UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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: 04/30/03
Date of reporting period: 11/01/02 - 04/30/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
April 30, 2003
MuniYield
California
Fund, Inc.
www.mlim.ml.com
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.
MuniYield California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
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 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 these securities.
Swap
Agreements
The Fund may also invest in swap agreements, which are over-the-
counter contracts in which one party agrees to make periodic
payments based on the change in market value of a specified bond,
basket of bonds, or index in return for periodic payments based on a
fixed or variable interest rate or the change in market value of a
different bond, basket of bonds or index. Swap agreements may be
used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MuniYield California Fund, Inc., April 30, 2003
DEAR SHAREHOLDER
For the six months ended April 30, 2003, the Common Stock of
MuniYield California Fund, Inc. had a net annualized yield of 6.31%,
based on a period-end per share net asset value of $15.52 and $.486
per share income dividends. Over the same period, the total
investment return on the Fund's Common Stock was +6.00%, based on a
change in per share net asset value from $15.14 to $15.52, and
assuming reinvestment of $.486 per share ordinary income dividends.
For the six-month period ended April 30, 2003, the Fund's Auction
Market Preferred Stock had an average yield of 2.43% for Series A,
1.04% for Series B and .74% for Series C.
For a description of the Fund's total investment return based on a
change in the per share market value (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 of the Financial Statements 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
Fund's market value can vary significantly from total investment
return based on changes in the Fund's net asset value.
The Municipal Market Environment
During the six-month period ended April 30, 2003, amid considerable
weekly and monthly volatility, long-term fixed income interest rates
generally declined. Geopolitical tensions and volatile equity
valuations continued to overshadow economic fundamentals as they
have for most of the last 12 months. Reacting to the strong U.S.
equity rally that began last October, fixed income bond yields
remained under pressure in November 2002, as U.S. equity markets
continued to strengthen. During November, the Standard & Poor's 500
(S&P 500) Index rose an additional 5.50%. Equity prices were
supported by further signs of U.S. economic recovery, especially
improving labor market activity. In late November, third-quarter
2002 U.S. gross domestic product growth was 4%, well above the
second-quarter 2002 rate of 1.30%. Financial conditions were also
strengthened by a larger-than-expected reduction in short-term
interest rates by the Federal Reserve Board in early November. The
Federal Funds target rate was lowered 50 basis points (0.50%) to
1.25%, its lowest level since the 1960s. This action by the Federal
Reserve Board was largely viewed as being taken to bolster the
sputtering U.S. economic recovery. Rebounding U.S. equity markets
and the prospects for a more substantial U.S. economic recovery
pushed long-term U.S. Treasury yield levels to 5.10% by late
November.
However, into early 2003, softer equity prices and renewed investor
concerns about U.S. military action against Iraq and North Korea
again pushed bond prices higher. Reacting to disappointing holiday
sales and corporate managements' attempts to scale back analysts'
expectation of future earnings, the S&P 500 Index declined more
than 10% from December 2002 to February 2003. Fearing an eventual
U.S./Iraq military confrontation in 2003, investors again sought the
safety of U.S. Treasury obligations and the prices of fixed income
issues rose. By the end of February 2003, U.S. Treasury bond yields
had declined approximately 40 basis points to 4.67%.
Bond yields continued to fall into early March. Once direct U.S.
military action against Iraq began, bond yields quickly rose. Prior
uncertainty surrounding the Iraqi situation was obviously removed
and early U.S. military successes fostered the hope that the
conflict would be quickly and positively concluded. Concurrently,
the S&P 400 Index rose over 6% as investors, in part, sold fixed
income issues to purchase equities in anticipation of a strong
U.S. economic recovery once the Iraqi conflict was resolved. By
mid-March, U.S. Treasury bond yields again rose to above 5%.
However, as there was growing sentiment that hostilities may not be
resolved in a matter of weeks, U.S. Treasury bond yields again
declined to end the month at 4.81%.
For the six months ended April 30, 2003, long-term U.S. Treasury
bond yields ratcheted back to near 5% by mid-April, as U.S. equity
markets continued to improve and the safe-haven premium U.S.
Treasury issues had commanded prior to the beginning of the Iraqi
conflict continued to be withdrawn. However, with the quick positive
resolution of the Iraqi war, investors quickly resumed their focus
on the fragile U.S. economic recovery. Business activity in the
United States has remained sluggish, especially job creation.
Investors have also been concerned that the recent SARS outbreak
would have a material, negative impact on world economic conditions,
especially in China and Japan. First quarter 2003 U.S. gross
domestic product was released in late April initially estimating
U.S. economic activity to be growing at 1.60%, well below many
analysts' assessments. These factors, as well as the possibility
that the Federal Reserve Board could again lower short-term interest
rates to encourage more robust U.S. economic growth, pushed bond
prices higher during the last two weeks of the period. By April 30,
2003, long-term U.S. Treasury bond yields had declined to almost
4.75%. Over the past six months, long-term U.S. bond yields fell
more than 20 basis points.
