MUNIYIELD
CALIFORNIA
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1998
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California Fund, Inc.
for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders. Statements and other information
herein are as dated and are subject to change.
MuniYield
California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MuniYield California Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1998, the Common Stock of
MuniYield California Fund, Inc. earned $0.473 per share income
dividends, which included earned and unpaid dividends of $0.074.
This represents a net annualized yield of 6.10%, based on a month-
end per share net asset value of $15.64. Over the same period, the
total investment return on the Fund's Common Stock was +1.26%, based
on a change in per share net asset value from $15.98 to $15.64, and
assuming reinvestment of $0.479 per share income dividends and
$0.065 per share capital gains distributions.
The average yields of the Fund's Auction Market Preferred Stock for
the six months ended April 30, 1998 were as follows: Series A,
3.97%; Series B, 3.43%; and Series C, 3.02%.
The Municipal Market Environment
During the six months ended April 30, 1998, bond yields generally
moved lower, and by mid-January 1998 had declined to recent historic
lows. Long-term US Treasury bond yields declined 20 basis points
(0.20%) during the same period and stood at 5.95% by April 30, 1998.
Similarly, long-term uninsured tax-exempt bond yields, as measured
by the Bond Buyer Revenue Bond Index, fell approximately 35 basis
points to 5.25%, a level not seen since the mid-1970s. While low
inflation has supported lower interest rates, much of the decline in
bond yields in late 1997 and early 1998 was driven more by the
turmoil in Asian financial markets than by domestic economic
fundamentals. Weak economic conditions in Asia were expected to
negatively impact US growth through reduced export demand.
Additionally, inflation in the United States was also expected to
decline in response to lower prices on goods imported from Asian
manufacturers.
However, in recent months, many investors have become increasingly
concerned that most of the downturn in Asia, especially in Japan,
has already occurred and any future deterioration will not be severe
enough to constrain US economic growth and inflationary pressures.
These concerns served to push interest rates higher in the latter
part of the period, causing fixed-income yields to retrace much of
their earlier gains.
Thus far in 1998, the municipal bond market has experienced
unexpectedly strong supply pressures. These supply pressures have
prevented tax-exempt bond yields from declining as much as US
Treasury bond yields. Over the last six months, more than $135
billion in new tax-exempt bonds were underwritten, an increase of
over 40% compared to the same period a year ago. During the last
three months, municipalities issued more than $72 billion in new
securities, an increase of over 60% compared to the same three-month
period in 1997. Additionally, corporate issuers have also viewed
current interest rate levels as an opportunity to issue significant
amounts of taxable securities. Thus far in 1998, more than $100
billion in investment-grade corporate bonds have been underwritten,
an increase of over 60% relative to the comparable period a year
ago. This sizeable corporate bond issuance has tended to support
generally higher fixed-income yields and reduce the demand for tax-
exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely
to be maintained. Continued increases in bond issuance will require
lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancing.
Preliminary estimates for 1998 total municipal bond issuance are
presently in the $200 billion--$225 billion range. These estimates
suggest that recent supply pressures are likely to abate later in
the year. Municipal bond investors received approximately $30
billion earlier this year in coupon payments, bond maturities and
proceeds from early redemptions. The demand generated by these
assets has helped offset the increase in supply seen thus far this
year. Furthermore, looking ahead, June and July have also tended to
be periods of strong investor demand as seasonal factors are likely
to generate strong income flows similar to those seen earlier this
year.
MuniYield California Fund, Inc.
April 30, 1998
It is also possible that at least some of the recent economic
strength seen in the United States will be reversed in the coming
months. A particularly mild winter has been partially responsible
for a strong housing sector, as well as other construction
industries. This recent strong trend may not be sustained and may
lead to weaker construction growth later this year. Additionally,
strong economic growth in 1997 and the increased use of electronic
tax filing have resulted in larger and earlier Federal and state
income tax refunds to many individuals. These refunds appear to have
supported strong consumer spending in recent months, but may be
borrowing against weaker spending later this year. In addition, the
continued impact of the Asian financial crisis on the US domestic
economy's future growth remains unclear. Barring a dramatic and
unexpected resurgence of domestic inflation, we do not believe that
the Federal Reserve Board will be willing to raise interest rates
until the full impact of the Asian situation can be established.
