UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8349
Name of Fund: MuniHoldings Florida Insured Fund
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, MuniHoldings
Florida Insured Fund, 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 08/31/04
Date of reporting period: 09/01/03 - 08/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniHoldings
Florida Insured Fund
Annual Report
August 31, 2004
[LOGO] Merrill Lynch Investment Managers
MuniHoldings Florida Insured Fund
The Benefits and Risks of Leveraging
MuniHoldings Florida Insured Fund utilizes leverage to seek to enhance the yield
and net asset value of its Common Shares. However, these objectives cannot be
achieved in all interest rate environments. To leverage, the Fund issues
Preferred Shares, which pay dividends at prevailing short-term interest rates,
and invests the proceeds in long-term municipal bonds. The interest earned on
these investments, net of dividends to Preferred Shares, is paid to Common
Shareholders in the form of dividends, and the value of these portfolio holdings
is reflected in the per share net asset value of the Fund's Common Shares.
However, in order to benefit Common Shareholders, the yield curve must be
positively sloped; that is, short-term interest rates must be lower than
long-term interest rates. At the same time, a period of generally declining
interest rates will benefit Common Shareholders. If either of these conditions
change, then the risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Share capitalization of
$100 million and the issuance of Preferred Shares for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Shares based on the lower short-term interest rates. At the same time, the
fund's total portfolio of $150 million earns the income based on long-term
interest rates. Of course, increases in short-term interest rates would reduce
(and even eliminate) the dividends on the Common Shares.
In this case, the dividends paid to Preferred Shareholders are significantly
lower than the income earned on the fund's long-term investments, and therefore
the Common Shareholders are the beneficiaries of the incremental yield. However,
if short-term interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the Common Shares
will be reduced or eliminated completely. At the same time, the market value of
the fund's Common Shares (that is, its price as listed on the New York Stock
Exchange) may, as a result, decline. Furthermore, if long-term interest rates
rise, the Common Shares' net asset value will reflect the full decline in the
price of the portfolio's investments, since the value of the fund's Preferred
Shares does not fluctuate. In addition to the decline in net asset value, the
market value of the fund's Common Shares may also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities. As of August 31, 2004, the percentage of the Fund's
total net assets invested in inverse floaters was 6.31%, before the deduction of
Preferred Shares.
Swap Agreements
The Fund may also invest in swap agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on the
change in market value of a specified bond, basket of bonds, or index in return
for periodic payments based on a fixed or variable interest rate or the change
in market value of a different bond, basket of bonds or index. Swap agreements
may be used to obtain or reduce exposure to a bond or market without owning or
taking physical custody of securities. Swap agreements involve the risk that the
party with whom the Fund has entered into the swap will default on its
obligation to pay the Fund and the risk that the Fund will not be able to meet
its obligations to pay the other party to the agreement.
2 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
A Letter From the President
Dear Shareholder
In recent months, the Federal Reserve Board (the Fed) has taken center stage as
it shifts away from its long-accommodative monetary stance. The Fed raised the
Federal Funds rate 75 basis points (.75%) in three separate moves since June,
bringing the target short-term interest rate to 1.75% -- still low by historical
standards. The Fed has been deliberate in telegraphing its intention to take a
"measured" approach to interest rate increases in order to avoid upsetting the
economy or the financial markets, while still leaving room to move more
aggressively if inflation and economic growth accelerate more than anticipated.
The forward curve currently projects further increases in short-term interest
rates before year-end. In addition to the Fed policy change, the financial
markets recently have had to grapple with a tense geopolitical environment,
higher oil prices and the worry and anticipation that accompanies a presidential
election.
The transition to higher rates can cause concern among equity and fixed income
investors alike. For bond investors, rising interest rates means the value of
older issues declines because they bear the former lower interest rates. In
addition, increasing inflation erodes the purchasing power of fixed income
securities. However, because municipal bonds offer the advantage of tax-exempt
income, they continue to be an attractive alternative for many fixed income
investors. For the 12-month period ended August 31, 2004, municipal bonds posted
a return of +7.11%, as measured by the Lehman Brothers Municipal Bond Index.
As always, our investment professionals are closely monitoring the markets, the
economy and the overall environment in an effort to make well-informed decisions
for the portfolios they manage. Our goal is to provide shareholders with
competitive returns, while always keeping one eye on managing the unavoidable
risk inherent in investing.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
Throughout the year, we continued to focus on increasing the Fund's yield
and protecting net asset value in what has been a volatile interest rate
environment.
Describe the recent market environment relative to municipal bonds.
Over the past 12 months, long-term U.S. Treasury bond yields declined amid
considerable monthly volatility. For example, 30-year U.S. Treasury bond yields
fell to 4.65% by mid-March 2004 before rising above 5.50% by early June. Much of
the volatility was prompted by investor anticipation of the Federal Reserve
Board (the Fed) action. The Fed seemed poised to maintain interest rates at
their historic lows early in the period in order to avoid derailing the economic
recovery, but later appeared more apt to increase interest rates as job growth
finally picked up.
In three separate moves, the Fed raised the short-term interest rate target from
1% to 1.75%. In doing so, the Fed indicated a tendency toward a "measured"
tightening cycle, which helped support higher bond prices (and lower yields) for
the remainder of the period. By August 31, 2004, long-term U.S. Treasury bond
yields stood at 4.93%, a decline of almost 30 basis points (.30%) over the past
year. The 10-year U.S. Treasury note yield ended the period at 4.12%, a decrease
of 35 basis points.
Tax-exempt issues exhibited less volatility than their taxable counterparts. As
measured by the Bond Buyer Revenue Bond Index, yields on long-term revenue bonds
fell approximately 30 basis points over the past year. According to Municipal
Market Data, yields on AAA-rated issues maturing in 30 years declined more than
30 basis points to 4.70%, and yields on 10-year AAA-rated issues fell more than
40 basis points to 3.50%.
Declining supply trends allowed tax-exempt bond prices to register moderate
gains for the year and outperform the taxable market. More than $360 billion in
new long-term tax-exempt bonds was underwritten in the past 12 months, a decline
of approximately 6% compared to last year. Approximately $95 billion in
long-term tax-exempt bonds was issued in the last three months of the year, a
decline of nearly 15% versus the same period a year ago.
Describe conditions in the State of Florida.
The state maintained solid credit ratings of Aa2 from Moody's, AA+ from Standard
& Poor's and AA from Fitch -- all with a stable outlook. This was based on an
improving and diverse economy, solid finances, moderate debt and a proactive
government that responds to economic downturns more quickly than other states.
Florida's economy is bolstered by strong population growth, which is attributed
to its attractive physical environment and favorable business climate. The
population growth is one reason Florida's economy typically has performed better
than the national economy. Although the growth in population has put a strain on
services such as education, transportation and healthcare, it also has allowed
the state to recover quickly from the recent sub-par economic trends.
Currently, the state's revenues are moderately higher than projected and
expenditures remain under control due to strong fiscal oversight. The fiscal
year 2005 budget was pressured by only modest revenue increases, but was brought
into balance through tight expenditure controls, including outsourcing work and
requiring local governments to pick up costs historically incurred by the state.
To pay for these additional expenses, municipalities imposed increases to
property taxes and/or local sales taxes through voter initiatives.
Recently, several parts of the state were ravaged by hurricanes in what has
proved to be a brutal storm season. The state and its municipalities continue to
evaluate the damage, as it could adversely affect their upcoming budgets.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended August 31, 2004, the Common Shares of MuniHoldings
Florida Insured Fund had net annualized yields of 6.56% and 6.79%, based on a
year-end per share net asset value of $15.37 and a per share market price of
$14.84, respectively, and $1.008 per share income dividends. Over the same
period, the total investment return on the Fund's Common Shares was +9.43%,
based on a change in per share net asset value from $15.04 to $15.37, and
assuming reinvestment of $1.002 per share ordinary income dividends.
The Fund's total return, based on net asset value, lagged the +10.12% average
return of the Lipper Florida Municipal Debt Funds category for the 12-month
period. (Funds in this Lipper category limit their investment to those
securities exempt from taxation in the state of Florida.) The underper-
4 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
formance may be attributed to a few factors. First, the Fund's investment
parameters require it to invest primarily in insured Florida bonds, whereas
other funds in the category have the flexibility to invest in uninsured debt
obligations as well. Spreads between the two narrowed during the year, helping
the uninsured bonds to outperform insured bonds for the period. Second, several
of the Fund's larger single-family housing bonds were called during the period,
which had a negative impact on net asset value. Finally, several large-coupon
bonds in the portfolio were prerefunded in prior reporting periods, as the
issuers took the opportunity to refinance their debt in the low interest rate
environment. Essentially, this transformed several of our longer-dated bonds
into intermediate maturity bonds, a sector that underperformed during the
period. While we have been selling securities in the intermediate sector over
the past year, we continued to hold these particular bonds to take advantage of
their high acquisition yield. Importantly, the Fund continued to provide an
above-average yield throughout the year relative to its insured peers.
For the six-month period ended August 31, 2004, the total investment return on
the Fund's Common Shares was -1.04%, based on a change in per share net asset
value from $16.10 to $15.37, and assuming reinvestment of $0.516 per share
income dividends.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Shares (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Shares can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the fiscal year?
We made no significant changes to our investment strategy during the year.
