0000950007-95-000132.txt : 19950829
0000950007-95-000132.hdr.sgml : 19950829
ACCESSION NUMBER: 0000950007-95-000132
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950828
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NEW YORK MUNI FUND INC
CENTRAL INDEX KEY: 0000315811
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 133076279
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-03032
FILM NUMBER: 95567751
BUSINESS ADDRESS:
STREET 1: 90 WASHINGTON ST - 19TH FL
CITY: NEW YORK
STATE: NY
ZIP: 10006
BUSINESS PHONE: 2126353005
N-30D
1
SEMI-ANNUAL
NEW YORK MUNI FUND, INC.
Dear Fellow Shareholder:
Fixed income securities prices began to recover in the first half of calendar
1995. The benchmark Treasury 7.5% "long bond" rose 15.9% after dropping 11.3%
last year. The Bond Buyer index of forty actively traded investment grade
municipal bonds rose by a smaller 7.3 % over this period.
After 1994's irrational decline in fixed income securities prices, sanity began
to return with the new year. Actually, securities prices bottomed coincidentally
with the November 1994 Congressional elections. Financial markets seemed to take
heart from Republican promises to balance the federal budget and reverse fifty
years of "New Deal" legislation. As the new year progressed, financial markets
became increasingly secure upon mounting evidence that legislators were actually
keeping their promises.
Significant progress toward a balanced budget probably will not be evident until
1998. But importantly, it appears that the glide path toward balance is set.
Meanwhile, economic growth slowed significantly during this year's first half,
and as growth has slowed, fears of a rise in inflation receded. Interestingly,
despite the bond market's fear of higher inflation in 1994, not only did
inflation not rise, but prospects began to improve for an actual further decline
in future price pressures.
These developments not only eliminated fears that the Federal Reserve would
endlessly tighten credit, but it actually gave rise to an expectation that some
of last year's restraint would be reversed. Indeed, the Federal Reserve slightly
eased its tight grip on credit early in July.
With interest rate pressures reversing, and bond prices appreciating, New York
Muni Fund's Net Asset Value climbed from 0.88 cents per share at year end to
0.94 cents on June 30, 1995. This represented a 6.8 % rise, and an 8.8% total
return. Investment income fell as bond prices generally rose. This was in line
with the performance of the Bond Buyer Municipal Bond Index, but it trailed the
returns from U.S. government bonds.
To be sure, the big reduction in municipal bond issuance that started in 1994
continued this year. New issuance went from about $300 billion in 1993 to about
$165 billion in 1994, and about 25% less than this amount thus far in 1995. But
municipal bonds underperformed as government officials began discussing reforms
to the current federal income tax system. The so-called "flat tax" seemed to get
the most attention. In a flat tax system all incomes would be taxed at the same
rate, and in its most extreme form all deductions would be eliminated, including
those for real estate taxes, mortgage interest, municipal bond interest, and
state and local income taxes.
The flat tax is a long way from being enacted, and in our view it is unlikely to
ever be enacted. But the mere mention of eliminating municipal bond interest
deductions hurt the municipal bond market. Municipal bond funds generally
suffered withdrawals during the January through June period, including New York
Muni Fund. However, this has not altered the Fund's investment strategy. Indeed
we think this is creating an opportunity for investors because municipal bond
prices have already adjusted to a flat tax.
As tax hysteria subsides, it is reasonable to believe that municipal bonds will
perform on a par with Treasury bonds, with the distinct possibility that
municipal bonds will outperform Treasuries going forward. As a
1
result, we intend to continue to utilize leverage when deemed appropriate, and
to utilize futures and options for hedging purposes in the event of unforseen
market movements.
For New York investors, New York State and City received rating downgrades in
this year's first half because of uncertainties about the outcome of both the
State and City budget negotiations. However, these negotiations were resolved
satisfactorily, and indeed both the State and City will actually reduce spending
versus last year. Thus, these rating downgrades were unjustified in our view,
and we have been taking advantage of what we think is an undervaluation of State
and City bonds by increasing New York Muni Fund's holdings of these securities.
Indeed, as the Fund's exposure to New York State and City related bonds has gone
up, the Fund's holdings of inverse floating rate bonds has gone down to about
30% at the end of June.
Easing fears of tax reform, a relative scarcity of tax-free securities, and the
positive fundamentals of slow economic growth and mild inflation should enable
the fixed income market and the New York Muni Fund to generate strong returns
for the remainder of the year. We thank you for your continued trust, and we
look forward to continuing to serve you in the future.
