MUNIHOLDINGS
NEW JERSEY
INSURED FUND, INC.
STRATEGIC
Performance
Semi-Annual Report
January 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., January 31, 2000
TO OUR SHAREHOLDERS
For the six-month period ended January 31, 2000, the Common Stock of
MuniHoldings New Jersey Insured Fund, Inc. earned $0.414 per share income
dividends, which include earned and unpaid dividends of $0.068. This represents
a net annualized yield of 6.86%, based on a month-end net asset value of $11.97
per share. Over the same period, the total investment return on the Fund's
Common Stock was -14.42%, based on a change in per share net asset value from
$14.47 to $11.97 and assuming reinvestment of $0.415 per share income dividends.
For the six months ended January 31, 2000, the Fund's Auction Market Preferred
Stock had an average yield of 3.42% for Series A and 3.37% for Series B.
The Municipal Market Environment
During the six months ended January 31, 2000, continued strong domestic growth,
gradual improvement in foreign economies and investor concerns regarding future
inflationary pressures pushed long-term fixed-income bond yields higher. The
Federal Reserve Board continued to raise short-term interest rates in August and
November 1999 as well as just after the period's close, seeking to moderate US
economic growth and maintain the existing benign inflationary environment. US
economic growth, in part intensified by Year 2000 (Y2K) preparations, grew 5.8%
during the last fiscal quarter of 1999 and had an annual rate of 4.1% for 1999.
A number of inflationary indicators have also begun to signal some increase in
price pressures.
However, most investors believe that the Federal Reserve Board will be extremely
vigilant in preventing such pressures from any material escalation. US Treasury
bond yields responded by rising approximately 60 basis points (0.60%) by
mid-January 2000. A strong rally, largely based upon an expected significant
reduction in the future supply of US Treasury 30-year maturity bonds, pushed
yields lower to 6.50% at January 31, 2000. Over the last six months, yields on
30-year US Treasury bonds rose approximately 40 basis points.
The tax-exempt bond market was also under pressure throughout the entire period.
Despite receiving more than $30 billion in coupon payments, bond maturities and
proceeds from early redemptions in December and January, overall investor demand
has diminished. It is likely that the returns generated by the US equity market
have continued to attract investor attention and have left little demand for
competing investment alternatives. At January 31, 2000, the long-term tax-exempt
revenue bond yield, as measured by the Bond Buyer Revenue Index, was 6.34%, an
increase of nearly 70 basis points over the last six months.
Issuance by municipalities has significantly declined in recent months. Over the
last six months, less than $100 billion in long-term tax-exempt bonds were
issued, representing a decline of over 20% compared to the same period a year
ago. During the last three months, less than $45 billion in long-term bonds were
issued by various municipalities. This most recent quarterly issuance is 30%
below the level of the January 31, 1999 quarter. Additionally, during January
2000, less than $8 billion in municipal debt was underwritten, down more than
50% from January 1999 levels. This represents the lowest monthly issuance in
over five years. Toward the end of 1999, consensus estimates for 2000 annual
issuance were in the $210 billion-$215 billion range. January's underwritings,
as well as those expected to be issued in the near future, have led some
analysts to revise their forecasts to the $190 billion range.
We believe an overall reduction in bond supply in the coming year should help
support the municipal bond market's overall technical position. While tax-exempt
bond yields, which are at their highest level in over three years, have
attracted significant retail investor interest, institutional demand declined
sharply. Long-term municipal mutual funds have seen consistent outflows in
recent months as the yields of individual securities rose faster than those of
larger, more diverse mutual funds. During the six months ended January 31, 2000,
tax-exempt mutual funds have had net redemptions of approximately $9 billion.
Also, the demand from property and casualty insurance companies has weakened as
a result of the losses and anticipated losses incurred from a series of damaging
storms across much of the eastern United States. Additionally, many
institutional investors who have in recent years been attracted to the municipal
bond market by historically attractive tax-exempt bond yield ratios of over 90%,
found other asset classes even more attractive. Even with a reduced supply
position, tax-exempt issuers have been forced to repeatedly raise munici-pal
bond yields in an attempt to attract adequate demand. We believe a reduced bond
supply going forward is likely to promote a more closely balanced supply/demand
structure and foster a more stable tax-exempt interest rate environment.
