UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8349
Name of Fund: MuniHoldings Florida Insured Fund
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, 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: 08/31/03
Date of reporting period: 09/01/02 - 2/28/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
February 28, 2003
MuniHoldings
Florida
Insured Fund
www.mlim.ml.com
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 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.
Swap
Agreements
The Fund may also invest in swap agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on the
change in market value of a specified bond, basket of bonds, or index in return
for periodic payments based on a fixed or variable interest rate or the change
in market value of a different bond, basket of bonds or index. Swap agreements
may be used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MuniHoldings Florida Insured Fund, February 28, 2003
DEAR SHAREHOLDER
For the six months ended February 28, 2003, the Common Shares of MuniHoldings
Florida Insured Fund had a net annualized yield of 6.11%, based on a period-end
share net asset value of $15.70 and $.476 per share income dividends. Over the
same period, the total investment return on the Fund's Common Shares was +5.28%,
based on a change in per share net asset value from $15.41 to $15.70, and
assuming reinvestment of $.475 per share ordinary income dividends.
For the six-month period ended February 28, 2003, the Fund's Preferred Shares
had an average yield as follows: Series A, 1.03%; Series B, 1.19%; Series C,
1.11%; Series D, 1.23%; and Series E, 1.23%.
The Municipal Market Environment
During the six-month period ended February 28, 2003, long-term fixed income
interest rates continued to move lower. As they had in 2002, declining U.S.
equity markets and escalating worldwide political tensions easily overshadowed
the incipient U.S. economic recovery, allowing bond yields to fall to recent
historical lows. Economic releases, such as national employment and purchasing
manager surveys, were generally weak early in the period. Additionally, at its
August 2002 meeting, the Federal Reserve Board indicated that concerns about
future economic weakness outweighed those of rising inflation. This signaled
that the Federal Reserve Board was more likely to continue to lower short-term
interest rates to boost economic activity rather than to raise them to reduce
inflationary pressures. These factors combined to generate a very favorable
fixed income environment in September 2002. The dramatic decline in equity
values during September also helped trigger a significant fixed income rally as
investors sought the safe-haven status of U.S. Treasury issues. By the end of
September, U.S. Treasury bond yields fell to 4.65%.
Bolstered by an unexpected decline in the national unemployment rate to 5.6% in
early October, U.S. equity markets staged a strong rally throughout much of the
month. The Standard & Poor's 500 (S&P 500) Index rose over 8% for October,
triggered by stronger-than-expected earnings reports from a large number of
companies, such as General Electric Company, International Business Machines
Corporation and Microsoft Corporation. As they have throughout most of the
period, bond prices traded in an inverse relationship to equity prices.
Consequently, as stocks rallied, bond yields rose in October, despite generally
weak economic releases. During October, the U.S. housing sector remained quite
robust, but retail sales and industrial production slowed. Fixed income bond
yields remained under pressure in November as U.S. equity markets continued to
strengthen. During November, the S&P 500 Index rose an additional 5.5%. Equity
prices were supported by further signs of U.S. economic recovery, especially
improving labor market activity. By the end of the third quarter, gross domestic
product growth was 4%, well above the second quarter 2002 rate of 1.3%.
Financial conditions were also strengthened by a larger-than-expected reduction
in short-term interest rates by the Federal Reserve Board in early November. The
Federal Funds target rate was lowered 50 basis points (.50%) to 1.25%, its
lowest level since the 1960s. Recent action by the Federal Reserve Board was
largely viewed as being taken to bolster the sputtering U.S. economic recovery.
Rebounding U.S. equity markets and the prospects for a more substantial U.S.
economic recovery pushed long-term U.S. Treasury yield levels to 5.10% by late
November.
However, over the past three months, softer equity prices and renewed investor
concerns about U.S. military action against Iraq and nuclear tensions in North
Korea again pushed bond prices higher. Reacting to disappointing holiday sales
and corporate managements' attempts to scale back analysts' expectation of
future earnings, the S&P 500 Index declined more than 8% during the last three
months. Fearing a U.S./Iraq military confrontation in early 2003, investors
again sought the safety of U.S. Treasury obligations. During February, U.S.
Treasury bond yields declined more than 25 basis points to end the period at
4.67%. Over the last six months, U.S. Treasury bond yields fell more than 25
basis points.
For the six-month period ended February 28, 2003, tax-exempt bond prices also
continued to rise. In recent months, municipal bond yields have declined in
response to the positive fixed income environment engendered by falling equity
valuations. Price advances in tax-exempt issues, however, have not been able to
keep pace with U.S. Treasury bond price improvement as municipal bonds cannot
offer foreign investors the safe-haven status U.S. Treasury obligations enjoy in
periods of economic and political instability. Additionally, tax-exempt bond
issuance increased dramatically in the last half of 2002, removing some of the
positive technical support the municipal bond market enjoyed earlier in the
year. At February 28, 2003, long-term municipal bond yields, as measured by the
Bond Buyer Revenue Bond Index, stood at 5.10%, a decline of approximately 15
basis points during the last six months.
A number of factors combined to generate consistently strong demand for
municipal bonds throughout the six-month period ended February 28, 2003.
Declining U.S. equity markets supported continued positive demand for tax-exempt
products as investors sought the relative security of fixed income issues. Also,
with tax-exempt money market rates near 1%, the demand for longer maturity
municipal issues has increased as investors have opted to buy longer maturity
issues rather than remain in cash reserves. Additionally, investors renewed
approximately $30 billion in January 2003 from bond maturities, coupon income
and proceeds from early redemptions. However, these positive demand factors have
not been totally able to offset the increase in tax-exempt new-issue supply that
has resulted in the underperformance seen in recent months. This price
underperformance served to make municipal bonds a particularly attractive
purchase relative to their taxable counterparts. Throughout most of the yield
curve, municipal bonds have been available for purchase at yields near or
exceeding those of comparable U.S. Treasury issues. Compared to their recent
historical averages of 82% - 88% of U.S. Treasury yields, municipal bond yield
ratios in their current 95% - 105% range are likely to prove attractive to
long-term investors.
