MUNIHOLDINGS
NEW YORK INSURED
FUND, INC.
STRATEGIC
Performance
[GRAPHIC OMITTED]
Semi-Annual Report
February 28, 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 shareholders 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., February 28, 1999
DEAR SHAREHOLDER
For the six months ended February 28, 1999, the Common Stock of MuniHoldings New
York Insured Fund, Inc. earned $0.432 per share income dividends, which included
earned and unpaid dividends of $0.066. This represents a net annualized yield of
7.16%, based on a month-end per share net asset value of $15.91. Over the same
period, the total investment return on the Fund's Common Stock was +2.69%, based
on a change in per share net asset value from $16.07 to $15.91, and assuming
reinvestment of $0.565 per share ordinary income dividends and $0.002 per share
capital gains.
For the six months ended February 28, 1999, the Fund's Preferred Stock had an
average yield of 3.66% for Series A and 3.55% for Series B.
The Municipal Market Environment
During most of the six months ended February 28, 1999, fixed-income investors
concentrated on the positive elements within the current economic framework. On
an annual basis, US economic growth remained modest, although it strengthened
somewhat in recent months. More important, continued weak foreign economic
growth has been seen as preventing US growth from overheating and generating
increased inflationary pressures. World commodity prices continued to decline to
their lowest level in over a decade, reinforcing the extremely positive
inflationary environment in the United States. Additionally, the Federal Reserve
Board lowered short-term interest rates in September, October and November.
These actions were taken both to ensure that US domestic economic growth would
not be negatively impacted by weak foreign demand and that US financial markets
would have adequate liquidity to offset deteriorating financial conditions in
Asia, Russia and Brazil. Despite considerable volatility, such positive factors
allowed long-term fixed-income interest rates to modestly decline into late
January 1999. During the six-month period ended February 28, 1999, US Treasury
bond yields declined almost 20 basis points (0.20%) to 5.09%, and long-term
tax-exempt revenue bond yields fell approximately 10 basis points to 5.17%, as
measured by the Bond Buyer Revenue Bond Index.
However, during February investors have developed a more negative bias toward
both the prospects for US economic growth and long-term bond yields. Economic
indicators released during February did not suggest that the US economy was
materially stronger in February than it had been in January or even in late
1998. Inflationary measures, such as the consumer price index and the gross
domestic product price deflator, have continued to suggest that domestic price
pressures are nearly non-existent. The consensus among economists was that
Federal Reserve Board Chairman Alan Greenspan's Humphrey-Hawkins testimony
emphasized that the balance between moderate economic growth and low inflation
seen in recent quarters remains in place and that it was unlikely that the
Federal Reserve Board would lower or raise short-term interest rates during
1999. However, investors largely chose to ignore these interpretations and began
to anticipate that the Federal Reserve Board was likely to raise short-term
interest rates sometime during 1999. Subsequently, fixed-income bond yields rose
for the remainder of the month. In February, US Treasury bond yields rose almost
50 basis points to 5.57%, and long-term uninsured municipal revenue bond yields
rose less than 15 basis points to end the month at 5.29%. During the February
quarter, US Treasury bond yields rose 30 basis points, while long-term municipal
bond yields rose less than 5 basis points, as measured by the Bond Buyer Revenue
Bond Index.
Throughout most of 1998, the municipal bond market's performance was impeded by
a significant increase in annual new-issue supply. However, in recent months,
the technical position of the tax-exempt market improved. This has led to the
outperformance by long-term municipal bonds seen thus far in 1999. Over the last
12 months, more than $275 billion in new long-term tax-exempt bonds was
underwritten, an increase of almost 16% compared to the same period a year ago.