Looking ahead, it appears to us that long-term tax-exempt bond yields will
remain under pressure, trading in a broad range centered around current levels.
Investors are also likely to remain concerned regarding future action by the
Federal Reserve Board in early 2000. Any improvement in bond prices may be
contingent upon weakening in both US employment growth and consumer spending.
The 100 basis point rise in US Treasury bond yields seen thus far could
negatively affect US economic growth. The US housing market is likely to be
among the first sectors to be affected, as some declines have already been
evidenced because of higher mortgage rates. We believe it is also unrealistic to
expect double-digit returns in US equity markets to continue indefinitely. Much
of the US consumer's wealth is tied to recent stock market appreciation. Any
slowing in these returns may reduce consumer spending. We believe that these
factors suggest that the worst of the recent increase in bond yields has passed
and stable, if not slightly improving, bond prices may be expected.
Portfolio Strategy
Throughout the six months ended January 31, 2000, our investment strategy
focused on seeking to enhance tax-exempt income. To achieve this goal, we kept
the Fund at an above-average duration as well as fully invested. During the
period, price volatility in the fixed-income market, particularly the municipal
market, was above average. This was the result of strong domestic growth,
concerns about inflation, and the uncertainty of the Y2K situation.
During the six months ended January 31, 2000, the long-term bond yield rose
approximately 25 basis points, while long-term tax-exempt interest rates rose
about 60 basis points. While this was not good for the Fund's total return, it
enabled us to purchase relatively high coupon bonds, which have not been
available in the New Jersey tax-exempt market since early 1995. These purchases
are intended to generate a higher level of tax-exempt income and limit the
effects the Fund may experience from any future interest rate volatility.
In Conclusion
On September 9, 1999, the Fund's Board of Directors approved a plan of
reorganization whereby the Fund would acquire substantially all of the assets
and liabilities of MuniHoldings New Jersey Insured Fund II, Inc. and
MuniHoldings New Jersey Fund III, Inc. in exchange for newly issued shares of
the Fund. The plan of reorganization was approved by shareholders on February
16, 2000, and the reorganization took place on March 6, 2000.
We appreciate your ongoing interest in MuniHoldings New Jersey Insured Fund,
Inc., and we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Portfolio Manager
March 8, 2000
2 & 3
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2000
PROXY RESULTS
During the six-month period ended January 31, 2000, MuniHoldings New Jersey
Insured Fund, Inc.'s Common Stock share holders voted on the following
proposals. Proposal 1 was approved at a shareholders' meeting on January 20,
2000. Proposals 2 and 3 were approved at a shareholders' meeting on December 15,
1999. The description of each proposal and number of shares voted are as
follows:
- --------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------
1. To approve the Agreement and
Plan of Reorganization among
the Fund, MuniHoldings New
Jersey Insured Fund II, Inc.
and MuniHoldings New Jersey
Insured Fund III, Inc. 3,679,682 81,071 165,526
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- --------------------------------------------------------------------------------
2. To elect the Fund's
Directors: Terry K. Glenn 6,645,015 242,186
Ronald W. Forbes 6,648,626 238,575
Cynthia A. Montgomery 6,648,626 238,575
Kevin A. Ryan 6,648,626 238,575
Arthur Zeikel 6,644,629 242,572
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------
3. To ratify the selection of
Ernst & Young LLP as the Fund's
independent auditors for the
current fiscal year. 6,701,468 60,977 124,756
- --------------------------------------------------------------------------------
During the six-month period ended January 31, 2000, MuniHoldings New Jersey
Insured Fund, Inc.'s Preferred Stock share holders voted on the following
proposals. Proposal 1 was approved at a shareholders' meeting on January 20,
2000. Proposals 2 and 3 were approved at a shareholders' meeting on December 15,
1999. The description of each proposal and number of shares voted are as
follows:
- --------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------
1. To approve the Agreement and
Plan of Reorganization among
the Fund, MuniHoldings New
Jersey Insured Fund II, Inc.
and MuniHoldings New Jersey
Insured Fund III, Inc. as
follows: Series A 1,077 0 215
Series B 1,306 0 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- --------------------------------------------------------------------------------
2. To elect the Fund's Board of
Directors: Terry K. Glenn,
Ronald W. Forbes, Cynthia A.
