MUNIHOLDINGS
FLORIDA INSURED
FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
August 31, 2000
<PAGE>
MuniHoldings Florida Insured Fund
The Benefits and Risks of Leveraging
MuniHoldings Florida Insured Fund utilizes leverage to seek to enhance the yield
and net asset value of its Common Shares. However, these objectives cannot be
achieved in all interest rate environments. To leverage, the Fund issues
Preferred Shares, which pay dividends at prevailing short-term interest rates,
and invests the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Shareholders in the form of dividends, and
the value of these portfolio holdings is reflected in the per share net asset
value of the Fund's Common Shares. However, in order to benefit Common
Shareholders, the yield curve must be positively sloped; that is, short-term
interest rates must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common Shareholders.
If either of these conditions change, then the risks of leveraging will begin to
outweigh the benefits.
To illustrate these concepts, assume a fund's Common Share capitalization of
$100 million and the issuance of Preferred Shares for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Shares based on the lower short-term interest rates. At the same time, the
fund's total portfolio of $150 million earns the income based on long-term
interest rates. Of course, increases in short-term interest rates would reduce
(and even eliminate) the dividends on the Common Shares.
In this case, the dividends paid to Preferred Shareholders are significantly
lower than the income earned on the fund's long-term investments, and therefore
the Common Shareholders are the beneficiaries of the incremental yield. However,
if short-term interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the Common Shares
will be reduced or eliminated completely. At the same time, the market value of
the fund's Common Shares (that is, its price as listed on the New York Stock
Exchange) may, as a result, decline. Furthermore, if long-term interest rates
rise, the Common Shares' net asset value will reflect the full decline in the
price of the portfolio's investments, since the value of the fund's Preferred
Shares does not fluctuate. In addition to the decline in net asset value, the
market value of the fund's Common Shares may also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
DEAR SHAREHOLDER
For the year ended August 31, 2000, the Common Shares of MuniHoldings Florida
Insured Fund earned $0.783 per share in income dividends, which included earned
and unpaid dividends of $0.063. This represents a net annualized yield of 5.65%,
based on a month-end per share net asset value of $13.85. During the same
period, the total investment return on the Fund's Common Shares was +7.03%,
based on a change in per share net asset value from $13.84 to $13.85, and
assuming reinvestment of $0.788 per share income dividends.
For the six months ended August 31, 2000, the total investment return on the
Fund's Common Shares was +13.92%, based on a change in per share net asset value
from $12.56 to $13.85, and assuming reinvestment of $0.362 per share income
dividends.
For the six months ended August 31, 2000, the Fund's Preferred Shares had an
average yield of 4.23% for Series A; 4.24% for Series B; 4.38% for Series C;
4.23% for Series D; and 4.28% for Series E.
The Municipal Market Environment
During the six months ended August 31, 2000, US domestic economic growth
remained robust. After growing at a 4.2% annual rate in 1999, US domestic
economic growth expanded at a 4.8% rate during the first quarter of 2000 and at
a 5.2% rate during the second quarter. However, despite these significant growth
rates and the lowest unemployment rates since 1970, few price measure indicators
have shown any meaningful signs of future price pressures at the consumer level.
With few signs of any economic slowdown, the Federal Reserve Board continued to
raise short-term interest rates in February, March and May 2000. The Federal
Reserve Board cited both the continued growth of US employment and the continued
strength of US equity markets as reasons for attempting to moderate US economic
growth before inflationary price pressures can occur.
However, since then fixed-income markets have largely ignored strong economic
fundamentals and concentrated upon very positive technical supply factors.
Declining bond issuance -- both current, and more importantly, expected future
issuance -- helped push bond yields lower into mid-April 2000. In late January
and early February 2000, the US Treasury announced its intention to reduce the
amounts to be auctioned in the quarterly Treasury note and bond auctions.
Furthermore, budgetary surpluses allowed the US Treasury to repurchase
outstanding, higher-couponed Treasury issues, primarily in the 15-year and
longer maturity sector. Both these actions resulted in significant reduction in
the outstanding supply of longer-dated maturity US Treasury debt. Domestic and
international investors soon began to accumulate what was expected to become a
scarce commodity and bond prices quickly rose.
By mid-April 2000, US Treasury bond yields had declined nearly 50 basis points
(0.50%) to 5.67%. During the remainder of the period, US Treasury bond prices
were volatile as strong economic reports and investors' concerns of additional
moves by the Federal Reserve Board occasionally overshadowed the positive
technical position of the long-term Treasury bond market. By mid-June, long-term
US Treasury bond yields rose to more than 6.00%.
Recently, a number of economic indicators have begun to suggest that the actions
taken by the Federal Reserve Board in 1999 and early 2000 have started to affect
US economic growth. Both new home sales and consumer spending have slowed,
suggesting that economic growth may subside into a 4% - 4.5% range by late 2000.
In our opinion, this range of growth was targeted by the Federal Reserve Board
as being sustainable, given current productivity measures, without endangering
the present benign inflationary environment.
