TAURUS
MUNICALIFORNIA
HOLDINGS, INC.
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1997
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
Patrick D. Sweeney, 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 #11074 -- 4/97
Taurus MuniCalifornia Holdings, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1997, the Common Stock of
Taurus MuniCalifornia Holdings, Inc. earned $0.342 per share income
dividends, which included earned and unpaid dividends of $0.054. This
represents a net annualized yield of 6.05%, based on a month-end per
share net asset value of $11.40. Over the same period, the total
investment return on the fund's Common Stock was +1.49%, based on a
change in per share net asset value from $11.59 to $11.40, and assuming
reinvestment of $0.346 per share income dividends.
For the six-month period ended April 30, 1997, the fund's Auction Market
Preferred Stock had an average yield of 3.40%.
The Municipal Market Environment
Long-term tax-exempt revenue bonds traded in a relatively narrow range
throughout much of the six-month period ended April 30, 1997. By mid-
January 1997, municipal bond yields rose to over 6% as investors reacted
negatively to reports of progressively stronger domestic economic
growth. However, a continued lack of any material inflationary pressures
allowed bond yields to decline to their prior levels by late February.
Bond yields rose again as investors became increasingly concerned that
the US domestic economic strength seen thus far in 1997 would continue,
and that the increase in short-term interest rates by the Federal
Reserve Board (FRB) in late March would be the first in a series of such
moves designed to slow the US economy before any dormant inflationary
pressures were awakened. Long-term tax-exempt bond yields rose
approximately 15 basis points (0.15%) to almost 6.15% by mid-April.
Similarly, long-term US Treasury bond yields rose over 35 basis points
over the same period to 7.16%. However, in late April economic
indicators were released showing that despite considerable economic
growth any inflationary pressures, particularly those associated with
wage increases, were well-contained and of no immediate concern. Fixed-
income bond prices staged a significant rally during the last week
in April with long-term US Treasury bond yields falling nearly 20 basis
points to end the month at 6.95%. Municipal bond yields, as measured by
the Bond Buyer Revenue Bond Index, declined nearly 15 basis points to
stand at 6.01% by April 30, 1997.
As in recent quarters, the relative stability of long-term tax-exempt
bond yields was supported by low levels of new municipal bond issuance.
During the six months ended April 30, 1997, approximately $90 billion in
long-term tax-exempt bonds was underwritten, a decline of over 6%
compared to the corresponding period a year earlier. During the three-
month period ended April 30, 1997, $41 billion in new long-term
municipal bonds was issued, also a 6% decline in issuance compared to
the three months ended April 30, 1996. Overall investor demand remained
strong, particularly from property and casualty insurance companies and
individual retail investors. In recent years, investor demand increased
whenever tax-exempt bond yields approached or exceeded the 6% level as
they have in the past few months.
Additionally, in recent months much of the new bond issuance was
dominated by a number of larger issues. These included $710 million in
New York City water bonds, $600 million in state of California bonds,
$1 billion in New York City general obligation bonds, $435 million in
Dade County, Florida water and sewer revenue bonds, $450 million in
Puerto Rico Electric Authority issues and $930 million in Port Authority
of New York and New Jersey issues. These bonds have typically been
issued in states with relatively high state income taxes and
consequently were generally underwritten at yields that were relatively
unattractive to residents in other states. This has exacerbated the
general decline in overall issuance in recent years, making the decrease
in supply even more dramatic for general market investors.
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, sign of a
resurgence in inflation. Recent economic growth generated considerable
unexpected tax revenues for the Federal government. Forecasts for the
1997 Federal fiscal deficit were reduced to under $100 billion, a level
not seen since the early 1980s. Such a reduced Federal deficit enhances
the prospect for a balanced Federal budget. All these factors support a
scenario of steady, or even falling, interest rates in the coming years.
Present annual estimates of future municipal bond issuance remain
centered around $175 billion, indicating that the current relative
scarcity of tax-exempt bonds should continue for at least the remainder
of the year. Should interest rates begin to decline later this year,
either as the result of a balanced Federal budget or continued benign
inflation, investors are unlikely to be able to purchase long-term
municipal bonds at their currently attractive levels.
Portfolio Strategy
For the six-month period ended April 30, 1997, we focused on sustaining
an appealing level of tax-exempt income while seeking to achieve an
above-average total return for the fund. We entered the April period
optimistic that interest rates would decline because of the seemingly
attractive level of interest rates and the tight technical market in
municipal bonds. To take advantage of this scenario, we extended the
portfolio's duration and lowered cash reserves to a minimal level. From
November 1996 to the beginning of December 1996, this strategy prevailed
as interest rates declined about 30 basis points.
