UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-8707
Name of Fund: MuniHoldings Insured Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
MuniHoldings Insured 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: 04/30/05
Date of reporting period: 05/01/04 - 10/31/04
Item 1 - Report to Stockholders
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Merrill Lynch Investment Managers
www.mlim.ml.com
MuniHoldings
Insured Fund, Inc.
Semi-Annual Report
October 31, 2004
MuniHoldings Insured Fund, Inc. seeks to provide shareholders with
current income exempt from federal income taxes by investing
primarily in a portfolio of long-term, investment grade municipal
obligations the interest on which, in the opinion of bond counsel
to the issuer, is exempt from federal income taxes. Under normal
circumstances, the Fund invests at least 80% of its total assets in
municipal bonds that are covered by insurance.
This report, including the financial information herein, is
transmitted to shareholders of MuniHoldings Insured Fund, Inc. for
their information. It is not a prospectus. Past performance results
shown in this report should not be considered a representation of
future performance. The Fund has leveraged its Common Stock and
intends to remain leveraged by issuing Preferred Stock to provide
the Common Stock shareholders with a potentially higher rate of
return. Leverage creates risks for Common Stock shareholders,
including the likelihood of greater volatility of net asset value
and market price of shares of the Common Stock, and the risk that
fluctuations in the short-term dividend rates of the Preferred Stock
may affect the yield to Common Stock shareholders. Statements and
other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses
to determine how to vote proxies relating to portfolio securities
is available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) at www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's Web site at
http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the
most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com; and (2) on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
MuniHoldings Insured Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
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MuniHoldings Insured Fund, Inc.
The Benefits and Risks of Leveraging
MuniHoldings Insured Fund, Inc. utilizes leveraging to seek
to enhance the yield and net asset value of its Common Stock.
However, these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned
on these investments is paid to Common Stock shareholders in the
form of dividends, and the value of these portfolio holdings is
reflected in the per share net asset value of the Fund's Common
Stock. However, in order to benefit Common Stock shareholders, the
yield curve must be positively sloped; that is, short-term interest
rates must be lower than long-term interest rates. At the same time,
a period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issue of Preferred Stock for
an additional $50 million, creating a total value of $150 million
available for investment in long-term municipal bonds. If prevailing
short-term interest rates are approximately 3% and long-term
interest rates are approximately 6%, the yield curve has a strongly
positive slope. The fund pays dividends on the $50 million of
Preferred Stock based on the lower short-term interest rates. At the
same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value on the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange), may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related
to changes in a floating interest rate ("inverse floaters"). In
general, income on inverse floaters will decrease when short-term
interest rates increase and increase when short-term interest
rates decrease. Investments in inverse floaters may be characterized
as derivative securities and may subject the Fund to the risks
of reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value
of such securities will generally be more volatile than that of
fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in these securities. As of October 31,
2004, the percentage of the Fund's total net assets invested in
inverse floaters was .60%, before the deduction of Preferred Stock.
Swap Agreements
The Fund may also invest in swap agreements, which are over-the-
counter contracts in which one party agrees to make periodic
payments based on the change in market value of a specified bond,
basket of bonds, or index in return for periodic payments based on a
fixed or variable interest rate or the change in market value of a
different bond, basket of bonds or index. Swap agreements may be
used to obtain exposure to a bond or market without owning or taking
physical custody of securities. Swap agreements involve the risk
that the party with whom the Fund has entered into the 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.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
A Letter From the President
Dear Shareholder
As we ended the current reporting period, the financial markets
were facing a number of uncertainties. At the top of investors'
minds were questions about economic expansion, corporate earnings,
interest rates and inflation, politics, oil prices and terrorism.
After benefiting from aggressive monetary and fiscal policy
stimulus, some fear the U.S. economy has hit a "soft patch." In
fact, economic expansion has slowed somewhat in recent months, but
we believe it is easing into a pace of growth that is sustainable
and healthy. The favorable economic environment has served to
benefit American corporations, which have continued to post strong
earnings. Although the most impressive results were seen earlier in
the year, solid productivity, improved revenue growth and cost
discipline all point to a vital corporate sector.
In terms of inflation and interest rates, the Federal Reserve Board
(the Fed) has signaled its confidence in the economic recovery by
increasing the Federal Funds target rate four times in the past
several months, from 1% to 2% as of the November 10 Federal Open
Market Committee meeting. Inflation, for its part, has remained in
check. Investors and economists are focused on how quickly Fed
policy will move from here.
With the presidential election now behind us, any politically
provoked market angst should subside to some extent. The effect
of oil prices, however, is more difficult to predict. At around $50
per barrel, the price of oil is clearly a concern. However, on an
inflation-adjusted basis and considering modern usage levels, the
situation is far from the crisis proportions we saw in the 1980s.