By June, investor focus returned to the dwindling supply of long-term US
Treasury securities and bond prices generally rose for the remainder of the
period. The decline in long-term US Treasury bond yields resulted in an inverted
yield curve as short-term and intermediate-term interest rates did not fall
proportionately to long-term interest rates as the Federal Reserve Board was
expected to continue to raise short-term interest rates. The current inversion
has had as much to do with debt reduction and Treasury buybacks as with investor
expectations of slower economic growth.
Tax-exempt bond yields have also declined in recent months. The decline has
largely been in response to the rally in US Treasury securities, as well as a
continued positive technical supply environment. States such as California and
Maryland have announced that their large current and anticipated future budget
surpluses will permit the cancellation or postponement of expected bond
issuance. Additionally, some issuers have also initiated tenders to repurchase
existing debt, reducing the supply of tax-exempt bonds in the secondary market
as well. Given the decline in available long-term Treasury securities, some
investors who need longer maturity investment vehicles have begun to consider
long-term municipal bonds as potential substitutes. This has further
strengthened the overall positive technical position of the tax-exempt market.
During the last six months, long-term revenue bond yields have declined more
than 50 basis points to 5.72%, their lowest level since late August 1999, as
measured by the Bond Buyer Revenue Bond Index.
August 2000 was one of the few months in recent years in which the tax-exempt
bond market outperformed its taxable counterpart. This has largely been a
reflection of the continuing reduction in new municipal bond issuance and a
moderate increase in investor demand. During the last six months, approximately
$100 billion in long-term tax-exempt bonds was issued, a decline of almost 15%
compared to the same period in 1999. During the last three months, more than $50
billion in new long-term municipal bonds was underwritten, a decline of nearly
10% compared to the same three-month period in 1999.
Recently, investor demand has been stronger, particularly among individual
retail investors. Investors received more than $45 billion in coupon payments,
bond maturities and the proceeds from early redemptions during June and July.
Traditional institutional investors, such as mutual funds, have not played a
major role during recent months as fund flows, although slowing, remained
negative. However, non-traditional buyers, hedge funds and arbitrageurs have
noticeably increased their activity as may be expected when tax-exempt bond
yield ratios exceed 100% of their taxable counterparts as they have in recent
weeks. Property/casualty insurers, after being unprofitable for a number of
years, have also begun to return to the tax-exempt bond market.
However, tax-exempt bond yields have generally declined throughout most of this
year. Much of the resulting price appreciation has been triggered by the
significant improvement in the long-term US Treasury market. While the technical
position of the municipal bond market has been very positive this year, it was
also positive for most of 1999 when tax-exempt bond yields rose dramatically.
From that perspective, it may be too early to become overly positive about the
extent to which the municipal bond market can continue to improve. The US
Treasury bond market demonstrated on a number of occasions this year that its
positive technical backdrop can quickly be subordinated by resurgent domestic
economic growth.
Portfolio Strategy
At the end of January 2000, the US Treasury announced that it would reduce the
amount of Treasury notes and bonds to be auctioned. This helped the Florida
municipal bond market, as well as all fixed-income markets, to rally. We
continued our strategy of seeking to reduce the volatility of the Fund by
selling interest rate-sensitive issues, which had been negatively affecting the
Fund's total return. As a replacement, we structured premium coupon bonds (5.75%
or larger) in the new-issue Florida market. These bonds enhanced the Fund's
dividend and helped to lessen volatility. We kept the Fund fully invested in an
effort to enhance shareholder income. New-issue supply in Florida was down 12.5%
compared to the same time period a year ago.
Looking forward, we believe interest rates will trend sideways until there is a
substantial slowdown in the economy, although there may also be some volatility
because of the increase in energy prices. In our opinion, this inflation scare
could present an opportunity to extend the duration of the Fund in preparation
for a significant decline in yields when the economy slows enough for the
Federal Reserve Board to stop raising short-term interest rates.
2 & 3
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
In Conclusion
We appreciate your ongoing interest in MuniHoldings Florida Insured Fund, and we
look forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Robert A. DiMella
Robert A. DiMella
Vice President and Portfolio Manager
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Portfolio Manager
October 2, 2000
We are pleased to announce that Robert A. DiMella is responsible for the
day-to-day management of MuniHoldings Florida Insured Fund, Inc. Mr. DiMella has
been employed by Merrill Lynch Investment Managers, L.P. since 1993 and is Vice
President and Portfolio Manager.