For the six months ended April 30, 2003, long-term tax-exempt bond
yields also fell modestly. Yield volatility was reduced relative to
that seen in U.S. Treasury issues, as municipal bond prices were
much less sensitive to worldwide geopolitical pressures on a daily
and weekly basis. Tax-exempt bond yields generally followed their
taxable counterparts higher, responding to a more positive U.S.
fixed income environment and continued slow economic growth. After
rising approximately 10 basis points in November 2002 to 5.30%,
municipal bond yields generally declined through February 2003. At
February 28, 2003, long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, fell to approximately
5.05%. However, similar to U.S. Treasury bond yields, once military
action began in Iraq, municipal bond yields rose sharply to nearly
5.20% before declining to approximately 5.10% by the end of April.
Over the past six months, long-term tax-exempt bond yields fell
approximately 11 basis points, slightly less than U.S. Treasury
obligations.
A number of factors have combined to generate consistently strong
demand for municipal bonds throughout the six-month period ended
April 30, 2003. Generally weak U.S. equity markets have supported
continued positive demand for tax-exempt products as investors have
sought the relative security of fixed income issues. Also, with tax-
exempt money market rates near 1%, the demand for longer maturity
municipal issues has increased as investors have opted to buy longer
maturity issues rather than remain in cash reserves. Additionally,
investors received approximately $30 billion in January 2003 from
bond maturities, coupon income and proceeds from early redemptions.
However, these positive demand factors were not totally able to
offset the increase in tax-exempt new-issue supply, preventing more
significant declines in tax-exempt bond yields. This modest
underperformance has served to make municipal bonds a particularly
attractive purchase relative to their taxable counterparts.
Throughout most of the yield curve, municipal bonds have been able
to be purchased at yields near or exceeding those of comparable
Treasury issues. Compared to their recent historical averages of
82% - 88% of U.S. Treasury yields, municipal bond yield ratios in
their current 95% - 105% range are likely to prove attractive to
long-term investors.
Declining U.S. equity markets and escalating geopolitical pressures
have resulted in reduced economic activity and consumer confidence.
It is important to note that, despite all the recent negative
factors impeding the growth of U.S. businesses, the U.S. economy
still grew at an approximate 2.50% rate for all of 2002, twice that
of 2001. Similar expansion is expected for early 2003. Lower oil
prices, reduced geopolitical uncertainties, increased Federal
spending for defense, and a likely Federal tax cut are all factors
which should promote stronger economic growth later this year.
However, it is questionable to expect that business and investor
confidence can be so quickly restored as to trigger dramatic,
explosive U.S. economic growth and engender associated, large-scale
interest rate increases. The resumption of solid economic growth is
likely to be a gradual process accompanied by equally graduated
increases in bond yields. Moderate economic growth, especially
within a context of negligible inflationary pressures, should not
greatly endanger the positive fixed income environments tax-exempt
products currently enjoy.
MuniYield California Fund, Inc., April 30, 2003
Specific to California, the state's financial condition has
continued to deteriorate over the past six months. A weakened
national economy and its effect on the once powerful technology
sector led to a significant decline in income tax revenues,
resulting in a large state budget deficit. Prior to the state's
January budget revision, there was an approximate $35 billion budget
shortfall projected during the following 18-month period. One of the
efforts to close the gap was the issuance of tobacco revenue-backed
securities. California executed the largest single sale of municipal
bonds backed by revenues from the Master Settlement Agreement with
the four largest tobacco producers. California intended to come to
market with another transaction, effectively attempting to monetize
this future revenue stream, but a weakened demand for these
securities drove up borrowing costs. This second transaction, which
would total nearly $3 billion, has been postponed indefinitely. The
state has approached cutting spending, a more politically difficult
decision, and the proposed sale of nearly $3 billion of pension
bonds. The governor's office is also working with investment bankers
and caucus leaders as lawmakers consider up to $10 billion in
deficit financing to address the shortfall. However, details will
remain unclear until the state's May budget revision. The major
rating services currently have California general obligation debt
rated in the low single-A range.
Portfolio Strategy
The Fund employs leverage to attempt to provide a higher current
return of tax-exempt income to shareholders. Throughout the six
months ended April 30, 2003, we maintained a fully invested
position, with cash equivalent reserves averaging less than 2% of
total assets. Cash reserves were limited because of the tight
technical position of the California short-term marketplace. Yields
on California municipal cash equivalents were consistently averaged
near 1% throughout most of the period and are currently below 1% for
some tranches of the Fund's Preferred Stock. Our strategy was aimed
at creating a more defensive market structure within a leveraged
portfolio, which maintains both a fully invested posture and
contains a position of inverse floaters representing 14.5% of
assets. We have raised the Fund's overall average coupon levels and
shortened maturities through purchases in both the primary and
secondary California markets. The Fund's net asset value recently
exceeded $15.50, well above the original issue level of $15.00.
