MUNIYIELD
CALIFORNIA
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1999
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 months ended April 30, 1999, the Common Stock of
MuniYield California Fund, Inc. earned $0.446 per share income
dividends, which included earned and unpaid dividends of $0.069.
This represents a net annualized yield of 5.87%, based on a month-
end per share net asset value of $15.33. Over the same period, the
total investment return on the Fund's Common Stock was +0.85%, based
on a change in per share net asset value from $16.23 to $15.33, and
assuming reinvest-ment of $0.564 per share ordinary income dividends
and $0.474 per share capital gains distributions.
For the six-month period ended April 30, 1999, the average yields of
the Fund's Auction Market Preferred Stock were: Series A, 4.45%;
Series B, 4.30%; and Series C, 3.84%.
The Municipal Market Environment
During the six months ended April 30, 1999, long-term bond yields
generally moved higher. From November 1998 through mid-January 1999,
long-term bond yields traded in a relatively narrow range. However,
during February, a number of economic indicators were released that
suggested that economic growth in the United States would likely
remain strong throughout most of 1999. Consequently, long-term US
Treasury bond yields rose more than 60 basis points (0.60%) to 5.70%
by early March. During the remainder of the six-month period, US
Treasury bond yields traded between 5.50% and 5.70% as the lack of
inflationary pressures offset much of the concerns generated by
continued strong economic growth. During most of the period, long-
term, uninsured tax-exempt bond yields exhibited far less volatility
and were largely stable. Also, long-term municipal bond yields rose
just 5 basis points to 5.29% at the end of April 1999, as measured
by the Bond Buyer Revenue Bond Index.
In recent months, the tax-exempt market was better able to withstand
much of the upward pressure on bond yields because of its stronger
technical position. While the continued positive inflationary
environment limited some of the recent increases in taxable bond
yields, a deteriorating supply/demand position helped push taxable
bond yields significantly higher than municipal bond yields. Much of
the US Treasury bond market's underperformance in recent months can
be attributed to the large amounts of taxable corporate issuance.
Large taxable corporate underwritings reduced the demand for US
Government securities in recent months, pushing US Treasury bond
yields higher.
On the other hand, the tax-exempt bond market enjoyed only limited
new-issue supply. During the six months ended April 30, 1999, more
than $123 billion in new long-term tax-exempt securities was
underwritten, a decline of 10% compared to the same period a year
ago. Municipalities issued less than $60 billion in long-term tax-
exempt securities during the three months ended April 30, 1999, a
decline of 25% compared to the April 30, 1998 quarter. More
recently, the rate of new tax-exempt issuance has declined even
further. During April 1999, just over $15 billion in long-term tax-
exempt securities was marketed, a decline of over 33% compared to
April 1998 levels. As municipal bond yields fell and stabilized in
recent quarters, the ability of municipalities to refinance existing
higher-couponed debt declined. This led to a significant decrease in
refunding issuance and an overall drop in new municipal bond supply.
When coupled with ongoing, moderate retail and institutional demand,
the tax-exempt bond market was able to avoid much of the yield
volatility exhibited by US Treasury securities.
Looking ahead, the expected combination of moderate economic growth
in the United States and continued negligible inflation suggests a
relatively stable interest rate environment. However, in recent
years, bond yields reached their annual peaks in early May and
declined for the remainder of the year. A meaningful decline in
fixed-income bond yields would require either evidence of a
significant slowdown in the US economy or the resumption of concerns
regarding renewed shocks to the world's economic system. Currently,
neither condition exists or seems likely in the immediate future. In
our opinion, this suggests a continuation of the narrow trading
ranges seen in recent months.
MuniYield California Fund, Inc.
April 30, 1999
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, 1999, the
Fund had an above-industry average yield, largely stemming from its
advantage of being one of the more mature leveraged California tax-
exempt portfolios.
During the last six months, we made an effort to balance the Fund's
high-coupon structure with bond holdings that are more sensitive to
interest rate moves. We believe these additions may provide greater
total return potential if interest rates resume their decline later
this year.
