UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-8081
Name of Fund: MuniHoldings Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
MuniHoldings Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ,
08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 04/30/03
Date of reporting period: 05/01/02 - 04/30/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
Annual Report
April 30, 2003
MuniHoldings
Fund, Inc.
www.mlim.ml.com
MuniHoldings Fund, Inc. seeks to provide shareholders with current
income exempt from Federal income taxes by investing primarily in a
portfolio of long-term, investment-grade municipal obligations the
interest on which, in the opinion of bond counsel to the issuer, is
exempt from Federal income taxes.
This report, including the financial information herein, is
transmitted to shareholders of MuniHoldings Fund, Inc. for their
information. It is not a prospectus. Past performance results shown
in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock and intends to
remain leveraged by issuing Preferred Stock to provide the Common
Stock shareholders with a potentially higher rate of return.
Leverage creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders. Statements and other information
herein are as dated and are subject to change.
MuniHoldings Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIHOLDINGS FUND, INC.
The Benefits
And Risks of
Leveraging
MuniHoldings Fund, Inc. has the ability to leverage to seek
to enhance the yield and net asset value of its Common Stock.
However, these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Stock shareholders in the form
of dividends, and the value of these portfolio holdings is reflected
in the per share net asset value of the Fund's Common Stock.
However, in order to benefit Common Stock shareholders, the yield
curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issue 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 on the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange), may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, income on inverse floaters will decrease when short-term
interest rates increase and increase when short-term interest rates
decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in these securities.
Swap
Agreements
The Fund may also invest in swap agreements, which are over-the-
counter contracts in which one party agrees to make periodic
payments based on the change in market value of a specified bond,
basket of bonds, or index in return for periodic payments based on a
fixed or variable interest rate or the change in market value of a
different bond, basket of bonds or index. Swap agreements may be
used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MuniHoldings Fund, Inc., April 30, 2003
DEAR SHAREHOLDER
For the year ended April 30, 2003, the Common Stock of MuniHoldings
Fund, Inc. had a net annualized yield of 6.61%, based on a year-end
per share net asset value of $15.07 and $.996 per share income
dividends. Over the same period, the total investment return on the
Fund's Common Stock was +11.54%, based on a change in per share
net asset value from $14.50 to $15.07, and assuming reinvestment of
..983 per share ordinary income dividends.
For the six-month period ended April 30, 2003, the total investment
return on the Fund's Common Stock was +6.39%, based on a change in
per share net asset value from $14.70 to $15.07, and assuming
reinvestment of $.516 per share income dividends.
For the six-month period ended April 30, 2003, the Fund's Auction
Market Preferred Stock had an average yield of 1.16% for Series A
and 1.07% for Series B.
For a description of the Fund's total investment return based on a
change in the per share market value (as measured by the trading
price of the Fund's share on the New York Stock Exchange), and
assuming reinvestment of dividends, please refer to the Financial
Highlights section of the Financial Statements included in this
report. As a closed-end fund, the Fund's shares may trade in the
secondary market at a premium or discount to the Fund's net asset
value. As a result, total investment returns based on changes in the
Fund's market value can vary significantly from total investment
return based on changes in the Fund's net asset value.
The Municipal Market Environment
During the six-month period ended April 30, 2003, amid considerable
weekly and monthly volatility, long-term fixed income interest rates
generally declined. Geopolitical tensions and volatile equity
valuations continued to overshadow economic fundamentals as they
have for most of the last 12 months. Reacting to the strong U.S.
equity rally that began last October, fixed income bond yields
remained under pressure in November 2002, as U.S. equity markets
continued to strengthen. During November, the Standard & Poor's 500
(S&P 500) Index rose an additional 5.50%. Equity prices were
supported by further signs of U.S. economic recovery, especially
improving labor market activity. In late November, third-quarter
2002 U.S. gross domestic product growth was 4%, well above the
second-quarter 2002 rate of 1.30%. Financial conditions were also
strengthened by a larger-than-expected reduction in short-term
interest rates by the Federal Reserve Board in early November. The
Federal Funds target rate was lowered 50 basis points (0.50%) to
1.25%, its lowest level since the 1960s. This action by the Federal
Reserve Board was largely viewed as being taken to bolster the
sputtering U.S. economic recovery. Rebounding U.S. equity markets
and the prospects for a more substantial U.S. economic recovery
pushed long-term U.S. Treasury yield levels to 5.10% by late
November.
However, into early 2003, softer equity prices and renewed investor
concerns about U.S. military action against Iraq and North Korea
again pushed bond prices higher. Reacting to disappointing holiday
sales and corporate managements' attempts to scale back analysts'
expectation of future earnings, the S&P 500 Index declined more than
10% from December 2002 to February 2003. Fearing an eventual U.S./
Iraq military confrontation in 2003, investors again sought the
safety of U.S. Treasury obligations and the prices of fixed income
issues rose. By the end of February 2003, U.S. Treasury bond yields
had declined approximately 40 basis points to 4.67%.
Bond yields continued to fall into early March. Once direct U.S.
military action against Iraq began, bond yields quickly rose. Prior
uncertainty surrounding the Iraqi situation was obviously removed
and early U.S. military successes fostered the hope that the
conflict would be quickly and positively concluded. Concurrently,
the S&P 400 Index rose over 6% as investors, in part, sold fixed
income issues to purchase equities in anticipation of a strong
U.S. economic recovery once the Iraqi conflict was resolved. By
mid-March, U.S. Treasury bond yields again rose to above 5%.
However, as there was growing sentiment that hostilities may not be
resolved in a matter of weeks, U.S. Treasury bond yields again
declined to end the month at 4.81%.
For the six months ended April 30, 2003, long-term U.S. Treasury
bond yields ratcheted back to near 5% by mid-April, as U.S. equity
markets continued to improve and the safe-haven premium U.S.
Treasury issues had commanded prior to the beginning of the Iraqi
conflict continued to be withdrawn. However, with the quick positive
resolution of the Iraqi war, investors quickly resumed their focus
on the fragile U.S. economic recovery. Business activity in the
United States has remained sluggish, especially job creation.
Investors have also been concerned that the recent SARS outbreak
would have a material, negative impact on world economic conditions,
especially in China and Japan. First quarter 2003 U.S. gross
domestic product was released in late April initially estimating
U.S. economic activity to be growing at 1.60%, well below many
analysts' assessments. These factors, as well as the possibility
that the Federal Reserve Board could again lower short-term interest
rates to encourage more robust U.S. economic growth, pushed bond
prices higher during the last two weeks of the period. By April 30,
2003, long-term U.S. Treasury bond yields had declined to almost
4.75%. Over the past six months, long-term U.S. bond yields fell
more than 20 basis points.
For the six months ended April 30, 2003, long-term tax-exempt bond
yields also fell modestly. Yield volatility was reduced relative to
that seen in U.S. Treasury issues, as municipal bond prices were
much less sensitive to worldwide geopolitical pressures on a daily
and weekly basis. Tax-exempt bond yields generally followed their
taxable counterparts higher, responding to a more positive U.S.
fixed income environment and continued slow economic growth. After
rising approximately 10 basis points in November 2002 to 5.30%,
municipal bond yields generally declined through February 2003. At
February 28, 2003, long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, fell to approximately
5.05%. However, similar to U.S. Treasury bond yields, once military
action began in Iraq, municipal bond yields rose sharply to nearly
5.20% before declining to approximately 5.10% by the end of April.