Going forward, our strategy is focused on protecting this price
level, since historically we have witnessed a reluctance of
municipal prices to move higher once the market has achieved these
levels. As market yields decline through 5%, retail investor demand
for California issues has historically declined. The market has
substantially exceeded these levels, and it is our aim to reduce
price volatility in the Fund from this point forward.
Steps taken to date include raising the average level of couponing
of the Fund's holdings and concentrating assets in parts of the
yield curve that we believe offer the best value for interest rate
risk taken. We have employed an interest rate swap representing 5%
of total assets to further seek to protect the Fund's asset
valuation. The use of leverage allowed the Fund to generate an above-
average yield. Consequently, it was not necessary to reach for
additional yield by compromising credit quality.
The action taken by the Federal Reserve Board in lowering interest
rates, combined with tight market technicals, resulted in a material
decrease in the Fund's borrowing cost. At April 30, 2003, the Fund
had three tranches of Preferred Stock. Two of these tranches were in
a seven-day floating rate mode; the third was fixed for a two-year
period (expiring October 2003). The decline in the short-term
interest rates has benefited the execution with respect to the two
floating rate tranches. This decline, in combination with a steep
tax-exempt yield curve, generated a material income benefit to the
Fund's Common Stock shareholder from the leveraging of the Preferred
Stock. These declines led to lower borrowing yields for the Fund and
increased yields for the Fund's Common Stock shareholder. However,
should the spread between short-term and long-term interest rates
narrow, the benefits of leverage will decline, and as a result,
reduce the yield on the Fund's Common Stock. (For a more complete
explanation of the benefits and risks of leveraging, see page 1 of
this report to shareholders.)
In Conclusion
We appreciate your 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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Kenneth A. Jacob)
Kenneth A. Jacob
Senior Vice President
(John M. Loffredo)
John M. Loffredo
Senior Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and
Portfolio Manager
May 20, 2003
PROXY RESULTS
During the six-month period ended April 30, 2003, MuniYield
California Fund, Inc.'s Common Stock shareholders voted on the
following proposal. The proposal was approved at a shareholders'
meeting on April 28, 2003. 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: Terry K. Glenn 19,509,907 371,501
James H. Bodurtha 19,511,862 369,546
Joe Grills 19,505,029 376,379
Roberta Cooper Ramo 19,517,974 363,434
Robert S. Salomon, Jr. 19,504,089 377,319
Stephen B. Swensrud 19,496,639 384,769
During the six-month period ended April 30, 2003, MuniYield
California Fund, Inc.'s Preferred Stock shareholders (Series A, B &
C) voted on the following proposal. The proposal was approved at a
shareholders' meeting on April 28, 2003. 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: Terry K. Glenn, James H. Bodurtha,
Joe Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo,
Robert S. Salomon, Jr. and Stephen B. Swensrud 4,286 8
MuniYield California Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
California--136.1% ABAG Finance Authority for Nonprofit Corporations, California,
Revenue Refunding Bonds:
A- NR* $ 2,000 COP (Episcopal Homes Foundation), 5.125% due 7/01/2018 $ 2,033
BBB NR* 1,730 (Redwood Senior Homes and Services), 6% due 11/15/2022 1,759
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) 4,444
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) 5,023
AAA Aaa 2,500 Bakersfield, California, COP, Refunding (Convention Center
Expansion Project), 5.80% due 4/01/2017 (i) 2,820
AA- Aa2 6,900 California HFA, Home Mortgage Revenue Bonds, Series D, 5.85%
due 8/01/2017 7,423
California Health Facilities Finance Authority Revenue Bonds:
AAA NR* 5,000 (Kaiser Permanente), RIB, Series 26, 9.34% due 6/01/2022 (g)(k) 5,675
NR* Aa3 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 3,031
AAA Aaa 1,490 California Health Facilities Finance Authority, Revenue
Refunding Bonds (Pomona Valley Hospital Medical Center), Series A,
5.625% due 7/01/2019 (i) 1,656
California Infrastructure and Economic Development Bank
Revenue Bonds:
AAA Aaa 2,520 (Asian Museum Foundation of San Francisco), 5.50% due
6/01/2018 (i) 2,811
A- NR* 4,730 (J. David Gladstone Institute Project), 5.50% due 10/01/2021 5,052
A- NR* 4,990 (J. David Gladstone Institute Project), 5.50% due 10/01/2022 5,303
BBB Baa3 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 13,347
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), AMT:
NR* Aaa 660 Series A-1, 6.90% due 12/01/2024 (e)(h) 739
AAA NR* 730 Series B, 6.15% due 6/01/2020 (f) 797
California State Department of Veteran Affairs, Home Purpose
Revenue Refunding Bonds:
AAA Aaa 3,000 Series A, 5.30% due 12/01/2021 (a) 3,162
AA- Aa2 5,970 Series C, 5.875% due 12/01/2015 6,505
AA- Aa2 9,315 Series C, 6.05% due 12/01/2020 (l) 10,028
AA- Aa2 2,500 Series C, 6.15% due 12/01/2027 2,597
BBB+ A3 4,500 California State, Department of Water Resources, Power Supply
Revenue Bonds, Series A, 5.75% due 5/01/2017 5,003
AA Aa3 8,000 California State Department of Water Resources Revenue Bonds
(Central Valley Project), 5.25% due 7/01/2022 8,025
A A2 2,500 California State, GO, 5.25% due 4/01/2032 2,538
California State, GO, Refunding:
A A2 8,000 5.75% due 5/01/2030 8,586
AA- A2 2,785 (Veterans), AMT, Series BJ, 5.70% due 12/01/2032 2,866
California State Public Works Board, Lease Revenue Bonds:
AAA Aaa 2,000 (California State University), Series C, 5.40% due 10/01/2022 (i) 2,137
AAA NR* 8,500 DRIVERS, Series 209, 9.635% due 3/01/2016 (a)(k) 10,391
A- Aaa 6,800 (Department of Corrections), Series A, 7% due 11/01/2004 (j) 7,528
AAA Aaa 6,645 (Department of Health Services), Series A, 5.75% due
11/01/2017 (i) 7,409
California State University and Colleges, Housing System Revenue
Refunding Bonds (c):
AAA Aaa 3,000 5.75% due 11/01/2015 3,335
AAA Aaa 3,500 5.80% due 11/01/2017 3,886
AAA Aaa 3,900 5.90% due 11/01/2021 4,341
AAA Aaa 5,250 California Statewide Communities Development Authority, COP
(John Muir/Mount Diablo Health System), 5.125% due 8/15/2022 (i) 5,466
California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A:
A- A3 2,270 6% due 10/01/2023 2,418
A- A3 3,000 5.50% due 10/01/2033 3,062
A+ A1 5,000 California Statewide Communities Development Authority Revenue
Bonds (Sutter Health), Series B, 5.50% due 8/15/2028 5,131
BBB+ Baa1 2,000 Central California, Joint Powers Health Financing Authority,
COP (Community Hospitals of Central California), 6% due 2/01/2020 2,090
AAA Aaa 2,000 Chino Basin, California, Regional Financing Authority Revenue
Bonds (Inland Empire Utility Agency Sewer Project), 5.75% due
11/01/2019 (i) 2,279
BBB NR* 1,140 Contra Costa County, California, Public Financing Authority,
Tax Allocation Revenue Bonds, Series A, 7.10% due 8/01/2022 1,164
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 (i) 2,926
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 (i) 2,747
A- A3 5,000 Golden State Tobacco Securitization Corporation, California,
Tobacco Settlement Revenue Bonds, Series 2003-A-1, 6.75% due
6/01/2039 4,423
NR* Aaa 9,957 Industry, California, Urban Development Agency, Tax Allocation
Refunding Bonds, RIB, Series 632-X, 9.41% due 5/01/2021 (i)(k) 11,955
NR* Aaa 2,000 Los Angeles, California, COP (Sonnenblick Del Rio West Los Angeles),
6.20% due 11/01/2031 (a) 2,366
AAA Aaa 10,000 Los Angeles, California, Community College District, GO, Series A,
5.50% due 8/01/2021 (i) 10,913
AAA Aaa 3,645 Los Angeles, California, Community Redevelopment Agency, Tax
Allocation Refunding Bonds (Bunker Hill), Series H, 6.50% due
12/01/2015 (g) 3,824
AAA Aaa 5,075 Los Angeles, California, Convention and Exhibition Center Authority,
Lease Revenue Refunding Bonds, DRIVERS, Series 162, 5.375% due
8/15/2018 (i)(k) 5,391
Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Refunding Bonds:
AA- Aaa 11,865 6% due 2/15/2005 (j) 12,972
NR* Aa3 4,920 RIB, Series 370, 10.36% due 2/15/2024 (k) 5,798
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
DRIVERS Derivative Inverse Tax-Exempt Receipts
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, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
California Los Angeles, California, Harbor Department Revenue Bonds, AMT:
(concluded) AAA Aaa $ 4,000 RITR, Series RI-7, 10.645% due 11/01/2026 (i)(k) $ 5,094
AA Aa3 6,000 Series B, 5.375% due 11/01/2023 6,153
AA Aa3 2,000 Series B, 6% due 8/01/2015 2,240
AAA Aaa 9,000 Los Angeles, California, Wastewater System Revenue Bonds,
Series A, 5% due 6/01/2023 (c) 9,307
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 7/01/2017 (a) 4,369
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) 5,490
AAA Aaa 8,705 Modesto, California, Wastewater Treatment Facilities Revenue Bonds,
5.625% due 11/01/2017 (i) 9,900
AAA Aaa 1,750 North City-West, California, School Facilities Financing Authority,
Special Tax Refunding Bonds, Series B, 5.75% due 9/01/2015 (g) 1,984
Oakland, California, Joint Powers Financing Authority, Lease
Revenue Bonds (Oakland Administration Buildings)(a):
AAA Aaa 2,000 5.90% due 8/01/2016 2,268
AAA Aaa 11,395 5.75% due 8/01/2021 12,849
AAA Aaa 3,500 Oakland, California, State Building Authority, Lease Revenue
Bonds (Elihu M. Harris), Series A, 5% due 4/01/2023 (a) 3,617
Oakland, California, Unified School District, Alameda County, GO,
