MUNIHOLDINGS
FUND, INC.
FUND LOGO
Semi-Annual Report
October 31, 2000
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 the ability to leverage its Common Stock
by issuing Preferred Stock to provide the Common Stock shareholders
with a potentially higher rate of return. Leverage creates risks for
Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of shares of the
Common Stock, and the risk that fluctuations in the short-term
dividend rates of the Preferred Stock may affect the yield to Common
Stock shareholders. Statements and other information herein are as
dated and are subject to change.
MuniHoldings 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.
MuniHoldings Fund, Inc., October 31, 2000
DEAR SHAREHOLDER
For the six months ended October 31, 2000, the Common Stock of
MuniHoldings Fund, Inc. earned $0.427 per share income dividends,
which included earned and unpaid dividends of $0.066. This
represents a net annualized yield of 6.25%, based on a month-end per
share net asset value of $13.55 per share. Over the same period, the
total investment return on the Fund's Common Stock was +6.60%, based
on a change in per share net asset value from $13.16 to $13.55, and
assuming reinvestment of $0.440 per share income dividends.
For the six-month period ended October 31, 2000, the Fund's Auction
Market Preferred Stock had an average yield of 4.25% for Series A
and 4.04% for Series B.
The Municipal Market Environment
During the six months ended October 31, 2000, long-term US Treasury
bond yields generally drifted lower. A number of economic
indicators, particularly employment, new home sales and consumer
spending, have suggested that US economic growth, while still
strong, has moderated from 1999's robust levels. Preliminary
estimates for third-quarter 2000 US gross domestic product growth
were recently released at 2.7%, well below the first-quarter 2000
rate of 4.8% and the second-quarter 2000 rate of 5.6%. This decline
in economic growth suggests to some analysts that the Federal
Reserve Board has finished raising interest rates for its current
interest rate cycle. The Federal Reserve Board increased short-term
interest rates at its May meeting and has since kept monetary policy
steady at its subsequent meetings. Given the potential for stable
short-term interest rates in the coming months, investor emphasis
focused on the continuing US Treasury debt reduction program and
forecasts of sizeable Federal budgetary surpluses going forward.
Many investors have concluded that there will be a significant
future shortage of longer-dated maturity US Treasury securities. By
late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%, their lowest level in more than a year.
However, for the remainder of the period, bond yields were unable to
maintain their earlier gains. Rising oil prices were the major focus
behind the decline in bond prices, as many investors feared that
higher oil prices would result in increased inflationary pressures.
Additionally, US corporations issued large amounts of taxable debt
in order to take advantage of the current low interest rate
environment. During the last three months, US corporations issued
more than $100 billion in investment-grade securities, offering
yields in the 7.25%--9% range. Many investors found these taxable
issues an attractive and more plentiful alternative to US Treasury
bonds. As the demand for US Treasury issues weakened, US bond yields
rose. Although US Treasury bond yields rose to 5.78% by the end of
October 2000, overall they declined almost 20 basis points during
the last six months.
The six-month period ended October 31, 2000 was one of the few
periods in recent years in which the tax-exempt bond market
outperformed its taxable counterpart, the US Treasury bond market.
While municipal bond yields followed the similar seesaw pattern of
Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively
narrow range during much of October 2000. Overall investor demand
for municipal bonds remained strong, allowing tax-exempt bond
yields, as measured by the Bond Buyer Revenue Bond Index, to decline
30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has
continued to decline, albeit at a slower rate than earlier this
year. Over this period, more than $53 billion in new long-term
municipal bonds was issued, a decline of 3% compared to the same
three-month period in 1999. During the last six months, more than
$105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200
billion in new municipal securities was marketed during the past
year, a decline of more than 16% compared to the same 12-month
period in 1999.
The demand for municipal bonds came from a number of non-traditional
and conventional sources. Derivative/arbitrage programs and
insurance companies remained the dominant institutional buyers,
while individual retail purchases also remained strong. Traditional,
open-end tax-exempt mutual funds have continued to see significant
disintermediation. It was recently reported that thus far during the
2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately,
the combination of reduced new bond issuance and ongoing demand from
non-traditional sources has been able to more than offset the
decline in demand from tax-exempt mutual funds. This favorable
balance has fostered a significant decline in municipal bond yields
in recent months.
