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: 07/31/04
Date of reporting period: 08/01/03 - 07/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniHoldings New Jersey
Insured Fund, Inc.
Annual Report
July 31, 2004
[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, net of dividends to Preferred Stock, 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, 2004, the percentage of the Fund's
total net assets invested in inverse floaters was 3.86%, before the deduction of
Preferred Stock.
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 or reduce exposure to a bond or market without owning or
taking physical custody of securities. Swap agreements involve the risk that the
party with whom the Fund has entered into the swap will default on its
obligation to pay the Fund and the risk that the Fund will not be able to meet
its obligations to pay the other party to the agreement.
2 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
A Letter From the President
Dear Shareholder
In recent months, the Federal Reserve Board (the Fed) has taken center stage as
it shifts away from its long-accommodative monetary stance. In a
much-anticipated move, the Fed raised the Federal Funds rate 25 basis points
(.25%) on June 30, representing the first interest rate increase in four years.
Shortly after period-end, the Fed announced an additional 25 basis point rate
hike, bringing the target short-term interest rate to 1.50% -- still low by
historical standards. The Fed has been very deliberate in telegraphing its
intention to take a "measured" approach to the interest rate increases so as to
avoid upsetting the economy or the financial markets. Still, the Fed has stated
that it may move more aggressively if inflation and economic growth accelerate
more than anticipated. In addition to the Fed policy change, the financial
markets recently have had to grapple with a tense geopolitical environment,
higher oil prices and the worry and anticipation that accompanies a presidential
election.
While inflation has moved up on a cyclical basis, this is an indication that the
Fed has been successful in avoiding deflation -- just as it set out to do a year
ago. The challenge now is to normalize interest rates in order to keep inflation
within acceptable limits. The futures curve currently projects further increases
in short-term interest rates before year-end.
The transition to higher rates can cause concern among equity and fixed income
investors alike. For bond investors, rising rates means the value of older
issues declines because they bear the former lower rates. In addition,
increasing inflation erodes the purchasing power of fixed income securities. But
because municipal bonds offer the advantage of tax-exempt income, they continue
to be an attractive alternative for many fixed income investors. For the
six-month and 12-month periods ended July 31, 2004, municipal bonds posted
returns of +.06% and +5.79%, respectively, as measured by the Lehman Brothers
Municipal Bond Index.
As always, our investment professionals are closely monitoring the markets, the
economy and the overall environment in an effort to make well-informed decisions
for the portfolios they manage. Our goal is to provide shareholders with
competitive returns, while always keeping one eye on managing the unavoidable
risk inherent in investing.
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, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund provided an attractive total return and competitive yields for
the year, outperforming its peer group as well as the broader municipal bond
market.
Discuss the recent market environment relative to municipal bonds.
Over the past 12 months, long-term U.S. Treasury bond yields were little
changed, despite considerable month-to-month volatility. For example, long-term
U.S. Treasury bond yields fell to 4.65% by mid-March 2004 before rising to over
5.50% by early June. Much of the volatility was prompted by investor
anticipation of Federal Reserve Board (the Fed) action. The Fed seemed poised to
maintain rates at their historic lows early in the period so as to avoid
derailing the economic recovery, but later appeared more apt to increase
interest rates as job growth finally picked up.
On June 30, the Fed raised its short-term interest rate target for the first
time in four years -- from 1% to 1.25%. In doing so, the Fed indicated a
tendency toward a measured, moderate monetary tightening cycle, which helped
support higher bond prices (and lower yields). By the end of July 2004,
long-term U.S. Treasury bond yields stood at 5.20%, a decline of 10 basis points
(.10%) over the past year. The 10-year U.S. Treasury note yield ended the period
at 4.48%, an increase of less than 10 basis points during the past 12 months.
Tax-exempt issues experienced less volatility than their taxable counterparts.
Long-term revenue bond yields, as measured by the Bond Buyer Revenue Bond Index,
fell approximately 10 basis points over the last year to 5.31%. According to
Municipal Market Data, yields on AAA-rated issues maturing in 30 years declined
more than 15 basis points to 4.90% at July 31, while yields on 10-year AAA-rated
issues fell more than 25 basis points to 3.79%.
Declining supply trends allowed tax-exempt bond prices to register modest gains.
During the past 12 months, more than $360 billion in new long-term tax-exempt
bonds was underwritten, a decline of approximately 8% versus last year.
Approximately $100 billion in long-term tax-exempt bonds was issued in the last
three months of the period, a decline of more than 15% compared to the same
period a year ago.
Describe conditions in the State of New Jersey.
New Jersey's economy continues to improve, mirroring the broad-based recovery
evident throughout much of the country. Labor market trends indicate rising job
creation across various industries as the jobless rate remains near a three-year
low.
While tax revenues have exceeded initial projections, the fiscal year 2005
budget remains structurally out of balance, reflecting an increased reliance on
one-time revenue enhancements. In an effort to plug the gap in the $28 billion
budget, the state government proposed the issuance late this summer of up to
$2.7 billion in state contract bonds secured by increased cigarette taxes and
motor vehicle surcharges. Despite a Republican-led challenge to the proposal's
constitutionality on the grounds that it violates the state's debt limitation
clause and its balanced budget act, the New Jersey Supreme Court upheld the
plan, allowing the stopgap financing to proceed. In response, all three
credit-ratings agencies downgraded their view on the state's general obligation
debt. Currently, New Jersey is assigned credit ratings of AA- by Fitch Ratings
Service and Standard & Poor's and Aa3 by Moody's Investor Service.
Long-term municipal issuance in New Jersey over the past year totaled
approximately $10.03 billion, representing a 46% decline from the prior year's
volume and a sharp contrast to the 8% drop for the nation. The decline is
primarily attributed to the absence of tobacco settlement bonds, as issuance of
these bonds in prior years served to inflate volume totals. Finally, shortly
after the close of the period, the state's top government post was in question
following a stunning resignation announcement by Governor James McGreevey. The
governor's resignation becomes effective November 15, 2004.
