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 811-08707
Name of Fund: MuniHoldings Insured 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, 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: 04/30/06
Date of reporting period: 05/01/05 - 10/31/05
Item 1 - Report to Stockholders
MuniHoldings Fund, Inc.
MuniHoldings Insured Fund, Inc.
Semi-Annual Reports
October 31, 2005
(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-MER-FUND (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
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MuniHoldings Fund, Inc.
MuniHoldings Insured Fund, Inc.
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 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.
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 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. As of October 31, 2005, the
percentages of MuniHoldings Fund, Inc.'s and MuniHoldings Insured Fund, Inc.'s
total net assets invested in inverse floaters were 2.87% and 5.57%,
respectively, before the deduction of Preferred Stock.
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.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
A Letter From the President
Dear Shareholder
As the financial markets continued to muddle their way through 2005, the
Federal Reserve Board (the Fed) advanced its monetary tightening campaign full
steam ahead. The 12th consecutive interest rate hike since June 2004 came on
November 1, bringing the target federal funds rate to 4%. The central bank is
clearly more focused on inflationary figures than on economic growth, which
has shown some signs of moderating. Despite rising short-term interest rates
and record-high energy prices, the major market indexes managed to post
positive results for the current reporting period:
Total Returns as of October 31, 2005 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) + 5.27% + 8.72%
Small-cap U.S. equities (Russell 2000 Index) +12.25 +12.08
International equities (MSCI Europe Australasia Far East Index) + 8.63 +18.09
Fixed income (Lehman Brothers Aggregate Bond Index) + 0.15 + 1.13
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.59 + 2.54
High yield bonds (Credit Suisse First Boston High Yield Index) + 2.87 + 3.54
The headlines in recent months focused on Hurricanes Katrina and Rita and,
more recently, the nomination of Ben Bernanke to succeed Alan Greenspan as
Chairman of the Fed. While the hurricanes prompted a spike in energy prices
and short-term disruptions to production and spending, the longer-term
economic impact is likely to be tempered. In fact, the fiscal stimulus
associated with reconstruction efforts in the Gulf Coast region could add to
gross domestic product growth in 2006. Notably, the uncontroversial nomination
of Dr. Bernanke was well received by the markets.
The U.S. equity markets remained largely range bound in 2005. Up to this
point, strong corporate earnings reports and relatively low long-term bond
yields have worked in favor of equities. Looking ahead, high energy prices,
continued interest rate hikes, a potential consumer slowdown and/or
disappointing earnings pose the greatest risks to U.S. stocks. Internationally,
many markets have benefited from strong economic statistics, trade surpluses
and solid finances.
The bond market continued to be characterized by a flattening yield curve,
although long-term yields finally began to inch higher toward period end. The
10-year Treasury yield hit 4.57% on October 31, 2005, its highest level in
more than six months. Still, the difference between the two-year and 10-year
Treasury yield was just 17 basis points (.17%) at period end, compared to 149
basis points a year earlier.
Financial markets are likely to face continued crosscurrents in the months
ahead. Nevertheless, opportunities do exist and we encourage you to work with
your financial advisor to diversify your portfolio among a variety of asset
types. This can help to diffuse risk while also tapping into the potential
benefits of a broader range of investment alternatives. As always, we thank
you for trusting Merrill Lynch Investment Managers with your investment
assets.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Director
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
A Discussion With Your Funds' Portfolio Manager
Relative to the broader municipal market, we ended the period with a neutral
level of interest rate risk but positioned for the continued flattening of the
municipal yield curve.
Describe the recent market environment relative to municipal bonds.
Over the past six months, long-term bond yields generally rose as their
prices, which move in the opposite direction, fell. In the second half of the
period, investors worried about the higher energy costs generated by the Gulf
Coast hurricanes, which threatened to pressure inflation upward. Stronger-than-
expected third quarter gross domestic product growth further added to
inflationary concerns. The combination of faster economic growth and
potential price increases pushed bond yields higher.
The Federal Reserve Board (the Fed) continued to raise short-term interest
rates at each of its meetings during the period, lifting the federal funds
target rate to 3.75% by period-end (and to 4% just one day later on November
1). As short-term interest rates increased more dramatically than longer rates,
the yield curve continued to flatten. During the past six months, 10-year
Treasury note yields rose 36 basis points (.36%) to 4.57% and 30-year Treasury
bond yields rose 25 basis points to 4.76%.
Tax-exempt bond yields exhibited a similar pattern during the period.
According to Municipal Market Data, the yield on AAA-rated issues maturing in
30 years increased 22 basis points to 4.59%, while the yield on AAA-rated
issues maturing in 10 years rose 35 basis points to 3.92%.
Historically low nominal tax-exempt bond yields continued to encourage
municipalities to issue new debt and refund outstanding, higher-couponed
issues. During the past six months, almost $208 billion in new long-term tax-
exempt bonds was issued, a year-over-year increase of 9.1%. More recently, the
pace of new bond issuance moderated, with approximately $91 billion in tax-
exempt bond issuance during the past three months, an increase of 5.8% on a
year-over-year basis. During the first nine months of 2005, the volume of
refunding issues rose to $106 billion, an increase of more than 55% compared
to that underwritten during the same period in 2004. Refunding issues were
heavily weighted in the 10-year - 20-year maturity range, putting pressure on
intermediate tax-exempt bond yields while supporting longer-term bond prices.
Investor demand for municipal product remained positive for most of the
period. The most current statistics from the Investment Company Institute
indicate that, year-to-date through September 2005, net new cash flows into
long-term municipal bond funds exceeded $6.7 billion - a significant
improvement from the $12.9 billion net outflow seen during the same period
in 2004. Notably, throughout much of the past year, high-yield tax-exempt bond
funds have been the principal target for these new cash inflows. During recent
months, these lower-rated and non-rated bond funds received an average of
$115 million per week. The need to invest these cash flows led to very strong
demand for lower-rated issues and a consequent narrowing of credit spreads.
Solid investor demand for tax-exempt issues generally helped municipal bond
performance approach that of taxable bonds in recent months and reverse some
of their prior underperformance. In addition, the ratio of tax-exempt bond
yields to taxable bond yields remains attractive and should continue to draw
both traditional and non-traditional investors to the municipal marketplace,
especially if municipal bond issuance remains manageable.
The communities shattered by Hurricanes Katrina and Rita will require
extensive reconstruction. It is too early to estimate the amount of tax-exempt
debt that may be required to finance these efforts or to assess the overall
impact on the municipal market. However, much of the rebuilding is likely to
be funded through federal loans and grants, and the reconstruction will likely
be spread over a number of years. Consequently, any new municipal bond
issuance prompted by the hurricanes is not likely to disrupt the tax-exempt
market in the near future.
MuniHoldings Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended October 31, 2005, the Common Stock of
MuniHoldings Fund, Inc. had net annualized yields of 6.93% and 6.95%, based on
a period-end per share net asset value of $16.06 and a per share market price
of $16.01, respectively, and $.561 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +1.92%,
based on a change in per share net asset value from $16.31 to $16.06, and
assuming reinvestment of all distributions.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
The Fund's total return, based on net asset value, exceeded the +1.16% average
return of the Lipper General Municipal Debt Funds (Leveraged) category for the
six-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.)
The Fund's outperformance can be attributed to a modestly overweighted
exposure to spread product - lower-quality, higher-yielding municipal bonds,
which benefited as credit spreads narrowed during the period. The high yield
municipal market continued to perform well on the back of strong demand, as
investors, looking for better yields in a low interest rate environment,
poured cash into high yield mutual funds. The Fund benefited particularly from
issues in the special tax (land secured), senior living and toll road sectors,
all of which saw gains in an otherwise down market. The Fund also benefited
from price appreciation of its holdings issued by Mississippi Systems Energy,
a subsidiary of Entergy Corp., which was downgraded after Hurricane Katrina
struck the Gulf Coast region. Ironically, the credit downgrade caused our
bonds to appreciate because it made it less probable that the securities' call
feature would be exercised. Of final note, the Fund's underweight stance in
airline bonds was a positive. We had no exposure to either Delta Air Lines or
Northwest Airlines, both of which declared bankruptcy during the period, in
part because of the impact of higher fuel costs.
