TAURUS
MUNICALIFORNIA
HOLDINGS, INC.
FUND LOGO
Semi-Annual Report
April 30, 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
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
Taurus MuniCalifornia Holdings, Inc.
TO OUR SHAREHOLDERS
<PAGE>
For the six-month period ended April 30, 1996, the Common Stock of
Taurus MuniCalifornia Holdings, Inc. earned $0.333 per share income
dividends, which included earned and unpaid dividends of $0.054.
This represents a net annualized yield of 5.97%, based on a month-
end per share net asset value of $11.18. Over the same period, the
total investment return on the fund's Common Stock was +1.37%,
based on a change in per share net asset value from $11.39 to
$11.18, and assuming reinvestment of $0.334 per share income
dividends.
For the six-month period ended April 30, 1996, the fund's Auction
Market Preferred Stock had an average yield of 3.85%.
The Environment
Investor perceptions regarding the US economy changed over the
course of the six-month period ended April 30, 1996. As 1995 drew to
a close and 1996 began, it appeared that the US economy was losing
momentum. Lackluster retail sales, increases in initial unemployment
claims (along with weak job and income growth), and evidence of
slowing in the manufacturing sector all suggested that the rate of
economic growth was decelerating, with some forecasters even
suggesting the possibility of an imminent recession.
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is likely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
<PAGE>
The Municipal Market
During the six months ended April 30, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended April 30, 1996. At
April 30, 1996, long-term municipal bond yields were approximately
6.30%, an increase of approximately 30 basis points over the last
six months. The rise in US Treasury bond yields was more
substantial. Over the last six months, yields on US Treasury
securities rose approximately 60 basis points to 6.90%. During the
April period, the municipal bond market reversed the trend seen
throughout much of 1995 and significantly outperformed the US
Treasury bond market.
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income has dissipated. As the negative revenue impact of the
various proposals, such as the flat tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat tax, value-added tax
or any other reform were made. Consequently, fears of losing the
favored tax treatment of municipal bond income declined even
further. As a percentage of Treasury bond yields, tax-exempt bond
yield ratios quickly declined from 95% to approximately 90%. This
allowed the municipal bond market to maintain much of the gains made
since early 1995.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were underwritten, an increase of approximately
45% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $40 billion in long-term tax-exempt securities were
underwritten, an increase of 35% compared to the same period a year
ago. At current interest rate levels large amounts of refundings are
unlikely and the rate of new bond issuance should continue to
decline.
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the six-month period ended April 30,
1996 to absorb the relative increase in bond issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
We entered the six-month period ended April 30, 1996 very optimistic
that interest rates would decline. This optimism was based on the
belief that the economy was slowing and that advances on a balanced
Federal budget agreement would be beneficial to the fixed-income
markets. To take advantage of this anticipated decline in interest
rates, we decreased cash reserves to 1% of net assets, and increased
the fund's duration. This strategy benefited the portfolio's
performance as long-term interest rates declined over 30 basis
points through the end of December.
The new year brought the beginning of a reversal in the trend of
lower interest rates. By late February, signs of a strengthening
economy began to undermine investor confidence in the fixed-income
market. In March an explosive employment report seemed to confirm a
surge in the growth of the US economy, and yields began to rise
rapidly. Prior to the backup in yields, we gradually increased the
fund's cash reserves while decreasing its duration. This strategy
enabled the fund to be less sensitive to the significant backup in
yields experienced in the fixed-income markets. One other positive
factor for the fund during this backup in yields was that municipal
bonds significantly outperformed US Treasury securities.
<PAGE>
Because of the various influences that affected the economy, such as
the severe winter weather and the Government shutdowns, the economic
data released so far in 1996 was cloudy and subject to many
interpretations, but overall pointed to a stronger economy. The data
suggested that the economy may be picking up steam, which warrants a
cautious approach to the market until a clearer view of the
economy's direction emerges. Looking ahead, the fund will maintain
its cautious approach to the market until a clearer path for
interest rates becomes evident.
