MUNIHOLDINGS
FLORIDA INSURED
FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
February 28, 1998
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 -- 2/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
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 do not fluctuate. In addition to the decline in net asset value,
the market value of the fund's Common Shares may also decline.
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.
MuniHoldings Florida Insured Fund, February 28, 1998
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report for
MuniHoldings Florida Insured Fund. In this and future reports to
shareholders, we will highlight the Fund's performance, describe the
recent investment environment and outline investment activities. The
Fund seeks to provide shareholders with current income exempt from
Federal income tax and the opportunity to own shares, the value of
which is exempt from Florida intangible personal property tax, by
investing in a portfolio of long-term, investment grade municipal
obligations.
Since inception (September 26, 1997) through February 28, 1998, the
Common Shares of MuniHoldings Florida Insured Fund earned $0.375 per
share income dividends, which included earned and unpaid dividends
of $0.067. This represents a net annualized yield of 5.63%, based on
a month-end per share net asset value of $15.61. Over the same
period, the total investment return on the Fund's Common Shares was
+6.13%, based on a change in per share net asset value from $15.00
to $15.61, and assuming reinvestment of $0.308 per share income
dividends.
Since inception (September 26, 1997) through February 28, 1998, the
Fund's Preferred Shares had an average yield of 2.70% for Series A
and 2.97% for Series B.
The Municipal Market Environment
During the six months ended February 28, 1998, bond yields declined
to recent historic lows. Prior to late October, the ongoing positive
combination of moderate economic growth and low inflation had
allowed interest rates to gradually move lower. More recently,
however, the decline in interest rates was driven more by the
continued turmoil in Asian equity markets than by fundamental
concerns. A significant "flight to quality" has benefited the US
Treasury bond market, particularly longer-maturity US Treasury
bonds, as foreign investors have sought safe haven in the relative
stability of US financial markets. Over the six months ended
February 28, 1998, US Treasury bond yields declined approximately 70
basis points (0.70%) to 5.92%. Long-term municipal revenue bonds, as
measured by the Bond Buyer Revenue Bond Index, declined over 30
basis points to end the February period at 5.36%. Tax-exempt bond
yields have not been at these levels since the mid-1970s.
Without the ability to benefit from the tax advantage inherent in
municipal bonds, foreign investors have not participated to any
significant extent in the tax-exempt market. Consequently, municipal
bond yields have not declined as dramatically as have taxable US
Treasury securities. The increase in new municipal bond issuance
over the past six months has also prevented the tax-exempt bond
market from more closely mirroring the yield declines exhibited by
its taxable counterpart. Over the last six months, over $125 billion
in new long-term municipal bonds were underwritten, an increase of
over 35% compared to the same six-month period one year ago. As
interest rates have continued to decline in recent months, new tax-
exempt bond issuance has remained strong. Over $60 billion in new
long-term municipal securities were issued during the last three
months, an increase of over 40% compared to the same three-month
period ended February 28, 1997. During the past month, over $20
billion in new long-term municipal securities were underwritten,
representing an increase of over 50% compared to the February 1997
level and the largest February issuance ever.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not
declining, interest rates in the United States. It is likely that
the recent correction will result in slower US domestic growth in
the coming months. This decline should be generated in part by
reduced US export growth. Going forward, Asian consumer demand for
US products is likely to decline in response to diminished Asian
economic growth. Perhaps more important, it is likely that, barring
a dramatic and unexpected resurgence in domestic growth and
inflation, the Federal Reserve Board will be unwilling to raise
interest rates until the full impact of the recent Asian market
turmoil can be established.
All of these factors suggest that over the near term, interest
rates, including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some relative pressure because of continued strong new-
issue supply. However, the recent pace of municipal bond issuance is
likely to be unsustainable. Continued increases in bond issuance
will require lower and lower tax-exempt bond yields to generate the
economic savings necessary for additional municipal bond
refinancings. Preliminary estimates of 1998 total municipal bond
issuance are presently in the $200 billion -- $225 billion range.
These estimates suggest that recent supply pressures are likely to
abate somewhat next year, or at least exert only minimal technical
pressure during 1998. Additionally, municipal bond investors
received approximately $30 billion in January and February coupon
payments, bond maturities and proceeds from early redemptions, which
should serve to intensify investor demand in the near future. With
tax-exempt bond yields at already attractive yield ratios relative
to US Treasury bonds (approximately 90% at the end of February
1998), any further pressure on the municipal market may well
represent an attractive investment opportunity.