Finally, although terrorism and geopolitical tensions are realities
we are forced to live with today, history has shown us that the
financial effects of any single event tend to be short-lived.
Amid the uncertainty, the Lehman Brothers Municipal Bond Index
posted a 12-month return of +6.03% and a six-month return of
+4.79% as of October 31, 2004. Long-term bond yields were slightly
lower at October 31, 2004 than they were a year earlier. As always,
our investment professionals are closely monitoring the markets,
the economy and the overall environment in an effort to make
well-informed decisions for the portfolios they manage. For the
individual investor, the key during uncertain times is to remain
focused on the big picture. Investment success comes not from
reacting to short-term volatility, but from maintaining a long-term
perspective and adhering to the disciplines of asset allocation,
diversification and rebalancing. We encourage you to work with your
financial advisor to ensure these time-tested techniques are
incorporated into your investment plan.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
A Discussion With Your Fund's Portfolio Manager
The Fund was able to outperform its comparable Lipper category
average over the past six months, as we continued to focus on
preserving net asset value and providing a competitive yield.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields declined sharply during the past six months,
while bond prices, which move in the opposite direction, rose.
Somewhat surprisingly, these gains came as the U.S. economy
continued to improve.
In June, the Federal Reserve Board (the Fed) raised its short-term
interest rate target to 1.25%, its first rate increase in more than
four years. In an accompanying statement, however, the Fed made it
clear that it planned to pursue a "measured" series of interest rate
hikes. The prospect for a moderate sequence of interest rate hikes
supported higher bond prices (and lower yields) for the remainder of
the six-month period, despite additional Fed interest rate increases
in August and September. By October 31, 2004, the 30-year Treasury
bond yield stood at 4.79%, 50 basis points (.50%) lower than six
months earlier. The yield on the 10-year U.S. Treasury note was
4.02%, 48 basis points lower.
In the tax-exempt market, yields on long-term revenue bonds, as
measured by the Bond Buyer Revenue Bond Index, fell 31 basis points
during the past six months. According to Municipal Market Data,
yields on AAA-rated issues maturing in 30 years declined 33 basis
points to 4.60%. Yields on 10-year AAA-rated issues fell 56 basis
points to 3.40%.
More than $190 billion in new long-term tax-exempt bonds was issued
in the past six months, a decline of nearly 8% compared to the same
period a year ago. The declining supply amid favorable demand
allowed tax-exempt bond prices to register significant gains in the
past six months, performing in line with their taxable counterparts.
We expect new municipal issuance to be manageable for the rest of
2004, which should continue to support the tax-exempt market's
favorable technical position. Long-term tax-exempt bond yields have
continued to be between 88% and 93% of equivalent Treasury bond
yields, above their recent historic average of 85% to 88%. These
attractive yield ratios should continue to attract traditional
and non-traditional investors to the municipal market, and allow
tax-exempt bonds to outperform their taxable counterparts in the
coming months.
How did the Fund perform during the period in light of the existing
market conditions?
For the six-month period ended October 31, 2004, the Common Stock of
MuniHoldings Insured Fund, Inc. had net annualized yields of 6.22%
and 6.50%, based on a period-end per share net asset value of $14.55
and a per share market price of $13.92, respectively, and $.456 per
share income dividends. Over the same period, the total investment
return on the Fund's Common Stock was +6.66%, based on a change in
per share net asset value from $14.12 to $14.55, and assuming
reinvestment of ordinary income dividends.
The Fund's total return, based on net asset value, surpassed
its comparable Lipper category of Insured Municipal Debt Funds
(Leveraged), which had an average return of +6.32% for the six-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.) Performance over the past six months was
supported by our avoidance of the most volatile portions of the
yield curve. In particular, we steered away from bonds with
maturities of 10 years and shorter and emphasized 20-year and longer
bonds. This approach shielded the portfolio from much of the
market's volatility while also helping to augment yield.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
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 dividends, 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?
Throughout the period, we continued to focus on securities that we
felt represented the best relative value in the insured municipal
marketplace. In our view, tax-exempt New Jersey bonds provided one
such investment opportunity as an increase in supply caused a
temporarily weak technical market.
In addition, we began to shift our focus further out on the
municipal yield curve - a graphical representation of the yields
offered by bonds of similar quality but varying maturities - during
the period. As the curve steepened significantly in the 15- to
30-year range, we sought to take advantage of the situation by
investing in bonds with slightly longer maturities. In particular,
we emphasized bonds with maturities between 23 and 26 years, an area
of the curve we thought offered particular value. At the same time,
we de-emphasized shorter bonds, which we believed would encounter
more challenging performance ahead.
