MUNIYIELD
CALIFORNIA
FUND, INC.
FUND LOGO
Annual Report
October 31, 1996
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California Fund, Inc.
for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders. Statements and other information
herein are as dated and are subject to change.
<PAGE>
MuniYield
California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Fund, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1996, the Common Stock of MuniYield
California Fund, Inc. earned $0.935 per share income dividends,
which included earned and unpaid dividends of $0.079. This
represents a net annualized yield of 6.05%, based on a month-end net
asset value of $15.44 per share. Over the same period, the total
investment return on the Fund's Common Stock was +8.54%, based on a
change in per share net asset value from $15.18 to $15.44, and
assuming reinvestment of $0.931 per share income dividends.
<PAGE>
For the six-month period ended October 31, 1996, the total
investment return on the Fund's Common Stock was +7.17%, based on a
change in per share net asset value from $14.88 to $15.44, and
assuming reinvestment of $0.472 per share income dividends.
For the six-month period ended October 31, 1996, the Fund's Auction
Market Preferred Stock had an average yield of 3.15% for Series A
and 3.25% for Series B.
The Municipal Market Environment
Municipal bond yields generally moved lower during the six months
ended October 31, 1996. Long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined approximately
35 basis points (0.35%) to end the six-month period at approximately
5.94%. The municipal bond market exhibited considerable weekly yield
volatility over the six months ended October 31, 1996 with bond yields
fluctuating as much as 20 basis points. This ongoing volatility was
in response to conflicting evidence regarding the degree to which
recent economic growth will result in any significant increase in
inflationary pressures.
Much of the evidence supporting stronger growth has centered around
the strong employment growth seen in April and June, with bond
yields rising in response. Other, more recent, economic indicators
have suggested that economic growth will not be excessive and
inflationary pressures will remain well-contained. This continued
benign inflationary environment has supported lower tax-exempt bond
yields in recent months. US Treasury bond yields have exhibited
similar, albeit greater, volatility during the period, falling more
than 20 basis points to end the period at 6.64%. Over the past six
months, tax-exempt bond yields registered significantly greater
declines than those shown by US Treasury bonds. This relative
outperformance by the municipal bond market was largely the result
of the strong technical support the tax-exempt market has enjoyed
throughout most of 1996. Perhaps most significantly, the pace of new
bond issuance has recently slowed.
Over the last year, approximately $180 billion in long-term
municipal securities was issued, an increase of over 25% versus the
same period a year ago. Much of this increase was the result of
issuers seeking to refinance their existing higher-couponed debt as
interest rates declined in 1995 and early 1996. As interest rates
rose, these financings became increasingly economically impractical
and issuance declined. Over the last six months, approximately $90
billion in long-term tax-exempt securities was underwritten, an
increase of 5% versus the comparable period a year earlier. Only $41
billion in tax-exempt securities was issued in the last three
months, a 3% decline in issuance versus the October 30, 1995
quarter.
<PAGE>
At the same time, investor demand remained consistently strong. With
nominal new-issue yields generally above 6%, retail investor
interest was steady. Additionally, investors received over $50
billion this June and July in assets derived from coupon income,
bond maturities, and proceeds from early redemptions. Annual new
bond issuance has declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s were redeemed at
their first optional call date, the total number of outstanding tax-
exempt bonds has declined. This combination of a declining net
supply and significant amounts of assets helped maintain investor
demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance has led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While still historically
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Portfolio Strategy
During the 12-month period ended October 31, 1996, our portfolio
strategy focused on seeking to provide current return while being
mindful of capital appreciation. In an effort to enhance the
additional benefit of increased yield to Common Stock shareholders,
we kept the Fund's Preferred Stock in the shortest possible maturity
range. (For a complete explanation of the benefits and risks of
leveraging, see page 4 of this report to shareholders.) The Fund's
performance was enhanced this year by early recognition that
interest rates in the beginning of 1996 were likely to head higher.
We maintained an above-average coupon structure, tempering the
negative reaction of net asset value to the ensuing interest rate
increases.
