[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
January 31, 2002
MuniHoldings
New Jersey
Insured Fund, Inc.
www.mlim.ml.com
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 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 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.
The Fund may also invest in swap agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on the
change in market value of a specified bond, basket of bonds, or index in return
for periodic payments based on a fixed or variable interest rate or the change
in market value of a different bond, basket of bonds or index. Swap agreements
may be used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
TO OUR SHAREHOLDERS
For the six-month period ended January 31, 2002, the Common Stock of
MuniHoldings New Jersey Insured Fund, Inc. earned $0.433 per share income
dividends, which included earned and unpaid dividends of $0.073. This represents
a net annualized yield of 5.94%, based on a month-end net asset value of $14.47
per share. Over the same period, the total investment return on the Fund's
Common Stock was +2.69%, based on a change in per share net asset value from
$14.54 to $14.47, and assuming reinvestment of $0.426 per share income
dividends.
For the six months ended January 31, 2002, the Fund's Auction Market Preferred
Stock had an average yield as follows: Series A, 1.67%; Series B, 1.81%; Series
C, 1.86%; Series D, 1.71%; and Series E, 1.86%.
The Municipal Market Environment
Throughout most of the six-month period ended January 31, 2002, long-term
fixed-income interest rates exhibited considerable volatility. During the
January 2002 period, long-term US Treasury bond yields registered slight
declines while long-term municipal bond yields were largely unchanged. From
early summer through early September 2001, fixed-income yields generally
declined. Weak economic growth, exemplified by declines in industrial production
and large losses in employment, easily outweighed modest strength in consumer
confidence and spending. Consensus was that a meaningful US economic recovery
was unlikely before early 2002. Consequently, US equity markets remained under
pressure and fixed-income instruments benefited. By the end of August 2001, the
Federal Reserve Board had lowered its target for short-term interest rates to
3.50%, cutting interest rates by 300 basis points (3.00%) during the first eight
months of 2001.
By early September there were some, albeit few, indications pointing toward the
beginning of a US economic recovery. Immediately following the tragedy of the
World Trade Center and Pentagon attacks, however, all such indications
effectively vanished. After anemic economic growth of just 0.3% during the
second quarter of 2001, US gross domestic product growth was reported to have
declined 1.3% during the third quarter of 2001. The Federal Reserve Board
quickly lowered short-term interest rates an additional 50 basis points
immediately following the terrorist attacks, just prior to the reopening of the
stock exchanges. This marked the eighth time in 2001 that the Federal Reserve
Board had eased monetary conditions. Despite the events of September 11, the
Federal Reserve Board noted that the nation's long-term economic prospects
remained favorable.
Initially, long-term interest rates rose during the days following the September
11 attacks. The quick response by both Federal and state governments to
stabilize, aid and revive US business activities, promptly improved fixed-income
investors' confidence. Investor attention again focused on weak US economic
fundamentals and on a financial environment further impaired by the economic
losses resulting from the recent attacks. In addition to the immediate loss of
four days of equity trading and air transportation, including air cargo
transfers, US consumer confidence was expected to be severely shaken, resulting
in weaker consumer spending and, eventually, diminished business manufacturing.
By September 30, 2001, US Treasury bond yields declined to 5.42%, their
approximate level before the September attacks.
In early October, the Federal Reserve Board lowered short-term interest rates an
additional 50 basis points to a target of 2.50%, the lowest rate in nearly 40
years. US economic reports continued to be very weak, pushing US equity prices
lower in early October and bond prices higher. US military reprisals in
Afghanistan also helped support higher bond prices as investors sought the safe
haven of US Treasury obligations. At the end of October, the US Treasury
announced that it would no longer issue 30-year maturity bonds, triggering an
explosive fixed-income rally as investors scrambled to purchase
soon-to-be-unavailable issues. By the end of October, long-term US Treasury bond
yields declined to 4.87%, falling more than 50 basis points in October 2001.
Despite additional decreases in its short-term interest rate target to 1.75% by
the Federal Reserve Board, long-term fixed-income markets were unable to hold
their October gains. Rapid, significant US military success in Afghanistan,
stronger-than-expected retail sales, and recovering US equity markets combined
to suggest to many investors that a US economic recovery was far more imminent
than had been expected earlier in the fall of 2001. Bond yields rose during
November and December 2001 as investors sold securities both to realize recent
profits and in anticipation of an early reversal of the Federal Reserve Board's
policy. By the end of December, long-term US Treasury bond yields rose to
approximately 5.45%.
During January 2002, economic indicators were mixed and fixed-income bond yields
remained volatile. The January index of leading economic conditions rose for the
third consecutive month signaling that US economic activity is likely to expand
later this year. However, employment trends, especially in manufacturing,
remained weak suggesting that recent increases in consumer confidence and
spending were fragile. In late January 2002, fourth quarter 2001 gross domestic
product growth was initially estimated at 0.2%, reflecting only modest
improvement of negative growth from the third quarter of 2001. At month end, the
Federal Reserve Board ceased its aggressive series of interest rate reductions
by maintaining its overnight interest rate target at 1.75%, a 40-year low. The
Federal Reserve Board noted that while US economic activity was beginning to
strengthen, it was still possible that earlier economic weakness could return
should consumer spending decline. At the end of January 2002, long-term US
Treasury bond yields stood at 5.43%, a decline of approximately 10 basis points
during the past six months.
