UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08081
Name of Fund: BlackRock MuniHoldings Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock 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: 04/30/06
Date of reporting period: 05/01/05 - 04/30/06
Item 1 - Report to Stockholders
Annual Reports (As Restated)
April 30, 2006
MuniHoldings Fund, Inc.
MuniHoldings Insured Fund, Inc.
(BULL Logo) Merrill Lynch Investment Managers
www.mlim.ml.com
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc. seek to provide
shareholders with current income exempt from federal income taxes by investing
primarily in portfolios 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. Under normal circumstances, MuniHoldings Insured
Fund, Inc. invests at least 80% of its total assets in municipal bonds that
are covered by insurance.
These reports, including the financial information herein, are transmitted to
shareholders of MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc.
for their information. This is not a prospectus. Past performance results
shown in these reports should not be considered a representation of future
performance. The Funds have leveraged their Common Stock and intend to remain
leveraged by issuing Preferred Stock to provide the Common Stock shareholders
with potentially higher rates 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.
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free 1-800-637-3863; (2) on
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
MuniHoldings Fund, Inc.
MuniHoldings Insured Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... Logo)
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MuniHoldings Fund, Inc.
MuniHoldings Insured Fund, Inc.
The financial statements and financial highlights in this report have been
restated as described in Note 6 to the financial statements. Other information
in this report affected by the restatement has been revised.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined
assets under management as of March 31, 2006). The transaction is expected to
close in the third quarter of 2006, at which time the new company will operate
under the BlackRock name. The Fund's Board of Directors has approved a new
investment advisory agreement with BlackRock Advisors, Inc. or its successor
("BlackRock Advisors") on substantially the same terms and for the same
advisory fee as the current investment advisory agreement with the Investment
Adviser. If the new agreement is approved by the Fund's shareholders,
BlackRock Advisors is expected to become the Fund's investment adviser upon
the closing of the transaction between Merrill Lynch and BlackRock.
Quality Profiles as of April 30, 2006 (As Restated. See Note 6)
Percent of
MuniHoldings Fund, Inc. by Total
S&P/Moody's Rating Investments
AAA/Aaa 35.2%
AA/Aa 7.3
A/A 15.7
BBB/Baa 16.7
BB/Ba 2.1
B/B 1.7
CCC/Caa 1.5
NR 18.3
Other++ 1.5
++ Includes portfolio holdings in short-term investments and
variable rate demand notes.
Percent of
MuniHoldings Insured Fund, Inc. by Total
S&P/Moody's Rating Investments
AAA/Aaa 92.0%
AA/Aa 3.0
A/A 1.7
BBB/Baa 2.5
Other++ 0.8
++ Includes portfolio holdings in short-term investments and
variable rate demand notes.
Dividend Policy
The Funds' dividend policy is to distribute all or a portion of their net
investment income to their shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Funds 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 Funds for any
particular month may be more or less than the amount of net investment income
earned by the Funds during such month. The Funds' 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
these reports.
ANNUAL REPORTS APRIL 30, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager - BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our investors.
MLIM is a leading investment management organization with over $576 billion in
assets under management globally and 2,757 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios. BlackRock is one of the largest publicly traded
investment management firms in the United States with $463.1 billion in
assets under management and 1,839 employees. It manages assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, liquidity and alternative investment products.
At the completion of the transaction, which is expected in the third quarter
of this year, the resultant firm will be a top-10 investment manager worldwide
with over $1 trillion in assets under management.* The combined company will
provide a wider selection of high-quality investment solutions across a range
of asset classes and investment styles. MLIM and BlackRock possess
complementary capabilities that together create a well-rounded organization
uniting some of the finest money managers in the industry. At the same time,
the firms share similar values and beliefs - they are focused on delivering
excellence on behalf of clients, and both make investment performance their
single most important mission. In short, the merger only reinforces our
commitment to shareholders.
Most of MLIM's investment products - including mutual funds, separately
managed accounts, annuities and variable insurance funds - eventually will
carry the "BlackRock" name. As a shareholder in one or more MLIM-advised
mutual funds, you will receive a proxy package in the coming weeks in
connection with this transaction. After you receive this information, should
you have any questions or concerns, do not hesitate to contact your financial
advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
ANNUAL REPORTS APRIL 30, 2006
A Discussion With Your Funds' Portfolio Manager
The Funds ended the period fully invested and with an overall neutral market
posture. We remain focused on generating an attractive level of tax-exempt
income for our shareholders.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields rose sharply during the 12-month period, with much of
the increase occurring in March and April 2006. Bond prices, which move
opposite yields, declined. Bond prices were pressured as investors focused on
solid economic growth, both globally and in the United States, and renewed
inflationary pressures deriving from rising commodity prices.
The Federal Reserve Board (the Fed) continued to raise short-term interest
rates at each of its meetings during the past year, bringing the federal funds
target rate to 4.75% at period-end, and to 5% with another interest rate hike
on May 10. In response, the yield curve continued to flatten, with short-term
interest rates rising more than longer-term interest rates. Over the past 12
months, 30-year U.S. Treasury bond yields rose 66 basis points (.66%) to 5.17%
and 10-year U.S. Treasury note yields rose 86 basis points to 5.07%, the
highest level since May 2002.
While municipal bond yields also rose sharply in recent months, a significant
decline in new issuance allowed municipal bond prices to decline much less
than their taxable counterparts. As measured by Municipal Market Data, yields
on AAA-rated issues maturing in 30 years rose 16 basis points to 4.53% while
yields on AAA-rated issues maturing in 10 years rose 51 basis points to 4.08%.
For the most part, the recent outperformance of the tax-exempt market has been
fostered by a dramatic decline in new bond issuance so far in 2006. In 2005,
more than $408 billion in new long-term tax-exempt bonds was underwritten, a
new annual record and an increase of over 13% versus 2004. Over the past six-
month and three-month periods, new issue volume has declined 8.6% and 24%,
respectively, compared to the corresponding periods a year ago.
The tax-exempt market has continued to enjoy strong investor demand. As
reported by the Investment Company Institute, long-term municipal bond funds
received net new monies of $5.0 billion in 2005 - a sharp reversal from the
$3.7 billion outflow in 2004. During the first quarter of 2006, tax-exempt
mutual funds received over $9.3 billion, slightly higher than the $8.9 billion
inflow during the same period in 2005. Recent statistics from AMG Data
Services indicate that, thus far in 2006, average weekly cash flows into long-
term municipal bond funds averaged over $300 million, a significant
improvement from the weekly average of $65 million in December 2005.
Looking ahead, the fundamentals for the tax-exempt bond market appear
favorable, and continued positive cash flows are anticipated. Given their
attractive yields relative to comparable U.S. Treasury bonds, and the
prospects for reduced issuance in 2006, we believe municipal bonds could enjoy
solid results in the coming months.
MuniHoldings Fund, Inc.
How did the Fund perform during the fiscal year?
For the 12-month period ended April 30, 2006, the Common Stock of MuniHoldings
Fund, Inc. had net annualized yields of 6.58% and 6.56%, based on a year-end
per share net asset value of $16.14 and a per share market price of $16.20,
respectively, and $1.062 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +5.69%, based on a
change in per share net asset value from $16.31 to $16.14, and assuming
reinvestment of all distributions.
The Fund's total return, based on net asset value, exceeded the +3.86% average
return of the Lipper General Municipal Debt Funds (Leveraged) category for the
12-month period. (Funds in this Lipper category invest primarily in municipal
debt issues rated in the top four credit-rating categories. These funds can be
leveraged via use of debt, preferred equity and/or reverse repurchase
agreements.)
Overall, the municipal market performed fairly well in this period of rising
interest rates. The yield curve continued to flatten as the long end rallied
slightly while the short end underperformed. Against this backdrop, the Fund
benefited from its limited exposure to securities with shorter effective
maturities, generally eight years - 15 years. Also contributing to performance
was the portfolio's ample exposure to lower-rated investment quality and non-
investment grade securities (that is, spread product). As has been the case
for the past 24 months, credit spreads continued to narrow in the municipal
market as strong demand for incremental yield met with an extremely low supply
of higher-yielding securities. This led to strong outperformance for spread
sectors.
ANNUAL REPORTS APRIL 30, 2006
For the six-month period ended April 30, 2006, the total investment return on
the Fund's Common Stock was +3.70%, based on a change in per share net asset
value from $16.06 to $16.14, and assuming reinvestment of all distributions.
For a description of the Fund's total investment return based on a change in
the per share market value of the Fund's Common Stock (as measured by the
trading price of the Fund's shares on the New York Stock Exchange), and
assuming reinvestment of distributions, please refer to the Financial
Highlights section of 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 market
value of the Fund's Common Stock can vary significantly from total investment
returns based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Broadly speaking, we moved the portfolio from a slightly defensive stance to
more of a neutral posture as the Fed appeared to be approaching a pause in its
interest rate-hiking campaign. Although both the Treasury and the municipal
yield curves continued to flatten during the past six months, the move was not
nearly as dramatic as we have seen in prior periods. The municipal curve
managed to retain a positive slope - particularly notable because the Treasury
curve actually inverted early in 2006 - and this contributed to the market's
and the Fund's positive performance.
We maintained our focus on refundable, essential service securities from high-
demand states. The lack of new-issue supply and increased demand for municipal
bonds has caused spreads to narrow in all sectors of the municipal market. We
took advantage of these tight spreads to move the Fund to a market neutral
exposure to spread product while increasing its position in bonds tax-exempt
in specialty states (that is, states with a combination of high taxes and
larger populations). We believe this strategy should prove beneficial with any
shift in the supply/demand imbalance in both the high yield sector and the
general municipal market.
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock had an average yield of 3.02% for Series A, 3.07% for Series B
and 2.96% for Series C. The Fed raised the short-term interest rate target 200
basis points during the 12-month period, and this continued to affect the
Fund's borrowing costs. We would expect additional increases in the cost of
funds to be more limited as the Fed nears a pause in its monetary tightening
campaign. Despite the interest rate increases during the period, the tax-
exempt yield curve maintained a positive slope, allowing us to borrow at a
lower rate than where we invest. This continued to generate an income benefit
to the holders of Common Stock from the leveraging of Preferred Stock.
However, should the spread between short-term and long-term interest rates
narrow, the benefits of leveraging 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 7 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We remain focused on generating an attractive level of tax-exempt income for
our shareholders. The Fund ended the period fully invested and with an overall
neutral market posture. After 16 consecutive interest rate hikes, the Fed may
be near a pause in its monetary tightening program. However, global economies
and certain pockets of the U.S. economy continue to show solid growth, leading
us to believe that it still may be early to become too aggressive. We believe
a neutral stance is prudent in the current environment and should provide
competitive performance.
MuniHoldings Insured Fund, Inc.
How did the Fund perform during the fiscal year?
For the 12-month period ended April 30, 2006, the Common Stock of MuniHoldings
Insured Fund, Inc. had net annualized yields of 5.92% and 6.24%, based on a
year-end per share net asset value of $13.80 and a per share market price of
$13.10, respectively, and $.817 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +1.46%,
based on a change in per share net asset value from $14.44 to $13.80, and
assuming reinvestment of all distributions.
The Fund's total return, based on net asset value, trailed the +2.24% average
return of the Lipper Insured Municipal Debt Funds (Leveraged) category for the
12-month period. (Funds in this Lipper category invest primarily in municipal
debt issues insured as to timely payment. These funds can be leveraged via use
of debt, preferred equity and/or reverse repurchase agreements.)
ANNUAL REPORTS APRIL 30, 2006
A Discussion With Your Funds' Portfolio Manager (concluded)
Overall, the municipal market performed fairly well in this period of rising
interest rates. The yield curve continued to flatten as the long end rallied
slightly while the short end underperformed. Against this backdrop, Fund
performance lagged due to its higher exposure to securities at the shorter end
of the yield curve. While we anticipated that the curve would flatten, we held
on to securities with shorter effective maturities (generally eight years - 15
years) because they were booked in the portfolio at above-average yields,
allowing us to maintain the Fund's competitive distribution rate. As such, the
Fund maintained one of the highest yields in its Lipper category, although its
total return underperformed the average.
For the six-month period ended April 30, 2006, the total investment return on
the Fund's Common Stock was +1.84%, based on a change in per share net asset
value from $13.94 to $13.80, and assuming reinvestment of all distributions.
For a description of the Fund's total investment return based on a change in
the per share market value of the Fund's Common Stock (as measured by the
trading price of the Fund's shares on the New York Stock Exchange), and
assuming reinvestment of distributions, please refer to the Financial
Highlights section of 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 market
value of the Fund's Common Stock may vary significantly from total investment
returns based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Broadly speaking, we moved the portfolio from a slightly defensive stance to
more of a neutral posture as the Fed appeared to be approaching a pause in its
interest rate-hiking campaign. Although both the Treasury and the municipal
yield curves continued to flatten during the past six months, the move was not
nearly as dramatic as we have seen in prior periods. The municipal curve
managed to retain a positive slope - particularly notable because the Treasury
curve actually inverted early in 2006 - and this contributed to the market's
and the Fund's positive performance.
We maintained our focus on refundable, essential service securities from high-
demand states. The lack of new-issue supply and increased demand for municipal
bonds has caused spreads to narrow in all sectors of the municipal market. We
took advantage of these tight spreads to in-crease the Fund's exposure to the
bonds of specialty states (that is, states with a combination of high taxes
and larger populations.) We believe our strategy should prove beneficial going
forward, as the relatively tight spreads have driven down the yield sacrifice
typically involved in owning specialty state bonds. However, should increasing
supply or decreasing demand reestablish normal sector spreads in the future,
we will once again decrease our exposure to the specialty states.
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock had average yields of 3.09% for Series A and 2.99% for Series
B. The Fed raised the short-term interest rate target 200 basis points during
the 12-month period, and this continued to affect the Fund's borrowing costs.
We would expect additional increases in the cost of funds to be more limited
as the Fed nears a pause in its monetary tightening campaign. Despite the
interest rate increases during the period, the tax-exempt yield curve
maintained a positive slope, allowing us to borrow at a lower rate than where
we invest. This continued to generate an income benefit to the holders of
Common Stock from the leveraging of Preferred Stock. However, should the
spread between short-term and long-term interest rates narrow, the benefits of
leveraging 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 7 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We remain focused on generating an attractive level of tax-exempt income for
our shareholders. The Fund ended the period fully invested and with an overall
neutral market posture. After 16 consecutive interest rate hikes, the Fed may
be near a pause in its monetary tightening program. However, global economies
and certain pockets of the U.S. economy continue to show solid growth, leading
us to believe that it still may be early to become too aggressive. We believe
a neutral stance is prudent in the current environment and should provide
competitive performance.
Robert A. DiMella, CFA
Vice President and Portfolio Manager
May 15, 2006
ANNUAL REPORTS APRIL 30, 2006
The Benefits and Risks of Leveraging
The Funds utilize leveraging to seek to enhance the yield and net asset value
of their Common Stock. However, these objectives cannot be achieved in all
interest rate environments. To leverage, each 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 each Fund's Common Stock. However, in order to benefit Common Stock
shareholders, the yield curve must be positively sloped; that is, short-term
interest rates must be lower than long-term interest rates. At the same time,
a period of generally declining interest rates will benefit Common Stock
shareholders. If either of these conditions change, then the risks of
leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of
Preferred Stock based on the lower short-term interest rates. At the same
time, the fund's total portfolio of $150 million earns the income based on
long-term interest rates.
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 of April 30, 2006, MuniHoldings Fund, Inc. and MuniHoldings Insured Fund,
Inc. had leverage amounts, due to Auction Market Preferred Stock, of 35.85%
and 42.98% of total net assets, respectively, before the deduction of
Preferred Stock.
