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 811-08349
Name of Fund: MuniHoldings Florida Insured Fund
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 Florida Insured Fund, 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: 08/31/05
Date of reporting period: 09/01/04 - 02/28/05
Item 1 - Report to Stockholders
MuniHoldings
Florida Insured Fund
Semi-Annual Report
February 28, 2005
MuniHoldings Florida Insured Fund
The Benefits and Risks of Leveraging
MuniHoldings Florida Insured Fund utilizes leverage to seek to enhance the yield
and net asset value of its Common Shares. However, these objectives cannot be
achieved in all interest rate environments. To leverage, the Fund issues
Preferred Shares, which pay dividends at prevailing short-term interest rates,
and invests the proceeds in long-term municipal bonds. The interest earned on
these investments, net of dividends to Preferred Shares, is paid to Common
Shareholders in the form of dividends, and the value of these portfolio holdings
is reflected in the per share net asset value of the Fund's Common Shares.
However, in order to benefit Common 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 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 Share capitalization of
$100 million and the issuance of Preferred Shares 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
Shares based on the lower short-term interest rates. At the same time, the
fund's total portfolio of $150 million earns the income based on long-term
interest rates. Of course, increases in short- term interest rates would reduce
(and even eliminate) the dividends on the Common Shares.
In this case, the dividends paid to Preferred Shareholders are significantly
lower than the income earned on the fund's long-term investments, and therefore
the Common 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 Shares
will be reduced or eliminated completely. At the same time, the market value of
the fund's Common Shares (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 Shares' net asset value will reflect the full decline in the
price of the portfolio's investments, since the value of the fund's Preferred
Shares does not fluctuate. In addition to the decline in net asset value, the
market value of the fund's Common Shares may also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities. As of February 28, 2005, the percentage of the
Fund's total net assets invested in inverse floaters was 6.17%, before the
deduction of Preferred Shares.
Swap Agreements
The Fund may also invest in swap agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on the
change in market value of a specified bond, basket of bonds, or index in return
for periodic payments based on a fixed or variable interest rate or the change
in market value of a different bond, basket of bonds or index. Swap agreements
may be used to obtain or reduce exposure to a bond or market without owning or
taking physical custody of securities. Swap agreements involve the risk that the
party with whom the Fund has entered into the swap will default on its
obligation to pay the Fund and the risk that the Fund will not be able to meet
its obligations to pay the other party to the agreement.
2 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
A Letter From the President
Dear Shareholder
Financial markets broadly posted positive returns over the most recent reporting
period, with international equities providing some of the most impressive
results.
Total Returns as of February 28, 2005 6-month 12-month
========================================================================================
U.S. equities (Standard & Poor's 500 Index) + 9.99% + 6.98%
----------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +21.18 +18.68
----------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 1.26 + 2.43
----------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 2.40 + 2.96
----------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) + 7.53 +11.21
----------------------------------------------------------------------------------------
The U.S. economy has continued to show resilience in the face of the Federal
Reserve Board's (the Fed) continued interest rate hikes and, more recently,
higher oil prices. The Fed's measured tightening program recently brought the
federal funds rate to 2.75% en route to a more "neutral" short-term interest
rate target (relative to inflation). Since the U.S. presidential election,
progress has been monitored on many fronts in Washington, although concerns
remain about the structural problems of debt and deficits, as reflected by a
significant decline in the U.S. dollar.
U.S. equities ended 2004 in a strong rally, but remained in a fairly narrow
trading range for the first two months of 2005. Divergences were notable among
sectors, with energy emerging as a clear leader. On the positive side,
corporations have accelerated their hiring plans, capital spending remains
reasonably robust and merger-and-acquisition activity has increased. Offsetting
the positives are slowing corporate earnings growth, renewed energy price
concerns and the potential for an economic slowdown. International equities,
particularly in Asia, have benefited from higher economic growth rates (China
recorded growth of 9.3% in 2004), stronger currencies and relatively reasonable
valuations.
The major action in the bond market has been a flattening of the yield curve. As
short-term interest rates continued to rise, yields on the long end of the curve
remained relatively stable -- even declining at certain points since the Fed's
monetary tightening program began in June 2004. This phenomenon has been largely
attributed to continued foreign interest in U.S. bonds, which has served to
absorb much of the excess supply. By period-end, many believed long-term yields
were long overdue for a rise.
Looking ahead, the environment is likely to be a challenging one for investors,
with diversification and selectivity becoming increasingly important themes.
With this in mind, we encourage you to meet with your financial advisor to
review your goals and asset allocation and to rebalance your portfolio, as
necessary, to ensure it remains aligned with your objectives and risk tolerance.
As always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to serving you in the months and years
ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Trustee
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 3
A Discussion With Your Fund's Portfolio Manager
We continued in our efforts to preserve the Fund's net asset value while
focusing on providing an above-average yield for our shareholders.
Discuss the recent market environment relative to municipal bonds.
Despite broadly positive economic conditions, long-term bond yields declined
during the past six months as bond prices, which move opposite yields, generally
rose. Gross domestic product (GDP) grew at a rate of 4.4% in 2004, well ahead of
2003's annual rate of 3%. The improving economic activity was largely offset by
inflationary trends remaining in the 1.5% - 2% range. Also helping to boost bond
prices was strong currency-related demand for long-term U.S. Treasury issues on
the part of many foreign governments.
Over the past six months, long-term U.S. Treasury bond yields declined 21 basis
points (.21%) to 4.72% at February 28, 2005. At the same time, the Federal
Reserve Board (the Fed) continued to raise short-term interest rates, moving its
federal funds target rate recently to 2.75%. The Fed's series of interest rate
hikes, and the expectation for a continuation of the monetary tightening
program, pressured shorter-maturity bond yields higher throughout the period.
The yield on the 10-year Treasury note increased 26 basis points to 4.36% at
period-end.
In the municipal bond market, the yield on A-rated revenue bonds maturing in 30
years declined 16 basis points to 4.93% at the end of February, according to the
Bond Buyer Revenue Bond Index. AAA-rated issues maturing in 30 years, as
reported by Municipal Market Data, declined 19 basis points to 4.51%.
Conversely, shorter-maturity municipal bond yields increased. Yields on
AAA-rated tax-exempt bonds maturing in 10 years increased 15 basis points to
3.65% at period-end.
Investor demand for municipal bonds was solid throughout the period and
increased in the latter months. The most current statistics from the Investment
Company Institute indicate that long-term municipal bond funds saw net new cash
flows of $870 million in January 2005, a sharp contrast to the $224 million in
net cash outflows in January 2004.