The municipal bond market displayed a very similar pattern during the January
period. Long-term tax-exempt bond yields had generally declined through early
September as strong investor demand easily outweighed sizable increases in new
bond issuance. The disruption in the financial markets following the September
11 attacks also served to push tax-exempt bond yields higher. The municipal bond
market was able to reorganize operations quickly, and tax-exempt bond yields
declined in conjunction with US Treasury bond yields for the remainder of the
six-month period. While municipal bond yields were unable to match the dramatic
declines witnessed in the US Treasury market, tax-exempt bond prices rose
strongly during late October. As measured by the Bond Buyer Revenue Bond Index,
at the end of October 2001, long-term municipal bond yields stood at 5.23%,
declining approximately 20 basis points during October.
Similar to its taxable counterpart, the long-term municipal bond market also was
unable to maintain the improvements made in September and October 2001. In
addition to a slightly stronger financial environment, increased tax-exempt bond
issuance during the last three months of the period also put upward pressure on
municipal bond yields. By the end of January 2002, long-term tax-exempt revenue
bond yields rose to approximately 5.45%. During the last six months, tax-exempt
bond yields rose less than five basis points.
Interest rates appear likely to remain near current levels in early 2002 as US
economic conditions are expected to remain weak. However, going forward,
business activity is likely to accelerate, perhaps significantly. Immediately
after the September 11 attacks, the Federal Government announced a $45 billion
aid package for New York City, Washington, DC and the airline industry, with
additional fiscal aid packages expected. The military response to these attacks
will continue to require sizable increases in Defense Department spending.
Eventually, this governmental spending should result in increased US economic
activity, particularly in the construction and defense industries. This
governmental stimulus, in conjunction with the actions already taken by the
Federal Reserve Board, can be expected to generate significant increases in US
gross domestic product growth some time in mid-2002.
As inflationary pressures are expected to remain well-contained going forward,
increased economic activity need not result in significant increases in
long-term bond yields. Also, throughout much of 2001, the municipal bond market
exhibited far less volatility than its taxable counterparts. Since the strong
technical position that supported the tax-exempt bond market's performance for
much of 2001 can be
2 & 3
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
expected to continue going forward, any potential increases in municipal bond
yields also can be expected to be minimal.
Portfolio Strategy
During the six-month period ended January 31, 2002, we maintained a neutral
position for the Fund relative to the municipal bond market. We continued our
strategy of seeking to reduce the Fund's volatility by selling interest
rate-sensitive issues. With the proceeds, we purchased bonds maturing in the
15-year - 20-year range. During the last three months, more than $4 billion of
long-term tax-exempt bonds was issued in New Jersey, with almost $2 billion of
it coming from one issue in December 2001. Despite the increased supply, retail
and institutional demand remained strong. At this time, we expect to remain
fully invested in an effort to enhance shareholder income.
The 475 basis point decline in short-term interest rates by the Federal Reserve
Board in 2001 resulted in a material decrease in the Fund's borrowing cost into
the 1% - 1.25% range. This decline, in combination with a steep tax-exempt yield
curve, benefited the Fund's Common Stock shareholders from the leveraging of the
Preferred Stock. Additional limited declines in short-term interest rates are
expected this year. These declines should lead to lower borrowing costs for the
Fund and increased yields for the Fund's Common Stock shareholders. However,
should short-term tax-exempt interest rates rise, the benefits of leveraging
will diminish and the yield paid to the Common Stock shareholder will decline.
(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 MuniHoldings New Jersey Insured Fund,
Inc., and we look forward to serving your investment needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Robert D. Sneeden
Robert D. Sneeden
Vice President and Portfolio Manager
March 7, 2002
PROXY RESULTS
During the six-month period ended January 31, 2002, MuniHoldings New Jersey
Insured Fund, Inc.'s Common Stock shareholders voted on the following proposal.
The proposal was approved at a shareholders' meeting on December 12, 2001. The
description of the proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Terry K. Glenn 20,525,467 414,583
Robert W. Forbes 20,525,467 414,583
Cynthia A. Montgomery 20,525,467 414,583
Kevin A. Ryan 20,522,367 417,683
Roscoe S. Suddarth 20,525,467 414,583
Edward D. Zinbarg 20,523,386 416,664
---------------------------------------------------------------------------------------------------------------------------------
During the six-month period ended January 31, 2002, MuniHoldings New Jersey
Insured Fund, Inc.'s Preferred Stock shareholders (Series A-E) voted on the
following proposal. The proposal was approved at a shareholders' meeting on
December 12, 2001. The description of the proposal and number of shares voted
are as follows:
Shares Voted Shares Withheld
For From Voting
---------------------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Terry K. Glenn, Ronald W. Forbes,
Cynthia A. Montgomery, Charles C. Reilly, Kevin A. Ryan, Roscoe S.