Montgomery, Charles C. Reilly,
Kevin A. Ryan, Richard R. West
and Arthur Zeikel as follows: Series A 797 0
Series B 936 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------
3. To ratify the selection of
Ernst & Young LLP as the Fund's
independent auditors for the
current fiscal year as follows:
Series A 797 0 0
Series B 940 0 0
- --------------------------------------------------------------------------------
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--96.2% Bernards Township, New Jersey, School District, GO:
AA A1 $ 3,205 5.30% due 1/01/2022 $ 2,883
AA A1 2,870 5.30% due 1/01/2023 2,572
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,350 Brick Township, New Jersey, Municipal Utilities
Authority, Revenue Refunding Bonds, 5% due 12/01/2016 (b) 3,001
----------------------------------------------------------------------------------------------------------------
Delaware River Port Authority of Pennsylvania and
New Jersey Revenue Bonds:
AAA Aaa 4,365 6% due 1/01/2018 (d) 4,407
AAA Aaa 1,500 6% due 1/01/2019 (d)(g) 1,509
AAA Aaa 3,625 (Port District Project), Series B, 5% due 1/01/2026 (c) 3,059
----------------------------------------------------------------------------------------------------------------
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) 4,482
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,705 Essex County, New Jersey, Improvement Authority,
Utility System Revenue Bonds (East Orange
Franchise), 6% due 7/01/2018 (c) 2,730
----------------------------------------------------------------------------------------------------------------
Freehold Township, New Jersey, Board of Education, GO (d):
AAA NR* 1,455 5.40% due 7/15/2024 1,326
AAA NR* 1,540 5.40% due 7/15/2025 1,400
----------------------------------------------------------------------------------------------------------------
AAA NR* 2,000 Hudson County, New Jersey, Improvement Authority,
Facility Lease Revenue Refunding Bonds
(Hudson County Lease Project), 5.40% due 10/01/2025 (b) 1,817
----------------------------------------------------------------------------------------------------------------
Metuchen, New Jersey, School District, GO (b):
AAA NR* 1,185 5.20% due 9/15/2023 1,044
AAA NR* 1,245 5.20% due 9/15/2024 1,093
AAA NR* 1,315 5.20% due 9/15/2025 1,150
AAA NR* 1,385 5.20% due 9/15/2026 1,208
AAA NR* 710 5.20% due 9/15/2027 618
----------------------------------------------------------------------------------------------------------------
</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
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., January 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 Middlesex County, New Jersey, COP (c):
(concluded) AAA Aaa $ 4,855 5.25% due 6/15/2023 $ 4,317
AAA Aaa 8,075 5.30% due 6/15/2029 7,127
----------------------------------------------------------------------------------------------------------------
BBB- NR* 4,000 New Jersey EDA, First Mortgage Revenue Refunding
Bonds (Fellowship Village), Series A, 5.50% due 1/01/2025 3,096
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 New Jersey EDA, Natural Gas Facilities Revenue
Refunding Bonds (NUI Corporation Projects),
AMT, Series A, 5.70% due 6/01/2032 (c) 4,626
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,155 New Jersey EDA, Revenue Bonds (Transportation
Project), Sub-Lease, Series A, 6% due 5/01/2016 (d) 5,231
----------------------------------------------------------------------------------------------------------------
New Jersey EDA, State Lease Revenue Bonds (State
Office Buildings Projects) (a):
AAA Aaa 3,000 6% due 6/15/2015 3,062
AAA Aaa 4,620 6.25% due 6/15/2020 4,733
----------------------------------------------------------------------------------------------------------------
New Jersey EDA, Water Facilities Revenue Bonds, AMT:
AAA Aaa 3,000 (New Jersey American Water Company Inc.), Series
B, 5.375% due 5/01/2032 (b) 2,618
AAA Aaa 3,500 RITR, Series 34, 7.17% due 5/01/2032 (b)(f) 2,617
AAA Aaa 7,400 RITR, Series 35, 6.735% due 2/01/2038 (c)(f) 5,301
----------------------------------------------------------------------------------------------------------------
A1+c VMIG1+ 500 New Jersey EDA, Water Facilities Revenue Refunding Bonds
(United Water New Jersey Inc. Project), VRDN, Series B,
3.60% due 11/01/2025 (a)(e) 500
----------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing
Authority, Revenue Refunding Bonds:
AAA Aaa 1,770 (AHS Hospital Corporation), Series A, 5.375% due 7/01/2019 (a) 1,621
BBB NR* 3,075 (Christian Health Care Center), Series A, 5.50% due 7/01/2018 2,508
AAA Aaa 4,450 (Meridian Health System Obligation Group), 5.375% due 7/01/2024 (d) 3,986
BBB- Baa3 4,200 (Saint Elizabeth Hospital Obligation Group), 6% due 7/01/2027 3,295
AAA Aaa 2,020 (Shoreline Behavioral Health Center), 5.50% due 7/01/2027 (c) 1,837
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,890 New Jersey Sports and Exposition Authority, Convention Center,
Luxury Tax Revenue Refunding Bonds, 5% due 9/01/2017 (c) 4,348
----------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority, Revenue
Refunding Bonds (Monmouth University), Series C:
BBB Baa2 2,030 5.75% due 7/01/2017 1,905
BBB Baa2 2,000 5.80% due 7/01/2022 1,834
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,850 New Jersey State Educational Facilities Authority, Revenue
Refunding Bonds (University of Medicine & Dentistry),
Series B, 5.25% due 12/01/2021 (a) 2,534
----------------------------------------------------------------------------------------------------------------
AAA NR* 2,730 New Jersey State Higher Education Assistance Authority,
Student Loan Revenue Bonds, AMT, Series A, 5.25% due 6/01/2018 (c) 2,462
----------------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, AMT (c):
AAA Aaa 4,195 Series K, 6.375% due 10/01/2026 4,262
AAA Aaa 1,000 Series U, 5.60% due 10/01/2012 981
AAA Aaa 2,820 Series U, 5.65% due 10/01/2013 2,758
AAA Aaa 4,500 Series U, 5.85% due 4/01/2029 4,241
----------------------------------------------------------------------------------------------------------------
New Jersey State Transit Corporation, COP (Federal
Transit Administration Grants), Series A (a):
AAA Aaa 1,500 6% due 9/15/2013 1,543
AAA Aaa 5,000 6.125% due 9/15/2015 5,125
----------------------------------------------------------------------------------------------------------------
North Bergen Township, New Jersey, Board of Education, COP (d):
NR* Aaa 1,000 6% due 12/15/2019 1,011
NR* Aaa 1,580 6.25% due 12/15/2020 1,622
NR* Aaa 1,680 6.25% due 12/15/2021 1,716
----------------------------------------------------------------------------------------------------------------
AAA NR* 1,200 North Hudson, New Jersey, Sewer Authority Revenue
Bonds, 5.125% due 8/01/2022 (b) 1,047
----------------------------------------------------------------------------------------------------------------
Paterson, New Jersey, Public School District, COP (c):
NR* Aaa 1,980 6.125% due 11/01/2015 2,037
NR* Aaa 2,000 6.25% due 11/01/2019 2,048
----------------------------------------------------------------------------------------------------------------
AA A1 3,500 Rutgers State University, New Jersey, Revenue Bonds,
Series A, 5.20% due 5/01/2027 3,023
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,765 South Jersey Transportation Authority, New Jersey,
Transportation System, Revenue Refunding Bonds, 5% due 11/01/2019 (a) 1,540
----------------------------------------------------------------------------------------------------------------
AAA NR* 4,260 Sparta Township, New Jersey, School District,
GO, Refunding, 5% due 9/01/2020 (c) 3,674
----------------------------------------------------------------------------------------------------------------
West Orange, New Jersey, Board of Education, COP (c):
NR* Aaa 2,040 5.75% due 10/01/2014 2,055
NR* Aaa 3,590 6% due 10/01/2024 3,593
- ------------------------------------------------------------------------------------------------------------------------------------
New York--0.9% A1+ VMIG1+ 1,300 Port Authority of New York and New Jersey, Special Obligation
Revenue Refunding Bonds (Versatile Structure Obligation),
VRDN, Series 5, 3.60% due 8/01/2024 (e) 1,300
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--3.9% AAA Aaa 6,000 Puerto Rico Commonwealth, Infrastructure Financing Authority,
Special Revenue Bonds, Series A, 5% due 7/01/2028 (a) 5,019
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,095 Puerto Rico Public Buildings Authority Revenue Bonds
(Government Facilities), Series B, 5% due 7/01/2027 (a) 920
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$169,262)--101.0% 153,372
Variation Margin on Financial Futures Contracts**--0.1% 122
Liabilities in Excess of Other Assets--(1.1%) (1,667)
--------
Net Assets--100.0% $151,827
========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) MBIA Insured.
