MUNIYIELD
CALIFORNIA
FUND, INC.
FUND LOGO
Annual Report
October 31, 1995
Officers and Directors
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
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, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYC
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California Fund, Inc.
for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders.
<PAGE>
MuniYield
California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Fund, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1995, the Common Stock of MuniYield
California Fund, Inc. earned $0.896 per share income dividends,
which included earned and unpaid dividends of $0.075. This
represents a net annualized yield of 5.90%, based on a month-end net
asset value of $15.18 per share. Over the same period, the total
investment return on the Fund's Common Stock was +19.33%, based on a
change in per share net asset value from $13.91 to $15.18, and
assuming reinvestment of $0.903 per share income dividends and
$0.246 per share capital gains distributions.
For the six-month period ended October 31, 1995, the total
investment return on the Fund's Common Stock was +7.95%, based on a
change in per share net asset value from $14.54 to $15.18, and
assuming reinvestment of $0.438 per share income dividends.
For the six-month period ended October 31, 1995, the Fund's Auction
Market Preferred Stock had an average yield of 4.15% for Series A
and 3.67% for Series B.
<PAGE>
The Environment
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
Another significant development has been the strengthening of the US
dollar relative to the yen and the Deutschemark. Improving interest
rate differentials favoring the US currency, combined with
coordinated central bank intervention and more positive investor
sentiment, have helped to bolster the dollar in foreign exchange
markets. Other factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows to the
United States and the prospect of increased capital outflows from
Japan. However, it remains to be seen if the US dollar's
strengthening trend can continue without significant improvements in
the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
The Municipal Market
Tax-exempt bond yields continued to decline during the six-month
period ended October 31, 1995. As measured by the Bond Buyer Revenue
Bond Index, the yield on uninsured, long-term municipal revenue
bonds fell 30 basis points (0.30%) to end the October period at
approximately 6.00%. While tax-exempt bond yields have declined
dramatically from their highs one year ago, municipal bond yields
have exhibited considerable yield volatility on a weekly basis. In
recent months, tax-exempt bond yields have fluctuated by as much as
20 basis points on a week-to-week basis. US Treasury bond yields
have displayed similar volatility, but the extent of their decline
has been greater. By the end of October, long-term US Treasury bond
yields had declined almost 100 basis points to 6.33%. Proposed
Federal tax restructuring continued to weigh heavily on the tax-
exempt bond market. Thus far in 1995, US Treasury bond yields have
declined approximately 150 basis points. Municipal bond yields have
fallen approximately 95 basis points as the uncertainty surrounding
any changes to the existing Federal income tax structure has
prevented the municipal bond market from rallying as strongly as its
taxable counterpart.
<PAGE>
A general view of a moderately expanding domestic economy, supported
by a very favorable inflationary environment, allowed interest rates
to significantly decline from their recent highs in November 1994.
However, this decline was not a smooth downward curve. Conflicting
economic indicators were released during recent months that have
prevented a clear consensus regarding the near-term direction of
interest rates from being reached. The resultant uncertainty has
promoted more of a saw-toothed pattern as interest rate declines
were repeatedly interrupted by indications of stronger-than-expected
economic growth. As these concerns were overcome by subsequent
weaker economic releases, interest rate declines have resumed. These
periods of volatility are likely to continue for the remainder of
1995, or until proposed Federal budget deficit reduction packages
are resolved and any resultant responses by the Federal Reserve
Board have occurred.
However, the municipal bond market's technical position remained
supportive throughout recent quarters. Approximately $82 billion in
long-term municipal securities were issued during the six months
ended October 31, 1995. While this issuance is virtually identical
to underwritings during the October 31, 1994 quarter, tax-exempt
bond issuance over the last 12 months remained approximately 25%
below comparable 1994 levels. The municipal bond market should
maintain this positive technical position well into 1996. Annual
issuance for 1995 is now projected to be approximately $140 billion,
significantly less than last year's already low level of $162
billion. Projected maturities and early redemptions for the
remainder of 1995 and throughout 1996 will lead to a continued
decline in the total outstanding municipal bond supply throughout
1996 and, perhaps, into 1998 should new bond issuance remain at
historically low levels.