Portfolio Strategy
Since the Fund's inception, our primary strategy has been to
maintain a fully invested position. During this period, we were
constructive on the interest rate outlook and focused on the
purchase of bonds with price appreciation potential while seeking to
provide an attractive level of tax-exempt income. This strategy
enabled the Fund to perform extremely well in the declining interest
rate environment recently witnessed in the tax-exempt fixed-income
market.
Looking ahead, we expect to remain constructive on interest rates. A
slower growth, low inflation economic environment should continue to
supply a positive backdrop for debt securities, and the relatively
tight technical supply/demand outlook for municipal bonds will
likely cushion any temporary down moves in tax-exempt bond prices.
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 Portfolio Manager
April 3, 1998
Portfolio Insurance
MuniHoldings Florida Insured Fund seeks to provide its shareholders
with the benefits of an insured municipal bond portfolio.
Previously, the Fund generally achieved this objective by limiting
at least 80% of portfolio investments to municipal bonds insured
under policies obtained by the issuer or another party, including
the Fund itself, and issued by insurance carriers with claims paying
ability ratings of AAA or its equivalent from at least two
nationally recognized rating agencies, such as Standard & Poor's
Ratings Services, Moody's Investors Service, Inc., or Fitch IBCA,
Inc. In order to increase the Fund's flexibility to obtain
appropriate investments, the Fund has modified its practice with
respect to the ratings criteria it applies to the carriers that
provide insurance for the municipal bonds in its portfolio.
Currently, the Fund may also invest in municipal bonds insured by,
or may itself purchase an insurance policy for all or a portion of
its municipal bond portfolio from, an insurance carrier with a
claims paying ability rating of AAA or its equivalent from at least
one of such nationally recognized rating agencies. There can be no
assurance that insurance of the kind described above will continue
to be available to the Fund, and the Fund has reserved its right to
modify its criteria for portfolio insurance, or discontinue its
policy of maintaining an insured portfolio if such insurance is no
longer available or if the cost of such insurance outweighs its
benefits to the Fund. Although we periodically review the financial
condition of each insurer, there can be no assurance that the
insurers will be able to honor their obligations under the
circumstances of any claim thereunder.
<TABLE>
<CAPTION>
MuniHoldings Florida Insured Fund, February 28, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Florida -- 95.0% AAA Aaa $4,000 Bay County, Florida, Water System Revenue Bonds,
5.125% due 9/01/2022 (b) $3,953
AAA Aaa 1,500 Brevard County, Florida, School Board, COP, Series
B, 5.50% due 7/01/2021 (c) 1,545
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 813
AAA Aaa 1,250 5.70% due 11/01/2029 1,271
A1+ NR* 3,075 Broward County, Florida, HFA, M/F Housing Revenue
Refunding Bonds, VRDN (Southern Pointe Project),
3.40% due 5/15/2027 (a)(h) 3,075
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) 1,717
NR* Aaa 9,000 Clay County, Florida, HFA, S/F Mortgage Revenue Bonds
(Multi-County), AMT, 5.45% due 4/01/2031 (e) 8,999
AAA Aaa 2,500 Cocoa, Florida, Water and Sewer Revenue Improvement
Bonds, 5.75% due 10/01/2017 (i) 2,676
NR* NR* 4,440 Collier County, Florida, IDA, IDR, Refunding
(Southern States Utilities), AMT, 6.50% due
10/01/2025 4,729
Dade County, Florida, Aviation Revenue Bonds (Miami
International Airport), AMT, Series B (d):
AAA Aaa 1,500 5.125% due 10/01/2017 1,488
AAA Aaa 8,450 5.125% due 10/01/2022 8,282
AAA Aaa 6,500 Dade County, Florida, Aviation Revenue Bonds, Series
B, 5.60% due 10/01/2026 (b) 6,774
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 1,359
NR* NR* 1,445 6.05% due 11/01/2039 1,470
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 1,244
AAA Aaa 1,700 5.70% due 9/01/2022 1,735
AAA Aaa 1,890 5.75% due 9/01/2029 1,929
AA- VMIG1+ 900 Dade County, Florida, IDA, Exempt Facilities Revenue
Refunding Bonds (Florida Power and Light Company),
VRDN, 3.65% due 6/01/2021 (a) 900
Dade County, Florida, Water and Sewer System Revenue
Bonds (i):
AAA Aaa 1,885 5.375% due 10/01/2016 1,941