We began extending the portfolio's average call protection in order
to seek to secure the Fund's income stream. The Fund's portfolio
includes a significant position in securities with call features
that may be exercised within the next three years--four years. A
growing Federal budget surplus, a corresponding reduction of
Treasury bond issuance and historically low inflationary
expectations have given us confidence that debt securities should 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 yield spreads relative to their
taxable counterparts. Therefore, we believe a more aggressive
position is warranted within the Fund's portfolio mix. It should be
noted that this strategy does not mean a lowering of credit quality.
With the inordinately tight credit quality spreads, 88% of the
Fund's net assets was invested in securities rated AA or better by
at least one of the major rating agencies.
Short-term tax-exempt yields exhibited considerable volatility in
recent months. Interest rates paid to the Fund's Preferred Stock
shareholders traded below 3% in December 1998, reflecting heightened
investor demand at year-end. Current short-term interest rate levels
reflect tax season-related pressures, which we expect to abate soon.
During the six-month period ended April 30, 1999, leveraging
generated a significant incremental yield to the Fund's Common Stock
shareholders. Because we believe that the Federal Reserve Board's
monetary policy is likely to remain in a narrow range for the
remainder of the year, we expect short-term tax-exempt interest
rates to remain at, or slightly below, current levels. However,
should the spread between short-term and long-term interest rates
narrow, the benefits of the leverage will decline and, as a result,
reduce the yield to the Fund's Common Stock. (For a complete
explanation of the benefits and risks of leveraging, see page 4 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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and Portfolio Manager
June 3, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on MuniYield California Fund, Inc.'s
Board of Directors. We are pleased to announce that Terry K. Glenn
has been elected President and Director of the Fund. Mr. Glenn has
held the position of Executive Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
MuniYield California Fund, Inc.
April 30, 1999
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended April 30, 1999, MuniYield
California Fund, Inc.'s Common Stock shareholders voted on the
following proposals. Proposals 1 and 2 were approved at a
shareholders' meeting on April 21, 1999. The meeting was adjourned
with respect to Proposal 3. The description of each proposal and
number of shares voted are as follows:
Shares Shares Withheld
Voted For From Voting
<S> <S> <C> <C>
1. To elect the Fund's Directors: Terry K. Glenn 20,516,835 302,665
James H. Bodurtha 20,518,549 300,951
Herbert I. London 20,516,177 303,323
Robert R. Martin 20,505,377 314,123
Arthur Zeikel 20,513,826 305,674
Shares Shares Voted Shares Voted
Voted For Against Abstain
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 20,403,451 115,150 300,899
3. To approve an amendment to the Articles Supplementary of the Fund. Adjourned Adjourned Adjourned
<CAPTION>
During the six-month period ended April 30, 1999, MuniYield
California Fund, Inc.'s Preferred Stock shareholders (Series A, B,
and C) voted on the following proposals. Proposals 1 and 2 were
approved at a shareholders' meeting on April 21, 1999. The meeting
was adjourned with respect to Proposal 3. The description of each
proposal and number of shares voted are as follows:
Shares Shares Withheld
Voted For From Voting
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors:
Terry K. Glenn, James H. Bodurtha,
Herbert I. London, Robert R. Martin,
Joseph L. May, Andre F. Perold and
Arthur Zeikel as follows: Series A 2,398 2
Series B 2,238 0
Series C 799 0
Shares Shares Voted Shares Voted
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: Series A 2,400 0 0
Series B 2,238 0 0
Series C 753 0 45
3. To approve an amendment to the Articles Supplementary of the Fund. Adjourned Adjourned Adjourned
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield California Fund, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. However,
these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Stock shareholders in the form
of dividends, and the value of these portfolio holdings is reflected
in the per share net asset value of the Fund's Common Stock.
However, in order to benefit Common Stock shareholders, the yield
curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, income on inverse floaters will decrease when short-term
interest rates increase and increase when short-term interest rates
decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in these securities.
MuniYield California Fund, Inc.