Despite the municipal bond market's relative underperformance
compared to the US Treasury market thus far in 1995, the extent of
the tax-exempt bond market's rally was nonetheless quite impressive.
Municipal bond yields have fallen 135 basis points from their highs
reached in November 1994 and municipal bond prices rose accordingly.
Most tax-exempt products recouped almost all of the losses incurred
in 1994 and are well on their way to posting double-digit total
returns for all of 1995. This relative underperformance so far in
1995 provided long-term investors with the rare opportunity to
purchase tax-exempt securities at yield levels near those of taxable
securities.
<PAGE>
Additionally, many of the factors that led to the relative
underperformance of the tax-exempt bond market thus far in 1995,
namely investor concern regarding Federal budget deficit reductions
and proposed changes in the Federal income tax structure, are
nearing resolution. The Federal budget reconciliation process has
already begun, and may be essentially completed by year-end. Recent
public opinion polls suggest that the majority of American taxpayers
prefer the existing Federal income tax system compared to proposed
changes, such as the flat tax or national sales tax. In an upcoming
election year, neither party is likely to advocate a clearly
unpopular position, particularly one that can be expected to
negatively impact the Federal budget deficit reduction program
through reduced tax revenues. As these factors are resolved, we
believe that much of the resistance that the municipal bond market
met this year should dissipate. This should allow municipal bond
yields to significantly decline from current levels in order to
return to more normal historic yield relationships.
Portfolio Strategy
Over the past 12 months, the Fund's performance was reflective of
the management strategies we employed over two distinct investment
periods. Toward the end of 1994, we believed the drastic rise in
longer maturity fixed-income security yields, combined with an
improved technical condition of the overall marketplace, restored
value to the municipal market. Consequently, we positioned the
portfolio in an aggressive stance with a minimal cash reserve
position.
This strategy was established a bit prematurely and, as a result,
the Fund's net asset value suffered toward the final months of 1994
as the municipal market continued to deteriorate. However, as a
better scenario for the municipal market began to unfold in 1995,
the Fund's more aggressive posture allowed the portfolio to benefit
from the price appreciation achieved as interest rates came down.
The Fund's appreciation can also be attributed to its above-average
credit quality. At October 31, 1995, 72% of the Fund's total assets
were invested in securities rated AA or better by at least one of
the major rating agencies. The general tightness of yield spreads
over the range of credit qualities allowed the Fund to maintain this
level of quality without significant sacrifice of current yield.
Recently, we adopted a more cautious approach to the bond market
since it has reached yield levels that historically have proved
unattractive to retail investors. The portfolio's asset mix was
restructured to a more defensive posture with higher-couponed issues
replacing more market-sensitive performance securities. In order to
maintain a relatively high degree of current return, cash equivalent
reserves are still minimal in a range of 7%--10%. Therefore, even
though the Fund reduced its volatility to market swings, its low
cash position should allow sufficient price appreciation should
interest rates continue to decline.
<PAGE>
Short-term tax-exempt interest rates traded in the 3.25%--4.00% range
throughout most of the last six months. This has continued to
generate significant beneficial impact upon the yield paid to the
Fund's Common Stock shareholders. 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 complete explanation of the benefits and
risks of leveraging, see page 5 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 ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Portfolio Manager
November 28, 1995
We are pleased to announce that Walter C. O'Connor is responsible
for the day-to-day management of MuniYield California Fund, Inc. Mr.
O'Connor has been employed by Merrill Lynch Asset Management, L.P.
(an affiliate of the Fund's investment adviser) since 1993 as Vice
President and Portfolio Manager, and was Assistant Vice President
from 1991 to 1993. Prior thereto, he was Assistant Vice President
with Prudential Securities from 1984 to 1991.
