MUNIHOLDINGS
NEW YORK INSURED
FUND, INC.
STRATEGIC
Performance
[GRAPHIC OMITTED]
Annual Report
August 31, 1999
<PAGE>
MuniHoldings New York Insured Fund, Inc.
The Benefits and
Risks of
Leveraging
MuniHoldings New York Insured Fund, Inc. has the ability to leverage to seek to
enhance the yield and net asset value of its Common Stock. However, these
objectives cannot be achieved in all interest rate environments. To leverage,
the Fund issues Preferred Stock, which pays dividends at prevailing short-term
interest rates, and invests the proceeds in long-term municipal bonds. The
interest earned on these investments is paid to Common Stock 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 Stock. However, in order to
benefit Common Stock 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 Stock 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 Stock capitalization of
$100 million and the issuance of Preferred Stock 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
Stock 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 Stock.
In this case, the dividends paid to Preferred Stock share holders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock 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 Stock will be reduced or eliminated completely. At
the same time, the market value on the fund's Common Stock (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 Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
DEAR SHAREHOLDER
For the year ended August 31, 1999, the Common Stock of MuniHoldings New York
Insured Fund, Inc. earned $0.862 per share income dividends, which included
earned and unpaid dividends of $0.075. This represents a net annualized yield of
6.09%, based on a month-end per share net asset value of $14.16. Over the same
period, the total investment return on the Fund's Common Stock was -5.91%, based
on a change in per share net asset value from $16.07 to $14.16, and assuming
reinvestment of $0.996 per share ordinary income dividends and $0.002 per share
capital gains distributions.
For the six months ended August 31, 1999, the total investment return on the
Fund's Common Stock was -8.37%, based on a change in per share net asset value
from $15.91 to $14.16, and assuming reinvestment of $0.421 per share income
dividends.
For the six months ended August 31, 1999, the Fund's Preferred Stock had an
average yield of 3.05% for Series A and 2.97% for Series B.
The Municipal Market Environment
During the six months ended August 31, 1999, long-term bond yields rose
significantly. Steady US economic growth combined with improvement in foreign
economies and inflation concerns put upward pressure on bond yields throughout
the period. Continued strong US employment growth, particularly the decline in
the US unemployment rate to 4.2% in early June, was among the reasons the
Federal Reserve Board cited for raising short-term interest rates in late June
and again in late August. US Treasury bond yields reacted by climbing above
6.25% by mid-August before improving somewhat to 6.06% by August 31, 1999.
During the last six months, yields on long-term US Treasury securities increased
approximately 50 basis points (0.50%).
Long-term tax-exempt bond yields also rose during the last six months. Until
early May, the municipal bond market had been able to withstand much of the
upward pressure on bond yields. However, investor concerns regarding ongoing US
economic strength and the fear of additional moves by the Federal Reserve Board
eventually pushed municipal bond yields higher throughout June, July and August.
During the period, yields on long-term tax-exempt revenue bonds rose almost 55
basis points to 5.83%, as measured by the Bond Buyer Revenue Bond Index.
While the tax-exempt market has slightly underperformed its taxable counterpart
in recent months, technical conditions are helping to support municipal bond
prices. During the last six months, more than $115 billion in long-term
municipal bonds was underwritten, a decrease of more than 20% compared to the
same period a year ago. During the past three months, almost $60 billion in
municipal bonds was underwritten. This quarterly issuance represents a decline
of approximately 20% compared to the same three-month period in 1998.
Recently, the supply of new municipal bonds slowed even further. Total issuance
in August 1999 of $14 billion was nearly 40% lower than August 1998 levels.
Additionally, in June and July, investors received more than $40 billion in
coupon income and proceeds from bond maturities and early bond redemptions.
These proceeds have generated significant retail investor interest, easily
absorbing the recent diminished supply.