How did the Fund perform during the fiscal year?
For the 12-month period ended July 31, 2004, the Common Stock of MuniHoldings
New Jersey Insured Fund, Inc. had net annualized yields of 6.21% and 6.58%,
based on a year-end per share net asset value of $15.03 and a per share market
price of $14.17, respectively, and $.933 per share income dividends. Over the
same period, the total investment return on the Fund's Common Stock was +10.90%,
based on a change in per share net asset value from $14.46 to $15.03, and
assuming reinvestment of $.930 per share ordinary income dividends.
The Fund's total return, based on net asset value, exceeded the +9.73% average
return of the Lipper New Jersey Municipal Debt Funds category for the same
12-month period. (Funds in this Lipper category limit their investment to those
securities exempt from taxation in the state of New Jersey.)
4 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
The Fund achieved favorable results despite maintaining a slightly defensive
market posture for much of the year. There are two explanations for this. First,
part of the defensive strategy entailed an above-benchmark weighting in
intermediate-maturity bonds, reflecting our efforts to shorten the portfolio's
duration. The intermediate maturity range performed quite well for the first
eight months of the fiscal year in comparison to longer-dated bonds, thereby
providing an important boost to Fund performance. Second, we maintained the
portfolio's hedge positions throughout the year. Although the hedges hindered
performance early in the year as interest rates unexpectedly declined, our
adherence to the strategy paid off this spring as interest rates rose, allowing
the Fund to recapture the bulk of the hedge-related losses and post more
favorable performance results.
For the six-month period ended July 31, 2004, the total investment return on the
Fund's Common Stock was -.22%, based on a change in per share net asset value
from $15.57 to $15.03, and assuming reinvestment of $.474 per share income
dividends.
For the six-month period ended July 31, 2004, the Fund's Auction Market
Preferred Stock (AMPS) had average yields as follows: Series A, .80%; Series B,
..81%; Series C, .95%; Series D, .81%; and Series E, .77%.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (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 of
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 market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the year?
Given the rise in market rates this past spring, we removed the majority of our
hedge positions and modestly restructured the portfolio. At the time, market
rates appeared to be discounting stronger economic growth and a more aggressive
Fed policy than seemed likely given the economic and geopolitical backdrop. We
viewed this as an opportunity to abandon the Fund's defensive posture in
anticipation of lower long-term interest rates.
In addition, the outperformance of the Fund's intermediate-maturity bonds
prompted us to reallocate some of those assets into longer-dated bonds. As the
municipal yield curve grew steeper, the longer-dated bonds began to represent
better value, in our view, while also providing a higher income stream. These
changes have given the Fund a higher degree of interest rate sensitivity,
reflecting our more constructive investment outlook.
We essentially remained fully invested throughout the period, and sector
concentrations continued to reflect an above-average exposure to general
obligation bonds and other tax-backed issues.
The Fund's borrowing costs remained around 1% throughout most of the period.
These attractive funding levels, in combination with a steep yield curve,
continued to generate a generous income benefit to the Fund's Common Stock
shareholders. At this time, the Fed has articulated its intention to bring
short-term interest rates to a neutral level, starting with modest interest rate
hikes at its June and August meetings. Nevertheless, future interest rate
increases are expected to be gradual and should not have a material impact on
the positive advantage leverage has upon the Fund's Common Stock yield. Of
course, should the spread between short-term and long-term interest rates
narrow, the benefits of leveraging will decline and, as a result, reduce the
yield on the Fund's Common Stock. At the end of the period, the Fund's leverage
amount, due to AMPS, was 39.10% of total net assets. (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?
We continue to emphasize greater diversification in the portfolio and a market
posture somewhat more aggressive than that of the Fund's Lipper peers. This
reflects a more constructive outlook for the municipal market in the near run,
although we remain cautious about the market's longer-term prospects and
anticipate the resumption of a more defensive strategy.
Despite the Fed's recent increase in the target short-term interest rate and the
associated increase (albeit modest) in borrowing costs, the Fund continues to
earn more income than is distributed through its monthly dividend. By
continually adding to this balance of undistributed net investment income, the
Fund is better positioned to maintain a stable dividend should its borrowing
costs continue to rise in conjunction with a monetary tightening policy.
