MUNIYIELD
CALIFORNIA
FUND, INC.
FUND LOGO
Annual Report
October 31, 2000
MuniYield California Fund, Inc. seeks to provide shareholders with
as high a level of current income exempt from Federal and California
income taxes as is consistent with its investment policies and
prudent investment management by investing primarily in a portfolio
of long-term, municipal obligations the interest on which, in the
opinion of bond counsel to the issuer, is exempt from Federal and
California income taxes.
This report, including the financial information herein, is
transmitted to shareholders of MuniYield California Fund, Inc. for
their information. It is not a prospectus. 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
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIYIELD CALIFORNIA FUND, INC.
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., October 31, 2000
DEAR SHAREHOLDER
For the year ended October 31, 2000, the Common Stock of MuniYield
California Fund, Inc. earned $0.797 per share income dividends,
which included earned and unpaid dividends of $0.066. This
represents a net annualized yield of 5.62%, based on a month-end net
asset value of $14.19 per share. During the same period, the total
investment return on the Fund's Common Stock was +13.45%, based on a
change in per share net asset value from $13.32 to $14.19, and
assuming reinvestment of $0.802 per share income dividends.
For the six-month period ended October 31, 2000, the total
investment return on the Fund's Common Stock was +9.02%, based on a
change in per share net asset value from $13.41 to $14.19, and
assuming reinvestment of $0.395 per share income dividends.
For the six-month period ended October 31, 2000, the Fund's Auction
Market Preferred Stock had an average yield of 3.22% for Series A,
3.60% for Series B and 3.71% for Series C.
The Municipal Market Environment
During the six months ended October 31, 2000, long-term US Treasury
bond yields generally drifted lower. A number of economic
indicators, particularly employment, new home sales and consumer
spending, have suggested that US economic growth, while still
strong, has moderated from 1999's robust levels. Preliminary
estimates for third-quarter 2000 US gross domestic product growth
were recently released at 2.7%, well below the first-quarter 2000
rate of 4.8% and the second-quarter 2000 rate of 5.6%. This decline
in economic growth suggests to some analysts that the Federal
Reserve Board has finished raising interest rates for its current
interest rate cycle. The Federal Reserve Board increased short-term
interest rates at its May meeting and has since kept monetary policy
steady at its subsequent meetings. Given the potential for stable
short-term interest rates in the coming months, investor emphasis
focused on the continuing US Treasury debt reduction program and
forecasts of sizeable Federal budgetary surpluses going forward.
Many investors have concluded that there will be a significant
future shortage of longer-dated maturity US Treasury securities. By
late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%; their lowest levels in more than a year.
However, for the remainder of the period, bond yields were unable to
maintain their earlier gains. Rising oil prices were the major focus
behind the decline in bond prices, as many investors feared that
higher oil prices would result in increased inflationary pressures.
Additionally, US corporations issued large amounts of taxable debt
in order to take advantage of the current low interest rate
environment. During the last three months, US corporations issued
more than $100 billion in investment-grade securities, offering
yields in the 7.25% - 9% range. Many investors found these taxable
issues an attractive and more plentiful alternative to US Treasury
bonds. As the demand for US Treasury issues weakened, US bond yields
rose. Although US Treasury bond yields rose to 5.78% by the end of
October 2000, overall they declined almost 20 basis points during
the last six months.
The six-month period ended October 31, 2000 was one of the few
periods in recent years in which the tax-exempt bond market out-
performed its taxable counterpart, the US Treasury bond market.
While municipal bond yields followed the similar seesaw pattern of
Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively
narrow range during much of October 2000. Overall investor demand
for municipal bonds remained strong, allowing tax-exempt bond
yields, as measured by the Bond Buyer Revenue Bond Index, to decline
30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has
continued to decline, albeit at a slower rate than earlier this
year. During this period, more than $53 billion in new long-term
municipal bonds was issued, a decline of 3% compared to the same
three-month period in 1999. During the last six months, more than
$105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200
billion in new municipal securities was marketed during the past
year, a decline of more than 16% compared to the same 12-month
period in 1999.
