MUNIHOLDINGS
NEW JERSEY
INSURED FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
July 31, 2000
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc.
The Benefits and Risks of Leveraging
MuniHoldings New Jersey Insured Fund, Inc. utilizes 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 of 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 investment 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 Jersey Insured Fund, Inc., July 31, 2000
TO OUR SHAREHOLDERS
For the 12-month period ended July 31, 2000, the Common Stock of MuniHoldings
New Jersey Insured Fund, Inc. earned $0.776 per share income dividends, which
included earned and unpaid dividends of $0.060. This represents a net annualized
yield of 5.90%, based on a month-end net asset value of $13.14 per share. During
the same period, the total investment return on the Fund's Common Stock was
-3.04%, based on a change in per share net asset value from $14.47 to $13.14,
and assuming reinvestment of $0.784 per share ordinary income dividends.
For the six-month period ended July 31, 2000, the Fund's Auction Market
Preferred Stock had an average yield as follows: Series A, 3.75%; Series B,
3.82%; Series C, 4.33%; and Series D, 4.12%.
The Municipal Market Environment
During the six months ended July 31, 2000, US domestic economic growth remained
robust. After growing at a 4.2% annual rate in 1999, US domestic economic growth
expanded at a 4.8% rate during the first quarter of 2000 and at a 5.2% rate
during the second quarter. However, despite these significant growth rates, few
price measure indicators have shown any meaningful signs of future price
pressures at the consumer level, despite the lowest unemployment rates since
1970. With few signs of any economic slowdown, the Federal Reserve Board
continued to raise short-term interest rates in February, March and May 2000.
The Federal Reserve Board cited both the continued growth of US employment and
the continued strength of US equity markets as reasons for attempting to
moderate US economic growth before inflationary price pressures can occur.
However, since then fixed-income markets have largely ignored strong economic
fundamentals and concentrated upon very positive technical supply factors.
Declining bond issuance--both current, and more importantly, expected future
issuance--helped push bond yields lower into mid-April 2000. In late January and
early February 2000, the US Treasury announced its intention to reduce the
amounts to be auctioned in the quarterly Treasury note and bond auctions.
Furthermore, budgetary surpluses allowed the US Treasury to repurchase
outstanding, higher-couponed Treasury issues, primarily in the 15-year and
longer maturity sector. Both these actions resulted in significant reduction in
the outstanding supply of longer-dated maturity US Treasury debt. Domestic and
international investors quickly began to accumulate what was expected to become
a scarce commodity and bond prices quickly rose.
By mid-April 2000, US Treasury bond yields had declined more than 80 basis
points (0.80%) to 5.67%. During the remainder of the period, US Treasury bond
prices were volatile as strong economic reports and investors' concerns of
additional moves by the Federal Reserve Board occasionally overshadowed the
positive technical position of the long-term US Treasury bond market.
Recently, a number of economic indicators have begun to suggest that the actions
taken by the Federal Reserve Board in 1999 and early 2000 have started to affect
US economic growth. Both new home sales and consumer spending have slowed,
suggesting that economic growth may subside into a 4%-4.5% range by late 2000.
In our opinion, this range of growth was targeted by the Federal Reserve Board
as being sustainable, given current productivity measures, without endangering
the present benign inflationary environment.
By June, investor focus returned to the dwindling supply of long-term US
Treasury securities and bond prices generally rose for the remainder of the
period. The decline in long-term US Treasury bond yields resulted in an inverted
yield curve as short-term and intermediate-term interest rates did not fall
proportionately to long-term interest rates as the Federal Reserve Board was
expected to continue to raise short-term interest rates. The current inversion
has had as much to do with debt reduction and US Treasury buybacks as with
investor expectations of slower economic growth. During the last six months, US
Treasury bond yields have declined more than 70 basis points to end the period
at 5.78%, their lowest monthly closing level since May 1999.
Tax-exempt bond yields also have declined in recent months. The decline has
largely been in response to the rally in US Treasury securities, as well as a
continued positive technical supply environment. States such as California and
Maryland have announced that their large current and anticipated future budget
surpluses will permit the cancellation or postponement of expected bond
issuance. Additionally, some issuers have also initiated tenders to repurchase
existing debt, reducing the supply of tax-exempt bonds in the secondary market
as well. Given the decline in available long-term US Treasury securities, some
investors who need longer maturity investment vehicles have begun to consider
long-term municipal bonds as potential substitutes. This has further
strengthened the overall positive technical position of the tax-exempt market.
During the last six months, long-term municipal revenue bond yields have
declined nearly 50 basis points to 5.85%, their lowest level since late August
1999, as measured by the Bond Buyer Revenue Bond Index.