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?
New purchases concentrated on bonds we believed offered our shareholders
attractive relative value. In anticipation of continued flattening of the
yield curve, we reduced our exposure to bonds with maturities of 10 years - 18
years while adding to our holdings in bonds longer than 25 years. We also
maintained our strategy of purchasing bonds of issuers we believed were more
likely to defease their existing debt to help close their budget gaps. When
bonds are defeased, it typically means that the securities are retired at
their first call date, enabling the bonds to appreciate significantly. The
states of California, Massachusetts and New Jersey were three such issuers who
have been aggressive in implementing this strategy.
Also, when appropriate, we purchased higher-coupon bonds with shorter call
dates, which we believed offered attractive relative yields and the potential
for future outperformance. For example, we purchased bonds issued for Xavier
University in New Orleans. These bonds, which carry MBIA insurance, offered 20
basis points of yield more than they would have prior to Hurricanes Katrina
and Rita. We continue to look for opportunities in the areas affected by the
two storms.
For the six-month period ended October 31, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had an average yield of 2.50% for Series A and 2.42%
for Series B. For the period October 19, 2005 to October 31, 2005, Series C
had an average yield of 2.50%. The Fed's interest rate hikes are clearly
having a material impact on the Fund's borrowing costs. The Fed raised the
short-term interest rate target 100 basis points during the six-month period
(and 25 basis points more on November 1). Still, the tax-exempt yield curve
remained relatively steep and 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. At the end of the period, the Fund's leverage amount, due
to AMPS, was 36.01% of total net assets, before the deduction of Preferred
Stock. (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?
Relative to the broader municipal market, we maintained a neutral level of
interest rate risk but are positioned for the continued flattening of the
yield curve. Having reduced some of our more volatile corporate-backed bonds,
the Fund has a more neutral exposure to high yield spread product. With higher
interest rates and our outlook for slower economic activity, however, we will
be on the lookout for opportunities to slightly increase the Fund's duration.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
A Discussion With Your Funds' Portfolio Manager (concluded)
MuniHoldings Insured Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended October 31, 2005, the Common Stock of
MuniHoldings Insured Fund, Inc. had net annualized yields of 6.28% and 6.46%,
based on a period-end per share net asset value of $13.94 and a per share
market price of $13.55, respectively, and $.441 per share income dividends.
Over the same period, the total investment return on the Fund's Common Stock
was -.37%, based on a change in per share net asset value from $14.44 to
$13.94, and assuming reinvestment of all distributions.
The Fund's total return, based on net asset value, slightly trailed the +.29%
average return of the Lipper Insured Municipal Debt Funds (Leveraged) category
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.) On the positive side, Fund performance was primarily influenced by
our yield curve strategy. For most of the period, we were overweighted in bonds
with maturities greater than 20 years. This benefited performance as the yield
curve flattened and longer-term bonds outperformed shorter-term issues.
However, we avoided bonds with maturities of 30 years and longer because of
their heightened interest rate risk. This detracted somewhat from relative
results as bonds maturing beyond 30 years were the municipal market's best
performers.
In an effort to preserve the Fund's competitive yield, we maintained our
holdings in five-year - 10-year prerefunded bonds, which offered higher
accrual rates than currently available in the low-yield environment. This
benefited the Fund's yield, but hampered its total return somewhat as rates on
bonds with maturities of 15 years and shorter rose.
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 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?
We continued to focus on securities that we felt represented the best relative
value in the insured municipal marketplace. With the yield curve flattening,
we continued to shift our emphasis further out on the curve, favoring bonds
with maturity dates of 20 years and longer while reducing our exposure to
15-year - 20-year bonds. New purchases were concentrated on issuers that
we believed were more likely to defease their existing debt to help close
budget gaps. When bonds are defeased, it typically means that the securities
are retired at their first call date, enabling the bonds to appreciate
significantly. Massachusetts, California and New Jersey are three state
issuers that have been aggressive in this strategy.
For the six months ended October 31, 2005, the Fund's Auction Market Preferred
Stock (AMPS) had average yields of 2.42% for Series A and 2.41% for Series B.
The Fed's interest rate hikes are clearly having a material impact on the
Fund's borrowing costs. The Fed raised the short-term interest rate target 100
basis points during the six-month period (and 25 basis points more on November
1). Still, the tax-exempt yield curve remained relatively steep and 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. At the end of
the period, the Fund's leverage amount, due to AMPS, was 42.23% of total net
assets, before the deduction of Preferred Stock. (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 neutrally positioned with
regard to interest rate risk. We continue to emphasize a competitive yield and
preservation of the portfolio's net asset value. Although we have begun to
restructure the portfolio by purchasing bonds with slightly longer maturity
dates, the securities added in recent months have tended to be premium-coupon
bonds with defensive characteristics, allowing us to extend our average
duration while still maintaining a fairly conservative approach.
Robert A. DiMella, CFA
Vice President and Portfolio Manager
November 15, 2005
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Proxy Results MuniHoldings Fund, Inc.
During the six-month period ended October 31, 2005, MuniHoldings Fund, Inc.'s
Common Stock shareholders voted on the following proposal. The proposal was
approved at a shareholders' meeting on August 23, 2005. A description of the
proposal and number of shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Directors: Robert C. Doll, Jr. 13,081,166 266,833
Cynthia A. Montgomery 13,078,947 269,052
Jean Margo Reid 13,078,447 269,552
Roscoe S. Suddarth 13,071,898 276,101
Edward D. Zinbarg 13,068,831 279,168
During the six-month period ended October 31, 2005, MuniHoldings Fund, Inc.'s
Preferred Stock shareholders (Series A & B) voted on the following proposal.
The proposal was approved at a shareholders' meeting on August 23, 2005. A
description of the proposal and number of shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr.,
Ronald W. Forbes, Cynthia A. Montgomery, Jean Margo Reid,
Roscoe S. Suddarth, Richard R. West and Edward D. Zinbarg 4,186 40
Proxy Results MuniHoldings Insured Fund, Inc.
During the six-month period ended October 31, 2005, MuniHoldings Insured Fund,
Inc.'s Common Stock shareholders voted on the following proposal. The proposal
was approved at a shareholders' meeting on August 23, 2005. A description of
the proposal and number of shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Directors: Robert C. Doll, Jr. 12,248,864 334,160
Cynthia A. Montgomery 12,242,346 340,678
Jean Margo Reid 12,245,064 337,960
Roscoe S. Suddarth 12,234,856 348,168
Edward D. Zinbarg 12,235,356 347,668
During the six-month period ended October 31, 2005, 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 23,
2005. A description of the proposal and number of shares voted were as
follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr.,
Ronald W. Forbes, Cynthia A. Montgomery, Jean Margo Reid,
Roscoe S. Suddarth, Richard R. West and Edward D. Zinbarg 5,139 6
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Portfolio Information
Quality Profiles as of October 31, 2005
Percent of
MuniHoldings Fund, Inc. by Total
S&P/Moody's Rating Investments
AAA/Aaa 26.8%
AA/Aa 5.3
A/A 18.9
BBB/Baa 21.9
BB/Ba 3.5
B/B 2.6
CCC/Caa 1.3
NR 18.3
Other* 1.4
* 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 88.4%
AA/Aa 2.9
A/A 5.3
BBB/Baa 2.6
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.
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.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (In Thousands)
MuniHoldings Fund, Inc.