April 30, 1999
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.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to
designate years. These systems may not be able to distinguish the
Year 2000 from the Year 1900 (commonly known as the "Year 2000
Problem"). The Fund could be adversely affected if the computer
systems used by the Fund's management or other Fund service
providers do not properly address this problem before January 1,
2000. The Fund's management expects to have addressed this problem
before then, and does not anticipate that the services it provides
will be adversely affected. The Fund's other service providers have
told the Fund's management that they also expect to resolve the Year
2000 Problem, and the Fund's management will continue to monitor the
situation as the Year 2000 approaches. However, if the problem has
not been fully addressed, the Fund could be negatively affected. The
Year 2000 Problem could also have a negative impact on the
securities in which the Fund invests, and this could hurt the Fund's
investment returns.
MuniYield California Fund, Inc.
April 30, 1999
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
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
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--94.9%
<S> <S> <C> <S> <C>
AAA Aaa $11,010 Beverly Hills, California, Public Financing Authority, Lease Revenue
Refunding Bonds, Series A, 5.125% due 6/01/2017 (i) $ 11,210
California HFA, Home Mortgage Revenue Bonds, AMT:
AA- Aa2 370 Series C, 7.60% due 8/01/2030 (d) 385
NR* Aa2 410 Series D, 7.75% due 8/01/2010 (d) 428
AAA Aaa 5,000 Series E, 6.10% due 8/01/2029 (a) 5,313
AA- Aa2 2,540 Series E-1, 6.70% due 8/01/2025 (d) 2,718
AA- Aa2 6,110 Series F-1, 7% due 8/01/2026 (d) 6,595
AA- Aa2 5,635 Series N, 6.375% due 2/01/2027 (d) 6,052
NR* Aa2 1,045 California HFA, Home Mortgage Revenue Bonds, Series D, 7.25% due 8/01/2017 (d) 1,095
A+ Aa2 3,750 California HFA, Revenue Bonds, RIB, AMT, Series B-2, 9.621% due 8/01/2023 (d)(k) 4,275
California Health Facilities Finance Authority Revenue Bonds:
NR* Aaa 10,000 RITR, Series 14, 6.32% due 8/15/2030 (i)(k) 10,552
NR* A1 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 3,119
AAA Aaa 5,435 California Health Facilities Finance Authority, Revenue Refunding Bonds
(Children's Hospital), 5.375% due 7/01/2016 (i) 5,628
California Pollution Control Financing Authority, PCR, Refunding, VRDN (l):
A1+ NR* 2,500 (Pacific Gas and Electric), AMT, Series C, 4.25% due 11/01/2026 2,500
A1+ NR* 2,500 (Pacific Gas and Electric), Series F, 4.20% due 11/01/2026 2,500
A1 VMIG1++ 4,300 (Southern California Edison), Series A, 4.15% due 2/28/2008 4,300
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 (e)(h) 1,350
AAA Aaa 10,000 California State, Department of Water Resources, Water Systems Revenue
Refunding Bonds (Central Valley Project), Series Q, 5.375% due 12/01/2027 (i) 10,285
A1+ VMIG1++ 1,600 California State Economic Development Financing Authority Revenue Bonds
(California Independent Systems Project), VRDN, Series C, 4.10% due 4/01/2008 (l) 1,600
California State, GO:
A+ Aaa 10,600 5.90% due 4/01/2003 (j) 11,660
AAA Aaa 9,500 5.125% due 10/01/2027 (a) 9,478
AAA Aaa 10,000 California State, GO, Refunding, 4.25% due 10/01/2026 (i) 8,699
California State Public Works Board, Lease Revenue Bonds (j):
A Aaa 1,000 (Department of Corrections), Series A, 6.875% due 11/01/2004 1,172
A Aaa 6,800 (Department of Corrections), Series A, 7% due 11/01/2004 8,008
A Aaa 3,535 (Various Community College Projects), 7.0% due 3/01/2004 4,101
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
<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 Public Works Board, Lease Revenue Refunding Bonds:
A A1 $ 4,265 (California Community Colleges), Series D, 5.375% due 3/01/2012 $ 4,496
