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 - 07/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniHoldings New Jersey
Insured Fund, Inc.
Annual Report
July 31, 2003
[LOGO] Merrill Lynch Investment Managers
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. As of July 31, 2003, the percentage of the Fund's
total net assets invested in inverse floaters was 3.86%.
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.
2 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
A Letter From the President
Dear Shareholder
Now more than half behind us, 2003 has been a meaningful year in many respects.
Perhaps the most significant development was the conclusion of all-out war in
Iraq. Although not especially sensitive to geopolitical events, the municipal
market has not been exempt from the general market excitement we have seen since
fighting gave way to restructuring in Iraq.
Municipal bond yields rose and fell in response to war fears, equity market
uncertainty, sub par economic growth, unemployment and deflation. By the end of
July, long-term municipal revenue bond yields stood at 5.4%, as measured by the
Bond Buyer Revenue Bond Index. With many state deficits at record levels,
municipalities issued more than $200 billion in new long-term tax-exempt bonds
during the six-month period ended July 31, 2003, an increase of more than 20%
versus the same six months of 2002. The availability of bonds, together with
attractive yield ratios relative to U.S. Treasury issues, made municipal bonds a
popular fixed income investment alternative.
Against this backdrop, our portfolio managers continued to work diligently to
deliver on our commitment to provide superior performance within reasonable
expectations for risk and return. This included striving to outperform our peers
and the market indexes. With that said, remember also that the advice and
guidance of a skilled financial advisor can mean the difference between fruitful
and fruitless investing. A financial professional can help you choose those
investments that will best serve you as you plan for your financial future.
Finally, I am proud to premiere a new look to our shareholder communications.
Our portfolio manager commentaries have been trimmed and organized in such a way
that you can get the information you need at a glance, in plain language.
Today's markets are confusing enough. We want to help you put it all in
perspective. The report's new size also allows us certain mailing efficiencies.
The cost savings in both production and postage are passed on to the fund and,
ultimately, to fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
As the municipal yield curve grew steeper, we took the opportunity to move
further out, selling the Fund's shorter-duration holdings and buying bonds with
modestly longer maturities.
Discuss the recent market environment relative to municipal bonds.
Amid considerable interest rate volatility, U.S. Treasury bond yields were
higher at 5.35% at the end of July, 2003 than they had been six months earlier.
Volatile equity markets, concerns over the Iraqi conflict, and sub par economic
growth combined to generally push interest rates lower through June. Bond
yields, however, moved sharply higher in July in response to more positive
business activity, especially continued strong homes sales and improving
employment trends.
Long-term tax-exempt bond yields also rose over the six months ended July 31,
2003, although to a lesser extent than U.S. Treasury obligations. Yield
volatility was lower than that seen in U.S. Treasury issues, as municipal bond
prices typically are less sensitive to worldwide geopolitical pressures on a
daily and weekly basis. By the end of July, long-term municipal revenue bond
yields, as measured by the Bond Buyer Revenue Bond Index, stood at 5.4%.
The municipal market outperformed the U.S. Treasury market over the past six
months, despite a dramatic increase in new bond issuance. Recent semi-annual
issuance has, in fact, exceeded the annual issuance seen during much of the
mid-1990s. The monthly issuance for July 2003, at almost $30 billion,
represented the largest amount of tax-exempt bonds ever sold in the month of
July. Historically low interest rates over the past year have been used by state
and local governments as an opportunity to finance existing infrastructure needs
and refinance outstanding, higher-coupon issues. Current estimates for 2003
municipal bond new issuance are approximately $350 billion, similar to 2002's
record high issuance.
A number of factors continue to foster strong investor demand for municipal
bonds. Tax-exempt money market rates have remained below 1% for much of this
year, forcing investors to invest in longer maturities to generate desired
levels of coupon income. In July and August 2003, investors are expected to
receive approximately $60 billion in coupon income, bond maturities and the
proceeds from early redemptions. We believe much of these proceeds are likely to
be reinvested in the municipal market.
As an asset class, municipal bonds have remained an attractive investment
alternative, especially relative to U.S. Treasury issues. At the end of July
2003, tax-exempt bond yields were 85% - 93% of comparable U.S. Treasury issues,
well in excess of their historic average of 82% - 88%. Current yield ratios have
made municipal securities attractive to both retail and institutional investors.
We expect the tax-exempt market's favorable technical position to remain stable
in the near term, therefore, an increase in bond issuance during the remainder
of 2003 is not likely to significantly impact the municipal bond market's
performance.
While many investors are concerned about how economic growth might affect bond
prices and yield, we believe moderate economic growth, especially within a
context of negligible inflationary pressures, should not greatly endanger the
positive fixed income environments tax-exempt products have enjoyed.
What developments in the state of New Jersey affected the Fund?
During the year, New Jersey maintained credit ratings of AA, Aa2 and AA from
Standard & Poor's, Moody's and Fitch, respectively. While Standard & Poor's
outlook is stable, those of Moody's and Fitch remain negative. The Fund
maintained negligible exposure to uninsured state-backed bonds; hence,
performance was virtually unaffected by the potential rating downgrades.
For its fiscal year ended June 30, 2003, the state faced another budget
shortfall. The gap was closed through several initiatives, including the
securitization of New Jersey's remaining tobacco settlement and a restructuring
of the corporate business tax (CBT). The changes to the CBT resulted in
permanent revenue, thereby enhancing the state's structural stability. In
addition, state spending was controlled in fiscal year 2003, remaining
comparable to 2002 spending levels.
Although the adopted budget for fiscal year 2004 is not structurally balanced,
it has grown only 1.6% since fiscal year 2003. On the revenue side, the state
increased taxes and fees in several areas, including the casino industry and the
cigarette tax. On the expense side, initiatives included reducing the New Jersey
Saver property tax rebates and the state's pension contribution.
The state's budget shortfalls caused increased issuance of New Jersey bonds.
While supply was up throughout the country, New Jersey's rate of issuance was
more than double the national rate of issuance this year, resulting in some
underperformance relative to national municipal bonds.
4 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
From a political and judicial perspective, the New Jersey Supreme Court affirmed
the constitutional validity of non-voter approved contract debt (that is, the
payment of principal and interest is subject to the state making annual
appropriations). Economically, New Jersey is one of the wealthiest states in the
nation with high personal income levels and strong housing price appreciation.
How did the Fund perform during the fiscal year?
For the year ended July 31, 2003, the Common Stock of MuniHoldings New Jersey
Insured Fund, Inc. had a net annualized yield of 6.20%, based on a year-end per
share net asset value of $14.46 and $.897 per share income dividends. Over the
same period, the total investment return on the Fund's Common Stock was +3.32%,
based on a change in per share net asset value from $14.90 to $14.46, and
assuming reinvestment of $.894 per share ordinary income dividends.
For the six-month period ended July 31, 2003, the total investment return on the
Fund's Common Stock was -.73%, based on a change in per share net asset value
from $15.03 to $14.46, and assuming reinvestment of $.456 per share ordinary
income dividends.