Face
Amount Municipal Bonds Value
Alabama--3.4%
$ 1,750 Camden, Alabama, IDB, Exempt Facilities Revenue
Bonds (Weyerhaeuser Company), Series A, 6.125%
due 12/01/2024 $ 1,927
4,550 Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5% due 1/01/2024 4,648
900 Sylacauga, Alabama, Health Care Authority Revenue
Bonds (Coosa Valley Medical Center), Series A,
6% due 8/01/2025 911
Arizona--2.8%
Maricopa County, Arizona, IDA, Education Revenue
Bonds (Arizona Charter Schools Project 1), Series A:
935 6.50% due 7/01/2012 950
2,300 6.75% due 7/01/2029 2,306
3,000 Phoenix, Arizona, IDA, Airport Facility, Revenue
Refunding Bonds (America West Airlines Inc.
Project), AMT, 6.30% due 4/01/2023 2,206
675 Show Low, Arizona, Improvement District No. 5,
Special Assessment Bonds, 6.375% due 1/01/2015 699
Arkansas--0.9%
2,000 University of Arkansas, University Construction
Revenue Bonds (UAMS Campus), Series B, 5%
due 11/01/2023 (e) 2,094
California--24.8%
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 (a) 3,199
3,405 California Pollution Control Financing Authority, PCR,
Refunding, DRIVERS, AMT, Series 878Z, 7.667%
due 12/01/2009 (e)(i) 3,828
7,000 California State Department of Water Resources,
Power Supply Revenue Bonds, Series A, 5.25%
due 5/01/2020 7,462
California State, GO, Refunding:
2,490 5.375% due 10/01/2010 2,706
510 5.375% due 10/01/2027 541
6,800 California State Public Works Board, Lease Revenue
Bonds (Department of Corrections), Series C, 5.25%
due 6/01/2028 7,095
2,500 California State, Various Purpose, GO, 5.50%
due 4/01/2028 2,681
3,870 California Statewide Communities Development
Authority, Health Facility Revenue Bonds (Memorial
Health Services), Series A, 6% due 10/01/2023 4,245
2,000 East Side Union High School District, California,
Santa Clara County, GO (Election of 2002), Series D,
5% due 8/01/2021 (h) 2,097
Face
Amount Municipal Bonds Value
California (concluded)
Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds:
$ 1,165 Series A-3, 7.875% due 6/01/2042 $ 1,422
1,670 Series B, 5.625% due 6/01/2013 (f) 1,872
7,955 Los Angeles, California, Unified School District, GO,
Series A, 5% due 1/01/2028 (e) 8,248
Montebello, California, Unified School District, GO (b):
2,405 5.61%** due 8/01/2022 1,076
2,455 5.61%** due 8/01/2023 1,038
2,095 Oceanside, California, Unified School District,
GO (Election of 2000), Series C, 5.25%
due 8/01/2032 (e) 2,210
1,000 Sunnyvale, California, School District, GO (Election of
2004), Series A, 5% due 9/01/2026 (d) 1,043
2,440 University of California, Limited Project Revenue
Bonds, Series B, 5% due 5/15/2033 (d) 2,515
2,565 William S. Hart Union High School District, California,
Capital Appreciation, GO (Election of 2001),
Series B, 4.72%** due 9/01/2025 (d) 948
Colorado--1.7%
1,000 Colorado Water Resources and Power Development
Authority, Water Resources Revenue Bonds (East
Cherry Creek Valley Water and Sanitation District
Water Activity Enterprise, Inc. Project), Series A, 5%
due 11/15/2029 (e) 1,035
2,645 Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee), Series A, 7.35%
due 9/01/2031 2,802
Connecticut--3.4%
2,285 Bridgeport, Connecticut, Senior Living Facilities
Revenue Bonds (3030 Park Retirement Community
Project), 7.25% due 4/01/2035 1,919
2,165 Connecticut State Development Authority, Airport
Facility Revenue Bonds (LearJet Inc. Project), AMT,
7.95% due 4/01/2026 2,583
2,735 Connecticut State Development Authority, IDR (AFCO
Cargo BDL--LLC Project), AMT, 8% due 4/01/2030 2,958
Florida--7.2%
1,430 Broward County, Florida, Airport Exempt Facility
Revenue Bonds (Learjet Inc. Project), AMT, 7.50%
due 11/01/2020 1,614
2,340 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%**
due 10/01/2037 (e) 434
Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds:
2,250 Series A, 6.25% due 5/01/2037 2,376
2,550 Series B, 6.50% due 5/01/2037 2,736
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
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (continued) (In Thousands)
MuniHoldings Fund, Inc.
Face
Amount Municipal Bonds Value
Florida (concluded)
$ 3,225 Orange County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Orlando Regional
Healthcare), 6% due 12/01/2028 $ 3,459
900 Orlando, Florida, Urban Community Development
District, Capital Improvement Special Assessment
Bonds, Series A, 6.95% due 5/01/2033 971
1,685 Preserve at Wilderness Lake, Florida, Community
Development District, Capital Improvement Bonds,
Series A, 5.90% due 5/01/2034 1,718
Tern Bay Community Development District, Florida,
Capital Improvement Revenue Refunding Bonds:
1,000 Series A, 5.375% due 5/01/2037 995
1,660 Series B, 5% due 5/01/2015 1,670
Georgia--0.8%
1,750 Atlanta, Georgia, Tax Allocation Bonds (Atlantic
Station Project), 7.90% due 12/01/2024 1,887
Illinois--3.4%
730 Beardstown, Illinois, IDR (Jefferson Smurfit Corp.
Project), 8% due 10/01/2016 765
1,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American
Airlines Inc. Project), 8.20% due 12/01/2024 846
1,200 Chicago, Illinois, Special Assessment Bonds (Lake
Shore East), 6.75% due 12/01/2032 1,298
4,000 Illinois HDA, Homeowner Mortgage Revenue Bonds,
AMT, Sub-Series C-2, 5.35% due 2/01/2027 4,078
625 Naperville, Illinois, IDR (General Motors Corporation),
Refunding, VRDN, 6.75% due 12/01/2012 (k) 625
Indiana--2.6%
8,985 Allen County, Indiana, Redevelopment District
Tax Increment Revenue Bonds (General Motors
Development Area), 7%** due 11/15/2013 5,840
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 (e) 2,164
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 4,182
1,750 New Orleans, Louisiana, Financing Authority Revenue
Bonds (Xavier University of Louisiana Project),
5.30% due 6/01/2026 1,822
3,540 New Orleans, Louisiana, GO (Public Improvements),
5% due 10/01/2033 (e) 3,589
Maryland--4.1%
1,875 Anne Arundel County, Maryland, Special Obligation
Revenue Bonds (Arundel Mills Project), 7.10%
due 7/01/2009 (f) 2,140
Maryland State Economic Development Corporation,
Student Housing Revenue Bonds (University of
Maryland College Park Project):
1,760 6% due 6/01/2021 1,899
1,700 6.50% due 6/01/2027 1,867
2,750 Maryland State Energy Financing Administration,
Limited Obligation Revenue Bonds (Cogeneration--
AES Warrior Run), AMT, 7.40% due 9/01/2019 2,791
500 Prince Georges County, Maryland, Special Obligation
Bonds (National Harbor Project), 5.20%
due 7/01/2034 501
Face
Amount Municipal Bonds Value
Massachusetts--3.3%
$ 1,000 Massachusetts Bay Transportation Authority, Special
Assessment Revenue Bonds, Series A, 5%
due 7/01/2034 $ 1,029
6,115 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (d) 6,320
Michigan--2.9%
1,400 Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A,
6% due 7/01/2020 (g) 1,515
4,805 Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Pollution
Control), AMT, Series B, 5.65% due 9/01/2029 4,974
Minnesota--1.6%
3,500 Minneapolis, Minnesota, Community Development
Agency, Supported Development Revenue Refunding
Bonds, Series G-3, 5.45% due 12/01/2031 3,643
Mississippi--4.7%
7,675 Claiborne County, Mississippi, PCR, Refunding
(System Energy Resources Inc. Project), 6.20%
due 2/01/2026 7,807
2,500 Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources Inc.