Issuance of Florida municipal bonds declined approximately 26.5% in the past
year. This has made it more difficult to restructure the portfolio.
In general, we maintained our focus on increasing the income provided to
shareholders and muting the Fund's net asset value volatility. The intermediate
part of the yield curve, the 10-year - 15-year sector, continued to be the most
volatile. Therefore, we sought to reduce some of our holdings in this maturity
range and, with the proceeds from the sales, we looked to purchase
premium-coupon bonds in the 20-year - 30-year maturity area. Our observations
and research reveal that the longer end of the yield curve has held firm. As
such, this is where we have found the greatest value.
For the six-month period ended August 31, 2004, the Fund's Auction Market
Preferred Shares (AMPS) had average yields as follows: Series A, 1.04%; Series
B, 1.01%; Series C, .97%; Series D, 1.04%; and Series E, 1.01%. These attractive
funding levels, in combination with a steep tax-exempt yield curve, continued to
generate a significant income benefit to the Fund's Common Shareholders. While
the Fed has articulated its intention to bring short-term interest rates to a
neutral level, future interest rate increases are expected to be gradual and
should not have a material impact on the positive advantage leverage has had on
the yield of the Fund's Common Shares. Of course, should the spread between
short-term and long-term interest rates narrow, the benefits of leveraging will
decline and, as a result, reduce the yield on the Fund's Common Shares. At
period-end, the Fund's leverage amount, due to AMPS, was 38.55% of total net
assets, before the deduction of Preferred Shares. (For a more complete
explanation of the benefits and risks of leveraging, see page 2 of this report
to shareholders.)
How would you characterize the portfolio's position at the close of the period?
As long as the municipal yield curve remains steep, we will continue to sell the
intermediate part of the curve and use periods of volatility to structure
higher-coupon bonds whenever they are attractively priced.
We expect municipal bond issuance in Florida to remain somewhat subdued in the
next few months as the state surveys the impact of Hurricanes Charley, Frances
and Ivan, and waits out the remainder of the storm season. However, Florida
municipal bond supply could increase over the next year as municipalities issue
debt to help repair and rebuild their infrastructures. This may provide us with
some opportunity to structure bonds with desirable characteristics.
Robert D. Sneeden
Vice President and Portfolio Manager
September 22, 2004
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 5
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Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
====================================================================================================================================
Florida--155.0%
------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa $ 6,600 Alachua County, Florida, School Board, COP, 5.25%
due 7/01/2029 (b) $ 6,952
----------------------------------------------------------------------------------------------------------
AA NR* 4,530 Beacon Tradeport Community Development District, Florida,
Special Assessment Revenue Refunding Bonds (Commercial
Project), Series A, 5.625% due 5/01/2032 (k) 4,808
----------------------------------------------------------------------------------------------------------
Brevard County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT (d)(g):
NR* Aaa 1,940 6.80% due 3/01/2028 1,978
NR* Aaa 140 (Multi-County Program), 6.30% due 3/01/2020 150
----------------------------------------------------------------------------------------------------------
NR* Aaa 635 Broward County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT, 6.70% due 2/01/2028 (d)(g) 646
----------------------------------------------------------------------------------------------------------
Clay County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT (d):
NR* Aaa 1,060 6.55% due 3/01/2028 (i) 1,084
NR* Aaa 395 (Multi-County Program), AMT, 6.375% due 10/01/2026 (g) 403
----------------------------------------------------------------------------------------------------------
AAA Aaa 1,320 Clay County, Florida, School Board, COP (Master Lease
Program), 5.75% due 7/01/2022 (a) 1,481
----------------------------------------------------------------------------------------------------------
BBB NR* 5,000 Collier County, Florida, IDA, IDR, Refunding (Southern
States Utilities), AMT, 6.50% due 10/01/2025 5,262
----------------------------------------------------------------------------------------------------------
AAA NR* 7,510 Dade County, Florida, HFA, S/F Mortgage Revenue Bonds, AMT,
6.70% due 4/01/2028 (d)(g) 7,717
----------------------------------------------------------------------------------------------------------
Dade County, Florida, Water and Sewer System Revenue
Bonds (h):
AAA Aaa 20,575 5.25% due 10/01/2021 22,081
AAA Aaa 21,640 5.25% due 10/01/2026 22,303
----------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Deltona, Florida, Utility System Revenue Bonds, 5.125%
due 10/01/2027 (a) 5,193
----------------------------------------------------------------------------------------------------------
NR* Aaa 250 Duval County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT, 6.30% due 10/01/2029 (a)(d)(g) 251
----------------------------------------------------------------------------------------------------------
Escambia County, Florida, HFA, S/F Mortgage Revenue
Refunding Bonds (Multi-County Program), AMT, Series A
(a)(i):
NR* Aaa 975 6.30% due 10/01/2020 994
NR* Aaa 3,825 6.375% due 10/01/2026 3,902
----------------------------------------------------------------------------------------------------------
NR* Aaa 15,060 Escambia County, Florida, Health Facilities Authority,
Health Facility Revenue Bonds (Florida Health Care
Facility Loan), 5.95% due 7/01/2020 (b) 15,553
----------------------------------------------------------------------------------------------------------
AAA Aaa 5,280 Escambia County, Florida, Health Facilities Authority
Revenue Refunding Bonds (Ascension Health Credit), Series
A-1, 5.75% due 11/15/2009 (b)(j) 6,078
----------------------------------------------------------------------------------------------------------
AAA Aaa 1,540 Fishhawk Community Development District, Florida, Special
Assessment Revenue Refunding Bonds, 5.25% due 5/01/2018 (a) 1,706
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,655 Florida HFA, Homeowner Mortgage Revenue Refunding Bonds,
AMT, Series 2, 5.75% due 7/01/2014 (a) 2,801
----------------------------------------------------------------------------------------------------------
AAA Aaa 10,850 Florida HFA, Revenue Refunding Bonds, AMT, RITR, Series 12,
10.05% due 7/01/2029 (a)(f) 11,629
----------------------------------------------------------------------------------------------------------
AAA Aaa 50 Florida HFA, S/F Mortgage Revenue Refunding Bonds, AMT,
Series A, 6.65% due 1/01/2024 (d)(g) 51
----------------------------------------------------------------------------------------------------------
AAA Aaa 1,590 Florida Housing Finance Corporation, Homeowner Mortgage
Revenue Refunding Bonds, AMT, Series 4, 6.25%
due 7/01/2022 (c) 1,633
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,055 Florida Housing Finance Corporation, Housing Revenue Bonds
(Waverly Apartments), AMT, Series C-1, 6.30%
due 7/01/2030 (c) 2,189
----------------------------------------------------------------------------------------------------------
Florida Municipal Loan Council Revenue Bonds, Series B (a):
AAA Aaa 1,285 5.375% due 11/01/2025 1,367
AAA Aaa 4,150 5.375% due 11/01/2030 4,370
Portfolio Abbreviations
To simplify the listings of MuniHoldings Florida Insured Fund's portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
6 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
====================================================================================================================================
Florida (continued)
------------------------------------------------------------------------------------------------------------------------------------
Florida State Board of Education, Capital Outlay, GO,
Public Education:
AAA Aaa $12,000 Series B, 5.75% due 6/01/2005 (a)(j) $ 12,503
AAA Aaa 6,600 Series C, 5.75% due 6/01/2023 (h) 7,386
AAA Aaa 1,000 Series C, 5.75% due 6/01/2029 (h) 1,103
AAA Aaa 7,000 Series E, 5.625% due 6/01/2029 (c) 7,508
----------------------------------------------------------------------------------------------------------
AAA Aaa 6,900 Florida State Board of Education, Capital Outlay, GO,
Series A, 5.90% due 1/01/2005 (c)(j) 7,073
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,750 Florida State Board of Education, GO, Public Education,
Refunding, Series D, 5.75% due 6/01/2022 (c) 4,271
----------------------------------------------------------------------------------------------------------
AAA NR* 12,725 Florida State Board of Education, Lottery Revenue Bonds,
DRIVERS, Series 222, 11.196% due 7/01/2017 (f)(h) 16,927
----------------------------------------------------------------------------------------------------------
Florida State Board of Regents, Housing Revenue Bonds (h):
AAA Aaa 2,200 (University of Central Florida), 5.25% due 10/01/2026 2,302
AAA Aaa 1,080 (University of Florida), 6% due 7/01/2018 1,242
----------------------------------------------------------------------------------------------------------
AAA Aaa 7,165 Florida State Board of Regents, University Systems
Improvement Revenue Bonds, 5.25% due 7/01/2022 (a) 7,659
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,505 Florida State Department of General Services, Division
Facilities Management Revenue Bonds (Florida Facilities
Pool), Series A, 6% due 9/01/2025 (b) 3,997
----------------------------------------------------------------------------------------------------------
Florida State Governmental Utility Authority, Utility
Revenue Bonds (b):
AAA Aaa 2,350 (Citrus Utility System), 5.125% due 10/01/2033 2,425
AAA Aaa 2,900 (Lehigh Utility System), 5.125% due 10/01/2033 2,992
----------------------------------------------------------------------------------------------------------