Describe conditions in the State of Florida.
Ratings agency Moody's recently increased the state's credit rating from AA2 to
AA1, and Standard & Poor's increased its rating from AA+ to AAA. At period-end,
Fitch maintained a rating of AA. The favorable ratings are based on solid
economic and financial performance, in addition to moderate debt and a proactive
government that responds to economic downturns faster than other states.
This past year's hurricane season had little impact on the state's finances.
Florida's continued economic strength is bolstered by robust population growth,
which is attributed to its attractive physical environment and favorable
business climate. Although the growth in population has put a strain on services
such as education, transportation and healthcare, it also has allowed the state
to recover more quickly from sub par economic trends.
Currently, the state's revenues are higher than budgeted and expenditures remain
under control due to prudent fiscal oversight. The fiscal year 2005 budget was
brought into balance through tight expenditure controls, including outsourcing
work and requiring local governments to pick up costs historically incurred by
the state. To pay for these additional expenses, municipalities imposed
increases to property taxes and/or local sales taxes through voter initiatives.
Given the government's concerns over the high healthcare costs facing the state
-- roughly $15 billion or 26% in the upcoming budget -- Governor Jeb Bush has
proposed a partially private health insurance plan.
Florida continues to maintain sound and solid fund balances with consistent
General Fund operations. In addition, the state has a working Capital Reserve
Fund and a Budget Stabilization Fund in excess of $1.8 billion. Our strategy in
purchasing Florida issues has been to favor insured general obligation bonds and
their equivalents rather than uninsured bonds, as there is no meaningful yield
offered in exchange for the additional risk associated with uninsured bonds.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended February 28, 2005, the Common Shares of
MuniHoldings Florida Insured Fund had net annualized yields of 6.64% and 6.68%,
based on a period-end per share net asset value of $15.39 and a per share market
price of $15.31, respectively, and $.507 per share income dividends. Over the
same period, the total investment return on the Fund's Common Shares was +3.54%,
based on a change in per share net asset value from $15.37 to $15.39, and
assuming reinvestment of all distributions.
4 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
The Fund's total return, based on net asset value, lagged the +4.11% average
return of the Lipper Florida Municipal Debt Funds category for the six-month
period. (Funds in this Lipper category limit their investment to those
securities exempt from taxation in the State of Florida.) Notably, the Fund's
investment parameters require it to invest primarily in insured Florida bonds,
whereas other funds in this category have greater ability to invest in uninsured
debt obligations. This put the Fund at a disadvantage as spreads between the two
continued to narrow during the period, helping uninsured bonds to outperform.
As mortgage-refinancing activity continued strong, we saw an increasing number
of prepayment calls on single-family housing bonds in Florida. The Fund
experienced some large prepayment calls during the period, and this had a
negative impact on total return. In addition, several large-coupon bonds in the
portfolio were prerefunded in prior reporting periods, as the issuers took the
opportunity to refinance their debt in the low interest rate environment. This
transformed several of our longer-dated bonds into intermediate-maturity bonds,
a sector that has suffered as the yield curve began to flatten during the
period. We continued to hold these bonds to take advantage of their high
acquisition yield, as we would not be able to match that yield in the current
low interest rate environment.
Importantly, the Fund continued to provide a highly competitive yield relative
to other closed-end Florida insured funds. Our long-term commitment to an
above-average yield continues to enhance performance.
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 Shares (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 Shares 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?
We generally continued our strategy of reducing exposure to bonds in the 10-year
- 15-year maturity range, and reinvesting the proceeds in premium-coupon bonds
with 25-year - 30-year maturities, whenever they became available. This proved
to be a challenge at times, as new issuance of Florida municipal bonds fell 6%
during the past six months versus the same period a year ago. In addition, much
of the recent new supply was comprised of small issues extending to only 20
years and, therefore, did not offer the characteristics we desired in making new
investments for the portfolio. Importantly, we remained fully invested
throughout the period in order to augment the portfolio's yield.
For the six-month period ended February 28, 2005, the Fund's Auction Market
Preferred Shares (AMPS) had average yields as follows: Series A, 1.27%; Series
B, 1.29%; Series C, 1.36%; Series D, 1.30%; and Series E, 1.32%. Continued
short-term interest rate increases by the Fed have modestly increased the Fund's
borrowing costs throughout the past six months. Although the Fed remains
committed to tightening short-term interest rates, the Fund's borrowing costs
remain quite low on a historical basis and the leveraging of Preferred Shares
has continued to generate a material income benefit to the holders of Common
Shares. However, should the spread between short-term and long-term interest
rates narrow, the benefits of leverage will decline and, as a result, reduce the
yield on the Fund's Common Shares. At the end of the period, the Fund's leverage
amount, due to AMPS, was 38.55% of total net assets. (For a more complete
explanation of the benefits and risks of leveraging, see page 2 of this report
to shareholders.)
How would you characterize the Fund's position at the close of the period?
While the yield curve has been exhibiting a flattening trend, we continue to
find value in longer-dated securities and, therefore, continue to favor bonds in
the 25-year - 30-year maturity range. We expect the U.S. equity and bond markets
to remain volatile as investors continue to anticipate and react to economic
data and Fed actions. Given the Fed's intention to continue its measured program
of rate hikes, we believe a defensive market posture continues to be the prudent
course. We will continue to monitor the economic landscape for a backup in
interest rates, which would prompt us to take a more aggressive approach.