(d) FSA Insured.
(e) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at January 31,
2000.
(f) The interest rate is subject to change periodically and inversely based upon
prevailing market rates. The interest rate shown is the rate in effect at
January 31, 2000.
(g) All or a portion of security held as collateral in connection with financial
futures contracts.
+ Highest short-term rating by Moody's Investors Service, Inc.
* Not Rated.
** Financial futures contracts sold as of January 31, 2000 were as follows:
- --------------------------------------------------------------------------------
(in Thousands)
- --------------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
- --------------------------------------------------------------------------------
170 US Treasury Bonds March 2000 $15,677
- --------------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$15,316) $15,677
=======
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
6 & 7
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2000
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of January 31, 2000
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets: Investments, at value (identified cost--$169,261,881) ............................ $ 153,371,614
Cash ............................................................................. 7,476
Receivables:
Securities sold ................................................................ $ 8,879,606
Interest ....................................................................... 1,901,725
Variation margin ............................................................... 122,188 10,903,519
-------------
Prepaid expenses ................................................................. 9,931
-------------
Total assets ..................................................................... 164,292,540
-------------
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ........................................................... 12,170,833
Dividends to shareholders ...................................................... 142,685
Investment adviser ............................................................. 60,548
Offering costs ................................................................. 60,000 12,434,066
-------------
Accrued expenses ................................................................. 31,751
-------------
Total liabilities ................................................................ 12,465,817
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ....................................................................... $ 151,826,723
=============
- ----------------------------------------------------------------------------------------------------------------------------------
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share (2,720 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) ............ $ 68,000,000
Common Stock, par value $.10 per share (7,000,496 shares issued and outstanding) $ 700,050
Paid-in capital in excess of par ................................................. 103,388,100
Undistributed investment income--net ............................................. 565,699
Accumulated realized capital losses on investments--net .......................... (4,349,270)
Accumulated distributions in excess of realized capital gains on investments--net (226,339)
Unrealized depreciation on investments--net ...................................... (16,251,517)
-------------
Total--Equivalent to $11.97 net asset value per share of Common Stock
(market price--$11.75) ........................................................... 83,826,723
-------------
Total capital .................................................................... $ 151,826,723
=============
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended January 31, 2000
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Interest and amortization of premium and discount earned ......... $ 4,579,641
Income:
- --------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ......................................... $ 440,981
Commission fees .................................................. 83,635
Professional fees ................................................ 40,023
Accounting services .............................................. 28,032
Transfer agent fees .............................................. 18,777
Organization expenses ............................................ 14,688
Printing and shareholder reports ................................. 11,697
Directors' fees and expenses ..................................... 9,442
Listing fees ..................................................... 7,837
Custodian fees ................................................... 6,929
Pricing fees ..................................................... 3,793
Other ............................................................ 8,575
------------
Total expenses before reimbursement .............................. 674,409
Reimbursement of expenses ........................................ (40,678)
------------
Total expenses after reimbursement ............................... 633,731
------------
Investment income--net ........................................... 3,945,910
------------
- --------------------------------------------------------------------------------------------------------------------------
Realized & Realized loss on investments--net ................................ (4,349,270)
Unrealized Change in unrealized depreciation on investments--net ............ (13,006,218)
Loss on ------------
Investments--Net: Net Decrease in Net Assets Resulting from Operations ............. $(13,409,578)
============
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2000
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations: Investment income--net ............................................... $ 3,945,910 $ 7,875,123