In Conclusion
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
Senior Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
<PAGE>
May 24, 1996
We are pleased to announce that Roberto Roffo is responsible for the
day-to-day management of Taurus MuniCalifornia Holdings, Inc. Mr.
Roffo has been employed by Merrill Lynch Asset Management, L.P. (an
affiliate of the Fund's investment adviser) since 1992 and as Vice
President since 1996. Prior thereto, he was Operations Manager with
State Street Bank and Trust Company from 1989 to 1992.
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.
<PAGE>
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.
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--98.1%
<S> <S> <C> <S> <C>
California Health Facilities Financing Authority Revenue Bonds, Series A:
BB NR* $1,500 Refunding (Good Samaritan Health System), 7.50% due 5/01/2000 (i) $ 1,686
AAA Aaa 2,180 (San Francisco Children's Hospital), 7.50% due 10/01/2020 (d) 2,407
<PAGE>
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 545 AMT, Series C, 7.60% due 8/01/2030 569
AA- Aa 1,165 AMT, Series D, 7.75% due 8/01/2010 1,220
AA- Aa 2,000 AMT, Series F-1, 7% due 8/01/2026 2,068
AA- Aa 1,750 Series A, 8.20% due 8/01/2017 1,829
AA- Aa 1,725 Series D, 7.25% due 8/01/2017 1,806
AA- Aa 1,000 California HFA, Revenue Bonds, RIB, AMT, 9.237% due 8/01/2023 (h) 1,010
California Pollution Control Financing Authority, PCR, Refunding, VRDN (g):
A1+ P1 300 (Exxon Project), 3.65% due 12/01/2012 300
A1+ VMIG1++ 200 (Shell Oil Company Project), Series B, 3.50% due 10/01/2011 200
NR* Aa3 1,500 California Pollution Control Financing Authority, Resource Recovery Revenue
Bonds (Honey Lake Power Project), VRDN, AMT, 4.10% due 9/01/2018 (g) 1,500
California Pollution Control Financing Authority, Resource Recovery Revenue
Bonds, VRDN, AMT (g):
A1 VMIG1++ 200 (Atlantic Richfield Company Project), Series A, 3.85% due 12/01/2024 200
NR* P1 1,000 Refunding (Ultra Power Malaga Project), Series A, 4.15% due 4/01/2017 1,000
NR* P1 800 Refunding (Ultra Power Malaga Project), Series B, 4.15% due 4/01/2017 800
A+ VMIG1++ 200 California Pollution Control Financing Authority, Solid Waste Disposal Revenue
Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT, Series B, 3.80% due
12/01/2024 (g) 200
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 1,275
NR* Aaa 695 Series A-2, 7.95% due 12/01/2024 777
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 1,080
A- A 2,500 (Department of Corrections--Monterey County), 7% due 11/01/2019 2,721
A- A1 1,000 Refunding (Various Universities of California Projects), 5.50% due 6/01/2021 908
AAA Aaa 1,375 Castaic Lake Water Agency, California, COP (Water System Improvement Project),
7.125% due 8/01/2000 (d)(i) 1,537
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) 3,269
NR* Baa 1,000 Clovis, California, COP, 7.20% due 8/01/2011 1,061
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) 2,446
BBB NR* 2,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 2,083
<PAGE>
AAA Aaa 2,700 Cucamonga County, California, Water District Facilities Refinancing Bonds,
COP, 6.50% due 9/01/2022 (b) 2,811
NR* NR* 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds, Series
B, 7.25% due 1/01/2012 (c) 930
Fresno, California, Sewer Revenue Bonds, Series A-1 (a):
AAA Aaa 2,010 6.25% due 9/01/2014 2,151
AAA Aaa 500 5.25% due 9/01/2019 463
AA Aa 1,500 Long Beach, California, Water Revenue Refunding Bonds, 6.25% due 5/01/2024 1,532
AA- AA 1,350 Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Bonds, RITR, 8.67% due 2/01/2020 (h) 1,428
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
AA Aa $2,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B,
6.625% due 8/01/2019 $ 2,083
AAA NR* 245 Los Angeles, California, S/F Home Mortgage Revenue Bonds, AMT, Issue A,
7.55% due 12/01/2023 (e) 255
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 984
AAA Aaa 1,000 Los Angeles County, California, Transportation Commission, Sales Tax Revenue
Bonds, Series A, 6.75% due 7/01/2001 (b)(i) 1,115
AA Aa 6,200 Metropolitan Water District, Southern California Waterworks Revenue Refunding
Bonds, RIB, 7.394% due 10/30/2020 (h) 5,278