Suddarth, Richard R. West and Edward D. Zinbarg as follows:
Series A 1,349 0
Series B 1,320 10
Series C 2,024 367
Series D 1,877 0
Series E 1,112 0
---------------------------------------------------------------------------------------------------------------------------------
4 & 5
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
New Jersey--87.1% AAA Aaa $ 1,875 Atlantic Highlands, New Jersey, Highland Regional Sewer Authority,
Sewer Revenue Refunding Bonds, 5.50% due 1/01/2020 (b) $ 1,976
-----------------------------------------------------------------------------------------------------------
AAA Aaa 700 Bergen County, New Jersey, Utilities Authority, Water PCR, Refunding,
Series A, 5.375% due 12/15/2012 (b) 759
-----------------------------------------------------------------------------------------------------------
Camden County, New Jersey, Improvement Authority, Lease Revenue
Bonds (c):
AAA Aaa 1,540 5.50% due 9/01/2016 1,629
AAA Aaa 2,635 5.375% due 9/01/2019 2,720
-----------------------------------------------------------------------------------------------------------
NR* Aaa 430 Carteret, New Jersey, Board of Education, COP, 6% due 1/15/2024 (d) 468
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,710 Casino Reinvestment Development Authority, New Jersey, Parking Fee
Revenue Bonds, Series A, 5.25% due 10/01/2017 (c) 5,819
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,005 Delaware River and Bay Authority Revenue Bonds, Series A, 5.625% due
1/01/2018 (a) 2,136
-----------------------------------------------------------------------------------------------------------
Delaware River Port Authority of Pennsylvania and New Jersey Revenue
Bonds (c):
AAA Aaa 5,000 5.50% due 1/01/2012 5,399
AAA Aaa 6,000 5.625% due 1/01/2013 6,524
AAA Aaa 500 5.75% due 1/01/2015 543
AAA Aaa 4,865 6% due 1/01/2018 5,329
AAA Aaa 5,525 6% due 1/01/2019 6,037
AAA Aaa 2,425 (Port District Project), Series B, 5.625% due 1/01/2026 2,547
-----------------------------------------------------------------------------------------------------------
AAA Aaa 7,895 East Orange, New Jersey, Board of Education, COP, 5.50% due
8/01/2012 (c) 8,626
-----------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 East Orange, New Jersey, Water Utility, GO, Refunding, 5.70%
due 6/15/2022 (a) 1,059
-----------------------------------------------------------------------------------------------------------
Essex County, New Jersey, Improvement Authority, Lease Revenue Bonds:
NR* Aaa 4,000 (Correctional Facility Project), 6% due 10/01/2025 (b) 4,372
NR* Aaa 3,100 (County Correctional Facility Project), 5.75% due 10/01/2030 3,309
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,300 Essex County, New Jersey, Improvement Authority, Lease Revenue
Refunding Bonds (County Jail and Youth House Project), 5.35%
due 12/01/2024 (a) 3,367
-----------------------------------------------------------------------------------------------------------
Essex County, New Jersey, Improvement Authority, Utility System Revenue
Bonds (d):
AAA Aaa 2,705 (East Orange Franchise), 6% due 7/01/2018 2,938
AAA Aaa 3,050 (Orange Franchise), Series A, 5.75% due 7/01/2027 3,199
-----------------------------------------------------------------------------------------------------------
NR* Aaa 1,100 Essex County, New Jersey, Utilities Authority, Solid Waste Revenue
Refunding Bonds, Series A, 4.80% due 4/01/2014 (c) 1,112
-----------------------------------------------------------------------------------------------------------
Ewing Township, New Jersey, School District, School GO (b):
NR* Aaa 1,805 5.30% due 8/01/2019 1,849
NR* Aaa 1,780 5.30% due 8/01/2020 1,821
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,240 Freehold, New Jersey, Regional High School District, GO, Refunding,
5% due 3/01/2016 (b) 1,275
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Hoboken, New Jersey, Parking Authority, Parking Revenue Bonds,
Series A, 5.30% due 5/01/2027 (a) 1,529
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,040 Hopewell Valley, New Jersey, Regional School District, GO, Refunding,
5% due 8/15/2014 (b) 2,109
-----------------------------------------------------------------------------------------------------------
Hunterdon, New Jersey, Central Regional High School District, GO,
Refunding (c):
AAA Aaa 1,255 5.25% due 5/01/2014 1,335
AAA Aaa 1,260 5.25% due 5/01/2015 1,337
-----------------------------------------------------------------------------------------------------------
AAA Aaa 765 Jersey City, New Jersey, GO, Refunding, Quality School, Series A,
5.375% due 9/01/2017 (c) 801
-----------------------------------------------------------------------------------------------------------
Lafayette Yard, New Jersey, Community Development Revenue Bonds
(Hotel/Conference Center Project--Trenton) (d)(e):
NR* Aaa 5,250 6% due 4/01/2010 5,985
NR* Aaa 1,125 6.125% due 4/01/2010 1,292
-----------------------------------------------------------------------------------------------------------
NR* Aaa 1,155 Lafayette Yard, New Jersey, Community Development Revenue Refunding
Bonds (Hotel/Conference Center Project--Trenton), 5.125% due
4/01/2017 (b) 1,177
-----------------------------------------------------------------------------------------------------------
AAA Aaa 825 Lopatcong Township, New Jersey, Board of Education, GO,
5.70% due 7/15/2010 (c)(e) 920
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Marlboro Township, New Jersey, Board of Education, GO,
5.25% due 7/15/2017 (c) 1,029
-----------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, COP (d):
AAA Aaa 1,375 5.50% due 8/01/2016 1,470
AAA Aaa 1,550 5.25% due 6/15/2023 1,579
-----------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, Improvement Authority, Lease Revenue
Bonds (Educational Services Commission Projects):
AAA Aaa 3,970 5.70% due 7/15/2020 4,257
AAA Aaa 5,270 6% due 7/15/2025 5,802
-----------------------------------------------------------------------------------------------------------
AAA Aaa 500 Middlesex County, New Jersey, Improvement Authority Revenue Bonds
(Senior Citizens Housing Project), AMT, 5.50% due 9/01/2030 (a) 512
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,475 Middletown Township, New Jersey, Board of Education, GO, Refunding,
5% due 8/01/2016 (c) 1,503
-----------------------------------------------------------------------------------------------------------
Monmouth County, New Jersey, Improvement Authority, Revenue Refunding
Bonds (a):
AAA Aaa 1,540 5.35% due 12/01/2017 1,600
