TAURUS
MUNICALIFORNIA
HOLDINGS, INC.
FUND LOGO
Annual Report
October 31, 1994
This report, including the financial information herein, is
transmitted to the shareholders of Taurus MuniCalifornia Holdings,
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 repre-
sentation of future performance. The fund has leveraged its Common
Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders.
<PAGE>
Taurus MuniCalifornia Holdings, Inc.
Box 9011
Princeton, NJ
08543-9011
Taurus MuniCalifornia Holdings, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1994, the Common Stock of Taurus
MuniCalifornia Holdings, Inc. earned $0.813 per share income
dividends, which includes earned and unpaid dividends of $0.060.
This represents a net annualized yield of 7.95%, based on a month-
end net asset value of $10.25 per share. Over the same period, the
total investment return on the fund's Common Stock was -10.84%,
based on a change in per share net asset value from $12.51 to
$10.25, and assuming reinvestment of $0.816 per share income
dividends and $0.096 per share capital gains distributions.
For the six-month period ended October 31, 1994, the total
investment return on the fund's Common Stock was -2.32%, based on a
change in per share net asset value from $10.88 to $10.25, and
assuming reinvestment of $0.351 per share income dividends.
For the six-month period ended October 31, 1994, the fund's Auction
Market Preferred Stock had an average yield of 2.86%.
The Environment
As discussed in our last report to shareholders, the Federal Reserve
Board moved to counteract inflationary pressures by tightening
monetary policy. This trend continued during the May--October
period. Despite the series of preemptive strikes against inflation
by the central bank, concerns of increasing inflationary pressures
continued to prompt volatility in the US capital markets during the
period. In addition, the weakness of the US dollar in foreign
exchange markets prolonged stock and bond market declines.
Ongoing strength in the manufacturing sector and better-than-
expected economic results continue to fuel speculation that the
Federal Reserve Board will continue to raise short-term interest
rates in the months ahead. However, although consumer spending is
increasing, it is doing so at a lower rate than has been the case in
recent economic recoveries. In the weeks ahead, investors will
continue to assess economic data and inflationary trends in order to
gauge whether further increases in short-term interest rates are
imminent. Continued indications of moderate and sustainable levels
of economic growth would be positive for the US capital markets. At
the same time, greater US dollar stability in foreign exchange
markets would help to dampen expectations of significantly higher
short-term interest rates.
<PAGE>
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
three months ended October 31, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by almost 50 basis points (0.50%) to 6.95%
during the October 31, 1994 quarter. This represents the highest
level in tax-exempt bond yields in over two years. US Treasury bonds
suffered even greater declines during the quarter as Treasury bond
yields rose approximately 60 basis points to end the quarter at
8.00%.
The tax-exempt bond market reacted negatively throughout the October
quarter to indications that, despite a series of interest rate
increases by the Federal Reserve Board, the strength of the domestic
economy seen in recent quarters has not yet been significantly
reduced. While inflationary pressures have remained well contained,
additional Federal Reserve Board actions have been expected both to
ensure that domestic economic growth is eventually confined to
current levels and to assure nervous financial markets of its anti-
inflationary intentions.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the quarter ended October 31, 1994, only $32 billion
in long-term tax-exempt securities were issued, a decline of over
50% versus the October 31, 1993 quarter. Similarly, for the six
months ended October 31, 1994, only $75 billion in municipal
securities were underwritten, a decline of over 50% versus the
comparable period a year earlier. This reduction in issuance in
recent quarters has allowed the municipal bond market to react to
both the decline in investor demand and the rise in fixed-income
yields in a more orderly fashion than in similar situations in the
past, particularly during 1987.
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for long-
term investors.
<PAGE>
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
During the quarter ended October 31, 1994, our portfolio strategy
consisted of selling discounted bonds and replacing them with higher-
yielding current coupon bonds. Furthermore, the fund's cash reserves
averaged 5% of net assets for the quarter, and premium coupons were
purchased when available. The net effect of this strategy enhanced
the fund's yield, while restructuring the portfolio more
defensively. Municipal issuance of California bonds for this quarter
versus the same quarter last year decreased 33%, which indicates the
difficulty of purchasing bonds that would both fit our portfolio
strategy and fulfill the fund's diversification requirements. Also,
in response to the State's recent downgrade in credit and the unsure
path of California's economic recovery, we raised the percentage of
long-term holdings of bonds rated AA or better by one of the major
rating services from 70% to 80%.
Looking forward, our strategy will consist of enhancing income for
Common Stock shareholders through the purchase of current coupon and
premium coupon bonds when attractively priced.
