-----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, PloE0yEbPDtMPfknGLi1J4hPNoHQxNh82EpP4Enzl5hoqvN9b2YP2Bot2L87lND5 Tmmi+v4LQ1ruoMP0uC1idA== 0000900092-97-000113.txt : 19970612 0000900092-97-000113.hdr.sgml : 19970612 ACCESSION NUMBER: 0000900092-97-000113 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970611 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: 97622105 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-30D 1 SEMI-ANNUAL REPORT MUNIYIELD CALIFORNIA FUND, INC. FUND LOGO Semi-Annual Report April 30, 1997 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 volatility of net asset value and market price of shares of the Common Stock, and the risk that fluctuations in the short-term dividend rates of the Preferred Stock may affect the yield to Common Stock shareholders. Statements and other information herein are as dated and are subject to change. MuniYield California Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MuniYield California Fund, Inc. TO OUR SHAREHOLDERS For the six months ended April 30, 1997, the Common Stock of MuniYield California Fund, Inc. earned $0.462 per share income dividends, which included earned and unpaid dividends of $0.074. This represents a net annualized yield of 6.13%, based on a month- end net asset value of $15.19 per share. Over the same period, the total investment return on the Fund's Common Stock was +1.51%, based on a change in per share net asset value from $15.44 to $15.19, and assuming reinvestment of $0.466 per share income dividends. For the six-month period ended April 30, 1997, the Fund's Auction Market Preferred Stock had an average yield of 3.62% for Series A and 3.46% for Series B. The Municipal Market Environment Long-term tax-exempt revenue bonds traded in a relatively narrow range throughout much of the six-month period ended April 30, 1997. By mid-January 1997, municipal bond yields rose to over 6% as in- vestors reacted negatively to reports of progressively stronger domestic economic growth. However, a continued lack of any material inflationary pressures allowed bond yields to decline to their prior levels by late February. Bond yields rose again as investors became increasingly concerned that the US domestic economic strength seen thus far in 1997 would continue, and that the increase in short-term interest rates by the Federal Reserve Board in late March would be the first in a series of such moves designed to slow the US economy before any dormant inflationary pressures were awakened. Long-term tax-exempt bond yields rose approximately 15 basis points (0.15%) to almost 6.15% by mid-April. Similarly, long-term US Treasury bond yields rose over 35 basis points over the same period to 7.16%. However, in late April economic indicators were released showing that despite considerable economic growth any inflationary pressures, particularly those associated with wage increases, were well-contained and of no immediate concern. Fixed-income bond prices staged a significant rally during the last week in April with long- term US Treasury bond yields falling nearly 20 basis points to end the month at 6.95%. Municipal bond yields, as measured by the Bond Buyer Revenue Bond Index, declined nearly 15 basis points to stand at 6.01% by April 30, 1997. As in recent quarters, the relative stability of long-term tax- exempt bond yields was supported by low levels of new municipal bond issuance. During the six months ended April 30, 1997, approximately $90 billion in long-term tax-exempt bonds was underwritten, a decline of over 6% compared to the corresponding period a year earlier. During the three-month period ended April 30, 1997, $41 billion in new long-term municipal bonds was issued, also a 6% decline in issuance compared to the three months ended April 30, 1996. Overall investor demand remained strong, particularly from property and casualty insurance companies and individual retail investors. In recent years, investor demand increased whenever tax- exempt bond yields approached or exceeded the 6% level as they have in the past few months. Additionally, in recent months much of the new bond issuance was dominated by a number of larger issues. These included $710 million in New York City water bonds, $600 million in state of California bonds, $1 billion in New York City general obligation bonds, $435 million in Dade County, Florida water and sewer revenue bonds, $450 million in Puerto Rico Electric Authority issues and $930 million in Port Authority of New York and New Jersey issues. These bonds have