TAURUS
MUNINEW YORK
HOLDINGS, INC.
STRATEGIC
Performance
Annual Report
October 31, 1997
<PAGE>
Taurus MuniNew York Holdings, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1997, the Common Stock of Taurus MuniNew York
Holdings, Inc. earned $0.818 per share income dividends, which included earned
and unpaid dividends of $0.069. This represents a net annualized yield of 6.58%,
based on a month-end per share net asset value of $12.43. Over the same period,
the total investment return on the Fund's Common Stock was +11.10%, based on a
change in per share net asset value from $12.03 to $12.43, and assuming
reinvestment of $0.807 per share income dividends and $0.031 per share capital
gains distributions.
For the six-month period ended October 31, 1997, the total investment return on
the Fund's Common Stock was +8.82%, based on a change in per share net asset
value from $11.77 to $12.43, and assuming reinvestment of $0.360 per share
income dividends.
For the six-month period ended October 31, 1997, the Fund's Auction Market
Preferred Stock had an average yield of 3.84%.
The Municipal Market Environment
Long-term interest rates generally declined during the six-month period ended
October 31, 1997. The general financial environment has remained one of solid
economic growth tempered by few or no inflationary pressures. While economic
growth has been conducive to declining bond yields, it has remained strong
enough to suggest that the Federal Reserve Board (FRB) might find it necessary
to raise short-term interest rates. This would be intended to slow economic
growth and ensure that any incipient inflationary pressures would be curtailed.
There were investor concerns that the FRB would be forced to raise interest
rates prior to year-end, thus preventing an even more dramatic decline in
interest rates. Long-term tax-exempt revenue bonds, as measured by the Bond
Buyer Revenue Bond Index, declined over 50 basis points (0.50%) to end the
six-month period ended October 31, 1997 at 5.60%.
Similarly, long-term US Treasury bond yields generally moved lower during most
of the six-month period ended October 31, 1997. However, the turmoil in the
world's equity markets during the last week in October has resulted in a
significant rally in the Treasury bond market. The US Treasury bond market was
the beneficiary of a flight to quality mainly by foreign investors whose own
domestic markets have continued to be very volatile. Prior to the initial
decline in Asian equity markets, long-term US Treasury bond yields were
essentially unchanged. By the end of October, US Treasury bond yields declined
80 basis points to 6.15%, their lowest level of 1997.
The tax-exempt bond market's continued underperformance as compared to its
taxable counterpart has been largely in response to its ongoing weakening
technical position. As municipal bond yields have declined, municipalities have
hurriedly rushed to refinance outstanding higher-couponed debt with new issues
financed at present low rates. During the last six months, over $118 billion in
new long-term tax-exempt issues were underwritten, an increase of over 25%
versus the comparable period a year ago. As interest rates have continued to
decline, these refinancings have intensified municipal bond issuance. During the
past three months, approximately $60 billion in new long-term municipal
securities were underwritten, an increase of over 34% as compared to the October
31, 1996 quarter.
The recent trend toward larger and larger bond issues has also continued.
However, issues of such magnitude usually must be attractively priced to ensure
adequate investor interest. Obviously, the yields of other municipal bond issues
are impacted by the yield premiums such large issuers have been required to pay.
Much of the municipal bond market's recent underperformance can be traced to
market pressures that these large bond issuances have exerted.
In our opinion, the recent correction in world equity markets has enhanced the
near-term prospects for continued low, if not declining, interest rates in the
United States. It is likely that the recent correction will result in slower US
domestic growth in the
1
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
coming months. This decline is likely to be generated in part by reduced US
export growth. Additionally, some decline in consumer spending also can be
expected in response to reduced consumer confidence. Perhaps more importantly,
it is likely that barring a dramatic and unexpected resurgence in domestic
growth, the FRB may be unwilling to raise interest rates until the full impact
of the equity market's corrections can be established.
All of these factors suggest that for at least the near term, interest rates,
including tax-exempt bond yields, are unlikely to rise by any appreciable
amount. It is probable that municipal bond yields will remain under some
pressure as a result of continued strong new-issue supply. However, the recent
pace of municipal bond issuance is likely to be unsustainable. Continued
increases in bond issuance will require lower tax-exempt bond yields to generate
the economic savings necessary for additional municipal bond refinancing. With
tax-exempt bond yields at already attractive yield ratios relative to US
Treasury bonds (approximately 90% at the end of October), any further pressure
on the municipal market may represent an attractive investment opportunity.