The recent relative underperformance of the municipal bond market has generated
very attractive tax-exempt bond yield ratios, similar to those that were
available at the end of 1998. In December 1998, long-term, uninsured municipal
bond yields were higher than those of their taxable counterparts. Historically,
long-term tax-exempt bond yields have been approximately 82%-85% of long-term US
Treasury bond yields. Municipal bond yields rose at a faster rate in recent
months than US Treasury bond yields, causing the yield ratio to increase. At May
31, 1999, long-term municipal bond yields were approximately 92% of their
taxable counterparts. At August 31, 1999, long-term uninsured tax-exempt bond
yields were approximately 96% of US Treasury bonds. Current ratios, while lower
than those available at the end of 1998, still represent historically attractive
levels.
Looking ahead, it appears to us that long-term municipal bond yields will trade
in a relatively tight range near current levels. Strong US economic performance
is being balanced by nearly negligible inflation readings, as well as
improvements in productivity in both manufacturing and service industries. We
believe that future moves by the Federal Reserve Board have largely been
discounted by bond investors and are to a great extent reflected in present bond
yields.
Any improvement in bond prices is likely to be contingent upon weakening in both
US employment growth and consumer spending. The 100 basis point rise in US
Treasury bond yields seen thus far this year is likely to negatively affect US
economic growth. The US housing market will be among the first sectors likely to
be affected, as some declines have already been evidenced because of higher
mortgage rates. We believe it is also unrealistic to expect double-digit returns
in US equity markets to continue indefinitely. Much of the US consumer's wealth
is tied to recent stock market appreciation. Any slowing in these incredible
growth rates is likely to reduce consumer spending. We believe that these
factors suggest that the worst of the recent increase in bond yields has passed
and stable, if not slightly improving, bond prices may be expected.
Portfolio Strategy
We began the six-month period ended August 31, 1999 neutral on the interest rate
outlook. We looked to reduce our exposure to the long-term end of the municipal
yield curve in favor of municipal bonds in the 20-year sector as the yield
differential started to narrow considerably. This strategy worked well as
interest rates increased into early May. At this time we adopted a more
constructive strategy, taking advantage of the higher yields available in the
tax-exempt market. This move, which proved to be pre mature since the tax-exempt
bond market came under additional pressure through the end of August, negatively
impacted the Fund's total return.
Looking ahead, we expect to maintain our constructive investment strategy.
Tax-exempt yields are approximately 96% of Treasury securities, well above their
historical average of 82%-85%, providing an attractive buying opportunity.
In Conclusion
We appreciate your ongoing interest in MuniHoldings New York Insured Fund, Inc.,
and we look forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Roberto Roffo
Roberto Roffo
Vice President and
Portfolio Manager
October 4, 1999
2 & 3
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
New York -- 99.0% Albany County, New York, Airport Authority,
Airport Revenue Bonds, AMT (d):
AAA Aaa $ 1,500 5.375% due 12/15/2017 $ 1,440
AAA Aaa 1,500 5.50% due 12/15/2019 1,459
-------------------------------------------------------------------------------------------
NR* Aaa 2,325 Battery Park City Authority, New York, Revenue
Bonds, RITR, Series 25, 7.32% due 11/01/2026 (a)(g) 2,203
---------------------------------------------------------------------------------------------
Long Island Power Authority, New York, Electric
System Revenue Refunding Bonds, Series A (d):
AAA Aaa 2,500 5% due 12/01/2018 2,305
AAA Aaa 1,700 5.125% due 12/01/2022 1,569
---------------------------------------------------------------------------------------------
Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Bonds:
AAA Aaa 3,000 (Grand Central Terminal), Series 1,
5.70% due 7/01/2024 (d) 2,992
AAA Aaa 7,695 Series A, 5.625% due 7/01/2027 (e) 7,636
---------------------------------------------------------------------------------------------
Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Refunding Bonds (a):