Robert D. Sneeden
Vice President and Portfolio Manager
March 24, 2005
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 5
Schedule of Investments (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Florida--155.8%
-----------------------------------------------------------------------------------------------------------------------------------
$ 6,600 Alachua County, Florida, School Board, COP, 5.25% due 7/01/2029 (b) $ 7,104
---------------------------------------------------------------------------------------------------------
4,195 Beacon Tradeport Community Development District, Florida, Special Assessment
Revenue Refunding Bonds (Commercial Project), Series A, 5.625% due 5/01/2032 (k) 4,544
---------------------------------------------------------------------------------------------------------
Brevard County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (d)(g):
1,520 6.80% due 3/01/2028 1,544
70 (Multi-County Program), 6.30% due 3/01/2020 75
---------------------------------------------------------------------------------------------------------
470 Broward County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.70%
due 2/01/2028 (d)(g) 476
---------------------------------------------------------------------------------------------------------
Clay County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (d):
880 6.55% due 3/01/2028 (i) 900
10 (Multi-County Program), 6.375% due 10/01/2026 (g) 10
---------------------------------------------------------------------------------------------------------
1,320 Clay County, Florida, School Board, COP (Master Lease Program), 5.75%
due 7/01/2022 (a) 1,474
---------------------------------------------------------------------------------------------------------
5,000 Collier County, Florida, IDA, IDR, Refunding (Southern States Utilities), AMT,
6.50% due 10/01/2025 5,189
---------------------------------------------------------------------------------------------------------
6,385 Dade County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.70%
due 4/01/2028 (d)(g) 6,520
---------------------------------------------------------------------------------------------------------
Dade County, Florida, Water and Sewer System Revenue Bonds (h):
20,575 5.25% due 10/01/2021 21,796
21,640 5.25% due 10/01/2026 22,856
---------------------------------------------------------------------------------------------------------
5,000 Deltona, Florida Utility System Revenue Bonds, 5.125% due 10/01/2027 (a) 5,290
---------------------------------------------------------------------------------------------------------
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds
(Multi-County Program), AMT, Series A (a)(i):
490 6.30% due 10/01/2020 491
1,825 6.375% due 10/01/2026 1,829
---------------------------------------------------------------------------------------------------------
20,225 Escambia County, Florida, Health Facilities Authority, Health Facility Revenue
Bonds (Florida Health Care Facility Loan), 5.95% due 7/01/2020 (b) 20,481
---------------------------------------------------------------------------------------------------------
5,280 Escambia County, Florida, Health Facilities Authority, Revenue Refunding Bonds
(Ascension Health Credit), Series A-1, 5.75% due 11/15/2009 (b)(j) 5,951
---------------------------------------------------------------------------------------------------------
2,425 Florida HFA, Homeowner Mortgage Revenue Refunding Bonds, AMT, Series 2, 5.75%
due 7/01/2014 (a) 2,539
---------------------------------------------------------------------------------------------------------
9,965 Florida HFA, Revenue Refunding Bonds, AMT, RITR, Series 12, 9.49%
due 7/01/2029 (a)(f) 10,662
---------------------------------------------------------------------------------------------------------
1,385 Florida Housing Finance Corporation, Homeowner Mortgage Revenue Refunding Bonds,
AMT, Series 4, 6.25% due 7/01/2022 (c) 1,397
---------------------------------------------------------------------------------------------------------
2,055 Florida Housing Finance Corporation, Housing Revenue Bonds (Waverly Apartments),
AMT, Series C-1, 6.30% due 7/01/2030 (c) 2,189
---------------------------------------------------------------------------------------------------------
Florida Municipal Loan Council Revenue Bonds, Series B (a):
1,285 5.375% due 11/01/2025 1,394
4,150 5.375% due 11/01/2030 4,442
---------------------------------------------------------------------------------------------------------
Florida State Board of Education, Capital Outlay, GO, Public Education:
12,000 Series B, 5.75% due 6/01/2005 (a)(j) 12,231
6,600 Series C, 5.75% due 6/01/2023 (h) 7,384
1,000 Series C, 5.75% due 6/01/2029 (h) 1,115
7,000 Series E, 5.625% due 6/01/2029 (c) 7,710
---------------------------------------------------------------------------------------------------------
12,725 Florida State Board of Education, Lottery Revenue Bonds, DRIVERS, Series 222,
11.185% due 7/01/2017 (f)(h) 16,871
---------------------------------------------------------------------------------------------------------
Portfolio Abbreviations
To simplify the listings of MuniHoldings Florida Insured Fund's portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
6 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Florida (continued)
-----------------------------------------------------------------------------------------------------------------------------------
$ 3,750 Florida State Board of Education, Public Education, GO, Refunding, Series D,
5.75% due 6/01/2022 (c) $ 4,229
---------------------------------------------------------------------------------------------------------
Florida State Board of Regents, Housing Revenue Bonds (h):
2,200 (University of Central Florida), 5.25% due 10/01/2026 2,366
1,080 (University of Florida), 6% due 7/01/2018 1,232
---------------------------------------------------------------------------------------------------------
7,165 Florida State Board of Regents, University Systems Improvement Revenue Bonds,
5.25% due 7/01/2022 (a) 7,558
---------------------------------------------------------------------------------------------------------
3,505 Florida State Department of General Services, Division Facilities Management
Revenue Bonds (Florida Facilities Pool), Series A, 6% due 9/01/2025 (b) 3,971
---------------------------------------------------------------------------------------------------------
Florida State Governmental Utility Authority, Utility Revenue Bonds (b):
2,350 (Citrus Utility System), 5.125% due 10/01/2033 2,466
2,900 (Lehigh Utility System), 5.125% due 10/01/2033 3,043
---------------------------------------------------------------------------------------------------------
14,325 Florida State Turnpike Authority, Turnpike Revenue Bonds, DRIVERS, Series 218,
10.934% due 7/01/2029 (f)(h) 18,460
---------------------------------------------------------------------------------------------------------
Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series A:
3,590 5.50% due 7/01/2016 (a) 4,000
2,835 5.75% due 7/01/2019 3,179
---------------------------------------------------------------------------------------------------------
7,135 Highlands County, Florida, Health Facilities Authority, Hospital Revenue Bonds
(Adventist Health System), Series A, 6% due 11/15/2031 7,720
---------------------------------------------------------------------------------------------------------
4,500 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric Company
Project), 6.25% due 12/01/2034 (a) 4,668
---------------------------------------------------------------------------------------------------------
Hillsborough County, Florida, School Board, COP (a):
33,400 6% due 7/01/2009 (j) 37,845
6,600 5.375% due 7/01/2026 7,039
---------------------------------------------------------------------------------------------------------
1,300 Indian River County, Florida, Water and Sewer Revenue Refunding Bonds, Series
A, 5.25% due 9/01/2018 (h) 1,416
---------------------------------------------------------------------------------------------------------
1,800 Jacksonville, Florida, Economic Development Commission, Health Care Facilities
Revenue Bonds (Mayo Clinic -- Jacksonville), Series A, 5.50% due 11/15/2036 (a) 1,954
---------------------------------------------------------------------------------------------------------
2,415 Jacksonville, Florida, Electric Authority, Electric System Revenue Refunding
