MUNIHOLDINGS
NEW JERSEY
INSURED
FUND II, INC.
FUND LOGO
Semi-Annual Report
November 30, 1999
This report, including the financial information herein, is
transmitted to the shareholders of MuniHoldings New Jersey Insured
Fund II, Inc. for their information. It is not a prospectus,
circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. The
Fund has leveraged its Common Stock by issuing Preferred Stock to
provide the Common Stock shareholders with a potentially higher rate
of return. Leverage creates risks for Common Stock shareholders,
including the likelihood of greater volatility of net asset value
and market price of shares of the Common Stock, and the risk that
fluctuations in the short-term dividend rates of the Preferred Stock
may affect the yield to Common Stock shareholders. Past performance
results shown in this report should not be considered a
representation of future performance. Statements and other
information herein are as dated and are subject to change.
MuniHoldings New Jersey
Insured Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIHOLDINGS NEW JERSEY INSURED FUND II, INC.
The Benefits and
Risks of
Leveraging
MuniHoldings New Jersey Insured Fund II, Inc. has the ability to
leverage to seek to enhance the yield and net asset value of its
Common Stock. However, these objectives cannot be achieved in all
interest rate environments. To leverage, the Fund issues Preferred
Stock, which pays dividends at prevailing short-term interest rates,
and invests the proceeds in long-term municipal bonds. The interest
earned on these investments is paid to Common Stock shareholders in
the form of dividends, and the value of these portfolio holdings is
reflected in the per share net asset value of the Fund's Common
Stock. However, in order to benefit Common Stock shareholders, the
yield curve must be positively sloped; that is, short-term interest
rates must be lower than long-term interest rates. At the same time,
a period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value 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 invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and net
asset value of the Fund's shares may also be more volatile than if
the Fund did not invest in these securities.
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
DEAR SHAREHOLDER
For the six-month period ended November 30, 1999, the Common Stock
of MuniHoldings New Jersey Insured Fund II, Inc. earned $0.379 per
share income dividends, which included earned and unpaid dividends
of $0.059. This represents a net annualized yield of 6.31%, based on
a month-end per share net asset value of $11.98. Over the same
period, total investment return on the Fund's Common Stock was
- -12.63%, based on a change in per share net asset value from $14.16
to $11.98, and assuming reinvestment of $0.381 per share income
dividends.
For the six-month period ended November 30, 1999, the Fund's Auction
Market Preferred Stock had an average yield of 3.22% for Series A
and 3.32% for Series B.
The Municipal Market Environment
The combination of steady strong domestic economic growth,
improvement in foreign economies (most notably in Japan) and
increasing investor concerns regarding potential increases in US
inflation put upward pressure on bond yields throughout the six-
month period ended November 30, 1999. Continued strong US employment
growth and consumer spending were among the reasons the Federal
Reserve Board cited for raising short-term interest rates in late
June, August and November. US Treasury bond yields reacted by
climbing above 6.375% by late October and into November. During the
period, yields on 30-year US Treasury bonds increased over 45 basis
points (0.45%).
Long-term tax-exempt bond yields also rose during the six months
ended November 30, 1999. For much of the first half of 1999, the
municipal bond market was able to withstand much of the upward
pressure on bond yields. However, investor concerns of additional
moves by the Federal Reserve Board to moderate US economic growth
and, more importantly, the loss of the strong technical support that
the tax-exempt market enjoyed in early 1999 helped push municipal
bond yields significantly higher for the remainder of the period.