For the six-month period ended July 31, 2003, the Fund's Auction Market
Preferred Stock had average yields as follows: Series A, .83%; Series B, .92%;
Series C, .96%; Series D, .85%; and Series E, .89%.
For a description of the Fund's total investment return based on a change in the
per share market value (as measured by the trading price of the Fund's shares on
the New York Stock Exchange), and assuming reinvestment of dividends, please
refer to the Financial Highlights section included in this report. As a
closed-end fund, the Fund's shares may trade in the secondary market at a
premium or discount to the Fund's net asset value. As a result, total investment
returns based on changes in the Fund's market value can vary significantly from
total investment return based on changes in the Fund's net asset value.
What changes were made to the portfolio during the fiscal year?
The most significant change in terms of the structure of the portfolio had to do
with the shape of the yield curve. As the yield curve grew steeper during the
fiscal period, we took the opportunity to move further out on the curve, selling
the Fund's shorter-duration holdings and buying bonds with longer maturities in
an effort to realize profits and reinvest at attractive market rates. In many
cases, the shorter holdings were advance-refunded bonds or the proceeds from
early retirement of securities. We liquidated some of our advance-refunded
bonds, which generally are refunded prior to maturity as issuers attempt to take
advantage of lower interest rates. When a bond is refinanced ahead of its call
date, the original bonds are secured by an escrow account that typically is
invested in Treasury securities. Because many of these bonds experienced a sharp
rise in value during the period, we liquidated those holdings and reinvested the
proceeds in longer-term bonds. The goal was to lock in profits rather than
remain subject to wherever interest rates might be on those bonds' scheduled
call dates. To some extent, the strategies we employed increased the portfolio's
interest rate sensitivity.
During the period, the Fund's borrowing costs declined to a range of .75% -
..95%. These attractive funding levels, in combination with a steep tax-exempt
yield curve, have generated a significant income benefit to the Fund's Common
Stock shareholders. Further declines in the Fund's borrowing costs 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
expect short-term borrowing costs to remain near current attractive levels for
the coming months. However, should the spread between short-term and long-term
interest rates narrow, the benefits of leverage will decline, and as a result,
reduce the yield on the Fund's Common Stock. (For a more complete explanation of
the benefits and risks of leveraging, see page 2 of this report to
shareholders.)
How would you characterize the Fund's position at the close of the period?
At the close of the period, the Fund had approximately 83% of its assets in
insured paper. At this time, the Fund is positioned somewhat more aggressively
than its peers. We will continue to look for periods of market strength to
reduce the Fund's interest rate sensitivity and position the portfolio more
defensively.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
August 13, 2003
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
State Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey--146.6% AAA Aaa $ 1,875 Atlantic Highlands, New Jersey, Highland Regional Sewer $ 1,985
Authority, Sewer Revenue Refunding Bonds, 5.50% due 1/01/2020 (b)
--------------------------------------------------------------------------------------------------------------
Bayonne, New Jersey, Municipal Utilities Authority, Water System
Revenue Bonds, Series B (g):
NR* Aaa 1,335 4.50% due 4/01/2028 1,195
NR* Aaa 2,440 4.75% due 4/01/2033 2,257
--------------------------------------------------------------------------------------------------------------
Camden County, New Jersey, Improvement Authority, Lease Revenue
Bonds (c):
AAA Aaa 1,540 5.50% due 9/01/2010 (e) 1,731
AAA Aaa 2,635 5.375% due 9/01/2019 2,749
--------------------------------------------------------------------------------------------------------------
NR* Aaa 430 Carteret, New Jersey, Board of Education, COP, 6% due 1/15/2024 (d) 466
--------------------------------------------------------------------------------------------------------------
AAA Aaa 6,210 Casino Reinvestment Development Authority, New Jersey, Parking Fee
Revenue Bonds, Series A, 5.25% due 10/01/2017 (c) 6,481
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,005 Delaware River and Bay Authority Revenue Bonds, Series A, 5.625%
due 1/01/2018 (a) 2,150
--------------------------------------------------------------------------------------------------------------
Delaware River Port Authority of Pennsylvania and New Jersey
Revenue Bonds (c):
AAA Aaa 5,000 5.50% due 1/01/2012 5,460
AAA Aaa 6,000 5.625% due 1/01/2013 6,576
AAA Aaa 500 5.75% due 1/01/2015 549
AAA Aaa 4,865 6% due 1/01/2018 5,387
AAA Aaa 5,525 6% due 1/01/2019 6,089
AAA Aaa 2,425 (Port District Project), Series B, 5.625% due 1/01/2026 2,518
--------------------------------------------------------------------------------------------------------------
AAA Aaa 7,895 East Orange, New Jersey, Board of Education, COP, 5.50%
due 8/01/2012 (c) 8,779
--------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 East Orange, New Jersey, Water Utility, GO, Refunding, 5.70%
due 6/15/2022 (a) 1,054
--------------------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Essex County, New Jersey, Improvement Authority, Lease Revenue
Bonds (Correctional Facility Project), 6% due 10/01/2025 (b) 4,340
--------------------------------------------------------------------------------------------------------------
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) 3,341
--------------------------------------------------------------------------------------------------------------
Essex County, New Jersey, Improvement Authority Revenue Bonds,
Series A (b):
NR* Aaa 3,890 4.50% due 10/01/2023 3,595
NR* Aaa 4,400 5% due 10/01/2028 4,329
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,705 Essex County, New Jersey, Improvement Authority, Utility System
Revenue Bonds (East Orange Franchise), 6% due 7/01/2018 (d) 3,008
--------------------------------------------------------------------------------------------------------------
Garden State Preservation Trust, New Jersey, Capital Appreciation
Revenue Bonds (c):
AAA Aaa 5,750 Series A, 5% due 11/01/2020 5,814
AAA Aaa 9,000 Series B, 5.12%** due 11/01/2023 2,970
AAA Aaa 10,000 Series B, 5.20%** due 11/01/2025 2,958
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Hoboken, New Jersey, Parking Authority, Parking Revenue Bonds,
Series A, 5.30% due 5/01/2011 (a)(e) 1,678
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 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey AAA Aaa $ 765 Jersey City, New Jersey, GO, Refunding, Quality School, Series A,
(continued) 5.375% due 9/01/2017 (c) $ 808
---------------------------------------------------------------------------------------------------------------
NR* Aaa 5,250 Lafayette Yard, New Jersey, Community Development Revenue Bonds
(Hotel/Conference Center Project--Trenton), 6%
due 4/01/2010 (d)(e) 6,066
---------------------------------------------------------------------------------------------------------------
AAA Aaa 825 Lopatcong Township, New Jersey, Board of Education, GO, 5.70%
due 7/15/2010 (c)(e) 936
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Marlboro Township, New Jersey, Board of Education, GO, 5.25%
due 7/15/2017 (c) 1,043
---------------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, COP (d):
AAA Aaa 1,375 5.50% due 8/01/2016 1,477
AAA Aaa 1,550 5.25% due 6/15/2023 1,570
---------------------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, Improvement Authority, Lease
Revenue Bonds (Educational Services Commission Projects):
AAA Aa1 3,970 5.70% due 7/15/2020 4,262
AAA Aa1 5,270 6% due 7/15/2025 5,716
---------------------------------------------------------------------------------------------------------------
AAA Aaa 500 Middlesex County, New Jersey, Improvement Authority Revenue Bonds
(Senior Citizens Housing Project), AMT, 5.50% due 9/01/2030 (a) 514
---------------------------------------------------------------------------------------------------------------
Monmouth County, New Jersey, Improvement Authority, Revenue
Refunding Bonds (a):
AAA Aaa 1,540 5.35% due 12/01/2017 1,624
AAA Aaa 1,470 5.375% due 12/01/2018 1,545
---------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Monroe Township, New Jersey, Municipal Utilities Authority,
Middlesex County Revenue Refunding Bonds, 5.25% due 2/01/2016 (b) 1,050