As a part of their investment strategy, the Funds 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 Funds 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 Funds invest in inverse floaters, the market value of each
Fund's portfolio and the net asset value of each Fund's shares may also be
more volatile than if the Funds did not invest in these securities.
Swap Agreements
The Funds may 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. Swap agreements involve the risk that the
party with whom each Fund has entered into a swap will default on its
obligation to pay the Fund and the risk that the Fund will not be able to meet
its obligations to pay the other party to the agreement.
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments as of April 30, 2006
(As Restated. See Note 6)
MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Alabama--2.9%
$ 1,750 Camden, Alabama, IDB, Exempt Facilities Revenue
Bonds (Weyerhaeuser Company), Series A, 6.125%
due 12/01/2024 $ 1,924
4,550 Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5% due 1/01/2024 4,646
Alaska--1.5%
3,400 Valdez, Alaska, Marine Terminal Revenue Refunding
Bonds (BP Pipelines Inc. Project), VRDN, Series C,
3.71% due 7/01/2037 (f) 3,400
Arizona--3.4%
Maricopa County, Arizona, IDA, Education Revenue
Bonds (Arizona Charter Schools Project 1), Series A:
935 6.50% due 7/01/2012 942
2,300 6.75% due 7/01/2029 2,289
3,000 Phoenix, Arizona, IDA, Airport Facility, Revenue
Refunding Bonds (America West Airlines Inc.
Project), AMT, 6.30% due 4/01/2023 2,668
1,000 Pinal County, Arizona, COP, 5% due 12/01/2029 1,007
610 Show Low, Arizona, Improvement District No. 5,
Special Assessment Bonds, 6.375% due 1/01/2015 627
Arkansas--0.9%
2,000 University of Arkansas, University Construction
Revenue Bonds (UAMS Campus), Series B, 5%
due 11/01/2023 (h) 2,073
California--18.7%
875 Agua Caliente Band of Cahuilla Indians, California,
Casino Revenue Bonds, 5.60% due 7/01/2013 907
2,965 California Infrastructure and Economic Development
Bank, Insured Revenue Bonds (Rand Corporation),
Series A, 5.50% due 4/01/2032 (b) 3,173
6,800 California State Public Works Board, Lease Revenue
Bonds (Department of Corrections), Series C, 5.25%
due 6/01/2028 7,049
2,500 California State, Various Purpose, GO, 5.50%
due 4/01/2028 2,705
3,870 California Statewide Communities Development
Authority, Health Facility Revenue Bonds (Memorial
Health Services), Series A, 6% due 10/01/2023 4,202
2,000 East Side Union High School District, California,
Santa Clara County, GO (Election of 2002), Series D,
5% due 8/01/2021 (k) 2,092
Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds:
1,165 Series A-3, 7.875% due 6/01/2042 1,387
1,670 Series B, 5.625% due 6/01/2013 (i) 1,837
6,000 Los Angeles, California, Unified School District, GO,
Series A, 5% due 1/01/2028 (h) 6,201
Montebello, California, Unified School District,
GO (c)(m):
2,405 5.61% due 8/01/2022 1,091
2,455 5.61% due 8/01/2023 1,059
Face
Amount Municipal Bonds Value
California (concluded)
$ 2,095 Oceanside, California, Unified School District,
GO (Election of 2000), Series C, 5.25%
due 8/01/2032 (h) $ 2,196
3,490 Sequoia, California, Unified High School District,
GO, Refunding, Series B, 5.50% due 7/01/2035 (e) 3,823
1,000 Sunnyvale, California, School District, GO (Election of
2004), Series A, 5% due 9/01/2026 (e) 1,040
2,915 Tustin, California, Unified School District, Senior
Lien Special Tax Bonds (Community Facilities District
Number 97-1), Series A, 5% due 9/01/2032 (e) 2,977
Colorado--1.7%
2,645 Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee), Series A, 7.35%
due 9/01/2031 2,799
1,000 Plaza Metropolitan District Number 1, Colorado,
Tax Allocation Revenue Bonds (Public Improvement
Fees), 8.125% due 12/01/2025 997
Connecticut--4.5%
2,285 Bridgeport, Connecticut, Senior Living Facilities
Revenue Bonds (3030 Park Retirement Community
Project), 7.25% due 4/01/2035 1,925
2,165 Connecticut State Development Authority, Airport
Facility Revenue Bonds (LearJet Inc. Project), AMT,
7.95% due 4/01/2026 2,575
2,735 Connecticut State Development Authority, IDR (AFCO
Cargo BDL-LLC Project), AMT, 8% due 4/01/2030 2,957
2,450 Connecticut State, GO, Series A, 4.75%
due 12/15/2024 2,507
Florida--9.1%
2,980 Florida State Department of Transportation, Turnpike
Revenue Bonds, Series A, 5% due 7/01/2030 3,082
2,340 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%
due 10/01/2037 (h)(m) 434
Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds:
2,250 Series A, 6.25% due 5/01/2037 2,453
2,550 Series B, 6.50% due 5/01/2037 2,821
3,225 Orange County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Orlando Regional
Healthcare), 6% due 12/01/2012 (i) 3,602
2,095 Orlando, Florida, Greater Orlando Aviation Authority,
Airport Facilities Revenue Bonds (JetBlue Airways
Corp.), AMT, 6.50% due 11/15/2036 2,100
800 Orlando, Florida, Urban Community Development
District, Capital Improvement Special Assessment
Bonds, Series A, 6.95% due 5/01/2033 862
1,645 Preserve at Wilderness Lake, Florida, Community
Development District, Capital Improvement Bonds,
Series A, 5.90% due 5/01/2034 1,688
Portfolio Abbreviations
To simplify the listings of portfolio holdings in the Schedules of
Investments, we have abbreviated the names of many of the securities according
to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
VRDN Variable Rate Demand Notes
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued)
MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Florida (concluded)
$ 1,000 Tern Bay Community Development District, Florida,
Capital Improvement Revenue Refunding Bonds,
Series A, 5.375% due 5/01/2037 $ 989
2,300 West Villages Improvement District, Florida, Special
Assessment Revenue Refunding Bonds (Unit of
Development Number 2), 5.80% due 5/01/2036 2,349
Georgia--0.9%
1,750 Atlanta, Georgia, Tax Allocation Bonds (Atlantic
Station Project), 7.90% due 12/01/2024 1,941
Illinois--3.8%
730 Beardstown, Illinois, IDR (Jefferson Smurfit Corp.
Project), 8% due 10/01/2016 751
1,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American
Airlines Inc. Project), 8.20% due 12/01/2024 1,004
1,200 Chicago, Illinois, Special Assessment Bonds (Lake
Shore East), 6.75% due 12/01/2032 1,288
4,000 Illinois HDA, Homeowner Mortgage Revenue Bonds,
AMT, Sub-Series C-2, 5.35% due 2/01/2027 4,072
700 Illinois State Finance Authority Revenue Bonds
(Landing At Plymouth Place Project), Series A, 6%
due 5/15/2025 723
625 Naperville, Illinois, IDR (General Motors Corporation),
Refunding, VRDN, 8% due 12/01/2012 (f) 625
Indiana--2.6%
8,985 Allen County, Indiana, Redevelopment District Tax
Increment Revenue Bonds (General Motors
Development Area), 7% due 5/15/2008 (i)(m) 5,911
Kentucky--1.0%
2,000 Louisville and Jefferson Counties, Kentucky, Metropolitan
Sewer District, Sewer and Drain System Revenue
Bonds, Series A, 5.50% due 5/15/2034 (h) 2,155
Louisiana--4.3%
4,115 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Franciscan Missionaries of Our Lady Health
System, Inc.), Series A, 5.25% due 8/15/2036 4,181
1,750 New Orleans, Louisiana, Financing Authority Revenue
Bonds (Xavier University of Louisiana Project),
5.30% due 6/01/2026 (h) 1,822
3,540 New Orleans, Louisiana, GO (Public Improvements),
5% due 10/01/2033 (h) 3,585
Maryland--3.9%
1,875 Anne Arundel County, Maryland, Special Obligation
Revenue Bonds (Arundel Mills Project), 7.10%
due 7/01/2009 (i) 2,090
Maryland State Economic Development Corporation,
Student Housing Revenue Bonds (University of
Maryland College Park Project) (i):
1,760 6% due 6/01/2013 1,960
1,700 6.50% due 6/01/2013 1,945
2,750 Maryland State Energy Financing Administration,
Limited Obligation Revenue Bonds
(Cogeneration-AES Warrior Run), AMT, 7.40%
due 9/01/2019 2,779
Massachusetts--3.7%
2,900 Massachusetts State, HFA, Housing Revenue Bonds,
AMT, Series A, 5.25% due 12/01/2048 2,900
5,215 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (e) 5,403
Face
Amount Municipal Bonds Value
Michigan--3.5%
$ 1,400 Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A,
6% due 7/01/2020 (a) $ 1,501
4,805 Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Pollution
Control), AMT, Series B, 5.65% due 9/01/2029 4,978
1,300 Michigan State Strategic Fund, PCR (General
Motors Corporation Project), VRDN, 7.875%
due 12/01/2008 (f) 1,300
Minnesota--1.7%
3,500 Minneapolis, Minnesota, Community Development
Agency, Supported Development Revenue Refunding
Bonds, Series G-3, 5.45% due 12/01/2011 (i) 3,778
Mississippi--5.5%
7,675 Claiborne County, Mississippi, PCR, Refunding
(System Energy Resources Inc. Project), 6.20%
due 2/01/2026 7,746
2,500 Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources Inc.
Project), 5.90% due 5/01/2022 2,521
Mississippi Development Bank, Special Obligation
Revenue Refunding Bonds (Gulfport Water and
Sewer System Project) (e):
1,000 5.25% due 7/01/2017 1,076
810 5.25% due 7/01/2019 867
Missouri--1.4%
1,915 Fenton, Missouri, Tax Increment Revenue Refunding
and Improvement Bonds (Gravois Bluffs), 7%
due 10/01/2011 (i) 2,186
1,000 Missouri State Development Finance Board,
Infrastructure Facilities Revenue Refunding Bonds
(Branson), Series A, 5.50% due 12/01/2032 1,026
New Jersey--13.4%
1,595 Garden State Preservation Trust of New Jersey, Open
Space and Farmland Preservation Revenue Bonds,
Series A, 5.80% due 11/01/2017 (e) 1,794
New Jersey EDA, Cigarette Tax Revenue Bonds:
5,385 5.75% due 6/15/2029 5,689
2,280 5.75% due 6/15/2034 2,396
New Jersey EDA, Retirement Community Revenue
Bonds Series A:
1,475 (Cedar Crest Village Inc. Facility), 7.25%
due 11/15/2031 1,591
2,600 (Seabrook Village Inc.), 8.25% due 11/15/2030 2,908
1,965 New Jersey EDA, School Facilities Construction
Revenue Bonds, Series O, 5.125% due 3/01/2030 2,035
New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT:
1,000 6.625% due 9/15/2012 1,016
2,950 6.25% due 9/15/2029 2,876
3,325 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (South Jersey Hospital), 6%
due 7/01/2026 3,518
3,500 New Jersey State Turnpike Authority, Turnpike
Revenue Bonds, Series C, 5% due 1/01/2030 (e) 3,619
2,315 Tobacco Settlement Financing Corporation of
New Jersey, Asset-Backed Revenue Bonds, 7%
due 6/01/2041 2,619
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued)
MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
New Mexico--3.7%
$ 2,000 Farmington, New Mexico, PCR, Refunding (Public
Service Company of New Mexico--San Juan
Project), Series A, 6.30% due 12/01/2016 $ 2,063
New Mexico Finance Authority, Senior Lien State
Transportation Revenue Bonds, Series A (h):
2,100 5.125% due 6/15/2017 2,227
3,720 5.125% due 6/15/2018 3,939
New York--14.2%
1,185 Dutchess County, New York, IDA, Civic Facility
Revenue Refunding Bonds (Saint Francis Hospital),
Series A, 7.50% due 3/01/2029 1,287
535 New York City, New York, City IDA, Civic Facility
Revenue Bonds, Series C, 6.80% due 6/01/2028 573
480 New York City, New York, GO, Refunding, Series F,
6% due 8/01/2006 (h)(i) 490
New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds:
3,500 Series A, 5.25% due 10/15/2018 (h) 3,749
6,500 Series A, 5% due 10/15/2029 (b) 6,736
2,715 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (h) 2,880
1,050 New York State Thruway Authority, General
Revenue Refunding Bonds, Series G, 5.25%
due 1/01/2027 (e) 1,118
Tobacco Settlement Financing Corporation of New
York Revenue Bonds:
3,150 Series A-1, 5.50% due 6/01/2018 3,368
3,500 Series C-1, 5.50% due 6/01/2017 3,715
3,800 Series C-1, 5.50% due 6/01/2020 (c) 4,093
1,400 Series C-1, 5.50% due 6/01/2022 1,494
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 2,209
Oklahoma--0.6%
1,425 Tulsa, Oklahoma, Municipal Airport Trust Revenue
Refunding Bonds (AMR Corporation), AMT, Series A,
5.375% due 12/01/2035 1,417
Oregon--0.9%
2,050 Western Generation Agency, Oregon, Cogeneration
Project Revenue Bonds (Wauna Cogeneration
Project), AMT, Series B, 7.40% due 1/01/2016 2,066
Pennsylvania--6.8%
1,700 Bucks County, Pennsylvania, IDA, Retirement
Community Revenue Bonds (Ann's Choice Inc.),
Series A, 6.25% due 1/01/2035 1,749
3,500 Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds
(National Gypsum Company), AMT, Series B,
6.125% due 11/01/2027 3,686
725 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development, 7.75% due 12/01/2017 734
2,500 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development (Days Inn), Refunding,
Series B, 6.50% due 2/01/2007 (i) 2,590
Philadelphia, Pennsylvania, Authority for Industrial
Development, Senior Living Revenue Bonds:
1,105 (Arbor House Inc. Project), Series E, 6.10%
due 7/01/2033 1,146
1,245 (Saligman House Project), Series C, 6.10%
due 7/01/2033 1,292
Face
Amount Municipal Bonds Value
Pennsylvania (concluded)
$ 3,500 Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Bonds (Guthrie Healthcare System),
Series B, 7.125% due 12/01/2031 $ 4,099
Rhode Island--1.4%
2,820 Rhode Island State Health and Educational Building
Corporation, Hospital Financing Revenue Bonds
(Lifespan Obligation Group), 6.50% due 8/15/2012 (i) 3,215
South Carolina--1.5%
3,020 Medical University Hospital Authority, South Carolina,
Hospital Facilities Revenue Refunding Bonds,
Series A, 6.375% due 8/15/2012 (i) 3,434
Tennessee--6.0%
4,500 Hardeman County, Tennessee, Correctional Facilities
Corporation Revenue Bonds, 7.75% due 8/01/2017 4,645
4,575 Shelby County, Tennessee, Health, Educational
and Housing Facility Board, Hospital Revenue
Refunding Bonds (Methodist Healthcare) 6.50%
due 9/01/2012 (i) 5,238
3,400 Tennessee Educational Loan Revenue Bonds
(Educational Funding South Inc.), AMT, Senior
Series B, 6.20% due 12/01/2021 3,424
Texas--12.5%
4,000 Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), First Tier, Series A,
6.70% due 1/01/2028 4,252
1,000 Brazos River Authority, Texas, PCR, Refunding
(TXU Energy Company LLC Project), Series B, 4.75%
due 5/01/2029 1,005
2,340 Brazos River Authority, Texas, Revenue Refunding
Bonds (Reliant Energy Inc. Project), Series B, 7.75%
due 12/01/2018 2,537
3,375 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 3,762
1,800 Houston, Texas, Health Facilities Development
Corporation, Retirement Facility Revenue Bonds
(Buckingham Senior Living Community), Series A,
7.125% due 2/15/2034 1,964
3,000 Lower Colorado River Authority, Texas, PCR
(Samsung Austin Semiconductor), AMT, 6.375%
due 4/01/2027 3,128
1,485 Matagorda County, Texas, Navigation District
Number 1, Revenue Refunding Bonds (Reliant
Energy Inc.), Series C, 8% due 5/01/2029 1,596
1,425 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue
Bonds (Citgo Petroleum Corporation Project), AMT,
8.25% due 11/01/2031 1,492
5,160 Texas State Department of Housing and Community
Affairs, Residential Mortgage Revenue Bonds, AMT,
Series A, 5.70% due 1/01/2033 (d) 5,248
2,800 Texas State Department of Housing and Community
Affairs, Residential Mortgage Revenue Refunding
Bonds, AMT, Series B, 5.25% due 7/01/2022 (d) 2,881
Vermont--1.1%
2,370 Vermont Educational and Health Buildings Financing
Agency, Revenue Bonds (Developmental and Mental
Health), Series A, 6% due 6/15/2017 2,446
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (concluded)
MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Virginia--5.4%
$ 1,150 Chesterfield County, Virginia, IDA, PCR (Virginia
Electric and Power Company), Series A, 5.875%