AAA NR* 14,325 Florida State Turnpike Authority, Turnpike Revenue Bonds,
DRIVERS, Series 218, 10.945% due 7/01/2029 (f)(h) 18,682
----------------------------------------------------------------------------------------------------------
Florida State Turnpike Authority, Turnpike Revenue Bonds
(Department of Transportation), Series A:
AAA Aaa 3,590 5.50% due 7/01/2016 (a) 4,011
AA- Aa3 2,835 5.75% due 7/01/2019 3,207
----------------------------------------------------------------------------------------------------------
A A2 7,135 Highlands County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Adventist Health System), Series A,
6% due 11/15/2031 7,607
----------------------------------------------------------------------------------------------------------
NR* Baa1 4,945 Hillsborough County, Florida, IDA, Hospital Revenue
Refunding Bonds (Tampa General Hospital Project), Series B,
5.25% due 10/01/2034 4,884
----------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa
Electric Company Project), 6.25% due 12/01/2034 (a) 4,637
----------------------------------------------------------------------------------------------------------
Hillsborough County, Florida, School Board, COP (a):
AAA Aaa 33,400 6% due 7/01/2009 (j) 38,672
NR* Aaa 6,600 5.375% due 7/01/2026 6,874
----------------------------------------------------------------------------------------------------------
AAA Aaa 1,300 Indian River County, Florida, Water and Sewer Revenue
Refunding Bonds, Series A, 5.25% due 9/01/2018 (h) 1,427
----------------------------------------------------------------------------------------------------------
AAA Aaa 1,800 Jacksonville, Florida, Economic Development Commission,
Health Care Facilities Revenue Bonds (Mayo
Clinic--Jacksonville), Series A, 5.50% due 11/15/2036 (a) 1,913
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,415 Jacksonville, Florida, Electric Authority, Electric System
Revenue Refunding Bonds, Series 3-A, 6% due 4/01/2005 (a)(j) 2,503
----------------------------------------------------------------------------------------------------------
AAA Aaa 7,305 Jacksonville, Florida, Guaranteed Entitlement Revenue
Refunding and Improvement Bonds, 5.25% due 10/01/2032 (h) 7,624
----------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Airport Revenue
Bonds, AMT, Series A (h):
AAA Aaa 1,295 6.10% due 10/01/2018 1,373
AAA Aaa 8,385 6.25% due 10/01/2024 8,896
----------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Port Authority, Seaport Revenue
Bonds, AMT (a):
NR* Aaa 1,130 5.625% due 11/01/2010 (j) 1,278
NR* Aaa 1,870 5.625% due 11/01/2026 1,986
----------------------------------------------------------------------------------------------------------
Jacksonville, Florida, Sales Tax Revenue Bonds (b):
AAA Aaa 2,000 5.50% due 10/01/2016 2,248
AAA Aaa 3,800 5.50% due 10/01/2018 4,271
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
====================================================================================================================================
Florida (continued)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,500 Jacksonville, Florida, Water and Sewer Revenue Bonds (United
Water Florida Project), AMT, 6.35% due 8/01/2025 (b) $ 1,585
----------------------------------------------------------------------------------------------------------
Lee County, Florida, Airport Revenue Bonds (c):
NR* Aaa 9,963 RIB, AMT, Series 811-X, 10.36% due 10/01/2029 (f) 12,211
AAA Aaa 1,000 Series B, 5.75% due 10/01/2033 1,090
----------------------------------------------------------------------------------------------------------
Lee County, Florida, Capital Revenue Bonds (b):
AAA Aaa 6,525 5.25% due 10/01/2023 7,009
AAA Aaa 6,865 5.25% due 10/01/2024 7,350
----------------------------------------------------------------------------------------------------------
Lee County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT (d)(g):
NR* Aaa 210 (Multi-County Program), AMT, Series A-1, 7.20%
due 3/01/2033 214
NR* Aaa 1,145 Series A-6, 6.45% due 3/01/2031 (e) 1,168
----------------------------------------------------------------------------------------------------------
NR* Aaa 1,130 Lee County, Florida, HFA, S/F Mortgage Revenue Refunding
Bonds, AMT, Series A-2, 6.30% due 3/01/2029 (d)(e)(g) 1,149
----------------------------------------------------------------------------------------------------------
Leesburg, Florida, Capital Improvement Revenue Bonds (h):
AAA Aaa 1,605 5.25% due 10/01/2027 1,700
AAA Aaa 3,425 5.25% due 10/01/2034 3,603
----------------------------------------------------------------------------------------------------------
NR* Aaa 1,210 Manatee County, Florida, HFA, S/F Mortgage Revenue Refunding
Bonds, AMT, Sub-Series 1, 6.25% due 11/01/2028 (d) 1,219
----------------------------------------------------------------------------------------------------------
AAA Aaa 1,330 Marco Island, Florida, Utility System Revenue Bonds, 5.25%
due 10/01/2020 (a) 1,450
----------------------------------------------------------------------------------------------------------
NR* Aaa 5,990 Martin County, Florida, Utilities System Revenue Bonds,
5.125% due 10/01/2033 (b) 6,181
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Miami Beach, Florida, Redevelopment Agency, Tax Increment
Revenue Bonds, City Center Tax Allocation (Historic
Village), AMT, 5.875% due 12/01/2022 (a) 2,057
----------------------------------------------------------------------------------------------------------
Miami Beach, Florida, Stormwater Revenue Bonds (h):
AAA Aaa 1,630 5.75% due 9/01/2016 1,857
AAA Aaa 1,000 5.25% due 9/01/2020 1,071
AAA Aaa 4,400 5.25% due 9/01/2025 4,623
AAA Aaa 1,910 5.375% due 9/01/2030 2,009
----------------------------------------------------------------------------------------------------------
Miami Beach, Florida, Water and Sewer Revenue Bonds (b):
AAA Aaa 2,690 5.625% due 9/01/2018 3,044
AAA Aaa 10,600 5.75% due 9/01/2025 11,788
----------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Aviation Revenue Bonds, AMT,
Series A:
AAA Aaa 2,750 5.125% due 10/01/2035 (c) 2,775
AAA Aaa 400 (Miami International Airport), 5.45% due 10/01/2012
(h) 439
AAA Aaa 6,000 (Miami International Airport), 6% due 10/01/2024 (h) 6,721
AAA Aaa 10,000 (Miami International Airport), 6% due 10/01/2029 (h) 11,098
----------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Educational Facilities Authority
Revenue Bonds (University of Miami), Series A (b):
AAA Aaa 1,000 5.50% due 4/01/2019 1,117
AAA Aaa 19,425 6% due 4/01/2023 22,198
AAA Aaa 5,000 5.75% due 4/01/2029 5,512
----------------------------------------------------------------------------------------------------------
AAA Aaa 8,995 Miami-Dade County, Florida, Expressway Authority, Toll
System Revenue Bonds, Series B, 5.25% due 7/01/2027 (h) 9,524
----------------------------------------------------------------------------------------------------------
NR* Aaa 12,250 Miami-Dade County, Florida, Expressway Authority, Toll
System Revenue Refunding Bonds, 5.125% due 7/01/2025 (h) 12,758
----------------------------------------------------------------------------------------------------------
NR* Aaa 6,705 Miami-Dade County, Florida, GO (Parks Program), 6%
due 11/01/2024 (h) 7,621
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,185 Miami-Dade County, Florida, HFA, M/F Mortgage Revenue Bonds
(Marbrisa Apartments Project), AMT, Series 2A, 6%
due 8/01/2026 (c) 2,325
----------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, IDA, IDR (b):
AAA Aaa 5,100 (Airis Miami II LLC Project), AMT, 6% due 10/15/2019 5,685
AAA Aaa 3,280 (BAC Funding Corporation Project), Series A, 5.25%
due 10/01/2020 3,542
----------------------------------------------------------------------------------------------------------
Miami-Dade County, Florida, Solid Waste System Revenue
Bonds (c):
AAA Aaa 2,945 5.50% due 10/01/2015 3,319
AAA Aaa 3,105 5.50% due 10/01/2016 3,489
8 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
====================================================================================================================================
Florida (continued)
------------------------------------------------------------------------------------------------------------------------------------
Nassau County, Florida, Public Improvement Revenue Refunding
Bonds (a):
AAA Aaa $ 1,035 5.75% due 5/01/2016 $ 1,176
AAA Aaa 1,095 5.75% due 5/01/2017 1,241
AAA Aaa 1,155 5.75% due 5/01/2018 1,309
AAA Aaa 1,225 5.75% due 5/01/2019 1,388
----------------------------------------------------------------------------------------------------------
AAA Aaa 5,175 Nassau County, Florida, Water and Sewer System Revenue
Bonds, 5.125% due 9/01/2033 (a) 5,339
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,410 Ocoee, Florida, Water and Sewer System, Revenue Refunding
and Improvement Bonds, 5.125% due 10/01/2033 (b) 3,519
----------------------------------------------------------------------------------------------------------
NR* Aaa 85 Orange County, Florida, HFA, Homeowner Revenue Refunding
Bonds, AMT, Series B-1, 6.20% due 9/01/2029 (d)(g) 90
----------------------------------------------------------------------------------------------------------
NR* Aaa 2,375 Orange County, Florida, HFA, M/F Housing Revenue Bonds,
Series A, 6.40% due 1/01/2031 (a) 2,480
----------------------------------------------------------------------------------------------------------
AAA NR* 2,005 Orange County, Florida, HFA, S/F Mortgage Revenue Bonds,
AMT, 6.85% due 10/01/2027 (d)(g) 2,047
----------------------------------------------------------------------------------------------------------
Orange County Florida, Health Facilities Authority, Hospital
Revenue Bonds:
A A2 2,900 (Adventist Health System), 6.25% due 11/15/2024 3,137
A A2 9,220 (Orlando Regional Healthcare), 6% due 12/01/2029 9,747
AAA Aaa 5,000 (Orlando Regional Healthcare), Series A, 6.25%
due 10/01/2018 (a) 6,117
----------------------------------------------------------------------------------------------------------
AAA Aaa 5,630 Orange County, Florida, Sales Tax Revenue Refunding Bonds,
Series B, 5% due 1/01/2025 (h) 5,804
----------------------------------------------------------------------------------------------------------
NR* Aaa 1,300 Orange County, Florida, School Board COP, 5.50%