<PAGE>
As the year progressed, we identified a fairly well-defined trading
range in the municipal market. We effectively managed the purchases
and sales of long-term revenue bonds in the Fund's holdings by
exploiting the upper and lower boundaries of this trading range. We
then concentrated larger percentages of the Fund's assets in
securities rated at least AA by one or more of the major rating
agencies, in response to the lack of yield differentials between
credit quality classes. We anticipate continuing this approach until
the point where deteriorating economic releases lead to a change in
an interest rate forecast that allows a more constructive trend for
bond prices.
In Conclusion
We appreciate your ongoing interest in MuniYield California Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and Portfolio Manager
<PAGE>
November 25, 1996
PROXY RESULTS
<TABLE>
During the six-month period ended October 31, 1996, MuniYield
California Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on September 19, 1996. The description of each
proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C> <C> <C>
1.To elect the Fund's Board of Directors: James H. Bodurtha 16,022,997 467,560
Herbert I. London 16,018,681 471,876
Robert R. Martin 16,017,922 472,635
Arthur Zeikel 16,024,529 466,028
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. 15,994,582 75,568 420,407
<CAPTION>
During the six-month period ended October 31, 1996, 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, 1996. The description of
each proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <C> <C>
1.To elect the Fund's Board of Directors: James H. Bodurtha, Herbert I. London,
Robert R. Martin, Joseph L. May, Andre F. Perold and Arthur Zeikel as follows:
Series A 2,334 6
Series B 2,318 63
<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 as follows:
Series A 2,334 6 0
Series B 2,307 11 63
</TABLE>
<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. 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.
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield California Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RIB Residual Interest Bonds
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--95.7%
<S> <S> <C> <S> <C>
California Health Facilities Financing Authority Revenue Bonds:
AA Aa3 $ 1,000 (Kaiser Permanente), Series A, 7% due 12/01/2010 $ 1,096
AAA Aaa 2,000 (Kaiser Permanente), Series A, 7% due 10/01/2018 (c) 2,166
A1+ VMIG1++ 1,200 (Pooled Loan Program), VRDN, Series 85-B, 3.35% due 10/01/2010 (a)(d) 1,200
AAA Aaa 1,000 Refunding (Adventist Health), Series A, 6.50% due 3/01/2014 (c) 1,071
A1+ VMIG1++ 1,200 Refunding (Catholic West), VRDN, Series C, 3.35% due 7/01/2011 (a)(c) 1,200
AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,482
NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 3,023
A+ A 3,600 (Sutter Health Hospital), Series 89-A, 6.70% due 1/01/2013 3,755
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 1,920 AMT, Series C, 7.45% due 8/01/2011 2,015
AA- Aa 2,585 AMT, Series E-1, 6.70% due 8/01/2025 2,680
AA- Aa 4,955 AMT, Series F-1, 7% due 8/01/2026 5,263
AA- Aa 1,200 Series D, 7.25% due 8/01/2017 1,272
AA- Aa 760 Series F, 7.875% due 8/01/2019 793
AA- Aa 2,900 California HFA, Revenue Bonds, RIB, AMT, 8.856% due 8/01/2023 (h) 3,067
<PAGE>
A1 NR* 770 California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas and Electric Co.), VRDN, AMT, Series G, 3.60% due
2/01/2016 (a) 770
NR* Aa3 700 California Pollution Control Financing Authority, Resource Recovery Revenue
Bonds (Honey Lake Power Project), VRDN, AMT, 3.55% due 9/01/2018 (a) 700
California State Public Works Board, Lease Revenue Bonds:
A A 3,000 (California Community College), Series A, 6.75% due 9/01/2001 (g) 3,354
A A 6,800 (Department of Corrections--Monterey County), Series A, 7% due 11/01/2004 (g) 7,957
A A 9,800 (Various California State University Projects), Series A, 6.70% due
10/01/2002 (g) 11,066
A A 5,100 (Various California State University Projects), Series A, 6.625% due
10/01/2010 5,511
A A 5,085 (Various Community College Projects), Series B, 7% due 3/01/2004 (g) 5,889
A1+ VMIG1++ 5,400 California State, RAN, VRDN, Series C-1, 3.35% due 6/30/1997 (a) 5,400
AAA Aaa 13,250 California State Veterans, GO, UT, AMT, Series BD, BE and BF, 6.375% due
2/01/2027 (b) 13,601
AA Aa 4,750 California Statewide Community Development Authority Revenue Bonds,
COP (Saint Joseph Health System Group), 6.625% due 7/01/2021 5,087
A+ A1 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital),
6.60% due 11/01/2012 3,164
BBB NR* 1,000 Contra Costa County, California, Public Financing Authority,
