MUNIYIELD
NEW JERSEY
INSURED
FUND, INC.
FUND LOGO
Annual Report
October 31, 2000
MuniYield New Jersey Insured Fund, Inc. seeks to provide
shareholders with as high a level of current income exempt from
Federal and New Jersey income taxes as is consistent with its
investment policies and prudent investment management by investing
primarily in a portfolio of long-term municipal obligations the
interest on which, in the opinion of bond counsel to the issuer, is
exempt from Federal and New Jersey income taxes.
This report, including the financial information here-in, is
transmitted to shareholders of MuniYield New Jersey Insured Fund,
Inc. for their information. It is not a prospectus. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
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. Statements and other information
herein are as dated and are subject to change.
MuniYield New Jersey
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIYIELD NEW JERSEY INSURED FUND, INC.
MuniYield New Jersey Insured Fund, Inc. utilizes leveraging 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 the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in these securities.
MuniYield New Jersey Insured Fund, Inc., October 31, 2000
DEAR SHAREHOLDER
For the year ended October 31, 2000, the Common Stock of MuniYield
New Jersey Insured Fund, Inc. earned $0.805 per share income
dividends, which included earned and unpaid dividends of $0.067.
This represents a net annualized yield of 5.77%, based on a month-
end net asset value of $13.96 per share. During the same period, the
total investment return on the Fund's Common Stock was +10.27%,
based on a change in per share net asset value from $13.48 to
$13.96, and assuming reinvestment of $0.808 per share income
dividends.
For the six-month period ended October 31, 2000, the total
investment return on the Fund's Common Stock was +7.74%, based on a
change in per share net asset value from $13.35 to $13.96, and
assuming reinvestment of $0.403 per share income dividends.
For the six-month period ended October 31, 2000, the Fund's Auction
Market Preferred Stock had an average yield of 3.77%.
The Municipal Market Environment
During the six months ended October 31, 2000, long-term US Treasury
bond yields generally drifted lower. A number of economic
indicators, particularly employment, new home sales and consumer
spending, have suggested that US economic growth, while still
strong, has moderated from 1999's robust levels. Preliminary
estimates for third-quarter 2000 US gross domestic product growth
were recently released at 2.7%, well below the first-quarter 2000
rate of 4.8% and the second-quarter 2000 rate of 5.6%. This decline
in economic growth suggests to some analysts that the Federal
Reserve Board has finished raising interest rates for its current
interest rate cycle. The Federal Reserve Board increased short-term
interest rates at its May meeting and has since kept monetary policy
steady at its subsequent meetings. Given the potential for stable
short-term interest rates in the coming months, investor emphasis
focused on the continuing US Treasury debt reduction program and
forecasts of sizeable Federal budgetary surpluses going forward.
Many investors have concluded that there will be a significant
future shortage of longer-dated maturity US Treasury securities. By
late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%, their lowest level in more than a year.
However, for the remainder of the period, bond yields were unable to
maintain their earlier gains. Rising oil prices were the major focus
behind the decline in bond prices, as many investors feared that
higher oil prices would result in increased inflationary pressures.
Additionally, US corporations issued large amounts of taxable debt
in order to take advantage of the current low interest rate
environment. During the last three months, US corporations issued
more than $100 billion in investment-grade securities, offering
yields in the 7.25% - 9% range. Many investors found these taxable
issues an attractive and more plentiful alternative to US Treasury
bonds. As the demand for US Treasury issues weakened, US bond yields
rose. Although US Treasury bond yields rose to 5.78% by the end of
October 2000, overall they declined almost 20 basis points during
the last six months.
The six-month period ended October 31, 2000 was one of the few
periods in recent years in which the tax-exempt bond market
outperformed its taxable counterpart, the US Treasury bond market.
While municipal bond yields followed the similar seesaw pattern of
Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively
narrow range during much of October 2000. Overall investor demand
for municipal bonds remained strong, allowing tax-exempt bond
yields, as measured by the Bond Buyer Revenue Bond Index, to decline
30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has
continued to decline, albeit at a slower rate than earlier this
year. During this period, more than $53 billion in new long-term
municipal bonds was issued, a decline of 3% compared to the same
three-month period in 1999. During the last six months, more than
$105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200
billion in new municipal securities was marketed during the past
year, a decline of more than 16% compared to the same 12-month
period in 1999.
