MUNIYIELD
CALIFORNIA
FUND, INC.
STRATEGIC
Performance
FUND LOGO
Annual Report
October 31, 1994
Officers and Directors
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MYC
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 rep-
resentation 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 like-
lihood 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.
MuniYield
California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MuniYield California Fund, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1994, the Common Stock of MuniYield
California Fund, Inc. earned $1.062 per share income dividends,
which includes earned and unpaid dividends of $0.083. This
represents a net annualized yield of 7.66%, based on a month-end net
asset value of $13.91 per share. Over the same period, the total
investment return on the Fund's Common Stock was -9.69%, based on a
change in per share net asset value from $16.60 to $13.91, and
assuming reinvestment of $1.067 per share income dividends.
For the six-month period ended October 31, 1994, the total
investment return on the Fund's Common Stock was -2.51%, based on a
change in per share net asset value from $14.81 to $13.91, and
assuming reinvestment of $0.502 per share income dividends.
For the six-month period ended October 31, 1994, the Fund's Auction
Market Preferred Stock had an average yield of 2.97% for Series A
and 2.84% for Series B.
The Environment
As discussed in our last report to shareholders, the Federal Reserve
Board moved to counteract inflationary pressures by tightening
monetary policy. This trend continued during the May--October
period. Despite the series of preemptive strikes against inflation
by the central bank, concerns of increasing inflationary pressures
continued to prompt volatility in the US capital markets during the
period. In addition, the weakness of the US dollar in foreign
exchange markets prolonged stock and bond market declines.
Ongoing strength in the manufacturing sector and better-than-
expected economic results continue to fuel speculation that the
Federal Reserve Board will continue to raise short-term interest
rates in the months ahead. However, although consumer spending is
increasing, it is doing so at a lower rate than has been the case in
recent economic recoveries. In the weeks ahead, investors will
continue to assess economic data and inflationary trends in order to
gauge whether further increases in short-term interest rates are
imminent. Continued indications of moderate and sustainable levels
of economic growth would be positive for the US capital markets. At
the same time, greater US dollar stability in foreign exchange
markets would help to dampen expectations of significantly higher
short-term interest rates.
<PAGE>
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
three months ended October 31, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by almost 50 basis points (0.50%) to 6.95%
during the October 31, 1994 quarter. This represents the highest
level in tax-exempt bond yields in over two years. US Treasury bonds
suffered even greater declines during the quarter as Treasury bond
yields rose approximately 60 basis points to end the quarter at
8.00%.
The tax-exempt bond market reacted negatively throughout the October
quarter to indications that, despite a series of interest rate
increases by the Federal Reserve Board, the strength of the domestic
economy seen in recent quarters has not yet been significantly
reduced. While inflationary pressures have remained well contained,
additional Federal Reserve Board actions have been expected both to
ensure that domestic economic growth is eventually confined to
current levels and to assure nervous financial markets of its anti-
inflationary intentions.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the quarter ended October 31, 1994, only $32 billion
in long-term tax-exempt securities were issued, a decline of over
50% versus the October 31, 1993 quarter. Similarly, for the six
months ended October 31, 1994, only $75 billion in municipal
securities were underwritten, a decline of over 50% versus the
comparable period a year earlier. This reduction in issuance in
recent quarters has allowed the municipal bond market to react to
both the decline in investor demand and the rise in fixed-income
yields in a more orderly fashion than in similar situations in the
past, particularly during 1987.
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for long-
term investors.
<PAGE>
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
The California municipal bond market experienced two notable
positive technical developments over the past year. First, following
a series of rating downgrades because of budgetary shortfalls from
an ailing, contracting state economy, California stabilized as a
municipal credit. The general improvement in the overall national
economic scene was shared, although to a lesser degree, by
California, providing a base for its municipal securities to be
purchased with greater confidence by tax-exempt investors. Second,
issuance of California municipal bonds, although still the highest
of any state, is down drastically from prior years' figures. This
provided some degree of support for a marketplace that witnessed a
historic rise in long-term interest rates over the past year. We
manage MuniYield California Fund, Inc.'s assets to seek a high
current return to shareholders consistent with prudent investment
management. The Fund's fully invested posture allowed it to generate
a substantial level of tax-exempt income, yet during periods of
price volatility subjected the Fund's price valuation to market
swings. Throughout the past year, we tried to cushion the volatility
by concentrating the Fund's assets in securities of above-industry
average coupons. These holdings are less price sensitive to market
volatility than securities accruing at a steep discount to par
value. We maintained a high percentage of the Fund's assets
concentrated in AA or better rated securities during a period
characterized by extremely tight credit quality yield spreads.