<PAGE>
PROXY RESULTS
During the six-month period ended October 31, 1995, MuniYield
California Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on June 16, 1995. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1.To elect the Fund's Board of Directors: Herbert I. London 15,796,421 636,389
Robert R. Martin 15,796,421 636,389
Arthur Zeikel 15,797,089 635,721
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2.To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year. 15,750,601 141,298 540,911
</TABLE>
<TABLE>
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
California Fund, Inc. Preferred Stock shareholders (Series A and B)
voted on the following proposals. The proposals were approved at a
special shareholders' meeting on June 16, 1995. The description of
each proposal and number of shares voted are as follows:
<PAGE>
Shares Voted Shares Voted
For Without Authority
1.To elect the Fund's Board of Directors: Herbert I. London, Robert
R. Martin, Joseph L. May, Andre F. Perold and Arthur Zeikel as
follows:
<S> <C> <C>
Series A 1,900 0
Series B 2,364 0
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
2.To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year as follows:
<S> <C> <C> <C>
Series A 1,900 0 0
Series B 2,364 0 0
</TABLE>
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.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield California Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax
(subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
RIB Residual Interest Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California--94.3%
<S> <S> <C> <S> <C>
California Health Facilities Financing Authority Revenue Bonds:
A1+ VMIG1++ $ 1,800 (Catholic Health Care), VRDN, Series C, 3.60% due 7/01/2020 (a)(c) $ 1,800
A1+ NR* 2,200 (Huntington Memorial Hospital), VRDN, 3.75% due 11/01/2010 (a) 2,200
AA Aa3 1,000 (Kaiser Permanente), Series A, 7% due 12/01/2010 1,093
AAA Aaa 2,000 (Kaiser Permanente), Series A, 7% due 10/01/2018 (c) 2,210
AAA Aaa 1,000 Refunding (Adventist Health), Series A, 6.50% due 3/01/2014 (c) 1,054
AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,445
NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 2,943
A+ A 3,600 (Sutter Health), Series 89-A, 6.70% due 1/01/2013 3,801
<PAGE>
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 2,635 AMT, Series C, 7.45% due 8/01/2011 2,764
AA- Aa 2,600 AMT, Series E-1, 6.70% due 8/01/2025 2,664
AA- Aa 5,000 AMT, Series F-1, 7% due 8/01/2026 5,241
AA- Aa 1,275 Series D, 7.25% due 8/01/2017 1,363
AA- Aa 870 Series F, 7.875% due 8/01/2019 918
AA- Aa 2,950 California HFA, Revenue Bonds, RIB, AMT, 8.777% due 8/01/2023 (h) 3,075
California Pollution Control Financing Authority, Resource Recovery
Revenue Bonds, VRDN, AMT (a):
A1 VMIG1++ 300 (Atlantic Richfield Company Project), Series A, 3.95% due 12/01/2024 300
NR* P1 1,500 (Delano Project), 4% due 8/01/2019 1,500
NR* P1 300 (Delano Project), Series 1991, 4% due 8/01/2019 300
NR* Aa3 500 (Honey Lake Power Project), 4% due 9/01/2018 500
NR* P1 300 Refunding (Ultra Power Rocklin Project), Series A, 4.05% due 6/01/2017 300
California Public Works Board, Lease Revenue Bonds:
A- A 3,000 (California Community Colleges), Series A, 6.75% due 9/01/2011 3,171
A- A 6,800 (Department of Corrections-Monterey County), Series A, 7% due 11/01/2019 7,397
