-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eYSQIXYoUQUChanb7N4cvv0vnougnm/lHLIzUnFIf5t4HdMOsoLFgZ/XPKozFNUz A/y6QKgzOl3n4NsVtBxbmQ== 0000900092-95-000151.txt : 19950608 0000900092-95-000151.hdr.sgml : 19950608 ACCESSION NUMBER: 0000900092-95-000151 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950607 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIYIELD CALIFORNIA FUND INC CENTRAL INDEX KEY: 0000882152 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06499 FILM NUMBER: 95545484 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 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-30D 1 SEMI-ANNUAL REPORT MUNIYIELD CALIFORNIA FUND, INC. FUND LOGO Semi-Annual Report April 30, 1995 This report, including the financial information herein, is transmitted to the shareholders of MuniYield California Fund, Inc. for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in the report. Past performance results shown in this report should not be considered a representation of future performance. The Fund has leveraged its Common Stock 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 volatil-ity 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. MuniYield California Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MuniYield California Fund, Inc. TO OUR SHAREHOLDERS For the six-month period ended April 30, 1995, the Common Stock of MuniYield California Fund, Inc. earned $0.455 per share income dividends, which included earned and unpaid dividends of $0.072. This represents a net annualized yield of 6.31%, based on a month- end per share net asset value of $14.54. Over the same period, the total investment return on the Fund's Common Stock was +10.54%, based on a change in per share net asset value from $13.91 to $14.54, and assuming reinvestment of $0.466 per share income dividends and $0.246 per share capital gains distributions. For the six-month period ended April 30, 1995, the Fund's Auction Market Preferred Stock had an average yield of 4.23% for Series A and 4.41% for Series B. The Environment During the six months ended April 30, 1995, the perception that the US economy was overheating and inflationary pressures were increasing gave way to a more benign economic outlook. With more signs of slowing growth, investors now appear to be forecasting a "soft landing" for the US economy. Although gross domestic product was reported to have increased at a revised 5.1% rate during the final quarter of 1994, declines in other indicators such as new home sales and durable goods orders registered thus far in 1995 have led investors to anticipate that the economy is losing enough momentum to keep inflation under control and preclude further significant monetary policy tightening by the Federal Reserve Board. A further indication of a slowing economy was the reported decline in the Index of Leading Economic Indicators for March. As US stock and bond markets have risen on more positive economic news, the value of the US dollar has reached new lows relative to the yen and the Deutschemark. Persistent trade deficits and exports of capital from the United States have kept the US currency in a decade-long decline relative to the Japanese and German currencies. Over the longer term, since the United States has the highest productivity among industrialized nations and among the lowest labor costs, demand for US dollar-denominated assets may improve. However, a reduction of the still-widening US trade deficit may be necessary before the US dollar appreciates substantially relative to the yen and the Deutschemark. The first months of 1995 have been very positive for the stock and bond markets. Continued signs of a moderating expansion and well- contained inflationary pressures would provide further assurance that the peak in interest rates is behind us. On the other hand, indications of reaccelerating growth and further significant monetary policy tightening by the Federal Reserve Board would be a decided negative for the US financial markets. The Municipal Market During the six-month period ended April 30, 