AAA Aaa 1,000 Series B, 5% due 7/01/2020 915
AAA Aaa 2,625 Series E, 5% due 7/01/2021 2,391
---------------------------------------------------------------------------------------------
AAA Aaa 14,710 Metropolitan Transportation Authority, New York,
Dedicated Tax Fund Revenue Bonds, Series A,
5% due 4/01/2029 (d) 13,188
---------------------------------------------------------------------------------------------
AAA Aaa 1,000 Metropolitan Transportation Authority, New York,
Transit Facilities Revenue Bonds, Series C-1,
5.50% due 7/01/2022 (e) 978
---------------------------------------------------------------------------------------------
AAA Aaa 2,385 Monroe--Woodbury, New York, Central School District, GO,
5.625% due 5/15/2023 (e) 2,387
---------------------------------------------------------------------------------------------
AAA Aaa 3,000 Nassau County, New York, IDA, Civic Facility Revenue
Refunding Bonds (Hofstra University Project),
5% due 7/01/2023 (e) 2,717
---------------------------------------------------------------------------------------------
AAA Aaa 10,500 New York City, New York, Educational Construction
Fund Revenue Bonds, Junior Sub-Lien,
5.50% due 4/01/2026 (a) 10,242
---------------------------------------------------------------------------------------------
A- A3 5,820 New York City, New York, GO, Series C,
5.375% due 11/15/2027 5,417
---------------------------------------------------------------------------------------------
AAA Aaa 1,830 New York City, New York, IDA, Civic Facilities
Revenue Bonds (Rockefeller Foundation Project),
5.375% due 7/01/2023 1,755
---------------------------------------------------------------------------------------------
A A3 5,000 New York City, New York, IDA, Special Facilities
Revenue Bonds (Terminal One Group Association
Project), AMT, 6.125% due 1/01/2024 5,090
---------------------------------------------------------------------------------------------
NR* A1 9,000 New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds,
RITR, Series 21, 7.62% due 6/15/2029 (g) 8,871
---------------------------------------------------------------------------------------------
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue
Refunding Bonds (b):
AAA Aaa 3,300 Series C, 5% due 6/15/2021 3,002
A1+ VMIG1+ 2,850 VRDN, Series G, 3.15% due 6/15/2024 (h) 2,850
---------------------------------------------------------------------------------------------
New York City, New York, Transitional Finance
Authority Revenue Bonds, Future Tax Secured:
AA Aa3 5,000 Series A, 5% due 8/15/2027 4,488
NR* VMIG1+ 800 VRDN, Series C, 2.70% due 5/01/2028 (h) 800
---------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue Bonds:
AAA NR* 10,000 (Frances Schervier Project), 5.50% due 7/01/2027 (d) 9,708
AAA Aaa 2,300 (Gustavus Adolphus Childrens School), Series B,
5.50% due 7/01/2018 (a) 2,271
AAA Aaa 6,000 (Mental Health Services), Series B,
5.375% due 2/15/2026 (d) 5,719
AAA Aaa 2,000 (Niagara Nursing Home), 5.60% due 8/01/2037 (c)(e) 1,921
AAA Aaa 5,000 (Saint Barnabas Hospital), 5.45% due 8/01/2035 (a)(c) 4,751
---------------------------------------------------------------------------------------------
New York State Dormitory Authority,
Revenue Refunding Bonds:
AAA Aaa 2,180 (City University System Consolidated),
Series 1, 5.125% due 7/01/2027 (e) 2,000
AAA Aaa 5,000 (City University System Consolidated Third), Series 1,
5% due 7/01/2026 (b) 4,503
AAA NR* 10,780 (Hospital Mortgage -- United Health Services),
5.375% due 8/01/2027 (a)(c) 10,235
AAA Aaa 3,715 (Mental Health Services Facilities Improvement),
Series D, 5% due 8/15/2017 (e) 3,429
AAA Aaa 5,320 (Millard Fillmore Hospital Project),
5.375% due 2/01/2032 (a)(c) 5,035
AAA Aaa 3,460 (North Shore University Hospital),
5.25% due 11/01/2019 (e) 3,259
---------------------------------------------------------------------------------------------
AAA Aaa 7,500 New York State Energy Research and Development
Authority, Facilities Revenue Refunding Bonds
(Consolidated Edison Co. of New York),
Series A, 6.10% due 8/15/2020 (a) 7,731
---------------------------------------------------------------------------------------------
NR* NR* 2,500 New York State Energy Research and Development
Authority, Gas Facilities Revenue Bonds,
RITR, Series 9, 7.32% due 1/01/2021 (e)(g) 2,383
---------------------------------------------------------------------------------------------
AAA NR* 2,305 New York State Energy Research and Development
Authority, PCR (New York State Electric and Gas Co.
