-----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, GPOXRcxSsfDfQGeUZrNEyMnVywnPXq0kZGOFfILgyURLNuYV4m49Da46sUQS8q1A PMUVnp/qm/Vlo3Y0PsYJ+A== 0000900092-04-000080.txt : 20040629 0000900092-04-000080.hdr.sgml : 20040629 20040629150854 ACCESSION NUMBER: 0000900092-04-000080 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040430 FILED AS OF DATE: 20040629 EFFECTIVENESS DATE: 20040629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIYIELD CALIFORNIA FUND INC CENTRAL INDEX KEY: 0000882152 IRS NUMBER: 223144221 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06499 FILM NUMBER: 04888398 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092822800 MAIL ADDRESS: STREET 1: P O BOX 9066 STREET 2: C/O MERRILL LYNCH ASSET MANAGEMENT CITY: PRINCETON STATE: NJ ZIP: 08543-9011 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA MUNIYIELD FUND INC DATE OF NAME CHANGE: 19600201 N-CSR 1 ml7143.txt MUNIYIELD CALIFORNIA UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6499 Name of Fund: MuniYield California Fund, Inc. Fund Address: P.O. Box 9011 Princeton, NJ 08543-9011 Name and address of agent for service: Terry K. Glenn, President, MuniYield California Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543- 9011 Registrant's telephone number, including area code: (609) 282-2800 Date of fiscal year end: 10/31/04 Date of reporting period: 11/01/03 - 04/30/04 Item 1 - Report to Stockholders (BULL LOGO) Merrill Lynch Investment Managers www.mlim.ml.com MuniYield California Fund, Inc. Semi-Annual Report April 30, 2004 MuniYield California Fund, Inc. seeks to provide shareholders with as high a level of current income exempt from Federal and California income taxes as is consistent with its investment policies and prudent investment management by investing primarily in a portfolio of long-term municipal obligations the interest on which, in the opinion of bond counsel to the issuer, is exempt from Federal and California income taxes. This report, including the financial information herein, is transmitted to shareholders of MuniYield California 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. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863; (2) on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's website at http://www.sec.gov. MuniYield California Fund, Inc. Box 9011 Princeton, NJ 08543-9011 (GO PAPERLESS LOGO) It's Fast, Convenient, & Timely! To sign up today, go to www.icsdelivery.com/live. MuniYield California Fund, Inc. The Benefits and Risks of Leveraging MuniYield California 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, net of dividends to Preferred Stock, 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 on the Common Stock. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pickup on the Common Stock will be reduced or eliminated completely. At the same time, the market value of the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. As a part of its investment strategy, the Fund may invest in certain securities whose potential income return is inversely related to changes in a floating interest rate ("inverse floaters"). In general, income on inverse floaters will decrease when short-term interest rates increase and increase when short-term interest rates decrease. Investments in inverse floaters may be characterized as derivative securities and may subject the Fund to the risks of reduced or eliminated interest payments and losses of invested principal. In addition, inverse floaters have the effect of providing investment leverage and, as a result, the market value of such securities will generally be more volatile than that of fixed- rate, tax-exempt securities. To the extent the Fund invests in inverse floaters, the market value of the Fund's portfolio and the net asset value of the Fund's shares may also be more volatile than if the Fund did not invest in such securities. As of April 30, 2004, the percentage of the Fund's total net assets invested in inverse floaters was 9.88%. 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 CALIFORNIA FUND, INC., APRIL 30, 2004 A Letter From the President Dear Shareholder For the six-month and 12-month periods ended April 30, 2004, the Lehman Brothers Municipal Bond Index posted returns of +1.19% and +2.68%, respectively. Its taxable counterpart, the Lehman Brothers Aggregate Bond Index, had returns of +1.25% and +1.82% for the same periods. Amid considerable month-to-month volatility, tax-exempt bond yields rose over the past year, although not to the same extent as 10-year U.S. Treasury yields. In all, tax-exempt securities continued to be an attractive fixed income investment alternative. As of April month-end, the Federal Reserve Board maintained its accommodative policy stance, although a better-than-expected employment report for the month of March prompted speculation that an interest rate increase could come sooner than many had expected. On April 2, 2004, the good news on the employment front - previously the one dim spot in an otherwise bright economic picture - helped prompt the yield on the 10-year Treasury bond to spike nearly 25 basis points (.25%) from 3.91% to 4.15%. Market watchers continue to monitor the economic data and Federal Reserve Board language for indications of interest rate direction. If economic growth maintains its recent pace and employment figures continue to improve, many believe it is just a matter of time before interest rates move upward. Equity markets, in the meantime, gleaned support from the improving economic environment and provided attractive returns. For the six-month and 12-month periods ended April 30, 2004, the Standard & Poor's 500 Index returned +6.27% and +22.88%, respectively. Significant fiscal and monetary stimulus in 2003, including low interest rates and tax cuts, has opened the door to consumer spending, capital spending, increases in exports and