MUNIHOLDINGS
NEW YORK
FUND, INC.
FUND LOGO
Annual Report
June 30, 1998
This report, including the financial information herein, is
transmitted to the shareholders of MuniHoldings New York Fund, 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.
MuniHoldings
New York
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MuniHoldings New York Fund, Inc.
The Benefits and
Risks of
Leveraging
MuniHoldings New York Fund, Inc., has the ability to leverage 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.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, interest rates on inverse floaters will decrease when short-
term interest rates increase and increase when short-term interest
rates decrease. Investments in inverse floaters may be characterized
as derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities.
MuniHoldings New York Fund, Inc., June 30, 1998
DEAR SHAREHOLDER
We are pleased to provide you with this first annual report for
MuniHoldings New York Fund, Inc. In this and future reports to
shareholders, we will highlight the Fund's performance, describe the
recent investment environment and outline investment activities. The
Fund seeks to provide shareholders with current income exempt from
Federal, New York State and New York City income taxes by investing
in a portfolio of long-term, investment-grade municipal
obligations.
Since inception (February 27, 1998) through June 30, 1998, the
Common Stock of MuniHoldings New York Fund, Inc. earned $0.283 per
share income dividends, which included earned and unpaid dividends
of $0.065. This represents a net annualized yield of 5.52%, based on
a month-end per share net asset value of $15.08. Over the same
period, the total investment return on the Fund's Common Stock was
+2.03%, based on a change in per share net asset value from $15.00
to $15.08, and assuming reinvestment of $0.218 per share income
dividends.
For the period February 27, 1998 through June 30 , 1998, the Fund's
Preferred Stock had an average yield of 4.02% for Series A and 3.44%
for Series B.
The Municipal Market Environment
Since inception (February 27, 1998) through June 30, 1998, long-term
tax-exempt revenue bond yields were little changed. Throughout the
period, the near absence of inflationary pressures continued to
support low interest rates. However, consistently strong domestic
economic growth has caused some investors to fear that the Federal
Reserve Board will be forced eventually to raise short-term interest
rates. Such action would be taken to ensure that the US economy's
present rate of growth would decelerate before any inflationary
pressures could develop. These concerns pushed bond yields modestly
higher by late April.
However, the weakening financial conditions in many Asian countries
subsequently calmed investor fears of Federal Reserve Board
intervention, and fixed-income prices again moved higher. Long-term
uninsured municipal bond yields, as measured by the Bond Buyer
Revenue Bond Index, fell approximately 5 basis points (0.05%) to end
the June quarter at 5.34%. As in late 1997 and early 1998, US
Treasury bond yields benefited from a "flight to quality" as foreign
investors were drawn to the relative safe haven of US Government
securities. Long-term US Treasury bond yields declined approximately
30 basis points to end the June quarter at 5.62%.
Thus far in 1998, the municipal bond market has experienced
unexpectedly strong supply pressures. These supply pressures have
prevented tax-exempt bond yields from declining as much as US
Treasury bond yields. During the first six months of 1998, more than
$145 billion in new tax-exempt bonds were underwritten, an increase
of over 50% compared to the same period a year ago. During the
quarter ended June 30, 1998, municipalities issued over $75 billion
in new securities, an increase of more than 35% compared to the same
three-month period in 1997. Additionally, corporate issuers have
also viewed current interest rate levels as an opportunity to issue
significant amounts of taxable securities. Thus far in 1998, over
$500 billion in investment-grade corporate bonds have been
underwritten, an increase of more than 70% compared to the same
period a year ago. This sizeable corporate bond issuance has tended
to both support generally higher fixed-income yields and reduce the
demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely
to be maintained. Continued increases in bond issuance will require
lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancings.