AAA Aaa 1,470 5.375% due 12/01/2018 1,526
-----------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Monroe Township, New Jersey, Municipal Utilities Authority, Middlesex
County Revenue Refunding Bonds, 5.25% due 2/01/2016 (b) 1,037
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,304 Mount Laurel Township, New Jersey, Board of Education, GO, 5.60% due
8/01/2019 (b) 2,415
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,060 New Jersey EDA, Construction Revenue Bonds, GO (School Facilities),
Series A, 5.50% due 6/15/2012 (a) 3,351
-----------------------------------------------------------------------------------------------------------
A1+ NR* 4,500 New Jersey EDA, Economic Development Revenue Refunding Bonds
(Foreign Trade Zone Project), VRDN, 1.40% due 12/01/2007 (g) 4,500
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 New Jersey EDA, Lease Revenue Bonds (University of Medicine and
Dentistry--International Center for Public Health Project),
6% due 6/01/2032 (a) 5,424
-----------------------------------------------------------------------------------------------------------
A1+ VMIG1@ 1,000 New Jersey EDA, Natural Gas Facilities Revenue Bonds (NUI Corporation
Project), VRDN, AMT, Series A, 1.45% due 6/01/2026 (a)(g) 1,000
-----------------------------------------------------------------------------------------------------------
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
DRIVERS Derivative Inverse Tax-Exempt Receipts
EDA Economic Development Authority
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
VRDN Variable Rate Demand Notes
6 & 7
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
New Jersey New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds, AMT:
(continued) AAA Aaa $18,920 (NUI Corporation Projects), Series A, 5.70% due 6/01/2032 (d) $ 19,613
A1+ VMIG1@ 100 (New Jersey Natural Gas Co. Project), VRDN, Series A, 1.45%
due 8/01/2030 (a)(g) 100
NR* Aaa 3,155 RIB, Series 161, 9.82% due 6/01/2032 (d)(f) 3,386
-----------------------------------------------------------------------------------------------------------
New Jersey EDA, Parking Facility Revenue Bonds (Elizabeth Development
Company Project) (b):
AAA Aaa 1,430 5.60% due 10/15/2019 1,503
AAA Aaa 1,000 5.60% due 10/15/2026 1,044
-----------------------------------------------------------------------------------------------------------
AAA NR* 4,580 New Jersey EDA, Revenue Bonds, DRIVERS, Series 219, 10.56%
due 5/01/2016 (c)(f) 5,439
-----------------------------------------------------------------------------------------------------------
New Jersey EDA, School Facilities Construction Revenue Bonds,
Series A (a):
AAA Aaa 1,100 5.125% due 6/15/2014 1,147
AAA Aaa 7,000 5.25% due 6/15/2017 7,214
AAA Aaa 7,200 5.25% due 6/15/2018 7,393
-----------------------------------------------------------------------------------------------------------
New Jersey EDA, State Lease Revenue Bonds (State Office Buildings
Projects) (a):
AAA Aaa 3,000 6% due 6/15/2015 3,337
AAA Aaa 4,620 6.25% due 6/15/2020 5,185
-----------------------------------------------------------------------------------------------------------
New Jersey EDA, Water Facilities Revenue Refunding Bonds (United Water
of New Jersey Inc. Project), VRDN (a)(g):
A1+ VMIG1@ 3,400 AMT, Series C, 1.50% due 11/01/2025 3,400
A1+ VMIG1@ 2,500 Series A, 1.45% due 11/01/2026 2,500
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,820 New Jersey Health Care Facilities Financing Authority, Revenue Bonds
(Society of the Valley Hospital), 5.375% due 7/01/2025 (a) 2,878
-----------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds:
AAA Aaa 4,000 (AHS Hospital Corporation), Series A, 6% due 7/01/2013 4,523
AAA Aaa 1,000 (Meridian Health System Obligation Group), 5.375% due 7/01/2024 (c) 1,021
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,400 New Jersey Sports and Exposition Authority, State Contract Revenue
Bonds, Series A, 6% due 3/01/2013 (d) 2,681
-----------------------------------------------------------------------------------------------------------
A1+ VMIG1@ 100 New Jersey Sports and Exposition Authority, State Contract Revenue
Bonds, VRDN, Series C, 1.10% due 9/01/2024 (d)(g) 100
-----------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority Revenue Bonds:
AAA Aaa 8,905 (Capital Improvement Fund), Series A, 5.75% due 9/01/2017 (c) 9,605
AAA Aaa 9,420 (Capital Improvement Fund), Series A, 5.75% due 9/01/2018 (c) 10,125
AAA Aaa 2,000 (Princeton Theological), Series B, 5.90% due 7/01/2026 2,106
AAA Aaa 2,350 (Trenton State College), Series A, 5.75% due 7/01/2006 (d)(e) 2,611
-----------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority, Revenue Refunding
Bonds:
AAA Aaa 2,375 (Rowan University), Series C, 5.25% due 7/01/2017 (b) 2,454
AAA Aaa 2,820 (Rowan University), Series C, 5.25% due 7/01/2018 (b) 2,902
AAA Aaa 2,635 (Rowan University), Series C, 5.25% due 7/01/2019 (b) 2,703
AAA Aaa 350 (Seton Hall University Project), Series A, 5.25% due 7/01/2012 (a) 375
AAA Aaa 660 (Seton Hall University Project), Series A, 5.25% due 7/01/2013 (a) 702
AAA Aaa 4,000 (University of Medicine and Dentistry), Series B, 5.25% due
12/01/2017 (a) 4,074
-----------------------------------------------------------------------------------------------------------
New Jersey State Highway Authority, Garden State Parkway, General
Revenue Refunding Bonds:
AAA Aaa 3,200 5.75% due 1/01/2015 (b) 3,497
AA- A1 1,900 5.625% due 1/01/2030 1,997
-----------------------------------------------------------------------------------------------------------
New Jersey State Highway Authority, Garden State Parkway General
Revenue Refunding Bonds, Senior Parkway (b):
AAA Aaa 2,000 5.25% due 1/01/2018 2,056
AAA Aaa 3,085 5.25% due 1/01/2019 3,162
-----------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds (d):
AAA Aaa 9,215 AMT, Series K, 6.375% due 10/01/2026 9,560
AAA Aaa 1,555 AMT, Series M, 6.95% due 10/01/2022 1,631
AAA Aaa 5,580 AMT, Series M, 7% due 10/01/2026 5,861
AAA Aaa 1,000 AMT, Series U, 5.60% due 10/01/2012 1,053
AAA Aaa 2,820 AMT, Series U, 5.65% due 10/01/2013 2,957
AAA Aaa 3,000 AMT, Series U, 5.75% due 4/01/2018 3,101
AAA Aaa 2,320 AMT, Series U, 5.85% due 4/01/2029 2,385
AAA Aaa 2,540 Series L, 6.65% due 10/01/2014 2,657
-----------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Refunding Bonds, AMT, Series S (d):
AAA Aaa 2,440 5.95% due 10/01/2017 2,555
AAA Aaa 2,050 6.05% due 10/01/2028 2,130
-----------------------------------------------------------------------------------------------------------