due 8/01/2025 (b) 1,386
----------------------------------------------------------------------------------------------------------
Orange County, Florida, Tourist Development Tax Revenue
Bonds (b):
AAA Aaa 5,710 5.375% due 10/01/2018 6,258
AAA Aaa 31,745 5.75% due 10/01/2025 34,932
AAA Aaa 2,000 5.50% due 10/01/2031 2,144
AAA Aaa 27,075 5.50% due 10/01/2032 28,910
----------------------------------------------------------------------------------------------------------
Orlando and Orange County, Florida, Expressway Authority
Revenue Bonds, Series B (b):
AAA Aaa 3,250 5% due 7/01/2030 3,315
AAA Aaa 28,700 5% due 7/01/2035 29,190
----------------------------------------------------------------------------------------------------------
Osceola County, Florida, Infrastructure Sales Surplus Tax
Revenue Bonds (b):
NR* Aaa 3,155 5.375% due 10/01/2018 3,477
NR* Aaa 7,680 5.25% due 10/01/2025 8,109
----------------------------------------------------------------------------------------------------------
Osceola County, Florida, Sales Tax Revenue Bonds (h):
NR* Aaa 2,065 5.625% due 6/01/2016 2,313
NR* Aaa 1,605 5.625% due 6/01/2017 1,791
NR* Aaa 1,075 5.625% due 6/01/2018 1,196
----------------------------------------------------------------------------------------------------------
NR* Aaa 4,240 Osceola County, Florida, School Board, COP, Series A, 5.25%
due 6/01/2027 (b) 4,462
----------------------------------------------------------------------------------------------------------
AAA Aaa 5,560 Osceola County, Florida, Tourist Development Tax Revenue
Bonds, Series A, 5.50% due 10/01/2027 (h) 5,992
----------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, GO (Liquid Acquisition Program),
Series B (a):
AAA Aaa 4,605 5.75% due 8/01/2016 5,204
AAA Aaa 5,330 5.75% due 8/01/2018 6,013
----------------------------------------------------------------------------------------------------------
AAA Aaa 5,500 Palm Beach County, Florida, Public Improvement Revenue Bonds
(Convention Center Project) 5.625% due 11/01/2011 (h)(j) 6,357
----------------------------------------------------------------------------------------------------------
AAA Aaa 6,115 Palm Beach County, Florida, School Board COP, Refunding,
Series B, 5.375% due 8/01/2017 (b) 6,719
----------------------------------------------------------------------------------------------------------
Palm Beach County, Florida, School Board COP, Series A:
AAA Aaa 5,070 6% due 8/01/2010 (h)(j) 5,952
AAA Aaa 13,205 6.25% due 8/01/2010 (h)(j) 15,681
AAA Aaa 4,235 5.50% due 8/01/2016 (b) 4,705
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Pasco County, Florida, Sales Tax Revenue Bonds (Half-Cent),
5% due 12/01/2033 (b) 2,038
----------------------------------------------------------------------------------------------------------
Pembroke Pines, Florida, Public Improvement Revenue Bonds,
Series A (b):
NR* Aaa 1,755 5% due 10/01/2029 1,795
NR* Aaa 2,070 5% due 10/01/2034 2,113
----------------------------------------------------------------------------------------------------------
AAA NR* 1,820 Pinellas County, Florida, HFA, S/F Mortgage Revenue Bonds
(Multi-County Program), AMT, Series A, 6.70%
due 2/01/2028 (d)(g) 1,863
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
====================================================================================================================================
Florida (concluded)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 9,885 Polk County, Florida, School Board COP, Master Lease, Series
A, 5.50% due 1/01/2025 (c) $ 10,629
----------------------------------------------------------------------------------------------------------
NR* Aaa 9,645 Pompano Beach, Florida, Water and Sewer Revenue Bonds, 6%
due 7/01/2020 (h) 10,602
----------------------------------------------------------------------------------------------------------
Port St. Lucie, Florida, Utility Revenue Bonds (a):
NR* Aaa 1,280 5.25% due 9/01/2026 1,359
NR* Aaa 1,345 5.25% due 9/01/2027 1,424
AAA Aaa 3,000 5.125% due 9/01/2031 3,081
----------------------------------------------------------------------------------------------------------
Saint John's County, Florida, IDA, IDR, Refunding
(Professional Golf Project) (a):
AAA Aaa 1,275 5.50% due 9/01/2015 1,422
AAA Aaa 1,345 5.50% due 9/01/2016 1,497
AAA Aaa 1,420 5.50% due 9/01/2017 1,575
AAA Aaa 1,500 5.50% due 9/01/2018 1,659
----------------------------------------------------------------------------------------------------------
Saint John's County, Florida, Sales Tax Revenue Bonds, GO
(b):
AAA Aaa 1,375 Series A, 5.25% due 10/01/2028 1,451
AAA Aaa 1,355 Series A, 5.25% due 10/01/2031 1,426
AAA Aaa 2,000 Series A, 5.25% due 10/01/2034 2,104
AAA Aaa 1,430 Series B, 5.25% due 10/01/2027 1,514
AAA Aaa 840 Series B, 5.25% due 10/01/2032 884
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,500 Saint John's County, Florida, Transportation Improvement
Revenue Bonds, 5.125% due 10/01/2032 (b) 3,613
----------------------------------------------------------------------------------------------------------
NR* Aaa 4,055 Saint Lucie County, Florida, School Board, COP, 6.25%
due 7/01/2010 (c)(j) 4,809
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,165 Saint Lucie County, Florida, School Board, COP (Master Lease
Program), Series A, 5% due 7/01/2028 (c) 2,209
----------------------------------------------------------------------------------------------------------
Saint Lucie County, Florida, School Board COP,
Refunding (c):
NR* Aaa 1,345 Series A, 5.50% due 7/01/2016 1,493
NR* Aaa 1,420 Series A, 5.50% due 7/01/2017 1,570
NR* Aaa 1,495 Series A, 5.50% due 7/01/2018 1,649
NR* Aaa 1,050 Series C, 5.50% due 7/01/2016 1,165
NR* Aaa 1,105 Series C, 5.50% due 7/01/2017 1,222
NR* Aaa 1,170 Series C, 5.50% due 7/01/2018 1,290
----------------------------------------------------------------------------------------------------------
Saint Lucie, Florida, West Services District, Utility
Revenue Bonds (a):
AAA Aaa 1,720 5.25% due 10/01/2034 1,816
AAA Aaa 2,700 5% due 10/01/2038 2,751
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,250 Saint Lucie, Florida, West Services District, Utility
Revenue Refunding Bonds, Senior Lien, 6% due 10/01/2022 (a) 3,756
----------------------------------------------------------------------------------------------------------
A A2 1,750 South Lake County, Florida, Hospital District Revenue Bonds
(South Lake Hospital Inc.), 5.80% due 10/01/2034 1,791
----------------------------------------------------------------------------------------------------------
Sunrise, Florida, Utility System Revenue Refunding Bonds (b):
AAA Aaa 2,250 5.20% due 10/01/2022 2,485
AAA Aaa 7,000 5.50% due 10/01/2018 8,089
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,430 Sunrise Lakes, Florida, Phase 4 Recreation District,
Refunding Bonds, GO, 5.25% due 8/01/2024 (b) 2,563
----------------------------------------------------------------------------------------------------------
Tallahassee, Florida, Lease Revenue Bonds (Florida State
University Project), Series A (a):
AAA Aaa 2,800 5.25% due 8/01/2023 2,958
AAA Aaa 1,000 5.375% due 8/01/2026 1,057
----------------------------------------------------------------------------------------------------------
AAA Aaa 14,750 Tampa, Florida, Sports Authority Revenue Bonds (Local Option
Sales Tax--Stadium Project), 5.25% due 1/01/2027 (a) 15,131
----------------------------------------------------------------------------------------------------------
AAA Aaa 30,335 Tampa Bay, Florida, Water Utility System Revenue Bonds, 6%
due 10/01/2011 (h)(j) 35,743
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,835 Taylor County, Florida, Sales Tax Revenue Bonds, 6%
due 10/01/2025 (h) 4,352
----------------------------------------------------------------------------------------------------------
Village Center Community Development District, Florida,
Recreational Revenue Bonds, Series A (a):
AAA Aaa 10,775 5.375% due 11/01/2034 11,517
AAA Aaa 1,750 5.125% due 11/01/2036 1,805
----------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Village Center Community Development District, Florida,
Utility Revenue Bonds, 5.25% due 10/01/2023 (a) 3,216
10 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Schedule of Investments (concluded) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
====================================================================================================================================
Puerto Rico--3.5%
------------------------------------------------------------------------------------------------------------------------------------
BBB Baa3 $ 3,720 Children's Trust Fund Project of Puerto Rico, Tobacco
Settlement Revenue Refunding Bonds, 5.375% due 5/15/2033 $ 3,366
----------------------------------------------------------------------------------------------------------
A- Baa1 3,000 Puerto Rico Commonwealth, GO, Public Improvement, 6%
due 7/01/2005 (j) 3,139
----------------------------------------------------------------------------------------------------------
A Baa1 10,125 Puerto Rico Commonwealth Highway and Transportation
Authority, Transportation Revenue Bonds, Series B, 6%
due 7/01/2005 (j) 10,614
----------------------------------------------------------------------------------------------------------
AAA Aaa 2,725 Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Revenue Bonds (University
Plaza Project), Series A, 5.625% due 7/01/2019 (a) 3,086
----------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$856,624)--158.5% 916,755
==========================================================================================================
Shares
Held Short-Term Securities
====================================================================================================================================
10,335 Merrill Lynch Institutional Tax-Exempt Fund (l) 10,335
----------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$10,335)--1.8% 10,335
==========================================================================================================
Total Investments (Cost--$866,959**)--160.3% 927,090
Other Assets Less Liabilities--2.5% 14,692
Preferred Shares, at Redemption Value--(62.8%) (363,273)
---------
Net Assets Applicable to Common Shares--100.0% $ 578,509
=========
* Not Rated.
