UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8621
Name of Fund: MuniHoldings New Jersey Insured Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, MuniHoldings
New Jersey Insured Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ
08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 07/31/03
Date of reporting period: 08/01/02 - 1/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
January 31, 2003
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.
Swap
Agreements
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, 2003
TO OUR SHAREHOLDERS
For the six-month period ended January 31, 2003, the Common Stock of
MuniHoldings New Jersey Insured Fund, Inc. had a net annualized yield of 5.82%,
based on a period-end per share net asset value of $15.03 and $.441 per share
income dividends. Over the same period, the total investment return on the
Fund's Common Stock was +4.08%, based on a change in per share net asset value
from $14.90 to $15.03 and assuming reinvestment of $.438 per share ordinary
income dividends.
For the six months ended January 31, 2003, the Fund's Auction Market Preferred
Stock had an average yield as follows: Series A, 1.03%; Series B, 1.00%; Series
C, 1.01%; Series D, 1.07%; and Series E, 1.08%.
The Municipal Market Environment
During the six-month period ended January 31, 2003, long-term fixed income
interest rates continued to move lower. As they had in 2002, declining U.S.
equity markets and escalating worldwide political tensions easily overshadowed
the incipient U.S. economic recovery, allowing bond yields to fall to recent
historical lows. Economic releases, such as national employment and purchasing
manager surveys, were generally weak early in the period. Additionally, at its
August 2002 meeting, the Federal Reserve Board indicated that concerns about
future economic weakness outweighed those of rising inflation. This signaled
that the Federal Reserve Board was more likely to continue to lower short-term
interest rates to boost economic activity rather than to raise them to reduce
inflationary pressures. These factors combined to generate a very favorable
fixed income environment during August and September 2002. The dramatic decline
in equity values in late August and September triggered a significant fixed
income rally as investors sought the safe-haven status of U.S. Treasury issues.
By the end of September, U.S. Treasury bond yields had fallen to 4.65%.
Bolstered by an unexpected decline in the national unemployment rate to 5.6% in
early October, U.S. equity markets staged a strong rally throughout much of the
month. The Standard & Poor's 500 (S&P 500) Index rose over 8% for October,
triggered by stronger-than-expected earnings reports from a large number of
companies, such as General Electric Company, International Business Machines
Corporation and Microsoft Corporation. As they have throughout most of the
period, bond prices traded in an inverse relationship to equity prices.
Consequently, as stocks rallied, bond yields rose in October, despite generally
weak economic releases. During October, the U.S. housing sector remained quite
robust, but retail sales and industrial production slowed. Fixed income bond
yields remained under pressure in November as U.S. equity markets continued to
strengthen. During November, the S&P 500 Index rose an additional 5.5%. Equity
prices were supported by further signs of U.S. economic recovery, especially
improving labor market activity. By the end of November, third quarter gross
domestic product growth was 4%. Financial conditions were also strengthened by a
larger-than-expected reduction in short-term interest rates by the Federal
Reserve Board in early November. The Federal Funds target rate was lowered 50
basis points (.50%) to 1.25%, its lowest level since the 1960s. Recent action by
the Federal Reserve Board was largely viewed as being taken to bolster the
sputtering U.S. economic recovery. Rebounding U.S. equity markets and the
prospects for a more substantial U.S. economic recovery pushed long-term U.S.
Treasury yield levels to 5.10% by late November.
In December 2002 and January 2003, softer equity prices and renewed investor
concerns about potential military action against Iraq and nuclear tensions in
North Korea again pushed bond prices higher. The S&P 500 Index declined more
than 5% in December on disappointing earnings reports and anticipated weak
holiday retail sales. During January, the S&P 500 Index declined an additional
2.5% as businesses tried to scale back analysts' expectations of future
earnings. In early 2003, investors again sought the safety of U.S. Treasury
securities. U.S. Treasury bond yields declined more than 25 basis points in
December and January to end the period at approximately 4.85%. Over the last six
months, U.S. Treasury bond yields fell more than 45 basis points.
For the six-month period ended January 31, 2003, tax-exempt bond prices also
generally rose. In recent months, municipal bond yields have declined in
response to the positive fixed income environment engendered by falling equity
valuations. Price advances in tax-exempt issues have not been able to keep pace
with U.S. Treasury bond price improvement as municipal bonds cannot offer
foreign investors the safe-haven status U.S. Treasury obligations enjoy in
periods of economic and political instability. Additionally, tax-exempt bond
issuance increased dramatically in the last half of 2002, removing some of the
positive technical support the municipal bond market enjoyed earlier in 2002. At
the end of January 2003, long-term municipal bond yields, as measured by the
Bond Buyer Revenue Bond Index, stood at 5.34%, a decline of approximately 15
basis points during the last six months.
Investor demand for tax-exempt products remained positive throughout the period.
In addition to the approximately $75 billion investors received from June to
August 2002 from bond maturities, coupon income and proceeds from early
redemptions, investors also received approximately $30 billion from these
sources in January 2003. The Investment Company Institute reported that in 2002
municipal bond funds net cash flows were very positive at more than $16 billion,
an increase of over 40% compared to 2001. However, these positive demand factors
have not been able to offset the increase in tax-exempt new-issue supply that
has resulted in the underperformance seen in recent months. This price
underperformance served to make municipal bonds a particularly attractive
purchase relative to their taxable counterparts. Throughout most of the yield
curve, municipal bonds have been available for purchase at yields near or
exceeding those of comparable U.S. Treasury issues. Compared to their recent
historical averages of 82% - 88% of U.S. Treasury yields, municipal bond yield
ratios in their current 95% - 105% range are likely to prove attractive to
long-term investors.