The relative underperformance of the municipal bond market in recent months has
been especially disappointing given the strong technical position the tax-exempt
bond market has enjoyed. The issuance of long-term tax-exempt securities has
dramatically declined. During the last year, almost $200 billion in new
long-term municipal securities was issued, a decline of almost 20% compared to
the same period a year earlier. For the six months ended July 31, 2000,
approximately $100 billion in new tax-exempt bonds was underwritten, a decline
of 17% compared to the same period in 1999.
Although investors received more than $45 billion in coupon payments, bond
maturities and the proceeds from early bond redemptions during June and July,
overall investor demand has diminished. Long-term municipal bond mutual funds
have seen consistent outflows in recent months as the yields of individual
securities have risen faster than those of larger, more diverse mutual funds.
Thus far this year, tax-exempt mutual funds have had net redemptions of more
than $12 billion.
However, the rate at which these redemptions have been occurring has slowed in
recent months. Recent US equity market volatility, especially in the NASDAQ, has
reduced some investor interest in the stock market. This investor interest,
especially earlier this year, had been siphoning away demand for municipal bonds
by retail investors. Also, the demand from property and casualty companies is
expected to increase in the coming months. These firms are becoming more
profitable after experiencing losses in the past few years resulting from a
series of weather-related natural disasters. Yet as positive as the tax-exempt
bond market's technical environment has been for much of this year, investor
response to the reduction in both current and future supply of US Treasury bonds
has been overwhelmingly positive and municipal bond yields have underperformed
their taxable counterparts.
Significantly lower municipal bond yields are still likely to require weaker US
employment growth and consumer spending. The actions taken in recent months by
the Federal Reserve Board should eventually slow US economic growth. Recent
declines in US new home sales are perhaps the first sign that consumer spending
is being slowed by higher interest rates. Until further signs develop, it is
likely that the municipal bond market's current favorable technical position
will dampen significant tax-exempt interest rate volatility and provide a stable
environment for eventual improvement in municipal bond prices.
Portfolio Strategy
During the fiscal year ended July 31, 2000, the municipal bond market was
volatile, resulting from very strong economic growth and further potential
tightening of monetary policy by the Federal Reserve Board. By October 1999, we
initiated a strategy in which we sold interest rate-sensitive issues, which had
been negatively affecting the Fund's total returns. As a replacement, we
structured premium coupon bonds (6% or larger) in the new-issue New Jersey
market. These bonds enhanced the Fund's dividend and helped lessen the Fund's
volatility. By July 31, 2000, 95.9% of the Fund's net assets were rated A or
better by at least one of the major rating agencies. The Fund also remained
2 & 3
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
fully invested in an effort to enhance shareholder income.
At the end of January 2000, the US Treasury had announced that it would reduce
the amount of Treasury notes and bonds to be auctioned. This helped the New
Jersey municipal market, as well as all fixed-income markets, to rally. We
continued our strategy of selling discounts and purchasing premium bonds
whenever available. New-issue supply in New Jersey in the first half of 2000 was
down 3% compared to the same period a year ago.
In Conclusion
We appreciate your ongoing interest in MuniHoldings New Jersey Insured Fund,
Inc., and we look forward to serving your investment needs in the months and
years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Portfolio Manager
September 7, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
New Jersey--94.0% AAA Aaa $ 1,005 Atlantic City, New Jersey, Municipal Utilities Revenue
Bonds, 5% due 6/01/2022 (a) $ 937
---------------------------------------------------------------------------------------------------------------
Bernards Township, New Jersey, School District, GO:
AAA A1 3,205 5.30% due 1/01/2022 3,101
AAA A1 2,870 5.30% due 1/01/2023 2,768
---------------------------------------------------------------------------------------------------------------
Camden County, New Jersey, Improvement Authority, Lease Revenue Bonds (c):
AAA Aaa 1,540 5.50% due 9/01/2016 1,554
AAA Aaa 2,635 5.375% due 9/01/2019 2,596
---------------------------------------------------------------------------------------------------------------
NR* Aaa 430 Carteret, New Jersey, Board of Education, COP, 6% due 1/15/2024 (d) 448
---------------------------------------------------------------------------------------------------------------