Bonds, Series 3-A, 6% due 4/01/2005 (a)(j) 2,448
---------------------------------------------------------------------------------------------------------
7,305 Jacksonville, Florida, Guaranteed Entitlement Revenue Refunding and Improvement
Bonds, 5.25% due 10/01/2032 (h) 7,758
---------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Airport Revenue Bonds, AMT, Series A (h):
1,295 6.10% due 10/01/2018 1,344
8,385 6.25% due 10/01/2024 8,708
---------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Seaport Revenue Bonds, AMT (a):
1,130 5.625% due 11/01/2010 (j) 1,256
1,870 5.625% due 11/01/2026 2,034
---------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Sales Tax Revenue Bonds (b):
2,000 5.50% due 10/01/2016 2,237
3,800 5.50% due 10/01/2018 4,237
---------------------------------------------------------------------------------------------------------
1,500 Jacksonville, Florida, Water and Sewer Revenue Bonds (United Water Florida
Project), AMT, 6.35% due 8/01/2025 (b) 1,551
---------------------------------------------------------------------------------------------------------
Lee County, Florida, Airport Revenue Bonds (c):
9,963 RIB, AMT, Series 811-X, 9.82% due 10/01/2029 (f) 12,189
1,000 Series B, 5.75% due 10/01/2033 1,113
---------------------------------------------------------------------------------------------------------
6,865 Lee County, Florida, Capital Revenue Bonds, 5.25% due 10/01/2024 (b) 7,391
---------------------------------------------------------------------------------------------------------
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 7
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Florida (continued)
-----------------------------------------------------------------------------------------------------------------------------------
$ 175 Lee County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program), AMT,
Series A-1, 7.20% due 3/01/2033 (d)(g) $ 177
---------------------------------------------------------------------------------------------------------
835 Lee County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT, Series A-2,
6.30% due 3/01/2029 (d)(e)(g) 835
---------------------------------------------------------------------------------------------------------
Leesburg, Florida, Capital Improvement Revenue Bonds (h):
1,605 5.25% due 10/01/2027 1,737
3,425 5.25% due 10/01/2034 3,676
---------------------------------------------------------------------------------------------------------
1,025 Manatee County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT,
Sub-Series 1, 6.25% due 11/01/2028 (d) 1,031
---------------------------------------------------------------------------------------------------------
1,330 Marco Island, Florida, Utility System Revenue Bonds, 5.25% due 10/01/2020 (a) 1,456
---------------------------------------------------------------------------------------------------------
5,990 Martin County, Florida, Utilities System Revenue Bonds, 5.125% due 10/01/2033 (b) 6,285
---------------------------------------------------------------------------------------------------------
2,000 Miami Beach, Florida, Redevelopment Agency, Tax Increment Revenue Bonds, City
---------------------------------------------------------------------------------------------------------
Center Tax Allocation (Historic Village), AMT, 5.875% due 12/01/2022 (a) 2,044
---------------------------------------------------------------------------------------------------------
Miami Beach, Florida, Stormwater Revenue Bonds (h):
1,630 5.75% due 9/01/2016 1,841
1,000 5.25% due 9/01/2020 1,088
4,400 5.25% due 9/01/2025 4,733
1,910 5.375% due 9/01/2030 2,044
---------------------------------------------------------------------------------------------------------
Miami Beach, Florida, Water and Sewer Revenue Bonds (b):
2,690 5.625% due 9/01/2018 3,014
10,600 5.75% due 9/01/2025 11,867
---------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Aviation Revenue Bonds:
3,075 AMT, Series A, 5.125% due 10/01/2035 (c) 3,162
6,000 (Miami International Airport), AMT, Series A, 6% due 10/01/2024 (h) 6,717
10,000 (Miami International Airport), AMT, Series A, 6% due 10/01/2029 (h) 11,117
4,385 (Miami International Airport), AMT, Series A, 5% due 10/01/2030 (h) 4,496
31,700 (Miami International Airport), Series B, 5% due 10/01/2037 (h) 32,785
---------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Educational Facilities Authority Revenue Bonds
(University of Miami), Series A (b):
1,000 5.50% due 4/01/2019 1,107
19,425 6% due 4/01/2023 21,970
5,000 5.75% due 4/01/2029 5,560
---------------------------------------------------------------------------------------------------------
8,995 Miami-Dade County, Florida, Expressway Authority, Toll System Revenue Bonds,
Series B, 5.25% due 7/01/2027 (h) 9,718
---------------------------------------------------------------------------------------------------------
12,250 Miami-Dade County, Florida, Expressway Authority, Toll System Revenue Refunding
Bonds, 5.125% due 7/01/2025 (h) 13,043
---------------------------------------------------------------------------------------------------------
6,705 Miami-Dade County, Florida, GO (Parks Program), 6% due 11/01/2024 (h) 7,575
---------------------------------------------------------------------------------------------------------
2,185 Miami-Dade County, Florida, HFA, M/F Mortgage Revenue Bonds (Marbrisa Apartments
Project), AMT, Series 2A, 6% due 8/01/2026 (c) 2,332
---------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, IDA, IDR (b):
5,100 (Airis Miami II LLC Project), AMT, 6% due 10/15/2019 5,655
3,280 (BAC Funding Corporation Project), Series A, 5.25% due 10/01/2020 3,584
---------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Solid Waste System Revenue Bonds (c):
2,945 5.50% due 10/01/2015 3,293
3,105 5.50% due 10/01/2016 3,470
---------------------------------------------------------------------------------------------------------
Nassau County, Florida, Public Improvement Revenue Refunding Bonds (a):
1,035 5.75% due 5/01/2016 1,168
1,095 5.75% due 5/01/2017 1,234
1,155 5.75% due 5/01/2018 1,300
1,225 5.75% due 5/01/2019 1,378
---------------------------------------------------------------------------------------------------------
5,175 Nassau County, Florida, Water and Sewer System Revenue Bonds, 5.125%
due 9/01/2033 (a) 5,428
---------------------------------------------------------------------------------------------------------
25 Orange County, Florida, HFA, Homeowner Revenue Refunding Bonds, AMT, Series B-1,
6.20% due 9/01/2029 (d)(g) 26
---------------------------------------------------------------------------------------------------------
2,375 Orange County, Florida, HFA, M/F Housing Revenue Bonds, Series A, 6.40%
due 1/01/2031 (a) 2,473
---------------------------------------------------------------------------------------------------------
8 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Florida (continued)
-----------------------------------------------------------------------------------------------------------------------------------
$ 1,975 Orange County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.85%
due 10/01/2027 (d)(g) $ 2,017
---------------------------------------------------------------------------------------------------------
Orange County, Florida, Health Facilities Authority, Hospital Revenue Bonds:
2,900 (Adventist Health System), 6.25% due 11/15/2024 3,206
9,220 (Orlando Regional Healthcare), 6% due 12/01/2029 10,010
5,000 (Orlando Regional Healthcare), Series A, 6.25% due 10/01/2018 (a) 6,082
---------------------------------------------------------------------------------------------------------
1,300 Orange County, Florida, School Board, COP, 5.50% due 8/01/2025 (b) 1,409
---------------------------------------------------------------------------------------------------------
Orange County, Florida, Tourist Development Tax Revenue Bonds (b):
5,710 5.375% due 10/01/2018 6,226
31,745 5.75% due 10/01/2025 34,891
2,000 5.50% due 10/01/2031 2,155
27,075 5.50% due 10/01/2032 29,344
---------------------------------------------------------------------------------------------------------
Orlando and Orange County, Florida, Expressway Authority Revenue Bonds, Series B
(b):
3,250 5% due 7/01/2030 3,378
28,700 5% due 7/01/2035 29,727
---------------------------------------------------------------------------------------------------------
Osceola County, Florida, Infrastructure Sales Surplus Tax Revenue Bonds (b):