Continued uncertainty regarding the pace of the current U.S. economic recovery
as well as the resolution of the U.N./Iraq confrontation are likely to keep
interest rates near their present levels for the immediate future. Equity market
declines over the past three years have helped push interest rates lower than
economic fundamentals alone would support. When U.S. business conditions improve
and equity markets stabilize, any associated interest rate increases should not
be extreme. Inflationary pressures are negligible and any move by the Federal
Reserve Board to raise short-term interest rates is unlikely before late 2003.
As equity valuations are likely to only gradually improve, the U.S. economic
recovery is also likely to be a moderate process. This suggests that the pace of
any interest rate increases will also be gradual. As the municipal bond market's
strong technical position can be expected to remain supportive in the coming
months, future tax-exempt interest rate increases should be more restrained than
their taxable counterparts.
Specific to New Jersey, the state faces a deteriorating fiscal situation as
continuing sluggish economic growth resulted in lower-than-anticipated tax
receipts. In fiscal 2003, a projected deficit of roughly $5.3 billion was
addressed by a combination of spending reductions and revenue enhancements.
Among initiatives proposed by Governor James McGreevey were a restructuring of
the corporate business tax, an increase in cigarette taxes and the imposition of
delayed funding increases for municipalities, schools and certain state
agencies. An additional $1.8 billion was raised in August 2002 by the
securitization of part of the state's tobacco settlement revenues. While these
efforts were successful in balancing the budget, the significant reliance on
non-recurring revenues will require further measures next year to achieve
structural balance. On February 4, 2003, the governor introduced the state's
fiscal 2004 budget totaling $23.7 billion in which it was proposed eliminating a
projected $5 billion deficit through substantial job cuts, $3.7 billion in
spending reductions, and higher taxes on hotels, cigarettes and casinos. These
measures are in addition to the treasurer's recent announcement of the state's
intent to issue an additional tobacco securitization of more than $1 billion to
help close the projected gap. Currently, Moody's Investors Service assigns the
state a rating of Aa2 with a negative outlook, while Standard & Poor's maintains
a rating of AA with a stable outlook. Although these ratings
2 & 3
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
clearly reflect such underlying fundamental strengths as a highly educated
workforce and a diverse economic base, it seems likely that prospects for the
state's credit ratings hinge largely on the degree to which policymakers
successfully deal with the fiscal and economic challenges that lie ahead.
Portfolio Strategy
Portfolio activity during the period consisted primarily of the modest
reallocation of portfolio assets into longer-dated securities. In some cases,
funding for these purchases came from the early redemption of a portion of the
Fund's more seasoned holdings as issuers sought to refinance existing debt in
the current low interest rate environment. Other sources included proceeds from
the sale of bonds that were advance-refunded and, as a consequence, were valued
at substantial premiums. Despite the attractive coupon income typically
associated with this type of bond, the premiums tend to amortize at a rapid pace
offsetting some of the income-related benefits. Given the uncertainty over
future reinvestment prospects, we considered it prudent to lock in gains on the
appreciated securities and reinvest the proceeds in high-quality bonds maturing
in the 20-year - 25-year range. The shape of the municipal yield curve has
become unusually steep in recent months, offering an attractive opportunity to
add incremental yield to the portfolio by modestly extending the average
maturity of the Fund's holdings.
In terms of sector allocation, tax-backed obligations represented the Fund's
single largest commitment, comprising about 50% of portfolio assets. The
majority of these holdings are bonds issued by a broad cross section of local
school districts and municipalities as well as state agencies carrying either
the direct, or in some cases, the implicit guaranty of the state. At
approximately 20% of assets, the transportation sector constituted the next
largest concentration, reflecting characteristically stable credit fundamentals
and the prevalence of issuers such as the Port Authority of New York and New
Jersey and the New Jersey Turnpike Authority. The Fund's overall credit profile
remains quite strong with approximately 86% of portfolio assets guaranteed by
one of the monoline insurers, thus earning the highest of credit ratings and
effectively insulating shareholders from any perceived risks associated with the
state's budget difficulties.
During the period, the Fund's borrowing costs hovered close to 1%, representing
some of the lowest interest rates since the Fund's inception. These funding
levels, in combination with a steep tax-exempt yield curve, provided a material
income benefit to the Fund's Common Stock shareholders from the leveraging of
the Preferred Stock. Further declines in short-term interest rates would require
significant easing of monetary policy by the Federal Reserve Board. While such
action is not expected, neither is an increase in short-term interest rates. We
believe that the Fund's short-term borrowing costs should remain near current
levels for much of 2003. However, should the spread between short-term and
long-term interest rates narrow, the benefits of leveraging will decline and, as
a result, reduce the yield on the Fund's Common Stock. (For a more complete
explanation of the benefits and risks of leveraging, see page 1 of this report
to shareholders.)
In the months ahead, our portfolio strategy will be premised on the expectation
that an aggressively accommodative monetary policy, coupled with improving
consumer sentiment and business confidence, will spark an economic rebound.