AAA Aaa 6,510 Casino Reinvestment Development Authority, New Jersey, Parking Fee
Revenue Bonds, Series A, 5.25% due 10/01/2017 (c) 6,380
---------------------------------------------------------------------------------------------------------------
Delaware River Port Authority of Pennsylvania and New Jersey Revenue Bonds:
AAA Aaa 5,000 5.50% due 1/01/2012 (c) 5,167
AAA Aaa 3,250 5.625% due 1/01/2013 (c) 3,366
AAA Aaa 4,365 6% due 1/01/2018 (c) 4,582
AAA Aaa 5,500 6% due 1/01/2019 (c) 5,770
AAA Aaa 8,025 (Port District Project), Series B, 5% due 1/01/2026 (d) 7,386
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 East Orange, New Jersey, Water Utility, GO, Refunding, 5.70% due
6/15/2022 (a) 1,012
---------------------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Essex County, New Jersey, Improvement Authority, Lease Revenue Bonds
(Correctional Facility Project), 6% due 10/01/2025 (b) 4,179
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Essex County, New Jersey, Improvement Authority, Lease Revenue Refunding
Bonds (County Jail and Youth House Project), 5.35% due 12/01/2024 (a) 4,854
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,705 Essex County, New Jersey, Improvement Authority, Utility System Revenue
Bonds (East Orange Franchise), 6% due 7/01/2018 (d) 2,834
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,015 Jersey City, New Jersey, GO, Refunding, Quality School, Series A, 5.375%
due 9/01/2017 1,014
---------------------------------------------------------------------------------------------------------------
Lafayette Yard, New Jersey, Community Development Revenue Bonds
(Hotel/Conference Center Project--Trenton) (d):
NR* Aaa 1,125 6.125% due 4/01/2016 1,207
NR* Aaa 4,250 6% due 4/01/2029 4,437
---------------------------------------------------------------------------------------------------------------
AAA Aaa 825 Lopatcong Township, New Jersey, Board of Education, GO, 5.70% due
7/15/2025 (c) 833
---------------------------------------------------------------------------------------------------------------
Metuchen, New Jersey, School District, GO (b):
AAA NR* 1,000 5.20% due 9/15/2024 953
AAA NR* 1,190 5.20% due 9/15/2025 1,131
AAA NR* 885 5.20% due 9/15/2026 839
---------------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, COP (d):
AAA Aaa 4,630 5.25% due 6/15/2023 4,445
AAA Aaa 6,600 5.30% due 6/15/2029 6,309
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,250 Middlesex County, New Jersey, COP, Refunding, 5% due 2/15/2019 (d) 4,000
---------------------------------------------------------------------------------------------------------------
AA+ Aaa 5,270 Middlesex County, New Jersey, Improvement Authority, Lease Revenue Bonds
(Educational Services Commission Projects), 6% due 7/15/2025 5,520
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,100 Montgomery Township, New Jersey, Board of Education, COP, 4.875% due
9/01/2023 (d) 992
---------------------------------------------------------------------------------------------------------------
Moorestown Township, New Jersey, School District, GO (b):
AAA Aaa 1,180 4.90% due 1/01/2021 1,083
AAA Aaa 1,315 4.95% due 1/01/2023 1,209
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,015 New Brunswick, New Jersey, Housing Authority, Lease Revenue Refunding
Bonds, 4.625% due 7/01/2024 (b) 4,327
---------------------------------------------------------------------------------------------------------------
A1+ P1 100 New Jersey EDA, Economic Development Revenue Refunding Bonds
(Stolthaven Project), VRDN, Series A, 4.05% due 1/15/2018 (f) 100
---------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio Abbreviations
To simplify the listings of MuniHoldings New Jersey 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 at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
RIB Residual Interest Bonds
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
New Jersey BBB- NR* $ 6,650 New Jersey EDA, First Mortgage Revenue Refunding Bonds (Fellowship
(continued) Village), Series A, 5.50% due 1/01/2025 $ 5,219
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 New Jersey EDA, Lease Revenue Bonds (University of Medicine and
Dentistry--International Center for Public Health Project), 6%
due 6/01/2032(a) 5,194
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds:
AAA Aaa 6,075 (NUI Corporation Projects), AMT, Series A, 5.70% due 6/01/2032 (d) 5,969
A1+c VMIG1+ 2,000 (New Jersey Natural Gas Co. Project), VRDN, AMT, Series A, 4.20%
due 8/01/2030 (a)(f) 2,000
A1+c VMIG1+ 2,100 (New Jersey Natural Gas Co. Project), VRDN, Series A, 3.70% due
1/01/2028 (a)(f) 2,100
NR* Aaa 7,210 RIB, AMT, Series 161, 6.94% due 6/01/2032 (d)(e) 6,959
---------------------------------------------------------------------------------------------------------------
AAA Aaa 6,155 New Jersey EDA, Revenue Bonds (Transportation Project), Sub-Lease,
Series A, 6% due 5/01/2016 (c) 6,484