For the six-month period ended October 31, 2004, the Fund's Auction
Market Preferred Stock (AMPS) had an average yield of 1.15% for
Series A and 1.17% for Series B. These attractive funding levels,
in combination with a positively sloped yield curve, continued to
provide a generous income benefit to the Common Stock shareholder
from the leveraging of Preferred Stock. While the Fed is likely
to continue raising short-term interest rates, the increases are
expected to be gradual and should not have an immediate material
impact on the positive advantage leverage has had on the Fund's
Common Stock yield. 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. At the end of the period, the Fund's leverage amount, due
to AMPS, was 41.71% of total net assets. (For a more complete
explanation of the benefits and risks of leveraging, see page 2 of
this report to shareholders.)
How would you characterize the Fund's position at the close of the
period?
At period end, the portfolio was fully invested and, in anticipation
of higher interest rates, defensively positioned. We continue to
emphasize a competitive yield and preservation of the portfolio's
net asset value. While we have begun to restructure the portfolio
with bonds offering slightly longer maturity dates, those securities
added in recent months have tended to be premium-coupon bonds with
defensive characteristics. Such a defensive posture has enabled the
Fund to increase its yield-generation potential while helping to
insulate it from the volatility expected to accompany a rising
interest rate environment.
Robert A. DiMella, CFA
Vice President and Portfolio Manager
November 11, 2004
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Proxy Results
During the six-month period ended October 31, 2004, MuniHoldings
Insured Fund, Inc.'s Common Stock shareholders voted on the
following proposal. The proposal was approved at a shareholders'
meeting on August 25, 2004. A description of the proposal and number
of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Directors: Terry K. Glenn 11,924,415 790,827
Cynthia A. Montgomery 11,920,975 794,267
Kevin A. Ryan 11,915,738 799,504
Roscoe S. Suddarth 11,923,177 792,065
Edward D. Zinbarg 11,920,760 794,482
During the six-month period ended October 31, 2004, MuniHoldings
Insured Fund, Inc.'s Preferred Stock (Series A & B) shareholders
voted on the following proposal. The proposal was approved at a
shareholders' meeting on August 25, 2004. A description of the
proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Board of Directors: Terry K. Glenn,
Ronald W. Forbes, Cynthia A. Montgomery, Kevin A. Ryan,
Roscoe S. Suddarth, Richard R. West and Edward D. Zinbarg 5,341 18
Quality Profile
The quality ratings of securities in the Fund as of October 31, 2004
were as follows:
Percent of
Total
S&P Rating/Moody's Rating Investments
AAA/Aaa 87.7%
AA/Aa 4.6
A/A 5.5
BBB/Baa 1.5
Other* 0.7
* Includes portfolio holdings in short-term investments.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (In Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
Arkansas--1.2% NR* Aaa $ 1,930 University of Arkansas, University Revenue Bonds
(Fayetteville Campus), 5.50% due 12/01/2018 (c) $ 2,199
California--25.1% AAA Aaa 3,500 California Pollution Control Financing Authority, PCR,
Refunding (Pacific Gas & Electric), AMT, Series A, 5.35%
due 12/01/2016 (b) 3,803
California State Department of Water Resources, Power
Supply Revenue Bonds, Series A:
AAA Aaa 4,000 5.375% due 5/01/2017 (d) 4,449
BBB+ A2 3,400 5.25% due 5/01/2020 3,676
A A3 1,300 California State, Various Purpose, GO, 5.50% due 4/01/2028 1,405
Golden State Tobacco Securitization Corporation of California,