due 6/01/2017 $ 1,236
3,000 Fairfax County, Virginia, EDA, Resource Recovery
Revenue Refunding Bonds, AMT, Series A, 6.10%
due 2/01/2011 (b) 3,259
Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds:
3,825 Senior Series A, 5.50% due 8/15/2028 3,896
1,500 Senior Series B, 8.40% due 8/15/2029 (m) 394
300 Senior Series B, 8.80% due 8/15/2030 (m) 74
3,035 Tobacco Settlement Financing Corporation of
Virginia, Asset-Backed Revenue Bonds, 5.625%
due 6/01/2037 3,101
Washington--0.6%
1,365 Seattle, Washington, Housing Authority Revenue
Bonds (Replacement Housing Project), 6.125%
due 12/01/2032 1,346
Wisconsin--1.2%
Wisconsin State Health and Educational Facilities
Authority Revenue Bonds:
825 (New Castle Place Project), Series A, 7%
due 12/01/2031 850
1,755 (Synergyhealth Inc.), 6% due 11/15/2032 1,877
Puerto Rico--0.8%
2,060 Puerto Rico Industrial, Medical and Environmental
Pollution Control Facilities Financing Authority,
Special Facilities Revenue Bonds (American
Airlines Inc.), Series A, 6.45% due 12/01/2025 1,851
U.S. Virgin Islands--1.7%
3,460 Virgin Islands Government Refinery Facilities, Revenue
Refunding Bonds (Hovensa Coker Project), AMT,
6.50% due 7/01/2021 3,888
Total Municipal Bonds
(Cost--$312,964)--146.8% 328,389
Face
Amount Municipal Bonds Held in Trust (g) Value
California--3.2%
$ 6,810 California Pollution Control Financing Authority, PCR,
Refunding (Pacific Gas and Electric), AMT, Series A,
5.35% due 12/01/2016 (h) $ 7,180
Maryland--5.1%
10,835 Baltimore, Maryland, Convention Center Hotel
Revenue Bonds, Senior Series A, 5.25%
due 9/01/2039 (k) 11,436
New York--2.0%
4,240 New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A, 5.25%
due 10/15/2027 (b) 4,505
Texas--5.5%
11,760 Harris County, Texas, Toll Road Revenue
Refunding Bonds, Senior Lien, Series A,
5.25% due 8/15/2035 (e) 12,241
Total Municipal Bonds Held in Trust
(Cost--$35,709)--15.8% 35,362
Shares
Held Short-Term Securities
9 Merrill Lynch Institutional Tax-Exempt Fund,
3.49% (j)(l) 9
Total Short-Term Securities
(Cost--$9)--0.0% 9
Total Investments (Cost--$348,682*)--162.6% 363,760
Other Assets Less Liabilities--0.9% 1,956
Liability for Trust Certificates, Including Interest
Expense Payable--(7.6%) (17,005)
Preferred Stock, at Redemption Value--(55.9%) (125,053)
----------
Net Assets Applicable to Common Stock--100.0% $ 223,658
==========
* The cost and unrealized appreciation (depreciation) of investments
as of April 30, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 331,545
===============
Gross unrealized appreciation $ 17,212
Gross unrealized depreciation (1,820)
---------------
Net unrealized appreciation $ 15,392
===============
(a) ACA Insured.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) FNMA/GNMA Collateralized.
(e) FSA Insured.
(f) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(g) As restated. See Note 6. Securities represent underlying bonds
transferred to a separate securitization trust established in a
tender option bond transaction in which the Fund may have acquired
the residual interest certificates. These securities serve as collateral
in a financing transaction. See Note 1(c) to Financial Statements for
details of Municipal Bonds Held in Trust.
(h) MBIA Insured.
(i) Prerefunded.
(j) Represents the current yield as of 4/30/2006.
(k) XL Capital Insured.
(l) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Dividend
Affiliate Activity Income
Merrill Lynch Institutional Tax-Exempt Fund -- --*
* Amount is less than $1,000.
(m) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments as of April 30, 2006
(As Restated. See Note 6)
MuniHoldings Insured Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Alabama--1.3%
$ 2,170 Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5.50% due 1/01/2022 $ 2,317
California--26.4%
2,000 California State Public Works Board, Lease Revenue
Bonds (Department of General Services--
Capitol East End Complex), Series A, 5%
due 12/01/2027 (a) 2,051
1,300 California State, Various Purpose, GO, 5.50%
due 4/01/2028 1,407
East Side Union High School District, California,
Santa Clara County, GO (Election of 2002):
1,800 Series B, 5% due 8/01/2027 (c) 1,854
1,335 Series D, 5% due 8/01/2021 (d) 1,396
5,155 Series D, 5% due 8/01/2029 (d) 5,305
Los Angeles, California, Unified School District, GO:
2,000 (Election of 1997), Series F, 5% due 1/01/2028 (c) 2,067
4,395 Series A, 5% due 1/01/2028 (b) 4,542
2,565 Modesto, California, Schools Infrastructure
Financing Agency, Special Tax Bonds, 5.50%
due 9/01/2036 (a) 2,760
5,005 San Francisco, California, City and County, GO
(California Academy of Sciences Improvements),
Series E, 5% due 6/15/2023 (b) 5,201
1,265 San Jose, California, GO (Libraries, Parks and Public
Safety Projects), 5% due 9/01/2030 (b) 1,301
San Pablo, California, Joint Powers Financing
Authority, Tax Allocation Revenue Refunding
Bonds (b)(m):
2,635 5.66% due 12/01/2024 1,010
2,355 5.66% due 12/01/2025 852
2,355 5.66% due 12/01/2026 803
3,145 Sequoia, California, Unified High School District, GO,
Refunding, Series B, 5.50% due 7/01/2035 (f) 3,445
2,080 Sweetwater, California, Union High School District,
Public Financing Authority, Special Tax Revenue
Bonds, Series A, 5% due 9/01/2028 (f) 2,139
Tustin, California, Unified School District, Senior Lien
Special Tax Bonds (Community Facilities District
Number 97-1), Series A, (f):
2,180 5% due 9/01/2032 2,227
2,800 5% due 9/01/2038 2,852
2,000 University of California Revenue Bonds (Multiple
Purpose Projects), Series Q, 5% due 9/01/2022 (f) 2,074
3,480 West Contra Costa, California, Unified School
District, GO, Series C, 5% due 8/01/2021 (c) 3,616
Colorado--6.5%
10,620 Aurora, Colorado, COP 5.75% due 12/01/2010 (a)(g) 11,481
Florida--4.2%
2,890 Florida State Department of Transportation, Turnpike
Revenue Bonds, Series A, 5% due 7/01/2030 2,989
2,225 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%
due 10/01/2037 (b)(m) 413
3,850 Pasco County, Florida, Half-Cent Sales Tax Revenue
Bonds, 5.125% due 12/01/2028 (a) 4,003
Face
Amount Municipal Bonds Value
Georgia--1.2%
$ 2,000 Augusta, Georgia, Water and Sewer Revenue
Bonds, 5.25% due 10/01/2034 (f) $ 2,114
Illinois--10.0%
7,965 Chicago, Illinois, GO, Series A, 6%
due 7/01/2010 (c)(g) 8,713
2,965 Chicago, Illinois, Park District, Limited Tax, GO,
Series A, 5.75% due 1/01/2011 (c)(g) 3,214
1,000 Chicago, Illinois, Second Lien, Water
Revenue Refunding Bonds, VRDN, 3.77%
due 11/01/2031 (b)(l) 1,000
4,500 Illinois State, GO, First Series, 6% due 1/01/2018 (c) 4,809
45 Lake, Cook, Kane and McHenry Counties, Illinois,
Community Unit School District Number 220, GO,
5.75% due 12/01/2019 (c) 48
Indiana--1.2%
2,000 Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A, 5.25% due 6/01/2029 (c) 2,110
Maryland--1.6%
2,640 Baltimore, Maryland, Convention Center Hotel
Revenue Bonds, Senior Series A, 5.25%
due 9/01/2023 (d) 2,825
Massachusetts--11.6%
3,565 Massachusetts Bay Transportation Authority, Sales
Tax Revenue Refunding Bonds, Senior Series A,
5% due 7/01/2035 3,648
2,105 Massachusetts Bay Transportation Authority,
Special Assessment Revenue Refunding Bonds,
Series A, 5% due 7/01/2031 2,172
565 Massachusetts State, HFA, Housing Development
Revenue Refunding Bonds, AMT, Series A, 5.15%
due 6/01/2011 (b) 567
Massachusetts State, HFA, Rental Housing Mortgage
Revenue Bonds, AMT (f):
3,300 Series A, 5.15% due 7/01/2026 3,289
2,440 Series C, 5.50% due 7/01/2032 2,555
8,065 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (f) 8,356
Michigan--2.3%
2,035 Boyne City, Michigan, Public School District, GO,
5.75% due 5/01/2009 (c)(g) 2,150
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds, AMT (d):
400 DRIVERS, Series 858Z, 6.838%
due 12/01/2011 (h) 446
1,500 (Detroit Edison Pollution), Series B, 5.65%
due 9/01/2029 1,579
Minnesota--2.4%
4,015 Sauk Rapids, Minnesota, Independent School District
Number 47, GO, Series A, 5.65% due 2/01/2019 (b) 4,340
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (continued)
MuniHoldings Insured Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Missouri--5.2%
$ 2,000 Cape Girardeau, Missouri, School District Number 063,
GO (Missouri Direct Deposit Program), 5.50%
due 3/01/2018 (c) $ 2,112
Mehlville, Missouri, School District Number R-9, COP
Series A (f):
1,925 5.50% due 3/01/2014 2,060
2,175 5.50% due 3/01/2015 2,322
1,170 5.50% due 3/01/2016 1,250
1,500 5.50% due 3/01/2017 1,592
Nebraska--2.2%
Omaha Convention Hotel Corporation, Nebraska,
Convention Center Revenue Bonds, First Tier,
Series A (a):
1,585 5.50% due 4/01/2020 1,697
2,000 5.50% due 4/01/2021 2,136
New Jersey--18.1%
2,335 Garden State Preservation Trust of New Jersey, Open
Space and Farmland Preservation Revenue Bonds,
Series A, 5.80% due 11/01/2017 (f) 2,627
New Jersey EDA, Cigarette Tax Revenue Bonds:
5,295 5.75% due 6/15/2029 5,594
3,800 5.75% due 6/15/2034 (k) 4,118
6,700 New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5.25% due 7/01/2033 (b) 7,092
6,705 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series D,
5% due 6/15/2019 (f) 6,999
5,500 New Jersey State Turnpike Authority, Turnpike
Revenue Bonds, Series C, 5% due 1/01/2030 (f) 5,687
New Mexico--3.1%
New Mexico Finance Authority, Senior Lien State
Transportation Revenue Bonds, Series A (b):
1,900 5.125% due 6/15/2017 2,015
3,325 5.125% due 6/15/2018 3,521
New York--31.9%
10,000 Nassau Health Care Corporation, New York,
Health System Revenue Bonds, 5.75%
due 8/01/2009 (f)(g) 10,810
New York City, New York, GO (f):
4,000 Series E, 5% due 11/01/2017 4,198
7,085 Series G, 5.75% due 10/15/2007 (g) 7,360
New York City, New York, GO, Refunding:
5,865 Series C, 5.875% due 8/01/2006 (b)(g) 5,984
230 Series G, 5.75% due 2/01/2017 (f) 234
New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A:
3,150 5.25% due 10/15/2018 (b) 3,374
4,095 5.25% due 10/15/2027 (a) 4,351
3,500 5% due 10/15/2029 (a) 3,627
4,000 5% due 10/15/2032 (a) 4,139
2,645 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (b) 2,805
945 New York State Thruway Authority, General
Revenue Refunding Bonds, Series G, 5.25%
due 1/01/2027 (f) 1,007
Tobacco Settlement Financing Corporation of New
York Revenue Bonds, Series C-1:
4,900 5.50% due 6/01/2017 5,201
3,430 5.50% due 6/01/2020 (c) 3,694
Face
Amount Municipal Bonds Value
Oklahoma--0.9%
$ 1,600 Oklahoma State Industries Authority, Revenue
Refunding Bonds (Integris Baptist), VRDN, Series B,
3.81% due 8/15/2029 (b)(l) $ 1,600
Oregon--0.8%
1,400 Portland, Oregon, Urban Renewal and Redevelopment
Tax Allocation Bonds (Oregon Convention Center),
Series A, 5.75% due 6/15/2015 (a) 1,513
Pennsylvania--10.2%
3,900 Pennsylvania State Higher Educational Facilities
Authority, State System of Higher Education Revenue
Bonds, Series O, 5.125% due 6/15/2024 (a) 3,950
6,045 Philadelphia, Pennsylvania, Airport Revenue Bonds
(Philadelphia Airport System), AMT, Series B, 5.50%
due 6/15/2017 (c) 6,246
1,730 Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Refunding Bonds (Guthrie Healthcare
System), Series A, 5.875% due 12/01/2031 1,829
2,015 Seneca Valley, Pennsylvania, School District, GO, 5%
due 1/01/2019 (c) 2,115
1,800 Washington County, Pennsylvania, Capital Funding
Authority Revenue Bonds (Capital Projects and
Equipment Program), 6.15% due 12/01/2029 (a) 1,928
1,885 York County, Pennsylvania, School of Technology
Authority, Lease Revenue Refunding Bonds, 5.50%
due 2/15/2022 (c) 2,026
Rhode Island--4.8%
5,000 Providence, Rhode Island, Redevelopment Agency
Revenue Refunding Bonds (Public Safety
and Municipal Buildings), Series A, 5.75%
due 4/01/2010 (a)(g) 5,409
2,870 Rhode Island State Health and Educational
Building Corporation Revenue Bonds (Rhode
Island School of Design), Series D, 5.50%
due 8/15/2031 (d) 3,089
South Carolina--0.9%
1,525 Medical University Hospital Authority, South Carolina,
Hospital Facilities, Revenue Refunding Bonds,
Series A, 5.25% due 2/15/2025 (b)(e) 1,607
Tennessee--3.0%
Tennessee HDA, Revenue Refunding Bonds
(Homeownership Program), AMT, Series A (f):
2,730 5.25% due 7/01/2022 2,793
2,505 5.35% due 1/01/2026 2,563
Texas--1.6%
2,780 Houston, Texas, Community College System,
Participation Interests, COP (Alief Center Project),
5.75% due 8/15/2022 (b) 2,923
Washington--4.9%
4,000 Bellevue, Washington, GO, Refunding, 5.50%
due 12/01/2039 (b) 4,317
2,310 Chelan County, Washington, Public Utility District
Number 001, Consolidated Revenue Bonds
(Chelan Hydro System), AMT, Series A, 5.45%
due 7/01/2037 (a) 2,416
1,810 Snohomish County, Washington, Public Utility District
Number 001, Electric Revenue Bonds, 5.50%
due 12/01/2022 (f) 1,942
ANNUAL REPORTS APRIL 30, 2006
Schedule of Investments (concluded)
MuniHoldings Insured Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
West Virginia--2.9%
$ 5,000 West Virginia State Housing Development Fund,
Housing Finance Revenue Refunding Bonds,
Series D, 5.20% due 11/01/2021 (b) $ 5,139
Wisconsin--0.3%
500 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Blood Center of
Southeastern Wisconsin Project), 5.50%
due 6/01/2024 520
Wyoming--0.9%
1,500 Wyoming Student Loan Corporation, Student Loan
Revenue Refunding Bonds, Series A, 6.20%
due 6/01/2024 1,589
Puerto Rico--3.0%
3,235 Puerto Rico Electric Power Authority, Power
Revenue Bonds, Series RR, 5%
due 7/01/2027 (d) 3,355
1,870 Puerto Rico Public Buildings Authority, Government
Facilities Revenue Refunding Bonds, Series D,
5.25% due 7/01/2036 1,927
Total Municipal Bonds
(Cost--$284,310)--163.4% 290,442
Municipal Bonds Held in Trust (j)
Arkansas--4.3%
7,420 Arkansas State Development Finance Authority,
M/F Mortgage Revenue Refunding Bonds, Series C,
5.35% due 12/01/2035 (b)(e) 7,666
California--3.9%
6,500 California Pollution Control Financing Authority, PCR,
Refunding (Pacific Gas and Electric), AMT, Series A,
5.35% due 12/01/2016 (b) 6,853
Face
Amount Municipal Bonds Held in Trust (j) Value
Illinois--2.7%
$ 4,300 Chicago, Illinois, O'Hare International Airport Revenue
Bonds, Third Lien, AMT, Series B-2, 6%
due 1/01/2029 (d) $ 4,743
Michigan--2.8%
3,500 Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Pollution Control Project), AMT, Series C, 5.65%
due 9/01/2029 (d) 3,684
1,200 Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Pollution Control Project), AMT, Series A, 5.50%
due 6/01/2030 (d) 1,268
Texas--4.7%
8,000 Dallas-Fort Worth, Texas, International Airport Revenue
Bonds, AMT, Series A, 5.50% due 11/01/2033 (b) 8,453
Total Municipal Bonds Held in Trust
(Cost--$32,001)--18.4% 32,667
Shares
Held Short-Term Securities
21 Merrill Lynch Institutional Tax-Exempt Fund,
3.49% (i)(n) 21
Total Short-Term Securities
(Cost--$21)--0.0% 21
Total Investments (Cost--$316,332*)--181.8% 323,130
Other Assets Less Liabilities--2.4% 4,314
Liability for Trust Certificates, Including Interest
Expense Payable--(8.8%) (15,593)
Preferred Stock, at Redemption Value--(75.4%) (134,061)
----------
Net Assets Applicable to Common Stock--100.0% $ 177,790
==========
* The cost and unrealized appreciation (depreciation) of investments
as of April 30, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 301,417
===============
Gross unrealized appreciation $ 7,996
Gross unrealized depreciation (1,743)
---------------
Net unrealized appreciation $ 6,253
===============
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) XL Capital Insured.