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, State Lease Revenue Bonds (State Office Buildings
Projects) (a):
AAA Aaa 3,000 6% due 6/15/2015 3,188
AAA Aaa 4,620 6.25% due 6/15/2020 4,965
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, Water Facilities Revenue Bonds, AMT:
AAA Aaa 13,000 (American Water Company Inc.), Series A, 5.25% due 7/01/2038 (b) 11,926
AAA Aaa 14,800 (Middlesex Water Company Project), 5.35% due 2/01/2038 13,808
---------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds:
AAA Aaa 6,750 (Atlantic Health Systems Hospital Corporation), Series A, 5% due
7/01/2027 (a) 6,091
AAA Aaa 2,750 (Barnert Hospital), 5% due 8/01/2025 (d) 2,502
BBB NR* 3,075 (Christian Health Care Center), Series A, 5.50% due 7/01/2018 2,545
AAA Aaa 2,875 (JFK Medical Center--Hartwyck), 5% due 7/01/2025 (d) 2,609
AAA Aaa 3,000 (Medical Center at Princeton Obligation Group), 5% due 7/01/2023 (a) 2,740
AAA Aaa 11,340 (Meridian Health System Obligation Group), 5.375% due 7/01/2024 (c) 10,904
BBB- Baa3 1,150 (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 966
AAA Aaa 5,255 (Virtua Health Issue), 4.50% due 7/01/2028 (c) 4,319
---------------------------------------------------------------------------------------------------------------
New Jersey Sports and Exposition Authority, State Contract
Revenue Bonds (d):
AAA Aaa 2,400 Series A, 6% due 3/01/2013 2,571
A1+ VMIG1+ 6,200 VRDN, Series C, 4% due 9/01/2024 (f) 6,200
---------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority Revenue Bonds:
AAA Aaa 8,905 (Capital Improvement Fund), Series A, 5.75% due 9/01/2017 (c) 9,179
AAA Aaa 9,420 (Capital Improvement Fund), Series A, 5.75% due 9/01/2018 (c) 9,681
AAA Aaa 2,500 (New Jersey Institute of Teachers), Series 1995E, 5.375% due
7/01/2025 (d) 2,418
AAA Aaa 1,950 (University Medical Dentistry of New Jersey), Series C, 5.125%
due 12/01/2029 (a) 1,815
---------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority, Revenue
Refunding Bonds:
BBB Baa2 2,030 (Monmouth University), Series C, 5.75% due 7/01/2017 2,008
BBB Baa2 2,000 (Monmouth University), Series C, 5.80% due 7/01/2022 1,949
AAA Aaa 2,730 (Ramapo College), Series G, 4.625% due 7/01/2028 (a) 2,324
---------------------------------------------------------------------------------------------------------------
AAA NR* 11,130 New Jersey State Higher Education Assistance Authority, Student Loan
Revenue Bonds, AMT, Series A, 5.25% due 6/01/2018 (d) 10,645
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,200 New Jersey State Highway Authority, Garden State Parkway, General
Revenue Refunding Bonds, 5.75% due 1/01/2015 (b) 2,295
---------------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds (d):
AAA Aaa 6,195 AMT, Series K, 6.375% due 10/01/2026 6,315
AAA Aaa 2,000 AMT, Series M, 6.95% due 10/01/2022 2,101
AAA Aaa 2,000 AMT, Series M, 7% due 10/01/2026 2,106
AAA Aaa 1,000 AMT, Series U, 5.60% due 10/01/2012 1,024
AAA Aaa 2,820 AMT, Series U, 5.65% due 10/01/2013 2,878
AAA Aaa 3,000 AMT, Series U, 5.75% due 4/01/2018 3,021
AAA Aaa 2,320 AMT, Series U, 5.85% due 4/01/2029 2,321
AAA Aaa 3,000 Series L, 6.65% due 10/01/2014 3,132
---------------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Refunding Bonds (d):
AAA Aaa 2,440 AMT, Series S, 5.95% due 10/01/2017 2,460
AAA Aaa 2,800 Series V, 5.25% due 4/01/2026 2,588
---------------------------------------------------------------------------------------------------------------
New Jersey State Transit Corporation, COP (Federal Transit
Administration Grants), Series A (a):
AAA Aaa 1,500 6% due 9/15/2013 1,603
AAA Aaa 5,000 6.125% due 9/15/2015 5,340
---------------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority, Transportation
System Revenue Bonds, Series A:
AA Aa2 2,740 6% due 6/15/2016 2,892
AAA Aaa 2,500 5% due 6/15/2018 (c) 2,361
AAA Aaa 1,500 4.50% due 6/15/2019 (c) 1,292
AA Aa2 7,500 6% due 6/15/2019 7,858
---------------------------------------------------------------------------------------------------------------
AAA Aaa 20,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds,
Series A, 5.75% due 1/01/2019 (d) 20,496
---------------------------------------------------------------------------------------------------------------
North Bergen Township, New Jersey, Board of Education, COP (c):
NR* Aaa 1,250 5% due 12/15/2018 1,170
NR* Aaa 1,000 6% due 12/15/2019 1,047
NR* Aaa 1,580 6.25% due 12/15/2020 1,685
NR* Aaa 1,680 6.25% due 12/15/2021 1,785
---------------------------------------------------------------------------------------------------------------
AAA NR* 1,200 North Hudson, New Jersey, Sewer Authority Revenue Bonds, 5.125%
due 8/01/2022 (b) 1,137
---------------------------------------------------------------------------------------------------------------
NR* Aaa 3,035 Orange Township, New Jersey, Municipal Utility and Lease, GO, Refunding,
Series C, 5.10% due 12/01/2017 (d) 2,923
---------------------------------------------------------------------------------------------------------------