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,304 Mount Laurel Township, New Jersey, Board of Education, GO, 5.60%
due 8/01/2019 (b) 2,447
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 New Jersey Building Authority, State Building Revenue Bonds,
Series A, 5.25% due 12/15/2019 (c) 1,034
---------------------------------------------------------------------------------------------------------------
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) 5,443
---------------------------------------------------------------------------------------------------------------
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 19,638
NR* Aaa 3,155 RIB, Series 161, 10.24% due 6/01/2032 (f) 3,394
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, Parking Facility Revenue Bonds (Elizabeth
Development Company Project) (b):
AAA Aaa 1,430 5.60% due 10/15/2019 1,519
AAA Aaa 1,000 5.60% due 10/15/2026 1,035
---------------------------------------------------------------------------------------------------------------
AAA NR* 4,580 New Jersey EDA, Revenue Bonds, DRIVERS, Series 219, 10.92%
due 5/01/2016 (c)(f) 5,674
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, School Facilities Construction Revenue Bonds,
Series A (a):
AAA Aaa 7,000 5.25% due 6/15/2017 7,302
AAA Aaa 7,200 5.25% due 6/15/2018 7,464
---------------------------------------------------------------------------------------------------------------
New Jersey EDA, State Lease Revenue Bonds (State Office Buildings
Projects) (a):
AAA Aaa 3,000 6% due 6/15/2015 3,363
AAA Aaa 4,620 6.25% due 6/15/2020 5,227
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,100 New Jersey EDA, Water Facilities Revenue Refunding Bonds
(American Water), AMT, Series B, 5.125% due 4/01/2022 (a) 4,083
---------------------------------------------------------------------------------------------------------------
New Jersey Health Care Facilities Financing Authority Revenue
Bonds:
AAA Aaa 2,820 (Society of the Valley Hospital), 5.375% due 7/01/2025 (a) 2,845
NR* Baa2 3,135 (Somerset Medical Center), 5.50% due 7/01/2033 2,935
NR* Baa1 5,440 (South Jersey Hospital), 6% due 7/01/2026 5,469
---------------------------------------------------------------------------------------------------------------
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) 4,534
A- A3 1,455 (Atlantic City Medical Center), 6.25% due 7/01/2017 1,552
A- A3 3,500 (Atlantic City Medical Center), 5.75% due 7/01/2025 3,573
BBB+ NR* 1,775 (Holy Name Hospital), 6% due 7/01/2025 1,784
AAA Aaa 1,000 (Meridian Health System Obligation Group), 5.375%
due 7/01/2024 (c) 1,017
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,400 New Jersey Sports and Exposition Authority, State Contract
Revenue Bonds, Series A, 6% due 3/01/2013 (d) 2,703
---------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 New Jersey State Educational Facilities Authority, Higher
Education, Capital Improvement Revenue Bonds, Series A, 5.125%
due 9/01/2022 (a) 7,567
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey New Jersey State Educational Facilities Authority Revenue Bonds
(continued) (Capital Improvement Fund), Series A (c):
AAA Aaa $ 8,905 5.75% due 9/01/2017 $ 9,744
AAA Aaa 9,420 5.75% due 9/01/2018 10,266
---------------------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority, Revenue
Refunding Bonds:
AAA Aaa 2,375 (Rowan University), Series C, 5.25% due 7/01/2017 (b) 2,485
AAA Aaa 2,820 (Rowan University), Series C, 5.25% due 7/01/2018 (b) 2,934
AAA Aaa 2,635 (Rowan University), Series C, 5.25% due 7/01/2019 (b) 2,726
AAA Aaa 4,000 (University of Medicine and Dentistry), Series B, 5.25%
due 12/01/2017 (a) 4,176
---------------------------------------------------------------------------------------------------------------
New Jersey State Highway Authority, Garden State Parkway General
Revenue Refunding Bonds (e):
AAA Aaa 3,200 5.75% due 1/01/2010 (b) 3,636
AAA Aaa 5,085 Senior Parkway, 5.25% due 1/01/2012 5,570
---------------------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds (d):
AAA Aaa 1,555 AMT, Series M, 6.95% due 10/01/2022 1,608
AAA Aaa 1,670 AMT, Series M, 7% due 10/01/2026 1,682
AAA Aaa 1,000 AMT, Series U, 5.60% due 10/01/2012 1,031
AAA Aaa 2,820 AMT, Series U, 5.65% due 10/01/2013 2,896
AAA Aaa 3,000 AMT, Series U, 5.75% due 4/01/2018 3,086
AAA Aaa 2,320 AMT, Series U, 5.85% due 4/01/2029 2,370
AAA Aaa 2,255 Series L, 6.65% due 10/01/2014 2,333
---------------------------------------------------------------------------------------------------------------
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 2,524
AAA Aaa 790 6.05% due 10/01/2028 813
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 New Jersey State Transit Corporation, COP (Federal Transit
Administration Grants), Series A, 6.125% due 9/15/2009 (a)(e) 5,822
---------------------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds:
AA- Aa3 7,500 Series A, 6% due 6/15/2010 (e) 8,631
AAA Aaa 2,000 Series A, 5% due 6/15/2015 (c) 2,069
AAA NR* 10,000 Series A, 5.25% due 6/15/2015 (d) 10,580
AA- Aa3 12,600 Series C, 5.50% due 6/15/2019 13,216
---------------------------------------------------------------------------------------------------------------
AAA Aaa 15,075 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Refunding Bonds, Series B, 6%
due 12/15/2011 (d)(e) 17,492
---------------------------------------------------------------------------------------------------------------
AAA Aaa 6,225 New Jersey State Turnpike Authority, Turnpike Revenue Bonds,
Series A, 5% due 1/01/2030 (a) 6,135
---------------------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds (d):
AAA Aaa 20,000 Series A, 5.75% due 1/01/2019 21,643
AAA Aaa 5,520 Series C, 6.50% due 1/01/2016 6,546
---------------------------------------------------------------------------------------------------------------
North Bergen Township, New Jersey, Board of Education, COP (c):
NR* Aaa 1,250 5% due 12/15/2018 1,274
NR* Aaa 1,000 6% due 12/15/2019 1,110
NR* Aaa 1,580 6.25% due 12/15/2020 1,790
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) 3,126
---------------------------------------------------------------------------------------------------------------
Passaic County, New Jersey, GO, Refunding (c):
NR* Aaa 2,360 5.25% due 6/01/2015 2,514
NR* Aaa 2,350 5.25% due 6/01/2016 2,484
8 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey Paterson, New Jersey, Public School District, COP (d):
(concluded) NR* Aaa $ 1,980 6.125% due 11/01/2015 $ 2,254
NR* Aaa 2,000 6.25% due 11/01/2019 2,266
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Salem County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds (Public Service Electric &
Gas), Series C, 5.55% due 11/01/2033 (d) 2,049
---------------------------------------------------------------------------------------------------------------
South Jersey Port Corporation of New Jersey Revenue Refunding
Bonds:
A NR* 3,750 4.50% due 1/01/2015 3,649
A NR* 1,920 4.50% due 1/01/2016 1,847
A NR* 1,500 5% due 1/01/2026 1,432
A NR* 2,000 5.10% due 1/01/2033 1,918
---------------------------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corporation of New Jersey Revenue
Bonds:
A- Baa2 7,640 6.75% due 6/01/2039 6,759
A- Baa2 7,820 7% due 6/01/2041 7,105
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,325 Trenton, New Jersey, Parking Authority, Parking Revenue Bonds,
DRIVERS, Series 221, 10.76% due 4/01/2010 (b)(e)(f) 5,651
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,740 University of Medicine and Dentistry, New Jersey, Revenue Bonds,
Series A, 5.50% due 12/01/2027 (a) 4,969
---------------------------------------------------------------------------------------------------------------
West Deptford Township, New Jersey, GO (b):
NR* Aaa 4,170 5.625% due 9/01/2026 4,392
NR* Aaa 4,410 5.625% due 9/01/2027 4,642
NR* Aaa 3,615 5.625% due 9/01/2028 3,800
NR* Aaa 4,940 5.625% due 9/01/2029 5,191
---------------------------------------------------------------------------------------------------------------
West Orange, New Jersey, Board of Education, COP (d):
NR* Aaa 2,040 5.75% due 10/01/2014 2,258
NR* Aaa 3,615 6% due 10/01/2024 3,939
===================================================================================================================================
New York--8.7% 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) 4,862
---------------------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds, AMT (d):
AAA NR* 2,375 DRIVERS, Series 192, 10.39% due 12/01/2025 (f) 2,520
AAA Aaa 1,500 (JFK International Air Terminal), Series 6, 6.25%
due 12/01/2015 1,658
NR* Aaa 2,165 (JFK International Air Terminal LLC), RIB, Series 157, 10.34%
due 12/01/2022 (f) 2,329
AAA Aaa 13,500 (Special Project--JFK International Air Terminal), Series 6,
6.25% due 12/01/2011 15,020