Declining U.S. equity markets and escalating geopolitical pressures have
resulted in reduced economic activity and consumer confidence. Consequently,
fixed income bond yields have continued to decline to recent historic lows and
to levels that may not be supported by economic fundamentals alone. It is
important to note that, despite all the negative factors impeding the growth of
U.S. businesses, the U.S. economy still grew at an approximate 2.5% rate for all
of 2002, twice that of 2001. Similar expansion is expected in early 2003.
However, until both Iraqi and North Korean conflicts are resolved, any
meaningful increase in interest rates is unlikely.
Some analysts expect that, upon resolution of these conflicts, U.S. business
conditions will quickly improve. Bond yields, especially U.S. Treasury
securities, which have enjoyed a significant safe-haven benefit, are also
expected to quickly rise. However, it is questionable to expect that even a
quick, positive closure to these hostilities would restore business and investor
confidence to the extent that U.S. economic growth would dramatically explode
and foster associated, large-scale interest rate increases. The resumption of
solid economic growth is likely to be a gradual process accompanied by equally
graduated increases in bond yields. Moderate economic growth, within the content
of negligible inflationary pressures, should not greatly endanger the positive
fixed income environment tax-exempt products are currently experiencing.
Specific to Florida, the state's General Fund budget proposal for the fiscal
year 2003 - 2004 is $53.9 billion, a 7% increase from the prior year. This
budget will attempt to close a $2 billion fiscal year 2004 operating shortfall.
It includes currently passed referendums for smaller classroom sizes, enrolling
four-year olds as pre-kindergartners and a high-speed rail line. Florida is
projected to end fiscal year 2002 - 2003 with an operating surplus of $140
million and a Rainy Day Fund at $960 million, a sharp contrast to most other
states. With the implementation of the constitutional amendments, spending will
increase faster than revenues and will force the state to borrow. In fiscal year
2004, $3 billion is earmarked for schools. However, this is just part of an
estimated $4 billion - $27 billion cost for education during the next eight
years. With this increase in spending in the current fiscal year, other programs
will be reduced and/or eliminated to pick up the expense. Some proposed cuts
include $200 million from transportation, $111 million from universities and $51
million from juvenile crime prevention. Additional expenditure savings will be
derived by outsourcing
2 & 3
MuniHoldings Florida Insured Fund, February 28, 2003
state agency functions such as payroll and benefits administration, totaling
another $200 million. These reductions, along with an increase in the corporate
tax structure, the inclusion of video lottery terminals at racetracks and
improving sales tax collections are estimated to generate more than $1 billion.
Proposed expenditure reductions and revenue increases, along with a sizeable
Rainy Day Fund, will enable the state to operate without increasing other taxes.
However, the state balanced its budget by burdening local governments and
universities by asking the voters to increase local sales taxes and/or increase
tuition to meet local operations. Even though the state is being pressured by a
weak national economy, we believe it is in position in the coming year to
perform well, given their prospective management and financial flexibility.
Portfolio Strategy
For the six months ended February 28, 2003, we maintained the Fund's neutral
position, as we focused on reducing the volatility of the Fund. We continued to
sell some of the Fund's 10-year - 15-year bonds and purchased larger-couponed
bonds maturing in 20 years - 30 years. These longer maturities are expected to
enhance the Fund's income stream and help preserve asset valuations during
future periods of market volatility. During the period, new-issue supply was up
approximately 40% compared to the same period a year ago. Despite the heavy
supply, retail and institutional demand remained robust. This strong demand
hindered us from fully implementing our desired strategy. The vast majority of
new bond issuance has been structured as par bonds, which are more price
sensitive and produce less income than desired premium coupon structured issues.
Going forward, the municipal bond curve is expected to remain quite steep.
Therefore, we look to maintain the Fund's neutral position and will remain fully
invested in an effort to enhance shareholder income.
During the period, the Fund's borrowing costs remained in the 1% - 1.5% range,
with interest rates presently below 1%. These very attractive funding levels, in
combination with the steep tax-exempt yield curve, generated a significant
income benefit to the Fund's Common Shareholders from the leveraging of the
Preferred Shares. We do not anticipate any material reduction in the Fund's
borrowing costs in 2003 as additional monetary policy easing by the Federal
Reserve Board is not expected. We anticipate the Fund's short-term borrowing
costs to remain in the 1% - 1.5% range for most of the year. 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. (For a more complete explanation of the benefits and risks of
leveraging, see page 1 of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniHoldings Florida Insured Fund, and we
look forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Portfolio Manager
March 26, 2003
PROXY RESULTS
During the six-month period ended February 28, 2003, MuniHoldings Florida
Insured Fund's Common Shareholders voted on the following proposal. The proposal
was approved at a shareholders' meeting on January 28, 2003. The 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: Terry K. Glenn 35,778,859 650,574
Ronald W. Forbes 35,777,849 651,584
Cynthia A. Montgomery 35,772,292 657,141
Kevin A. Ryan 35,748,272 681,161
Roscoe S. Suddarth 35,767,030 662,403
Edward D. Zinbarg 35,766,201 663,232
- ----------------------------------------------------------------------------------------------------------------------------------
During the six-month period ended February 28, 2003, 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 28,
2003. 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: Terry K. Glenn, Ronald W. Forbes,
