. Statements and other information herein are as
dated and are subject to change.
MuniYield
Pennsylvania Fund
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
<PAGE>
For the six-month period ended April 30, 1996, the Common Shares of
MuniYield Pennsylvania Fund earned $0.462 per share income
dividends, which included earned and unpaid dividends of $0.078.
This represents a net annualized yield of 6.17%, based on a month-
end per share net asset value of $15.02. Over the same period, the
total investment return on the Fund's Common Shares was +0.96%,
based on a change in per share net asset value from $15.36 to
$15.02, and assuming reinvestment of $0.461 per share income
dividends.
For the six-month period ended April 30, 1996, the Fund's Auction
Market Preferred Shares had an average yield of 3.73%.
The Environment
Investor perceptions regarding the US economy changed over the
course of the six-month period ended April 30, 1996. As 1995 drew to
a close and 1996 began, it appeared that the US economy was losing
momentum. Lackluster retail sales, increases in initial unemployment
claims (along with weak job and income growth), and evidence of
slowing in the manufacturing sector all suggested that the rate of
economic growth was decelerating, with some forecasters even
suggesting the possibility of an imminent recession.
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is unlikely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
The Municipal Market
During the six months ended April 30, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended April 30, 1996. At
April 30, 1996, long-term municipal bond yields were approximately
6.30%, an increase of approximately 30 basis points over the last
six months. The rise in US Treasury bond yields was more
substantial. Over the last six months, yields on US Treasury
securities rose approximately 60 basis points to 6.90%. During the
April period, the municipal bond market reversed the trend seen
throughout much of 1995 and significantly outperformed the US
Treasury bond market.
<PAGE>
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income has dissipated. As the negative revenue impact of the
various proposals, such as the flat tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat tax, value-added tax
or any other reform were made. Consequently, fears of losing the
favored tax treatment of municipal bond income declined even
further. As a percentage of Treasury bond yields, tax-exempt bond
yield ratios quickly declined from 95% to approximately 90%. This
allowed the municipal bond market to maintain much of the gains made
since early 1995.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were underwritten, an increase of approximately
45% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $40 billion in long-term tax-exempt securities were
underwritten, an increase of 35% compared to the same period a year
ago. At current interest rate levels large amounts of refundings are
unlikely and the rate of new bond issuance should continue to
decline.
<PAGE>
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the six-month period ended April 30,
1996 to absorb the relative increase in bond issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
We entered the six-month period ended April 30, 1996 optimistic that
interest rates would decline. This optimism was based on the belief
that the economy was slowing and that advances on a balanced Federal
budget agreement would be beneficial to the fixed-income markets. To
take advantage of this anticipated decline in interest rates, we
reduced the Fund's cash reserve position to a low level and
increased the Fund's duration. This strategy benefited the Fund's
performance as long-term interest rates declined over 50 basis
points through the end of December. Through mid-January, the economy
appeared sluggish enough that the Federal Reserve Board lowered the
Federal Funds rate by 0.50% to 5.25% and the markets priced in
further easings of monetary policy.
The new year brought the beginning of a reversal in the trend of
lower interest rates. By late February signs of a strengthening
economy began to undermine the confidence in the fixed-income
market. In March a strong employment report seemed to confirm a
surge in the growth of the US economy, and yields rose rapidly.
Prior to the back up in yields, we gradually increased the Fund's
cash reserves while shortening its duration. This strategy made the
Fund less sensitive to the back up in yields experienced in the
fixed-income markets.
<PAGE>
Looking ahead, we remain cautious on long-term interest rates. We
believe this stance is warranted as economic releases so far in 1996
continue to show strength while inflationary pressures appeared in
the form of higher commodity prices. However, with the swift
increase in yields this year, we recently decreased the Fund's cash
reserve position by purchasing long-term securities at attractive
yields. We will maintain a cautious approach to the municipal bond
market until a clearer direction of interest rates emerges during
the balance of the year.