Tobacco Settlement Revenue Bonds, Series B:
A- Baa1 2,000 5.50% due 6/01/2018 2,077
A- Baa1 5,000 5.75% due 6/01/2022 5,283
AAA Aaa 1,600 5.375% due 6/01/2028 (c) 1,689
AAA Aaa 5,305 Industry, California, Urban Development Agency, Tax
Allocation Bonds (Civic-Recreational-Industrial Redevelopment
Project No. 1), Series B, 5% due 5/01/2019 (b) 5,691
AAA Aaa 5,780 Los Angeles, California, Unified School District, GO, Series A,
5% due 1/01/2028 (b) 5,981
AAA Aaa 2,565 Modesto, California, Schools Infrastructure Financing Agency,
Special Tax Bonds, 5.50% due 9/01/2036 (a) 2,797
AA Aa3 1,750 Sacramento County, California, Sanitation District Financing
Authority Revenue Refunding Bonds, RIB, Series 366, 9.692%
due 12/01/2027 (h) 1,927
San Pablo, California, Joint Powers Financing Authority,
Tax Allocation Revenue Refunding Bonds (b):
AAA Aaa 2,635 5.66%** due 12/01/2024 913
AAA Aaa 2,355 5.66%** due 12/01/2025 765
AAA Aaa 2,355 5.66%** due 12/01/2026 717
AAA Aaa 2,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series Q, 5% due 9/01/2022 (f) 2,112
AAA Aaa 3,480 West Contra Costa, California, Unified School District,
GO, Series C, 5% due 8/01/2021 (c) 3,696
Colorado--6.5% Aurora, Colorado, COP (a):
AAA Aaa 2,440 5.75% due 12/01/2015 2,792
AAA Aaa 2,560 5.75% due 12/01/2016 2,925
AAA Aaa 2,730 5.75% due 12/01/2017 3,112
AAA Aaa 2,890 5.75% due 12/01/2018 3,295
Connecticut--8.9% Connecticut State HFA Revenue Bonds (Housing Mortgage
Finance Program), AMT, Series D-2:
AAA Aaa 8,000 5.15% due 11/15/2022 (b) 8,283
AAA Aaa 3,170 5.30% due 5/15/2033 3,195
AA Baa3 4,710 Connecticut State Health and Educational Facilities Authority
Revenue Refunding Bonds (University of Hartford), Series E,
5.50% due 7/01/2022 (e) 5,113
Florida--3.4% AAA Aaa 3,500 Dade County, Florida, Water and Sewer System Revenue Bonds,
5.25% due 10/01/2021 (c) 3,760
NR* Aaa 2,500 Escambia County, Florida, Health Facilities Authority, Health
Facility Revenue Bonds (Florida Health Care Facility Loan),
5.95% due 7/01/2020 (a) 2,562
Illinois--16.3% Chicago, Illinois, GO (c):
AAA Aaa 5,000 5.50% due 1/01/2021 5,474
AAA Aaa 2,790 Series A, 6% due 1/01/2018 3,214
AAA Aaa 2,000 Series A, 6% due 1/01/2019 2,304
AAA Aaa 3,175 Series A, 6% due 1/01/2020 3,663
Portfolio Abbreviations
To simplify the listings of MuniHoldings Insured Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
Illinois Chicago, Illinois, O'Hare International Airport Revenue
(concluded) Bonds, 3rd Lien, AMT, Series B-2:
AAA Aaa $ 1,800 5.75% due 1/01/2023 (f) $ 1,974
AAA Aaa 4,300 6% due 1/01/2029 (d) 4,763
AAA Aaa 3,500 Chicago, Illinois, Parking District, GO, Series A, 5.75%
due 1/01/2017 (c) 3,948
AAA Aaa 4,500 Illinois State, GO, First Series, 6% due 1/01/2018 (c) 5,101
AAA Aaa 45 Lake, Cook, Kane, and McHenry Counties, Illinois, Community
United School District, GO, 5.75% due 12/01/2019 (c) 51
Kentucky--2.6% AAA Aaa 4,380 Fayette County, Kentucky, School District Finance Corporation,
School Building Revenue Bonds, 5.50% due 9/01/2019 (b) 4,911
Massachusetts-- AAA Aaa 65 Massachusetts State, GO, Refunding, Series D, 5.375% due
4.2% 8/01/2012 (b)(g) 74
AAA Aaa 2,440 Massachusetts State HFA, Rental Housing Mortgage Revenue
Bonds, AMT, Series C, 5.50% due 7/01/2032 (f) 2,528
AAA Aaa 5,000 Massachusetts State Special Obligation Dedicated Tax Revenue
Bonds, 5.25% due 1/01/2025 (c) 5,360
Michigan--4.7% AAA Aaa 2,035 Boyne City, Michigan, Public School District, GO, 5.75% due
5/01/2009 (c)(g) 2,274
Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds, AMT (d):
AAA Aaa 1,200 (Detroit Edison Company Project), Series A, 5.50% due
6/01/2030 1,268