typically been issued in states with relatively high state income taxes and consequently were generally underwritten at yields that were relatively unattractive to residents in other states. This has exacerbated the general decline in overall issuance in recent years, making the decrease in supply even more dramatic for general market investors. The present economic situation remains nearly ideal. The domestic economy continues to grow steadily with little, if any, signs of a resurgence in inflation. Recent economic growth generated considerable unexpected tax revenues for the Federal government. Forecasts for the 1997 Federal fiscal deficit were reduced to under $100 billion, a level not seen since the early 1980s. Such a reduced Federal deficit enhances the prospect for a balanced Federal budget. All these factors support a scenario of steady, or even falling, interest rates in the coming years. Present annual estimates of future municipal bond issuance remain centered around $175 billion, indicating that the current relative scarcity of tax-exempt bonds should continue for at least the remainder of the year. Should interest rates begin to decline later this year, either as the result of a balanced Federal budget or continued benign inflation, investors are unlikely to be able to purchase long-term municipal bonds at their currently attractive levels. Portfolio Strategy During the six-month period ended April 30, 1997, the municipal market conformed to a fairly well-defined trading range, albeit at less expensive levels than those seen in recent history. As long- term US Treasury interest rates rose to 7% and California municipal bonds approached 6%, we took a more aggressive investment stance for MuniYield California Fund, Inc. Generally, demand for municipal bonds has historically increased when interest rates reach the levels currently seen, and the recent marketplace has proved to be no exception. This increased interest in municipal bonds combined with a drastic decrease in California municipal issuance has created an unusually thin marketplace. Therefore, as interest rates rose we attempted to utilize any periods of market weakness to add aggressively structured, higher-yielding securities to the portfolio mix. We intend to remain focused on seeking to provide an above- industry average current yield while enhancing the Fund's net asset value. Because of the inordinately narrow nature of credit quality spreads, the Fund's portfolio is concentrated in higher-rated credits with over 84% of portfolio assets in securities rated AA or better by at least one of the major rating services. In Conclusion We appreciate your ongoing interest in MuniYield California Fund, Inc., and we look forward to assisting you with your financial needs in the months and years to come. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Vincent R. Giordano) Vincent R. Giordano Senior Vice President (Walter C. O'Connor) Walter C. O'Connor Vice President and Portfolio Manager May 28, 1997 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 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. 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 PCR Pollution Control Revenue Bonds RAN Revenue Anticipation Notes RIB Residual Interest Bonds RITR Residual Interest Trust Receipts S/F Single-Family 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--96.3% Anaheim, California, Public Financing Authority, Lease Revenue Bonds (Public Improvement Project), Sub-Series C (f): AAA Aaa $22,750 5.95%** due 9/01/2022 $ 5,087 AAA Aaa 10,000 5.98%** due 9/01/2023 2,105 AAA Aaa 5,000 6%** due 9/01/2025 932 AAA Aaa 19,430 6%** due 9/01/2026 3,389 AAA Aaa 10,000 6.05%** due 9/01/2029 1,456 California Health Facilities Financing Authority Revenue Bonds: AA Aa3 1,000 (Kaiser Permanente), Series A, 7% due 12/01/2010 1,091 AAA Aaa 2,000 (Kaiser Permanente), Series A, 7% due 10/01/2018 (c) 2,131 AAA Aaa 1,000 Refunding (Adventist Health), Series A, 6.50% due 3/01/2014 (c) 1,060 AAA Aaa 2,000 Refunding (Insured Catholic Health Facility), Series B, 5% due 7/01/2014 (b) 1,838 AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,396 NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 3,022 A+ A 3,600 (Sutter Health Hospital), Series 89-A, 6.70% due 1/01/2013 3,732 California HFA, Home Mortgage Revenue Bonds: AA- Aa 1,105 AMT, Series C, 7.45% due 8/01/2011 1,138 AA- Aa 2,585 AMT, Series E-1, 6.70% due 8/01/2025 2,674 AA- Aa 4,955 AMT, Series F-1, 7% due 8/01/2026 5,226 AA- Aa 970 Series D, 7.25% due 8/01/2017 1,020 AA- Aa 2,850 California HFA, Revenue Bonds, RIB, AMT, 9.112% due 8/01/2023 (h) 2,982 A1+ NR* 100 California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas and Electric Co.), VRDN, Series C, 4.15% due 11/01/2026 (a) 100 California Pollution Control Financing Authority, PCR (Southern California Edison), VRDN (a): A1 VMIG1++ 700 Series A, 4.10% due 2/28/2008 700 A1 VMIG1++ 800 Series B, 4.10% due 2/28/2008 800 NR* P1 2,100 California Pollution Control Financing Authority, Resource Recovery Revenue Bonds (Delano Project), VRDN, AMT, Series 1991, 4.45% due 8/01/2019 (a) 2,100
