-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J6DM6vFsF2eSUpo3b1CMPdTl6qpcnJvY2yEHE1IUZ8wB+A/KFDwS5DA31CyXtb4g eS9SZK8TxsH1WWUAuwMWOQ== 0000900092-02-000147.txt : 20021223 0000900092-02-000147.hdr.sgml : 20021223 20021223145710 ACCESSION NUMBER: 0000900092-02-000147 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021031 FILED AS OF DATE: 20021223 EFFECTIVENESS DATE: 20021223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIYIELD FUND INC CENTRAL INDEX KEY: 0000879361 IRS NUMBER: 223136942 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06414 FILM NUMBER: 02866738 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092822800 MAIL ADDRESS: STREET 1: PO BOX 9011 STREET 2: C/O MERRILL LYNCH ASSET MANAGEMENT CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-30D 1 ml6945.txt MUNIYIELD (BULL LOGO) Merrill Lynch Investment Managers Annual Report October 31, 2002 MuniYield Fund, Inc. www.mlim.ml.com MuniYield Fund, Inc. seeks to provide shareholders with as high a level of current income exempt from Federal income taxes as is consistent with its investment policies and prudent investment management by investing primarily in a portfolio of long-term, investment-grade municipal obligations the interest on which, in the opinion of bond counsel to the issuer, is exempt from Federal income taxes. This report, including the financial information herein, is transmitted to shareholders of MuniYield Fund, Inc. for their information. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Fund has leveraged its Common Stock and intends to remain leveraged by issuing Preferred Stock to provide the Common Stock shareholders with a potentially higher rate of return. Leverage creates risks for Common Stock shareholders, including the likelihood of greater volatility of net asset value and market price of shares of the Common Stock, and the risk that fluctuations in the short-term dividend rates of the Preferred Stock may affect the yield to Common Stock shareholders. Statements and other information herein are as dated and are subject to change. MuniYield Fund, Inc. Box 9011 Princeton, NJ 08543-9011 Printed on post-consumer recycled paper MUNIYIELD FUND, INC. The Benefits And Risks of Leveraging MuniYield Fund, Inc. utilizes leveraging to seek to enhance the yield and net asset value of its Common Stock. However, these objectives cannot be achieved in all interest rate environments. To leverage, the Fund issues Preferred Stock, which pays dividends at prevailing short-term interest rates, and invests the proceeds in long-term municipal bonds. The interest earned on these investments is paid to Common Stock shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share net asset value of the Fund's Common Stock. However, in order to benefit Common Stock shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. At the same time, a period of generally declining interest rates will benefit Common Stock shareholders. If either of these conditions change, then the risks of leveraging will begin to outweigh the benefits. To illustrate these concepts, assume a fund's Common Stock capitalization of $100 million and the issuance of Preferred Stock for an additional $50 million, creating a total value of $150 million available for investment in long-term municipal bonds. If prevailing short-term interest rates are approximately 3% and long-term interest rates are approximately 6%, the yield curve has a strongly positive slope. The fund pays dividends on the $50 million of Preferred Stock based on the lower short-term interest rates. At the same time, the fund's total portfolio of $150 million earns the income based on long-term interest rates. Of course, increases in short-term interest rates would reduce (and even eliminate) the dividends of the Common Stock. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pickup on the Common Stock will be reduced or eliminated completely. At the same time, the market value of the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. As a part of its investment strategy, the Fund may invest in certain securities whose potential income return is inversely related to changes in a floating interest rate ("inverse floaters"). In general, income on inverse floaters will decrease when short-term interest rates increase and increase when short-term interest rates decrease. Investments in inverse floaters may be characterized as derivative securities and may subject the Fund to the risks of reduced or eliminated interest payments and losses of invested principal. In addition, inverse floaters have the effect of providing investment leverage and, as a result, the market value of such securities will generally be more volatile than that of fixed-rate, tax-exempt securities. To the extent the Fund invests in inverse floaters, the market value of the Fund's portfolio and the net asset value of the Fund's shares may also be more volatile than if the Fund did not invest in such securities. Swap Agreements The Fund may also invest in swap agreements, which are over-the- counter contracts in which one party agrees to make periodic payments based on the change in market value of a specified bond, basket of bonds, or index in return for periodic payments based on a fixed or variable interest rate or the change in market value of a different bond, basket of bonds or index. Swap agreements may be used to obtain exposure to a bond or market without owning or taking physical custody of securities. MuniYield Fund, Inc., October 31, 2002 DEAR SHAREHOLDER For the year ended October 31, 2002, the Common Stock of MuniYield Fund, Inc. earned $.879 per share income dividends, which included earned and unpaid dividends of $.078. This represents a net annualized yield of 6.95%, based on a year-end net asset value of $13.28 per share. During the same period, the total investment return on the Fund's Common Stock was +5.07%, based on a change in per share net asset value from $13.55 to $13.28, and assuming reinvestment of $.923 per share income dividends. For the six-month period ended October 31, 2002, the total investment returns on the Fund's Common Stock was +3.37%, based on a change in per share net asset value from $13.30 to $13.28, and assuming reinvestment of $.463 per share income dividends. For the six-month period ended October 31, 2002, the Fund's Auction Market Preferred Stock had an average yield as follows: Series A, 1.40%; Series B, 1.28%; Series C, 1.46%; Series D, 2.00%; Series E, 1.32%; and Series F, 1.34%. The Municipal Market Environment During the six-month period ended October 31, 2002, the direction of long-term fixed income interest rates was driven as much by volatile U.S. equity markets and continued worldwide political tensions as by economic fundamentals. After rising steadily early in 2002, bond yields reversed course to move sharply lower throughout most of the period. Positive economic fundamentals repeatedly were overwhelmed by falling equity valuations and declines in investor confidence. U.S. gross domestic product (GDP) activity for the first quarter of 2002 measured at 5%, considerably above the level of economic growth seen at the end of 2001. During May and June, a number of economic indicators, such as housing activity, consumer spending and weekly unemployment claims, all pointed to at least a modest economic recovery by the end of 2002. However, steady dramatic declines in U.S. equity markets led the majority of investors to conclude that the Federal Reserve Board was unlikely to increase short-term interest rates for the remainder of the year. U.S. Treasury issue prices were also boosted by erupting Middle East and India/Pakistan conflicts that led many international investors to seek the safe-haven status of U.S. Treasury securities. By the end of June 2002, long-term U.S. Treasury bond yields had declined to 5.50%, a decline of almost 35 basis points (.35%) from their recent highs in mid-March. In late July, second quarter U.S. GDP growth was initially estimated at 1.1%. While subject to revision, this estimate suggested that continued declines in U.S. equity prices were negatively affecting not only