AAA Aaa 2,000 Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, 6.20% due 2/14/2011 (a) 2,056
A+ A1 2,000 Pasadena, California, COP, Refunding (Old Pasadena Package Facility Project),
6.25% due 1/01/2018 2,050
A+ Aa 2,000 Sacramento, California, City Financing Authority, Lease Revenue Refunding
Bonds, Series B, 5.40% due 11/01/2020 1,847
<PAGE>
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) 1,538
AAA Aaa 1,000 Refunding, Issue 1, 6.50% due 5/01/2013 (a) 1,062
AAA Aaa 2,000 Refunding, Issue 2, 6.75% due 5/01/2013 (d) 2,163
AAA Aaa 1,000 San Francisco, California, City and County Sewer Revenue Refunding Bonds,
6% due 10/01/2011 (a) 1,026
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) 119
AAA Aaa 500 San Mateo County, California, Joint Powers Financing Authority, Lease Revenue
Refunding Bonds (Capital Projects Program), 5% due 7/01/2021 (d) 443
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) 2,193
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds,
AMT (e):
AAA NR* 3,035 (Mortgage-Backed Securities Program), Series A, 7.625% due 10/01/2023 3,173
AAA NR* 175 Series B, 7.75% due 3/01/2024 (f) 184
AAA Aaa 1,435 Southern California Public Power Authority, Transmission Project Revenue
Refunding Bonds (Southern Transmission), Series A, 5.50%** due 7/01/2012 (b)(c) 554
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 2,604
A NR* 1,415 Torrance, California, Hospital Revenue Refunding Bonds (Little Company of Mary
Hospital), 6.875% due 7/01/2015 1,467
AAA Aaa 1,000 Walnut Creek, California, COP, Refunding (John Muir Medical Center), 5% due
2/15/2016 (d) 880
Total Investments (Cost--$74,338)--98.1% 76,341
Other Assets Less Liabilities--1.9% 1,509
-------
Net Assets--100.0% $77,850
=======
<PAGE>
<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 April 30, 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 April 30, 1996.
(i)Prerefunded.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the fund.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$74,337,710) (Note 1a) $76,340,518
Cash 40,864
Interest receivable 1,589,384
Prepaid expenses and other assets 9,304
-----------
Total assets 77,980,070
-----------
Liabilities: Payables:
Dividends to shareholders (Note 1e) $ 48,873
Investment adviser (Note 2) 34,214 83,087
-----------
Accrued expenses and other liabilities 46,586
-----------
Total liabilities 129,673
-----------
Net Assets: Net assets $77,850,397
===========
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 675,347
Accumulated realized capital losses on investments--net (Note 5) (1,877,227)
Unrealized appreciation on investments--net 2,002,808
-----------
Total--Equivalent to $11.18 net asset value per share of
Common Stock (market price--$10.00) 57,850,397
-----------
Total capital $77,850,397
===========
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six
Months Ended
April 30, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 2,435,871
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 198,899
Professional fees 38,657
Commission fees (Note 4) 25,169
Accounting services (Note 2) 20,130
Printing and shareholder reports 18,185
Transfer agent fees 17,688
Directors' fees and expenses 9,514
Listing fees 8,239
Custodian fees 4,076
Pricing fees 2,869
Other 4,681
-----------
Total expenses 348,107
-----------
Investment income--net 2,087,764
-----------
Realized & Realized gain on investments--net 1,278,117
Unrealized Gain Change in unrealized appreciation on investments--net (2,339,270)
(Loss) on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,026,611
(Notes 1b, 1d & 3): ===========
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 2,087,764 $ 4,163,470
Realized gain (loss) on investments--net 1,278,117 (803,306)
Change in unrealized appreciation/depreciation on
investments--net (2,339,270) 6,705,589
----------- -----------
Net increase in net assets resulting from operations 1,026,611 10,065,753
----------- -----------
Dividends to Investment income--net:
Shareholders Common Stock (1,727,455) (3,406,959)
(Note 1e): Preferred Stock (384,320) (755,392)
----------- -----------
Net decrease in net assets resulting from dividends to
shareholders (2,111,775) (4,162,351)
----------- -----------
Net Assets: Total increase (decrease) in net assets (1,085,164) 5,903,402