Sincerely,
Dr. Vincent J. Malanga
President
2
Portfolio Composition
June 30, 1995
By Type
(60.1%) FCLT
(9.6%) FCSI
(8.2%) LRIB
(2.3%) SRIB
(19.7%) INLT
By Rating(D)
(25.7%) AA
(5.4%) A
(20.3%) BBB
(4.3%) NR
(44.3%) AAA
FIXED COUPON BONDS
FCLT--Long (maturity > 15 years) (includes long zero coupons)
FCSI--Short or Intermediate - (maturity (LT) 15 years) (includes zero coupon
bonds)
VARIABLE RATE BONDS
RIB (Residential Interest Bond) type inverse floaters. These are leveraged bonds
whose coupon varies inversely with rates on short term companion issues,
and whose value will fluctuate by some multiple of the fluctuations in value
of a fixed rate bond with the same maturity and coupon as the underlying
bond.
LRIB - Long Term (maturity > 15 years)
SRIB - Short or Intermediate Term ((LT) 15 year maturity)
IN (Index) based inverse floaters are bonds whose interest coupons vary
inversely with an index of short term interest rates and then revert to a
fixed rate mode. The duration and fluctuations on these bonds will be similar
to fixed rate bonds with the same maturity.
INLT - Long Term (maturity > 15 years)
INSI - Short or Intermediate Term (maturity (LT) 15 years)
(D)If a security has a split rating, the highest applicable rating is used,
including published ratings on identical credits for individual securities
not individually rated.
3
Left Column
NEW YORK MUNI FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
ASSETS
Cash ............................... $ 1,270,263
------------
Investment in securities at value
(Note 4) (cost $310,395,639) ..... 296,148,435
Receivables:
Interest ......................... 4,851,921
Investment securities sold ....... 4,223,971
Capital stock sold ............... 10,253
------------
Total assets ................. 306,504,843
------------
LIABILITIES
Notes payable (Note 7) ............. 65,000,000
Payables:
Investment securities purchased .. 91,203,455
Capital stock redeemed ........... 3,514
Dividend declared ................ 85,591
Accrued expenses ................. 1,085,047
------------
Total liabilities ............ 157,377,607
------------
NET ASSETS consisting of:
Accumulated net realized loss ...... $(23,526,750)
Unrealized depreciation of
securities ....................... (14,247,204)
Paid-in-capital applicable to
158,555,947 shares of $.01 par
value capital stock ............... 186,901,190
------------- -------------
$149,127,236
============
NET ASSET VALUE PER SHARE ............ $.94
====
(Right Column)
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
INVESTMENT INCOME
Interest income ................................................. $ 6,930,252
EXPENSES (Notes 2 and 3)
Management fee ....................... $ 431,506
Custodian and accounting fees ........ 112,767
Transfer agent fees .................. 146,324
Professional fees .................... 157,223
Directors' fees ...................... 20,596
Printing and postage ................. 28,316
Interest ............................. 2,004,158
Distribution expenses ................ 464,577
Operating expenses on defaulted
bonds .............................. 63,760
Other ................................ 179,445
-----------
Total expenses ................. 3,608,672
-----------
Net investment income .......... 3,321,580
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized (loss) on:
Investments ........................ (1,551,810)
Futures contracts .................. (147,344)
Options written .................... (73,794)
-----------
(1,772,948)
Net unrealized appreciation of
investments ........................ 17,029,443
-----------
Net gain on investments .............. 15,256,495
-----------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ...................... $18,578,075
===========
STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
Six Months
Ended Year Ended
June 30, 1995 December 31,
(Unaudited) Year
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income ............................................. $ 3,321,580 $ 11,648,285
Net realized loss on investments and futures contracts ............ (1,699,154) (21,046,462)
Net realized (loss) on option contracts written .................. (73,794) (96,873)
Unrealized appreciation (depreciation) on investments ............. 17,029,443 (27,168,378 )
------------ ------------
Net increase (decrease) in net assets from operations ...... 18,578,075 (36,663,428 )
DIVIDENDS PAID TO SHAREHOLDERS FROM:
Investment income ................................................. (3,321,207) (11,649,104
Net realized gain from investments ................................ - (1,888,345)
CAPITAL SHARE TRANSACTIONS (Note 5) ................................. (78,794,541) (12,686,075)
------------ ------------
Total decrease (63,537,673) (62,886,952)
NET ASSETS:
Beginning of period ............................................... 212,664,909 275,551,861
------------ ------------
End of period ..................................................... $149,127,236 $212,664,909
============ ============
See Notes to Financial Statements.