The following three months proved to be extremely volatile as economic
reports suggested strength in the economy with benign inflation combined
with the threat of a monetary tightening by the FRB. We shifted our
investment strategy at this point to seek to manage the trading ranges
the municipal market maintained during this time. Finally in late March
1997 when the FRB raised the Federal Funds rate by 25 basis points,
interest rates broke out of the trading range in which they had
vacillated. At this point we shifted our strategy again because of the
attractive level of interest rates. Therefore, we extended the
portfolio's duration and again lowered cash reserves to minimal levels
in anticipation of a decline in interest rates. This strategy proved
correct as interest rates rallied during the last week of April and
declined nearly 25 basis points very quickly. Looking forward, we
anticipate a volatile market that will once again remain caught within a
constrained trading range until the economy either moderates or
accelerates even further.
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 to come.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERTO ROFFO
Roberto Roffo
Vice President and Portfolio Manager
May 27, 1997
Taurus MuniCalifornia Holdings, Inc. April 30, 1997
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.
Taurus MuniCalifornia Holdings, Inc. April 30, 1997
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
California -- 91.9%
California Health Facilities Financing Authority Revenue Bonds, Series A:
AA Aa3 $3,500 (Kaiser Permanente), 6.50% due 12/01/2020 $3,719
BB Aaa 1,500 Refunding (Good Samaritan Health System), 7.50% due 5/01/2000 (i) 1,649
AAA Aaa 2,180 (San Francisco Children's Hospital), 7.50% due 10/01/2000 (d)(i) 2,418
AAA Aaa 1,750 California Health Facilities Financing Authority, Revenue Refunding Bonds (Catholic
Insured Healthcare-West), Series E, 5.25% due 7/01/2016 (a) 1,643
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 515 AMT, Series C, 7.60% due 8/01/2030 541
AA- Aa 965 AMT, Series D, 7.75% due 8/01/2010 1,018
AA- Aa 1,975 AMT, Series F-1, 7% due 8/01/2026 2,083
AA- Aa 1,650 Series D, 7.25% due 8/01/2017 1,734
AA- AA 1,000 California HFA, Revenue Bonds, RIB, AMT, 9.112% due 8/01/2023 (h) 1,046
California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas and
Electric), VRDN (g):
A1 NR* 300 AMT, Series G, 4.20% due 2/01/2016 300
A1+ NR* 1,000 Series C, 3.90% due 11/01/2026 1,000
A1+ NR* 1,800 Series F, 4.20% due 11/01/2026 1,800
AAA Aaa 1,500 California Pollution Control Financing Authority, PCR, Refunding (San Diego Gas and
Electric Co.), Series A, 5.90% due 6/01/2014 (d) 1,558
California Pollution Control Financing Authority, PCR (Southern California Edison Co.):
A+ A2 1,285 AMT, Series B, 6.40% due 12/01/2024 1,322
A1 VMIG1+ 700 VRDN, Series C, 4.10% due 2/28/2008 (g) 700
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) 1,296
A Aaa 1,000 California State Public Works Board, Lease Revenue Bonds (Department of
Corrections-Monterey County), Series A, 6.875% due 11/01/2004 (i) 1,140
NR* Aa2 400 California Statewide Community Development Authority, Solid Waste Facility Revenue
Bonds (Chevron U.S.A. Inc. Project), VRDN, AMT, 4.15% 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) 3,344
A1 VMIG1+ 200 Chula Vista, California, IDR, Refunding (San Diego Gas), VRDN, Series A, 4.25%
