MUNIHOLDINGS
FLORIDA INSURED FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
August 31, 1998
<PAGE>
MuniHoldings Florida Insured Fund
The Benefits and
Risks of
Leveraging
MuniHoldings Florida Insured Fund has the ability to 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, interest rates 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 such securities.
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
DEAR SHAREHOLDER
Since inception (September 26, 1997) through August 31, 1998, the Common Shares
of MuniHoldings Florida Insured Fund earned $0.778 per share income dividends,
which included earned and unpaid dividends of $0.070. This represents a net
annualized yield of 5.21%, based on a month-end per share net asset value of
$16.03. Over the same period, the total investment return on the Fund's Common
Shares was +11.97%, based on a change in per share net asset value from $15.00
to $16.03, and assuming reinvestment of $0.709 per share income dividends.
For the six months ended August 31, 1998, the total investment return on the
Fund's Common Shares was +5.50%, based on a change in per share net asset value
from $15.61 to $16.03, and assuming reinvestment of $0.401 per share income
dividends.
For the six-month period ended August 31, 1998, the Fund's Preferred Shares had
an average yield of 3.67% for Series A and 3.53% for Series B.
The Municipal Market Environment
Long-term tax-exempt bond yields declined slightly during the six months ended
August 31, 1998. Throughout most of this year, foreign economic factors have
continued to outweigh US domestic fundamentals. Thus far this year, the near
absence of inflationary pressures in the United States continued to support low
interest rates. Consistently strong domestic economic growth has caused some
investors to fear that the Federal Reserve Board would be forced eventually to
raise short-term interest rates. This action would be taken to ensure that the
US economy's present rate of growth would decelerate before any inflationary
pressures could develop. However, the weakening financial conditions in many
Asian countries, combined with the currency devaluation in Russia, calmed
investor concerns of Federal Reserve Board intervention, and fixed-income bond
prices again moved higher. As measured by the Bond Buyer Revenue Bond Index,
long-term uninsured municipal bond yields fell approximately 10 basis points
(0.10%) to end the six-month period at 5.26%. As in late 1997 and early 1998, US
Treasury bond yields benefited from a "flight to quality" as foreign investors
were drawn to the relative safe haven of US Government securities. Additionally,
the sharp US equity market correction at the end of August triggered an
additional flight into US Treasury securities. Long-term US Treasury bond yields
declined approximately 70 basis points to end the six-month period at 5.21%.
Thus far in 1998, the municipal bond market has experienced unexpectedly strong
supply pressures. To a large extent these supply pressures have prevented
tax-exempt bond yields from declining as much as US Treasury bond yields. During
the first eight months of 1998, almost $150 billion in new tax-exempt bonds were
underwritten, an increase of about 40% compared to the same period a year ago.
During the most recent three months, municipalities issued almost $75 billion in
new securities, an increase of nearly 25% compared to the same three-month
period in 1997.
However, the recent pace of new municipal bond issuance is unlikely to be
maintained. Continued increases in bond issuance will require lower and lower
municipal bond yields to generate the economic savings necessary for additional
tax-exempt bond refinancings. Preliminary estimates for 1998 total municipal
bond issuance are in the $200 billion-$225 billion range. These estimates
suggest that recent supply pressures, which have lessened recently, are likely
to abate further later in the year.
The continued impact of the Asian financial crisis on the US domestic economy's
future growth remains unclear. Current Asian economic conditions continue to
reflect ongoing weakness. Recent trade data indicated that reduced US exports to
these countries might have lowered US economic growth in the first half of 1998
by as much as 2%. Since further trade deterioration is likely in the coming
months, we do not believe the Federal Reserve Board will be willing to raise
interest rates, barring a dramatic and unexpected resurgence of domestic
inflation.