Portfolio Strategy
During the 12 months ended October 31, 1997, we managed the Fund with the
intention of seeking to sustain a generous level of tax-exempt income in
addition to providing an attractive total return. We began the 12-month period
optimistic that interest rates would decline in response to the historically
attractive 6.75% yield on the US Treasury bond and the correspondingly high
yields on municipal bonds. This optimism on interest rates proved correct as
interest rates declined about 60 basis points from October 1996 to October 1997.
While the overall trend in interest rates was down for the year, market
volatility created a narrow trading range in which the Fund was invested.
Between October 1996 and December 1996, interest rates declined about 35 basis
points in response to the belief that inflation was not a threat. At that time
the Fund's aggressive posture, which we adopted when interest rates were higher,
was scaled back to a more defensive posture because of our belief that interest
rates had declined too rapidly relative to the prevailing economic conditions.
This strategy proved correct as interest rates increased about 80 basis points
from December 1996 to April 1997 on investors' belief that the economy was
expanding at an excessive pace that would cause inflation and ultimately lead to
an FRB tightening. At this point, with interest rates at 7.15% for long-term US
Treasury bonds, we once again adopted a more aggressive posture because of the
excessive backup in municipal yields and our belief that the FRB would not
tighten monetary policy since inflation did not appear to be a threat. This
strategy benefited Fund performance as interest rates ultimately declined about
100 basis points from April 1997 to the end of October 1997. This interest rate
decline was the result of various circumstances, such as low inflation and the
volatility created by the Asian stock market and currency crisis. As a result of
our strategy, the Fund had a total return above the industry average of similar
New York municipal bond funds.
Given our opinion that interest rates are not in danger of rising
substantially--and that they probably will trade in a narrow range--we expect to
concentrate on seeking to enhance tax-exempt income for our shareholders while
trying to limit any net asset value volatility.
In Conclusion
We appreciate your ongoing interest in Taurus MuniNew York 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
December 5, 1997
2
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
THE BENEFITS AND RISKS OF LEVERAGING
Taurus MuniNew York 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.
PROXY RESULTS
Taurus MuniNew York Holdings, Inc. Common Stock shareholders voted on and
approved the following proposals at a shareholders' meeting on November 20,
1997. The description of each proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization between the Fund and MuniYield
New York Insured Fund II, Inc. 3,466,754 159,971 250,681
- ----------------------------------------------------------------------------------------------------------------------------
Taurus MuniNew York Holdings, Inc. Preferred Stock shareholders voted on and
approved the following proposals at a shareholders' meeting on November 20,
1997. The description of each proposal and number of shares voted are as
follows:
- ----------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ----------------------------------------------------------------------------------------------------------------------------
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization between the Fund and MuniYield
New York Insured Fund II, Inc. 1,110 50 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Shareholders of MuniYield New York Insured Fund II, Inc. also approved the
proposed merger on November 20, 1997. MuniYield New York Insured Fund II, Inc.
will be the fund surviving the merger, which is presently scheduled to take
place on February 6, 1998.