Again, as market volatility increases, better-quality holdings are
more liquid and should provide a better cushion in the event of
falling bond prices.
<PAGE>
In the beginning of the Fund's fiscal year, we had a relatively
large percentage of assets concentrated in prerefunded securities.
Prerefunded bonds are of the highest quality in municipal credits,
yet as they approach the refund date the large price premium they
command runs off. To capture this premium prior to its erosion, we
sold a portion of the securities throughout the year with the
proceeds being reinvested in similarly couponed, higher-yielding
bonds. We intend to keep the Preferred Stock of the Fund in a short-
term maturity mode in order to enhance the leverage effect of high
current return to the Common Stock shareholders. (For a complete
explanation of the Fund's leveraging strategy, see "The Benefits and
Risks of Leveraging" on page 3 of this report to shareholders.) We
are looking forward to a scenario for municipal bonds where eventual
slowing of the US economy provides price stability in a technically
strong California municipal marketplace.
In Conclusion
We appreciate your ongoing interest in MuniYield California Fund,
Inc., and we look forward to serving your investment needs in the
months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
November 23, 1994
<PAGE>
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.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced. 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.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
California--93.2%
AAA Aaa $ 5,000 Anaheim, California, Public Financing Authority Revenue Bonds (Electric
Utilities San Juan 4), Second Series, 5.75% due 10/01/2022 (d) $ 4,325
AAA Aaa 1,500 Brea, California, Public Financing Authority, Water Revenue Bonds, Series B,
6.25% due 7/01/2021 (d) 1,409
AAA Aaa 10,900 Brea, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(Redevelopment Project AB), 5.50% due 8/01/2017 (c) 9,236
California Educational Facilities Authority Revenue Bonds:
NR* Baa1 1,775 (Mills College), 6.875% due 9/01/2022 1,714
AA Aa 1,000 (University of Southern California Project), Series B, 6.75% due 10/01/2015 1,005
<PAGE>
California Health Facilities Financing Authority Revenue Bonds:
AA Aa2 1,000 (Kaiser Permanente), Series A, 7% due 12/01/2010 1,019
AA Aa2 2,500 (Kaiser Permanente), Series A, 6.75% due 10/01/2019 2,447
AAA Aaa 1,000 Refunding (Adventist Health), Series A, 6.50% due 3/01/2014 (c) 986
AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,153
NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 2,674
A+ A1 3,600 (Sutter Health), Series 89A, 6.70% due 1/01/2013 3,555
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 2,880 AMT, Series C, 7.45% due 8/01/2011 2,939
AA- Aa 2,550 AMT, Series E-1, 6.70% due 8/01/2025 2,423
AA- Aa 5,000 AMT, Series F-1, 7% due 8/01/2026 4,936
AA- Aa 1,275 Series D, 7.25% due 8/01/2017 1,276
AA- Aa 920 Series F, 7.875% due 8/01/2019 929
AA- Aa 3,000 California HFA, Revenue Bonds, AMT, RIB, 9.111% due 8/01/2023 (h) 2,602
California Pollution Control Financing Authority, PCR (Southern California
Edison):
A+ Aa3 8,000 Refunding, Series C, 6.85% due 12/01/2008 8,238
A-1 P1 2,100 VRDN, Series A, 3.50% due 2/28/2008 (a) 2,100
NR* P1 1,100 California Pollution Control Financing Authority, Resource Recovery Revenue
Refunding Bonds (Ultra Power-Rocklin), VRDN, AMT, Series A, 3.75% due
6/01/2017 (a) 1,100
A1+ VMIG1 1,200 California Pollution Control Financing Authority, Solid Waste Disposal Revenue
Bonds (Shell Oil Co.-Martinez Project), VRDN, AMT, Series A, 3.55% due
10/01/2024 (a) 1,200
California Public Works Board, Lease Revenue Bonds, Series A:
A- A 3,000 (California Community Colleges), 6.75% due 9/01/2011 2,994
A A 6,800 (Department of Corrections-Monterey County), 7% due 11/01/2019 6,784
A- A 5,100 (Various California State University Projects), 6.625% due 10/01/2010 5,053