These factors suggest that over the near term, interest rates in general are
unlikely to rise by any appreciable amount. Recent supply pressures have caused
municipal bond yield ratios to rise relative to US Treasury bond yields. At
August 31, 1998, long-term tax-exempt bond yields were at attractive yield
ratios relative to US Treasury securities of comparable maturities (over 90%),
well in excess of their expected range of 85%-88%. Tax-exempt bond yield ratios
have rarely exceeded 90% in the 1980s and 1990s. Previous instances have usually
been associated with potential changes in Federal tax codes that would have
adversely affected the tax-favored status of municipal bonds. The present
situation has developed largely because of a temporary supply imbalance. These
imbalances should soon be corrected as tax-exempt bond issuance slows from its
current rapid pace later this year. Any further pressure on the municipal market
may well represent a very attractive investment opportunity.
Portfolio Strategy
During the six months ended August 31, 1998, we maintained our constructive
outlook toward interest rates as the US economy showed signs of moderating, and
inflation remained benign. Combined with the continued turmoil in the Asian
equity markets, the Federal Reserve Board did not change short-term interest
rates during the period. As a result, we maintained a fully invested position in
order to seek to enhance shareholder income.
At current interest rate levels, with long-term municipal bond yields nearing
5%, we may begin to sell some of the Fund's more aggressively structured
securities. Proceeds of these sales would be concentrated in cash reserves or
used to purchase less interest rate-sensitive, income-oriented holdings.
Although the fundamental economic backdrop for the marketplace is still quite
supportive, we would expect the municipal market to participate only marginally
in any further fixed-income price gains.
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/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Robert A. DiMella
Robert A. DiMella
Vice President and
Co-Portfolio Manager
/s/ Robert D. Sneeden
Robert D. Sneeden
Co-Portfolio Manager
September 28, 1998
================================================================================
Effective July 1998, Robert D. Sneeden became co-portfolio manager of
MuniHoldings Florida Insured Fund. Mr. Sneeden has been employed by Merrill
Lynch Asset Management, L.P. (an affiliate of the Fund's investment adviser)
since 1994 as Portfolio Manager. Prior thereto, he was a vice president at
Lehman Brothers from 1990 to 1994.
================================================================================
2 & 3
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida--92.3% AAA Aaa $ 1,500 Brevard County, Florida, School Board, COP, Series B, Refunding, 5.50%
due 7/01/2021 (c) $ 1,574
-----------------------------------------------------------------------------------------------------------------
Broward County, Florida, HFA, M/F Housing Revenue Bonds (Heron Pointe
Apartments Project), AMT, Series A (d):
AAA Aaa 800 5.65% due 11/01/2022 829
AAA Aaa 1,250 5.70% due 11/01/2029 1,296
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,650 Broward County, Florida, Professional Sports Facilities, Tax Revenue
Bonds (Civic Arena Project), Series A, 5.625% due 9/01/2028 (b) 1,745
-----------------------------------------------------------------------------------------------------------------
NR* Aaa 9,000 Clay County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County), AMT,
5.45% due 4/01/2031 (e) 9,086
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Cocoa, Florida, Water and Sewer Revenue Improvement Bonds, 5.75% due
10/01/2017 (i) 2,710
-----------------------------------------------------------------------------------------------------------------
NR* NR* 4,440 Collier County, Florida, IDA, IDR, Refunding (Southern States Utilities),
AMT, 6.50% due 10/01/2025 4,720
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Dade County, Florida, Aviation Revenue Bonds (Miami International Airport),
AMT, Series B, 5.125% due 10/01/2022 (d) 1,988
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 Dade County, Florida, Aviation Revenue Bonds, Series B, 5.60% due
10/01/2026 (b) 6,896
-----------------------------------------------------------------------------------------------------------------
Dade County, Florida, HFA, M/F Mortgage Revenue Bonds (Golden Lakes
Apartments Project), AMT, Series A:
NR* NR* 1,335 5.95% due 11/01/2027 1,388
NR* NR* 1,445 6.05% due 11/01/2039 1,502
-----------------------------------------------------------------------------------------------------------------
Dade County, Florida, HFA, M/F Mortgage Revenue Bonds (Siesta Pointe
Apartments), AMT, Series A (d):
AAA Aaa 1,225 5.65% due 9/01/2017 1,270
AAA Aaa 1,700 5.70% due 9/01/2022 1,762
AAA Aaa 1,890 5.75% due 9/01/2029 1,958
-----------------------------------------------------------------------------------------------------------------
Dade County, Florida, Water and Sewer System Revenue Bonds (i):
AAA Aaa 1,885 5.375% due 10/01/2016 1,986
AAA Aaa 11,930 5.50% due 10/01/2025 12,512