Tax Allocation Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 1,060
AAA Aaa 2,365 Contra Costa County, California, Transportation Authority,
Sales Tax Revenue Bonds, Series A, 6% due 3/01/2006 (d) 2,552
AAA Aaa 2,000 Cucamonga County, California, Water District Facilities Refinancing Bonds,
COP, 6.50% due 9/01/2022 (d) 2,164
AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds
(Senior Lien Project Loans), Series A, 6.75% due 11/01/2015 (b) 426
AAA Aaa 3,500 East Bay, California, Municipal Utility District, Water System Subordinated
Revenue Refunding Bonds, 6% due 6/01/2012 (c) 3,629
AAA Aaa 1,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds
(El Cajon Redevelopment Project), 6.60% due 10/01/2022 (b) 1,091
BBB Baa 1,905 Inglewood, California, Public Financing Authority Revenue Bonds (Manchester-
Prairie-North Inglewood Industrial Park Project), Series B, 7% due 5/01/2022 2,025
</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>
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) $ 3,955
Los Angeles, California, Department of Water and Power, Waterworks
Revenue Bonds:
AAA Aaa 3,925 6.30% due 7/01/2024 (c) 4,194
AA Aa 4,000 Refunding, 6.40% due 5/15/2028 4,190
Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B:
AA Aa 4,240 6.60% due 8/01/2015 4,511
AA Aa 6,855 6.625% due 8/01/2019 7,282
AAA Aaa 3,000 Los Angeles, California, Wastewater System Revenue Bonds, Series D, 6.625%
due 12/01/2012 (c) 3,254
AAA Aaa 5,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50%
due 9/01/2000 (c)(g) 5,484
Los Angeles County, California, Metropolitan Transportation Authority, Sales
Tax Revenue Refunding Bonds:
AAA Aaa 5,720 Proposition A, Series A, 5% due 7/01/2021 (d) 5,179
A1+ VMIG1++ 3,800 Proposition C, VRDN, Second Senior Series A, 3.40% due 7/01/2020 (a)(c) 3,800
AAA Aaa 10,660 Los Angeles County, California, Public Works Financing Authority, Lease
Revenue Refunding Bonds, Series A, 6% due 9/01/2004 (c) 11,486
AA- Aaa 6,500 Los Angeles County, California, Transportation Commission, Sales Tax
Revenue Bonds, Series A, 6.75% due 7/01/2001 (g) 7,267
M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project):
A A 5,000 Series C, 6.875% due 7/01/2019 5,118
AAA Aaa 6,155 Series E, 6.50% due 7/01/2017 (c) 6,643
AA Aa 6,000 Metropolitan Water District, Southern California Waterworks Revenue Bonds,
6.625% due 7/01/2001 (g) 6,659
AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds,
RIB, 9.142% due 9/02/2025 (c)(h) 2,863
AAA Aaa 1,955 Northern California Power Agency, Public Power Revenue Bonds
(Hydroelectric Project Number 1), Series E, 7.15% due 7/01/2024 (c) 2,083
<PAGE>
AAA Aaa 16,000 Orange County, California, Local Transportation Authority,
Sales Tax Revenue Bonds, Second Series, 6.10% due 2/14/2011 (d) 16,602
A NR* 5,000 Palmdale, California, Civic Authority, Revenue Refunding Bonds
(Merged Redevelopment Project), Series A, 6.60% due 9/01/2034 5,414
AAA Aaa 3,905 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Bonds
(Rancho Redevelopment Project), 6.75% due 9/01/2020 (c) 4,193
NR* A 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP
(Eisenhower Memorial Hospital), 7% due 3/01/2022 4,050
Redwood City, California, Public Financing Authority, Local Agency
Revenue Bonds:
AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,437
A- NR* 1,500 Series B, 7.25% due 7/15/2011 1,639
AAA Aaa 7,950 Riverside County, California, Transportation Commission,
Sales Tax Revenue Refunding Bonds, Series A, 6% due 6/01/2005 (d) 8,632
A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80% due
11/01/2001 (g) 20,279
Sacramento, California, Municipal Utility District, Electric Revenue Bonds,
Series B (c):
AAA Aaa 3,180 6.25% due 8/15/2011 3,375
AAA Aaa 4,865 6.375% due 8/15/2022 5,176
AAA Aaa 5,000 San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds, 5% due 5/15/2020 (d) 4,586
</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>
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) $ 1,601
AAA Aaa 4,525 AMT, Issue 6, 6.60% due 5/01/2020 (b) 4,899
AAA Aaa 11,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 11,919
AA- A1 5,480 San Francisco, California, City and County, GO (Variable Purpose Projects),
UT, Series A, 6.50% due 12/15/2010 5,784
<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 5,258
AAA Aaa 4,715 San Francisco, California, City and County Redevelopment Agency, Lease
Revenue Bonds (George R. Moscone Convention Center), 6.80% due 7/01/2019 (f) 5,234
AAA Aaa 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due
7/01/2021 (c) 3,432
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) 10,591