Preliminary estimates for 1998 total municipal bond issuance are
presently in the $200 billion--$225 billion range. These estimates
suggest that recent supply pressures are likely to abate later in
the year. Earlier this year, municipal bond investors received
approximately $30 billion in coupon payments, bond maturities and
proceeds from early redemptions. The demand generated by these
assets has helped to offset the increase in supply seen thus far in
1998. Historically, the month of July tends to be a period of strong
investor demand as seasonal factors generate strong income flows. It
is also possible that at least some of the recent economic strength
seen in the United States will be reversed in the coming months. A
particularly mild winter has been partially responsible for a strong
housing sector, as well as other construction industries. This past
winter's economic strength may have borrowed from future quarters'
growth. This recent strong trend may not be sustained and may lead
to weaker construction growth later this year. Additionally, strong
economic growth in 1997 and the increased use of electronic tax
filings have resulted in larger and earlier Federal and state income
tax refunds to many individuals. These refunds appear to have
supported strong consumer spending in recent months, but may be
borrowing against weaker spending later this year.
The continued impact of the Asian financial crisis on the US
domestic economy's future growth remains unclear. Current Asian
economic conditions continue to reflect ongoing weakness. Recent
trade data indicated that reduced US exports to these countries may
have lowered US economic growth by as much as 2% in the first
quarter of 1998. Since further trade deterioration is possible in
the coming months, we do not believe that the Federal Reserve Board
will be willing to raise interest rates, barring a dramatic and
unexpected resurgence of domestic inflation.
These factors suggest that over the near term, interest rates in
general are unlikely to rise by any appreciable amount. Recent
supply pressures have caused municipal bond yield ratios to rise
relative to US Treasury bond yields. At June 30, 1998, long-term tax-
exempt bond yields were at attractive yield ratios relative to US
Treasury securities of comparable maturities (over 90%), well in
excess of their expected range of 85%--88%. Tax-exempt bond yield
ratios rarely exceeded 90% in the 1980s and 1990s. Previous
instances have usually been associated with potential changes in the
Federal tax code that would have adversely affected the tax-favored
status of municipal bonds. The present situation has developed
largely because of a temporary supply imbalance. These imbalances
should soon be corrected as tax-exempt bond issuance slows from its
current rapid pace later this year. Any further pressure on the
municipal market may well represent a very attractive investment
opportunity.
Portfolio Strategy
During the four months since the Fund's inception, our strategy was
to maintain a fully invested position. This aggressive stance
enabled the Fund to perform extremely well in the declining interest
rate environment witnessed recently in the tax-exempt fixed-income
market. Although it is probable that the market will experience some
volatility in the future and setbacks are likely to occur, we
believe that these instances will be short-lived. In our opinion, a
slow growth, low inflation economic environment is likely to
continue to supply a positive backdrop for debt securities, and the
relatively tight technical supply/demand outlook for municipal
bonds should cushion any temporary downward movements in tax-exempt
bond prices. While the Fund is already aggressively structured, our
strategy going forward will be concentrated more on improving the
call features of the underlying securities in the portfolio, as well
as adjusting the sector diversity of the Fund's holdings.
Because of historically tight credit quality spreads, we favored
overweighting the position of the Fund's assets in AAA-insured
securities. At June 30, 1998, 28% of the Fund's assets were rated
AAA by Standard & Poor's Corp.