All these factors suggest that over the near term, tax-exempt as
well as taxable bond yields are unlikely to rise by any appreciable
amount. Recent supply pressures have caused municipal bond yield
ratios to rise relative to US Treasury bond yields. At April 30,
1998, long-term tax-exempt bond yields were at attractive yield
ratios relative to comparable US Treasury securities (over 90%),
and well in excess of their expected range of 85%--88%. Any further
pressure upon the municipal market may well represent a very
attractive investment opportunity.
Portfolio Strategy
In general, we have continuously managed MuniYield California Fund,
Inc. with a focus on seeking to enhance current income. As a result
of this strategy, during the six months ended April 30, 1998 the
Fund had an above-industry average yield, largely because it is one
of the more mature leveraged California municipal tax-exempt
portfolios. (For a complete explanation of the benefits and risks of
leveraging, see page 3 of this report to shareholders.)
Recently, we have made an effort to balance this high-coupon
structure by adding performance-based positions to the Fund that are
more sensitive to interest rate moves. We believe these additions
may provide greater total return if the general level of interest
rates were to resume their decline later this year. A growing
Federal budget surplus, a corresponding scaling back of Treasury
bond issuance and a historically low level of inflationary
expectations give us confidence that debt securities are likely to
be well supported going forward. Also, as the California municipal
calendar of new issuance subsides, the technical position of the
municipal market is likely to improve, possibly leading to
significant price appreciation. California municipal bonds are
currently at historically attractive percentages relative to their
taxable counterparts. Therefore, we believe a more aggressive stance
within the Fund's portfolio mix is warranted. However, a more
aggressive position does not mean a lowering of credit quality. In
response to inordinately tight credit quality spreads, the Fund's
percentage of assets devoted to securities rated AA or better by at
least one of the major rating agencies was 85% at April 30, 1998.
In Conclusion
We would like to welcome the shareholders from Taurus MuniCalifornia
Holdings, Inc. 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
June 1, 1998
MuniYield California Fund, Inc.
April 30, 1998
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.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its
net investment income to its shareholders on a monthly basis.
However, in order to provide shareholders with a more consistent
yield to the current trading price of shares of Common Stock of the
Fund, the Fund may at times pay out less than the entire amount of
net investment income earned in any particular month and may at
times in any month pay out such accumulated but undistributed income
in addition to net investment income earned in that month. As a
result, the dividends paid by the Fund for any particular month may
be more or less than the amount of net investment income earned by
the Fund during such month. The Fund's current accumulated but
undistributed net investment income, if any, is disclosed in the
Statement of Assets, Liabilities and Capital, which comprises part
of the Financial Information included in this report.
MuniYield California Fund, Inc.