A- A 5,100 (Various California State University Projects), Series A, 6.625% due 10/01/2010 5,360
A- A 9,800 (Various California State University Projects), Series A, 6.70% due 10/01/2017 10,316
A- A 1,550 (Various Community College Projects), 7% due 3/01/2014 1,687
A- A 3,535 (Various Community College Projects), 7% due 3/01/2019 3,831
AAA Aaa 17,900 (Various Universities of California Projects), Series A, 6.60% due 12/01/2002 (g) 20,442
A A1 3,980 California State, GO, 5.25% due 10/01/2013 3,772
A A1 5,000 California State, GO, Variable Purpose Bonds, 5.90% due 4/01/2023 4,959
California Statewide Community Development Authority Revenue Bonds, COP:
AA Aa 4,750 (Saint Joseph Health System Group), 6.625% due 7/01/2021 5,074
A1 VMIG1++ 2,500 (Sutter Health Obligation Group), VRDN, 3.80% due 7/01/2015 (a)(b) 2,500
A+ A1 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital), 6.60% due
11/01/2012 3,118
BBB NR* 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 1,057
AAA Aaa 2,000 Cucamonga County, California, Water District Facilities Refinancing Bonds,
COP, 6.50% due 9/01/2022 (d) 2,121
AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds
(Senior Lien Project Loans), Series A, 6.75% due 11/01/2015 (b) 429
AAA Aaa 3,500 East Bay, California, Municipal Utility District, Water System,
Subordinated Revenue Refunding Bonds, 6% due 6/01/2012 (c) 3,587
AAA Aaa 1,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds
(El Cajon Redevelopment Project), 6.60% due 10/01/2022 (b) 1,068
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
BBB Baa $ 1,930 Inglewood, California, Public Financing Authority Revenue Bonds
(Manchester-Prairie-North Inglewood Industrial Park Project), Series B,
7% due 5/01/2022 $ 1,999
AA Aa 1,000 Kings River Conservation District, California, Revenue Refunding Bonds
(Pine Flat Power), Series D, 6.375% due 1/01/2012 1,037
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) 3,863
AAA Aaa 4,000 Los Angeles, California, Convention and Exhibition Center Authority, Lease Revenue
Refunding Bonds, Series A, 5.375% due 8/15/2018 (c) 3,825
AAA Aaa 3,925 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds,
6.30% due 7/01/2024 (c) 4,117
AA Aa 3,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B,
6.625% due 8/01/2019 3,130
AAA Aaa 3,000 Los Angeles, California, Wastewater System Revenue Bonds, Series D,
6.625% due 12/01/2012 (c) 3,214
AAA Aaa 12,900 Los Angeles County, California, COP (Correctional Facilities Project),
6.50% due 9/01/2013 (c) 13,558
Los Angeles County, California, Transportation Commission, Sales Tax
Revenue Bonds, Series A:
AA- Aaa 6,500 6.75% due 7/01/2001 (g) 7,367
A+ Aaa 6,850 Proposition C, Second Series, 6.75% due 7/01/2002 (g) 7,839
AA- A1 2,000 Refunding, 7% due 7/01/2019 2,173
M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project):
A A 5,000 Series C, 6.875% due 7/01/2019 5,216
AAA Aaa 2,955 Series E, 6.50% due 7/01/2017 (c) 3,124
AA Aa 8,000 Metropolitan Water District, Southern California, Waterworks Revenue Bonds,
6.625% due 7/01/2012 8,558
AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds,
RIB, 8.891% due 9/02/2025 (c)(h) 2,775
<PAGE>
Northern California Power Agency, Public Power Revenue Bonds
(Hydroelectric Project Number 1) (c):
AAA Aaa 4,000 Refunding, Series A, 5.50% due 7/01/2016 3,927
AAA Aaa 1,970 Series E, 7.15% due 7/01/2024 2,142