Currently, there is no reason to expect that the positive technical
position of the municipal bond market will significantly
deteriorate. The steeply positive yield curve and the relatively
high credit quality that the tax-exempt bond market offers should
continue to attract different classes of institutional buyers.
Strong state and local governmental financial conditions also
suggest that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-
exempt bond market. Various tax and spending programs proposed by
both candidates have obvious implications for state and local
governments as well as corporate and individual taxpayers. Political
history has shown that the enactment of campaign promises, both
Republican and Democratic, has very often been a long, laborious
process. This suggests that over the next few months US economic
factors will most likely have a greater effect on bond yields than
political considerations.
Portfolio Strategy
During the six-month period ended October 31, 2000, we focused on
seeking to enhance tax-exempt income to the Fund's Common Stock
shareholders through the use of leverage. In our opinion, the Fund's
structure was conducive to accomplishing this goal. The fixed-income
market was subject to price volatility resulting from continued
strong economic growth and uncertainty surrounding the magnitude of
future monetary tightening by the Federal Reserve Board. Although
there is evidence of an economic slowdown, there still seems to be
concern about higher inflation in the future. Our fully invested
position, accentuated by our leveraged strategy, subjected the
Fund's net asset value to the volatility that accompanies such a
drastic rise and fall in interest rates.
During the past six months, the combination of increased volatility
in the municipal marketplace and widening of credit spreads in all
fixed-income markets caused the Fund's lower investment-grade and
below investment-grade issues to underperform the general market.
Sectors under considerable pressure were healthcare services,
airlines and industrial development bonds. We traded several of
these issues for tax reasons, but we believe these credits are
providing incremental yields that should help the Fund's long-term
performance.
The yield on the Fund's Auction Market Preferred Stock averaged
4.16% throughout the six-month period ended October 31, 2000.
Although the Federal Reserve Board's tightening bias caused this
rate to be higher than the historical average, leverage continued to
benefit Common Stock shareholders by significantly augmenting their
yield. 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
complete explanation of the benefits and risks of leveraging, see
page 1 of this report to shareholders.)
Going forward, we believe the Fund is well structured with the
ability to provide a high current income and for low volatility. We
expect to maintain this strategy until the economy has slowed and
the Federal Reserve Board believes it has contained inflation.
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
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Robert A. DiMella)
Robert A. DiMella
Vice President and Portfolio Manager
December 1, 2000
MuniHoldings Fund, Inc., October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Arizona--3.9% B+ Ba3 $ 5,000 Apache County, Arizona, IDA, PCR, Refunding (Tucson Electric
Power Co. Project), Series B, 5.875% due 3/01/2033 $ 4,421
NR* B1 3,000 Phoenix, Arizona, IDA, Airport Facility Revenue
Refunding Bonds (America West Airlines Inc.
Project), AMT, 6.30% due 4/01/2023 2,671
NR* NR* 975 Show Low, Arizona, Improvement District No. 5, Special
Assessment Bonds, 6.375% due 1/01/2015 995
AAA Aaa 3,350 Tucson, Arizona, Airport Authority Incorporated, Revenue
Refunding Bonds, 5.70% due 6/01/2013 (e) 3,429
California AAA Aaa 1,000 Anaheim, California, Public Financing Authority, Lease
--11.4% Revenue Bonds (Public Improvements
Project), Series C, 6.20%** due 9/01/2024 (d) 261
BBB NR* 4,500 Contra Costa County, California, Public Financing Authority,
Tax Allocation Revenue Refunding Bonds (Pleasant Hill Bart Etc.