-----------------------------------------------------------------------------------------------------------------
NR* Aaa 2,300 Duval County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 5.30%
due 4/01/2031 (e) 2,322
-----------------------------------------------------------------------------------------------------------------
BBB+ A3 4,500 Escambia County, Florida, HFA, Health Facilities Revenue Bonds
(Baptist Hospital and Baptist Manor), 5.125% due 10/01/2019 4,434
-----------------------------------------------------------------------------------------------------------------
NR* Aaa 2,500 Escambia County, Florida, HFA, S/F Mortgage Revenue Bonds
(Multi-County Program), AMT, Series C, 5.80% due 10/01/2019 (e) 2,589
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,675 Florida HFA (Lago Village Apartments Projects), AMT, Series F,
5.90% due 12/01/2027 (c) 1,769
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 10,970 Florida HFA, RITR, Series 12, 7.77% due 7/01/2029 (b)(g) 12,079
-----------------------------------------------------------------------------------------------------------------
Florida Housing Finance Corporation Revenue Bonds (Homeowner
Mortgage), Series 1 (b):
AAA Aaa 2,120 5.10% due 1/01/2013 2,123
AAA Aaa 2,750 5.10% due 7/01/2013 2,754
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,210 Florida Ports Financing Commission Revenue Bonds (State Transportation
Trust Fund), AMT, 5.375% due 6/01/2027 (b) 2,267
-----------------------------------------------------------------------------------------------------------------
AA+ Aa2 1,000 Florida State Department of Transportation (Right of Way Acquisition and
Bridge), 5.50% due 7/01/2021 1,039
-----------------------------------------------------------------------------------------------------------------
Florida State Mid-Bay Bridge Authority Revenue Bonds, Series A (c):
AAA Aaa 3,400 5.45%** due 10/01/2022 993
NR* Aaa 5,000 5.45%** due 10/01/2023 1,380
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,435 Florida State Turnpike Authority Revenue Bonds (Department of
Transportation), Series B, 5% due 7/01/2015 (b) 7,540
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Fort Myers, Florida, Improvement Revenue Refunding Bonds, Series A,
5% due 12/01/2022 (c) 1,492
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,700 Hillsborough County, Florida, Aviation Authority, Revenue Refunding
Bonds (Tampa International Airport), Series B, 5.125% due 10/01/2017 (c) 5,771
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Hillsborough County, Florida, Port District, Special Revenue Refunding
Bonds (Tampa Port Authority), AMT, 6% due 6/01/2020 (d) 3,252
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 11,015 Hillsborough County, Florida, School Board, COP, RITR, Series 31, 6.82%
due 7/01/2021 (b)(g) 11,924
-----------------------------------------------------------------------------------------------------------------
NR* Aaa 2,415 Homestead, Florida, Water and Wastewater Revenue Refunding Bonds, 5.25%
due 10/01/2027 (c) 2,470
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,660 Jacksonville, Florida, Capital Improvement Revenue Refunding Bonds
(Stadium Project), 4.75% due 10/01/2025 (c) 2,566
-----------------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Health Facilities Authority, Hospital Revenue
Bonds:
AAA Aaa 18,225 (Charity Obligation Group), Series A, 5.125% due 8/15/2027 (b) 18,232
NR* VMIG1+ 700 Refunding (Genesis Rehabilitation Hospital), VRDN, 3.70% due
5/01/2021 (a) 700
-----------------------------------------------------------------------------------------------------------------
AA- A1 2,000 Lakeland, Florida, Electric and Water Revenue Bonds, 5.50%
due 10/01/2026 2,090
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,540 Lakeland, Florida, Hospital Systems, Revenue Refunding Bonds
(Lakeland Regional Medical Center), Series A, 5% due 11/15/2022 (b) 5,471
-----------------------------------------------------------------------------------------------------------------
Leon County, Florida, School Board, COP (Master Lease Program) (b):
AAA Aaa 2,460 5.125% due 7/01/2017 2,502
AAA Aaa 1,000 5.125% due 7/01/2022 1,002
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Manatee County, Florida, School Board, COP, 6.125% due
7/01/2006 (b)(f)(g) 1,150
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,665 Martin County, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Martin Memorial Medical Center Project), Series A,
5.375% due 11/15/2024 (b) 3,797
-----------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 300 Martin County, Florida, PCR, Refunding (Florida Power and Light
Company Project), VRDN, 3.70% due 9/01/2024 (a) 300
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Miami-Dade County, Florida, Public Facilities Revenue Bonds
(Jackson Memorial Hospital), 5% due 6/01/2018 (d) 995
-----------------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Special Obligation Revenue Bonds,
Series B (b):
AAA Aaa 15,000 5.66%** due 10/01/2033 2,297
AAA Aaa 10,885 5.66%** due 10/01/2034 1,576
AAA Aaa 16,340 5.61%** due 10/01/2035 2,237