4
NEW YORK MUNI FUND, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash Flows From Operating Activities
Net increase to net assets from operations ................................................... $ 18,578,075
Adjustments to reconcile net increase in net assets from operations to net cash provided
by operating activities:
Purchase of investment securities .......................................................... (447,145,021)
Proceeds on sale of securities ............................................................. 472,481,311
Premiums paid to close options written .................................................. (197,468)
Increase in interest receivable ............................................................ (418,616)
Increase in accrued expenses ............................................................... 305,905
Net accretion of discount on securities .................................................... (62,097)
Net realized loss:
Investments .............................................................................. 1,415,827
Options written .......................................................................... 73,794
Unrealized appreciation on securities and options written for the period ................... (17,029,443)
--------------
Net cash provided by operating activities 28,002,267
--------------
Cash Flows From Financing Activities:*
Net proceeds from notes payable ...................................................... 45,000,000
Proceeds on shares sold .................................................................. 1,494,895,629
Payment on shares repurchased ............................................................ (1,576,928,657)
Cash dividends paid ...................................................................... (505,344)
--------------
Net cash used in financing activities ................................................ (37,538,372)
--------------
Net decrease in cash ................................................................. 9,536,105
Cash at beginning of period .................................................................. 10,806,368
--------------
Cash at end of period ........................................................................ $ 1,270,263
==============
-------------
*Non-cash financing activities not included herein consist of reinvestment of dividends of $3,231,748.
Cash payments for interest expense totaled $1,919,322.
See Notes to Financial Statements.
5
NEW YORK MUNI FUND
STATEMENT OF INVESTMENTS
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
Principal
Amount Issue(000) Type(0) Rating(00) Value
$ 2,280,000DD Battery Park City, HDA, RB, Series A, Refunding, 5.000, 11/01/08 ....... FCLT AA $ 2,112,055
4,780,000DD Cayuga County, HIC, Auburn Memorial Hospital, Asset Guaranty
Insured, 6.000, 1/01/21 .............................................. FCLT AAA 4,688,272
3,045,000DD Franklin County, SWMA, Solid Waste System Project, RB, 6.250,
6/01/15 .............................................................. FCLT BBB 2,977,036
5,000,000DD Glen Cove, IDA, CFR, The Regency at Glen Cove Project, AMBAC
Insured, ETM, CAB , 10/15/19 ......................................... FCLT AAA 1,177,950
1,880,000DD Glen Cove, IDA, CFR, The Regency at Glen Cove Project, ETM, CAB,
10/15/19 ............................................................. FCLT AAA 442,909
1,485,000 Guam Airport Authority, RB, Series A, 6.500, 10/01/23 .................. FCLT BBB 1,469,645
4,000,000 Guam Government, Series A, 5.150, 1/15/07 .............................. FCLT BBB 3,611,600
1,000,000 Housing New York Corporation, Refunding, Senior Lien, 5.000, 1/01/13 ... FCLT AA 875,505
1,370,000 Housing New York Corporation, Refunding, Senior Lien, 5.000, 1/01/18 ... FCLT AA 1,170,007
975,000 Jamestown, NY, Housing Authority Mortgage, RB, Bradmoor Village
Project, Section 8, 6.125, 7/01/10 ................................... FCLT A- 954,428
2,000,000DD Lyons, MCF, Initiatives Corporation Project, RB, 6.800, 9/01/24 ........ FCLT BAA1 2,037,340
5,290,000DD New York City, ECF, MBIA Insured, 5.500, 4/01/08 ....................... FCSI AAA 5,236,994
5,925,000DD New York City, ECF, MBIA Insured, 5.500, 10/01/08 ...................... FCSI AAA 5,864,032
1,400,000DD New York City, FSA Insured, ETM, Convertible, CAB, 8/01/11 ............. FCLT AAA 1,254,064
3,000,000 New York City, GO, CARS, IFRN*, AMBAC Insured, 9/01/11 ................. LRIB AAA 3,012,270
4,225,000 New York City, GO, IFRN*, 9/30/03 ...................................... SRIB A- 6,930,817
18,330,000DD New York City, GO, IFRN*, 8/01/12 ...................................... INLT A- 19,301,673
13,640,000DD New York City, GO, IFRN*, 8/01/14 ...................................... INLT A- 14,092,302
14,600,000 New York City, GO, IFRN*, 8/15/17 ...................................... INLT A- 13,325,566
6,500,000 New York City, Health & Hospital Corp, RB, AMBAC Insured, 5.635,
2/15/23 ............................................................. FCLT AAA 6,088,550
18,700,000DD New York City, Health & Hospital Corp, RB, Series A, 6.300, 2/15/20 ... FCLT BBB 17,694,501