New Jersey State Transit Corporation, COP (Federal Transit
Administration Grants), Series A (a):
AAA Aaa 4,000 6% due 9/15/2013 4,441
AAA Aaa 5,000 6.125% due 9/15/2015 5,570
-----------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority, Transportation
System Revenue Bonds, Series A:
AAA Aaa 4,265 6% due 6/15/2010 (c)(e) 4,837
AA Aa2 7,740 6% due 6/15/2010 (e) 8,779
AA Aa2 7,500 6% due 6/15/2010 (e)(h) 8,507
AAA Aaa 2,000 5% due 6/15/2015 (c) 2,036
AAA NR* 10,000 5.25% due 6/15/2015 (d) 10,377
AAA Aaa 3,000 5.75% due 6/15/2015 (d) 3,338
-----------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority, Transportation
System Revenue Refunding Bonds, Series B:
AAA Aaa 2,500 6% due 12/15/2017 (d) 2,796
AAA Aaa 7,440 6% due 12/15/2019 8,265
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,605 New Jersey State Transportation Trust Fund, Transportation System
Authority Revenue Refunding Bonds, Series B, 6% due 12/15/2018 (d) 7,360
-----------------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds (d):
AAA Aaa 20,000 Series A, 5.75% due 1/01/2019 21,347
AAA Aaa 5,520 Series C, 6.50% due 1/01/2016 6,539
-----------------------------------------------------------------------------------------------------------
North Bergen Township, New Jersey, Board of Education, COP (c):
NR* Aaa 1,250 5% due 12/15/2018 1,264
NR* Aaa 1,000 6% due 12/15/2019 1,108
NR* Aaa 1,580 6.25% due 12/15/2020 1,784
NR* Aaa 1,680 6.25% due 12/15/2021 1,891
-----------------------------------------------------------------------------------------------------------
NR* Aaa 3,035 Orange Township, New Jersey, Municipal Utility and Lease, GO,
Refunding, Series C, 5.10% due 12/01/2017 (d) 3,091
-----------------------------------------------------------------------------------------------------------
8 & 9
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
New Jersey Passaic County, New Jersey, GO, Refunding (c):
(concluded) NR* Aaa $ 2,080 5.25% due 6/01/2013 $ 2,231
NR* Aaa 2,170 5.25% due 6/01/2014 2,305
NR* Aaa 2,360 5.25% due 6/01/2015 2,487
NR* Aaa 2,350 5.25% due 6/01/2016 2,457
-----------------------------------------------------------------------------------------------------------
Paterson, New Jersey, Public School District, COP (d):
NR* Aaa 1,980 6.125% due 11/01/2015 2,223
NR* Aaa 2,000 6.25% due 11/01/2019 2,240
-----------------------------------------------------------------------------------------------------------
Salem County, New Jersey, Industrial Pollution Control Financing
Authority Revenue Refunding Bonds:
AAA Aaa 5,000 (Atlantic City Electric Company), 6.15% due 6/01/2029 (c) 5,475
AAA Aaa 2,000 (Public Service Electric & Gas), Series C, 5.55% due 11/01/2033 (d) 2,041
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,565 South Jersey Transportation Authority, New Jersey, Transportation
System Revenue Refunding Bonds, 5.25% due 11/01/2013 (a) 2,722
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,325 Trenton, New Jersey, Parking Authority, Parking Revenue Bonds,
DRIVERS, Series 221, 10.76% due 4/01/2010 (b)(e)(f) 5,534
-----------------------------------------------------------------------------------------------------------
West Deptford Township, New Jersey, GO (b):
NR* Aaa 4,170 5.625% due 9/01/2026 4,395
NR* Aaa 4,410 5.625% due 9/01/2027 4,645
NR* Aaa 3,615 5.625% due 9/01/2028 3,805
NR* Aaa 4,940 5.625% due 9/01/2029 5,199
-----------------------------------------------------------------------------------------------------------
West Orange, New Jersey, Board of Education, COP (d):
NR* Aaa 2,040 5.75% due 10/01/2014 2,233
NR* Aaa 3,615 6% due 10/01/2024 3,940
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,600 West Windsor-Plainsboro, New Jersey, Regional School District, GO,
5.50% due 12/01/2013 (b) 1,695
====================================================================================================================================
New York--5.8% AAA Aaa 4,750 Port Authority of New York and New Jersey, Consolidated Revenue
Refunding Bonds, AMT, 119th Series, 5.50% due 9/15/2019 (b) 4,885
-----------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation Revenue
Bonds, AMT (d):
AAA NR* 2,375 DRIVERS, Series 192, 10.02% due 12/01/2025 (f) 2,538
NR* Aaa 2,165 (JFK International Air Terminal LLC), RIB, Series 157, 9.92% due
12/01/2022 (f) 2,370
AAA Aaa 13,500 (JFK International Air Terminal--Special Project), Series 6, 6.25%
due 12/01/2011 15,337
AAA Aaa 1,500 (JFK International Airport Terminal), Series 6, 6.25% due 12/01/2015 1,708
-----------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation Revenue
Refunding Bonds (Versatile Structure Obligation), VRDN (g):
A1+ VMIG1@ 1,100 Series 2, 1.55% due 5/01/2019 1,100
A1+ VMIG1@ 800 Series 3, 1.55% due 6/01/2020 800
A1+ VMIG1@ 500 Series 5, 1.55% due 8/01/2024 500
====================================================================================================================================
Puerto Rico--5.9% NR* Aaa 7,875 Puerto Rico Commonwealth, GO, RIB, Series 365, 10.47%
due 7/01/2005 (d)(e)(f) 9,742
-----------------------------------------------------------------------------------------------------------
A Baa1 6,000 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B, 6% due 7/01/2026 (c) 6,351
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,355 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series X,
5.50% due 7/01/2025 (d) 2,394
-----------------------------------------------------------------------------------------------------------
Puerto Rico Industrial Tourist, Educational, Medical and Environmental
Control Facilities Revenue Bonds, Series A:
AAA Aaa 1,780 (Hospital Auxilio Mutuo Obligation Group), 6.25% due 7/01/2024 (d) 1,932
AA Aa2 1,750 (Hospital de la Concepcion), 6.50% due 11/15/2020 1,942
-----------------------------------------------------------------------------------------------------------
AAA Aaa 7,120 Puerto Rico Public Financing Corporation Revenue Bonds (Commonwealth
Appropriation), Series A, 5.50% due 8/01/2019 (d) 7,513
-----------------------------------------------------------------------------------------------------------
Total Investments (Cost--$482,283)--98.8% 501,095
Variation Margin on Financial Futures Contracts**--0.0% 99
Other Assets Less Liabilities--1.2% 6,149
--------
Net Assets--100.0% $507,343
========
====================================================================================================================================
(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