long-awaited job growth. As expected, these developments have led the way to improvements in corporate earnings - a positive for stock markets. The events and efforts of the past year leave us with a much stronger economy today. Of course, markets will always fluctuate, and there are many uncertainties - not the least of which are geopolitical in nature - which can translate into negative market movements. Keeping this in mind, we encourage you to revisit your portfolio and your asset allocation strategy to ensure you are well positioned to take advantage of the opportunities that lie ahead. Importantly, your financial advisor can help you develop a strategy most suitable for your circumstances through all types of market and economic cycles. We thank you for trusting Merrill Lynch Investment Managers with your investment assets, and we look forward to serving you in the months and years ahead. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 A Discussion With Your Fund's Portfolio Manager Given the still uncertain interest rate environment, we maintained a defensive stance throughout the period, seeking to protect the Fund's net asset value and enhance current yield for our shareholders. Describe the recent market environment relative to municipal bonds. For much of the six-month period, a positive economic backdrop helped bond prices to move higher as yields, which typically move opposite of prices, declined. In early April, however, a surprisingly strong monthly employment report triggered fears that the long-accommodative Federal Reserve Board might raise interest rates sooner than many had expected. As a result, bond yields rose (prices fell) sharply for the remainder of the period. At the end of April, long-term U.S. Treasury bond yields had climbed to 5.13%, representing an increase of approximately 15 basis points (.15%) over the past six months. Ten-year U.S. Treasury note yields stood at 4.30% as of period-end, an increase of more than 20 basis points. Tax-exempt bond yields generally mimicked the movement of their taxable counterparts, although volatility in the municipal market was more subdued. Long-term revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, rose just four basis points over the past six months. For the same period, yields on AAA-rated issues maturing in 30 years increased approximately 10 basis points to 4.93% while yields on 10-year, AAA-rated issues rose more than 16 basis points to nearly 4%, according to Municipal Market Data. The more marked increase in 10-year bond yields may be attributed to the fact that recent issuance has been heavily concentrated in the 10-year - 20-year range. The resulting supply imbalance prompted higher intermediate bond yields (and lower prices). Longer-maturity and lower-rated issues continued to benefit from more favorable supply/demand factors and, therefore, have seen less price depreciation. For the six-month period as a whole, municipal bond supply declined approximately 5% compared to the same period a year ago. While investor enthusiasm for stocks has taken some attention away from fixed income markets, overall demand for tax-exempt municipal bonds has remained positive. Recent Federal Reserve Board statistics showed that U.S. household holdings of municipal securities increased by more than $25 billion during the fourth quarter of 2003 to approximately $680 billion. In addition, data from the Investment Company Institute indicates that, in just the first three months of 2004, tax-exempt bond funds have seen net new cash flows of almost $640 million. Describe conditions in the State of California. In March 2004, California voters approved measures authorizing the issuance of up to $15 billion in economic recovery bonds to finance accumulated fiscal-year deficits. At the same time, the State Constitution was amended to provide for the enactment and maintenance of a balanced state budget; the establishment of specific reserve requirements; and restrictions on future deficit-related borrowing. Passage of the propositions mitigated short-term liquidity risks while providing the Legislature with additional time to formulate future budget solutions. Following the approval of these measures, Moody's Investors Service revised the state's credit outlook from negative to stable while Standard & Poor's (S&P) revised the outlook from stable to positive. Moody's and S&P affirmed California's outstanding long- term ratings of Baa1 and BBB, respectively, noting that further credit improvement is contingent on the state's ability to reduce its structural imbalances. The positive developments came as a welcomed change following several months of negative news, highlighted by a $38 billion budget deficit, a gubernatorial recall election in October 2003 and credit downgrades from all three major rating agencies. How did the Fund perform in light of the existing market conditions? For the six-month period ended April 30, 2004, the Common Stock of MuniYield California Fund, Inc. had net annualized yields of 6.56% and 7.14%, based on a period-end per share net asset value of $14.85 and a per share market price of $13.66, respectively, and $.486 per share income dividends. Over the same period, the total investment return on the Fund's Common Stock was +1.22%, based on a change in per share net asset value from $15.17 to $14.85, and assuming reinvestment of $.486 per share ordinary income dividends. For the six-month period ended April 30, 2004, the Fund's Auction Market Preferred Stock (AMPS) had an average yield of 1.03% for Series A, .92% for Series B and .81% for Series C. MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 The Fund's total return, based on net asset value, lagged its comparable Lipper category of California Municipal Debt Funds, which had an average return of +2.41% for the six-month period. (Funds in this Lipper category