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
STATE
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
<C> <C> <C> <S> <C>
Florida -- 95.3%
NR* Aaa $ 5,845 Brevard County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.80% due 3/01/2028 (e)(h) $ 6,122
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,440 Broward County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.70% due 2/01/2028 (e)(h) 2,542
----------------------------------------------------------------------------------------------------------------------------------
Charlotte County, Florida, Health Care Facilities Revenue Refunding Bonds, RIB (d)(g):
AAA Aaa 20,300 6% due 8/26/2027 20,691
AAA Aaa 3,000 (Bon Secours Health System), 7.407% due 8/26/2027 3,113
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 5,000 Charlotte County, Florida, Utility Revenue Refunding Bonds, 5% due 10/01/2023 (i) 4,675
----------------------------------------------------------------------------------------------------------------------------------
Clay County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT (e):
NR* Aaa 2,005 6.55% due 3/01/2028 (j) 2,099
NR* Aaa 2,620 (Multi-County Program), 6.375% due 10/01/2026 (h) 2,743
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,320 Clay County, Florida, School Board, COP (Master Lease Program), 5.75% due 7/01/2022 (b) 1,356
----------------------------------------------------------------------------------------------------------------------------------
NR* NR* 4,990 Collier County, Florida, IDA, IDR, Refunding (Southern States Utilities), AMT,
6.50% due 10/01/2025 4,827
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 9,350 Dade County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.70% due 4/01/2028 (e)(h) 9,862
----------------------------------------------------------------------------------------------------------------------------------
Dade County, Florida, Water and Sewer System Revenue Bonds (i):
AAA Aaa 22,500 5.25% due 10/01/2021 21,911
AAA Aaa 17,210 5.25% due 10/01/2026 16,594
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 10,510 Duval County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, 6.30% due 10/01/2029 (b)(e)(h) 10,946
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 13,445 Escambia County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds (Multi-County Program),
AMT, Series A, 6.375% due 10/01/2026 (b)(j) 14,097
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Escambia County, Florida, Health Facilities Authority, Health Facility Revenue Bonds (Florida
Health Care Facility Loan), 5.95% due 7/01/2020 (c) 10,452
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 Escambia County, Florida, Utilities Authority, Utility System Revenue Bonds,
5.25% due 1/01/2024 (i) 2,660
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,935 Florida HFA, Homeowner Mortgage Revenue Refunding Bonds, AMT, Series 2,
5.75% due 7/01/2014 (b) 4,014
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 16,360 Florida HFA, Revenue Refunding Bonds, AMT, RITR, Series 12, 6.97% due 7/01/2029 (b)(g) 16,806
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio Abbreviations
To simplify the listings of MuniHoldings Florida Insured Fund's portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
STATE
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
<C> <C> <C> <S> <C>
Florida
(continued)
AAA Aaa $ 3,770 Florida HFA, S/F Mortgage Revenue Refunding Bonds, AMT, Series A,
6.65% due 1/01/2024 (e)(h) $ 3,966
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,055 Florida Housing Finance Corporation, Housing Revenue Bonds (Waverly Apartments), AMT,
Series C-1, 6.30% due 7/01/2030 (d) 2,117
----------------------------------------------------------------------------------------------------------------------------------
Florida Municipal Loan Council Revenue Bonds (b):
AAA Aaa 2,365 5% due 4/01/2029 2,186
AAA Aaa 1,250 Series B, 5.75% due 11/01/2013 1,331
AAA Aaa 1,320 Series B, 5.75% due 11/01/2014 1,395
----------------------------------------------------------------------------------------------------------------------------------
Florida State Board of Education, Capital Outlay, GO, Public Education, Series C (i):
AAA Aaa 4,000 5.75% due 6/01/2023 4,113
AAA Aaa 1,500 5.75% due 6/01/2029 1,539
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 3,450 Florida State Board of Education, Capital Outlay, GO, RIB, Series 190,
7.19% due 1/01/2015 (d)(g) 3,692
----------------------------------------------------------------------------------------------------------------------------------
Florida State Board of Education, GO, Public Education, Series B (b):
AAA Aaa 3,000 5.75% due 6/01/2015 3,088
AAA Aaa 9,000 5.75% due 6/01/2017 9,238
----------------------------------------------------------------------------------------------------------------------------------
Florida State Board of Education, Lottery Revenue Bonds, Series B (i):
AAA Aaa 11,885 6.25% due 7/01/2018 13,003
AAA Aaa 12,625 6.25% due 7/01/2019 13,792
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,165 Florida State Board of Regents, University Systems Improvement Revenue Bonds,
5.25% due 7/01/2022 (b) 7,010
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,505 Florida State Department of General Services, Division Facilities Management Revenue Bonds
(Florida Facilities Pool), Series A, 6% due 9/01/2025 (c) 3,708
----------------------------------------------------------------------------------------------------------------------------------
Florida State Turnpike Authority, Turnpike Revenue Bonds (Department of Transportation),
Series A (i):
AAA Aaa 11,250 5% due 7/01/2021 10,597
AAA Aaa 25,000 6.25% due 7/01/2029 27,130
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 27,000 Hillsborough County, Florida, School Board, COP, 6% due 7/01/2025 (b) 28,389