AAA Aaa 3,500 (Detroit Edison Company Project), Series C, 5.65% due
9/01/2029 3,700
AAA Aaa 1,500 (Detroit Edison Pollution), Series B, 5.65% due 9/01/2029 1,586
Minnesota--2.4% NR* Aaa 4,015 Sauk Rapids, Minnesota, Independent School District Number 47,
GO, Series A, 5.65% due 2/01/2019 (b) 4,525
Mississippi--0.7% BBB- Ba1 1,250 Mississippi Business Finance Corporation, Mississippi, PCR,
Refunding (System Energy Resources Inc. Project), 5.875%
due 4/01/2022 1,254
Missouri--7.8% AAA Aaa 2,000 Cape Girardeau, Missouri, School District Number 063, GO
(Missouri Direct Deposit Program), 5.50% due 3/01/2018 (c) 2,218
Mehlville, Missouri, School District Number R-9, COP (f):
AAA Aaa 1,570 (Missouri Capital Improvement Projects), 5.50% due 9/01/2015 1,786
AAA Aaa 2,610 (Missouri Capital Improvement Projects), 5.50% due 9/01/2018 2,957
AAA Aaa 1,925 Series A, 5.50% due 3/01/2014 2,174
AAA Aaa 2,175 Series A, 5.50% due 3/01/2015 2,428
AAA Aaa 1,170 Series A, 5.50% due 3/01/2016 1,303
AAA Aaa 1,500 Series A, 5.50% due 3/01/2017 1,670
Nebraska--2.1% Omaha Convention Hotel Corporation, Nebraska, Convention
Center Revenue Bonds, First Tier, Series A (a):
AAA Aaa 1,585 5.50% due 4/01/2020 1,781
AAA Aaa 2,000 5.50% due 4/01/2021 2,238
Nevada--2.4% AAA Aaa 4,000 Las Vegas, Nevada, New Convention and Visitors Authority
Revenue Bonds, 5.75% due 7/01/2018 (a) 4,520
New Jersey--9.4% New Jersey EDA, Cigarette Tax Revenue Bonds:
BBB Baa2 2,795 5.75% due 6/15/2029 2,866
AAA Aa2 3,800 5.75% due 6/15/2034 4,109
AAA Aaa 6,700 New Jersey EDA, Motor Vehicle Surcharge Revenue Bonds,
Series A, 5.25% due 7/01/2033 (b) 7,117
AAA Aaa 3,000 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Refunding Bonds, Series B, 6%
due 12/15/2011 (b)(g) 3,554
New York--27.7% AAA Aaa 10,000 Nassau Health Care Corporation, New York, Health System
Revenue Bonds, 5.75% due 8/01/2009 (f)(g) 11,571
New York City, New York, GO, Refunding:
AAA Aaa 3,090 Series C, 5.875% due 8/01/2006 (b)(g) 3,350
AAA Aaa 3,160 Series C, 5.875% due 2/01/2016 (b) 3,418
AAA Aaa 7,500 Series G, 5.75% due 2/01/2006 (f)(g) 7,955
AAA Aaa 7,085 New York City, New York, GO, Series G, 5.75% due 10/15/2012 (f) 7,799
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
New York AAA Aaa $ 3,850 New York City, New York, Sales Tax Asset Receivable
(concluded) Corporation Revenue Bonds, Series A, 5.25% due 10/15/2027 (a) $ 4,137
AAA Aaa 2,645 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D, 5.25%
due 10/01/2023 (b) 2,843
Tobacco Settlement Financing Corporation of New York Revenue
Bonds:
AAA Aaa 3,000 Series A-1, 5.25% due 6/01/2022 (a) 3,229
AA- A3 4,900 Series C-1, 5.50% due 6/01/2017 5,363
AA- A3 2,000 Series C-1, 5.50% due 6/01/2021 2,187
Ohio--1.2% AAA Aaa 2,070 Columbus, Ohio, City School District, School Facilities
Construction and Improvement, GO, 5.25% due 12/01/2028 (f) 2,208
Oregon--0.8% NR* Aaa 1,400 Portland, Oregon, Urban Renewal and Redevelopment Tax
Allocation Bonds (Oregon Convention Center), Series A, 5.75%
due 6/15/2015 (a) 1,597
Pennsylvania-- NR* Aaa 3,900 Pennsylvania State Higher Educational Facilities Authority,
11.5% State System of Higher Education Revenue Bonds, Series O,
5.125% due 6/15/2024 (a) 4,110
AAA Aaa 6,045 Philadelphia, Pennsylvania, Airport Revenue Bonds
(Philadelphia Airport System), AMT, Series B, 5.50% due
6/15/2017 (c) 6,464
AAA Aaa 4,930 Philadelphia, Pennsylvania, School District, GO, Series A,
5.25% due 4/01/2015 (b) 5,367
AAA Aaa 3,400 Washington County, Pennsylvania, Capital Funding Authority
Revenue Bonds (Capital Projects and Equipment Program), 6.15%
due 12/01/2029 (a) 3,561
NR* Aaa 1,885 York County, Pennsylvania, School of Technology Authority,