We appreciate your ongoing interest in Taurus MuniCalifornia
Holdings, Inc., and we look forward to serving your investment needs
and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
<PAGE>
November 29, 1994
THE BENEFITS AND RISKS OF LEVERAGING
Taurus MuniCalifornia Holdings, 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.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced. At the same time, the market value of
the fund's Common Stock (that is, its price as listed on the New
York Stock Exchange) may, as a result, decline. Furthermore, if long-
term interest rates rise, the Common Stock's net asset value will
reflect the full decline in the price of the portfolio's
investments, since the value of the fund's Preferred Stock does not
fluctuate. In addition to the decline in net asset value, the market
value of the fund's Common Stock may also decline.
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Taurus MuniCalifornia Holdings, 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 Authority
IDR Industrial Development 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--101.9%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 California Educational Facilities Authority Revenue Bonds (Stanford
University), Series J, 6% due 11/01/2016 $ 928
California Health Facilities Financing Authority Revenue Bonds,
Series A:
BBB Baa1 1,500 (Health Dimensions), 7.50% due 5/01/2015 1,500
AAA Aaa 2,180 (San Francisco Children's Hospital), 7.50% due 10/01/2020 (d) 2,296
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 1,750 Series A, 8.20% due 8/01/2017 1,837
AA- Aa 580 Series C, AMT, 7.60% due 8/01/2030 583
AA- Aa 1,165 Series D, AMT, 7.75% due 8/01/2010 1,172
AA- Aa 2,000 Series E-1, AMT, 6.70% due 8/01/2025 1,900
AA- Aa 2,500 Series F-1, AMT, 7% due 8/01/2026 2,468
AA- Aa 1,000 California HFA, Revenue Bonds, AMT, RIB, 9.111% due 8/01/2023 (h) 867
<PAGE>
A1+ VMIG1 2,800 California Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT, Series A,
3.55% due 10/01/2024 (g) 2,800
California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue
Bonds (Mortgage-Backed Securities Program), AMT (e):
NR* Aaa 1,215 Series A-1, 6.90% due 12/01/2024 1,191
NR* Aaa 695 Series A-2, 7.95% due 12/01/2024 763
California State Public Works Board, Lease Revenue Bonds (Department of
Corrections), Series A:
A A 1,000 6.875% due 11/01/2014 987
A A 2,500 7% due 11/01/2019 2,494
AA Aa 1,750 California Statewide Community Development Authority Revenue Bonds, COP
(Saint Joseph Health System Group), 6.50% due 7/01/2015 1,698
AAA Aaa 1,450 Cerritos, California, Public Financing Authority, Revenue Refunding Bonds
(Los Coyotes Redevelopment Project Loan), Series A, 6.50% due 11/01/2023 (a) 1,415
NR* Baa 1,000 Clovis, California, COP, 7.20% due 8/01/2011 996
</TABLE>
<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 $ 2,200 Compton, California, Community Redevelopment Agency, Tax Allocation Refunding
Bonds (Walnut Industrial Park), Series A, 7.50% due 8/01/2013 (a) $ 2,327
BBB NR* 2,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 1,971
NR* A 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds, Series B,
7.25% due 1/01/2012 (i) 859
AAA Aaa 1,950 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds (El Cajon
Redevelopment Project), 6.60% due 10/01/2022 (a) 1,928
AAA Aaa 2,010 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (a) 1,948
AAA Aaa 3,000 LaQuinta, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(LaQuinta Redevelopment Project), 8.40% due 9/01/2000 (d) (j) 3,481
AAA Aaa 1,000 Long Beach, California, Financing Authority Revenue Refunding Bonds, 5.50% due