AA A1 5,000 Santa Clara County, California, Transportation District, Sales Tax Revenue
Bonds, Series A, 6.75% due 6/01/2011 5,451
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (c) 3,085
AAA Aaa 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater
Project), Series A, 6.50% due 9/01/2002 (d)(g) 8,665
AAA NR* 1,125 Southern California Home Financing Authority, S/F Mortgage Revenue Bonds,
AMT, Series A, 6.75% due 9/01/2022 (e) 1,161
AAA Aaa 5,000 Stockton, California, Revenue Bonds (Wastewater Treatment Plant Expansion),
COP, Series A, 6.80% due 9/01/2024 (d) 5,603
University of California Revenue Bonds (Multiple Purpose Projects):
A NR* 3,300 Refunding, Series A, 6.875% due 9/01/2002 (g) 3,751
AAA Aaa 13,560 Series D, 6.375% due 9/01/2019 (c) 14,448
Puerto Rico--2.7%
A Baa1 5,500 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series V, 6.625% due 7/01/2012 5,908
A1+ VMIG1++ 1,600 Puerto Rico Commonwealth, Revenue Refunding Bonds (Government Development
Bank), VRDN, 3.30% due 12/01/2015 (a) 1,600
BBB+ Baa1 2,600 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series T, 6.375% due 7/01/2024 2,727
Total Investments (Cost--$348,418)--98.4% 372,997
Other Assets Less Liabilities--1.6% 6,085
--------
Net Assets--100.0% $379,082
========
<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, 1996.
(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, 1996.
++Highest short-term rating by Moody's Investors Service, Inc.
*Not Rated.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets, Liabilities and Capital as of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$348,418,146) (Note 1a) $372,996,680
Cash 72,103
Interest receivable 6,593,159
Deferred organization expenses (Note 1e) 1,859
Prepaid expenses and other assets 14,186
------------
Total assets 379,677,987
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 342,117
Investment adviser (Note 2) 160,108 502,225
------------
Accrued expenses and other liabilities 94,261
------------
Total liabilities 596,486
------------
Net Assets: Net assets $379,081,501
============
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (4,800 shares
of AMPS* issued and outstanding at $25,000 per share
liquidation preference) $120,000,000
Common Stock, par value $.10 per share (16,781,559 shares
issued and outstanding) $ 1,678,156
Paid-in capital in excess of par 233,789,454
Undistributed investment income--net 2,952,622
Accumulated realized capital losses on investments--net
(Note 5) (3,917,265)
Unrealized appreciation on investments--net 24,578,534
------------
Total--Equivalent to $15.44 net asset value per Common Stock
(market price--$14.875) 259,081,501
------------
Total capital $379,081,501
============
<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, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 21,942,622
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,875,520
Commission fees (Note 4) 303,840
Professional fees 79,003
Accounting services (Note 2) 64,467
Transfer agent fees 54,508
Printing and shareholder reports 43,314
Custodian fees 30,347
Listing fees 24,635
Directors' fees and expenses 23,107
Pricing fees 10,829
Amortization of organization expenses (Note 1e) 5,814
Other 21,547
------------
Total expenses 2,536,931
------------
Investment income--net 19,405,691
------------
<PAGE>
Realized & Realized gain on investments--net 279,008
Unrealized Gain on Change in unrealized appreciation on investments--net 4,438,485
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 24,123,184
============
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: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 19,405,691 $ 19,809,357
Realized gain (loss) on investments--net 279,008 (4,196,257)
Change in unrealized appreciation/depreciation on
investments--net 4,438,485 29,929,032
------------ ------------
Net increase in net assets resulting from operations 24,123,184 45,542,132
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (15,619,604) (15,159,571)
Shareholders Preferred Stock (4,164,120) (4,189,584)
(Note 1f): Realized gain on investments--net:
Common Stock -- (4,134,976)
Preferred Stock -- (741,300)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (19,783,724) (24,225,431)
------------ ------------
Net Assets: Total increase in net assets 4,339,460 21,316,701
Beginning of year 374,742,041 353,425,340
------------ ------------
End of year* $379,081,501 $374,742,041
============ ============
<FN>
*Undistributed investment income--net $ 2,952,622 $ 3,330,655
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