AAA Aaa 7,125 (California State University Project), Series A, 5.375% due 10/01/2017 (a) 7,399
AAA Aaa 2,625 (Various Community College Project), Series B, 5.625% due 3/01/2019 (a) 2,779
AA Aa3 4,750 California Statewide Community Development Authority Revenue Bonds, COP
(Saint Joseph Health System Group), 6.625% due 7/01/2004 (j) 5,460
AAA Aaa 6,185 Contra Costa County, California, Public Financing Authority, Lease Revenue
Refunding Bonds (Various Capital Facilities), Series A, 5.35% due 8/01/2024 (i) 6,380
BBB NR* 3,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Bonds, Series A, 7.10% due 8/01/2022 3,305
NR* NR* 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds,
Series B, 7.25% due 1/01/2012 (b) 1,013
BBB Baa3 1,810 Inglewood, California, Public Financing Authority, Revenue Refunding Bonds,
Series B, 7% due 5/01/2002 (j) 1,998
AAA Aaa 11,290 Jurupa, California, Community Services District, Revenue Refunding Bonds
Special Tax Community Facilities District Number 1, 4.75% due 9/01/2024 (g) 10,669
AAA Aaa 3,645 Los Angeles, California, Community Redevelopment Agency, Tax Allocation
Refunding Bonds (Bunker Hill), Series H, 6.50% due 12/01/2015 (g) 4,089
NR* Aaa 4,000 Los Angeles, California, Convention and Exhibition Center Authority,
Lease Revenue Bonds, RITR, Series 21, 6.32% due 8/15/2018 (k) 4,190
NR* Aaa 6,200 Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds, RITR, Series 18, 6.37% due 11/15/2031 (k) 6,459
A+ Aa3 7,300 Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Refunding Bonds, 6.375% due 2/01/2020 7,870
AAA Aaa 3,925 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds,
6.30% due 7/01/2024 (i) 4,414
AAA Aaa 11,875 Los Angeles, California, Department of Water and Power, Waterworks Revenue
Refunding Bonds, 4.25% due 10/15/2034 (i) 10,125
Los Angeles, California, Harbor Department Revenue Bonds:
AA Aa3 4,240 AMT, Series B, 6.60% due 8/01/2015 4,651
AA Aa3 8,855 AMT, Series B, 6.625% due 8/01/2019 9,690
AA Aa3 11,000 AMT, Series B, 5.375% due 11/01/2023 11,192
NR* Aaa 4,000 RITR, Series RI-7, 7.995% due 11/01/2026 (i)(k) 4,869
AAA NR* 145 Los Angeles, California, S/F Home Mortgage Revenue Bonds (Mortgage-Backed
Securities Program), AMT, Issue A, 7.55% due 12/01/2023 (d)(h) 150
AAA Aaa 10,000 Los Angeles, California, Unified School District, GO, Series B, 5% due 7/01/2023 (c) 9,848
AAA Aaa 6,605 Los Angeles, California, Wastewater System Revenue Refunding Bonds, Series C,
4% due 6/01/2015 (i) 5,997
NR* NR* 5,000 Los Angeles County, California, Metropolitan Transportation Authority,
Sales Tax Revenue Bonds, RITR, Series 30, 6.07% due 7/01/2023 (a)(k) 5,125
Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax
Revenue Refunding Bonds:
AAA Aaa 3,000 Proposition A, First Tier, Senior Series A, 5.25% due 7/01/2027 (i) 3,048
AAA Aaa 3,500 Proposition C, Second Senior-Series A, 5% due 7/01/2023 (a) 3,447
AAA Aaa 13,080 Proposition C, Second Series, Series A, 4.75% due 7/01/2026 (g) 12,355
AAA Aaa 9,600 Los Angeles County, California, Public Works Financing Authority, Lease Revenue
Bonds (Multiple Capital Facilities Project V), Series B, 5.125% due 12/01/2029 (a) 9,577
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
<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 $ 1,270 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds,
RIB, 9.618% due 8/01/2025 (i)(k) $ 1,503
AAA Aaa 5,000 Northern California Power Agency, Multiple Capital Facilities Revenue
Refunding Bonds, Series A, 5% due 8/01/2025 (a) 4,906
AAA Aaa 4,000 Northern California Power Agency, Public Power Revenue Refunding Bonds
(Hydroelectric Project Number 1), Series A, 5% due 7/01/2028 (i) 3,922
Oakland, California, Joint Powers Financing Authority, Lease Revenue Bonds
(Oakland Administration Buildings) (a):
AAA Aaa 2,000 5.90% due 8/01/2016 2,198
AAA Aaa 6,000 5.75% due 8/01/2021 6,440