invest primarily in municipal debt issues exempt from taxation in the State of California.) We have been managing the Fund conservatively, maintaining a shorter duration than many of our peers in order to protect the Fund's net asset value and insulate the portfolio from any spikes in interest rates. During the past six months, the municipal bond market rallied (yields fell as prices rose) more strongly than anticipated, and our strategy temporarily resulted in under-performance relative to our peers. We continue to believe the Fund is positioned to outperform when interest rates eventually rise, a phenomenon we began to see as the period closed. For a description of the Fund's total investment return based on a change in the per share market value of the Fund's Common Stock (as measured by the trading price of the Fund's shares on the New York Stock Exchange), and assuming reinvestment of dividends, please refer to the Financial Highlights section included in this report. As a closed-end fund, the Fund's shares may trade in the secondary market at a premium or discount to the Fund's net asset value. As a result, total investment returns based on changes in the market value of the Fund's Common Stock can vary significantly from total investment return based on changes in the Fund's net asset value. What changes were made to the portfolio during the period? We have been managing the Fund defensively - preparing for an eventual rise in long-term interest rates - for some time. In keeping with this approach, our portfolio duration has been substantially below the industry average. Generally, the lower the duration, the less an investment will fluctuate in value as interest rates move up or down. Although our emphasis on limiting price volatility does result in slight underperformance when interest rates move lower, that trend had already started to reverse dramatically as the period came to a close. We believe the Fund's relative performance will improve meaningfully as market rates continue to rise on expectations that the Federal Reserve Board will raise the Federal Funds target rate sooner than many had anticipated. While seeking to protect the Fund's net asset value, we also have been emphasizing current yield in the portfolio. To that end, our primary focus when making purchases has been on higher-coupon bonds that we believe can deliver a high current accrual. During the period, the Fund's borrowing costs generally remained in the .75% - 1.25% range. These attractive funding levels, in combination with a steep tax-exempt yield curve, generated a significant income benefit to the Fund's Common Stock shareholders. At this point, the Federal Reserve Board appears poised to begin raising short-term interest rates, most likely later in 2004. The increase, however, is expected to be gradual and should not have a material impact on the positive advantage leverage has had on the Fund's Common Stock yield. We expect short-term borrowing costs to remain near current attractive levels for the coming months. 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. At the end of the period, the Fund's leverage amount, due to AMPS, was 30.68% of total assets. (For a more complete explanation of the benefits and risks of leveraging, see page 2 of this report to shareholders.) How would you characterize the Fund's position at the close of the period? In preparation for rising interest rates, the Fund remained defensively positioned at period-end with a shorter-than-average portfolio duration. The Fund also was fully invested at the close of the period. With short-term cash equivalents yielding only about 1%, the performance penalty for holding assets in cash reserves is far too severe. While we are keeping an eye toward adopting a more aggressive stance, we believe such a move is further down the road, perhaps after the Federal Reserve Board has entered a tightening monetary cycle. As interest rates rise, we also intend to address the Fund's call structure. If the market falls far enough, in our estimation, it may be time to extend the average call protection in the Fund, effectively making it a more aggressive portfolio. Finally, credit quality remains an important focus in managing the Fund. Given the recent positive developments in California's finances, we may look to increase the Fund's exposure to state- related credits; that is, California general obligation bonds and other direct obligations backed by the full faith and credit of the state. Walter C. O'Connor Vice President and Portfolio Manager May 7, 2004 MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Schedule of Investments (In Thousands)
S&P Moody's Face Ratings Ratings Amount Municipal Bonds Value California--133.7% ABAG Finance Authority for Nonprofit Corporations, California, Revenue Refunding Bonds: BBB+ NR* $ 2,000 (Episcopal Homes Foundation), COP, 5.125% due 7/01/2018 $ 1,900 BBB NR* 1,730 (Redwood Senior Homes and Services), 6% due 11/15/2022 1,764 AAA Aaa 3,975 Antioch Area Public Facilities Financing Agency, California, Special Tax (Community Facilities District Number 1989-1), 5.70% due 8/01/2022 (a) 4,324 AAA Aaa 4,690 Arcata, California, Joint Powers Financing Authority, Tax Allocation Revenue Refunding Bonds (Community Development Project Loan), Series A, 6% due 8/01/2023 (a) 4,830 AAA Aaa 2,500 Bakersfield, California, COP, Refunding (Convention Center Expansion Project), 5.80% due 4/01/2017 (h) 2,728 AA- Aa2 3,135 California HFA, Home Mortgage Revenue Bonds, Series D, 5.85% due 8/01/2017 3,316 California Health Facilities Financing Authority Revenue Bonds: AAA NR* 5,000 (Kaiser Permanente), RIB, Series 26, 9.59% due 6/01/2022 (f)(j) 5,541 NR* Aa3 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 2,910 A- A3 2,500 (Stanford Hospital and Clinics), Series A, 5% due 11/15/2023 2,442 AAA Aaa 1,490 California Health Facilities