----------------------------------------------------------------------------------------------------------------------------------
Hillsborough County, Florida, School Board, COP, Refunding (Master Lease Program), Series A (b):
AAA Aaa 8,000 5.375% due 7/01/2021 7,915
AAA Aaa 5,000 5.25% due 7/01/2022 4,854
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Hillsborough County, Florida, School Board, COP, Revenue Refunding Bonds (Master Lease
Program), Series A, 5% due 7/01/2023 (b) 2,338
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,415 Homestead, Florida, Water and Wastewater Revenue Refunding Bonds, 5.25% due 10/01/2027 (c) 1,363
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Indian Trace, Community Development District, Florida, Water Management, Special Benefit
Assessment, 5% due 5/01/2027 (b) 9,275
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 2,415 Jacksonville, Florida, Electric Authority, Electric System Revenue Refunding Bonds, Series 3-A,
6% due 10/01/2030 (b) 2,491
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 22,075 Jacksonville, Florida, Health Facilities Authority, Hospital Revenue Refunding Bonds (Charity
Obligation Group), Series A, 5.125% due 8/15/2027 (b) 20,471
----------------------------------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Airport Revenue Bonds, AMT, Series A (i):
AAA Aaa 1,295 6.10% due 10/01/2018 1,347
AAA Aaa 6,375 6.25% due 10/01/2024 6,652
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,650 Jupiter Island, Florida, Utility System Revenue Bonds (South Martin Regional Utility),
5% due 10/01/2018 (b) 1,582
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,745 Lake County, Florida, School Board, COP, 5% due 7/01/2023 (b) 3,485
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 14,925 Lee County, Florida, Airport Revenue Bonds, AMT, Series A, 6% due 10/01/2029 (d) 15,651
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,170 Lee County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT, Series A-6,
6.45% due 3/01/2031 (e)(f)(h) 2,335
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,910 Lee County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT, Series A-2,
6.30% due 3/01/2029 (e)(f)(h) 2,989
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 3,015 Manatee County, Florida, HFA, S/F Mortgage Revenue Refunding Bonds, AMT, Sub-Series 1,
6.25% due 11/01/2028 (e) 3,185
----------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1@ 200 Martin County, Florida, PCR, Refunding (Florida Power & Light Company Project), VRDN,
4.25% due 7/15/2022 (a) 200
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,150 Miami Beach, Florida, Parking Revenue Bonds, 5.125% due 9/01/2022 (d) 4,918
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Miami Beach, Florida, Water and Sewer Revenue Bonds, 5.75% due 9/01/2025 (c) 10,315
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Miami -- Dade County, Florida, Aviation Revenue Bonds (Miami International Airport), AMT,
Series A, 6% due 10/01/2029 (i) 10,512
----------------------------------------------------------------------------------------------------------------------------------
Miami -- Dade County, Florida, Educational Facilities Authority Revenue Bonds, Series A (c):
AAA Aaa 17,425 6% due 4/01/2023 18,450
AAA Aaa 5,000 (University of Miami), 5.75% due 4/01/2029 5,136
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 18,780 Miami -- Dade County, Florida, Expressway Authority, Toll System Revenue Bonds,
6.375% due 7/01/2029 (i) 20,619
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 6,705 Miami -- Dade County, Florida, GO (Parks Program), 6% due 11/01/2024 (i) 7,093
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,320 Miami -- Dade County, Florida, HFA, M/F Mortgage Revenue Bonds (Marbrisa Apartments Project),
AMT, Series 2A, 6% due 8/01/2026 (d) 1,338
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,100 Miami -- Dade County, Florida, IDA, IDR (Airis Miami II LLC Project), AMT, 6% due 10/15/2019 (c) 5,328
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Miami -- Dade County, Florida, Professional Sports Franchise Facility Tax Revenue Refunding Bonds,
5% due 10/01/2023 (b) 2,338
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 16,225 Miami -- Dade County, Florida, Public Service Tax Revenue Bonds (UMSA Public Improvements),
5% due 10/01/2023 (d) 15,171
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Miami -- Dade County, Florida, Water and Sewer Revenue Bonds, Series A,
5% due 10/01/2029 (i) 9,237
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,750 North Springs, Florida, Improvement District, Water Management, GO, Refunding,
5% due 5/01/2019 (b) 1,668
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,950 Okeechobee, Florida, Utility Authority, Utility System Revenue Refunding Bonds, Capital
Improvements, 5% due 10/01/2019 (d) 2,810
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,155 Orange County, Florida, HFA, Homeowner Revenue Refunding Bonds, AMT, Series B-1,
6.20% due 9/01/2029 (e)(h) 1,194
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
STATE
S&P Moody's Face
Ratings Ratings Amount Issue Value
====================================================================================================================================
<C> <C> <C> <S> <C>
Florida
(concluded)
NR* Aaa $ 2,375 Orange County, Florida, HFA, M/F Housing Revenue Bonds, Series A, 6.40% due 1/01/2031 (b) $ 2,484
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 6,225 Orange County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
6.85% due 10/01/2027 (e)(h) 6,533
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Orange County, Florida, Health Facilities Authority, Hospital Revenue Bonds (Orlando Regional
Healthcare), Series A, 6.25% due 10/01/2018 (b) 5,548