1,600,000 New York City, Health & Hospital Corp, RB, Series A, AMBAC Insured,
5.750, 2/15/22 ....................................................... FCLT AAA 1,526,608
2,200,000 New York City, IDA, Imclone Systems Inc Project, AMT, 11.25, 5/01/04 ... FCSI NR 2,403,742
2,113,000 New York City, IDA, Imclone Systems Inc Project, AMT, 10.75, 6/15/96 ... FCSI NR 2,104,316
11,870,000 New York City, IFRN*, 8/15/10 .......................................... INLT A- 11,751,300
3,000,000 New York State Energy, RDA, Con Edison Project, MBIA Insured, AMT,
6.375, 2/01/27 ....................................................... FCLT AAA 3,019,200
4,000,000DD New York State Energy, RDA, Long Island Lighting Company Project,
AMT, 7.150, 9/01/19 .................................................. FCLT BBB- 4,015,520
6,785,000 New York State Energy, RDA, Long Island Lighting Company Project,
AMT, 7.150, 9/01/19 .................................................. FCLT BBB- 6,811,326
2,450,000DD New York State Energy, RDA, Long Island Lighting Company Project,
AMT, 7.150, 6/01/20 .................................................. FCLT BBB- 2,459,506
3,260,000 New York State Energy, RDA, Long Island Lighting Company Project,
AMT, 7.150, 2/01/22 .................................................. FCLT BBB- 3,272,649
1,000,000DD New York State Energy, RDA, Long Island Lighting Company Project,
AMT, 7.150, 2/01/22 .................................................. FCLT BBB- 1,003,880
1,440,000DD New York State Energy, RDA, Long Island Lighting Company Project,
AMT, 6.900, 8/01/22 .................................................. FCLT BBB- 1,424,218
6
NEW YORK MUNI FUND
STATEMENT OF INVESTMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
Principal
Amount Issue(000) Type(0) Rating(00) Value
------ ---------- ------ --------- -----
$ 315,000 New York State Energy, RDA, NYS Electric Gas Project, MBIA Insured,
6.050, 4/01/34 ....................................................... FCLT AAA $ 311,710
2,000,000 New York State Energy, RDA, Rochester Gas & Electric, MBIA Insured,
6.500, 5/15/32 ....................................................... FCLT AAA 2,063,698
1,520,000DD New York State Energy, RDA, Western NY Nuclear Service Center
Project, CAPMAC Insured, 5.400, 4/01/05 .............................. FCSI AAA 1,525,578
9,500,000DD New York State Mortgage Agency, AMT, 6.100, 4/01/25 .................... FCLT AA 9,294,895
25,000,000DD New York State Thruway Authority, Convertible, FGIC Insured, IFRN*,
1/01/04 .............................................................. LRIB AAA 21,321,000
8,000,000 New York State, DAR, Mount Sinai School of Medicine, MBIA Insured
5.700, 7/01/11 ....................................................... FCLT AAA 8,000,000
2,000,000 New York State, DAR, State University, 5.500, 5/15/09 .................. FCSI BBB+ 1,943,260
1,500,000DD New York State, GO, Refunding, Series B, 5.875, 8/15/14 ................ FCLT A- 1,501,590
700,000 New York State, HFA, Multi Family Housing, SONYMAE / FHA Insured,
AMT, 6.300, 8/15/26 .................................................. FCLT AA 700,000
1,000,000DD New York State, MCFFA, Aurelia Osborn Fox Memorial Hospital Project,
FSA Insured, 6.500, 1/01/19 .......................................... FCLT AAA 1,025,730
260,000 New York State, MCFFA, Brookdale Hospital Medical Center, 6.600,
2/15/03 .............................................................. FCSI BBB 262,140
630,000 New York State, MCFFA, Brookdale Hospital Medical Center, 6.600,
8/15/03 .............................................................. FCSI BBB 635,053
400,000 New York State, MCFFA, Brookdale Hospital Medical Center, 6.850,
2/15/17 .............................................................. FCLT BBB 399,508
2,550,000DD New York State, MCFFA, Central Suffolk Hospital Project, 6.125,
1/01/16 .............................................................. FCLT BBB 2,244,230
500,000DD New York State, MCFFA, FHA - Mortgage Project, 6.500, 2/15/35 .......... FCLT AA 511,420
250,000 New York State, MCFFA, FHA Insured Mortgage Project, 6.150, 2/15/25 .... FCLT AA 247,290
2,135,000 New York State, MCFFA, Hospital & Nursing Project, MBIA Insured,
5.750, 8/15/19 ....................................................... FCLT AAA 2,043,665
4,745,000DD New York State, MCFFA, Hospital & Nursing, FHA Insured, 6.250,
2/15/35 .............................................................. FCLT AAA 4,723,837
1,750,000DD New York State, MCFFA, Huntington Hospital Project, 6.500, 1/01/14 ..... FCLT BBB 1,758,155
23,630,000 New York State, MCFFA, Insured Mortgage Project, MBIA Insured,
5.900, 8/15/33 ....................................................... FCLT AAA 22,762,779
450,000 New York State, MCFFA, Mental Health Services Project, FGIC Insured,
6.375, 8/15/17 ....................................................... FCLT AAA 459,527
1,000,000 New York State, MCFFA, Mercy Medical Center, LOC Natwest Bank,
5.875, 1/01/15 ....................................................... FCLT AA- 969,910
6,240,000DD New York State, MCFFA, Montefiore Medical Center, 6.000, 2/15/35 ....... FCLT AAA 6,155,822