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
August 12, 2004
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey--158.3%
-----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,875 Atlantic Highlands, New Jersey, Highland Regional
Sewer Authority, Sewer Revenue Refunding Bonds,
5.50% due 1/01/2020 (b) $ 2,029
-----------------------------------------------------------------------------------------------------
Camden County, New Jersey, Improvement Authority,
Lease Revenue Bonds (c):
AAA Aaa 1,540 5.50% due 9/01/2010 (e) 1,730
AAA Aaa 2,635 5.375% due 9/01/2019 2,846
-----------------------------------------------------------------------------------------------------
NR* Aaa 430 Carteret, New Jersey, Board of Education, COP, 6%
due 1/15/2024 (d)(i) 484
-----------------------------------------------------------------------------------------------------
AAA Aaa 6,210 Casino Reinvestment Development Authority, New
Jersey, Parking Fee Revenue Bonds, Series A, 5.25%
due 10/01/2017 (c) 6,622
-----------------------------------------------------------------------------------------------------
Delaware River and Bay Authority Revenue Bonds:
AAA Aaa 2,500 5% due 1/01/2033 (d) 2,515
AAA Aaa 2,005 Series A, 5.625% due 1/01/2018 (a) 2,213
-----------------------------------------------------------------------------------------------------
A- A2 4,630 Delaware River Joint Toll Bridge Commission, New
Jersey, Bridge Revenue Refunding Bonds, 5%
due 7/01/2028 4,606
-----------------------------------------------------------------------------------------------------
Delaware River Port Authority of Pennsylvania and New
Jersey Revenue Bonds (c):
AAA Aaa 5,000 5.50% due 1/01/2012 5,508
AAA Aaa 6,000 5.625% due 1/01/2013 6,646
AAA Aaa 500 5.75% due 1/01/2015 553
AAA Aaa 4,865 6% due 1/01/2018 5,445
AAA Aaa 5,525 6% due 1/01/2019 6,184
AAA Aaa 2,425 (Port District Project), Series B, 5.625%
due 1/01/2026 2,555
-----------------------------------------------------------------------------------------------------
AAA Aaa 7,895 East Orange, New Jersey, Board of Education, COP,
5.50% due 8/01/2012 (c) 8,896
-----------------------------------------------------------------------------------------------------
NR* Aaa 1,000 East Orange, New Jersey, Water Utility, GO,
Refunding, 5.70% due 6/15/2022 (a) 1,091
-----------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Essex County, New Jersey, Improvement Authority,
Lease Revenue Bonds (Correctional Facility Project),
6% due 10/01/2025 (b) 4,457
-----------------------------------------------------------------------------------------------------
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) 3,451
-----------------------------------------------------------------------------------------------------
NR* Aaa 4,400 Essex County, New Jersey, Improvement Authority
Revenue Bonds, Series A, 5% due 10/01/2028 (b) 4,423
-----------------------------------------------------------------------------------------------------
AAA Aaa 2,705 Essex County, New Jersey, Improvement Authority,
Utility System Revenue Bonds (East Orange Franchise),
6% due 7/01/2018 (d) 3,006
-----------------------------------------------------------------------------------------------------
Garden State Preservation Trust, New Jersey, Capital
Appreciation Revenue Bonds (c):
AAA Aaa 9,000 Series B, 5.12%** due 11/01/2023 3,432
AAA Aaa 10,000 Series B, 5.20%** due 11/01/2025 3,338
-----------------------------------------------------------------------------------------------------
Garden State Preservation Trust, New Jersey, Open
Space and Farmland Preservation Revenue Bonds,
Series A (c):
AAA Aa3 1,960 5.80% due 11/01/2021 2,095
AAA Aa3 2,730 5.80% due 11/01/2023 2,892
AAA Aa3 9,160 5.75% due 11/01/2028 9,967
-----------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Hoboken, New Jersey, Parking Authority, Parking
Revenue Bonds, Series A, 5.30% due 5/01/2011 (a)(e) 1,690
-----------------------------------------------------------------------------------------------------
AAA Aaa 765 Jersey City, New Jersey, GO, Refunding, Quality
School, Series A, 5.375% due 9/01/2017 (c) 834
-----------------------------------------------------------------------------------------------------
AAA Aaa 2,230 Jersey City, New Jersey, GO, Series B, 5.25%
due 9/01/2023 (c) 2,345
-----------------------------------------------------------------------------------------------------
NR* Aaa 5,250 Lafayette Yard, New Jersey, Community Development
Revenue Bonds (Hotel/Conference Center
Project--Trenton), 6% due 4/01/2010 (d)(e) 6,050
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, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey (continued)
-----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,000 Marlboro Township, New Jersey, Board of Education,
GO, 5.25% due 7/15/2017 (c) $ 1,075
-----------------------------------------------------------------------------------------------------
AAA Aaa 1,550 Middlesex County, New Jersey, COP, 5.25%
due 6/15/2023 (d) 1,616
-----------------------------------------------------------------------------------------------------
AAA Aaa 1,375 Middlesex County, New Jersey, COP, Refunding, 5.50%
due 8/01/2016 (d) 1,505
-----------------------------------------------------------------------------------------------------
Middlesex County, New Jersey, Improvement Authority,
Lease Revenue Bonds (Educational Services Commission
Projects):
AAA Aa1 3,970 5.70% due 7/15/2020 4,397
AAA Aa1 5,270 6% due 7/15/2025 5,869
-----------------------------------------------------------------------------------------------------
AAA Aaa 500 Middlesex County, New Jersey, Improvement Authority
Revenue Bonds (Senior Citizens Housing Project), AMT,
5.50% due 9/01/2030 (a) 517
-----------------------------------------------------------------------------------------------------
Monmouth County, New Jersey, Improvement Authority,
Revenue Refunding Bonds (a):
AAA Aaa 1,540 5.35% due 12/01/2017 1,678
AAA Aaa 1,470 5.375% due 12/01/2018 1,600
-----------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Monroe Township, New Jersey, Municipal Utilities
Authority, Middlesex County Revenue Refunding Bonds,
5.25% due 2/01/2016 (b) 1,076
-----------------------------------------------------------------------------------------------------
AAA Aaa 2,304 Mount Laurel Township, New Jersey, Board of
Education, GO, 5.60% due 8/01/2006 (b)(e) 2,513