consumer but business confidence as well and undermining much of the economic growth witnessed earlier this year. Some analysts extrapolated that recent weakness would continue, if not accelerate. This brought about forecasts that the Federal Reserve Board would soon be obliged to lower short-term interest rates both to offset equity market declines and boost consumer and business spending. The possibility of lower short-term interest rates helped push longer-term bond yields lower still during July and August. The dramatic decline in U.S. equity prices in late August and September triggered a significant fixed income rally as investors again sought the safe-haven status of U.S. Treasury securities. By the end of September, U.S. Treasury bond yields fell to 4.66%. Bolstered by an unexpected decline in the national unemployment rate to 5.6% in early October, U.S. equity markets staged a strong rally throughout much of the month. The Standard & Poor's 500 Index rose more than 8% for the month, triggered by stronger-than-expected earnings reports from a large number of companies, such as General Electric Company, International Business Machines Corporation and Microsoft Corporation. Bond prices continued to trade in an inverse relationship to equity prices. Consequently, as stocks rallied, bond yields rose in October, despite generally weak economic releases. During October, the U.S. housing sector remained quite robust, but retail sales and industrial production slowed. By October 31, 2002, long-term U.S. Treasury bond yields rose to almost 5%, a monthly increase of more than 30 basis points. During the past six months, the yield on 30-year U.S. Treasury bonds declined over 60 basis points. For the six-month period ended October 31, 2002, municipal bond prices also generally increased. Similar to their taxable counterparts, municipal bond yields rose in early 2002, largely on the expectation of short-term interest rate increases by the Federal Reserve Board. By late March, long-term municipal revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, rose to 5.67%, their highest level in more than a year. During recent months, tax-exempt bond yields have generally declined largely in response to the positive fixed income environment engendered by falling equity valuations. The municipal bond market's price advances in tax-exempt issues, however, have not been able to keep pace with U.S. Treasury issues as municipal bonds cannot offer foreign investors the safe-haven status U.S. Treasury issues enjoy in periods of economic and financial instability. The municipal bond market's recent price advances have also been supported by the continued improvement in the tax-exempt market's technical position. Despite sizeable advances in the rate of new municipal bond issuance, investor demand has increased, allowing tax-exempt bond prices to rise. By the end of October 2002, long-term municipal revenue bond yields stood at 5.20%, a decline of more than 30 basis points during the past six months. Investor demand has remained very positive throughout the period. The Investment Company Institute reported that thus far in 2002, municipal bond fund net cash flows remained very strong at over $17.5 billion, up nearly 80% compared to the same period in 2001. Additionally, investors received from June to August 2002 approximately $75 billion from bond maturities, proceeds from early redemptions and coupon income. Given the current weakness in U.S. equity markets, much of these monies were likely reinvested in tax-exempt products. Perhaps more importantly, short-term municipal rates have continued to move lower in response to Federal Reserve Board actions. In reaction to Federal Reserve Board interest rate reductions, short-term municipal rates have declined to the 1% - 1.50% range. As interest rates have declined, investors have extended maturities to take advantage of the steep municipal bond yield curve. The significant income sacrifice incurred by remaining in cash reserves has resulted in ongoing strong demand for municipal securities, especially in the 5-year - 15-year maturity range. Recent performance by the tax-exempt market has been even more impressive considering the increase in new bond issuance seen thus far in 2002. Nationwide, municipalities have used present low interest rate levels both to refinance older debt and fund new capital projects. Over the past six months, more than $200 billion in new long-term municipal bonds was issued, an increase of nearly 40% compared to the same period in 2001. Nearly $100 billion in long- term tax-exempt securities was underwritten during the October quarter of 2002, an increase of over 40% compared to the October quarter of 2001 level. In the coming months, interest rates are likely to remain volatile, with an expected upward bias. However, until equity market conditions stabilize, interest rates should remain near their current historically low levels. While recent stock market declines appear to have negatively affected economic growth in recent months, business activity is likely to accelerate going forward. While governmental stimulus in response to the September 11, 2001 attacks has been significant, the recent 50 basis point decrease in interest rates by the Federal Reserve Board should provide additional incentive to the sluggish U.S. economy. The ongoing U.S. military response to worldwide terrorism has reduced a once-sizeable Federal surplus to a material deficit. Further military action in early 2003 would likely result in higher Federal spending, deficits and increased Treasury financing. Increased Federal borrowings can be expected to put upward pressure on interest rates going forward. Equity market declines helped push interest rates to lower levels than economic fundamentals alone would support. When U.S. equity markets stabilize and economic activity resumes, associated interest rate increases should not be extreme. Inflationary pressures have remained subdued, meaning that significant interest rate increases are unlikely. As equity valuations are likely to only gradually recover, U.S. economic recovery is also likely to be a moderate process. This suggests that the pace of any interest rate increases will be gradual. As the municipal bond market's strong technical position can be expected to remain supportive in the coming months, future tax-exempt rate increases should be more restrained than their taxable counterparts. Portfolio Strategy During the six-month period ended October 31, 2002, we focused on seeking to enhance the Fund's dividend stream and reduce the Fund's net asset price volatility. Market instability was expected because of uncertain financial and economic conditions. Reducing price volatility generally involves lowering the Fund's interest rate sensitivity, which we accomplished in early 2002. This strategy worked well as interest rates rose in March. Since then, however, interest rates declined because of both continued economic uncertainty and unstable equity markets. As interest rates fell further, we shifted to a more defensive position. While this strategy may have been implemented a bit early, the Fund's leveraged structure and fully invested position allowed it to participate in the recent bond market rally. It is our belief that interest rates are not likely to decline much further. If solid economic recovery should develop by early 2003, we would expect interest rates to move higher. MuniYield Fund, Inc., October 31, 2002 During the six-month period ended October 31, 2002, the Fund's borrowing costs remained in the 1% - 1.25% range. These attractive funding levels, in combination with a steep tax-exempt yield curve, generated a material income benefit to the Fund's Common Stock shareholder. Further declines in the Fund's borrowing costs would require significant easing of monetary policy by the Federal Reserve Board. While such action is not expected, an increase in short-term interest rates by the Federal Reserve Board is even less anticipated. We expect the Fund's short-term borrowing costs to stay near current levels for the remainder of this year and into 2003. However, should the spread between short-term and long-term interest rates narrow, the benefits of leverage will decline and, as a result, reduce the yield on the Fund's Common Stock. (For a more complete explanation of the benefits and risks of leveraging, see page 1 of this report to shareholders.) In Conclusion We appreciate your interest in MuniYield Fund, Inc., and we look forward to serving your investment needs in the months and years ahead. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director (Kenneth A. Jacob) Kenneth A. Jacob Senior Vice President (John M. Loffredo) John M. Loffredo Senior Vice President (Roberto Roffo) Roberto Roffo Vice President and Portfolio Manager December 6, 2002 MANAGED DIVIDEND POLICY The Fund's dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more consistent yield to the current trading price of shares of Common Stock of the Fund, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Fund for any particular month may be more or less than the amount of net investment income earned by the Fund during such month. The Fund's current accumulated but undistributed net investment income, if any, is disclosed in the Statement of Net Assets, which comprises part of the Financial Information included in this report. SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Issue Value Alabama--0.0% A1 VMIG1++ $ 100 Columbia, Alabama, IDB, PCR, Refunding (Alabama Power Company Project), VRDN, Series E, 2% due 10/01/2022 (m) $ 100 Alaska--0.9% NR* Baa2 5,050 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 5,067 Arizona--5.4% AAA Aaa 1,460 Arizona State Wastewater Management Authority, Wastewater Treatment Financial Assistance Revenue Bonds, Series A, 5.60% due 7/01/2006 (b)(c) 1,654 Maricopa County, Arizona, IDA, M/F Housing Revenue Refunding Bonds (CRS Pine Ridge Housing Corporation), Series A-1 (g): AAA NR* 5,000 6% due 10/20/2031 5,562 AAA NR* 5,000 6.05% due 10/20/2036 5,575 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines Inc. Project), AMT: NR* Caa2 8,300 6.25% due 6/01/2019 3,009 NR* Caa2 6,900 6.30% due 4/01/2023 2,501 Phoenix, Arizona, IDA, M/F Housing Revenue Bonds (Bay Club Apartments Project)(g): AAA NR* 565 5.80% due 11/20/2021 619 AAA NR* 915 5.90% due 11/20/2031 1,006 AAA NR* 1,270 5.95% due 11/20/2036 1,400 Phoenix, Arizona, IDA, M/F Housing Revenue Bonds (Summit Apartments LLC Project)(g): AAA NR* 1,610 6.25% due 7/20/2022 1,798 AAA NR* 1,425 6.45% due 7/20/2032 1,621 AAA NR* 1,305 6.55% due 7/20/2037 1,492 Pima County, Arizona, IDA, M/F Housing Revenue Bonds (Columbus Village), Series A (g): AAA NR* 1,000 5.90% due 10/20/2021 1,106 AAA NR* 1,745 6% due 10/20/2031 1,941 AAA NR* 2,320 6.05% due 10/20/2041 2,582 California-- NR* A1 2,000 California County, California, Tobacco Securitization Agency, 5.0% Tobacco Revenue Bonds (Alameda County), 6% due 6/01/2042 1,973 A+ A1 15,000 California State, GO, Refunding, 5% due 10/01/2032 14,868
Portfolio Abbreviations To simplify the listings of MuniYield Fund, Inc.'s portfolio holdings in the Schedule of Investments, we have abbreviated the names of many of the securities according to the list below and at right. AMT Alternative Minimum Tax (subject to) COP Certificates of Participation DRIVERS Derivative Inverse Tax-Exempt Receipts EDA Economic Development Authority GO General Obligation Bonds HFA Housing Finance Agency IDA Industrial Development Authority IDB Industrial Development Board IDR Industrial Development Revenue Bonds INFLOS Inverse Floating Rate Municipal Bonds M/F Multi-Family PCR Pollution Control Revenue Bonds RIB Residual Interest Bonds RITR Residual Interest Trust Receipts S/F Single-Family VRDN Variable Rate Demand Notes MuniYield Fund, Inc., October 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Issue Value California Los Angeles County, California, Schools Regionalized Business (concluded) Services, COP (County Schools Pooled Financing Program), Series B (c): AAA Aaa $ 3,000 5% due 9/01/2022 $ 3,001 AAA Aaa 4,740 5.125% due 9/01/2027 4,742 AAA Aaa 2,500 5.125% due 9/01/2031 2,501 Los Angeles County, California, Schools Regionalized Business Services, COP, Pooled Financing, Series A (c): AAA Aaa 1,430 5.90%** due 8/01/2019 613 AAA Aaa 2,510 6%** due 8/01/2029 594 AA Aa3 1,250 Sacramento County, California, Sanitation District Financing Authority, Revenue Refunding Bonds, Trust Receipts, Class R, Series A, 9.889% due 12/01/2019 (k) 1,522 Colorado--7.8% Broomfield, Colorado, COP (Open Space Park and Recreational Facilities)(c): NR* Aaa 4,430 5.75% due 12/01/2014 4,997 NR* Aaa 4,680 5.75% due 12/01/2015 5,244 AA Aa2 1,365 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT, Series D-2, 6.90% due 4/01/2029 1,495 Colorado Health Facilities Authority, Health Facilities Revenue Bonds (National Benevolent Association): NR* Baa3 1,000 Series A, 6.375% due 9/01/2029 868 NR* Baa3 600 Series C, 7% due 3/01/2019 581 NR* Baa3 750 Series C, 7% due 3/01/2024 708 NR* Baa3 1,125 Series C, 7.125% due 3/01/2030 1,077 AAA NR* 8,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D, 7.75% due 11/15/2013 (c) 10,067 NR* Baa2 6,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Pavilions), AMT, 7.75% due 9/01/2016 6,942 Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee), Series A: NR* NR* 1,735 7.10% due 9/01/2014 1,749 NR* NR* 5,065 7.35% due 9/01/2031 5,106 A1+ VMIG1++ 5,100 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN, 1.90% due 5/01/2013 (c)(m) 5,100 BB+ Ba1 2,000 Northwest Parkway, Colorado, Public Highway Authority Revenue Bonds, First Tier, Sub-Series D, 7.125% due 6/15/2041 2,068 Connecticut-- NR* NR* 700 Connecticut State Development Authority, IDR (AFCO Cargo 2.8% BDL-LLC Project), AMT, 7.35% due 4/01/2010 692 AAA Aaa 12,000 Connecticut State, HFA, Revenue Refunding Bonds (Housing Mortgage Finance Program), Series F, Sub-Series F-1, 6% due 5/15/2017 (o) 12,853 NR* Aaa 2,175 Connecticut State Special Tax Obligation Revenue Bonds, RIB, Series 372, 9.923% due 12/01/2017 (h)(k) 2,781 Florida--5.1% NR* NR* 1,760 Bonnet Creek Resort, Florida, Community Development District, Special Assessment Revenue Bonds, 7.50% due 5/01/2034 1,771 AAA Aaa 2,755 Broward County, Florida, Airport System Revenue Bonds, AMT, Series J-1, 5.75% due 10/01/2018 (c) 2,980 Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National Gypsum), AMT: NR* NR* 11,500 Series A, 7.125% due 4/01/2030 11,342 NR* NR* 5,000 Series B, 7.125% due 4/01/2030 4,931 AAA Aaa 8,700 Pinellas County, Florida, Housing Authority, Housing Revenue Bonds (Affordable Housing Program), 4.60% due 12/01/2010 (i) 9,249 Georgia--3.6% AAA Aaa 12,140 Atlanta, Georgia, Airport Revenue Refunding Bonds, Series A, 5.875% due 1/01/2016 (h) 13,445 NR* NR* 4,600 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station Project), 7.90% due 12/01/2024 4,699 AAA Aa2 3,250 Georgia State, HFA, S/F Mortgage Revenue Refunding Bonds, Series A, Sub-Series A-1, 6.125% due 12/01/2015 (d) 3,361 Idaho--1.3% AA NR* 1,585 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT, Senior Series C-2, 7.15% due 7/01/2023 1,607 BB+ Ba3 7,150 Power County, Idaho, Industrial Development Corporation, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45% due 8/01/2032 6,071 Illinois--5.0% NR* B2 835 Beardstown, Illinois, IDR (Jefferson Smurfit Corp. Project), 8% due 10/01/2016 854 NR* Aaa 1,085 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series B, 7.625% due 9/01/2027 (f)(g)(l) 1,172 B+ B1 2,750 Illinois Development Finance Authority, PCR, Refunding (Illinois Power Company Project), Series A, 7.375% due 7/01/2006 (b) 3,273 AAA Aaa 3,285 Illinois Development Finance Authority Revenue Bonds (Presbyterian Home Lake Project), Series B, 6.30% due 9/01/2022 (i) 3,632 BBB Baa3 2,540 Illinois Development Finance Authority, Revenue Refunding Bonds (Olin Corporation Project), Series D, 6.75% due 3/01/2016 2,681 NR* NR* 2,500 Illinois Educational Facilities Authority, Revenue Refunding Bonds (Chicago Osteopathic Health System), 7.25% due 11/15/2019 (b) 2,626 NR* Ba3 1,250 Illinois Health Facilities Authority Revenue Bonds (Holy Cross Hospital Project), 6.70% due 3/01/2014 958 AAA Aaa 4,000 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax Revenue Bonds (McCormick Place Expansion), Series A, 5.50% due 6/15/2023 (e) 4,220 AAA Aaa 8,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue Bonds (McCormick Place Convention Center), 7% due 7/01/2026 (a) 10,364 Kansas--0.2% BB+ NR* 1,250 Lenexa, Kansas, Health Care Facility Revenue Bonds (Lakeview Village Inc.), Series C, 6.875% due 5/15/2032 1,262 Kentucky--0.7% BBB Baa2 4,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,173 Louisiana-- BBB Baa3 3,010 Calcasieu Parish, Louisiana, IDB, IDR, Refunding (Olin 4.5% Corporation Project), 6.625% due 2/01/2016 3,167 BB- NR* 24,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project), 6.50% due 1/01/2017 23,357 Maryland--1.4% NR* NR* 3,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 3,020 A Baa1 5,000 Maryland State Health and Higher Educational Facilities Authority, Revenue Refunding Bonds (University of Maryland Medical System), 6% due 7/01/2032 5,269