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio To simplify the listings of MuniHoldings Florida Insured
abbreviations Fund's portfolio holdings in the Schedule of Investments, we
have abbreviated the names of some of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Florida AAA Aaa $ 4,000 North Broward, Florida, Hospital District Revenue Refunding and
(concluded) Improvement Bonds, 5.375% due 1/15/2024 (b) $ 4,136
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,340 Okaloosa County, Florida, Gas District Revenue Bonds (Gas Systems),
Series A, 5.625% due 10/01/2023 (b) 3,577
-----------------------------------------------------------------------------------------------------------------
AAA NR* 1,000 Orange County, Florida, HFA, M/F Housing Revenue Bonds (Metro Place
Apartments), AMT, Series A, 5.35% due 10/01/2023 (h) 1,012
-----------------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Orange County, Florida, School Board, COP, Refunding, Series A,
5.375% due 8/01/2022 (b) 10,353
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Orange County, Florida, Tourist Development Tax Revenue Refunding Bonds,
5.125% due 10/01/2021 (b) 5,037
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,250 Orlando and Orange County Expressway Authority, Florida, Expressway
Revenue Refunding Bonds (Junior Lien), 5% due 7/01/2021 (i) 1,243
-----------------------------------------------------------------------------------------------------------------
NR* Aaa 1,500 Pinellas County, Florida, HFA, S/F Housing Revenue Bonds (Multi-County
Program), Series A-1, AMT, 5.30% due 9/01/2030 (e) 1,514
-----------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 1,400 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding
Bonds (Pooled Hospital Loan Program), DATES, 3.65% due 12/01/2015 (a) 1,400
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Pinellas County, Florida, Sewer Revenue Refunding Bonds, 5% due
10/01/2024 (i) 2,983
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,095 Saint Johns' County, Florida, IDA, IDR (Professional Golf Hall of Fame
Project), 5.875% due 9/01/2023 (b) 7,645
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 South Miami, Florida, Health Facilities Authority, Hospital Revenue
Refunding Bonds (Baptist Health Systems Obligation Group), 5.50%
due 10/01/2020 (b) 2,866
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Saint Petersburg, Florida, Excise Tax Revenue Refunding Bonds, 5.15%
due 10/01/2013 (i) 10,249
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Tampa, Florida, Sports Authority Revenue Bonds (Stadium Project), 5.25%
due 1/01/2027 (b) 7,661
-----------------------------------------------------------------------------------------------------------------
Tampa, Florida, Utility Tax Improvement Bonds:
AAA Aaa 3,335 5.13%** due 10/01/2016 (c) 1,392
AAA Aaa 5,600 5% due 10/01/2019 (d) 5,604
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,250 Tampa-Hillsborough County, Florida, Expressway Authority, Revenue
Refunding Bonds, 5% due 7/01/2027 (c) 7,206
-----------------------------------------------------------------------------------------------------------------
Village Center Community Development District, Florida, Recreational
Revenue Refunding Bonds, Senior Series A (b):
AAA Aaa 10,025 5% due 11/01/2021 9,970
AAA Aaa 2,515 5.50% due 11/01/2013 2,748
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Winter Haven, Florida, Utility System Revenue Refunding and Improvement
Bonds, 4.75% due 10/01/2028 (b) 4,814
====================================================================================================================================
Illinois--1.5% AAA Aaa 4,000 Illinois Development Financing Authority, PCR, Refunding (Illinois Power
Company Project), Series A, 5.40% due 3/01/2028 (b) 4,074
====================================================================================================================================
New York--4.9% BBB+ Baa1 5,950 Metropolitan Transportation Authority of New York, Commuter Facilities
Revenue Bonds, Series A, 5.25% due 7/01/2028 5,986
-----------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 3,100 New York City, New York, Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, VRDN, Series G, 3.70% due 6/15/2024 (a)(i) 3,100
-----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 New York State Dormitory Authority Revenue Refunding Bonds (Library
Facilities), 5.25% due 7/01/2019 4,579
====================================================================================================================================
Texas--0.0% A1+ NR* 100 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 3.65%
due 12/01/2025 (a) 100
====================================================================================================================================
Total Investments (Cost-$264,979)-98.7% 273,584
Other Assets Less Liabilities-1.3% 3,682
-------
Net Assets-100.0% $277,266
========
====================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based
upon prevailing market rates. The interest rate shown is
the rate in effect at August 31, 1998.
(b) MBIA Insured.
(c) AMBAC Insured.
(d) FSA Insured.