Over the past six months, long-term tax-exempt bond yields fell
approximately 11 basis points, slightly less than U.S. Treasury
obligations.
A number of factors have combined to generate consistently strong
demand for municipal bonds throughout the six-month period ended
April 30, 2003. Generally weak U.S. equity markets have supported
continued positive demand for tax-exempt products as investors have
sought the relative security of fixed income issues. Also, with tax-
exempt money market rates near 1%, the demand for longer maturity
municipal issues has increased as investors have opted to buy longer
maturity issues rather than remain in cash reserves. Additionally,
investors received approximately $30 billion in January 2003 from
bond maturities, coupon income and proceeds from early redemptions.
However, these positive demand factors were not totally able to
offset the increase in tax-exempt new-issue supply, preventing more
significant declines in tax-exempt bond yields. This modest
underperformance has served to make municipal bonds a particularly
attractive purchase relative to their taxable counterparts.
Throughout most of the yield curve, municipal bonds have been able
to be purchased at yields near or exceeding those of comparable
Treasury issues. Compared to their recent historical averages of
82% - 88% of U.S. Treasury yields, municipal bond yield ratios in
their current 95% - 105% range are likely to prove attractive to
long-term investors.
Declining U.S. equity markets and escalating geopolitical pressures
have resulted in reduced economic activity and consumer confidence.
It is important to note that, despite all the recent negative
factors impeding the growth of U.S. businesses, the U.S. economy
still grew at an approximate 2.50% rate for all of 2002, twice that
of 2001. Similar expansion is expected for early 2003. Lower oil
prices, reduced geopolitical uncertainties, increased Federal
spending for defense, and a likely Federal tax cut are all factors
which should promote stronger economic growth later this year.
However, it is questionable to expect that business and investor
confidence can be so quickly restored as to trigger dramatic,
explosive U.S. economic growth and engender associated, large-scale
interest rate increases. The resumption of solid economic growth is
likely to be a gradual process accompanied by equally graduated
increases in bond yields. Moderate economic growth, especially
within a context of negligible inflationary pressures, should not
greatly endanger the positive fixed income environments tax-exempt
products currently enjoy.
MuniHoldings Fund, Inc., April 30, 2003
Portfolio Strategy
In an effort to achieve the Fund's primary goal of enhancing the tax-
exempt yield to the Common Stock shareholder, our investment
strategy involved sustaining a defensive structure with a fully
invested stance. Because the Fund currently has a low exposure to
performance bonds, the Fund fared well during the past six months
even though interest rates were volatile. We maintained a fully
invested position as a result of the extremely low interest rates
received on cash reserves. A low cash balance helped the Fund
generate a tax-exempt yield significantly above the industry
average. The Fund's trading activity focused on corporate-backed
issues and supply/demand imbalances in the California market. We
took advantage of the significant weakness in the airline sector and
purchased bonds with various security features backed by American
Airlines and Continental Airlines. These issues rallied going into
the fourth quarter of 2002 as new crossover buyers entered the tax-
exempt market. We took advantage of the higher prices and in January
2003 reduced the Fund's exposure of American Airlines-backed bonds,
anticipating a weak earning season for the industry and American
Airlines in particular. We also added TXU Electric bonds into the
portfolio. Under unwarranted pressure on their parent company,
spreads for TXU Electric-backed bonds widened significantly in
October 2002. We purchased approximately 2% of the Fund's assets in
TXU Electric-backed bonds at attractive levels before investor
demand drove up the prices of bonds following Moody's Investors
Service reaffirmation of TXU Electric's Baa2 rating. In addition,
we made attractive purchases in the new-issue market. The large
$11.8 billion California Department of Water issue provided the Fund
with an opportunity to purchase attractively priced non-amortized
paper. Because of the size of the issue, the California Department
of Water transaction came at a significant concession to the market
to stimulate demand. The Fund was able to purchase attractively
priced bonds maturing in 2021 and 2022.
The long-term outlook for the tax-exempt high yield market looks
positive. We have seen a significant spread narrowing in the taxable
market since October 2002, and the municipal market generally lags
their taxable counterparts by three months - six months. With credit
spreads still well above historical averages, the municipal high
yield market should continue to perform well. We believe the Fund's
portfolio structure of a high current yield and defensive duration
position should enable the Fund to perform well in most interest
rate environments. We will look to reduce the Fund's exposure to
spread product if either there is a significant improvement in
credit spreads or if there is the risk of another economic slowdown.
During the period, the Fund's borrowing costs remained in the
1% - 1.25% range, with interest rates presently near 1%. These
attractive funding levels, in combination with a steep tax-exempt
yield curve, have generated a significant income benefit to the
Fund's Common Stock shareholders. Further declines in the Fund's
borrowing costs would require significant easing of monetary policy
by the Federal Reserve Board. While such action is not expected, an
increase in short-term interest rates by the Federal Reserve Board
is even less anticipated. We expect short-term borrowing costs to
remain near current attractive levels for the coming months.
However, should the spread between short-term and long-term interest
rates narrow, the benefits of leverage will decline, and as a
result, reduce the yield on the Fund's Common Stock. (For a more
complete explanation of the benefits and risks of leveraging, see
page 1 of this report to shareholders.)
In Conclusion
We thank you for your support of MuniHoldings Fund, Inc., and we
look forward to serving your investment needs in the months and
years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Kenneth A. Jacob)
Kenneth A. Jacob
Senior Vice President
(John M. Loffredo)
John M. Loffredo
Senior Vice President
(Robert A. DiMella)
Robert A. DiMella
Vice President and Portfolio Manager
May 19, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings+++ Ratings+++ Amount Issue Value
Arizona--1.5% BB+ Ba1 $ 1,200 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (El Paso Electric Company Project), Series A, 6.25%
due 5/01/2037 $ 1,212
NR* Caa2 3,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds
(America West Airlines Inc. Project), AMT, 6.30% due 4/01/2023 983
NR* NR* 835 Show Low, Arizona, Improvement District No. 5, Special Assessment
Bonds, 6.375% due 1/01/2015 881
California-- A- A3 3,870 California Statewide Communities Development Authority, Health
11.9% Facility Revenue Bonds (Memorial Health Services), Series A, 6%
due 10/01/2023 4,123
A A2 3,000 Chula Vista, California, IDR, Refunding (San Diego Gas &
Electric Co.), AMT, Series A, 6.75% due 3/01/2023 3,041
Montebello, California, Unified School District, GO (b):
AAA Aaa 2,405 5.61%** due 8/01/2022 914
AAA Aaa 2,455 5.61%** due 8/01/2023 877
Sacramento County, California, Sanitation District Financing
Authority, Revenue Refunding Bonds:
AA Aa3 11,450 RIB, Series 366, 10.111% due 12/01/2027 (f) 14,032
AA Aa3 1,550 Series A, 5.875% due 12/01/2027 1,725
Colorado--3.8% NR* NR* 2,645 Elk Valley, Colorado, Public Improvement Revenue Bonds (Public
Improvement Fee), Series A, 7.35% due 9/01/2031 2,702
AA NR* 3,000 Interlocken, Colorado, GO, Refunding (Metropolitan District),
Series A, 5.75% due 12/15/2019 3,239
BB+ Ba1 1,840 Northwest Parkway, Colorado, Public Highway Authority Revenue
Bonds, First Tier, Sub-Series D, 7.125% due 6/15/2041 1,924
Connecticut-- NR* NR* 2,735 Connecticut State Development Authority, IDR (AFCO Cargo
6.5% BDL--LLC Project), AMT, 8% due 4/01/2030 2,817
AAA Aaa 8,970 Connecticut State Special Tax Obligation Revenue Bonds
(Transportation Infrastructure), Series A, 6% due 12/01/2009 (b)(c) 10,764
Florida--5.1% NR* NR* 700 Bonnet Creek Resort, Florida, Community Development District,
Special Assessment Revenue Bonds, 7.50% due 5/01/2034 720
Portfolio
Abbreviations
To simplify the listings of MuniHoldings Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the
names of many of the securities according to the list below and at
right.