Cynthia A. Montgomery, Charles C. Reilly, Kevin A. Ryan, Roscoe S. Suddarth,
Richard R. West and Edward D. Zinbarg 12,007 18
- ----------------------------------------------------------------------------------------------------------------------------------
QUALITY PROFILE
The quality ratings of securities in the Fund as of February 28, 2003 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Total Investments
- --------------------------------------------------------------------------------
AAA/Aaa ................................................................ 91.7%
AA/Aa .................................................................. 1.0
A/A .................................................................... 5.5
NR (Not Rated) ......................................................... 1.8
- --------------------------------------------------------------------------------
4 & 5
MuniHoldings Florida Insured Fund, February 28, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
California--1.7% A A1 $10,000 Golden State Tobacco Securitization Corporation, California,
Tobacco Settlement Revenue Bonds, Series 2003-A-1, 6.75% due
6/01/2039 $ 9,852
====================================================================================================================================
Florida--151.1% AA NR* 5,670 Beacon Tradeport Community Development District, Florida,
Special Assessment Revenue Refunding Bonds (Commercial
Project), Series A, 5.625% due 5/01/2032 (l) 6,009
-------------------------------------------------------------------------------------------------------------
Brevard County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (d)(g):
NR* Aaa 4,565 6.80% due 3/01/2028 4,773
NR* Aaa 710 (Multi-County Program), 6.30% due 3/01/2020 767
-------------------------------------------------------------------------------------------------------------
NR* Aaa 1,815 Broward County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT, 6.70% due 2/01/2028 (d)(g) 1,892
-------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Broward County, Florida, School Board, COP, 5% due 7/01/2028 (a) 10,208
-------------------------------------------------------------------------------------------------------------
Clay County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (d):
NR* Aaa 2,750 6.55% due 3/01/2028 (i) 2,876
NR* Aaa 1,835 (Multi-County Program), 6.375% due 10/01/2026 (g) 1,978
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,320 Clay County, Florida, School Board, COP (Master Lease Program),
5.75% due 7/01/2022 (a) 1,453
-------------------------------------------------------------------------------------------------------------
NR* NR* 5,000 Collier County, Florida, IDA, IDR, Refunding (Southern States
Utilities), AMT, 6.50% due 10/01/2025 4,982
-------------------------------------------------------------------------------------------------------------
AAA NR* 11,350 Dade County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
6.70% due 4/01/2028 (d)(g) 11,892
-------------------------------------------------------------------------------------------------------------
Dade County, Florida, Water and Sewer System Revenue Bonds (h):
AAA Aaa 20,575 5.25% due 10/01/2021 21,861
AAA Aaa 21,640 5.25% due 10/01/2026 22,475
-------------------------------------------------------------------------------------------------------------
NR* Aaa 9,140 Duval County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
6.30% due 10/01/2029 (a)(d)(g) 9,807
-------------------------------------------------------------------------------------------------------------
Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds
(Multi-County Program), AMT, Series A (a)(i):
NR* Aaa 2,200 6.30% due 10/01/2020 2,378
NR* Aaa 8,000 6.375% due 10/01/2026 8,624
-------------------------------------------------------------------------------------------------------------
NR* Aaa 18,600 Escambia County, Florida, Health Facilities Authority, Health
Facility Revenue Bonds (Florida Health Care Facility Loan),
5.95% due 7/01/2020 (b) 20,479
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,580 Escambia County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Ascension Health Credit), Series A-1, 5.75%
due 11/15/2029 (b) 6,042
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,630 Florida HFA, Homeowner Mortgage Revenue Refunding Bonds, AMT,
Series 2, 5.75% due 7/01/2014 (a) 3,855
-------------------------------------------------------------------------------------------------------------
NR* Aaa 15,160 Florida HFA, Revenue Refunding Bonds, AMT, RITR, Series 12,
10.30% due 7/01/2029 (a)(f) 16,615
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,925 Florida HFA, S/F Mortgage Revenue Refunding Bonds, AMT, Series
A, 6.65% due 1/01/2024 (d)(g) 3,060
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 Florida Housing Finance Corporation, Homeowner Mortgage Revenue
Refunding Bonds, AMT, Series 4, 6.25% due 7/01/2022 (c) 2,973
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,055 Florida Housing Finance Corporation, Housing Revenue Bonds
(Waverly Apartments), AMT, Series C-1, 6.30% due 7/01/2030 (c) 2,247
-------------------------------------------------------------------------------------------------------------
Florida Municipal Loan Council Revenue Bonds, Series B (a):
AAA Aaa 1,500 5.25% due 11/01/2020 1,601
AAA Aaa 1,285 5.375% due 11/01/2025 1,357
AAA Aaa 4,150 5.375% due 11/01/2030 4,360
-------------------------------------------------------------------------------------------------------------
Florida State Board of Education, Capital Outlay, GO, Public Education:
AAA Aaa 6,600 Series C, 5.75% due 6/01/2023 (h) 7,248
AAA Aaa 1,000 Series C, 5.75% due 6/01/2029 (h) 1,091
AAA Aaa 7,000 Series E, 5.625% due 6/01/2029 (c) 7,529
-------------------------------------------------------------------------------------------------------------
AAA NR* 3,450 Florida State Board of Education, Capital Outlay, GO, RIB,
Series 190, 10.36% due 1/01/2015 (c)(f) 4,102
-------------------------------------------------------------------------------------------------------------
AAA Aaa 12,000 Florida State Board of Education, GO, Public Education,
Series B, 5.75% due 6/01/2005 (a)(j) 13,318
-------------------------------------------------------------------------------------------------------------