Lease Revenue Refunding Bonds, 5.50% due 2/15/2022 (c) 2,105
Rhode Island-- NR* Aaa 5,000 Providence, Rhode Island, Redevelopment Agency Revenue
4.7% Refunding Bonds (Public Safety and Municipal Buildings),
Series A, 5.75% due 4/01/2019 (a) 5,663
NR* Aaa 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) 3,088
Tennessee--3.3% Tennessee HDA, Revenue Refunding Bonds (Homeownership Program),
AMT, Series A (f):
AAA Aaa 3,095 5.25% due 7/01/2022 3,242
AAA Aaa 2,845 5.35% due 1/01/2026 2,953
Texas--7.9% NR* A3 3,000 Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.), Trust Certificates, Second Tier, Series B,
6% due 1/01/2023 3,095
AAA Aaa 8,000 Dallas-Fort Worth, Texas, International Airport Revenue Bonds,
AMT, Series A, 5.50% due 11/01/2033 (b) 8,435
AAA Aaa 2,961 Houston, Texas, Community College System, Participation
Interests, COP (Alief Center Project), 5.75% due 8/15/2022 (b) 3,296
Virginia--3.3% AAA Aaa 5,950 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds,
Series J, Sub-Series J-1, 5.20% due 7/01/2019 (b) 6,179
Washington--4.7% AAA Aaa 4,000 Bellevue, Washington, GO, Refunding, 5.50% due 12/01/2039 (b) 4,303
AAA Aaa 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) 2,405
AAA Aaa 1,810 Snohomish County, Washington, Public Utility District Number 001,
Electric Revenue Bonds, 5.50% due 12/01/2022 (f) 2,023
West Virginia-- AAA Aaa 5,000 West Virginia State Housing Development Fund, Housing Finance
2.8% Revenue Refunding Bonds, Series D, 5.20% due 11/01/2021 (b) 5,264
Wisconsin--0.3% BBB+ NR* 500 Wisconsin State Health and Educational Facilities Authority
Revenue Bonds (Blood Center of Southeastern Wisconsin Project),
5.50% due 6/01/2024 513
Wyoming--0.9% AA NR* 1,500 Wyoming Student Loan Corporation, Student Loan Revenue
Refunding Bonds, Series A, 6.20% due 6/01/2024 1,620
Total Municipal Bonds (Cost--$292,999)--166.8% 312,253
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (concluded) (In Thousands)
Shares
Held Short-Term Securities Value
2,321 Merrill Lynch Institutional Tax-Exempt Fund (i) $ 2,321
Total Short-Term Securities (Cost--$2,321)--1.2% 2,321
Total Investments (Cost--$295,320***)--168.0% 314,574
Other Assets Less Liabilities--3.6% 6,673
Preferred Stock, at Redemption Value--(71.6%) (134,019)
----------
Net Assets Applicable to Common Stock--100.0% $ 187,228
==========
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) XL Capital Insured.
(e) Radian Insured.
(f) FSA Insured.
(g) Prerefunded.
(h) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at October 31, 2004.
(i) Investments in companies considered to be an affiliate of the Fund
(such companies are defined as "Affiliated Companies" in Section
2(a)(3) of the Investment Company Act of 1940) were as follows:
(in Thousands)
Net Dividend
Affiliate Activity Income
Merrill Lynch Institutional
Tax-Exempt Fund 2,000 $32
* Not Rated.
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
*** The cost and unrealized appreciation/depreciation of investments as
of October 31, 2004, as computed for federal income tax purposes,
were as follows:
(in Thousands)
Aggregate cost $ 295,306
=============
Gross unrealized appreciation $ 19,596
Gross unrealized depreciation (328)
-------------
Net unrealized appreciation $ 19,268
=============
Forward interest rate swaps outstanding as of October 31, 2004
were as follows:
(in Thousands)
Notional Unrealized
Amount Depreciation
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 4.099% interest
Broker, J.P. Morgan Chase Bank
Expires January 2025 $30,000 $ (342)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 3.68% interest
Broker, Morgan Stanley
Capital Services Inc.