(e) FHA Insured.
(f) FSA Insured.
(g) Prerefunded.
(h) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(i) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Dividend
Affiliate Activity Income
Merrill Lynch Institutional Tax-Exempt Fund (100) $15
(j) As restated. See Note 6. Securities represent underlying bonds
transferred to a separate securitization trust established in a
tender option bond transaction in which the Fund may have acquired
the residual interest certificates. These securities serve as collateral
in a financing transaction. See Note 1(c) to Financial Statements for
details of Municipal Bonds Held in Trust.
(k) Assured Guaranty Insured.
(l) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(m) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(n) Represents the current yield as of 4/30/2006.
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Statements of Net Assets (As Restated. See Note 6)
MuniHoldings
MuniHoldings Insured
As of April 30, 2006 Fund, Inc. Fund, Inc.
Assets
Investments in unaffiliated securities, at value* $ 363,750,805 $ 323,109,498
Investments in affiliated securities, at value** 8,940 20,840
Cash 683,782 7,781
Receivable for securities sold 3,601,148 5,327,830
Interest receivable 6,081,762 4,814,277
Prepaid expenses and other assets 2,197 2,351
--------------- ---------------
Total assets 374,128,634 333,282,577
--------------- ---------------
Liabilities
Trust certificates 16,822,500 15,460,000
Payable for securities purchased 8,178,543 5,555,888
Interest expense payable 182,901 132,725
Payable to investment adviser 147,330 115,801
Payable for other affiliates 2,380 2,152
Dividends payable to Common Stock shareholders -- 90,855
Offering costs payable 10,000 --
Accrued expenses and other liabilities 74,431 73,896
--------------- ---------------
Total liabilities 25,418,085 21,431,317
--------------- ---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.10 per share*** of
AMPS+++ at $25,000 per share liquidation preference 125,052,947 134,061,235
--------------- ---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 223,657,602 $ 177,790,025
=============== ===============
Net Assets Consist of
Undistributed investment income--net $ 2,408,263 $ 936,244
Accumulated realized capital losses--net (172,781) (21,699,988)
Unrealized appreciation--net 15,078,156 6,798,634
--------------- ---------------
Total accumulated earnings (losses)--net 17,313,638 (13,965,110)
Common Stock, par value $.10 per share++ 1,386,115 1,288,620
Paid-in capital in excess of par 204,957,849 190,466,515
--------------- ---------------
Net Assets $ 223,657,602 $ 177,790,025
=============== ===============
Net asset value per share of Common Stock $ 16.14 $ 13.80
=============== ===============
Market price $ 16.20 $ 13.10
=============== ===============
* Identified cost on unaffiliated securities $ 348,672,649 $ 316,310,864
=============== ===============
** Identified cost on affiliated securities $ 8,940 $ 20,840
=============== ===============
*** Preferred Stock authorized, issued and outstanding:
Series A Shares 2,200 2,680
=============== ===============
Series B Shares 2,200 2,680
=============== ===============
Series C Shares 600 --
=============== ===============
++ Common Stock issued and outstanding 13,861,150 12,886,200
=============== ===============
+++ Auction Market Preferred Stock.
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Statements of Operations (As Restated. See Note 6)
MuniHoldings
MuniHoldings Insured
For the Year Ended April 30, 2006 Fund, Inc. Fund, Inc.
Investment Income
Interest and amortization of premium and discount earned $ 18,988,809 $ 15,307,432
Dividends from affiliates 234 15,125
--------------- ---------------
Total income 18,989,043 15,322,557
--------------- ---------------
Expenses
Investment advisory fees 1,883,168 1,736,742
Interest expense and fees 343,902 552,081
Commission fees 298,124 339,984
Accounting services 125,246 118,375
Professional fees 56,115 56,501
Transfer agent fees 54,870 48,540
Directors' fees and expenses 32,595 32,906
Printing and shareholder reports 26,329 24,708
Custodian fees 20,799 20,331
Pricing fees 19,551 16,105
Listing fees 15,057 15,048
Other 41,397 45,844
--------------- ---------------
Total expenses before waiver and/or reimbursement 2,917,153 3,007,165
Waiver and/or reimbursement of expenses (18) (196,849)
--------------- ---------------
Total expenses after waiver and/or reimbursement 2,917,135 2,810,316
--------------- ---------------
Investment income--net 16,071,908 12,512,241
--------------- ---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 3,422,736 3,060,190
Futures contracts and forward interest rate swaps--net -- (700,892)
--------------- ---------------
Total realized gain--net 3,422,736 2,359,298
--------------- ---------------
Change in unrealized appreciation/depreciation on:
Investments--net (3,470,614) (9,762,207)
Futures contracts and forward interest rate swaps--net -- 945,784
--------------- ---------------
Total change in unrealized appreciation/depreciation--net (3,470,614) (8,816,423)
--------------- ---------------
Total realized and unrealized loss--net (47,878) (6,457,125)
--------------- ---------------
Dividends to Preferred Stock Shareholders
Investment income--net (3,250,051) (3,639,222)
--------------- ---------------
Net Increase in Net Assets Resulting from Operations $ 12,773,979 $ 2,415,894
=============== ===============
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Statements of Changes in Net Assets (As Restated. See Note 6) MuniHoldings Fund, Inc.
For the Year Ended April 30,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 16,071,908 $ 16,624,737
Realized gain--net 3,422,736 2,939,797
Change in unrealized appreciation/depreciation--net (3,470,614) 8,533,488
Dividends to Preferred Stock shareholders (3,250,051) (1,607,958)
--------------- ---------------
Net increase in net assets resulting from operations 12,773,979 26,490,064
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (14,886,804) (15,903,116)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (14,886,804) (15,903,116)
--------------- ---------------
Stock Transactions
Offering and underwriting costs resulting from the issuance of Preferred Stock (253,446) --
Value of shares issued to Common Stock shareholders in reinvestment of dividends 805,613 158,591
--------------- ---------------
Net increase in net assets resulting from stock transactions 552,167 158,591
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (1,560,658) 10,745,539
Beginning of year 225,218,260 214,472,721
--------------- ---------------
End of year* $ 223,657,602 $ 225,218,260
=============== ===============
* Undistributed investment income--net $ 2,408,263 $ 4,473,210
=============== ===============
See Notes to Financial Statements.
MuniHoldings Insured Fund, Inc.
For the Year Ended April 30,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 12,512,241 $ 13,024,998
Realized gain--net 2,359,298 1,298,936
Change in unrealized appreciation/depreciation--net (8,816,423) 3,509,698
Dividends to Preferred Stock shareholders (3,639,222) (2,002,764)
--------------- ---------------
Net increase in net assets resulting from operations 2,415,894 15,830,868
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (10,717,062) (11,735,198)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (10,717,062) (11,735,198)
--------------- ---------------
Stock Transactions
Value of shares issued to Common Stock shareholders in reinvestment of dividends 269,995 --
--------------- ---------------
Net increase in net assets resulting from stock transactions 269,995 --
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (8,031,173) 4,095,670
Beginning of year 185,821,198 181,725,528
--------------- ---------------
End of year* $ 177,790,025 $ 185,821,198
=============== ===============
* Undistributed investment income--net $ 936,244 $ 2,780,287
=============== ===============
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Financial Highlights (As Restated. See Note 6) MuniHoldings Fund, Inc.
The following per share data and ratios have been derived For the Year Ended April 30,
from information provided in the financial statements. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of year $ 16.31 $ 15.54 $ 15.07 $ 14.50 $ 13.76
----------- ----------- ----------- ----------- -----------
Investment income--net 1.16++++ 1.20++++ 1.25++++ 1.25++++ 1.17
Realized and unrealized gain (loss)--net --++++++ .84 .40 .40 .66
Less dividends to Preferred Stock shareholders
from investment income--net (.23) (.12) (.07) (.10) (.16)
----------- ----------- ----------- ----------- -----------
Total from investment operations .93 1.92 1.58 1.55 1.67
----------- ----------- ----------- ----------- -----------
Less dividends to Common Stock shareholders
from investment income--net (1.08) (1.15) (1.11) (.98) (.93)
----------- ----------- ----------- ----------- -----------
Offering and underwriting costs resulting from
the issuance of Preferred Stock (.02) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 16.14 $ 16.31 $ 15.54 $ 15.07 $ 14.50
=========== =========== =========== =========== ===========
Market price per share, end of year $ 16.20 $ 16.12 $ 14.43 $ 14.43 $ 13.38
=========== =========== =========== =========== ===========
Total Investment Return++
Based on net asset value per share 5.69% 12.95% 10.94% 11.54% 12.64%
=========== =========== =========== =========== ===========
Based on market price per share 7.34% 20.22% 7.58% 15.75% 8.51%
=========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Common Stock
Total expenses, net of reimbursement and excluding
interest expense and fees* 1.15% 1.13% 1.14% 1.18% 1.21%
=========== =========== =========== =========== ===========
Total expenses, net of reimbursement* 1.30% 1.15% 1.23% 1.37% 1.46%
=========== =========== =========== =========== ===========
Total expenses* 1.30% 1.15% 1.24% 1.37% 1.46%
=========== =========== =========== =========== ===========
Total investment income--net* 7.15% 7.61% 7.98% 8.40% 8.03%
=========== =========== =========== =========== ===========
Amount of dividends to Preferred Stock shareholders 1.45% .74% .45% .66% 1.08%
=========== =========== =========== =========== ===========
Investment income--net, to Common Stock shareholders 5.70% 6.87% 7.53% 7.74% 6.95%
=========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Preferred Stock
Dividends to Preferred Stock shareholders 2.76% 1.47% .88% 1.23% 1.96%
=========== =========== =========== =========== ===========
Supplemental Data
Net assets applicable to Common Stock, end of
year (in thousands) $ 223,658 $ 225,218 $ 214,473 $ 207,960 $ 200,091
=========== =========== =========== =========== ===========
Preferred Stock outstanding at liquidation
preference, end of year (in thousands) $ 125,000 $ 110,000 $ 110,000 $ 110,000 $ 110,000
=========== =========== =========== =========== ===========
Portfolio turnover 45% 34% 41% 46% 56%
=========== =========== =========== =========== ===========
Leverage
Asset coverage per $1,000 $ 2,789 $ 3,047 $ 2,950 $ 2,891 $ 2,819
=========== =========== =========== =========== ===========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 688 $ 366 $ 220 $ 315 $ 492
=========== =========== =========== =========== ===========
Series B--Investment income--net $ 684 $ 365 $ 223 $ 302 $ 490
=========== =========== =========== =========== ===========
Series C**--Investment income--net $ 389 -- -- -- --
=========== =========== =========== =========== ===========
* Do not reflect the effect of dividends to Preferred Stock shareholders.
** Series C was issued on October 19, 2005.
++ Total investment returns based on market price, 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.
++++ Based on average shares outstanding.
++++++ Amount is less than $(.01).
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Financial Highlights (As Restated. See Note 6) MuniHoldings Insured Fund, Inc.