April 30, 1998
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 below and at
right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
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--97.8%
<S> <S> <C> <S> <C>
California HFA, Home Mortgage Revenue Bonds:
AA- Aa2 $ 610 AMT, Series C, 7.45% due 8/01/2011 $ 619
AA- Aa 440 AMT, Series C, 7.60% due 8/01/2030 463
AA- Aa2 790 AMT, Series D, 7.75% due 8/01/2010 837
AAA Aaa 5,000 AMT, Series E, 6.10% due 8/01/2029 (b) 5,257
AA- Aa 2,565 AMT, Series E-1, 6.70% due 8/01/2025 2,732
AA- Aa 6,930 AMT, Series F-1, 7% due 8/01/2026 7,466
AA- Aa 5,735 AMT, Series N, 6.375% due 2/01/2027 6,110
AA- Aa 2,180 Series D, 7.25% due 8/01/2017 2,297
AA- Aa 3,750 California HFA, Revenue Bonds, RIB, AMT, 9.162% due 8/01/2023 (h) 4,252
California Health Facilities Financing Authority Revenue Bonds:
A1+ VMIG1++ 1,000 (Adventist Hospital), VRDN, Series A, 4.10% due 9/01/2028 (a)(c) 1,000
AAA Aaa 2,000 (Kaiser Permanente), Series A, 7% due 10/01/2018 (c) 2,110
A1+ VMIG1++ 135 (Pooled Loan Program), VRDN, Series 85-B, 4.05% due 7/01/2013 (a)(d) 135
AAA Aaa 10,000 RITR, Series 17, 6.37% due 8/15/2030 (c)(h) 10,038
AAA Aaa 5,435 Refunding (Children's Hospital), 5.375% due 7/01/2016 (c) 5,471
AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,419
NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 3,123
A+ A 3,600 (Sutter Health Hospital), Series 89-A, 6.70% due 1/01/2013 3,692
California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas and Electric Co.), VRDN (a):
A1+ NR* 2,840 AMT, Series C, 4.20% due 11/01/2026 2,840
A1+ NR* 1,000 Series C, 4.05% due 11/01/2026 1,000
A1+ NR* 4,500 Series F, 4.10% due 11/01/2026 4,500
AAA Aaa 1,500 California Pollution Control Financing Authority, PCR, Refunding
(San Diego Gas and Electric Co.), Series A, 5.90% due 6/01/2014 (c) 1,644
NR* Aaa 1,215 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT, Series A-1, 6.90% due 12/01/2024 (i) 1,319
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
<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>
California State, Department of Water Resources, Water Systems Revenue Bonds
(Central Valley Project):
AAA Aaa $10,000 Refunding, Series Q, 5.375% due 12/01/2027 (c) $10,019
AA Aa2 3,000 Series O, 4.75% due 12/01/2025 2,734
California State Public Works Board, Lease Revenue Bonds:
A Aaa 1,000 (Department of Corrections--Monterey County Soledad II), Series A, 6.875% due
11/01/2004 (g) 1,154
A Aaa 6,800 (Department of Corrections--Monterey County Soledad II), Series A, 7% due
11/01/2004 (g) 7,893
AAA Aaa 2,625 Refunding (California Community Colleges), Series B, 5.625% due 3/01/2019 (b) 2,685
AAA Aaa 7,125 Refunding (California State University Projects), Series A, 5.375% due
10/01/2017 (b) 7,195
A Aaa 7,130 (Various California State University Projects), Series A, 6.625% due
10/01/2002 (g) 7,919
AAA Aaa 14,800 (Various California State University Projects), Series A, 6.70% due
10/01/2002 (g) 16,483
A Aaa 3,535 (Various Community College Projects), Series B, 7% due 3/01/2004 (g) 4,064
AAA Aaa 5,000 California State, Refunding, GO, UT, 5% due 2/01/2023 (d) 4,774
AA Aa 4,750 California Statewide Community Development Authority Revenue Bonds, COP
(Saint Joseph Health System Group), 6.625% due 7/01/2004 (g) 5,366
AAA Aaa 3,000 Cerritos, California, Public Financing Authority, Revenue Refunding Bonds
(Los Coyotes Redevelopment Project Loan), Series A, 6.50% due 11/01/2023 (b) 3,555
A+ Aaa 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital), 6.60% due
11/01/2002 (g) 3,334
AAA Aaa 6,435 Contra Costa County, California, Public Financing Authority, Lease Revenue Refunding