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California (continued) A1+ VMIGI++ $1,400 California Pollution Control Financing Authority, Solid Waste Disposal Revenue Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT, Series A, 4.15% due 10/01/2024 (a) $ 1,400 AA Aa 5,000 California State Department of Water Resources, Water System Revenue Bonds (Central Valley Project), Series O, 5% due 12/01/2022 4,482 California State Public Works Board, Lease Revenue Bonds (g): A Aaa 3,000 (California Community College), Series A, 6.75% due 9/01/2001 3,295 A Aaa 6,800 (Department of Corrections--Monterey County, Soledad II), Series A, 7% due 11/01/2004 7,805 A A 3,600 (Various California State University Projects), Series A, 6.625% due 10/01/2002 3,964 A Aaa 9,800 (Various California State University Projects), Series A, 6.70% due 10/01/2002 10,860 A Aaa 3,535 (Various Community College Projects), Series B, 7% due 3/01/2004 4,023 SP1+ MIG1++ 2,200 California State, RAN, Series A, 4.50% due 6/30/1997 2,202 AA Aa 4,750 California Statewide Community Development Authority Revenue Bonds, COP (Saint Joseph Health System Group), 6.625% due 7/01/2021 5,133 A+ Aaa 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital), 6.60% due 11/01/2002 (g) 3,303 BBB NR* 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 1,061 AAA Aaa 2,000 Cucamonga County, California, Water District Facilities Refinancing Bonds, COP, 6.50% due 9/01/2022 (d) 2,132 AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds (Senior Lien Project Loans), Series A, 6.75% due 11/01/2015 (b) 422 East Bay, California, Municipal Utility District, Water System Subordinated Revenue Refunding Bonds (d): AAA Aaa 1,750 5% due 6/01/2016 1,607 AAA Aaa 2,000 5% due 6/01/2026 1,789 AAA Aaa 1,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds (El Cajon Redevelopment Project), 6.60% due 10/01/2022 (b) 1,074 BBB Baa 1,875 Inglewood, California, Public Financing Authority Revenue Bonds (Manchester- Prairie-North Inglewood Industrial Park Project), Series B, 7% due 5/01/2022 1,990 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) 3,918 A+ Aa3 3,600 Los Angeles, California, Department of Water and Power, Electric Plant Revenue Refunding Bonds, 6.375% due 2/01/2020 3,744 AAA Aaa 3,925 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds, 6.30% due 7/01/2024 (c) 4,097 Los Angeles, California, Harbor Department Revenue Bonds: AA Aa 4,240 AMT, Series B, 6.60% due 8/01/2015 4,532 AA Aa 6,855 AMT, Series B, 6.625% due 8/01/2019 7,295 AAA Aaa 4,000 RITR, 8.345% due 11/01/2026 (c)(h) 4,230 AAA Aaa 3,000 Los Angeles, California, Wastewater System Revenue Bonds, Series D, 6.625% due 12/01/2012 (c) 3,213 AAA Aaa 5,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50% due 9/01/2000 (c)(g) 5,388
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California (continued) Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue Bonds: AAA Aaa $ 7,875 (Proposition C), Second Series A, 5% due 7/01/2025 (b) $ 7,035 AAA Aaa 5,000 Refunding (Proposition A), Series A, 5% due 7/01/2021 (d) 4,436 AA- Aaa 6,500 Los Angeles County, California, Transportation Commission, Sales Tax Revenue Bonds, Series A, 6.75% due 7/01/2001 (g) 7,121 M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project): A A3 5,000 Refunding, Series H, 5.90% due 7/01/2020 4,950 AAA Aaa 6,155 Series E, 6.50% due 7/01/2017 (c) 6,584 Metropolitan Water District, Southern California Waterworks Revenue Bonds: AA Aa 6,000 6.625% due 7/01/2001(g) 6,538 AAA Aaa 2,000 Refunding, Series B, 5% due 7/01/2014 (c) 1,858 AA Aa 6,100 Series C, 5% due 7/01/2027 5,448 AAA Aaa 5,000 Mountain View, California, Tax Allocation Bonds (Shoreline Regional Community Park), Series A, 5.50% due 8/01/2021 (c) 4,818 AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds, RIB, 9.04% due 9/02/2025 (c)(h) 2,831 AAA Aaa 7,840 Orange County, California, Local Transportation Authority, Sales Tax Revenue Bonds, RITR, Series B, 8.27% due 