Series F (i):
AAA Aaa 3,290 5.50% due 8/01/2017 3,685
AAA Aaa 3,770 5.50% due 8/01/2018 4,209
AAA Aaa 1,750 Pleasant Valley, California, School District, Ventura County, GO,
Series C, 5.75% due 8/01/2025 (b)(i) 1,973
AAA Aaa 10,600 Port Oakland, California, Port Revenue Refunding Bonds, Series I,
5.40% due 11/01/2017 (i) 11,776
NR* Aaa 5,808 Port Oakland, California, RIB, Refunding, AMT, Series 717X, 9.13%
due 11/01/2027 (c)(k) 6,247
AAA Aaa 4,315 Rancho Cucamonga, California, Redevelopment Agency, Tax
Allocation Refunding Bonds (Rancho Redevelopment Project), 5.25%
due 9/01/2020 (g) 4,647
AAA Aaa 2,345 Richmond, California, Redevelopment Agency, Tax Allocation,
Refunding Bonds (Harbour Redevelopment Project), Series A, 5.50%
due 7/01/2018 (i) 2,617
AAA Aaa 4,000 Roseville, California, Electric System Revenue Bonds, COP, 5.50%
due 8/01/2009 (g)(j) 4,700
AAA Aaa 5,000 Sacramento, California, Municipal Utility District, Electric
Revenue Refunding Bonds, Series L, 5.125% due 7/01/2022 (i) 5,202
Sacramento County, California, Sanitation District Financing
Authority, Revenue Refunding Bonds:
AA Aa3 4,500 RIB, Series 366, 10.111% due 12/01/2027 (k) 5,515
AA Aa3 5,695 Series A, 5.60% due 12/01/2017 6,254
AA Aa3 6,190 Series A, 5.75% due 12/01/2018 6,821
AA Aa3 3,750 Trust Receipts, Class R, Series A, 10.32% due 12/01/2019 (k) 4,576
AAA Aaa 10,100 San Bernardino, California, City Unified School District, GO,
Refunding, Series A, 5.875% due 8/01/2024 (c) 11,434
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 (i) 3,315
AAA Aaa 5,000 San Bernardino, California, Joint Powers Financing Authority,
Tax Allocation Revenue Refunding Bonds, Series A, 5.75% due
10/01/2015 (g) 5,544
San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, AMT, Second Series:
AAA Aaa 3,000 Issue 5, 6.50% due 5/01/2019 (c) 3,185
AAA Aaa 4,525 Issue 6, 6.60% due 5/01/2020 (a) 4,809
AAA Aaa 2,000 Issue 11, 6.25% due 5/01/2005 (c)(j) 2,206
AA Aa3 1,720 San Francisco, California, City and County Educational Facilities,
GO (Community College), Series A, 5.75% due 6/15/2019 1,956
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 (g) 5,080
AA Aa3 1,310 San Francisco, California, City and County Zoo Facilities, GO,
Series B, 5.75% due 6/15/2019 1,490
AAA Aaa 4,590 San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road Revenue Refunding Bonds, Series A, 5.25% due 1/15/2030 (i) 4,820
A A2 3,100 San Jose, California, Redevelopment Agency, Tax Allocation Bonds
(Merged Area Redevelopment Project), 5.25% due 8/01/2029 3,205
AAA Aaa 2,020 Santa Clara, California, Unified School District, GO, 5.50% due
7/01/2021 (c) 2,218
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 3,573
NR* Aaa 5,125 Santa Clara Valley, California, Water District, COP, Refunding,
RIB, Series 411, 10.36% due 2/01/2024 (c)(k) 5,643
AAA Aaa 4,000 Santa Monica, California, Redevelopment Agency, Tax Allocation
Bonds (Earthquake Recovery Redevelopment Project), 6% due
7/01/2029 (a) 4,612
AAA Aaa 2,000 Sequoia, California, Unified High School District, GO, 5.70%
due 7/01/2024 (g) 2,193
AAA Aaa 2,265 South Bayside, California, Waste Management Authority, Waste
System Revenue Bonds, 5.75% due 3/01/2020 (a) 2,562
AAA NR* 305 Southern California Home Finance Authority, S/F Mortgage Revenue
Bonds (Mortgage-Backed Securities Program), AMT, Series A, 6.75%
due 9/01/2022 (f) 308
AAA Aaa 3,235 Taft, California, Public Financing Authority, Lease Revenue Bonds
(Community Correctional Facility), Series A, 6.05% due 1/01/2017 (i) 3,665
A+ A1 1,310 Torrance, California, Hospital Revenue Refunding Bonds (Torrance
Memorial Medical Center), Series A, 6% due 6/01/2022 1,420
Vernon, California, Electric System Revenue Bonds (Malburg
Generating Station Project):
BBB+ A2 2,740 5.50% due 4/01/2022 2,786
BBB+ A2 1,250 5.50% due 4/01/2023 1,268
AAA Aaa 5,000 Vista, California, Joint Powers Financing Authority, Lease
Revenue Refunding Bonds, 5.625% due 5/01/2016 (i) 5,687
Puerto Rico-- AAA Aaa 2,140 Puerto Rico Commonwealth Highway and Transportation Authority,
1.9% Highway Revenue Bonds, Series Y, 5.50% due 7/01/2006 (i)(j) 2,426
AAA Aaa 2,600 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series X, 5.50% due 7/01/2025 (i) 2,794
A- Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Refunding
Bonds, Series U, 6% due 7/01/2014 1,068
MuniYield California Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Issue Value
Virgin Islands-- BBB- Baa3 $ 3,000 Virgin Islands Government Refinery Facilities Revenue Bonds
0.9% (Hovensa Coker Project), AMT, 6.50% due 7/01/2021 $ 3,035
Total Municipal Bonds (Cost--$424,123)--138.9% 458,970
Shares
Held Short-Term Securities
612 CMA California Municipal Money Fund (d) 612
Total Short-Term Securities (Cost--$612)--0.2% 612
Total Investments (Cost--$424,735)--139.1% 459,582