3,230,000 New York State, MCFFA, Refunding, Presbyterian Hospital Project,
MBIA Insured, 5.375, 2/15/25 ......................................... FCLT AAA 2,900,282
20,000,000 New York State, MCFFA, Refunding, St Lukes - Roosevelt Hospital
Project, MBIA Insured, 5.700, 2/15/29 ................................ FCLT AAA 18,860,800
1,690,000 New York State, MCFFA, Secured Hospital Revenue, 6.250, 2/15/24 ........ FCLT BBB 1,622,569
7
NEW YORK MUNI FUND
STATEMENT OF INVESTMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
Principal
Amount Issue(000) Type(0) Rating(00) Value
$ 9,805,000D1 Niagara County, IDA, Falls Street Faire Project, AMT, 10.00, 9/01/06 ... FCSI NR $ 3,876,211
4,020,000D1 Niagara County, IDA, Falls Street Faire Project, AMT, 10.00, 9/01/06 ... FCSI NR 1,589,227
5,870,000D1 Niagara Falls, URA, Old Falls Street Improvement Project, 11.00,
5/01/99 .............................................................. FCSI NR 2,893,206
4,475,000DD Onondaga County, IDA, Community General Hospital Project, 6.625,
1/01/18 .............................................................. FCLT BBB 4,443,944
2,600,000DD Onondaga County, IDA, Resource Recovery Project, AMT, 7.000,
5/01/15 .............................................................. FCLT A- 2,658,032
3,400,000DD Onondaga County, IDA, Series A, Crouse Irving Project, LOC Fleet
Bank, 7.900, 1/01/17 ................................................. FCLT A- 3,853,390
1,230,000 Puerto Rico Housing & Finance Agency Affordable Housing, GNMA/
FNMA/FHLMC Collateral, AMT, 6.100, 10/01/15 .......................... FCLT AAA 1,214,379
2,920,000DD Puerto Rico Housing & Finance Agency Affordable Housing, GNMA/
FNMA/FHLMC Collateral, AMT, 6.250, 4/01/29 ........................... FCLT AAA 2,907,415
2,000,000 Puerto Rico Public Building Authority, 5.500, 7/01/21 .................. FCLT A- 1,834,780
225,000 Puerto Rico Public Building Authority, RB, AMBAC Insured, 5.750,
7/01/16 .............................................................. FCLT AAA 220,430
6,495,000 University of Puerto Rico, RB, MBIA Insured, 6/01/13 ................... FCLT AAA 2,303,192
------------
Total Investments (cost $310,395,639**) ............. $296,148,435
============
* Inverse Floating Rate Notes (IFRN) are instruments whose interest rates
bear an inverse relationship to the interest rate on another security or
the value of an index.
** Cost for Federal income tax purposes is $309,958,202.
(D) The value of these non-income producing securities has been estimated in
good faith by the Fund's Board of Directors. See Note 4 to the financial
statements.
(DD) Approximately $130,691,000 market value of securities are segregated in
whole or in part as collateral securing a line of credit.
8
NEW YORK MUNI FUND
STATEMENT OF INVESTMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
Legend
(0)Type FCLT -Fixed Coupon Long Term
FCSI -Fixed Coupon Short or Intermediate Term
LRIB -Residual Interest Bond Long Term
SRIB -Residual Interest Bond Short or Intermediate Term
INLT -Indexed Inverse Floating Rate Bond Long Term
INSI -Indexed Inverse Floating Rate Bond Short or Intermediate Term
(00)Ratings If a security has a split rating the highest applicable rating is
used, including published ratings on identical credits for
individual securities not individually rated.
NR-Not Rated
(000)Issue MBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
CAB Capital Appreciation Bond
CARS Complimentary Auction Rate Security
CFR Civic Facility Revenue
CAPMAC Capital Markets Assurance Corporation
DAR Dormitory Authority Revenue
ECF Educational Construction Fund
EPA Electric Power Authority
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Administration
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FSA Financial Security Association
GO General Obligation
HDA Housing Development Authority
HIC Hospital Improvement Corporation
IDA Industrial Development Authority
MBIA Municipal Bond Insurance Assurance Corporation
MCF Medical Care Facilities
MCFFA Medical Care Facilities Finance Agency
RB Revenue Bond
RDA Research and Development Authority
SWMA Solid Waste Management Authority
SONYMAE State of New York Mortgage Agency
URA Urban Renewal Authority
See Notes to Financial Statements.
9
NEW YORK MUNI FUND
NOTES TO FINANICAL STATEMENTS
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
1. Significant Accounting Policies
New York Muni Fund, Inc. (the Fund) is an open-end management investment
company registered under the Investment Company Act of 1940. The following is a
summary of significant accounting policies followed in the preparation of its
financial statements:
Valuation of Securities-Investments are stated at value based on prices
provided by a pricing service when such prices are believed to reflect the
fair market value of such securities. Securities not priced in this manner
are at the mean of the last reported bid and asked prices provided by
principal market makers and recognized dealers in such securities. Other
assets and securities for which no quotations are readily available are
valued in good faith using methods determined by the Board of Directors.