due 7/01/2021 (g) 200
BBB NR* 2,000 Contra Costa County, California, Public Financing Authority, Tax Allocation Revenue
Refunding Bonds, Series A, 7.10% due 8/01/2022 2,123
AAA Aaa 2,700 Cucamonga County, California, Water District Facilities Refinancing Bonds, COP,
6.50% due 9/01/2022 (b) 2,878
NR* NR* 810 Cypress, California, S/F Residential Mortgage Revenue Refunding Bonds, Series B,
7.25% due 1/01/2012 (c) 907
AAA Aaa 2,010 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (a) 2,172
Los Angeles, California, Department of Water and Power, Electric Plant Revenue Bonds:
A+ Aa3 1,350 RITR, 8.687% due 2/01/2020 (h) 1,460
A+ Aa3 1,000 Refunding, 6.375% due 2/01/2020 1,040
AA Aa 2,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B, 6.625%
due 8/01/2019 2,128
AAA NR* 230 Los Angeles, California, S/F Home Mortgage Revenue Bonds, AMT, Issue A, 7.55%
due 12/01/2023 (e) 242
Metropolitan Water District, Southern California Waterworks Revenue Bonds, Series C:
AA Aa 1,500 5% due 7/01/2027 1,340
AAA Aaa 1,000 5% due 7/01/2027 (d) 894
A+ A1 2,000 Pasadena, California, COP, Refunding (Old Pasadena Package Facility Project),
6.25% due 1/01/2018 2,093
AAA Aaa 1,000 Port Oakland, California, Port Revenue Bonds, AMT, Series E, 6.50% due 11/01/2016 (d) 1,048
AAA Aaa 1,720 San Diego, California, IDR, RITR, 8.135% due 9/01/2018 (h) 1,795
BBB+ Baa1 1,300 San Diego, California, Redevelopment Agency Refunding Bonds (Horton Project),
Series B, 6.625% due 11/01/2017 1,370
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) 1,572
AAA Aaa 1,000 Refunding, Issue 1, 6.50% due 5/01/2013 (a) 1,073
AAA Aaa 2,000 Refunding, Issue 2, 6.75% due 5/01/2013 (d) 2,177
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 1,250 San Jose, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(Merged Area Redevelopment Project), 5.50% due 8/01/2017 (d) 1,214
AAA Aaa 3,500 San Mateo County, California, Joint Powers Financing Authority, Lease Revenue
Refunding Bonds (Capital Projects Program), 5% due 7/01/2021 (d) 3,193
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) 2,207
AAA Aaa 3,850 Santa Cruz County, California, COP, Refunding (Capital Facilities Project),
5.60% due 9/01/2023 (d) 3,813
Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT:
AAA NR* 2,615 (Mortgage-Backed Securities Program), Series A, 7.625% due 10/01/2023 (e) 2,751
AAA NR* 175 Series B, 7.75% due 3/01/2024 (f) 185
BBB+ NR* 2,305 Stanislaus, California, Waste-to-Energy Financing Agency, Solid Waste Facility Revenue
Refunding Bonds (Ogden Martin System Inc. Project), 7.625% due 1/01/2010 2,467
A NR* 1,405 Torrance, California, Hospital Revenue Refunding Bonds (Little Company of Mary
Hospital), 6.875% due 7/01/2015 1,494
Puerto Rico -- 6.1%
A Baa1 735 Puerto Rico Commonwealth, 5.40% due 7/01/2025 685
A Baa1 2,500 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Refunding Bonds,
5% due 7/01/2019 2,226
A Baa1 2,000 Puerto Rico Commonwealth, Highway and Transportation Authority, Highway Revenue
Bonds, Series Y, 5.50% due 7/01/2036 1,878
Total Investments (Cost -- $74,496) -- 98.0% 77,451
Other Assets Less Liabilities -- 2.0% 1,572
---------
Net Assets -- 100.0% $79,023
=========
(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 April 30, 1997.
(h) The interest rate is subject to change periodically and inversely
based upon market rates. The interest rate shown is the rate in
effect at April 30, 1997.
(i) Prerefunded.