As municipal bond yields declined in recent years, it has taken increasingly
lower bond yields to generate the cost savings necessary to refinance remaining
higher-couponed debt. Consequently, the rate of increases in municipal bond
issuance slowed dramatically in recent quarters. During the last six months,
over $120 billion in new tax-exempt bonds was issued, a decrease of
approximately 7% compared to the same period a year ago. During the quarter
ended February 28, 1999, less than $60 billion in new long-term municipal bonds
was underwritten, representing a decline of nearly 10% compared to the quarter
ended February 28, 1998.
The pace of tax-exempt issuance slowed further in 1999. Year-to-date issuance
was less than $33 billion, representing a decline of almost 25% compared to
January 1998's volume. Additionally, investors received over $40 billion in
coupon payments, maturities and proceeds from early redemptions in January and
February. Consequently, investor demand has been strong in recent months, easily
matching, if not at times exceeding, available supply. We will monitor this
situation closely in the coming months to determine if the supply pressures
exerted in 1998 are abating and fostering a more balanced supply/demand
environment for 1999. Such an environment should allow the tax-exempt market's
performance to more closely mirror that of its taxable counterpart.
Foreign investors have rarely been active investors in the tax-exempt bond
market since they are unable to benefit from the inherent tax advantage of
municipal securities. Consequently, the municipal bond market has not been able
to benefit from the strong "flight to quality" demand enjoyed by US Treasury
securities since late 1997. This inability has in large part resulted in
significantly smaller declines in municipal bond yields compared to US Treasury
securities. However, this has resulted in the opportunity to purchase tax-exempt
securities with yields very close to or, in some instances, exceeding those of
comparable US Treasury bonds. By February 28, 1999, long-term tax-exempt bond
yields were at 95% of US Treasury bond yields. Municipal bond yield ratios have
averaged approximately 92% for the last 12 months. During 1997, tax-exempt bond
yield ratios averaged 84%. It is likely that the combination of the annual
increase in new-issue volume and the "safe-haven" status of US Treasury
securities drove municipal bond yield ratios to their present attractive levels.
Should new volume decline and/or foreign financial markets regain stability in
1999, tax-exempt bond yield ratios could quickly return to their more historic
levels (85%-88%).
Looking ahead, the expected combination of moderate economic growth in the
United States and continued negligible inflation suggests a relatively stable
interest rate environment into early 1999. The continued robustness of the US
economy has led to some back up in interest rates. However, at present these
factors suggest that there is little immediate risk of sustained significant
increases in long-term bond yields. It is likely that foreign financial markets
will again be a critical factor in determining US bond yields.
Portfolio Strategy
During the six-month period ended February 28, 1999, we maintained our
constructive portfolio strategy for MuniHoldings New York Insured Fund, Inc. We
believed that a continuation of current equity market turmoil would have a
negative impact on economic growth, thereby constricting global inflation and
forcing interest rates lower over the next several months. As this scenario came
to pass, economic turmoil increased in various parts of the world, including
Russia and Brazil. While the US economy performed much better than anticipated,
inflation remained quite benign. Beginning in late January 1999, we shifted
toward a more neutral position on interest rates. Consequently, we started to
reduce the Fund's exposure to the long end of the municipal curve and placed an
emphasis on municipal bonds in the 20-year sector as the yield differential
started to narrow considerably. Looking ahead, we believe this strategy allows
the Fund to be less sensitive to any negative market movement should interest
rates start to rise.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Robert A. DiMella
Robert A. DiMella
Vice President and Co-Portfolio Manager
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Co-Portfolio Manager
April 7, 1999
================================================================================
We are pleased to announce that Robert D. Sneeden has become Co-Portfolio
Manager of MuniHoldings New York Insured Fund, Inc. Mr. Sneeden has been
employed by Merrill Lynch Asset Management, L.P. (an affiliate of the Fund's
investment adviser) since 1994 as Portfolio Manager.
================================================================================
2 & 3
<PAGE>
MuniHoldings New York Insured Fund, Inc., February 28, 1999
PROXY RESULTS
During the six-month period ended February 28, 1999, MuniHoldings New York
Insured Fund, Inc. Common Stock shareholders voted on the following proposals.