Financing Authority, Revenue Refunding Bonds (Pomona Valley Hospital Medical Center), Series A, 5.625% due 7/01/2019 (h) 1,615 California Infrastructure and Economic Development Bank Revenue Bonds: AAA Aaa 2,520 (Asian Museum Foundation of San Francisco), 5.50% due 6/01/2018 (h) 2,734 A- NR* 4,990 (J. David Gladstone Institute Project), 5.50% due 10/01/2022 5,205 BBB+ Baa2 13,000 California Pollution Control Financing Authority, Solid Waste Disposal Revenue Refunding Bonds (Republic Services Inc. Project), AMT, Series C, 5.25% due 6/01/2023 12,925 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Bonds (Mortgage-Backed Securities Program), AMT: NR* Aaa 270 Series A-1, 6.90% due 12/01/2024 (d)(g) 284 AAA NR* 280 Series B, 6.15% due 6/01/2020 (e) 290 California State Department of Veteran Affairs, Home Purpose Revenue Refunding Bonds: AAA Aaa 3,000 Series A, 5.30% due 12/01/2021 (a) 3,116 AA- Aa2 5,970 Series C, 5.875% due 12/01/2015 6,210 AA- Aa2 9,315 Series C, 6.05% due 12/01/2020 9,704 AA- Aa2 2,500 Series C, 6.15% due 12/01/2027 2,605 BBB+ A3 4,500 California State Department of Water Resources, Power Supply Revenue Bonds, Series A, 5.75% due 5/01/2017 4,875 AA Aa3 8,000 California State Department of Water Resources Revenue Bonds (Central Valley Project), 5.25% due 7/01/2022 8,017
Portfolio Abbreviations To simplify the listings of MuniYield California Fund, Inc.'s portfolio holdings in the Schedule of Investments, we have abbreviated the names of many of the securities according to the list at right. AMT Alternative Minimum Tax (subject to) COP Certificates of Participation GO General Obligation Bonds HFA Housing Finance Agency M/F Multi-Family RIB Residual Interest Bonds RITR Residual Interest Trust Receipts S/F Single-Family MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face Ratings Ratings Amount Municipal Bonds Value California (continued) California State, GO, Refunding: BBB Baa1 $ 8,000 5.75% due 5/01/2030 $ 8,286 AA- Baa1 2,785 (Veterans), AMT, Series BJ, 5.70% due 12/01/2032 2,808 California State Public Works Board, Lease Revenue Bonds: AAA Aaa 2,000 (California State University), Series C, 5.40% due 10/01/2022 (h) 2,091 BBB- Aaa 6,800 (Department of Corrections), Series A, 7% due 11/01/2004 (i) 7,133 BBB- Baa2 5,000 (Department of Corrections), Series C, 5.50% due 6/01/2023 5,093 AAA Aaa 6,645 (Department of Health Services), Series A, 5.75% due 11/01/2017 (h) 7,323 AAA Baa2 17,000 (Various Community College Projects), Series A, 5.625% due 3/01/2016 (a) 18,295 California State University and Colleges, Housing System Revenue Refunding Bonds (c): AAA Aaa 3,000 5.75% due 11/01/2015 3,215 AAA Aaa 3,500 5.80% due 11/01/2017 3,754 AAA Aaa 3,900 5.90% due 11/01/2021 4,180 California State, Various Purpose, GO: BBB Aaa 4,730 5.50% due 4/01/2030 4,839 BBB Baa1 6,850 5.50% due 11/01/2033 6,997 AAA Aaa 5,250 California Statewide Communities Development Authority, COP (John Muir/Mount Diablo Health System), 5.125% due 8/15/2022 (h) 5,378 California Statewide Communities Development Authority, Health Facility Revenue Bonds (Memorial Health Services), Series A: A A3 3,270 6% due 10/01/2023 3,462 A A3 3,000 5.50% due 10/01/2033 3,004 AA- A1 5,000 California Statewide Communities Development Authority Revenue Bonds (Sutter Health), Series B, 5.50% due 8/15/2028 5,096 BBB Baa2 2,000 Central California, Joint Powers Health Financing Authority, COP (Community Hospitals of Central California), 6% due 2/01/2020 2,080 AAA Aaa 2,000 Chino Basin, California, Regional Financing Authority Revenue Bonds (Inland Empire Utility Agency Sewer Project), 5.75% due 11/01/2019 (h) 2,220 AAA Aaa 2,705 Contra Costa County, California, Public Financing Lease Revenue Refunding Bonds (Various Capital Facilities), Series A, 5.30% due 8/01/2020 (h) 2,841 AAA Aaa 2,500 Davis, California, Joint Unified School District, Community Facilities District, Special Tax Refunding Bonds, Number 1, 5.50% due 8/15/2021 (h) 2,651 BBB Baa3 5,650 Golden State Tobacco Securitization Corporation of California, Tobacco Settlement Revenue Bonds, Series A-4, 7.80% due 6/01/2042 5,969 NR* Aaa 9,957 Industry, California, Urban Development Agency, Tax Allocation Refunding Bonds, RIB, Series 632-X, 9.66% due 5/01/2021 (h)(j) 11,332 NR* Aaa 2,000 Los Angeles, California, COP (Sonnenblick Del Rio West Los Angeles), 6.20% due 11/01/2031 (a) 2,248 AAA Aaa 10,000 Los Angeles, California, Community College District, GO, Series A, 5.50% due 8/01/2021 (h) 10,705
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face Ratings Ratings Amount Municipal Bonds Value California (continued) Los Angeles, California, Department of Water and Power, Electric Plant Revenue Refunding Bonds: AA- Aaa $ 9,865 6% due 2/15/2005 (i) $ 10,330 NR* Aa3 4,920 RIB, Series 370, 10.61% due 2/15/2024 (j) 5,382 Los Angeles, California, Harbor Department Revenue Bonds, AMT: AA Aa2 2,000 Series B, 6% due 8/01/2015 2,153 AA Aa2 6,000 Series B, 5.375% due 11/01/2023 6,068 AAA Aaa 4,000 RITR, Series RI-7, 10.975% due 11/01/2026 (h)(j) 4,696 AAA Aaa 9,000 Los Angeles, California, Wastewater System Revenue Bonds, Series A, 5% due 6/01/2023 (c) 9,094 AAA Aaa 4,000 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue Bonds (Proposition C), Second Tier, Senior Series A, 5.50% due 7/21/2005 (a)(i) 4,271 AAA Aaa 5,000 Los Angeles County, California, Public Works Financing Authority, Lease Revenue Bonds (Multiple Capital Facilities Project VI), Series A, 5.625% due 5/01/2026 (a) 5,277 AAA Aaa 8,705 Modesto, California, Wastewater Treatment Facilities Revenue Bonds, 5.625% due 11/01/2017 (h) 9,561 AAA Aaa 1,750 North City-West, California, School Facilities Financing Authority, Special Tax Refunding Bonds, Series B, 5.75% due 9/01/2015 (f) 1,912 Oakland, California, Joint Powers Financing Authority, Lease Revenue Bonds (Oakland Administration Buildings) (a): AAA Aaa 2,000 5.90% due 