In Conclusion
We appreciate your interest in MuniYield Pennsylvania Fund, and we
look forward to serving your investment needs and objectives in the
months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William M. Petty)
William M. Petty
Portfolio Manager
<PAGE>
June 3, 1996
We are pleased to announce that William M. Petty is responsible for
the day-to-day management of MuniYield Pennsylvania Fund. Mr. Petty
has been employed by Merrill Lynch Asset Management L.P. (an
affiliate of the Fund's investment adviser) since 1993 as Vice
President and was an Assistant Vice President from 1992 to 1993.
Prior thereto, he was employed by J.J. Kenny Municipal Bond Brokers
as a Municipal Bond Broker from 1990 to 1992.
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 pick-up 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 Shares 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--96.7%
<S> <S> <C> <S> <C>
Allegheny County, Pennsylvania, Hospital Development Authority, Health
Center Revenue Bonds (c):
AAA Aaa $ 1,000 (Presbyterian University), Series A, 6.25% due 11/01/2023 $ 1,014
AAA Aaa 2,500 (University of Pittsburgh Medical Center System), 5.375% due 12/01/2025 2,272
<PAGE>
Allegheny County, Pennsylvania, Hospital Development Authority Revenue Bonds:
AAA Aaa 2,000 (Allegheny General Hospital Project), Series A, 6.25% due 9/01/2020 (c) 2,044
A-1 VMIG1++ 5,300 (Presbyterian Health Center), VRDN, Series C, 4.10% due 3/01/2020 (a)(c) 5,300
NR* A 3,000 (South Hills Health System), Series A, 6.50% due 5/01/2014 3,013
AAA Aaa 5,000 Beaver County, Pennsylvania, Hospital Authority, Revenue Refunding Bonds
(Medical Center Beaver County, Inc.), 6.625% due 7/01/2010 (b) 5,351
AAA NR* 2,880 Delaware County, Pennsylvania, College Authority Revenue Bonds
(Neumann College), 5.625% due 10/01/2025 (f) 2,709
A1+ P1 2,000 Delaware County, Pennsylvania, IDA, PCR (BP Oil Inc. Project), UPDATES, 4.20%
due 12/01/2009 (a) 2,000
A1+ NR* 800 Geisinger, Pennsylvania, Health Systems Authority Revenue Bonds, VRDN,
Series B, 4.10% due 7/01/2022 (a) 800
NR* Baa1 1,785 Latrobe, Pennsylvania, IDA, College Revenue Bonds (Saint Vincent College
Project), 6.75% due 5/01/2014 1,798
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) 3,120
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 2,627
AAA Aaa 2,000 Refunding, Series A, 7% due 12/01/2017 (b) 2,176
BBB- Baa3 1,500 Series B, 7.125% due 12/01/2022 1,560
Montgomery County, Pennsylvania, Higher Education and Health Authority Revenue
Bonds:
BBB NR* 2,050 (Northwestern Corporation), 7.125% due 6/01/2018 2,104
AAA NR* 1,800 Refunding (Saint Joseph's University), 6.50% due 12/15/2012 (f) 1,865
AAA NR* 2,500 Refunding (Saint Joseph's University), 6.50% due 12/15/2022 (f) 2,576
Montgomery County, Pennsylvania, IDA, PCR, Refunding (Philadelphia Electric
Company):
BBB+ Baa2 1,800 AMT, Series A, 7.60% due 4/01/2021 1,930
AAA Aaa 4,400 Series B, 6.70% due 12/01/2021 (c) 4,687
AAA Aaa 1,260 North Penn, Pennsylvania, Water Authority Revenue Bonds, 6.875% due 11/01/2004
(d)(e) 1,414
AAA Aaa 1,000 North Wales, Pennsylvania, Water Authority Revenue Bonds, 6.75% due 11/01/2004
(d)(e) 1,123
BBB- Baa2 1,500 Pennsylvania Economic Development Financing Authority, Exempt Facilities
Revenue Bonds (MacMillan Limited Partnership Project), AMT, 7.60% due 12/01/2020 1,652
<PAGE>
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 4,380