3,155 5.375% due 10/01/2018 3,495
7,680 5.25% due 10/01/2025 8,307
---------------------------------------------------------------------------------------------------------
Osceola County, Florida, Sales Tax Revenue Bonds (h):
2,065 5.625% due 6/01/2016 2,327
1,605 5.625% due 6/01/2017 1,806
1,075 5.625% due 6/01/2018 1,207
---------------------------------------------------------------------------------------------------------
4,240 Osceola County, Florida, School Board, COP, Series A, 5.25% due 6/01/2027 (b) 4,547
---------------------------------------------------------------------------------------------------------
5,560 Osceola County, Florida, Tourist Development Tax Revenue Bonds, Series A, 5.50%
due 10/01/2027 (h) 6,093
---------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, GO (Liquid Acquisition Program), Series B (a):
4,605 5.75% due 8/01/2016 5,140
5,330 5.75% due 8/01/2018 5,935
---------------------------------------------------------------------------------------------------------
5,500 Palm Beach County, Florida, Public Improvement Revenue Bonds (Convention Center
Project) 5.625% due 11/01/2011 (h)(j) 6,254
---------------------------------------------------------------------------------------------------------
6,115 Palm Beach County, Florida, School Board COP, Refunding, Series B, 5.375%
due 8/01/2017 (b) 6,755
---------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, School Board COP, Series A (j):
5,070 6% due 8/01/2010 (h) 5,839
13,205 6.25% due 8/01/2010 (h) 15,372
4,235 5.50% due 8/01/2011 (b) 4,720
---------------------------------------------------------------------------------------------------------
2,070 Pembroke Pines, Florida, Public Improvement Revenue Bonds, Series A, 5%
due 10/01/2034 (b) 2,156
---------------------------------------------------------------------------------------------------------
1,425 Pinellas County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program),
AMT, Series A, 6.70% due 2/01/2028 (d)(g) 1,454
---------------------------------------------------------------------------------------------------------
9,885 Polk County, Florida, School Board, COP, Master Lease, Series A, 5.50%
due 1/01/2025 (c) 10,848
---------------------------------------------------------------------------------------------------------
9,645 Pompano Beach, Florida, Water and Sewer Revenue Bonds, 6% due 7/01/2020 (h) 10,415
---------------------------------------------------------------------------------------------------------
Port St. Lucie, Florida, Utility Revenue Bonds (a):
1,280 5.25% due 9/01/2026 1,388
1,345 5.25% due 9/01/2027 1,455
---------------------------------------------------------------------------------------------------------
Saint Johns County, Florida, IDA, IDR, Refunding (Professional Golf Project) (a):
1,275 5.50% due 9/01/2015 1,432
1,345 5.50% due 9/01/2016 1,501
1,420 5.50% due 9/01/2017 1,581
1,500 5.50% due 9/01/2018 1,667
---------------------------------------------------------------------------------------------------------
Saint Johns County, Florida, Sales Tax Revenue Bonds, GO (b):
1,375 Series A, 5.25% due 10/01/2028 1,485
1,355 Series A, 5.25% due 10/01/2031 1,455
2,000 Series A, 5.25% due 10/01/2034 2,146
1,430 Series B, 5.25% due 10/01/2027 1,548
840 Series B, 5.25% due 10/01/2032 902
---------------------------------------------------------------------------------------------------------
3,500 Saint Johns County, Florida, Transportation Improvement Revenue Bonds, 5.125%
due 10/01/2032 (b) 3,673
---------------------------------------------------------------------------------------------------------
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 9
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===================================================================================================================================
Florida (concluded)
-----------------------------------------------------------------------------------------------------------------------------------
$ 4,055 Saint Lucie County, Florida, School Board, COP, 6.25% due 7/01/2010 (c)(j) $ 4,714
---------------------------------------------------------------------------------------------------------
Saint Lucie County, Florida, School Board, COP, Refunding (c):
1,420 Series A, 5.50% due 7/01/2017 1,578
1,495 Series A, 5.50% due 7/01/2018 1,658
1,105 Series C, 5.50% due 7/01/2017 1,228
1,170 Series C, 5.50% due 7/01/2018 1,298
---------------------------------------------------------------------------------------------------------
Saint Lucie, Florida, West Services District, Utility Revenue Bonds (a):
1,720 5.25% due 10/01/2034 1,856
4,750 5% due 10/01/2038 4,948
---------------------------------------------------------------------------------------------------------
3,250 Saint Lucie, Florida, West Services District, Utility Revenue Refunding Bonds,
Senior Lien, 6% due 10/01/2022 (a) 3,738
---------------------------------------------------------------------------------------------------------
1,750 South Lake County, Florida, Hospital District Revenue Bonds (South Lake Hospital
Inc.), 5.80% due 10/01/2034 1,815
---------------------------------------------------------------------------------------------------------
Sunrise, Florida, Utility System Revenue Refunding Bonds (b):
8,000 5.50% due 10/01/2018 9,166
2,250 5.20% due 10/01/2022 2,514
---------------------------------------------------------------------------------------------------------
2,430 Sunrise Lakes, Florida, Phase 4 Recreation District, Refunding Bonds, GO, 5.25%
due 8/01/2024 (b) 2,567
---------------------------------------------------------------------------------------------------------
Tallahassee, Florida, Lease Revenue Bonds (Florida State University Project),
Series A (a):
2,800 5.25% due 8/01/2023 2,995
1,000 5.375% due 8/01/2026 1,082
---------------------------------------------------------------------------------------------------------
30,335 Tampa Bay, Florida, Water Utility System Revenue Bonds, 6% due 10/01/2011 (h)(j) 35,131
---------------------------------------------------------------------------------------------------------
14,750 Tampa, Florida, Sports Authority Revenue Bonds (Local Option Sales Tax--Stadium
Project), 5.25% due 1/01/2027 (a) 15,387
---------------------------------------------------------------------------------------------------------
3,835 Taylor County, Florida, Sales Tax Revenue Bonds, 6% due 10/01/2025 (h) 4,320
---------------------------------------------------------------------------------------------------------
8,935 University of Central Florida (UCF) Athletics Association Inc., COP, Series A,
5.25% due 10/01/2034 (h) 9,553
---------------------------------------------------------------------------------------------------------
Village Center Community Development District, Florida, Recreational Revenue
Bonds, Series A (a):
10,775 5.375% due 11/01/2034 11,728
1,750 5.125% due 11/01/2036 1,842
---------------------------------------------------------------------------------------------------------
3,000 Village Center Community Development District, Florida, Utility Revenue Bonds,
5.25% due 10/01/2023 (a) 3,253
---------------------------------------------------------------------------------------------------------
===================================================================================================================================
Puerto Rico--2.8%
-----------------------------------------------------------------------------------------------------------------------------------
3,000 Puerto Rico Commonwealth, GO, Public Improvement, 6% due 7/01/2005 3,068
---------------------------------------------------------------------------------------------------------
10,125 Puerto Rico Commonwealth Highway and Transportation Authority, Transportation
Revenue Bonds, Series B, 6% due 7/01/2005 (j) 10,359
---------------------------------------------------------------------------------------------------------
2,725 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control
Facilities Revenue Bonds (University Plaza Project), Series A, 5.625%
due 7/01/2019 (a) 3,046
---------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$857,678)--158.6% 918,487
=========================================================================================================
10 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Schedule of Investments (concluded) (in Thousands)
Shares