Bonds (Various Capital Facilities), Series A, 5.35% due 8/01/2024 (c) 6,416
BBB NR* 3,000 Contra Costa County, California, Public Financing Authority, Tax Allocation Revenue
Refunding Bonds, Series A, 7.10% due 8/01/2022 3,272
NR* NR* 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds, Series B,
7.25% due 1/01/2012 (j) 987
AAA Aaa 2,010 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (b) 2,283
BBB Baa 1,845 Inglewood, California, Public Financing Authority Revenue Bonds
(Manchester-Prairie-North Inglewood Industrial Park Project), Series B,
7% due 5/01/2022 1,992
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) 4,022
AAA Aaa 4,000 Los Angeles, California, Convention and Exhibition Center Authority,
Lease Revenue Bonds, RITR, Series 21, 6.37% due 8/15/2018 (c)(h) 4,035
Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds (h):
A+ Aa3 7,300 RIB, Refunding, 6.375% due 2/01/2020 7,833
AAA Aaa 6,200 RITR, Series 18, 6.42% due 11/15/2031 (d) 6,208
AAA Aaa 3,925 Los Angeles, California, Department of Water and Power, Waterworks
Revenue Bonds, 6.30% due 7/01/2024 (c) 4,297
Los Angeles, California, Harbor Department Revenue Bonds:
AA Aa3 4,240 AMT, Series B, 6.60% due 8/01/2015 4,630
AA Aa3 8,855 AMT, Series B, 6.625% due 8/01/2019 9,653
AAA Aaa 4,000 RITR, AMT, Series 7, 7.995% due 11/01/2026 (c)(h) 4,905
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
<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 NR* $ 215 Los Angeles, California, S/F Home Mortgage Revenue Bonds, AMT,
Series A, 7.55% due 12/01/2023 (i) $ 225
AAA Aaa 5,000 Los Angeles, California, Wastewater System Revenue Bonds, Series A,
5% due 6/01/2028 (d) 4,754
AAA Aaa 5,000 Los Angeles County, California, Metropolitan Transportation Authority,
Sales Tax Revenue Bonds, RITR, Series 30, 6.12% due 7/01/2023 (b)(h) 4,806
AAA Aaa 2,955 M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project),
Series E, 6.50% due 7/01/2017 (c) 3,175
AA Aa2 10,000 Metropolitan Water District, Southern California Waterworks Revenue Bonds,
Series A, 5% due 7/01/2026 9,535
AAA Aaa 2,000 Monterey County, California, COP (Natividad Medical Improvement Center),
Series E, 4.75% due 8/01/2027 (c) 1,823
AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue
Bonds, RIB, 9.04% due 9/02/2025 (c)(h) 2,944
Oakland, California, Joint Powers Financing Authority, Lease Revenue Bonds
(Oakland Administration Buildings) (b):
AAA Aaa 2,000 5.90% due 8/01/2016 2,131
AAA Aaa 6,000 5.75% due 8/01/2021 6,230
AAA Aaa 5,395 5.75% due 8/01/2026 5,602
AAA Aaa 4,070 Oakland, California, State Building Authority, Lease Revenue Bonds
(Elihu M. Harris), Series A, 5% due 4/01/2023 (b) 3,886
AAA Aaa 7,840 Orange County, California, Local Transportation Authority, Sales Tax
Revenue Bonds, RITR, Series B, 7.82% due 2/15/2002 (g)(h) 9,085
A+ A1 2,000 Pasadena, California, COP, Refunding (Old Pasadena Package Facility Project),
6.25% due 1/01/2018 2,211
NR* A2 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP
(Eisenhower Memorial Hospital), 7% due 3/01/2002 (g) 4,163
AAA Aaa 2,345 Richmond, California, Redevelopment Agency, Tax Allocation, Refunding
(Harbour Redevelopment Project), Series A, 5.50% due 7/01/2018 (c) 2,384
A1+ Aa1 2,200 Roseville, California, Finance Authority, Hospital Lease Revenue Bonds
(Roseville Hospital), VRDN, Series A, 3.95% due 10/01/2014 (a) 2,200
A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds,
6.80% due 11/01/2001 (g) 19,843
AAA Aaa 1,720 San Diego, California, IDR, RITR, 7.785% due 9/01/2018 (h) 1,969
BBB+ Baa1 1,300 San Diego, California, Redevelopment Agency, Tax Allocation,
Refunding (Horton Project), Series B, 6.625% due 11/01/2017 1,436