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: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.18 $ 13.91 $ 16.60 $ 14.03 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.16 1.18 1.23 1.22 .77
Realized and unrealized gain (loss) on
investments--net .28 1.53 (2.65) 2.62 (.07)
-------- -------- -------- -------- --------
Total from investment operations 1.44 2.71 (1.42) 3.84 .70
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.93) (.90) (1.00) (.99) (.55)
Realized gain on investments--net -- (.25) (.07) (.08) --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.93) (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) (.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 (.25) (.29) (.20) (.20) (.28)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.44 $ 15.18 $ 13.91 $ 16.60 $ 14.03
======== ======== ======== ======== ========
Market price per share, end of period $ 14.875 $ 13.375 $ 12.125 $ 15.625 $ 14.50
======== ======== ======== ======== ========
Total Investment Based on market price per share 18.68% 20.62% (16.36%) 15.56% .43%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 8.54% 19.33% (9.69%) 26.88% 2.79%+++
======== ======== ======== ======== ========
<PAGE>
Ratios to Average Expenses, net of reimbursement .67% .69% .66% .69% .54%*
Net Assets:*** ======== ======== ======== ======== ========
Expenses .67% .69% .66% .69% .71%*
======== ======== ======== ======== ========
Investment income--net 5.16% 5.48% 5.44% 5.35% 5.65%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $259,082 $254,742 $233,425 $278,522 $233,502
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $120,000 $120,000 $120,000 $120,000 $120,000
======== ======== ======== ======== ========
Portfolio turnover 67.48% 69.59% 78.89% 21.68% 28.75%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,159 $ 3,123 $ 2,945 $ 3,321 $ 2,946
======== ======== ======== ======== ========
Dividends Per Share Series A--Investment income--net $ 875 $ 882 $ 694 $ 547 $ 449
On Preferred Stock ======== ======== ======== ======== ========
Outstanding:++++++ Series B--Investment income--net $ 860 $ 864 $ 615 $ 688 $ 481
======== ======== ======== ======== ========
<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 that occurred on December 1, 1994.
+++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.
<PAGE>
(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 on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1996 were $239,863,386 and
$235,521,062, respectively.
Net realized and unrealized gains (losses) as of October 31, 1996
were as follows:
Realized Unrealized
Gains Gains
(Losses)
Long-term investments $ 1,286,129 $24,578,534
Short-term investments (1,215) --
Financial futures contracts (1,005,906) --
----------- -----------
Total $ 279,008 $24,578,534
=========== ===========
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $24,578,534, all of which related to
appreciated securities. The aggregate cost of investments at
October 31, 1996 for Federal income tax purposes was $348,418,146.
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, 1996, shares issued and outstanding
remained constant at 16,781,559. At October 31, 1996, total paid-in
capital amounted to $235,467,610.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at October 31, 1996 were as
follows: Series A, 3.25% and Series B, 3.00%.
As of October 31, 1996, there were 4,800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
<PAGE>
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, 1996, MLPF&S, an affiliate of FAM, earned $200,611 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a net capital loss carryforward of
approximately $2,658,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 8, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.078926 per share, payable on November 27, 1996 to shareholders
of record as of November 18, 1996.
<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, 1996, 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 four-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, 1996 by correspondence with the custodian. 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.
<PAGE>
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, 1996, 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 3, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (UNAUDITED)
All of the net investment income distributions paid by MuniYield
California Fund, Inc. during its taxable year ended October 31, 1996
qualify as tax-exempt interest dividends for Federal income tax
purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
<PAGE>
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