Project), AMT, Series A, 6.15% due 7/01/2026 (e) 2,341
---------------------------------------------------------------------------------------------
AAA Aaa 1,285 New York State Energy Research and Development
Authority, Solid Waste Disposal Revenue Bonds
(New York State Electric and Gas Co. Project),
AMT, Series A, 5.70% due 12/01/2028 (e) 1,249
---------------------------------------------------------------------------------------------
AAA Aaa 765 New York State Environmental Facilities Corporation,
Special Obligation Revenue Refunding Bonds (Riverbank
State Park), 5.125% due 4/01/2022 (a) 710
---------------------------------------------------------------------------------------------
New York State, GO, Refunding, Series D (a):
AAA Aaa 3,410 5% due 7/15/2015 3,241
AAA Aaa 3,765 5% due 7/15/2017 3,520
---------------------------------------------------------------------------------------------
AAA Aaa 2,000 New York State, HFA, Revenue Refunding Bonds
(Fulton Manor), 6.10% due 11/15/2025 (a)(c) 2,109
---------------------------------------------------------------------------------------------
New York State, HFA, Revenue Refunding Bonds,
Housing Mortgage Project, Series A (d):
AAA Aaa 1,740 6.10% due 11/01/2015 1,818
AAA Aaa 2,990 6.125% due 11/01/2020 3,119
---------------------------------------------------------------------------------------------
AAA Aaa 2,800 New York State Local Government Assistance
Corporation Revenue Refunding Bonds, Series B,
5.50% due 4/01/2021 (a) 2,741
---------------------------------------------------------------------------------------------
AAA Aaa 1,000 New York State Medical Care Facilities Finance Agency
Revenue Bonds (Mental Health Services), Series A,
6% due 2/15/2005 (e)(f) 1,081
---------------------------------------------------------------------------------------------
New York State Mortgage Agency, Revenue Refunding
Bonds, Homeowner Mortgage:
NR* Aa2 2,500 AMT, Series 54, 6.20% due 10/01/2026 2,568
NR* Aa2 955 AMT, Series 58, 6.40% due 4/01/2027 996
AAA Aaa 2,140 AMT, Series 67, 5.70% due 10/01/2017 (e) 2,140
NR* Aa2 5,990 AMT, Series 67, 5.80% due 10/01/2028 6,022
NR* Aa2 1,500 Series 59, 6.25% due 4/01/2027 1,557
NR* Aa2 1,000 Series 61, 5.80% due 10/01/2017 1,008
---------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Portfolio
Abbreviations
To simplify the listings of MuniHoldings New York Insured Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
New York AAA NR* $ 3,000 New York State Thruway Authority, Service Contract
(concluded) Revenue Bonds (Local Highway and Bridge),
5.75% due 4/01/2015 (e) $ 3,069
---------------------------------------------------------------------------------------------
New York State Urban Development Corporation
Revenue Bonds:
AAA Aaa 10,000 (Correctional Capital Facilities), Series 6,
5.375% due 1/01/2025 (a) 9,553
AAA Aaa 3,875 RITR, Series 26, 7.32% due 1/01/2025 (e)(g) 3,678
---------------------------------------------------------------------------------------------
AAA NR* 1,775 Niagara, New York, Frontier Authority, Airport
Revenue Bonds (Buffalo Niagara International
Airport), AMT, 5% due 4/01/2028 (b) 1,578
---------------------------------------------------------------------------------------------
AAA Aaa 9,980 Port Authority of New York and New Jersey, Special
Obligation Revenue Bonds (JFK International Air
Terminal Project), AMT, Series 6,
5.75% due 12/01/2022 (e) 10,157
---------------------------------------------------------------------------------------------
AAA Aaa 7,090 Suffolk County, New York, Water Authority,
Waterworks Revenue Bonds, Series A,
5% due 6/01/2022 (a) 6,444
---------------------------------------------------------------------------------------------
AAA Aaa 11,000 Syracuse, New York, Housing Authority, Mortgage
Revenue Bonds (Loretto Rest), Series A,
5.70% due 8/01/2027 (a)(c) 10,863
---------------------------------------------------------------------------------------------
AAA Aaa 2,250 Yonkers, New York, GO, Series C, 5% due 6/01/2019 (b) 2,072
======================================================================================================================
Total Investments (Cost -- $238,312) -- 99.0% 231,274
Other Assets Less Liabilities -- 1.0% 2,321
--------
Net Assets -- 100.0% $233,595
========
======================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHA Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) The interest rate is subject to change periodically and inversely based upon
prevailing market rates. The interest rate shown is the rate in effect at
August 31, 1999.