Variation Margin on Financial Futures Contracts**--(0.0%) (119)
Other Assets Less Liabilities--3.3% 11,085
Preferred Stock, at Redemption Value--(42.4%) (140,133)
---------
Net Assets Applicable to Common Stock--100.0% $ 330,415
=========
(a) AMBAC Insured.
(b) Escrowed to maturity.
(c) FGIC Insured.
(d) 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 612 $16
(e) FHLMC Collateralized.
(f) FNMA/GNMA Collateralized.
(g) FSA Insured.
(h) GNMA Collateralized.
(i) MBIA Insured.
(j) Prerefunded.
(k) The interest rate shown is subject to change periodically and
inversely based upon prevailing market rates. The interest rate
shown is the rate in effect at April 30, 2003.
(l) All or a portion of security held in connection with open
financial futures contracts.
* Not Rated.
** Financial futures contracts sold as of April 30, 2003 were as
follows:
(in Thousands)
Number of Expiration
Contracts Issue Date Value
200 U.S. Treasury Notes June 2003 $ 23,025
---------
Total Financial Futures Contracts Sold
(Total Contract Price--$23,111) $ 23,025
=========
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of April 30, 2003
were as follows:
Percent of
S&P Rating/Moody's Rating Total Investments
AAA/Aaa 65.1%
AA/Aa 17.7
A/A 12.4
BBB/Baa 4.7
NR (Not Rated) 0.1
STATEMENT OF NET ASSETS
As of April 30, 2003
Assets: Investments, at value (identified cost--$424,734,721) $ 459,582,105
Cash 60,535
Receivables:
Interest $ 8,933,865
Securities sold 2,463,006
Dividends 14 11,396,885
-------------
Prepaid expenses 175,257
-------------
Total assets 471,214,782
-------------
Liabilities: Payables:
Dividends to shareholders 216,388
Investment adviser 197,412
Variation margin 118,750
Other affiliates 3,632 536,182
-------------
Accrued expenses 130,788
-------------
Total liabilities 666,970
-------------
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) 140,133,224
-------------
Net Assets Net assets applicable to Common Stock $ 330,414,588
Applicable To =============
Common Stock:
Analysis of Net Common Stock, par value $.10 per share (21,295,255 shares issued and
Assets Applicable outstanding) $ 2,129,526
to Common Stock: Paid-in capital in excess of par 299,957,928
Undistributed investment income--net $ 2,813,609
Accumulated realized capital losses on investments--net (9,419,797)
Unrealized appreciation on investments--net 34,933,322
-------------
Total accumulated earnings--net 28,327,134
-------------
Total--Equivalent to $15.52 net asset value per share of Common Stock
(market price--$14.55) $ 330,414,588
=============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
MuniYield California Fund, Inc., April 30, 2003
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2003
Investment Interest $ 12,735,268
Income: Dividends 16,270
-------------
Total income 12,751,538
-------------
Expenses: Investment advisory fees $ 1,154,358
Commission fees 181,038
Accounting services 77,801
Professional fees 25,602
Transfer agent fees 22,746
Listing fees 15,701
Printing and shareholder reports 15,453
Directors' fees and expenses 14,879
Custodian fees 12,241
Pricing fees 7,846
Other 20,376
-------------
Total expenses before reimbursement 1,548,041
Reimbursement of expenses (10,157)
-------------
Total expenses after reimbursement 1,537,884
-------------
Investment income--net 11,213,654
-------------
Realized & Realized gain on investments--net 132,333
Unrealized Change in unrealized appreciation on investments--net 8,243,210
Gain On -------------
Investments--Net: Total realized and unrealized gain on investments--net 8,375,543
-------------
Dividends & Investment income--net (1,105,744)
Distributions to Realized gain on investments--net (6,976)
Preferred Stock -------------
Shareholders: Total dividends and distributions to Preferred Stock shareholders (1,112,720)
-------------
Net Increase in Net Assets Resulting from Operations $ 18,476,477
=============
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2003 2002
Operations: Investment income--net $ 11,213,654 $ 22,702,565
Realized gain on investments--net 132,333 4,745,197
Change in unrealized appreciation on investments--net 8,243,210 (6,145,783)
Dividends and distributions to Preferred Stock shareholders (1,112,720) (2,476,760)
------------- -------------
Net increase in net assets resulting from operations 18,476,477 18,825,219
------------- -------------
Dividends & Investment income--net (10,349,494) (20,592,555)
Distributions to Realized gain on investments--net (57,092) (60,340)
Common Stock ------------- -------------
Shareholders: Net decrease in net assets resulting from dividends and
distributions to Common Stock shareholders (10,406,586) (20,652,895)
------------- -------------
Common Stock Value of shares issued to Common Stock shareholders in