-----------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Newark, New Jersey, Housing Authority, Port
Authority--Port Newark Marine Terminal Additional
Rent-Backed Revenue Bonds (City of Newark
Redevelopment Projects), 5% due 1/01/2037 (d) 1,989
-----------------------------------------------------------------------------------------------------
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) 5,514
-----------------------------------------------------------------------------------------------------
New Jersey EDA, Natural Gas Facilities Revenue
Refunding Bonds, AMT (d):
AAA Aaa 18,920 (NUI Corporation Projects), AMT, Series A,
5.70% due 6/01/2032 19,673
NR* Aaa 3,155 RIB, AMT, Series 161, 10.01% due 6/01/2032 (f) 3,406
-----------------------------------------------------------------------------------------------------
New Jersey EDA, Parking Facility Revenue Bonds
(Elizabeth Development Company Project) (b):
AAA Aaa 1,430 5.60% due 10/15/2019 1,572
AAA Aaa 1,000 5.60% due 10/15/2026 1,064
-----------------------------------------------------------------------------------------------------
AAA NR* 4,580 New Jersey EDA Revenue Bonds, DRIVERS, Series 219,
10.651% due 5/01/2016 (c)(f) 5,803
-----------------------------------------------------------------------------------------------------
New Jersey EDA, School Facilities Construction
Revenue Bonds, Series A (a):
AAA Aaa 7,000 5.25% due 6/15/2017 7,530
AAA Aaa 7,200 5.25% due 6/15/2018 7,714
-----------------------------------------------------------------------------------------------------
BBB NR 2,500 New Jersey EDA, Solid Waste Disposal Facilities
Revenue Bonds (Waste Management Inc.), AMT, Series A,
5.30% due 6/01/2015 2,548
-----------------------------------------------------------------------------------------------------
New Jersey EDA, State Lease Revenue Bonds (State
Office Buildings Projects) (a):
AAA Aaa 3,000 6% due 6/15/2015 3,385
AAA Aaa 4,620 6.25% due 6/15/2020 5,247
-----------------------------------------------------------------------------------------------------
AAA Aaa 8,135 New Jersey EDA, Water Facilities Revenue Refunding
Bonds (American Water), AMT, Series B, 5.125%
due 4/01/2022 (a) 8,335
-----------------------------------------------------------------------------------------------------
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) 2,926
NR* Baa2 3,135 (Somerset Medical Center), 5.50% due 7/01/2033 2,987
-----------------------------------------------------------------------------------------------------
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) 4,608
A A2 1,455 (Atlantic City Medical Center), 6.25%
due 7/01/2017 1,615
A A2 3,500 (Atlantic City Medical Center), 5.75%
due 7/01/2025 3,651
BBB+ NR* 1,775 (Holy Name Hospital), 6% due 7/01/2025 1,802
AAA Aaa 1,000 (Meridian Health System Obligation Group),
5.375% due 7/01/2024 (c) 1,035
NR* Baa1 5,440 (South Jersey Hospital), 6% due 7/01/2026 5,616
-----------------------------------------------------------------------------------------------------
New Jersey Sports and Exposition Authority, Luxury
Tax Revenue Refunding Bonds (Convention Center) (d):
AAA Aaa 2,000 5.50% due 3/01/2021 2,239
AAA Aaa 1,000 5.50% due 3/01/2022 1,115
-----------------------------------------------------------------------------------------------------
AAA Aaa 2,400 New Jersey Sports and Exposition Authority, State
Contract Revenue Bonds, Series A, 6% due 3/01/2013 (d) 2,711
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey (continued)
-----------------------------------------------------------------------------------------------------------------------------------
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) $ 7,799
-----------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority
Revenue Bonds:
AAA Aaa 8,905 (Capital Improvement Fund), Series A, 5.75%
due 9/01/2017 (c) 9,938
AAA Aaa 9,420 (Capital Improvement Fund), Series A, 5.75%
due 9/01/2018 (c) 10,512
AAA Aaa 3,615 (Rowan University), Series C, 5.125%
due 7/01/2028 (d) 3,688
AAA Aaa 3,260 (Rowan University), Series C, 5%
due 7/01/2034 (d) 3,275
-----------------------------------------------------------------------------------------------------
New Jersey State Educational Facilities Authority,
Revenue Refunding Bonds:
AAA Aaa 7,000 (Montclair State University), Series L, 5%
due 7/01/2034 (d) 7,031
AAA Aaa 2,375 (Rowan University), Series C, 5.25%
due 7/01/2017 (b) 2,551
AAA Aaa 2,820 (Rowan University), Series C, 5.25%
due 7/01/2018 (b) 3,019
AAA Aaa 2,635 (Rowan University), Series C, 5.25%
due 7/01/2019 (b) 2,811
AAA Aaa 4,000 (University of Medicine and Dentistry), Series
B, 5.25% due 12/01/2017 (a) 4,181
-----------------------------------------------------------------------------------------------------
New Jersey State Highway Authority, Garden State
Parkway, General Revenue Refunding Bonds (e):
AAA Aaa 3,200 5.75% due 1/01/2010 (b) 3,633
AAA Aaa 3,085 Senior Parkway, 5.25% due 1/01/2012 3,422
-----------------------------------------------------------------------------------------------------
New Jersey State Housing and Mortgage Finance Agency,
Home Buyer Revenue Bonds (d):
AAA Aaa 820 AMT, Series M, 6.95% due 10/01/2022 838
AAA Aaa 1,000 AMT, Series U, 5.60% due 10/01/2012 1,048
AAA Aaa 2,820 AMT, Series U, 5.65% due 10/01/2013 2,954
AAA Aaa 3,000 AMT, Series U, 5.75% due 4/01/2018 3,129
AAA Aaa 1,995 AMT, Series U, 5.85% due 4/01/2029 2,056
AAA Aaa 1,775 Series L, 6.65% due 10/01/2014 1,816
-----------------------------------------------------------------------------------------------------
AAA Aaa 2,440 New Jersey State Housing and Mortgage Finance Agency,
Home Buyer Revenue Refunding Bonds, AMT, Series S,
5.95% due 10/01/2017 (d) 2,544
-----------------------------------------------------------------------------------------------------
AAA Aaa 5,000 New Jersey State Transit Corporation, COP (Federal
Transit Administration Grants), Series A, 6.125%
due 9/15/2009 (a)(e) 5,695
-----------------------------------------------------------------------------------------------------
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds:
AAA A1 7,500 Series A, 6% due 6/15/2010 (e) 8,609
AAA Aaa 2,000 Series A, 5% due 6/15/2015 (c) 2,108
AAA NR* 10,000 Series B, 5.25% due 6/15/2015 (d) 10,736
A+ A1 12,600 Series C, 5.50% due 6/15/2019 13,725