The demand for municipal bonds came from a number of non-traditional
and conventional sources. Derivative/arbitrage programs and
insurance companies remained the dominant institutional buyers,
while individual retail purchases also remained strong. Traditional,
open-end tax-exempt mutual funds have continued to see significant
disintermediation. It was recently reported that thus far during the
2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately,
the combination of reduced new bond issuance and ongoing demand from
non-traditional sources has been able to more than offset the
decline in demand from tax-exempt mutual funds. This favorable
balance has fostered a significant decline in municipal bond yields
in recent months.
Currently, there is no reason to expect that the positive technical
position of the municipal bond market will significantly
deteriorate. The steeply positive yield curve and the relatively
high credit quality that the tax-exempt bond market offers should
continue to attract different classes of institutional buyers.
Strong state and local governmental financial conditions also
suggest that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-
exempt bond market. Various tax and spending programs proposed by
both candidates have obvious implications for state and local
governments as well as corporate and individual taxpayers. Political
history has shown that the enactment of campaign promises, both
Republican and Democratic, has very often been a long, laborious
process. This suggests that over the next few months US economic
factors will most likely have a greater effect on bond yields than
political considerations.
Portfolio Strategy
During the six months ended October 31, 2000, our decision to
maintain a fully invested position produced solid returns for
shareholders as the tax-exempt bond market rebounded from depressed
levels. We took steps earlier in the year to lower the Fund's
duration, which decreased the Fund's sensitivity to interest rate
fluctuations and may also have reduced its total return; however, a
renewed focus on strategies designed to enhance the Fund's dividend
income appear to have compensated for the difference in market
appreciation.
The very competitive distribution yield provided to shareholders
remains the Fund's most appealing attribute especially within the
context of its conservative investment parameters. As an insured
portfolio, more than 80% of the Fund's investments carry bond
insurance and, consequently, receive the highest rating from at
least one of the nationally recognized rating agencies. Overall,
88.8% of the securities held by the portfolio are rated in the top
two rating categories. This emphasis on quality proved especially
beneficial in recent months as credit spreads have remained under
pressure, causing valuations of lower-quality securities to lag the
overall market.
The technical backdrop for New Jersey municipal issuance has
remained favorable, supported by strong demand from individual
investors and reduced supply. New Jersey issuance has plummeted 32%
from year-ago levels compared to an 8% decline in overall municipal
new-issue volume for the last six months. While this dynamic has
contributed to strong performance for this sector relative to the
general market, reduced volume both in terms of new and seasoned
issues hampered our ability to successfully implement certain
aspects of portfolio strategy. With year end approaching, these
challenges seem unlikely to abate soon; however, issuance could
possibly accelerate during the first and second quarters of 2001,
providing a more flexible environment for managing the portfolio.
MuniYield New Jersey Insured Fund, Inc., October 31, 2000
New Jersey continues to exhibit solid credit fundamentals as the
state's financial profile remains healthy in the wake of robust
economic conditions. General Fund revenue collections rose 12.5%
during fiscal year 1999, while the rate of increase in expenditures
was kept slightly below 2%. This marks the second consecutive year
of running an operating surplus, which, in conjunction with a flush
Rainy Day Fund and a moderate debt burden, demonstrates the
conservative approach to managing the state's finances. The state
legislature recently passed an $8.6 billion bill for school
construction, which is expected to be financed largely through bonds
issued by the Economic Development Authority. Although not general
obligation debt of the state, this new financing will, for practical
purposes, be considered annual appropriation backed obligations. The
ensuing increase in the state's debt service burden bears watching
insofar as a less favorable economic environment may limit budget
flexibility in subsequent years.