Florida State Board of Education, Lottery Revenue Bonds (h):
AAA NR* 12,725 DRIVERS, Series 222, 10.78% due 7/01/2017 (f) 17,264
AAA Aaa 9,330 Series A, 5.25% due 7/01/2018 10,055
AAA Aaa 7,500 Series C, 5.25% due 7/01/2020 7,989
-------------------------------------------------------------------------------------------------------------
AAA NR* 8,500 Florida State Board of Education, Public Education, GO, Refunding,
Series D, 5.75% due 6/01/2022 (c) 9,507
-------------------------------------------------------------------------------------------------------------
Florida State Board of Regents, Housing Revenue Bonds (h):
AAA Aaa 1,000 (University of Central Florida), 5.25% due 10/01/2026 1,043
AAA Aaa 1,080 (University of Florida), 6% due 7/01/2018 1,235
-------------------------------------------------------------------------------------------------------------
AAA Aaa 7,165 Florida State Board of Regents, University Systems Improvement
Revenue Bonds, 5.25% due 7/01/2022 (a) 7,424
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,505 Florida State Department of General Services, Division Facilities
Management Revenue Bonds (Florida Facilities Pool), Series A, 6%
due 9/01/2025 (b) 3,929
-------------------------------------------------------------------------------------------------------------
AAA Aaa 8,795 Florida State Department of Transportation, GO, 5% due 7/01/2025 (a) 9,023
-------------------------------------------------------------------------------------------------------------
AAA NR* 14,325 Florida State Turnpike Authority, Turnpike Revenue Bonds, DRIVERS,
Series 218, 11.09% due 7/01/2029 (f)(h) 19,242
-------------------------------------------------------------------------------------------------------------
Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of
Transportation), Series A:
AAA Aa3 3,590 5.50% due 7/01/2016 (a) 4,012
AA- Aa3 2,835 5.75% due 7/01/2019 3,175
-------------------------------------------------------------------------------------------------------------
A- A3 7,135 Highlands County, Florida, Health Facilities Authority Revenue
Bonds (Adventist Health System/Sunbelt Obligated Group), Series
A, 6% due 11/15/2031 7,519
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric
Company Project), 6.25% due 12/01/2034 (a) 4,928
-------------------------------------------------------------------------------------------------------------
Hillsborough County, Florida, School Board, COP (a):
AAA Aaa 33,400 6% due 7/01/2009 (j) 39,925
NR* Aaa 6,600 5.375% due 7/01/2026 6,860
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,300 Indian River County, Florida, Water and Sewer Revenue Refunding
Bonds, Series A, 5.25% due 9/01/2018 (h) 1,413
-------------------------------------------------------------------------------------------------------------
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 below and 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 & 7
MuniHoldings Florida Insured Fund, February 28, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
Florida AAA NR* $ 2,415 Jacksonville, Florida, Electric Authority, Electric System Revenue
(continued) Refunding Bonds, Series 3-A, 6% due 10/01/2030 (a) $ 2,632
-------------------------------------------------------------------------------------------------------------
AAA Aaa 7,305 Jacksonville, Florida, Guaranteed Entitlement Revenue Refunding
and Improvement Bonds, 5.25% due 10/01/2032 (h) 7,612
-------------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Airport Revenue Bonds, AMT,
Series A (h):
AAA Aaa 1,295 6.10% due 10/01/2018 1,439
AAA Aaa 8,385 6.25% due 10/01/2024 9,248
-------------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Seaport Revenue Bonds, AMT:
NR* Aaa 1,130 5.625% due 11/01/2010 (j) 1,317
NR* Aaa 1,870 5.625% due 11/01/2026 (a) 1,959
-------------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Sales Tax Revenue Bonds (b):
AAA Aaa 2,000 5.50% due 10/01/2016 2,241
AAA Aaa 3,800 5.50% due 10/01/2018 4,205
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Jacksonville, Florida, Water and Sewer Revenue Bonds (United
Water Florida Project), AMT, 6.35% due 8/01/2025 (b) 1,650
-------------------------------------------------------------------------------------------------------------
Lee County, Florida, Airport Revenue Bonds (c):
AAA Aaa 19,925 AMT, Series A, 6% due 10/01/2029 22,114
AAA Aaa 1,000 Series B, 5.75% due 10/01/2033 1,089
-------------------------------------------------------------------------------------------------------------
Lee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (d)(g):
NR* Aaa 775 (Multi-County Program), Series A-1, 7.20% due 3/01/2033 871
NR* Aaa 2,170 Series A-6, 6.45% due 3/01/2031 (e) 2,420
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,350 Lee County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds,
AMT, Series A-2, 6.30% due 3/01/2029 (d)(e)(g) 2,593
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,655 Lee County, Florida, School Board COP, Series A, 5% due 8/01/2018 (c) 2,827
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,945 Manatee County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds,
AMT, Sub-Series 1, 6.25% due 11/01/2028 (d) 3,254
-------------------------------------------------------------------------------------------------------------
AAA NR* 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) 2,167
-------------------------------------------------------------------------------------------------------------
Miami Beach, Florida, Stormwater Revenue Bonds (h):
AAA Aaa 1,630 5.75% due 9/01/2016 1,865
AAA Aaa 1,000 5.25% due 9/01/2020 1,066
AAA Aaa 4,400 5.25% due 9/01/2025 4,593
AAA Aaa 1,910 5.375% due 9/01/2030 2,005
-------------------------------------------------------------------------------------------------------------
Miami Beach, Florida, Water and Sewer Revenue Bonds (b):
AAA Aaa 2,690 5.625% due 9/01/2018 2,997
AAA Aaa 10,600 5.75% due 9/01/2025 11,619
-------------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Aviation Revenue Bonds (Miami International
Airport), AMT, Series A (h):
AAA Aaa 1,000 5.45% due 10/01/2012 1,097
AAA Aaa 1,385 5.55% due 10/01/2013 1,521
AAA Aaa 6,000 6% due 10/01/2024 6,773
AAA Aaa 10,000 6% due 10/01/2029 11,239
-------------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Educational Facilities Authority Revenue
Bonds, Series A (b):