Recently, prospects for the passage of an aggressive economic stimulus bill have
improved dramatically, further raising the likelihood of stronger economic
growth. Nevertheless, fixed income markets remain well bid, as existing
geopolitical risks appear likely to dominate investors' thoughts for the near
term. With this in mind, the portfolio remains positioned for stable-to-modestly
higher interest rates, while the adoption of a fully defensive stance appears
unwarranted until such time as these risks subside. We will maintain our cash
reserves at limited levels, in an effort to enhance the Fund's income
distribution.
In Conclusion
We appreciate your ongoing interest in MuniHoldings New Jersey Insured Fund,
Inc., and we look forward to serving your investment needs in the months and
years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Theodore R. Jaeckel, Jr.
Theodore R. Jaeckel, Jr.
Vice President and Portfolio Manager
March 5, 2003
PROXY RESULTS
During the six-month period ended January 31, 2003, MuniHoldings New Jersey
Insured Fund, Inc.'s Common Stock shareholders voted on the following proposal.
The proposal was approved at a shareholders' meeting on January 28, 2003. A
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 20,156,507 740,386
Ronald W. Forbes 20,174,191 722,702
Cynthia A. Montgomery 20,153,734 743,159
Kevin A. Ryan 20,147,731 749,162
Roscoe S. Suddarth 20,151,394 745,499
Edward D. Zinbarg 20,134,398 762,495
-----------------------------------------------------------------------------------------------------
During the six-month period ended January 31, 2003, 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
January 28, 2003. A 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 7,638 58
W. Forbes, Cynthia A. Montgomery, Charles C. Reilly, Kevin A.
Ryan, Roscoe S. Suddarth, Richard R. West and Edward D.
Zinbarg
-----------------------------------------------------------------------------------------------------
4 & 5
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
New Jersey--143.0% AAA Aaa $ 1,875 Atlantic Highlands, New Jersey, Highland Regional Sewer
Authority, Sewer Revenue Refunding Bonds, 5.50% due 1/01/2020 (b) $ 2,031
---------------------------------------------------------------------------------------------------------------
Camden County, New Jersey, Improvement Authority, Lease
Revenue Bonds (c):
AAA Aaa 1,540 5.50% due 9/01/2016 1,696
AAA Aaa 2,635 5.375% due 9/01/2019 2,803
---------------------------------------------------------------------------------------------------------------
NR* Aaa 430 Carteret, New Jersey, Board of Education, COP, 6% due 1/15/2024 (d) 480
---------------------------------------------------------------------------------------------------------------
AAA Aaa 6,210 Casino Reinvestment Development Authority, New Jersey, Parking Fee
Revenue Bonds, Series A, 5.25% due 10/01/2017 (c) 6,597
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,005 Delaware River and Bay Authority Revenue Bonds, Series A, 5.625%
due 1/01/2018 (a) 2,195
---------------------------------------------------------------------------------------------------------------
Delaware River Port Authority of Pennsylvania and New Jersey
Revenue Bonds (c):
AAA Aaa 5,000 5.50% due 1/01/2012 5,596
AAA Aaa 6,000 5.625% due 1/01/2013 6,645
AAA Aaa 500 5.75% due 1/01/2015 554
AAA Aaa 4,865 6% due 1/01/2018 5,473
AAA Aaa 5,525 6% due 1/01/2019 6,197
AAA Aaa 2,425 (Port District Project), Series B, 5.625% due 1/01/2026 2,599
---------------------------------------------------------------------------------------------------------------
AAA Aaa 7,895 East Orange, New Jersey, Board of Education, COP, 5.50%
due 8/01/2012 (c) 8,948
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 East Orange, New Jersey, Water Utility, GO, Refunding, 5.70%
due 6/15/2022 (a) 1,073
---------------------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Essex County, New Jersey, Improvement Authority, Lease Revenue Bonds
(Correctional Facility Project), 6% due 10/01/2025 (b) 4,479
---------------------------------------------------------------------------------------------------------------
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) 3,425
---------------------------------------------------------------------------------------------------------------
Essex County, New Jersey, Improvement Authority, Utility System
Revenue Bonds (d):
AAA Aaa 2,705 (East Orange Franchise), 6% due 7/01/2018 2,995
AAA Aaa 3,050 (Orange Franchise), Series A, 5.75% due 7/01/2027 3,274
---------------------------------------------------------------------------------------------------------------
Ewing Township, New Jersey, School District, School GO (b):
NR* Aaa 1,805 5.30% due 8/01/2019 1,888
NR* Aaa 1,780 5.30% due 8/01/2020 1,856
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,883 Freehold Township, New Jersey, Board of Education, GO, 5.25%
due 2/15/2032 (d) 2,978
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Hoboken, New Jersey, Parking Authority, Parking Revenue Bonds, Series A,
5.30% due 5/01/2011 (a)(e) 1,707
---------------------------------------------------------------------------------------------------------------
AAA Aaa 765 Jersey City, New Jersey, GO, Refunding, Quality School, Series A, 5.375%
due 9/01/2017 (c) 826
---------------------------------------------------------------------------------------------------------------
NR* Aaa 5,250 Lafayette Yard, New Jersey, Community Development Revenue Bonds
(Hotel/Conference Center Project--Trenton), 6% due 4/01/2010 (d)(e)(g) 6,187
---------------------------------------------------------------------------------------------------------------
AAA Aaa 825 Lopatcong Township, New Jersey, Board of Education, GO, 5.70%
due 7/15/2010 (c)(e) 954
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Marlboro Township, New Jersey, Board of Education, GO, 5.25%
due 7/15/2017 (c) 1,061
---------------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, COP (d):
AAA Aaa 1,375 5.50% due 8/01/2016 1,519
AAA Aaa 1,550 5.25% due 6/15/2023 1,614
---------------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, Improvement Authority, Lease Revenue Bonds
(Educational Services Commission Projects):
AAA Aaa 3,970 5.70% due 7/15/2020 4,378
AAA Aaa 5,270 6% due 7/15/2025 5,889
---------------------------------------------------------------------------------------------------------------
AAA Aaa 500 Middlesex County, New Jersey, Improvement Authority Revenue Bonds
