TAURUS
MUNICALIFORNIA
HOLDINGS, INC.
FUND LOGO
Annual Report
October 31, 1996
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
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Roberto Roffo, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
110 Washington Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MCF
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. Statements and other information
herein are as dated and are subject to change.
Taurus MuniCalifornia
Holdings, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
Taurus MuniCalifornia Holdings, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1996, the Common Stock of Taurus
MuniCalifornia Holdings, Inc. earned $0.671 per share income
dividends, which included earned and unpaid dividends of $0.058.
This represents a net annualized yield of 5.79%, based on a month-
end net asset value of $11.59 per share. Over the same period, the
total investment return on the fund's Common Stock was +8.48%, based
on a change in per share net asset value from $11.39 to $11.59, and
assuming reinvestment of $0.668 per share income dividends.
For the six-month period ended October 31, 1996, the total
investment return on the fund's Common Stock was +7.01%, based on a
change in per share net asset value from $11.18 to $11.59, and
assuming reinvestment of $0.334 per share income dividends.
For the six-month period ended October 31, 1996, the fund's Auction
Market Preferred Stock had an average yield of 3.09%.
The Municipal Market Environment
Municipal bond yields generally moved lower during the six months
ended October 31, 1996. Long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined
approximately 35 basis points (0.35%) to close the six-month period
ended October 31, 1996 at approximately 5.94%. The municipal bond
market exhibited considerable weekly yield volatility over the six
months ended October 31, 1996 with bond yields vacillating as much
as 20 basis points. This ongoing volatility was in response to
fluctuating evidence regarding the degree to which recent economic
growth would result in any significant increase in inflationary
pressures. Much of the evidence supporting stronger growth centered
around the strong employment growth seen in April and June with bond
yields rising in response. Other more recent economic indicators
have suggested that economic growth will not be excessive and
inflationary pressures will remain well-contained. This continued
benign inflationary environment has supported lower tax-exempt bond
yields in recent months. US Treasury bond yields have exhibited
similar, albeit greater, volatility during the six-months ended
October 31, 1996, falling more than 20 basis points to end the
period at 6.64%. Over the past six months, tax-exempt bond yields
registered significantly greater declines than those shown by the US
Treasury bond. This relative outperformance by the municipal bond
market was largely the result of the strong technical support the
tax-exempt market has enjoyed throughout most of 1996. Perhaps most
significantly, the pace of new bond issuance has recently slowed.
<PAGE>
Over the last year, approximately $180 billion in long-term
municipal securities was issued, an increase of over 25% versus the
same period a year ago. Much of this increase was the result of
issuers seeking to refinance their existing higher-couponed debt as
interest rates declined in 1995 and early 1996. As interest rates
rose, these financings became increasingly economically impractical
and issuance declined. Over the last six months, approximately $90
billion in long-term tax-exempt securities was underwritten, an
increase of 5% versus the comparable period a year earlier. Only $41
billion in tax-exempt securities was issued in the last three
months, a 3% decline in issuance versus the October 31, 1995
quarter.
At the same time, investor demand remained consistently strong. With
nominal new-issue yields generally above 6%, retail investor
interest was steady. Additionally, investors received over $50
billion this June and July in assets derived from coupon income,
bond maturities, and proceeds from early redemptions. Annual new
bond issuance has declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s were redeemed at
their first optional call date, the total number of outstanding tax-
exempt bonds has declined. This combination of a declining net
supply and significant amounts of assets helped maintain investor
demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance has led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While still historically
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
<PAGE>
Portfolio Strategy
For the 12 months ended October 31, 1996, the fund was managed with
the intention of sustaining an attractive level of tax-exempt income
while seeking to achieve an above-average total return. We entered
the 12-month period optimistic that interest rates would decline in
response to the sluggish economy that we expected the current 7%
yield on the US Treasury bond to create. To take advantage of this
scenario, we extended the fund's duration and lowered the cash
reserve position to a minimal level. From October 1995 to January
1996 the impression that the economy had slowed and that there was
no inflation on the horizon was enough to lower interest rates
almost 50 basis points. Two rounds of Federal Reserve Board easings
in December and January lulled investors into complacency. This set
the stage for a sudden loss of investor confidence as an undeniably
strong employment number in March blindsided the market and began a
period of extreme volatility, which continued through the end of
October. Looking ahead, we expect this volatile period to continue,
and our investment strategy to remain neutral until the direction of
the economy becomes clearer.