The yields on long-term tax-exempt revenue bonds rose over 70 basis
points to 6.14% by November 30, 1999, as measured by the Bond Buyer
Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond
issuance has remained a positive factor within the municipal bond
market, as it had been for much of the past year. Over the last
year, more than $230 billion in long-term municipal bonds was
issued, a decline of nearly 20% compared to the same period a year
ago. During the past six months, over $115 billion in long-term tax-
exempt bonds was underwritten, representing a decline of nearly 15%
compared to the corresponding period in 1998. Over the past three
months, approximately $55 billion in securities was issued by
municipalities nationally. This quarterly issuance represented a
decline of over 5% when compared to the same period in 1998. It is
likely that many tax-exempt issuers have accelerated their
financings in recent months to avoid any potential Year 2000
(Y2K)-related disruptions at year-end. It is likely that this increased
new-issue volume in October and November is at the expense of future
bond issuance, particularly in early 2000. Consequently, the
municipal market's positive technical position is likely to continue
into early next year.
Although tax-exempt bond yields are at their highest level in over
two years and have attracted significant retail investor interest,
institutional demand has declined sharply. Long-term municipal
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. In addition, the demand from
property/casualty insurance companies has weakened as a result of
the losses, and anticipated losses, incurred as a result of the
series of damaging storms across much of the eastern United States.
Additionally, many institutional investors who were attracted to the
municipal bond market in recent years by historically attractive tax-
exempt bond yield ratios of over 90% have found other asset classes
even more attractive. Even with a reduced supply position, tax-
exempt issuers have been forced to repeatedly raise municipal bond
yields in the attempt to attract adequate demand.
The recent relative underperformance of the municipal bond market
has resulted in an opportunity for long-term investors to purchase
tax-exempt issues whose yields are nearly identical with taxable US
Treasury securities. At November 30, 1999, long-term uninsured
municipal revenue bond yields were almost 98% of comparable US
Treasury securities. In recent months, many taxable asset classes,
such as corporate bonds, mortgage-backed securities and US agency
debt, have all accelerated debt issuance. This acceleration was
initiated largely to avoid issuing securities at year-end and to
minimize any associated Y2K problems that may develop. However, this
increased issuance has also resulted in higher yield levels in the
various asset classes as lower bond prices became necessary to
attract sufficient investor demand. Going forward, it is believed
that the pace of non-US Government debt issuance is likely to slow
significantly. As the supply of this debt declines, we would expect
many institutional investors to return to the municipal bond market
and the attractive yield ratios available.
Looking ahead, it appears to us that long-term tax-exempt bond
yields will remain under pressure, trading in a broad range centered
near current levels. Investors are likely to remain concerned about
future action by the Federal Reserve Board. We believe Y2K
considerations have prohibited any further Federal Reserve Board
moves from the end of the year and the beginning of 2000. Any
improvement in bond prices will probably be contingent upon
weakening in both US employment growth and consumer spending. The
100 basis point rise in US Treasury bond yields seen thus far this
year may negatively impact US economic growth. The US housing market
will be among the first sectors likely to be affected, as some
declines have already been evidenced in response to higher mortgage
rates. We believe that it is also unrealistic to expect double-digit
returns in US equity markets to continue indefinitely. Much of the
US consumer's wealth is tied to recent stock market appreciation.
Any slowing in these incredible growth rates is likely to reduce
consumer spending. We believe that these factors suggest that the
worst of the recent increase in bond yields has passed and stable,
if not slightly improving, bond prices may be expected.
In Conclusion
On September 9, 1999, MuniHoldings New Jersey Insured Fund II,
Inc.'s Board of Directors approved a plan of reorganization, subject
to shareholder approval and certain other conditions, whereby
MuniHoldings New Jersey Insured Fund, Inc. would acquire
substantially all of the assets and liabilities of MuniHoldings New
Jersey Insured Fund II, Inc. in exchange for newly issued shares of
MuniHoldings New Jersey Insured Fund, Inc. These Funds are
registered, non-diversified, closed-end management investment
companies. Both entities have similar investment objectives and are
managed by Fund Asset Management, L.P.