3
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
New York--100.2%
- ----------------------------------------------------------------------------------------------------------------------
A A2 $3,000 Allegany County, New York, IDA, Solid Waste Disposal Facility Revenue Bonds
(Atlantic Richfield Company), AMT, 6.625% due 9/01/2016 $ 3,250
- ----------------------------------------------------------------------------------------------------------------------
A A2 1,275 Battery Park City Authority, New York, Revenue Refunding Bonds, Junior Series A,
5.80% due 11/01/2022 1,309
- ----------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,600 Buffalo, New York, Sewer Authority Revenue Bonds, Series F, 6% due 7/01/2013 (c) 1,765
- ----------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Metropolitan Transportation Authority, New York Commuter Facilities Revenue Bonds,
Series B, 5.125% due 7/01/2024 (b) 4,882
- ----------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Metropolitan Transportation Authority, New York, Dedicated Tax Fund, Series A,
5.25% due 4/01/2026 (e) 1,968
- ----------------------------------------------------------------------------------------------------------------------
BBB+ Baa1 3,000 Metropolitan Transportation Authority, New York, Transit Facilities Service Contract,
Refunding, Series 5, 7% due 7/01/2012 3,270
- ----------------------------------------------------------------------------------------------------------------------
Municipal Assistance Corporation for City of Troy, New York, Series A (e):
AAA Aaa 1,850 5% due 1/15/2016 1,802
AAA Aaa 2,250 5% due 1/15/2022 2,164
- ----------------------------------------------------------------------------------------------------------------------
A1+ Aa2 3,700 New York City, New York, Health and Hospital Corporation, Health System Revenue Bonds,
VRDN, Series A, 3.60% due 2/15/2026 (a) 3,700
- ----------------------------------------------------------------------------------------------------------------------
NR* Aaa 885 New York City, New York, IDA, Civic Facility Revenue Bonds (Anti-Defamation League
Foundation), Series A, 5.50% due 6/01/2022 (e) 892
- ----------------------------------------------------------------------------------------------------------------------
New York City, New York, IDA, Special Facility Revenue Bonds, AMT:
BBB- Baa2 2,000 (1990 AMR/American Airlines Inc. Project), 7.75% due 7/01/2019 2,101
A A 2,220 RITR, Series 5, 7.895% due 1/01/2024 (f) 2,431
- ----------------------------------------------------------------------------------------------------------------------
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds:
A- A2 3,375 RIB, 7.625% due 6/15/2025 (f) 3,717
A- A2 2,000 RITR, Series 21, 7.22% due 6/15/2029 (f) 2,110
AAA Aaa 2,000 Series 1994-A, 7% due 6/15/2015 (c) 2,189
A- A2 1,290 Series A, 6.75% due 6/15/2017 1,393
A- A2 3,000 Series B, 5.75% due 6/15/2029 3,076
- ----------------------------------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 2,010 (Consolidated City University System), Series 1, 5.125% due 7/01/2027 (e) 1,958
A1+ VMIG1+ 300 (Cornell University), VRDN, Series B, 3.60% due 7/01/2025 (a) 300
BBB+ Baa1 3,500 (Department of Health), 5.50% due 7/01/2025 3,460
A- Baa1 2,340 (Mental Health Services Facilities Improvement), Series B, 6% due 8/15/2016 2,516
A- Baa1 2,370 (Mental Health Services Facilities Improvement), Series B, 5.375% due 2/15/2026 2,301
AAA Aaa 1,105 (New School for Social Research), 5.75% due 7/01/2026 (e) 1,144
A- A3 1,500 Refunding (State University Educational Facilities), Series A, 5.50% due 5/15/2019 1,529
A- A3 2,000 Refunding (State University Educational Facilities), Series A, 5.25% due 5/15/2021 1,968
BBB+ Baa1 1,000 (State University Athletic Facilities), 7.25% due 7/01/2021 1,099
A- A3 4,000 (State University Educational Facilities), 5.50% due 5/15/2026 4,000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of Taurus MuniNew York 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)
HFA Housing Finance Agency
IDA Industrial Development Revenue Bonds
M/F Multi-Family
RIB Residual Interest Bonds
RITR Residual Interest Tax Receipts
VRDN Variable Rate Demand Notes
4
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
New York (concluded)
- ----------------------------------------------------------------------------------------------------------------------
New York State Energy Research and Development Authority, Facilities Revenue Bonds:
AAA Aaa $2,000 (Con Edison Company Inc.), AMT, Series A, 6.75% due 1/15/2027 (e) $ 2,140
AAA Aaa 1,000 RITR, Series 19, 8.22% due 8/15/2020 (f) 1,137
- ----------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,255 New York State Energy Research and Development Authority, Gas Facilities Revenue
Bonds (Brooklyn Union Gas Company), AMT, Series B, 6.75% due 2/01/2024 (e) 1,372
- ----------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 New York State Environmental Facilities Corporation, Special Obligation, Revenue
Refunding Bonds (Riverbank State Park), 5.125% due 4/01/2022 (b) 2,932
- ----------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,055 New York State, HFA, M/F Housing Revenue Bonds, AMT, Series A, 7.75%
due 11/01/2020 (b) 1,126
- ----------------------------------------------------------------------------------------------------------------------
New York State Local Government Assistance Corporation:
A+ Aaa 2,000 Series A, 6.875% due 4/01/2002 (g) 2,246
A+ A3 1,380 Series B, 6.25% due 4/01/2021 1,471
A+ A3 2,000 Series D, 5% due 4/01/2023 1,874
A1+ VMIG1+ 1,500 VRDN, Series D, 3.65% due 4/01/2025 (a) 1,500
- ----------------------------------------------------------------------------------------------------------------------