(Senior Citizens Housing Project), AMT, 5.50% due 9/01/2030 (a) 523
---------------------------------------------------------------------------------------------------------------
Monmouth County, New Jersey, Improvement Authority, Revenue Refunding
Bonds (a):
AAA Aaa 1,540 5.35% due 12/01/2017 1,656
AAA Aaa 1,470 5.375% due 12/01/2018 1,574
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Monroe Township, New Jersey, Municipal Utilities Authority,
Middlesex County Revenue Refunding Bonds, 5.25% due 2/01/2016 (b) 1,071
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,304 Mount Laurel Township, New Jersey, Board of Education, GO, 5.60%
due 8/01/2019 (b) 2,450
---------------------------------------------------------------------------------------------------------------
New Jersey Building Authority, State Building Revenue Bonds,
Series A (c):
AAA Aaa 1,000 5.25% due 12/15/2019 1,064
AAA Aaa 1,000 5.25% due 12/15/2020 1,058
AAA Aaa 1,000 5% due 12/15/2021 1,027
---------------------------------------------------------------------------------------------------------------
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) 5,589
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds, AMT (d):
AAA Aaa 18,920 (NUI Corporation Projects), Series A, 5.70% due 6/01/2032 19,979
NR* Aaa 3,155 RIB, Series 161, 9.97% due 6/01/2032 (f) 3,508
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,600 New Jersey EDA, New Jersey Water Facilities Revenue Refunding Bonds
(American Water), AMT, Series B, 5.125% due 4/01/2022 (a) 4,666
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, Parking Facility Revenue Bonds (Elizabeth Development
Company Project) (b):
AAA Aaa 1,430 5.60% due 10/15/2019 1,535
AAA Aaa 1,000 5.60% due 10/15/2026 1,062
---------------------------------------------------------------------------------------------------------------
AAA NR* 4,580 New Jersey EDA, Revenue Bonds, DRIVERS, Series 219, 10.66%
due 5/01/2016 (c)(f) 5,872
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, School Facilities Construction Revenue Bonds, Series A (a):
AAA Aaa 1,100 5.125% due 6/15/2014 1,183
AAA Aaa 7,000 5.25% due 6/15/2017 7,478
AAA Aaa 7,200 5.25% due 6/15/2018 7,650
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, State Lease Revenue Bonds (State Office Buildings
Projects) (a):
AAA Aaa 3,000 6% due 6/15/2015 3,431
AAA Aaa 4,620 6.25% due 6/15/2020 5,319
---------------------------------------------------------------------------------------------------------------
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
RIB Residual Interest Bonds
6 & 7
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
New Jersey New Jersey Health Care Facilities Financing Authority Revenue Bonds:
(continued) AAA Aaa $ 2,820 (Society of the Valley Hospital), 5.375% due 7/01/2025 (a) $ 2,936
NR* Baa1 5,440 (South Jersey Hospital), 6% due 7/01/2026 5,561
---------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds:
AAA Aaa 4,000 (AHS Hospital Corporation), Series A, 6% due 7/01/2013 (a) 4,626
A- A3 1,455 (Atlantic City Medical Center), 6.25% due 7/01/2017 1,589
A- A3 3,500 (Atlantic City Medical Center), 5.75% due 7/01/2025 3,569
BBB+ NR* 1,775 (Holy Name Hospital), 6% due 7/01/2025 1,790
AAA Aaa 1,000 (Meridian Health System Obligation Group), 5.375% due 7/01/2024 (c) 1,042
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,400 New Jersey Sports and Exposition Authority, State Contract Revenue Bonds,
Series A, 6% due 3/01/2013 (d) 2,746
---------------------------------------------------------------------------------------------------------------
AAA Aaa 9,000 New Jersey State Educational Facilities Authority, Higher Education,
Capital Improvement Revenue Bonds, Series A, 5.125% due 9/01/2022 (a) 9,292
---------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority Revenue Bonds:
AAA Aaa 8,905 (Capital Improvement Fund), Series A, 5.75% due 9/01/2017 (c) 9,891
AAA Aaa 9,420 (Capital Improvement Fund), Series A, 5.75% due 9/01/2018 (c) 10,469
AAA Aaa 1,060 (Ramapo College of New Jersey), Series H, 5% due 7/01/2021 (b) 1,090
AAA Aaa 1,045 (Ramapo College of New Jersey), Series J, 5% due 7/01/2020 (b) 1,080
---------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority, Revenue
Refunding Bonds:
AA BBB 1,000 (Rider University), 5.25% due 7/01/2014 1,071
AAA Aaa 2,375 (Rowan University), Series C, 5.25% due 7/01/2017 (b) 2,554
AAA Aaa 2,820 (Rowan University), Series C, 5.25% due 7/01/2018 (b) 3,014
AAA Aaa 2,635 (Rowan University), Series C, 5.25% due 7/01/2019 (b) 2,802
AAA Aaa 4,000 (University of Medicine and Dentistry), Series B, 5.25%
due 12/01/2017 (a) 4,273
---------------------------------------------------------------------------------------------------------------
New Jersey State Highway Authority, Garden State Parkway, General
Revenue Refunding Bonds:
AAA Aaa 3,200 5.75% due 1/01/2015 (b) 3,574
AA- A1 1,900 5.625% due 1/01/2030 2,033
---------------------------------------------------------------------------------------------------------------
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 2,132
AAA Aaa 3,085 5.25% due 1/01/2019 3,272
---------------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds (d):
AAA Aaa 6,595 AMT, Series K, 6.375% due 10/01/2026 6,823
AAA Aaa 1,555 AMT, Series M, 6.95% due 10/01/2022 1,620
AAA Aaa 4,595 AMT, Series M, 7% due 10/01/2026 4,791
AAA Aaa 1,000 AMT, Series U, 5.60% due 10/01/2012 1,050
AAA Aaa 2,820 AMT, Series U, 5.65% due 10/01/2013 2,949
AAA Aaa 3,000 AMT, Series U, 5.75% due 4/01/2018 3,142
AAA Aaa 2,320 AMT, Series U, 5.85% due 4/01/2029 2,407
AAA Aaa 2,540 Series L, 6.65% due 10/01/2014 2,641
---------------------------------------------------------------------------------------------------------------
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 2,551
AAA Aaa 1,930 6.05% due 10/01/2028 2,016
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 New Jersey State Transit Corporation, COP (Federal Transit
Administration Grants), Series A, 6.125% due 9/15/2009 (a)(e) 5,909
---------------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority, Transportation
System Revenue Bonds:
AA- Aa3 7,500 Series A, 6% due 6/15/2010 (e) 8,802
AAA Aaa 2,000 Series A, 5% due 6/15/2015 (c) 2,089
AAA NR* 10,000 Series B, 5.25% due 6/15/2015 (d) 10,820
---------------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority, Transportation
System Revenue Refunding Bonds:
AAA Aaa 8,525 Series A, 5.50% due 12/15/2015 (a) 9,654
AAA Aaa 2,500 Series B, 6% due 12/15/2011 (d)(e) 2,956