The proposals were approved at a shareholders' meeting on December 16, 1998. The
description of each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Directors: Ronald W. Forbes 9,677,433 69,141
Cynthia A. Montgomery 9,673,450 73,124
Kevin A. Ryan 9,679,433 67,141
Arthur Zeikel 9,671,083 75,491
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche llp
as the Fund's independent auditors for the current
fiscal year. 9,493,986 117,511 135,077
- ------------------------------------------------------------------------------------------------
</TABLE>
During the six-month period ended February 28, 1999, MuniHoldings New York
Insured Fund, Inc. Preferred Stock (Series A and B) shareholders voted on the
following proposals. The proposals were approved at a shareholders' meeting on
December 16, 1998. The description of each proposal and number of shares voted
are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Ronald W.
Forbes, Cynthia A. Montgomery, Charles C. Reilly,
Kevin A. Ryan, Richard R. West and Arthur Zeikel
as follows:
Series A 1,846 0
Series B 1,892 0
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche llp
as the Fund's independent auditors for the current
fiscal year as follows:
Series A 1,846 0 0
Series B 1,892 0 0
- ------------------------------------------------------------------------------------------------
</TABLE>
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on MuniHoldings New York Insured Fund, Inc.'s Board of
Directors. We are pleased to announce that Terry K. Glenn has been elected
President and Director of the Fund. Mr. Glenn has held the position of Executive
Vice President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors in wishing
him well in his retirement from Merrill Lynch and are pleased that he will
continue as a member of the Fund's Board of Directors.
- --------------------------------------------------------------------------------
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 (b):
AAA Aaa $ 1,500 5.375% due 12/15/2017 $ 1,546
AAA Aaa 1,500 5.50% due 12/15/2019 1,558
------------------------------------------------------------------------------------------
NR* Aaa 2,325 Battery Park City Authority, New York,
Revenue Bonds, RITR, Series 25, 7.62%
due 11/01/2026 (g) 2,563
------------------------------------------------------------------------------------------
Long Island Power Authority, New York,
Electric System Revenue Bonds, Series A:
AAA Aaa 3,375 5% due 12/01/2018 (b) 3,362
AAA Aaa 4,750 5.25% due 12/01/2026 (d) 4,847
------------------------------------------------------------------------------------------
Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Bonds:
AAA Aaa 3,000 (Grand Central Terminal), Series 1, 5.70% due
7/01/2024 (b) 3,183
AAA Aaa 1,000 Refunding, Series B, 5% due 7/01/2020 (c) 990
AAA Aaa 2,625 Refunding, Series E, 5% due 7/01/2021 (c) 2,597
AAA Aaa 7,695 Series A, 5.625% due 7/01/2027 (d) 8,175
------------------------------------------------------------------------------------------
AAA Aaa 16,500 Metropolitan Transportation Authority, New York,
Dedicated Tax Fund Revenue Bonds, Series A,
5.25% due 4/01/2026 (d) 16,810
------------------------------------------------------------------------------------------
AAA Aaa 1,000 Metropolitan Transportation Authority, New York,
Transit Facilities Revenue Bonds, Series C-1,
5.50% due 7/01/2022 (d) 1,051
------------------------------------------------------------------------------------------
AAA Aaa 2,385 Monroe--Woodbury, New York, Central School
District, GO, 5.625% due 5/15/2023 (d) 2,512
------------------------------------------------------------------------------------------
AAA Aaa 10,500 New York City, New York, Educational Construction
Fund Revenue Bonds, Junior Sub-Lien, 5.50% due
4/01/2026 (c) 11,004