January 31, 2002.
(g) 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,
2002.
(h) All or a portion of security held as collateral in connection with open
financial futures contracts.
@ Highest short-term rating by Moody's Investors Service, Inc.
* Not Rated.
** Financial futures contracts sold as of January 31, 2002 were as follows:
----------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
----------------------------------------------------------------------------
235 US Treasury Bonds March 2002 $24,880,625
----------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$24,994,453) $24,880,625
===========
----------------------------------------------------------------------------
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of January 31, 2002 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
--------------------------------------------------------------------------------
AAA/Aaa ............................................................ 90.6%
AA/Aa .............................................................. 4.2
A/A ................................................................ 1.2
Other* ............................................................. 2.8
--------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
10 & 11
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of January 31, 2002
=============================================================================================================================
Assets: Investments, at value (identified cost--$482,283,396) ........................ $501,095,004
Cash ......................................................................... 60,150
Receivables:
Interest ................................................................... $ 5,902,500
Securities sold ............................................................ 667,915
Variation margin ........................................................... 99,141 6,669,556
------------
Prepaid expenses and other assets ............................................ 39,736
------------
Total assets ................................................................. 507,864,446
------------
=============================================================================================================================
Liabilities: Payables:
Dividends to shareholders .................................................. 260,791
Investment adviser ......................................................... 223,328 484,119
------------
Accrued expenses ............................................................. 37,096
------------
Total liabilities ............................................................ 521,215
------------
=============================================================================================================================
Net Assets: Net assets ................................................................... $507,343,231
============
=============================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share (8,120 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) ........ $203,000,000
Common Stock, par value $.10 per share (21,038,614 shares issued
and outstanding) ........................................................... $ 2,103,861
Paid-in capital in excess of par ............................................. 316,324,239
Undistributed investment income--net ......................................... 1,823,843
Accumulated realized capital losses on investments--net ...................... (34,834,148)
Unrealized appreciation on investments--net .................................. 18,925,436
------------
Total--Equivalent to $14.47 net asset value per share of Common Stock
(market price--$13.95) ...................................................... 304,343,231
------------
Total capital ................................................................ $507,343,231
============
=============================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended January 31, 2002
==============================================================================================================
Investment Interest ............................................... $13,068,078
Income:
==============================================================================================================
Expenses: Investment advisory fees ............................... $ 1,412,937
Commission fees ........................................ 257,556
Accounting services .................................... 87,535
Reorganization expenses ................................ 74,780
Professional fees ...................................... 48,826
Transfer agent fees .................................... 32,849
Printing and shareholder reports ....................... 18,137
Custodian fees ......................................... 18,016
Listing fees ........................................... 17,443
Directors' fees and expenses ........................... 15,056
Pricing fees ........................................... 11,306
Other .................................................. 21,289
-----------
Total expenses before reimbursement .................... 2,015,730
Reimbursement of expenses .............................. (117,154)
-----------
Total expenses after reimbursement ..................... 1,898,576
-----------
Investment income--net ................................. 11,169,502
-----------
==============================================================================================================
Realized & Realized gain on investments--net ...................... 1,265,977
Unrealized Gain (Loss) Change in unrealized appreciation on investments--net .. (3,218,754)
On Investments--Net: -----------
Net Increase in Net Assets Resulting from Operations ... $ 9,216,725
===========
==============================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: January 31, 2002 July 31, 2001
====================================================================================================================================
Operations: Investment income--net .............................................................. $ 11,169,502 $ 20,489,071
Realized gain (loss) on investments--net ............................................ 1,265,977 (26,158)
Change in unrealized appreciation/depreciation on investments--net .................. (3,218,754) 25,706,635
------------ ------------
Net increase in net assets resulting from operations ................................ 9,216,725 46,169,548