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
MuniHoldings Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings+++ Ratings+++ Amount Issue Value
Florida BBB Baa1 $ 2,520 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric
(concluded) Company Project), 5.10% due 10/01/2013 $ 2,448
A- A2 4,725 Orange County, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Orlando Regional Healthcare), 6% due 12/01/2028 5,015
NR* NR* 1,000 Orlando, Florida, Urban Community Development District, Capital
Improvement Special Assessment Bonds, Series A, 6.95% due 5/01/2033 1,021
NR* NR* 1,400 Palm Beach County, Florida, HFA, M/F Housing Revenue Bonds (Lake
Delray Apartment Project), AMT, Series A, 6.40% due 1/01/2031 1,314
Georgia--0.9% NR* NR* 1,750 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station
Project), 7.90% due 12/01/2024 1,815
Idaho--1.2% BB+ Ba3 3,000 Power County, Idaho, Industrial Development Corporation, Solid
Waste Disposal Revenue Bonds (FMC Corporation Project), AMT,
6.45% due 8/01/2032 2,515
Illinois--4.0% NR* B2 845 Beardstown, Illinois, IDR (Jefferson Smurfit Corp. Project), 8%
due 10/01/2016 868
NR* NR* 1,200 Chicago, Illinois, Special Assessment Bonds (Lake Shore East),
6.75% due 12/01/2032 1,201
BBB NR* 2,250 Illinois Development Finance Authority, Revenue Refunding Bonds
(Community Rehab Providers), Series A, 6.05% due 7/01/2019 2,215
AA Aa2 4,000 Illinois HDA, Homeowner Mortgage Revenue Bonds, AMT, Sub-Series C-2,
5.35% due 2/01/2027 4,112
Indiana--2.4% NR* NR* 8,985 Allen County, Indiana, Redevelopment District Tax Increment
Revenue Bonds (General Motors Development Area), 7%** due 11/15/2013 4,975
Louisiana--0.4% NR* NR* 800 Hodge, Louisiana, Utility Revenue Bonds (Stone Container
Corporation), AMT, 9% due 3/01/2010 817
Maryland--2.3% NR* NR* 1,875 Anne Arundel County, Maryland, Special Obligation Revenue Bonds
(Arundel Mills Project), 7.10% due 7/01/2029 2,044
NR* NR* 2,750 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT,
7.40% due 9/01/2019 2,810
Massachusetts-- BB+ NR* 1,000 Massachusetts State Development Finance Agency, Revenue
0.4% Refunding Bonds (Eastern Nazarine College), 5.625% due 4/01/2029 749
Michigan--1.7% BBB Baa2 3,505 Delta County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (Mead
Westvaco--Escanaba), Series A, 6.25% due 4/15/2027 3,540
Minnesota--1.8% A- NR* 3,500 Minneapolis, Minnesota, Community Development Agency, Supported
Development Revenue Refunding Bonds, Series G-3, 5.45% due
12/01/2031 3,639
Mississippi-- BBB- Ba1 7,675 Claiborne County, Mississippi, PCR, Refunding (System Energy
5.1% Resources Inc. Project), 6.20% due 2/01/2026 7,655
BBB- Ba1 3,000 Mississippi Business Finance Corporation, Mississippi, PCR,
Refunding (System Energy Resources Inc. Project), 5.90% due
5/01/2022 2,961
Missouri--1.7% NR* NR* 2,000 Fenton, Missouri, Tax Increment Revenue Refunding and Improvement
Bonds (Gravois Bluffs), 7% due 10/01/2021 2,113
BBB+ Baa1 1,400 Missouri State Development Finance Board, Infrastructure Facilities
Revenue Bonds (Branson), Series A, 5.50% due 12/01/2032 1,421
Nevada--1.5% AAA Aaa 3,000 Clark County, Nevada, IDR (Power Company Project), AMT, Series A,
6.70% due 6/01/2022 (b) 3,108
New Jersey-- New Jersey EDA, Retirement Community Revenue Bonds, Series A:
10.6% NR* NR* 1,475 (Cedar Crest Village Inc. Facility), 7.25% due 11/15/2031 1,475
NR* NR* 3,600 (Seabrook Village Inc.), 8.25% due 11/15/2030 3,799
New Jersey EDA, Special Facility Revenue Bonds (Continental
Airlines Inc. Project), AMT:
B Caa2 1,000 6.625% due 9/15/2012 731
B Caa2 2,500 6.25% due 9/15/2029 1,752
New Jersey Health Care Facilities Financing Authority Revenue
Bonds:
BB+ NR* 1,625 (Pascack Valley Hospital Association), 6.625% due 7/01/2036 1,606
NR* Baa1 3,325 (South Jersey Hospital), 6% due 7/01/2026 3,431
AAA Aaa 4,425 Salem County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds (Public Service Electric & Gas),
RIB, Series 380, 10.86% due 6/01/2031 (f)(g) 5,035
A- A3 4,605 Tobacco Settlement Financing Corporation of New Jersey Revenue
Bonds, 7% due 6/01/2041 4,236
New Mexico-- Farmington, New Mexico, PCR, Refunding (Public Service Company--San
2.5% Juan Project):
BBB- Baa3 2,000 Series A, 6.30% due 12/01/2016 2,043
BBB- Baa3 2,000 Series D, 6.375% due 4/01/2022 2,047
AAA Aaa 1,000 Los Alamos County, New Mexico, Utility System Revenue Refunding
Bonds, Series A, 6% due 7/01/2015 (e) 1,070
New York--18.6% New York City, New York, City IDA, Civic Facility Revenue Bonds:
NR* NR* 535 Series C, 6.80% due 6/01/2028 546
NR* NR* 1,240 (Special Needs Facilities Pooled Program), Series C-1, 5.50%
due 7/01/2007 1,236
BBB- Ba2 1,110 New York City, New York, City IDA, Special Facility Revenue
Bonds (British Airways PLC Project), AMT, 7.625% due 12/01/2032 844
NR* Aaa 6,000 New York City, New York, City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, RITR, Series 11, 9.92% due
6/15/2026 (e)(f) 7,533
A A2 1,900 New York City, New York, Fiscal Year 2003, GO, Series I, 5.75%
due 3/01/2021 2,048
AAA Aaa 11,000 New York City, New York, GO, Refunding, Series G, 5.75% due
2/01/2014 (b) 12,111
AAA Aaa 10,000 New York City, New York, GO, Series F, 6% due 8/01/2016 (g) 11,221
NR* NR* 1,165 Westchester County, New York, IDA, Civic Facility Revenue Bonds
(Special Needs Facilities Pooled Program), Series E-1, 5.50% due
7/01/2007 1,161
NR* NR* 2,080 Westchester County, New York, IDA, Continuing Care Retirement,
Mortgage Revenue Bonds (Kendal on Hudson Project), Series A,
6.50% due 1/01/2034 2,049
North Carolina-- BBB Baa3 2,100 North Carolina Eastern Municipal Power Agency, Power System
1.1% Revenue Refunding Bonds, Series C, 5.375% due 1/01/2016 2,199
Ohio--0.2% NR* VMIG1++ 400 Montgomery County, Ohio, Revenue Refunding Bonds (Miami Valley
Hospital), VRDN, Series A, 1.35% due 11/15/2022 (i) 400
Oklahoma--0.6% A1+ VMIG1++ 200 Oklahoma State Industries Authority, Revenue Refunding Bonds
(Integris Baptist), VRDN, Series B, 1.35% due 8/15/2029 (g)(i) 200
MuniHoldings Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings+++ Ratings+++ Amount Issue Value