The Fund's cost of borrowing remained relatively stable through-out
the October period, reflecting the pause in Federal Reserve Board
policy actions since May. Long-term tax-exempt interest rates, as
previously noted, have declined modestly, causing the municipal
yield curve to flatten. While this flattening reduced the
incremental yield enhancement resulting from leveraging the Fund's
Common Stock, it is important to note that in contrast to the
inverted shape of the Treasury curve, the municipal yield curve
remains positively sloped. Historical analysis of the municipal
yield curve demonstrates this resiliency throughout a number of
economic cycles. Furthermore, with expectations mounting that
monetary policy may soon become less restrictive, the benefits of
leverage could well increase as short-term interest rates decline in
response, effectively lowering market rates on the Fund's
outstanding Preferred Stock. However, should the spread between
short-term and long-term interest rates narrow, the benefits of
leverage will decline and, as a result, reduce the yield on the
Fund's Common Stock. (For a complete explanation of the benefits and
risks of leveraging, see page 1 of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniYield New Jersey Insured
Fund, Inc., and we look forward to assisting you with your financial
needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and
Portfolio Manager
December 1, 2000
<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% AAA Aaa $ 2,875 Cape May County, New Jersey, Industrial Pollution Control
Financing Authority Revenue Bonds (Atlantic City Electric
Company Project), AMT, Series A, 7.20% due 11/01/2029 (d) $ 3,136
AAA Aaa 3,010 Carteret, New Jersey, Board of Education, COP,
6.75% due 10/15/2004 (d)(e) 3,302
AAA Aaa 1,000 Carteret, New Jersey, Board of Education, COP,
Refunding, 4.75% due 4/15/2019 (d) 911
NR* Aaa 2,500 Delaware River Port Authority of Pennsylvania and New Jersey
Revenue Bonds, RIB, Series 396, 7.44% due 1/01/2019 (c)(f) 2,777
East Orange, New Jersey, Board of Education, COP (c):
AAA Aaa 1,000 5.30%** due 2/01/2024 265
AAA Aaa 2,845 5.28%** due 8/01/2024 732
AAA Aaa 1,845 5.36%** due 8/01/2027 397
AAA Aaa 2,850 5.38%** due 2/01/2028 595
AAA Aaa 1,120 Essex County, New Jersey, Improvement Authority,
Parking Facility Revenue Bonds, 6.20% due 7/01/2002 (d)(e) 1,162
BBB NR* 2,000 Gloucester County, New Jersey, Improvement Authority, Solid
Waste Resource Recovery Revenue Refunding Bonds (Waste
Management Inc. Project), Series A, 6.85% due 12/01/2029 2,068
AAA Aaa 3,630 Hoboken, Union City, Weehawken, New Jersey, Sewer Authority,
Sewer Revenue Refunding Bonds, 6.20% due 8/01/2019 (d) 3,750
AAA Aaa 7,600 Hudson County, New Jersey, COP, Refunding (Correctional
Facilities), 6.60% due 12/01/2021 (d) 7,922
AAA NR* 8,250 Hudson County, New Jersey, Improvement Authority, Facility
Lease Revenue Refunding Bonds (Hudson County Lease Project),
5.375% due 10/01/2024 (b) 8,113
AAA Aaa 3,750 Jersey City, New Jersey, Sewer Authority, Sewer Revenue
Refunding Bonds, 6.25% due 1/01/2014 (a) 4,179