In Conclusion
We appreciate your ongoing interest in MuniHoldings New York Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Robert A. DiMella)
Robert A. DiMella
Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
July 30, 1998
MuniHoldings New York Fund, Inc., June 30, 1998
Portfolio
Abbreviations
To simplify the listings of MuniHoldings New York Fund, 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)
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New York AAA Aaa $ 5,000 Battery Park City Authority, New York, Revenue Bonds, RITR,
- --94.2% Series 25, 6.97% due 11/01/2026 (b)(c) $ 5,350
AAA Aaa 2,000 Buffalo, New York, Municipal Water Finance Authority, Water
System Revenue Bonds, 5% due 7/01/2025 (d) 1,948
AAA Aaa 2,600 Long Island Power Authority, New York, Electric System Revenue
Bonds, Series A, 5.50% due 12/01/2029 (e) 2,670
AAA Aaa 1,200 Metropolitan Transportation Authority, New York, Dedicated Tax
Fund, Series A, 4.75% due 4/01/2028 (d) 1,126
New York City, New York, GO:
BBB+ A3 4,000 Series H, 5% due 8/01/2022 3,853
BBB+ A3 5,000 Series H, 5.125% due 8/01/2025 4,861
BBB+ A3 2,000 UT, Series J, 5.50% due 2/15/2026 2,031
A A3 5,885 New York City, New York, Industrial Development Agency, Civic
Facilities Revenue Bonds (Nightingale-Bamford School Project),
5.85% due 1/15/2020 6,111
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
A- A2 4,750 Series B, 5.25% due 6/15/2029 4,743
A- A2 7,500 Series D, 4.75% due 6/15/2025 6,983
A1+ VMIG1++ 300 VRDN, Series C, 4.05% due 6/15/2023 (a)(d) 300
AA Aa3 7,500 New York City, New York, Transitional Finance Authority
Revenue Bonds (Future Tax Secured), Series C, 5% due 5/01/2026 7,280
A1+ VMIG1++ 300 New York City, New York, VRDN, Series B, Sub-Series B-2, 4.05%
due 8/15/2023 (a)(e) 300
New York State Dormitory Authority Revenue Bonds:
A1+ VMIG1++ 1,800 (Cornell University), VRDN, Series B, 3.90% due 7/01/2025 (a) 1,800
BBB+ A3 7,550 (Court Facilities Lease), Series A, 5.25% due 5/15/2021 7,480
NR* Aaa 2,960 (Culinary Institute), 5% due 7/01/2027 (e) 2,880
AAA Aaa 7,400 (Mental Health Services Facilities), Series B, 5% due
2/15/2028 (f) 7,199
A- A3 2,370 (Mental Health Services Facilities Improvement), Series B,
5.375% due 2/15/2026 2,392
AAA Aaa 2,900 Refunding (New York & Presbyterian Hospital), 5% due
8/01/2032 (c) 2,803
BBB+ Baa1 3,000 Refunding (Secured Hospital--North General Hospital),
Series G, 5.30% due 2/15/2019 2,992
BBB+ Baa1 7,500 Refunding (Secured Hospital--Wyckoff Heights), Series H,
5.30% due 8/15/2021 7,480
A- A3 2,000 Refunding (State University Educational Facilities), 5.125%
due 5/15/2021 1,964
AAA Aaa 1,455 Refunding (University of Rochester), Series A, 5.125% due
7/01/2022 (e) 1,436
AAA Aaa 6,000 Refunding (University of Rochester), Series A, 5% due
7/01/2023 (e) 5,850
AA Aa 5,000 Refunding (Vassar College), 5% due 7/01/2025 4,891
BBB+ Baa1 7,000 (Secured Hospital--Interfaith Medical Center), Series D,
5.40% due 2/15/2028 7,036
BBB+ Baa1 4,500 (Secured Hospital--Saint Agnes Hospital), Series A, 5.30%
due 2/15/2019 4,489
BBB+ Baa1 1,750 (Secured Hospital--Saint Agnes Hospital), Series A, 5.40%
due 2/15/2025 1,759
BBB+ Baa1 1,000 (Secured Hospital--Saint Clare's Hospital), Series B,
5.30% due 2/15/2019 997
BBB+ Baa1 6,500 (Secured Hospital--Saint Clare's Hospital), Series B,
5.40% due 2/15/2025 (g) 6,533
AAA Aaa 4,075 (State University Educational Facilities), Series A,
4.75% due 5/15/2025 (e) 3,833
New York State Energy Research and Development Authority,
PCR, AMT:
AAA Aaa 2,000 (New York State Electric and Gas Corporation Project),
Series A, 6.15% due 7/01/2026 (e) 2,165
A1+ NR* 300 (Niagara Power Corporation Project), VRDN, Series B,
4.10% due 7/01/2027 (a) 300
AAA Aaa 3,000 New York State Environmental Facilities Corporation, Special
Obligation Revenue Refunding Bonds (Riverbank State Park),
5.125% due 4/01/2022 (c) 2,953
AAA Aaa 5,065 New York State Local Government Assistance Corp., RITR,
Series 27, 6.97% due 4/01/2021 (b)(e) 5,318
New York State Mortgage Agency Revenue Bonds:
NR* Aa2 7,435 (Homeowner Mortgage), AMT, Series 69, 5.40% due 10/01/2019 7,486
NR* Aa2 3,900 (Homeowner Mortgage), AMT, Series 69, 5.50% due 10/01/2028 3,915
NR* Aa2 4,900 Series 41-A, 6.45% due 10/01/2014 5,286
New York State Urban Development Corporation Revenue Bonds:
BBB+ Baa1 9,500 (Correctional Facilities-Service Contract), Series A, 5%