1995, the tax-exempt bond market gradually recouped much of the losses sustained during 1994. Signs of a weakening domestic economy and ongoing moderate inflationary pressures have fostered an environment of declining interest rates. Since October 31, 1994, A-rated, uninsured municipal revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, have declined over 65 basis points (0.65%) to close the six- month period ended April 30, 1995 at 6.29%. Tax-exempt bond yields initially continued to climb in late 1994, reaching a high of 7.37% in late November 1994. Municipal bond yields have since declined over 100 basis points from their recent highs and are presently lower than they were a year ago. US Treasury bond yields have experienced similar declines over the last six months to end the April period at 7.34%. Much of the recent improvement in the tax-exempt bond market, however, has occurred over the last three months. During this most recent quarter, municipal bond yields have fallen approximately 50 basis points, while US Treasury bond yields declined only 35 basis points. Tax-exempt bond yields declined more than their taxable counterparts in recent months, largely in response to the significant decline in new bond issuance in recent quarters. Over the last six months, less than $60 billion in new long-term municipal securities were underwritten, a decline of nearly 45% versus the comparable period a year earlier. Issuance was particularly low this past January and February, with monthly volume of less than $8 billion. These levels are the lowest monthly totals since the mid-1980s. To compound the municipal market's already strong technical posture, both institutional and individual investors have seen significant cash inflows in recent months. These assets were derived from regular coupon payments, bond maturities and the proceeds from early bond calls and redemptions. It has been estimated that investors received over $20 billion in principal redemptions and coupon income in January 1995 alone. With monthly issuance in the $10 billion range thus far this year, the current supply/demand imbalance has dominated the municipal market and bond prices have risen accordingly. The tax-exempt bond market's technical position is likely to remain very strong throughout most of 1995. Investors are expected to receive almost $40 billion in principal and coupon payments on July 1, 1995. Investor proceeds from all sources have been estimated to exceed $200 billion for all of 1995. Estimates of total new bond issuance for 1995 have continued to be lowered with most estimates now in the $125 billion range. Investors should find it increasingly difficult to replace existing holdings as they mature and to reinvest coupon income in such an environment. The municipal bond market's outperformance thus far this year caused the tax-exempt market to become temporarily expensive relative to its taxable counterpart in late April. Investor concerns regarding the international currency situation and the future impact of proposed revisions to US taxation policies upon the tax advantage inherent to municipal bonds have combined to cause tax-exempt bond yields to increase marginally in recent weeks. Municipal bond yields have risen approximately 15 basis points from their lows in mid- April 1995. Long-term US Treasury bond yields have remained essentially stable. Such an underperformance by the tax-exempt bond market is likely to be limited in duration. The recent increase in tax-exempt bond yields has already begun to attract institutional investors since some municipal bonds yielding in excess of 85% of US Treasury bond yields are again available. Also, concerns regarding the implication for municipal bonds' tax advantage resulting from various proposed tax law changes (for example, flat-tax, value-added tax or national sales tax) are all likely to quickly recede as investors realize that such, if any, changes are unlikely to be enacted before late 1996 at the earliest. Long-term investors will also recall 1986 when similar tax proposals were