11/01/2022 (a) 834
<PAGE>
AAA Aaa 1,500 Los Angeles, California, Community Redevelopment Agency, Tax Allocation
Refunding Bonds (Bunker Hill), Series H, 6.50% due 12/01/2015 (c) 1,458
Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds:
AA Aa 2,000 Refunding, 5.75% due 9/01/2013 1,779
AA Aa 1,350 RITR, 8.618% due 2/01/2020 (h) 1,212
AA Aa 2,950 Los Angeles, California, Department of Water and Power, Waterworks Revenue
Refunding Bonds, 6.40% due 5/15/2028 2,762
AAA NR* 305 Los Angeles, California, S/F Home Mortgage Revenue Bonds, AMT, Series A,
7.55% due 12/01/2023 (e) 308
A1+ VMIG1 3,000 Los Angeles County, California, Metropolitan Transportation Authority, Sales
Tax Revenue Refunding Bonds (Proposition C-Second Senior), VRDN, Series A,
3.25% due 7/01/2020 (d) (g) 3,000
AAA Aaa 2,650 Oakland, California, Revenue Refunding Bonds (Pension Financing), Series A,
7.60% due 8/01/2021 (b) 2,831
AAA Aaa 1,500 Ontario, California, Redevelopment Financing Authority Revenue Bonds (Ontario
Redevelopment Project No. 1), 5.50% due 8/01/2018 (d) 1,267
NR* A 2,000 Orange County, California, Community Facilities District No. 87-3, Special Tax
Revenue Bonds (Mission Viejo), Series A, 8.125% due 8/15/1998 (j) 2,232
Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, RIB (h):
AA Aa 1,000 8.111% due 2/14/2011 940
AAA Aaa 2,000 Second Series, 7.961% due 2/14/2011 (b) 1,822
AAA Aaa 2,485 Palmdale, California, Civic Authority Revenue Refunding Bonds (Redevelopment
Project No. 1), Series A, 5.50% due 7/01/2023 (d) 2,069
NR* Baa 1,960 Pleasanton, California, Joint Powers Financing Authority, Revenue Reassessment
Bonds, Series A, 6.15% due 9/02/2012 1,782
A+ Aa3 2,500 San Diego, California, IDR, Refunding (San Diego Gas and Electric), Series C,
5.90% due 9/01/2018 2,209
AAA NR* 115 San Francisco, California, City and County, S/F Mortgage Revenue Bonds (Mortgage-
Backed Securities Program), AMT, 7.45% due 1/01/2024 (e)(f) 116
</TABLE>
<PAGE>
<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>
A+ A1 $ 2,500 San Jose, California, Financing Authority, Revenue Refunding Bonds (Convention
Center Project), Series C, 6.40% due 9/01/2022 $ 2,331
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds,
AMT (e):
AAA NR* 1,135 (Mortgage-Backed Securities Program), Series A, 7.625% due 10/01/2023 1,149
AAA NR* 175 Series B, 7.75% due 3/01/2024 (f) 178
AA- Aa 1,100 Southern California Public Power Authority Revenue Bonds (Transmission Project),
RIB, 8.012% due 7/01/2012 (h) 924
BBB+ NR* 1,500 Stanislaus, California, Waste-to-Energy Financing Agency, Solid Waste Facility
Revenue Refunding Bonds (Ogden Martin System Inc. Project ), COP, 7.625% due
1/01/2010 1,531
AAA Aaa 1,585 Suisun City, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(Suisun City Redevelopment Project), 5.625% due 10/01/2013 (d) 1,385
AAA Aaa 2,000 University of California Revenue Bonds (Multiple Purpose Projects), Series D,
6.375% due 9/01/2019 (d) 1,917
Total Investments (Cost--$76,809)--101.9% 74,445
Liabilities in Excess of Other Assets--(1.9%) (1,413)
-------
Net Assets--100.0% $73,032
=======
<FN>
(a)AMBAC Insured.
(b)FGIC Insured.
(c)FSA Insured.
(d)MBIA Insured.
(e)GNMA Collateralized.
(f)FNMA Collateralized.
(g)The interest rate is subject to change periodically based upon the prevailing
market rate. The interest rate shown is the rate in effect at October 31, 1994.
(h)The interest rate is subject to change periodically and inversely to the
prevailing market rate. The interest rate shown is the rate in effect
at October 31, 1994.
(i)Escrowed to Maturity.
(j)Prerefunded.
*Not Rated.