A- A 9,800 (Various California State University Projects), 6.70% due 10/01/2017 9,488
</TABLE>
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 Minimun Tax (subject to)
COP Certificate of Participation
GO General Obligation Bonds
HFA Housing Finance Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt
Securities
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
California (continued)
California State Department of Water Resources Revenue Bonds (Central Valley
Project):
AA Aa $ 5,000 Refunding, Series L, 5.625% due 12/01/2012 $ 4,431
AA Aa 5,500 RITES, 8.488% due 12/01/2021 (h) 4,386
AAA Aaa 3,000 California Statewide Community Development Authority, Lease Revenue Refunding
Bonds (Oakland Convention Centers Project), 6% due 10/01/2010 (b) 2,870
<PAGE>
AA Aa 4,750 California Statewide Community Development Authority Revenue Bonds, COP (Saint
Joseph Health System Group), 6.625% due 7/01/2021 4,642
NR* Baa1 5,895 Concord, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Central
Concord Redevelopment Project), Sub-Series A, 6% due 7/01/2019 5,289
A+ A1 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital), 6.60% due
11/01/2012 2,858
BBB NR* 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 986
AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds (Senior Lien
Project Loans), Series A, 6.75% due 11/01/2015 (b) 396
AAA Aaa 2,150 Culver City, California, Wastewater Facilities Revenue Bonds, Series A, 6.75% due
9/01/2016 (d) 2,162
AAA Aaa 3,500 East Bay, California, Municipal Utility District Water System, Subordinated
Revenue Refunding Bonds, 6% due 6/01/2012 (c) 3,286
AAA Aaa 1,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds (El Cajon
Redevelopment Project), 6.60% due 10/01/2022 (b) 989
BBB NR* 1,500 Fresno, California, Joint Powers Financing Authority, Local Agency Revenue
Refunding Bonds, Series A, 6.55% due 9/02/2012 1,408
AAA Aaa 5,000 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (b) 4,845
BBB Baa 1,955 Inglewood, California, Public Financing Authority Revenue Bonds (Manchester-
Praire-North Inglewood & Industrial Park Project), Series B, 7% due 5/01/2022 1,906
A1 VMIG1 1,200 Irvine, California, Improvement Board Act of 1915, VRDN (Assessment District
Number 94-15), 3.50% due 9/02/2020 (a) 1,200
A1 VMIG1 1,400 Irvine Ranch, California, Water District, District Numbers 140-240-105-250,
VRDN, 3.50% due 4/01/2033 (a) 1,400
AA Aa 5,535 Long Beach, California, Water Revenue Refunding Bonds, 6.25% due 5/01/2024 5,110
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) 3,543
Los Angeles, California, Department of Water and Power, Electric Plant Revenue
Refunding Bonds:
AA Aa 2,000 5.75% due 9/01/2013 1,779
AA Aa 1,000 6.375% due 2/01/2020 947
<PAGE>
AAA Aaa 3,925 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds,
6.30% due 7/01/2024 (c) 3,723
Los Angeles, California, Wastewater System Revenue Bonds (c):
AAA Aaa 5,130 Refunding, Series A, 5.70% due 6/01/2020 4,427
AAA Aaa 4,130 Series B, 5.70% due 6/01/2023 3,542
AAA Aaa 3,000 Series D, 6.625% due 12/01/2012 3,012
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
California (continued)
AAA Aaa $11,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50%
due 9/01/2013 (c) $ 10,852
Los Angeles County, California, Transportation Commission, Sales Tax Revenue
Bonds, Series A:
AA- Aaa 6,800 6.75% due 7/01/2001 (g) 7,344
AAA Aaa 1,500 Proposition C, Second Series, 6.25% due 7/01/2013 (c) 1,438
AAA Aaa 3,000 Proposition C, Second Series, 6% due 7/01/2023 (c) 2,720
AA- A1 2,000 Refunding, 7% due 7/01/2019 2,028
M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project):
A A 5,000 Series C, 6.875% due 7/01/2019 4,996
AAA Aaa 2,955 Series E, 6.50% due 7/01/2017 (c) 2,903
Metropolitan Water District, Southern California, Waterworks Revenue Bonds:
AA NR* 6,000 6.75% due 7/01/2001 (g) 6,480
AA Aa 4,000 6.625% due 7/01/2012 3,993
AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds,
RIB, 9.355% due 9/02/2025 (c)(h) 2,362