2/14/2011 (d)(h) 8,310 A NR* 5,000 Palmdale, California, Civic Authority, Revenue Refunding Bonds (Merged Redevelopment Project), Series A, 6.60% due 9/01/2034 5,304 AAA Aaa 3,700 Pittsburg, California, Public Financing Authority, Wastewater Revenue Refunding Bonds, Series A, 5.125% due 6/01/2015 (d) 3,454 AAA Aaa 3,905 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Bonds (Rancho Redevelopment Project), 6.75% due 9/01/2020 (c) 4,163 NR* A2 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower Memorial Hospital), 7% due 3/01/2002 (g) 4,160 AAA Aaa 2,225 Redding, California, Joint Powers Financing Authority, Lease Revenue Bonds (Civic Center Project), Series A, 5.25% due 3/01/2026 (c) 2,069 Redwood City, California, Public Financing Authority, Local Agency Revenue Bonds: AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,377 A- NR* 1,500 Series B, 7.25% due 7/15/2011 1,630 AAA Aaa 7,950 Riverside County, California, Transportation Commission, Sales Tax Revenue Refunding Bonds, Series A, 6% due 6/01/2005 (d) 8,511 A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80% due 11/01/2001(g) 19,856 Sacramento, California, Municipal Utility District, Electric Revenue Bonds, Series B (c): AAA Aaa 3,180 6.25% due 8/15/2011 3,349 AAA Aaa 4,865 6.375% due 8/15/2022 5,106 AAA Aaa 4,890 San Diego, California, Public Facilities Financing Authority, Sewer Revenue Bonds, Series B, 5.25% due 5/15/2027 (d) 4,542
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) California (concldued) San Francisco, California, City and County Airport Commission, International Airport Revenue Bonds, Second Series: AAA Aaa $ 1,500 AMT, Issue 5, 6.50% due 5/01/2019 (d) $ 1,572 AAA Aaa 4,525 AMT, Issue 6, 6.60% due 5/01/2020 (b) 4,773 AAA Aaa 11,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 11,803 AA- A1 5,480 San Francisco, California, City and County, GO (Various Purpose Projects), UT, Series A, 6.50% due 12/15/2010 5,760 San Francisco, California, City and County Public Utilities Commission, Water Revenue Bonds, Series A: AA- Aaa 5,000 6.50% due 11/01/2001 (g) 5,455 AA- Aa 2,000 Refunding, 5% due 11/01/2015 1,846 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 (f) 5,167 AAA Aaa 1,310 San Jose, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Merged Area Redevelopment Project), 5.50% due 8/01/2017 (c) 1,273 AAA Aaa 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) 3,389 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) 10,440 AA A1 5,000 Santa Clara County, California, Transportation District, Sales Tax Revenue Bonds, Series A, 6.75% due 6/01/2011 5,414 AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds (Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (c) 3,069 AAA Aaa 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater Project), Series A, 6.50% due 9/01/2002 (d)(g) 8,476 AAA NR* 1,125 Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT, Series A, 6.75% due 9/01/2022 (e) 1,157 A A 2,700 Southern California Public Power Authority, Power Project Revenue Refunding Bonds, 5.50% due 7/01/2020 2,516 AAA Aaa 5,000 Stockton, California, Revenue Bonds, COP (Wastewater Treatment Plant Expansion), Series A, 6.80% due 9/01/2024 (d) 5,487 AAA Aaa 1,730 Stockton, California, Unified School District, COP (Capital Financing Projects), 5.375% due 2/01/2022 (c) 1,638 AAA Aaa 3,750 Tracy, California, Area Public Facilities Financing Agency, Special Tax Community Facilities District, 5.50% due 10/01/2021 (c) 3,613 University of California Revenue Bonds: A NR* 3,300 Refunding (Multiple Purpose Projects), Series A, 6.875% due 9/01/2002 (g) 3,668 AAA Aaa 6,645 RITR, Series 13, 8% due 9/01/2019 (c)(h) 7,168
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value Ratings Ratings Amount Issue (Note 1a) Puerto Rico--2.3% A Baa1 $5,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue Refunding Bonds, Series V, 6.625% due 7/01/2012 $ 5,870 BBB+ Baa1 2,600 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6.375% due 7/01/2024 2,728 Total Investments (Cost--$350,369)--98.6% 369,670 Other Assets Less Liabilities--1.4% 5,258 -------- Net Assets--100.0% $374,928 ======== (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, 1997. (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 based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 1997. ++Highest short-term ratings by Moody's Investors Service, Inc. *Not rated. **Represents a zero coupon bond; the interest rate shown is the effective yield at the time of purchase by the Fund. See Notes to Financial Statements.