We appreciate your investment in the MuniHoldings New Jersey Insured
Fund II, Inc.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
December 30, 1999
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
New Jersey--94.3% Atlantic City, New Jersey, Municipal Utilities
Revenue Bonds (a):
AAA Aaa $ 1,605 5% due 6/01/2022 $ 1,439
AAA Aaa 2,695 5% due 6/01/2029 2,368
NR* Aaa 2,000 Bayonne, New Jersey, Municipal Utilities Authority,
Water System Revenue Bonds, 5% due 1/01/2028 (d) 1,762
Black Horse Pike, New Jersey, Regional School
District, GO (b):
AAA Aaa 2,370 4.75% due 12/01/2014 2,158
AAA Aaa 1,175 4.75% due 12/01/2017 1,036
AAA Aaa 1,000 Camden County, New Jersey, Improvement Authority,
Lease Revenue Bonds, 5.50% due 9/01/2016 (b) 974
AAA Aaa 1,000 Camden County, New Jersey, Improvement Authority,
Revenue Refunding Bonds (Health System--Catholic Health
East), Series B, 5.25% due 11/15/2011 (a) 997
AAA Aaa 7,040 Casino Reinvestment Development Authority, New Jersey,
Parking Fee Revenue Bonds, Series A, 5.25% due 10/01/2017 (c) 6,650
AAA Aaa 8,900 Delaware River Port Authority of Pennsylvania and
New Jersey Revenue Bonds (Port District Project), Series B,
5% due 1/01/2026 (d) 7,872
AAA NR* 3,195 Hudson County, New Jersey, Improvement Authority, Facility
Lease Revenue Refunding Bonds (Hudson County Lease Project),
5.25% due 10/01/2012 (b) 3,168
AAA Aaa 1,460 Jersey City, New Jersey, Municipal Utilities Authority,
Sewer Revenue Refunding Bonds, 5.25% due 12/01/2012 (c) 1,455
AAA Aaa 4,250 Middlesex County, New Jersey, COP, Refunding, 5% due
2/15/2019 (d) 3,836
AAA Aaa 2,560 Middlesex County, New Jersey, Improvement Authority,
Utility System Revenue Refunding Bonds (Perth Amboy
Franchise Project), Series A, 5% due 9/01/2029 (a) 2,248
Montgomery Township, New Jersey, Board of Education, COP (d):
NR* Aaa 2,000 4.75% due 9/01/2018 1,747
NR* Aaa 1,100 4.875% due 9/01/2023 958
Moorestown Township, New Jersey, School District, GO (b):
AAA Aaa 1,180 4.90% due 1/01/2021 1,042
AAA Aaa 1,315 4.95% due 1/01/2023 1,164
BBB- NR* 4,000 New Jersey EDA, First Mortgage Revenue Refunding Bonds
(Fellowship Village), Series A, 5.50% due 1/01/2025 3,449
NR* Aaa 8,555 New Jersey EDA, Natural Gas Facilities Revenue Refunding
Bonds, RIB, AMT, Series 161, 7.23% due 6/01/2032 (d) (e) 7,933
New Jersey EDA, Water Facilities Revenue Bonds, AMT:
AAA Aaa 7,000 (American Water Company Inc.), Series A, 5.25%
due 7/01/2038 (b) 6,224
AAA Aaa 5,000 (Middlesex Water Company Project), 5.35%
due 2/01/2038 (d) 4,522
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) 5,886
AAA Aaa 6,750 (JFK Medical Center--Hartwyck), 5% due 7/01/2025 (d) 5,920
AAA Aaa 3,000 (Medical Center at Princeton Obligation Group),
5% due 7/01/2023 (a) 2,651
AAA Aaa 3,570 (Meridian Health System Obligation Group), 5.375%