Project), 5.90% due 5/01/2022 2,546
Missouri--1.4%
2,000 Fenton, Missouri, Tax Increment Revenue Refunding
and Improvement Bonds (Gravois Bluffs), 7%
due 10/01/2021 2,138
1,000 Missouri State Development Finance Board,
Infrastructure Facilities Revenue Refunding Bonds
(Branson), Series A, 5.50% due 12/01/2032 1,027
Nevada--1.4%
3,000 Clark County, Nevada, IDR (Power Company Project),
AMT, Series A, 6.70% due 6/01/2022 (b) 3,120
New Jersey--12.5%
New Jersey EDA, Cigarette Tax Revenue Bonds:
5,385 5.75% due 6/15/2029 5,657
2,280 5.75% due 6/15/2034 2,384
New Jersey EDA, Retirement Community Revenue
Bonds, Series A:
1,475 (Cedar Crest Village Inc. Facility), 7.25%
due 11/15/2031 1,594
2,600 (Seabrook Village Inc.), 8.25% due 11/15/2030 2,928
1,965 New Jersey EDA, School Facilities Construction
Revenue Bonds, Series O, 5.125% due 3/01/2030 2,032
New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT:
1,000 6.625% due 9/15/2012 930
2,950 6.25% due 9/15/2029 2,385
3,325 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (South Jersey Hospital), 6%
due 7/01/2026 3,536
3,500 New Jersey State Turnpike Authority, Turnpike Revenue
Bonds, Series C, 5% due 1/01/2030 (d) 3,635
2,315 Tobacco Settlement Financing Corporation of New
Jersey, Asset-Backed Revenue Bonds, 7%
due 6/01/2041 2,708
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (continued) (In Thousands)
MuniHoldings Fund, Inc.
Face
Amount Municipal Bonds Value
New Mexico--0.9%
$ 2,000 Farmington, New Mexico, PCR, Refunding (Public
Service Company--San Juan Project), Series A,
6.30% due 12/01/2016 $ 2,089
New York--12.9%
1,190 Dutchess County, New York, IDA, Civic Facility
Revenue Refunding Bonds (Saint Francis Hospital),
Series A, 7.50% due 3/01/2029 1,292
3,875 Metropolitan Transportation Authority, New York,
Revenue Bonds, Series B, 5% due 11/15/2030 (a) 4,024
535 New York City, New York, City IDA, Civic Facility
Revenue Bonds, Series C, 6.80% due 6/01/2028 574
New York City, New York, GO, Refunding, Series F (e):
1,040 6% due 8/01/2006 (f) 1,078
480 6% due 8/01/2016 497
New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds:
2,120 DRIVERS, Series 1133Z, 7.50% due 10/15/2012 (i) 2,413
2,000 Series A, 5% due 10/15/2029 (a) 2,082
2,800 New York State Dormitory Authority, Non-State
Supported Debt, Revenue Bonds (Mount
Sinai--NYU Medical Center Health System),
5.50% due 7/01/2026 2,829
2,715 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (e) 2,904
Tobacco Settlement Financing Corporation of
New York Revenue Bonds:
3,150 Series A-1, 5.50% due 6/01/2018 3,404
3,500 Series C-1, 5.50% due 6/01/2017 3,773
1,400 Series C-1, 5.50% due 6/01/2022 1,507
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 2,211
North Carolina--1.0%
1,040 Gaston County, North Carolina, Industrial Facilities
and Pollution Control Financing Authority, Revenue
Bonds (National Gypsum Company Project), AMT,
5.75% due 8/01/2035 1,076
1,000 North Carolina Medical Care Commission, Health Care
Housing Revenue Bonds (The ARC of North Carolina
Projects), Series A, 5.80% due 10/01/2034 1,023
Oklahoma--2.2%
3,400 Oklahoma State Industries Authority, Revenue
Refunding Bonds (Integris Baptist), VRDN, Series B,
2.72% due 8/15/2029 (e)(k) 3,400
1,425 Tulsa, Oklahoma, Municipal Airport Trust Revenue
Refunding Bonds (AMR Corporation), AMT, Series A,
5.375% due 12/01/2035 1,392
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 2,081
Pennsylvania--7.4%
2,840 Lehigh County, Pennsylvania, IDA, PCR, Refunding
(Pennsylvania Power and Light Utilities Corporation
Project), 4.75% due 2/15/2027 (b) 2,855
3,500 Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds
(National Gypsum Company), AMT, Series B,
6.125% due 11/01/2027 3,700
Face
Amount Municipal Bonds Value
Pennsylvania (concluded)
$ 725 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development, 7.75% due 12/01/2017 $ 741
2,500 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development (Days Inn), Refunding,
Series B, 6.50% due 10/01/2027 2,564
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
3,500 Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Bonds (Guthrie Healthcare System),
Series B, 7.125% due 12/01/2031 4,129
Rhode Island--1.4%
2,820 Rhode Island State Health and Educational Building
Corporation, Hospital Financing Revenue Bonds
(Lifespan Obligation Group), 6.50% due 8/15/2032 3,078
South Carolina--1.6%
3,020 Medical University Hospital Authority, South Carolina,
Hospital Facilities Revenue Refunding Bonds,
Series A, 6.375% due 8/15/2012 (f) 3,490
Tennessee--6.1%
4,500 Hardeman County, Tennessee, Correctional Facilities
Corporation Revenue Bonds, 7.75% due 8/01/2017 4,665
4,575 Shelby County, Tennessee, Health, Educational and
Housing Facility Board, Hospital Revenue Refunding
Bonds (Methodist Healthcare), 6.50% due 9/01/2012 (f) 5,325
3,400 Tennessee Educational Loan Revenue Bonds
(Educational Funding South Inc.), AMT, Senior
Series B, 6.20% due 12/01/2021 3,462
Texas--16.1%
4,000 Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), First Tier, Series A,
6.70% due 1/01/2028 4,270
1,000 Brazos River Authority, Texas, PCR, Refunding (TXU
Energy Company LLC Project), Series B, 4.75%
due 5/01/2029 1,011
2,340 Brazos River Authority, Texas, Revenue Refunding
Bonds (Reliant Energy Inc. Project), Series B, 7.75%
due 12/01/2018 2,573
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 3,749
700 Harris County, Texas, Health Facilities Development
Corporation, Revenue Refunding Bonds
(Methodist Hospital), VRDN, Series B, 2.70%
due 12/01/2032 (k) 700
3,450 Harris County, Texas, Revenue Refunding Bonds,
DRIVERS, Series 1111, 7.478% due 8/15/2009 (d)(i) 3,728
1,800 Houston, Texas, Health Facilities Development
Corporation, Retirement Facility Revenue Bonds
(Buckingham Senior Living Community), Series A,
7.125% due 2/15/2034 1,965
3,000 Lower Colorado River Authority, Texas, PCR (Samsung
Austin Semiconductor), AMT, 6.375% due 4/01/2027 3,161
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (concluded) (In Thousands)
MuniHoldings Fund, Inc.