In Conclusion
We appreciate your ongoing interest in Taurus MuniCalifornia
Holdings, Inc., and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
<PAGE>
November 22, 1996
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 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.
<PAGE>
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 1996, Taurus
MuniCalifornia Holdings, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on September 19, 1996. The description of each
proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1.To elect the fund's Board of Directors: Cynthia A. Montgomery 4,965,143 145,635
Charles C. Reilly 4,970,293 140,485
Kevin A. Ryan 4,970,793 139,985
Arthur Zeikel 4,970,193 140,585
<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. 5,025,350 13,676 71,752
<CAPTION>
During the six-month period ended October 31, 1996, Taurus
MuniCalifornia Holdings, Inc. Preferred Stock shareholders voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on September 19, 1996. The description of each
proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <C> <C>
1.To elect the fund's Board of Directors: Ronald W. Forbes, Cynthia A.
Montgomery, Charles C. Reilly, Kevin A. Ryan, Richard R. West and
Arthur Zeikel 772 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. 768 0 4
</TABLE>
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 below and at right.
<PAGE>
AMT Alternative Minimum Tax (subject to)
COP Certificates of ParticipationHFAHousing 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 la)
California--98.1%
<S> <S> <C> <S> <C>
California Health Facilities Financing Authority Revenue Bonds, Series A:
AA Aa3 $3,500 (Kaiser Permanente), 6.50% due 12/01/2020 $ 3,682
NR* Aaa 1,500 Refunding (Good Samaritan Health System), 7.50% due 5/01/2000 (i) 1,682
AAA Aaa 2,180 (San Francisco Children's Hospital), 7.50% due 10/01/2000 (d)(i) 2,462
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 535 AMT, Series C, 7.60% due 8/01/2030 565
AA- Aa 1,165 AMT, Series D, 7.75% due 8/01/2010 1,234
AA- Aa 1,975 AMT, Series F-1, 7% due 8/01/2026 2,098
AA- Aa 1,750 Series A, 8.20% due 8/01/2017 1,818
AA- Aa 1,650 Series D, 7.25% due 8/01/2017 1,750
AA- Aa 1,000 California HFA, Revenue Bonds, RIB, AMT, 8.856% due 8/01/2023 (h) 1,058
California Pollution Control Financing Authority, PCR:
A+ A2 1,285 AMT (Southern California Edison Co.), Series B, 6.40% due 12/01/2024 1,330
A1 NR* 300 Refunding (Pacific Gas and Electric Co.), VRDN, AMT, Series G, 3.60%
due 2/01/2016 (g) 300
A1 A2 1,500 Refunding (San Diego Gas and Electric Co.), Series A, 5.90% due 6/01/2014 1,563
California Pollution Control Financing Authority, Resource Recovery
Revenue Bonds, VRDN, AMT (g):
A1 VMIG1++ 200 (Atlantic Richfield Company Project), Series A, 3.65% due 12/01/2024 200
NR* NR* 1,000 (Delano Project), 3.55% due 8/01/2019 1,000
NR* P1 1,100 Refunding (Ultra Power Malaga Project), Series B, 3.60% due 4/01/2017 1,100
A1+ VMIG1++ 500 California Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT, Series A, 3.60%
due 10/01/2024 (g) 500
NR* Aaa 1,215 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue
Bonds (Mortgage-Backed Securities Program), AMT, Series A-1, 6.90% due
12/01/2024 (e)(j) 1,305
<PAGE>
California State Public Works Board, Lease Revenue Bonds (Department of
Corrections--Monterey County), Series A (i):
A A 1,000 6.875% due 11/01/2004 1,157
A A 2,500 7% due 11/01/2004 2,925
NR* Aa2 400 California Statewide Community Development Authority, Solid Waste Facility
Revenue Bonds (Chevron U.S.A. Inc. Project), VRDN, AMT, 3.60% due 12/15/2024 (g) 400
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) 3,429
NR* Baa 1,000 Clovis, California, COP, 7.20% due 8/01/2011 1,079
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) 2,436
BBB NR* 2,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 2,119
AAA Aaa 2,700 Cucamonga County, California, Water District Facilities Refinancing Bonds,
COP, 6.50% due 9/01/2022 (b) 2,921
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note la)
California (concluded)
<S> <S> <C> <S> <C>
NR* NR* $ 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds,
Series B, 7.25% due 1/01/2012 (c) $ 926
AAA Aaa 2,010 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (a) 2,206
Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds:
A+ Aa 1,000 Refunding, 6.375% due 2/01/2020 1,052
AAA Aaa 1,000 Refunding, Second Issue, 5.25% due 11/15/2026 (b) 929
A+ Aa 1,350 RITR, 8.327% due 2/01/2020 (h) 1,494
AA Aa 2,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B,
6.625% due 8/01/2019 2,125
AAA NR* 230 Los Angeles, California, S/F Home Mortgage Revenue Bonds, AMT, Issue A,
7.55% due 12/01/2023 (e) 242
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 1,027
<PAGE>
AA Aa 6,200 Metropolitan Water District, Southern California Waterworks Revenue
Refunding Bonds, RIB, 6.912% due 10/30/2020 (h) 5,791
A+ A1 2,000 Pasadena, California, COP, Refunding (Old Pasadena Package Facility Project),
6.25% due 1/01/2018 2,155
AAA Aaa 1,000 Port Oakland, California, Port Revenue Bonds, AMT, Series E, 6.50% due
11/01/2016 (d) 1,071
BBB+ Baa1 1,300 San Diego, California, Redevelopment Agency Refunding Bonds, Series B, 6.625%
due 11/01/2017 1,360
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) 1,601
AAA Aaa 1,650 Refunding, Issue 1, 6.30% due 5/01/2011 (a) 1,751
AAA Aaa 1,000 Refunding, Issue 1, 6.50% due 5/01/2013 (a) 1,084
AAA Aaa 2,000 Refunding, Issue 2, 6.75% due 5/01/2013 (d) 2,212
AAA Aaa 1,000 San Francisco, California, City and County Sewer Revenue Refunding Bonds, 6%
due 10/01/2011 (a) 1,041
AAA NR* 110 San Francisco, California, City and County, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT, 7.45% due 1/01/2024 (f) 115
AAA Aaa 500 San Mateo County, California, Joint Powers Financing Authority, Lease
Revenue Refunding Bonds (Capital Projects Program), 5% due 7/01/2021 (d) 464
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) 2,248
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT:
AAA NR* 2,945 (Mortgage-Backed Securities Program), Series A, 7.625% due 10/01/2023 (e) 3,111
AAA NR* 175 Series B, 7.75% due 3/01/2024 (f) 185
BBB+ NR* 2,420 Stanislaus, California, Waste-to-Energy Financing Agency, Solid Waste
Facility Revenue Refunding Bonds (Ogden Martin System Inc. Project), 7.625%
due 1/01/2010 2,611
A NR* 1,405 Torrance, California, Hospital Revenue Refunding Bonds (Little Company of
Mary Hospital), 6.875% due 7/01/2015 1,498
Total Investments (Cost--$74,384)--98.1% 78,412
Other Assets Less Liabilities--1.9% 1,548
-------
Net Assets--100.0% $79,960
=======
<PAGE>
<FN>
(a)AMBAC Insured.
(b)FGIC Insured.
(c)Escrowed to Maturity.
(d)MBIA Insured.
(e)GNMA Collateralized.
(f)GNMA/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, 1996.
(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, 1996.
(i)Prerefunded.
(j)FHLMC Collateralized.
*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>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$74,384,463) (Note 1a) $78,411,675
Cash 16,144
Interest receivable 1,684,890
Prepaid expenses 5,783
-----------
Total assets 80,118,492
-----------
Liabilities: Payables:
Dividends to shareholders (Note 1e) $ 51,512
Investment adviser (Note 2) 33,712 85,224
-----------
Accrued expenses and other liabilities 73,761
-----------
Total liabilities 158,985
-----------
Net Assets: Net assets $79,959,507
===========
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (800 shares of AMPS*
issued and outstanding at $25,000 per share liquidation $20,000,000
preference)
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 722,334
Accumulated realized capital losses on investments--net (Note 5) (1,839,508)
Unrealized appreciation on investments--net 4,027,212
-----------
Total--Equivalent to $11.59 net asset value per share of
Common Stock (market price--$10.75) 59,959,507
-----------
Total capital $79,959,507
===========
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the
Year Ended
October 31, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 4,874,758
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 396,335
Professional fees 79,351
Commission fees (Note 4) 51,655
Transfer agent fees 37,238
Accounting services (Note 2) 35,689
Printing and shareholder reports 34,912
Directors' fees and expenses 19,245
Listing fees 16,670
Custodian fees 9,294
Pricing fees 7,313
Other 10,701
-----------
Total expenses 698,403
-----------
Investment income--net 4,176,355
-----------
<PAGE>
Realized & Realized gain on investments--net 1,315,836
Unrealized Gain Change in unrealized appreciation on investments--net (314,866)
(Loss) on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,177,325
(Notes 1b, 1d & 3): ===========
See Notes to Financial Statements.