Redevelopment), 5.25% due 8/01/2028 4,137
Foothill--De Anza, California, Community College
District, GO (e):
AAA Aaa 4,390 6.24%** due 8/01/2025 1,087
AAA Aaa 5,290 6.24%** due 8/01/2026 1,235
AAA Aaa 5,205 6.25%** due 8/01/2027 1,147
AAA Aaa 6,105 6.25%** due 8/01/2028 1,270
AAA Aaa 5,215 6.26%** due 8/01/2029 1,022
Montebello, California, Unified School District, GO (c):
AAA Aaa 2,350 5.61%** due 8/01/2021 735
AAA Aaa 2,405 5.61%** due 8/01/2022 710
AAA Aaa 2,455 5.61%** due 8/01/2023 684
Sacramento County, California, Sanitation District
Financing Authority, Revenue Refunding Bonds:
AA Aa3 11,450 RIB, Series 366, 7.64% due 12/01/2027 (h) 12,127
AA Aa3 4,695 Series A, 5.60% due 12/01/2017 4,822
San Marino, California, Unified School District, GO,
Series A (e):
AAA Aaa 2,195 5.63%** due 7/01/2020 732
AAA Aaa 2,330 5.66%** due 7/01/2021 732
AAA Aaa 2,665 5.68%** due 7/01/2022 790
AAA Aaa 2,830 5.69%** due 7/01/2023 792
AAA Aaa 6,080 5.71%** due 7/01/2025 1,513
Connecticut AAA Aaa 5,830 Bridgeport, Connecticut, GO, Refunding, Series A,
--11.5% 6% due 7/15/2012 (c) 6,319
NR* NR* 2,735 Connecticut State Development Authority, IDR
(AFCO Cargo BDL--LLC Project), AMT, 8% due 4/01/2030 2,789
BBB- Ba1 3,000 Connecticut State Health and Educational Facilities Authority,
Revenue Refunding Bonds (University of Hartford),
Series D, 6.80% due 7/01/2022 3,034
Connecticut State Special Tax Obligation Revenue Bonds:
NR* Aaa 4,485 RIB, Series 372, 7.59% due 12/01/2017 (c)(h) 5,043
AAA Aaa 9,805 (Transportation Infrastructure), Series A, 5.50%
due 9/01/2011 (d) 10,362
AAA Aaa 6,205 (Transportation Infrastructure), Series A,
5.50% due 9/01/2012 (d) 6,504
District of AAA Aaa 5,690 District of Columbia, University Revenue Refunding
Columbia--4.7% Bonds (George Washington University),
Series A, 5.75% due 9/15/2020 (e) 5,792
AAA Aaa 2,250 District of Columbia, Water and Sewer Authority,
Public Utility Revenue Refunding Bonds,
5.50% due 10/01/2017 (d) 2,282
AAA Aaa 6,380 Washington, D.C., Convention Center Authority, Dedicated
Tax Revenue Bonds, Senior Lien, 5% due 10/01/2021 (a) 5,867
Illinois--9.7% NR* NR* 895 Beardstown, Illinois, IDR (Jefferson Smurfit Corp.
Project), 8% due 10/01/2016 933
BBB NR* 5,000 Illinois Development Finance Authority, Revenue Refunding
Bonds (Community Rehab Providers), Series A, 6.05% due 7/01/2019 4,490
A A3 2,430 Illinois Health Facilities Authority, Revenue Refunding
Bonds (Riverside Health System), Series A, 6% due 11/15/2015 2,364
AAA Aaa 10,000 Illinois Regional Transportation Authority Revenue Bonds,
6.50% due 7/01/2026 11,441
NR* Aaa 6,535 McLean and Woodford Counties, Illinois, Community Unit School
District Number 005, GO, Refunding, 5.625% due 12/01/2017 (d) 6,645
AAA Aaa 3,000 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Refunding Bonds (McCormick Plant
Expansion Project), 5.50% due 12/15/2024 (c) 2,941
Indiana--2.5% NR* NR* 8,985 Allen County, Indiana, Redevelopment District Tax Increment
Revenue Bonds (General Motors Development Area), 7%** due
11/15/2013 3,831
AAA Aaa 3,550 Shelby, Indiana, Eastern School Building Corporation, First
Mortgage Revenue Bonds, 6% due 1/15/2025 (c) 3,692
Kentucky--1.0% NR* NR* 3,150 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds
(TJ International Project), AMT, 6.55% due 4/15/2027 3,102
Maryland--2.9% NR* NR* 1,875 Anne Arundel County, Maryland, Special Obligation Revenue
Bonds (Arundel Mills Project), 7.10% due 7/01/2029 1,910
NR* NR* 6,550 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration--AES Warrior Run),
AMT, 7.40% due 9/01/2019 6,635
Massachusetts AAA Aaa 5,980 Massachusetts Bay Transportation Authority, Massachusetts,
--3.7% General Transportation System Revenue Bonds, Series A,
5% due 3/01/2027 (c) 5,495
AAA Aaa 5,325 Route 3 North Transit Improvement Association, Massachusetts,
Lease Revenue Bonds, 5.625% due 6/15/2020 (e) 5,378
Minnesota--1.8% Robbinsdale, Minnesota, Independent School District
Number 281, GO:
NR* Aa1 2,410 5.50% due 2/01/2016 2,442
NR* Aa1 2,850 5.625% due 2/01/2019 2,881
</TABLE>
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 at right.