The demand for municipal bonds came from a number of non-traditional
and conventional sources. Derivative/arbitrage programs and
insurance companies remained the dominant institutional buyers,
while individual retail purchases also remained strong. Traditional,
open-end tax-exempt mutual funds have continued to see significant
disintermediation. It was recently reported that thus far during the
2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately,
the combination of reduced new bond issuance and ongoing demand from
non-traditional sources has been able to more than offset the
decline in demand from tax-exempt mutual funds. This favorable
balance has fostered a significant decline in municipal bond yields
in recent months.
Currently, there is no reason to expect that the positive technical
position of the municipal bond market will significantly
deteriorate. The steeply positive yield curve and the relatively
high credit quality that the tax-exempt bond market offers should
continue to attract different classes of institutional buyers.
Strong state and local governmental financial conditions also
suggest that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-
exempt bond market. Various tax and spending programs proposed by
both candidates have obvious implications for state and local
governments as well as corporate and individual taxpayers. Political
history has shown that the enactment of campaign promises, both
Republican and Democratic, has very often been a long, laborious
process. This suggests that over the next few months US economic
factors will most likely have a greater effect on bond yields than
political considerations.
Portfolio Strategy
During the six months ended October 31, 2000, the Fund underwent a
slight restructuring with our aim to reduce portfolio volatility in
what became an extremely volatile interest rate environment within a
general trend toward lower yields. We continued to maintain a fully
invested position, mainly in higher-quality California municipal
bonds. Our strategy has concentrated on utilizing strength in market
conditions in an effort to reduce asset price volatility and
increase current income. We adopted a more neutral stance as a
closed-end, leveraged municipal fund, yet our fully invested
position may likely allow significant price appreciation should
fixed-income securities values start to improve following signs of
an economic slowdown. We do not anticipate making any significant
changes going forward, yet we will monitor the overall economic
backdrop for signs of a more favorable environment for fixed-income
securities and California municipal bonds in particular.
MuniYield California Fund, Inc., October 31, 2000
The 125 basis point increase in short-term interest rates by the
Federal Reserve Board during the past year has resulted in a minor
increase in the Fund's borrowing cost to the 3% - 3.5% range.
However, the tax-exempt yield curve has remained steeply positive,
generating a material income benefit to the Fund's Common Stock
shareholders from the leveraging of the Preferred Stock. However,
should the spread between short-term and long-term interest rates
narrow, the benefits of leverage will decline and, as a result,
reduce the yield on the Fund's Common Stock. (For a complete