AAA Aaa 16,000 Orange County, California, Local Transportation Authority, Sales Tax Revenue Bonds,
Second Series, 6.10% due 2/14/2011 (d) 16,504
A NR* 5,000 Palmdale, California, Civic Authority, Revenue Refunding Bonds
(Merged Redevelopment Project), Series A, 6.60% due 9/01/2034 5,482
AAA Aaa 3,905 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Bonds
(Rancho Redevelopment Project), 6.75% due 9/01/2020 (c) 4,195
NR* A 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP
(Eisenhower Memorial Hospital), 7% due 3/01/2022 3,935
Redwood City, California, Public Financing Authority, Local Agency Revenue Bonds:
AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,408
A- NR* 1,500 Series B, 7.25% due 7/15/2011 1,629
A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80% due
11/01/2001 (g) 20,554
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
Sacramento, California, Municipal Utility District, Electric Revenue Bonds,
Series B (c):
AAA Aaa $ 3,180 6.25% due 8/15/2011 $ 3,454
AAA Aaa 4,865 6.375% due 8/15/2022 5,106
San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, Second Series:
AAA Aaa 1,500 AMT, Issue 5, 6.50% due 5/01/2019 (d) 1,593
AAA Aaa 4,525 AMT, Issue 6, 6.60% due 5/01/2020 (b) 4,858
AAA Aaa 11,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 11,770
AA- A1 5,480 San Francisco, California, City and County, GO, UT (Various Purpose Projects),
Series A, 6.50% due 12/15/2010 5,794
<PAGE>
AA Aa 5,000 San Francisco, California, City and County Public Utilities Commission,
Water Revenue Bonds, Series A, 6.50% due 11/01/2017 5,307
AAA Aaa 4,715 San Francisco, California, City and County Redevelopment Agency, Lease Revenue
Bonds (George R. Moscone Convention Center), 6.80% due 7/01/2019 (i) 5,123
AAA Aaa 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) 3,372
AAA Aaa 9,525 Santa Clara County, California, Financing Authority, Lease Revenue Bonds
(VMC Facility Replacement Project), Series A, 6.75% due 11/15/2020 (b) 10,381
AA A1 5,000 Santa Clara County, California, Transportation District, Sales Tax
Revenue Bonds, Series A, 6.75% due 6/01/2011 5,435
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (c) 3,074
AAA Aaa 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater Project),
Series A, 6.50% due 9/01/2022 (d) 8,239
AAA NR* 1,145 Southern California Home Financing Authority, S/F Mortgage Revenue Bonds,
AMT, Series A, 6.75% due 9/01/2022 (e) 1,179
A1+ VMIG1++ 1,400 Southern California Public Power Authority, Revenue Refunding Bonds
(Southern Transmission Project), VRDN, 3.55% due 7/01/2019 (a)(b) 1,400
AAA Aaa 5,000 Stockton, California, COP, Revenue Bonds (Wastewater Treatment Plant Expansion),
Series A, 6.80% due 9/01/2024 (d) 5,449
University of California Revenue Bonds (Multiple Purpose Projects):
A- NR* 3,300 Refunding, Series A, 6.875% due 9/01/2002 (g) 3,795
AAA Aaa 13,560 Series D, 6.375% due 9/01/2019 (c) 14,206
Puerto Rico--1.6%
A Baa1 5,500 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series V, 6.625% due 7/01/2012 5,867
Total Investments (Cost--$339,193)--95.9% 359,333
Other Assets Less Liabilities--4.1% 15,409
--------
Net Assets--100.0% $374,742
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1995.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FNMA/GNMA Collateralized.
(f)FSA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 1995.