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
MuniHoldings Fund, Inc., October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Mississippi BBB- Ba1 $ 7,675 Claiborne County, Mississippi, PCR, Refunding (System
--5.0% Energy Resources Inc. Project),
6.20% due 2/01/2026 $ 7,326
BBB- Ba1 3,000 Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources Inc. Project),
5.90% due 5/01/2022 2,780
NR* NR* 4,825 Mississippi Development Bank, Special Obligation
Revenue Refunding Bonds (Diamond Lakes Utilities), Series A,
6.25% due 12/01/2017 4,589
Missouri--0.1% NR* NR* 215 Missouri State Health and Educational Facilities Authority
Revenue Bonds (Southwest Baptist University Project),
9.50% due 10/01/2001 (b) 224
New Jersey NR* NR* 3,000 New Jersey EDA, Retirement Community Revenue Bonds
--3.6% (Seabrook Village Inc.), Series A, 8.25% due 11/15/2030 2,903
BBB- Baa3 3,425 New Jersey Health Care Facilities Financing Authority,
Revenue Refunding Bonds (Saint Elizabeth Hospital Obligation
Group), 6% due 7/01/2020 3,048
AAA Aaa 4,425 Salem County, New Jersey, Industrial Pollution Control
Financing Authority, Revenue Refunding Bonds (Public Service
Electric & Gas), RIB, Series 380, 7.94% due 6/01/2031 (e)(h) 4,825
New Mexico Farmington, New Mexico, PCR, Refunding, Series A:
--1.1% A1+ P1 300 (Arizona Public Service Company), VRDN, 4.60% due 5/01/2024 (f) 300
BBB- Baa3 2,000 (Public Service Company--San Juan Project), 6.30% due 12/01/2016 1,955
AAA Aaa 1,000 Los Alamos County, New Mexico, Utility System Revenue
Refunding Bonds, Series A, 6% due 7/01/2015 (d) 1,056
New York--16.5% AAA Aaa 4,000 Metropolitan Transportation Authority, New York, Dedicated
Tax Fund Revenue Bonds, Series A, 5.50% due 4/01/2016 (e) 4,045
BBB+ Baa1 7,500 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series A, 6% due 7/01/2024 7,682
NR* Aaa 6,000 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds, RITR,
Series 11, 7.07% due 6/15/2026 (d)(h) 6,180
AA+ Aa2 5,000 New York City, New York, City Transitional Finance
Authority Revenue Bonds, Future Tax Secured, Series B,
4.75% due 11/15/2023 4,372
New York City, New York, GO:
AAA Aaa 11,000 Refunding, Series G, 5.75% due 2/01/2014 (c) 11,428
AAA Aaa 10,000 Series F, 6% due 8/01/2016 (e) 10,498
NR* Aaa 4,745 New York State Mortgage Agency Revenue Bonds, AMT,
24th Series, 6.05% due 4/01/2020 4,829
Ohio--0.8% NR* Ba2 2,750 Cleveland, Ohio, Airport Special Revenue Refunding Bonds
(Continental Airlines Inc. Project), AMT, 5.70% due 12/01/2019 2,366
Oregon--0.4% NR* NR* 1,300 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), AMT,
Series B, 7.40% due 1/01/2016 1,337
Pennsylvania NR* VMIG1++ 6,800 Geisinger Authority, Pennsylvania, Health System
--7.0% Revenue Refunding Bonds (Penn State--Geisinger Health),
VRDN, Series B, 4.60% due 8/15/2028 (f) 6,800
NR* NR* 3,250 Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue Bonds (National Gypsum Company),
AMT, Series A, 6.25% due 11/01/2027 2,718
AAA NR* 4,970 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds (Eastern College),
Series B, 8% due 10/15/2006 (g) 5,914
Philadelphia, Pennsylvania, Authority for IDR, Refunding
(Commercial Development):
NR* NR* 4,000 (Days Inn), Series B, 6.50% due 10/01/2027 3,858
NR* NR* 1,500 (Doubletree), Series A, 6.50% due 10/01/2027 1,447
Tennessee--3.0% Hardeman County, Tennessee, Correctional Facilities Corporation
Revenue Bonds:
NR* NR* 680 7% due 8/01/2004 699
NR* NR* 4,500 7.75% due 8/01/2017 4,601
NR* Aa2 3,400 Tennessee Educational Loan Revenue Bonds (Educational
Funding South Inc.), AMT, Senior Series B, 6.20% due 12/01/2021 3,494
Texas--6.1% A1+ NR* 8,300 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Refunding Bonds (Methodist Hospital),