MuniYield Fund, Inc., October 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Issue Value Massachusetts-- A1+ VMIG1++ $ 1,000 Massachusetts State Health and Educational Facilities 0.2% Authority, Revenue Refunding Bonds (Capital Asset Program), VRDN, Series C, 1.65% due 7/01/2010 (e)(m) $ 1,000 Michigan--0.5% AAA Aaa 3,100 Michigan State Hospital Finance Authority, Revenue Refunding Bonds, INFLOS, 10.865% due 2/15/2022 (i)(k) 3,240 Minnesota-- Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling 2.1% Hills Project), Series A (g): NR* Aa2 420 6% due 8/20/2021 458 NR* Aa2 2,000 6.20% due 2/20/2043 2,205 NR* Aa2 1,000 Minneapolis, Minnesota, M/F Housing Revenue Bonds (Gaar Scott Loft Project), AMT, 5.95% due 5/01/2030 1,054 Saint Paul, Minnesota, Port Authority, Office Building Lease Revenue Bonds: AA+ Aa1 3,885 5% due 12/01/2022 3,888 AA+ Aa1 5,000 5.25% due 12/01/2027 5,084 Mississippi-- BBB Baa2 10,000 Lowndes County, Mississippi, Solid Waste Disposal and PCR, 1.9% Refunding (Weyerhaeuser Company Project), Series A, 6.80% due 4/01/2022 11,218 Missouri--1.1% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds (Gravois Bluffs): NR* NR* 1,420 6.75% due 10/01/2015 1,457 NR* NR* 2,800 7% due 10/01/2021 2,934 AAA NR* 2,020 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds, Homeownership, AMT, Series B, 7.55% due 9/01/2027 (f)(g) 2,116 New Jersey-- NR* NR* 3,000 New Jersey EDA, First Mortgage Revenue Bonds (The 13.9% Presbyterian Home), Series A, 6.375% due 11/01/2031 3,015 NR* NR* 3,300 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village Inc. Facility), Series A, 7.25% due 11/15/2031 3,281 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT: B+ B3 3,905 6.25% due 9/15/2019 2,169 B+ B3 8,595 6.25% due 9/15/2029 4,352 AAA Aaa 4,450 New Jersey EDA, Water Facilities Revenue Bonds (New Jersey American Water Company Inc. Project), AMT, 6.50% due 4/01/2022 (h) 4,552 A- A2 19,640 New Jersey State Transit Corporation, COP (Federal Transit Administration Grants), Series B, 5.75% due 9/15/2014 21,865 AAA NR* 4,360 Port Authority of New York and New Jersey Revenue Refunding Bonds, DRIVERS, AMT, Series 177, 9.88% due 10/15/2032 (e)(k) 5,146 AAA NR* 20,575 Port Authority of New York and New Jersey, Special Obligation Revenue Bonds, DRIVERS, AMT, Series 192, 9.37% due 12/01/2025 (e)(k) 23,307 Tobacco Settlement Financing Corporation of New Jersey, Asset Backed Revenue Refunding Bonds: A A1 10,000 5.75% due 6/01/2032 9,523 A A1 5,000 6% due 6/01/2037 4,756 New York-- AAA Aaa 1,865 Dutchess County, New York, Resource Recovery Agency Revenue 26.2% Bonds (Solid Waste System), Series A, 5.25% due 1/01/2011 (e) 2,087 NR* Aaa 5,595 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Bonds, RITR, Series 9, 10.87% due 7/01/2006 (b)(h)(k) 7,279 A A2 40,000 Metropolitan Transportation Authority, New York, Revenue Refunding Bonds, Series A, 5.75% due 11/15/2032 43,097 BBB+ A3 11,200 New York City, New York, City IDA, Special Facilities Revenue Bonds (Terminal One Group Association Project), AMT, 6.125% due 1/01/2024 11,505 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds (k): AAA NR* 5,000 DRIVERS, Series 198, 9.35% due 6/15/2026 (e) 5,883 NR* Aaa 3,000 RITR, Series 11, 10.22% due 6/15/2026 (i) 3,743 AA Aa2 25,890 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Refunding Bonds, 5.50% due 6/15/2033 27,343 New York City, New York, GO, Refunding, Series G: AAA Aaa 1,825 5.50% due 8/01/2012 (q) 2,058 AAA Aaa 2,090 5.75% due 2/01/2014 (e) 2,291 AAA Aaa 2,000 5.75% due 2/01/2014 (h) 2,192 AAA Aaa 10,000 New York City, New York, GO, Refunding, Trust Receipts, Series R, 10.627% due 5/15/2014 (h)(k) 13,563 AA- A3 11,100 New York State Dormitory Authority, Revenue Refunding Bonds, Series B, 5.25% due 11/15/2023 12,127 AAA Aaa 7,500 New York State Dormitory Authority, State University Educational Facilities Revenue Refunding Bonds, Series 1989, 6% due 5/15/2015 (e) 8,608 AA NR* 10,000 New York State Urban Development Corporation, Personal Income Tax Revenue Bonds (State Facilities), Series A, 5.50% due 3/15/2032 10,554 NR* Baa3 2,475 Onondaga County, New York, IDA Revenue Bonds (Air Cargo), AMT, 6.125% due 1/01/2032 2,390 North BBB Baa3 4,750 North Carolina Eastern Municipal Power Agency, Power System Carolina--1.5% Revenue Bonds, Series D, 6.75% due 1/01/2026 5,112 AA Aa2 950 North Carolina, HFA, Home Ownership Revenue Bonds, AMT, Series 8-A, 6.20% due 7/01/2016 995 AA Aa2 1,510 North Carolina, HFA, S/F Revenue Bonds, Series II, 6.20% due 3/01/2016 (d) 1,599 NR* NR* 1,000 North Carolina Medical Care Commission, Health Care Facilities, First Mortgage Revenue Bonds (Arbor Acres Community Project), 6.375% due 3/01/2032 1,006 Ohio--1.4% Cuyahoga County, Ohio, Mortgage Revenue Bonds (West Tech Apartments Project), AMT (g): NR* Aaa 1,410 5.75% due 9/20/2020 1,467 NR* Aaa 2,250 5.85% due 9/20/2030 2,340 NR* NR* 2,175 Lucas County, Ohio, Health Care Facility Revenue Refunding and Improvement Bonds (Sunset Retirement Communities), Series A, 6.625% due 8/15/2030 2,267 NR* Aaa 1,120 Mad River, Ohio, Local School District, GO, Refunding (Classroom Facilities), 5.75% due 12/01/2019 (h) 1,248 NR* Aaa 1,000 Montgomery County, Ohio, Water System Revenue Refunding Bonds (Greater Moraine Beaver), 5.375% due 11/15/2015 (c) 1,104 Oklahoma--1.1% Holdenville, Oklahoma, Industrial Authority, Correctional Facility Revenue Bonds (b)(j): AAA NR* 1,650 6.60% due 7/01/2006 1,912 AAA NR* 3,250 6.70% due 7/01/2006 3,771
MuniYield Fund, Inc., October 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Issue Value Oklahoma A1+ VMIG1++ $ 600 Oklahoma State Industries Authority Revenue Refunding (concluded) Bonds (Integris Baptist), VRDN, Series B, 1.95% due 8/15/2029 (e)(m) $ 600 Oregon--3.9% AAA Aaa 7,905 Oregon State Department of Administrative Services, COP, Series A, 6% due 5/01/2010 (b)(c) 9,294 AA Aa2 6,635 Oregon State, GO, Refunding (Veterans Welfare), Series 80A, 5.70% due 10/01/2032 7,071 Portland, Oregon, Housing Authority, Housing Revenue Bonds (Pine Square and University Place): NR* NR* 1,830 Series A, 5.875% due 1/01/2022 1,798 NR* NR* 3,580 Series A, 6% due 1/01/2032 3,505 NR* NR* 1,120 Series B, 5.90% due 1/01/2032 1,100 Pennsylvania-- AAA Aaa 5,000 Lehigh County, Pennsylvania, IDA, PCR, Refunding 14.1% (Pennsylvania Power and Light Company Project), Series B, 6.40% due 9/01/2029 (e) 5,455 AAA Aaa 9,675 Pennsylvania Convention Center Revenue Refunding Bonds, Series A, 6.70% due 9/01/2014 (e) 10,684 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds (National Gypsum Company), AMT: NR* NR* 16,350 Series A, 6.25% due 11/01/2027 14,492 NR* NR* 8,800 Series B, 6.125% due 11/01/2027 7,674 AA+ Aa2 1,660 Pennsylvania HFA, S/F Mortgage Refunding Bonds, AMT, Series 42, 6.85% due 4/01/2025 1,730 AAA Aaa 16,270 Pennsylvania State Higher Educational Facilities Authority, Health Services Revenue Refunding Bonds (Allegheny Delaware Valley Obligation), Series C, 5.875% due 11/15/2016 (e) 17,713 NR* NR* 1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial Development, AMT, 7.75% due 12/01/2017 1,301 Philadelphia, Pennsylvania, Authority for IDR, Refunding, Commercial Development: NR* NR* 3,650 (Days