made and tax-exempt bond yields initially rose and then quickly fell. Investors are likely to view the current situation as an opportunity to purchase very attractively priced tax- advantaged products. This should cause municipal bond yields to quickly return to their more historic relationship. Portfolio Strategy Over the past six months, MuniYield California Fund, Inc. benefited from a fully invested posture of long-term California revenue bonds that appreciated handsomely during a very potent rally for municipal securities in general. We positioned the Fund with higher-quality securities that participated actively when the market moved in response to the general slowing of the US economy. However, as the price of municipal securities reached a historically high relationship to taxable debt, we began taking some profits by selling a portion of our holdings into an increasingly thin secondary market. Recently, market technicals have been conducive to raising cash reserves since demand has remained relatively constant in the face of declining new issuance. Our strategy going forward is to raise cash reserves to approximately 15% of total assets in anticipation that renewed economic growth later this year combined with uncertainty of new tax legislation's effect on municipal securities could cause future price volatility. When available, we will recommit a portion of these proceeds to higher-couponed cushion securities, a strategy designed to serve the dual purpose of providing high current return with a greater degree of price stability. In Conclusion We appreciate your ongoing interest in MuniYield California Fund, Inc., and we look forward to serving your investment needs in the months and years to come. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Vincent R. Giordano) Vincent R. Giordano Vice President and Portfolio Manager May 23, 1995 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 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 pick-up 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. 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 RIB Residual Interest Bonds SAVRS Select Auction Variable Rate Securities S/F Single-Family TRAN Tax Revenue Anticipation Notes UT Unlimited Tax VRDN Variable Rate Demand Notes SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California--92.5% California Health Facilities Financing Authority Revenue Bonds: A1+ VMIG1++ $ 1,500 (Catholic Health Care), VRDN, Series C, 4.35% due 7/01/2020 (a)(c) $ 1,500 AA Aa3 1,000 (Kaiser Permanente), Series A, 7% due 12/01/2010 1,053 AAA Aaa 2,000 (Kaiser Permanente), Series A, 7% due 10/01/2018 (c) 2,128 AAA Aaa 1,000 Refunding (Adventist Health), Series A, 6.50% due 3/01/2014 (c) 1,028 AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,316 NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 2,854 A+ A1 3,600 (Sutter Health), Series 89A, 6.70% due 1/01/2013 3,649 California HFA, Home Mortgage Revenue Bonds: AA- Aa 2,880 AMT, Series C, 7.45% due 8/01/2011 3,022 AA- Aa 5,000 AMT, Series F-1, 7% due 8/01/2026 5,128 AA- Aa 1,275 Series D, 7.25% due 8/01/2017 1,339 AA- Aa 920 Series F, 7.875% due 8/01/2019 969 AA- Aa 3,000 California HFA, Revenue Bonds, AMT, Linked SAVRS and RIB, 7.59% due 8/01/2023 2,981 California Pollution Control Financing Authority, Resource Recovery Revenue Bonds, VRDN, AMT (a): A1 VMIG1++ 400 (Atlantic Richfield Company Project), Series A, 5% due 12/01/2024 400 NR* P1 600 (Delano Project), 5.20% due 8/01/2019 600 NR* P1 1,500 Refunding (Ultra Power Malaga Project), Series A, 5.25% due 4/01/2017 1,500 California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT (a): A1+ VMIG1++ 1,100 Series A, 4.95% due 10/01/2024 1,100 A1+ VMIG1++ 1,000 Series B, 4.95% due 12/01/2024 1,000 California Public Works Board, Lease Revenue Bonds: A- A 3,000 (California Community Colleges), Series A, 6.75% due 9/01/2011 3,084 A- A 6,800 (Department of Corrections-Monterey County), Series A, 7% due 11/01/2019 7,151 A- A 5,100 (Various California State University Projects), Series A, 6.625% due 10/01/2010 5,202 A- A 9,800 (Various California State University Projects), Series A, 6.70% due 10/01/2017 10,068 A- A 1,550 (Various Community College Projects), 7% due 3/01/2014 1,630 A- A 3,535 (Various Community College Projects), 7% due 3/01/2019 3,710 AA Aa 5,180 California State Department of Water Resources Revenue Bonds (Central Valley Project), Series K, 6% due 12/01/2021 5,026