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Orange County, Florida, School Board, COP, Refunding Bonds, Series A, 5.375% due 8/01/2022 (b) 9,817
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 27,745 Orange County, Florida, Tourist Development Tax Revenue Bonds, 5.75% due 10/01/2025 (c) 28,413
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 15,585 Orange County, Florida, Tourist Development Tax Revenue Refunding Bonds,
5.125% due 10/01/2021 (b) 14,935
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 19,400 Orlando and Orange County, Florida, Expressway Authority, Expressway Revenue Refunding
Bonds, Junior Lien, 5% due 7/01/2021 (i) 18,273
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 3,440 Osceola County, Florida, Sales Tax Revenue Bonds, 5% due 4/01/2024 (d) 3,210
----------------------------------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, GO (Liquid Acquisition Program), Series B (b):
AAA Aaa 3,730 5.75% due 8/01/2016 3,896
AAA Aaa 5,330 5.75% due 8/01/2018 5,530
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 2,150 Palm Beach County, Florida, HFA, S/F Homeowner Revenue Refunding Bonds, AMT, Series A-1,
6.05% due 10/01/2020 (b)(e)(h) 2,202
----------------------------------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, School Board, COP, Series A (i):
AAA Aaa 5,070 6% due 8/01/2023 5,365
AAA Aaa 11,000 6.25% due 8/01/2025 11,914
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 1,000 Pasco County, Florida, Solid Waste Disposal and Resource Recovery System Revenue Refunding
Bonds, AMT, 6% due 4/01/2010 (c) 1,081
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 5,920 Pinellas County, Florida, HFA, S/F Mortgage Revenue Bonds (Multi-County Program), AMT,
Series A, 6.70% due 2/01/2028 (e)(h) 6,166
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,535 Pinellas County, Florida, Sewer Revenue Refunding Bonds, 5% due 10/01/2024 (i) 2,364
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 7,000 Pompano Beach, Florida, Water and Sewer Revenue Bonds, 6% due 7/01/2020 (i) 7,344
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,585 Saint John's County, Florida, IDA, IDR (Golf Hall of Fame Project), 5.875% due 9/01/2023 (b) 6,785
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,750 Saint John's County, Florida, Sales Tax Revenue Refunding Bonds, 5% due 10/01/2019 (i) 3,573
----------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1@ 5,500 Saint Lucie County, Florida, PCR, Refunding (Florida Power and Light Company Project), VRDN,
4.30% due 1/01/2026 (a) 5,500
----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 4,055 Saint Lucie County, Florida, School Board, COP, 6.25% due 7/01/2024 (d) 4,390
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,250 Saint Lucie, Florida, West Services District, Utility Revenue Refunding Bonds, Senior Lien,
6% due 10/01/2022 (b) 3,451
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 27,295 Sunrise, Florida, Utility System Revenue Refunding Bonds, 5% due 10/01/2028 (c) 25,623
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,000 Sunrise Lakes, Florida, Phase 4 Recreation District, Refunding Bonds, GO,
5.25% due 8/01/2024 (c) 6,768
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 26,585 Tampa Bay, Florida, Water Utility System Revenue Bonds, 6% due 10/01/2024 (i) 28,128
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 18,850 Tampa, Florida, Sports Authority Revenue Bonds (Local Option Sales Tax -- Stadium Project),
5.25% due 1/01/2027 (b) 18,172
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Tampa, Florida, Sports Authority Revenue Bonds, Sales Tax Payments (Stadium Project),
5.25% due 1/01/2027 (b) 7,230
----------------------------------------------------------------------------------------------------------------------------------
AAA NR* 5,600 Tampa, Florida, Utility Tax Improvement Revenue Bonds, 5% due 10/01/2019 (d) 5,335
----------------------------------------------------------------------------------------------------------------------------------
Tampa-Hillsborough County, Florida, Expressway Authority, Revenue Refunding Bonds (c):
AAA Aaa 2,500 5.125% due 7/01/2019 2,422
AAA Aaa 9,000 5% due 7/01/2027 8,346
----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,835 Taylor County, Florida, Sales Tax Revenue Bonds, 6% due 10/01/2025 (i) 4,042
====================================================================================================================================
Georgia -- 1.2%
AAA Aaa 9,000 Georgia Municipal Electric Authority, Power Revenue Refunding Bonds, Series EE,
6.40% due 1/01/2023 (c) 9,444
====================================================================================================================================
Puerto Rico -- 3.1%
Puerto Rico Commonwealth, GO, Public Improvement:
AAA Aaa 12,750 6% due 7/01/2029 (b) 13,466
A Baa1 3,000 6% due 7/01/2029 3,101
----------------------------------------------------------------------------------------------------------------------------------
A Baa1 8,125 Puerto Rico Commonwealth Highway and Transportation Authority, Transportation Revenue
Bonds, Series B, 6% due 7/01/2026 8,407
====================================================================================================================================
Total Investments (Cost -- $772,736) -- 99.6% 793,322
Other Assets Less Liabilities -- 0.4% 2,889
--------
Net Assets -- 100.0% $796,211
========
====================================================================================================================================
</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,
2000.
(b) MBIA Insured.
(c) AMBAC Insured.
(d) FSA Insured.
(e) GNMA Collateralized.
(f) FHLMC Collateralized.
(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, 2000.
(h) FNMA Collateralized.
(i) FGIC Insured.
(j) FHA Insured.
* Not Rated.
