TAURUS
MUNICALIFORNIA
HOLDINGS, INC.
FUND LOGO
Annual Report
October 31, 1995
<PAGE>
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
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.
Taurus MuniCalifornia
Holdings, Inc.
Box 9011
Princeton, NJ
08543-9011
TO OUR SHAREHOLDERS
For the year ended October 31, 1995, the Common Stock of Taurus
MuniCalifornia Holdings, Inc. earned $0.653 per share income
dividends, which included earned and unpaid dividends of $0.055.
This represents a net annualized yield of 5.74%, based on a month-
end net asset value of $11.39 per share. Over the same period, the
total investment return on the fund's Common Stock was +19.05%,
based on a change in per share net asset value from $10.25 to
$11.39, and assuming reinvestment of $0.658 per share income
dividends.
<PAGE>
For the six-month period ended October 31, 1995, the total
investment return on the fund's Common Stock was +9.32%, based on a
change in per share net asset value from $10.77 to $11.39, and
assuming reinvestment of $0.319 per share income dividends.
For the six-month period ended October 31, 1995, the fund's Auction
Market Preferred Stock had an average yield of 3.40%.
The Environment
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
Another significant development has been the strengthening of the US
dollar relative to the yen and the Deutschemark. Improving interest
rate differentials favoring the US currency, combined with
coordinated central bank intervention and more positive investor
sentiment, have helped to bolster the dollar in foreign exchange
markets. Other factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows to the
United States and the prospect of increased capital outflows from
Japan. However, it remains to be seen if the US dollar's
strengthening trend can continue without significant improvements in
the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
<PAGE>
The Municipal Market
Tax-exempt bond yields continued to decline during the six-month
period ended October 31, 1995. As measured by the Bond Buyer Revenue
Bond Index, the yield on uninsured, long-term municipal revenue
bonds fell 30 basis points (0.30%) to end the October period at
approximately 6.00%. While tax-exempt bond yields have declined
dramatically from their highs one year ago, municipal bond yields
have exhibited considerable yield volatility on a weekly basis. In
recent months, tax-exempt bond yields have fluctuated by as much as
20 basis points on a week-to-week basis. US Treasury bond yields
have displayed similar volatility, but the extent of their decline
has been greater. By the end of October, long-term US Treasury bond
yields had declined almost 100 basis points to 6.33%. Proposed
Federal tax restructuring continued to weigh heavily on the tax-
exempt bond market. Thus far in 1995, US Treasury bond yields have
declined approximately 150 basis points. Municipal bond yields have
fallen approximately 95 basis points as the uncertainty surrounding
any changes to the existing Federal income tax structure has
prevented the municipal bond market from rallying as strongly as its
taxable counterpart.
A general view of a moderately expanding domestic economy, supported
by a very favorable inflationary environment, allowed interest rates
to significantly decline from their recent highs in November 1994.
However, this decline was not a smooth downward curve. Conflicting
economic indicators were released during recent months that have
prevented a clear consensus regarding the near-term direction of
interest rates from being reached. The resultant uncertainty has
promoted more of a saw-toothed pattern as interest rate declines
were repeatedly interrupted by indications of stronger-than-expected
economic growth. As these concerns were overcome by subsequent
weaker economic releases, interest rate declines have resumed. These
periods of volatility are likely to continue for the remainder of
1995, or until proposed Federal budget deficit reduction packages
are resolved and any resultant responses by the Federal Reserve
Board have occurred.
However, the municipal bond market's technical position remained
supportive throughout recent quarters. Approximately $82 billion in
long-term municipal securities were issued during the six months
ended October 31, 1995. While this issuance is virtually identical
to underwritings during the October 31, 1994 quarter, tax-exempt
bond issuance over the last 12 months remained approximately 25%
below comparable 1994 levels. The municipal bond market should
maintain this positive technical position well into 1996. Annual
issuance for 1995 is now projected to be approximately $140 billion,
significantly less than last year's already low level of $162
billion. Projected maturities and early redemptions for the
remainder of 1995 and throughout 1996 will lead to a continued
decline in the total outstanding municipal bond supply throughout
1996 and, perhaps, into 1998 should new bond issuance remain at
historically low levels.
<PAGE>
Despite the municipal bond market's relative underperformance
compared to the US Treasury market thus far in 1995, the extent of
the tax-exempt bond market's rally was nonetheless quite impressive.
Municipal bond yields have fallen 135 basis points from their highs
reached in November 1994 and municipal bond prices rose accordingly.
Most tax-exempt products recouped almost all of the losses incurred
in 1994 and are well on their way to posting double-digit total
returns for all of 1995. This relative underperformance so far in
1995 provided long-term investors with the rare opportunity to
purchase tax-exempt securities at yield levels near those of taxable
securities.
Additionally, many of the factors that led to the relative
underperformance of the tax-exempt bond market thus far in 1995,
namely investor concern regarding Federal budget deficit reductions
and proposed changes in the Federal income tax structure, are
nearing resolution. The Federal budget reconciliation process has
already begun, and may be essentially completed by year-end. Recent
public opinion polls suggest that the majority of American taxpayers
prefer the existing Federal income tax system compared to proposed
changes, such as the flat tax or national sales tax. In an upcoming
election year, neither party is likely to advocate a clearly
unpopular position, particularly one that can be expected to
negatively impact the Federal budget deficit reduction program
through reduced tax revenues. As these factors are resolved, we
believe that much of the resistance that the municipal bond market
met this year should dissipate. This should allow municipal bond
yields to significantly decline from current levels in order to
return to more normal historic yield relationships.
Portfolio Strategy
For the fiscal year ended October 31, 1995, our portfolio strategy
was essentially constructive. However, within this period there were
a few months of volatility that we took advantage of to purchase
bonds that we believed would better suit our optimistic outlook. We
sought to anticipate shifts in investor sentiment, whether they were
motivated by perceived changes in economic conditions or the belief
that interest rates had gone too high. During the 12 months ended
October 31, 1995, the fund was positioned accordingly to take full
advantage of the declining interest rate environment.
The only constant throughout the 12-month period was that cash
reserves were kept at minimal levels. This was done for two reasons:
First to enhance income for the shareholders, and second, to keep
reserves low out of concern for an extremely tight technical market
for California bonds. Compared to the prior 12 months, California
bond issuance declined 42%. Looking ahead, our strategy will
continue to focus on seeking to provide an attractive total return
and a generous level of tax-exempt income for our shareholders.
In Conclusion
We appreciate your ongoing interest in Taurus MuniCalifornia
Holdings, Inc., and we look forward to serving your investment needs
in the months and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Portfolio Manager
November 24, 1995
We are pleased to announce that Walter C. O'Connor is responsible
for the day-to-day management of Taurus MuniCalifornia Holdings,
Inc. Mr. O'Connor has been employed by Merrill Lynch Asset
Management, L.P. (an affiliate of the Fund's investment adviser)
since 1993 as Vice President and Portfolio Manager and was Assistant
Vice President from 1991 to 1993. Prior thereto, he was Assistant
Vice President with Prudential Securities from 1984 to 1991.
<PAGE>
PROXY RESULTS
During the six-month period ended October 31, 1995, Taurus
MuniCalifornia Holdings, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on June 16, 1995. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Charles C. Reilly 4,938,198 133,737
Kevin A. Ryan 4,938,205 133,730
Cynthia A. Montgomery 4,938,205 133,730
Arthur Zeikel 4,936,355 135,580
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Ernst & Young LLP as the Fund's independent auditors. 4,958,472 25,238 88,225
</TABLE>
During the six-month period ended October 31, 1995, Taurus
MuniCalifornia Holdings, Inc. Preferred Stock shareholders voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on June 16, 1995. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Ronald W. Forbes 792 0
Charles C. Reilly 792 0
Kevin A. Ryan 792 0
Richard R. West 792 0
Cynthia A. Montgomery 792 0
Arthur Zeikel 792 0
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Ernst & Young LLP as the Fund's independent auditors. 730 0 62
</TABLE>
<PAGE>
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. 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 pick-up on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of 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
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--99.4%
<S> <S> <C> <S> <C>
California Health Facilities Financing Authority Revenue Bonds, Series A:
BB Ba $ 1,500 Refunding (Good Samaritan Health System), 7.50% due 5/01/2015 $ 1,681
AAA Aaa 2,180 (San Francisco Children's Hospital), 7.50% due 10/01/2020 (d) 2,478
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 580 AMT, Series C, 7.60% due 8/01/2030 616
AA- Aa 1,165 AMT, Series D, 7.75% due 8/01/2010 1,236
AA- Aa 2,000 AMT, Series F-1, 7% due 8/01/2026 2,097
AA- Aa 1,750 Series A, 8.20% due 8/01/2017 1,851
AA- Aa 1,775 Series D, 7.25% due 8/01/2017 1,897
AA- Aa 1,000 California HFA, Revenue Bonds, RIB, AMT, 8.777% due 8/01/2023 (h) 1,043
A1 VMIG1++ 400 California Pollution Control Financing Authority, PCR (Southern California
Edison), VRDN, Series A, 3.75% due 2/28/2008 (g) 400
<PAGE>
NR* P1 500 California Pollution Control Financing Authority, Resource Recovery Revenue
Refunding Bonds (Ultra Power Rocklin Project), VRDN, AMT, Series A, 4.05% due
6/01/2017 (g) 500
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 1,282
NR* Aaa 695 Series A-2, 7.95% due 12/01/2024 800
AAA NR* 1,000 Series B, 7.75% due 9/01/2026 1,125
California State Public Works Board, Lease Revenue Bonds, Series A:
A- A 1,000 (Department of Corrections-Monterey County), 6.875% due 11/01/2014 1,082
A- A 2,500 (Department of Corrections-Monterey County), 7% due 11/01/2019 2,719
A- A1 1,250 Refunding (Various Universities of California Projects), 5.50% due 6/01/2021 1,158
A- A 1,250 (Various Community College Projects), 5.625% due 12/01/2018 1,181
NR* Aa2 490 California Statewide Community Development Authority, Solid Waste Facility
Revenue Bonds (Chevron USA, Inc. Project), VRDN, AMT, 3.90% due 12/15/2024 (g) 490
AAA Aaa 3,000 Cerritos, California, Public Financing Authority, Revenue Refunding Bonds
(Los Coyotes Redevelopment Project Loan), Series A, 6.50% due 11/01/2023 (a) 3,366
NR* Baa 1,000 Clovis, California, COP, 7.20% due 8/01/2011 1,049
AAA Aaa 2,200 Compton, California, Community Redevelopment Agency, Tax Allocation
Refunding Bonds (Walnut Industrial Park), Series A, 7.50% due 8/01/1999 (a) (i) 2,489
BBB NR* 2,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 2,113
AAA Aaa 2,700 Cucamonga County, California, Water District Facilities Refinancing Bonds,
COP, 6.50% due 9/01/2022 (b) 2,863
NR* NR* 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds,
Series B, 7.25% due 1/01/2012 (c) 895
Fresno, California, Sewer Revenue Bonds, Series A-1 (a):
AAA Aaa 2,010 6.25% due 9/01/2014 2,178
AAA Aaa 500 5.25% due 9/01/2019 475
Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds:
AAA Aaa 1,000 Refunding, 5.375% due 9/01/2023 (d) 952
AA- Aa 1,350 RITR, 8.522% due 2/01/2020 (h) 1,453
AA Aa 2,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B,
6.625% due 8/01/2019 2,087
AAA NR* 255 Los Angeles, California, S/F Home Mortgage Revenue Bonds, AMT, Series A,
7.55% due 12/01/2023 (e) 269
</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- A $1,000 Los Angeles, California, State Building Authority, Lease Revenue Refunding Bonds
(California State Department of General Services), Series A, 5.625% due 5/01/2011 $ 985
A1+ VMIG1++ 600 Los Angeles County, California, Metropolitan Transportation Authority, Sales
Tax Revenue Refunding Bonds (Proposition C-Second Senior), VRDN, Series A, 3.85%
due 7/01/2020 (d) (g) 600
Orange County, California, Local Transportation Authority, Sales Tax Revenue Bonds:
AAA Aaa 2,000 6.20% due 2/14/2011 (a) 2,113
AAA Aaa 4,000 Second Series, 6.10% due 2/14/2011 (b) 4,126
A+ A1 2,000 Pasadena, California, COP, Refunding (Old Pasadena Package Facility Project),
6.25% due 1/01/2018 2,081
Sacramento, California, City Financing Authority, Lease Revenue Refunding Bonds,
Series B:
A+ Aa 3,000 5% due 11/01/2014 2,729
A+ Aa 2,000 5.40% due 11/01/2020 1,877
AAA Aaa 2,000 San Diego, California, Sewer Revenue Bonds, Series A, 5.25% due 5/15/2020 (a) 1,877
San Francisco, California, City and County Airport Commission, International
Airport Revenue Bonds, Second Series:
AAA Aaa 1,500 AMT, Issue 5, 6.50% due 5/01/2019 (b) 1,593
AAA Aaa 2,000 Refunding, Issue 2, 6.75% due 5/01/2013 (d) 2,191
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) 121
AAA Aaa 1,500 San Jose, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(Merged Area Redevelopment Project), 5% due 8/01/2020 (d) 1,358
AAA Aaa 500 San Mateo County, California, Joint Powers Financing Authority, Lease Revenue
Refunding Bonds (Capital Projects Program), 5% due 7/01/2021 (d) 457
AAA Aaa 2,000 Santa Clara County, California, Financing Authority, Lease Revenue Bonds
(VMC Facility Replacement Project), Series A, 6.875% due 11/15/2014 (a) 2,212
<PAGE>
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT (e):
AAA NR* 3,035 Series A, 7.625% due 10/01/2023 3,209
AAA NR* 175 Series B, 7.75% due 3/01/2024 (f) 185
BBB+ NR* 1,480 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 1,585
A NR* 1,415 Torrance, California, Hospital Revenue Refunding Bonds (Little Company of
Mary Hospital), 6.875% due 7/01/2015 1,478
University of California, Revenue Refunding Bonds (Multiple Purpose Projects),
Series C (a):
AAA Aaa 1,000 5% due 9/01/2014 922
AAA Aaa 3,230 5% due 9/01/2023 2,908
Total Investments (Cost--$74,090)--99.4% 78,432
Other Assets Less Liabilities--0.6% 504
-------
Net Assets--100.0% $78,936
=======
<FN>
(a)AMBAC Insured.
(b)FGIC Insured.
(c)Escrowed to Maturity.
(d)MBIA Insured.
(e)GNMA Collateralized.
(f)FNMA Collateralized.
(g)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, 1995.
(h)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 1995.
(i)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$74,090,325) (Note 1a) $78,432,403
Interest receivable 1,499,068
Prepaid expenses 6,005
-----------
Total assets 79,937,476
-----------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 46,294
Investment adviser (Note 2) 34,431 80,725
-----------
Accrued expenses and other liabilities 921,190
-----------
Total liabilities 1,001,915
-----------
Net Assets: Net assets $78,935,561
===========
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (800 shares of
AMPS* issued and outstanding at $25,000 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 56,531,915
Undistributed investment income--net 699,358
Accumulated realized capital losses on investments--net
(Note 5) (3,155,344)
Unrealized appreciation on investments--net 4,342,078
-----------
Total--Equivalent to $11.39 net asset value per share of
Common Stock (market price--$9.50) 58,935,561
-----------
Total capital $78,935,561
===========
<FN>
*Auction Market Preferred Stock.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1995
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 4,865,135
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 379,020
Professional fees 77,956
Commission fees (Note 4) 49,573
Accounting services (Note 2) 46,999
Printing and shareholder reports 46,428
Transfer agent fees 39,124
Directors' fees and expenses 19,977
Listing fees 16,545
Custodian fees 9,621
Pricing fees 5,353
Amortization of organization expenses (Note 1e) 3,068
Other 8,001
-----------
Total expenses 701,665
-----------
Investment income--net 4,163,470
-----------
Realized & Realized loss on investments--net (803,306)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 6,705,589
(Loss) on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations $10,065,753
(Notes 1b, ===========
1d & 3):
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 4,163,470 $ 4,353,977
Realized loss on investments--net (803,306) (2,347,373)
Change in unrealized appreciation/depreciation on investments--net 6,705,589 (8,442,214)
----------- -----------
Net increase (decrease) in net assets resulting from operations 10,065,753 (6,435,610)
----------- -----------
Dividends & Investment income--net:
Distributions to Common Stock (3,406,959) (3,697,586)
Shareholders Preferred Stock (755,392) (445,660)
(Note 1f): Realized gain on investments--net:
Common Stock -- (1,023,588)
Preferred Stock -- (85,836)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (4,162,351) (5,252,670)
----------- -----------
Net Assets: Total increase (decrease) in net assets 5,903,402 (11,688,280)
Beginning of year 73,032,159 84,720,439
----------- -----------
End of year* $78,935,561 $73,032,159
=========== ===========
<FN>
*Undistributed investment income--net (Note 1g) $ 699,358 $ 690,034
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<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: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.25 $ 12.51 $ 11.53 $ 11.66 $ 11.05
Operating -------- -------- -------- -------- --------
Performance: Investment income--net . .81 .84 .91 .99 1.01
Realized and unrealized gain (loss) on
investments--net 1.14 (2.08) 1.13 (.05) .62
-------- -------- -------- -------- --------
Total from investment operations 1.95 (1.24) 2.04 .94 1.63
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.66) (.71) (.82) (.88) (.82)
Realized gain on investments--net -- (.20) (.14) (.06) (.01)
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.66) (.91) (.96) (.94) (.83)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.15) (.09) (.08) (.12) (.19)
Realized gain on investments--net -- (.02) (.02) (.01) --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.15) (.11) (.10) (.13) (.19)
======== ======== ======== ======== ========
Net asset value, end of year $ 11.39 $ 10.25 $ 12.51 $ 11.53 $ 11.66
======== ======== ======== ======== ========
Market price per share, end of year $ 9.50 $ 9.25 $ 13.00 $ 12.50 $ 12.25
======== ======== ======== ======== ========
Total Investment Based on market price per share 10.03% (22.57%) 12.52% 10.18% 18.41%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 19.05% (10.84%) 17.39% 6.77% 13.47%
======== ======== ======== ======== ========
Ratios to Average Expenses .93% .89% .94% .88% .91%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net 5.50% 5.49% 5.76% 6.36% 6.60%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of year (in thousands) $ 58,936 $ 53,032 $ 64,720 $ 59,030 $ 58,543
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
======== ======== ======== ======== ========
Portfolio turnover 107.20% 87.83% 52.04% 50.50% 27.89%
======== ======== ======== ======== ========
Dividends Per Investment income--net $ 944 $ 557 $ 514 $ 769 $ 1,179
Share On ======== ======== ======== ======== ========
Preferred Stock
Outstanding:++
<PAGE>
<FN>
*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.
++Dividends per share have been adjusted to reflect a two-for-one
stock split.
See Notes to Financial Statements.
</TABLE>
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 markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Short-term
securities with a remaining maturity 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.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
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.
* Options--The Fund is authorized to write covered call options and
purchase put and call 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.
<PAGE>
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
NOTES TO FINANCIAL STATEMENTS (concluded)
(g) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $8,205 have been reclassified from paid-in capital to
undistributed net investment income. These reclassifications have no
effect on net assets or net asset value per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $78,678,495 and
$80,313,922, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995
were as follows:
<PAGE>
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ (210,760) $4,342,078
Short-term investments 638 --
Financial futures contracts (593,184) --
---------- ----------
Total $ (803,306) $4,342,078
========== ==========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $4,121,078, of which $4,345,093
related to appreciated securities and $224,015 related to
depreciated securities. The aggregate cost of investments at October
31, 1995 for Federal income tax purposes was $74,311,325.
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, 1995, shares issued and outstanding
remained constant at 5,175,539. At October 31, 1995, 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, 1995 was 3.60%.
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share plus accumulated and unpaid dividends of $74,683.
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, 1995, MLPF&S, a subsidiary of ML &
Co., earned $48,164 as commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a capital loss carryforward of
approximately $2,372,000, of which $2,352,000 expires in 2002 and
$20,000 expires in 2003. This amount will be available to offset
like amounts of any future taxable gains.
<PAGE>
6. Subsequent Event:
On November 13, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.054717 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<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, 1995, 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 financial highlights for each of the years 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, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
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, 1995, 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 financial highlights for each of the
indicated years, in conformity with generally accepted accounting
principles.
<PAGE>
(Ernst & Young LLP)
Princeton, New Jersey
November 30, 1995
</AUDIT-REPORT>
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, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
PER SHARE INFORMATION (UNAUDITED)
<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, 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 -- --
November 1, 1994 to January 31, 1995 0.21 (0.31) 0.62 0.18 0.04 -- --
February 1, 1995 to April 30, 1995 0.20 (0.01) 0.23 0.16 0.04 -- --
May 1, 1995 to July 31, 1995 0.20 0.14 0.09 0.16 0.04 -- --
August 1, 1995 to October 31, 1995 0.20 0.03 0.35 0.16 0.03 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
November 1, 1993 to January 31, 1994 $12.45 $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
November 1, 1994 to January 31, 1995 10.56 9.56 9.50 8.125 901
February 1, 1995 to April 30, 1995 11.05 10.57 10.00 9.25 274
May 1, 1995 to July 31, 1995 11.49 10.75 9.875 9.25 417
August 1, 1995 to October 31, 1995 11.44 10.84 9.75 9.125 532
<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
110 Washington Street
New York, New York 10286
<PAGE>
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MCF