VRDN, 4.60% due 12/01/2025 (f) 8,300
BB Ba1 5,000 Houston, Texas, Airport System Revenue Bonds (Special
Facilities--Continental Airlines), AMT, Series B, 6.125%
due 7/15/2017 4,568
BBB- Baa3 3,500 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 3,364
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 1,974
Utah--0.0% NR* NR* 3,000 Tooele County, Utah, PCR, Refunding (Laidlaw Environmental),
AMT, Series A, 7.55% due 7/01/2027 113
Virginia--3.3% AAA Aaa 7,000 Fairfax County, Virginia, EDA, Resource Recovery Revenue
Refunding Bonds, AMT, Series A, 6.10% due 2/01/2011 (a) 7,625
NR* NR* 3,250 Peninsula Ports Authority, Virginia, Revenue Refunding
Bonds (Port Facility--Zeigler Coal), 6.90% due 5/02/2022 780
Pocahontas Parkway Associates Virginia, Toll Road
Revenue Bonds, First Tier, Sub-Series C:
NR* Ba1 5,600 6.25%** due 8/15/2028 688
NR* Ba1 5,700 6.25%** due 8/15/2029 649
Wyoming--0.1% NR* P1 200 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc.
Project), VRDN, 4.55% due 8/15/2020 (f) 200
Total Investments (Cost--$301,209)--100.1% 297,019
Liabilities in Excess of Other Assets--(0.1%) (154)
--------
Net Assets--100.0% $296,865
========
(a)AMBAC Insured.
(b)Escrowed to maturity.
(c)FGIC Insured.
(d)FSA Insured.
(e)MBIA Insured.
(f)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 2000.
(g)Prerefunded.
(h)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 2000.
*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.
See Notes to Financial Statements.
</TABLE>
MuniHoldings Fund, Inc., October 31, 2000
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of October 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost -- $301,209,172) $297,018,893
Cash 45,024
Receivables:
Interest $ 4,495,294
Securities sold 100,000 4,595,294
------------
Prepaid expenses 17,698
------------
Total assets 301,676,909
------------
Liabilities: Payables:
Securities purchased 4,479,983
Dividends to shareholders 138,850
Investment adviser 133,715 4,752,548
------------
Accrued expenses 59,789
------------
Total liabilities 4,812,337
------------
Net Assets: Net assets $296,864,572
============
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share
(4,400 shares of AMPS* issued and outstanding at
$25,000 per share liquidation preference) $110,000,000
Common Stock, par value $.10 per share (13,795,227 shares
issued and outstanding) $ 1,379,523
Paid-in capital in excess of par 204,148,460
Undistributed investment income--net 991,318
Accumulated realized capital losses on investments--net (12,601,771)
Accumulated distributions in excess of realized
capital gains on investments--net (2,862,679)
Unrealized depreciation on investments--net (4,190,279)
------------
Total--Equivalent to $13.55 net asset value per
share of Common Stock (market price--$11.4375) 186,864,572
------------
Total capital $296,864,572
============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended October 31, 2000
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 8,832,660
Income:
Expenses: Investment advisory fees $ 814,039
Commission fees 132,770
Accounting services 61,377
Professional fees 38,943
Printing and shareholder reports 38,539
Listing fees 19,272
Transfer agent fees 19,099
Directors' fees and expenses 12,502
Custodian fees 10,985
Pricing fees 5,391
Other 9,916
------------
Total expenses 1,162,833
------------
Investment income--net 7,669,827
------------
Realized and Realized gain on investments--net 637,707
Unrealized Gain on Change in unrealized depreciation on investments--net 5,356,358
Investments--Net: ------------
Net Increase in Net Assets Resulting from Operations $ 13,663,892
============
See Notes to Financial Statements.