@ 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
(unaudited)
The quality ratings of securities in the Fund as of August 31, 2000 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
--------------------------------------------------------------------------------
AAA/Aaa ............................................................. 96.9%
A/A ................................................................. 1.4
NR (Not Rated) ...................................................... 0.6
Other+ .............................................................. 0.7
--------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
8 & 9
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of August 31, 2000
====================================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost -- $772,735,738) ................................ $793,321,650
Cash ................................................................................... 64,503
Receivables:
Interest ............................................................................. $ 12,792,691
Securities sold ...................................................................... 965,973 13,758,664
------------
Prepaid expenses and other assets ...................................................... 140,674
------------
Total assets ........................................................................... 807,285,491
------------
====================================================================================================================================
Liabilities: Payables:
Securities purchased ................................................................. 10,348,525
Dividends to shareholders ............................................................ 316,876
Investment adviser ................................................................... 258,791 10,924,192
------------
Accrued expenses and other liabilities ................................................. 150,453
------------
Total liabilities ...................................................................... 11,074,645
------------
====================================================================================================================================
Net Assets: Net assets ............................................................................. $796,210,846
============
====================================================================================================================================
Capital: Capital Shares (unlimited number of shares authorized):
Preferred Shares, par value $.10 per share (13,130 shares of AMPS* issued and
outstanding at $25,000 per share liquidation preference) ............................. $328,250,000
Common Shares, par value $.10 per share (33,780,979 shares issued and outstanding) ... $ 3,378,098
Paid-in capital in excess of par ....................................................... 516,205,033
Undistributed investment income -- net ................................................. 2,283,517
Accumulated realized capital losses on investments -- net .............................. (70,566,260)
Accumulated distributions in excess of realized capital gains on investments -- net .... (3,925,454)
Unrealized appreciation on investments -- net .......................................... 20,585,912
------------
Total -- Equivalent to $13.85 net asset value of Common Share (market price -- $11.6875) 467,960,846
------------
Total capital .......................................................................... $796,210,846
============
====================================================================================================================================
</TABLE>
* Auction Market Preferred Shares.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended August 31, 2000
====================================================================================================================================
<C> <S> <C> <C>
Investment Interest and amortization of premium and discount earned ............................ $ 30,953,280
Income:
====================================================================================================================================
Expenses: Investment advisory fees ............................................................ $ 2,981,242
Commission fees ..................................................................... 595,917
Reorganization expenses ............................................................. 467,867
Transfer agent fees ................................................................. 139,477
Accounting services ................................................................. 95,729
Custodian fees ...................................................................... 44,934
Professional fees ................................................................... 39,491
Printing and shareholder reports .................................................... 38,658
Listing fees ........................................................................ 24,328
Trustees' fees and expenses ......................................................... 21,014
Pricing fees ........................................................................ 18,612
Other ............................................................................... 31,000
------------
Total expenses before reimbursement ................................................. 4,498,269
Reimbursement of expenses ........................................................... (382,369)
------------
Total expenses after reimbursement .................................................. 4,115,900
------------
Investment income -- net ............................................................ 26,837,380
------------
====================================================================================================================================
Realized & Realized loss on investments -- net ................................................. (27,110,725)
Unrealized Change in unrealized appreciation/depreciation on investments -- net ................ 63,496,483
Gain (Loss) ------------
On Investments Net Increase in Net Assets Resulting from Operations ................................ $ 63,223,138
-- Net: ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended
August 31,
-----------------------------
Increase (Decrease) in Net Assets: 2000 1999
====================================================================================================================================
<C> <S> <C> <C>
Operations: Investment income -- net ........................................................ $ 26,837,380 $ 12,319,438
Realized loss on investments -- net ............................................. (27,110,725) (1,856,838)
Change in unrealized appreciation/depreciation on investments -- net ............ 63,496,483 (17,298,513)
------------ ------------
Net increase (decrease) in net assets resulting from operations ................. 63,223,138 (6,835,913)
------------ ------------
====================================================================================================================================
Dividends and Investment income -- net:
Distributions to Common Shares ................................................................. (16,840,776) (9,261,991)
Shareholders: Preferred Shares .............................................................. (9,464,264) (2,522,551)
Realized gain on investments -- net:
Common Shares ................................................................. -- (795,035)
Preferred Shares .............................................................. -- (298,605)
In excess of realized gain on investments -- net:
Common Shares ................................................................. -- (2,853,657)
Preferred Shares .............................................................. -- (1,071,797)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to
shareholders .................................................................. (26,305,040) (16,803,636)
------------ ------------
====================================================================================================================================
Capital Share Proceeds from issuance of Common Shares resulting from reorganization ........... 281,648,040 --
Transactions: Proceeds from issuance of Preferred Shares resulting from reorganization ........ 223,500,000 --
Value of shares issued to Common Shareholders in reinvestment of dividends
and distributions ............................................................. -- 518,200