AAA Aaa 4,000 Pennsylvania HFA, Refunding (Rental Housing), 6.50% due 7/01/2023 (g) 4,094
Pennsylvania HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa 4,000 Refunding, Series 47, 5.70% due 10/01/2026 3,692
AA+ Aa 2,630 Series 34-B, 7% due 4/01/2024 2,713
AA+ Aa 3,000 Series 41-B, 6.65% due 4/01/2025 3,050
AAA Aaa 3,500 Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue
Refunding Bonds, Series A, 5% due 6/15/2013 (c) 3,163
A NR* 2,000 Pennsylvania State Finance Authority, Revenue Refunding Bonds (Municipal Capital
Improvements Program), 6.60% due 11/01/2009 2,083
AA- A1 5,000 Pennsylvania State, GO, UT, Second Series A, 6.60% due 11/01/2011 5,353
</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>
AAA Aaa $ 2,000 Pennsylvania State Higher Educational Assistance Agency, Student Loan Revenue
Bonds, AMT, Series C, 7.15% due 9/01/2021 (b) $ 2,075
AAA Aaa 1,255 Pennsylvania State Higher Educational Facilities Authority, College and
University Revenue Refunding Bonds (Duquesne University), Series A, 6.75%
due 4/01/2020 (c) 1,324
Pennsylvania State Higher Educational Facilities Authority Revenue Bonds:
A1+ NR* 1,200 (Carnegie Mellon University), VRDN, Series B, 4.20% due 11/01/2027 (a) 1,200
AAA Aaa 2,625 Refunding (State System of Higher Education), Series N, 5.80% due 6/15/2024 (c) 2,589
AAA Aaa 2,000 Pennsylvania State, IDA, Economic Development Revenue Refunding Bonds,
Series A, 5.50% due 1/01/2014 (b) 1,923
A- A 2,050 Pennsylvania State, IDA, Revenue Bonds (Economic Development), Series A,
7% due 7/01/2001 (e) 2,281
Pennsylvania State University, Refunding:
AA- A1 2,500 6.25% due 3/01/2011 2,556
AA- A1 1,750 Series A, 5.10% due 3/01/2018 1,558
<PAGE>
Philadelphia, Pennsylvania, Hospitals and Higher Educational Facilities
Authority, Hospital Revenue Bonds:
A1+ VMIG1++ 2,500 (Children's Hospital of Philadelphia Project), VRDN, 4.10% due 3/01/2027 (a) 2,500
A- NR* 1,000 (Children's Seashore House), Series B, 7% due 8/15/2022 1,038
A- NR* 3,000 Refunding (Presbyterian Medical Center), 6.65% due 12/01/2019 (h) 3,342
BBB NR* 1,630 Philadelphia, Pennsylvania, Hospitals and Higher Educational Facilities
Authority Revenue Bonds (Northwestern Corporation), 7% due 6/01/2012 1,673
AAA Aaa 2,000 Philadelphia, Pennsylvania, School District, Series B, 5.50% due 9/01/2025 (b) 1,881
Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds (c):
AAA Aaa 1,000 5.50% due 8/01/2014 963
AAA Aaa 3,820 5.60% due 8/01/2018 3,660
AAA Aaa 5,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water and Sewer System
Revenue Bonds (First Lien), Series A, 5.65% due 9/01/2025 (d) 4,779
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 2,607
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 1,034
AAA Aaa 1,550 Washington County, Pennsylvania, Hospital Authority Revenue Bonds (The Washington
Hospital Project), 5.625% due 7/01/2023 (b) 1,459
Puerto Rico--1.7%
Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds (e):
AAA NR* 900 Series S, 6.50% due 7/01/2002 994
AAA NR* 1,000 Series T, 6.50% due 7/01/2002 1,104
Total Investments (Cost--$119,800)--98.4% 124,203
Other Assets Less Liabilities--1.6% 2,039
--------
Net Assets--100.0% $126,242
========
<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, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)Prerefunded.
(f)Insured by Connie Lee.
(g)FNMA Collateralized.
(h)Escrowed to maturity.
++Highest short-term rating by Moody's Investors Service, Inc.