(e) GNMA and FNMA Collateralized.
(f) Prerefunded.
(g) 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 August 31,
1998.
(h) FNMA Collateralized.
(i) FGIC Insured.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is
the effective yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service,
Inc.
Ratings of issues shown have not been audited by Deloitte &
Touche LLP.
See Notes to Financial Statements.
Quality Profile The quality ratings of securities in the Fund as of August
31, 1998 were as follows:
------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
------------------------------------------------------------
AAA/Aaa .......................................... 89.0%
AA/Aa ............................................ 1.1
A/A .............................................. 1.6
BBB/Baa .......................................... 2.2
NR (Not Rated) ................................... 2.8
Other+ ........................................... 2.0
------------------------------------------------------------
+Temporary investments in short-term municipal securities.
6 & 7
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of August 31, 1998
===============================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified
cost-$264,978,744) (Note 1a) ................... $273,583,871
Cash ........................................... 63,829
Interest receivable ............................ 4,017,259
Prepaid expenses and other assets .............. 12,233
------------
Total assets ................................... 277,677,192
------------
===============================================================================================
Liabilities: Payables:
Investment adviser (Note 2) .................. $ 110,848
Offering costs (Note 1e) ..................... 92,767
Dividends to shareholders
(Note 1f) .................................... 70,494 274,109
----------
Accrued expenses and other liabilities ......... 137,026
------------
Total liabilities .............................. 411,135
------------
===============================================================================================
Net Assets: Net assets ..................................... $277,266,057
============
===============================================================================================
Capital: Capital Shares (unlimited number of
shares of beneficial interest
authorized) (Note 4):
Preferred Shares, par value $.10 per
share (4,190 shares of AMPS* issued
and outstanding at $25,000 per share
liquidation preference) ...................... $104,750,000
Common Shares, par value $.10 per
share (10,764,871 shares issued and
outstanding) ................................. $ 1,076,487
Paid-in capital in excess of par ............... 159,135,551
Undistributed investment income-net ............ 748,414
Undistributed realized capital gains
on investments-net ............................. 2,950,478
Unrealized appreciation on investments-net ..... 8,605,127
----------
Total capital-Equivalent to $16.03
net asset value of Common Share (market
price-$14.8125) ................................ 172,516,057
------------
Total capital .................................. $277,266,057
============
===============================================================================================
</TABLE>
*Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period September 26, 1997+ to August 31, 1998
===============================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium
Income (Note 1d): and discount earned .......................... $ 12,883,025
===============================================================================================
Expenses: Investment advisory fees (Note 2) .............. $ 1,351,976
Commission fees (Note 4) ....................... 230,324
Professional fees .............................. 65,284
Accounting services (Note 2) ................... 53,097
Transfer agent fees ............................ 25,748
Trustees' fees and expenses .................... 22,963
Custodian fees ................................. 18,880
Organization expenses .......................... 15,000
Listing fees ................................... 14,911
Pricing fees ................................... 7,756
Printing and shareholder reports ............... 5,518
Other .......................................... 28,087
-----------
Total expenses before reimbursement ............ 1,839,544
Reimbursement of expenses (Note 2) ............. (508,580)
-----------
Total expenses after reimbursement ............. 1,330,964
------------
Investment income-net .......................... 11,552,061
------------
===============================================================================================
Realized & Realized gain on investments-net ............... 2,950,478
Unrealized Gain Unrealized appreciation on investments-net ..... 8,605,127
on Investments-- ------------
Net (Notes 1b, 1d Net Increase in Net Assets Resulting from
& 3); Operations ..................................... $ 23,107,666
============
===============================================================================================
</TABLE>
+Commencement of operations.