** The cost and unrealized appreciation/depreciation of investments as of
August 31, 2004, as computed for federal income tax purposes were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ................................. $ 867,610
=========
Gross unrealized appreciation .................. $ 60,132
Gross unrealized depreciation .................. (652)
---------
Net unrealized appreciation .................... $ 59,480
=========
+ Ratings shown are unaudited.
(a) MBIA Insured.
(b) AMBAC Insured.
(c) FSA Insured.
(d) GNMA Collateralized.
(e) FHLMC Collateralized.
(f) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at August 31, 2004.
(g) FNMA Collateralized.
(h) FGIC Insured.
(i) FHA Insured.
(j) Prerefunded.
(k) Radian Insured.
(l) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 100 $231
--------------------------------------------------------------------------
Forward interest rate swaps outstanding as of August 31, 2004 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
--------------------------------------------------------------------------
Receive a price return equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate equal to 4.397%
Broker, J.P. Morgan Chase Bank
Expires October 2024 $ 43,500 $ (1,827)
Receive a price return equal to 7-Day
Bond Market Association Municipal
Swap Index Rate and pay a fixed
rate equal to 3.655%
Broker, J.P. Morgan Chase Bank
Expires November 2014 $ 74,400 (788)
--------------------------------------------------------------------------
Total $ (2,615)
========
See Notes to Financial Statements.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Net Assets
As of August 31, 2004
=============================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$856,623,504) .............................................. $ 916,755,049
Investments in affiliated securities, at value (identified
cost--$10,335,265) ............................................... 10,335,265
Receivables:
Interest ....................................................... $ 14,650,394
Securities sold ................................................ 2,842,551
Dividends from affiliates ...................................... 313 17,493,258
-------------
Prepaid expenses and other assets ................................. 127,873
-------------
Total assets ...................................................... 944,711,445
-------------
=============================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps ............ 2,615,286
Payables:
Dividends to Common Shareholders ............................... 154,422
Investment adviser ............................................. 26,046
Custodian bank ................................................. 24,837
Other affiliates ............................................... 8,081 213,386
-------------
Accrued expenses .................................................. 100,800
-------------
Total liabilities ................................................. 2,929,472
-------------
=============================================================================================================================
Preferred Shares
-----------------------------------------------------------------------------------------------------------------------------
Preferred Shares, at redemption value, par value $.10 per share
(2,095 Series A Shares, 3,495 Series B Shares, 3,440 Series C
Shares, 2,160 Series D Shares and 3,340 Series E Shares of AMPS*
authorized, issued and outstanding at $25,000 per share
liquidation preference) .......................................... 363,272,942
-------------
=============================================================================================================================
Net Assets Applicable to Common Shares
-----------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Shares ............................ $ 578,509,031
=============
=============================================================================================================================
Analysis of Net Assets Applicable to Common Shares
-----------------------------------------------------------------------------------------------------------------------------
Common Shares, par value $.10 per share (37,628,592 shares issued
and outstanding) ................................................. $ 3,762,859
Paid-in capital in excess of par .................................. 570,474,526
Undistributed investment income--net .............................. $ 10,048,191
Accumulated realized capital losses--net .......................... (63,292,804)
Unrealized appreciation--net ...................................... 57,516,259
-------------
Total accumulated earnings--net ................................... 4,271,646
-------------
Total--Equivalent to $15.37 net asset value of Common Share
(market price--$14.84) ........................................... $ 578,509,031
=============
* Auction Market Preferred Shares.
See Notes to Financial Statements.
12 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Statement of Operations
For the Year Ended August 31, 2004
=============================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------
Interest .......................................................... $ 48,015,613
Dividends from affiliates ......................................... 231,280
-------------
Total income ...................................................... 48,246,893
-------------
=============================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .......................................... $ 5,177,182
Commission fees ................................................... 925,693
Accounting services ............................................... 264,668
Transfer agent fees ............................................... 96,813
Professional fees ................................................. 65,558
Printing and shareholder reports .................................. 53,806
Custodian fees .................................................... 46,818
Trustees' fees and expenses ....................................... 35,415
Listing fees ...................................................... 29,112
Pricing fees ...................................................... 26,406
Other ............................................................. 67,209
-------------
Total expenses before waiver and reimbursement .................... 6,788,680
Waiver and reimbursement of expenses .............................. (431,184)
-------------
Total expenses after waiver and reimbursement ..................... 6,357,496
-------------
Investment income--net ............................................ 41,889,397
-------------
=============================================================================================================================
Realized & Unrealized Gain (Loss)--Net
-----------------------------------------------------------------------------------------------------------------------------
Realized loss on:
Investments--net ............................................... (1,672,784)
Forward interest rate swaps .................................... (5,935,714) (7,608,498)
Change in unrealized appreciation/depreciation on:
Investments--net ............................................... 22,175,012
Forward interest rate swaps .................................... (2,775,678) 19,399,334
-------------------------------
Total realized and unrealized gain--net ........................... 11,790,836
-------------
=============================================================================================================================
Dividends to Preferred Shareholders
-----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ (3,460,330)
-------------
Net Increase in Net Assets Resulting from Operations .............. $ 50,219,903
=============
See Notes to Financial Statements.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Year Ended
August 31,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
=============================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ $ 41,889,397 $ 43,285,182
Realized gain (loss)--net ......................................... (7,608,498) 7,751,089
Change in unrealized appreciation/depreciation--net ............... 19,399,334 (25,268,892)
Dividends and distributions to Preferred Shareholders ............. (3,460,330) (3,842,377)
-------------------------------
Net increase in net assets resulting from operations .............. 50,219,903 21,925,002
-------------------------------
=============================================================================================================================
Dividends to Common Shareholders
-----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................ (37,703,849) (35,935,305)
-------------------------------
Net decrease in net assets resulting from dividends to Common
Shareholders ..................................................... (37,703,849) (35,935,305)
-------------------------------
=============================================================================================================================
Net Assets Applicable to Common Shares
-----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Shares 12,516,054 (14,010,303)
Beginning of year ................................................. 565,992,977 580,003,280
-------------------------------
End of year* ...................................................... $ 578,509,031 $ 565,992,977
===============================
* Undistributed investment income--net ......................... $ 10,048,191 $ 9,324,544
===============================
See Notes to Financial Statements.