8/01/2016 2,191 AAA Aaa 11,395 5.75% due 8/01/2021 12,314 Oakland, California, Unified School District, Alameda County, GO, Series F (h): AAA Aaa 3,290 5.50% due 8/01/2017 3,574 AAA Aaa 3,770 5.50% due 8/01/2018 4,093 AAA Aaa 1,750 Pleasant Valley, California, School District, Ventura County, GO, Series C, 5.75% due 8/01/2025 (b)(h) 1,896 BBB- NR* 2,255 Pomona, California, Public Financing Authority, Revenue Refunding Bonds (Merged Redevelopment Project), Series A1, 5.75% due 2/01/2034 2,183 AAA Aaa 10,600 Port Oakland, California, Port Revenue Refunding Bonds, Series I, 5.40% due 11/01/2017 (h) 11,424 AAA Aaa 2,000 Port Oakland, California, Revenue Refunding Bonds, AMT, Series N, 5% due 11/01/2022 (h) 2,008 NR* Aaa 5,808 Port Oakland, California, RIB, Refunding, AMT, Series 717X, 9.40% due 11/01/2027 (c)(j) 6,055 AAA Aaa 4,315 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Rancho Redevelopment Project), 5.25% due 9/01/2020 (f) 4,543 AAA Aaa 2,345 Richmond, California, Redevelopment Agency, Tax Allocation, Refunding Bonds (Harbour Redevelopment Project), Series A, 5.50% due 7/01/2018 (h) 2,540 AAA Aaa 5,000 Sacramento, California, Municipal Utility District, Electric Revenue Refunding Bonds, Series L, 5.125% due 7/01/2022 (h) 5,134 Sacramento County, California, Sanitation District, Financing Authority, Revenue Refunding Bonds: AA Aa3 4,500 RIB, Series 366, 10.362% due 12/01/2027 (j) 5,054 AA Aa3 5,695 Series A, 5.60% due 12/01/2017 6,038 AA Aa3 6,190 Series A, 5.75% due 12/01/2018 6,582 AA Aa3 3,750 Trust Receipts, Class R, Series A, 10.56% due 12/01/2019 (j) 4,278 AAA Aaa 10,100 San Bernardino, California, City Unified School District, GO, Refunding, Series A, 5.875% due 8/01/2024 (c) 11,040 AAA Aaa 3,000 San Bernardino, California, Joint Powers Financing Authority, Lease Revenue Bonds (Department of Transportation Lease), Series A, 5.50% due 12/01/2020 (h) 3,186 AAA Aaa 5,000 San Bernardino, California, Joint Powers Financing Authority, Tax Allocation Revenue Refunding Bonds, Series A, 5.75% due 10/01/2015 (f) 5,345 AAA Aaa 2,000 San Francisco, California, City and County Airport Commission, International Airport Revenue Bonds, AMT, Second Series, Issue 11, 6.25% due 5/01/2005 (c)(i) 2,114
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face Ratings Ratings Amount Municipal Bonds Value California (concluded) AA Aa3 $ 1,720 San Francisco, California, City and County Educational Facilities, GO (Community College), Series A, 5.75% due 6/15/2019 $ 1,898 AAA Aaa 4,715 San Francisco, California, City and County Redevelopment Agency, Lease Revenue Refunding Bonds (George R. Moscone Convention Center), 6.80% due 7/01/2019 (f) 4,849 AA Aa3 1,310 San Francisco, California, City and County Zoo Facilities, GO, Series B, 5.75% due 6/15/2019 1,446 AAA Aaa 4,590 San Joaquin Hills, California, Transportation Corridor Agency, Toll Road Revenue Refunding Bonds, Series A, 5.25% due 1/15/2030 (h) 4,635 AAA Aaa 2,020 Santa Clara, California, Unified School District, GO, 5.50% due 7/01/2021 (c) 2,179 NR* A3 3,500 Santa Clara County, California, Housing Authority, M/F Housing Revenue Bonds (John Burns Gardens Apartments Project), AMT, Series A, 6% due 8/01/2041 3,492 AAA Aaa 4,000 Santa Monica, California, Redevelopment Agency, Tax Allocation Bonds (Earthquake Recovery Redevelopment Project), 6% due 7/01/2029 (a) 4,386 AAA Aaa 2,000 Sequoia, California, Unified High School District, GO, 5.70% due 7/01/2024 (f) 2,140 AAA Aaa 2,265 South Bayside, California, Waste Management Authority, Waste System Revenue Bonds, 5.75% due 3/01/2020 (a) 2,488 AAA NR* 90 Southern California Home Finance Authority, S/F Mortgage Revenue Bonds (Mortgage-Backed Securities Program), AMT, Series A, 6.75% due 9/01/2022 (e) 90 AAA Aaa 3,235 Taft, California, Public Financing Authority, Lease Revenue Bonds (Community Correctional Facilty), Series A, 6.05% due 1/01/2017 (h) 3,536 A+ A1 1,310 Torrance, California, Hospital Revenue Refunding Bonds (Torrance Memorial Medical Center), Series A, 6% due 6/01/2022 1,387 Vernon, California, Electric System Revenue Bonds (Malburg Generating Station Project): BBB+ Aaa 2,740 5.50% due 4/01/2022 2,767 BBB+ Aaa 1,250 5.50% due 4/01/2023 1,261 BBB+ Aaa 2,250 5.30% due 4/01/2026 2,241 AAA Aaa 5,000 Vista, California, Joint Powers Financing Authority, Lease Revenue Refunding Bonds, 5.625% due 5/01/2016 (h) 5,485 Puerto Rico--2.9% AAA Aaa 2,140 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue Bonds, Series Y, 5.50% due 7/01/2026 (h)(i) 2,334 Puerto Rico Electric Power Authority, Power Revenue Bonds: A- A3 3,000 Series NN, 5.125% due 7/01/2029 3,003 AAA Aaa 2,600 Series X, 5.50% due 7/01/2025 (h) 2,679 A- A3 1,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series U, 6% due 7/01/2014 1,026 Virgin Islands--1.0% BBB- Baa3 3,000 Virgin Islands Government Refinery Facilities, Revenue Refunding Bonds (Hovensa Coker Project), AMT, 6.50% due 7/01/2021 3,194 Total Municipal Bonds (Cost--$415,544)--137.6% 435,187
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Schedule of Investments (concluded) (In Thousands)
Shares Held Short-Term Securities Value 47 CMA California Municipal Money Fund++ $ 47 Total Short-Term Securities (Cost--$47)--0.0% 47 Total Investments (Cost--$415,591)--137.6% 435,234 Other Assets Less Liabilities--6.7% 21,038 Preferred Stock, at Redemption Value--(44.3%) (140,000) --------- Net Assets Applicable to Common Stock--100.0% $ 316,272 ========= (a)AMBAC Insured. (b)Escrowed to maturity. (c)FGIC Insured. (d)FHLMC Collateralized. (e)FNMA/GNMA Collateralized. (f)FSA Insured. (g)GNMA Collateralized. (h)MBIA Insured. (i)Prerefunded. (j)The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 2004. *Not Rated. ++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 Dividend Affiliate Activity Income CMA California Municipal Money Fund (14,286) $10 See Notes to Financial Statements.