The following per share data and ratios have been derived For the Year Ended April 30,
from information provided in the financial statements. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of year $ 14.44 $ 14.12 $ 14.48 $ 13.78 $ 13.29
----------- ----------- ----------- ----------- -----------
Investment income--net .97++ 1.01++ 1.04++ 1.06++ 1.07
Realized and unrealized gain (loss)--net (.50) .38 (.42) .62 .44
Less dividends to Preferred Stock shareholders
from investment income--net (.28) (.16) (.09) (.13) (.21)
----------- ----------- ----------- ----------- -----------
Total from investment operations .19 1.23 .53 1.55 1.30
----------- ----------- ----------- ----------- -----------
Less dividends to Common Stock shareholders
from investment income--net (.83) (.91) (.89) (.85) (.81)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year $ 13.80 $ 14.44 $ 14.12 $ 14.48 $ 13.78
=========== =========== =========== =========== ===========
Market price per share, end of year $ 13.10 $ 13.70 $ 12.64 $ 13.50 $ 12.65
=========== =========== =========== =========== ===========
Total Investment Return*
Based on net asset value per share 1.46% 9.35% 4.07% 12.04% 10.28%
=========== =========== =========== =========== ===========
Based on market price per share 1.51% 15.90% (.07%) 13.79% 4.38%
=========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Common Stock
Total expenses, net of waiver and reimbursement
and excluding interest expense and fees** 1.24% 1.24% 1.24% 1.28% 1.30%
=========== =========== =========== =========== ===========
Total expenses, net of waiver and reimbursement** 1.54% 1.60% 1.57% 1.69% 1.86%
=========== =========== =========== =========== ===========
Total expenses** 1.65% 1.70% 1.67% 1.79% 1.95%
=========== =========== =========== =========== ===========
Total investment income--net** 6.87% 7.09% 7.12% 7.55% 7.75%
=========== =========== =========== =========== ===========
Amount of dividends to Preferred Stock shareholders 2.00% 1.09% .65% .91% 1.50%
=========== =========== =========== =========== ===========
Investment income--net, to Common Stock shareholders 4.87% 6.00% 6.47% 6.64% 6.25%
=========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Preferred Stock
Dividends to Preferred Stock shareholders 2.72% 1.50% .90% 1.23% 1.99%
=========== =========== =========== =========== ===========
Supplemental Data
Net assets applicable to Common Stock, end of
year (in thousands) $ 177,790 $ 185,821 $ 181,726 $ 186,372 $ 177,286
=========== =========== =========== =========== ===========
Preferred Stock outstanding at liquidation
preference, end of year (in thousands) $ 134,000 $ 134,000 $ 134,000 $ 134,000 $ 134,000
=========== =========== =========== =========== ===========
Portfolio turnover 59% 43% 41% 48% 47%
=========== =========== =========== =========== ===========
Leverage
Asset coverage per $1,000 $ 2,327 $ 2,387 $ 2,356 $ 2,391 $ 2,323
=========== =========== =========== =========== ===========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 686 $ 372 $ 225 $ 313 $ 502
=========== =========== =========== =========== ===========
Series B--Investment income--net $ 672 $ 376 $ 228 $ 302 $ 491
=========== =========== =========== =========== ===========
* 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.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
++ Based on average shares outstanding.
See Notes to Financial Statements.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc. (the "Funds" or
individually as the "Fund") are registered under the Investment Company Act of
1940, as amended, as non-diversified, closed-end management investment
companies. The Funds' financial statements are prepared in conformity with
U.S. generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The Funds determine and make available for publication the net
asset value of their Common Stock on a daily basis. The Funds' Common Stock
shares are listed on the New York Stock Exchange under the symbols MHD and
MUS, respectively. The following is a summary of significant accounting
policies followed by the Funds.
(a) Valuation of investments--Municipal bonds are traded primarily in the over-
the-counter ("OTC") markets and are valued at the last available bid price in
the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Funds under the general
direction of the Board of Directors. Such valuations and procedures are
reviewed periodically by the Board of Directors of the Funds. 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 OTC market, valuation is
the last asked price (options written) or the last bid price (options
purchased). Swap agreements are valued by quoted fair values received daily by
the Fund's pricing service. Short-term investments with a remaining maturity
of 60 days or less are valued at amortized cost, which approximates market
value, under which method the investment is valued at cost and any premium or
discount is amortized on a straight line basis to maturity. Investments in
open-end investment companies are valued at their net asset value each
business day. Securities and other 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 Funds.
(b) Derivative financial instruments--Each 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 movements and movements in
the securities markets. 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--Each 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--Each Fund may 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--Each Fund may enter into forward interest rate
swaps. In a forward interest rate swap, the Fund and the counterparty agree to
make periodic net payments on a specified notional contract amount, commencing
on a specified future effective date, unless terminated earlier. When the
agreement is closed, the Fund records a realized gain or loss in an amount
equal to the value of the agreement.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (continued)
(c) Municipal bonds held in trust--The Funds invest in leveraged residual
certificates ("TOB Residuals") issued by tender option bond trusts ("TOBs"). A
TOB is established by a third party sponsor forming a special purpose entity,
into which a Fund, or an agent on behalf of the Fund, transfers municipal
securities. A TOB typically issues two classes of beneficial interests: short-
term floating rate certificates, which are sold to third party investors, and
residual certificates, which are generally issued to the Fund which made the
transfer or to affiliates of the Fund. Each Fund's transfers of the municipal
securities to a TOB do not qualify for sale treatment under Statement of
Financial Accounting Standards No. 140 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," therefore the
municipal securities deposited into a TOB are presented in the Funds'
schedules of investments and the proceeds from the transactions are reported
as a liability for trust certificates of the Funds. Similarly, proceeds from
residual certificates issued to affiliates, if any, from the transaction are
included in the liability for trust certificates. Interest income from the
underlying security is recorded by the Funds on an accrual basis. Interest
expense incurred on the secured borrowing and other expenses related to
remarketing, administration and trustee services to a TOB are reported as
expenses of a Fund. The floating rate certificates have interest rates that
generally reset weekly and their holders have the option to tender
certificates to the TOB for redemption at par at each reset date. The residual
interests held by the Funds include the right of the Funds (1) to cause the
holders of a proportional share of floating rate certificates to tender their
certificates at par, and (2) to transfer a corresponding share of the
municipal securities from the TOB to the Funds. At April 30, 2006, the
aggregate value of the underlying municipal securities transferred to TOBs and
the related liability for trust certificates were:
Range of
Interest Underlying
Rates on Municipal
Liability for the Liability Bonds
Trust for Trust Transferred
Certificates Certificates to TOBs
MuniHoldings 3.60% -
Fund, Inc. $16,822,500 3.61% $35,361,517
MuniHoldings Insured 3.60% -
Fund, Inc. $15,460,000 3.63% $32,666,640
Financial transactions executed through TOBs generally will underperform the
market for fixed rate municipal bonds in a rising interest rate environment,
but tend to outperform the market for fixed rate bonds when interest rates
decline or remain relatively stable. Should short-term interest rates rise,
the Funds' investments in TOB Residuals likely will adversely affect the
Funds' investment income - net and distributions to shareholders. Fluctuations
in the market value of municipal securities deposited into the TOB may
adversely affect the Funds' net asset value per share.
While the Funds' investment policies and restrictions expressly permit
investments in inverse floating rate securities such as TOB Residuals, they
generally do not allow the Funds to borrow money for purposes of making
investments. The Funds' management believes that the Funds' restrictions on
borrowings do not apply to the secured borrowings deemed to have occurred for
accounting purposes.
(d) Income taxes--It is each 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.
(e) 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 Funds amortize all
premiums and discounts on debt securities.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(g) Offering costs for MuniHoldings Fund, Inc.--Direct expenses relating to
the public offering of the Fund's Preferred Stock were charged to capital at
the time of issuance of the shares.
2. Investment Advisory Agreement and Transactions with Affiliates:
Each 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.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (continued)
FAM is responsible for the management of each Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, each 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. The Investment
Adviser has agreed to reimburse its management fee by the amount of management
fees each Fund pays to FAM indirectly through their investment in the Merrill
Lynch Institutional Tax-Exempt Fund. For the year ended April 30, 2006, FAM
reimbursed the Funds in the amount of $18 and $1,279 relating to MuniHoldings
Fund, Inc. and MuniHoldings Insured Fund, Inc., respectively. In addition, for
MuniHoldings Insured Fund, Inc., the Investment Adviser has agreed to
reimburse its management fee based on the proceeds of Preferred Stock that
exceeds 35% of the Fund's total net assets. For the year ended April 30, 2006,
FAM earned fees of $1,736,742, of which $195,570 was waived.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of
FAM, received commissions on the execution of portfolio security transactions
for the year ended April 30, 2006 as follows:
MuniHoldings Fund, Inc. $626
MuniHoldings Insured Fund, Inc. $621
For the year ended April 30, 2006, MLPF&S received underwriting fees of
$150,000 in connection with the issuance of an additional Series of Preferred
Stock for MuniHoldings Fund, Inc.
For the year ended April 30, 2006, MuniHoldings Fund, Inc. purchased a
security, subject to Rule 17a-7 under the Investment Company Act of 1940, from
MuniYield Insured Fund, Inc., an affiliate of FAM. This resulted in an
outstanding payable in the amount of $3,459,721.
For the year ended April 30, 2006, MuniHoldings Fund, Inc. and MuniHoldings
Insured Fund, Inc. reimbursed FAM $7,841 and $7,235, respectively, for certain
accounting services.
Certain officers and/or directors of the Funds are officers and/or directors
of FAM, PSI, and/or ML & Co.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction closed on
September 29, 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended April 30, 2006 were as follows:
MuniHoldings
MuniHoldings Insured
Fund, Inc. Fund, Inc.
Total Purchases $177,369,874 $193,560,171
Total Sales $155,290,885 $194,811,540
4. Stock Transactions:
Each 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
MuniHoldings Fund, Inc.
Shares issued and outstanding during the years ended April 30, 2006 and April
30, 2005 increased by 49,412 and 9,843, respectively, as a result of dividend
reinvestment.
MuniHoldings Insured Fund, Inc.
Shares issued and outstanding during the year ended April 30, 2006 increased
by 18,659 as a result of dividend reinvestment. Shares issued and outstanding
during the year ended April 30, 2005 remained constant.
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Funds,
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, 2006 were as follows:
MuniHoldings
MuniHoldings Insured
Fund, Inc. Fund, Inc.
Series A 3.60% 3.70%
Series B 3.70% 3.71%
Series C 3.69% --
MuniHoldings Fund, Inc.
Shares issued and outstanding during the year ended April 30, 2006 increased
by 600 from the issuance of an additional series of Preferred Stock. Shares
issued and outstanding during the year ended April 30, 2005 remained constant.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (continued)
MuniHoldings Insured Fund, Inc.
Shares issued and outstanding during the years ended April 30, 2006 and April
30, 2005 remained constant.
Each 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, 2006, MLPF&S earned
commissions as follows:
Commissions
MuniHoldings Fund, Inc. $181,639
MuniHoldings Insured Fund, Inc. $208,024
5. Distributions to Shareholders:
Each Fund paid a tax-exempt income dividend to holders of Common Stock in the
amounts of $.082000 per share and $.061000 per share relating to MuniHoldings
Fund, Inc. and MuniHoldings Insured Fund, Inc. respectively, on May 30, 2006
to shareholders of record on May 15, 2006.
MuniHoldings Fund, Inc.
The tax character of distributions paid during the fiscal years ended April
30, 2006 and April 30, 2005 was as follows:
4/30/2006 4/30/2005
Distributions paid from:
Tax-exempt income $ 18,136,855 $ 17,511,074
--------------- ---------------
Total distributions $ 18,136,855 $ 17,511,074
=============== ===============
As of April 30, 2006, the components of accumulated earnings on a tax
basis were as follows:
Undistributed tax-exempt income--net $ 2,091,190
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net 2,091,190
Capital loss carryforward (44,718)*
Unrealized gains--net 15,267,166**
---------------
Total accumulated earnings--net $ 17,313,638
===============
* On April 30, 2006, the Fund had a net capital loss carryforward of
$44,718, all of which 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, the difference between book and tax amortization
methods for premiums and discounts on fixed income securities
and the difference between the book and tax treatment of residual
interests in tender option bond trusts.
MuniHoldings Insured Fund, Inc.
The tax character of distributions paid during the fiscal years ended
April 30, 2006 and April 30, 2005 was as follows:
4/30/2006 4/30/2005
Distributions paid from:
Tax-exempt income $ 14,356,284 $ 13,737,962
--------------- ---------------
Total distributions $ 14,356,284 $ 13,737,962
=============== ===============
As of April 30, 2006, the components of accumulated losses on a tax
basis were as follows:
Undistributed tax-exempt income--net $ 936,244
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net 936,244
Capital loss carryforward (18,796,624)*
Unrealized gains--net 3,895,270**
---------------
Total accumulated losses--net $ (13,965,110)
===============
* On April 30, 2006, the Fund had a net capital loss carryforward of
$18,796,624, of which $8,922,900 expires in 2008, $9,580,044
expires in 2009 and $293,680 expires in 2013. 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 wash
sales, the tax deferral of losses on straddles and the difference
between the book and tax treatment of residual interests in
tender option bond trusts.
6. Restatement Information:
Subsequent to the issuance of their April 30, 2006 financial statements, the
Funds determined that the criteria for sale accounting in Statement of
Financial Accounting Standards No. 140 had not been met for certain transfers
of municipal bonds, and that these transfers should have been accounted for as
secured borrowings rather than as sales. Accordingly, the Funds have restated
the Statements of Net Assets, including the Schedules of Investments, as of
April 30, 2006, the Statements 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 certain financial highlights for each of the five years in the
period then ended. The effects of the restatement were to record the transfers
of the municipal bonds as secured borrowings, to give effect to offsetting
changes in realized gain - net and in the change in unrealized appreciation/
depreciation - net on the transferred municipal securities and to give effect
to interest on the bonds as interest income and interest on the secured
borrowings as interest expense.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (continued)
MuniHoldings Fund, Inc.
Statement of Net Assets
As of April 30, 2006
Previously
Reported Restated
Investments in unaffiliated
securities, at value $ 346,928,305 $ 363,750,805
Investments in unaffiliated
securities, identified cost $ 331,856,177 $ 348,672,649
Interest receivable $ 5,898,861 $ 6,081,762
Total assets $ 357,123,233 $ 374,128,634
Trust certificates -- $ 16,822,500
Interest expense payable -- $ 182,901
Total liabilities $ 8,412,684 $ 25,418,085
Accumulated realized capital
losses--net $ (166,753) $ (172,781)
Unrealized appreciation--net $ 15,072,128 $ 15,078,156
Statement of Operations
For the Year Ended April 30, 2006
Previously
Reported Restated
Interest income $ 18,644,907 $ 18,988,809
Total income $ 18,645,141 $ 18,989,043
Interest expense and fees -- $ 343,902
Total expenses before waiver
and/or reimbursement $ 2,573,251 $ 2,917,153
Total expenses after waiver and/or
reimbursement $ 2,573,233 $ 2,917,135
Realized gain (loss) on
investments--net $ 3,393,460 $ 3,422,736
Total realized gain--net $ 3,393,460 $ 3,422,736
Change in unrealized
appreciation/depreciation
on investments--net $ (3,441,338) $ (3,470,614)
Total change in unrealized
appreciation/depreciation--net $ (3,441,338) $ (3,470,614)
Statement of Changes in Net Assets
For the Year Ended April 30, 2006
Previously
Reported Restated
Realized gain--net $ 3,393,460 $ 3,422,736
Change in unrealized appreciation/
depreciation--net $ (3,441,338) $ (3,470,614)
Statement of Changes in Net Assets
For the Year Ended April 30, 2005
Previously
Reported Restated
Realized gain--net $ 2,939,627 $ 2,939,797
Change in unrealized appreciation/
depreciation--net $ 8,533,658 $ 8,533,488
Financial Highlights
For the Years Ended April 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004 2003 2002
Previously Previously Previously Previously Previously
Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated
Total expenses, net
of reimbursement* 1.15% 1.30% 1.13% 1.15% 1.14% 1.23% 1.18% 1.37% 1.21% 1.46%
Total expenses* 1.15% 1.30% 1.13% 1.15% 1.15% 1.24% 1.18% 1.37% 1.21% 1.46%
Portfolio turnover 53.60% 45% 36.23% 34% 42.89% 41% 50.68% 46% 62.94% 56%
* Do not reflect the effect of dividends to Preferred Stock shareholders.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (continued)
MuniHoldings Insured Fund, Inc.