Ratings of issues shown have not been audited by Ernst & Young LLP.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$76,808,530) (Note la) $74,445,019
Cash 89,442
Receivables:
Securities sold $ 3,501,350
Interest 1,157,967 4,659,317
-----------
Deferred organization expenses (Note 1e) 3,068
Prepaid expenses 3,959
-----------
Total assets 79,200,805
-----------
Liabilities: Payables:
Securities purchased 6,001,784
Dividends to shareholders (Note 1g) 63,726
Investment adviser (Note 2) 31,515 6,097,025
-----------
Accrued expenses and other liabilities 71,621
-----------
Total liabilities 6,168,646
-----------
Net Assets: Net assets $73,032,159
===========
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (400 shares of AMPS*
issued and outstanding at $50,000 per share liquidation preference) $20,000,000
Common Stock, par value $.10 per share (5,175,539 shares
issued and outstanding) $ 517,554
Paid-in capital in excess of par 56,540,120
Undistributed investment income--net 690,034
Accumulated realized capital losses--net (Note 5) (2,352,038)
Unrealized depreciation on investments--net (2,363,511)
-----------
Total--Equivalent to $10.25 net asset value per share of
Common Stock (market price--$9.25) 53,032,159
-----------
Total capital $73,032,159
===========
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 5,055,490
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 395,058
Professional fees 69,559
Commission fees (Note 4) 52,347
Transfer agent fees 36,427
Printing and shareholder reports 33,579
Accounting services (Note 2) 30,359
Directors' fees and expenses 21,572
Listing fees 20,102
Amortization of organization expenses (Note 1e) 12,319
Custodian fees 8,792
Pricing fees 7,021
Other 14,378
-----------
Total expenses 701,513
-----------
Investment income--net 4,353,977
-----------
Realized & Realized loss on investments and financial futures contracts--net (2,347,373)
Unrealized Change in unrealized appreciation on investments--net (8,442,214)
Loss on -----------
Investments Net Decrease in Net Assets Resulting from Operations $(6,435,610)
- --Net (Notes ===========
1d & 3):
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year
Ended October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 4,353,977 $ 4,726,204
Realized gain (loss) on investments and financial futures
contracts--net (2,347,373) 1,109,420
Change in unrealized appreciation on investments--net (8,442,214) 4,649,718
----------- -----------
Net increase (decrease) in net assets resulting from operations (6,435,610) 10,485,342
----------- -----------
Dividends & Investment income--net:
Distributions Common Stock (3,697,586) (4,225,407)
To Shareholders Preferred Stock (445,660) (411,312)
(Note 1g): Realized gain on investments--net:
Common Stock (1,023,588) (735,917)
Preferred Stock (85,836) (96,900)
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (5,252,670) (5,469,536)
----------- -----------
Common Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends and distributions -- 1,185,162
(Note 4): Value of shares tendered -- (510,041)
----------- -----------
Net increase in net assets derived from Common Stock transactions -- 675,121
----------- -----------
<PAGE>
Net Assets: Total increase (decrease) in net assets (11,688,280) 5,690,927
Beginning of year 84,720,439 79,029,512
----------- -----------
End of year* $73,032,159 $84,720,439
=========== ===========
*Undistributed investment income--net $ 690,034 $ 479,303
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived Feb. 1,
from information provided in the financial statements. 1990++ to
For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.51 $ 11.53 $ 11.66 $ 11.05 $ 11.16
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .84 .91 .99 1.01 .67
Realized and unrealized gain (loss) on
investments--net (2.08) 1.13 (.05) .62 --
-------- -------- -------- -------- --------
Total from investment operations (1.24) 2.04 .94 1.63 .67
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.71) (.82) (.88) (.82) (.49)
Realized gain on investments--net (.20) (.14) (.06) (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions (.91) (.96) (.94) (.83) (.49)
-------- -------- -------- -------- --------
Capital charge resulting from issuance
of Common Stock -- -- -- -- (.07)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.09) (.08) (.12) (.19) (.11)
Realized gain on investments--net (.02) (.02) (.01) -- --
-------- -------- -------- -------- --------
Capital charge resulting from issuance
of Preferred Stock. -- -- -- -- (.11)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.11) (.10) (.13) (.19) (.22)
======== ======== ======== ======== ========
Net asset value, end of period $ 10.25 $ 12.51 $ 11.53 $ 11.66 $ 11.05
======== ======== ======== ======== ========
Market price per share, end of period $ 9.25 $ 13.00 $ 12.50 $ 12.25 $ 11.125
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share (22.57%) 12.52% 10.18% 18.41% (3.04%)+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share (10.84%) 17.39% 6.77% 13.47% 3.56%+++
======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .89% .94% .88% .91% .82%*
Average Net ======== ======== ======== ======== ========
Assets:*** Expenses .89% .94% .88% .91% .97%*
======== ======== ======== ======== ========
Investment income--net 5.49% 5.76% 6.36% 6.60% 6.65%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock,
Data: end of period (in thousands) $ 53,032 $ 64,720 $ 59,030 $ 58,543 $ 54,500
======== ======== ======== ======== ========
Preferred Stock outstanding, end of
period (in thousands) $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
======== ======== ======== ======== ========
Portfolio turnover 87.83% 52.04% 50.50% 27.89% 85.91%
======== ======== ======== ======== ========
<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 effect of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 30, 1990.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Taurus MuniCalifornia Holdings, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified,
closed-end management investment company. The Fund determines and
makes available for publication the net asset value of its Common
Stock on a weekly basis. The Fund's Common Stock is listed on the
New York Stock Exchange under the symbol MCF. 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 market 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, which are traded on exchanges, are valued at their
closing prices as of the close of such exchanges. Options, which are
traded on exchanges, are valued at their last sale price as of the
close of such exchanges or, lacking any sales, at the last available
bid price. Short-term securities with a remaining maturity of sixty
days or less are valued at amortized cost, which approximates market
value. Securities for which market quotations are not readily
available are valued at their 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
Directors.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margins as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
<PAGE>
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Non-income producing investments--Written and purchased options
are non-income producing investments.
(g) 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"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), which is also an indirect wholly-
owned subsidiary of ML & Co.
<PAGE>
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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $67,201,848 and
$74,633,823, respectively.
Net realized and unrealized losses as of October 31, 1994 were as
follows:
Realized Unrealized
Losses Losses
Long-term investments $(2,160,365) $(2,363,511)
Financial futures contracts (187,008) --
----------- -----------
Total $(2,347,373) $(2,363,511)
=========== ===========
As of October 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $2,363,511, of which $746,616 related
to appreciated securities and $3,110,127 related to depreciated
securities. The aggregate cost of investments at October 31, 1994
for Federal income tax purposes was $76,808,530.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
Common Stock
For the year ended October 31, 1994, shares issued and outstanding
remained constant at 5,175,539. At October 31, 1994, total paid-in
capital amounted to $57,057,674.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yield in effect at October 31, 1994 was 3.14%.
<PAGE>
For the year ended October 31, 1994, there were 400 AMPS shares
authorized, issued and outstanding with a liquidation preference of
$50,000 per share plus accumulated and unpaid dividends of $153,759.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated on
the proceeds of each auction.
For the year ended October 31, 1994, MLPF&S, an affiliate of Merrill
Lynch Investment Management, Inc., earned $63,181 as commissions.
5. Capital Loss Carryforward:
At October 31, 1994, the Fund had a capital loss carryforward of
approximately $2,352,000, all of which expires in 2002. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 8, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.059559 per share, payable on November 29, 1994 to shareholders
of record as of November 18, 1994.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
Taurus MuniCalifornia Holdings, Inc.
We have audited the accompanying statement of assets, liabilities
and capital of Taurus MuniCalifornia Holdings, Inc., including the
schedule of investments, as of October 31, 1994, and the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and 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 as of
October 31, 1994, 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.
<PAGE>
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Taurus MuniCalifornia Holdings, Inc. at
October 31, 1994, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP)
New York, New York
December 2, 1994
IMPORTANT TAX INFORMATION (UNAUDITED)
All of the net investment income distributions paid monthly by
Taurus MuniCalifornia Holdings, Inc. during its taxable year ended
October 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the per share capital
gain distributions declared by the fund during the year:
<TABLE>
<CAPTION>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <C> <C> <C>
Common Stock Shareholders 12/30/93 $ .101451 $ .096323
Preferred Stock Shareholders 1/06/94 $ 70.42 $ 67.66
2/03/94 $ 39.66 $ 36.85
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (unaudited)
<PAGE>
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
November 1, 1992 to January 31, 1993 $0.24 $ 0.02 $ 0.42 $0.21 $0.02 $0.14 $0.02
February 1, 1993 to April 30, 1993 0.23 0.07 0.23 0.21 0.02 -- --
May 1, 1993 to July 31, 1993 0.23 0.05 0.04 0.20 0.02 -- --
August 1, 1993 to October 31, 1993 0.21 0.08 0.22 0.20 0.02 -- --
November 1, 1993 to January 31, 1994 0.22 0.22 (0.16) 0.18 0.02 0.20 0.01
February 1, 1994 to April 30, 1994 0.21 (0.25) (1.25) 0.18 0.02 -- 0.01
May 1, 1994 to July 31, 1994 0.20 (0.26) 0.38 0.17 0.03 -- --
August 1, 1994 to October 31, 1994 0.21 (0.16) (0.60) 0.18 0.02 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
November 1, 1992 to January 31, 1993 $11.92 $11.53 $13.125 $12.00 245
February 1, 1993 to April 30, 1993 12.40 11.82 13.375 12.125 311
May 1, 1993 to July 31, 1993 12.34 12.08 13.625 12.125 267
August 1, 1993 to October 31, 1993 12.66 12.20 13.00 12.375 207
November 1, 1993 to January 31, 1994 12.46 12.11 12.875 11.25 381
February 1, 1994 to April 30, 1994 12.33 10.56 12.25 10.00 307
May 1, 1994 to July 31, 1994 11.18 10.60 10.875 9.50 369
August 1, 1994 to October 31, 1994 11.02 10.23 9.875 8.875 535
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
90 Washington Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MCF
<PAGE>