AAA Aaa 1,475 Monmouth County, New Jersey, Improvement Authority, Revenue
Refunding Bonds (Pooled Governmental Loan), 4.75% due
12/01/2014 (a) 1,395
BBB- NR* 1,000 New Jersey EDA, First Mortgage Revenue Bonds (Fellowship
Village), Series C, 5.50% due 1/01/2028 775
New Jersey EDA, First Mortgage Revenue Refunding Bonds
(Fellowship Village), Series A:
BBB- NR* 1,700 5.50% due 1/01/2018 1,396
BBB- NR* 2,000 5.50% due 1/01/2025 1,569
NR* Aaa 3,000 New Jersey EDA, Natural Gas Facilities Revenue Refunding
Bonds (NUI Corporation), RIB, Series 371, 8.19% due
10/01/2022 (a)(f) 3,336
</TABLE>
Portfolio
Abbreviations
To simplify the listings of MuniYield 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
M/F Multi-Family
RIB Residual Interest Bonds
VRDN Variable Rate Demand Notes
<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 New Jersey EDA, Revenue Bonds:
(concluded) AAA Aaa $ 2,305 (Educational Testing Service), Series B,
6.125% due 5/15/2005 (d)(e) $ 2,487
NR* Aaa 6,000 (Saint Barnabas Medical Center), Series A,
6.23%** due 7/01/2019 (d) 2,109
AAA Aaa 9,080 (Transportation Project Sublease), Series A,
5.875% due 5/01/2014 (c) 9,605
New Jersey EDA, Revenue Refunding Bonds:
AAA Aaa 4,000 (Educational Testing Service), Series A, 4.75%
due 5/15/2018 (d) 3,655
AAA Aaa 2,835 (RWJ Health Care Corporation), 6.50% due 7/01/2024 (c) 3,040
AAA Aaa 1,150 New Jersey EDA, State Contract Revenue Bonds
(Economic Recovery), Series A, 6% due 3/15/2021 (c) 1,178
NR* Aaa 2,535 New Jersey EDA, Water Facilities Revenue Bonds, RIB,
AMT, Series 417, 9.09% due 11/01/2034 (b)(f) 2,877
New Jersey EDA, Water Facilities Revenue Refunding
Bonds (United Water of New Jersey Inc. Project), VRDN (a)(g):
A1+c VMIG1++ 500 Series A, 4.55% due 11/01/2026 500
A1+c VMIG1++ 1,400 Series B, 4.60% due 11/01/2025 1,400
A+ A1 2,000 New Jersey Health Care Facilities Financing
Authority Revenue Bonds (Robert Wood Johnson
University Hospital), 5.75% due 7/01/2025 1,964
New Jersey Health Care Facilities Financing Authority,
Revenue Refunding Bonds:
BBB- Baa3 1,200 (Englewood Hospital and Medical Center), 6.70%
due 7/01/2015 1,082
AAA Aaa 4,000 (Hackensack University Medical Center),
Series B, 5.20% due 1/01/2028 (d) 3,762
BBB+ NR* 1,800 (Holy Name Hospital), 6% due 7/01/2025 1,582
AAA Aaa 2,500 (Meridian Health System Obligation Group),
5.25% due 7/01/2019 (c) 2,422
AAA Aaa 2,500 (Meridian Health System Obligation Group),
5.375% due 7/01/2024 (c) 2,426
AAA Aaa 1,750 (Saint Barnabas Health Obligated Group),
Series B, 5% due 7/01/2024 (d) 1,599
AAA Aaa 2,710 (Saint Barnabas Hospital), Series B, 5.09%**
due 7/01/2019 (d) 941
AAA Aaa 1,110 (Saint Barnabas Hospital), Series B, 5.10%**
due 7/01/2020 (d) 361
BBB- Baa3 4,000 (Saint Elizabeth Hospital Obligation Group),
6% due 7/01/2024 (d) 3,459
AAA Aaa 2,000 New Jersey Sports and Exposition Authority
Convention Center, Luxury Tax Revenue Bonds,
Series A, 6.60% due 7/01/2002 (d)(e) 2,107
AA+ Aaa 1,990 New Jersey State Educational Facilities Authority
Revenue Bonds (Institute of Advanced
Study), Series G, 5% due 7/01/2018 1,891
AA+ Aa1 2,590 New Jersey State, GO, 4.50% due 2/01/2016 2,325