AAA Aaa 8,000 Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, Second Series, RIB, 8.111% due 2/14/2011 (d)(h) 7,290
A Aaa 5,000 Palmdale, California, Civic Authority Revenue Refunding Bonds (Merged
Redevelopment Project Areas), Series A, 6.60% due 9/01/2034 5,013
A+ A1 5,000 Pasadena, California, COP, Refunding Bonds (Old Pasadena Package Facility
Project), 6.25% due 1/01/2018 4,681
AAA Aaa 3,905 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Bonds
(Rancho Redevelopment Project), 6.75% due 9/01/2020 (c) 3,895
<PAGE>
NR* A 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower
Memorial Hospital), 7% due 3/01/2022 3,652
Redwood City, California, Public Financing Authority, Local Agency Revenue
Bonds:
AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,004
A- NR* 1,500 Series B, 7.25% due 7/15/2011 1,535
A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80% due
11/01/2001 (g) 19,537
A+ Aa3 4,100 San Diego, California, IDR (San Diego Gas & Electric), Series A, 6.40% due
9/01/2018 3,857
San Francisco, California, City and County Airport Commission, International
Airport Revenue Bonds, Second Series:
AAA Aaa 2,000 Issue 5, AMT, 6.50% due 5/01/2019 (d) 1,912
AAA Aaa 2,500 Issue 5, AMT, 6.50% due 5/01/2024 (d) 2,375
AAA Aaa 4,525 Issue 6, AMT, 6.60% due 5/01/2020 (b) 4,376
AAA Aaa 11,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 10,837
AA- A1 5,480 San Francisco, California, City and County, GO, UT (Variable Purpose Projects),
Series A, 6.50% due 12/15/2010 5,512
A+ A1 2,000 San Jose, California, Financing Authority Revenue Refunding Bonds (Convention
Center Project), Series C, 6.30% due 9/01/2010 1,922
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <S> <C> <S> <C>
California (concluded)
AAA Aaa $ 5,000 Santa Ana, California, Financing Authority, Lease Revenue Bonds (Police
Administration and Holdings Facility), Series A, 6.25% due 7/01/2024 (c) $ 4,748
AAA Aaa 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) 3,097
AA A1 5,000 Santa Clara County, California, Transportation District, Sales Tax Revenue Bonds,
Series A, 6.75% due 6/01/2011 5,049
SP-1+ NR* 7,300 Santa Cruz County, California, TRAN, GO, 4.50% due 8/01/1995 7,298
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (c) 2,790
<PAGE>
AAA Aaa 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater Project),
Series A, 6.50% due 9/01/2022 (d) 7,555
AAA NR* 1,145 Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT,
Series A, 6.75% due 9/01/2022 (e) 1,093
A A 3,960 Southern California Public Power Authority, Power Revenue Bonds (Multiple Projects),
6.75% due 7/01/2012 3,943
Southern California Public Power Authority Revenue Bonds (Transmission Project):
AAA Aaa 6,000 Refunding, 5.75% due 7/01/2021 (c) 5,202
AA- Aa 1,400 RIB, 8.012% due 7/01/2012 (h) 1,176
University of California Revenue Bonds (Multiple Purpose Projects):
A- A 3,300 Refunding, Series A, 6.875% due 9/01/2002 (g) 3,596
AAA Aaa 3,765 Series D, 6.375% due 9/01/2019 (c) 3,609
Puerto Rico--4.8%
A Baa1 6,350 Puerto Rico Commonwealth, GO, UT, 6.50% due 7/01/2023 6,110
A Baa1 4,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Refunding Bonds, Series V, 6.625% due 7/01/2012 3,960
Puerto Rico Electric Power Authority, Power Revenue Bonds:
A- Baa1 1,715 Refunding, Series N, 7.125% due 7/01/2014 1,765
A- Baa1 2,000 Refunding, Series S, 7% due 7/01/2007 2,085
A- Baa1 2,985 Series P, 7% due 7/01/2021 3,021
Total Investments (Cost--$356,122)--98.0% 346,333
Other Assets Less Liabilities--2.0% 7,092
--------
Net Assets--100.0% $353,425
========
<FN>
*Not Rated.
(a)The interest rate is subject to change periodically based
upon prevailing market rates. The interest rates shown
are those in effect at October 31, 1994.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FNMA/GNMA Collateralized.
(f)FSA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically and
inversely to the prevailing market rate. The interest rates
shown are the rates in effect at October 31, 1994.