-------------------------------------------------------------------------------------------
A- A3 5,820 New York City, New York, GO, Series C, 5.375% due
11/15/2027 5,917
------------------------------------------------------------------------------------------
AAA Aaa 1,830 New York City, New York, IDA, Civic Facilities
Revenue Bonds (Rockefeller Foundation Project),
5.375% due 7/01/2023 1,878
------------------------------------------------------------------------------------------
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 5,313
------------------------------------------------------------------------------------------
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds:
NR* A1 9,000 RITR, Series 21, 7.92% due 6/15/2029 (g) 10,379
AAA Aaa 3,400 Refunding, Series C, 5% due 6/15/2021 (e) 3,364
------------------------------------------------------------------------------------------
</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)
DATES Daily Adjustable Tax-Exempt Securities
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>
- --------------------------------------------------------------------------------
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 New York City, New York,
Transitional Finance Authority
Revenue Bonds (Future Tax Secured):
(concluded) AA Aa3 $ 5,000 Series A, 5% due 8/15/2027 $ 4,903
NR* VMIG1+ 100 VRDN, Series C, 3.15% due 5/01/2028 (a) 100
------------------------------------------------------------------------------------------
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 7,180 (Consolidated City University System), Series 1,
5.125% due 7/01/2027 (d) 7,200
AAA NR* 10,000 (Frances Schervier Project), 5.50% due
7/01/2027 (b) 10,457
AAA NR* 6,000 (Mental Health Services), Series B, 5.375% due
2/15/2026 (b) 6,174
AAA Aaa 4,000 (Municipal Health Facilities Improvement Program),
Series 1, 4.75% due 1/15/2029 (b) 3,786
AAA Aaa 2,000 (Niagara Nursing Home), 5.60% due 8/01/2037 (d)(f) 2,093
AAA Aaa 5,320 Refunding (Millard Fillmore Hospital Project),
5.375% due 2/01/2032 (c)(f) 5,472
AAA Aaa 3,460 Refunding (North Shore University Hospital), 5.25%
due 11/01/2019 (d) 3,517
AAA NR* 10,780 Refunding (United Health Services Hospitals),
5.375% due 8/01/2027 (c)(f) 11,099
AAA Aaa 5,000 (St. Barnabas Hospital), 5.45% due
8/01/2035 (c)(f) 5,160
------------------------------------------------------------------------------------------
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 (c) 8,316
------------------------------------------------------------------------------------------
AAA Aaa 2,500 New York State Energy Research and Development
Authority, Gas Facilities Revenue Bonds,
RITR, Series 9, 7.62% due 1/01/2021 (g) 2,738
------------------------------------------------------------------------------------------
New York State Energy Research and Development
Authority, PCR:
AAA NR* 2,305 (New York State Electric and Gas Co. Project),
AMT, Series A, 6.15% due 7/01/2026 (d) 2,513
A1+ NR* 400 (Niagara Mohawk Power Corp. Project), DATES,
Series A, 3.55% due 7/01/2015 (a) 400
A1+ NR* 900 (Niagara Power Corporation Project), VRDN, AMT,
Series B, 3.60% due 7/01/2027 (a) 900
------------------------------------------------------------------------------------------
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 (d) 1,339
------------------------------------------------------------------------------------------
AAA Aaa 765 New York State Environmental Facilities
Corporation, Special Obligation Revenue
Refunding Bonds (Riverbank State Park),
5.125% due 4/01/2022 (c) 767
------------------------------------------------------------------------------------------
New York State, GO, Refunding, Series D (c):
AAA Aaa 3,410 5% due 7/15/2015 3,457
AAA Aaa 3,765 5% due 7/15/2017 3,774
------------------------------------------------------------------------------------------