Futures Contracts and Options Written on Future Contracts-Initial margin
deposits with respect to these contracts are maintained by the Fund's
custodian in segregated asset accounts. Subsequent changes in the daily
valuation of open contracts are recognized as unrealized gains or losses.
Variation margin payments are made or received as daily appreciation or
depreciation in the value of these contracts occurs. Realized gains or
losses are recorded when a contract is closed.
Options Written on Municipal Bonds-The Fund writes options on municipal
bonds. Premiums received for options written are recorded as a liability and
subsequently marked to market daily to reflect the current value of the
options written. If the written option expires unexercised, the premium
received is treated as realized gain. If the option is exercised, the
premium received is used to reduce the cost of the security purchased or
sold.
Federal 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 all of its taxable and tax exempt
income to its shareholders. Therefore, no provision for federal income tax
is required.
Distributions-The Fund declares dividends daily from its net investment
income and pays such dividends on the last Wednesday of each month.
Distributions of net capital gains, if any, realized on sales of investments
are made annually, as declared by the Fund's Board of Directors. Dividends
are reinvested at the net asset value unless shareholders request payment in
cash.
General-Securities transactions are accounted for on a trade date basis.
Interest income is accrued as earned. Premiums and original issue discount
on securities purchased are amortized over the life of the respective
securities. Realized gains and losses from the sale of securities are
recorded on an identified cost basis. Net operating expenses incurred on
properties collateralizing defaulted bonds are charged to operating expenses
as incurred. Costs incurred to restructure defaulted bonds are charged to
realized losses as incurred.
2. Investment Advisory Fees and Other Transactions with Affiliates
Under a Management Agreement, the Fund pays an investment management fee to
Fundamental Portfolio Advisors, Inc. (the Manager) equal to 0.5% of the Fund's
average daily net asset value up to $100 million and decreasing by .02% of each
$100 million increase in net assets down to 0.4% of net assets in excess of $500
million. The Manager is required to reimburse the Fund an amount not exceeding
the amount of fees payable to the Manager under the agreement for any fiscal
year, if, and to the extent that the aggregate operating expenses of the Fund
for any fiscal year including the fees payable to the Manager, but excluding
interest expenses, taxes, brokerage fees and commissions, expenses paid pursuant
to the Distribution Plan, and extraordinary expenses
10
NEW YORK MUNI FUND
NOTES TO FINANICAL STATEMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
exceeds, on an annual basis, 1.5% of the average daily net assets of the Fund.
No such reimbursement was required for the six months ended June 30, 1995.
Pursuant to a Distribution Plan (the Plan) adopted pursuant to Rule 12b-1
promulgated under the Investment Company Act of 1940, the Fund may pay certain
promotional and advertising expenses and may compensate certain registered
securities dealers and financial institutions for services provided in
connection with the processing of orders for purchase or redemption of the
Fund's shares and furnishing other shareholder services. Payments by the Fund
shall not in the aggregate, in any fiscal year, exceed 0.5% of the average daily
net assets of the Fund.
Under a distribution agreement with Fundamental Service Corporation (FSC),
an affiliate of the Manager, amounts are paid under the Plan to compensate FSC
for the services it provides and the expenses it bears in distributing the
Fund's shares to investors. Any cumulative distribution related to expenses
incurred by FSC in excess of the annual maximum amount payable by the Fund under
the Plan may be carried forward for three years in anticipation of reimbursement
by the Fund on a "first in-first out" basis. If the Plan is terminated or
discontinued in accordance with its terms, the obligation of the Fund to make
payments to FSC will cease and the Fund will not be required to make payments
past the termination date. Amounts paid to FSC pursuant to the agreement totaled
$153,600 for the six months ended June 30, 1995. The Fund compensates
Fundamental Shareholder Services, Inc., as an affiliate of the manager, for the
services it provides under a Transfer Agent and Service Agreement. Transfer
agent fees for the period ended June 30, 1995 are set forth in the statement of
operations.
3. Directors' Fees
All of the Directors of the Fund are also directors or trustees of two other
affiliated mutual funds for which the Manager acts as investment adviser. For
services and attendance at board meetings and meetings of committees which are
common to each Fund, each Director who is not affiliated with the Manager is
compensated at the rate of $6,500 per quarter pro rated among the funds based on
their respective average net assets.
4. Complex Securities, Concentrations of Credit Risk, and Investment
Transactions
Inverse Floating Rate Notes (IFRN):
The Fund invests in variable rate securities commonly called "inverse
floaters". The interest rates on these securities have an inverse relationship
to the interest rate of other securities or the value of an index. Changes in
interest rate on the other security or index inversely affect the rate paid on
the inverse floater, and the inverse floater's price will be more volatile than
that of a fixed-rate bond. Recent interest rate movements and other market
factors have substantially reduced the liquidity of IFRN's.