Statement of Net Assets
As of April 30, 2006
Previously
Reported Restated
Investments in unaffiliated
securities, at value $ 307,649,498 $ 323,109,498
Investments in unaffiliated
securities, identified cost $ 301,849,062 $ 316,310,864
Interest receivable $ 4,681,552 $ 4,814,277
Total assets $ 317,689,852 $ 333,282,577
Trust certificates -- $ 15,460,000
Interest expense payable -- $ 132,725
Total liabilities $ 5,838,592 $ 21,431,317
Accumulated realized capital
losses--net $ (20,701,790) $ (21,699,988)
Unrealized appreciation--net $ 5,800,436 $ 6,798,634
Statement of Operations
For the Year Ended April 30, 2006
Previously
Reported Restated
Interest income $ 14,755,351 $ 15,307,432
Total income $ 14,770,476 $ 15,322,557
Interest expense and fees -- $ 552,081
Total expenses before waiver
and reimbursement $ 2,455,084 $ 3,007,165
Total expenses after waiver and
reimbursement $ 2,258,235 $ 2,810,316
Realized gain (loss) on
investments--net $ 3,115,377 $ 3,060,190
Total realized gain--net $ 2,414,485 $ 2,359,298
Change in unrealized
appreciation/depreciation on
investments--net $ (9,817,394) $ (9,762,207)
Total change in unrealized
appreciation/depreciation--net $ (8,871,610) $ (8,816,423)
Statement of Changes in Net Assets
For the Year Ended April 30, 2006
Previously
Reported Restated
Realized gain--net $ 2,414,485 $ 2,359,298
Change in unrealized appreciation/
depreciation--net $ (8,871,610) $ (8,816,423)
Statement of Changes in Net Assets
For the Year Ended April 30, 2005
Previously
Reported Restated
Realized gain--net $ 2,296,913 $ 1,298,936
Change in unrealized appreciation/
depreciation--net $ 2,511,721 $ 3,509,698
Financial Highlights
Financial Highlights
For the Years Ended April 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004 2003 2002
Previously Previously Previously Previously Previously
Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated
Total expenses, net
of waiver and
reimbursement** 1.24% 1.54% 1.24% 1.60% 1.24% 1.57% 1.28% 1.69% 1.30% 1.86%
Total expenses** 1.35% 1.65% 1.35% 1.70% 1.34% 1.67% 1.38% 1.79% 1.39% 1.95%
Portfolio turnover 63.53% 59% 51.81% 43% 39.94% 41% 49.59% 48% 49.69% 47%
** Do not reflect the effect of dividends to Preferred Stock shareholders.
ANNUAL REPORTS APRIL 30, 2006
Notes to Financial Statements (concluded)
While the Statements of Net Assets of the Funds as of April 30, 2005, 2004,
2003 and 2002, not presented herein, have not been reissued to give effect to
the restatement, the principal effects of the restatement would be to increase
investments and payable for trust certificates by corresponding amounts at
each year, with no effect on previously reported net assets.
The Statements of Operations of the Funds for the years ended April 30, 2005,
2004, 2003 and 2002, not presented herein, have not been reissued to give
effect to the restatement. However, the principal effects of the restatement
would be to increase interest income and interest expense and fees by
corresponding amounts each year, and where applicable, to revise realized gain
(loss) on investments - net, and the change in unrealized appreciation/
depreciation on investments - net, by corresponding and offsetting amounts.
The Statements of Changes in Net Assets of the Funds for the years ended April
30, 2004, 2003 and 2002, not presented herein, have not been reissued to give
effect to the restatement, but the principal effects of the restatement, where
applicable, would be to revise previously reported realized gain (loss) on
investments - net, and change in unrealized appreciation/depreciation - net,
by corresponding and offsetting amounts.
7. Subsequent Event:
On September 29, 2006, BlackRock, Inc. and ML & Co. combined ML & Co.'s
investment management business, Merrill Lynch Investment Managers, L.P., and
its affiliates, including FAM, with BlackRock, Inc. to create a new
independent company. MuniHoldings Fund, Inc. and MuniHoldings Insured Fund,
Inc. were renamed BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings
Insured Fund, Inc., respectively.
On August 15, 2006, shareholders of each of these Funds approved a new
Investment Advisory Agreement with BlackRock Advisors, Inc. (the "Manager"),
an indirect, wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors,
Inc. was recently reorganized into a limited liability company and renamed
BlackRock Advisors, LLC. The new Investment Advisory Agreement between
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc. and the Manager
became effective on September 29, 2006.
ANNUAL REPORTS APRIL 30, 2006
Report of Independent Registered Public Accounting Firm
To the Shareholders and Boards of Directors of
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc.:
We have audited the accompanying statements of net assets, including the
schedules of investments, of MuniHoldings Fund, Inc. and MuniHoldings Insured
Fund, Inc. (the "Funds") as of April 30, 2006, and the related statements of
operations and changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on the financial statements and financial highlights of each of the
Funds based on our audits. The statements of changes in net assets of the Funds
for the year ended April 30, 2005 (before the restatement described in Note 6)
and their financial highlights for each of the four years in the period ended
April 30, 2005 (before the restatement described in Note 6) were audited by
other auditors whose report, dated June 10, 2005, expressed a qualified opinion
on these financial statements and financial highlights because of the errors
described in Note 6.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Funds are not required to have, nor were we engaged to
perform, an audit of their internal control over financial reporting. Our
audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
April 30, 2006, by correspondence with the custodians and brokers; where
replies were not received from brokers, we performed other auditing
procedures. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights of
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc. referred to above,
present fairly, in all material respects, their financial position as of April
30, 2006, and the results of their operations, changes in their net assets and
their financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 6, the statements of net assets, including the schedules
of investments as of April 30, 2006, and the related statements of operations,
the statements of changes in net assets and the financial highlights of each
of the Funds for the year then ended have been restated.
We also have audited the adjustments, applied by management, to restate the
statements of changes in net assets of MuniHoldings Fund, Inc. and MuniHoldings
Insured Fund, Inc. for the year ended April 30, 2005 and certain financial
highlights of each of the Funds for each of the four years in the period then
ended, to correct the errors described in Note 6. These adjustments are the
responsibility of the Funds' management. The audit procedures that we performed
with respect to the adjustments included such tests as we considered necessary
in the circumstances and were designed to obtain reasonable assurance about
whether the adjustments are appropriate and have been properly applied, in all
material respects, to the restated statements of changes in net assets for each
of the Funds for the year ended April 30, 2005, and to the restated information
in the financial highlights for each of the Funds for each of the four years
in the period then ended. We did not perform any audit procedures designed
to assess whether any additional adjustments or disclosures to the Funds'
financial statements or financial highlights as of April 30, 2005, and for each
of the four years in the period then ended, might be necessary in order for
such financial statements or financial highlights to be presented in conformity
with generally accepted accounting principles. In our opinion, the adjustments
to the statements of changes in net assets of each of the Funds for the year
ended April 30, 2005 and to their financial highlights for each of the four
years in the period then ended, for the restatement described in Note 6 are
appropriate and have been properly applied, in all material respects. However,
we were not engaged to audit, review, or apply any procedures to the Funds'
financial statements or financial highlights as of April 30, 2005, and for each
of the four years in the period then ended, other than with respect to the
adjustments to the Funds' statements of changes in net assets and their
financial highlights for the restatement described in Note 6 and, accordingly,
we do not express an opinion or any other form of assurance on the Funds'
financial statements as of April 30, 2005, or on their financial highlights
for the year then ended or for each of the four years in the period then ended.
Deloitte & Touche LLP
Princeton, New Jersey
May 18, 2007
ANNUAL REPORTS APRIL 30, 2006
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc.:
We have audited, before the effects of the adjustments for the correction of
the error described in Note 6, the accompanying statements of changes in net
assets of MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc. for the
year ended April 30, 2005, and financial highlights for each of the four years
in the period then ended (the 2005 financial statement and financial
highlights referred to above before the effects of the adjustments discussed
in Note 6 are not presented herein). 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 the standards of the Public Company
Accounting Oversight Board (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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Fund's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, except for the error described in Note 6, the 2005 financial
statements and financial highlights referred to above present fairly, in all
material respects, the changes in net assets of MuniHoldings Fund, Inc. and
MuniHoldings Insured Fund, Inc. for the year ended April 30, 2005, and their
financial highlights for each of the four years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
We were not engaged to audit, review, or apply any procedures to the
adjustments for the correction of the error described in Note 6 and,
accordingly, we do not express an opinion or any other form of assurance about
whether such adjustments are appropriate and have been properly applied. Those
adjustments were audited by Deloitte & Touche LLP.
(Ernst & Young LLP)
Philadelphia, Pennsylvania
June 10, 2005
Fund Certification (unaudited)
In September 2005, MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc.
filed their Chief Executive Officer Certification for the prior year with the
New York Stock Exchange pursuant to Section 303A.12(a) of the New York Stock
Exchange Corporate Governance Listing Standards.
The Funds' Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Funds' Form N-CSR and are available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
Important Tax Information (unaudited)
All of the net investment income distributions paid by MuniHoldings Fund, Inc.
and MuniHoldings Insured Fund, Inc. during the taxable year ended April 30,
2006 qualify as tax-exempt interest dividends for federal income tax purposes.
ANNUAL REPORTS APRIL 30, 2006
Automatic Dividend Reinvestment Plan
How the Plan Works--The Funds offer a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by each Fund are
automatically reinvested in additional shares of Common Stock of each Fund.
The Plan is administered on behalf of the shareholders by The Bank of New York
(the "Plan Agent"). Under the Plan, whenever the Funds declare a dividend,
participants in the Plan will receive the equivalent in shares of Common Stock
of each Fund. The Plan Agent will acquire the shares for the participant's
account either (i) through receipt of additional unissued but authorized
shares of each Fund ("newly issued shares") or (ii) by purchase of outstanding
shares of Common Stock on the open market on the New York Stock Exchange or
elsewhere. If, on the dividend payment date, each Fund's net asset value per
share is equal to or less than the market price per share plus estimated
brokerage commissions (a condition often referred to as a "market premium"),
the Plan Agent will invest the dividend amount in newly issued shares. If the
Funds' net asset value per share is greater than the market price per share (a
condition often referred to as a "market discount"), the Plan Agent will
invest the dividend amount by purchasing on the open market additional shares.
If the Plan Agent is unable to invest the full dividend amount in open market
purchases, or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the
dividend by either (i) when the shares are newly issued, the net asset value
per share on the date the shares are issued or (ii) when shares are purchased
in the open market, the average purchase price per share.
Participation in the Plan--Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Funds unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan, must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any
time without penalty by writing to the Plan Agent.
Benefits of the Plan--The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Funds. The Plan
promotes a long-term strategy of investing at a lower cost. All shares
acquired pursuant to the Plan receive voting rights. In addition, if the
market price plus commissions of each Fund's shares is above the net asset
value, participants in the Plan will receive shares of the Funds for less than
they could otherwise purchase them and with a cash value greater than the
value of any cash distribution they would have received. However, there may
not be enough shares available in the market to make distributions in shares
at prices below the net asset value. Also, since each Fund does not redeem
shares, the price on resale may be more or less than the net asset value.
Plan Fees--There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Funds. However, brokerage commissions may be
incurred when the Funds purchase shares on the open market and shareholders
will pay a pro rata share of any such commissions.
Tax Implications--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. Therefore,
income and capital gains may still be realized even though shareholders do not
receive cash. Participation in the Plan generally will not effect the tax-
exempt status of exempt interest dividends paid by the Fund. If, when the
Funds' shares are trading at a market premium, the Funds issue 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 the discount from the
market value (which may not exceed 5% of the fair market value of each 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.
Contact Information--All correspondence concerning the Plan, including any
questions about 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.
ANNUAL REPORTS APRIL 30, 2006
Disclosure of Investment Advisory Agreement
Activities of and Composition of the Boards of Directors
All but one member of each Fund's Board of Directors is an independent
director whose only affiliation with Fund Asset Management, L.P. (the
"Investment Adviser") or other Merrill Lynch affiliates is as a director of
each Fund and as a trustee or director of certain other funds advised by the
Investment Adviser or its affiliates. The Chairman of the Boards is also an
independent director. New director nominees are chosen as nominees by a
Nominating Committee comprised of independent directors. All independent
directors also are members of each Board's Audit Committee and the independent
directors meet in executive session at each in-person Board meeting. Each
Board and each Audit Committee meet in person for at least two days each
quarter and conduct other in-person and telephone meetings throughout the
year, some of which are formal board meetings, and some of which are
informational meetings. The independent counsel to the independent directors
attends all in-person Board and Audit Committee meetings and other meetings at
the independent directors' request.
Investment Advisory Agreements--Matters Considered by the Boards
Every year, each Board considers approval of each Fund's investment advisory
agreement (the "Investment Advisory Agreement"). Each Board assesses the
nature, scope and quality of the services provided to each Fund by the
personnel of the Investment Adviser and its affiliates, including
administrative services, shareholder services, oversight of fund accounting,
marketing services and assistance in meeting legal and regulatory
requirements. Each Board also receives and assesses information regarding the
services provided to the Fund by certain unaffiliated service providers.
At various times throughout the year, each Board also considers a range of
information in connection with its oversight of the services provided by the
Investment Adviser and its affiliates. Among the matters considered are: (a)
fees (in addition to management fees) paid to the Investment Adviser and its
affiliates by each Fund; (b) Fund operating expenses paid to third parties;
(c) the resources devoted to and compliance reports relating to each Fund's
investment objective, policies and restrictions, and its compliance with its
Code of Ethics and the Investment Adviser's compliance policies and
procedures; and (d) the nature, cost and character of non-investment
management services provided by the Investment Adviser and its affiliates.
Each Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall services provided by
the Investment Adviser to be of high quality. Each Board also believes that
the Investment Adviser is financially sound and well managed and notes that
the Investment Adviser is affiliated with one of America's largest financial
firms. Each Board works closely with the Investment Adviser in overseeing the
Investment Adviser's efforts to achieve good performance. As part of this
effort, each Board discusses portfolio manager effectiveness and, when
performance is not satisfactory, discusses with the Investment Adviser taking
steps such as changing investment personnel.
Annual Consideration of Approvals by the Boards of Directors
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement, each Board requests and receives materials specifically
relating to the Fund's Investment Advisory Agreement. These materials are
prepared separately for each Fund, and include (a) information compiled by
Lipper Inc. ("Lipper") on the fees and expenses, investment performance and
leverage of the Fund as compared to a comparable group of funds as classified
by Lipper; (b) information comparing each Fund's market price with its net
asset value per share; (c) a discussion by each Fund's portfolio management
team of investment strategies used by the Fund during its most recent fiscal
year; (d) information on the profitability to the Investment Adviser and its
affiliates of the Investment Advisory Agreement and other relationships with
the Fund; and (e) information provided by the Investment Adviser concerning
investment advisory fees charged to other retail closed-end funds under
similar investment mandates. Each Board also considers other matters it deems
important to the approval process, such as payments made for services related
to the valuation and pricing of Fund portfolio holdings, the Fund's portfolio
turnover statistics, and direct and indirect benefits to the Investment
Adviser and its affiliates from their relationship with the Fund. The Boards
did not identify any particular information as controlling, and each member of
the Boards may have attributed different weights to the various items
considered.