14 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Financial Highlights
The following per share data and ratios have been derived For the Year Ended
from information provided in the financial statements. August 31,
----------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001+ 2000+
=========================================================================================================================
Per Share Operating Performance
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year . $ 15.04 $ 15.41 $ 15.29 $ 13.85 $ 13.84
----------------------------------------------------------
Investment income--net ............. 1.11++ 1.15++ 1.14 1.02 .93
Realized and unrealized gain
(loss)--net ....................... .31 (.46) .06 1.42 .08
Dividends and distributions to
Preferred Shareholders:
Investment income--net .......... (.09) (.10) (.13) (.22) (.21)
Realized gain--net .............. -- -- --@ -- --
Capital write-off (charge) resulting
from issuance of Preferred Shares . -- -- -- --@ --
----------------------------------------------------------
Total from investment operations ... 1.33 .59 1.07 2.22 .80
----------------------------------------------------------
Less dividends and distributions to
Common Shareholders:
Investment income--net .......... (1.00) (.96) (.95) (.78) (.79)
Realized gain--net .............. -- -- --@ -- --
----------------------------------------------------------
Total dividends and distributions to
Common Shareholders ............... (1.00) (.96) (.95) (.78) (.79)
----------------------------------------------------------
Net asset value, end of year ....... $ 15.37 $ 15.04 $ 15.41 $ 15.29 $ 13.85
==========================================================
Market price per share, end of year $ 14.84 $ 14.08 $ 14.66 $ 14.04 $11.6875
==========================================================
=========================================================================================================================
Total Investment Return*
-------------------------------------------------------------------------------------------------------------------------
Based on market price per share .... 12.86% 2.51% 11.63% 27.82% (1.96%)
==========================================================
Based on net asset value per share . 9.43% 4.17% 7.75% 17.47% 7.03%
==========================================================
=========================================================================================================================
Ratios Based on Average Net Assets of Common Shares
-------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and
reimbursement and excluding
reorganization expenses** ......... 1.10% 1.10% 1.13% 1.14% 1.18%
==========================================================
Total expenses, excluding
reorganization expenses** ......... 1.17% 1.17% 1.20% 1.23% 1.30%
==========================================================
Total expenses** ................... 1.17% 1.17% 1.21% 1.26% 1.45%
==========================================================
Total investment income--net** ..... 7.23% 7.40% 7.71% 7.88% 8.65%
==========================================================
Amount of dividends to Preferred
Shareholders ...................... .60% .65% .96% 2.31% 3.05%
==========================================================
Investment income--net, to Common
Shareholders ...................... 6.63% 6.75% 6.75% 5.57% 5.60%
==========================================================
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
For the Year Ended
August 31,
The following per share data and ratios have been derived ------------------------------------------------------------
from information provided in the financial statements. 2004 2003 2002 2001+ 2000+
==============================================================================================================================
Ratios Based on Average Net Assets of Common & Preferred Shares**
------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and
reimbursement and excluding
reorganization expenses .............. .67% .68% .69% .68% .67%
============================================================
Total expenses, excluding
reorganization expenses .............. .72% .72% .73% .74% .74%
============================================================
Total expenses ........................ .72% .72% .73% .75% .83%
============================================================
Total investment income--net .......... 4.44% 4.57% 4.68% 4.71% 4.95%
============================================================
==============================================================================================================================
Ratios Based on Average Net Assets of Preferred Shares
------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Shareholders ... .95% 1.06% 1.49% 3.43% 4.08%
============================================================
==============================================================================================================================
Supplemental Data
------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Shares,
end of year (in thousands) ........... $578,509 $565,993 $580,003 $575,251 $467,961
============================================================
Preferred Shares outstanding, end of
year (in thousands) .................. $363,250 $363,250 $363,250 $363,250 $328,250
============================================================
Portfolio turnover .................... 21.20% 27.40% 13.89% 47.50% 105.22%
============================================================
==============================================================================================================================
Leverage
------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............. $ 2,593 $ 2,558 $ 2,597 $ 2,584 $ 2,426
============================================================
==============================================================================================================================
Dividends Per Share on Preferred Shares Outstanding
------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ...... $ 233 $ 252 $ 362 $ 885 $ 985
============================================================
Series B--Investment income--net ...... $ 237 $ 267 $ 375 $ 754 $ 984
============================================================
Series C--Investment income--net ...... $ 237 $ 252 $ 369 $ 889 $ 610
============================================================
Series D--Investment income--net ...... $ 243 $ 273 $ 368 $ 855 $ 595
============================================================
Series E--Investment income--net ...... $ 241 $ 276 $ 381 $ 850 $ 585
============================================================
* 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. If applicable, the Fund's Investment Adviser waived a portion of
its management fee. Without such waiver, the Fund's performance would have
been lower.
** Do not reflect the effect of dividends to Preferred Shareholders.
+ Certain prior years amounts have been reclassified to conform with current
year presentation.
++ Based on average shares outstanding.
@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
16 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
MuniHoldings Florida Insured Fund, (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund determines and makes available for publication the net
asset value of its Common Shares on a daily basis. The Fund's Common Shares are
listed on the New York Stock Exchange under the symbol MFL. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the last available bid price in the
over-the-counter market or on the basis of values as obtained by a pricing
service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Trustees. Such valuations and procedures will
be reviewed periodically by the Board of Trustees of the Fund. Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their closing prices as of the close of such exchanges. Options written or
purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). Swap agreements are valued by quoted fair values received daily by
the Fund from the counterparty. Short-term investments with a remaining maturity
of 60 days or less are valued at amortized cost which approximates market value,
under which method the investment is valued at cost and any premium or discount
is amortized on a straight line basis to maturity. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
o Options -- The Fund may write covered call options and purchase call and
put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. When a security is
purchased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the
security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent
of the premiums received or paid (or loss or gain to the extent the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed, the Fund records a realized gain or
loss in an amount equal to the value of the agreement.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distribution of capital gains are recorded on the
ex-dividend dates.
(f) Custodian bank -- The Fund recorded an amount payable to the custodian bank
reflecting an overnight overdraft, which resulted from management estimates of
available cash.
(g) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $1,571 has been reclassified between undistributed net investment income
and accumulated net realized capital losses as a result of permanent differences
attributable to the amortization methods for premiums and discounts on fixed
income securities. This reclassification has no effect on net assets or net
asset values 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 daily net assets, including
proceeds from the issuance of Preferred Shares. For the year ended August 31,
2004, FAM earned fees of $5,177,182, of which $376,567 was waived. For the year
ended August 31, 2004, FAM reimbursed the Fund in the amount of $54,617.
In addition, Merrill Lynch, Pierce, Fenner, & Smith Incorporated ("MLPF&S"), a
subsidiary of ML & Co., received $1,460 in commissions on the execution of
portfolio security transactions for the Fund for the year ended August 31, 2004.
For the year ended August 31, 2004, the Fund reimbursed FAM $18,026 for certain
accounting services.
Certain officers and/or trustees of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended August 31, 2004 were $198,093,830 and $192,003,636, respectively.
4. Share Transactions:
The Fund is authorized to issue an unlimited number of shares of beneficial
interest, including Preferred Shares, par value $.10 per share, all of which
were initially classified as Common Shares. The Board of Trustees is authorized,
however, to reclassify any unissued shares of beneficial interest without
approval of holders of Common Shares.
Preferred Shares
Auction Market Preferred Shares are redeemable Preferred Shares of the Fund,
with a par value of $.10 per share and a liquidation preference of $25,000 per
share plus accrued and unpaid dividends, that entitle their holders to receive
cash dividends at an annual rate that may vary for the successive dividend
periods. The yields in effect at August 31, 2004 were as follows: Series A,
1.099%; Series B, 1.150%; Series C, 1.20%; Series D, 1.150% and Series E,
1.150%.
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, 2004, MLPF&S Incorporated, an affiliate
of FAM, earned $482,320 as commissions.
18 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Notes to Financial Statements (concluded)
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Shares in the
amount of $.086000 per share on September 29, 2004 to shareholders of record on
September 14, 2004.
The tax character of distributions paid during the fiscal years ended August 31,
2004 and August 31, 2003 was as follows:
--------------------------------------------------------------------------------
8/31/2004 8/31/2003
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income ................... $41,164,179 $39,777,682
-------------------------------
Total distributions .................... $41,164,179 $39,777,682
===============================
As of August 31, 2004, the components of accumulated earnings on a tax basis
were as follows:
--------------------------------------------------------------------------------
Undistributed tax-exempt income--net .................... $ 9,957,201
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... 9,957,201
Capital loss carryforward ............................... (53,580,322)*
Unrealized gains--net ................................... 47,894,767**
------------
Total accumulated earnings--net ......................... $ 4,271,646
============
* On August 31, 2004, the Fund had a net capital loss carryforward of
$53,580,322, of which $25,345,146 expires in 2007, $9,834,324 expires in
2008, $16,563,861 expires in 2009 and $1,836,991 expires in 2012. This
amount will be available to offset like amounts of any future taxable
gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
tax deferral of losses on straddles, the difference between book and tax
amortization methods for premiums and discounts on fixed income securities
and the deferral of post-October capital losses for tax purposes.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
MuniHoldings Florida Insured Fund:
We have audited the accompanying statement of net assets, including the schedule
of investments, of MuniHoldings Florida Insured Fund as of August 31, 2004, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and 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 as of August 31, 2004, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MuniHoldings Florida Insured Fund as of August 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 15, 2004
20 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Important Tax Information
All of the net investment income distributions paid by MuniHoldings Florida
Insured Fund during the taxable year ended August 31, 2004 qualify as tax-exempt
interest dividends for federal income tax purposes.
Please retain this information for your records.
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of August 31, 2004 were as
follows:
--------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ............................................... 92.7%
AA/Aa ................................................. 0.9
A/A ................................................... 3.9
BBB/Baa ............................................... 1.4
Other* ................................................ 1.1
--------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Fund may at
times pay out less than the entire amount of net investment income earned in any
particular month and may at times in any particular month pay out such
accumulated but undistributed income in addition to net investment income earned
in that month. As a result, the dividends paid by the Fund for any particular
month may be more or less than the amount of net investment income earned by the
Fund during such month. The Fund's current accumulated but undistributed net
investment income, if any, is disclosed in the Statement of Net Assets, which
comprises part of the financial information included in this report.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Automatic Dividend Reinvestment Plan
The following description of the Fund's Automatic Dividend Reinvestment Plan
(the "Plan") is sent to you annually as required by federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Shares otherwise elects,
all dividend and capital gains distributions will be automatically reinvested by
The Bank of New York (the "Plan Agent"), as agent for shareholders in
administering the Plan, in additional Common Shares of the Fund. Holders of
Common Shares who elect not to participate in the Plan will receive all
distributions in cash paid by check mailed directly to the shareholder of record
(or, if the shares are held in street or other nominee name then to such
nominee) by The Bank of New York, as dividend paying agent. Such participants
may elect not to participate in the Plan and to receive all distributions of
dividends and capital gains in cash by sending written instructions to The Bank
of New York, as dividend paying agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date; otherwise such
termination will be effective with respect to any subsequently declared dividend
or distribution.