Futures Contracts and Options on Futures Contracts:
The Fund invests in futures contracts, consisting primarily of US Treasury
Bond Futures. A futures contract is an agreement between two parties to buy and
sell a security for a set price on a future date. Futures contracts are traded
on designated "contract markets" which through their clearing corporations,
guarantee performance of
11
NEW YORK MUNI FUND
NOTES TO FINANICAL STATEMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
the contracts. In addition the Fund invests in options on US Treasury Bond
Futures which give the holder a right to buy or sell futures contracts in the
future. Unlike a futures contract which requires the parties to the contract to
buy and sell a security on a set date, an option on a futures contract entitles
its holder to decide before a future date whether to enter into such a futures
contract. Both types of contracts are marked to market daily and changes in
valuation will effect the net asset value of the Fund.
The Fund's principal objective in holding or issuing derivative financial
instruments is as a hedge against interest-rate fluctuations in its municipal
bond portfolio, and to enhance its total return. The Fund's principal objective
is to maximize the level of tax-exempt interest income while maintaining
acceptable levels of interest rate and liquidity risk. To achieve this
objective, the Fund uses a combination of derivative financial instruments
principally consisting of US Treasury Bond Futures and Options on US Treasury
Bond Futures. Typically the Fund sells treasury bond futures contracts or writes
treasury bond option contracts. These activities create off balance sheet risk
since the Fund may be unable to enter into an offsetting position and under the
terms of the contract deliver the security at a specified time at a specified
price. The cost to the fund of acquiring the security to deliver may be in
excess of recorded amounts and result in a loss to the Fund. During the six
months ended June 30, 1995, the Fund had daily average notional amounts
outstanding of approximately $13,000 and $1,823,000 of short positions on US
Treasury Bond Futures and options written on US Treasury Bond Futures,
respectively. Realized gains and losses from these transactions are stated
separately in the Statement of Operations.
The following table summarizes option contracts written by the Fund for the
period ended June 30, 1995.
Number of Premiums Received
Contracts Received Cost Loss
--------- -------- ---- ----
Contracts outstanding December 31, 1994 . $100 $123,674
Options written ......................... - - -
Contracts closed or expired ............. 100 123,674 $197,468 ($73,794)
---- --------
Contracts outstanding June 30, 1995 ..... - $ 0
==== ========
Concentration of Credit Risk:
The Fund owns 100% of two Niagara Falls Industrial Development Agency bonds
("IDA Bonds") due to mature on September 1, 2006, and 98.3% of a Niagara Falls
New York Urban Renewal Agency 11% bond ("URA Bond") due to mature on May 1, 2009
which are in default. The IDA Bonds are secured by commercial retail and office
buildings known as the Falls Street Faire and Falls Street Station Projects
("Projects"). The URA Bond is secured by certain rental payments from the
Projects. There is uncertainty as to the timing of events and the subsequent
ability of the Projects to generate cash flows sufficient to service the IDA and
URA Bonds. These bonds are valued under methods determined by the Board of
Directors. In the aggregate these bonds are valued at $8,358,643 at June 30,
1995 (42.44% of their face value of $19,695,000). No interest income was accrued
on these bonds during the six months ended June 30, 1995.
On October 6, 1992 the Fund entered into an agreement to restructure the
terms of the IDA bonds whereby the lessors of the Projects agreed to surrender
control of the Projects and waive any and all rights and interests of any kind
in the Projects. Legal, investment banking, and other restructuring costs
charged to realized loss totaled approximately $136,000 for six months ended
June 30, 1995 ($1,059,800 cumulatively from October 6, 1992 to six months ended
June 30, 1995). The Fund has retained an investment banker to assist them in
finding the
12
NEW YORK MUNI FUND
NOTES TO FINANICAL STATEMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
highest and best use for the Projects. The Fund, through its investment banker,
engaged a manager to operate the Projects on its behalf, and the Fund is paying
the net operating expenses of the Projects. Net operating expenses related to
the Projects for the six months ended June 30, 1995 are disclosed in the
statement of operations, and cumulatively from October 6, 1992 to June 30, 1995
totaled approximately $339,760.
Other Investment Transactions:
During the six months ended June 30, 1995, purchases and sales of investment
securities, other than short-term obligations, were $483,447,933 and
$454,274,742 respectively.
As of June 30, 1995 net unrealized depreciation of portfolio securities on a
federal income tax basis amounted to $13,809,768 composed of unrealized
appreciation of $4,710,995 and unrealized depreciation of $18,520,762.