<PAGE>
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$356,122,367) (Note 1a) $346,333,384
Cash 85,617
Receivables:
Securities sold $ 17,347,618
Interest 6,712,571 24,060,189
------------
Deferred organization expenses (Note 1e) 13,469
Prepaid expenses 26,778
------------
Total assets 370,519,437
------------
Liabilities: Payables:
Securities purchased 16,338,833
Dividends to shareholders (Note 1g) 514,160
Investment adviser (Note 2) 152,448 17,005,441
------------
Accrued expenses 88,656
------------
Total liabilities 17,094,097
------------
Net Assets: Net assets $353,425,340
============
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,400 shares of AMPS*
issued and outstanding at $50,000 per share liquidation preference) $120,000,000
Common Stock, par value $.10 per share (16,781,559 shares issued
and outstanding) $ 1,678,156
Paid-in capital in excess of par 233,789,721
Undistributed investment income--net 2,869,102
Undistributed realized capital gains--net 4,877,344
Unrealized depreciation on investments--net (9,788,983)
------------
Total--Equivalent to $13.91 net asset value per share of Common
Stock (market price--$12.125) 233,425,340
------------
Total capital $353,425,340
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned. $ 23,159,510
Income
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 1,896,483
Commission fees (Note 4) 300,776
Professional fees 59,970
Transfer agent fees 44,196
Accounting services (Note 2) 39,587
Printing and shareholder reports 37,881
Custodian fees 29,067
Listing fees 24,836
Directors' fees and expenses 22,980
Pricing fees 13,972
Amortization of organization expenses (Note 1e) 5,798
Other 15,206
------------
Total expenses 2,490,752
------------
Investment income--net 20,668,758
------------
Realized & Realized gain on investments--net 4,877,369
Unrealized Change in unrealized appreciation/depreciation on investments--net (49,417,622)
Gain (Loss) ------------
on Investments Net Decrease in Net Assets Resulting from Operations $(23,871,495)
- --Net (Notes ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 20,668,758 $ 20,280,402
Realized gain on investments--net 4,877,369 1,294,043
Change in unrealized appreciation/depreciation on
investments--net (49,417,622) 42,476,677
------------ ------------
Net increase (decrease) in net assets resulting from operations (23,871,495) 64,051,122
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (16,790,151) (16,558,026)
Shareholders Preferred Stock (3,140,796) (2,963,328)
(Note 1g): Realized gain on investments--net:
Common Stock (1,122,166) (1,322,361)
Preferred Stock (171,888) (323,088)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (21,225,001) (21,166,803)
------------ ------------
<PAGE>
Common Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends and distributions -- 2,135,067
(Note 4): ------------ ------------
Net increase in net assets derived from capital stock transactions -- 2,135,067
------------ ------------
Net Assets: Total increase (decrease) in net assets (45,096,496) 45,019,386
Beginning of year 398,521,836 353,502,450
------------ ------------
End of year* $353,425,340 $398,521,836
============ ============
*Undistributed investment income--net $ 2,869,102 $ 2,131,291
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived For the Feb. 28,
from information provided in the financial statements. Year Ended 1992++ to
October 31, October 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.60 $ 14.03 $ 14.18
Operating --------- --------- ---------
Performance: Investment income--net 1.23 1.22 .77
Realized and unrealized gain (loss) on investments--net (2.65) 2.62 (.07)
--------- --------- ---------
Total from investment operations (1.42) 3.84 .70
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (1.00) (.99) (.55)
Realized gain on investments--net (.07) (.08) --
--------- --------- ---------
Total dividends and distributions to Common Stock
shareholders (1.07) (1.07) (.55)
--------- --------- ---------
Capital charge resulting from issuance of Common Stock -- -- (.02)
--------- --------- ---------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net (.19) (.18) (.14)
Realized gain on investments--net (.01) (.02) --
Capital charge resulting from issuance of Preferred Stock -- -- (.14)
--------- --------- ---------
Total effect of Preferred Stock activity (.20) (.20) (.28)
--------- --------- ---------
Net asset value, end of period $ 13.91 $ 16.60 $ 14.03
========= ========= =========
Market price per share, end of period $ 12.125 $ 15.625 $ 14.50
========= ========= =========
Total Based on market price per share (16.36%) 15.56% 0.43%+++
Investment ========= ========= =========
Return:** Based on net asset value per share (9.69%) 26.88% 2.79%+++
========= ========= =========
Ratios to Expenses, net of reimbursement .66% .69% .54%*
Average ========= ========= =========
Net Assets:*** Expenses .66% .69% .71%*
========= ========= =========
Investment income--net 5.44% 5.35% 5.65%*
========= ========= =========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 233,425 $ 278,522 $ 233,502
========= ========= =========
Preferred Stock outstanding, end of period (in thousands) $ 120,000 $ 120,000 $ 120,000
========= ========= =========
Portfolio turnover 78.89% 21.68% 28.75%
========= ========= =========
Dividends Per Series A--Investment income--net $ 1,388 $ 1,093 $ 898
Share On Series B--Investment income--net 1,229 1,376 962
Preferred Stock
Outstanding:
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value,
result in substantially different returns. Total investment
returns exclude the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 10, 1992.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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 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, which are traded on exchanges, are valued at
their closing prices as of the close of such exchanges. Options,
which are traded on exchanges, are valued at their last sale price
as of the close of such exchanges or, lacking any sales, at the last
available bid price. Securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market
value. Securities for which market quotations are not readily
available are valued at their fair value as determined in good faith
by or under the direction of the Board of Directors of the Fund.