FINANCIAL INFORMATION Statement of Assets, Liabilities and Capital as of April 30, 1997 Assets: Investments, at value (identified cost--$350,368,631) (Note 1a) $369,670,419 Cash 18,153 Receivables: Securities sold $ 14,071,041 Interest receivable 6,476,262 20,547,303 ------------ Deferred organization expenses (Note 1e) 1,859 Prepaid expenses and other assets 14,186 ------------ Total assets 390,251,920 ------------ Liabilities: Payables: Securities purchased 14,566,290 Dividends to shareholders (Note 1f) 542,468 Investment adviser (Note 2) 152,976 15,261,734 ------------ Accrued expenses and other liabilities 61,728 ------------ Total liabilities 15,323,462 ------------ Net Assets: Net assets $374,928,458 ============ Capital: Capital Stock (200,000,000 shares authorized) (Note 4): Preferred Stock, par value $.05 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 233,789,454 Undistributed investment income--net 2,762,686 Accumulated realized capital losses on investments--net (Note 5) (2,603,626) Unrealized appreciation on investments--net 19,301,788 ------------ Total--Equivalent to $15.19 net asset value per share Common Stock (market price--$14.75) 254,928,458 ------------ Total capital $374,928,458 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
FINANCIAL INFORMATION (continued) Statement of Operations For the Six Months Ended April 30, 1997 Investment Income Interest and amortization of premium and discount earned $ 11,005,795 (Note 1d): Expenses: Investment advisory fees (Note 2) $ 939,162 Commission fees (Note 4) 149,544 Professional fees 36,705 Accounting services (Note 2) 34,936 Transfer agent fees 28,115 Printing and shareholder reports 19,818 Custodian fees 14,311 Listing fees 11,939 Directors' fees and expenses 11,130 Pricing fees 4,022 Amortization of organization expenses (Note 1e) 915 Other 11,723 ------------ Total expenses 1,262,320 ------------ Investment income--net 9,743,475 ------------ Realized & Realized gain on investments--net 1,313,639 Unrealized Gain Change in unrealized appreciation on investments--net (5,276,746) (Loss) on ------------ Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,780,368 (Notes 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 April 30, October 31, Increase (Decrease) in Net Assets: 1997 1996 Operations: Investment income--net $ 9,743,475 $ 19,405,691 Realized gain on investments--net 1,313,639 279,008 Change in unrealized appreciation on investments--net (5,276,746) 4,438,485 ------------ ------------ Net increase in net assets resulting from operations 5,780,368 24,123,184 ------------ ------------ Dividends to Investment income--net: Shareholders Common Stock (7,825,946) (15,619,604) (Note 1f): Preferred Stock (2,107,465) (4,164,120) ------------ ------------ Net decrease in net assets resulting from dividends to shareholders (9,933,411) (19,783,724) ------------ ------------ Net Assets: Total increase (decrease) in net assets (4,153,043) 4,339,460 Beginning of period 379,081,501 374,742,041 ------------ ------------ End of period* $374,928,458 $379,081,501 ============ ============ *Undistributed investment income--net $ 2,762,686 $ 2,952,622 ============ ============ See Notes to Financial Statements.