Oklahoma Tulsa, Oklahoma, Municipal Airport Trust Revenue Refunding
(concluded) Bonds (AMR), AMT, Series A:
CCC Caa2 $ 570 5.80% due 6/01/2035 $ 334
CCC Caa2 1,425 5.375% due 12/01/2035 799
Oregon--0.9% NR* NR* 2,050 Western Generation Agency, Oregon, Cogeneration Project Revenue
Bonds (Wauna Cogeneration Project), AMT, Series B, 7.40% due
1/01/2016 1,921
Pennsylvania-- Pennsylvania Economic Development Financing Authority, Exempt
10.4% Facilities Revenue Bonds (National Gypsum Company), AMT:
NR* NR* 2,750 Series A, 6.25% due 11/01/2027 2,500
NR* NR* 6,000 Series B, 6.125% due 11/01/2027 5,366
AAA NR* 4,970 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds (Eastern College), Series B,
8% due 10/15/2006 (c) 6,089
NR* NR* 725 Philadelphia, Pennsylvania, Authority for IDR, Commercial
Development, AMT, 7.75% due 12/01/2017 743
NR* NR* 4,000 Philadelphia, Pennsylvania, Authority for IDR, Refunding,
Commercial Development (Days Inn), Series B, 6.50% due 10/01/2027 3,969
A- NR* 2,900 Sayre, Pennsylvania, Health Care Facilities Authority Revenue
Bonds (Guthrie Health), Series A, 5.875% due 12/01/2031 3,025
Rhode Island-- Rhode Island State Health and Educational Building Corporation,
1.9% Hospital Financing Revenue Bonds (Lifespan Obligation Group):
BBB Baa2 1,500 6.375% due 8/15/2021 1,553
BBB Baa2 2,385 6.50% due 8/15/2032 2,450
South BBB+ Baa2 3,020 Medical University, South Carolina, Hospital Authority, Hospital
Carolina--3.5% Facilities Revenue Refunding Bonds, Series A, 6.375% due 8/15/2027 3,156
BBB- NR* 2,400 South Carolina Jobs, EDA, Revenue Bonds (Myrtle Beach Convention
Center), Series A, 6.625% due 4/01/2036 2,405
A- A3 1,875 Tobacco Settlement Revenue Management Authority, South Carolina,
Tobacco Settlement Revenue Bonds, Series B, 6.375% due 5/15/2028 1,608
South Dakota-- A A3 1,320 Educational Enhancement Funding Corporation, South Dakota,
0.5% Series B, 6.50% due 6/01/2032 1,124
Tennessee--6.6% Hardeman County, Tennessee, Correctional Facilities Corporation
Revenue Bonds:
NR* NR* 680 7% due 8/01/2004 708
NR* NR* 4,500 7.75% due 8/01/2017 4,535
BBB+ Baa1 4,575 Shelby County, Tennessee, Health, Educational and Housing
Facility Board, Hospital Revenue Refunding Bonds (Methodist
Healthcare), 6.50% due 9/01/2026 4,926
NR* Aa2 3,400 Tennessee Educational Loan Revenue Bonds (Educational Funding
South Inc.), AMT, Senior-Series B, 6.20% due 12/01/2021 3,604
Texas--23.9% BBB- Baa3 4,000 Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.), First Tier, Series A, 6.70% due 1/01/2028 4,162
Brazos River Authority, Texas, PCR, Refunding:
BBB Baa2 1,000 (TXU Electric Company Project), Series B, 4.75% due 5/01/2029 992
BBB Baa2 2,785 (Texas Utility Company), AMT, Series A, 7.70% due 4/01/2033 2,923
BBB Baa2 2,360 (Utilities Electric Company), AMT, Series B, 5.05% due 6/01/2030 2,355
BBB- Ba1 2,340 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant
Energy Inc. Project), Series B, 7.75% due 12/01/2018 2,439
A- A3 3,875 Brazos River, Texas, Harbor Navigation District, Brazoria County
Environmental Revenue Refunding Bonds (Dow Chemical Company Project),
AMT, Series A-7, 6.625% due 5/15/2033 4,011
CC Caa2 1,355 Dallas-Fort Worth, Texas, International Airport Facility
Improvement Corporation Revenue Bonds (American Airlines Inc.),
6% due 11/01/2014 468
CC Caa2 1,000 Dallas-Fort Worth, Texas, International Airport Facility,
Improvement Corporation Revenue Refunding Bonds (American Airlines),
AMT, Series A, 5.95% due 5/01/2029 650
NR* Ba3 1,340 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 7.50% due 5/01/2025 1,318
BBB Baa2 2,315 Gulf Coast, Texas, Waste Disposal Authority, Revenue Refunding
Bonds (International Paper Company), AMT, Series A, 6.10%
due 8/01/2024 2,338
B Caa2 2,100 Houston, Texas, Airport System, Special Facilities Revenue Bonds
(Continental Airlines), AMT, Series E, 6.75% due 7/01/2029 1,240
A- A3 3,000 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 3,130
BBB- Ba1 1,485 Matagorda County, Texas, Navigation District Number 1 Revenue
Refunding Bonds (Reliant Energy Inc.), Series C, 8% due 5/01/2029 1,544
NR* NR* 2,000 North Central Texas, Health Facility Development Corporation,
Retirement Facility Revenue Bonds (Northwest Senior Housing),
Series A, 7.50% due 11/15/2029 2,045
BBB Baa2 5,000 Port Corpus Christi, Texas, Revenue Refunding Bonds (Celanese
Project), Series A, 6.45% due 11/01/2030 5,111
BBB Baa2 1,390 Sabine River Authority, Texas, PCR, Refunding (TXU Electric
Company Project), Series C, 4% due 5/01/2028 1,390
AAA Aaa 7,945 Texas State Department of Housing and Community Affairs,
Residential Mortgage Revenue Bonds, AMT, Series A, 5.70% due
1/01/2033 (d) 8,540
AAA Aaa 3,460 Texas State Department of Housing and Community Affairs,
Residential Mortgage Revenue Refunding Bonds, AMT, Series B,
5.25% due 7/01/2022 (d) 3,552
NR* Baa3 1,500 Texas State Student Housing Corporation, Student Housing
Revenue Bonds (Midwestern State University Project), 6.50%
due 9/01/2034 1,457
Utah--0.0% NR* NR* 3,000 Tooele County, Utah, PCR, Refunding (Laidlaw Environmental),
AMT, Series A, 7.55% due 7/01/2027 (h) 0
Vermont--1.2% BBB+ NR* 2,370 Vermont Educational and Health Buildings, Financing Agency
Revenue Bonds (Developmental and Mental Health), Series A, 6%
due 6/15/2017 2,448
Virginia--8.7% BBB+ A3 1,150 Chesterfield County, Virginia, IDA, PCR (Virginia Electric and
Power Company), Series A, 5.875% due 6/01/2017 1,219
AAA Aaa 7,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding
Bonds, AMT, Series A, 6.10% due 2/01/2011 (a) 8,107
BBB- Baa3 1,450 Mecklenburg County, Virginia, IDA, Exempt Facility Revenue
Refunding Bonds (UAE LP Project), 6.50% due 10/15/2017 1,423
MuniHoldings Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings+++ Ratings+++ Amount Issue Value
Virginia Pocahontas Parkway Associates Virginia, Toll Road Revenue Bonds:
(concluded) NR* Ba1 $ 5,600 First Tier, Sub-Series C, 6.25%** due 8/15/2028 $ 253
NR* Ba1 5,700 First Tier, Sub-Series C, 6.25%** due 8/15/2029 228
BB NR* 750 Senior-Series A, 5.50% due 8/15/2028 497
BB NR* 1,500 Senior-Series B, 8.40%** due 8/15/2029 150