New York State Medical Care Facilities Finance Agency Revenue Bonds:
BBB+ Baa 2,485 (Brookdale Hospital Medical Center), Series A, 6.85% due 2/15/2017 2,727
AAA Aaa 2,000 Refunding (Mental Health Services), Series F, 5.25% due 2/15/2021 (d) 1,950
- ----------------------------------------------------------------------------------------------------------------------
New York State Mortgage Agency, Homeownership Revenue Bonds:
NR* Aa2 3,270 AMT, Series 44, 7.50% due 4/01/2026 3,559
NR* Aa2 5,750 AMT, Series HH-3, 7.95% due 4/01/2022 6,065
NR* Aa2 1,100 Series EE-2, 7.50% due 4/01/2016 1,155
- ----------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 New York State Mortgage Agency Revenue Bonds, RITR, AMT, Series 24, 7.47%
due 10/01/2028 (f) 1,026
- ----------------------------------------------------------------------------------------------------------------------
New York State Urban Development Corporation Revenue Bonds (Correctional Capital
Facilities), Series 6:
BBB+ Baa1 5,000 5.375% due 1/01/2025 4,850
AAA Aaa 2,000 5.375% due 1/01/2025 (b) 1,996
- ----------------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Consolidated Bonds:
AA- A1 3,000 71st Series, 6.50% due 1/15/2026 3,188
AA- A1 3,000 72nd Series, 7.35% due 10/01/2002 (g) 3,432
- ----------------------------------------------------------------------------------------------------------------------
BBB+ Baa1 4,000 Triborough Bridge and Tunnel Authority, New York (Convention Center Project),
Series E, 7.25% due 1/01/2010 4,736
- ----------------------------------------------------------------------------------------------------------------------
A+ Aa 1,000 Triborough Bridge and Tunnel Authority, New York, General Purpose Revenue Refunding
Bonds, Series B, 5% due 1/01/2020 970
- ----------------------------------------------------------------------------------------------------------------------
Total Investments (Cost-- $107,052)-- 100.2% 113,746
Liabilities in Excess of Other Assets-- (0.2%) (283)
--------
Net Assets-- 100.0% $113,463
========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at October 31,
1997.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1997.
(g) Prerefunded.
* Not Rated.
+ Highest short-term rating issued by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
5
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1997
<TABLE>
<CAPTION>
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$107,052,201) (Note 1a) .. $113,746,412
Cash............................................................. 113,676
Receivables:
Interest....................................................... $ 1,751,822
Securities sold................................................ 10,000 1,761,822
-----------
Prepaid expenses and other assets................................ 5,544
------------
Total assets .................................................... 115,627,454
------------
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased........................................... 1,904,149
Dividends to shareholders (Note 1e)............................ 123,895
Investment adviser (Note 2).................................... 50,824 2,078,868
-----------
Accrued expenses and other liabilities........................... 86,042
------------
Total liabilities ............................................... 2,164,910
------------
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets....................................................... $113,462,544
============
- -----------------------------------------------------------------------------------------------------------------------------
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (1,200 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $ 30,000,000
Common Stock, par value $.10 per share (6,714,921 shares issued
and outstanding)............................................... $ 671,492
Paid-in capital in excess of par................................. 73,695,014
Undistributed investment income--net............................. 902,866
Undistributed realized capital gains on investments--net......... 1,498,961
Unrealized appreciation on investments--net...................... 6,694,211
-----------
Total--Equivalent to $12.43 net asset value per share of
Common Stock (market price--$12.25).............................. 83,462,544
------------
Total capital.................................................... $113,462,544
============
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
6
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the
Year Ended
October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned......... $ 6,574,526
(Note 1d):
- ------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2)................................ $ 558,041
Professional fees................................................ 80,696
Commission fees (Note 4)......................................... 75,816
Accounting services (Note 2)..................................... 51,052
Transfer agent fees.............................................. 43,670
Printing and shareholder reports................................. 26,350
Directors' fees and expenses..................................... 19,462
Listing fees..................................................... 16,420
Custodian fees................................................... 10,903
Pricing fees..................................................... 5,964
Other............................................................ 13,463
---------
Total expenses .................................................. 901,837
-----------
Investment income--net........................................... 5,672,689