Realized gain (loss) on investments--net ............................. (4,349,270) 325,337
Change in unrealized appreciation/depreciation on investments--net.... (13,006,218) (4,373,963)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... (13,409,578) 3,826,497
------------- -------------
- -----------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions Common Stock ....................................................... (2,906,585) (5,676,267)
to Shareholders: Preferred Stock .................................................... (1,157,550) (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 ........................................ (4,064,135) (8,189,766)
------------- -------------
- -----------------------------------------------------------------------------------------------------------------------
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment of
Transactions: dividends and distributions .......................................... -- 696,570
------------- -------------
- -----------------------------------------------------------------------------------------------------------------------
Net Assets: Total decrease in net assets ......................................... (17,473,713) (3,666,699)
Beginning of period .................................................. 169,300,436 172,967,135
------------- -------------
End of period* ....................................................... $ 151,826,723 $ 169,300,436
============= =============
- -----------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net ................................. $ 565,699 $ 683,924
============= =============
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been For the Six For the For the Period
derived from information provided in the financial Months Ended Year Ended March 11, 1998+
statements. January 31, July 31, to July 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Net asset value, beginning of period ........................... $ 14.47 $ 15.09 $ 15.00
Operating -------- --------- ---------
Performance: Investment income--net ......................................... .57 1.13 .46
Realized and unrealized gain (loss) on investments--net ........ (2.48) (.58) .16
-------- --------- ---------
Total from investment operations ............................... (1.91) .55 .62
-------- --------- ---------
Less dividends and distributions to Common Stock shareholders:
Investment income--net ....................................... (.42) (.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 . (.42) (.85) (.26)
-------- --------- ---------
Capital charge resulting from issuance of Common Stock ......... -- -- (.03)
-------- --------- ---------
Effect of Preferred Stock activity:++
Dividends and distributions to Preferred Stock shareholders:
Investment income--net ...................................... (.17) (.30) (.12)
Realized gain on investments--net ........................... -- (.02) --
Capital charge resulting from issuance of Preferred Stock ... -- -- (.12)
-------- --------- ---------
Total effect of Preferred Stock activity ....................... (.17) (.32) (.24)
-------- --------- ---------
Net asset value, end of period ................................. $ 11.97 $ 14.47 $ 15.09
======== ========= =========
Market price per share, end of period .......................... $ 11.75 $ 13.4375 $ 15.375
======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on market price per share ................................ (9.54%)# (7.44%) 4.29%#
Returns:** ======== ========= =========
Based on net asset value per share ............................. (14.42%)# 1.56% 2.35%#
======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios Based on Total expenses, net of reimbursement*** ........................ 1.37%* 1.22% .29%*
Average Net ======== ========= =========
Assets of Total expenses*** .............................................. 1.46%* 1.31% 1.21%*
Common Stock: ======== ========= =========
Total investment income--net*** ................................ 8.52%* 7.32% 8.17%*
======== ========= =========
Amount of dividends to Preferred Stock shareholders ............ 2.50%* 1.93% 2.14%*
======== ========= =========
Investment income--net, to Common Stock shareholders ........... 6.02%* 5.39% 6.03%*
======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios Based on Total expenses, net of reimbursement ........................... .79%* .75% .18%*
Total Average ======== ========= =========
Net Assets:+++*** Total expenses ................................................. .84%* .80% .76%*
======== ========= =========
Total investment income--net ................................... 4.91%* 4.48% 5.13%*
======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios Based on Dividends to Preferred Stock shareholders ...................... 3.40%* 3.04% 3.61%*
Average Net ======== ========= =========
Assets of
Preferred Stock:
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 83,827 $ 101,300 $ 104,967
Data: ======== ========= =========
Preferred Stock outstanding, end of period (in thousands) ...... $ 68,000 $ 68,000 $ 68,000
======== ========= =========
Portfolio turnover ............................................. 35.10% 64.93% 32.46%
======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Leverage: Asset coverage per $1,000 ...................................... $ 2,233 $ 2,490 $ 2,544
======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends Per Series A--Investment income--net ............................... $ 429 $ 763 $ 317
Share On ======== ========= =========
Preferred Stock Series B--Investment income--net ............................... $ 422 $ 766 $ 300
Outstanding: ======== ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on October 19, 1998.