BB NR* 300 Senior-Series B, 8.80%** due 8/15/2030 28
AAA Aaa 5,990 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds,
Series J, Sub-Series J-1, 5.20% due 7/01/2019 (g) 6,274
Washington-- NR* NR* 1,700 Port Seattle, Washington, Special Facilities Revenue Bonds
1.2% (Northwest Airlines Project), AMT, 7.25% due 4/01/2030 1,123
NR* NR* 1,425 Seattle, Washington, Housing Authority, Housing Revenue Bonds
(Replacement Housing Project), 6.125% due 12/01/2032 1,427
West Virginia-- B+ Ba3 1,000 Princeton, West Virginia, Hospital Revenue Refunding Bonds
0.4% (Community Hospital Association Inc. Project), 6% due 5/01/2019 807
Wisconsin--2.3% AAA Aaa 2,000 Evansville, Wisconsin, Community School District, GO, Refunding,
5.50% due 4/01/2020 (b) 2,174
Wisconsin State Health and Educational Facilities Authority
Revenue Bonds:
NR* NR* 825 (New Castle Place Project), Series A, 7% due 12/01/2031 828
BBB+ NR* 1,755 (Synergyhealth Inc.), 6% due 11/15/2032 1,772
Wyoming--1.3% BB+ Ba3 3,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
(FMC Corporation Project), AMT, Series B, 6.90% due 9/01/2024 2,735
Virgin BBB- Baa3 4,650 Virgin Islands Government Refinery Facilities Revenue
Islands--2.3% Bonds (Hovensa Coker Project), AMT, 6.50% due 7/01/2021 4,704
Total Municipal Bonds (Cost--$306,840)--150.9% 313,760
Shares
Held Short-Term Securities
3,209 Merrill Lynch Institutional Tax-Exempt Fund (j) 3,209
Total Short-Term Securities (Cost--$3,209)--1.5% 3,209
Total Investments (Cost--$310,049)--152.4% 316,969
Other Assets Less Liabilities--0.5% 1,004
Preferred Stock, at Redemption Value--(52.9%) (110,013)
---------
Net Assets Applicable to Common Stock--100.0% $ 207,960
=========
(a)AMBAC Insured.
(b)FGIC Insured.
(c)Prerefunded.
(d)FNMA/GNMA Collateralized.
(e)FSA 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 April 30, 2003.
(g)MBIA Insured.
(h)Non-income producing security.
(i)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 2003.
(j)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2 (a)(3) of the Investment Company Act of 1940) are as
follows:
(in Thousands)
Net Dividend
Affiliate Activity Income
Merrill Lynch Institutional
Tax-Exempt Fund 3,209 $16
*Not Rated.
**Represents a zero coupon bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
+++Ratings have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
STATEMENT OF NET ASSETS
As of April 30, 2003
Assets: Investments, at value (identified cost--$310,048,596) $316,969,085
Cash 1,428,526
Receivables:
Interest $ 5,667,196
Securities sold 1,486,320
Dividends 103 7,153,619
------------
Prepaid expenses 1,645
------------
Total assets 325,552,875
------------
Liabilities: Payables:
Securities purchased 7,301,054
Investment adviser 147,368
Dividends to Common Stock shareholders 97,975
Other affiliates 2,456 7,548,853
------------
Accrued expenses and other liabilities 31,272
------------
Total liabilities 7,580,125
------------
Preferred Stock: Preferred Stock at redemption value, par value $.10 per share
(2,200 Series A shares and 2,200 Series B shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference) 110,012,650
------------
Net Assets Net assets applicable to Common Stock $207,960,100
Applicable To ============
Common Stock:
Analysis of Common Stock, par value $.10 per share (13,795,227 shares issued
Net Assets and outstanding) $ 1,379,523
Applicable To Paid-in capital in excess of par 204,148,463
Common Stock: Undistributed investment income--net $ 4,384,130
Accumulated realized capital losses on investments--net (8,872,505)
Unrealized appreciation on investments--net 6,920,489
------------
Total accumulated earnings--net 2,432,114
------------
Total--Equivalent to $15.07 net asset value per share of Common Stock
(market price--$14.43) $207,960,100
============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
MuniHoldings Fund, Inc., April 30, 2003
STATEMENT OF OPERATIONS
For the Year Ended April 30, 2003
Investment Interest $ 19,607,430
Income: Dividends 15,645
------------
Total income 19,623,075
------------
Expenses: Investment advisory fees $ 1,732,165
Commission fees 281,776
Accounting services 116,337
Professional fees 68,042
Transfer agent fees 45,242
Directors' fees and expenses 37,075
Printing and shareholder reports 32,139
Listing fees 28,965
Pricing fees 18,090
Custodian fees 16,735
Other 35,163
------------
Total expenses before reimbursement 2,411,729
Reimbursement of expenses (2,403)
------------
Total expenses after reimbursement 2,409,326
------------
Investment income--net 17,213,749
------------
Realized & Realized gain on investments--net 2,818,349
Unrealized Change in unrealized appreciation on investments--net 2,755,933
Gain on ------------
Investments--Net: Total realized and unrealized gain on investments--net 5,574,282
------------
Dividends to Investment income--net (1,358,346)
Preferred Stock ------------
Shareholders: Net Increase in Net Assets Resulting from Operations $ 21,429,685
============
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the
Year Ended
April 30,
Increase (Decrease) in Net Assets: 2003 2002
Operations: Investment income--net $ 17,213,749 $ 15,990,874
Realized gain on investments--net 2,818,349 2,616,658
Change in unrealized appreciation/depreciation on investments--net 2,755,933 6,658,173
Dividends to Preferred Stock shareholders (1,358,346) (2,161,082)
------------ ------------
Net increase in net assets resulting from operations 21,429,685 23,104,623
------------ ------------
Dividends to Investment income--net (13,560,708) (12,800,964)
Common Stock ------------ ------------
Shareholders: Net decrease in net assets resulting from dividends to Common
Stock shareholders (13,560,708) (12,800,964)
------------ ------------
Net Assets Total increase in net assets applicable to Common Stock 7,868,977 10,303,659
Applicable to Beginning of year 200,091,123 189,787,464
Common Stock: ------------ ------------
End of year* $207,960,100 $200,091,123
------------ ------------
*Undistributed investment income--net $ 4,384,130 $ 2,094,130
============ ============
See Notes to Financial Statements.