AAA Aaa 6,605 Series B, 6% due 12/15/2011 (e) 7,811
AAA Aaa 7,440 Series B, 6% due 12/15/2011 (e) 8,799
---------------------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds (d):
AAA Aaa 20,000 Series A, 5.75% due 1/01/2019 21,982
AAA Aaa 5,520 Series C, 6.50% due 1/01/2016 6,682
---------------------------------------------------------------------------------------------------------------
North Bergen Township, New Jersey, Board of Education, COP (c):
NR* Aaa 1,250 5% due 12/15/2018 1,310
NR* Aaa 1,000 6% due 12/15/2019 1,135
NR* Aaa 1,580 6.25% due 12/15/2020 1,821
NR* Aaa 1,680 6.25% due 12/15/2021 1,929
---------------------------------------------------------------------------------------------------------------
NR* Aaa 3,035 Orange Township, New Jersey, Municipal Utility and Lease, GO, Refunding,
Series C, 5.10% due 12/01/2017 (d) 3,194
---------------------------------------------------------------------------------------------------------------
Passaic County, New Jersey, GO, Refunding (c):
NR* Aaa 2,360 5.25% due 6/01/2015 2,574
NR* Aaa 2,350 5.25% due 6/01/2016 2,547
---------------------------------------------------------------------------------------------------------------
Paterson, New Jersey, Public School District, COP (d):
NR* Aaa 1,980 6.125% due 11/01/2015 2,311
NR* Aaa 2,000 6.25% due 11/01/2019 2,288
---------------------------------------------------------------------------------------------------------------
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) 5,397
AAA Aaa 2,000 (Public Service Electric & Gas), Series C, 5.55% due 11/01/2033 (d) 2,048
---------------------------------------------------------------------------------------------------------------
South Jersey Port Corporation of New Jersey Revenue Refunding Bonds:
A NR* 3,750 4.50% due 1/01/2015 3,756
A NR* 2,920 4.50% due 1/01/2016 2,892
A NR* 1,500 5% due 1/01/2026 1,482
A NR* 2,000 5.10% due 1/01/2033 1,989
---------------------------------------------------------------------------------------------------------------
A A1 7,640 Tobacco Settlement Financing Corporation, New Jersey, Asset-Backed
Revenue Refunding Bonds, 6% due 6/01/2037 6,794
---------------------------------------------------------------------------------------------------------------
8 & 9
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
New Jersey AAA Aaa $ 4,325 Trenton, New Jersey, Parking Authority, Parking Revenue Bonds, DRIVERS,
(concluded) Series 221, 10.76% due 4/01/2010 (b)(e)(f) $ 5,855
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,650 University of Medicine and Dentistry, New Jersey, COP, 5% due 4/15/2025 1,682
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,740 University of Medicine and Dentistry, New Jersey, Revenue Bonds,
Series A, 5.50% due 12/01/2027 (a) 5,075
---------------------------------------------------------------------------------------------------------------
West Deptford Township, New Jersey, GO (b):
NR* Aaa 4,170 5.625% due 9/01/2026 4,485
NR* Aaa 4,410 5.625% due 9/01/2027 4,739
NR* Aaa 3,615 5.625% due 9/01/2028 3,880
NR* Aaa 4,940 5.625% due 9/01/2029 5,300
---------------------------------------------------------------------------------------------------------------
West Orange, New Jersey, Board of Education, COP (d):
NR* Aaa 2,040 5.75% due 10/01/2014 2,307
NR* Aaa 3,615 6% due 10/01/2024 3,993
===================================================================================================================================
New York--8.6% 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) 4,951
---------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds, AMT (d):
AAA NR* 2,375 DRIVERS, Series 192, 10.11% due 12/01/2025 (f) 2,630
AAA Aaa 1,500 (JFK International Air Terminal), Series 6, 6.25% due 12/01/2015 1,728
NR* Aaa 2,165 (JFK International Air Terminal LLC), RIB, Series 157, 10.07%
due 12/01/2022 (f) 2,457
AAA Aaa 13,500 (JFK International Air Terminal--Special Project), Series 6,
6.25% due 12/01/2011 15,505
===================================================================================================================================
Pennsylvania--1.5% A- A2 4,630 Delaware River Joint Toll Bridge Commission, Pennsylvania, Bridge
Revenue Refunding Bonds, 5% due 7/01/2028 4,610
===================================================================================================================================
Puerto Rico--7.8% Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA Aaa 10,000 Series HH, 5.25% due 7/01/2029 (c) 10,407
AAA Aaa 2,355 Series X, 5.50% due 7/01/2025 (d) 2,463
---------------------------------------------------------------------------------------------------------------
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) 1,949
AA Aa2 1,750 (Hospital de la Concepcion), 6.50% due 11/15/2020 1,988
---------------------------------------------------------------------------------------------------------------
AAA Aaa 7,120 Puerto Rico Public Financing Corporation Revenue Bonds
(Commonwealth Appropriation), Series A, 5.50% due 8/01/2019 (d) 7,781
---------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$478,855)--160.9% 508,764
===================================================================================================================================
Shares
Held Common Stock
===================================================================================================================================
2,400 CMA New Jersey Municipal Money Fund*** 2,400
---------------------------------------------------------------------------------------------------------------
Total Common Stock (Cost--$2,400)--0.8% 2,400
---------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$481,255)--161.7% 511,164
Variation Margin on Financial Futures Contracts**--0.0% (48)
Other Assets Less Liabilities--2.5% 8,054
Preferred Stock, at Redemption Value--(64.2%) (203,010)
--------
Net Assets Applicable to Common Stock--100.0% $316,160
========
===================================================================================================================================
(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, 2003.
(g) All or a portion of security held as collateral in connection with open
financial futures contracts.
* Not Rated.
** Financial futures contracts sold as of January 31, 2003 were as follows:
(in Thousands)
--------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
--------------------------------------------------------------------------