FINANCIAL INFORMATION (concluded) Financial Highlights
The following per share data and ratios have been derived For the Six from information provided in the financial statements. Months Ended For the April 30, Year Ended October 31, Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993 Per Share Net asset value, beginning of period $ 15.44 $ 15.18 $ 13.91 $ 16.60 $ 14.03 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .58 1.16 1.18 1.23 1.22 Realized and unrealized gain (loss) on investments--net (.23) .28 1.53 (2.65) 2.62 -------- -------- -------- -------- -------- Total from investment operations .35 1.44 2.71 (1.42) 3.84 -------- -------- -------- -------- -------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.47) (.93) (.90) (1.00) (.99) Realized gain on investments--net -- -- (.25) (.07) (.08) -------- -------- -------- -------- -------- Total dividends and distributions to Common Stock shareholders (.47) (.93) (1.15) (1.07) (1.07) -------- -------- -------- -------- -------- Effect of Preferred Stock activity: Dividends and distributions to Preferred Stock shareholders: Investment income--net (.13) (.25) (.25) (.19) (.18) Realized gain on investments--net -- -- (.04) (.01) (.02) -------- -------- -------- -------- -------- Total effect of Preferred Stock activity (.13) (.25) (.29) (.20) (.20) -------- -------- -------- -------- -------- Net asset value, end of period $ 15.19 $ 15.44 $ 15.18 $ 13.91 $ 16.60 ======== ======== ======== ======== ======== Market price per share, end of period $ 14.75 $ 14.875 $ 13.375 $ 12.125 $ 15.625 ======== ======== ======== ======== ======== Total Investment Based on market price per share 2.31%+++ 18.68% 20.62% (16.36%) 15.56% Return:** ======== ======== ======== ======== ======== Based on net asset value per share 1.51%+++ 8.54% 19.33% (9.69%) 26.88% ======== ======== ======== ======== ======== Ratios to Average Expenses .67%* .67% .69% .66% .69% Net Assets:*** ======== ======== ======== ======== ======== Investment income--net 5.19%* 5.16% 5.48% 5.44% 5.35% ======== ======== ======== ======== ======== Supplemental Net assets, net of Preferred Stock, end of Data: period (in thousands) $254,928 $259,082 $254,742 $233,425 $278,522 ======== ======== ======== ======== ======== Preferred Stock outstanding, end of period (in thousands) $120,000 $120,000 $120,000 $120,000 $120,000 ======== ======== ======== ======== ======== Portfolio turnover 43.33% 67.48% 69.59% 78.89% 21.68% ======== ======== ======== ======== ======== Leverage: Asset coverage per $1,000 $ 3,124 $ 3,159 $ 3,123 $ 2,945 $ 3,321 ======== ======== ======== ======== ======== Dividends Series A--Investment income--net $ 449 $ 875 $ 882 $ 694 $ 547 Per Share on ======== ======== ======== ======== ======== Preferred Stock Series B--Investment income--net $ 429 $ 860 $ 864 $ 615 $ 688 Outstanding:++ ======== ======== ======== ======== ======== *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. ++Dividends per share have been adjusted to reflect a two-for-one stock split that occurred on December 1, 1994. +++Aggregate total investment return. See Notes to Financial Statements.
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 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 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 secur-ity transactions are determined on the identified cost basis. NOTES TO FINANCIAL STATEMENTS (concluded) (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, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended April 30, 1997 were $157,168,731 and $169,164,741, respectively. Net realized and unrealized gains (losses) as of April 30, 1997 were as follows: Realized Unrealized Gains Gains (Losses) Long-term investments $ 1,313,639 $19,303,388 Short-term investments -- (1,600) ----------- ----------- Total $ 1,313,639 $19,301,788 =========== =========== As of April 30, 1997, net unrealized appreciation for Federal income tax purposes aggregated $19,301,788, of which $19,850,811 related to appreciated securities and $549,023 related to depreciated securities. The aggregate cost of investments at April 30, 1997 for Federal income tax purposes was $350,368,631. 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, 1997, shares issued and outstanding remained constant at 16,781,559. At April 30, 1997, total paid-in capital amounted to $235,467,610. 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, 1997 were as follows: Series A, 3.585% and Series B, 4.00%. As of April 30, 1997, there were 4,800 AMPS shares authorized, issued and outstanding with a liquidation preference of $25,000 per share. The Fund pays commissions to certain broker-dealers at the end of each auction at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of each auction. For the six months ended April 30, 1997, Merrill Lynch, Pierce, Fenner & Smith Inc., an affiliate of FAM, earned $88,176 as commissions. 5. Capital Loss Carryforward: At April 30, 1997, the Fund had a net capital loss carryforward of approximately $2,658,000, all of which expires in 2003. This amount will be available to offset like amounts of any future taxable gains. 6. Subsequent Event: On May 9, 1997, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $.074230 per share, payable on May 29, 1997 to shareholders of record as of May 19, 1997. OFFICERS AND DIRECTORS Arthur Zeikel, President and Director James H. Bodurtha, Director Herbert I. London, Director Robert R. Martin, Director Joseph L. May, Director Andre F. Perold, Director Terry K. Glenn, Executive Vice President Vincent R. Giordano, Senior Vice President Donald C. Burke, Vice President Kenneth A. Jacob, Vice President Walter C. O'Connor, Vice President Gerald M. Richard, Treasurer Custodian The Bank of New York 90 Washington Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 NYSE Symbol MYC -----END PRIVACY-ENHANCED MESSAGE-----