*Not Rated.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$119,799,657) (Note 1a) $124,202,622
Cash 63,900
Interest receivable 2,243,615
Deferred organization expense (Note 1e) 14,480
Prepaid expenses and other assets 3,399
------------
Total assets 126,528,016
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 171,821
Investment adviser (Note 2) 55,380 227,201
------------
Accrued expenses and other liabilities 59,191
------------
Total liabilities 286,392
------------
Net Assets: Net assets $126,241,624
============
Capital: Capital Shares (unlimited number of shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.10 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 806,000
Undistributed realized capital gains on investments--net 431,201
Unrealized appreciation on investments--net 4,402,965
------------
Total--Equivalent to $15.02 net asset value per Common Share
(market price--$14.375) 86,241,624
------------
Total capital $126,241,624
============
<PAGE>
<FN>
*Auction Market Preferred Shares.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended April 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 3,821,853
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 321,230
Commission fees (Note 4) 49,817
Professional fees 35,017
Transfer agent fees 23,552
Printing and shareholder reports 21,140
Accounting services (Note 2) 13,766
Trustees' fees and expenses 11,376
Listing fees 8,288
Custodian fees 4,227
Pricing fees 4,096
Amortization of organization expenses (Note 1e) 3,613
Other 5,268
------------
Total expenses 501,390
------------
Investment income--net 3,320,463
------------
Realized & Unreal- Realized gain on investments--net 1,723,788
ized Gain (Loss) on Change in unrealized appreciation on investments--net (3,638,241)
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 1,406,010
============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 3,320,463 $ 6,733,495
Realized gain (loss) on investments--net 1,723,788 (941,783)
Change in unrealized appreciation/depreciation on investments
--net (3,638,241) 9,730,987
------------ ------------
Net increase in net assets resulting from operations 1,406,010 15,522,699
------------ ------------
Dividends & Investment income--net:
Distributions to Common Shares (2,646,385) (5,124,407)
Shareholders Preferred Shares (744,176) (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 (3,390,561) (6,905,097)
------------ ------------
Net Assets: Total increase (decrease) in net assets (1,984,551) 8,617,602
Beginning of period 128,226,175 119,608,573
------------ ------------
End of period* $126,241,624 $128,226,175
============ ============
<FN>
*Undistributed investment income--net $ 806,000 $ 876,098
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the For the
The following per share data and ratios have been derived Six Months Period
from information provided in the financial statements. Ended For the Oct. 30, 1992++
April 30, 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 .58 1.17 1.15 1.12 --
Realized and unrealized gain (loss) on
investments--net (.33) 1.53 (2.41) 2.30 --
-------- -------- -------- -------- --------
Total from investment operations .25 2.70 (1.26) 3.42 --
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Shareholders:
Investment income--net (.46) (.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 (.46) (.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 (.13) (.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 (.13) (.26) (.22) (.33) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.02 $ 15.36 $ 13.86 $ 16.37 $ 14.13
======== ======== ======== ======== ========
Market price per share, end of period $ 14.375 $ 13.75 $ 11.00 $ 16.375 $ 15.00
======== ======== ======== ======== ========
Total Investment Based on market price per share 7.94%+++ 34.17% (27.82%) 15.30% .00%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .96%+++ 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 5.15%* 5.44% 5.12% 5.20% --
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, net of Preferred Shares, end of
Data: period (in thousands) $ 86,242 $ 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 45.42% 43.59% 18.64% 14.03% --
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,156 $ 3,206 $ 2,990 $ 3,316 --
======== ======== ======== ======== ========
Dividends Per Share Investment income--net $ 465 $ 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. 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 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.
(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 and post-October losses.
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.
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.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1996 were $56,714,799 and
$66,424,943, respectively.
Net realized and unrealized gains as of April 30, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $1,398,100 $4,402,965
Financial futures contracts 325,688 --
---------- ----------
Total $1,723,788 $4,402,965
========== ==========
As of April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $4,402,965, of which $4,935,605 related to
appreciated securities and $532,640 related to depreciated
securities. The aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $119,799,657.
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 six months ended April 30, 1996, shares issued and
outstanding remained constant at 5,743,422. At April 30, 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 April 30, 1996 was 3.84%.
As of April 30, 1996, there were 1,600 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $52.
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, 1996, MLPF&S, an affiliate of FAM, earned $38,115 as
commissions.
<PAGE>
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a net capital loss carryforward of
approximately $305,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On May 10, 1996, the Fund's Board of Trustees declared an ordinary
income dividend to holders of Common Shares in the amount of
$0.077692 per share, payable on May 30, 1996 to shareholders of
record as of May 21, 1996.