Quality Profile The quality ratings of securities in the Fund as of April 30, 2004 were as follows: Percent of Total S&P Rating/Moody's Rating Investments AAA/Aaa 63.7% AA/Aa 18.3 A/A 6.4 BBB/Baa 11.6 MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Statement of Net Assets
As of April 30, 2004 Assets Investments in unaffiliated securities, at value (identified cost--$415,543,953) $ 435,186,557 Investments in affiliated securities, at value (identified cost--$46,973) 46,973 Receivables: Securities sold $ 16,453,668 Interest 9,163,836 25,617,504 --------------- Prepaid expenses 6,380 --------------- Total assets 460,857,414 --------------- Liabilities Payables: Custodian bank 4,126,281 Investment adviser 219,442 Dividends to Common Stock shareholders 193,171 Other affiliates 3,196 4,542,090 --------------- Accrued expenses 42,856 --------------- Total liabilities 4,584,946 --------------- Preferred Stock Preferred Stock, at redemption value, par value $.10 per share (2,400 Series A Shares, 2,400 Series B Shares and 800 Series C Shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) 140,000,000 --------------- Net Assets Applicable to Common Stock Net assets applicable to Common Stock $ 316,272,468 =============== Analysis of Net Assets Applicable to Common Stock Common Stock, par value $.10 per share (21,295,255 shares issued and outstanding) $ 2,129,526 Paid-in capital in excess of par 299,957,928 Undistributed investment income--net $ 2,929,720 Accumulated realized capital losses on investments--net (8,387,310) Unrealized appreciation on investments--net 19,642,604 --------------- Total accumulated earnings--net 14,185,014 --------------- Total--Equivalent to $14.85 net asset value per share of Common Stock (market price--$13.66) $ 316,272,468 =============== *Auction Market Preferred Stock. See Notes to Financial Statements.
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Statement of Operations
For the Six Months Ended April 30, 2004 Investment Income Interest $ 12,513,496 Dividends from affiliates 9,546 --------------- Total income 12,523,042 --------------- Expenses Investment advisory fees $ 1,160,689 Commission fees 176,414 Accounting services 77,832 Transfer agent fees 31,622 Professional fees 29,829 Printing and shareholder reports 19,973 Custodian fees 12,258 Directors' fees and expenses 11,322 Listing fees 10,582 Pricing fees 7,287 Other 20,640 --------------- Total expenses before reimbursement 1,558,448 Reimbursement of expenses (8,258) --------------- Total expenses after reimbursement 1,550,190 --------------- Investment income--net 10,972,852 --------------- Realized & Unrealized Gain (Loss) on Investments--Net Realized gain on investments--net 1,206,596 Change in unrealized appreciation on investments--net (8,048,655) --------------- Total realized and unrealized loss on investments--net (6,842,059) --------------- Dividends to Preferred Stock Shareholders Investment income--net (664,016) --------------- Net Increase in Net Assets Resulting from Operations $ 3,466,777 =============== See Notes to Financial Statements.
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Statements of Changes in Net Assets
For the For the Six Months Year Ended Ended April 30, October 31, Increase (Decrease) in Net Asset Value: 2004 2003 Operations Investment income--net $ 10,972,852 $ 22,666,324 Realized gain (loss) on investments--net 1,206,596 (41,823) Change in unrealized appreciation on investments--net (8,048,655) 1,001,147 Dividends and distributions to Preferred Stock shareholders (664,016) (2,059,080) --------------- --------------- Net increase in net assets resulting from operations 3,466,777 21,566,568 --------------- --------------- Dividends & Distributions to Common Stock Shareholders Investment income--net (10,349,494) (20,698,988) Realized gain on invesments--net -- (57,092) --------------- --------------- Net decrease in net assets resulting from dividends and distributions to Common Stock shareholders (10,349,494) (20,756,080) --------------- --------------- Net Assets Applicable to Common Stock Total increase (decrease) in net assets applicable to Common Stock (6,882,717) 810,488 Beginning of period 323,155,185 322,344,697 --------------- --------------- End of period* $ 316,272,468 $ 323,155,185 =============== =============== *Undistributed investment income--net $ 2,929,720 $ 2,970,378 =============== =============== See Notes to Financial Statements.