-----------
- ------------------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ............................... 1,940,283
Unrealized Gain on Change in unrealized appreciation on investments--net ........... 1,808,244
Investments--Net -----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations ............ $ 9,421,216
===========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended October 31,
------------------------------
Increase (Decrease) in Net Assets: 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Operations: Investment income--net ............................................. $ 5,672,689 $ 5,683,601
Realized gain on investments--net .................................. 1,940,283 1,475,289
Change in unrealized appreciation/depreciation on investments--net . 1,808,244 (1,066,500)
------------- -------------
Net increase in net assets resulting from operations ............... 9,421,216 6,092,390
------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Common Stock ..................................................... (4,755,843) (4,660,309)
Shareholders Preferred Stock .................................................. (832,692) (980,749)
(Note 1e): Realized gain on investments--net:
Common Stock ..................................................... (873,551) (566,101)
Preferred Stock .................................................. (265,356) (134,351)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders .................................................... (6,727,442) (6,341,510)
------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets ............................ 2,693,774 (249,120)
Beginning of year .................................................. 110,768,770 111,017,890
------------- -------------
End of year* ....................................................... $ 113,462,544 $ 110,768,770
============= =============
- -------------------------------------------------------------------------------------------------------------------------
* Undistributed investment income==net (Note 1f) ................... $ 902,866 $ 809,447
============= =============
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
FINANCIAL INFORMATION (concluded)
Financial Highlights
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
-------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .............. $ 12.03 $ 12.07 $ 11.18 $ 13.23 $ 11.95
Operating --------- --------- -------- --------- -----------
Performance: Investment income--net .......................... .84 .85 .88 .91 .99
Realized and unrealized gain (loss) on
investments--net ............................... .56 .05 .95 (1.76) 1.28
--------- --------- -------- --------- -----------
Total from investment operations ............... 1.40 .90 1.83 (.85) 2.27
--------- --------- -------- --------- -----------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ...................... (.71) (.69) (.71) (.78) (.88)
Realized gain on investments--net ............ (.13) (.08) (.05) (.28) --
--------- --------- -------- --------- -----------
Total dividends and distributions to Common
Stock shareholders ............................. (.84) (.77) (.76) (1.06) (.88)
--------- --------- -------- --------- -----------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ..................... (.12) (.15) (.17) (.10) (.11)
Realized gain on investments--net .......... (.04) (.02) (.01) (.04) --
--------- --------- -------- --------- -----------
Total effect of Preferred Stock activity ....... (.16) (.17) (.18) (.14) (.11)
--------- --------- -------- --------- -----------
Net asset value, end of year ................... $ 12.43 $ 12.03 $ 12.07 $ 11.18 $ 13.23
========= ========= ======== ========= ===========
Market price per share, end of year ............ $ 12.25 $ 10.875 $ 10.75 $ 9.875 $ 14.25
========= ========= ======== ========= ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on market price per share ................ 21.12% 8.54% 16.98% (24.38%) 19.63%
Return:* ========= ========= ======== ========= ===========
Based on net asset value per share ............. 11.10% 6.94% 16.01% (7.78%) 18.50%
========= ========= ======== ========= ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ....................................... .81% .82% .83% .80% .86%
Net Assets:** ========= ========= ======== ========= ===========
Investment income==net ......................... 5.08% 5.15% 5.54% 5.40% 5.82%
========= ========= ======== ========= ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, net of Preferred Stock, end
Data: of year (in thousands) ......................... $ 83,463 $ 80,769 $ 81,018 $ 75,075 $ 87,553
========= ========= ======== ========= ===========
Preferred Stock outstanding, end of year
(in thousands) ................................. $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000
========= ========= ======== ========= ===========
Portfolio turnover ............................. 123.02% 193.24% 165.22% 65.74% 34.31%
========= ========= ======== ========= ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Leverage: Asset coverage per $1,000 ...................... $ 3,782 $ 3,692 $ 3,701 $ 3,503 $ 3,916
========= ========= ======== ========= ===========
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Per Share Investment income==net ......................... $ 694 $ 817 $ 949 $ 573 $ 626
On Preferred Stock ========= ========= ======== ========= ===========
Outstanding:+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
loads.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Dividends per share have been adjusted to reflect a two-for-one stock
split that occurred on December 1, 1994.