San Francisco, California, Bay Area Rapid Transit District,
Sales Tax Revenue Refunding Bonds (b):
AAA Aaa 2,000 4.75% due 7/01/2023 1,838
AAA Aaa 21,500 5% due 7/01/2028 20,440
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (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 $ 3,000 AMT, Issue 5, 6.50% due 5/01/2019 (d) $ 3,243
AAA Aaa 4,525 AMT, Issue 6, 6.60% due 5/01/2020 (b) 4,915
AAA Aaa 21,910 Issue 15-B, 4.50% due 5/01/2028 (c) 19,026
AAA Aaa 12,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 13,030
AAA Aaa 2,000 Refunding, Issue 2, 6.75% due 5/01/2013 (c) 2,214
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) 5,300
AA+ NR* 105 San Francisco, California, City and County S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT, 7.45% due 1/01/2024 (e) 110
AAA Aaa 3,500 San Mateo County, California, Joint Powers Financing Authority, Lease
Revenue Refunding Bonds (Capital Projects Program), 5% due 7/01/2021 (c) 3,388
AAA Aaa 15,000 Santa Clara, California, Electric Revenue Refunding Bonds, Series A, 5%
due 7/01/2027(b) 14,270
Santa Clara County, California, Financing Authority, Lease Revenue Bonds,
Series A (b):
AAA Aaa 13,000 Refunding, 5% due 11/15/2022 12,416
AAA Aaa 9,525 (VMC Facility Replacement Project), 6.75% due 11/15/2004 (g) 10,940
AAA Aaa 2,000 (VMC Facility Replacement Project), 6.875% due 11/15/2004 (g) 2,310
AAA Aaa 3,850 Santa Cruz County, California, COP, Refunding (Capital Facilities Project),
5.60% due 9/01/2023 (c) 4,060
AAA Aaa 5,000 Santa Fe Springs, California, Community Development Common Tax Allocation,
Refunding (Consolidated Redevelopment Program), Series A, 5% due 9/01/2017 (c) 4,837
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Consolidated Redevelopment Project), Series A, 6% due 9/01/2014 (c) 3,230
AAA Aaa 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater
Project), Series A, 6.50% due 9/01/2002 (d)(g) 8,526
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT:
AAA NR* 2,115 (Mortgage-Backed Securities), Series A, 7.625% due 10/01/2023 (i) 2,221
AAA NR* 1,080 Series A, 6.75% due 9/01/2022 (e) 1,134
AAA NR* 160 Series B, 7.75% due 3/01/2024 (e) 168
AAA VMIG1++ 1,500 Southern California Public Power Authority, Power Project Revenue
Refunding Bonds (Sub-Palo Verde Project), VRDN, Series C, 3.90% due
7/01/2017 (a)(b) 1,500
AAA Aaa 5,000 Stockton, California, Revenue Bonds, COP (Wastewater Treatment Plant
Expansion), Series A, 6.80% due 9/01/2004 (d)(g) 5,738
A NR* 1,385 Torrance, California, Hospital Revenue Refunding Bonds (Little Company
of Mary Hospital), 6.875% due 7/01/2015 1,500
AAA Aaa 6,645 University of California Revenue Bonds, RITR, Series 13, 8.37% due
9/01/2019 (c)(h) 7,941
A+ NR* 3,300 University of California Revenue Refunding Bonds (Multiple Purpose
Projects), Series A, 6.875% due 9/01/2002 (g) 3,680
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Puerto Rico--2.2%
<S> <S> <C> <S> <C>
A Baa1 $ 5,500 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series V, 6.625% due 7/01/2012 $ 6,008
Puerto Rico Electric Power Authority, Power Revenue Bonds:
BBB+ Baa1 1,000 Refunding, Series U, 6% due 7/01/2014 1,053
BBB+ Baa1 2,600 Series T, 6.375% due 7/01/2004 (g) 2,907
Total Investments (Cost--$443,910)--100.0% 465,377
Other Assets Less Liabilities--0.0% 103
--------
Net Assets--100.0% $465,480
========
<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 April 30, 1998.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FNMA/GNMA Collateralized.
(f)FSA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1998.
(i)GNMA Collateralized.
(j)Escrowed to maturity.
*Not rated.