Whenever the Fund declares an income dividend or capital gains distribution
(collectively referred to as "dividends") payable either in shares or in cash,
non-participants in the Plan will receive cash and participants in the Plan will
receive the equivalent in Common Shares. The shares will be acquired by the Plan
Agent for the participant's account, depending upon the circumstances described
below, either (i) through receipt of additional unissued but authorized Common
Shares from the Fund ("newly issued shares") or (ii) by purchase of outstanding
Common Shares on the open market ("open-market purchases") on the New York Stock
Exchange or elsewhere. If on the payment date for the dividend, the net asset
value per share of the Common Shares is equal to or less than the market price
per share of the Common Shares plus estimated brokerage commissions (such
conditions being referred to herein as "market premium"), the Plan Agent will
invest the dividend amount in newly issued shares on behalf of the participant.
The number of newly issued Common Shares to be credited to the participant's
account will be determined by dividing the dollar amount of the dividend by the
net asset value per share on the date the shares are issued, provided that the
maximum discount from the then current market price per share on the date of
issuance may not exceed 5%. If on the dividend payment date the net asset value
per share is greater than the market value (such condition being referred to
herein as "market discount"), the Plan Agent will invest the dividend amount in
shares acquired on behalf of the participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. It is contemplated that the Fund
will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately 10 days. If, before the Plan Agent has completed its
open-market purchases, the market price of a Common Share exceeds the net asset
value per share, the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the Fund's shares, resulting in the acquisitions
of fewer shares than if the dividend had been paid in newly issued shares on the
dividend payment date. Because of the foregoing difficulty with respect to
open-market purchases, the Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the purchase
period or if the market discount shifts to a market premium during the purchase
period, the Plan Agent will cease making open-market purchases and will invest
the uninvested portion of the dividend amount in newly issued shares at the
close of business on the last purchase date determined by dividing the
uninvested portion of the dividend by the net asset value per share.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan. The Plan Agent will forward all
proxy solicitation materials to participants and vote proxies for shares held
pursuant to the Plan in accordance with the instructions of the participants.
22 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
In the case of shareholders such as banks, brokers or nominees which hold shares
of others who are the beneficial owners, the Plan Agent will administer the Plan
on the basis of the number of shares certified from time to time by the record
shareholders as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gains distributions payable either in
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal, state or local income tax that may be payable (or
required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus commissions
of the Fund's shares is above the net asset value, participants in the Plan will
receive shares of the Fund at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem
shares, the price on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be excluded
from gross income to the extent that the cash amount reinvested would be
excluded from gross income. If, when the Fund's shares are trading at a premium
over net asset value, the Fund issues shares pursuant to the Plan that have a
greater fair market value than the amount of cash reinvested, it is possible
that all or a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable distribution. If
the discount is viewed as a taxable distribution, it is also possible that the
taxable character of this discount would be allocable to all the shareholders,
including shareholders who do not participate in the Plan. Thus, shareholders
who do not participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable share of the
discount.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at
The Bank of New York, Church Street Station, P.O. Box 11258, New York, NY
10286-1258, Telephone: 800-432-8224.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 23
[LOGO] Merrill Lynch Investment Managers
Officers and Trustees (unaudited)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Trustee
------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President of the Merrill Lynch Investment Managers, 124 Funds None
Glenn* Princeton, NJ and present L.P. ("MLIM")/Fund Asset Management, L.P. 157 Portfolios
08543-9011 Trustee ("FAM")--Advised Funds since 1999; Chairman
Age: 63 (Americas Region) of MLIM from 2000 to 2002;
Executive Vice President of MLIM and FAM (which
terms as used herein include their corporate
predecessors) from 1983 to 2002; President of
FAM Distributors, Inc. ("FAMD") from 1986 to 2002
and Director thereof from 1991 to 2002; Executive
Vice President and Director of Princeton Services,
Inc. ("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services,
Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his present and former positions with MLIM, FAM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Trustee's term is unlimited. Trustees serve until their resignation, removal or death, or
until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board
of Trustees.
====================================================================================================================================
Independent Trustees*
------------------------------------------------------------------------------------------------------------------------------------
Ronald W. P.O. Box 9095 Trustee 1997 to Professor Emeritus of Finance, School of Business, 48 Funds None
Forbes Princeton, NJ present State University of New York at Albany since 2000 48 Portfolios
08543-9095 and Professor thereof from 1989 to 2000; Interna-
Age: 63 tional Consultant, Urban Institute, Washington, D.C.
from 1995 to 1999.
------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Trustee 1997 to Professor, Harvard Business School since 1989; 48 Funds Newell
Montgomery Princeton, NJ present Associate Professor, J.L. Kellogg Graduate School of 48 Portfolios Rubbermaid,
08543-9095 Management, Northwestern University from 1985 to Inc.
Age: 52 1989; Associate Professor, Graduate School of
Business Administration, University of Michigan from
1979 to 1985.
------------------------------------------------------------------------------------------------------------------------------------
Jean Margo P.O. Box 9095 Trustee 2004 to Self-employed consultant since 2001; Counsel of 48 Funds None
Reid Princeton, NJ present Alliance Capital Management (investment adviser) 48 Portfolios
08543-9095 in 2000; General Counsel, Director and Secretary of
Age: 59 Sanford C. Bernstein & Co., Inc. (investment adviser/
broker-dealer) from 1997 to 2000; Secretary,
Sanford C. Bernstein Fund, Inc. from 1994 to 2000;
Director and Secretary of SCB, Inc. since 1998;
Director and Secretary of SCB Partners, Inc. since 2000;
Director of Covenant House from 2001 to 2004.
------------------------------------------------------------------------------------------------------------------------------------
Kevin A. P.O. Box 9095 Trustee 1997 to Founder and currently Director Emeritus of Boston 48 Funds None
Ryan Princeton, NJ present University Center for the Advancement of Ethics and 48 Portfolios
08543-9095 Character and Director thereof from 1989 to 1999;
Age: 71 Professor from 1982 to 1999 and currently Professor
Emeritus of Education of Boston University; formerly
taught on the faculties of The University of Chicago,
Stanford University and Ohio State University.
------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Trustee 2000 to President, Middle East Institute from 1995 to 2001; 48 Funds None
Suddarth Princeton, NJ present Foreign Service Officer, United States Foreign 48 Portfolios
08543-9095 Service from 1961 to 1995; Career Minister from 1989
Age: 69 to 1995; Deputy Inspector General, U.S. Department of
State from 1991 to 1994; U.S. Ambassador to The
Hashemite Kingdom of Jordan from 1987 to 1990.
24 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Officers and Trustees (unaudited) (concluded)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Trustees* (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Richard R. P.O. Box 9095 Trustee 1997 to Professor of Finance since 1984, Dean from 48 Funds Bowne &
West Princeton, NJ present 1984 to 1993 and currently Dean Emeritus of 48 Portfolios Co., Inc.;
08543-9095 New York University Leonard N. Stern School of Vornado
Age: 66 Business Administration, New York University from Realty Trust;
1994 to present; Professor of Finance thereof from Vornado
1982 to 1994. Operating
Company;
Alexander's,
Inc.
------------------------------------------------------------------------------------------------------------------------------------
Edward D. P.O. Box 9095 Trustee 2000 to Self-employed financial consultant since 1994; 48 Funds None
Zinbarg Princeton, NJ present Executive Vice President of The Prudential Insurance 48 Portfolios
08543-9095 Company of America from 1988 to 1994; former
Age: 69 Director of Prudential Reinsurance Company and
former Trustee of the Prudential Foundation.
------------------------------------------------------------------------------------------------------------------------
* The Trustee's term is unlimited. Trustees serve until their resignation, removal or death, or until December 31 of the
year in which they turn 72.
------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1997 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President, Director and Treasurer of Princeton Services since 1999;
08543-9011 and and Vice President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 44 Treasurer 1999 to
present
------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9011 Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Jacob Princeton, NJ Vice present Management) of MLIM from 1997 to 2000.
08543-9011 President
Age: 53
------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Loffredo Princeton, NJ Vice present Management) of MLIM from 1998 to 2000.
08543-9011 President
Age: 40
------------------------------------------------------------------------------------------------------------------------------------
Robert D. P.O. Box 9011 Vice 1999 to Vice President (Municipal Tax-Exempt Fund Management) of MLIM since 1998.
Sneeden Princeton, NJ President present
08543-9011
Age: 51
------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM since 2004; Global Director of Compliance at
08543-9011 Officer Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Age: 53 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000.
------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997.
08543-9011
Age: 44
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Trustees.