Certain Specific Renewal Data
In connection with the most recent renewal of each Fund's Investment Advisory
Agreement in November 2005, the independent directors' and Boards' review
included the following:
ANNUAL REPORTS APRIL 30, 2006
Investment Adviser's Services and Fund Performance--Each Board reviewed the
nature, extent and quality of services provided by the Investment Adviser,
including the investment advisory services and the resulting performance of
each Fund. The Boards focused primarily on the Investment Adviser's investment
advisory services and each Fund's investment performance. Each Board compared
Fund performance - both including and excluding the effects of each Fund's
fees and expenses - to the performance of a comparable group of funds. While
each Board reviews performance data quarterly, consistent with the Investment
Adviser's investment goals, each Board attaches primary importance to
performance over relatively long periods of time, typically three to five
years.
Relative to closed-end leveraged general municipal debt funds deemed
comparable by the Investment Adviser, the Board noted that for the period
ended August 31, 2005, MuniHoldings Fund, Inc.'s performance for the one-,
three- and five-year periods ranked in the first quintile. The Board also
reviewed the Fund's performance based on annualized yields and noted that the
Fund ranked in the first quintile for the past three years ended August 31,
2005, and in the third quintile for the prior year.
Relative to closed-end leveraged insured municipal debt funds deemed
comparable by the Investment Adviser, the Board noted that MuniHoldings
Insured Fund, Inc.'s performance ranked in the fifth quintile for the one-year
period, in the second quintile for the three-year period, and in the first
quintile for the five-year period, ended August 31, 2005. The Board also noted
the Fund's performance based on annualized yields and noted that the Fund
ranked in the fifth quintile for the one-year period ended August 31, 2005,
and in the second quintile for the two prior years. The Board concluded that
each Fund's performance supported the continuation of the Investment Advisory
Agreement.
The Investment Adviser's Personnel and Investment Process--At least annually,
each Board reviews each Fund's investment objectives and strategies. The
Boards discussed with senior management of the Investment Adviser responsible
for investment operations and the senior management of the Investment Adviser's
municipal investing group the strategies being used to achieve the stated
objectives. Among other things, each Board considered the size, education and
experience of the Investment Adviser's investment staff, its use of technology,
and the Investment Adviser's approach to training and retaining portfolio
managers and other research, advisory and management personnel. Each Board also
reviewed the Investment Adviser's compensation policies and practices with
respect to the Funds' portfolio manager. The Board also considered the
experience of the Funds' portfolio manager and noted that Mr. DiMella has over
13 years of experience investing in municipal securities. The Board concluded
that the Investment Adviser and its investment staff and each Fund's management
team have extensive experience in analyzing and managing the type of investment
used by each Fund and that each Fund benefits from that experience.
Management Fees and Other Expenses--Each Board reviews the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels - the actual rate includes advisory and
administrative service fees and the effects of any fee waivers - compared to
the other funds considered comparable by Lipper. It also compares the Fund's
total expenses to those of other comparable funds of the Investment Adviser.
The Board noted that investment advisory fees charged to each of the Funds was
equal to or slightly more than the fees charged to other retail closed-end
funds of the Investment Adviser. With respect to MuniHoldings Fund, Inc., the
Board noted that that the contractual and actual management fee rates and
total expense ratio were below the median fees charged by comparable funds, as
determined by Lipper. With respect to MuniHoldings Insured Fund, Inc., the
Board noted that contractual management fee rate was equal to the median fee
charged by comparable funds, as determined by Lipper, while the actual
management fee rate and actual total expense ratio were higher than the median
fees charged by such comparable funds. Each Board concluded that the Fund's
management fee and fee rate and overall expense ratio (taking into account the
fee waiver agreement applicable to MuniHoldings Insured Fund, Inc.) are
reasonable compared to those of other comparable funds.
Profitability--Each Board considered the cost of the services provided to the
Fund by the Investment Adviser, and the Investment Adviser's and its
affiliates' profits relating to the management of the Fund and the MLIM/FAM-
advised funds. As part of its analysis, each Board reviewed the Investment
Adviser's methodology in allocating its costs to the management of the Fund
and concluded that there was a reasonable basis for the allocation. The Boards
also considered federal court decisions discussing an investment adviser's
profitability and profitability levels considered to be reasonable in those
decisions. Each Board concluded that the Investment Adviser's profits are
acceptable in relation to the nature and quality of services provided and
given the level of fees and expenses overall.
ANNUAL REPORTS APRIL 30, 2006
Disclosure of Investment Advisory Agreement (concluded)
Economies of Scale--Each Board considered the extent to which economies of
scale might be realized as the assets of a Fund increase and whether there
should be changes in the management fee rate or structure in order to enable
the Fund to participate in these economies of scale. Each Board considered
economies of scale to the extent applicable to each Fund's closed-end
structure and determined that each Fund appropriately benefits from any
economies of scale and no changes were currently necessary.
Conclusion
After the independent directors deliberated in executive session, each entire
Board, including all of the independent directors, approved the renewal of the
existing Investment Advisory Agreement, concluding that the advisory fee,
taking into account the fee waiver applicable to MuniHoldings Insured Fund,
Inc., was reasonable in relation to the services provided and that a contract
renewal was in the best interests of the shareholders.
Officers and Directors
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Robert C. Doll, Jr.* President 2005 to President of the MLIM/FAM-advised funds since 131 Funds None
P.O. Box 9011 and present 2005; President of MLIM and FAM since 2001; 177 Portfolios
Princeton, Director Co-Head (Americas Region) thereof from 2000
NJ 08543-9011 to 2001 and Senior Vice President from 1999
Age: 51 to 2001; President and Director of Princeton
Services, Inc. ("Princeton Services") since 2001;
President of Princeton Administrators, L.P.
("Princeton Administrators") since 2001; Chief
Investment Officer of OppenheimerFunds, Inc.
in 1999 and Executive Vice President thereof
from 1991 to 1999.
* Mr. Doll is a director, trustee or member of an advisory board of certain
other investment companies for which MLIM or FAM acts as investment adviser.
Mr. Doll is an "interested person," as defined in the Investment Company Act,
of the Fund based on his positions with MLIM, FAM, Princeton Services and
Princeton Administrators. Directors serve until their resignation, removal
or death, or until December 31 of the year in which they turn 72. As Fund
President, Mr. Doll serves at the pleasure of the Board of Directors.
ANNUAL REPORTS APRIL 30, 2006
Officers and Directors (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Independent Directors*
Ronald W. Forbes** Director 1997 (MHD) Professor Emeritus of Finance, School of 49 Funds None
P.O. Box 9095 and 1998 Business, State University of New York at 50 Portfolios
Princeton, (MUS) to Albany since 2000 and Professor thereof from
NJ 08543-9095 present 1989 to 2000; International Consultant, Urban
Age: 65 Institute, Washington, D.C. from 1995 to 1999.
Cynthia A. Montgomery Director 1997 (MHD) Professor, Harvard Business School since 49 Funds Newell
P.O. Box 9095 and 1998 1989; Associate Professor, J.L. Kellogg 50 Portfolios Rubbermaid, Inc.
Princeton, (MUS) to Graduate School of Management, Northwestern (manufacturing)
NJ 08543-9095 present University from 1985 to 1989; Associate
Age: 53 Professor, Graduate School of Business
Administration, University of Michigan from
1979 to 1985; Director, Harvard Business
School Publishing since 2005; Director,
McLean Hospital since 2005.
Jean Margo Reid Director 2004 to Self-employed consultant since 2001; Counsel 49 Funds None
P.O. Box 9095 present of Alliance Capital Management (investment 50 Portfolios
Princeton, adviser) in 2000; General Counsel, Director
NJ 08543-9095 and Secretary of Sanford C. Bernstein & Co.,
Age: 60 Inc. (investment adviser/broker-dealer) from 1997
to 2000; Secretary, Sanford C. Bernstein Fund,
Inc. from 1994 to 2000; Director and Secretary
of SCB, Inc. since 1998; Director and Secretary
of SCB Partners, Inc. since 2000; and Director of
Covenant House from 2001 to 2004.
Roscoe S. Suddarth Director 2000 to President, Middle East Institute, from 1995 49 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 and Career Minister from 1989 to 1995; Deputy
Age: 70 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 (MHD) Professor of Finance from 1984 to 1995, 49 Funds Bowne & Co.,
P.O. Box 9095 and 1998 Dean from 1984 to 1993 and since 1995 50 Portfolios Inc. (financial
Princeton, (MUS) to Dean Emeritus of New York University's printers);
NJ 08543-9095 present Leonard N. Stern School of Business Vornado Realty
Age: 68 Administration. Trust (real
estate
company);
Alexander's, Inc.
(real estate
company)
Edward D. Zinbarg Director 2000 to Self-employed financial consultant since 49 Funds None
P.O. Box 9095 present 1994; Executive Vice President of the 50 Portfolios
Princeton, Prudential Insurance Company of America from
NJ 08543-9095 1988 to 1994; Former Director of Prudential
Age: 71 Reinsurance Company and former Trustee of the
Prudential Foundation.
* Directors serve until their resignation, removal or death, or until December 31
of the year in which they turn 72.
** Chairman of the Board of Directors and the Audit Committee.
ANNUAL REPORTS APRIL 30, 2006
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Vice 1997 (MHD) First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
P.O. Box 9011 President and 1998 Senior Vice President and Treasurer of Princeton Services since 1999 and Director
Princeton, and (MUS) to since 2004; Vice President of FAM Distributors, Inc. ("FAMD") since 1999 and
NJ 08543-9011 Treasurer present Director since 2004; Vice President of MLIM and FAM from 1990 to 1997; Director
Age: 45 and 1999 of Taxation of MLIM from 1990 to 2001; Vice President, Treasurer and Secretary of
to present the IQ Funds since 2004.
Kenneth A. Jacob Senior 2002 to Managing Director of MLIM since 2000; Director of MLIM from 1997 to 2000.
P.O. Box 9011 Vice present
Princeton, President
NJ 08543-9011
Age: 55
John M. Loffredo Senior 2002 to Managing Director of MLIM since 2000; Director of MLIM from 1997 to 2000.
P.O. Box 9011 Vice present
Princeton, President
NJ 08543-9011
Age: 42
Robert A. DiMella Vice 1997 (MHD) Managing Director of MLIM since 2004; Director of MLIM from 2002 to 2004;
P.O. Box 9011 President and 1999 Vice President of MLIM from 1996 to 2001.
Princeton, (MUS) to
NJ 08543-9011 present
Age: 39
Jeffrey Hiller Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President
P.O. Box 9011 Compliance present and Chief Compliance Officer of MLIM (Americas Region) since 2004; Chief
Princeton, Officer Compliance Officer of the IQ Funds since 2004; Global Director of Compliance at
NJ 08543-9011 Morgan Stanley Investment Management from 2002 to 2004; Managing Director
Age: 54 and Global Director of Compliance at Citigroup Asset Management from 2000
to 2002; Chief Compliance Officer at Soros Fund Management in 2000; Chief
Compliance Officer at Prudential Financial from 1995 to 2000; Senior Counsel in
the Commission's Securities and Exchange Division of Enforcement in Washington,
D.C. from 1990 to 1995.
Alice A. Pellegrino Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
P.O. Box 9011 present 2002; Attorney associated with MLIM since 1997; Secretary of MLIM, FAM, FAMD
Princeton, and Princeton Services since 2004.
NJ 08543-9011
Age: 46
* Officers of the Funds 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 - 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street - 7 West
New York, NY 10286
NYSE Symbols
MHD MuniHoldings Fund, Inc.
MUS MuniHoldings Insured Fund, Inc.
Effective January 1, 2007, Edward D. Zinbarg retired as a Trustee/Director of
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc. The Funds' Boards
of Trustees/Directors wish Mr. Zinbarg well in his retirement.
Effective April 13, 2007, Jeffrey Hiller resigned his position as Chief
Compliance Officer of the Funds. Also effective April 13, 2007, Karen Clark was
appointed Chief Compliance Officer of the Funds. Ms. Clark has been a Managing
Director of BlackRock, Inc. since 2007. She was a Director thereof from 2005 to
2007. Prior to that, Ms. Clark was a principal and senior compliance officer at
State Street Global Advisors from 2001 to 2005. Ms. Clark was a principal
consultant with PricewaterhouseCoopers, LLP from 1998 to 2001. From 1993 to
1998, Ms. Clark was Branch Chief, Division of Investment Management and Office
of Compliance Inspections and Examinations, with the U.S. Securities and
Exchange Commission.
ANNUAL REPORTS APRIL 30, 2006
Availability of Quarterly Schedule of Investments
The Funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters
of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the
SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Electronic Delivery
The Funds offer electronic delivery of communications to their shareholders.
In order to receive this service, you must register your account and provide
us with e-mail information. To sign up for this service, simply access this
Web site at http://www.icsdelivery.com/live and follow the instructions. When
you visit this site, you will obtain a personal identification number (PIN).
You will need this PIN should you wish to update your e-mail address, choose
to discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
ANNUAL REPORTS APRIL 30, 2006
Item 2 - Code of Ethics - The registrant has adopted 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 and principal accounting officer, or persons performing
similar functions. A copy of the code of ethics is available
without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors has determined that (i) the registrant has the following
audit committee financial experts serving on its audit committee and
(ii) each audit committee financial expert is independent: (1)
Ronald W. Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg
(retired as of December 31, 2006).
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending April 30, 2006 - $34,000
Fiscal Year Ending April 30, 2005 - $32,000
(b) Audit-Related Fees -
Fiscal Year Ending April 30, 2006 - $3,500
Fiscal Year Ending April 30, 2005 - $3,500
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ending April 30, 2006 - $6,000
Fiscal Year Ending April 30, 2005 - $5,700
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ending April 30, 2006 - $0
Fiscal Year Ending April 30, 2005 - $0
(e)(1) The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided
to the registrant on an annual basis require specific pre-approval
by the Committee. The Committee also must approve other non-audit
services provided to the registrant and those non-audit services
provided to the registrant's affiliated service providers that
relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee
believes are a) consistent with the SEC's auditor independence rules
and b) routine and recurring services that will not impair the
independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis
("general pre-approval"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. Any proposed services
exceeding the pre-approved cost levels will require specific pre-
approval by the Committee, as will any other services not subject to
general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending April 30, 2006 - $9,500
Fiscal Year Ending April 30, 2005 - $9,200
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $0, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Ronald W. Forbes
Cynthia A. Montgomery
Jean Margo Reid
Roscoe S. Suddarth
Richard R. West
Edward D. Zinbarg (retired as of December 31, 2006)
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
Proxy Voting Policies and Procedures
------------------------------------
Each Fund's Board of Directors/Trustees has delegated to Merrill
Lynch Investment Managers, L.P. and/or Fund Asset Management, L.P.
(the "Investment Adviser") authority to vote all proxies relating to
the Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to
the voting of proxies related to the portfolio securities held in
the account of one or more of its clients, including a Fund.
Pursuant to these Proxy Voting Procedures, the Investment Adviser's
primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of each Fund and its
shareholders, and to act in a manner that the Investment Adviser
believes is most likely to enhance the economic value of the
securities held by the Fund. The Proxy Voting Procedures are
designed to ensure that that the Investment Adviser considers the
interests of its clients, including the Funds, and not the interests
of the Investment Adviser, when voting proxies and that real (or
perceived) material conflicts that may arise between the Investment
Adviser's interest and those of the Investment Adviser's clients are
properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment
professionals appointed by the CIO, portfolio managers and
investment analysts appointed by the CIO and any other personnel the
CIO deems appropriate. The Committee will also include two non-
voting representatives from the Investment Adviser's Legal
department appointed by the Investment Adviser's General Counsel.