due 1/01/2028 9,077
AAA Aaa 5,000 RITR, Series 26, 6.97% due 1/01/2025 (b)(e) 5,306
AAA Aaa 1,700 Oneida County, New York, Industrial Development Agency,
Revenue Bonds (Civic Facility-Mohawk Valley), Series A,
5.20% due 2/01/2013 (f) 1,730
Port Authority of New York and New Jersey, Consolidated Bonds:
AA- A1 6,565 109th Series, 4th Installment, 5.375% due 1/15/2032 6,679
AA- A1 7,500 111th Series, 5% due 10/01/2032 7,284
Puerto A1+ VMIG1++ 600 Puerto Rico Commonwealth, Government Development Bank, Revenue
Rico--0.3% Refunding Bonds, VRDN, 3.15% due 12/01/2015 (a)(e) 600
Total Investments (Cost--$177,572)--94.5% 179,469
Variation Margin on Financial Futures Contracts--0.0%** (30)
Other Assets Less Liabilities--5.5% 10,479
---------
Net Assets--100.0% $ 189,918
=========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the interest
rate in effect at June 30, 1998.
(b)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
interest rate in effect at June 30, 1998.
(c)AMBAC Insured.
(d)FGIC Insured.
(e)MBIA Insured.
(f)FSA Insured.
(g)All or a portion of security held as collateral in connection
with open financial futures contracts.
*Not Rated.
**Financial futures contracts sold as of June 30, 1998 were as
follows:
(in Thousands)
Number of Expiration Value
Contracts Issue Date (Notes 1a & 1b)
75 US Treasury Bonds September 1998 $9,269
Total Financial Futures Contracts Sold
(Total Contract Price--$9,239) $9,269
======
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
MuniHoldings New York Fund, Inc., June 30, 1998
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of June 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$177,572,104) (Note 1a) $179,468,517
Cash 3,195,613
Receivables:
Securities sold $ 4,885,752
Interest 2,997,160 7,882,912
------------
Deferred organization expenses (Note 1e) 15,147
Prepaid expenses and other assets 4,113
------------
Total assets 190,566,302
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 264,311
Distributor (Note 2) 108,324
Investment adviser (Note 2) 50,904
Variation margin (Note 1b) 30,469 454,008
------------
Accrued expenses and other liabilities 193,813
------------
Total liabilities 647,821
------------
Net Assets: Net assets $189,918,481
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (3,040 shares of
AMPS* issued and outstanding at $25,000
per share liquidation preference) $ 76,000,000
Common Stock, par value $.10 per share (7,556,667 shares
issued and outstanding) $ 755,667
Paid-in capital in excess of par 111,608,781
Undistributed investment income--net 515,734
Accumulated realized capital losses on investments--net (827,645)
Unrealized appreciation on investments--net 1,865,944
------------
Total--Equivalent to $15.08 net asset value per share of
Common Stock (market price--$14.5625) 113,918,481
------------
Total capital $189,918,481
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period February 27, 1998++ to June 30, 1998
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 3,117,591
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 312,904
Commission fees (Note 4) 35,234
Professional fees 22,009
Accounting services (Note 2) 20,304
Transfer agent fees 10,769
Directors' fees and expenses 10,255
Listing fees 8,085
Custodian fees 4,563
Pricing fees 1,505
Amortization of organization expenses (Note 1e) 1,103
Other 12,305
------------
Total expenses before reimbursement 439,036
Reimbursement of expenses (Note 2) (288,699)
------------
Total expenses after reimbursement 150,337
------------
Investment income--net 2,967,254
------------
Realized & Realized loss on investments--net (827,645)
Unrealized Gain Unrealized appreciation on investments--net 1,865,944
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 4,005,553
(Notes 1b, 1d & 3): ============
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
MuniHoldings New York Fund, Inc., June 30, 1998
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
Feb. 27, 1998++ to
Increase (Decrease) in Net Assets: June 30,1998
<S> <S> <C>
Operations: Investment income--net $ 2,967,254
Realized loss on investments--net (827,645)
Unrealized appreciation on investments--net 1,865,944
------------
Net increase in net assets resulting from operations 4,005,553
------------
Dividends to Investment income--net:
Shareholders Common Stock (1,644,233)
(Note 1f): Preferred Stock (807,287)
------------