due 7/01/2024 (c) 3,328
NR* Aaa 605 (Saint Barnabas Medical Center), Series A, 5%
due 7/01/2023 (d) 535
AAA Aaa 3,455 (Virtua Health Issue), 4.50% due 7/01/2028 (c) 2,739
AA+ Aaa 2,825 New Jersey State Educational Facilities Authority
Revenue Bonds (Institute for Advanced Study), Series G,
5% due 7/01/2028 2,486
AAA Aaa 2,730 New Jersey State Educational Facilities Authority,
Revenue Refunding Bonds (Ramapo College), Series G,
4.625% due 7/01/2028 (a) 2,245
AAA NR* 4,000 New Jersey State Higher Education Assistance Authority,
Student Loan Revenue Bonds, AMT, Series A, 5.25% due
6/01/2018 (d) 3,735
AAA Aaa 2,800 New Jersey State Housing and Mortgage Finance Agency
Revenue Bonds, Home Buyer, AMT, Series U, 5.85% due
4/01/2029 (d) 2,715
New Jersey State Housing and Mortgage Finance Agency
Revenue Refunding Bonds, Home Buyer (d):
AAA Aaa 1,220 AMT, Series S, 5.95% due 10/01/2017 1,224
AAA Aaa 1,500 AMT, Series X, 5.35% due 4/01/2029 1,325
AAA Aaa 3,000 Series V, 5.25% due 4/01/2026 2,660
AAA NR* 1,500 Port Authority of New York and New Jersey, Revenue Bonds,
RIB, Series 50, 6.605% due 1/15/2032 (d) (e) 1,266
A1+ VMIG1++ 900 Port Authority of New York and New Jersey, Special Obligation
Revenue Refunding Bonds (Versatile Structure Obligation),
VRDN, Series 2, 3.75% due 5/01/2019 (f) 900
Rancocas Valley, New Jersey, Regional High School
District, GO (b):
AAA Aaa 500 5.30% due 2/01/2022 469
AAA Aaa 1,220 5.30% due 2/01/2026 1,132
AAA Aaa 3,000 Rutgers State University, New Jersey, Revenue Bonds,
Series A, 4.75% due 5/01/2029 (a) 2,506
South Jersey Transportation Authority, New Jersey,
Transportation System Revenue Refunding Bonds (a):
AAA Aaa 4,000 5% due 11/01/2017 3,659
AAA Aaa 1,900 5.125% due 11/01/2022 1,732
NR* Aaa 2,480 Union County, New Jersey, Utilities Authority, RITR,
Series 38, 6.42% due 6/01/2020 (e) 2,220
Union County, New Jersey, Utilities Authority, Revenue
Refunding Bonds, AMT (a):
AAA Aaa 5,500 County Deficiency, Series A-2, 5% due 6/15/2028 4,773
AAA Aaa 3,000 Senior Lease (Ogden Martin), Series A, 5% due 6/01/2014 2,826
</TABLE>
Portfolio Abbreviations
To simplify the listings of MuniHoldings New Jersey Insured Fund II,
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
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
New Jersey Wall Township, New Jersey, School District, GO (c):
(concluded) AAA Aaa $ 2,250 4.50% due 7/15/2018 $ 1,893
AAA Aaa 2,640 4.75% due 7/15/2022 2,260
Puerto Rico--3.8% AAA Aaa 5,750 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series DD, 5% due 7/01/2028 (d) 5,041
Total Investments (Cost--$145,403)--98.1% 131,128
Other Assets Less Liabilities--1.9% 2,590
---------
Net Assets--100.0% $ 133,718
=========
<FN>
(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 November 30, 1999.