AAA Aaa 11,930 5.50% due 10/01/2025 12,306
Duval County, Florida, HFA, S/F Mortgage Revenue
Bonds, AMT (e):
NR* Aaa 1,000 5.25% due 10/01/2018 995
NR* Aaa 3,300 5.30% due 4/01/2031 3,279
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) 2,576
AAA Aaa 1,675 Florida HFA (Lago Village Apartments Projects), AMT,
Series F, 5.90% due 12/01/2027 (c) 1,749
AAA Aaa 11,000 Florida HFA, RITR, AMT, Series 12, 7.72% due 7/01/2029
(b)(g) 11,770
Florida State Department of Transportation (Right of
Way Acquisition and Bridge):
AA+ Aa2 1,000 5.50% due 7/01/2021 1,029
AA+ Aa2 10,000 5.375% due 7/01/2026 10,135
Florida State Mid-Bay Bridge Authority Revenue Bonds,
Series A (c):
NR* Aaa 3,400 5.45%** due 10/01/2022 947
NR* Aaa 5,000 5.45%** due 10/01/2023 1,320
AAA Aaa 6,245 Fort Myers, Florida, Improvement Revenue Refunding
Bonds, Series A, 5% due 12/01/2022 (c) 6,114
A NR* 365 Halifax Hospital Medical Center, Florida, Health Care
Facilities Revenue Bonds (Halifax Management Systems),
Series A, 5% due 4/01/2012 360
AAA Aaa 5,700 Hillsborough County, Florida, Aviation Authority,
Revenue Refunding Bonds (Tampa International Airport),
Series B, 5.125% due 10/01/2017 (c) 5,683
AAA Aaa 3,000 Hillsborough County, Florida, Port District, Special
Revenue Refunding Bonds (Tampa Port Authority), AMT,
6% due 6/01/2020 (d) 3,238
NR* Aaa 2,415 Homestead, Florida, Water and Wastewater Revenue
Refunding Bonds, 5.25% due 10/01/2027 (c) 2,425
NR* Aaa 6,000 Indian Trace Community Development District, Florida,
Water Management (Special Benefit Assessment), 5% due
5/01/2027 (b) 5,865
Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Bonds:
AAA Aaa 12,225 (Charity Obligation Group), Series A, 5.125% due
8/15/2027 (b) 12,015
NR* VMIG1+ 200 Refunding (Genesis Rehabilitation Hospital), VRDN,
3.70% due 5/01/2021 (a) 200
AA- Aa 2,000 Lakeland, Florida, Electric and Water Revenue Bonds,
5.50% due 10/01/2026 2,065
AAA Aaa 12,500 Lakeland, Florida, Hospital Systems Revenue Refunding
Bonds (Lakeland Regional Medical Center), Series A,
5% due 11/15/2022 (b) 12,204
Leon County, Florida, School Board, COP (Master Lease
Program) (b):
AAA Aaa 2,460 5.125% due 7/01/2017 2,467
AAA Aaa 1,000 5.125% due 7/01/2022 986
AAA Aaa 1,000 Manatee County, Florida, School Board, COP, 6.125% due
7/01/2006 (b)(f) 1,140
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) 3,717
Miami-Dade County, Florida, Special Obligation Revenue
Bonds, Series B (b):
AAA Aaa 15,000 5.66%** due 10/01/2033 2,167
AAA Aaa 10,885 5.66%** due 10/01/2034 1,487
AAA Aaa 16,340 5.61%** due 10/01/2035 2,111
AAA Aaa 4,000 North Broward, Florida, Hospital District Revenue
Refunding and Improvement Bonds, 5.375% due 1/15/2024
(b) 4,054
AAA Aaa 3,340 Okaloosa County, Florida, Gas District Revenue Bonds
(Gas Systems), Series A, 5.625% due 10/01/2023 (b) 3,524
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) 994
NR* Aaa 10,000 Orange County, Florida, School Board, COP, Refunding,
Series A, 5.375% due 8/01/2022 (b) 10,155
AAA Aaa 7,000 Orange County, Florida, Tourist Development Tax
Revenue Refunding Bonds, 5.125% due 10/01/2021 (b) 6,972
Pinellas County, Florida, HFA, S/F Housing Revenue
Bonds (Multi-County Program) (e):
NR* Aaa 1,500 AMT, Series A-1, 5.30% due 9/01/2030 1,493
NR* Aaa 1,395 Series A-2, 5.05% due 3/01/2015 1,390
AAA Aaa 6,765 Port Saint Lucie, Florida, Utility Revenue Refunding
and Improvement Bonds, Series A, 5.125% due 9/01/2027
(b) 6,679
AAA Aaa 7,095 Saint John's County, Florida, IDA, IDR (Professional
Golf Hall of Fame Project), 5.875% due 9/01/2023 (b) 7,583
AAA Aaa 10,000 Saint Petersburg, Florida, Excise Tax Revenue
Refunding Bonds, 5.15% due 10/01/2013 (i) 10,143
AAA Aaa 4,550 South Broward Hospital District, Florida, Revenue
Refunding Bonds, 5.25% due 5 /01/2021 (b) 4, 550
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) 2,824
AAA Aaa 5,000 Tampa, Florida, Health Systems Revenue Bonds
(Catholic Health), Series A-1, 4.875% due 11/15/2023
(b) 4,771
Tampa, Florida, Utility Tax Improvement Bonds (c):
AAA Aaa 3,335 5.13%** due 10/01/2016 1,315
AAA Aaa 1,100 5.50%** due 10/01/2019 366
Tampa-Hillsborough County, Florida, Expressway
Authority, Revenue Refunding Bonds (c):
AAA Aaa 1,000 5.125% due 7/01/2017 1,003
AAA Aaa 10,000 5% due 7/01/2027 9,774
Village Center Community Development District,
Florida, Recreational Revenue Refunding Bonds, Series