Held Short-Term Securities Value
=========================================================================================================
5,635 Merrill Lynch Institutional Tax-Exempt Fund (l) $ 5,635
---------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$5,635)--1.0% 5,635
=========================================================================================================
Total Investments (Cost--$863,313*) --159.6% 924,122
Other Assets Less Liabilities--3.1% 18,164
Preferred Shares, at Redemption Value--(62.7%) (363,300)
---------
Net Assets Applicable to Common Shares--100.0% $ 578,986
=========
* The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2005, as computed for federal income tax purposes, were as
follows:
(in Thousands)
-------------------------------------------------------------------------
Aggregate cost ................................................ $863,958
========
Gross unrealized appreciation ................................. $ 61,199
Gross unrealized depreciation ................................. (1,035)
--------
Net unrealized appreciation ................................... $ 60,164
========
(a) MBIA Insured.
(b) AMBAC Insured.
(c) FSA Insured.
(d) GNMA Collateralized.
(e) FHLMC Collateralized.
(f) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(g) FNMA Collateralized.
(h) FGIC Insured.
(i) FHA Insured.
(j) Prerefunded.
(k) Radian Insured.
(l) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund (4,700) $90
--------------------------------------------------------------------------
Forward interest rate swaps outstanding as of February 28, 2005 were as
follows:
(in Thousands)
-------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
-------------------------------------------------------------------------
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate equal to 3.568%
Broker, JPMorgan Chase Bank
Expires April 2015 $65,000 $ 706
Receive a variable rate equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate equal to 3.567%
Broker, JPMorgan Chase Bank
Expires May 2015 $74,400 898
-------------------------------------------------------------------------
Total $1,604
======
See Notes to Financial Statements.
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 11
Statement of Net Assets
As of February 28, 2005
===================================================================================================================
Assets
-------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$857,677,982) ........................ $ 918,486,460
Investments in affiliated securities, at value
(identified cost--$5,635,265) .......................... 5,635,265
Unrealized appreciation on forward interest rate swaps .. 1,604,104
Cash .................................................... 20,341
Receivables:
Interest ............................................. $ 15,098,084
Securities sold ...................................... 1,965,000
Dividends from affiliates ............................ 264 17,063,348
-------------
Prepaid expenses ........................................ 12,561
-------------
Total assets ............................................ 942,822,079
-------------
===================================================================================================================
Liabilities
-------------------------------------------------------------------------------------------------------------------
Payables:
Investment adviser ................................... 297,483
Dividends to Common Shareholders ..................... 128,272
Other affiliates ..................................... 8,252 434,007
-------------
Accrued expenses ........................................ 102,578
-------------
Total liabilities ....................................... 536,585
-------------
===================================================================================================================
Preferred Shares
-------------------------------------------------------------------------------------------------------------------
Preferred Shares, at redemption value, par value $.10
per share (2,095 Series A Shares, 3,495 Series B Shares,
3,440 Series CShares, 2,160 Series D Shares and 3,340
Series E Shares of AMPS* authorized, issued and
outstanding at $25,000 per share liquidation preference) 363,299,816
-------------
===================================================================================================================
Net Assets Applicable to Common Shares
-------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Shares .................. $ 578,985,678
=============
===================================================================================================================
Analysis of Net Assets Applicable to Common Shares
-------------------------------------------------------------------------------------------------------------------
Common Shares, par value $.10 per share (37,628,592
shares issued and outstanding) ......................... $ 3,762,859
Paid-in capital in excess of par ........................ 570,474,526
Undistributed investment income--net .................... $ 9,062,347
Accumulated realized capital losses--net ................ (66,726,636)
Unrealized appreciation--net ............................ 62,412,582
-------------
Total accumulated earnings--net ......................... 4,748,293
-------------
Total--Equivalent to $15.39 net asset value of Common
Shares (market price--$15.31) .......................... $ 578,985,678
=============
* Auction Market Preferred Shares.
See Notes to Financial Statements.
12 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Statement of Operations
For the Six Months Ended February 28, 2005
===================================================================================================================
Investment Income
-------------------------------------------------------------------------------------------------------------------
Interest ................................................ $ 23,661,473
Dividends from affiliates ............................... 89,735
-------------
Total income ............................................ 23,751,208
-------------
===================================================================================================================
Expenses
-------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................ $ 2,573,275
Commission fees ......................................... 466,338
Accounting services ..................................... 135,788
Transfer agent fees ..................................... 49,599
Professional fees ....................................... 29,418
Printing and shareholder reports ........................ 25,300
Custodian fees .......................................... 22,788
Trustees' fees and expenses ............................. 16,876
Listing fees ............................................ 14,673
Pricing fees ............................................ 14,565
Other ................................................... 6,350
-------------
Total expenses before waiver and reimbursement .......... 3,354,970
Waiver and reimbursement of expenses .................... (174,436)
-------------
Total expenses after waiver and reimbursement ........... 3,180,534
-------------
Investment income--net .................................. 20,570,674
-------------
===================================================================================================================
Realized & Unrealized Gain (Loss)--Net
-------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ..................................... 1,556,585
Forward interest rate swaps--net ..................... (4,990,417) (3,433,832)
-------------
Change in unrealized appreciation (depreciation) on:
Investments--net ..................................... 676,933
Forward interest rate swaps--net ..................... 4,219,390 4,896,323
-------------------------------
Total realized and unrealized gain--net ................. 1,462,491
-------------
===================================================================================================================
Dividends to Preferred Shareholders
-------------------------------------------------------------------------------------------------------------------
Investment income--net .................................. (2,365,936)
-------------
Net Increase in Net Assets Resulting from Operations .... $ 19,667,229
=============
See Notes to Financial Statements.