explanation of the benefits and risks of leveraging, see page 1 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 to come.
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
December 4, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
California--95.6% AAA Aaa $ 6,500 Alameda Corridor Transportation Authority, California,
Revenue Bonds, Senior Lien, Series A, 4.75%
due 10/01/2025 (h) $ 5,802
AAA Aaa 4,180 Antioch Area Public Facilities Financing Agency,
California, Special Tax (Community Facilities District
Number 1989-1), 5.70% due 8/01/2022 (a) 4,297
AAA Aaa 5,690 Arcata, California, Joint Powers Financing Authority,
Tax Allocation Revenue Refunding Bonds (Community
Development Project Loan), Series A, 6% due 8/01/2023 (a) 5,897
AAA Aaa 2,500 Bakersfield, California, COP, Refunding (Convention
Center Expansion Project), 5.80% due 4/01/2017 (h) 2,610
California Educational Facilities Authority,
Revenue Refunding Bonds:
AAA Aaa 2,100 (Pooled College), Series A, 5.60% due 12/01/2014 (h) 2,189
NR* Aaa 5,000 RIB, Series 413, 7.89% due 10/01/2026 (h)(j) 5,474
AA+ Aa2 1,500 (University of Southern California), Series A,
5.70% due 10/01/2015 1,579
California HFA, Home Mortgage Revenue Bonds, AMT (c):
AA- Aa2 1,560 Series E-1, 6.70% due 8/01/2025 1,597
AA- Aa2 2,140 Series F-1, 7% due 8/01/2026 2,186
AA- Aa2 4,870 Series N, 6.375% due 2/01/2027 5,076
AAA Aaa 1,615 Series P, 5.80% due 2/01/2019(a) 1,651
A+ Aa2 3,700 California HFA, Revenue Bonds, RIB, AMT, Series B-2,
8.351% due 8/01/2023 (c)(j) 3,941
NR* A1 2,835 California Health Facilities Finance Authority
Revenue Bonds (Scripps Research Institute), Series A,
6.625% due 7/01/2018 2,986
California Health Facilities Finance Authority,
Revenue Refunding Bonds (h):
A1+ VMIG1++ 3,000 (Adventist Hospital), VRDN, Series A, 4.40%
due 9/01/2028 (k) 3,000
AAA Aaa 1,490 (Pomona Valley Hospital Medical Center),
Series A, 5.625% due 7/01/2019 1,526
AAA Aaa 2,520 California Infrastructure and Economic Development
Bank Revenue Bonds (Asian Museum Foundation of San
Francisco), 5.50% due 6/01/2018 (h) 2,578
California Pollution Control Financing Authority,
PCR, Refunding, VRDN (k):
A1+ NR* 1,000 (Pacific Gas and Electric), AMT, Series B,
4.45% due 11/01/2026 1,000
A1+ NR* 500 (Pacific Gas and Electric), Series A, 4.40%
due 12/01/2018 500
A1+ NR* 10,200 (Pacific Gas and Electric), Series E, 2.75%
due 11/01/2026 10,200
A1 VMIG1++ 100 (Southern California Edison Company),
Series B, 4.55% due 2/28/2008 100
</TABLE>
Portfolio
Abbreviations
To simplify the listings of MuniYield California Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative 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 (continued) (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
California NR* Aaa $ 1,215 California Rural Home Mortgage Finance
(continued) Authority, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT,
Series A-1, 6.90% due 12/01/2024 (d)(g) $ 1,309
AA Aa3 6,315 California State Department of Veteran Affairs,
Home Purpose Revenue Refunding Bonds,
Series C, 6.05% due 12/01/2020 6,511
California State, GO, Refunding:
AAA Aaa 15,000 4.25% due 10/01/2026 (h) 12,247
AA Aa2 5,000 5.75% due 5/01/2030 5,143
California State Public Works Board,
Lease Revenue Bonds:
AAA Aaa 2,000 (California State University), Series C, 5.40%
due 10/01/2022 (h) 2,004
AA- Aaa 6,800 (Department of Corrections), Series A, 7% due