AAA Aaa 10,000 New Jersey State Higher Education Assistance Authority, Student
Loan Revenue Bonds, AMT, Series A, 5.30% due 6/01/2017 (a) 9,750
New Jersey State Housing and Mortgage Finance Agency,
Home Buyer Revenue Bonds, AMT (d):
AAA Aaa 3,150 Series CC, 5.80% due 10/01/2020 3,149
AAA Aaa 2,840 Series M, 7% due 10/01/2026 2,993
AAA Aaa 2,750 New Jersey State Housing and Mortgage Finance
Agency, M/F Housing Revenue Refunding Bonds, Series A,
6.05% due 11/01/2020 (a) 2,795
AAA Aaa 5,350 New Jersey State Transit Corporation, COP, 6.50%
due 10/01/2016 (c) 5,840
AAA Aaa 6,500 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series A, 5% due
6/15/2018 (c) 6,195
AAA Aaa 2,500 New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds, Series A, 5.75% due 1/01/2019 (d) 2,572
Ocean County, New Jersey, Utilities Authority,
Wastewater Revenue Refunding Bonds, GO (h):
NR* Aa1 500 5% due 1/01/2013 490
NR* Aa1 1,340 5% due 1/01/2018 1,273
Port Authority of New York and New Jersey,
Consolidated Revenue Bonds:
AA- A1 1,000 93rd Series, 6.125% due 6/01/2094 1,074
AAA Aaa 4,000 AMT, 97th Series, 6.65% due 1/15/2023 (b) 4,234
AAA Aaa 3,500 Port Authority of New York and New Jersey, Consolidated
Revenue Refunding Bonds, AMT, 96th Series, 6.60%
due 10/01/2023 (b) 3,704
NR* Aaa 4,075 Port Authority of New York and New Jersey, Revenue
Bonds, Trust Receipts, AMT, Class R, Series 10,
7.02% due 1/15/2017 (c)(f) 4,334
A1+ VMIG1++ 2,300 Port Authority of New York and New Jersey, Special
Obligation Revenue Refunding Bonds (Versatile Structure
Obligation), VRDN, Series 3, 4.55% due 6/01/2020 (g) 2,300
AAA Aaa 898 Rancocas Valley, New Jersey, Regional High School
District, GO, 5.30% due 2/01/2029 (b) 871
AAA Aaa 1,180 South Brunswick Township, New Jersey, Board of Education,
GO, 6.40% due 8/01/2005 (b)(e) 1,272
AAA Aaa 5,250 South Jersey Transportation Authority, New Jersey,
Transportation System Revenue Refunding Bonds,
5% due 11/01/2029 (a) 4,831
Union County, New Jersey, Utilities Authority, Senior
Lease Revenue Refunding Bonds (Ogden Martin System
of Union), AMT, Series A (a):
AAA Aaa 1,590 5.375% due 6/01/2017 1,568
AAA Aaa 1,670 5.375% due 6/01/2018 1,637
West Windsor-Plainsboro, New Jersey, Regional School
District, GO, Refunding (b):
AAA Aaa 2,500 4.75% due 9/15/2022 2,225
AAA Aaa 2,500 4.75% due 9/15/2023 2,219
Puerto Rico--4.8% AAA Aaa 1,540 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series HH, 5.25% due 7/01/2029 (c) 1,495
NR* Aa2 2,110 Puerto Rico Industrial Tourist Educational, Medical
and Environmental Control Facilities Revenue Bonds
(Ascension Health), RIB, Series 377, 7.69% due 11/15/2030 (f) 2,282
AAA Aaa 5,000 Puerto Rico Public Buildings Authority Revenue Bonds
(Government Facilities), Series B, 5% due 7/01/2027 (a) 4,701
Total Investments (Cost--$169,576)--99.1% 174,356
Other Assets Less Liabilities--0.9% 1,529
--------
Net Assets--100.0% $175,885
========
(a)AMBAC Insured.
(b)FGIC Insured.
(c)FSA Insured.
(d)MBIA Insured
(e)Prerefunded.
(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 October 31, 2000.
(g)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 2000.