Inn), Series B, 6.50% due 10/01/2027 3,632 NR* NR* 4,000 (Doubletree), Series A, 6.50% due 10/01/2027 3,950 AAA Aaa 10,965 Philadelphia, Pennsylvania, School District, GO, Series A, 5.50% due 2/01/2031 (i) 11,474 A- NR* 5,000 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds (Guthrie Health Issue), Series B, 1%/7.125% due 12/01/2031 (r) 5,196 Rhode Island-- Woonsocket, Rhode Island, GO (h): 0.5% NR* Aaa 1,225 6% due 10/01/2017 1,399 NR* Aaa 1,195 6% due 10/01/2018 1,356 South AAA Aaa 1,000 Fairfield County, South Carolina, PCR (South Carolina Carolina--0.2% Electric and Gas), 6.50% due 9/01/2014 (e) 1,034 South BBB+ Baa2 900 South Dakota State Health and Educational Facilities Dakota--0.2% Authority Revenue Refunding Bonds (Prairie Lakes), 7.25% due 4/01/2022 922 Tennessee-- NR* NR* 4,610 Hardeman County, Tennessee, Correctional Facilities 0.9% Corporation Revenue Bonds, 7.75% due 8/01/2017 4,614 NR* VMIG1++ 585 Sevier County, Tennessee, Public Building Authority Revenue Bonds, Local Government Public Improvement, VRDN, Series IV-1, 1.95% due 6/01/2023 (i)(m) 585 Texas--15.3% Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First Tier, Series A: BBB- Baa3 6,000 6.70% due 1/01/2028 6,143 BBB- Baa3 5,000 6.70% due 1/01/2032 5,145 A1+ VMIG1++ 600 Bell County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Scott & White Memorial Hospital), VRDN, Series 2001-2, 1.95% due 8/15/2031 (e)(m) 600 Bexar County, Texas, Housing Finance Corporation, M/F Housing Revenue Bonds (Water at Northern Hills Apartments), Series A (e): NR* Aaa 1,300 5.80% due 8/01/2021 1,384 NR* Aaa 2,460 6% due 8/01/2031 2,643 NR* Aaa 1,000 6.05% due 8/01/2036 1,077 Dallas-Fort Worth, Texas, International Airport Facility, Improvement Corporation Revenue Refunding Bonds (American Airlines), AMT: BB- B2 3,500 Series A, 5.95% due 5/01/2029 2,922 BB- B2 15,860 Series B, 6.05% due 5/01/2029 7,771 Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Good Shepherd Medical Center Project): AA Baa2 3,000 6.875% due 10/01/2020 3,456 AA Baa2 2,000 6.375% due 10/01/2025 2,207 AA- Aa3 5,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste Disposal Facility Revenue Bonds (E.I. du Pont de Nemours and Company Project), AMT, 6.40% due 4/01/2026 5,339 NR* Baa2 3,900 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 7.50% due 5/01/2025 3,844 NR* Baa3 1,600 Houston, Texas, Industrial Development Corporation Revenue Bonds (Air Cargo), AMT, 6.375% due 1/01/2023 1,546 Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT: BBB+ Baa1 6,200 6.375% due 4/01/2027 6,338 BBB+ Baa1 6,000 6.95% due 4/01/2030 6,392 BBB Baa2 10,280 Sabine River Authority, Texas, PCR, Refunding (TXU Electric Company Project), Series C, 4% due 5/01/2028 9,972 San Antonio, Texas, Water Revenue Refunding Bonds: AA- Aa3 1,000 5.875% due 5/15/2016 1,122 AA- Aa3 1,000 5.875% due 5/15/2017 1,121 Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First Tier, Series A (c): AAA Aaa 6,500 5.50% due 8/15/2039 6,802 AAA Aaa 6,875 5.25% due 8/15/2042 7,012 AAA Aaa 7,020 Tyler, Texas, Waterworks and Sewer Revenue Bonds, 5.70% due 9/01/2030 (h) 7,434 Utah--0.3% NR* NR* 1,000 Tooele County, Utah, PCR, Refunding (Laidlaw Environmental), AMT, Series A, 7.55% due 7/01/2027 (n) 0 AAA Aaa 1,545 Utah State Board of Regents Revenue Refunding Bonds (University of Utah Research Facilities), Series A, 5.50% due 4/01/2018 (e) 1,653 Virginia-- BBB NR* 5,000 Amelia County, Virginia, IDA, Solid Waste Disposal Revenue 2.5% Refunding Bonds (Waste Management Project), AMT, 4.90% due 4/01/2027 5,097 AAA Aaa 5,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding Bonds, AMT, Series A, 6.10% due 2/01/2011 (c) 5,736
MuniYield Fund, Inc., October 31, 2002 SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Issue Value Virginia NR* NR* $ 1,000 Pittsylvania County, Virginia, IDA Revenue Refunding Bonds, (concluded) Exempt-Facility, AMT, Series A, 7.55% due 1/01/2019 $ 984 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds: NR* Ba1 6,200 First Tier, Sub-Series C, 6.25%** due 8/15/2031 349 BBB- NR* 24,800 Senior Series B, 6.67%** due 8/15/2029 2,667 Washington-- A A1 10,000 Tobacco Settlement Authority, Washington, Tobacco Settlement 2.0% Revenue Bonds, 6.625% due 6/01/2032 9,865 Vancouver, Washington, Housing Authority, Housing Revenue Bonds (Teal Pointe Apartments Project), AMT: NR* NR* 945 6% due 9/01/2022 930 NR* NR* 1,250 6.20% due 9/01/2032 1,227 West B+ Ba3 1,000 Princeton, West Virginia, Hospital Revenue Refunding Bonds Virginia--0.7% (Community Hospital Association Inc. Project), 6% due 5/01/2019 802 BBB Baa2 3,000 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 7/15/2025 3,133 Wisconsin-- NR* Baa3 700 Milwaukee, Wisconsin, Revenue Bonds (Air Cargo), AMT, 6.50% 0.6% due 1/01/2025 681 AAA Aaa 2,600 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (e) 2,876 Wyoming--1.0% BB+ Ba3 3,525 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, Series A, 7% due 6/01/2024 3,231 AA NR* 2,500 Wyoming Student Loan Corporation, Student Loan Revenue Refunding Bonds, Series A, 6.20% due 6/01/2024 2,637 Puerto A A1 15,000 Children's Trust Fund, Puerto Rico, Tobacco Settlement Rico--12.9% Revenue Refunding Bonds, 5.50% due 5/15/2039 14,408 Puerto Rico Commonwealth, Highway and Transportation Authority, Transportation Revenue Bonds: A Baa1 18,000 Series D, 5.75% due 7/01/2041 19,658 AAA Aaa 15,000 Trust Receipts, Class R, Series B, 9.678% due 7/01/2035 (e)(k) 18,418 AAA Aaa 2,500 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R, Series 16 HH, 9.308% due 7/01/2013 (i)(k) 3,311 Puerto Rico Public Buildings Authority, Government Facilities Revenue Refunding Bonds: A- Baa1 5,425 Series F, 5.25% due 7/01/2023 5,634 A- Baa1 6,535 Series F, 5.25% due 7/01/2025 6,773 A- Baa1 3,000 Series G, 5% due 7/01/2026 2,983 NR* Aa2 4,350 Puerto Rico Public Finance Corporation Revenue Bonds, DRIVERS, Series 272, 8.63% due 8/01/2030 (k) 5,024 Total Municipal Bonds (Cost--$857,945)--148.7% 877,746 Shares Held Common Stock 224 Horizon Natural Resources Co. (p) 7 12 Merrill Lynch Institutional Tax-Exempt Fund++++ 12 Total Common Stock (Cost--$2,474)--0.0% 19 Total Investments (Cost--$860,419)--148.7% 877,765 Unrealized Depreciation on Forward Interest Rate Swap--(0.1%) (575) Variation Margin on Financial Futures Contracts***--(0.0%) (199) Other Assets Less Liabilities--1.1% 6,186 Preferred Stock, at Redemption Value--(49.7%) (293,076) --------- Net Assets Applicable to Common Stock--100.0% $ 590,101 ========= (a)Escrowed to maturity. (b)Prerefunded. (c)AMBAC Insured. (d)FHA Insured. (e)MBIA Insured. (f)FNMA Collateralized. (g)GNMA Collateralized. (h)FGIC Insured. (i)FSA Insured. (j)Connie Lee Insured. (k)The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate in effect at October 31, 2002. (l)FHLMC Collateralized. (m)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, 2002. (n)Non-income producing security. (o)All or a portion of security held as collateral in connection with open financial futures contracts. (p)Represents entitlement received from a bankruptcy exchange for Peninsula Ports. (q)XL Capital Insured. (r)Represents a step bond. The first interest rate is in effect until a predetermined date and the second interest rate is effective thereafter until maturity. *Not Rated. **Represents a zero coupon bond; the interest rate shown reflects the effective yield at the time of purchase by the Fund. ***Financial futures contracts sold as of October 31, 2002 were as follows: (in Thousands) Number of Expiration Contracts Issue Date Value 440 U.S. Treasury Bonds December 2002 $ 50,476 ----------- Total Financial Futures Contracts Sold (Total Contract Price--$48,702) $ 50,476 =========== ++Highest short-term rating by Moody's Investors Services, Inc. ++++Investments in companies considered to be an affiliate of the Fund (such companies are defined as "Affiliated Companies" in Section 2 (a)(3) of the Investment Company Act of 1940) are as follows: (in Thousands) Net Share Net Dividend Affiliate Activity Cost Income Merrill Lynch Institutional Tax-Exempt Fund 12 $12 $12 +++Ratings of issues shown are unaudited. See Notes to Financial Statements.