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California (continued) California Statewide Community Development Authority Revenue Bonds, COP: A1+ NR* $ 3,445 Refunding (House of Ear Institute), VRDN, 4.85% due 12/01/2018 (a) $ 3,445 A1+ VMIG1++ 4,500 Refunding (Saint Joseph Health System), VRDN, 4.55% due 7/01/2008 (a) 4,500 AA Aa 4,750 (Saint Joseph Health System Group), 6.625% due 7/01/2021 4,872 NR* Baa1 5,895 Concord, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Central Concord Redevelopment Project), Sub-Series A, 6% due 7/01/2019 5,655 A+ A1 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital), 6.60% due 11/01/2012 3,019 BBB NR* 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 1,020 AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds (Senior Lien Project Loans), Series A, 6.75% due 11/01/2015 (b) 416 AAA Aaa 2,150 Culver City, California, Wastewater Facilities Revenue Bonds, Series A, 6.75% due 9/01/2016 (d) 2,262 AAA Aaa 3,500 East Bay, California, Municipal Utility District Water System, Subordinated Revenue Refunding Bonds, 6% due 6/01/2012 (c) 3,492 AAA Aaa 1,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds (El Cajon Redevelopment Project), 6.60% due 10/01/2022 (b) 1,043 BBB NR* 1,500 Fresno, California, Joint Powers Financing Authority, Local Agency Revenue Refunding Bonds, Series A, 6.55% due 9/02/2012 1,480 AAA Aaa 5,000 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (b) 5,176 BBB Baa 1,955 Inglewood, California, Public Financing Authority Revenue Bonds (Manchester -Prairie-North Inglewood Industrial Park Project), Series B, 7% due 5/01/2022 1,982 AA Aa 5,535 Long Beach, California, Water Revenue Refunding Bonds, 6.25% due 5/01/2024 5,535 AAA Aaa 3,645 Los Angeles, California, Community Redevelopment Agency, Tax Allocation Refunding Bonds (Bunker Hill), Series H, 6.50% due 12/01/2015 (f) 3,749 AA Aa 2,200 Los Angeles, California, Department of Water and Power, Electric Plant Revenue Refunding Bonds, 6.375% due 2/01/2020 2,222 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds: AAA Aaa 3,925 6.30% due 7/01/2024 (c) 3,956 AA Aa 1,750 6.50% due 4/15/2032 1,776 AA Aa 3,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B, 6.625% due 8/01/2019 3,059 AAA Aaa 3,000 Los Angeles, California, Wastewater System Revenue Bonds, Series D, 6.625% due 12/01/2012 (c) 3,126 AAA Aaa 12,400 Los Angeles County, California, COP (Correctional Facilities Project), 6.50% due 9/01/2013 (c) 12,740 A1+ VMIG1++ 8,900 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue Refunding Bonds (Proposition C--Second Senior), VRDN, Series A, 4.55% due 7/01/2020 (a)(c) 8,900 SP1+ MIG1++ 2,900 Los Angeles County, California, TRAN, UT, 4.50% due 6/30/1995 2,900
SCHEDULE OF INVESTMENTS (continued)) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California (continued) Los Angeles County, California, Transportation Commission, Sales Tax Revenue Bonds, Series A: AA- Aaa $ 6,500 6.75% due 7/01/2001 (g) $ 7,160 AAA Aaa 1,500 Proposition C, Second Series A, 6.25% due 7/01/2013 (c) 1,518 AA- A1 2,000 Refunding, 7% due 7/01/2019 2,085 M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project): A A 5,000 Series C, 6.875% due 7/01/2019 5,157 AAA Aaa 2,955 Series E, 6.50% due 7/01/2017 (c) 3,038 AA Aa 8,000 Metropolitan Water District, Southern California, Waterworks Revenue Bonds, 6.625% due 7/01/2012 8,297 AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds, RIB, 8.544% due 9/02/2025 (c)(h) 2,669 AAA Aaa 1,985 Northern California Power Agency, Public Power Revenue Bonds (Hydroelectric Project 1), Series E, 7.15% due 7/01/2024 (c) 2,135 AAA Aaa 16,000 Orange County, California, Local Transportation Authority, Sales Tax Revenue