Paterson, New Jersey, Public School District, COP (d):
NR* Aaa 1,980 6.125% due 11/01/2015 2,128
NR* Aaa 2,000 6.25% due 11/01/2019 2,148
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Plainfield, New Jersey, Municipal Utilities Authority, Sewer Revenue
Bonds, Series A, 4.75% due 12/15/2023 (c) 885
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Plainfield, New Jersey, Municipal Utilities Authority, Solid Waste
Revenue Bonds, Series A, 4.75% due 12/15/2023 (c) 885
---------------------------------------------------------------------------------------------------------------
Rancocas Valley, New Jersey, Regional High School District, GO:
AAA Aaa 955 5.30% due 2/01/2024 (b) 923
AAA Aaa 770 5.30% due 2/01/2026 741
---------------------------------------------------------------------------------------------------------------
AA A1 3,095 Rutgers State University, New Jersey, Revenue Bonds, Series A, 5.20%
due 5/01/2027 2,911
---------------------------------------------------------------------------------------------------------------
Salem County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds:
AAA Aaa 5,000 (Atlantic City Electric Company), 6.15% due 6/01/2029 5,250
AAA Aaa 2,300 (Public Service Electric & Gas), Series C, 5.55% due 11/01/2033 (d) 2,270
---------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
New Jersey South Jersey Transportation Authority, New Jersey, Transportation
(concluded) System Revenue Refunding Bonds (a):
AAA Aaa $ 4,000 5% due 11/01/2017 $ 3,809
AAA Aaa 4,900 5.125% due 11/01/2022 4,641
---------------------------------------------------------------------------------------------------------------
NR* Aaa 8,650 Trenton, New Jersey, Parking Authority, Parking Revenue Bonds,
6.10% due 4/01/2026 (b) 9,098
---------------------------------------------------------------------------------------------------------------
Union County, New Jersey, Utilities Authority, County
Deficiency Revenue Refunding Bonds:
AAA Aaa 4,500 AMT, Series A-2, 5% due 6/15/2028 (a) 4,025
AA+ Aaa 2,065 Series C-1, 5% due 6/15/2028 1,890
---------------------------------------------------------------------------------------------------------------
Union County, New Jersey, Utilities Authority, Senior Lease Revenue
Refunding Bonds (Ogden Martin System of Union), AMT, Series A (a):
AAA Aaa 2,305 5.375% due 6/01/2019 2,224
AAA Aaa 1,755 5.375% due 6/01/2020 1,688
AAA Aaa 3,050 5.35% due 6/01/2023 2,907
---------------------------------------------------------------------------------------------------------------
Wall Township, New Jersey, School District, GO (c):
AAA Aaa 2,540 4.75% due 7/15/2022 2,257
AAA Aaa 1,685 4.75% due 7/15/2023 1,493
---------------------------------------------------------------------------------------------------------------
West Orange, New Jersey, Board of Education, COP (d):
NR* Aaa 2,040 5.75% due 10/01/2014 2,138
NR* Aaa 3,590 6% due 10/01/2024 3,763
===================================================================================================================================
New York--3.2% AAA Aaa 4,750 Port Authority of New York and New Jersey, Consolidated Revenue
Refunding Bonds, AMT, 119th Series, 5.50% due 9/15/2019 (b) 4,662
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,750 Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds (JFK International Air Terminal Project), AMT, Series 6,
5.75% due 12/01/2025 (d) 4,764
---------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation Revenue
Refunding Bonds (Versatile Structure Obligation), VRDN (f):
A1+ VMIG1+ 200 AMT, Series 4, 4.15% due 4/01/2024 200
A1+ VMIG1+ 2,600 AMT, Series 6, 4.15% due 12/01/2017 2,600
A1+ VMIG1+ 800 Series 5, 4.10% due 8/01/2024 800
===================================================================================================================================
Puerto Rico--5.2% AAA Aaa 11,000 Puerto Rico Commonwealth, GO, Public Improvement, 6% due 7/01/2029 (d) 11,492
---------------------------------------------------------------------------------------------------------------
A Baa1 6,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B, 6% due 7/01/2026 6,149
---------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial Tourist, Educational, Medical and Environmental
Control Facilities Revenue Bonds, Series A:
AAA Aaa 1,780 (Hospital Auxilio Mutuo Obligation Group), 6.25% due 7/01/2024 (d) 1,848
AA Aa2 1,750 (Hospital de la Concepcion), 6.50% due 11/15/2020 1,902
===================================================================================================================================
Total Investments (Cost--$425,493)--102.4% 418,932
Liabilities in Excess of Other Assets--(2.4%) (9,797)
--------
Net Assets--100.0% $409,135
========
===================================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FSA Insured.
(d) MBIA Insured.
(e) 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 July 31, 2000.
(f) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at July 31, 2000.