Net decrease in net assets resulting from dividends to shareholders (2,451,520)
------------
Capital Stock Proceeds from issuance of Common Stock 113,250,000
Transactions Proceeds from issuance of Preferred Stock 76,000,000
(Notes 1e & 4): Offering costs resulting from the issuance of Common Stock (278,202)
Offering and underwriting costs resulting from the issuance of Preferred Stock (707,355)
------------
Net increase in net assets derived from capital stock transactions 188,264,443
------------
Net Assets: Total increase in net assets 189,818,476
Beginning of period 100,005
------------
End of period* $189,918,481
============
<FN>
*Undistributed investment income--net $ 515,734
============
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
Feb. 27, 1998++ to
Increase (Decrease) in Net Asset Value: June 30, 1998
<S> <S> <C>
Per Share Net asset value, beginning of period $ 15.00
Operating ------------
Performance: Investment income--net .36
Realized and unrealized gain on investments--net .14
------------
Total from investment operations .50
------------
Less dividends to Common Stock shareholders:
Investment income--net (.22)
------------
Capital charge resulting from issuance of Common Stock (.04)
------------
Effect of Preferred Share activity++++:
Dividends to Preferred Stock shareholders:
Investment income--net (.07)
Capital charge resulting from issuance of Preferred Stock (.09)
------------
Total effect of Preferred Stock activity (.16)
------------
Net asset value, end of period $ 15.08
============
Market price per share, end of period $ 14.5625
============
Total Investment Based on market price per share (1.47%)+++
Return:** ============
Based on net asset value per share 2.03%+++
============
Ratios to Average Expenses, net of reimbursement .26%*
Net Assets:*** ============
Expenses .77%*
============
Investment income--net 5.22%*
============
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 113,918
Data: ============
Preferred Stock outstanding, end of period (in thousands) $ 76,000
============
Portfolio turnover 28.25%
============
Leverage: Asset coverage per $1,000 $ 2,499
============
Dividends Series A--Investment income--net $ 286
Per Share on ============
Preferred Stock Series B--Investment income--net $ 245
Outstanding: ============
<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 effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of operations.
++++The Fund's Preferred Stock was issued on March 19, 1998.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
MuniHoldings New York Fund, Inc., June 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings New York Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. Prior to commencement of operations
on February 27, 1998, the Fund had no operations other than those
relating to organizational matters and the sale of 6,667 shares of
Common Stock on January 20, 1998 to Fund Asset Management, L.P.
("FAM") for $100,005. 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 MUN. 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. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities for which market
quotations are not readily available are valued at 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
financial 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 margin 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 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) Deferred organization and offering expenses--Deferred
organization expenses are amortized on a straight-line basis over a
period not exceeding five years. In accordance with Statement of
Position 98-5, any unamortized organization expenses will be
expensed on the first day of the next fiscal year beginning after
December 15, 1998. This change will not have any material impact on
the operations of the Fund. Direct expenses relating to the public
offering of the Fund's Common and Preferred Stock were charged to
capital at the time of issuance of the shares.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with 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 0.55% of
the Fund's average weekly net assets, including proceeds from the
sale of Preferred Stock. For the period February 27, 1998 to June
30, 1998, FAM earned fees of $312,904, of which $244,654 was
reimbursed. In addition, FAM reimbursed the Fund $44,045 in
additional expenses.