++Highest short-term ratings by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 1998
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 75.5%
AA/Aa 13.9
A/A 5.3
BBB/Baa 2.3
NR (Not Rated) 0.2
Other++ 2.8
[FN]
++Temporary investments in short-term municipal securities.
MuniYield California Fund, Inc.
April 30, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$443,909,936) (Note 1a) $465,377,239
Cash 76,532
Receivables:
Interest $ 7,442,310
Securities sold 3,541,681 10,983,991
------------
Prepaid expenses and other assets 17,053
------------
Total assets 476,454,815
------------
Liabilities: Payables:
Securities purchased 10,493,387
Investment adviser (Note 2) 193,592 10,686,979
------------
Accrued expenses and other liabilities 288,127
------------
Total liabilities 10,975,106
------------
Net Assets: Net assets $465,479,709
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (5,600 shares
of AMPS* issued and outstanding at $25,000 per share
liquidation preference) $140,000,000
Common Stock, par value $.10 per share (20,812,457 shares
issued and outstanding) $ 2,081,246
Paid-in capital in excess of par 292,186,986
Undistributed investment income--net 3,269,810
Undistributed realized capital gains on investments--net 6,474,364
Unrealized appreciation on investments--net 21,467,303
------------
Total--Equivalent to $15.64 net asset value per share
Common Stock (market price--$15.6875) 325,479,709
------------
Total capital $465,479,709
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1998
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 11,912,186
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,047,709
Commission fees (Note 4) 163,736
Professional fees 44,516
Accounting services (Note 2) 37,975
Transfer agent fees 27,151
Custodian fees 17,292
Directors' fees and expenses 11,319
Listing fees 9,871
Pricing fees 7,838
Printing and shareholder reports 2,655
Other 11,478
------------
Total expenses 1,381,540
------------
Investment income--net 10,530,646
------------
Realized & Realized gain on investments--net 8,712,259
Unrealized Gain Change in unrealized appreciation on investments--net (14,173,884)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,069,021
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 10,530,646 $ 19,726,136
Realized gain on investments--net 8,712,259 4,361,725
Change in unrealized appreciation on investments--net (14,173,884) 4,684,387
------------ ------------
Net increase in net assets resulting from operations 5,069,021 28,772,248
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (8,289,796) (15,659,702)
Shareholders Preferred Stock (1,953,320) (4,036,776)
(Note 1f): Realized gain on investments--net:
Common Stock (1,382,437) --
Preferred Stock (355,680) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (11,981,233) (19,696,478)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions 1,999,481 139,682
(Notes 1e & 4): Proceeds from issuance of Common Stock resulting from
reorganization 62,338,657 --
Offering costs from issuance of Common Stock resulting from
reorganization (243,170) --
Proceeds from issuance of Preferred Stock resulting from
reorganization 20,000,000 --
------------ ------------
Net increase in net assets derived from capital stock
transactions 84,094,968 139,682
------------ ------------
Net Assets: Total increase in net assets 77,182,756 9,215,452
Beginning of period 388,296,953 379,081,501
------------ ------------
End of period* $465,479,709 $388,296,953
============ ============
<FN>
*Undistributed investment income--net $ 3,269,810 $ 2,982,280
============ ============
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the
April 30, Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.98 $ 15.44 $ 15.18 $ 13.91 $ 16.60
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .56 1.17 1.16 1.18 1.23
Realized and unrealized gain (loss)
on investments--net (.21) .54 .28 1.53 (2.65)
-------- -------- -------- -------- --------
Total from investment operations .35 1.71 1.44 2.71 (1.42)
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.46) (.93) (.93) (.90) (1.00)
Realized gain on investments--net (.08) -- -- (.25) (.07)
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.54) (.93) (.93) (1.15) (1.07)
-------- -------- -------- -------- --------
Capital charge resulting from issuance
of Common Stock (.01) -- -- -- --
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.12) (.24) (.25) (.25) (.19)
Realized gain on investments--net (.02) -- -- (.04) (.01)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.14) (.24) (.25) (.29) (.20)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.64 $ 15.98 $ 15.44 $ 15.18 $ 13.91
======== ======== ======== ======== ========