------------ ------------
Net increase in net assets derived from capital share transactions .............. 505,148,040 518,200
------------ ------------
====================================================================================================================================
Net Assets: Total increase (decrease) in net assets ......................................... 542,066,138 (23,121,349)
Beginning of year ............................................................... 254,144,708 277,266,057
------------ ------------
End of year* .................................................................... $796,210,846 $254,144,708
============ ============
====================================================================================================================================
* Undistributed investment income -- net .......................................... $ 2,283,517 $ 1,283,310
============ ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended For the Period
August 31, Sept. 26,
---------------------- 1997+ to
Increase (Decrease) in Net Asset Value: 2000 1999 Aug. 31, 1998
====================================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ................................... $ 13.84 $ 16.03 $ 15.00
Operating --------- --------- ---------
Performance: Investment income -- net ............................................... .93 1.14 1.08
Realized and unrealized gain (loss) on investments -- net .............. .08 (1.77) 1.08
--------- --------- ---------
Total from investment operations ....................................... 1.01 (.63) 2.16
--------- --------- ---------
Less dividends and distributions to Common Shareholders:
Investment income -- net ............................................. (.79) (.86) (.71)
Realized gain on investments -- net .................................. -- (.07) --
In excess of realized gain on investments -- net ..................... -- (.27) --
--------- --------- ---------
Total dividends and distributions to Common Shareholders ............... (.79) (1.20) (.71)
--------- --------- ---------
Capital charge resulting from issuance of Common Shares ................ -- -- (.03)
--------- --------- ---------
Effect of Preferred Share activity:++
Dividends and distributions to Preferred Shareholders:
Investment income -- net ........................................... (.21) (.23) (.30)
Realized gain on investments -- net ................................ -- (.03) --
In excess of realized gain on investments -- net ................... -- (.10) --
Capital charge resulting from issuance of Preferred Shares ........... -- -- (.09)
--------- --------- ---------
Total effect of Preferred Share activity ............................... (.21) (.36) (.39)
--------- --------- ---------
Net asset value, end of period ......................................... $ 13.85 $ 13.84 $ 16.03
========= ========= =========
Market price per share, end of period .................................. $ 11.6875 $ 12.75 $ 14.8125
========= ========= =========
====================================================================================================================================
Total Investment Based on market price per share ........................................ (1.96%) (6.80%) 3.47%@
Return:** ========= ========= =========
Based on net asset value per share ..................................... 7.03% (6.51%) 11.97%@
========= ========= =========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding reorganization
Average Net Assets expenses*** .......................................................... 1.18% 1.18% .87%*
Of Common Shares: ========= ========= =========
Total expenses, excluding reorganization expenses*** ................... 1.30% 1.26% 1.20%*
========= ========= =========
Total expenses*** ...................................................... 1.45% 1.26% 1.20%*
========= ========= =========
Total investment income -- net*** ...................................... 8.65% 7.34% 7.51%*
========= ========= =========
Amount of dividends to Preferred Shareholders .......................... 3.05% 1.50% 2.07%*
========= ========= =========
Investment income -- net, to Common Shareholders ....................... 5.60% 5.84% 5.44%*
========= ========= =========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding reorganization
Total Average expenses ............................................................. .67% .73% .54%*
Net Assets:+++*** ========= ========= =========
Total expenses, excluding reorganization expenses ...................... .74% .77% .75%*
========= ========= =========
Total expenses ......................................................... .83% .77% .75%*
========= ========= =========
Total investment income -- net ......................................... 4.95% 4.51% 4.70%*
========= ========= =========
====================================================================================================================================
Ratios Based on Dividends to Preferred Shareholders .................................... 4.08% 2.39% 3.47%*
Average Net Assets ========= ========= =========
Of Preferred Shares:
====================================================================================================================================
Supplemental Net assets, net of Preferred Shares, end of period (in thousands) ...... $ 467,961 $ 149,395 $ 172,516
Data: ========= ========= =========
Preferred Shares outstanding, end of period (in thousands) ............. $ 328,250 $ 104,750 $ 104,750
========= ========= =========
Portfolio turnover ..................................................... 105.22% 120.70% 101.89%
========= ========= =========
====================================================================================================================================
Leverage: Asset coverage per $1,000 .............................................. $ 2,426 $ 2,426 $ 2,647
====================================================================================================================================
Dividends Series A -- Investment income -- net ................................... $ 985 $ 606 $ 753
Per Share on ========= ========= =========
Preferred Shares Series B -- Investment income -- net ................................... $ 984 $ 598 $ 764
Outstanding: ========= ========= =========
Series C -- Investment income -- net ................................... $ 610 $ -- $ --
========= ========= =========
Series D -- Investment income -- net ................................... $ 595 $ -- $ --
========= ========= =========
Series E -- Investment income -- net ................................... $ 585 $ -- $ --
========= ========= =========
====================================================================================================================================
</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
charges. The Fund's investment adviser voluntarily waived a portion of its
management fee. Without such waiver, the Fund's performance would have
been lower.
*** Do not reflect the effect of dividends to Preferred Shareholders.
+ Commencement of operations.
++ The Fund's Preferred Shares were issued on October 16, 1997 (Series A and
Series B) and February 7, 2000 (Series C, Series D and Series E).
+++ Includes Common and Preferred Shares average net assets.
@ Aggregate total investment return.
See Notes to Financial Statements.
12 & 13
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings Florida Insured Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. The Fund will
determine and make available for publication the net asset value of its Common
Shares on a weekly basis. The Fund's Common Shares are listed on the New York
Stock Exchange under the symbol MFL. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Trustees of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Trustees.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options -- The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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. Distribution of capital gains are recorded on the
ex-dividend dates.
(g) Reclassification -- Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $467,867 have been reclassified between paid-in capital
in excess of par and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Shares. For the year ended August 31,
2000, FAM earned fees of $2,981,242, of which $382,369 was 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
year ended August 31, 2000 were $567,989,042 and $547,252,038, respectively.