Bonds, Second Series, Linked SAVRS and RIB, 6.10% due 2/14/2011 (d) 16,241 AAA Aaa 1,360 Orchard, California, School District Bonds, Series A, 6.50% due 8/01/2019 (d) 1,413 A NR* 5,000 Palmdale, California, Civic Authority Revenue Refunding Bonds (Merged Redevelopment Project Areas), Series A, 6.60% due 9/01/2034 5,113 AAA Aaa 3,905 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Bonds (Rancho Redevelopment Project), 6.75% due 9/01/2020 (c) 4,078 NR* A 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower Memorial Hospital), 7% due 3/01/2022 3,887 Redwood City, California, Public Financing Authority, Local Agency Revenue Bonds: AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,222 A- NR* 1,500 Series B, 7.25% due 7/15/2011 1,592 A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80% due 11/01/2001 (g) 20,031 Sacramento, California, Municipal Utility District, Electric Revenue Bonds, Series B (c): AAA Aaa 3,180 6.25% due 8/15/2011 3,242 AAA Aaa 3,400 6.375% due 8/15/2022 3,444 San Francisco, California, City and County Airport Commission, International Airport Revenue Bonds, Second Series: AAA Aaa 1,500 Issue 5, AMT, 6.50% due 5/01/2019 (d) 1,527 AAA Aaa 4,525 Issue 6, AMT, 6.60% due 5/01/2020 (b) 4,653 AAA Aaa 11,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 11,355 AA A1 5,480 San Francisco, California, City and County, GO, UT (Variable Purpose Projects), Series A, 6.50% due 12/15/2010 5,643 AA Aa 5,000 San Francisco, California, City and County Public Utilities Commission, Water Revenue Bonds, Series A, 6.50% due 11/01/2017 5,098 AAA Aaa 4,715 San Francisco, California, City and County Redevelopment Agency, Lease Revenue Bonds (George R. Moscone Convention Center), 6.80% due 7/01/2019 5,026
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California (concluded) AAA Aaa $ 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) $ 3,263 AAA Aaa 9,525 Santa Clara County, California, Financing Authority, Lease Revenue Bonds (VMC Facility Replacement Project), Series A, 6.75% due 11/15/2020 (b) 10,089 AA A1 5,000 Santa Clara County, California, Transportation District, Sales Tax Revenue Bonds, Series A, 6.75% due 6/01/2011 5,213 AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds (Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (c) 2,936 AAA Aaa 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater Project), Series A, 6.50% due 9/01/2022 (d) 7,973 AAA NR* 1,145 Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT, Series A, 6.75% due 9/01/2022 (e) 1,161 A A 3,460 Southern California Public Power Authority, Power Revenue Bonds (Multiple Projects), 6.75% due 7/01/2012 3,622 AA- Aa 1,000 Southern California Public Power Authority, Transmission Project, Revenue Refunding Bonds (Southern Transmission Project), 6.125% due 7/01/2018 987 AAA Aaa 5,000 Stockton, California, COP, Revenue Bonds (Wastewater Treatment Plant Expansion), Series A, 6.80% due 9/01/2024 (d) 5,325 University of California Revenue Bonds (Multiple Purpose Projects): A- NR* 3,300 Refunding, Series A, 6.875% due 9/01/2002 (g) 3,695 AAA Aaa 3,010 Refunding, Series C, 5% due 9/01/2023 (b) 2,523 AAA Aaa 3,765 Series D, 6.375% due 9/01/2019 (c) 3,813 Puerto Rico--3.9% A Baa1 4,850 Puerto Rico Commonwealth, GO, UT, 6.50% due 7/01/2023 4,919 A Baa1 5,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue Refunding Bonds, Series V, 6.625% due 7/01/2012 5,661 A- Baa1 2,985 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7% due 7/01/2021 3,198 Total Investments (Cost--$339,881)--96.4% 350,765 Other Assets Less Liabilities--3.6% 13,161 -------- Net Assets--100.0% $363,926 ======== (a)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 1995. (b)AMBAC Insured. (c)MBIA Insured. (d)FGIC Insured. (e)FNMA/GNMA Collateralized. (f)FSA Insured. (g)Prerefunded. (h)The interest rate is subject to change periodically and inversely to the prevailing market rate. The interest rate shown is the rate in effect at April 30, 1995. *Not Rated. ++Highest short-term rating by Moody's Investors Service, Inc. See Notes to Financial Statements.