(h)This issue will begin to accrue interest on December 28, 2000.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
MuniYield New Jersey Insured Fund, Inc., October 31, 2000
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of October 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$169,575,629) $174,355,613
Cash 92,271
Receivables:
Interest $ 2,863,855
Securities sold 662,037 3,525,892
------------
Prepaid expenses and other assets 29,762
------------
Total assets 178,003,538
------------
Liabilities: Payables:
Securities purchased 1,788,083
Dividends to shareholders 148,652
Investment adviser 71,700 2,008,435
------------
Accrued expenses and other liabilities 109,968
------------
Total liabilities 2,118,403
------------
Net Assets: Net assets $175,885,135
============
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.05 per share
(2,240 shares of AMPS* issued and outstanding at $25,000
per share liquidation preference) $ 56,000,000
Common Stock, par value $.10 per share
(8,586,560 shares issued and outstanding) $ 858,656
Paid-in capital in excess of par 120,317,344
Undistributed investment income--net 899,949
Accumulated realized capital losses on investments--net (4,928,343)
Accumulated distributions in excess of realized
capital gains on investments--net (2,042,455)
Unrealized appreciation on investments--net 4,779,984
------------
Total--Equivalent to $13.96 net asset value per
Common Stock (market price--$13.375) 119,885,135
------------
Total capital $175,885,135
============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 2000
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 10,105,578
Income:
Expenses: Investment advisory fees $ 861,445
Commission fees 144,726
Professional fees 77,778
Accounting services 60,853
Transfer agent fees 40,824
Directors' fees and expenses 33,594
Printing and shareholder reports 24,068
Listing fees 19,145
Custodian fees 11,228
Pricing fees 9,181
Other 14,963
------------
Total expenses 1,297,805
------------
Investment income--net 8,807,773
------------
Realized & Realized loss on investments--net (4,545,008)
Unrealized Change in unrealized appreciation/depreciation
Gain (Loss) on on investments--net 8,959,946
Investments--Net: ------------
Net Increase in Net Assets Resulting from Operations $ 13,222,711
============
See Notes to Financial Statements.
</TABLE>
MuniYield New Jersey Insured Fund, Inc., October 31, 2000
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 8,807,773 $ 9,163,902
Realized loss on investments--net (4,545,008) (197,745)
Change in unrealized appreciation/depreciation on
investments--net 8,959,946 (19,089,084)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 13,222,711 (10,122,927)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (6,937,082) (7,530,812)
Shareholders: Preferred Stock (2,163,459) (1,603,974)
In excess of realized gain on investments--net:
Common Stock -- (1,849,703)
Preferred Stock -- (192,752)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (9,100,541) (11,177,241)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders
Transactions: in reinvestment of dividends and distributions -- 1,484,734
------------ ------------
Net Assets: Total increase (decrease) in net assets 4,122,170 (19,815,434)
Beginning of year 171,762,965 191,578,399
------------ ------------
End of year* $175,885,135 $171,762,965
============ ============
*Undistributed investment income--net $ 899,949 $ 1,192,717
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 13.48 $ 15.96 $ 15.49 $ 15.10 $ 15.12
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.03 1.07 1.11 1.13 1.12
Realized and unrealized gain (loss)
on investments--net .51 (2.24) .49 .38 (.03)
-------- -------- -------- -------- --------
Total from investment operations 1.54 (1.17) 1.60 1.51 1.09
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.81) (.88) (.88) (.91) (.88)
Realized gain on investments--net -- -- (.02) -- --
In excess of realized gain on investments--net -- (.22) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.81) (1.10) (.90) (.91) (.88)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net (.25) (.19) (.20) (.21) (.23)
Realized gain on investments--net -- -- (.03) -- --
In excess of realized gain on
investments--net -- (.02) -- -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.25) (.21) (.23) (.21) (.23)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.96 $ 13.48 $ 15.96 $ 15.49 $ 15.10
======== ======== ======== ======== ========
Market price per share, end of year $ 13.375 $ 12.625 $ 16.75 $15.8125 $ 14.75
======== ======== ======== ======== ========
Total Investment Based on market price per share 12.80% (18.97%) 12.13% 13.77% 10.93%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 10.27% (9.20%) 9.07% 8.87% 6.09%
======== ======== ======== ======== ========
Ratios Based on Total expenses** 1.11% 1.03% 1.03% 1.04% 1.04%
Average Net ======== ======== ======== ======== ========
Assets of Total investment income--net** 7.56% 7.07% 7.10% 7.43% 7.46%
Common Stock: ======== ======== ======== ======== ========
Amount of dividends to
Preferred Stock shareholders 1.86% 1.24% 1.30% 1.37% 1.55%
======== ======== ======== ======== ========
Investment income--net, to
Common Stock shareholders 5.70% 5.83% 5.80% 6.06% 5.91%
======== ======== ======== ======== ========
Ratios Based on Total expenses .75% .72% .72% .72% .72%
Total Average Net ======== ======== ======== ======== ========
Assets:**++ Total investment income--net 5.10% 4.94% 4.96% 5.12% 5.13%
======== ======== ======== ======== ========
Ratios Based on Dividends to Preferred Stock
Average Net shareholders 3.85% 2.87% 3.06% 3.08% 3.44%
Assets of ======== ======== ======== ======== ========
Preferred Stock:
Supplemental Net assets, net of Preferred Stock,
Data: end of year (in thousands) $119,885 $115,763 $135,578 $129,768 $124,948
======== ======== ======== ======== ========
Preferred Stock outstanding,
end of year (in thousands) $ 56,000 $ 56,000 $ 56,000 $ 56,000 $ 56,000
======== ======== ======== ======== ========
Portfolio turnover 50.65% 61.80% 46.23% 26.16% 37.08%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,141 $ 3,067 $ 3,421 $ 3,317 $ 3,231
======== ======== ======== ======== ========
Dividends Per Investment income--net $ 966 $ 716 $ 765 $ 771 $ 860
Share On ======== ======== ======== ======== ========
Preferred Stock
Outstanding:
*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.