Net realized losses for the year ended August 31, 2000 and net unrealized gains
as of August 31, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
--------------------------------------------------------------------------------
Long-term investments ................... $(24,688,862) $ 20,585,912
Financial futures contracts ............. (2,421,863) --
------------ ------------
Total ................................... $(27,110,725) $ 20,585,912
============ ============
--------------------------------------------------------------------------------
As of August 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $19,421,266, of which $24,390,047 related to appreciated
securities and $4,968,781 related to depreciated securities. The aggregate cost
of investments at August 31, 2000 for Federal income tax purposes was
$773,900,384.
4. Capital Share Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares,
14 & 15
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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 year ended August 31, 2000, increased by
22,982,927 as a result of issuance of Common Shares from the reorganization.
Shares issued and outstanding for the year ended August 31, 1999, increased by
33,181 as a result of dividend reinvestment.
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, 2000 were as follows: Series A, 4.125%; Series B, 3.99%; Series C,
4.13%; Series D, 4.10%; and Series E, 3.99%.
Shares issued and outstanding during the year ended August 31, 2000, increased
by 8,940 as a result of issuance of Preferred Shares from the reorganization.
Shares issued and outstanding for the year ended August 31, 1999 remained
constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the year ended August 31, 2000, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $294,716 as commissions.
5. Acquisition of Other FAM-Managed Investment Companies:
On February 7, 2000, the Fund acquired all of the net assets of MuniHoldings
Florida Insured Fund II, MuniHoldings Florida Insured Fund III and MuniHoldings
Florida Insured Fund IV pursuant to a plan of reorganization. The acquisition
was accomplished by a tax-free exchange of the following capital shares:
--------------------------------------------------------------------------------
Common AMPS
Shares Exchanged Exchanged
--------------------------------------------------------------------------------
MuniHoldings Florida Insured
Fund II .................................. 8,840,687 3,440
MuniHoldings Florida Insured
Fund III ................................. 6,181,830 2,160
MuniHoldings Florida Insured
Fund IV .................................. 9,126,034 3,340
--------------------------------------------------------------------------------
In exchange for these shares, the Fund issued 22,982,927 common shares and 8,940
AMPS. As of that date, net assets of the acquired funds, including unrealized
depreciation and accumulated net realized capital losses, were as follows:
--------------------------------------------------------------------------------
Accumulated
Net Unrealized Net Realized
Assets Depreciation Capital Losses
--------------------------------------------------------------------------------
MuniHoldings Florida
Insured Fund II ........... $191,524,093 $ 15,673,718 $ 10,332,909
MuniHoldings Florida
Insured Fund III .......... $125,485,059 $ 7,454,639 $ 13,000,880
MuniHoldings Florida
Insured Fund IV ........... $188,138,887 $ 11,088,828 $ 20,121,746
--------------------------------------------------------------------------------
The aggregate net assets of the Fund immediately after the acquisition amounted
to $742,224,491.
6. Capital Loss Carryforward:
At August 31, 2000, the Fund had a net capital loss carryforward of
approximately $40,332,000 of which $8,424,000 expires in 2006, $24,254,000
expires in 2007 and $7,654,000 expires in 2008. This amount will be available to
offset like amounts of any future taxable gains.
7. Subsequent Event:
On September 7, 2000, the Fund's Board of Trustees declared an ordinary income
dividend to Common Shareholders in the amount of $.063382 per share, payable on
September 28, 2000 to shareholders of record as of September 18, 2000.
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, 2000, the related statements of operations for the year then ended
and changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the two-year period
then ended and for the period 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
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian and
broker. 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 audits provide 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, 2000, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
October 13, 2000
16 & 17
<PAGE>
MuniHoldings Florida Insured Fund, August 31, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniHoldings Florida
Insured Fund during its taxable year ended August 31, 2000 qualify as tax-exempt
interest dividends for Federal income tax purposes.
Additionally, there were no capital gains distributions paid by the Fund during
the year.
Please retain this information for your records.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of the
Fund's Common Shares, the Fund may at times pay out less than the entire amount
of net investment income earned in any particular month and may at times in any
particular month pay out such accumulated but undistributed income in addition
to net investment income earned in that month. As a result, the dividends paid
by the Fund for any particular month may be more or less than the amount of net
investment income earned by the Fund during such month. The Fund's current
accumulated but undistributed net investment income, if any, is disclosed in the
Statement of Assets, Liabilities and Capital, which comprises part of the
financial information included in this report.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Roscoe S. Suddarth, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Edward D. Zinbarg, Trustee
Vincent R. Giordano, Senior Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Robert D. Sneeden, Vice President
Donald C. Burke, Vice President and Treasurer
Jodi M. Pinedo, 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:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MFL
18 & 19
<PAGE>
MuniHoldings Florida Insured Fund seeks to provide shareholders with current
income exempt from Federal income tax. The Fund also seeks to offer shareholders
the opportunity to own shares, the value of which is exempt from Florida
intangible personal property tax. The Fund seeks to achieve its investment
objective by investing primarily in a portfolio of long-term, investment-grade
municipal obligations, the interest on which, in the opinion of bond counsel to
the issuer, is exempt from Federal income taxes and which enables shares of the
Fund to be exempt from Florida intangible personal property tax.
This report, including the financial information herein, is transmitted to
shareholders of MuniHoldings Florida Insured Fund for their information. It is
not a prospectus. Past performance results shown in this report should not be
considered a representation of future performance. The Fund has 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 -- 8/00
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