Face
Amount Municipal Bonds Value
Texas (concluded)
$ 1,485 Matagorda County, Texas, Navigation District
Number 1, Revenue Refunding Bonds (Reliant
Energy Inc.), Series C, 8% due 5/01/2029 $ 1,616
1,425 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 8.25%
due 11/01/2031 1,509
2,500 Port Corpus Christi, Texas, Revenue Refunding Bonds
(Celanese Project), Series A, 6.45% due 11/01/2030 2,647
5,750 Texas State Department of Housing and Community
Affairs, Residential Mortgage Revenue Bonds, AMT,
Series A, 5.70% due 1/01/2033 (c) 5,912
2,850 Texas State Department of Housing and Community
Affairs, Residential Mortgage Revenue Refunding
Bonds, AMT, Series B, 5.25% due 7/01/2022 (c) 2,950
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 2,462
Virginia--6.3%
1,150 Chesterfield County, Virginia, IDA, PCR (Virginia
Electric and Power Company), Series A, 5.875%
due 6/01/2017 1,233
3,000 Fairfax County, Virginia, EDA, Resource Recovery
Revenue Refunding Bonds, AMT, Series A, 6.10%
due 2/01/2011 (a) 3,296
Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds:
3,825 Senior-Series A, 5.50% due 8/15/2028 3,939
1,500 Senior-Series B, 8.40%** due 8/15/2029 384
300 Senior-Series B, 8.80%** due 8/15/2030 72
5,000 Tobacco Settlement Financing Corporation of Virginia,
Asset-Backed Revenue Bonds, 5.625%
due 6/01/2037 5,106
Washington--0.6%
1,365 Seattle, Washington, Housing Authority Revenue
Bonds (Replacement Housing Project), 6.125%
due 12/01/2032 1,350
Face
Amount Municipal Bonds Value
West Virginia--0.4%
$ 1,000 Princeton, West Virginia, Hospital Revenue Refunding
Bonds (Community Hospital Association Inc. Project),
6% due 5/01/2019 $ 930
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 1,861
Wyoming--1.4%
3,000 Sweetwater County, Wyoming, Solid Waste Disposal
Revenue Bonds (FMC Corporation Project), AMT,
Series B, 6.90% due 9/01/2024 3,028
Puerto Rico--2.5%
4,005 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series RR, 5% due 7/01/2027 (h) 4,186
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 1,453
U.S. Virgin Islands--1.8%
3,460 Virgin Islands Government Refinery Facilities, Revenue
Refunding Bonds (Hovensa Coker Project), AMT,
6.50% due 7/01/2021 3,899
Total Municipal Bonds
(Cost--$327,575)--154.0% 342,283
Shares
Held Short-Term Securities
9 Merrill Lynch Institutional Tax-Exempt Fund (j) 9
Total Short-Term Securities
(Cost--$9)--0.0% 9
Total Investments (Cost--$327,584*)--154.0% 342,291
Other Assets Less Liabilities--2.3% 4,999
Preferred Stock, at Redemption Value--(56.3%) (125,039)
-----------
Net Assets Applicable to Common Stock--100.0% $ 222,251
===========
* The cost and unrealized appreciation (depreciation) of investments
as of October 31, 2005, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 327,296
===============
Gross unrealized appreciation $ 17,438
Gross unrealized depreciation (2,443)
---------------
Net unrealized appreciation $ 14,995
===============
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FNMA/GNMA Collateralized.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) ACA Insured.
(h) XL Capital Insured.
(i) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(j) 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.
(k) 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.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (In Thousands)
MuniHoldings Insured Fund, Inc.
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
Arizona--2.1%
3,590 Pinal County, Arizona, COP, 5.25% due 12/01/2023 3,729
Arkansas--2.2%
3,710 Arkansas State Development Finance Authority,
M/F Mortgage Revenue Refunding Bonds, DRIVERS,
Series 964Z, 7.689% due 6/01/2010 (c)(e)(i) 3,996
California--35.1%
3,250 California Pollution Control Financing Authority, PCR,
Refunding, DRIVERS, AMT, Series 878Z, 7.667%
due 12/01/2009 (e)(i) 3,654
California State Department of Water Resources,
Power Supply Revenue Bonds, Series A:
4,000 5.375% due 5/01/2017 (g) 4,315
3,400 5.25% due 5/01/2020 3,625
3,325 5.375% due 5/01/2022 3,577
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 1,394
East Side Union High School District, California, Santa
Clara County, GO (Election of 2002):
1,800 Series B, 5% due 8/01/2027 (b) 1,859
1,335 Series D, 5% due 8/01/2021 (g) 1,400
5,155 Series D, 5% due 8/01/2029 (g) 5,332
5,305 Industry, California, Urban Development Agency, Tax
Allocation Bonds (Civic-Recreational--Industrial
Redevelopment Project No. 1), Series B, 5%
due 5/01/2019 (e) 5,555
Los Angeles, California, Unified School District, GO:
2,000 (Election of 1997), Series F, 5% due 1/01/2028 (b) 2,074
4,940 Series A, 5% due 1/01/2028 (e) 5,122
2,565 Modesto, California, Schools Infrastructure Financing
Agency, Special Tax Bonds, 5.50% due 9/01/2036 (a) 2,775
5,005 San Francisco, California, City & County, GO
(California Academy of Sciences Improvements),
Series E, 5% due 6/15/2023 (e) 5,222
1,265 San Jose, California, GO (Libraries, Parks and Public
Safety Projects), 5% due 9/01/2030 (e) 1,304
San Pablo, California, Joint Powers Financing Authority,
Tax Allocation Revenue Refunding Bonds (e):
2,635 5.66%* due 12/01/2024 976
2,355 5.66%* due 12/01/2025 821
2,355 5.66%* due 12/01/2026 771
2,800 Tustin, California, Unified School District, Senior Lien
Special Tax Bonds (Community Facilities District
Number 97-1), Series A, 5% due 9/01/2038 (d) 2,852
1,700 University of California, Limited Project Revenue
Bonds, Series B, 5% due 5/15/2033 (d) 1,752
2,000 University of California Revenue Bonds (Multiple
Purpose Projects), Series Q, 5% due 9/01/2022 (d) 2,081
3,480 West Contra Costa, California, Unified School District,
GO, Series C, 5% due 8/01/2021 (b) 3,635
2,435 William S. Hart Union High School District, California,
Capital Appreciation, GO (Election of 2001),
Series B, 4.72%* due 9/01/2025 (d) 900
Face
Amount Municipal Bonds Value
Colorado--6.7%
Aurora, Colorado, COP (a):
$ 2,440 5.75% due 12/01/2015 $ 2,673
2,560 5.75% due 12/01/2016 2,805
2,730 5.75% due 12/01/2017 2,984
2,890 5.75% due 12/01/2018 3,159
500 Moffat County, Colorado, PCR, Refunding (PacifiCorp
Projects), VRDN, 2.70% due 5/01/2013 (a)(h) 500
Connecticut--2.9%
5,000 Connecticut State Health and Educational Facilities
Authority Revenue Bonds (Connecticut State
University System), Series E, 5% due 11/01/2033 (b) 5,146
Florida--0.2%
2,225 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%*
due 10/01/2037 (e) 413
Georgia--1.2%
2,000 Augusta, Georgia, Water and Sewer Revenue Bonds,
5.25% due 10/01/2034 (d) 2,123
Illinois--12.2%
7,965 Chicago, Illinois, GO, Series A, 6%
due 7/01/2010 (b)(f) 8,868
2,150 Chicago, Illinois, O'Hare International Airport
Revenue Bonds, DRIVERS, AMT, Series 845-Z,
8.956% due 1/01/2012 (e)(g)(i) 2,603
Chicago, Illinois, Park District, Limited Tax, GO,
Series A (b):
2,965 5.75% due 1/01/2011 (f) 3,264
535 5.75% due 1/01/2017 583
1,535 Counties of Madison, Jersey, Macoupin, Calhoun,
Morgan, Scott and Greene and State of Illinois,
Community College District Number 536
(Lewis & Clark), GO (Alternate Revenue Source),
Series B, 5.25% due 11/01/2030 (d) 1,624
4,500 Illinois State, GO, First Series, 6% due 1/01/2018 (b) 4,901
45 Lake, Cook, Kane and McHenry Counties, Illinois,
Community Unit School District Number 220, GO,
5.75% due 12/01/2019 (b) 49
Indiana--1.2%
2,000 Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A, 5.25% due 6/01/2029 (b) 2,115
Massachusetts--9.9%
3,565 Massachusetts Bay Transportation Authority, Sales
Tax Revenue Refunding Bonds, Senior Series A, 5%
due 7/01/2035 3,637
1,030 Massachusetts State, HFA, Housing Development
Revenue Refunding Bonds, AMT, Series A, 5.15%
due 6/01/2011 (e) 1,043
Massachusetts State, HFA, Rental Housing Mortgage
Revenue Bonds, AMT (d):
3,300 Series A, 5.15% due 7/01/2026 3,283
2,440 Series C, 5.50% due 7/01/2032 2,548
7,160 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (d) 7,400
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (continued) (In Thousands)
MuniHoldings Insured Fund, Inc.