510 U.S. Treasury Bonds March 2003 $58,212
--------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$57,152) $58,212
=======
--------------------------------------------------------------------------
*** Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Share Net Dividend
Affiliate Activity Cost Income
--------------------------------------------------------------------------
CMA New Jersey
Municipal Money Fund 2,400 $2,400 $5
--------------------------------------------------------------------------
See Notes to Financial Statements.
10 & 11
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
STATEMENT OF NET ASSETS
As of January 31, 2003
===================================================================================================================================
Assets: Investments, at value (identified cost--$481,254,789) ................. $511,164,483
Cash .................................................................. 87,545
Receivables:
Interest ......................................................... $ 5,966,148
Securities sold .................................................. 2,513,430
Dividends ........................................................ 4,594 8,484,172
------------
Prepaid expenses ...................................................... 15,340
------------
Total assets .......................................................... 519,751,540
------------
===================================================================================================================================
Liabilities: Payables:
Investment adviser ............................................... 249,614
Dividends to Common Stock shareholders ........................... 215,035
Variation margin ................................................. 47,813 512,462
------------
Accrued expenses ...................................................... 68,655
------------
Total liabilities ..................................................... 581,117
------------
===================================================================================================================================
Preferred Stock: Preferred Stock, at redemption value, par value $.10 per share
(1,360 Series A shares, 1,360 Series B shares, 2,400 Series C shares,
1,880 Series D shares and 1,120 Series E shares of AMPS* issued and
outstanding at $25,000 per share liquidation preference) .............. 203,010,176
------------
===================================================================================================================================
Net Assets Net assets applicable to Common Stock ................................. $316,160,247
Applicable to ============
Common Stock:
===================================================================================================================================
Analysis of Net Common Stock, par value $.10 per share (21,038,614 shares
Assets Applicable to issued and outstanding) ............................................... $ 2,103,861
Common Stock: Paid-in capital in excess of par ...................................... 316,252,102
Undistributed investment income--net .................................. $ 4,052,734
Accumulated realized capital losses on investments--net ............... (35,098,300)
Unrealized appreciation on investments--net ........................... 28,849,850
------------
Total accumulated losses--net ......................................... (2,195,716)
------------
Total--Equivalent to $15.03 net asset value per share of
Common Stock (market price--$13.90) ................................... $316,160,247
============
===================================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended January 31, 2003
===================================================================================================================================
Investment Interest .............................................................. $ 13,403,531
Income: Dividends ............................................................. 4,594
------------
Total income .......................................................... 13,408,125
------------
===================================================================================================================================
Expenses: Investment advisory fees .............................................. $ 1,455,942
Commission fees ....................................................... 265,017
Accounting services ................................................... 86,522
Professional fees ..................................................... 44,340
Transfer agent fees ................................................... 42,331
Directors' fees and expenses .......................................... 19,194
Printing and shareholder reports ...................................... 18,201
Listing fees .......................................................... 16,134
Custodian fees ........................................................ 14,775
Pricing fees .......................................................... 11,699
Other ................................................................. 21,275
-----------
Total expenses before reimbursement ................................... 1,995,430
Reimbursement of expenses ............................................. (122,232)
-----------
Total expenses after reimbursement .................................... 1,873,198
------------
Investment income--net ................................................ 11,534,927
------------
===================================================================================================================================
Realized & Realized gain on investments--net ..................................... 173,872
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net .... 1,223,409
On Investments--Net: ------------
Total realized and unrealized gain on investments--net ................ 1,397,281
------------
===================================================================================================================================
Dividends to Investment income--net ................................................ (1,071,918)
Preferred Stock ------------
Shareholders: Net Increase in Net Assets Resulting from Operations .................. $ 11,860,290
============
===================================================================================================================================
See Notes to Financial Statements.