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Financial Highlights
The following per share data and ratios have been derived For the Six from information provided in the financial statements. Months Ended April 30, For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001++ 2000++ Per Share Operating Performance Net asset value, beginning of period $ 15.17 $ 15.14 $ 15.22 $ 14.19 $ 13.32 ---------- ---------- ---------- ---------- ---------- Investment income--net .52++++ 1.06++++ 1.07++++ 1.03 1.02 Realized and unrealized gain (loss) on investments--net (.32) .04 (.06) 1.05 .88 Dividends and distributions to Preferred Stock shareholders: Investment income--net (.03) (.10) (.12) (.20) (.23) Realized gain on investments--net -- --+++++ --+++++ -- -- ---------- ---------- ---------- ---------- ---------- Total from investment operations .17 1.00 .89 1.88 1.67 ---------- ---------- ---------- ---------- ---------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.49) (.97) (.97) (.85) (.80) Realized gain on investments--net -- --+++++ --+++++ -- -- ---------- ---------- ---------- ---------- ---------- Total dividends and distributions to Common Stock shareholders (.49) (.97) (.97) (.85) (.80) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 14.85 $ 15.17 $ 15.14 $ 15.22 $ 14.19 ========== ========== ========== ========== ========== Market price per share, end of period $ 13.66 $ 14.15 $ 14.46 $ 15.10 $ 13.0625 ========== ========== ========== ========== ========== Total Investment Return** Based on market price per share (.18%)+++ 4.64% 2.18% 22.71% 10.18% ========== ========== ========== ========== ========== Based on net asset value per share 1.22%+++ 7.14% 6.14% 13.85% 13.45% ========== ========== ========== ========== ========== Ratios Based on Average Net Assets of Common Stock Total expenses, net of reimbursement*** .95%* .95% .99% 1.00% 1.02% ========== ========== ========== ========== ========== Total expenses*** .96%* .96% .99% 1.00% 1.02% ========== ========== ========== ========== ========== Total investment income--net*** 6.74%* 6.93% 7.13% 7.00% 7.51% ========== ========== ========== ========== ========== Amount of dividends to Preferred Stock shareholders .41%* .63% .77% 1.37% 1.69% ========== ========== ========== ========== ========== Investment income--net, to Common Stock shareholders 6.33%* 6.30% 6.36% 5.63% 5.82% ========== ========== ========== ========== ========== Ratios Based on Average Net Assets of Common & Preferred Stock*** Total expenses, net of reimbursement .67%* .67% .69% .69% .69% ========== ========== ========== ========== ========== Total expenses .67%* .67% .69% .69% .69% ========== ========== ========== ========== ========== Total investment income--net 4.72%* 4.84% 4.95% 4.83% 5.05% ========== ========== ========== ========== ========== Ratios Based on Average Net Assets of Preferred Stock Dividends to Preferred Stock shareholders .95%* 1.46% 1.76% 3.04% 3.47% ========== ========== ========== ========== ==========
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Financial Highlights (concluded)
For the Six Months Ended The following per share data and ratios have been derived April 30, For the Year Ended October 31, from information provided in the financial statements. 2004 2003 2002 2001++ 2000++ Supplemental Data Net assets applicable to Common Stock, end of period (in thousands) $ 316,272 $ 323,155 $ 322,345 $ 322,524 $ 300,503 ========== ========== ========== ========== ========== Preferred Stock outstanding, end of period (in thousands) $ 140,000 $ 140,000 $ 140,000 $ 140,000 $ 140,000 ========== ========== ========== ========== ========== Portfolio turnover 12.23% 20.24% 49.87% 58.17% 93.01% ========== ========== ========== ========== ========== Leverage Asset coverage per $1,000 $ 3,259 $ 3,308 $ 3,302 $ 3,304 $ 3,146 ========== ========== ========== ========== ========== Dividends Per Share on Preferred Stock Outstanding Series A--Investment income--net $ 129 $ 569 $ 607 $ 802 $ 865 ========== ========== ========== ========== ========== Series B--Investment income--net $ 114 $ 217 $ 322 $ 721 $ 875 ========== ========== ========== ========== ========== Series C--Investment income--net $ 101 $ 207 $ 292 $ 745 $ 875 ========== ========== ========== ========== ========== *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 charges. ***Do not reflect the effect of dividends to Preferred Stock shareholders. ++Certain prior year amounts have been reclassified to conform to current year presentation. ++++Based on average shares outstanding. +++Aggregate total investment return. +++++Amount is less than $(.01) per share. See Notes to Financial Statements.
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Notes to Financial Statements 1. Significant Accounting Policies: MuniYield California Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, 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. Actual results may differ from these estimates. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal, recurring nature. The Fund determines and makes available for publication the net asset value of its Common Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock Exchange under the symbol MYC. 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 last available bid price in the over-the-counter market or on the basis of yield equivalents as obtained by the Fund's pricing service from one or more 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 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-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued by quoted fair values received daily by the Fund from the counterparty. Short-term investments with a remaining maturity 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 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 both to increase the return of the Fund and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Financial futures contracts--The Fund may purchase or sell financial futures contracts and options on such futures contracts. 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 may 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. MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Notes to Financial Statements (continued) * Forward interest rate swaps--The Fund may enter into forward interest rate swaps. In a forward interest rate swap, the Fund and the counterparty agree to make periodic net payments on a specified notional contract amount, commencing on a specified future effective date, unless terminated earlier. 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. Interest income is recognized on the accrual basis. Dividend income is recorded on the ex-dividend dates. The Fund amortizes all premiums and discounts on debt securities. (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) Custodian bank--The Fund recorded an amount payable to the custodian bank reflecting an overnight overdraft, which resulted from management estimates of available cash. 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 six months ended April 30, 2004, FAM reimbursed the Fund in the amount of $8,258. For the six months ended April 30, 2004, the Fund reimbursed FAM $4,718 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 six months ended April 30, 2004 were $56,266,833 and $55,405,947, respectively. Net realized gains for the six months ended April 30, 2004 and net unrealized appreciation as of April 30, 2004 were as follows: Realized Unrealized Gains Appreciation Long-term investments $ 800,140 $ 19,642,604 Forward interest rate swaps 406,456 -- ------------ ------------ Total $ 1,206,596 $ 19,642,604 ============ ============ As of April 30, 2004, net unrealized appreciation for Federal income tax purposes aggregated $19,803,276, of which $21,353,763 related to appreciated securities and $1,550,487 related to depreciated securities. The aggregate cost of investments at April 30, 2004 for Federal income tax purposes was $415,430,254. 