Face
Amount Municipal Bonds Value
Michigan--3.8%
$ 2,035 Boyne City, Michigan, Public School District, GO,
5.75% due 5/01/2009 (b)(f) $ 2,192
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds AMT (g):
1,500 (Detroit Edison Pollution), Series B, 5.65%
due 9/01/2029 1,580
1,750 DRIVERS, Series 857Z, 8.257% due 3/01/2010 (i) 1,936
1,000 DRIVERS, Series 858Z, 7.958% due 12/01/2011 (i) 1,109
Minnesota--2.4%
4,015 Sauk Rapids, Minnesota, Independent School District
Number 47, GO, Series A, 5.65% due 2/01/2019 (e) 4,365
Missouri--5.3%
2,000 Cape Girardeau, Missouri, School District Number 063,
GO (Missouri Direct Deposit Program), 5.50%
due 3/01/2018 (b) 2,142
Mehlville, Missouri, School District Number R-9, COP,
Series A (d):
1,925 5.50% due 3/01/2014 2,090
2,175 5.50% due 3/01/2015 2,351
1,170 5.50% due 3/01/2016 1,265
1,500 5.50% due 3/01/2017 1,618
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 1,717
2,000 5.50% due 4/01/2021 2,167
New Jersey--16.5%
New Jersey EDA, Cigarette Tax Revenue Bonds:
5,295 5.75% due 6/15/2029 5,563
3,800 5.75% due 6/15/2034 4,148
6,700 New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5.25% due 7/01/2033 (e) 7,116
6,705 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series D,
5% due 6/15/2019 (d) 7,061
5,500 New Jersey State Turnpike Authority, Turnpike Revenue
Bonds, Series C, 5% due 1/01/2030 (d) 5,713
New York--28.2%
1,185 Metropolitan Transportation Authority, New York,
Revenue Bonds, Series B, 5% due 11/15/2030 (a) 1,230
10,000 Nassau Health Care Corporation, New York, Health
System Revenue Bonds, 5.75% due 8/01/2009 (d)(f) 11,030
New York City, New York, GO, Refunding:
5,865 Series C, 5.875% due 8/01/2006 (e)(f) 6,076
385 Series C, 5.875% due 2/01/2016 (e) 398
7,500 Series G, 5.75% due 2/01/2017 (d) 7,658
7,085 New York City, New York, GO, Series G, 5.75%
due 10/15/2007 (d)(f) 7,506
New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A (a):
4,095 5.25% due 10/15/2027 4,378
1,000 5% due 10/15/2029 1,041
1,000 5% due 10/15/2032 1,037
Face
Amount Municipal Bonds Value
New York (concluded)
$ 2,645 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (e) $ 2,829
Tobacco Settlement Financing Corporation of New
York Revenue Bonds, Series C-1:
4,900 5.50% due 6/01/2017 5,282
2,000 5.50% due 6/01/2021 2,165
Oregon--0.9%
1,400 Portland, Oregon, Urban Renewal and Redevelopment
Tax Allocation Bonds (Oregon Convention Center),
Series A, 5.75% due 6/15/2015 (a) 1,540
Pennsylvania--12.8%
2,730 Lehigh County, Pennsylvania, IDA, PCR, Refunding
(Pennsylvania Power and Light Utilities Corporation
Project), 4.75% due 2/15/2027 (b) 2,744
2,000 Pennsylvania State Higher Educational Facilities
Authority, Revenue Bonds (Slippery Rock University
Foundation, Inc.), Series A, 5% due 7/01/2037 (g) 2,038
3,900 Pennsylvania State Higher Educational Facilities
Authority, State System of Higher Education Revenue
Bonds, Series O, 5.125% due 6/15/2024 (a) 3,991
6,045 Philadelphia, Pennsylvania, Airport Revenue Bonds
(Philadelphia Airport System), AMT, Series B, 5.50%
due 6/15/2017 (b) 6,302
1,730 Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Refunding Bonds (Guthrie Healthcare
System), Series A, 5.875% due 12/01/2031 1,838
2,015 Seneca Valley, Pennsylvania, School District,
GO, 5% due 1/01/2019 (b) 2,132
1,800 Washington County, Pennsylvania, Capital Funding
Authority Revenue Bonds (Capital Projects and
Equipment Program), 6.15% due 12/01/2029 (a) 1,912
1,885 York County, Pennsylvania, School of Technology
Authority, Lease Revenue Refunding Bonds, 5.50%
due 2/15/2022 (b) 2,055
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)(f) 5,506
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 (g) 3,098
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 (c)(e) 1,607
Tennessee--3.4%
700 Sevier County, Tennessee, Public Building Authority,
Local Government Public Improvement Revenue
Bonds, VRDN, Series IV-E-1, 2.72%
due 6/01/2030 (a)(h) 700
Tennessee HDA, Revenue Refunding
Bonds (Homeownership Program),
AMT, Series A (d):
2,770 5.25% due 7/01/2022 2,852
2,545 5.35% due 1/01/2026 2,612
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Schedule of Investments (concluded) (In Thousands)
MuniHoldings Insured Fund, Inc.
Face
Amount Municipal Bonds Value
Texas--4.8%
$ 1,200 Bell County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Scott &
White Memorial Hospital), VRDN, Series 2001-2,
2.72% due 8/15/2031 (e)(h) $ 1,200
4,000 Dallas-Fort Worth, Texas, International Airport
Revenue Bonds, DRIVERS, AMT, Series 778-Z,
7.957% due 11/01/2011 (e)(i) 4,390
2,830 Houston, Texas, Community College System,
Participation Interests, COP (Alief Center Project),
5.75% due 8/15/2022 (e) 3,013
Washington--4.8%
4,000 Bellevue, Washington, GO, Refunding, 5.50%
due 12/01/2039 (e) 4,285
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) 2,391
1,810 Snohomish County, Washington, Public Utility District
Number 001, Electric Revenue Bonds, 5.50%
due 12/01/2022 (d) 1,974
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 (e) 5,146
Wisconsin--0.2%
500 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Blood Center of South-
eastern Wisconsin Project), 5.50% due 6/01/2024 520
Face
Amount Municipal Bonds Value
Wyoming--0.9%
$ 1,500 Wyoming Student Loan Corporation,
Student Loan Revenue Refunding
Bonds, Series A, 6.20%
due 6/01/2024 $ 1,599
Puerto Rico--3.1%
3,500 Puerto Rico Electric Power Authority,
Power Revenue Bonds, Series RR, 5%
due 7/01/2027 (g) 3,658
1,870 Puerto Rico Public Buildings Authority,
Government Facilities Revenue
Refunding Bonds, Series D, 5.25%
due 7/01/2036 1,924
Total Municipal Bonds
(Cost--$302,804)--172.9% 310,600
Shares
Held Short-Term Securities
21 Merrill Lynch Institutional Tax-Exempt Fund (j) 21
Total Short-Term Securities
(Cost--$21)--0.0% 21
Total Investments (Cost--$302,825**)--172.9% 310,621
Other Assets Less Liabilities--1.7% 3,061
Preferred Stock, at Redemption Value--(74.6%) (134,031)
-----------
Net Assets Applicable to Common Stock--100.0% $ 179,651
===========
* Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
** The cost and unrealized appreciation (depreciation) of investments
as of October 31, 2005, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 302,825
===============
Gross unrealized appreciation $ 9,426
Gross unrealized depreciation (1,630)
---------------
Net unrealized appreciation $ 7,796
===============
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHA Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) XL Capital Insured.