Quality Profile (unaudited) The quality ratings of securities in the Fund as of October 31, 2002 were as follows: Percent of S&P Rating/Moody's Rating Total Investments AAA/Aaa 38.4% AA/Aa 11.4 A/A 20.2 BBB/Baa 10.9 BB/Ba 4.4 B/B 2.4 CCC/Caa 0.6 NR (Not Rated) 10.8 Other* 0.9 *Temporary investments in short-term municipal securities. MuniYield Fund, Inc., October 31, 2002 STATEMENT OF NET ASSETS
As of October 31, 2002 Assets: Investments, at value (identified cost--$860,418,630) $ 877,765,370 Cash 84,179 Receivables: Interest $ 14,620,497 Securities sold 11,056,198 25,676,695 ------------- Prepaid expenses 65,883 ------------- Total assets 903,592,127 ------------- Liabilities: Unrealized depreciation on forward interest rate swap 575,108 Payables: Securities purchased 18,580,685 Dividends to Common Stock shareholders 569,409 Investment adviser 391,233 Variation margin 199,375 19,740,702 ------------- Accrued expenses 98,745 ------------- Total liabilities 20,414,555 ------------- Preferred Stock: Preferred Stock, par value $.05 per share (1,800 Series A shares, 1,800 Series B shares, 1,800 Series C shares, 1,800 Series D shares, 2,800 Series E shares and 1,720 Series F shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) 293,076,446 ------------- Net Assets Net assets applicable to Common Stock $ 590,101,126 Applicable To ============= Common Stock: Analysis of Net Common Stock, par value $.10 per share (44,430,631 shares Assets Applicable issued and outstanding) $ 4,443,063 to Common Stock: Paid-in capital in excess of par 632,817,001 Undistributed investment income--net $ 8,945,048 Accumulated realized capital losses on investments--net (71,101,868) Unrealized appreciation on investments--net 14,997,882 ------------- Total accumulated losses--net (47,158,938) ------------- Total--Equivalent to $13.28 net asset value per share of Common Stock (market price--$12.88) $ 590,101,126 ============= *Auction Market Preferred Stock. See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2002 Investment Interest $ 52,802,439 Income: Dividends 12,469 ------------- Total income 52,814,908 ------------- Expenses: Investment advisory fees $ 4,395,305 Commission fees 749,785 Accounting services 270,785 Transfer agent fees 111,197 Professional fees 91,286 Printing and shareholder reports 68,827 Custodian fees 49,706 Directors' fees and expenses 43,698 Pricing fees 32,145 Listing fees 31,066 Other 75,905 ------------- Total expenses before reimbursement 5,919,705 Reimbursement of expenses (2,056) ------------- Total expenses after reimbursement 5,917,649 ------------- Investment income--net 46,897,259 ------------- Realized & Realized loss on investments--net (3,498,012) Unrealized Change in unrealized appreciation/depreciation on investments--net (9,783,800) Loss on ------------- Investments--Net: Total realized and unrealized loss on investments--net (13,281,812) ------------- Dividends to Investment income--net (4,354,062) Preferred Stock ------------- Shareholders: Net Increase in Net Assets Resulting from Operations $ 29,261,385 ============= See Notes to Financial Statements.
MuniYield Fund, Inc., October 31, 2002 STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31, Increase (Decrease) in Net Assets: 2002 2001++ Operations: Investment income--net $ 46,897,259 $ 39,687,196 Realized loss on investments--net (3,498,012) (6,837,621) Change in unrealized appreciation/depreciation on investments--net (9,783,800) 26,701,588 Dividends to Preferred Stock shareholders (4,354,062) (8,333,060) ------------- ------------- Net increase in net assets resulting from operations 29,261,385 51,218,103 ------------- ------------- Dividends to Investment income--net (40,283,240) (33,154,288) Common Stock ------------- ------------- Shareholders: Net decrease in net assets resulting from dividends to Common Stock shareholders (40,283,240) (33,154,288) ------------- ------------- Common Stock Proceeds from issuance of Common Stock resulting from reorganization 73,630,647 -- Transactions: Value of shares issued to Common Stock shareholders in reinvestment of dividends 2,755,535 5,311,917 ------------- ------------- Net increase in net assets derived from Common Stock transactions 76,386,182 5,311,917 ------------- ------------- Net Assets Total increase in net assets applicable to Common Stock 65,364,327 23,375,732 Applicable To Beginning of year 524,736,799 501,361,067 Common Stock: ------------- ------------- End of year* $ 590,101,126 $ 524,736,799 ============= ============= *Undistributed investment income--net $ 8,945,048 $ 6,318,376 ============= ============= ++Certain prior year amounts have been reclassified to conform to current year presentation. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived from information provided in the financial statements. For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 Per Share Net asset value, beginning of year $ 13.55 $ 13.08 $ 13.21 $ 16.27 $ 16.09 Operating --------- --------- --------- --------- --------- Performance:++++ Investment income--net 1.04 1.03 1.09 1.12 1.19 Realized and unrealized gain (loss) on investments--net (.31) .52 (.08) (2.34) .49 Dividends and distributions to Preferred Stock shareholders: Investment income--net (.08) (.22) (.27) (.17) (.18) Realized gain on investments--net -- -- -- (.04) (.09) In excess of realized gain on investments--net -- -- -- (.03) -- --------- --------- --------- --------- --------- Total from investment operations .65 1.33 .74 (1.46) 1.41 --------- --------- --------- --------- --------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.92) (.86) (.87) (.95) (.97) Realized gain on investments--net -- -- -- (.38) (.26) In excess of realized gain on investments--net -- -- -- (.27) -- --------- --------- --------- --------- --------- Total dividends and distributions to Common Stock shareholders (.92) (.86) (.87) (1.60) (1.23) --------- --------- --------- --------- --------- Net asset value, end of year $ 13.28 $ 13.55 $ 13.08 $ 13.21 $ 16.27 ========= ========= ========= ========= ========= Market price per share, end of year $ 12.88 $ 13.94 $ 12.625 $ 12.875 $ 16.875 ========= ========= ========= ========= ========= Total Based on market price per share (.94%) 17.79% 5.26% (15.35%) 14.74% Investment ========= ========= ========= ========= ========= Return:* Based on net asset value per share 5.07% 10.51% 6.28% (9.92%) 9.15% ========= ========= ========= ========= ========= Ratios Based on Total expenses, net of reimbursement** 1.01% 1.01% .99% .93% .89% Average Net ========= ========= ========= ========= ========= Assets of Total expenses** 1.01% 1.01% .99% .93% .89% Common Stock: ========= ========= ========= ========= ========= Total investment income--net** 7.97% 7.74% 8.35% 7.42% 7.43% ========= ========= ========= ========= ========= Amount of dividends to Preferred Stock shareholders .74% 1.63% 2.07% 1.11% 1.10% ========= ========= ========= ========= ========= Investment income--net, to Common Stock shareholders 7.23% 6.11% 6.28% 6.31% 6.33% ========= ========= ========= ========= ========= Ratios Based on Total expenses, net of reimbursement .67% .68% .66% .65% .63% Average Net ========= ========= ========= ========= ========= Assets of Total expenses .67% .68% .66% .65% .63% Common & ========= ========= ========= ========= ========= Preferred Total investment income--net 5.33% 5.20% 5.56% 5.17% 5.26% Stock:** ========= ========= ========= ========= ========= Ratios Based on Dividends to Preferred Stock shareholders 1.50% 3.33% 4.12% 2.55% 2.66% Average Net Assets ========= ========= ========= ========= ========= Of Preferred Stock: Supplemental Net assets applicable to Common Stock, Data: end of year (in thousands) $ 590,101 $ 524,737 $ 501,361 $ 506,030 $ 611,222 ========= ========= ========= ========= ========= Preferred Stock outstanding, end of year (in thousands) $ 293,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 ========= ========= ========= ========= ========= Portfolio turnover 104.63% 83.26% 103.44% 78.42% 91.63% ========= ========= ========= ========= ========= Leverage: Asset coverage per $1,000 $ 3,014 $ 3,099 $ 3,005 $ 3,024 $ 3,445 ========= ========= ========= ========= ========= Dividends Series A--Investment income--net $ 346 $ 816 $ 1,052 $ 588 $ 694 Per Share on ========= ========= ========= ========= ========= Preferred Stock Series B--Investment income--net $ 369 $ 864 $ 1,009 $ 595 $ 687 Outstanding: ========= ========= ========= ========= ========= Series C--Investment income--net $ 353 $ 847 $ 1,032 $ 687 $ 643 ========= ========= ========= ========= ========= Series D--Investment income--net $ 504 $ 850 $ 1,035 $ 694 $ 637 ========= ========= ========= ========= ========= Series E--Investment income--net $ 346 $ 805 $ 1,038 $ 627 $ 656 ========= ========= ========= ========= ========= Series F--Investment income--net $ 324++ -- -- -- -- ========= ========= ========= ========= ========= *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 charges. **Do not reflect the effect of dividends to Preferred Stock shareholders. ++Series F was issued on November 19, 2001. ++++Certain prior year amounts have been reclassified to conform to current year presentation. See Notes to Financial Statements.