Transactions: reinvestment of dividends and distributions -- 1,648,690
------------- -------------
Net Assets Total increase (decrease) in net assets applicable to Common Stock 8,069,891 (178,986)
Applicable to Beginning of period 322,344,697 322,523,683
Common Stock: ------------- -------------
End of period* $ 330,414,588 $ 322,344,697
============= =============
*Undistributed investment income--net $ 2,813,609 $ 3,055,193
============= =============
See Notes to Financial Statements.
MuniYield California Fund, Inc., April 30, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios For the
have been derived from information Six Months
provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of period $ 15.14 $ 15.22 $ 14.19 $ 13.32 $ 16.23
Operating ----------- ------------ --------- --------- ---------
Performance:++ Investment income--net .53++++++++ 1.07++++++++ 1.03 1.02 1.03
Realized and unrealized gain (loss)
on investments--net .39 (.06) 1.05 .88 (2.25)
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.05) (.12) (.20) (.23) (.14)
Realized gain on investments--net --+++++ --+++++ -- -- (.04)
In excess of realized gain on
investments--net -- -- -- -- (.05)
--------- --------- --------- --------- ---------
Total from investment operations .87 .89 1.88 1.67 (1.45)
--------- --------- --------- --------- ---------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.49) (.97) (.85) (.80) (.88)
Realized gain on investments--net --+++++ --+++++ -- -- (.24)
In excess of realized gain on
investments--net -- -- -- -- (.34)
--------- --------- --------- --------- ---------
Total dividends and distributions to
Common Stock shareholders (.49) (.97) (.85) (.80) (1.46)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 15.52 $ 15.14 $ 15.22 $ 14.19 $ 13.32
========= ========= ========= ========= =========
Market price per share, end of period $ 14.55 $ 14.46 $ 15.10 $ 13.0625 $ 12.625
========= ========= ========= ========= =========
Total Investment Based on market price per share 4.05%+++ 2.18% 22.71% 10.18% (16.13%)
Return:** ========= ========= ========= ========= =========
Based on net asset value per share 6.00%+++ 6.14% 13.85% 13.45% (9.70%)
========= ========= ========= ========= =========
Ratios Based on Expenses, net of reimbursement*** .95%* .99% 1.00% 1.02% .98%
Average Net ========= ========= ========= ========= =========
Assets of Total expenses*** .96%* .99% 1.00% 1.02% .98%
Common Stock: ========= ========= ========= ========= =========
Total investment income--net*** 6.96%* 7.13% 7.00% 7.51% 6.86%
========= ========= ========= ========= =========
Amount of dividends to Preferred
Stock shareholders .69%* .77% 1.37% 1.69% .96%
========= ========= ========= ========= =========
Investment income--net, to Common
Stock shareholders 6.27%* 6.36% 5.63% 5.82% 5.90%
========= ========= ========= ========= =========
Ratios Based on Total expenses, net of reimbursement .67%* .69% .69% .69% .68%
Average Net ========= ========= ========= ========= =========
Assets Of Total expenses .67%* .69% .69% .69% .68%
Common & ========= ========= ========= ========= =========
Preferred Total investment income--net 4.86%* 4.95% 4.83% 5.05% 4.77%
Stock:*** ========= ========= ========= ========= =========
Ratios Based on Dividends to Preferred Stock
Average Net shareholders 1.59%* 1.76% 3.04% 3.47% 2.18%
Assets of ========= ========= ========= ========= =========
Preferred Stock:
Supplemental Net assets applicable to Common Stock,
Data: end of period (in thousands) $ 330,415 $ 322,345 $ 322,524 $ 300,503 $ 282,114
========= ========= ========= ========= =========
Preferred Stock outstanding, end of
period (in thousands) $ 140,000 $ 140,000 $ 140,000 $ 140,000 $ 140,000
========= ========= ========= ========= =========
Portfolio turnover 12.17% 49.87% 58.17% 93.01% 146.39%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $ 3,360 $ 3,302 $ 3,304 $ 3,146 $ 3,015
========= ========= ========= ========= =========
Dividends Per Series A--Investment income--net $ 301 $ 607 $ 802 $ 865 $ 527
Share On ========= ========= ========= ========= =========
Preferred Stock Series B--Investment income--net $ 129 $ 322 $ 721 $ 875 $ 546
Outstanding: ========= ========= ========= ========= =========
Series C--Investment income--net $ 92 $ 292 $ 745 $ 875 $ 591
========= ========= ========= ========= =========
*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.
+++Aggregate total investment return.
+++++Amount is less than $(.01) per share.
++++++++Based on average shares outstanding.
See Notes to Financial Statements.
MuniYield California Fund, Inc., April 30, 2003