A (b):
AAA Aaa 2,560 5.50% due 11/01/2012 2,693
AAA Aaa 2,815 5.50% due 11/01/2013 2,953
AAA Aaa 10,025 5% due 11/01/2021 9,806
Puerto Rico -- 5.4% AAA Aaa 15,000 Puerto Rico Commonwealth, Infrastructure Financing
Authority, Special Tax Revenue Bonds, Series A, 5%
due 7/01/2021 (c) 14,735
Utah -- 5.1% A1+ VMIG1+ 13,900 Emery County, Utah, PCR, Refunding (Pacificorp
Projects), VRDN, 3.65% due 11/01/2024 (a)(c) 13,900
----------
Total Investments (Cost -- $282,645) -- 105.5% 287,927
Liabilities in Excess of Other Assets -- (5.5%) (15,120)
----------
Net Assets -- 100.0% $272,807
==========
(a) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in effect
at February 28, 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 February 28, 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.
See Notes to Financial Statements.
</TABLE>
Quality Profile
The quality ratings of securities in the Fund as of February 28, 1998
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets*
AAA/Aaa 91.1%
AA/Aa 4.9
A/A 0.1
NR (Not Rated) 2.8
Other+ 6.6
+ Temporary investments in short-term municipal investments.
* Total may not equal 100%.
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 some of the securities according to
the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
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
<TABLE>
<CAPTION>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of February 28, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $282,645,193) (Note 1a) $287,927,474
Cash 76,819
Interest receivable 4,080,327
Deferred organization expenses (Note 1e) 13,449
------------
Total assets 292,098,069
------------
Liabilities: Payables:
Securities purchased $18,929,145
Investment adviser (Note 2) 87,485
Dividends to shareholders (Note 1f) 32,137 19,048,767
------------
Accrued expenses and other liabilities 241,939
------------
Total liabilities 19,290,706
------------
Net Assets: Net assets $272,807,363
============
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 (10,762,707 shares issued and
outstanding) $1,076,271
Paid-in capital in excess of par 159,102,204
Undistributed investment income -- net 774,593
Undistributed realized capital gains on investments -- net 1,822,014
Unrealized appreciation on investments -- net 5,282,281
------------
Total -- Equivalent to $15.61 net asset value per Common Share (market
price -- $15.8125) 168,057,363
------------
Total capital $272,807,363
============
* Auction Market Preferred Shares.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period September 26, 1997+ to February 28, 1998
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $5,696,192
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $600,071
Commission fees (Note 4) 96,559
Accounting services (Note 2) 21,117
Professional fees 19,526
Trustees' fees and expenses 9,381
Transfer agent fees 8,806
Listing fees 7,004
Custodian fees 5,126
Printing and shareholder reports 3,268
Pricing fees 2,949
Amortization of organization expenses (Note 1e) 1,338
Other 2,470
------------
Total expenses before reimbursement 777,615
Reimbursement of expenses (Note 2) (446,864)
------------
Total expenses after reimbursement 330,751
------------
Investment income -- net 5,365,441
------------
Realized & Realized gain on investments -- net 1,822,014
Unrealized Gain on Unrealized appreciation on investments -- net 5,282,281
Investments -- ------------
Net (Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $12,469,736
============
+ Commencement of operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the Period
Sept. 26, 1997+
Increase (Decrease) in Net Asset Value: to Feb. 28, 1998
<S> <C> <C>
Operations: Investment income -- net $5,365,441
Realized gain on investments -- net 1,822,014
Unrealized appreciation on investments -- net 5,282,281
------------
Net increase in net assets resulting from operations 12,469,736
------------
Dividends to Investment income -- net:
Shareholders Common Shares (3,312,102)
(Note 1f): Preferred Shares (1,278,746)
------------
Net decrease in net assets resulting from dividends to shareholders (4,590,848)
------------
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 94,307
Offering and underwriting 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 264,828,470
------------
Net Assets: Total increase in net assets 272,707,358
Beginning of period 100,005