===================================================================================================================================
Pennsylvania--1.5% A- A2 4,630 Delaware River Joint Toll Bridge Commission, Pennsylvania, Bridge
Revenue Refunding Bonds, 5% due 7/01/2028 4,442
===================================================================================================================================
Puerto Rico--7.9% Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA Aaa 10,000 Series HH, 5.25% due 7/01/2029 (c) 10,116
AAA Aaa 2,355 Series X, 5.50% due 7/01/2025 (d) 2,458
---------------------------------------------------------------------------------------------------------------
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) 1,900
AA Aa2 1,750 (Hospital de la Concepcion), 6.50% due 11/15/2020 1,921
---------------------------------------------------------------------------------------------------------------
AAA Aaa 7,120 Puerto Rico Public Financing Corporation Revenue Bonds
(Commonwealth Appropriation), Series A, 5.50% due 8/01/2019 (d) 7,639
---------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$482,772)--164.7% 500,861
===============================================================================================================
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) (in Thousands)
Shares
Held Short-Term Investments Value
===================================================================================================================================
1,009 CMA New Jersey Municipal Money Fund (h) $ 1,009
---------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost--$1,009)--0.3% 1,009
===================================================================================================================================
Total Investments (Cost--$483,781)--165.0% 501,870
Other Assets Less Liabilities--1.7% 5,263
Preferred Stock, at Redemption Value--(66.7%) (203,007)
--------
Net Assets Applicable to Common Stock--100.0% $304,126
========
(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 July 31, 2003.
(g) XL Capital Insured.
(h) 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 Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
CMA New Jersey
Municipal Money Fund 1,009 $12
--------------------------------------------------------------------------
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
+ Ratings of issues shown are unaudited.
See Notes to Financial Statements.
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of July 31, 2003 were as
follows:
--------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa .......................................................... 86.6%
AA/Aa ............................................................ 4.8
A/A .............................................................. 6.4
BBB/Baa .......................................................... 2.0
NR (Not Rated) ................................................... 0.2
--------------------------------------------------------------------------------
10 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Statement of Net Assets
As of July 31, 2003
========================================================================================================================
Assets
------------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost--$483,780,795) ............ $ 501,870,390
Cash ............................................................. 10,829
Receivables:
Interest ...................................................... $ 5,773,701
Dividends from affiliates ..................................... 8 5,773,709
-------------
Prepaid expenses ................................................. 9,459
-------------
Total assets ..................................................... 507,664,387
-------------
========================================================================================================================
Liabilities
------------------------------------------------------------------------------------------------------------------------
Payables:
Investment adviser ............................................ 232,769
Dividends to Common Stock shareholders ........................ 225,353
Other affiliates .............................................. 3,987 462,109
-------------
Accrued expenses ................................................. 68,809
-------------
Total liabilities ................................................ 530,918
-------------
========================================================================================================================
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) .................................................... 203,007,469
-------------
========================================================================================================================
Net Assets Applicable to Common Stock
------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ............................ $ 304,126,000
=============
========================================================================================================================
Analysis of Net Assets Applicable to Common Stock
------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share (21,038,614 shares issued
and outstanding) ................................................. $ 2,103,861
Paid-in capital in excess of par ................................. 316,254,529
Undistributed investment income--net ............................. $ 4,671,930
Accumulated realized capital losses on investments--net .......... (36,993,915)
Unrealized appreciation on investments--net ...................... 18,089,595
-------------
Total accumulated losses--net .................................... (14,232,390)
-------------
Total--Equivalent to $14.46 net asset value per share of Common
Stock (market price--$13.59) ..................................... $ 304,126,000
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 11
[LOGO] Merrill Lynch Investment Managers
Statement of Operations
For the Year Ended July 31, 2003
========================================================================================================================
Investment Income
------------------------------------------------------------------------------------------------------------------------
Interest ......................................................... $ 26,334,740
Dividends from affiliates ........................................ 12,090
-------------
Total income ..................................................... 26,346,830
-------------
========================================================================================================================
Expenses
------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ......................................... $ 2,882,461
Commission fees .................................................. 517,289
Accounting services .............................................. 171,765
Transfer agent fees .............................................. 88,058
Professional fees ................................................ 83,078
Directors' fees and expenses ..................................... 37,413
Printing and shareholder reports ................................. 35,626
Custodian fees ................................................... 29,554
Listing fees ..................................................... 28,965
Pricing fees ..................................................... 22,271
Other ............................................................ 49,438
-------------
Total expenses before waiver and reimbursement ................... 3,945,918
Waiver and reimbursement of expenses ............................. (242,251)
-------------
Total expenses after waiver and reimbursement .................... 3,703,667
-------------
Investment income--net ........................................... 22,643,163
-------------
========================================================================================================================
Realized & Unrealized Loss on Investments--Net
------------------------------------------------------------------------------------------------------------------------
Realized loss on investments--net ................................ (1,721,743)
Change in unrealized appreciation on investments--net ............ (9,536,846)
-------------
Total realized and unrealized loss on investments--net ........... (11,258,589)
-------------
========================================================================================================================
Dividends to Preferred Stock Shareholders
------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... (1,964,923)
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 9,419,651
=============
See Notes to Financial Statements.