11/01/2004 (i) 7,636
AAA Aaa 6,645 (Department of Health Services), Series A,
5.75% due 11/01/2017 (h) 7,001
California State University and Colleges,
Housing System Revenue Refunding Bonds (b):
AAA Aaa 3,000 5.75% due 11/01/2015 3,146
AAA Aaa 3,500 5.80% due 11/01/2017 3,651
AAA Aaa 3,900 5.90% due 11/01/2021 4,096
AAA Aaa 5,250 California Statewide Communities Development
Authority, COP (John Muir/Mount Diablo Health System),
5.125% due 8/15/2022 (h) 5,059
AAA Aaa 4,500 Central Coast Water Authority, California,
Regional Facilities Revenue Refunding Bonds (State
Water Project), Series A, 5% due 10/01/2022 (a) 4,332
AAA Aaa 2,000 Chino Basin, California, Regional Financing Authority
Revenue Bonds (Inland Empire Utility Agency Sewer Project),
5.75% due 11/01/2019 (h) 2,087
Contra Costa County, California, Public Financing
Authority, Lease Revenue Refunding Bonds
(Various Capital Facilities), Series A (h):
AAA Aaa 2,705 5.30% due 8/01/2020 2,698
AAA Aaa 3,485 5.35% due 8/01/2024 3,462
Contra Costa County, California, Public Financing
Authority, Tax Allocation Revenue Bonds, Series A:
AAA NR* 1,860 7.10% due 8/01/2002 (i) 1,992
BBB NR* 1,140 7.10% due 8/01/2022 1,183
AAA Aaa 2,500 Davis, California, Joint Unified School District,
Community Facilities District, Special Tax Refunding
Bonds, Number 1, 5.50% due 8/15/2021 (h) 2,522
AAA Aaa 3,950 East Bay, California, Municipal Utility District,
Water System Subordinated Revenue Refunding
Bonds, 5% due 6/01/2026 (b) 3,722
AAA Aaa 2,500 Fontana, California, Redevelopment Agency Tax
Allocation Refunding Bonds (Southwest Industrial
Park Project), 5% due 9/01/2022 (h) 2,382
BBB Baa3 1,775 Inglewood, California, Public Financing Authority,
Revenue Refunding Bonds, Series B, 7% due 5/01/2002 (i) 1,861
NR* Aaa 2,000 Los Angeles, California, COP (Sonnenblick Del Rio
West Los Angeles), 6.20% due 11/01/2031 (a) 2,167
AAA Aaa 3,645 Los Angeles, California, Community Redevelopment
Agency, Tax Allocation Refunding Bonds
(Bunker Hill), Series H, 6.50% due 12/01/2015 (f) 3,929
AAA Aaa 5,000 Los Angeles, California, Convention and Exhibition
Center Authority, Lease Revenue Refunding Bonds,
Series A, 5.375% due 8/15/2018 (h) 5,026
NR* Aa3 9,060 Los Angeles, California, Department of Water and
Power, Electric Plant Revenue Refunding Bonds, RIB,
Series 370, 7.841% due 2/15/2024 (j) 9,641
Los Angeles, California, Harbor Department
Revenue Bonds, AMT:
NR* Aaa 4,000 RITR, Series RI-7, 8.095% due 11/01/2026 (h)(j) 4,462
AA Aa3 2,000 Series B, 6% due 8/01/2015 2,103
AA Aa3 4,240 Series B, 6.60% due 8/01/2015 4,455
AA Aa3 8,855 Series B, 6.625% due 8/01/2019 9,276
AAA Aaa 9,500 Los Angeles, California, Unified School District,
GO, Series A, 5% due 7/01/2021 (b) 9,087
AAA Aaa 13,750 Los Angeles, California, Wastewater System Revenue
Bonds, Series A, 5% due 6/01/2023 (b) 13,037
AAA Aaa 5,000 Los Angeles County, California, Public Works
Financing Authority, Lease Revenue Bonds (Multiple Capital
Facilities Project VI), Series A, 5.625% due 5/01/2026 (a) 5,075
AAA Aaa 4,000 Los Angeles County, California, Metropolitan
Transportation Authority, Sales Tax Revenue Bonds
(Proposition C), Second Tier, Senior Series A,
5.50% due 7/01/2017 (a) 4,082
AAA Aaa 2,950 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds,