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 13
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2005 2004
===================================================================================================================
Operations
-------------------------------------------------------------------------------------------------------------------
Investment income--net .................................. $ 20,570,674 $ 41,889,397
Realized loss--net ...................................... (3,433,832) (7,608,498)
Change in unrealized appreciation (depreciation)--net ... 4,896,323 19,399,334
Dividends to Preferred Shareholders ..................... (2,365,936) (3,460,330)
-------------------------------
Net increase in net assets resulting from operations .... 19,667,229 50,219,903
-------------------------------
===================================================================================================================
Dividends to Common Shareholders
-------------------------------------------------------------------------------------------------------------------
Investment income--net .................................. (19,190,582) (37,703,849)
-------------------------------
Net decrease in net assets resulting from dividends to
Common Shareholders .................................... (19,190,582) (37,703,849)
-------------------------------
===================================================================================================================
Net Assets Applicable to Common Shares
-------------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to Common Shares 476,647 12,516,054
Beginning of period ..................................... 578,509,031 565,992,977
-------------------------------
End of period* .......................................... $ 578,985,678 $ 578,509,031
===============================
* Undistributed investment income--net ............... $ 9,062,347 $ 10,048,191
===============================
See Notes to Financial Statements.
14 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Financial Highlights
For the Six For the Year Ended
Months Ended August 31,
The following per share data and ratios have been derived February 28, ------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............... $ 15.37 $ 15.04 $ 15.41 $ 15.29 $ 13.85
--------------------------------------------------------------
Investment income--net ............................. .55+ 1.11+ 1.15+ 1.14 1.02
Realized and unrealized gain (loss)--net ........... .04 .31 (.46) .06 1.42
Dividends and distributions to Preferred
Shareholders:
Investment income--net .......................... (.06) (.09) (.10) (.13) (.22)
Realized gain--net .............................. -- -- -- --@ --
Capital write-off (charge) resulting from
issuance of Preferred Shares ...................... -- -- -- -- --@
--------------------------------------------------------------
Total from investment operations ................... .53 1.33 .59 1.07 2.22
--------------------------------------------------------------
Less dividends and distributions to Common
Shareholders:
Investment income--net .......................... (.51) (1.00) (.96) (.95) (.78)
Realized gain--net .............................. -- -- -- --@ --
--------------------------------------------------------------
Total dividends and distributions to Common
Shareholders ...................................... (.51) (1.00) (.96) (.95) (.78)
--------------------------------------------------------------
Net asset value, end of period ..................... $ 15.39 $ 15.37 $ 15.04 $ 15.41 $ 15.29
==============================================================
Market price per share, end of period .............. $ 15.31 $ 14.84 $ 14.08 $ 14.66 $ 14.04
==============================================================
===================================================================================================================================
Total Investment Return*
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................. 3.54%++ 9.43% 4.17% 7.75% 17.47%
==============================================================
Based on market price per share .................... 6.68%++ 12.86% 2.51% 11.63% 27.82%
==============================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Shares
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and
reimbursement and excluding reorganization
expenses** ........................................ 1.11%@@ 1.10% 1.10% 1.13% 1.14%
==============================================================
Total expenses, excluding reorganization expenses** 1.17%@@ 1.17% 1.17% 1.20% 1.23%
==============================================================
Total expenses** ................................... 1.17%@@ 1.17% 1.17% 1.21% 1.26%
==============================================================
Total investment income--net** ..................... 7.15%@@ 7.23% 7.40% 7.71% 7.88%
==============================================================
Amount of dividends to Preferred Shareholders ...... .82%@@ .60% .65% .96% 2.31%
==============================================================
Investment income--net, to Common Shareholders ..... 6.33%@@ 6.63% 6.75% 6.75% 5.57%
==============================================================
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 15
Financial Highlights (concluded)
For the Six For the Year Ended
Months Ended August 31,
The following per share data and ratios have been derived February 28, ------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Ratios Based on Average Net Assets of Common & Preferred Shares**
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement and
excluding reorganization expenses ................. .68%@@ .67% .68% .69% .68%
==============================================================
Total expenses, excluding reorganization expenses .. .72%@@ .72% .72% .73% .74%
==============================================================
Total expenses ..................................... .72%@@ .72% .72% .73% .75%
==============================================================
Total investment income--net ....................... 4.40%@@ 4.44% 4.57% 4.68% 4.71%
==============================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Shares
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Shareholders ................ 1.31%@@ .95% 1.06% 1.49% 3.43%
==============================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Shares, end of
period (in thousands) ............................. $578,986 $578,509 $565,993 $580,003 $575,251
==============================================================
Preferred Shares outstanding, end of period
(in thousands) .................................... $363,250 $363,250 $363,250 $363,250 $363,250
==============================================================
Portfolio turnover ................................. 7.24% 21.20% 27.40% 13.89% 47.50%
==============================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 .......................... $ 2,594 $ 2,593 $ 2,558 $ 2,597 $ 2,584
==============================================================
===================================================================================================================================
Dividends Per Share on Preferred Shares Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ................... $ 158 $ 233 $ 252 $ 362 $ 885
==============================================================
Series B--Investment income--net ................... $ 160 $ 237 $ 267 $ 375 $ 754
==============================================================
Series C--Investment income--net ................... $ 168 $ 237 $ 252 $ 369 $ 889
==============================================================
Series D--Investment income--net ................... $ 161 $ 243 $ 273 $ 368 $ 855
==============================================================
Series E--Investment income--net ................... $ 164 $ 241 $ 276 $ 381 $ 850
==============================================================
* 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 Shareholders.
+ Based on average shares outstanding.
++ Aggregate total investment return.
@ Amount is less than $(.01) per share.
@@ Annualized.