+++ Includes Common and Preferred Stock average net assets.
# Aggregate total investment return.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., January 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 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
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
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) Organization and offering expenses--In accordance with Statement of Position
98-5, unamortized organization expenses of $14,688 were expensed during the six
months ended January 31, 2000. This was considered to be a change in accounting
principle and had no material impact on the operations of the Fund. Direct
expenses relating to the public offering of the Fund's Common and Preferred
Stock were charged to capital at the time of issuance of the shares.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions and post-October
losses.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the six months ended January
31, 2000, FAM earned fees of $440,981, of which $40,678 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 six
months ended January 31, 2000 were $57,204,020 and $55,399,812, respectively.
Net realized gains (losses) for the six months ended January 31, 2000 and net
unrealized losses as of January 31, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments................. $(4,690,871) $(15,890,267)
Financial futures contracts .......... 341,601 (361,250)
----------- ------------
Total................................. $(4,349,270) $(16,251,517)
=========== ============
- --------------------------------------------------------------------------------
As of January 31, 2000, net unrealized depreciation for Federal income tax
purposes aggregated $15,890,267, of which $62,660 related to appreciated
securities and $15,952,927 related to depreciated securities. The aggregate cost
of investments at January 31, 2000 for Federal income tax purposes was
$169,261,881.
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 January 31, 2000
remained constant and during the year ended July 31, 1999 increased by 44,928 as
a result of dividend reinvestment.
12 & 13
<PAGE>
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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
January 31, 2000 were Series A, 3.16% and Series B, 3.18%.
Shares issued and outstanding during the six months ended January 31, 2000 and
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 six months ended January 31, 2000, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affilliate of FAM, earned $38,899 as
commissions.
5. Reorganization Plan:
On September 9, 1999, the Fund's Board of Directors approved a plan of
reorganization whereby the Fund would acquire substantially all of the assets
and liabilities of MuniHoldings New Jersey Insured Fund II, Inc. and
MuniHoldings New Jersey Insured Fund III, Inc. in exchange for newly issued
shares of the Fund. The plan of reorganization was approved by shareholders of
the Fund on January 20, 2000 and by shareholders of MuniHoldings New Jersey
Insured Fund II, Inc. and MuniHoldings New Jersey Insured Fund III, Inc. on
February 16, 2000. The reorganization was consummated on March 6, 2000.
6. Subsequent Event:
On February 7, 2000, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.067500 per share,
payable on February 28, 2000 to shareholders of record as of February 17, 2000.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of 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
The quality ratings of securities in the Fund as of January 31, 2000 were as
follows:
Percent of
S&P Rating/Moody's Rating Net Assets
- -------------------------------------------------
AAA/Aaa.................................. 86.0%
AA/Aa.................................... 5.6
BBB/Baa.................................. 8.2
Other+................................... 1.2
- -------------------------------------------------
+ Temporary investments in short-term municipal securities.
IMPORTANT TAX INFORMATION
On March 6, 2000, MuniHoldings New Jersey Insured Fund II, Inc. and MuniHoldings
New Jersey Insured Fund III, Inc. (the "Funds") merged into MuniHoldings New
Jersey Insured Fund, Inc.
All of the net investment income distributions paid by the Funds during their
taxable periods ended March 6, 2000 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, there were no capital gains
distributions paid by the Funds during the period.
Please retain this information for your records.
14 & 15
<PAGE>
Officers and Directors
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Robert D. Sneeden, Vice President
Donald C. Burke, Vice President
and Treasurer
William E. Zitelli, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MUJ
This report, including the financial information herein, is transmitted to the
shareholders of MuniHoldings New Jersey 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.
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 vola tility of net asset value
and market price of shares of the Common Stock, and the risk that fluc tuations
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--1/00
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