(h) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at August 31,
1999.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
================================================================================
Quality Profile
The quality ratings of securities in the Fund as of August 31, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa............................................................... 81.0%
AA/Aa................................................................. 7.1
A/A................................................................... 8.3
NR (Not Rated)........................................................ 1.0
Other+................................................................ 1.6
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of August 31, 1999
============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $238,311,776) (Note 1a) ............. $231,273,574
Cash ........................................................................ 7,567
Interest receivable ......................................................... 2,721,943
Prepaid expenses and other assets ........................................... 9,264
------------
Total assets ................................................................ 234,012,348
------------
============================================================================================================================
Liabilities: Payables:
Dividends to shareholders (Note 1f) ....................................... $ 102,722
Investment adviser (Note 2) ............................................... 97,500
Offering costs (Note 1e) .................................................. 52,165 252,387
------------
Accrued expenses and other liabilities ...................................... 164,930
------------
Total liabilities ........................................................... 417,317
------------
============================================================================================================================
Net Assets: Net assets .................................................................. $233,595,031
============
============================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (3,800 shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference) .............. $ 95,000,000
Common Stock, par value $.10 per share (9,787,106 shares issued
and outstanding) .......................................................... $ 978,710
Paid-in capital in excess of par ............................................ 144,677,715
Undistributed investment income -- net ...................................... 1,114,070
Accumulated distributions in excess of realized capital gains on
investments -- net (Note 1f) ................................................ (1,137,262)
Unrealized depreciation on investments -- net ............................... (7,038,202)
------------
Total -- Equivalent to $14.16 net asset value per share of Common Stock
(market price -- $14.00) .................................................... 138,595,031
------------
Total capital ............................................................... $233,595,031
============
============================================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
6 & 7
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended August 31, 1999
===========================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ............. $ 13,152,943
Income (Note 1d):
===========================================================================================================================
Expenses: Investment advisory fees (Note 2) .................................... $ 1,368,183
Commission fees (Note 4) ............................................. 241,015
Professional fees .................................................... 54,497
Accounting services (Note 2) ......................................... 40,568
Transfer agent fees .................................................. 34,640
Printing and shareholder reports ..................................... 19,668
Directors' fees and expenses ......................................... 18,495
Listing fees ......................................................... 16,195
Custodian fees ....................................................... 16,178
Pricing fees ......................................................... 8,607
Other ................................................................ 18,111
------------
Total expenses before reimbursement .................................. 1,836,157
Reimbursement of expenses (Note 2) ................................... (101,222)
------------
Total expenses after reimbursement ................................... 1,734,935
------------
Investment income -- net ............................................. 11,418,008
------------
===========================================================================================================================
Realized & Realized loss on investments--net .................................... (193,650)
Unrealized Loss on Change in unrealized appreciation/depreciation on investments--net ... (17,042,859)
Investments -- Net ------------
(Notes 1b, 1d & 3): Net Decrease in Net Assets Resulting from Operations ................. $ (5,818,501)
============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the For the Period
Year Ended Sept. 19, 1997+
August 31, to August 31,
Increase (Decrease) in Net Assets: 1999 1998
===========================================================================================================================
<S> <C> <C> <C>