AAA Aaa 1,000 5.50% due 4/01/2019 1,092
AAA Aaa 19,425 6% due 4/01/2023 21,707
AAA Aaa 5,000 (University of Miami), 5.75% due 4/01/2029 5,444
-------------------------------------------------------------------------------------------------------------
AAA Aaa 22,780 Miami-Dade County, Florida, Expressway Authority, Toll System
Revenue Bonds, 6.375% due 7/01/2010 (h)(j)(k) 27,893
-------------------------------------------------------------------------------------------------------------
NR* Aaa 6,705 Miami-Dade County, Florida, GO (Parks Program), 6% due 11/01/2024 (h) 7,673
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,185 Miami-Dade County, Florida, HFA, M/F Mortgage Revenue Bonds (Marbrisa
Apartments Project), AMT, Series 2A, 6% due 8/01/2026 (c) 2,351
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,605 Miami-Dade County, Florida, Health Facilities Authority, Hospital
Revenue Refunding Bonds (Miami Children's Hospital), Series A, 5.625%
due 8/15/2014 (b) 6,433
-------------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, IDA, IDR (b):
AAA Aaa 5,100 (Airis Miami II LLC Project), AMT, 6% due 10/15/2019 5,671
AAA Aaa 3,280 (BAC Funding Corporation Project), Series A, 5.25% due 10/01/2020 3,520
-------------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Solid Waste System Revenue Bond (c):
AAA Aaa 2,945 5.50% due 10/01/2015 3,309
AAA Aaa 3,105 5.50% due 10/01/2016 3,469
-------------------------------------------------------------------------------------------------------------
Nassau County, Florida, Public Improvement Revenue Refunding Bonds (a):
AAA Aaa 1,035 5.75% due 5/01/2016 1,177
AAA Aaa 1,095 5.75% due 5/01/2017 1,240
AAA Aaa 1,155 5.75% due 5/01/2018 1,303
AAA Aaa 1,225 5.75% due 5/01/2019 1,376
-------------------------------------------------------------------------------------------------------------
NR* Aaa 645 Orange County, Florida, HFA, Homeowner Revenue Refunding Bonds,
AMT, Series B-1, 6.20% due 9/01/2029 (d)(g) 689
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,375 Orange County, Florida, HFA, M/F Housing Revenue Bonds, Series A,
6.40% due 1/01/2031 (a) 2,603
-------------------------------------------------------------------------------------------------------------
AAA NR* 5,435 Orange County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.85%
due 10/01/2027 (d)(g) 5,661
-------------------------------------------------------------------------------------------------------------
Orange County, Florida, Health Facilities Authority, Hospital
Revenue Bonds:
A- A3 2,900 (Adventist Health System), 6.25% due 11/15/2024 3,089
A- A2 9,220 (Orlando Regional Healthcare), 6% due 12/01/2029 9,663
AAA Aaa 5,000 (Orlando Regional Healthcare), Series A, 6.25% due 10/01/2018 (a) 6,131
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,630 Orange County, Florida, Sales Tax Revenue Refunding Bonds, Series B,
5% due 1/01/2025 (h) 5,770
-------------------------------------------------------------------------------------------------------------
NR* Aaa 1,300 Orange County, Florida, School Board COP, 5.50% due 8/01/2025 (b) 1,375
-------------------------------------------------------------------------------------------------------------
Orange County, Florida, Tourist Development, Tax Revenue Bonds (b):
AAA Aaa 5,710 5.375% due 10/01/2018 6,240
AAA Aaa 31,745 5.75% due 10/01/2025 35,174
AAA Aaa 2,000 5.50% due 10/01/2031 2,100
AAA Aaa 27,075 5.50% due 10/01/2032 28,847
-------------------------------------------------------------------------------------------------------------
AAA Aaa 350 Orlando and Orange County Expressway Authority, Florida, Expressway
Revenue Bonds, Junior Lien, 6.50% due 7/01/2011 (h) 429
-------------------------------------------------------------------------------------------------------------
Osceola County, Florida, Infrastructure Sales Surplus Tax Revenue
Bonds (b):
NR* Aaa 3,155 5.375% due 10/01/2018 3,469
NR* Aaa 7,680 5.25% due 10/01/2025 8,039
-------------------------------------------------------------------------------------------------------------
Osceola County, Florida, Sales Tax Revenue Bonds (h):
NR* Aaa 2,065 5.625% due 6/01/2016 2,342
NR* Aaa 1,605 5.625% due 6/01/2017 1,810
NR* Aaa 1,075 5.625% due 6/01/2018 1,207
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,560 Osceola County, Florida, Tourist Development Tax Revenue Bonds,
Series A, 5.50% due 10/01/2027 (h) 5,962
-------------------------------------------------------------------------------------------------------------
8 & 9
MuniHoldings Florida Insured Fund, February 28, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
Florida Palm Beach County, Florida, GO (Liquid Acquisition Program),
(concluded) Series B (a):
AAA Aaa $ 4,605 5.75% due 8/01/2016 $ 5,256
AAA Aaa 5,330 5.75% due 8/01/2018 5,927
-------------------------------------------------------------------------------------------------------------
NR* Aaa 655 Palm Beach County, Florida, HFA, S/F Homeowner Revenue Refunding
Bonds, AMT, Series A-1, 6.05% due 10/01/2020 (a)(d)(g) 702
-------------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, Public Improvement Revenue Bonds
(Convention Center Project) (h):
AAA Aaa 2,665 5.625% due 11/01/2018 2,986
AAA Aaa 2,835 5.625% due 11/01/2019 3,154
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,115 Palm Beach County, Florida, School Board COP, Refunding, Series
B, 5.375% due 8/01/2017 (b) 6,737
-------------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, School Board COP, Series A:
AAA Aaa 5,070 6% due 8/01/2010 (h)(j) 6,089
AAA Aaa 13,205 6.25% due 8/01/2010 (h)(j) 16,076
AAA Aaa 4,235 5.50% due 8/01/2016 (b) 4,761
-------------------------------------------------------------------------------------------------------------
AAA NR* 4,185 Pinellas County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County
Program), AMT, Series A, 6.70% due 2/01/2028 (d)(g) 4,347
-------------------------------------------------------------------------------------------------------------
AAA Aaa 9,885 Polk County, Florida, School Board COP, Master Lease, Series A,
5.50% due 1/01/2025 (c) 10,547
-------------------------------------------------------------------------------------------------------------
NR* Aaa 5,600 Polk County, Florida, Utility System Revenue Bonds, 5% due
10/01/2029 (h) 5,725
-------------------------------------------------------------------------------------------------------------