-----------------------------------------------------------------------------------------------------
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) 17,529
-----------------------------------------------------------------------------------------------------
New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds (d):
AAA Aaa 20,000 Series A, 5.75% due 1/01/2019 22,089
AAA Aaa 1,165 Series C, 6.50% due 1/01/2016 1,392
AAA Aaa 4,355 Series C, 6.50% due 1/01/2016 (g) 5,210
-----------------------------------------------------------------------------------------------------
North Bergen Township, New Jersey, Board of
Education, COP (c):
NR* Aaa 1,250 5% due 12/15/2018 1,310
NR* Aaa 1,000 6% due 12/15/2019 1,148
NR* Aaa 1,580 6.25% due 12/15/2020 1,825
NR* Aaa 1,680 6.25% due 12/15/2021 1,941
-----------------------------------------------------------------------------------------------------
NR* Aaa 3,035 Orange Township, New Jersey, Municipal Utility and
Lease, GO, Refunding, Series C, 5.10%
due 12/01/2017 (d) 3,221
8 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings+ Ratings+ Amount Municipal Bonds Value
===================================================================================================================================
New Jersey (concluded)
-----------------------------------------------------------------------------------------------------------------------------------
Passaic County, New Jersey, GO, Refunding (c):
NR* Aaa $ 2,360 5.25% due 6/01/2015 $ 2,556
NR* Aaa 2,350 5.25% due 6/01/2016 2,538
-----------------------------------------------------------------------------------------------------
Paterson, New Jersey, Public School District,
COP (d):
NR* Aaa 1,980 6.125% due 11/01/2015 2,255
NR* Aaa 2,000 6.25% due 11/01/2019 2,290
-----------------------------------------------------------------------------------------------------
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) 5,034
-----------------------------------------------------------------------------------------------------
Port Authority of New York and New Jersey, Special
Obligation Revenue Bonds, AMT (d):
AAA NR* 2,375 DRIVERS, Series 192, 10.117% due 12/01/2025 (f) 2,665
NR* Aaa 2,165 (JFK International Air Terminal LLC), RIB,
Series 157, 10.11% due12/01/2022 (f) 2,530
AAA Aaa 13,500 (JFK International Air Terminal LLC), Series 6,
6.25% due 12/01/2011 15,148
AAA Aaa 1,500 (JFK International Air Terminal LLC), Series 6,
6.25% due 12/01/2015 1,695
-----------------------------------------------------------------------------------------------------
South Jersey Port Corporation of New Jersey, Revenue
Refunding Bonds:
A- NR* 3,750 4.50% due 1/01/2015 3,776
A- NR* 1,920 4.50% due 1/01/2016 1,917
A- NR* 1,500 5% due 1/01/2026 1,482
A- NR* 2,000 5.10% due 1/01/2033 1,976
-----------------------------------------------------------------------------------------------------
Tobacco Settlement Financing Corporation of New
Jersey Revenue Bonds:
BBB Baa3 7,640 6.75% due 6/01/2039 6,882
BBB Baa3 5,000 7% due 6/01/2041 4,624
-----------------------------------------------------------------------------------------------------
AAA Aaa 4,325 Trenton, New Jersey, Parking Authority, Parking
Revenue Bonds, DRIVERS, Series 221, 8.56%
due 4/01/2010 (b)(e)(f) 5,616
-----------------------------------------------------------------------------------------------------
AAA Aaa 4,740 University of Medicine and Dentistry, New Jersey,
Revenue Bonds, Series A, 5.50% due 12/01/2027 (a) 5,030
-----------------------------------------------------------------------------------------------------
NR* Aaa 17,135 West Deptford Township, New Jersey, GO, 5.625%
due 9/01/2010 (e) 19,362
-----------------------------------------------------------------------------------------------------
West Orange, New Jersey, Board of Education, COP (d):
NR* Aaa 2,040 5.75% due 10/01/2014 2,289
NR* Aaa 3,615 6% due 10/01/2024 4,056
===================================================================================================================================
Puerto Rico--9.2%
-----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Puerto Rico Commonwealth Highway and Transportation
Authority, Transportation Revenue Refunding Bonds,
Series J, 5% due 7/01/2029 (d) 4,556
-----------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, Power Revenue
Bonds:
AAA Aaa 10,000 Series HH, 5.25% due 7/01/2029 (c) 10,315
AAA Aaa 2,355 Series X, 5.50% due 7/01/2025 (d) 2,410
-----------------------------------------------------------------------------------------------------
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) 1,844
AA Aa2 1,750 (Hospital de la Concepcion), 6.50%
due 11/15/2020 2,009
-----------------------------------------------------------------------------------------------------
AAA Aaa 7,120 Puerto Rico Public Finance Corporation Bonds
(Commonwealth Appropriation Revenue), Series A, 5.50%
due 8/01/2011 (d)(e) 8,041
-----------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$498,743)--167.5% 529,513
=====================================================================================================
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) (in Thousands)
Shares
Held Short-Term Investments Value
=====================================================================================================
148 CMA New Jersey Municipal Money Fund (h) $ 148
-----------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost--$148)--0.0% 148
=====================================================================================================
Total Investments (Cost--$498,891***)--167.5% 529,661
Liabilities in Excess of Other Assets--(3.3%) (10,481)
Preferred Stock, at Redemption Value--(64.2%) (203,009)
----------
Net Assets Applicable to Common Stock--100.0% $ 316,171
==========
+ Ratings of issues shown are unaudited.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
*** The cost and unrealized appreciation/depreciation of investments as of
July 31, 2004, as computed for federal income tax purposes were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ............................................ $498,851
========
Gross unrealized appreciation ............................. $ 31,325
Gross unrealized depreciation ............................. (515)
--------
Net unrealized appreciation ............................... $ 30,810
========
(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, 2004.