+ Highest short-term rating by Moody's Investors Service, Inc.
* Not Rated.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of July 31, 2000
===========================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$425,493,324) ................ $ 418,932,264
Cash ................................................................. 50,298
Receivables:
Securities sold ................................................... $ 6,255,674
Interest .......................................................... 4,685,270 10,940,944
-------------
Prepaid expenses ..................................................... 4,604
-------------
Total assets ......................................................... 429,928,110
-------------
===========================================================================================================================
Liabilities: Payables:
Securities purchased .............................................. 20,186,889
Dividends to shareholders ......................................... 254,174
Investment adviser ................................................ 152,028
Offering costs .................................................... 42,809
Reorganization costs .............................................. 41,419 20,677,319
-------------
Accrued expenses ..................................................... 115,329
Total liabilities .................................................... 20,792,648
-------------
===========================================================================================================================
Net Assets: Net assets ........................................................... $ 409,135,462
=============
===========================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share (7,000 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $ 175,000,000
Common Stock, par value $.10 per share (17,817,155 shares issued
and outstanding) .................................................. $ 1,781,716
Paid-in capital in excess of par ..................................... 272,213,540
Undistributed investment income--net ................................. 1,142,342
Accumulated realized capital losses on investments--net .............. (34,214,737)
Accumulated distributions in excess of realized capital gains on
investments--net .................................................. (226,339)
Unrealized depreciation on investments--net .......................... (6,561,060)
-------------
Total--Equivalent to $13.14 net asset value per share of Common Stock
(market price--$11.6875) .......................................... 234,135,462
-------------
Total capital ........................................................ $ 409,135,462
=============
===========================================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended July 31, 2000
===================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ............... $ 14,575,794
Income:
===================================================================================================================================
Expenses: Investment advisory fees ............................................... $ 1,405,167
Reorganization expenses ................................................ 410,392
Commission fees ........................................................ 291,062
Transfer agent fees .................................................... 70,430
Professional fees ...................................................... 66,208
Accounting services .................................................... 47,844
Printing and shareholder reports ....................................... 26,433
Listing fees ........................................................... 23,478
Custodian fees ......................................................... 23,305
Directors' fees and expenses ........................................... 21,303
Organizational expenses ................................................ 14,688
Pricing fees ........................................................... 3,333
Other .................................................................. 16,237
-------------
Total expenses before reimbursement .................................... 2,419,880
Reimbursement of expenses .............................................. (175,046)
-------------
Total expenses after reimbursement ..................................... 2,244,834
-------------
Investment income--net ................................................. 12,330,960
-------------
===================================================================================================================================
Realized & Unrealized Realized loss on investments--net ...................................... (22,774,839)
Gain (Loss) on Change in unrealized appreciation/depreciation on investments--net ..... 23,363,613
Investments--Net: -------------
Net Increase in Net Assets Resulting from Operations ................... $ 12,919,734
=============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended
July 31,
------------------------------
Increase (Decrease) in Net Assets: 2000 1999
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ................................................ $ 12,330,960 $ 7,875,123
Realized gain (loss) on investments--net .............................. (22,774,839) 325,337
Change in unrealized appreciation/depreciation on investments--net .... 23,363,613 (4,373,963)
------------- -------------
Net increase in net assets resulting from operations .................. 12,919,734 3,826,497
------------- -------------
===================================================================================================================================
Dividends & Investment income--net:
Distributions to Common Stock ....................................................... (8,002,927) (5,676,267)
Shareholders: Preferred Stock .................................................... (4,279,115) (2,078,554)
Realized gain on investments--net:
Common Stock ....................................................... -- (77,651)
Preferred Stock .................................................... -- (130,955)
In excess of realized gain on investments to Common Stock
shareholders--net .................................................... -- (226,339)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders ........................................ (12,282,042) (8,189,766)
------------- -------------
===================================================================================================================================
Capital Stock Proceeds from issuance of Common Stock resulting from reorganization .. 132,197,334 --
Transactions: Proceeds from issuance of Preferred Stock resulting from reorganization 107,000,000 --
Value of shares issued to Common Stock shareholders in reinvestment
of dividends and distributions .........,............................. -- 696,570
------------- -------------
Net increase in net assets derived from capital stock transactions .... 239,197,334 696,570
------------- -------------
===================================================================================================================================
Net Assets: Total increase (decrease) in net assets ............................... 239,835,026 (3,666,699)
Beginning of year ..................................................... 169,300,436 172,967,135
------------- -------------
End of year* .......................................................... $ 409,135,462 $ 169,300,436