NR* Aaa 9,645 Pompano Beach, Florida, Water and Sewer Revenue Bonds, 6% due
7/01/2020 (h) 10,950
-------------------------------------------------------------------------------------------------------------
Saint John's County, Florida, IDA, IDR, Refunding (Professional
Golf Project) (a):
AAA Aaa 1,275 5.50% due 9/01/2015 1,445
AAA Aaa 1,345 5.50% due 9/01/2016 1,515
AAA Aaa 1,420 5.50% due 9/01/2017 1,589
AAA Aaa 1,500 5.50% due 9/01/2018 1,669
-------------------------------------------------------------------------------------------------------------
NR* Aaa 4,055 Saint Lucie County, Florida, School Board, COP, 6.25% due 7/01/2010
(c)(j) 4,932
-------------------------------------------------------------------------------------------------------------
Saint Lucie County, Florida, School Board, COP, Refunding (c):
NR* Aaa 1,270 Series A, 5.50% due 7/01/2015 1,434
NR* Aaa 1,345 Series A, 5.50% due 7/01/2016 1,511
NR* Aaa 1,420 Series A, 5.50% due 7/01/2017 1,584
NR* Aaa 1,495 Series A, 5.50% due 7/01/2018 1,659
NR* Aaa 1,000 Series C, 5.50% due 7/01/2015 1,129
NR* Aaa 1,050 Series C, 5.50% due 7/01/2016 1,179
NR* Aaa 1,105 Series C, 5.50% due 7/01/2017 1,233
NR* Aaa 1,170 Series C, 5.50% due 7/01/2018 1,298
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,250 Saint Lucie, Florida, West Services District, Utility Revenue
Refunding Bonds, Senior Lien, 6% due 10/01/2022 (a) 3,683
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,840 Seacoast, Florida, Utility Authority, Water and Sewer Utility
System Revenue Refunding Bonds, Series A, 5.50% due 3/01/2018 (h) 2,131
-------------------------------------------------------------------------------------------------------------
Sunrise, Florida, Utility System Revenue Refunding Bonds (b):
AAA Aaa 7,000 5.50% due 10/01/2018 8,085
AAA Aaa 2,250 5.20% due 10/01/2022 2,417
AAA Aaa 1,545 5% due 10/01/2028 1,605
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,430 Sunrise Lakes, Florida, Phase 4 Recreation District, Refunding
Bonds, GO, 5.25% due 8/01/2024 (b) 2,506
-------------------------------------------------------------------------------------------------------------
Tallahassee, Florida, Lease Revenue Bonds (Florida State University
Project), Series A (a):
AAA Aaa 2,800 5.25% due 8/01/2023 2,936
AAA Aaa 1,000 5.375% due 8/01/2026 1,053
-------------------------------------------------------------------------------------------------------------
AAA Aaa 30,335 Tampa Bay, Florida, Water Utility System Revenue Bonds, 6% due
10/01/2011 (h)(j) 36,431
-------------------------------------------------------------------------------------------------------------
AAA Aaa 14,750 Tampa, Florida, Sports Authority Revenue Bonds (Local Option Sales
Tax--Stadium Project), 5.25% due 1/01/2027 (a) 15,186
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,450 Tampa, Florida, Water and Sewer Revenue Bonds, 5.50% due
10/01/2009 (a)(j) 6,387
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,835 Taylor County, Florida, Sales Tax Revenue Bonds, 6% due
10/01/2025 (h) 4,379
===================================================================================================================================
New Jersey--1.4% A A1 8,250 Tobacco Settlement Financing Corporation of New Jersey Revenue
Bonds, 6.75% due 6/01/2039 7,978
===================================================================================================================================
Puerto Rico--4.3% A- Baa1 3,000 Puerto Rico Commonwealth, GO, Public Improvement, 6% due 7/01/2005 3,344
-------------------------------------------------------------------------------------------------------------
A- Aaa 6,500 Puerto Rico Commonwealth, GO, RIB, Series 365, 6% due 7/01/2005
(a)(f)(j) 7,992
-------------------------------------------------------------------------------------------------------------
A Baa1 10,125 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B, 6% due 7/01/2026 11,158
-------------------------------------------------------------------------------------------------------------
AAA Aaa 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) 3,041
-------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$863,844)--158.5% 936,664
===================================================================================================================================
Shares
Held Short-Term Securities
===================================================================================================================================
11,635 Merrill Lynch Institutional Tax-Exempt Fund (m) 11,635
-------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$11,635)--2.0% 11,635
===================================================================================================================================
Total Investments (Cost--$875,479)--160.5% 948,299
Variation Margin on Financial Futures Contracts**--0.0% 177
Other Assets Less Liabilities--1.0% 5,549
Preferred Shares at Redemption Value--(61.5%) (363,284)
---------
Net Assets Applicable to Common Shares--100.0% $ 590,741
=========
===================================================================================================================================
(a) MBIA Insured.
(b) AMBAC Insured.
(c) FSA Insured.
(d) GNMA Collateralized.
(e) FHLMC Collateralized.
(f) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at February 28, 2003.
(g) FNMA Collateralized.
(h) FGIC Insured.
(i) FHA Insured.
(j) Prerefunded.
(k) All or a portion of security held as collateral in connection with open
financial futures contracts.
(l) Radian Insured.
(m) 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) are as follows:
(in Thousands)
-----------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
-----------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 11,075 $57
-----------------------------------------------------------------------------
* Not Rated.
** Financial futures contracts sold as of February 28, 2003 were as follows:
(in Thousands)
-----------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
-----------------------------------------------------------------------------
435 U.S. Treasury March 2003 $50,773
-----------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$49,112) $50,773
=======
-----------------------------------------------------------------------------
See Notes to Financial Statements.