Proposition A, First Tier, Series C, 5% due 7/01/2020 (a) 2,836
AAA Aaa 2,000 Menlo Park, California, Community Development Agency,
Tax Allocation Refunding Bonds (Las Pulgas Community
Development Project), 5.375% due 6/01/2016 (a) 2,040
Metropolitan Water District of Southern California,
Waterworks Revenue Bonds, Series A:
AAA Aaa 5,730 5.75% due 7/01/2013 (h) 6,044
AA Aa2 5,500 5% due 7/01/2026 5,181
A1+ NR* 2,600 Metropolitan Water District of Southern California,
Waterworks Revenue Refunding Bonds, VRDN, Series B-1,
4.40% due 7/01/2035 (k) 2,600
AAA Aaa 8,705 Modesto, California, Wastewater Treatment Facilities
Revenue Bonds, 5.625% due 11/01/2017 (h) 9,043
AAA Aaa 1,750 North City-West, California, School Facilties Financing
Authority, Special Tax Refunding Bonds, Series B,
5.75% due 9/01/2015 (f) 1,841
AAA Aaa 1,270 Northern California Power Agency, Multiple Capital
Facilities Revenue Bonds, RIB, 8.483% due 8/01/2025 (h)(j) 1,402
Northern California Power Agency, Public Power Revenue
Refunding Bonds (Hydroelectric Project Number 1),
Series A (h):
AAA Aaa 13,600 5.125% due 7/01/2023 13,131
AAA Aaa 5,000 5% due 7/01/2028 4,694
Oakland, California, Joint Powers Financing Authority,
Lease Revenue Bonds (Oakland Administration Buildings) (a):
AAA Aaa 2,000 5.90% due 8/01/2016 2,120
AAA Aaa 11,395 5.75% due 8/01/2021 11,724
AAA Aaa 4,160 Oakland, California, State Building Authority, Lease
Revenue Bonds (Elihu M. Harris), Series A, 5% due
4/01/2023 (a) 3,950
Oakland, California, Unified School District,
Alameda County, GO, Series F (h):
AAA Aaa 3,290 5.50% due 8/01/2017 3,387
AAA Aaa 3,770 5.50% due 8/01/2018 3,861
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
California AAA Aaa $ 1,750 Pleasant Valley, California, School District,
(concluded) Ventura County, GO, Series C, 5.75% due 8/01/2025 (h) $ 1,802
AAA Aaa 10,600 Port Oakland, California, Port Revenue
Refunding Bonds, Series I, 5.40% due 11/01/2017 (h) 10,804
AAA Aaa 2,345 Richmond, California, Redevelopment Agency,
Tax Allocation, Refunding Bonds (Harbour Redevelopment
Project), Series A, 5.50% due 7/01/2018 (h) 2,398
AAA Aaa 1,750 Riverside County, California, Asset Leasing
Corporation, Leasehold Revenue Refunding Bonds (Riverside
County Hospital Project), Series B, 5.70% due 6/01/2016 (h) 1,854
AAA Aaa 5,000 Roseville, California, Electric System Revenue
Bonds, COP, 5.50% due 2/01/2024 (f) 5,033
AAA Aaa 5,000 Sacramento, California, Municipal Utility District,
Electric Revenue Refunding Bonds, Series L, 5.125%
due 7/01/2022 (h) 4,844
Sacramento County, California, Sanitation District
Financing Authority, Revenue Refunding Bonds:
AA Aa3 4,500 RIB, Series 366, 7.64% due 12/01/2027 (j) 4,766
AA Aa3 1,000 Series A, 5.60% due 12/01/2017 1,027
AA Aa3 2,500 Series A, 5.75% due 12/01/2018 2,579
NR* Aa3 3,750 Trust Receipts, Class R, Series A, 7.829%
due 12/01/2019 (j) 4,104
AAA Aaa 9,850 San Bernardino, California, City Unified
School District, GO, Refunding, Series A,
5.875% due 8/01/2024 (b) 10,284
AAA Aaa 3,000 San Bernardino, California, Joint Powers Financing
Authority, Lease Revenue Bonds (Department of Transportation
Lease), Series A, 5.50% due 12/01/2020 (h) 3,031
AAA Aaa 5,000 San Bernardino, California, Joint Powers Financing
Authority, Tax Allocation Revenue Refunding Bonds,
Series A, 5.75% due 10/01/2015 (f) 5,235