(g) Escrowed to maturity.
(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) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
CMA New Jersey Municipal Money Fund (861) $37
--------------------------------------------------------------------------
(i) All or a portion of security held as collateral in connection with closed
financial futures contracts.
Forward interest rate swaps outstanding as of July 31, 2004 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
--------------------------------------------------------------------------
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and pay
a fixed rate of 4.385%
Broker, J.P. Morgan Chase Bank
Expires November 2018 $ 4,210 $ (158)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and pay
a fixed rate of 4.625%
Broker, J.P. Morgan Chase Bank
Expires November 2028 $ 8,905 (392)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and pay
a fixed rate of 4.5425%
Broker, Morgan Stanley Capital
Services Inc.
Expires September 2024 $20,000 (584)
-------
Total $(1,134)
=======
See Notes to Financial Statements.
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of July 31, 2004 were as
follows:
--------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa .................................................... 88.9%
AA/Aa ...................................................... 0.4
A/A ........................................................ 6.1
BBB/Baa .................................................... 4.6
--------------------------------------------------------------------------------
10 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
Statement of Net Assets
As of July 31, 2004
============================================================================================================================
Assets
----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$498,743,191) ............................................. $ 529,513,103
Investments in affiliated securities, at value (identified
cost--$147,658) ................................................. 147,658
Cash ............................................................. 92,119
Receivables:
Interest ...................................................... $ 5,547,254
Dividends from affiliates ..................................... 360 5,547,614
-------------
Prepaid expenses ................................................. 2,209
-------------
Total assets ..................................................... 535,302,703
-------------
============================================================================================================================
Liabilities
----------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps ........... 1,134,173
Payables:
Securities purchased .......................................... 14,460,751
Investment adviser ............................................ 248,279
Dividends to Common Stock shareholders ........................ 210,662
Other affiliates .............................................. 3,609 14,923,301
-------------
Accrued expenses ................................................. 64,572
-------------
Total liabilities ................................................ 16,122,046
-------------
============================================================================================================================
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* authorized, issued and outstanding at $25,000 per share
liquidation preference) ......................................... 203,009,408
-------------
============================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ............................ $ 316,171,249
=============
============================================================================================================================
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 ............................. $ 5,768,803
Accumulated realized capital losses on investments--net .......... (37,591,683)
Unrealized appreciation on investments--net ...................... 29,635,739
-------------
Total accumulated losses--net .................................... (2,187,141)
-------------
Total--Equivalent to $15.03 net asset value per share of Common
Stock (market price--$14.17) .................................... $ 316,171,249
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Operations
For the Year Ended July 31, 2004
============================================================================================================================
Investment Income
----------------------------------------------------------------------------------------------------------------------------
Interest ......................................................... $ 25,999,273
Dividends from affiliates ........................................ 36,983
-------------
Total income ..................................................... 26,036,256
-------------
============================================================================================================================
Expenses
----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ......................................... $ 2,883,770
Commission fees .................................................. 516,645
Accounting services .............................................. 171,242
Transfer agent fees .............................................. 78,548
Professional fees ................................................ 57,444
Printing and shareholder reports ................................. 42,737
Directors' fees and expenses ..................................... 33,848
Custodian fees ................................................... 28,615
Listing fees ..................................................... 20,800
Pricing fees ..................................................... 17,861
Other ............................................................ 49,895
-------------
Total expenses before waiver and reimbursement ................... 3,901,405
Waiver and reimbursement of expenses ............................. (273,197)
-------------
Total expenses after waiver and reimbursement .................... 3,628,208
-------------
Investment income--net ........................................... 22,408,048
-------------
============================================================================================================================
Realized & Unrealized Gain (Loss) on Investments--Net
----------------------------------------------------------------------------------------------------------------------------
Realized loss from:
Investments--net .............................................. (535,635)
Futures contracts and forward interest rate swaps ............. (61,896) (597,531)
-------------
Change in unrealized appreciation/depreciation from:
Investments--net .............................................. 12,680,317
Forward interest rate swaps ................................... (1,134,173) 11,546,144
-------------------------------
Total realized and unrealized gain--net .......................... 10,948,613
-------------
============================================================================================================================
Dividends to Preferred Stock Shareholders
----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... (1,745,502)
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 31,611,159
=============
See Notes to Financial Statements.