FINANCIAL INFORMATION Statement of Assets, Liabilities and Capital as of April 30, 1995 Assets: Investments, at value (identified cost--$339,881,104) (Note 1a) $350,764,845 Cash 6,604,585 Receivables: Interest $ 6,396,352 Securities sold 3,668,698 10,065,050 ------------ Deferred organization expenses (Note 1e) 13,469 Prepaid expenses 26,778 ------------ Total assets 367,474,727 ------------ Liabilities: Payables: Securities purchased 2,985,752 Dividends to shareholders (Note 1f) 371,756 Investment adviser (Note 2) 141,003 3,498,511 ------------ Accrued expenses and other liabilities 49,728 ------------ Total liabilities 3,548,239 ------------ Net Assets: Net assets $363,926,488 ============ Capital: Capital Stock (200,000,000 shares authorized) (Note 4): Preferred Stock, par value $.10 per share (4,800 shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) $120,000,000 Common Stock, par value $.10 per share (16,781,559 shares issued and outstanding) $ 1,678,156 Paid-in capital in excess of par 233,789,721 Undistributed investment income--net 3,142,331 Accumulated realized capital losses on investments--net (5,567,461) Unrealized appreciation on investments--net 10,883,741 ------------ Total--Equivalent to $14.54 net asset value per share of Common Stock (market price--$13.125) 243,926,488 ------------ Total capital $363,926,488 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations
For the Six Months Ended April 30, 1995 Investment Income Interest and amortization of premium and discount earned. $ 11,080,995 (Note 1d): Expenses: Investment advisory fees (Note 2) $ 867,524 Commission fees (Note 4) 145,576 Professional fees 37,992 Accounting services (Note 2) 30,639 Printing and shareholder reports 30,214 Transfer agent fees 24,005 Custodian fees 14,212 Listing fees 12,233 Directors' fees and expenses 11,105 Pricing fees 6,416 Amortization of organization expenses (Note 1e) 2,809 Other 13,981 ------------ Total expenses 1,196,706 ------------ Investment income--net 9,884,289 ------------ Realized & Realized loss on investments (5,568,529) Unrealized Gain Change in unrealized appreciation/depreciation on invest (Loss) on ments--net 20,672,724 Investments ------------ - --Net (Notes Net Increase in Net Assets Resulting from Operations $ 24,988,484 1b, 1d & 3): ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statements of Changes in Net Assets
For the Six For the Months Ended Year Ended Increase (Decrease) in Net Assets: April 30, 1995 Oct. 31, 1994 Operations: Investment income--net $ 9,884,289 $ 20,668,758 Realized gain (loss) on investments--net (5,568,529) 4,877,369 Change in unrealized appreciation/depreciation on investments --net 20,672,724 (49,417,622) ------------ ------------ Net increase (decrease) in net assets resulting from operations 24,988,484 (23,871,495) ------------ ------------ Dividends & Investment income--net: Distributions to Common Stock (7,814,132) (16,790,151) Shareholders Preferred Stock (1,796,928) (3,140,796) (Note 1f): Realized gain on investments--net: Common Stock (4,134,976) (1,122,166) Preferred Stock (741,300) (171,888) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (14,487,336) (21,225,001) ------------ ------------ Net Assets: Total increase (decrease) in net assets 10,501,148 (45,096,496) Beginning of period 353,425,340 398,521,836 ------------ ------------ End of period* $363,926,488 $353,425,340 ============ ============ *Undistributed investment income--net $ 3,142,331 $ 2,869,102 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlights
For the For the Period The following per share data and ratios have been derived Six Months For the Feb. 28, from information provided in the financial statements. Ended Year Ended 1992++ to April 30, October 31, October 31, Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 Per Share Net asset value, beginning of period $ 13.91 $ 16.60 $ 14.03 $ 14.18 Operating -------- -------- -------- -------- Performance: Investment income--net .60 1.23 1.22 .77 Realized and unrealized gain (loss) on investments --net .91 (2.65) 2.62 (.07) -------- -------- -------- -------- Total from investment operations 1.51 (1.42) 3.84 .70 -------- -------- -------- -------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.47) (1.00) (.99) (.55) Realized