AAA Aaa 2,500 San Diego, California, Public Facilities Financing
Authority, Sewer Revenue Bonds, 5% due 5/15/2020 (b) 2,395
BBB+ Baa1 1,300 San Diego, California, Redevelopment Agency,
Tax Allocation, Refunding Bonds (Horton Project),
Series B, 6.625% due 11/01/2017 1,395
AAA Aaa 5,000 San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Refunding
Bonds, 4.75% due 7/01/2023 (a) 4,487
San Francisco, California, City and County Airport
Commission, International Airport Revenue Bonds, AMT,
Second Series:
AAA Aaa 3,000 Issue 5, 6.50% due 5/01/2019 (b) 3,205
AAA Aaa 4,525 Issue 6, 6.60% due 5/01/2020 (a) 4,828
AAA Aaa 3,000 Issue 11, 6.25% due 5/01/2026 (b) 3,136
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 (f) 5,161
AAA Aaa 2,020 Santa Clara, California, Unified School District, GO,
5.50% due 7/01/2021 (b) 2,048
AAA Aaa 2,000 Santa Clara County, California, Financing Authority,
Lease Revenue Bonds (VMC Facility Replacement Project),
Series A, 6.875% due 11/15/2004 (a)(i) 2,237
NR* Aaa 5,125 Santa Clara Valley, California, Water District, COP,
Refunding, RIB, Series 411, 7.89% due 2/01/2024 (b)(j) 5,477
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency,
Tax Allocation, Refunding Bonds (Conservation Redevelopment
Project), Series A, 6% due 9/01/2014 (h) 3,141
AAA Aaa 4,000 Santa Monica, California, Redevelopment Agency,
Tax Allocation Bonds (Earthquake Recovery Redevelopment
Project), 6% due 7/01/2029 (a) 4,222
AAA Aaa 1,000 Santa Rosa, California, High School District, GO,
5.70% due 5/01/2021 (f) 1,028
AAA Aaa 2,000 Sequoia, California, Unified High School
District, GO, 5.70% due 7/01/2024 (f) 2,037
AAA Aaa 2,265 South Bayside, California, Waste Management Authority,
Waste System Revenue Bonds, 5.75% due 3/01/2020 (a) 2,349
AAA NR* 765 Southern California Home Finance Authority, S/F
Mortgage Revenue Bonds (Mortgage-Backed Securities Program),
AMT, Series A, 6.75% due 9/01/2022 (e) 778
AAA Aaa 3,235 Taft, California, Public Financing Authority, Lease
Revenue Bonds (Community Correctional Facilty), Series A,
6.05% due 1/01/2017 (h) 3,436
University of California Revenue Bonds:
AAA Aaa 1,475 (Multi-Purpose Projects), Series F, 5%
due 9/01/2022 (b) 1,405
AAA Aaa 4,885 (Research Facilities), Series D, 5% due
9/01/2024 (f) 4,624
AAA Aaa 6,445 University of California Revenue Refunding
Bonds (Research Facilities), Series C,
5% due 9/01/2021 (f) 6,163
AAA Aaa 5,000 Vista, California, Joint Powers Financing Authority,
Lease Revenue Refunding Bonds, 5.625% due 5/01/2016 (h) 5,211
Puerto Rico--2.8% Puerto Rico Commonwealth, Highway and Transportation
Authority, Highway Revenue Refunding Bonds:
A Baa1 5,500 Series V, 6.625% due 7/01/2012 5,743
AAA Aaa 3,000 Series W, 5.50% due 7/01/2013 (h) 3,191
AAA Aaa 2,600 Puerto Rico Electric Power Authority, Power
Revenue Bonds, Series X, 5.50% due 7/01/2025 (h) 2,604
A- Baa1 1,000 Puerto Rico Electric Power Authority, Power
Revenue Refunding Bonds, Series U, 6% due 7/01/2014 1,050
Total Investments (Cost--$417,415)--98.4% 433,539
Other Assets Less Liabilities--1.6% 6,964
--------
Net Assets--100.0% $440,503
========
(a)AMBAC Insured.
(b)FGIC Insured.
(c)FHA Insured.
(d)FHLMC Collateralized.
(e)FNMA/GNMA Collateralized.
(f)FSA Insured.
(g)GNMA Collateralized.
(h)MBIA Insured.
(i)Prerefunded.
(j)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 2000.