MuniYield Fund, Inc., October 31, 2002 NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: MuniYield Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non-diversified, closed-end management investment company. The Fund's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. The Fund determines and makes available for publication the net asset value of its Common Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock Exchange under the symbol MYD. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Municipal bonds are traded primarily in the over-the-counter markets and are valued at the most recent bid price or yield equivalent as obtained by the Fund's pricing service from dealers that make markets in such securities. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their closing price as of the close of such exchanges. Options written or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-counter-market, valuation is the last asked price (options written) or the last bid price (options purchased). Securities with remaining maturities of sixty days or less are valued at amortized cost, which approximates market value. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith by or under the direction of the Board of Directors of the Fund, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Fund under the general supervision of the Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio investment strategies to increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than transactions in other types of instruments. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Financial futures contracts--The Fund may purchase or sell financial futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. * Forward interest rate swaps--The Fund is authorized to enter into forward interest rate swaps for the purpose of hedging the interest rate risk on portfolio securities. In a forward interest rate swap, the Fund and the counterparty agree to pay or receive interest on a specified notional contract amount, commencing on a specified future effective date, unless terminated earlier. The value of the agreement is determined by quoted fair values received daily by the Fund from the counterparty. When the agreement is closed, the Fund records a realized gain or loss in an amount equal to the value of the agreement. (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). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $356,434 increase in cost of securities (which, in turn, results in a corresponding $356,434 decrease in net unrealized appreciation and a corresponding $356,434 increase in undistributed net investment income), based on securities held by the Fund as of October 31, 2001. The effect of this change for the year ended October 31, 2002 was to increase net investment income by $171,599, decrease net unrealized appreciation by $212,386 and increase net realized capital losses by $315,647. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. (e) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. (f) Change in financial statement classification for Auction Market Preferred Stock ("AMPS")--In accordance with the provisions of the Financial Accounting Standards Board's Emerging Issues Task Force D-98 ("EITF D-98"), "Classification and Mesurement of Redeemable Securities," effective for the current period, the Fund has reclassified its AMPS outside of permanent equity in the Net Assets section of the Statement of Net Assets. In addition, dividends to Preferred Stock shareholders are now classified as a component of the "Net Increase in Net Assets Resulting from Operations" on the Statements of Operations and Changes in Net Assets and as a component of the "Total from investment operations" in the Financial Highlights. Prior year amounts presented have been reclassified to conform to this period's presentation. The application of EITF D-98 related entirely to presentation and had no impact on net asset value or the allocation of net investment income or net realized capital gains or losses to Common Stock shareholders. (g) Reclassification--Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the current year's permanent book/tax difference of $10,280 has been reclassified between accumulated net realized capital losses and undistributed net investment income. This reclassification has no effect on net assets or net asset value per share. 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 .50% of the Fund's average weekly net assets, including proceeds from the issuance of Preferred Stock. For the year ended October 31, 2002, FAM reimbursed the Fund in the amount of $2,056. For the year ended October 31, 2002, the Fund reimbursed FAM $33,990 for certain accounting services. Certain officers and/or directors of the Fund are officers and/or directors of FAM, PSI, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended October 31, 2002 were $908,206,281 and $884,629,619, respectively. Net realized losses for the year ended October 31, 2002 and net unrealized gains (losses) as of October 31, 2002 were as follows: Unrealized Realized Gains Losses (Losses) Long-term investments $ (569,232) $ 17,346,740 Financial futures contracts (2,928,780) (1,773,750) Forward interest rate swap -- (575,108) ------------- ------------- Total $ (3,498,012) $ 14,997,882 ============= ============= The Fund has entered into the following forward interest rate swap as of October 31, 2002: Interest Received Interest Paid ----------------- ------------- Notional Current Current Expiration Amount Rate Type Rate Type Date $48,800,000 NA* Variable** 4.44% Fixed 1/18/2023 *Initial interest rate will be determined on effective date January 18, 2003. **7-Day Bond Market Association rate at quarterly reset date. MuniYield Fund, Inc., October 31, 2002 NOTES TO FINANCIAL STATEMENTS (concluded) As of October 31, 2002, net unrealized appreciation for Federal income tax purposes aggregated $17,538,646, of which $43,937,309 related to appreciated securities and $26,398,663 related to depreciated securities. The aggregate cost of investments at October 31, 2002 for Federal income tax purposes was $860,226,724. 4. Stock Transactions: The Fund is authorized to issue 200,000,000 shares of stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of stock without approval of the holders of Common Stock. Common Stock Shares issued and outstanding increased by 5,508,830 as a result of issuance of Common Stock from reorganization and 207,485 as a result of dividend reinvestment during the year ended October 31, 2002. Shares issued and outstanding increased by 397,213 as a result of dividend reinvestment during the year ended October 31, 2001, respectively. Preferred Stock AMPS are redeemable shares of Preferred Stock of the Fund, with a par value of $.05 per share and a liquidation preference of $25,000 per share plus accrued and unpaid dividends, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at October 31, 2002 were as follows: Series A, 1.45%; Series B, 1.44%; Series C, 1.41%, Series D, 1.849%, Series E, 1.76% and Series F, 1.55%. Shares issued and outstanding during the year ended October 31, 2002 increased by 1,720 as a result of issuance of Preferred Stock from reorganization and during the year ended October 31, 2001 remained constant. The Fund pays commissions to certain broker-dealers at the end of each auction at an annual rate ranging from .25% to .375%, calculated on the proceeds of each auction. For the year ended October 31, 2002, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $404,541 as commissions. 