</TABLE>
MuniHoldings Fund, Inc., October 31, 2000
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Oct. 31, 2000 April 30, 2000
<S> <S> <C> <C>
Operations: Investment income--net $ 7,669,827 $ 16,359,370
Realized gain (loss) on investments--net 637,707 (14,434,866)
Change in unrealized appreciation/depreciation
on investments--net 5,356,358 (22,283,350)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 13,663,892 (20,358,846)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (6,063,017) (12,979,741)
Shareholders: Preferred Stock (2,299,176) (3,592,336)
In excess of realized gain on investments--net:
Common Stock -- (2,333,931)
Preferred Stock -- (528,748)
------------ ------------
Net decrease in net assets resulting from
dividends and distributions to shareholders (8,362,193) (19,434,756)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders
in reinvestment of dividends 238,652 --
------------ ------------
Transactions:
Net Assets: Total increase (decrease) in net assets 5,540,351 (39,793,602)
Beginning of period 291,324,221 331,117,823
------------ ------------
End of period* $296,864,572 $291,324,221
============ ============
*Undistributed investment income--net $ 991,318 $ 1,683,684
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Six For the Year Ended For the Period
Months Ended April 30, May 2, 1997++ to
Increase (Decrease) in Net Asset Value: Oct. 31, 2000 2000 1999 April 30, 1998
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.16 $ 16.05 $ 16.00 $ 15.00
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .56 1.18 1.24 1.21
Realized and unrealized gain (loss) on
investments--net .44 (2.66) .40 1.03
---------- ---------- ---------- ----------
Total from investment operations 1.00 (1.48) 1.64 2.24
---------- ---------- ---------- ----------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.44) (.94) (.97) (.87)
Realized gain on investments--net -- -- (.32) --
In excess of realized gain on
investments--net -- (.17) -- --
---------- ---------- ---------- ----------
Total dividends and distributions to
Common Stock shareholders (.44) (1.11) (1.29) (.87)
---------- ---------- ---------- ----------
Capital charge resulting from issuance
of Common Stock -- -- -- (.03)
---------- ---------- ---------- ----------
Effect of Preferred Stock activity:++++
Dividends and distributions
to Preferred Stock shareholders:
Investment income--net (.17) (.26) (.21) (.26)
Realized gain on investments--net -- -- (.09) --
In excess of realized gain
on investments--net -- (.04) -- --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.08)
---------- ---------- ---------- ----------
Total effect of Preferred Stock activity (.17) (.30) (.30) (.34)
---------- ---------- ---------- ----------
Net asset value, end of period $ 13.55 $ 13.16 $ 16.05 $ 16.00
========== ========== ========== ==========
Market price per share, end of period $ 11.4375 $ 12.5625 $ 15.25 $ 14.75
========== ========== ========== ==========
Total Investment Based on market price per share (5.74%)+++ (10.47%) 12.06% 4.01%+++
Return:** ========== ========== ========== ==========
Based on net asset value per share 6.60%+++ (10.89%) 8.73% 12.83%+++
========== ========== ========== ==========
Ratios Based on Total expenses, net of reimbursement*** 1.26%* 1.16% 1.20% 1.29%*
Average Net ========== ========== ========== ==========
Assets Of Total expenses*** 1.26%* 1.16% 1.09% 1.05%*
Common Stock: Total investment income--net*** 8.29%* 8.34% 7.52% 7.77%*
========== ========== ========== ==========
Amount of dividends to Preferred Stock
shareholders 2.48%* 1.83% 1.27% 1.67%*
========== ========== ========== ==========
Investment income--net, to Common Stock
shareholders 5.81%* 6.51% 6.25% 6.10%*
========== ========== ========== ==========
Ratios Based Total expenses, net of reimbursement .79%* .74% .73% .58%*
on Total ========== ========== ========== ==========
Average Net Total expenses .79%* .74% .73% .72%*
Assets:***++++++ ========== ========== ========== ==========
Total investment income--net 5.18%* 5.35% 5.05% 5.31%*
========== ========== ========== ==========
Ratios Based on Dividends to Preferred Stock shareholders 4.15%* 3.27% 2.58% 3.60%*
Average Net ========== ========== ========== ==========