============= =============
===================================================================================================================================
*Undistributed investment income--net .................................. $ 1,142,342 $ 683,924
============= =============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived For the Year Ended
from information provided in the financial statements. July 31, For the Period
------------------------ March 11, 1998+
Increase (Decrease) in Net Asset Value: 2000 1999 to July 31, 1998
====================================================================================================================================
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........................... $ 14.47 $ 15.09 $ 15.00
Operating ---------- ---------- ---------
Performance: Investment income--net ......................................... 1.07 1.13 .46
Realized and unrealized gain (loss) on investments--net ........ (1.27) (.58) .16
---------- ---------- ---------
Total from investment operations ............................... (.20) .55 .62
---------- ---------- ---------
Less dividends and distributions to Common Stock shareholders:
Investment income--net ...................................... (.78) (.81) (.26)
Realized gain on investments--net ........................... -- (.01) --
In excess of realized gain on investments--net .............. -- (.03) --
---------- ---------- ---------
Total dividends and distributions to Common Stock shareholders . (.78) (.85) (.26)
---------- ---------- ---------
Capital charge resulting from issuance of Common Stock ......... -- -- (.03)
---------- ---------- ---------
Effect of Preferred Stock activity:++
Dividends and distributions to PreferredStock shareholders:
Investment income--net ................................... (.35) (.30) (.12)
Realized gain on investments--net ........................ -- (.02) --
Capital charge resulting from issuance of Preferred Stock ...... -- -- (.12)
---------- ---------- ---------
Total effect of Preferred Stock activity ....................... (.35) (.32) (.24)
---------- ---------- ---------
Net asset value, end of period ................................. $ 13.14 $ 14.47 $ 15.09
========== ========== =========
Market price per share, end of period .......................... $ 11.6875 $ 13.4375 $ 15.375
========== ========== =========
====================================================================================================================================
Total Investment Based on market price per share ................................ (7.13%) (7.44%) 4.29%++++
Return:** ========== ========== =========
Based on net asset value per share ............................. (3.04%) 1.56% 2.35%++++
========== ========== =========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net Assets reorganization expenses*** .................................... 1.27% 1.22% .29%*
of Common Stock: ========== ========== =========
Total expenses, net of reimbursement*** ........................ 1.55% 1.22% .29%*
========== ========== =========
Total expenses*** .............................................. 1.67% 1.31% 1.21%*
========== ========== =========
Total investment income--net*** ................................ 8.52% 7.32% 8.17%*
========== ========== =========
Amount of dividends to Preferred Stock shareholders ............ 2.96% 1.93% 2.14%*
========== ========== =========
Investment income--net, to Common Stock shareholders ........... 5.56% 5.39% 6.03%*
========== ========== =========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Total Average reorganization expenses ....................................... .72% .75% .18%*
Net Assets:***+++ ========== ========== =========
Total expenses, net of reimbursement ........................... .88% .75% .18%*
========== ========== =========
Total expenses ................................................. .94% .80% .76%*
========== ========== =========
Total investment income--net ................................... 4.81% 4.48% 5.13%*
========== ========== =========
====================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ...................... 3.84% 3.04% 3.61%*
Average Net Assets ========== ========== =========
of Preferred Stock:
====================================================================================================================================
Supplemental Data: Net assets, net of Preferred Stock, end of period (in thousands) $ 234,135 $ 101,300 $ 104,967
========== ========== =========
Preferred Stock outstanding, end of period (in thousands) ...... $ 175,000 $ 68,000 $ 68,000
========== ========== =========
Portfolio turnover ............................................. 100.11% 64.93% 32.46%
========== ========== =========
==================================================================================================================================
Leverage: Asset coverage per $1,000 ...................................... $ 2,338 $ 2,490 $ 2,544
========== ========== =========
====================================================================================================================================
Dividends Per Share Series A--Investment income--net ............................... $ 896 $ 763 $ 317
On Preferred Stock ========== ========== =========
Outstanding: Series B--Investment income--net ............................... $ 898 $ 766 $ 300
========== ========== =========
Series C--Investment income--net ............................... $ 439 -- --
========== ========== =========
Series D--Investment income--net ............................... $ 418 -- --
========== ========== =========
====================================================================================================================================
</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 19, 1998 for Series
A and B and March 6, 2000 for Series C and D.
+++ Includes Common and Preferred Stock average net assets.
++++ Aggregate total investment return.
See Notes to Financial Statements.
12 & 13
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings New Jersey 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 accounting principles generally accepted in the United States of America,
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 MUJ. 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 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase
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) Organization expenses--In accordance with Statement of Position 98-5,
unamortized organization expenses of $14,688 were expensed during the year ended
July 31, 2000. This was considered to be a change in accounting principle and
had no material impact on the operations of the Fund.
(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.
(g) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $12 have been reclassified between undistributed net
investment income and accumulated net realized capital losses and $409,512 has
been reclassified between paid-in capital in excess of par and undistributed net
investment income. These reclassifications have no effect on net assets or net
asset value per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's port folio 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 July 31, 2000,
FAM earned fees of $1,405,167, of which $175,046 was voluntarily waived.
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 July 31, 2000 were $246,905,915 and $245,999,229, respectively.