During the period February 27, 1998 to June 30, 1998, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S") received underwriting fees of
$570,000 in connection with the issuance of the Fund's Preferred
Stock.
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 period February 27, 1998 to June 30, 1998 were $204,812,284
and $45,742,746, respectively.
Net realized losses for the period February 27, 1998 to June 30,
1998 and net unrealized gains (losses) as of June 30, 1998 were as
follows:
Unrealized
Realized Gains
Losses (Losses)
Long-term investments $ (606,295) $ 1,896,413
Financial futures contracts (221,350) (30,469)
------------ ------------
Total $ (827,645) $ 1,865,944
============ ============
As of June 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $1,896,413, of which $1,896,489 related to
appreciated and $76 related to depreciated securities. The aggregate
cost of investments at June 30, 1998 for Federal income tax purposes
was $177,572,104.
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 holders of Common Stock.
Common Stock
Shares issued and outstanding during the period February 27, 1998 to
June 30, 1998, increased by 7,550,000 as a result of the initial
offering. Prior to February 27, 1998 (commencement of operations),
the Fund issued 6,667 shares to FAM for $100,005.
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 yields in effect at June 30, 1998 were as
follows: Series A, 3.62% and Series B, 3.80%.
In connection with the offering of AMPS, the Board of Directors
reclassified 3,040 shares of unissued capital stock as AMPS. Shares
issued and outstanding during the period February 27, 1998 to June
30, 1998 increased by 3,040 as a result of the AMPS offering.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the period February
27, 1998 to June 30, 1998, MLPF&S earned $33,284 as commissions.
5. Capital Loss Carryforward:
At June 30, 1998, the Fund had a net capital loss carryforward of
approximately $827,000, all of which expires in 2006. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On July 9, 1998, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.065415 per share, payable on July 30, 1998 to shareholders of
record as of July 23, 1998.
MuniHoldings New York Fund, Inc., June 30, 1998
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
MuniHoldings New York Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniHoldings
New York Fund, Inc. as of June 30, 1998, the related statements of
operations and changes in net assets, and the financial highlights
for the period February 27, 1998 (commencement of operations) to
June 30, 1998. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audit.
We conducted our audit 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 the 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 at June 30,
1998 by correspondence with the custodian and broker. 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 audit provides
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniHoldings New York Fund, Inc. as of June 30, 1998, the results of
its operations, the changes in its net assets, and the financial
highlights for the period February 27, 1998 to June 30, 1998 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 7, 1998
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniHoldings
New York Fund, Inc. during its taxable period ended June 30, 1998
qualify as tax-exempt interest dividends for Federal income tax
purposes. Additionally, there were no capital gains distributed by
the Fund during the period.
Please retain this information for your records.
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of June 30, 1998
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 27.7%
AA/Aa 22.5
A/A 21.3
BBB/Baa 21.3
Other++ 1.7
[FN]
++Temporary investments in short-term municipal securities.
MuniHoldings New York Fund, Inc., June 30, 1998
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its
net investment income to its shareholders on a monthly basis.
However, in order to provide shareholders with a more consistent
yield to the current trading price of Common Stock of the Fund, the
Fund may at times pay out less than the entire amount of net
investment income earned in any particular month and may at times in
any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As
a result, the dividends paid by the Fund for any particular month
may be more or less than the amount of net investment income earned
by the Fund during such month. The Fund's current accumulated but
undistributed net investment income, if any, is disclosed in the
Statement of Assets, Liabilities and Capital, which comprises part
of the financial information included in this report.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Robert A. DiMella, Vice President
Roberto Roffo, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank &Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MUN