Operations: Investment income -- net .............................................. $ 11,418,008 $ 11,053,516
Realized gain (loss) on investments -- net ............................ (193,650) 884,972
Change in unrealized appreciation/depreciation on investments -- net .. (17,042,859) 10,004,657
------------ ------------
Net increase (decrease) in net assets resulting from operations ....... (5,818,501) 21,943,145
------------ ------------
===========================================================================================================================
Dividends & Investment income -- net:
Distributions to Common Stock ........................................................ (8,442,641) (7,304,626)
Shareholders Preferred Stock ..................................................... (2,635,794) (2,974,393)
(Note 1f): Realized gain on investments -- net:
Common Stock ........................................................ (501,319) --
Preferred Stock ..................................................... (190,003) --
In excess of realized gain on investments -- net:
Common Stock ........................................................ (824,696) --
Preferred Stock ..................................................... (312,566) --
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders ..................................... (12,907,019) (10,279,019)
------------ ------------
===========================================================================================================================
Capital Stock Proceeds from issuance of Common Stock ................................ -- 146,625,000
Transactions Proceeds from issuance of Preferred Stock ............................. -- 95,000,000
(Notes 1e & 4): Value of shares issued to Common Stock Shareholders in reinvestment
of dividends .......................................................... -- 85,052
Offering costs resulting from the issuance of Common Stock ............ -- (262,948)
Offering and underwriting costs resulting from the issuance of
Preferred Stock ....................................................... -- (890,684)
------------ ------------
Net increase in net assets derived from capital stock transactions .... -- 240,556,420
------------ ------------
===========================================================================================================================
Net Assets: Total increase (decrease) in net assets ............................... (18,725,520) 252,220,546
Beginning of period ................................................... 252,320,551 100,005
------------ ------------
End of period* ........................................................ $233,595,031 $252,320,551
============ ============
===========================================================================================================================
* Undistributed investment income -- net ................................ $ 1,114,070 $ 774,497
============ ============
===========================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived For the For the Period
from information provided in the financial statements. Year Ended Sept. 19, 1997+
August 31, to August 31,
Increase (Decrease) in Net Asset Value: 1999 1998
================================================================================================================================
<S> <C> <C> <C>
Per Share Net asset value, beginning of period ............................... $ 16.07 $ 15.00
Operating -------- --------
Performance: Investment income -- net ........................................... 1.16 1.13
Realized and unrealized gain (loss) on investments -- net .......... (1.75) 1.11
-------- --------
Total from investment operations ................................... (.59) 2.24
-------- --------
Less dividends and distributions to Common Stock shareholders:
Investment income -- net ......................................... (.86) (.75)
Realized gain on investments -- net .............................. (.05) --
In excess of realized capital gains on investments -- net ........ (.09) --
-------- --------
Total dividends and distributions to Common Stock shareholders ..... (1.00) (.75)
-------- --------
Capital charge resulting from issuance of Common Stock ............. -- (.03)
-------- --------
Effect of Preferred Stock activity:++
Dividends and distributions to Preferred Stock shareholders:
Investment income -- net ....................................... (.27) (.30)
Realized gain on investments -- net ............................ (.02) --
In excess of realized capital gains on investments -- net ...... (.03) --
Capital charge resulting from issuance of Preferred Stock .......... -- (.09)
-------- --------
Total effect of Preferred Stock activity ........................... (.32) (.39)
-------- --------
Net asset value, end of period ..................................... $ 14.16 $ 16.07
======== ========
Market price per share, end of period .............................. $ 14.00 $15.3125
======== ========
================================================================================================================================
Total Investment Based on market price per share .................................... (2.37%) 7.21%++++
Return:** ======== ========
Based on net asset value per share ................................. (5.91%) 12.52%++++
======== ========
================================================================================================================================
Ratios Based on Total expenses, net of reimbursement*** ............................ 1.13% .80%*
Average Net Assets ======== ========