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. 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. 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 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). 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 investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movement 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 is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* Forward interest rate swaps--The Fund is authorized to enter into
forward interest rate swaps. In a forward interest rate swap, the
Fund and the counterparty agree to pay or receive interest on a
specified notional contract amount, commencing on a specified future
effective date, unless terminated earlier. The value of the
agreement is determined by quoted fair values received daily by the
Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of
the agreement.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual basis. 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.
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,
2003, FAM reimbursed the Fund in the amount of $10,157.
For the six months ended April 30, 2003, the Fund reimbursed FAM
$5,225 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, 2003 were $55,504,030 and
$57,729,077, respectively.
Net realized gains (losses) for the six months ended April 30, 2003
and net unrealized gains as of April 30, 2003 were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 1,038,396 $ 34,847,384
Financial futures contracts (906,063) 85,938
------------ ------------
Total $ 132,333 $ 34,933,322
============ ============
As of April 30, 2003, net unrealized appreciation for Federal income
tax purposes aggregated $35,012,620, of which $35,816,068 related
to appreciated securities and $803,448 related to depreciated
securities. The aggregate cost of investments at April 30, 2003 for
Federal income tax purposes was $424,569,485.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of stock
without approval of the holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended April 30,
2003 remained constant and during the year ended October 31, 2002
increased by 110,780 as a result of dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock ("AMPS") 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, 2003 were: Series A, 3.14%; Series B, 1.15% and Series C, .95%.
Shares issued and outstanding during the six months ended April 30,
2003 and during the year ended October 31, 2002 remained constant.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 2003, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), an affiliate of FAM, earned $37,656 as commissions.
5. Capital Loss Carryforward:
On October 31, 2002, the Fund had a net capital loss carryforward of
$7,985,889, all of which expires in 2008. 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 $.081000 per share on May 29, 2003 to
shareholders of record on May 16, 2003.
MuniYield California Fund, Inc., April 30, 2003
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its
net investment income to its shareholders on a monthly basis. In
order to provide shareholders with a more consistent yield to the
current trading price of shares of Common Stock of the Fund, the
Fund may at times pay out less than the entire amount of net
investment income earned in any particular month and may at times in
any month pay out such accumulated but undistributed income in
addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more
or less than the amount of net investment income earned by the Fund
during such month. The Fund's current accumulated but undistributed
net investment income, if any, is disclosed in the Statement of Net
Assets, which comprises part of the Financial Information included
in this report.
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
Brian D. Stewart, Secretary
Melvin R. Seiden, Director of MuniYield California Fund, Inc., has
recently retired. The Fund's Board of Directors wishes Mr. Seiden
well in his retirement.
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
100Church Street
New York, NY 10286
NYSE Symbol
MYC
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (not answered until
July 15, 2003 and only annually for funds)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. -N/A (not answered until July 15, 2003 and only annually
for funds)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-
3 under the Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees.
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A (not answered until July 1, 2003)
Item 8--Reserved
Item 9(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.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. 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 23, 2003
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 23, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniYield California Fund, Inc.
Date: June 23, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.