Expires March 2015 $15,000 (178)
-------
Total $ (520)
=======
See Notes to Financial Statements.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Statement of Net Assets
As of October 31, 2004
Assets
Investments in unaffiliated securities, at value (identified cost--$292,999,074) $ 312,253,357
Investments in affiliated securities, at value (identified cost--$2,320,732) 2,320,732
Cash 65,222
Receivables:
Securities sold $ 6,712,353
Interest 4,842,590
Dividends from affiliates 96 11,555,039
---------------
Prepaid expenses 1,914
---------------
Total assets 326,196,264
---------------
Liabilities
Unrealized depreciation on forward interest rate swaps 519,660
Payables:
Securities purchased 4,136,902
Investment adviser 151,235
Dividends to Common Stock shareholders 126,466
Other affiliates 2,244 4,416,847
---------------
Accrued expenses 12,452
---------------
Total liabilities 4,948,959
---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.10 per share
(2,680 Series A Shares and 2,680 Series B Shares of AMPS* authorized,
issued and outstanding at $25,000 per share liquidation preference) 134,019,269
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 187,228,036
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (12,867,541 shares issued and
outstanding) $ 1,286,754
Paid-in capital in excess of par 190,198,389
Undistributed investment income--net $ 3,363,622
Accumulated realized capital losses--net (26,355,352)
Unrealized appreciation--net 18,734,623
---------------
Total accumulated losses--net (4,257,107)
---------------
Total--Equivalent to $14.55 net asset value per share of Common Stock
(market price--$13.92) $ 187,228,036
===============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Statement of Operations
For the Six Months Ended October 31, 2004
Investment Income
Interest $ 7,616,738
Dividends from affiliates 31,662
---------------
Total income 7,648,400
---------------
Expenses
Investment advisory fees $ 868,251
Commission fees 168,760
Accounting services 57,362
Professional fees 25,286
Transfer agent fees 24,879
Printing and shareholder reports 19,536
Directors' fees and expenses 16,068
Listing fees 10,267
Custodian fees 9,797
Pricing fees 6,776
Other 19,962
---------------
Total expenses before waiver and reimbursement 1,226,944
Waiver and reimbursement of expenses (92,553)
---------------
Total expenses after waiver and reimbursement 1,134,391
---------------
Investment income--net 6,514,009
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 1,381,936
Forward interest rate swaps--net (2,323,901) (941,965)
---------------
Change in unrealized appreciation/depreciation--net:
Investments--net 7,154,654
Forward interest rate swaps--net (580,356) 6,574,298
--------------- ---------------
Total realized and unrealized gain--net 5,632,333
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (776,235)
---------------
Net Increase in Net Assets Resulting from Operations $ 11,370,107
===============
See Notes to Financial Statements.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 2004 2004
Operations
Investment income--net $ 6,514,009 $ 13,371,943
Realized gain (loss)--net (941,965) 4,700,599
Change in unrealized appreciation/depreciation--net 6,574,298 (10,118,251)
Dividends to Preferred Stock shareholders (776,235) (1,212,833)
--------------- ---------------
Net increase in net assets resulting from operations 11,370,107 6,741,458
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (5,867,599) (11,387,774)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock
shareholders (5,867,599) (11,387,774)
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock 5,502,508 (4,646,316)
Beginning of period 181,725,528 186,371,844
--------------- ---------------
End of period* $ 187,228,036 $ 181,725,528
=============== ===============
* Undistributed investment income--net $ 3,363,622 $ 3,493,447
=============== ===============
See Notes to Financial Statements.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Financial Highlights
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
October 31, For the Year Ended April 30,
Increase (Decrease) in Net Asset Value: 2004 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 14.12 $ 14.48 $ 13.78 $ 13.29 $ 12.29
---------- ---------- ---------- ---------- ----------
Investment income--net .51+++ 1.04+++ 1.06+++ 1.07 1.14
Realized and unrealized gain (loss)--net .44 (.42) .62 .44 1.01
Dividends to Preferred Stock shareholders
from investment income--net (.06) (.09) (.13) (.21) (.41)
---------- ---------- ---------- ---------- ----------
Total from investment operations .89 .53 1.55 1.30 1.74
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders
from investment income--net (.46) (.89) (.85) (.81) (.74)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.55 $ 14.12 $ 14.48 $ 13.78 $ 13.29
========== ========== ========== ========== ==========
Market price per share, end of period $ 13.92 $ 12.64 $ 13.50 $ 12.65 $ 12.89
========== ========== ========== ========== ==========
Total Investment Return***
Based on net asset value per share 6.66%++ 4.07% 12.04% 10.28% 15.05%
========== ========== ========== ========== ==========
Based on market price per share 13.98%++ (.07%) 13.79% 4.38% 24.67%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of waiver and reimbursement** 1.25%* 1.24% 1.28% 1.30% 1.15%
========== ========== ========== ========== ==========
Total expenses** 1.35%* 1.34% 1.38% 1.39% 1.44%
========== ========== ========== ========== ==========
Total investment income--net** 7.15%* 7.12% 7.55% 7.75% 8.71%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock
shareholders .85%* .65% .91% 1.50% 3.14%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock
shareholders 6.30%* 6.47% 6.64% 6.25% 5.57%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common & Preferred Stock**
Total expenses, net of waiver and reimbursement .72%* .72% .74% .74% .64%
========== ========== ========== ========== ==========
Total expenses .78%* .78% .80% .79% .80%
========== ========== ========== ========== ==========
Total investment income--net 4.13%* 4.14% 4.34% 4.41% 4.84%
========== ========== ========== ========== ==========
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Financial Highlights (concluded)
For the Six
Months Ended
The following per share data and ratios have been derived October 31, For the Year Ended April 30,
from information provided in the financial statements. 2004 2004 2003 2002 2001
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders 1.16%* .90% 1.23% 1.99% 3.94%
========== ========== ========== ========== ==========
Supplemental Data
Net assets applicable to Common Stock,
end of period (in thousands) $ 187,228 $ 181,726 $ 186,372 $ 177,286 $ 171,007
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of period
(in thousands) $ 134,000 $ 134,000 $ 134,000 $ 134,000 $ 134,000
========== ========== ========== ========== ==========
Portfolio turnover 27.46% 39.94% 49.59% 49.69% 94.80%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,397 $ 2,356 $ 2,391 $ 2,323 $ 2,276
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 144 $ 225 $ 313 $ 502 $ 964
========== ========== ========== ========== ==========
Series B--Investment income--net $ 145 $ 228 $ 302 $ 491 $ 1,005
========== ========== ========== ========== ==========
* Annualized.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
*** Total investment returns based on market value, which can be significantly greater or lesser than
the net asset value, may result in substantially different returns. Total investment returns exclude
the effects of sales charges. If applicable, the Fund's Investment Adviser waived a portion of its
management fee. Without such waiver, the Fund's performance would have been lower.