AAA Aaa 5,395 5.75% due 8/01/2026 5,791
AAA Aaa 5,350 Pomona, California, Public Financing Authority, Revenue Refunding Bonds
(SW Pomona Redevelopment Project), Series W, 5% due 2/01/2024 (i) 5,245
AAA Aaa 2,345 Richmond, California, Redevelopment Agency, Tax Allocation, Refunding Bonds
(Harbour Redevelopment Project), Series A, 5.50% due 7/01/2018 (i) 2,481
AAA Aaa 5,000 Sacramento, California, Municipal Utility District, Electric Revenue Refunding
Bonds, Series L, 5.125% due 7/01/2015 (i) 5,129
AAA Aaa 10,000 Sacramento County, California, COP, Crossover Refunding (Public Facilities
Project), 4.75% due 10/01/2027 (a) 9,434
AAA Aaa 10,000 San Diego, California, Certificates of Undivided Interest, Water Utility Fund,
Net System Revenue Bonds, 5% due 8/01/2021 (c) 9,867
BBB+ Baa1 1,300 San Diego, California, Redevelopment Agency, Tax Allocation, Refunding Bonds
(Horton Project), Series B, 6.625% due 11/01/2017 1,448
AAA Aaa 10,760 San Diego County, California, Water Authority, Water Revenue Bonds, COP,
Series A, 5% due 5/01/2022 (c) 10,601
San Francisco, California, Bay Area Rapid Transit District, Sales Tax Revenue
Refunding Bonds:
AA- Aa3 4,000 5.25% due 7/01/2010 4,284
AA- Aa3 5,120 5.25% due 7/01/2013 5,380
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 (c) 3,341
AAA Aaa 4,525 AMT, Issue 6, 6.60% due 5/01/2020 (a) 5,060
AAA Aaa 8,000 Issue 15-B, 4.50% due 5/01/2028 (i) 7,244
San Francisco, California, City and County Airport Commission, International
Airport Revenue Refunding Bonds:
AAA Aaa 7,105 Issue 1, 6.50% due 5/01/2013 (a) 7,778
AAA Aaa 1,640 Issue 2, 6.75% due 5/01/2013 (i) 1,838
San Francisco, California, City and County GO, Refunding, Series 1 (c):
AAA Aaa 5,000 5.125% due 6/15/2013 5,206
AAA Aaa 6,825 5.125% due 6/15/2014 7,073
AAA Aaa 4,715 San Francisco, California, City and County Redevelopment Agency, Lease Revenue
Refunding Bonds (George R. Moscone Convention Center), 6.80% due 7/01/2019 (g) 5,365
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
<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>
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 (f) $ 109
AAA Aaa 2,000 San Francisco, California, State Building Authority, Lease Revenue Bonds
(San Francisco Civic Center Complex), Series A, 5.25% due 12/01/2021 (a) 2,036
AAA Aaa 5,000 San Jose, California, Redevelopment Agency Tax Allocation (Merged Area
Redevelopment Project), 5% due 8/01/2026 (a) 4,883
AAA Aaa 3,750 San Mateo County, California, Joint Powers Authority, Lease Revenue
Refunding Bonds (Capital Projects), Series A, 4.75% due 7/15/2023 (g) 3,563
Santa Clara County, California, Financing Authority, Lease Revenue Bonds
(VMC Facility Replacement Project), Series A (a)(j):
AAA Aaa 9,525 6.75% due 11/15/2004 11,108
AAA Aaa 2,000 6.875% due 11/15/2004 2,340
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation, Refunding
Bonds (Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (i) 3,256
Southern California Home Finance Authority, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT:
AAA NR* 965 Series A, 6.75% due 9/01/2022 (f) 1,012
AAA NR* 1,515 Series A, 7.625% due 10/01/2023 (h) 1,577
AAA NR* 120 Series B, 7.75% due 3/01/2024 (f) 125
AAA Aaa 5,000 Stockton, California, COP (Wastewater Treatment Plant Expansion), Series A,
6.80% due 9/01/2004 (c)(j) 5,818
Puerto Rico -- 2.1%
A Baa1 5,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Refunding Bonds, Series V, 6.625% due 7/01/2012 5,993
BBB+ Baa1 2,600 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series T, 6.375% due
7/01/2004 (j) 2,944
BBB+ Baa1 1,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds, Series U, 6%
due 7/01/2014 1,087
Total Investments (Cost--$435,892)--97.0% 451,003
Other Assets Less Liabilities--3.0% 13,713
--------
Net Assets--100.0% $464,716
========
<FN>
(a)AMBAC Insured.