(k)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 2000.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc., October 31, 2000
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of October 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$417,414,523) $433,538,528
Cash 199,571
Receivables:
Interest $ 7,499,581
Securities sold 6,221,546 13,721,127
------------
Prepaid expenses and other assets 11,953
------------
Total assets 447,471,179
------------
Liabilities: Payables:
Securities purchased 6,360,637
Dividends to shareholders 293,919
Investment adviser 179,754 6,834,310
------------
Accrued expenses and other liabilities 133,606
------------
Total liabilities 6,967,916
------------
Net Assets: Net assets $440,503,263
============
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 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 298,320,316
Undistributed investment income--net 3,732,077
Accumulated realized capital losses on investments--net (11,494,921)
Accumulated distributions in excess of realized capital
gains--net (8,296,662)
Unrealized appreciation on investments--net 16,124,005
------------
Total--Equivalent to $14.19 net asset value per
share of Common Stock (market price--$13.0625) 300,503,263
------------
Total capital $440,503,263
============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 2000
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 24,635,797
Income:
Expenses: Investment advisory fees $ 2,141,616
Commission fees 353,976
Accounting services 100,649
Professional fees 80,797
Transfer agent fees 70,916
Listing fees 38,615
Printing and shareholder reports 34,634
Directors' fees and expenses 32,499
Custodian fees 30,730
Pricing fees 15,686
Other 42,750
------------
Total expenses 2,942,868
------------
Investment income--net 21,692,929
------------
Realized & Realized loss on investments--net (11,494,921)
Unrealized Change in unrealized appreciation/depreciation
Gain (Loss) on on investments--net 30,050,061
Investments--Net: ------------
Net Increase in Net Assets Resulting from Operations $ 40,248,069
============
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc., October 31, 2000
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 21,692,929 $ 21,783,984
Realized loss on investments--net (11,494,921) (5,955,228)
Change in unrealized appreciation/depreciation
on investments--net 30,050,061 (41,734,304)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 40,248,069 (25,905,548)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (16,980,585) (18,534,023)
Shareholders: Preferred Stock (4,877,784) (3,048,224)
Realized gain on investments--net:
Common Stock -- (4,949,446)
Preferred Stock -- (777,830)
In excess of realized gain on investments--net:
Common Stock -- (7,168,573)
Preferred Stock -- (1,126,578)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (21,858,369) (35,604,674)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders
Transactions: in reinvestment of dividends and distributions -- 4,278,659
------------ ------------
Net Assets: Total increase (decrease) in net assets 18,389,700 (57,231,563)
Beginning of year 422,113,563 479,345,126
------------ ------------
End of year* $440,503,263 $422,113,563
============ ============
*Undistributed investment income--net $ 3,732,077 $ 3,897,517
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 13.32 $ 16.23 $ 15.98 $ 15.44 $ 15.18
Operating --------- -------- -------- -------- --------
Performance: Investment income--net 1.02 1.03 1.11 1.17 1.16
Realized and unrealized gain
(loss) on investments--net .88 (2.25) .39 .54 .28
--------- -------- -------- -------- --------
Total from investment operations 1.90 (1.22) 1.50 1.71 1.44
--------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.80) (.88) (.92) (.93) (.93)
Realized gain on investments--net -- (.24) (.08) -- --
In excess of realized gain on
investments--net -- (.34) -- -- --
--------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.80) (1.46) (1.00) (.93) (.93)
--------- -------- -------- -------- --------
Capital charge resulting from
issuance of Common Stock -- -- (.01) -- --
--------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.23) (.14) (.19) (.24) (.25)
Realized gain on investments--net -- (.04) (.05) -- --
In excess of realized gain on
investments--net -- (.05) -- -- --
--------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.23) (.23) (.24) (.24) (.25)
--------- -------- -------- -------- --------
Net asset value, end of year $ 14.19 $ 13.32 $ 16.23 $ 15.98 $ 15.44
========= ======== ======== ======== ========
Market price per share, end of year $13.0625 $ 12.625 $16.5625 $ 15.875 $ 14.875
========= ======== ======== ======== ========
Total Investment Based on market price per share 10.18% (16.13%) 8.10% 13.44% 18.68%
Return:* ========= ======== ======== ======== ========
Based on net asset value per share 13.45% (9.70%) 11.04% 10.01% 8.54%
========= ======== ======== ======== ========
Ratios Based on Total expenses** 1.02% .98% .93% .97% .98%
Average Net ========= ======== ======== ======== ========
Assets of Total investment income--net** 7.51% 6.86% 7.12% 7.47% 7.50%
Common Stock: ========= ======== ======== ======== ========
Amount of dividends to Preferred
Stock shareholders 1.69% .96% 1.21% 1.53% 1.61%
========= ======== ======== ======== ========
Investment income--net, to
Common Stock shareholders 5.82% 5.90% 5.91% 5.94% 5.89%
========= ======== ======== ======== ========