See Notes to Financial Statements.
16 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Notes to Financial Statements
1. Significant Accounting Policies:
MuniHoldings Florida Insured Fund, (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. The Fund determines and makes available for publication the
net asset value of its Common Shares on a daily basis. The Fund's Common Shares
are listed on the New York Stock Exchange under the symbol MFL. The following is
a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of values as obtained by a pricing
service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Trustees. Such valuations and procedures will
be reviewed periodically by the Board of Trustees of the Fund. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their closing prices as of the close of such exchanges. Options written or
purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Swap agreements are valued by quoted fair values received daily by
the Fund's pricing service. Short-term investments with a remaining maturity of
60 days or less are valued at amortized cost, which approximates market value,
under which method the investment is valued at cost and any premium or discount
is amortized on a straight line basis to maturity. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
o Options -- The Fund may write covered call options and purchase call and
put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. When a security is
purchased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the
security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent
of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed, the Fund records a realized gain or
loss in an amount equal to the value of the agreement.
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 17
Notes to Financial Statements (concluded)
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares. For the six months ended
February 28, 2005, FAM earned fees of $2,573,275, of which $161,933 was waived.
For the six months ended February 28, 2005, FAM reimbursed the Fund in the
amount of $12,503.
For the six months ended February 28, 2005, the Fund reimbursed FAM $9,916 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended February 28, 2005 were $66,533,551 and $66,184,628, respectively.
4. Share Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of holders of Common Shares.
Preferred Shares
Auction Market Preferred Shares are redeemable Preferred Shares of the Fund,
with a par value of $.10 per share and a liquidation preference of $25,000 per
share plus accrued and unpaid dividends, that entitle their holders to receive
cash dividends at an annual rate that may vary for the successive dividend
periods. The yields in effect at February 28, 2005 were as follows: Series A,
1.84%; Series B, 1.84%; Series C, 1.90%; Series D, 1.899%; and Series E, 1.80%.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended February 28, 2005, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $223,053 as
commissions.
5. Capital Loss Carryforward:
On August 31, 2004, the Fund had a net capital loss carryforward of $53,580,322,
of which $25,345,146 expires in 2007, $9,834,324 expires in 2008, $16,563,861
expires in 2009 and $1,836,991 expires in 2012. This amount will be available to
offset like amounts of any future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Shares in the
amount of $.083000 per share on March 30, 2005 to shareholders of record on
March 15, 2005.
18 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Fund may at
times pay out less than the entire amount of net investment income earned in any
particular month and may at times in any particular month pay out such
accumulated but undistributed income in addition to net investment income earned
in that month. As a result, the dividends paid by the Fund for any particular
month may be more or less than the amount of net investment income earned by the
Fund during such month. The Fund's current accumulated but undistributed net
investment income, if any, is disclosed in the Statement of Net Assets, which
comprises part of the financial information included in this report.
Portfolio Information as of February 28, 2005
Percent of
Quality Ratings by Total
S&P/Moody's Investments
--------------------------------------------------------------------------------
AAA/Aaa ............................................... 94.1%
AA/Aa ................................................. 0.8
A/A ................................................... 3.9
BBB/Baa ............................................... 0.6
Other* ................................................ 0.6
--------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 19
Proxy Results
During the six-month period ended February 28, 2005, MuniHoldings Florida
Insured Fund's Common Shareholders voted on the following proposal. The proposal
was approved at a shareholders' meeting on January 27, 2005. A description of
the proposal and number of shares voted are as follows:
--------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
--------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Trustees: Robert C. Doll, Jr. 36,568,516 364,976
Cynthia A. Montgomery 36,571,238 362,254
Jean Margo Reid 36,554,739 378,753
Roscoe S. Suddarth 36,536,346 397,146
Edward D. Zinbarg 36,517,980 415,512
--------------------------------------------------------------------------------------------------------------------
During the six-month period ended February 28, 2005, MuniHoldings Florida
Insured Fund's Preferred Shareholders (Series A-E) voted on the following
proposal. The proposal was approved at a shareholders' meeting on January 27,
2005. A description of the proposal and number of shares voted are as follows:
--------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
--------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Trustees: Robert C. Doll, Jr. 14,490 20
Ronald W. Forbes 14,490 20
Cynthia A. Montgomery 14,490 20
Jean Margo Reid 14,490 20
Roscoe S. Suddarth 14,489 21
Richard R. West 14,490 20
Edward D. Zinbarg 14,490 20
--------------------------------------------------------------------------------------------------------------------
20 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Officers and Trustees
Robert C. Doll, Jr., President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Jean Margo Reid, Trustee
Roscoe S. Suddarth, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Robert D. Sneeden, 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 Shares:
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
Preferred Shares:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MFL
--------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn, President and Trustee and Kevin A.
Ryan, Trustee of MuniHoldings Florida Insured Fund retired. The Fund's Board of
Trustees wishes Messrs. Glenn and Ryan well in their retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Trustee of
the Fund.
--------------------------------------------------------------------------------
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 21
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
22 MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site 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.
MUNIHOLDINGS FLORIDA INSURED FUND FEBRUARY 28, 2005 23
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
--------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
MuniHoldings Florida Insured Fund seeks to provide shareholders with current
income exempt from federal income tax. The Fund also seeks to offer shareholders
the opportunity to own shares, the value of which is exempt from Florida
intangible personal property tax. The Fund seeks to achieve its investment
objective by investing primarily in a portfolio of long-term, investment grade
municipal obligations, the interest on which, in the opinion of bond counsel to
the issuer, is exempt from federal income taxes and which enables shares of the
Fund to be exempt from Florida intangible personal property tax.
This report, including the financial information herein, is transmitted to
shareholders of MuniHoldings Florida Insured Fund for their information. It is
not a prospectus. Past performance results shown in this report should not be
considered a representation of future performance. The Fund has leveraged its
Common Shares and intends to remain leveraged by issuing Preferred Shares to
provide the Common Shareholders with a potentially higher rate of return.
Leverage creates risks for Common Shareholders, including the likelihood of
greater volatility of net asset value and market price of shares of the Common
Shares, and the risk that fluctuations in the short-term dividend rates of the
Preferred Shares may affect the yield to Common Shareholders. Statements and
other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniHoldings Florida Insured Fund
Box 9011
Princeton, NJ 08543-9011
#HOLDFL -- 2/05
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 Florida Insured Fund
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniHoldings Florida Insured Fund
Date: April 22, 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 Florida Insured Fund
Date: April 22, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings Florida Insured Fund
Date: April 22, 2005