------------
End of period* $272,807,363
============
* Undistributed investment income -- net $774,593
============
+ Commencement of operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
Sept. 26, 1997+
to Feb. 28, 1998
Increase (Decrease) in Net Asset Value:
<S> <C> <C>
Per Share Net asset value, beginning of period $15.00
Operating ------------
Performance: Investment income -- net .46
Realized and unrealized gain on investments -- net .66
------------
Total from investment operations 1.12
------------
Less dividends to Common Shareholders:
Investment income -- net (.31)
------------
Capital charge resulting from issuance of Common Shares (.03)
------------
Effect of Preferred Share activity:++
Dividends to Preferred Shareholders:
Investment income -- net (.08)
------------
Capital charge resulting from issuance of Preferred Shares (.09)
------------
Total effect of Preferred Share activity (.17)
------------
Net asset value, end of period $15.61
============
Market price per share, end of period $15.8125
============
Total Investment Based on market price per share 7.51%++++
Return:** ============
Based on net asset value per share 6.13%++++
============
Ratios to Average Expenses, net of reimbursement .30%*
Net Assets:*** ============
Expenses .71%*
============
Investment income -- net 4.92%*
============
Supplemental Net assets, net of Preferred Shares, end of period (in thousands) $168,057
Data: ============
Preferred Shares outstanding, end of period (in thousands) $104,750
============
Portfolio turnover 57.71%
============
Leverage: Asset coverage per $1,000 $2,604
============
Dividends Series A -- Investment income -- net $291
Per Share on ============
Preferred Shares Series B -- Investment income -- net $320
Outstanding: ============
* 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.
</TABLE>
MuniHoldings Florida Insured Fund, February 28, 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. 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.
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
their 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.
[bullet] 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.
[bullet] 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) Deferred organization and offering expenses -- Deferred
organization expenses are amortized on a straight-line basis over a
five-year period. 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.
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 any proceeds from
the sale of Preferred Shares. For the period September 26, 1997 to
February 28, 1998, FAM earned fees of $600,071, of which $446,864
was voluntarily waived.
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 February 28, 1998 were
$377,894,852 and $129,138,170, respectively.
Net realized gains for the period September 26, 1997 to February 28,
1998 and net unrealized gains as of February 28, 1998 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $1,822,014 $5,282,281
------------ ------------
Total $1,822,014 $5,282,281
============ ============
As of February 28, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $5,282,281, of which $5,655,266
related to appreciated securities and $372,985 related to
depreciated securities. The aggregate cost of investments at
February 28, 1998 for Federal income tax purposes was $282,645,193.
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 during the period September 26, 1997
to February 28, 1998 increased by 10,750,000 from shares sold and by
6,040 as a result of dividend reinvestment.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are shares of Preferred
Shares of the Fund 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, 1998 were as
follows: Series A, 3.40% and Series B, 3.20%.
As of February 28, 1998, there were 4,190 AMPS shares authorized,
issued and outstanding, with a liquidation preference of $25,000 per
share.
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 February 28, 1998, Merrill Lynch, Pierce,
Fenner & Smith Inc., an affiliate of FAM, earned $93,263 as
commissions.
5. Subsequent Event:
On March 9, 1998, the Fund's Board of Trustees declared an ordinary
income dividend to Common Shareholders in the amount of $.067416 per
share, payable on March 30, 1998 to shareholders of record as of
March 23, 1998.
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