5. Capital Stock
As of June 30, 1995 there were 500,000,000 shares of $.01 par value capital
stock authorized, and capital paid in amounted to $186,901,190. Transactions in
capital stock were as follows:
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
---------------------------------- ---------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 1,621,401,957 $1,494,905,882 2,943,748,646 $3,005,186,891
Shares issued on reinvestment of
dividends 3,512,611 3,231,748 10,690,975 11,094,904
Shares redeemed (1,708,482,725) (1,576,932,171) (2,946,253,498) (3,028,967,870)
-------------- -------------- -------------- --------------
Net increase (83,568,157) $ (78,794,541) 8,186,123 $ (12,686,075)
============== ============== ============== ==============
6. Line of Credit
The Fund has line of credit agreements with banks collateralized by cash and
portfolio securities. Borrowings under these agreements bear interest linked to
the bank's prime rate. Pursuant to these agreements $65,000,000 was outstanding
at June 30, 1995.
The maximum month end and the average borrowings outstanding during the six
months ended June 30, 1995 were $90,000,000 and $51,178,108, respectively.
13
NEW YORK MUNI FUND
NOTES TO FINANICAL STATEMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
7.Selected Financial Information
Six Months
Ended Years Ended December 31,
June 30, 1995 ----------------------------------------
(Unaudited) 1994 1993 1992 1991
--------- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net Asset Value, Beginning of Period .................. $0.88 $1.18 $1.21 $1.14 $1.04
----- ----- ----- ----- -----
Income from investment operations:
Net investment income ................................. .018 .056 .065 .061 .059
Net realized and unrealized gains (losses)
on investments ...................................... .059 (.290) .082 .070 .100
----- ----- ----- ----- -----
Total from investment operations .............. .077 (.234) .147 .131 .159
----- ----- ----- ----- -----
Less Distributions:
Dividends from net investment income .................. (.017) (.056) (.065) (.060) (.059)
Dividends from net realized gains ..................... - (.010) (.112) (.001) -
----- ----- ----- ----- -----
Total distributions ........................... (.017) (.066) (.177) (.061) (.059)
----- ----- ----- ----- -----
Net Asset Value, End of Period ........................ $0.94 $0.88 $1.18 $1.21 $1.14
===== ===== ===== ===== =====
Total Return .................................. 8.81% (20.47%) 12.58% 11.83% 15.73%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) ....................... $149,128 $212,665 $275,552 $196,516 $183,307
Ratios to Average Net Assets:
Interest expense .................................... 2.28%(D) 1.59% .61% .19% .09%
----- ----- ----- ----- -----
Operating expenses .................................. 1.82%(D) 1.62% 1.44% 1.50% 1.69%
Total expenses ................................ 4.10%(D) 3.21% 2.05% 1.69% 1.78%
==== ==== ==== ==== ====
Net investment income ......................... 3.78(D) 5.34% 5.20% 5.16% 5.47%
Portfolio turnover rate ............................... 214.11% 289.64% 404.05% 460.58% 365.12%
BANK LOANS
Amount outstanding at end of period (000 omitted) ..... $ 65,000 $ 20,000 $ 20,873 $ 725 $ -
Average amount of bank loans outstanding during the
period (000 omitted) ................................ $ 51,178 $ 54,479 $ 24,100 $ 5,194 $ 1,483*
Average number of shares outstanding during the
period (000 omitted) ................................ $177,799 206,323 184,664 161,404 167,206*
Average amount of debt per share during the period .... $ .288 $ .264 $ .131 $ .032 $ .009
* Based on monthly average
(D) Annualized
14
NEW YORK MUNI FUND
NOTES TO FINANICAL STATEMENTS (continued)
June 30, 1995
(Unaudited)
-------------------------------------------------------------------------------
8. Litigation
The Fund has been named as a defendant in a class action lawsuit alleging
that the Fund invested in certain derivative financial instruments that were
inconsistent with the Fund's stated investment objectives. The suit claims that
the defendants, which include the Fund's investment advisor, distributor, and
certain control persons, are liable for damages because there existed material
misstatements or omissions in the prospectuses that rendered them misleading.
Management has entered into negotiations with the plaintiffs who have
consented to a series of adjournments of all operative dates in the litigation.
Management is hopeful that these negotiations will lead to a resolution; if that
is not possible, the Fund intends to contest the case vigorously. This lawsuit
is in a preliminary state and involves significant complexities which result in
an inability to determine whether any liability will result and if so, whether
any such liability would be significant to the financial position of the Fund.
Accordingly, no amount has been accrued in the financial statements with respect
to this matter.
(Left Column)
NEW YORK MUNI FUND, INC.(R)
90 Washington Street
New York NY 10006
1-800-322-6864
This report and the financial statements contained
herein are submitted for the general information of
the shareholders of the Fund. The report is not
authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an
effective prospectus.
(Right Column)
-----------------------------------
NEW YORK MUNI FUND, INC.(R)
Semi-Annual Report
June 30, 1995
(Unaudited)
NEW YORK (LOGO) MUNI FUND
Triple
Tax-Free Investing
(LOGO) FUNDAMENTAL
Fundamental Family of Funds