Of Common Stock: Total expenses*** .................................................. 1.19% 1.19%*
======== ========
Total investment income -- net*** .................................. 7.43% 7.65%*
======== ========
Amount of dividends to Preferred Stock shareholders ................ 1.71% 2.06%*
======== ========
Investment income -- net, to Common Stock shareholders ............. 5.72% 5.59%*
======== ========
================================================================================================================================
Ratios Based on Total expenses, net of reimbursement ............................... .70% .50%*
Total Average Net ======== ========
Assets:+++*** Total expenses ..................................................... .74% .75%*
======== ========
Total investment income -- net ..................................... 4.59% 4.81%*
======== ========
================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders .......................... 2.77% 3.48%*
Average Net Assets ======== ========
Of Preferred Stock:
================================================================================================================================
Supplemental Data: Net assets, net of Preferred Stock, end of period (in thousands) ... $138,595 $157,321
======== ========
Preferred Stock outstanding, end of period (in thousands) .......... $ 95,000 $ 95,000
======== ========
Portfolio turnover ................................................. 34.48% 52.91%
======== ========
================================================================================================================================
Leverage: Asset coverage per $1,000 .......................................... $ 2,459 $ 2,656
======== ========
================================================================================================================================
Dividends Series A -- Investment income -- net ............................... $ 703 $ 796
Per Share on ======== ========
Preferred Stock Series B -- Investment income -- net ............................... $ 684 $ 769
Outstanding: ======== ========
================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on October 7, 1997.
+++ Includes Common and Preferred Stock average net assets.
++++ Aggregate total investment return.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings New York Insured Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles, which may require the use of
management accruals and estimates. The Fund determines and makes available for
publication the net asset value of its Common Stock on a weekly basis. The
Fund's Common Stock is listed on the New York Stock Exchange under the symbol
MHN. The following is a summary of significant accounting policies followed by
the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures
10 & 11
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
contracts for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts for delayed
delivery of securities at a specific future date and at a specific price or
yield. Upon entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the time it
was closed.
o Options -- The Fund is authorized to write covered call options and purchase
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 gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Offering expenses -- Direct expenses relating to the public offering of the
Fund's Common and Preferred Stock were charged to capital at the time of
issuance of the shares.
(f) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions and post-October
losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the year ended August 31,
1999, FAM earned fees of $1,368,183, of which $101,222 was voluntarily waived.
During the period September 19, 1997 to August 31, 1998, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, received
underwriting fees of $712,500 in connection with the issuance of the Fund's
Preferred Stock. Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors 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, 1999 were $84,109,347 and $92,156,269, respectively.
Net realized gains (losses) for the year ended August 31, 1999 and net
unrealized losses as of August 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments .................... $(1,019,614) $(7,038,202)
Financial futures contracts .............. 825,964 --
----------- -----------
Total .................................... $ (193,650) $(7,038,202)
=========== ===========
- --------------------------------------------------------------------------------
As of August 31, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $7,038,202, of which $344,688 related to appreciated
securities and $7,382,890 related to depreciated securities. The aggregate cost
of investments at August 31, 1999 for Federal income tax purposes was
$238,311,776.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. The Board of Directors is authorized, however, to
reclassify any unissued shares of capital stock without approval of holders of
Common Stock.
Common Stock
Shares issued and outstanding during the year ended August 31, 1999 remained
constant and during the period September 19, 1997 to August 31, 1998 increased
by 9,520,000 as a result of the initial offering and by 260,439 as a result of
dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.10 per share and a liquidation preference of $25,000
per share, that entitle their holders to receive cash dividends at an annual
rate that may vary for the successive dividend periods. The yields in effect at
August 31, 1999 were as follows: Series A, 2.90% and Series B, 2.999%.