(i)CGIC Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
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, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$339,192,835) (Note 1a) $359,332,884
Cash 41,136
Receivables:
Securities sold $ 13,271,752
Interest 6,433,128 19,704,880
------------
Deferred organization expenses (Note 1e) 7,672
Prepaid expenses and other assets 14,841
------------
Total assets 379,101,413
------------
Liabilities: Payables:
Securities purchased 3,770,055
Dividends to shareholders (Note 1f) 371,180
Investment adviser (Note 2) 163,636 4,304,871
------------
Accrued expenses and other liabilities 54,501
------------
Total liabilities 4,359,372
------------
<PAGE>
Net Assets: Net assets $374,742,041
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (4,800 shares of AMPS*
issued and outstanding at $25,000 per share liquidation
preference) $120,000,000
Common Stock, par value $.10 per share (16,781,559 shares
issued and outstanding) $ 1,678,156
Paid-in capital in excess of par 233,789,454
Undistributed investment income--net 3,330,655
Accumulated realized capital losses on investments--net
(Note 5) (4,196,273)
Unrealized appreciation on investments--net 20,140,049
------------
Total--Equivalent to $15.18 net asset value per
Common Stock (market price--$13.375) 254,742,041
------------
Total capital $374,742,041
============
<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, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 22,299,990
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,809,998
Commission fees (Note 4) 312,147
Professional fees 83,810
Printing and shareholder reports 60,010
Accounting services (Note 2) 59,864
Transfer agent fees 53,581
Custodian fees 28,918
Listing fees 24,635
Directors' fees and expenses 23,737
Pricing fees 10,926
Amortization of organization expenses (Note 1e) 5,797
Other 17,210
------------
Total expenses 2,490,633
------------
Investment income--net 19,809,357
------------
<PAGE>
Realized & Realized loss on investments--net (4,196,257)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 29,929,032
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 45,542,132
- --Net (Notes 1b, ============
1d & 3):
</TABLE>
<TABLE>
Statement of Chamges in Net Assets
<CAPTION>
For the Year
Ended October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 19,809,357 $ 20,668,758
Realized gain (loss) on investments--net (4,196,257) 4,877,369
Change in unrealized appreciation/depreciation on
investments--net 29,929,032 (49,417,622)
------------ ------------
Net increase (decrease) in net assets resulting from operations 45,542,132 (23,871,495)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (15,159,571) (16,790,151)
Shareholders Preferred Stock (4,189,584) (3,140,796)
(Note 1f): Realized gain on investments--net:
Common Stock (4,134,976) (1,122,166)
Preferred Stock (741,300) (171,888)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (24,225,431) (21,225,001)
------------ ------------
<PAGE>
Net Assets: Total increase (decrease) in net assets 21,316,701 (45,096,496)
Beginning of year 353,425,340 398,521,836
------------ ------------
End of year* $374,742,041 $353,425,340
============ ============
<FN>
*Undistributed investment income--net (Note 1g) $ 3,330,655 $ 2,869,102
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived Feb. 28,
from information provided in the financial statements. For the 1992++ to
Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.91 $ 16.60 $ 14.03 $ 14.18
Operating -------- -------- -------- --------
Performance: Investment income--net 1.18 1.23 1.22 .77
Realized and unrealized gain (loss) on
investments--net 1.53 (2.65) 2.62 (.07)
-------- -------- -------- --------
Total from investment operations 2.71 (1.42) 3.84 .70
-------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.90) (1.00) (.99) (.55)
Realized gain on investments--net (.25) (.07) (.08) --
-------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders (1.15) (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 (.25) (.19) (.18) (.14)
Realized gain on investments--net (.04) (.01) (.02) --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.14)
-------- -------- -------- --------
Total effect of Preferred Stock activity (.29) (.20) (.20) (.28)
-------- -------- -------- --------
Net asset value, end of period $ 15.18 $ 13.91 $ 16.60 $ 14.03
======== ======== ======== ========
Market price per share, end of period $ 13.375 $ 12.125 $ 15.625 $ 14.50
======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 20.62% (16.36%) 15.56% .43%+++
Return:** ======== ======== ======== ========
Based on net asset value per share 19.33% (9.69%) 26.88% 2.79%+++
======== ======== ======== ========
Ratios to Expenses, net of reimbursement .69% .66% .69% .54%*
Average ======== ======== ======== ========
Net Assets:*** Expenses .69% .66% .69% .71%*
======== ======== ======== ========
Investment income--net 5.48% 5.44% 5.35% 5.65%*
======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $254,742 $233,425 $278,522 $233,502
======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $120,000 $120,000 $120,000 $120,000
======== ======== ======== ========
Portfolio turnover 69.59% 78.89% 21.68% 28.75%
======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 882 $ 694 $ 547 $ 449
Share on Series B--Investment income--net 864 615 688 481
Preferred Stock
Outstanding:++++++
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 10, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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 and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
* 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 to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
(g) Reclassification--Generally accepted accounting principles
require that certain differences between accumulated net realized
capital losses and paid-in capital in excess of par for financial
reporting and tax purposes, if permanent, be reclassified to
undistributed net investment income. Accordingly, current year's
permanent book/tax differences of $1,084 and $267 have been reclas-
sified from accumulated net realized capital losses and paid-in
capital in excess of par, respectively, to undistributed net
investment income. These reclassifications have no effect on net
assets or net asset value per share.