(h) 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.
(i) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(j) 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
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Statements of Net Assets
MuniHoldings
MuniHoldings Insured
As of October 31, 2005 Fund, Inc. Fund, Inc.
Assets
Investments in unaffiliated securities, at value* $ 342,282,563 $ 310,600,597
Investments in affiliated securities, at value** 8,893 20,732
Cash 2,093,055 47,183
Receivable for securities sold 2,611,663 --
Interest receivable 5,877,373 5,012,284
Prepaid expenses 1,949 1,950
--------------- ---------------
Total assets 352,875,496 315,682,746
--------------- ---------------
Liabilities
Payable for securities purchased 5,216,168 1,746,087
Payable to investment adviser 148,640 121,882
Offering costs payable 130,156 --
Dividends payable to Common Stock shareholders 75,232 118,512
Payable for other affiliates 7,070 3,389
Accrued expenses and other liabilities 8,537 10,966
--------------- ---------------
Total liabilities 5,585,803 2,000,836
--------------- ---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.10 per share*** of
AMPS+++ at $25,000 per share liquidation preference 125,038,678 134,030,954
--------------- ---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 222,251,015 $ 179,650,956
=============== ===============
Net Assets Consist of
Undistributed investment income--net $ 3,189,983 $ 1,706,684
Accumulated realized capital losses--net (1,552,948) (21,606,952)
Unrealized appreciation--net 14,707,780 7,796,089
--------------- ---------------
Total accumulated earnings (losses)--net 16,344,815 (12,104,179)
Common Stock, par value $.10 per share++ 1,383,573 1,288,620
Paid-in capital in excess of par 204,522,627 190,466,515
--------------- ---------------
Net Assets $ 222,251,015 $ 179,650,956
=============== ===============
Net asset value per share of Common Stock $ 16.06 $ 13.94
=============== ===============
Market price $ 16.01 $ 13.55
=============== ===============
* Identified cost on unaffiliated securities $ 327,574,783 $ 302,804,508
=============== ===============
** Identified cost on affiliated securities $ 8,893 $ 20,732
=============== ===============
*** 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 13,835,734 12,886,200
=============== ===============
+++ Auction Market Preferred Stock.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Statements of Operations
MuniHoldings
MuniHoldings Insured
For the Six Months Ended October 31, 2005 Fund, Inc. Fund, Inc.
Investment Income
Interest and amortization of premium and discount earned $ 9,176,394 $ 7,422,520
Dividends from affiliates 105 14,824
--------------- ---------------
Total income 9,176,499 7,437,344
--------------- ---------------
Expenses
Investment advisory fees 930,227 879,042
Commission fees 142,351 168,618
Accounting services 60,496 60,296
Professional fees 27,793 27,982
Transfer agent fees 27,282 25,265
Printing and shareholder reports 14,989 14,879
Listing fees 8,418 9,844
Custodian fees 10,099 10,909
Pricing fees 8,957 8,129
Directors' fees and expenses 15,425 16,116
Other 19,928 21,509
--------------- ---------------
Total expenses before waiver and reimbursement 1,265,965 1,242,589
Waiver and reimbursement of expenses (9) (96,405)
--------------- ---------------
Total expenses after waiver and reimbursement 1,265,956 1,146,184
--------------- ---------------
Investment income--net 7,910,543 6,291,160
--------------- ---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 2,007,265 2,392,437
Futures contracts and forward interest rate swaps--net -- (883,114)
--------------- ---------------
Total realized gain--net 2,007,265 1,509,323
--------------- ---------------
Change in unrealized appreciation/depreciation on:
Investments--net (3,805,686) (7,821,741)
Futures contracts and forward interest rate swaps--net -- 945,784
--------------- ---------------
Total change in unrealized appreciation/depreciation--net (3,805,686) (6,875,957)
--------------- ---------------
Total realized and unrealized loss--net (1,798,421) (5,366,634)
--------------- ---------------
Dividends to Preferred Stock Shareholders
Investment income--net (1,369,568) (1,621,775)
--------------- ---------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 4,742,554 $ (697,249)
=============== ===============
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Statements of Changes in Net Assets MuniHoldings Fund, Inc.
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 2005 2005
Operations
Investment income--net $ 7,910,543 $ 16,624,737
Realized gain--net 2,007,265 2,939,627
Change in unrealized appreciation/depreciation--net (3,805,686) 8,533,658
Dividends to Preferred Stock shareholders (1,369,568) (1,607,958)
--------------- ---------------
Net increase in net assets resulting from operations 4,742,554 26,490,064
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (7,824,202) (15,903,116)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (7,824,202) (15,903,116)
--------------- ---------------
Capital Stock Transactions
Offering and underwriting costs resulting from the issuance of Preferred Stock (280,156) --
Value of shares issued to Common Stock shareholders in reinvestment of dividends 394,559 158,591
--------------- ---------------
Net increase in net assets resulting from capital stock transactions 114,403 158,591
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (2,967,245) 10,745,539
Beginning of period 225,218,260 214,472,721
--------------- ---------------
End of period* $ 222,251,015 $ 225,218,260
=============== ===============
* Undistributed investment income--net $ 3,189,983 $ 4,473,210
=============== ===============
See Notes to Financial Statements.
MuniHoldings Insured Fund, Inc.
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 2005 2005
Operations
Investment income--net $ 6,291,160 $ 13,024,998
Realized gain--net 1,509,323 2,296,913
Change in unrealized appreciation/depreciation--net (6,875,957) 2,511,721
Dividends to Preferred Stock shareholders (1,621,775) (2,002,764)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations (697,249) 15,830,868
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (5,742,988) (11,735,198)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (5,742,988) (11,735,198)
--------------- ---------------
Common Stock Transactions:
Value of shares issued to Common Stock shareholders in reinvestment of dividends 269,995 --
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (6,170,242) 4,095,670
Beginning of period 185,821,198 181,725,528
--------------- ---------------
End of period* $ 179,650,956 $ 185,821,198
=============== ===============
* Undistributed investment income--net $ 1,706,684 $ 2,780,287
=============== ===============
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Financial Highlights MuniHoldings Fund, Inc.