Shares issued and outstanding during the year ended August 31, 1999 remained
constant and during the period September 19, 1997 to August 31, 1998 increased
by 3,800 as a result of the AMPS offering.
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, 1999, MLPF&S, an affiliate of FAM, earned
$164,334 as commissions.
5. Reorganization Plan:
On September 9, 1999, the Fund's Board of Directors approved a plan of
reorganization whereby the Fund would acquire substantially all of the assets
and liabilities of MuniHoldings New York Fund, Inc., MuniHoldings New York
Insured Fund II, Inc. and MuniHoldings New York Insured Fund III, Inc. in
exchange for newly issued shares of the Fund. The plan of reorganization is
subject to shareholder approval. MuniHoldings New York Fund, Inc., MuniHoldings
New York Insured Fund II, Inc. and MuniHoldings New York Insured Fund III, Inc.
are registered, non-diversified, closed-end management investment companies. All
four entities have a similar investment objective and are managed by FAM.
6. Subsequent Event:
On September 8, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.075463 per share,
payable on September 29, 1999 to shareholders of record as of September 22,
1999.
12 & 13
<PAGE>
MuniHoldings New York Insured Fund, Inc., August 31, 1999
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
MuniHoldings New York Insured Fund, Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniHoldings New York Insured Fund,
Inc., as of August 31, 1999, the related statements of operations for the year
then ended and changes in net assets and the financial highlights for the year
then ended and for the period September 19, 1997 (commencement of operations) to
August 31, 1998. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1999 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 high lights present
fairly, in all material respects, the financial position of MuniHoldings New
York Insured Fund, Inc. as of August 31, 1999, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 7, 1999
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more or less than
the amount of net investment income earned by the Fund during such month. The
Fund's current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets, Liabilities and Capital, which comprises
part of the financial information included in this report.
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniHoldings New York
Insured Fund, Inc. during its taxable period ended August 31, 1999 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Additionally, the following table summarizes the per share taxable distributions
paid by the Fund during the year:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Payable Ordinary Long-Term
Date Income Capital Gains*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock Shareholders 12/30/98 $.133454 $.002032
- ---------------------------------------------------------------------------------------------------------------------
Preferred Stock Shareholders: Series A 11/12/98 $ 28.79 $ .43
11/19/98 $ 31.18 $ .47
11/27/98 $ 28.50 $ .43
12/03/98 $ 20.22 $ .32
12/10/98 $ 23.62 $ .36
12/17/98 $ .71 $ .03
---------------------------------------------------------------------------
Series B 11/13/98 $ 28.79 $ .43
11/20/98 $ 28.79 $ .43
11/27/98 $ 23.62 $ .36
12/04/98 $ 23.62 $ .36
12/11/98 $ 22.43 $ .36
12/18/98 $ .25 $ .01
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* The entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
- --------------------------------------------------------------------------------
YEAR 2000 ISSUES
- --------------------------------------------------------------------------------
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000 Problem"). The Fund could be adversely
affected if the computer systems used by the Fund's management or other Fund
service providers do not properly address this problem before January 1, 2000.
The Fund's management expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told the Fund's management that they
also expect to resolve the Year 2000 Problem, and the Fund's management will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Fund could be negatively affected. The
Year 2000 Problem could also have a negative impact on the securities in which
the Fund invests, and this could hurt the Fund's investment returns.
14 & 15
<PAGE>
Officers and Directors
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Robert D. Sneeden, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MHN
This report, including the financial information herein, is transmitted to the
shareholders of MuniHoldings New York Insured Fund, Inc. for their information.
It is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in the report. The
Fund has leveraged its Common Stock by issuing Preferred Stock to provide the
Common Stock share holders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of shares of the Common Stock,
and the risk that fluctuations in the short-term dividend rates of the Preferred
Stock may affect the yield to Common Stock shareholders. Past performance
results shown in this report should not be considered a representation of future
performance. Statements and other information herein are as dated and are
subject to change.
MuniHoldings New York
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #HOLDNY--8/99
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