MuniHoldings Fund, Inc., April 30, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended April 30,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of year $ 14.50 $ 13.76 $ 13.16 $ 16.05 $ 16.00
Operating --------- --------- --------- --------- ---------
Performance:++ Investment income--net 1.25++++ 1.17 1.10 1.18 1.24
Realized and unrealized gain (loss)
on investments--net .40 .66 .65 (2.66) .40
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.10) (.16) (.32) (.26) (.21)
Realized gain on investments--net -- -- -- -- (.09)
In excess of realized gain on
investments--net -- -- -- (.04) --
--------- --------- --------- --------- ---------
Total from investment operations 1.55 1.67 1.43 (1.78) 1.34
--------- --------- --------- --------- ---------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.98) (.93) (.83) (.94) (.97)
Realized gain on investments--net -- -- -- -- (.32)
In excess of realized gain on
investments--net -- -- -- (.17) --
--------- --------- --------- --------- ---------
Total dividends and distributions to
Common Stock shareholders (.98) (.93) (.83) (1.11) (1.29)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 15.07 $ 14.50 $ 13.76 $ 13.16 $ 16.05
========= ========= ========= ========= =========
Market price per share, end of year $ 14.43 $ 13.38 $ 13.18 $ 12.5625 $ 15.25
========= ========= ========= ========= =========
Total Investment Based on market price per share 15.75% 8.51% 12.09% (10.47%) 12.06%
Return:* ========= ========= ========= ========= =========
Based on net asset value per share 11.54% 12.64% 11.71% (10.89%) 8.73%
========= ========= ========= ========= =========
Ratios Based on Total expenses, net of reimbursement** 1.18% 1.21% 1.27% 1.16% 1.09%
Average Net ========= ========= ========= ========= =========
Assets Of Total expenses** 1.18% 1.21% 1.27% 1.16% 1.09%
Common Stock: ========= ========= ========= ========= =========
Total investment income--net** 8.40% 8.03% 8.08% 8.34% 7.52%
========= ========= ========= ========= =========
Amount of dividends to Preferred
Stock shareholders .66% 1.08% 2.32% 1.83% 1.27%
========= ========= ========= ========= =========
Investment income--net, to Common
Stock shareholders 7.74% 6.95% 5.76% 6.51% 6.25%
========= ========= ========= ========= =========
Ratios Based on Total expenses, net of reimbursement .77% .78% .80% .74% .73%
Average Net ========= ========= ========= ========= =========
Assets Of Total expenses .77% .78% .80% .74% .73%
Common & Preferred ========= ========= ========= ========= =========
Stock:** Total investment income--net 5.47% 5.17% 5.10% 5.35% 5.05%
========= ========= ========= ========= =========
Ratios Based on Dividends to Preferred Stock shareholders 1.23% 1.96% 3.97% 3.27% 2.58%
Average Net ========= ========= ========= ========= =========
Assets Of
Preferred Stock:
Supplemental Net assets applicable to Common Stock,
Data: end of year (in thousands) $ 207,960 $ 200,091 $ 189,787 $ 181,324 $ 221,118
========= ========= ========= ========= =========
Preferred Stock outstanding, end
of year (in thousands) $ 110,000 $ 110,000 $ 110,000 $ 110,000 $ 110,000
========= ========= ========= ========= =========
Portfolio turnover 50.68% 62.94% 91.25% 137.69% 66.07%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $ 2,891 $ 2,819 $ 2,725 $ 2,648 $ 3,010
========= ========= ========= ========= =========
Dividends Per Series A--Investment income--net $ 315 $ 492 $ 1,016 $ 820 $ 657
Share on ========= ========= ========= ========= =========
Preferred Stock Series B--Investment income--net $ 302 $ 490 $ 968 $ 813 $ 642
Outstanding: ========= ========= ========= ========= =========
*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 charges. If applicable, the Fund's Investment
Adviser waived a portion of its management fee. Without such waiver,
the Fund's performance would have been lower.
**Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Certain prior year amounts have been reclassified to conform to
current year presentation.
++++Based on average shares outstanding.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. The Fund's financial statements
are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use
of management accruals and estimates. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol MHD. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of
options traded in the over-counter-market, valuation is the last
asked price (options written) or the last bid price (options
purchased). Securities with remaining maturities of sixty days or
less are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movement and movements in the securities market. Losses may arise
due to changes in the value of the contract or if the counterparty
does not perform under the contract.
MuniHoldings Fund, Inc., April 30, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts.
Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
* Options--The Fund is authorized to write covered call options and
purchase 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.
* Forward interest rate swaps--The Fund is authorized to enter into
forward interest rate swaps. In a forward interest rate swap, the
Fund and the counterparty agree to pay or receive interest on a
specified notional contract amount, commencing on a specified future
effective date, unless terminated earlier. The value of the
agreement is determined by quoted fair values received daily by the
Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of
the agreement.
(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). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual basis. The Fund amortizes all premiums and
discounts on debt securities.
(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--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/tax difference of $4,695 has been reclassified
between undistributed net investment income and accumulated net
realized capital losses. This reclassification has 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 .55% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock. For the year ended April 30, 2003, FAM
reimbursed the Fund in the amount of $2,403.
For the year ended April 30, 2003, the Fund reimbursed FAM $7,342
for certain accounting services.
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 April 30, 2003 were $172,374,740
and $155,415,422, respectively.
Net realized gains for the year ended April 30, 2003 and net
unrealized gains as of April 30, 2003 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 2,818,349 $ 6,920,489
------------ ------------
Total $ 2,818,349 $ 6,920,489
============ ============
As of April 30, 2003, net unrealized appreciation for Federal income
tax purposes aggregated $7,045,767, of which $17,503,759 related
to appreciated securities and $10,457,992 related to depreciated
securities. The aggregate cost of investments at April 30, 2003 for
Federal income tax purposes was $309,923,318.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of 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 stock
without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the years ended April 30, 2003
and April 30, 2002 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.10 per share and a
liquidation preference of $25,000 per share plus accrued and unpaid
dividends, that entitle their holders to receive cash dividends at
an annual rate that may vary for the successive dividend periods.