<PAGE>
(b) 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.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Non-income producing investments--Written and purchased options
are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), which is also an indirect wholly-
owned subsidiary of ML & Co.
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, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $283,941,386 and
$290,857,510, respectively.
Net realized and unrealized gains (losses) as of October 31, 1994
were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $ 5,901,965 $(9,788,983)
Short-term investments (1,024,596) --
----------- -----------
Total $ 4,877,369 $(9,788,983)
=========== ===========
<PAGE>
As of October 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $9,788,983, of which $3,121,785
related to appreciated securities and $12,910,768 related to
depreciated securities. The aggregate cost of investments at October
31, 1994 for Federal income tax purposes was $356,122,367.
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 year ended October 31, 1994, shares issued
and outstanding remained constant at 16,781,559. At October 31,
1994, total paid-in capital amounted to $235,467,877.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at October 31, 1994 were:
Series A, 3.15% and Series B, 3.15%.
For the year ended October 31, 1994, there were 2,400 AMPS shares
authorized, issued and outstanding with a liquidation preference of
$50,000 per share, plus accumulated and unpaid dividends of
$180,430. Effective December 1, 1994 as a result of a two-for-one
stock split there will be 4,800 AMPS shares with a liquidation
preference of $25,000 per share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1994, MLPF&S, an affiliate of Merrill Lynch Investment
Management, Inc., earned $236,012 as commissions.
5. Subsequent Event:
On November 8, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.082808 per share, payable on November 29, 1994 to shareholders
of record as of November 18, 1994.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniYield California Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
California Fund, Inc. as of October 31, 1994, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the two-year period
then ended and the period February 28, 1992 (commencement of
operations) to October 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield California Fund, Inc. as of October 31, 1994, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 5, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
MuniYield California Fund, Inc. during its taxable year ended
October 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally the following table summarizes the per share capital
gain distributions declared by the Fund during
the year:
<PAGE>
<TABLE>
<CAPTION>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <S> <C> <C> <C>
Common Stock Shareholders 12/30/93 $ 0.066869 --
Preferred Stock Shareholders: Series A 12/02/93 $62.84 --
Series B 11/26/93 $46.90 --
12/02/93 $33.50 --
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (UNAUDITED)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
November 1, 1992 to January 31, 1993 $.31 $ .03 $ .85 $.25 $.05 $.08 $.02
February 1, 1993 to April 30, 1993 .31 .01 .70 .24 .05 -- --
May 1, 1993 to July 31, 1993 .30 .01 .22 .24 .04 -- --
August 1, 1993 to October 31, 1993 .31 .03 .77 .26 .05 -- --
November 1, 1993 to January 31, 1994 .31 .13 .02 .26 .04 .07 .01
February 1, 1994 to April 30, 1994 .30 .36 (2.24) .24 .05 -- --
May 1, 1994 to July 31, 1994 .31 .03 .23 .25 .05 -- --
August 1, 1994 to October 31, 1994 .31 (.22) (.96) .25 .05 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
November 1, 1992 to January 31, 1993 $14.83 $14.05 $14.875 $14.25 997
February 1, 1993 to April 30, 1993 16.00 14.53 15.50 14.625 1,387
May 1, 1993 to July 31, 1993 15.96 15.49 15.50 14.625 1,329
August 1, 1993 to October 31, 1993 16.80 15.80 16.375 15.125 2,021
November 1, 1993 to January 31, 1994 16.68 16.07 15.875 15.00 1,867
February 1, 1994 to April 30, 1994 16.62 14.35 15.875 13.125 2,112
May 1, 1994 to July 31, 1994 15.41 14.40 14.00 13.00 1,478
August 1, 1994 to October 31, 1994 15.11 13.90 13.875 12.00 1,818
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