12 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
Statements of Changes in Net Assets
For the Year Ended
July 31,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 22,408,048 $ 22,643,163
Realized loss on investments--net ................................ (597,531) (1,721,743)
Change in unrealized appreciation/depreciation on investments--net 11,546,144 (9,536,846)
Dividends to Preferred Stock shareholders ........................ (1,745,502) (1,964,923)
-------------------------------
Net increase in net assets resulting from operations ............. 31,611,159 9,419,651
-------------------------------
============================================================================================================================
Dividends to Common Stock Shareholders
----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... (19,565,910) (18,808,521)
-------------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders .............................................. (19,565,910) (18,808,521)
-------------------------------
============================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock 12,045,249 (9,388,870)
Beginning of year ................................................ 304,126,000 313,514,870
-------------------------------
End of year* ..................................................... $ 316,171,249 $ 304,126,000
===============================
* Undistributed investment income--net ........................ $ 5,768,803 $ 4,671,930
===============================
See Notes to Financial Statements.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 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: 2004 2003 2002 2001+++ 2000+++
=================================================================================================================================
Per Share Operating Performance
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ...... $ 14.46 $ 14.90 $ 14.54 $ 13.14 $ 14.47
--------------------------------------------------------------
Investment income--net .................. 1.07+ 1.08+ 1.06+ 1.08 1.07
Realized and unrealized gain (loss)
on investments--net .................... .51 (.54) .31 1.39 (1.27)
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net ............... (.08) (.09) (.15) (.34) (.35)
Capital write-off resulting from
issuance of Preferred Stock ........... -- -- -- --@ --
--------------------------------------------------------------
Total from investment operations ........ 1.50 .45 1.22 2.13 (.55)
--------------------------------------------------------------
Less dividends to Common Stock
shareholders from investment
income--net ............................ (.93) (.89) (.86) (.73) (.78)
--------------------------------------------------------------
Capital write-off resulting from
issuance of Common Stock ............... -- -- -- --@ --
--------------------------------------------------------------
Net asset value, end of year ............ $ 15.03 $ 14.46 $ 14.90 $ 14.54 $ 13.14
==============================================================
Market price per share, end of year ..... $ 14.17 $ 13.59 $ 14.24 $ 12.64 $11.6875
==============================================================
=================================================================================================================================
Total Investment Return*
---------------------------------------------------------------------------------------------------------------------------------
Based on market price per share ......... 11.24% 1.61% 20.01% 14.60% (7.13%)
==============================================================
Based on net asset value per share ...... 10.90% 3.32% 9.16% 17.26% (3.04%)
==============================================================
=================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
---------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and
reimbursement and excluding
reorganization expenses** .............. 1.13% 1.15% 1.19% 1.18% 1.27%
==============================================================
Total expenses, net of waiver and
reimbursement** ........................ 1.13% 1.15% 1.22% 1.18% 1.55%
==============================================================
Total expenses** ........................ 1.21% 1.23% 1.29% 1.29% 1.67%
==============================================================
Total investment income--net** .......... 6.97% 7.05% 7.32% 7.72% 8.52%
==============================================================
Amount of dividends to Preferred
Stock shareholders ..................... .54% .61% 1.00% 2.43% 2.96%
==============================================================
Investment income--net, to Common
Stock shareholders ..................... 6.43% 6.44% 6.32% 5.29% 5.56%
==============================================================
=================================================================================================================================
Ratios Based on Average Net Assets of Common & Preferred Stock**
---------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and
reimbursement and excluding
reorganization expenses ................ .69% .71% .72% .69% .72%
==============================================================
Total expenses, net of waiver and
reimbursement .......................... .69% .71% .73% .69% .88%
==============================================================
Total expenses .......................... .74% .75% .78% .76% .94%
==============================================================
Total investment income--net ............ 4.26% 4.32% 4.40% 4.53% 4.81%
==============================================================
14 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
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: 2004 2003 2002 2001+++ 2000+++
=================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
---------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock
shareholders ........................... .86% .97% 1.51% 3.46% 3.84%
==============================================================
=================================================================================================================================
Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
Stock, end of year (in thousands) ...... $316,171 $304,126 $313,515 $305,913 $234,135
==============================================================
Preferred Stock outstanding, end
of year (in thousands) ................. $203,000 $203,000 $203,000 $203,000 $175,000
==============================================================
Portfolio turnover ...................... 8.53% 28.89% 20.05% 55.60% 100.11%
==============================================================
=================================================================================================================================
Leverage
---------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............... $ 2,557 $ 2,498 $ 2,544 $ 2,507 $ 2,338
==============================================================
=================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding++
---------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ........ $ 206 $ 233 $ 356 $ 830 $ 896
==============================================================
Series B--Investment income--net ........ $ 210 $ 240 $ 381 $ 872 $ 898
==============================================================
Series C--Investment income--net ........ $ 235 $ 247 $ 389 $ 871 $ 439
==============================================================
Series D--Investment income--net ........ $ 210 $ 240 $ 363 $ 901 $ 418
==============================================================
Series E--Investment income--net ........ $ 197 $ 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).
+++ Certain prior year amounts have been reclassified to conform to current
year presentation.
@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 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 U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund determines and makes available for publication the net
asset value of its Common Stock on a daily 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 last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more dealers that make markets in the
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). Swap agreements are valued by quoted fair values
received daily by the Fund from the counterparty. Short-term investments with a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements 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 may 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, 2004
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 -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $237 has been reclassified between accumulated net realized capital losses
and undistributed net investment income as a result of permanent differences
attributable to taxable ordinary income dividends received for tax purposes.
This reclassification has no effect on net assets or net asset values 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 daily net assets, including
proceeds from the issuance of Preferred Stock. For the year ended July 31, 2004,
FAM earned fees of $2,883,770, of which $233,277 was waived. For the year ended
July 31, 2004, FAM reimbursed the Fund in the amount of $39,920.
For the year ended July 31, 2004, the Fund reimbursed FAM $11,289 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, 2004 were $60,990,600 and $43,674,306, respectively.
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, 2004 were as follows: Series
A, .70%; Series B, 1.00%; Series C, 1.05%; Series D, 1.00% and Series E, .90%.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended July 31, 2004, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $271,463 as commissions.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded)
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.079000 per share on August 30, 2004 to shareholders of record on
August 16, 2004.
The tax character of distributions paid during the fiscal years ended July 31,
2004 and July 31, 2003 was as follows:
--------------------------------------------------------------------------------
7/31/2004 7/31/2003
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income ................... $21,311,412 $20,773,444
-------------------------------
Total distributions .................... $21,311,412 $20,773,444
===============================
As of July 31, 2004, the components of accumulated losses on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt income--net .................... $ 5,729,012
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... 5,729,012
Capital loss carryforward ............................... (33,729,752)*
Unrealized gains--net ................................... 25,813,599**
------------
Total accumulated losses--net ........................... $ (2,187,141)
============
* On July 31, 2004, the Fund had a net capital loss carryforward of
$33,729,752, of which $2,713,832 expires in 2006, $2,188,055 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.