Market price per share, end of period $15.6875 $ 15.875 $ 14.875 $ 13.375 $ 12.125
======== ======== ======== ======== ========
Total Investment Based on market price per share 2.24%+++ 13.44% 18.68% 20.62% (16.36%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 1.26%+++ 10.01% 8.54% 19.33% (9.69%)
======== ======== ======== ======== ========
Ratios to Average Expenses .66%* .67% .67% .69% .66%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 5.03%* 5.14% 5.16% 5.48% 5.44%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock,
Data: end of period (in thousands) $325,480 $268,297 $259,082 $254,742 $233,425
======== ======== ======== ======== ========
Preferred Stock outstanding,
end of period (in thousands) $140,000 $120,000 $120,000 $120,000 $120,000
======== ======== ======== ======== ========
Portfolio turnover 74.16% 88.68% 67.48% 69.59% 78.89%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,325 $ 3,236 $ 3,159 $ 3,123 $ 2,945
======== ======== ======== ======== ========
Dividends Series A--Investment income--net $ 412 $ 852 $ 875 $ 882 $ 694
Per Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 348 $ 830 $ 860 $ 864 $ 615
Outstanding:++++ ======== ======== ======== ======== ========
Series C--Investment income--net $ 163 -- -- -- --
======== ======== ======== ======== ========
<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.
++The Fund's Preferred Stock was issued on April 10, 1992 (Series A
and B) and February 9, 1998 (Series C).
++++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>
MuniYield California Fund, Inc.
April 30, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund determines and makes available for publication the net
asset value of its Common Stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol MYC.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
MuniYield California Fund, Inc.
April 30, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Offering costs--Direct expenses relating to the issuance of
Common Stock resulting from reorganization were charged to capital.
(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, including proceeds from the
issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1998 were $304,794,406 and
$314,968,844, respectively.
Net realized gains for the six months ended April 30, 1998 and net
unrealized gains as of April 30, 1998 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 8,483,209 $21,467,303
Financial futures contracts 229,050 --
----------- -----------
Total $ 8,712,259 $21,467,303
=========== ===========
As of April 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $21,467,303, of which $24,772,135 related to
appreciated securities and $3,304,832 related to depreciated
securities. The aggregate cost of investments at April 30, 1998 for
Federal income tax purposes was $443,909,936.
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
Shares issued and outstanding during the six months ended April 30,
1998 increased by 3,896,657 pursuant to a plan of reorganization and
by 125,478 as a result of dividend reinvestment and during the year
ended October 31, 1997 increased by 8,763 as a result of dividend
reinvestment.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 1998 were:
Series A, 3.52%, Series B, 3.85%, and Series C, 3.519%.
In addition, AMPS shares increased by 800 pursuant to a plan of
reorganization. As a result, as of April 30, 1998, there were 5,600
AMPS shares authorized, issued and outstanding with a liquidation
preference of $25,000 per share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1998, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), an affiliate of FAM, earned $87,808 as commissions.
MuniYield California Fund, Inc.
April 30, 1997
5. Acquisition of Taurus MuniCalifornia
Holdings, Inc.:
On February 9, 1998, the Fund acquired all of the net assets of
Taurus MuniCalifornia Holdings, Inc. pursuant to an agreement and
plan of reorganization. The acquisition was accomplished by a tax-
free exchange of 5,189,572 Common Stock shares and 800 AMPS shares
of Taurus MuniCalifornia Holdings, Inc. for 3,896,657 Common Stock
shares and 800 AMPS shares of the Fund. Taurus MuniCalifornia
Holdings, Inc.'s net assets on that date of $82,338,657, including
$6,378,266 of unrealized appreciation and $944,239 of accumulated
net realized capital losses, were combined with those of the Fund.
The aggregate net assets of the Fund immediately after the
acquisition amounted to $472,188,749.
6. Subsequent Event:
On May 7, 1998, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.074089 per share, payable on May 28, 1998 to shareholders of
record as of May 21, 1998.
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
Philip M. Mandel, Secretary
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