++Includes Common and Preferred Stock average net assets.
See Notes to Financial Statements.
</TABLE>
MuniYield New Jersey Insured Fund, Inc., October 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield 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 conformity with accounting principles
generally accepted in the United States of America, which may
require the use of management accruals and estimates. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol MJI. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last
asked price (options written) or the last bid price (options
purchased). Securities with remaining maturities of sixty days or
less are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.
* 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.
* Options--The Fund is authorized to write covered call options and
purchase 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) 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.
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 .50% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 2000 were $85,518,950 and $89,644,690
respectively.
Net realized losses for the year ended October 31, 2000 and net
unrealized gains as of October 31, 2000 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (4,000,923) $ 4,779,984
Financial futures contracts (544,085) --
------------ -----------
Total $ (4,545,008) $ 4,779,984
============ ===========
As of October 31, 2000, net unrealized appreciation for Federal
income tax purposes aggregated $4,125,483, of which $6,795,994
related to appreciated securities and $2,670,511 related to
depreciated securities. The aggregate cost of investments at October
31, 2000 for Federal income tax purposes was $170,230,130.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the year ended October 31, 2000
remained constant and during the year ended October 31, 1999
increased by 92,658 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 $.05 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 yield in effect at October
31, 2000 was 4.00%.
Shares issued and outstanding during the years ended October 31,
2000 and October 31, 1999 remained constant.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the year ended
October 31, 2000, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $93,128 as commissions.
5. Capital Loss Carryforward:
At October 31, 2000, the Fund had a net capital loss carryforward of
approximately $4,659,000, of which $173,000 expires in 2007 and
$4,486,000 expires in 2008. This amount will be available to offset
amounts of any future taxable gains.
6. Subsequent Event:
On November 8, 2000, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.067100 per share, payable on November 29, 2000 to shareholders
of record as of November 20, 2000.
MuniYield New Jersey Insured Fund, Inc., October 31, 2000
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniYield New Jersey Insured Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield New
Jersey Insured Fund, Inc. as of October 31, 2000, the related
statements of operations for the year then ended, and changes in net
assets for each of the years in the two-year period then ended and
the financial highlights for each of the years in the five-year
period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at October 31, 2000 by
correspondence with the custodian and broker. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield New Jersey Insured Fund, Inc. as of October 31, 2000, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 5, 2000
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of October 31, 2000
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 84.6%
AA/Aa 4.2
A/A 1.1
BBB/Baa 6.8
Other ++ 2.4
++Temporary investments in short-term municipal securities.
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield New
Jersey Insured Fund, Inc. during its taxable year ended October 31,
2000 qualify as tax-exempt interest dividends for Federal Income tax
purposes. Additionally, there were no capital gains distributions
paid by the Fund during the year.
Please retain this information for your records.
MANAGED DIVIDEND POLICY
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 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
M. Colyer Crum, Director
Laurie Simon Hodrick, Director
Jack B. Sunderland, Director
Stephen B. Swensrud, Director
J. Thomas Touchton, Director
Fred G. Weiss, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, 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
MJI