(f)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at November 30, 1999.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of November 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$145,403,111) $131,128,142
Cash 62,005
Interest receivable 2,772,565
Prepaid expenses 13,878
------------
Total assets 133,976,590
------------
Liabilities: Payables:
Dividends to shareholders $ 184,833
Offering costs 32,424
Investment adviser 3,011 220,268
------------
Accrued expenses 38,430
------------
Total liabilities 258,698
------------
Net Assets: Net assets $133,717,892
============
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share (2,400 shares
of AMPS* issued and outstanding at $25,000
per share liquidation preference) $ 60,000,000
Common Stock, par value $.10 per share (6,151,635 shares
issued and outstanding) $ 615,164
Paid-in capital in excess of par 90,851,407
Undistributed investment income--net 381,989
Accumulated realized capital losses on investments--net (3,855,699)
Unrealized depreciation on investments--net (14,274,969)
------------
Total--Equivalent to $11.98 net asset value per share
of Common Stock (market price--$10.5625) 73,717,892
------------
Total capital $133,717,892
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1999
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 3,778,351
Income:
Expenses: Investment advisory fees $ 384,899
Commission fees 73,998
Professional fees 36,657
Transfer agent fees 21,808
Accounting services 13,356
Printing and shareholder reports 12,832
Organization expenses 10,796
Directors' fees and expenses 8,911
Listing fees 7,859
Custodian fees 5,866
Pricing fees 2,277
Other 8,630
------------
Total expenses before reimbursement 587,889
Reimbursement of expenses (114,903)
------------
Total expenses after reimbursement 472,986
------------
Investment income--net 3,305,365
------------
Realized & Realized loss on investments--net (1,900,741)
Unrealized Loss on Change in unrealized depreciation on investments--net (11,456,769)
Investments--Net: ------------
Net Decrease in Net Assets Resulting from Operations $(10,052,145)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Period
Months Ended Sept. 25, 1998++
November 30, to May 31,
Increase (Decrease) in Net Assets: 1999 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 3,305,365 $ 4,490,250
Realized loss on investments--net (1,900,741) (1,954,958)
Change in unrealized depreciation on investments--net (11,456,769) (2,818,200)
------------ ------------
Net decrease in net assets resulting from operations (10,052,145) (282,908)
------------ ------------
Dividends to Investment income--net:
Shareholders: Common Stock (2,342,721) (2,894,873)
Preferred Stock (982,488) (1,193,544)
------------ ------------
Net decrease in net assets resulting from
dividends to shareholders (3,325,209) (4,088,417)
------------ ------------
Capital Stock Proceeds from issuance of Common Stock -- 91,425,000
Transactions: Proceeds from issuance of Preferred Stock -- 60,000,000
Value of shares issued to Common Stock shareholders in
reinvestment of dividends -- 735,916
Offering costs resulting from the issuance of Common Stock -- (200,945)
Offering and underwriting costs resulting from the
issuance of Preferred Stock -- (593,405)
------------ ------------
Net increase in net assets derived from capital
stock transactions -- 151,366,566
------------ ------------
Net Assets: Total increase (decrease) in net assets (13,377,354) 146,995,241
Beginning of period 147,095,246 100,005
------------ ------------
End of period* $133,717,892 $147,095,246
============ ============
<FN>
*Undistributed investment income--net $ 381,989 $ 401,833
============ ============
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived For the Six For the Period
from information provided in the financial statements. Months Ended Sept. 25, 1998++
November 30, to May 31,
Increase (Decrease) in Net Asset Value: 1999 1999
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 14.16 $ 15.00
Operating ------------ ------------
Performance: Investment income--net .53 .73
Realized and unrealized loss on investments--net (2.17) (.78)
------------ ------------
Total from investment operations (1.64) (.05)
------------ ------------
Less dividends to Common Stock shareholders from
investment income--net (.38) (.47)
------------ ------------
Capital charge resulting from issuance of Common Stock -- (.03)
------------ ------------
Effect of Preferred Stock activity:++++
Dividends to Preferred Stock shareholders:
Investment income--net (.16) (.19)
Capital charge resulting from issuance of Preferred Stock -- (.10)
------------ ------------
Total effect of Preferred Stock activity (.16) (.29)
------------ ------------
Net asset value, end of period $ 11.98 $ 14.16
============ ============
Market price per share, end of period $ 10.5625 $ 12.9375
============ ============
Total Investment Based on market price per share (15.69%)+++ (10.88%)+++
Return:** ============ ============
Based on net asset value per share (12.63%)+++ (2.46%)+++
============ ============
Ratios Based on Total expenses, net of reimbursement*** 1.19%* .66%*