See Notes to Financial Statements.
8
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Taurus MuniNew York Holdings, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund determines and makes available for publication the
net asset value of its Common Stock on a weekly basis. The Fund's Common Stock
is listed on the New York Stock Exchange under the symbol MNY. 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 market 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 for which market quotations are not readily available are
valued at their 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.
o 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.
o Options -- The Fund is authorized to write covered call options and purchase
call and 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) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(f) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
9
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $9,265 have been reclassified between undistributed net
realized capital gains and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1997 were $127,869,417 and $132,122,578, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997 were as
follows:
----------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
----------------------------------------------------------------
Long-term investments...... $2,177,468 $6,694,211
Financial futures contracts (237,185) --
---------- ----------
Total...................... $1,940,283 $6,694,211
========== ==========
----------------------------------------------------------------
As of October 31, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $6,647,294, of which $6,650,565 related to appreciated
securities and $3,271 related to depreciated securities. The aggregate cost of
investments at October 31, 1997 for Federal income tax purposes was
$107,099,118.
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
Shares issued and outstanding during the years ended October 31, 1997 and
October 31, 1996 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund that entitle their holders to receive cash dividends at an annual rate that
may vary for the successive dividend periods. The yield in effect at October 31,
1997 was 5.65%.
As of October 31, 1997, there were 1,200 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 an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the year ended October 31, 1997, Merrill Lynch, Pierce, Fenner
& Smith Inc., an affiliate of FAM, earned $55,403 as commissions.
5. Reorganization Plan:
On November 20, 1997, the shareholders approved a plan of reorganization whereby
MuniYield New York Insured Fund II, Inc. would acquire substantially all of the
assets and liabilities of the Fund in exchange for newly issued shares of
MuniYield New York Insured Fund II, Inc. MuniYield New York Insured Fund II,
Inc. is a registered, non-diversified, closed-end management investment company.
Both entities have a similar investment objective and are managed by FAM.
6. Subsequent Event:
On November 6, 1997, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.069396 per share,
payable on November 26, 1997 to shareholders of record as of November 17, 1997.
10
<PAGE>
Taurus MuniNew York Holdings, Inc. October 31, 1997
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
Taurus MuniNew York Holdings, Inc.
We have audited the accompanying statement of assets, liabilities and capital of
Taurus MuniNew York Holdings, Inc., including the schedule of investments, as of
October 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1997, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Taurus
MuniNew York Holdings, Inc., at October 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and financial highlights for each of the indicated
years, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Princeton, New Jersey
November 26, 1997
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by Taurus MuniNew York
Holdings, Inc. during its taxable year ended October 31, 1997 qualify as
tax-exempt interest dividends for Federal income tax purposes. Additionally, the
following summarizes the per share capital gain distributions paid by the Fund
during the year:
- --------------------------------------------------------------------------------
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
- --------------------------------------------------------------------------------
Common Stock Shareholders 12/30/96 $ .099163 $ .030928
- --------------------------------------------------------------------------------
Preferred Stock Shareholders 11/27/96 $48.24 $15.05
12/26/96 $67.25 $20.97
10/29/97 $38.45 $31.17
- --------------------------------------------------------------------------------
Please retain this information for your records.
11
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
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
MNY
This report, including the financial information herein, is transmitted to the
shareholders of Taurus MuniNew York 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 MuniNew York Holdings, Inc.
Box 9011
Princeton, NJ
08543-9011 #11075-10/97
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