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. 2005 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 16.31 $ 15.54 $ 15.07 $ 14.50 $ 13.76
---------- ---------- ---------- ---------- ----------
Investment income--net .57++++ 1.20++++ 1.25++++ 1.25++++ 1.17
Realized and unrealized gain (loss)--net (.13) .84 .40 .40 .66
Less dividends to Preferred Stock shareholders from
investment income--net (.10) (.12) (.07) (.10) (.16)
---------- ---------- ---------- ---------- ----------
Total from investment operations .34 1.92 1.58 1.55 1.67
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders from
investment income--net (.57) (1.15) (1.11) (.98) (.93)
---------- ---------- ---------- ---------- ----------
Offering and underwriting costs resulting from the
issuance of Preferred Stock (.02) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.06 $ 16.31 $ 15.54 $ 15.07 $ 14.50
========== ========== ========== ========== ==========
Market price per share, end of period $ 16.01 $ 16.12 $ 14.43 $ 14.43 $ 13.38
========== ========== ========== ========== ==========
Total Investment Return++
Based on net asset value per share 1.92%+++ 12.95% 10.94% 11.54% 12.64%
========== ========== ========== ========== ==========
Based on market price per share 2.80%+++ 20.22% 7.58% 15.75% 8.51%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement* 1.12%** 1.13% 1.14% 1.18% 1.21%
========== ========== ========== ========== ==========
Total expenses* 1.12%** 1.13% 1.15% 1.18% 1.21%
========== ========== ========== ========== ==========
Total investment income--net* 6.97%** 7.61% 7.98% 8.40% 8.03%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock shareholders 1.21%** .74% .45% .66% 1.08%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock shareholders 5.76%** 6.87% 7.53% 7.74% 6.95%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders 2.46%** 1.47% .88% 1.23% 1.96%
========== ========== ========== ========== ==========
Supplemental Data
Net assets applicable to Common Stock,
end of period (in thousands) $ 222,251 $ 225,218 $ 214,473 $ 207,960 $ 200,091
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of period
(in thousands) $ 125,000 $ 110,000 $ 110,000 $ 110,000 $ 110,000
========== ========== ========== ========== ==========
Portfolio turnover 25.42% 36.23% 42.89% 50.68% 62.94%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,778 $ 3,047 $ 2,950 $ 2,891 $ 2,819
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 313 $ 366 $ 220 $ 315 $ 492
========== ========== ========== ========== ==========
Series B--Investment income--net $ 303 $ 365 $ 223 $ 302 $ 490
========== ========== ========== ========== ==========
Series C***--Investment income--net $ 22 -- -- -- --
========== ========== ========== ========== ==========
* Do not reflect the effect of dividends to Preferred
Stock shareholders.
** Annualized.
*** Series C was issued 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.
+++ Aggregate total investment return.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Financial Highlights MuniHoldings Insured Fund, Inc.
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. 2005 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 14.44 $ 14.12 $ 14.48 $ 13.78 $ 13.29
---------- ---------- ---------- ---------- ----------
Investment income--net .49+++ 1.01+++ 1.04+++ 1.06+++ 1.07
Realized and unrealized gain (loss)--net (.41) .38 (.42) .62 .44
Less dividends to Preferred Stock shareholders from
investment income--net (.13) (.16) (.09) (.13) (.21)
---------- ---------- ---------- ---------- ----------
Total from investment operations (.05) 1.23 .53 1.55 1.30
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders from
investment income--net (.45) (.91) (.89) (.85) (.81)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 13.94 $ 14.44 $ 14.12 $ 14.48 $ 13.78
========== ========== ========== ========== ==========
Market price per share, end of period $ 13.55 $ 13.70 $ 12.64 $ 13.50 $ 12.65
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share (.37%)++ 9.35% 4.07% 12.04% 10.28%
========== ========== ========== ========== ==========
Based on market price per share 2.07%++ 15.90% (.07%) 13.79% 4.38%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of waiver and reimbursement*** 1.24%* 1.24% 1.24% 1.28% 1.30%
========== ========== ========== ========== ==========
Total expenses*** 1.34%* 1.35% 1.34% 1.38% 1.39%
========== ========== ========== ========== ==========
Total investment income--net*** 6.79%* 7.09% 7.12% 7.55% 7.75%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock shareholders 1.75%* 1.09% .65% .91% 1.50%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock shareholders 5.04%* 6.00% 6.47% 6.64% 6.25%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders 2.41%* 1.50% .90% 1.23% 1.99%
========== ========== ========== ========== ==========
Supplemental Data
Net assets applicable to Common Stock,
end of period (in thousands) $ 179,651 $ 185,821 $ 181,726 $ 186,372 $ 177,286
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of period
(in thousands) $ 134,000 $ 134,000 $ 134,000 $ 134,000 $ 134,000
========== ========== ========== ========== ==========
Portfolio turnover 34.77% 51.81% 39.94% 49.59% 49.69%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,341 $ 2,387 $ 2,356 $ 2,391 $ 2,323
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 303 $ 372 $ 225 $ 313 $ 502
========== ========== ========== ========== ==========
Series B--Investment income--net $ 302 $ 376 $ 228 $ 302 $ 491
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially different
returns. Total investment returns exclude the effects of sales charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
++ Aggregate total investment return.
+++ Based on average shares outstanding.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
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. 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. All such adjustments are of a normal,
recurring nature. 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 markets ("OTC") and are valued at the last available bid price in
the OTC 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, 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.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Notes to Financial Statements (continued)
(c) 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.
(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 Funds amortize all
premiums and discounts on debt securities.
(e) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(f) 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.
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 six months ended October 31,
2005, FAM reimbursed the Funds in the amount of $9 and $1,259 relating to
MuniHoldings Fund, Inc. and MuniHoldings Insured Fund, Inc., respectively. In
addition, FAM earned fees of $879,042, of which $95,146 was waived, relating
to MuniHoldings Insured Fund, Inc.
For the six months ended October 31, 2005, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S") an affiliate of FAM, received underwriting fees
of $150,000 in connection with the issuance of MuniHoldings Fund, Inc.'s
Preferred Stock.
For the six months ended October 31, 2005, MuniHoldings Fund, Inc. and
MuniHoldings Insured Fund, Inc. reimbursed FAM $3,366 and $3,437,
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.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended October 31, 2005 were as follows:
MuniHoldings
MuniHoldings Insured
Fund, Inc. Fund, Inc.
Total Purchases $ 93,528,897 $ 108,981,494
--------------- ---------------
Total Sales $ 84,676,521 $ 110,835,460
=============== ===============
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 are 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 six months ended October 31, 2005 and
during the year ended April 30, 2005 increased by 23,996 and 9,843,
respectively, as a result of dividend reinvestment.
MuniHoldings Insured Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2005
increased by 18,659 as a result of dividend reinvestment. Shares issued and
outstanding during the year ended April 30, 2005 remained constant.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
Notes to Financial Statements (concluded)
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 October 31, 2005 were as follows:
MuniHoldings
MuniHoldings Insured
Fund, Inc. Fund, Inc.
Series A 2.40% 2.65%
Series B 2.40% 2.41%
Series C 2.50% --
MuniHoldings Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2005
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.
MuniHoldings Insured Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2005 and
the year ended 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 six months ended October 31, 2005, MLPF&S
earned commissions as follows:
Commissions
MuniHoldings Fund, Inc. $ 82,368
MuniHoldings Insured Fund, Inc. $ 105,357
5. Distributions to Shareholders:
Each Fund paid a tax-exempt income dividend to holders of Common Stock in the
amounts of $.091000 per share and $.071000 per share relating to MuniHoldings
Fund, Inc. and MuniHoldings Insured Fund, Inc. respectively, on November 29,
2005 to shareholders of record on November 15, 2005.
6. Capital Loss Carryforward:
MuniHoldings Fund, Inc.
On April 30, 2005, the Fund had a net capital loss carryforward of $3,435,164,
all of which expires in 2009. This amount will be available to offset like
amounts of any future taxable gains.
MuniHoldings Insured Fund, Inc.
On April 30, 2005, the Fund had a net capital loss carryforward of
$20,278,429, of which $10,694,516 expires in 2008 and $9,583,913 expires in
2009. This amount will be available to offset like amounts of any future
taxable gains.
Officers and Directors
Robert C. Doll, Jr., President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Jean Margo Reid, 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
MHD MuniHoldings Fund,Inc.
MUS MuniHoldings Insured Fund,Inc.
SEMI-ANNUAL REPORTS OCTOBER 31, 2005
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 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable to this semi-annual report
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 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.
11(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 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
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.
MuniHoldings Insured Fund, Inc.
By: /s/ Robert C. Doll, Jr.
----------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniHoldings Insured Fund, Inc.
Date: December 16, 2005
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
MuniHoldings Insured Fund, Inc.
Date: December 16, 2005
By: /s/ Donald C. Burke
----------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings Insured Fund, Inc.
Date: December 16, 2005