AAA Aaa 2,000 New York State, HFA, Revenue Refunding Bonds
(Fulton Manor), 6.10% due 11/15/2025 (c)(f) 2,175
------------------------------------------------------------------------------------------
New York State, HFA, Revenue Refunding Bonds
(Housing Mortgage Project), Series A (b):
AAA Aaa 1,740 6.10% due 11/01/2015 1,888
AAA Aaa 2,990 6.125% due 11/01/2020 3,227
------------------------------------------------------------------------------------------
AAA Aaa 2,800 New York State Local Government Assistance
Corporation, Revenue Refunding Bonds, Series B,
5.50% due 4/01/2021 (c) 2,902
------------------------------------------------------------------------------------------
AAA Aaa 1,000 New York State Medical Care Facilities Finance
Agency Revenue Bonds (Mental Health Services),
Series A, 6% due 2/15/2005 (d)(h) 1,125
------------------------------------------------------------------------------------------
New York State Mortgage Agency, Homeowner Mortgage
Revenue Bonds, AMT:
NR* Aa2 985 Series 58, 6.40% due 4/01/2027 1,072
AAA Aaa 2,140 Series 67, 5.70% due 10/01/2017 (d) 2,263
NR* Aa2 6,000 Series 67, 5.80% due 10/01/2028 6,359
------------------------------------------------------------------------------------------
New York State Mortgage Agency, Homeowner Mortgage
Revenue Refunding Bonds:
NR* Aa2 2,500 AMT, Series 54, 6.20% due 10/01/2026 2,689
NR* Aa2 1,500 Series 59, 6.25% due 4/01/2027 1,626
NR* Aa2 1,000 Series 61, 5.80% due 10/01/2017 1,052
------------------------------------------------------------------------------------------
New York State Urban Development Corporation Revenue
Bonds:
AAA Aaa 10,000 (Correctional Capital Facilities), Series 6,
5.375% due 1/01/2025 (c) 10,294
AAA Aaa 5,235 (Correctional Facilities Services Contract),
Series B, 4.75% due 1/01/2028 (c) 4,967
NR* Aaa 3,875 RITR, Series 26, 7.62% due 1/01/2025 (g) 4,210
------------------------------------------------------------------------------------------
AAA NR* 1,775 Niagara, New York, Frontier Authority, Airport
Revenue Bonds (Buffalo Niagara International
Airport), AMT, 5% due 4/01/2028 (e) 1,717
------------------------------------------------------------------------------------------
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 (d) 10,699
------------------------------------------------------------------------------------------
AAA Aaa 7,090 Suffolk County, New York, Water Authority,
Waterworks Revenue Bonds, Series A, 5% due
6/01/2022 (c) 7,013
------------------------------------------------------------------------------------------
AAA Aaa 11,000 Syracuse, New York, Housing Authority, Mortgage
Revenue Bonds (Loretto Rest), Series A,
5.70% due 8/01/2027 (c)(f) 11,642
================================================================================================================
Total Investments (Cost--$238,769)--99.0% 248,134
Other Assets Less Liabilities--1.0% 2,584
--------
Net Assets--100.0% $250,718
========
</TABLE>
================================================================================
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at February
28, 1999.
(b) FSA Insured.
(c) AMBAC Insured.
(d) MBIA Insured.
(e) FGIC Insured.
(f) FHA Insured.
(g) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at February 28, 1999.
(h) Prerefunded.
+ Highest short-term rating by Moody's Investors Service, Inc.
* Not Rated.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of February 28, 1999 were as
follows:
- --------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------
AAA/Aaa........................... 82.7%
AA/Aa............................. 7.1
A/A............................... 8.6
Other+............................ 0.6
- --------------------------------------------
+ Temporary investments in short-term municipal securities.