12 & 13
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: January 31, 2003 July 31, 2002
=================================================================================================================================
Operations: Investment income--net .................................................. $ 11,534,927 $ 22,385,498
Realized gain on investments--net ....................................... 173,872 913,120
Change in unrealized appreciation/depreciation on investments--net ...... 1,223,409 5,534,667
Dividends to Preferred Stock shareholders ............................... (1,071,918) (3,057,485)
------------- -------------
Net increase in net assets resulting from operations .................... 11,860,290 25,775,800
------------- -------------
=================================================================================================================================
Dividends to Investment income--net .................................................. (9,214,913) (18,173,596)
Common Stock ------------- -------------
Shareholders: Net decrease in net assets resulting from dividends to Common
Stock shareholders ...................................................... (9,214,913) (18,173,596)
------------- -------------
=================================================================================================================================
Net Assets Total increase in net assets applicable to Common Stock ................. 2,645,377 7,602,204
Applicable to Beginning of period ..................................................... 313,514,870 305,912,666
Common Stock: ------------- -------------
End of period* .......................................................... $ 316,160,247 $ 313,514,870
============= =============
=================================================================================================================================
* Undistributed investment income--net .................................... $ 4,052,734 $ 2,804,638
============= =============
=================================================================================================================================
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and For the
ratios have been derived from information Six Months For the Year Ended
provided in the financial statements. Ended July 31,
January 31, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
====================================================================================================================================
Per Share Net asset value, beginning of period .............. $ 14.90 $ 14.54 $ 13.14 $ 14.47 $ 15.09
Operating -------- -------- -------- -------- --------
Performance:+++ Investment income--net ............................ .55+ 1.06+ 1.08 1.07 1.13
Realized and unrealized gain (loss) on
investments--net .................................. .07 .31 1.39 (1.27) (.58)
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ......................... (.05) (.15) (.34) (.35) (.30)
Realized gain on investments--net .............. -- -- -- -- (.02)
Capital write-off resulting from issuance of
Preferred Stock ................................ -- -- --@@ -- --
-------- -------- -------- -------- --------
Total from investment operations .................. .57 1.22 2.13 (.55) .23
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ......................... (.44) (.86) (.73) (.78) (.81)
Realized gain on investments--net .............. -- -- -- -- (.01)
In excess of realized gain on investments--net . -- -- -- -- (.03)
Total dividends and distributions to Common
-------- -------- -------- -------- --------
Stock shareholders ................................ (.44) (.86) (.73) (.78) (.85)
-------- -------- -------- -------- --------
Capital write-off resulting from issuance of
Common Stock ...................................... -- -- --@@ -- --
-------- -------- -------- -------- --------
Net asset value, end of period .................... $ 15.03 $ 14.90 $ 14.54 $ 13.14 $ 14.47
======== ======== ======== ======== ========
Market price per share, end of period ............. $ 13.90 $ 14.24 $ 12.64 $11.6875 $13.4375
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on market price per share ................... .72%@ 20.01% 14.60% (7.13%) (7.44%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ................ 4.08%@ 9.16% 17.26% (3.04%) 1.56%
======== ======== ======== ======== ========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net reorganization expenses*** ........................ 1.16%* 1.19% 1.18% 1.27% 1.22%
Assets of ======== ======== ======== ======== ========
Common Stock: Total expenses, net of reimbursement*** ........... 1.16%* 1.22% 1.18% 1.55% 1.22%
======== ======== ======== ======== ========
Total expenses*** ................................. 1.24%* 1.29% 1.29% 1.67% 1.31%
======== ======== ======== ======== ========
Total investment income--net*** ................... 7.15%* 7.32% 7.72% 8.52% 7.32%
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock
shareholders ...................................... .66%* 1.00% 2.43% 2.96% 1.93%
======== ======== ======== ======== ========
Investment income--net, to Common Stock
shareholders ...................................... 6.49%* 6.32% 5.29% 5.56% 5.39%
======== ======== ======== ======== ========
====================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net Assets reorganization expenses ........................... .71%* .72% .69% .72% .75%
Of Common & ======== ======== ======== ======== ========
Preferred Total expenses, net of reimbursement .............. .71%* .73% .69% .88% .75%
Stock:*** ======== ======== ======== ======== ========
Total expenses .................................... .75%* .78% .76% .94% .80%
======== ======== ======== ======== ========
Total investment income--net ...................... 4.36%* 4.40% 4.53% 4.81% 4.48%
======== ======== ======== ======== ========
====================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ......... 1.04%* 1.51% 3.46% 3.84% 3.04%
Average Net ======== ======== ======== ======== ========
Assets of
Preferred Stock:
====================================================================================================================================
Supplemental Net assets applicable to Common Stock, end of
Data: period (in thousands) ............................. $316,160 $313,515 $305,913 $234,135 $101,300
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period (in
thousands) ........................................ $203,000 $203,000 $203,000 $175,000 $ 68,000
======== ======== ======== ======== ========
Portfolio turnover ................................ 15.51% 20.05% 55.60% 100.11% 64.93%
======== ======== ======== ======== ========