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
Sept. 26, 1997+
Increase (Decrease) in Net Assets: to Aug. 31, 1998
==================================================================================================================
<S> <C> <C>
Operations: Investment income-net ......................................................... $ 11,552,061
Realized gain on investments-net .............................................. 2,950,478
Unrealized appreciation on investments-net .................................... 8,605,127
-------------
Net increase in net assets resulting from operations .......................... 23,107,666
-------------
==================================================================================================================
Dividends to Investment income-net:
Shareholders Common Shares ............................................................... (7,624,987)
(Note 1f): Preferred Shares ............................................................ (3,178,660)
-------------
Net decrease in net assets resulting from dividends to shareholders ........... (10,803,647)
-------------
==================================================================================================================
Capital Share Net proceeds from issuance of Common Shares ................................... 161,250,000
Transactions Proceeds from issuance of Preferred Shares .................................... 104,750,000
(Notes 1e & 4): Value of shares issued to Common Shareholders in reinvestment of dividends .... 127,870
Offering costs resulting from the issuance of Common Shares ................... (340,658)
Offering and underwriting costs resulting from the issuance of Preferred Shares (925,179)
-------------
Net increase in net assets derived from capital share transactions ............ 264,862,033
-------------
==================================================================================================================
Net Assets: Total increase in net assets .................................................. 277,166,052
Beginning of period ........................................................... 100,005
-------------
End of period* ................................................................ $ 277,266,057
=============
==================================================================================================================
*Undistributed investment income-net ........................................... $ 748,414
=============
==================================================================================================================
</TABLE>
+Commencement of operations.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
Sept. 26, 1997+
Increase (Decrease) in Net Asset Value: to Aug. 31, 1998
====================================================================================================
<S> <C> <C>
Per Share Net asset value, beginning of period ............................ $ 15.00
Operating -------------
Performance: Investment income-net ........................................... 1.08
Realized and unrealized gain on investments-net ................. 1.08
-------------
Total from investment operations ................................ 2.16
-------------
Less dividends to Common Shareholders:
Investment income-net ......................................... (.71)
-------------
Capital charge resulting from issuance of Common Shares ......... (.03)
-------------
Effect of Preferred Share activity:++
Dividends to Preferred Shareholders:
Investment income-net ....................................... (.30)
Capital charge resulting from issuance of Preferred Shares .... (.09)
-------------
Total effect of Preferred Share activity ........................ (.39)
-------------
Net asset value, end of period .................................. $ 16.03
=============
Market price per share, end of period ........................... $ 14.8125
=============
====================================================================================================
Total Investment Based on market price per share ................................. 3.47%++
Return:** =============
Based on net asset value per share .............................. 11.97%++
=============
====================================================================================================
Ratios to Average Expenses, net of reimbursement .................................. .54%*
Net Assets:*** =============
Expenses ........................................................ .75%*
=============
Investment income-net ........................................... 4.70%*
=============
====================================================================================================
Supplemental Net assets, net of Preferred Shares, end of period (in thousands) $ 172,516
Data: =============
Preferred Shares outstanding, end of period (in thousands) ...... $ 104,750
=============
Portfolio turnover .............................................. 101.89%
=============
====================================================================================================
Leverage: Asset coverage per $1,000 ....................................... $ 2,647
=============
====================================================================================================
Dividends Series A-Investment income-net .................................. $ 753
Per Share on =============
Preferred Shares Series B-Investment income-net .................................. $ 764
Outstanding: =============
====================================================================================================
</TABLE>
* 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 loads.