Ratios Based on Total expenses .69% .68% .65% .67% .67%
Total Average ========= ======== ======== ======== ========
Net Assets:**++ Total investment income--net 5.05% 4.77% 4.94% 5.14% 5.16%
========= ======== ======== ======== ========
Ratios Based on Dividends to Preferred
Average Net Stock shareholders 3.47% 2.18% 2.82% 3.36% 3.47%
Assets of ========= ======== ======== ======== ========
Preferred Stock:
Supplemental Net assets, net of Preferred Stock,
Data: end of year (in thousands) $ 300,503 $282,114 $339,345 $268,297 $259,082
========= ======== ======== ======== ========
Preferred Stock outstanding,
end of year (in thousands) $ 140,000 $140,000 $140,000 $120,000 $120,000
========= ======== ======== ======== ========
Portfolio turnover 93.01% 146.39% 136.88% 88.68% 67.48%
========= ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,146 $ 3,015 $ 3,424 $ 3,236 $ 3,159
========= ======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 865 $ 527 $ 729 $ 852 $ 875
Share on ========= ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 875 $ 546 $ 693 $ 830 $ 860
Outstanding:++++ ========= ======== ======== ======== ========
Series C--Investment income--net $ 875 $ 591 $ 466 -- --
========= ======== ======== ======== ========
*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 charges.
**Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Includes Common and Preferred Stock average net assets.
++++The Fund's Preferred Stock was issued on April 10, 1992 (Series
A and B) and February 9, 1998 (Series C).
See Notes to Financial Statements.
</TABLE>
MuniYield California Fund, Inc., October 31, 2000
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 conformity with accounting principles generally accepted
in the United States of America, which may require the use of
management accruals and estimates. 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions.
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 .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.
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 year ended October 31, 2000 were $383,162,308 and
$381,898,661, respectively.
Net realized losses for the year ended October 31, 2000 and net
unrealized gains as of October 31, 2000 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (11,357,971) $ 16,124,005
Financial futures contracts (136,950) --
------------- ------------
Total $ (11,494,921) $ 16,124,005
============= ============
As of October 31, 2000, net unrealized appreciation for Federal
income tax purposes aggregated $16,124,005, of which $17,191,248
related to appreciated securities and $1,067,243 related to
depreciated securities. The aggregate cost of investments at October
31, 2000 for Federal income tax purposes was $417,414,523.
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 year ended October 31, 2000
remained constant and during the year ended October 31, 1999
increased by 274,041 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 $.10 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 vary
for the successive dividend periods. The yields in effect at October
31, 2000 were: Series A, 4.09%; Series B, 3.90%; and Series C,
3.30%.
Shares issued and outstanding during the years ended October 31,
2000 and October 31, 1999 remained constant.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the year ended
October 31, 2000, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), an affiliate of FAM, earned $125,661 as commissions.
5. Capital Loss Carryforward:
At October 31, 2000, the Fund had a net capital loss carry-forward
of approximately $18,771,000, of which $7,128,000 expires in 2007
and $11,643,000 expires in 2008. This amount will be available to
offset like amounts of any future taxable gains.
6. Subsequent Event:
On November 8, 2000, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.065900 per share, payable on November 29, 2000 to shareholders
of record as of November 20, 2000.
MuniYield California Fund, Inc., October 31, 2000
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniYield California Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
California Fund, Inc. as of October 31, 2000, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at October 31, 2000 by
correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield California Fund, Inc. as of October 31, 2000, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
December 5, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield
California Fund, Inc. during its taxable year ended October 31, 2000
qualify as tax-exempt interest dividends for Federal income tax
purposes. Additionally, there were no capital gains distributions
paid by the Fund during the year.
Please retain this information for your records.
MuniYield California Fund, Inc., October 31, 2000
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of October 31, 2000
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 75.5%
AA/Aa 15.7
A/A 2.2
BBB/Baa 1.0
Other++ 4.0
++Temporary investments in short-term municipal securities.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its
net investment income to its shareholders on a monthly basis. 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.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Joseph L. May, Director
Andre F. Perold, Director
Roberta Cooper Ramo, 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
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:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MYC