(b)Escrowed to Maturity.
(c)FGIC Insured.
(d)FHA Insured.
(e)FHLMC Collateralized.
(f)FNMA/GNMA Collateralized.
(g)FSA Insured.
(h)GNMA Collateralized.
(i)MBIA Insured.
(j)Prerefunded.
(k)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, 1999.
(l)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, 1999.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$435,892,319) (Note 1a) $451,003,201
Cash 29,766
Receivables:
Securities sold $ 10,036,291
Interest 7,408,054 17,444,345
------------
Prepaid expenses and other assets 69,825
------------
Total assets 468,547,137
------------
Liabilities: Payables:
Securities purchased 3,618,815
Investment adviser (Note 2) 204,386 3,823,201
------------
Accrued expenses and other liabilities 8,365
------------
Total liabilities 3,831,566
------------
Net Assets: Net assets $464,715,571
============
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 (21,184,475
shares issued and outstanding) $ 2,118,448
Paid-in capital in excess of par 298,335,376
Undistributed investment income--net 3,862,531
Undistributed realized capital gains on investments--net 5,288,334
Unrealized appreciation on investments--net 15,110,882
------------
Total--Equivalent to $15.33 net asset value per Common Stock
(market price--$15.75) 324,715,571
------------
Total capital $464,715,571
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1999
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 12,494,512
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,172,946
Commission fees (Note 4) 153,517
Accounting services (Note 2) 57,944
Professional fees 41,706
Transfer agent fees 32,168
Printing and shareholder reports 19,572
Custodian fees 16,474
Listing fees 14,564
Directors' fees and expenses 10,721
Pricing fees 6,457
Other 21,135
------------
Total expenses 1,547,204
------------
Investment income--net 10,947,308
------------
Realized & Realized gain on investments--net 7,628,257
Unrealized Gain Change in unrealized appreciation on investments--net (12,697,366)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,878,199
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 10,947,308 $ 22,247,040
Realized gain on investments--net 7,628,257 14,829,943
Change in unrealized appreciation on investments--net (12,697,366) (7,832,939)
------------ ------------
Net increase in net assets resulting from operations 5,878,199 29,244,044
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (9,666,562) (17,763,984)
Shareholders Preferred Stock (1,097,424) (3,786,536)
(Note 1f): Realized gain on investments--net:
Common Stock (12,118,019) (1,382,438)
Preferred Stock (1,904,408) (936,720)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (24,786,413) (23,869,678)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders
Transactions in reinvestment of dividends and distributions 4,278,659 3,578,320
(Note 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 4,278,659 85,673,807
------------ ------------
Net Assets: Total increase (decrease) in net assets (14,629,555) 91,048,173
Beginning of period 479,345,126 388,296,953
------------ ------------
End of period* $464,715,571 $479,345,126
============ ============
<FN>
*Undistributed investment income--net $ 3,862,531 $ 3,679,209
============ ============
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.23 $ 15.98 $ 15.44 $ 15.18 $ 13.91
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .52 1.11 1.17 1.16 1.18
Realized and unrealized gain (loss) on
investments--net (.24) .39 .54 .28 1.53
-------- -------- -------- -------- --------
Total from investment operations .28 1.50 1.71 1.44 2.71
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.46) (.92) (.93) (.93) (.90)
Realized gain on investments--net (.58) (.08) -- -- (.25)
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (1.04) (1.00) (.93) (.93) (1.15)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- (.01) -- -- --
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.05) (.19) (.24) (.25) (.25)
Realized gain on investments--net (.09) (.05) -- -- (.04)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.14) (.24) (.24) (.25) (.29)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.33 $ 16.23 $ 15.98 $ 15.44 $ 15.18
======== ======== ======== ======== ========
Market price per share, end of period $ 15.75 $16.5625 $ 15.875 $ 14.875 $ 13.375
======== ======== ======== ======== ========
Total Investment Based on market price per share 1.54%+++ 8.10% 13.44% 18.68% 20.62%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .85%+++ 11.04% 10.01% 8.54% 19.33%
======== ======== ======== ======== ========