====================================================================================================================================
Leverage: Asset coverage per $1,000 ......................... $ 2,557 $ 2,544 $ 2,507 $ 2,338 $ 2,490
======== ======== ======== ======== ========
====================================================================================================================================
Dividends Per Series A--Investment income--net .................. $ 131 $ 356 $ 830 $ 896 $ 763
Share On ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net .................. $ 128 $ 381 $ 872 $ 898 $ 766
Outstanding:++ ======== ======== ======== ======== ========
Series C--Investment income--net .................. $ 129 $ 389 $ 871 $ 439 --
======== ======== ======== ======== ========
Series D--Investment income--net .................. $ 136 $ 363 $ 901 $ 418 --
======== ======== ======== ======== ========
Series E--Investment income--net .................. $ 138 $ 393 $ 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. If applicable, the Fund's Investment Adviser waived a portion of
its management fee. Without such waiver, the Fund's performance would
have been lower.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Based on average shares outstanding.
++ 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).
+++ Certain prior year amounts have been reclassified to conform to current
year presentation.
@ Aggregate total investment return.
@@ Amount is less than $.01 per share.
See Notes to Financial Statements.
14 & 15
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
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 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.
o Forward interest rate swaps -- The Fund is authorized to enter into forward
interest rate swaps for the purpose of hedging the interest rate risk on
portfolio securities. In a forward interest rate swap, the Fund and the
counterparty agree to pay or receive interest on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. The value of the agreement is determined by quoted fair values received
daily by the Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of the
agreement.
(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. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(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.
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, 2003, FAM earned fees of $1,455,942, of which $118,627 was waived. For the
six months ended January 31, 2003, FAM reimbursed the Fund in the amount of
$3,605.
For the six months ended January 31, 2003, the Fund reimbursed FAM $5,754 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, 2003 were $79,041,937 and $82,695,134, respectively.
Net realized gains (losses) for the six months ended January 31, 2003 and net
unrealized gains (losses) as of January 31, 2003 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
--------------------------------------------------------------------------------
Long-term investments ................ $ 3,544,535 $ 29,909,694
Financial futures contracts .......... (3,370,663) (1,059,844)
------------ ------------
Total ................................ $ 173,872 $ 28,849,850
============ ============
--------------------------------------------------------------------------------
As of January 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $29,931,572, of which $30,620,809 related to appreciated
securities and $689,237 related to depreciated securities. The aggregate cost of
investments at January 31, 2003 for Federal income tax purposes was
$481,232,911.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of 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 stock without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended January 31, 2003 and
the year ended July 31, 2002 remained constant.
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, plus accrued and unpaid dividends, 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
16 & 17
MuniHoldings New Jersey Insured Fund, Inc., January 31, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
31, 2003 were as follows: Series A, .90%; Series B, .90%; Series C, .85%; Series
D, .85%; and Series E, .80%.
Shares issued and outstanding during the six months ended January 31, 2003 and
the year ended July 31, 2002 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended January 31, 2003, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, earned $125,167 as
commissions.
5. Capital Loss Carryforward:
At July 31, 2002, the Fund had a net capital loss carryforward of $35,328,697,
of which $2,713,832 expires in 2006, $4,022,894 expires in 2007, $1,794,104
expires in 2008 and $26,797,867 expires in 2009. This amount will be available
to offset like amounts of any future taxable gains.
6. Subsequent Event:
On February 6, 2003, a tax-exempt income dividend of $.076000 was declared. The
dividend was paid on February 27, 2003 to shareholders of record on February 14,
2003.
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 Net Assets, which comprises part of the financial
information included in this report.
QUALITY PROFILE
The quality ratings of securities in the Fund as of January 31, 2003 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Total Investments
--------------------------------------------------------------------------------
AAA/Aaa ............................................... 90.2%
AA/Aa ................................................. 2.7
A/A ................................................... 5.2
BBB/Baa ............................................... 1.4
Other* ................................................ 0.5
--------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
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
Theodore R. Jaeckel Jr., Vice President
Donald C. Burke, Vice President and Treasurer
Brian D. Stewart, Secretary
Custodian
The Bank of New York
100 Church 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
[GRAPHICS 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--1/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are
normally provided by the accountant in connection with
statutory and regulatory filings or engagements for
those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the
services comprising the fees disclosed under this
category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A.
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MuniHoldings New Jersey Insured Fund, Inc.
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
MuniHoldings New Jersey Insured Fund, Inc.
Date: March 17, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
MuniHoldings New Jersey Insured Fund, Inc.
Date: March 17, 2003
By: /s/ Donald C. Burke
-----------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings New Jersey Insured Fund, Inc.
Date: March 17, 2003