-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UgO11i8/5UD+inDtKY8+NWbobo1/7HtZ0on8OhmvDvSGz0SrFyeq7Yi+duKfCvIr Ai2OS1uV2aWJhwcbYmTJbg== 0000900092-03-000079.txt : 20030630 0000900092-03-000079.hdr.sgml : 20030630 20030630111047 ACCESSION NUMBER: 0000900092-03-000079 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030430 FILED AS OF DATE: 20030630 EFFECTIVENESS DATE: 20030630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIHOLDINGS FUND INC CENTRAL INDEX KEY: 0001034665 IRS NUMBER: 223508039 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08081 FILM NUMBER: 03762988 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD STREET 2: C/O MERRILL LYNCH ASSET MANAGEMENT CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: 6092823087 MAIL ADDRESS: STREET 1: MERRILL LYNCH ASSET MANAGEMENT STREET 2: INFO SYSTEMS SECT 2-B PO BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-CSR 1 ml7015.txt MUNIHOLDINGS 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. EX-99.CERT 3 ex99cert.txt EX-99 CERT EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Terry K. Glenn, President of MuniHoldings Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of MuniHoldings Fund, Inc. (the "Fund"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Fund's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the Fund and have: a) designed such disclosure controls and procedures to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Fund's other certifying officers and I have disclosed, based on our most recent evaluation, to the Fund's auditors and the audit committee of the Fund's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Fund's ability to record, process, summarize, and report financial data and have identified for the Fund's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls; and 6. The Fund's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 23, 2003 /s/ Terry K. Glenn Terry K. Glenn, President of MuniHoldings Fund, Inc. EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Donald C. Burke, Chief Financial Officer of MuniHoldings Fund, Inc., certify that: 1. I have reviewed this report on Form N-CSR of MuniHoldings Fund, Inc. (the "Fund"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Fund's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the Fund and have: a) designed such disclosure controls and procedures to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the Fund's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Fund's other certifying officers and I have disclosed, based on our most recent evaluation, to the Fund's auditors and the audit committee of the Fund's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Fund's ability to record, process, summarize, and report financial data and have identified for the Fund's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal controls; and 6. The Fund's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 23, 2003 /s/ Donald C. Burke Donald C. Burke, Chief Financial Officer of MuniHoldings Fund, Inc. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Terry K. Glenn, President of MuniHoldings Fund, Inc. (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: June 23, 2003 /s/ Terry K. Glenn Terry K. Glenn, President of MuniHoldings Fund, Inc. A signed original of this written statement required by Section 906 has been provided to MuniHoldings Fund, Inc. and will be retained by MuniHoldings Fund, Inc. and furnished to the Securities and Exchange Commission or staff upon request. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of MuniHoldings Fund, Inc. (the"Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: June 23, 2003 /s/ Donald C. Burke Donald C. Burke, Chief Financial Officer of MuniHoldings Fund, Inc. A signed original of this written statement required by Section 906 has been provided to MuniHoldings Fund, Inc. and will be retained by MuniHoldings Fund, Inc. and furnished to the Securities and Exchange Commission or staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----