*** Do not reflect the effect of dividends to Preferred
Shareholders.
+ Commencement of operations.
++ The Fund's Preferred Shares were issued on October 16, 1997.
++ Aggregate total investment return.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
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. Prior to commencement of operations on September 26, 1997
the Fund had no operations other than those relating to organizational matters
and the sale of 6,667 shares of Common Shares on September 18, 1997, to Fund
Asset Management, L.P. ("FAM") for $100,005. 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, which are traded on exchanges, are valued at
their last sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. 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
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt 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 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.
(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).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Offering expenses-Direct expenses relating to the public offering of the
Fund's Common and Preferred Shares were charged to capital at the time of
issuance of the shares.
(f) Dividends and distributions-Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with 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 0.55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares. For the period September 26,
1997 to August 31, 1998, FAM earned fees of $1,351,976, of which $508,580 was
voluntarily waived.
During the period September 26, 1997 to August 31, 1998, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), an affiliate of FAM, received underwriting fees
of $785,625 in connection with the issuance of the Fund's Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
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
period September 26, 1997 to August 31, 1998 were $503,222,979 and $247,337,066,
respectively.
Net realized gains (losses) for the period September 26, 1997 to August 31, 1998
and net unrealized gains as of August 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ................... $ 3,235,976 $ 8,605,127
Financial futures contracts ............. (285,498) --
----------- -----------
Total ................................... $ 2,950,478 $ 8,605,127
=========== ===========
- --------------------------------------------------------------------------------
As of August 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $8,605,127, all of which related to appreciated securities.
The aggregate cost of investments at August 31, 1998 for Federal income tax
purposes was $264,978,744.
4. Capital 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 capital without approval of
holders of Common Shares.
Common Shares
Shares issued and outstanding for the period September 26, 1997 to August 31,
1998, increased by 10,750,000 from shares sold and by 8,204 as a result of
dividend reinvestment. Prior to September 26, 1997 (commencement of operations),
the Fund issued 6,667 shares to FAM for $100,005.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are shares of Preferred Shares of the
Fund, with a par value of $.10 per share and a liquidation preference of $25,000
per share, 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
August 31, 1998 were as follows: Series A, 3.40% and Series B, 3.35%.
In connection with the offering of AMPS, the Board of Directors reclassified
4,190 shares of unissued capital stock as AMPS. Shares issued and outstanding
during the period September 26, 1997 to August 31, 1998 increased by 4,190 as a
result of the AMPS offering.
12 & 13
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the period September 26, 1997 to August 31, 1998, MLPF&S, an
affiliate of FAM, earned $218,138 as commissions.
5. Subsequent Event:
On September 8, 1998, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.069530 per share, payable on
September 29, 1998 to shareholders of record as of September 22, 1998.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
MuniHoldings Florida Insured Fund:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniHoldings Florida Insured Fund as
of August 31, 1998, the related statements of operations and changes in net
assets, and the financial highlights for the period from September 26, 1997
(commencement of operations) to August 31, 1998. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial highlights
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at August 31, 1998 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniHoldings Florida
Insured Fund as of August 31, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the period September 26,
1997 to August 31, 1998 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 6, 1998
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniHoldings Florida
Insured Fund during its taxable period ended August 31, 1998 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Additionally, there were no capital gains distributed by the Fund during the
period.
Please retain this information for your records.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, 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 Assets, Liabilities and Capital, which comprises
part of the financial information included in this report.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Richard R. West, Trustee
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents:
Common Shares:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Shares:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MFL
14 & 15
<PAGE>
This report, including the financial information herein, is transmitted to the
shareholders of MuniHoldings Florida Insured Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a representation of future
performance. The Fund has the ability to leverage its Common Shares 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 HOLDFL-8/98
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