6 & 7
<PAGE>
MuniHoldings New York Insured Fund, Inc., February 28, 1999
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of February 28, 1999
=======================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$238,769,209)
(Note 1a) ............................................. $ 248,133,951
Cash .................................................. 20,078
Interest receivable ................................... 2,949,000
Prepaid expenses and other assets ..................... 11,465
-------------
Total assets .......................................... 251,114,494
-------------
=======================================================================================================
Liabilities: Payables:
Investment adviser (Note 2) ......................... $ 98,495
Dividends to shareholders (Note 1f) ................. 70,089
Offering costs (Note 1e) ............................ 62,374 230,958
-------------
Accrued expenses and other liabilities ................ 165,889
-------------
Total liabilities ..................................... 396,847
-------------
=======================================================================================================
Net Assets: Net assets ............................................ $ 250,717,647
=============
=======================================================================================================
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 (9,787,106a
shares issued and outstanding) ...................... $ 978,710
Paid-in capital in excess of par ...................... 144,677,715
Undistributed investment income--net .................. 894,276
Accumulated realized capital losses on investments--net (197,796)
Unrealized appreciation on investments--net ........... 9,364,742
-------------
Total--Equivalent to $15.91 net asset value per share
of Common Stock (market price--$15.4375) .............. 155,717,647
-------------
Total capital ......................................... $ 250,717,647
=============
=======================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended February 28, 1999
===================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $ 6,515,190
Income
(Note 1d):
===================================================================================================
Expenses: Investment advisory fees (Note 2) ...................... $ 688,486
Commission fees (Note 4) ............................... 121,923
Professional fees ...................................... 33,391
Transfer agent fees .................................... 20,673
Accounting services (Note 2) ........................... 12,967
Printing and shareholder reports ....................... 11,935
Directors' fees and expenses ........................... 9,365
Custodian fees ......................................... 9,186
Listing fees ........................................... 8,192
Pricing fees ........................................... 4,467
Other .................................................. 9,062
-----------
Total expenses before reimbursement .................... 929,647
Reimbursement of expenses (Note 2) ..................... (49,203)
-----------
Total expenses after reimbursement ..................... 880,444
-----------
Investment income--net ................................. 5,634,746
-----------
===================================================================================================
Realized & Realized gain on investments--net ...................... 745,816
Unrealized Change in unrealized appreciation on investments--net .. (639,915)
Gain (Loss) -----------
on Invest- Net Increase in Net Assets Resulting from Operations ... $ 5,740,647
ments--Net ===========
(Notes 1b,
1d & 3):
===================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniHoldings New York Insured Fund, Inc., February 28, 1999
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
For the For the
Six Months Period
Ended Sept. 19, 1997+
Increase (Decrease) in Net Assets: Feb. 28, 1999 to Aug. 31, 1998
============================================================================================================
<S> <C> <C>
Operations: Investment income--net ................................... $ 5,634,746 $ 11,053,516
Realized gain on investments--net ........................ 745,816 884,972
Change in unrealized appreciation on investments--net .... (639,915) 10,004,657
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Net increase in net assets resulting from operations ..... 5,740,647 21,943,145
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============================================================================================================
Dividends & Investment income--net:
Distribu- Common Stock ........................................... (4,320,684) (7,304,626)
tions to Preferred Stock ........................................ (1,194,283) (2,974,393)
Shareholders Realized gain on investments--net:
(Note 1f): Common Stock ........................................... (1,326,015) --
Preferred Stock ........................................ (502,569) --
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ............................ (7,343,551) (10,279,019)
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============================================================================================================
Capital Stock Proceeds from issuance of Common Stock ................... -- 146,625,000
Transactions Proceeds from issuance of Preferred Stock ................ -- 95,000,000
(Notes 1e Value of shares issued to Common Stock Shareholders in
& 4): 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)
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Net increase in net assets derived from capital stock
transactions ............................................. -- 240,556,420
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============================================================================================================
Net Assets: Total increase (decrease) in net assets .................. (1,602,904) 252,220,546
Beginning of period ...................................... 252,320,551 100,005
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End of period* ........................................... $ 250,717,647 $ 252,320,551
============= =============
============================================================================================================
* Undistributed investment income--net ..................... $ 894,276 $ 774,497
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</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
The following per share data and ratios have been derived For the For the
from information provided in the financial statements. Six Months Period
Ended Sept. 19, 1997+
Increase (Decrease) in Net Asset Value: Feb. 28, 1999 to Aug. 31, 1998