gain on investments--net (.25) (.07) (.08) -- -------- -------- -------- -------- Total dividends and distributions to Common Stock shareholders (.72) (1.07) (1.07) (.55) -------- -------- -------- -------- Capital charge resulting from issuance of Common Stock -- -- -- (.02) -------- -------- -------- -------- Effect of Preferred Stock activity:++++ Dividends and distributions to Preferred Stock shareholders: Investment income--net (.11) (.19) (.18) (.14) Realized gain on investments--net (.05) (.01) (.02) -- Capital charge resulting from issuance of Preferred Stock -- -- -- (.14) -------- -------- -------- -------- Total effect of Preferred Stock activity (.16) (.20) (.20) (.28) -------- -------- -------- -------- Net asset value, end of period $ 14.54 $ 13.91 $ 16.60 $ 14.03 ======== ======== ======== ======== Market price per share, end of period $ 13.125 $ 12.125 $ 15.625 $ 14.50 ======== ======== ======== ======== Total Based on market price per share 14.47%+++ (16.36%) 15.56% .43%+++ Investment ======== ======== ======== ======== Return:** Based on net asset value per share 10.54%+++ (9.69%) 26.88% 2.79%+++ ======== ======== ======== ======== Ratios to Expenses, net of reimbursement .69%* .66% .69% .54%* Average ======== ======== ======== ======== Net Assets:*** Expenses .69%* .66% .69% .71%* ======== ======== ======== ======== Investment income--net 5.70%* 5.44% 5.35% 5.65%* ======== ======== ======== ======== Supplemental Net assets, net of Preferred Stock, end of period Data: (in thousands) $243,926 $233,425 $278,522 $233,502 ======== ======== ======== ======== Preferred Stock outstanding, end of period (in thousands) $120,000 $120,000 $120,000 $120,000 ======== ======== ======== ======== Portfolio turnover 23.13% 78.89% 21.68% 28.75% ======== ======== ======== ======== Dividends Per Series A--Investment income--net $ 353 $ 694 $ 547 $ 449 Share on Series B--Investment income--net 396 615 688 481 Preferred Stock Outstand- ing:++++++ *Annualized. **Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Total investment returns exclude the effects of sales loads. ***Do not reflect the effect of dividends to Preferred Stock shareholders. ++Commencement of Operations. ++++The Fund's Preferred Stock was issued on April 10, 1992. ++++++Dividends per share have been adjusted to reflect a two-for- one stock split. +++Aggregate total investment return. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: MuniYield California Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non-diversified, closed-end management investment company. These unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The Fund determines and makes available for publication the net asset value of its Common 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 most recent bid price or yield equivalent as obtained by the Fund's pricing service from dealers that make markets in such securities. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their closing prices as of the close of such exchanges. Options, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges or, lacking any sales, at the last available bid price. Securities with remaining maturities of sixty days or less are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available are valued at their fair value as determined in good faith by or under the direction of the Board of Directors of the Fund. (b) Derivative financial instruments--The Fund may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse movements in the debt markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Financial futures contracts--The Fund may purchase or sell interest rate futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Interest income is recognized on the accrual basis. Discounts and market premiums are amortized into interest income. Realized gains and losses on security transactions are determined on the identified cost basis. (e) Deferred organization expenses--Deferred organization expenses are amortized on a straight-line basis over a five-year period. (f) Dividends and distributions--Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays a monthly fee at an annual rate of 0.50% of the Fund's average weekly net