(j) FHLMC Collateralized.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
PORTFOLIO ABBREVIATIONS
To simplify the listings of Taurus MuniCalifornia Holdings, Inc. 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.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of April 30, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $74,495,831) (Note 1a) $77,451,165
Cash 173,421
Interest receivable 1,505,602
Prepaid expenses and other assets 5,782
-----------
Total assets 79,135,970
-----------
Liabilities: Payables:
Dividends to shareholders (Note 1e) $52,338
Investment adviser (Note 2) 32,233 84,571
-----------
Accrued expenses and other liabilities 28,451
-----------
Total liabilities 113,022
-----------
Net Assets: Net assets $79,022,948
===========
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 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 608,245
Accumulated realized capital losses on investments -- net (Note 5) (1,590,100)
Unrealized appreciation on investments -- net 2,955,334
-----------
Total -- Equivalent to $11.40 net asset value per share of Common Stock
(market price -- $10.625) 59,022,948
-----------
Total capital $79,022,948
===========
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
April 30, 1997
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $2,368,774
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $197,590
Professional fees 39,495
Accounting services (Note 2) 31,324
Commission fees (Note 4) 24,491
Transfer agent fees 17,655
Printing and shareholder reports 14,024
Directors' fees and expenses 9,479
Listing fees 7,835
Custodian fees 3,804
Pricing fees 2,767
Other 7,117
----------
Total expenses 355,581
------------
Investment income -- net 2,013,193
------------
Realized & Realized gain on investments -- net 249,408
Unrealized Change in unrealized appreciation on investments -- net (1,071,878)
Gain (Loss) on ------------
Investments -- Net Increase in Net Assets Resulting from Operations $1,190,723
Net (Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $2,013,193 $4,176,355
Realized gain on investments -- net 249,408 1,315,836
Change in unrealized appreciation on investments -- net (1,071,878) (314,866)
----------- -----------
Net increase in net assets resulting from operations 1,190,723 5,177,325
----------- -----------
Dividends to Investment income -- net:
Shareholders Common Stock (1,790,530) (3,457,027)
(Note 1e): Preferred Stock (336,752) (696,352)
----------- -----------
Net decrease in net assets resulting from dividends to shareholders (2,127,282) (4,153,379)
----------- -----------
Net Assets: Total increase (decrease) in net assets (936,559) 1,023,946
Beginning of period 79,959,507 78,935,561
----------- -----------
End of period* $79,022,948 $79,959,507
============ ============
*Undistributed investment income -- net $608,245 $722,334
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $11.59 $11.39 $10.25 $12.51 $11.53
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net .40 .80 .81 .84 .91
Realized and unrealized gain (loss) on
investments -- net (.17) .20 1.14 (2.08) 1.13
-------- -------- -------- -------- --------
Total from investment operations .23 1.00 1.95 (1.24) 2.04
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income -- net (.35) (.67) (.66) (.71) (.82)
Realized gain on investments -- net -- -- -- (.20) (.14)
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.35) (.67) (.66) (.91) (.96)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to
Preferred Stock shareholders:
Investment income -- net (.07) (.13) (.15) (.09) (.08)
Realized gain on investments -- net -- -- -- (.02) (.02)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.07) (.13) (.15) (.11) (.10)
-------- -------- -------- -------- --------
Net asset value, end of period $11.40 $11.59 $11.39 $10.25 $12.51
======== ======== ======== ======== ========
Market price per share, end of period $10.625 $10.75 $9.50 $9.25 $13.00
======== ======== ======== ======== ========
Total Based on market price per share 1.98%++++ 20.63% 10.03% (22.57%) 12.52%
Investment ======== ======== ======== ======== ========
Return:** Based on net asset value per share 1.49%++++ 8.48% 19.05% (10.84%) 17.39%
======== ======== ======== ======== ========
Ratios to
Average Expenses .90%* .88% .93% .89% .94%
Net Assets:*** ======== ======== ======== ======== ========
Investment income -- net 5.09%* 5.27% 5.50% 5.49% 5.76%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of period (in thousands) $59,023 $59,960 $58,936 $53,032 $64,720
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $20,000 $20,000 $20,000 $20,000 $20,000
======== ======== ======== ======== ========
Portfolio turnover 51.77% 55.58% 107.20% 87.83% 52.04%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $3,951 $3,998 $3,947 $3,652 $4,236
======== ======== ======== ======== ========
Dividends Investment income -- net $421 $870 $994 $557 $514
Per Share on ======== ======== ======== ======== ========
Preferred Stock
Outstanding:+
* 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 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.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Taurus MuniCalifornia Holdings, Inc. April 30, 1997
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.
(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.
(bullet) 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.
(bullet) 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.
(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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended April 30, 1997 were $38,251,745 and $43,211,022,
respectively.
Net realized and unrealized gains as of April 30, 1997 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $249,408 $2,955,334
---------- ----------
Total $249,408 $2,955,334
========== ==========
As of April 30, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $2,955,334, of which $3,074,490 related to
appreciated securities and $119,156 related to depreciated securities.
The aggregate cost of investments at April 30, 1997 for Federal income
tax purposes was $74,495,831.
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, 1997, shares issued and outstanding
remained constant at 5,175,539. At April 30, 1997, 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, 1997 was 3.30%.
As of April 30, 1997, 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, 1997, Merrill Lynch, Pierce, Fenner &
Smith Inc., an affiliate of FAM, earned $20,295 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.
6. Subsequent Event:
On May 9, 1997, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of $.054495
per share, payable on May 29, 1997 to shareholders of record as of May
19, 1997.