Net realized losses for the year ended July 31, 2000 and net unrealized losses
as of July 31, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
--------------------------------------------------------------------------------
Long-term investments .................. $(21,623,050) $ (6,561,060)
Financial futures contracts ............ (1,151,789) --
------------ ------------
Total .................................. $(22,774,839) $ (6,561,060)
============ ============
--------------------------------------------------------------------------------
As of July 31, 2000, net unrealized depreciation for Federal income tax purposes
aggregated $8,177,402, of which $5,204,074 related to appreciated securities and
$13,381,476 related to depreciated securities. The aggregate cost of investments
at July 31, 2000 for Federal income tax purposes was $427,109,666.
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 July 31, 2000 increased by
10,816,659 as a result of the reorganization
14 & 15
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
and during the year ended July 31, 1999 increased by 44,928 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 July 31, 2000 were Series A, 2.75%; Series B, 2.99%; Series C, 4.14% and
Series D, 4.10%.
Shares issued and outstanding during the year ended July 31, 2000 increased by
4,280 as a result of the reorganization and during the year ended July 31, 1999
remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the year ended July 31, 2000, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $146,926 as commissions.
5. Acquisition of Other FAM-Managed Investment Companies:
On March 6, 2000, the Fund acquired all of the net assets of MuniHoldings New
Jersey Insured Fund II, Inc. and MuniHoldings New Jersey Insured Fund III, Inc.
pursuant to a plan of reorganization. The acquisition was accomplished by a
tax-free exchange of the following capital shares:
--------------------------------------------------------------------------------
Common Stock AMPS
Shares Shares
Exchanged Exchanged
--------------------------------------------------------------------------------
MuniHoldings New Jersey Insured Fund II, Inc. ...... 6,154,660 2,400
MuniHoldings New Jersey Insured Fund III, Inc. ..... 5,297,667 1,880
--------------------------------------------------------------------------------
In exchange for these shares, the Fund issued 10,816,659 Common Stock shares and
4,280 AMPS shares. As of that date, net assets of the acquired funds, including
unrealized depreciation and accumulated net realized capital losses, were as
follows:
--------------------------------------------------------------------------------
Accumulated
Net Unrealized Net Realized
Assets Depreciation Capital Losses
--------------------------------------------------------------------------------
MuniHoldings New Jersey Insured
Fund II, Inc. ..................... $129,890,849 $14,709,462 $6,937,095
MuniHoldings New Jersey Insured
Fund III, Inc. .................... $109,306,485 $11,969,912 $4,502,815
--------------------------------------------------------------------------------
The aggregate net assets of the Fund immediately after the acquisition amounted
to $392,754,800.
6. Capital Loss Carryforward:
At July 31, 2000, the Fund had a net capital loss carryforward of approximately
$7,536,000, of which $523,000 expires in 2006, $6,464,000 expires in 2007 and
$549,000 expires in 2008. This amount will be available to offset like amounts
of any future taxable gains.
7. Subsequent Event:
On August 8, 2000, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.059895 per share,
payable on August 30, 2000 to shareholders of record as of August 18, 2000.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
MuniHoldings New Jersey Insured Fund, Inc.
We have audited the accompanying statement of assets, liabilities and capital
of MuniHoldings New Jersey Insured Fund, Inc., including the schedule of
investments, as of July 31, 2000, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of July 31, 2000, by correspondence with the
custodian and brokers. 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 referred to
above present fairly, in all material respects, the financial position of
MuniHoldings New Jersey Insured Fund, Inc. at July 31, 2000 and the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated periods in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
MetroPark, New Jersey
August 26, 2000
16 & 17
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., July 31, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniHoldings New Jersey
Insured Fund, Inc. during its taxable year ended July 31, 2000 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Additionally, there were no capital gains distributions paid by the Fund during
the year.
Please retain this information for your records.
MANAGED DIVIDEND POLICY (unaudited)
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of 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.
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of July 31, 2000 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
--------------------------------------------------------------------------------
AAA/Aaa ................................................ 90.6%
AA/Aa .................................................. 3.8
A/A .................................................... 1.5
BBB/Baa ................................................ 3.1
Other+ ................................................. 3.4
--------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
18 & 19
<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
Jodi M. Pinedo, 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:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MUJ
MuniHoldings New Jersey Insured Fund, Inc. seeks to provide shareholders with
current income exempt from Federal income tax and New Jersey personal income
taxes by investing in a portfolio of long-term, investment-grade municipal
obligations the interest on which, in the opinion of bond counsel to the issuer,
is exempt from Federal income tax and New Jersey personal income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniHoldings New Jersey Insured Fund, Inc. for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance. The Fund
has leveraged its Common 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. Statements and other
information herein are as dated and are subject to change.
MuniHoldings New Jersey
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #HOLDNJ2--7/00
[RECYCLE LOGO] Printed on post-consumer recycled paper