The Committee's membership shall be limited to full-time employees
of the Investment Adviser. No person with any investment banking,
trading, retail brokerage or research responsibilities for the
Investment Adviser's affiliates may serve as a member of the
Committee or participate in its decision making (except to the
extent such person is asked by the Committee to present information
to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser
might be asked to do so). The Committee determines how to vote the
proxies of all clients, including a Fund, that have delegated proxy
voting authority to the Investment Adviser and seeks to ensure that
all votes are consistent with the best interests of those clients
and are free from unwarranted and inappropriate influences. The
Committee establishes general proxy voting policies for the
Investment Adviser and is responsible for determining how those
policies are applied to specific proxy votes, in light of each
issuer's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated
consequences of alternate actions. In so doing, the Committee may
determine to vote a particular proxy in a manner contrary to its
generally stated policies. In addition, the Committee will be
responsible for ensuring that all reporting and recordkeeping
requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires
a case-by-case determination. In such cases, the Committee may
elect not to adopt a specific voting policy applicable to that
issue. The Investment Adviser believes that certain proxy voting
issues require investment analysis - such as approval of mergers and
other significant corporate transactions - akin to investment
decisions, and are, therefore, not suitable for general guidelines.
The Committee may elect to adopt a common position for the
Investment Adviser on certain proxy votes that are akin to
investment decisions, or determine to permit the portfolio manager
to make individual decisions on how best to maximize economic value
for a Fund (similar to normal buy/sell investment decisions made by
such portfolio managers). While it is expected that the Investment
Adviser will generally seek to vote proxies over which the
Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in
conjunction with a Fund's portfolio manager, may determine that the
Fund's specific circumstances require that its proxies be voted
differently.
To assist the Investment Adviser in voting proxies, the Committee
has retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address
special circumstances that can arise in connection with proxy
voting. For instance, under the Proxy Voting Procedures, the
Investment Adviser generally will not seek to vote proxies related
to portfolio securities that are on loan, although it may do so
under certain circumstances. In addition, the Investment Adviser
will vote proxies related to securities of foreign issuers only on a
best efforts basis and may elect not to vote at all in certain
countries where the Committee determines that the costs associated
with voting generally outweigh the benefits. The Committee may at
any time override these general policies if it determines that such
action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote proxies in
respect of an issuer where an affiliate of the Investment Adviser (each, an
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates and
Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or
if the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary
to advise the Committee on how to vote or to cast votes on behalf of the
Investment Adviser's clients.
In the event that the Committee determines not to retain an
independent fiduciary, or it does not follow the advice of such an
independent fiduciary, the powers of the Committee shall pass to a
subcommittee, appointed by the CIO (with advice from the Secretary
of the Committee), consisting solely of Committee members selected
by the CIO. The CIO shall appoint to the subcommittee, where
appropriate, only persons whose job responsibilities do not include
contact with the Client and whose job evaluations would not be
affected by the Investment Adviser's relationship with the Client
(or failure to retain such relationship). The subcommittee shall
determine whether and how to vote all proxies on behalf of the
Investment Adviser's clients or, if the proxy matter is, in their
judgment, akin to an investment decision, to defer to the applicable
portfolio managers, provided that, if the subcommittee determines to
alter the Investment Adviser's normal voting guidelines or, on
matters where the Investment Adviser's policy is case-by-case, does
not follow the voting recommendation of any proxy voting service or
other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies
relating to the Client may be voted unless the Secretary, or in the
Secretary's absence, the Assistant Secretary of the Committee
concurs that the subcommittee's determination is consistent with the
Investment Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain
recurring proxy issues that are not expected to involve unusual
circumstances. These policies are guidelines only, and the
Investment Adviser may elect to vote differently from the
recommendation set forth in a voting guideline if the Committee
determines that it is in a Fund's best interest to do so. In
addition, the guidelines may be reviewed at any time upon the
request of a Committee member and may be amended or deleted upon the
vote of a majority of Committee members present at a Committee
meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
* Proposals related to the composition of the Board of Directors of issuers
other than investment companies. As a general matter, the Committee
believes that a company's Board of Directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a
company's business and prospects, and is therefore best-positioned to set
corporate policy and oversee management. The Committee, therefore,
believes that the foundation of good corporate governance is the election
of qualified, independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over
time. In individual cases, the Committee may look at a nominee's history
of representing shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
* Proposals related to the selection of an issuer's independent auditors. As
a general matter, the Committee believes that corporate auditors have a
responsibility to represent the interests of shareholders and provide an
independent view on the propriety of financial reporting decisions of
corporate management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the Committee may
look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
* Proposals related to management compensation and employee benefits. As a
general matter, the Committee favors disclosure of an issuer's compensation
and benefit policies and opposes excessive compensation, but believes that
compensation matters are normally best determined by an issuer's board of
directors, rather than shareholders. Proposals to "micro-manage" an
issuer's compensation practices or to set arbitrary restrictions on
compensation or benefits will, therefore, generally not be supported.
* Proposals related to requests, principally from management, for approval of
amendments that would alter an issuer's capital structure. As a general
matter, the Committee will support requests that enhance the rights of
common shareholders and oppose requests that appear to be unreasonably
dilutive.
* Proposals related to requests for approval of amendments to an issuer's
charter or by-laws. As a general matter, the Committee opposes poison pill
provisions.
* Routine proposals related to requests regarding the formalities of
corporate meetings.
* Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the Committee
believes that a fund's Board of Directors (rather than its shareholders) is
best-positioned to set fund policy and oversee management. However, the
Committee opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective, that the
Investment Company Act envisions will be approved directly by shareholders.
* Proposals related to limiting corporate conduct in some manner that relates
to the shareholder's environmental or social concerns. The Committee
generally believes that annual shareholder meetings are inappropriate
forums for discussion of larger social issues, and opposes shareholder
resolutions "micromanaging" corporate conduct or requesting release of
information that would not help a shareholder evaluate an investment in the
corporation as an economic matter. While the Committee is generally
supportive of proposals to require corporate disclosure of matters that
seem relevant and material to the economic interests of shareholders, the
Committee is generally not supportive of proposals to require disclosure of
corporate matters for other purposes.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of April 30, 2006.
(a)(1) Mr. Robert A. DiMella is primarily responsible for the day-
to-day management of the registrant's portfolio ("Portfolio
Manager"). Mr. DiMella has been a portfolio manager with
MLIM since 1997, was a Vice President of MLIM from 1997 to
2001, was a Director (Tax-Exempt Fund Management) of MLIM
from 2002 to 2004, has been a Managing Director of MLIM
since 2004 and has 16 years of experience investing in
Municipal Bonds as a portfolio manager on behalf of
registered investment companies. He has been the portfolio
manager and a Vice President of the Fund since 1999.
(a)(2) As of April 30, 2006:
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
Other Other
(i) Name of Registered Other Pooled Registered Other Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
Robert A.
DiMella 5 1 0 0 1 0
$ 2,936,378,902 $ 22,996,576 $ 0 $ 0 $ 22,996,576 $ 0
(iv) Potential Material Conflicts of Interest
Real, potential or apparent conflicts of interest may arise when a
portfolio manager has day-to-day portfolio management responsibilities with
respect to more than one fund or account, including the following:
Certain investments may be appropriate for the Fund and also for other
clients advised by the Investment. Adviser and its affiliates, including other
client accounts managed by the Fund's portfolio management team. Investment
decisions for the Fund and other clients are made with a view to achieving
their respective investment objectives and after consideration of such factors
as their current holdings, availability of cash for investment and the size of
their investments generally. Frequently, a particular security may be bought or
sold for only one client or in different amounts and at different times for
more than one but less than all clients. Likewise, because clients of the
Investment Adviser and its affiliates may have differing investment strategies,
a particular security may be bought for one or more clients when one or more
other clients are selling the security. The investment results for the Fund may
differ from the results achieved by other clients of the Investment Adviser and
its affiliates and results among clients may differ. In addition, purchases or
sales of the same security may be made for two or more clients on the same day.
In such event, such transactions will be allocated among the clients in a
manner believed by the Investment Adviser and its affiliates to be equitable to
each. The Investment Adviser will not determine allocations based on whether it
receives a performance based fee from the client. In some cases, the allocation
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of the Investment Adviser and its
affiliates in the interest of achieving the most favorable net results to the
Fund.
To the extent that the Fund's portfolio management team has
responsibilities for managing accounts in addition to the Fund, a portfolio
manager will need to divide his time and attention among relevant accounts.
In some cases, a real, potential or apparent conflict may also arise
where (i) the Investment Adviser may have an incentive, such as a performance
based fee, in managing one account and not with respect to other accounts it
manages or (ii) where a member of the Fund's portfolio management team owns an
interest in one fund or account he or she manages and not another.
(a)(3) As of April 30, 2006:
Portfolio Manager Compensation
The Portfolio Manager Compensation Program of MLIM and its affiliates,
including the Investment Adviser, is critical to MLIM's ability to attract and
retain the most talented asset management professionals. This program ensures
that compensation is aligned with maximizing investment returns and it provides
a competitive pay opportunity for competitive performance.
Compensation Program
The elements of total compensation for MLIM and its affiliates
portfolio managers are a fixed base salary, annual performance-based cash and
stock compensation (cash and stock bonus) and other benefits. MLIM has balanced
these components of pay to provide portfolio managers with a powerful incentive
to achieve consistently superior investment performance. By design, portfolio
manager compensation levels fluctuate--both up and down--with the relative
investment performance of the portfolios that they manage.
Base Salary
Under the MLIM approach, like that of many asset management firms, base
salaries represent a relatively small portion of a portfolio manager's total
compensation. This approach serves to enhance the motivational value of the
performance-based (and therefore variable) compensation elements of the
compensation program.
Performance-Based Compensation
MLIM believes that the best interests of investors are served by
recruiting and retaining exceptional asset management talent and managing their
compensation within a consistent and disciplined framework that emphasizes pay
for performance in the context of an intensely competitive market for talent.
To that end, MLIM and its affiliates portfolio manager incentive compensation
is based on a formulaic compensation program. MLIM's formulaic portfolio
manager compensation program includes: investment performance relative to a
subset of general closed-end, leveraged, municipal debt funds over 1-, 3- and
5-year performance periods and a measure of operational efficiency. Portfolio
managers are compensated based on the pre-tax performance of the products they
manage. If a portfolio manager's tenure is less than 5 years, performance
periods will reflect time in position. Portfolio managers are compensated based
on products they manage. A discretionary element of portfolio manager
compensation may include consideration of: financial results, expense control,
profit margins, strategic planning and implementation, quality of client
service, market share, corporate reputation, capital allocation, compliance and
risk control, leadership, workforce diversity, supervision, technology and
innovation. MLIM and its affiliates also consider the extent to which
individuals exemplify and foster ML & Co.'s principles of client focus, respect
for the individual, teamwork, responsible citizenship and integrity. All
factors are considered collectively by MLIM management.
Cash Bonus
Performance-based compensation is distributed to portfolio managers in
a combination of cash and stock. Typically, the cash bonus, when combined with
base salary, represents more than 60% of total compensation for portfolio
managers.
Stock Bonus
A portion of the dollar value of the total annual performance-based
bonus is paid in restricted shares of ML & Co. stock. Paying a portion of
annual bonuses in stock puts compensation earned by a portfolio manager for a
given year "at risk" based on the company's ability to sustain and improve its
performance over future periods. The ultimate value of stock bonuses is
dependent on future ML & Co. stock price performance. As such, the stock bonus
aligns each portfolio manager's financial interests with those of the ML & Co.
shareholders and encourages a balance between short-term goals and long-term
strategic objectives. Management strongly believes that providing a significant
portion of competitive performance-based compensation in stock is in the best
interests of investors and shareholders. This approach ensures that portfolio
managers participate as shareholders in both the "downside risk" and "upside
opportunity" of the company's performance. Portfolio managers therefore have a
direct incentive to protect ML & Co.'s reputation for integrity.
Other Compensation Programs
Portfolio managers who meet relative investment performance and
financial management objectives during a performance year are eligible to
participate in a deferred cash program. Awards under this program are in the
form of deferred cash that may be benchmarked to a menu of MLIM mutual funds
(including their own fund) during a five-year vesting period. The deferred cash
program aligns the interests of participating portfolio managers with the
investment results of MLIM products and promotes continuity of successful
portfolio management teams.
Other Benefits
Portfolio managers are also eligible to participate in broad-based
plans offered generally to employees of ML & Co. and its affiliates, including
broad-based retirement, 401(k), health, and other employee benefit plans.
(a)(4) Beneficial Ownership of Securities. As of April 30, 2006,
Mr. DiMella does not beneficially own any stock issued by the
Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The Registrant's principal executive and principal financial
officers have evaluated the Registrant's disclosure controls and
procedures, including internal control over financial reporting,
within 90 days of this filing. Such principal officers have
concluded that as of May 18, 2007, the Registrant's disclosure
controls and procedures were effective in design and operation to
reasonably ensure that information required to be disclosed by the
Registrant in this Form N-CSR/A was recorded, processed, summarized,
and reported within the required time periods, and were sufficient
to form the basis of the certifications required by Rule 30a-(2) of
the Investment Company Act of 1940, as amended. Prior to reaching
that conclusion, such principal officers had become aware of matters
relating to the Registrant's participation in certain inverse
floater structures that necessitated restatement of financial
information included in Item 1 of this filing. As a result,
management of the Registrant had reevaluated certain disclosure
controls and procedures determined not to be effective, as discussed
more fully below.
Management of the Registrant is responsible for establishing and
maintaining effective internal control over financial reporting. In
fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related
costs of controls. The Registrant's internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. Such internal
control includes policies and procedures that provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of a registrant's assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
A control deficiency exists when the design or operation of a
control does not allow management or employees, in the normal course
of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a
control deficiency, or combination of control deficiencies, that
adversely affects the Registrant's ability to initiate, authorize,
record, process or report financial data reliably in accordance with
generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the Registrant's
annual or interim financial statements that is more than
inconsequential will not be prevented or detected. A material
weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a
material misstatement of the annual or interim financial statements
will not be prevented or detected.
Subsequent to the initial filing of the Registrant's Form N-CSR, the
Registrant identified the following control deficiency that was
determined to be a material weakness, as defined above, in the
Registrant's internal control over financial reporting at April 30,
2006. The Registrant's controls related to the review and analysis
of relevant terms and conditions of transfers of certain assets
pertaining to inverse floater structures were not operating
effectively to appropriately determine whether the transfers of
assets qualified for sale accounting under the provisions of
Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS 140"). As a result, these controls did not
detect that certain transfers were not appropriately recorded as
borrowings. Accordingly, the Registrant's financial statements as of
and for the period ended April 30, 2006, including prior periods
where applicable, were restated to appropriately reflect transfers
of such securities as secured borrowings and to report the related
income and expense. The restatement had no impact on net assets,
net asset value per share or total return.
Subsequent to April 30, 2006, but prior to the evaluation of the
design and operation of the Registrant's disclosure controls and
procedures at May 18, 2007, the Registrant's disclosure controls and
procedures were modified to enhance the review and analysis of the
relevant terms and conditions of transfers of securities in
connection with inverse floater structures in light of SFAS 140.
11(b) - There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940, as amended) that occurred during the
second half of the Registrant's fiscal year that have materially
affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting. However, as
discussed above, subsequent to April 30, 2006, the Registrant has
enhanced controls related to the application of SFAS 140.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - 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.
BlackRock MuniHoldings Fund, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock MuniHoldings Fund, Inc.
Date: June 7, 2007
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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock MuniHoldings Fund, Inc.
Date: June 7, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock MuniHoldings Fund, Inc.
Date: June 7, 2007