<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"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $235,456,031 and
$273,075,889, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $(2,154,377) $20,140,049
Short-term investments (24,099) --
Financial futures contracts (2,017,781) --
----------- -----------
Total $(4,196,257) $20,140,049
=========== ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $20,137,289, of which $20,191,866
related to appreciated securities and $54,577 related to depreciated
securities. The aggregate cost of investments at October 31, 1995
for Federal income tax purposes was $339,195,595.
<PAGE>
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, 1995, shares issued and outstanding
remained constant at 16,781,559. At October 31, 1995, total paid-in
capital amounted to $235,467,877.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at October 31, 1995 were:
Series A, 3.77% and Series B, 3.30%.
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 4,800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $508,510.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1995, MLPF&S, an affiliate of FAM, earned $226,343 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a net capital loss carryforward of
approximately $3,025,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 13, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.075105 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
MuniYield California Fund, Inc.:
<PAGE>
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, 1995, 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 three-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.
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, 1995 by correspondence with the custodian and broker. 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, 1995, 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 1, 1995
</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, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the per share capital
gains distributions paid 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 12/29/94 -- $ 0.246400
Preferred Stock Shareholders: Series A 12/15/94 -- $120.36
1/12/95 -- $ 43.42
Series B 11/25/94 -- $ 68.03
12/08/94 -- $ 29.51
12/15/94 -- $ 29.19
12/22/94 -- $ 33.55
12/29/94 -- $ 18.83
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, 1993 to January 31, 1994 $.31 $ .13 $ .02 $.26 $.04 $.07 $.01
February 1, 1994 to April 30, 1994 .30 .36 (2.24) .24 .05 -- --
May 1, 1994 to July 31, 1994 .31 .03 .23 .25 .05 -- --
August 1, 1994 to October 31, 1994 .31 (.22) (.96) .25 .05 -- --
November 1, 1994 to January 31, 1995 .31 (.34) .74 .24 .04 .25 .04
February 1, 1995 to April 30, 1995 .28 .01 .50 .22 .07 -- --
May 1, 1995 to July 31, 1995 .30 .02 .18 .22 .08 -- --
August 1, 1995 to October 31, 1995 .29 .06 .36 .22 .06 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
November 1, 1993 to January 31, 1994 $16.68 $16.03 $15.875 $15.00 1,867
February 1, 1994 to April 30, 1994 16.62 14.35 15.875 13.125 2,112
May 1, 1994 to July 31, 1994 15.41 14.40 14.00 13.00 1,478
August 1, 1994 to October 31, 1994 15.11 13.90 13.875 12.00 1,818
November 1, 1994 to January 31, 1995 14.02 12.76 12.75 11.25 4,025
February 1, 1995 to April 30, 1995 14.82 14.03 13.625 12.625 1,160
May 1, 1995 to July 31, 1995 15.33 14.49 13.50 12.625 1,329
August 1, 1995 to October 31, 1995 15.25 14.52 13.375 12.50 1,223
<PAGE>
<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>