10 & 11
MuniHoldings Florida Insured Fund, February 28, 2003
STATEMENT OF NET ASSETS
As of February 28, 2003
===================================================================================================================================
Assets: Investments, at value (identified cost--$875,479,330) ...................... $948,299,361
Cash ....................................................................... 42,172
Receivables:
Interest ................................................................. $ 14,814,483
Securities sold .......................................................... 5,245,000
Dividends ................................................................ 316 20,059,799
------------
Prepaid expenses ........................................................... 12,938
------------
Total assets ............................................................... 968,414,270
------------
===================================================================================================================================
Liabilities: Payables:
Securities purchased ..................................................... 13,617,916
Investment adviser ....................................................... 367,334
Variation margin ......................................................... 176,719
Dividends to Common Shareholders ......................................... 145,682 14,307,651
------------
Accrued expenses ........................................................... 81,223
------------
Total liabilities .......................................................... 14,388,874
------------
===================================================================================================================================
Preferred Shares: Preferred Shares, par value $.10 per share (2,095 Series A shares, 3,495
Series B shares, 3,440 Series C shares, 2,160 Series D shares and 3,340
Series E shares of AMPS* issued and outstanding at $25,000 per share
liquidation preference) .................................................... 363,283,912
------------
===================================================================================================================================
Net Assets Applicable Net assets applicable to Common Shares ..................................... $590,741,484
To Common Shares: ============
===================================================================================================================================
Analysis of Net Common Shares, par value $.10 per share (37,628,592 shares issued and
Assets Applicable to outstanding) ............................................................... $ 3,762,859
Common Shares: Paid-in capital in excess of par ........................................... 570,474,526
Undistributed investment income--net ....................................... $ 7,426,808
Accumulated realized capital losses on investments--net .................... (62,081,975)
Unrealized appreciation on investments--net ................................ 71,159,266
------------
Total accumulated earnings--net ............................................ 16,504,099
------------
Total--Equivalent to $15.70 net asset value of Common Share
(market price--$14.61) ..................................................... $590,741,484
============
===================================================================================================================================
* Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended February 28, 2003
===================================================================================================================================
Investment Interest .................................................................... $ 24,687,127
Income: Dividends ................................................................... 57,445
------------
Total income ................................................................ 24,744,572
------------
===================================================================================================================================
Expenses: Investment advisory fees .................................................... $ 2,574,273
Commission fees ............................................................. 457,781
Accounting services ......................................................... 135,942
Transfer agent fees ......................................................... 40,463
Professional fees ........................................................... 32,977
Custodian fees .............................................................. 23,429
Printing and shareholder reports ............................................ 20,205
Trustees' fees and expenses ................................................. 18,613
Listing fees ................................................................ 15,715
Pricing fees ................................................................ 14,867
Other ....................................................................... 27,379
-----------
Total expenses before reimbursement ......................................... 3,361,644
Reimbursement of expenses ................................................... (196,073)
-----------
Total expenses after reimbursement .......................................... 3,165,571
------------
Investment income--net ...................................................... 21,579,001
------------
===================================================================================================================================
Realized & Realized gain on investments--net ........................................... 1,354,991
Unrealized Gain Change in unrealized appreciation on investments--net ....................... 7,773,449
On Investments--Net: ------------
Total realized and unrealized gain on investments--net ...................... 9,128,440
------------
===================================================================================================================================
Dividends to Preferred Investment income--net ...................................................... (2,095,656)
Shareholders: ------------
Net Increase in Net Assets Resulting from Operations ........................ $ 28,611,785
============
===================================================================================================================================
See Notes to Financial Statements.
12 & 13
MuniHoldings Florida Insured Fund, February 28, 2003
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2003 2002
====================================================================================================================================
Operations: Investment income--net .................................................... $ 21,579,001 $ 43,232,492
Realized gain (loss) on investments--net .................................. 1,354,991 (1,265,683)
Change in unrealized appreciation on investments--net ..................... 7,773,449 4,002,745
Dividends and distributions to Preferred Shareholders ..................... (2,095,656) (5,450,131)
------------ ------------
Net increase in net assets resulting from operations ...................... 28,611,785 40,519,423
------------ ------------
====================================================================================================================================
Dividends & Investment income--net .................................................... (17,873,581) (35,655,838)
Distributions to Realized gain on investments--net ......................................... -- (110,854)
Common Shareholders: ------------ ------------
Net decrease in net assets resulting from dividends and
distributions to Common Shareholders ...................................... (17,873,581) (35,766,692)
------------ ------------
====================================================================================================================================
Net Assets Total increase in net assets applicable to Common Shares .................. 10,738,204 4,752,731
Applicable to Beginning of period ....................................................... 580,003,280 575,250,549
Common Shares: ------------ ------------
End of period* ............................................................ $590,741,484 $580,003,280
============ ============
====================================================================================================================================
*Undistributed investment income--net ...................................... $ 7,426,808 $ 5,817,044
============ ============
====================================================================================================================================
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived For the Six For the Year Ended
from information provided in the financial statements. Months Ended August 31,
February 28, --------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ..................... $ 15.41 $ 15.29 $ 13.85 $ 13.84 $ 16.03
Operating -------- -------- -------- -------- --------
Performance:+ Investment income--net ................................... .57++ 1.14 1.02 .93 1.14
Realized and unrealized gain (loss) on investments--net .. .26 .06 1.42 .08 (1.77)
Dividends and distributions to Preferred Shareholders:
Investment income--net ............................... (.06) (.13) (.22) (.21) (.23)
Realized gain on investments--net .................... -- --@@ -- -- (.03)
In excess of realized gain on investments--net ....... -- -- -- -- (.10)
Capital write-off (charge) resulting from issuance of
Preferred Shares ......................................... -- -- --@@ -- --
-------- -------- -------- -------- --------
Total from investment operations ......................... .77 1.07 2.22 .80 (.99)
-------- -------- -------- -------- --------
Less dividends and distributions to Common Shareholders:
Investment income--net ................................. (.48) (.95) (.78) (.79) (.86)
Realized gain on investments--net ...................... -- --@@ -- -- (.07)