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. Preferred Stock Auction Market Preferred Stock are shares of Preferred Stock of the Fund, with a par value of $.10 per share and a liquidation preference of $25,000 per share, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 2004 were: Series A, 1.05%; Series B, .97%; and Series C, .98%. MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Notes to Financial Statements (concluded) 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 six months ended April 30, 2004, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $102,586 as commissions. 5. Capital Loss Carryforward: On October 31, 2003, the Fund had a net capital loss carryforward of $8,339,735, of which $7,985,889 expires in 2008 and $353,846 expires in 2011. This amount will be available to offset like amounts of any future taxable gains. 6. Subsequent Event: The Fund paid a tax-exempt income dividend to holders of Common Stock in the amount of $0.081000 per share on May 27, 2004 to shareholders of record on May 14, 2004. Proxy Results
During the six-month period ended April 30, 2004, MuniYield California Fund, Inc.'s Common Stock shareholders voted on the following proposal. The proposal was approved at a shareholders' meeting on April 27, 2004. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Directors: James H. Bodurtha 19,978,919 361,989 Joe Grills 19,965,818 375,090 Roberta Cooper Ramo 19,973,962 366,946 Robert S. Salomon, Jr. 19,966,741 374,167 Stephen B. Swensrud 19,960,164 380,744 During the six-month period ended April 30, 2004, MuniYield California Fund, Inc.'s Preferred Stock shareholders (Series A - C) voted on the following proposal. The proposal was approved at a shareholders' meeting on April 27, 2004. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Board of Directors: James H. Bodurtha, Joe Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo, Robert S. Salomon, Jr., and Stephen B. Swensrud 3,403 180
MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Officers and Directors Terry K. Glenn, President and Director James H. Bodurtha, Director Joe Grills, Director Herbert I. London, Director Andre F. Perold, Director Roberta Cooper Ramo, Director Robert S. Salomon, Jr., Director Stephen B. Swensrud, Director Kenneth A. Jacob, Senior Vice President John M. Loffredo, Senior Vice President Walter C. O'Connor, Vice President Donald C. Burke, Vice President and Treasurer Phillip S. Gillespie, Secretary 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 101 Barclay Street - 7 West New York, NY 10286 NYSE Symbol MYC 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 stable level of dividend distributions, 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 particular 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. Electronic Delivery The Fund offers electronic delivery of communications to its shareholders. In order to receive this service, you must register your account and provide us with e-mail information. To sign up for this service, simply access this website http://www.icsdelivery.com/live and follow the instructions. When you visit this site, you will obtain a personal identification number (PIN). You will need this PIN should you wish to update your e-mail address, choose to discontinue this service and/or make any other changes to the service. This service is not available for certain retirement accounts at this time. MUNIYIELD CALIFORNIA FUND, INC., APRIL 30, 2004 Item 2 - Code of Ethics - Not Applicable to this semi-annual report Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual report Item 4 - Principal Accountant Fees and Services - Not Applicable to this semi-annual report Item 5 - Audit Committee of Listed Registrants - Not Applicable to this semi-annual report Item 6 - Schedule of Investments - Not Applicable Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies - Not Applicable to this semi-annual report Item 8 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers - Not Applicable Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable Item 10 - Controls and Procedures 10(a) - The registrant's certifying officers have reasonably designed such disclosure controls and procedures to ensure material information relating to the registrant is made known to us by others particularly during the period in which this report is being prepared. The registrant's certifying officers have determined that the registrant's disclosure controls and procedures are effective based on our evaluation of these controls and procedures as of a date within 90 days prior to the filing date of this report. 10(b) - There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11 - Exhibits attached hereto 11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report 11(a)(2) - Certifications - Attached hereto 11(a)(3) - Not Applicable 11(b) - Certifications - Attached hereto Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MuniYield California Fund, Inc. By: _/s/ Terry K. Glenn_______ Terry K. Glenn, President of MuniYield California Fund, Inc. Date: June 18, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: _/s/ Terry K. Glenn________ Terry K. Glenn, President of MuniYield California Fund, Inc. Date: June 18, 2004 By: _/s/ Donald C. Burke________ Donald C. Burke, Chief Financial Officer of MuniYield California Fund, Inc. Date: June 18, 2004 EX-99.CERT 2 ex99cert.txt EX-99 CERT EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Terry K. Glenn, President of MuniYield California Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of MuniYield California Fund, Inc. (the "Fund"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Fund's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year (the Fund's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer(s) and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. Date: June 18, 2004 /s/ Terry K. Glenn Terry K. Glenn, President of MuniYield California Fund, Inc. EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Donald C. Burke, Chief Financial Officer of MuniYield California Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of MuniYield California Fund, Inc. (the "Fund"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Fund's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Fund and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year (the Fund's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Fund's other certifying officer(s) and I have disclosed to the Fund's auditors and the audit committee of the Fund's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. Date: June 18, 2004 /s/ Donald C. Burke Donald C. Burke, Chief Financial Officer of MuniYield California Fund, Inc. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Terry K. Glenn, President of MuniYield California Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: June 18, 2004 /s/ Terry K. Glenn Terry K. Glenn, President of MuniYield California Fund, Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to MuniYield California Fund, Inc. and will be retained by MuniYield California Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of MuniYield California Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: June 18, 2004 /s/ Donald C. Burke Donald C. Burke, Chief Financial Officer of MuniYield California Fund, Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to MuniYield California Fund, Inc. and will be retained by MuniYield California Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----