------------ ------------
====================================================================================================================================
Dividends to Investment income--net:
Shareholders: Common Stock ...................................................................... (8,958,684) (13,742,015)
Preferred Stock ................................................................... (1,827,476) (6,446,254)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ................. (10,786,160) (20,188,269)
------------ ------------
====================================================================================================================================
Capital Stock Proceeds from issuance of Common Stock resulting from reorganization ................ -- 45,753,117
Transactions: Proceeds from issuance of Preferred Stock resulting from reorganization ............. -- 28,000,000
Offering costs resulting from the initial issuance of Common Stock .................. -- (24,359)
Write-off of offering costs resulting from the initial issuance of Preferred Stock .. -- 67,167
------------ ------------
Net increase in net assets derived from capital stock transactions .................. -- 73,795,925
------------ ------------
====================================================================================================================================
Net Assets: Total increase (decrease) in net assets ............................................. (1,569,435) 99,777,204
Beginning of period ................................................................. 508,912,666 409,135,462
------------ ------------
End of period* ...................................................................... $507,343,231 $508,912,666
============ ============
====================================================================================================================================
* Undistributed investment income--net ................................................ $ 1,823,843 $ 1,440,501
============ ============
====================================================================================================================================
See Notes to Financial Statements.
12 & 13
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
FINANCIAL HIGHLIGHTS
For the
For the Period
The following per share data and ratios have been derived Six Months For the Year Ended March 11,
from information provided in the financial statements. Ended July 31, 1998+ to
January 31, ---------------------------------- July 31,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
====================================================================================================================================
Per Share Net asset value, beginning of period ....... $ 14.54 $ 13.14 $ 14.47 $ 15.09 $ 15.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ..................... .54 1.08 1.07 1.13 .46
Realized and unrealized gain (loss) on
investments--net ........................... (.09) 1.39 (1.27) (.58) .16
-------- -------- -------- -------- --------
Total from investment operations ........... .45 2.47 (.20) .55 .62
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net .................... (.43) (.73) (.78) (.81) (.26)
Realized gain on investments--net ......... -- -- -- (.01) --
In excess of realized gain on
investments--net .......................... -- -- -- (.03) --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders .................. (.43) (.73) (.78) (.85) (.26)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock ............................... -- --@@ -- -- (.03)
-------- -------- -------- -------- --------
Effect of Preferred Stock:
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net ................. (.09) (.34) (.35) (.30) (.12)
Realized gain on investments--net ...... -- -- -- (.02) --
Capital write-off (charge) resulting from
issuance of Preferred Stock ................ -- --@@ -- -- (.12)
-------- -------- -------- -------- --------
Total effect of Preferred Stock ............ (.09) (.34) (.35) (.32) (.24)
-------- -------- -------- -------- --------
Net asset value, end of period ............. $ 14.47 $ 14.54 $ 13.14 $ 14.47 $ 15.09
======== ======== ======== ======== ========
Market price per share, end of period ...... $ 13.95 $ 12.64 $11.6875 $13.4375 $ 15.375
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on market price per share ............ 13.88%@ 14.60% (7.13%) (7.44%) 4.29%@
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ......... 2.69%@ 17.26% (3.04%) 1.56% 2.35%@
======== ======== ======== ======== ========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement
Average Net and excluding reorganization expenses*** ... 1.18%* 1.18% 1.27% 1.22% .29%*
Assets of Common ======== ======== ======== ======== ========
Stock: Total expenses, net of reimbursement*** .... 1.23%* 1.18% 1.55% 1.22% .29%*
======== ======== ======== ======== ========
Total expenses*** .......................... 1.30%* 1.29% 1.67% 1.31% 1.21%*
======== ======== ======== ======== ========
Total investment income--net*** ............ 7.23%* 7.72% 8.52% 7.32% 8.17%*
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock
shareholders ............................... 1.18%* 2.43% 2.96% 1.93% 2.14%*
======== ======== ======== ======== ========
Investment income--net, to Common Stock
shareholders ............................... 6.04%* 5.29% 5.56% 5.39% 6.03%*
======== ======== ======== ======== ========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement
Total Average and excluding reorganization expenses ...... .71%* .69% .72% .75% .18%*
Net Assets:***+++ ======== ======== ======== ======== ========
Total expenses, net of reimbursement ....... .74%* .69% .88% .75% .18%*
======== ======== ======== ======== ========
Total expenses ............................. .78%* .76% .94% .80% .76%*
======== ======== ======== ======== ========
Total investment income--net ............... 4.35%* 4.53% 4.81% 4.48% 5.13%*
======== ======== ======== ======== ========
====================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders .. 1.79%* 3.46% 3.84% 3.04% 3.61%*
Average Net ======== ======== ======== ======== ========
Assets of
Preferred Stock:
====================================================================================================================================
Supplemental Net assets, net of Preferred Stock,
Data: end of period (in thousands) ............... $304,343 $305,913 $234,135 $101,300 $104,967