In excess of realized gain on investments--net ......... -- -- -- -- (.27)
-------- -------- -------- -------- --------
Total dividends and distributions to Common Shareholders . (.48) (.95) (.78) (.79) (1.20)
-------- -------- -------- -------- --------
Net asset value, end of period ........................... $ 15.70 $ 15.41 $ 15.29 $ 13.85 $ 13.84
======== ======== ======== ======== ========
Market price per share, end of period .................... $ 14.61 $ 14.66 $ 14.04 $11.6875 $ 12.75
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on market price per share .......................... 2.98%@ 11.63% 27.82% (1.96%) (6.80%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ....................... 5.28%@ 7.75% 17.47% 7.03% (6.51%)
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net Assets reorganization expenses*** ............................... 1.10%* 1.13% 1.14% 1.18% 1.18%
Of Common Shares: ======== ======== ======== ======== ========
Total expenses, excluding reorganization expenses*** ..... 1.17%* 1.20% 1.23% 1.30% 1.26%
======== ======== ======== ======== ========
Total expenses*** ........................................ 1.17%* 1.21% 1.26% 1.45% 1.26%
======== ======== ======== ======== ========
Total investment income--net*** .......................... 7.50%* 7.71% 7.88% 8.65% 7.34%
======== ======== ======== ======== ========
Amount of dividends to Preferred Shareholders ............ .73%* .96% 2.31% 3.05% 1.50%
======== ======== ======== ======== ========
Investment income--net, to Common Shareholders ........... 6.77%* 6.75% 5.57% 5.60% 5.84%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net Assets reorganization expenses .................................. .68%* .69% .68% .67% .73%
Of Common & ======== ======== ======== ======== ========
Preferred Shares:*** Total expenses, excluding reorganization expenses ........ .72%* .73% .74% .74% .77%
======== ======== ======== ======== ========
Total expenses ........................................... .72%* .73% .75% .83% .77%
======== ======== ======== ======== ========
Total investment income--net ............................. 4.61%* 4.68% 4.71% 4.95% 4.51%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Dividends to Preferred Shareholders ...................... 1.16%* 1.49% 3.43% 4.08% 2.39%
Average Net Assets ======== ======== ======== ======== ========
Of Preferred Shares:
==================================================================================================================================
Supplemental Net assets applicable to Common Shares, end of period
Data: (in thousands) ........................................... $590,741 $580,003 $575,251 $467,961 $149,395
======== ======== ======== ======== ========
Preferred Shares outstanding, end of period (in thousands) $363,250 $363,250 $363,250 $328,250 $104,750
======== ======== ======== ======== ========
Portfolio turnover ....................................... 9.66% 13.89% 47.50% 105.22% 120.70%
======== ======== ======== ======== ========
==================================================================================================================================
Leverage: Asset coverage per $1,000 ................................ $ 2,626 $ 2,597 $ 2,584 $ 2,426 $ 2,426
======== ======== ======== ======== ========
==================================================================================================================================
Dividends Per Share Series A--Investment income--net ......................... $ 128 $ 362 $ 885 $ 985 $ 606
On Preferred Shares ======== ======== ======== ======== ========
Outstanding: Series B--Investment income--net ......................... $ 147 $ 375 $ 754 $ 984 $ 598
======== ======== ======== ======== ========
Series C--Investment income--net ......................... $ 138 $ 369 $ 889 $ 610 --
======== ======== ======== ======== ========
Series D--Investment income--net ......................... $ 152 $ 368 $ 855 $ 595 --
======== ======== ======== ======== ========
Series E--Investment income--net ......................... $ 153 $ 381 $ 850 $ 585 --
======== ======== ======== ======== ========
==================================================================================================================================
* 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. The Fund's Investment Adviser waived a portion of its management
fee. Without such waiver, the Fund's performance would have been lower.
*** Do not reflect the effect of dividends to Preferred Shareholders.
+ Certain prior year amounts have been reclassified to conform with current
year presentation.
++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Amount is less than $.01 per share.
See Notes to Financial Statements.
14 & 15
MuniHoldings Florida Insured Fund, February 28, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings Florida Insured Fund, (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature. The Fund will
determine and make available for publication the net asset value of its Common
Shares on a weekly 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 most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options -- The Fund is authorized to write covered call options and purchase
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 is authorized to enter into forward
interest rate swaps for the purpose of hedging the interest rate risk on
portfolio securities. In a forward interest rate swap, the Fund and the
counterparty agree to pay or receive interest on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. The value of the agreement is determined by quoted fair values received
daily by the Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of the
agreement.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distribution 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, 2003, FAM earned fees of $2,574,273, of which $186,791 was waived.
For the six months ended February 28, 2003, FAM reimbursed the Fund in the
amount of $9,282.
For the six months ended February 28, 2003, the Fund reimbursed FAM $11,523 for
certain accounting services.
Certain officers and/or trustees 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, 2003 were $82,413,882 and $79,155,759, respectively.
Net realized gains (losses) for the six months ended February 28, 2003 and net
unrealized gains (losses) as of February 28, 2003 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- -------------------------------------------------------------------------------
Long-term investments ......................... $ 2,378,437 $72,820,031
Financial futures contracts ................... (1,023,446) (1,660,765)
----------- -----------
Total ......................................... $ 1,354,991 $71,159,266
=========== ===========
- -------------------------------------------------------------------------------
As of February 28, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $72,206,388, of which $72,325,100 related to appreciated
securities and $118,712 related to depreciated securities. The aggregate cost of
investments at February 28, 2003 for Federal income tax purposes was
$876,092,973.
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.
Common Shares
Shares issued and outstanding for the six months ended February 28, 2003 and for
the year ended August 31, 2002, remained constant.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are redeemable Preferred Shares of the
Fund, with a par value
16 & 17
MuniHoldings Florida Insured Fund, February 28, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 2003 were as follows: Series A, 1.02%; Series B, 1.02%;
Series C, 1.02%; Series D, 1.02% and Series E, 1.02%.
Shares issued and outstanding for the six months ended February 28, 2003 and for
the year ended August 31, 2002, remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended February 28, 2003, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $249,043 as
commissions.
5. Capital Loss Carryforward:
On August 31, 2002, the Fund had a net capital loss carryforward of $59,696,283,
of which $7,768,611 expires in 2006, $25,529,487 expires in 2007, $9,834,324
expires in 2008 and $16,563,861 expires in 2009. This amount will be available
to offset like amounts of any future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Shares in the
amount of $.080000 per share payable on March 28, 2003 to shareholders of record
as of March 17, 2003.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of the
Fund's Common Shares, 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.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, 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
Brian D. Stewart, 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
New York, NY 10286
Preferred Shares:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MFL
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
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.
MuniHoldings Florida Insured Fund
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #HOLDFL--2/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are
normally provided by the accountant in connection with
statutory and regulatory filings or engagements for
those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the
services comprising the fees disclosed under this
category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A (not answered
until July 1, 2003)
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A (not answered until July 15, 2003
and only annually for funds)
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). 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/ Terry K. Glenn
---------------------------------
Terry K. Glenn,
President of
MuniHoldings Florida Insured Fund
Date: April 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Terry K. Glenn
---------------------------------
Terry K. Glenn,
President of
MuniHoldings Florida Insured Fund
Date: April 21, 2003
By: /s/ Donald C. Burke
---------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings Florida Insured Fund
Date: April 21, 2003