12 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Statements of Changes in Net Assets
For the Year Ended
July 31,
-------------------------------
Increase (Decrease) in Net Assets: 2003 2002
========================================================================================================================
Operations
------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 22,643,163 $ 22,385,498
Realized gain (loss) on investments--net ......................... (1,721,743) 913,120
Change in unrealized appreciation on investments--net ............ (9,536,846) 5,534,667
Dividends to Preferred Stock shareholders ........................ (1,964,923) (3,057,485)
-------------------------------
Net increase in net assets resulting from operations ............. 9,419,651 25,775,800
-------------------------------
========================================================================================================================
Dividends to Common Stock Shareholders
------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... (18,808,521) (18,173,596)
-------------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders ............................................... (18,808,521) (18,173,596)
-------------------------------
========================================================================================================================
Net Assets Applicable to Common Stock
------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock (9,388,870) 7,602,204
Beginning of year ................................................ 313,514,870 305,912,666
-------------------------------
End of year* ..................................................... $ 304,126,000 $ 313,514,870
===============================
* Undistributed investment income--net ........................ $ 4,671,930 $ 2,804,638
===============================
See Notes to Financial Statements.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended July 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=============================================================================================================================
Per Share Operating Performance@@
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ................. $14.90 $14.54 $13.14 $ 14.47 $ 15.09
----------------------------------------------------
Investment income--net ............................. 1.08+ 1.06+ 1.08 1.07 1.13
Realized and unrealized gain (loss) on
investments--net ................................... (.54) .31 1.39 (1.27) (.58)
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net .......................... (.09) (.15) (.34) (.35) (.30)
Realized gain on investments--net ............... -- -- -- -- (.02)
Capital write-off resulting from issuance
of Preferred Stock .............................. -- -- --@ -- --
----------------------------------------------------
Total from investment operations ................... .45 1.22 2.13 (.55) .23
----------------------------------------------------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net .......................... (.89) (.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 ................................. (.89) (.86) (.73) (.78) (.85)
----------------------------------------------------
Capital write-off resulting from issuance of
Common Stock ....................................... -- -- --@ -- --
----------------------------------------------------
Net asset value, end of year ....................... $14.46 $14.90 $14.54 $ 13.14 $ 14.47
====================================================
Market price per share, end of year ................ $13.59 $14.24 $12.64 $11.6875 $13.4375
====================================================
=============================================================================================================================
Total Investment Return*
-----------------------------------------------------------------------------------------------------------------------------
Based on market price per share .................... 1.61% 20.01% 14.60% (7.13%) (7.44%)
====================================================
Based on net asset value per share ................. 3.32% 9.16% 17.26% (3.04%) 1.56%
====================================================
=============================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement
and excluding reorganization expenses** ......... 1.15% 1.19% 1.18% 1.27% 1.22%
====================================================
Total expenses, net of waiver and reimbursement** .. 1.15% 1.22% 1.18% 1.55% 1.22%
====================================================
Total expenses** ................................... 1.23% 1.29% 1.29% 1.67% 1.31%
====================================================
Total investment income--net** ..................... 7.05% 7.32% 7.72% 8.52% 7.32%
====================================================
Amount of dividends to Preferred Stock shareholders .61% 1.00% 2.43% 2.96% 1.93%
====================================================
Investment income--net, to Common Stock shareholders 6.44% 6.32% 5.29% 5.56% 5.39%
====================================================
=============================================================================================================================
Ratios Based on Average Net Assets of Common & Preferred Stock**
-----------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement
and excluding reorganization expenses ............ .71% .72% .69% .72% .75%
====================================================
Total expenses, net of waiver and reimbursement .... .71% .73% .69% .88% .75%
====================================================
Total expenses ..................................... .75% .78% .76% .94% .80%
====================================================
Total investment income--net ....................... 4.32% 4.40% 4.53% 4.81% 4.48%
====================================================
14 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Financial Highlights (concluded)
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended July 31,
--------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=======================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
----------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders .97% 1.51% 3.46% 3.84% 3.04%
========================================================
=======================================================================================================================
Supplemental Data
----------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock,
end of year (in thousands) .............. $304,126 $313,515 $305,913 $234,135 $101,300
========================================================
Preferred Stock outstanding, end of year
(in thousands) .......................... $203,000 $203,000 $203,000 $175,000 $ 68,000
========================================================
Portfolio turnover ...................... 28.89% 20.05% 55.60% 100.11% 64.93%
========================================================
=======================================================================================================================
Leverage
----------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............... $ 2,498 $ 2,544 $ 2,507 $ 2,338 $ 2,490
========================================================
=======================================================================================================================
Dividends Per Share on Preferred Stock Outstanding++
----------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ........ $ 233 $ 356 $ 830 $ 896 $ 763
========================================================
Series B--Investment income--net ........ $ 240 $ 381 $ 872 $ 898 $ 766
========================================================
Series C--Investment income--net ........ $ 247 $ 389 $ 871 $ 439 --
========================================================
Series D--Investment income--net ........ $ 240 $ 363 $ 901 $ 418 --
========================================================
Series E--Investment income--net ........ $ 247 $ 393 $ 310 -- --
========================================================
* 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).
@ Amount is less than $(.01) per share.
@@ Certain prior year amounts have been reclassified to conform to current
year presentation.