Ratios to Average Expenses .66%* .65% .67% .67% .69%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 4.66%* 4.94% 5.14% 5.16% 5.48%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock,
Data: end of period (in thousands) $324,716 $339,345 $268,297 $259,082 $254,742
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $140,000 $140,000 $120,000 $120,000 $120,000
======== ======== ======== ======== ========
Portfolio turnover 68.55% 136.88% 88.68% 67.48% 69.59%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,319 $ 3,424 $ 3,236 $ 3,159 $ 3,123
======== ======== ======== ======== ========
Dividends Series A--Investment income--net $ 195 $ 729 $ 852 $ 875 $ 882
Per Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 176 $ 693 $ 830 $ 860 $ 864
Outstanding: ======== ======== ======== ======== ========
Series C--Investment income--net $ 260 $ 466 -- -- --
======== ======== ======== ======== ========
<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).
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc.
April 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements are
prepared in accordance with generally accepted accounting principles
which may require the use of management accruals and estimates.
These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of
the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund determines and makes
available for publication the net asset value of its Common Stock on
a weekly basis. The Fund's Common Stock is listed on the New York
Stock Exchange under the symbol MYC. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last
asked price (options written) or the last bid price (options
purchased). Securities with remaining maturities of sixty days or
less are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio 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.
MuniYield California Fund, Inc.
April 30, 1999
(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) 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, 1999 were $307,363,665 and
$326,920,629, respectively.
Net realized gains for the six months ended April 30, 1999 and net
unrealized gains as of April 30, 1999 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 7,273,951 $15,110,882
Financial futures contracts 354,306 --
----------- -----------
Total $ 7,628,257 $15,110,882
=========== ===========
As of April 30, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $15,110,882, of which $17,466,844 related to
appreciated securities and $2,355,962 related to depreciated
securities. The aggregate cost of investments at April 30, 1999 for
Federal income tax purposes was $435,892,319.
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,
1999 increased by 274,041 as a result of dividend reinvestment and
during the year ended October 31, 1998 increased by 3,896,657
pursuant to a plan of reorganization and by 223,455 as a result of
dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.05 per share and a
liquidation preference of $25,000 per share, that entitle their
holders to receive cash dividends at an annual rate that may
MuniYield California Fund, Inc.
April 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
vary for the successive dividend periods. The yields in effect at
April 30, 1999 were: Series A, 3.15%; Series B, 3.49%; and Series C,
2.74%.
Shares issued and outstanding during the six months ended April 30,
1999 remained constant and during the year ended October 31, 1998
increased by 800 pursuant to a plan of reorganization.
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, 1999, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), an affiliate of FAM, earned $77,714 as commissions.
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 6, 1999, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.068669 per share, payable on May 27, 1999 to shareholders of
record as of May 21, 1999.
MuniYield California Fund, Inc.
April 30, 1999
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 1999
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 73.0%
AA/Aa 15.1
A/A 2.9
BBB/Baa 2.3
NR (Not Rated) 1.3
Other++ 2.4
[FN]
++Temporary investments in short-term municipal securities.
MuniYield California Fund, Inc.
April 30, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Gerald M. Richard, Treasurer and Philip M. Mandel, Secretary of
MuniYield California Fund, Inc. have recently retired. Their
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's
Board of Directors in wishing Mr. Richard and Mr. Mandel well in
their retirements.
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 Whitehall Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYC