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 4,176,355 $ 4,163,470
Realized gain (loss) on investments--net 1,315,836 (803,306)
Change in unrealized appreciation/depreciation on
investments--net (314,866) 6,705,589
----------- -----------
Net increase in net assets resulting from operations 5,177,325 10,065,753
----------- -----------
Dividends to Investment income--net:
Shareholders Common Stock (3,457,027) (3,406,959)
(Note 1e): Preferred Stock (696,352) (755,392)
----------- -----------
Net decrease in net assets resulting from dividends to
shareholders (4,153,379) (4,162,351)
----------- -----------
Net Assets: Total increase in net assets 1,023,946 5,903,402
Beginning of year 78,935,561 73,032,159
----------- -----------
End of year* $79,959,507 $78,935,561
=========== ===========
<FN>
*Undistributed investment income--net $ 722,334 $ 699,358
=========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<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: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.39 $ 10.25 $ 12.51 $ 11.53 $ 11.66
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .80 .81 .84 .91 .99
Realized and unrealized gain (loss) on
investments--net .20 1.14 (2.08) 1.13 (.05)
-------- -------- -------- -------- --------
Total from investment operations 1.00 1.95 (1.24) 2.04 .94
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.67) (.66) (.71) (.82) (.88)
Realized gain on investments--net -- -- (.20) (.14) (.06)
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.67) (.66) (.91) (.96) (.94)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.13) (.15) (.09) (.08) (.12)
Realized gain on investments--net -- -- (.02) (.02) (.01)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.13) (.15) (.11) (.10) (.13)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.59 $ 11.39 $ 10.25 $ 12.51 $ 11.53
======== ======== ======== ======== ========
Market price per share, end of year $ 10.75 $ 9.50 $ 9.25 $ 13.00 $ 12.50
======== ======== ======== ======== ========
Total Investment Based on market price per share 20.63% 10.03% (22.57%) 12.52% 10.18%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 8.48% 19.05% (10.84%) 17.39% 6.77%
======== ======== ======== ======== ========
Ratios to Average Expenses .88% .93% .89% .94% .88%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net 5.27% 5.50% 5.49% 5.76% 6.36%
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end
Data: of year (in thousands) $ 59,960 $ 58,936 $ 53,032 $ 64,720 $ 59,030
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
======== ======== ======== ======== ========
Portfolio turnover 55.58% 107.20% 87.83% 52.04% 50.50%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,998 $ 3,947 $ 3,652 $ 4,236 $ 3,952
======== ======== ======== ======== ========
Dividends Per Investment income--net $ 870 $ 944 $ 557 $ 514 $ 769
Share On ======== ======== ======== ======== ========
Preferred Stock
Outstanding:++
<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 effects 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 that occurred on December 1, 1994.
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.
<PAGE>
(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.
(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).
<PAGE>
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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 1996 were $41,604,041 and
$49,738,071, respectively.
Net realized and unrealized gains as of October 31, 1996 were as
follows:
<PAGE>
Realized Unrealized
Gains Gains
Long-term investments $ 869,763 $4,027,212
Financial futures contracts 446,073 --
---------- ----------
Total $1,315,836 $4,027,212
========== ==========
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $4,026,347, of which $4,335,847
related to appreciated securities and $309,500 related to
depreciated securities. The aggregate cost of investments at October
31, 1996 for Federal income tax purposes was $74,385,328.
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, 1996, shares issued and outstanding
remained constant at 5,175,539. At October 31, 1996, total paid-in
capital amounted to $57,049,469.
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, 1996 was 3.30%.
As of October 31, 1996, there were 800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1%, calculated on
the proceeds of each auction.
For the year ended October 31, 1996, MLPF&S, a subsidiary of ML &
Co., earned $42,729 as commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a capital loss carryforward of
approximately $944,000, of which $924,000 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 8, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.058251 per share, payable on November 27, 1996 to shareholders
of record as of November 18, 1996.
<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, 1996, 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, 1996, 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, 1996, 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.
(Ernst & Young LLP)
<PAGE>
Princeton, New Jersey
November 25, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by Taurus
MuniCalifornia Holdings, Inc. during its taxable year ended October
31, 1996 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.