======== ======== ======== ======== ========
Preferred Stock outstanding,
end of period (in thousands) ............... $203,000 $203,000 $175,000 $ 68,000 $ 68,000
======== ======== ======== ======== ========
Portfolio turnover ......................... 12.57% 55.60% 100.11% 64.93% 32.46%
======== ======== ======== ======== ========
====================================================================================================================================
Leverage: Asset coverage per $1,000 .................. $ 2,499 $ 2,507 $ 2,338 $ 2,490 $ 2,544
======== ======== ======== ======== ========
====================================================================================================================================
Dividends Per Series A--Investment income--net ........... $ 211 $ 830 $ 896 $ 763 $ 317
Share On ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net ........... $ 228 $ 872 $ 898 $ 766 $ 300
Outstanding:++ ======== ======== ======== ======== ========
Series C--Investment income--net ........... $ 235 $ 871 $ 439 -- --
======== ======== ======== ======== ========
Series D--Investment income--net ........... $ 215 $ 901 $ 418 -- --
======== ======== ======== ======== ========
Series E--Investment income--net ........... $ 235 $ 310 -- -- --
======== ======== ======== ======== ========
====================================================================================================================================
* 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.
*** Includes Common and Preferred Stock average net assets.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on October 19, 1998 (Series A and
B), March 6, 2000 (Series C and D), and March 5, 2001 (Series E).
+++ Do not reflect the effect of dividends to Preferred Stock shareholders.
@ Aggregate total investment return.
@@ Amount is less than $.01 per share.
See Notes to Financial Statements.
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 conformity
with accounting principles generally accepted in the United States of America,
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
14 & 15
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
NOTES TO FINANCIAL STATEMENTS (concluded)
by the Fund, which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers of the Fund
under the general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase
call and put options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked to market to
reflect the current market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual 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.
(f) Offering expenses--During the year ended July 31, 2001, underestimated
offering expenses resulting from the initial issuance of Common Stock and
overestimated offering expenses resulting from the initial issuance of Preferred
Stock were charged to and written off to paid-in capital in excess of par,
respectively.
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, 2002, FAM earned fees of $1,412,937, of which $117,154 was waived.
For the six months ended January 31, 2002, the Fund reimbursed FAM $11,302 for
certain accounting services.
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, 2002 were $62,786,540 and $73,641,161, respectively.
Net realized gains for the six months ended January 31, 2002 and net unrealized
gains as of January 31, 2002 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
--------------------------------------------------------------------------------
Long-term investments ..................... $1,265,977 $18,811,608
Financial futures contracts ............... -- 113,828
---------- -----------
Total ..................................... $1,265,977 $18,925,436
========== ===========
--------------------------------------------------------------------------------
As of January 31, 2002, net unrealized appreciation for Federal income tax
purposes aggregated $18,811,608, of which $19,186,861 related to appreciated
securities and $375,253 related to depreciated securities. The aggregate cost of
investments at January 31, 2002 for Federal income tax purposes was
$482,283,396.
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, 2002
remained constant and during the year ended July 31, 2001 increased by 3,221,459
as a result of reorganization.
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, 2002 were Series A, 1.40%; Series B, 1%; Series C, 1.40%; Series D,
..94% and Series E, 1.10%.
Shares issued and outstanding during the six months ended January 31, 2002
remained constant and during the year ended July 31, 2001 increased by 1,120 as
a result of reorganization.
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, 2002, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $142,186 as
commissions.
5. Capital Loss Carryforward:
At July 31, 2001, the Fund had a net capital loss carryforward of approximately
$35,967,000, of which $3,352,000 expires in 2006, $4,023,000 expires in 2007,
$1,794,000 expires in 2008 and $26,798,000 expires in 2009. This amount will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
On February 7, 2002, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.073000 per share,
payable on February 27, 2002 to shareholders of record as of February 15, 2002.
16 & 17
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2002
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
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Robert D. Sneeden, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Vincent R. Giordano, Senior Vice President of MuniHoldings New Jersey Insured
Fund, Inc., has recently retired. The Fund's Board of Directors wishes Mr.
Giordano well in his retirement.
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MUJ
18 & 19
[LOGO] Merrill Lynch Investment Managers
[GRAPHIC OMITTED]
MuniHoldings New Jersey Insured Fund, Inc. seeks to provide shareholders with
current income exempt from Federal income tax and New Jersey personal income
taxes by investing in a portfolio of long-term, investment-grade municipal
obligations the interest on which, in the opinion of bond counsel to the issuer,
is exempt from Federal income tax and New Jersey personal income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniHoldings New Jersey Insured Fund, Inc. for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance. The Fund
has leveraged its Common Stock and intends to remain leveraged 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.
MuniHoldings New Jersey Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #HOLDNJ2--1/02