See Notes to Financial Statements.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 15
[LOGO] Merrill Lynch Investment Managers
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 amended, as a non-diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with accounting principles generally accepted in the United States of
America, which may require the use of management accruals and estimates. The
Fund determines and makes available for publication the net asset value of its
Common Stock on a weekly basis. The Fund's Common Stock is listed on the New
York Stock Exchange under the symbol 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). Forward interest rate swaps
are valued by quoted fair values received daily by the Fund from the
counterparty. 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 both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movement and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. 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 may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed, the Fund records a realized gain or
loss in an amount equal to the value of the agreement.
16 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Notes to Financial Statements (continued)
(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.
(f) Reclassification -- Accounting principles generally accepted in the United
States of America require that certain components of net assets be adjusted to
reflect permanent differences between financial and tax reporting. Accordingly,
the current year's permanent book/tax difference of $2,427 has been reclassified
between undistributed net investment income and paid-in capital in excess of
par. This reclassification has no effect on net assets or net asset value per
share.
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 year ended July 31, 2003,
FAM earned fees of $2,882,461, of which $232,420 was waived. For the year ended
July 31, 2003, FAM reimbursed the Fund in the amount of $9,831.
For the year ended July 31, 2003, the Fund reimbursed FAM $12,050 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
year ended July 31, 2003 were $148,736,412 and $148,714,628, respectively.
Net realized gains (losses) for the year ended July 31, 2003 and net unrealized
gains as of July 31, 2003 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
--------------------------------------------------------------------------------
Long-term investments ................... $ 4,232,553 $18,089,595
Financial futures contracts ............. (5,954,296) --
-------------------------------
Total ................................... $(1,721,743) $18,089,595
===============================
As of July 31, 2003, net unrealized appreciation for Federal income tax purposes
aggregated $18,116,874, of which $21,449,373 related to appreciated securities
and $3,332,499 related to depreciated securities. The aggregate cost of
investments at July 31, 2003 for Federal income tax purposes was $483,753,516.
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.
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 July 31, 2003 were as follows: Series
A, .70%; Series B, .65%; Series C, .80%; Series D, .65% and Series E, .60%.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the year ended July 31, 2003, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $256,317 as commissions.
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.076000 per share on August 28, 2003 to shareholders of record on
August 15, 2003.
The tax character of distributions paid during the fiscal years ended July 31,
2003 and July 31, 2002 was as follows:
--------------------------------------------------------------------------------
7/31/2003 7/31/2002
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................... $20,773,444 $21,231,081
-------------------------------
Total distributions .................... $20,773,444 $21,231,081
===============================
As of July 31, 2003, the components of accumulated losses on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt income--net .................... $ 4,644,652
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... 4,644,652
Capital loss carryforward ............................... (35,564,591)*
Unrealized gains--net ................................... 16,687,549**
------------
Total accumulated losses--net ........................... $(14,232,390)
============
* On July 31, 2003, the Fund had a net capital loss carryforward of
$35,564,591, of which $2,713,832 expires in 2006, $4,022,894 expires in
2007, $1,794,104 expires in 2008, $26,797,867 expires in 2009 and $235,894
expires in 2011. This amount will be available to offset like amounts of
any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on straddles, the
difference between book and tax amortization methods for premiums and
discounts on fixed income securities and the deferral of post-October
capital losses for tax purposes.
18 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Report of Independent Auditors
To the Shareholders and Board of Directors,
MuniHoldings New Jersey Insured Fund, Inc.
We have audited the accompanying statement of net assets of MuniHoldings New
Jersey Insured Fund, Inc., including the schedule of investments, as of July 31,
2003, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of July 31, 2003, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MuniHoldings New Jersey Insured Fund, Inc. at July 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the indicated periods in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
MetroPark, New Jersey
September 5, 2003
Important Tax Information (unaudited)
All of the net investment income distributions paid by MuniHoldings New Jersey
Insured Fund, Inc. during its taxable year ended July 31, 2003 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Please retain this information for your records.
Managed Dividend Policy (unaudited)
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.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 19
[LOGO] Merrill Lynch Investment Managers
Automatic Dividend Reinvestment Plan
The following description of the Fund's Automatic Dividend Reinvestment Plan
(the "Plan") is sent to you annually as required by Federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Stock otherwise elects,
all dividend and capital gains distributions will be automatically reinvested by
The Bank of New York (the "Plan Agent"), as agent for shareholders in
administering the Plan, in additional shares of Common Stock of the Fund.
Holders of Common Stock who elect not to participate in the Plan will receive
all distributions in cash paid by check mailed directly to the shareholder of
record (or, if the shares are held in street or other nominee name then to such
nominee) by The Bank of New York, as dividend paying agent. Such participants
may elect not to participate in the Plan and to receive all distributions of
dividends and capital gains in cash by sending written instructions to The Bank
of New York, as dividend paying agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date; otherwise such
termination will be effective with respect to any subsequently declared dividend
or distribution.
Whenever the Fund declares an income dividend or capital gains distribution
(collectively referred to as "dividends") payable either in shares or in cash,
non-participants in the Plan will receive cash and participants in the Plan will
receive the equivalent in shares of Common Stock. The shares will be acquired by
the Plan Agent for the participant's account, depending upon the circumstances
described below, either (i) through receipt of additional unissued but
authorized shares of Common Stock from the Fund ("newly issued shares") or (ii)
by purchase of outstanding shares of Common Stock on the open market
("open-market purchases") on the New York Stock Exchange or elsewhere. If on the
payment date for the dividend, the net asset value per share of the Common Stock
is equal to or less than the market price per share of the Common Stock plus
estimated brokerage commissions (such conditions being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares of
Common Stock to be credited to the participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance may not exceed 5%. If on
the dividend payment date the net asset value per share is greater than the
market value (such condition being referred to herein as "market discount"), the
Plan Agent will invest the dividend amount in shares acquired on behalf of the
participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. It is contemplated that the Fund
will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a share of Common Stock exceeds the
net asset value per share, the average per share purchase price paid by the Plan
Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisitions of fewer shares than if the dividend had been paid in newly issued
shares on the dividend payment date. Because of the foregoing difficulty with
respect to open-market purchases, the Plan provides that if the Plan Agent is
unable to invest the full dividend amount in open-market purchases during the
purchase period or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will cease making open-market purchases and will
invest the uninvested portion of the dividend amount in newly issued shares at
the close of business on the last purchase date determined by dividing the
uninvested portion of the dividend by the net asset value per share.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan. The Plan Agent will forward all
proxy solicitation materials to participants and vote proxies for shares held
pursuant to the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold shares
of others who are the beneficial owners, the Plan Agent will administer the Plan
on the basis
20 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
of the number of shares certified from time to time by the record shareholders
as representing the total amount registered in the record shareholder's name and
held for the account of beneficial owners who are to participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gains distributions payable either in
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus commissions
of the Fund's shares is above the net asset value, participants in the Plan will
receive shares of the Fund at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem
shares, the price on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be excluded
from gross income to the extent that the cash amount reinvested would be
excluded from gross income. If, when the Fund's shares are trading at a premium
over net asset value, the Fund issues shares pursuant to the Plan that have a
greater fair market value than the amount of cash reinvested, it is possible
that all or a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable distribution. If
the discount is viewed as a taxable distribution, it is also possible that the
taxable character of this discount would be allocable to all the shareholders,
including shareholders who do not participate in the Plan. Thus, shareholders
who do not participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable share of the
discount.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at
The Bank of New York, Church Street Station, P.O. Box 11258, New York, NY
10286-1258, Telephone: 800-432-8224.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 21
[LOGO] Merrill Lynch Investment Managers
Officers and Directors (unaudited)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held of Time Overseen by Held by
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
------------------------------------------------------------------------------------------------------------------------------------
Terry K. Glenn* P.O. Box 9011 President 1999 to President and Chairman of Merrill Lynch Investment 118 Funds None
Princeton, NJ and present Managers, L.P. ("MLIM")/Fund Asset Management, L.P. 163 Portfolios
08543-9011 Director and ("FAM")--Advised Funds since 1999; Chairman
Age: 62 1998 to (Americas Region) of MLIM from 2000 to 2002;
present Executive Vice President of FAM and MLIM (which
terms as used herein include their corporate
predecessors) from 1983 to 2002; President of FAM
Distributors, Inc. ("FAMD") from 1986 to 2002 and
Director thereof from 1991 to 2002; Executive Vice
President and Director of Princeton Services, Inc.