Beginning of period 78,935,561 73,032,159
----------- -----------
End of period* $77,850,397 $78,935,561
=========== ===========
<FN>
*Undistributed investment income--net $ 675,347 $ 699,358
=========== ===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
April 30, 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 period $ 11.39 $ 10.25 $ 12.51 $ 11.53 $ 11.66
Operating -------- -------- -------- -------- --------
Performance: Investment income--net . .39 .81 .84 .91 .99
Realized and unrealized gain (loss) on
investments--net (.20) 1.14 (2.08) 1.13 (.05)
-------- -------- -------- -------- --------
Total from investment operations .19 1.95 (1.24) 2.04 .94
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.33) (.66) (.71) (.82) (.88)
Realized gain on investments--net -- -- (.20) (.14) (.06)
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.33) (.66) (.91) (.96) (.94)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.07) (.15) (.09) (.08) (.12)
Realized gain on investments--net -- -- (.02) (.02) (.01)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.07) (.15) (.11) (.10) (.13)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.18 $ 11.39 $ 10.25 $ 12.51 $ 11.53
======== ======== ======== ======== ========
Market price per share, end of period $ 10.00 $ 9.50 $ 9.25 $ 13.00 $ 12.50
======== ======== ======== ======== ========
Total Investment Based on market price per share 8.71%+++ 10.03% (22.57%) 12.52% 10.18%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 1.37%+++ 19.05% (10.84%) 17.39% 6.77%
======== ======== ======== ======== ========
Ratios to Average Expenses .87%* .93% .89% .94% .88%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 5.23%* 5.50% 5.49% 5.76% 6.36%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of period (in thousands) $ 57,850 $ 58,936 $ 53,032 $ 64,720 $ 59,030
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
======== ======== ======== ======== ========
Portfolio turnover 27.00% 107.20% 87.83% 52.04% 50.50%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,893 $ 3,947 $ 3,652 $ 4,236 $ 3,952
======== ======== ======== ======== ========
Dividends Per Share Investment income--net $ 480 $ 944 $ 557 $ 514 $ 769
On Preferred Stock ======== ======== ======== ======== ========
Outstanding:++
<PAGE>
<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.
++Dividends per share have been adjusted to reflect a two-for-one
stock split that occurred on December 1, 1994.
+++Aggregate total investment return.
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. These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund determines and makes available for
publication the net asset value of its Common Stock on a weekly
basis. The Fund's Common Stock is listed on the New York Stock
Exchange under the symbol 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.
<PAGE>
(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.
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 six months ended April 30, 1996 were $20,619,910 and
$29,367,755, respectively.
Net realized and unrealized gains as of April 30, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 693,771 $2,002,808
Financial futures contracts 584,346 --
---------- ----------
Total $1,278,117 $2,002,808
========== ==========
<PAGE>
As of April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $2,002,808, of which $2,919,878 related to
appreciated securities and $917,070 related to depreciated
securities. The aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $74,337,710.
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 six months ended April 30, 1996, shares issued and
outstanding remained constant at 5,175,539. At April 30, 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 April 30, 1996 was 3.00%.
As of April 30, 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 six months ended April 30, 1996, MLPF&S, a subsidiary of ML
& Co., earned $23,518 as commissions.
<PAGE>
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.
6. Subsequent Event:
On May 10, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.053856 per share, payable on May 30, 1996 to shareholders of
record as of May 21, 1996.