Average Net ============ ============
Assets of Total expenses*** 1.47%* 1.29%*
Common Stock: ============ ============
Total investment income--net*** 8.28%* 7.49%*
============ ============
Amount of dividends to Preferred Stock shareholders 2.46%* 1.99%*
============ ============
Investment income--net, to Common Stock shareholders 5.82%* 5.50%*
============ ============
Ratios Based on Total expenses, net of reimbursement .68%* .41%*
Total Average Net ============ ============
Assets:++++++*** Total expenses .84%* .80%*
============ ============
Total investment income--net 4.72%* 4.65%*
============ ============
Ratios Based on Dividends to Preferred Stock shareholders 3.27%* 3.26%*
Average Net ============ ============
Assets of
Preferred Stock:
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 73,718 $ 87,095
Data: ============ ============
Preferred Stock outstanding, end of period (in thousands) $ 60,000 $ 60,000
============ ============
Portfolio turnover 39.22% 92.47%
============ ============
Leverage: Asset coverage per $1,000 $ 2,229 $ 2,452
============ ============
Dividends Per Series A--Investment income--net $ 403 $ 489
Share On ============ ============
Preferred Stock Series B--Investment income--net $ 416 $ 506
Outstanding: ============ ============
<FN>
*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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings New Jersey Insured Fund II, 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 MWJ. 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 and assets 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.
* 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.
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
* 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 $10,796 were
expensed during the six months ended November 30, 1999. This is
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.
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 November 30,
1999, FAM earned fees of $384,899, of which $114,903 was voluntarily
waived.
During the period September 25, 1998 to May 31, 1999, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM,
received underwriting fees of $450,000 in connection with the
issuance of the Fund's Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1999 were $53,628,637 and
$53,158,537, respectively.
Net realized gains (losses) for the six months November 30, 1999 and
net unrealized losses as of November 30, 1999 were as follows:
Realized Unrealized
Gains (Losses) Losses
Long-term investments $ (2,067,741) $(14,274,969)
Financial futures contracts 167,000 --
------------ ------------
Total $ (1,900,741) $(14,274,969)
============ ============
As of November 30, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $14,274,969, of which $47,327 related
to appreciated securities and $14,322,296 related to depreciated
securities. The aggregate cost of investments at November 30, 1999
for Federal income tax purposes was $145,403,111.
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 November
30, 1999 remained constant and during the period September 25, 1998
to May 31, 1999 increased by 6,095,000 as a result of the initial
offering and by 49,968 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
November 30, 1999 were 3.85% for Series A and 4.05% for Series B.
Shares issued and outstanding during the six months ended November
30, 1999 remained constant and during the period September 25, 1998
to May 31, 1999 increased by 2,400 as a result of the AMPS offering.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the six months ended
November 30, 1999, MLPF&S, an affiliate of FAM, earned $41,942 as
commissions.
5. Capital Loss Carryforward:
At May 31, 1999, the Fund had a net capital loss carryforward of
approximately $523,000, all of which expires in 2007. This amount
will be available to offset like amounts of any future taxable
gains.
6. Reorganization Plan:
On September 9, 1999, the Fund's Board of Directors approved a plan
of reorganization, subject to shareholder approval and certain other
conditions, whereby MuniHoldings New Jersey Insured Fund, Inc. would
acquire substantially all of the assets and liabilities of the Fund
and MuniHoldings New Jersey Insured Fund III, Inc. in exchange for
newly issued shares of MuniHoldings New Jersey Insured Fund, Inc.
These Funds are registered, non-diversified, closed-end management
investment companies. All three entities have a similar investment
objective and are managed by FAM.
7. Subsequent Event:
On December 8, 1999, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.059061 per share, payable on December 30, 1999 to shareholders
of record as of December 23, 1999.
QUALITY PROFILE
The quality ratings of securities in the Fund as of November 30,
1999 were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 94.8%
BBB/Baa 2.6
Other* 0.7
[FN]
*Temporary investments in short-term municipal securities.
MuniHoldings New Jersey Insured Fund II, Inc., November 30, 1999
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.
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
Roberto Roffo, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MWJ