=====================================================================================================================
<S> <C> <C> <C>
Per Share Net asset value, beginning of period ........................... $ 16.07 $ 15.00
Operating ------------- -------------
Performance: Investment income--net ......................................... .57 1.13
Realized and unrealized gain on investments--net ............... .02 1.11
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Total from investment operations ............................... .59 2.24
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Less dividends and distributions to Common Stock shareholders:
Investment income--net ....................................... (.44) (.75)
Realized gain on investments--net ............................ (.14) --
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Total dividends and distributions to Common Stock shareholders . (.58) --
------------- -------------
Capital charge resulting from issuance of Common Stock ......... -- (.03)
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Effect of Preferred Stock activity:++
Dividends and distributions to Preferred Stock shareholders:
Investment income--net ..................................... (.12) (.30)
Realized gain on investments--net .......................... (.05) --
Capital charge resulting from issuance of Preferred Stock ...... -- (.09)
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Total effect of Preferred Stock activity ....................... (.17) (.39)
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Net asset value, end of period ................................. $ 15.91 $ 16.07
============= =============
Market price per share, end of period .......................... $ 15.4375 $ 15.3125
============= =============
=====================================================================================================================
Total Based on market price per share ................................ 4.57%+++ 7.21%+++
Investment ============= =============
Return:** Based on net asset value per share ............................. 2.69%+++ 12.52%+++
============= =============
=====================================================================================================================
Ratios to Expenses, net of reimbursement ................................. .70%* .50%*
Average ============= =============
Net Assets:*** Expenses ....................................................... .74%* .75%*
============= =============
Investment income--net ......................................... 4.50%* 4.81%*
============= =============
=====================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 155,718 $ 157,321
Data: ============= =============
Preferred Stock outstanding, end of period (in thousands) ...... $ 95,000 $ 95,000
============= =============
Portfolio turnover ............................................. 15.54% 52.91%
============= =============
=====================================================================================================================
Leverage: Asset coverage per $1,000 ...................................... $ 2,639 $ 2,656
============= =============
=====================================================================================================================
Dividends Series A--Investment income--net ............................... $ 318 $ 796
Per Share on ============= =============
Preferred Series B--Investment income--net ............................... $ 310 $ 769
Stock ============= =============
Outstanding:
=====================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may
result in substantially different returns. Total investment
returns exclude the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred Stock
shareholders.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on October 7, 1997.
+++ Aggregate total investment return.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniHoldings New York Insured Fund, Inc., February 28, 1999
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. These unaudited financial statements reflect
all adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. 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 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.
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 0.55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the six months ended February
28, 1999, FAM earned fees of $688,486, of which $49,203 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 six
months ended February 28, 1999 were $38,785,565 and $45,984,943, respectively.
Net realized gains for the six months ended February 28, 1999 and net unrealized
gains as of February 28, 1999 were as follows:
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Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................. $ 745,816 $9,364,742
---------- ----------
Total .................................. $ 745,816 $9,364,742
========== ==========
- --------------------------------------------------------------------------------
As of February 28, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $9,364,742, of which $9,387,541 related to appreciated
securities and $22,799 related to depreciated securities. The aggregate cost of
investments at February 28, 1999 for Federal income tax purposes was
$238,769,209.
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 six months ended February 28, 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
February 28, 1999 were as follows: Series A, 2% and Series B, 2.14%.
Shares issued and outstanding during the six months ended February 28, 1999
remained constant and during the period
12 & 13
<PAGE>
MuniHoldings New York Insured Fund, Inc., February 28, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
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 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended February 28, 1999, MLPF&S earned $109,554
as commissions.
5. Subsequent Event:
On March 8, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.065830 per share,
payable on March 30, 1999 to shareholders of record as of March 24, 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.
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.
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
Patrick D. Sweeney, Secretary
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of MuniHoldings New York Insured Fund, Inc. has
recently retired. His colleagues at Merrill Lynch Asset Management, L.P. join
the Fund's Board of Directors in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
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
14 & 15
<PAGE>
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 shareholders 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--2/99
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