Report of Independent Registered Public Accounting Firm
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,
2004, 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 the standards of the Public Company
Accounting Oversight Board (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, 2004, by correspondence
with the custodian and others. 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, 2004, 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 U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
September 10, 2004
18 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
Automatic Dividend Reinvestment Plan (unaudited)
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 of the number
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Automatic Dividend Reinvestment Plan (unaudited) (concluded)
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.
20 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
Officers and Directors (unaudited)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President of the Merrill Lynch Investment Managers, 125 Funds None
Glenn* Princeton, NJ and present L.P. ("MLIM")/Fund Asset Management, L.P. 160 Portfolios
08543-9011 Director and ("FAM")--Advised Funds since 1999; Chairman
Age: 63 1998 to (Americas Region) of MLIM from 2000 to 2002;
present Executive Vice President of MLIM and FAM (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.
since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his present and former positions with MLIM, FAM, 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, 49 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: 63 International Consultant, Urban Institute,
Washington D.C. from 1995 to 1999.
------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Director 1998 to Professor, Harvard Business School since 1989; 49 Funds Newell Rub-
Montgomery Princeton, NJ present Associate Professor, J.L. Kellogg Graduate School 49 Portfolios bermaid Inc.
08543-9095 of Management, Northwestern University from
Age: 52 1985 to 1989; Associate Professor, Graduate School
of Business Administration, University of Michigan
from 1979 to 1985.
------------------------------------------------------------------------------------------------------------------------------------
Kevin A. P.O. Box 9095 Director 1998 to Founder and currently Director Emeritus of the 49 Funds None
Ryan Princeton, NJ present Boston University Center for the Advancement of 49 Portfolios
08543-9095 Ethics and Character and Director thereof from 1989
Age: 71 to 1999; Professor from 1982 to 1999 and currently
Professor Emeritus of Education at Boston
University; formerly on the teaching faculties of
The University of Chicago, Stanford University and
Ohio State University.
------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Director 2000 to President, Middle East Institute from 1995 to May, 49 Funds None
Suddarth Princeton, NJ present 2001; Foreign Service Officer, United States Foreign 49 Portfolios
08543-9095 Service from 1961 to 1995; Career Minister thereof
Age: 68 from 1989 to1995; 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. P.O. Box 9095 Director 1998 to Professor of Finance since 1984, Dean from 1984 49 Funds Bowne &
West Princeton, NJ present to 1993 and currently Dean Emeritus, Leonard N. 49 Portfolios Co., Inc.;
08543-9095 Stern School of Business Administration, New York Vornado
Age: 66 University from 1994 to present; Professor of Realty Trust;
Finance thereof from 1982 to 1994. Vornado
Operating
Company;
Alexander's,
Inc.
MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Officers and Directors (unaudited) (concluded)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age 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; 49 Funds None
Zinbarg Princeton, NJ present Executive Vice President of The Prudential Insurance 49 Portfolios
08543-9095 Company of America from 1988 to 1994; former
Age: 69 Director of Prudential Reinsurance Company and
former Trustee of the Prudential Foundation.
------------------------------------------------------------------------------------------------------------------------
* 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 of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999; Vice
08543-9011 and and President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 44 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: 53
------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior 2002 to Managing Director of MLIM since 2000 and Director (Municipal Tax-Exempt Fund
Loffredo Princeton, NJ Vice present Management) of MLIM from 1998 to 2000.
08543-9011 President
Age: 40
------------------------------------------------------------------------------------------------------------------------------------
Theodore P.O. Box 9011 Vice 1998 to Director (Municipal Tax-Exempt Fund Management) of MLIM since 2000;
R. Jaeckel Princeton, NJ President present Vice President of MLIM from 1994 to 2000.
Jr. 08543-9011
Age: 44
------------------------------------------------------------------------------------------------------------------------------------
Phillip S. P.O. Box 9011 Secretary 2003 to First Vice President of MLIM since 2001; Director (Legal Advisory) of MLIM from
Gillespie Princeton, NJ present 2000 to 2001; Vice President of MLIM from 1999 to 2000 and Attorney associated with
08543-9011 MLIM since 1998.
Age: 40
------------------------------------------------------------------------------------------------------------------------
* 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 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MUJ
22 MUNIHOLDINGS NEW JERSEY INSURED FUND, INC. JULY 31, 2004
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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 stable level of dividend distributions, 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.
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, 2004 qualify as
tax-exempt interest dividends for federal income tax purposes.
Please retain this information for your records.
Electronic Delivery
The Fund offers 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 Web
site 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, 2004 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)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniHoldings New Jersey Insured Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
#HOLDNJ2 -- 7/04
Item 2 - Code of Ethics - 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 - Audit Committee Financial Expert - 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 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending July 31, 2004 - $31,500
Fiscal Year Ending July 31, 2003 - $30,550
(b) Audit-Related Fees - Fiscal Year Ending July 31, 2004 - $3,000
Fiscal Year Ending July 31, 2003 - $3,000
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ending July 31, 2004 - $5,200
Fiscal Year Ending July 31, 2003 - $5,000
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending July 31, 2004 - $0
Fiscal Year Ending July 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending July 31, 2004 - $8,200
Fiscal Year Ending July 31, 2003 - $8,000
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Ronald W. Forbes
Cynthia A. Montgomery
Charles C. Reilly (retired as of December 31, 2003)
Kevin A. Ryan
Roscoe S. Suddarth
Richard R. West
Edward D. Zinbarg
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
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 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(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.
10(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - See Item 2
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - 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 17, 2004
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 17, 2004
By: /s/ Donald C. Burke
----------------------------
Donald C. Burke,
Chief Financial Officer of
MuniHoldings New Jersey Insured Fund, Inc.
Date: September 17, 2004