The yields in effect at April 30, 2003 were as follows: Series A,
1.15% and Series B, 1.20%.
Shares issued and outstanding for the years ended April 30, 2003 and
April 30, 2002 remained constant.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the year ended April
30, 2003, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an
affiliate of FAM, earned $175,133 as commissions.
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common
Stock in the amount of $.090000 per share on May 29, 2003 to
shareholders of record on May 16, 2003.
The tax character of distributions paid during the fiscal years
ended April 30, 2003 and April 30, 2002 was as follows:
4/30/2003 4/30/2002
Distributions paid from:
Tax-exempt income $ 14,919,054 $ 14,962,046
------------ ------------
Total distributions $ 14,919,054 $ 14,962,046
============ ============
As of April 30, 2003, the components of accumulated earnings on a
tax basis were as follows:
Undistributed tax-exempt income--net $ 4,258,853
Undistributed long-term capital gains--net --
------------
Total undistributed earnings--net 4,258,853
Capital loss carryforward (8,747,456)*
Unrealized gains--net 6,920,717**
------------
Total accumulated earnings--net $ 2,432,114
============
*On April 30, 2003, the Fund had a net capital loss carryforward of
$8,747,456, of which $1,675,186 expires in 2008 and $7,072,270
expires in 2009. This amount will be available to offset like
amounts of any future taxable gains.
**The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the tax deferral of losses on
straddles and the difference between book and tax amortization
methods for premiums and discounts on fixed income securities.
MuniHoldings Fund, Inc., April 30, 2003
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
MuniHoldings Fund, Inc.:
We have audited the accompanying statement of net assets of
MuniHoldings Fund, Inc., including the schedule of investments, as
of April 30, 2003, 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 five years in the period then ended. 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 auditing standards
generally accepted in the United States. 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 April 30, 2003, by
correspondence with the custodian and others. 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 MuniHoldings Fund, Inc. at April 30, 2003, 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 the financial highlights for each of the indicated periods in
conformity with accounting principles generally accepted in the
United States.
(Ernst & Young LLP)
MetroPark, New Jersey
June 6, 2003
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniHoldings
Fund, Inc. during its taxable year ended April 30, 2003 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Please retain this information for your records.
MANAGED DIVIDEND POLICY (unaudited)
The Fund's dividend policy is to distribute all or a portion of its
net investment income to its shareholders on a monthly basis. In
order to provide shareholders with a more consistent yield to the
current trading price of shares of Common Stock of the Fund, the
Fund may at times pay out less than the entire amount of net
investment income earned in any particular month and may at times in
any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As
a result, the dividends paid by the Fund for any particular month
may be more or less than the amount of net investment income earned
by the Fund during such month. The Fund's current accumulated but
undistributed net investment income, if any, is disclosed in the
Statement of Net Assets, which comprises part of the financial
information included in this report.
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of April 30, 2003
were as follows:
Percent of
S&P Rating/Moody's Rating Total Investments
AAA/Aaa 27.6%
AA/Aa 8.4
A/A 11.4
BBB/Baa 25.4
BB/Ba 4.4
B/B 1.4
CCC/Caa 1.0
Other++ 0.2
NR (Not Rated) 20.2
++Temporary investments in short-term municipal securities.
MuniHoldings Fund, Inc., April 30, 2003
OFFICERS AND DIRECTORS (unaudited)
Number of Other
Portfolios in Director-
Position(s) Length Fund Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Terry K. Glenn* President 1999 to President and Chairman of Merrill Lynch 118 Funds None
P.O.Box 9011 and present Investment Managers, L.P. ("MLIM")/Fund 162 Portfolios
Princeton, Director and Asset Management, L.P. ("FAM")--Advised
NJ 08543-9011 1987 to Funds since 1999; Chairman (Americas
Age: 62 present Region) of MLIM from 2000 to 2002;
Executive Vice President of MLIM
and FAM (which terms as used herein
include their corporate predecessors)
from 1983 to 2002; President of FAM
Distributors. Inc. ("FAMD") from
1986 to 2002 and Director thereof
from 1991 to 2002; Executive Vice
President and Director of Princeton
Services, Inc. ("Princeton Services")
from 1993 to 2002; President of Princeton
Administrators, L.P. from 1989 to 2002;
Director of Financial Data Services, Inc.
from 1985 to 2002.
*Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which FAM or MLIM acts as
investment adviser. Mr. Glenn is an "interested person" as described
in the Investment Company Act, of the Fund based on his former
positions with FAM, MLIM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Director's term is unlimited. Directors
serve until their resignation, removal or death, or until December
31, of the year in which they turn 72. As Fund President, Mr. Glenn
serves at the pleasure of the Board of Directors.
Independent Directors*
Ronald W. Forbes Director 1997 to Professor Emeritus of Finance, School 44 Funds None
P.O. Box 9095 present of Business, State University of New York 50 Portfolios
Princeton, at Albany since 2000 and Professor thereof
NJ 08543-9095 from 1989 to 2000; International Consultant,
Age: 62 Urban Institute from 1995 to 1999.
Cynthia A. Montgomery Director 1997 to Professor, Harvard Business School since 44 Funds Unum
P.O. Box 9095 present 1989; Director, Unum Provident Corporation 50 Portfolios Provident
Princeton, since 1990; Director, Newell Rubbermaid, Corpora-
NJ 08543-9095 Inc. since 1995. tion;
Age: 50 Newell
Rubber-
maid, Inc.
Charles C. Reilly Director 1997 to Self-employed financial consultant since 44 Funds None
P.O. Box 9095 present 1990. 50 Portfolios
Princeton,
NJ 08543-9095
Age: 71
Kevin A. Ryan Director 1997 to Founder and Director Emeritus of The Boston 44 Funds None
P.O. Box 9095 present University Center for the Advancement of 50 Portfolios
Princeton, Ethics and Character; Professor of Education
NJ 08543-9095 at Boston University from 1982 to 1999 and
Age: 70 Professor Emeritus since 1999.
Roscoe S. Suddarth Director 2000 to President, Middle East Institute from 1995 44 Funds None
P.O. Box 9095 present to 2001; Foreign Service Officer, United 50 Portfolios
Princeton, States Foreign Service from 1961 to 1995;
NJ 08543-9095 Career Minister from 1989 to 1995; Deputy
Age: 67 Inspector General, U.S. Department of State
from 1991 to 1994; U.S. Ambassador to the
Hashemite Kingdom of Jordan from 1987 to 1990.
Richard R. West Director 1997 to Dean Emeritus of New York University, 44 Funds Bowne &
P.O. Box 9095 present Leonard N. Stern School of Business 50 Portfolios Co., Inc.;
Princeton, Administration since 1994. Vornado
NJ 08543-9095 Operating
Age: 65 Company;
Vornado
Realty Trust;
Alexander's,
Inc.
Edward D. Zinbarg Director 2000 to Self-employed financial consultant since 44 Funds None
P.O. Box 9095 present 1994. 50 Portfolios
Princeton,
NJ 08543-9095
Age: 68
*The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72.