("Princeton Services") from 1993 to 2002; President
of Princeton Administrators, L.P. from 1989 to
2002; Director of Financial Data Services, Inc.
from 1985 to 2002.
---------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which
FAM or MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment
Company Act, of the Fund based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton
Administrators, L.P. The Director's term is unlimited. Directors serve until their resignation, removal, or death,
or until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the
Board of Directors.
====================================================================================================================================
Independent Directors*
------------------------------------------------------------------------------------------------------------------------------------
Ronald W. P.O. Box 9095 Director 1998 to Professor Emeritus of Finance, School of Business, 44 Funds None
Forbes Princeton, NJ present State University of New York at Albany since 2000 49 Portfolios
08543-9095 and Professor thereof from 1989 to 2000;
Age: 62 International Consultant at the Urban Institute
from 1995 to 1999.
------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Director 1998 to Professor, Harvard Business School since 1989; 44 Funds Unum
Montgomery Princeton, NJ present Director, Unum Provident Corporation since 1990; 49 Portfolios Provident
08543-9095 Director, Newell Rubbermaid, Inc. since 1995. Corporation;
Age: 51 Newell Rub-
bermaid Inc.
------------------------------------------------------------------------------------------------------------------------------------
Charles C. P.O. Box 9095 Director 1998 to Self-employed financial consultant since 1990; 44 Funds None
Reilly Princeton, NJ present Partner of Small Cities Cable Television from 1986 49 Portfolios
08543-9095 to 1997.
Age: 72
------------------------------------------------------------------------------------------------------------------------------------
Kevin A. Ryan P.O. Box 9095 Director 1998 to Founder and Director Emeritus of The Boston 44 Funds None
Princeton, NJ present University Center for the Advancement of 49 Portfolios
08543-9095 Ethics and Character; Professor of Education at
Age: 70 Boston University from 1982 to 1999; Professor
Emeritus thereof since 1999.
------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Director 2000 to President, Middle East Institute from 1995 to 2001; 44 Funds None
Suddarth Princeton, NJ present Foreign Service Officer, United States Foreign 49 Portfolios
08543-9095 Service, from 1961 to 1995; Career Minister from
Age: 67 1989 to 1995; Deputy Inspector General, U.S.
Department of State from 1991 to 1994; U.S.
Ambassador to the Hashemite Kingdom of Jordan from
1987 to 1990.
------------------------------------------------------------------------------------------------------------------------------------
Richard R. West P.O. Box 9095 Director 1998 to Dean Emeritus of New York University, Leonard N. 44 Funds Bowne &
Princeton, NJ present Stern School of Business Administration since 1994. 49 Portfolios Co., Inc.;
08543-9095 Vornado
Age: 65 Realty Trust;
Vernado
Operating
Company;
Alexander's,
Inc.
------------------------------------------------------------------------------------------------------------------------------------
22 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003
Officers and Directors (unaudited) (concluded)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held of Time Overseen by Held by
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors* (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Edward D. P.O. Box 9095 Director 2000 to Self-employed financial consultant since 1994. 44 Funds None
Zinbarg Princeton, NJ present 49 Portfolios
08543-9095
Age: 68
-------------------------------------------------------------------------------------------------------------------
* The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December
31 of the year in which they turn 72.
------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length
Held of Time
Name Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers
------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke P.O. Box 9011 Vice 1998 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof since
Princeton, NJ President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999;
08543-9011 and and Vice President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 43 Treasurer 1999 to
present
------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9011 Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Jacob Princeton, NJ Vice present Management) of MLIM from 1997 to 2000.
08543-9011 President
Age: 52
------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Loffredo Princeton, NJ Vice present Management) of MLIM from 1998 to 2000.
08543-9011 President
Age: 39
------------------------------------------------------------------------------------------------------------------------------------
Theodore R. P.O. Box 9011 Vice 1998 to Director (Municipal Tax-Exempt Fund Management) of MLIM since 2000;
Jaeckel Jr. Princeton, NJ President present Vice President of MLIM from 1994 to 2000.
08543-9011
Age: 43
------------------------------------------------------------------------------------------------------------------------------------
Brian D. P.O. Box 9011 Secretary 2002 to Vice President of MLIM since 2002; Attorney with Reed Smith from 2001 to 2002;
Stewart Princeton, NJ present Attorney with Saul Ewing from 1999 to 2001.
08543-9011
Age: 34
-------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
------------------------------------------------------------------------------------------------------------------------------------
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
Electronic Delivery
The Fund is now offering electronic delivery of communications to its
shareholders. In order to receive this service, you must register your account
and provide us with e-mail information. To sign up for this service, simply
access this website http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2003 23
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
MuniHoldings New Jersey Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#HOLDNJ2 -- 7/03
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--
The registrant has adopted 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 and principal
accounting officer, or persons performing similar functions. A copy of
the code of ethics is available without charge upon request by calling
toll-free 1-800-MER-FUND (1-800-637-3863).
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. -
The registrant's board of directors has determined that (i) the
registrant has the following audit committee financial experts serving
on its audit committee and (ii) each audit committee financial expert
is independent: (1) Ronald W. Forbes, (2) Richard R. West, and (3)
Edward D. Zinbarg.
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.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 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.
Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill Lynch
Investment Managers, L.P. and/or Fund Asset Management, L.P. (the
"Investment Adviser") authority to vote all proxies relating to the
Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to the
voting of proxies related to the portfolio securities held in the
account of one or more of its clients, including a Fund. Pursuant to
these Proxy Voting Procedures, the Investment Adviser's primary
objective when voting proxies is to make proxy voting decisions solely
in the best interests of each Fund and its shareholders, and to act in
a manner that the Investment Adviser believes is most likely to enhance
the economic value of the securities held by the Fund. The Proxy Voting
Procedures are designed to ensure that that the Investment Adviser
considers the interests of its clients, including the Funds, and not
the interests of the Investment Adviser, when voting proxies and that
real (or perceived) material conflicts that may arise between the
Investment Adviser's interest and those of the Investment Adviser's
clients are properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment professionals
appointed by the CIO, portfolio managers and investment analysts
appointed by the CIO and any other personnel the CIO deems appropriate.
The Committee will also include two non-voting representatives from the
Investment Adviser's Legal department appointed by the Investment
Adviser's General Counsel. The Committee's membership shall be limited
to full-time employees of the Investment Adviser. No person with any
investment banking, trading, retail brokerage or research
responsibilities for the Investment Adviser's affiliates may serve as a
member of the Committee or participate in its decision making (except
to the extent such person is asked by the Committee to present
information to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser might
be asked to do so). The Committee determines how to vote the proxies of
all clients, including a Fund, that have delegated proxy voting
authority to the Investment Adviser and seeks to ensure that all votes
are consistent with the best interests of those clients and are free
from unwarranted and inappropriate influences. The Committee
establishes general proxy voting policies for the Investment Adviser
and is responsible for determining how those policies are applied to
specific proxy votes, in light of each issuer's unique structure,
management, strategic options and, in certain circumstances, probable
economic and other anticipated consequences of alternate actions. In so
doing, the Committee may determine to vote a particular proxy in a
manner contrary to its generally stated policies. In addition, the
Committee will be responsible for ensuring that all reporting and
recordkeeping requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not
to adopt a specific voting policy applicable to that issue. The
Investment Adviser believes that certain proxy voting issues require
investment analysis - such as approval of mergers and other significant
corporate transactions - akin to investment decisions, and are,
therefore, not suitable for general guidelines. The Committee may elect
to adopt a common position for the Investment Adviser on certain proxy
votes that are akin to investment decisions, or determine to permit the
portfolio manager to make individual decisions on how best to maximize
economic value for a Fund (similar to normal buy/sell investment
decisions made by such portfolio managers). While it is expected that
the Investment Adviser will generally seek to vote proxies over which
the Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in conjunction
with a Fund's portfolio manager, may determine that the Fund's specific
circumstances require that its proxies be voted differently.
To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For
instance, under the Proxy Voting Procedures, the Investment Adviser
generally will not seek to vote proxies related to portfolio securities
that are on loan, although it may do so under certain circumstances. In
addition, the Investment Adviser will vote proxies related to
securities of foreign issuers only on a best efforts basis and may
elect not to vote at all in certain countries where the Committee
determines that the costs associated with voting generally outweigh the
benefits. The Committee may at any time override these general policies
if it determines that such action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote proxies in
respect of an issuer where an affiliate of the Investment Adviser (each, an
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates and
Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or if
the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary to
advise the Committee on how to vote or to cast votes on behalf of the Investment
Adviser's clients.
In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent
fiduciary, the powers of the Committee shall pass to a subcommittee,
appointed by the CIO (with advice from the Secretary of the Committee),
consisting solely of Committee members selected by the CIO. The CIO
shall appoint to the subcommittee, where appropriate, only persons
whose job responsibilities do not include contact with the Client and
whose job evaluations would not be affected by the Investment Adviser's
relationship with the Client (or failure to retain such relationship).
The subcommittee shall determine whether and how to vote all proxies on
behalf of the Investment Adviser's clients or, if the proxy matter is,
in their judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee
determines to alter the Investment Adviser's normal voting guidelines
or, on matters where the Investment Adviser's policy is case-by-case,
does not follow the voting recommendation of any proxy voting service
or other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies relating
to the Client may be voted unless the Secretary, or in the Secretary's
absence, the Assistant Secretary of the Committee concurs that the
subcommittee's determination is consistent with the Investment
Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain recurring
proxy issues that are not expected to involve unusual circumstances.
These policies are guidelines only, and the Investment Adviser may
elect to vote differently from the recommendation set forth in a voting
guideline if the Committee determines that it is in a Fund's best
interest to do so. In addition, the guidelines may be reviewed at any
time upon the request of a Committee member and may be amended or
deleted upon the vote of a majority of Committee members present at a
Committee meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
o Proposals related to the composition of the Board of Directors of issuers
other than investment companies. As a general matter, the Committee
believes that a company's Board of Directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a
company's business and prospects, and is therefore best-positioned to set
corporate policy and oversee management. The Committee, therefore,
believes that the foundation of good corporate governance is the election
of qualified, independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over
time. In individual cases, the Committee may look at a nominee's history
of representing shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
o Proposals related to the selection of an issuer's independent auditors. As
a general matter, the Committee believes that corporate auditors have a
responsibility to represent the interests of shareholders and provide an
independent view on the propriety of financial reporting decisions of
corporate management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the Committee may
look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
o Proposals related to management compensation and employee benefits. As a
general matter, the Committee favors disclosure of an issuer's
compensation and benefit policies and opposes excessive compensation, but
believes that compensation matters are normally best determined by an
issuer's board of directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set arbitrary
restrictions on compensation or benefits will, therefore, generally not be
supported.
o Proposals related to requests, principally from management, for approval
of amendments that would alter an issuer's capital structure. As a general
matter, the Committee will support requests that enhance the rights of
common shareholders and oppose requests that appear to be unreasonably
dilutive.
o Proposals related to requests for approval of amendments to an issuer's
charter or by-laws. As a general matter, the Committee opposes poison pill
provisions.
o Routine proposals related to requests regarding the formalities of
corporate meetings.
o Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the Committee
believes that a fund's Board of Directors (rather than its shareholders)
is best-positioned to set fund policy and oversee management. However, the
Committee opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective, that the
Investment Company Act envisions will be approved directly by
shareholders.
o Proposals related to limiting corporate conduct in some manner that
relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are
inappropriate forums for discussion of larger social issues, and opposes
shareholder resolutions "micromanaging" corporate conduct or requesting
release of information that would not help a shareholder evaluate an
investment in the corporation as an economic matter. While the Committee
is generally supportive of proposals to require corporate disclosure of
matters that seem relevant and material to the economic interests of
shareholders, the Committee is generally not supportive of proposals to
require disclosure of corporate matters for other purposes.
Item 8 -- Reserved
Item 9(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
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 pursuant to Section 302 of the Sarbanes-Oxley Act.
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: September 23, 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: September 23, 2003
By: /s/ Donald C. Burke
------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings New Jersey Insured Fund, Inc.
Date: September 23, 2003
Attached hereto as a furnished exhibit are the certifications
pursuant to Section 906 of the Sarbanes-Oxley Act.