5. Distributions to Shareholders: On November 7, 2002, a tax-exempt income dividend of $.078000 was declared. The dividend was paid on November 27, 2002, to shareholders of record on November 14, 2002. The tax character of distributions paid during the fiscal years ended October 31, 2002 and October 31, 2001 was as follows: 10/31/2002 10/31/2001 Distributions paid from: Tax-exempt income $ 44,637,302 $ 41,487,348 ------------ ------------ Total distributions $ 44,637,302 $ 41,487,348 ============ ============ As of October 31, 2002, the components of accumulated losses on a tax basis were as follows: Undistributed tax-exempt income--net $ 8,732,662 Undistributed long-term capital gains--net -- -------------- Total undistributed earnings--net 8,732,662 Capital loss carryforward (65,766,287)* Unrealized gains--net 9,874,687** -------------- Total accumulated losses--net $ (47,158,938) ============== *On October 31, 2002, the Fund had a net capital loss carryforward of $65,766,287, of which $3,822,310 expires in 2006; $14,903,466 expires in 2007; $40,851,001 expires in 2008; $6,000,235 expires in 2009; and $189,275 expires in 2010. This amount will be available to offset like amounts of any future taxable gains. **The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales, the tax deferral of losses on straddles, the realization for tax purposes of unrealized gains (losses) on certain futures contracts, the difference between book and tax amortization methods for premiums and discounts on fixed income securities and the deferral of post-October capital losses for tax purposes. 6. Reorganization Plan: On November 19, 2001, the Fund acquired all of the net assets of Merrill Lynch Municipal Strategy Fund, Inc. pursuant to a plan of reorganization. The acquisition was accomplished by a tax-free exchange of 8,033,912 common shares and 1,720 AMPS shares of Merrill Lynch Municipal Strategy Fund, Inc. for 5,508,829 common shares and 1,720 AMPS shares of the Fund. Merrill Lynch Municipal Strategy Fund, Inc.'s net assets applicable to Common Stock on that date of $73,630,646, including $777,188 of unrealized depreciation and $12,079,786 of accumulated net realized capital losses, were combined with those of the Fund. The aggregate net assets applicable to Common Stock of the Fund immediately after the acquisition amounted to $590,720,844. FAM paid reorganization costs of $127,215 on behalf of the Fund. In addition, 1,720 shares of AMPS shares of Merrill Lynch Municipal Strategy Fund, Inc. with a redemption value of $43,000,000 were combined with the AMPS shares of the Fund. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, MuniYield Fund, Inc.: We have audited the accompanying statement of net assets, including the schedule of investments, of MuniYield Fund, Inc. as of October 31, 2002, the related statement 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 presented. 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 auditing standards generally accepted in the United States of America. 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, 2002 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Fund, Inc. as of October 31, 2002, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey December 12, 2002 IMPORTANT TAX INFORMATION (unaudited) All of the net investment income distributions paid by MuniYield Fund, Inc. during its taxable year ended October 31, 2002 qualify as tax-exempt interest dividends for Federal income tax purposes. Please retain this information for your records. MuniYield Fund, Inc., October 31, 2002 OFFICERS AND DIRECTORS
Number of Other Portfolios in Director- Position(s) Length Fund Complex ships Held of Time Overseen by Held by Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director Interested Director Terry K. Glenn* President 1999 to Chairman, Americas Region since 2001 and 117 Funds None P.O. Box 9011 and present Executive Vice President since 1983 of 162 Portfolios Princeton, Director and 1991 Fund Asset Management, L.P. ("FAM") and NJ 08543-9011 to present Merrill Lynch Investment Managers, L.P. Age: 62 ("MLIM"); President of Merrill Lynch Mutual Funds since 1999; President of FAM Distributors, Inc. ("FAMD") since 1986 and Director thereof since 1991; Executive Vice President and Director of Princeton Services, Inc. ("Princeton Services") since 1993; President of Princeton Administrators, L.P. since 1988; Director of Financial Data Services, Inc. since 1985. *Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of the Fund based on his positions as Chairman (Americas Region) and Executive Vice President of FAM and MLIM; President of FAMD; Executive Vice President of Princeton Services; and President of Princeton Administrators, L.P. The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board of Directors. Number of Other Portfolios in Director- Position(s) Length Fund Complex ships Held of Time Overseen by Held by Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Director Director Independent Directors James H. Bodurtha Director 1995 to Director and Executive Vice President, 42 Funds None P.O. Box 9011 present The China Business Group, Inc. since 61 Portfolios Princeton, 1996; Chairman of Berkshire Holding NJ 08543-9011 Corporation since 1980. Age: 58 Joe Grills Director 2002 to Member of Committee on Investment of 42 Funds Kimco P.O. Box 9011 present Employee Benefit Assets of the Association 61 Portfolios Realty Princeton, for Financial Professionals since 1986. NJ 08543-9011 Age: 67 Herbert I. London Director 1991 to John M. Olin Professor of Humanities, 42 Funds None P.O. Box 9011 present New York University since 1993. 61 Portfolios Princeton, NJ 08543-9011 Age: 63 Andre F. Perold Director 1991 to George Gund Professor of Finance and 42 Funds None P.O. Box 9011 present Banking, Harvard Business School since 61 Portfolios Princeton, 2000; Finance Area Chair since 1996. NJ 08543-9011 Age: 50 Roberta Cooper Ramo Director 1999 to Shareholder, Modrall, Sperling, Roehl, 42 Funds Cooper's P.O. Box 9011 present Harris & Sisk, P.A. since 1993. 61 Portfolios Inc.; Princeton, ECMC, Inc. NJ 08543-9011 Age: 60 Robert S. Salomon, Jr. Director 2002 to Principal of STI Management since 1994; 42 Funds None P.O. Box 9011 present Director of Rye Country Day School 61 Portfolios Princeton, since 2001. NJ 08543-9011 Age: 66 Melvin R. Seiden Director 2002 to Director, Silbanc Properties, Ltd. 42 Funds None P.O. Box 9011 present (real estate, investment and consulting) 61 Portfolios Princeton, since 1987. NJ 08543-9011 Age: 72 Stephen B. Swensrud Director 2002 to Chairman, Fernwood Advisors since 1996. 42 Funds International P.O. Box 9011 present 61 Portfolios Mobile Princeton, Communi- NJ 08543-9011 cations, Age: 69 Inc. *The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. Position(s) Length Held of Time Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Fund Officers Donald C. Burke Vice 1993 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof P.O. Box 9011 President present since 1999; Senior Vice President and Treasurer of Princeton Services since Princeton, and and 1999 1999; Vice President of FAMD since 1999; Vice President of FAM and MLIM NJ 08543-9011 Treasurer to present from 1990 to 1997; Director of Taxation of MLIM since 1990. Age: 42 Kenneth A. Jacob Senior 2002 to Managing Director of FAM and MLIM since 1997. P.O. Box 9011 Vice present Princeton, President NJ 08543-9011 Age: 51 John M. Loffredo Senior 2002 to Managing Director of FAM and MLIM since 2000 and First Vice President P.O. Box 9011 Vice present from 1997 to 2000. Princeton, President NJ 08543-9011 Age: 38 Roberto W. Roffo Vice 2000 to Vice President of FAM and MLIM since 1996; Portfolio Manager with MLIM P.O. Box 9011 President present since 1992. Princeton, and NJ 08543-9011 Portfolio Age: 36 Manager Alice A. Pellegrino Secretary 1999 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from P.O. Box 9011 present 1999 to 2002; Attorney associated with MLIM since 1997; Associate with Princeton, Kirkpatrick & Lockhart LLP from 1992 to 1997. NJ 08543-9011 Age: 42 *Officers of the Fund serve at the pleasure of the Board of Directors.
Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: The Bank of New York 100 Church Street New York, NY 10286 NYSE Symbol MYD -----END PRIVACY-ENHANCED MESSAGE-----