Assets Of
Preferred Stock:
Supplemental Data: Net assets, net of Preferred Stock,
end of period (in thousands) $ 186,865 $ 181,324 $ 221,118 $ 219,717
========== ========== ========== ==========
Preferred Stock outstanding, end of
period (in thousands) $ 110,000 $ 110,000 $ 110,000 $ 110,000
========== ========== ========== ==========
Portfolio turnover 66.81% 137,69% 66.07% 106.16%
========== ========== ========== ==========
Leverage: Asset coverage per $1,000 $ 2,699 $ 2,648 $ 3,010 $ 2,997
========== ========== ========== ==========
Dividends Per Series A--Investment income--net $ 535 $ 820 $ 657 $ 810
Share on ========== ========== ========== ==========
Preferred Series B--Investment income--net $ 510 $ 813 $ 642 $ 816
Stock Outstanding: ========== ========== ========== ==========
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges. If applicable, the Fund's Investment
Adviser voluntarily 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.
++Commencement of operations.
++++The Fund's Preferred Stock was issued on June 5, 1997.
++++++Includes Common andPreferred Stock average net assets.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
MuniHoldings Fund, Inc., October 31, 2000
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. These unaudited financial
statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal,
recurring nature. 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 to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
* Options--The Fund is authorized to write covered call options and
purchase call and put options. When the Fund writes an option, an
amount equal to the premium received by the Fund is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions and post-October losses.
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.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended October 31, 2000 were $189,850,338 and
$211,795,439, respectively.
Net realized gains for the six months ended October 31, 2000 and net
unrealized losses as of October 31, 2000 were as follows:
Realized Unrealized
Gains Losses
Long-term investments $ 637,707 $(4,190,279)
------------ -----------
Total $ 637,707 $(4,190,279)
============ ===========
As of October 31, 2000, net unrealized depreciation for Federal
income tax purposes aggregated $4,190,279, of which $6,464,174
related to appreciated securities and $10,654,453 related to
depreciated securities. The aggregate cost of investments at October
31, 2000 for Federal income tax purposes was $301,209,172.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended October
31, 2000 increased by 17,918 as a result of dividend reinvestment
and during the year ended April 30, 2000 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, 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 October
31, 2000 were as follows: Series A, 4.13% and Series B, 3.60%.
Shares issued and outstanding during the six months ended October
31, 2000 and the year ended April 30, 2000 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 six months ended
October 31, 2000, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $162,130 as commissions.
5. Capital Loss Carryforward:
At April 30, 2000, the Fund had a net capital loss carryforward of
approximately $6,831,000, all of which expires in 2008. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 8, 2000, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.066046 per share, payable on November 29, 2000 to shareholders
of record as of November 20, 2000.
MuniHoldings Fund, Inc., October 31, 2000
QUALITY PROFILE
The quality ratings of securities in the Fund as of October 31, 2000
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 50.6%
AA/Aa 10.2
A/A 0.8
BBB/Baa 12.7
BB/Ba 4.3
B/B 0.9
NR(Not Rated) 15.3
Other* 5.3
*Temporary investments in short-term municipal securities.
MANAGED DIVIDEND POLICY
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 Assets, Liabilities and Capital, which comprises part
of the financial information included in this report.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Vincent R. Giordano, Senior Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Jodi M. Pinedo, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MHD