++ Aggregate total investment return.
+++ Based on average shares outstanding.
See Notes to Financial Statements.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
MuniHoldings Insured Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The Fund's 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. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary
to present a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature.
The Fund determines and makes available for publication the net
asset value of its Common Stock on a daily basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol MUS.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the last available
bid price in the over-the-counter 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 Fund under the
direction of the Board of Directors. Such valuations and procedures
will be reviewed periodically by the Board of Directors of the Fund.
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter 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 Fund.
(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
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--The Fund may purchase or sell
financial futures contracts and options on such futures contracts.
Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
* Options--The Fund 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.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Notes to Financial Statements (concluded)
* Forward interest rate swaps--The 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.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual basis. The Fund amortizes all premiums and
discounts on debt securities.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). The general partner of FAM
is Princeton Services, Inc. ("PSI"), an indirect, wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .55% of
the Fund's average daily net assets, including proceeds from the
issuance of Preferred Stock. For the six months ended October 31,
2004, FAM earned fees of $868,251, of which $87,073 was waived. For
the six months ended October 31, 2004, FAM reimbursed the Fund in
the amount of $5,480.
For the six months ended October 31, 2004, the Fund reimbursed FAM
$3,536 for certain accounting services.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended October 31, 2004 were $85,552,019 and
$92,919,343, respectively.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of stock
without approval of holders of Common Stock.
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred
Stock of the Fund, with a par value of $.10 per share and a
liquidation preference of $25,000 per share plus accrued and unpaid
dividends, that entitle their holders to receive cash dividends at
an annual rate that may vary for the successive dividend periods.
The yields in effect at October 31, 2004 were as follows: Series A,
1.35% and Series B, 1.50%.
The Fund pays commissions to certain broker-dealers at the end
of each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the six months
ended October 31, 2004, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $113,034 as commissions.
5. Capital Loss Carryforward:
On April 30, 2004, the Fund had a net capital loss carryforward of
$20,483,740 of which $10,899,827 expires in 2008 and $9,583,913
expires in 2009. This amount will be available to offset like
amounts of any future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common
Stock in the amount of $.076000 per share on November 29, 2004 to
shareholders of record on November 12, 2004.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Officers and Directors
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Jean Margo Reid, Director
Kevin A. Ryan, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Robert A. DiMella, Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
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 Symbol
MUS
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule 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 Fund's Forms N-Q are
available on the SEC's Web site at http://www.sec.gov. The Fund's
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.
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its
net investment income to its shareholders on a monthly basis. In
order to provide shareholders with a more stable level of dividend
distributions, the Fund may at times pay out less than the entire
amount of net investment income earned in any particular month and
may at times in any particular month pay out such accumulated but
undistributed income in addition to net investment income earned in
that month. As a result, the dividends paid by the Fund for any
particular month may be more or less than the amount of net
investment income earned by the Fund during such month. The Fund's
current accumulated but undistributed net investment income, if any,
is disclosed in the Statement of Net Assets, which comprises part of
the financial information included in this report.
Electronic Delivery
The Fund offers electronic delivery of communications to its
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
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.
MUNIHOLDINGS INSURED FUND, INC., OCTOBER 31, 2004
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to
this semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to
this semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable to this
semi-annual report
Item 8 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 10 - Controls and Procedures
10(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
10(b) - There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual
report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(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.
MuniHoldings Insured Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
MuniHoldings Insured Fund, Inc.
Date: December 13, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
MuniHoldings Insured Fund, Inc.
Date: December 13, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniHoldings Insured Fund, Inc.
Date: December 13, 2004