------------------------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Shares:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Shares:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MFL
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 25
[LOGO] Merrill Lynch Investment Managers
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
26 MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site http://www.icsdelivery.com/live and follow the instructions. When you visit
this site, you will obtain a personal identification number (PIN). You will need
this PIN should you wish to update your e-mail address, choose to discontinue
this service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
MUNIHOLDINGS FLORIDA INSURED FUND AUGUST 31, 2004 27
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniHoldings Florida Insured Fund seeks to provide shareholders with current
income exempt from federal income tax. The Fund also seeks to offer shareholders
the opportunity to own shares, the value of which is exempt from Florida
intangible personal property tax. The Fund seeks to achieve its investment
objective by investing primarily in a portfolio of long-term, investment grade
municipal obligations, the interest on which, in the opinion of bond counsel to
the issuer, is exempt from federal income taxes and which enables shares of the
Fund to be exempt from Florida intangible personal property tax.
This report, including the financial information herein, is transmitted to
shareholders of MuniHoldings Florida Insured Fund for their information. It is
not a prospectus. Past performance results shown in this report should not be
considered a representation of future performance. The Fund has leveraged its
Common Shares and intends to remain leveraged by issuing Preferred Shares to
provide the Common Shareholders with a potentially higher rate of return.
Leverage creates risks for Common Shareholders, including the likelihood of
greater volatility of net asset value and market price of shares of the Common
Shares, and the risk that fluctuations in the short-term dividend rates of the
Preferred Shares may affect the yield to Common Shareholders. Statements and
other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniHoldings Florida Insured Fund
Box 9011
Princeton, NJ 08543-9011
#HOLDFL -- 8/04
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Ronald W.
Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending August 31, 2004 - $30,000
Fiscal Year Ending August 31, 2003 - $26,000
(b) Audit-Related Fees - Fiscal Year Ending August 31, 2004 - $3,000
Fiscal Year Ending August 31, 2003 - $5,600
The nature of the services relate to compliance for AMPS.
(c) Tax Fees - Fiscal Year Ending August 31, 2004 - $5,610
Fiscal Year Ending August 31, 2003 - $4,800
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending August 31, 2004 - $0
Fiscal Year Ending August 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending August 31, 2004 - $14,913,836
Fiscal Year Ending August 31, 2003 - $18,318,444
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Ronald W. Forbes
Cynthia A. Montgomery
Charles C. Reilly (retired as of December 31, 2003)
Kevin A. Ryan
Roscoe S. Suddarth
Richard R. West
Edward D. Zinbarg
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill Lynch
Investment Managers, L.P. and/or Fund Asset Management, L.P. (the
"Investment Adviser") authority to vote all proxies relating to the
Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to the
voting of proxies related to the portfolio securities held in the
account of one or more of its clients, including a Fund. Pursuant to
these Proxy Voting Procedures, the Investment Adviser's primary
objective when voting proxies is to make proxy voting decisions solely
in the best interests of each Fund and its shareholders, and to act in
a manner that the Investment Adviser believes is most likely to enhance
the economic value of the securities held by the Fund. The Proxy Voting
Procedures are designed to ensure that that the Investment Adviser
considers the interests of its clients, including the Funds, and not
the interests of the Investment Adviser, when voting proxies and that
real (or perceived) material conflicts that may arise between the
Investment Adviser's interest and those of the Investment Adviser's
clients are properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment professionals
appointed by the CIO, portfolio managers and investment analysts
appointed by the CIO and any other personnel the CIO deems appropriate.
The Committee will also include two non-voting representatives from the
Investment Adviser's Legal department appointed by the Investment
Adviser's General Counsel. The Committee's membership shall be limited
to full-time employees of the Investment Adviser. No person with any
investment banking, trading, retail brokerage or research
responsibilities for the Investment Adviser's affiliates may serve as a
member of the Committee or participate in its decision making (except
to the extent such person is asked by the Committee to present
information to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser might
be asked to do so). The Committee determines how to vote the proxies of
all clients, including a Fund, that have delegated proxy voting
authority to the Investment Adviser and seeks to ensure that all votes
are consistent with the best interests of those clients and are free
from unwarranted and inappropriate influences. The Committee
establishes general proxy voting policies for the Investment Adviser
and is responsible for determining how those policies are applied to
specific proxy votes, in light of each issuer's unique structure,
management, strategic options and, in certain circumstances, probable
economic and other anticipated consequences of alternate actions. In so
doing, the Committee may determine to vote a particular proxy in a
manner contrary to its generally stated policies. In addition, the
Committee will be responsible for ensuring that all reporting and
recordkeeping requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not
to adopt a specific voting policy applicable to that issue. The
Investment Adviser believes that certain proxy voting issues require
investment analysis - such as approval of mergers and other significant
corporate transactions - akin to investment decisions, and are,
therefore, not suitable for general guidelines. The Committee may elect
to adopt a common position for the Investment Adviser on certain proxy
votes that are akin to investment decisions, or determine to permit the
portfolio manager to make individual decisions on how best to maximize
economic value for a Fund (similar to normal buy/sell investment
decisions made by such portfolio managers). While it is expected that
the Investment Adviser will generally seek to vote proxies over which
the Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in conjunction
with a Fund's portfolio manager, may determine that the Fund's specific
circumstances require that its proxies be voted differently.
To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For
instance, under the Proxy Voting Procedures, the Investment Adviser
generally will not seek to vote proxies related to portfolio securities
that are on loan, although it may do so under certain circumstances. In
addition, the Investment Adviser will vote proxies related to
securities of foreign issuers only on a best efforts basis and may
elect not to vote at all in certain countries where the Committee
determines that the costs associated with voting generally outweigh the
benefits. The Committee may at any time override these general policies
if it determines that such action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote proxies in
respect of an issuer where an affiliate of the Investment Adviser (each, an
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates and
Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or if
the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary to
advise the Committee on how to vote or to cast votes on behalf of the Investment
Adviser's clients.
In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent
fiduciary, the powers of the Committee shall pass to a subcommittee,
appointed by the CIO (with advice from the Secretary of the Committee),
consisting solely of Committee members selected by the CIO. The CIO
shall appoint to the subcommittee, where appropriate, only persons
whose job responsibilities do not include contact with the Client and
whose job evaluations would not be affected by the Investment Adviser's
relationship with the Client (or failure to retain such relationship).
The subcommittee shall determine whether and how to vote all proxies on
behalf of the Investment Adviser's clients or, if the proxy matter is,
in their judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee
determines to alter the Investment Adviser's normal voting guidelines
or, on matters where the Investment Adviser's policy is case-by-case,
does not follow the voting recommendation of any proxy voting service
or other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies relating
to the Client may be voted unless the Secretary, or in the Secretary's
absence, the Assistant Secretary of the Committee concurs that the
subcommittee's determination is consistent with the Investment
Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain recurring
proxy issues that are not expected to involve unusual circumstances.
These policies are guidelines only, and the Investment Adviser may
elect to vote differently from the recommendation set forth in a voting
guideline if the Committee determines that it is in a Fund's best
interest to do so. In addition, the guidelines may be reviewed at any
time upon the request of a Committee member and may be amended or
deleted upon the vote of a majority of Committee members present at a
Committee meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
o Proposals related to the composition of the Board of Directors of issuers
other than investment companies. As a general matter, the Committee
believes that a company's Board of Directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a
company's business and prospects, and is therefore best-positioned to set
corporate policy and oversee management. The Committee, therefore,
believes that the foundation of good corporate governance is the election
of qualified, independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over
time. In individual cases, the Committee may look at a nominee's history
of representing shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
o Proposals related to the selection of an issuer's independent auditors. As
a general matter, the Committee believes that corporate auditors have a
responsibility to represent the interests of shareholders and provide an
independent view on the propriety of financial reporting decisions of
corporate management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the Committee may
look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
o Proposals related to management compensation and employee benefits. As a
general matter, the Committee favors disclosure of an issuer's
compensation and benefit policies and opposes excessive compensation, but
believes that compensation matters are normally best determined by an
issuer's board of directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set arbitrary
restrictions on compensation or benefits will, therefore, generally not be
supported.
o Proposals related to requests, principally from management, for approval
of amendments that would alter an issuer's capital structure. As a general
matter, the Committee will support requests that enhance the rights of
common shareholders and oppose requests that appear to be unreasonably
dilutive.
o Proposals related to requests for approval of amendments to an issuer's
charter or by-laws. As a general matter, the Committee opposes poison pill
provisions.
o Routine proposals related to requests regarding the formalities of
corporate meetings.
o Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the Committee
believes that a fund's Board of Directors (rather than its shareholders)
is best-positioned to set fund policy and oversee management. However, the
Committee opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective, that the
Investment Company Act envisions will be approved directly by
shareholders.
o Proposals related to limiting corporate conduct in some manner that
relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are
inappropriate forums for discussion of larger social issues, and opposes
shareholder resolutions "micromanaging" corporate conduct or requesting
release of information that would not help a shareholder evaluate an
investment in the corporation as an economic matter. While the Committee
is generally supportive of proposals to require corporate disclosure of
matters that seem relevant and material to the economic interests of
shareholders, the Committee is generally not supportive of proposals to
require disclosure of corporate matters for other purposes.
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
10(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - See Item 2
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MuniHoldings Florida Insured Fund
By: /s/ Terry K. Glenn
---------------------------------
Terry K. Glenn,
President of
MuniHoldings Florida Insured Fund
Date: October 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
---------------------------------
Terry K. Glenn,
President of
MuniHoldings Florida Insured Fund
Date: October 18, 2004
By: /s/ Donald C. Burke
---------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings Florida Insured Fund
Date: October 18, 2004