assets. Accounting services are provided to the Fund by FAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended April 30, 1995 were $76,880,484 and $113,008,312, respectively. Net realized and unrealized gains (losses) as of April 30, 1995 were as follows: Realized Gains Unrealized (Losses) Gains Long-term investments $(3,417,012) $10,883,741 Short-term investments 24,139 -- Financial futures contracts (2,175,656) -- ----------- ----------- Total $(5,568,529) $10,883,741 =========== =========== As of April 30, 1995, net unrealized appreciation for Federal income tax purposes aggregated $10,883,741, of which $11,409,415 related to appreciated securities and $525,674 related to depreciated securities. The aggregate cost of investments at April 30, 1995 for Federal income tax purposes was $339,881,104. 4. Capital Stock Transactions: The Fund is authorized to issue 200,000,000 shares of capital 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 capital stock without approval of the holders of Common Stock. Common Stock For the six months ended April 30, 1995, shares issued and outstanding remained constant at 16,781,559. At April 30, 1995, total paid-in capital amounted to $235,467,877. Preferred Stock Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the Fund 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, 1995 were: Series A, 4.05% and Series B, 4.50%. A two-for-one stock split occurred on December 1, 1994. As a result, for the six months ended April 30, 1995, there were 4,800 AMPS shares authorized, issued and outstanding with a liquidation preference of $25,000 per share, plus accumulated and unpaid dividends of $604,923. The Fund pays commissions to certain broker-dealers at the end of each auction at the annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of each auction. For the six months ended April 30, 1995, MLPF&S, an affiliate of FAM, earned $130,088 as commissions. 5. Subsequent Event: On May 9, 1995, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $0.071961 per share, payable on May 30, 1995 to shareholders of record as of May 19, 1995. PER SHARE INFORMATION Per Share Selected Quarterly Financial Data*
Dividends/Distributions Net Realized Unrealized Investment Gains Gains Net Investment Income Capital Gains For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred May 1, 1993 to July 31, 1993 $.30 $ .01 $ .22 $.24 $.04 -- -- August 1, 1993 to October 31, 1993 .31 .03 .77 .26 .05 -- -- November 1, 1993 to January 31, 1994 .31 .13 .02 .26 .04 $.07 $.01 February 1, 1994 to April 30, 1994 .30 .36 (2.24) .24 .05 -- -- May 1, 1994 to July 31, 1994 .31 .03 .23 .25 .05 -- -- August 1, 1994 to October 31, 1994 .31 (.22) (.96) .25 .05 -- -- November 1, 1994 to January 31, 1995 .31 (.34) .74 .24 .04 .25 .05 February 1, 1995 to April 30, 1995 .29 .01 .50 .23 .07 -- -- Net Asset Value Market Price** For the Quarter High Low High Low Volume*** May 1, 1993 to July 31, 1993 $15.96 $15.49 $15.50 $14.625 1,329 August 1, 1993 to October 31, 1993 16.80 15.80 16.375 15.125 2,021 November 1, 1993 to January 31, 1994 16.68 16.07 15.875 15.00 1,867 February 1, 1994 to April 30, 1994 16.62 14.35 15.875 13.125 2,112 May 1, 1994 to July 31, 1994 15.41 14.40 14.00 13.00 1,478 August 1, 1994 to October 31, 1994 15.11 13.90 13.875 12.00 1,818 November 1, 1994 to January 31, 1995 14.02 12.77 12.75 11.25 4,025 February 1, 1995 to April 30, 1995 14.82 14.03 13.625 12.625 1,160 *Calculations are based upon Common Stock outstanding at the end of each quarter. **As reported in the consolidated transaction reporting system. ***In thousands.
OFFICERS AND DIRECTORS Arthur Zeikel, President and Director Herbert I. London, Director Robert R. Martin, Director Joseph L. May, Director Andre F. Perold, Director Terry K. Glenn, Executive Vice President Donald C. Burke, Vice President Vincent R. Giordano, Vice President Kenneth A. Jacob, Vice President Gerald M. Richard, Treasurer Mark B. Goldfus, Secretary Custodian The Bank of NewYork 90 Washington Street New York, New York 10286 Transfer Agents Common Stock: The Bank of NewYork 101 Barclay Street New York, New York 10286 Preferred Stock: IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 NYSE Symbol MYC -----END PRIVACY-ENHANCED MESSAGE-----