Position(s) Length
Held of Time
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
Fund Officers
Donald C. Burke Vice 1997 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof
P.O. Box 9011 President present since 1999; Senior Vice President and Treasurer of Princeton Services
Princeton, and and since 1999; Vice President of FAMD since 1999; Director of MLIM Taxation
NJ 08543-9011 Treasurer 1999 to since 1990.
Age: 42 present
Kenneth A. Jacob Senior 2002 to Managing Director of MLIM since 2000 and Director (Municipal Tax-Exempt
P.O. Box 9011 Vice present Fund Management) of MLIM from 1997 to 2000.
Princeton, President
NJ 08543-9011
Age: 52
John M. Loffredo Senior 2002 to Managing Director of MLIM since 2000 and Director (Municipal Tax-Exempt
P.O. Box 9011 Vice present Fund Management) of MLIM from 1998 to 2000.
Princeton, President
NJ 08543-9011
Age: 39
Robert A. DiMella Vice 1997 to Director (Municipal Tax-Exempt Fund Management) of MLIM since 2002;
P.O. Box 9011 President present Vice President of MLIM from 1996 to 2002.
Princeton,
NJ 08543-9011
Age: 36
Brian D. Stewart Secretary 2002 to Vice President (Legal Advisory) of MLIM since 2002; Attorney with Reed
P.O. Box 9011 present Smith from 2001 to 2002; Attorney with Saul Ewing from 1999 to 2001.
Princeton,
NJ 08543-9011
Age: 33
*Officers of the Fund serve at the pleasure of the Board of
Directors.
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MHD
MuniHoldings Fund, Inc., April 30, 2003
AUTOMATIC DIVIDEND REINVESTMENT PLAN (unaudited)
The following description of the Fund's Automatic Dividend
Reinvestment Plan (the "Plan") is sent to you annually as required
by Federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Stock
otherwise elects, all dividend and capital gains distributions
will be automatically reinvested by The Bank of New York (the "Plan
Agent"), as agent for shareholders in administering the Plan, in
additional shares of Common Stock of the Fund. Holders of Common
Stock who elect not to participate in the Plan will receive all
distributions in cash paid by check mailed directly to the
shareholder of record (or, if the shares are held in street or
other nominee name then to such nominee) by The Bank of New York,
as dividend paying agent. Such participants may elect not to
participate in the Plan and to receive all distributions of
dividends and capital gains in cash by sending written instructions
to The Bank of New York, as dividend paying agent, at the address
set forth below. Participation in the Plan is completely voluntary
and may be terminated or resumed at any time without penalty by
written notice if received by the Plan Agent not less than ten days
prior to any dividend record date; otherwise such termination will
be effective with respect to any subsequently declared dividend or
distribution.
Whenever the Fund declares an income dividend or capital gains
distribution (collectively referred to as "dividends") payable
either in shares or in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the
equivalent in shares of Common Stock. The shares will be acquired by
the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of
additional unissued but authorized shares of Common Stock from the
Fund ("newly issued shares") or (ii) by purchase of outstanding
shares of Common Stock on the open market ("open-market purchases")
on the New York Stock Exchange or elsewhere. If on the payment date
for the dividend, the net asset value per share of the Common Stock
is equal to or less than the market price per share of the Common
Stock plus estimated brokerage commissions (such conditions being
referred to herein as "market premium"), the Plan Agent will invest
the dividend amount in newly issued shares on behalf of the
participant. The number of newly issued shares of Common Stock to be
credited to the participant's account will be determined by dividing
the dollar amount of the dividend by the net asset value per share
on the date the shares are issued, provided that the maximum
discount from the then current market price per share on the date of
issuance may not exceed 5%. If on the dividend payment date the net
asset value per share is greater than the market value (such
condition being referred to herein as "market discount"), the Plan
Agent will invest the dividend amount in shares acquired on behalf
of the participant in open-market purchases.
In the event of a market discount on the dividend payment date, the
Plan Agent will have until the last business day before the next
date on which the shares trade on an "ex-dividend" basis or in no
event more than 30 days after the dividend payment date (the "last
purchase date") to invest the dividend amount in shares acquired in
open-market purchases. It is contemplated that the Fund will pay
monthly income dividends. Therefore, the period during which open-
market purchases can be made will exist only from the payment date
on the dividend through the date before the next "ex-dividend" date,
which typically will be approximately ten days. If, before the Plan
Agent has completed its open-market purchases, the market price of a
share of Common Stock exceeds the net asset value per share, the
average per share purchase price paid by the Plan Agent may exceed
the net asset value of the Fund's shares, resulting in the
acquisitions of fewer shares than if the dividend had been paid in
newly issued shares on the dividend payment date. Because of the
foregoing difficulty with respect to open-market purchases, the Plan
provides that if the Plan Agent is unable to invest the full
dividend amount in open-market purchases during the purchase period
or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will cease making open-market
purchases and will invest the uninvested portion of the dividend
amount in newly issued shares at the close of business on the last
purchase date determined by dividing the uninvested portion of the
dividend by the net asset value per share.
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account,
including information needed by shareholders for tax records. Shares
in the account of each Plan participant will be held by the Plan
Agent in non-certificated form in the name of the participant, and
each shareholder's proxy will include those shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for shares
held pursuant to the Plan in accordance with the instructions of the
participants.
In the case of shareholders such as banks, brokers or nominees
which hold shares of others who are the beneficial owners, the
Plan Agent will administer the Plan on the basis of the number of
shares certified from time to time by the record shareholders as
representing the total amount registered in the record shareholder's
name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued
directly by the Fund as a result of dividends or capital gains
distributions payable either in shares or in cash. However, each
participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open-market purchases in
connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not
relieve participants of any Federal, state or local income tax that
may be payable (or required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not
available to shareholders not participating in the Plan. If the
market price plus commissions of the Fund's shares is above the net
asset value, participants in the Plan will receive shares of the
Fund at less than they could otherwise purchase them and will have
shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market
price plus commissions is below the net asset value, participants
will receive distributions in shares with a net asset value greater
than the value of any cash distribution they would have received on
their shares. However, there may be insufficient shares available in
the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price
on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be
excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income. If, when the Fund's
shares are trading at a premium over net asset value, the Fund
issues shares pursuant to the Plan that have a greater fair market
value than the amount of cash reinvested, it is possible that all or
a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable
distribution. If the discount is viewed as a taxable distribution,
it is also possible that the taxable character of this discount
would be allocable to all the shareholders, including shareholders
who do not participate in the Plan. Thus, shareholders who do not
participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable
share of the discount.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the
Plan. There is no direct service charge to participants in the Plan;
however, the Fund reserves the right to amend the Plan to include a
service charge payable by the participants.
All correspondence concerning the Plan should be directed to the
Plan Agent at The Bank of New York, Church Street Station, P.O. Box
11258, New York , NY 10286-1258, Telephone: 800-432-8224.
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (not answered until
July 15, 2003 and only annually for funds)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. -N/A (not answered until July 15, 2003 and only annually
for funds)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-
3 under the Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees.
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A (not answered until July 1, 2003)
Item 8--Reserved
Item 9(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MuniHoldings Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
MuniHoldings Fund, Inc.
Date: June 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
MuniHoldings Fund, Inc.
Date: June 23, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniHoldings Fund, Inc.
Date: June 23, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.