All of MEN’s and MUI’s VRDP Shares have successfully remarketed since issuance, with an annualized dividend rate of 0.31% and 0.35%, respectively, for the six months ended October 31, 2011.
MEN’s and MUI’s Preferred Shares rank prior to MEN’s and MUI’s Common Shares as to the payment of dividends by MEN and MUI and distribution of assets upon dissolution or liquidation of MEN and MUI. The 1940 Act prohibits the declaration of any dividends on MEN’s and MUI’s Common Shares or the repurchase of MEN’s and MUI’s Common Shares if MEN and MUI fail to maintain the asset coverage of at least 200% of the liquidation preference of the outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, MEN and MUI are restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with the Preferred Shares or repurchasing such shares if MEN and MUI fail to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares governing instruments or comply with the basic maintenance amount requirement of the rating agencies then rating the Preferred Shares.
The holders of Preferred Shares have voting rights equal to the holders of Common Shares (one vote per share) and will vote together with holders of Common Shares (one vote per share) as a single class. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Directors for each Fund. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.
Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:
The Funds will pay a net investment income dividend in the following amounts per share on December 1, 2011 to Common Shareholders of record on November 15, 2011:
The dividends declared on AMPS or VRDP Shares for the period November 1, 2011 to November 30, 2011 were as follows:
On December 16, 2011, the following Funds issued Series W-7 Variable Rate MuniFund Term Preferred Shares (“VMTP Shares”), $100,000 liquidation value per share, with a maturity date of January 2, 2015 in private offerings of VMTP Shares with qualified institutional buyers, as defined in Rule 144A under the Securities Act of 1933 to finance the AMPS redemption. The VMTP Shares issued were as follows:
The following Funds announced the redemption of all of the outstanding AMPS at the indicated liquidation preference per share plus any accrued and unpaid dividends through the expected redemption date as follows:
|
|
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements |
The Board of Directors (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock Muni-Assets Fund, Inc. (“MUA”), BlackRock MuniEnhanced Fund, Inc. (“MEN”), BlackRock MuniHoldings Fund, Inc. (“MHD”), BlackRock MuniHoldings Fund II, Inc. (“MUH”), BlackRock MuniHoldings Quality Fund, Inc. (“MUS”), BlackRock Muni Intermediate Duration Fund, Inc. (“MUI”), BlackRock MuniVest Fund II, Inc. (“MVT” and together with MUA, MEN, MHD, MUH, MUS and MUI, each a “Fund,” and, collectively, the “Funds”) met on April 14, 2011 and May 12–13, 2011 to consider the approval of each Fund’s investment advisory agreement (each, an “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Board of each Fund also considered the approval of the sub-advisory agreement (each, a “Sub-Advisory Agreement”) between the Manager and BlackRock Investment Management, LLC (the “Sub-Advisor”), with respect to each Fund. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreements and the Sub-Advisory Agreements are referred to herein as the “Agreements.”
Activities and Composition of the Board
Each Board consists of eleven individuals, nine of whom are not “interested persons” of such Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Board Member. Each Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member) and is chaired by an Independent Board Member. The Board of each of MHD, MUH, MUS and MVT also has established a Committee on Auction Market Preferred Shares. In addition, the Board of each of MEN and MUI had established a Committee on Auction Market Preferred Shares prior to the redemption of all of its respective Fund’s outstanding auction market preferred shares. Further, the Boards, together with the boards of other BlackRock-managed funds, also had established an ad hoc committee, the Joint Product Pricing Committee, which consisted of Independent Board Members and the directors/trustees of the boards of certain other BlackRock-managed funds, who were not “interested persons” of their respective funds.
The Agreements
Pursuant to the 1940 Act, the Boards are required to consider the continuation of the Agreements on an annual basis. In connection with this process, the Boards assessed, among other things, the nature, scope and quality of the services provided to the Funds by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance program and assistance in meeting applicable legal and regulatory requirements.
The Boards, acting directly and through their respective committees, considered at each of their meetings, and from time to time as appropriate, factors that are relevant to their annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Funds and their shareholders. Among the matters the Boards considered were: (a) investment performance for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analyses of the reasons for any over performance or underperformance against their peers and/or benchmark, as applicable; (b) fees, including advisory and other amounts paid to BlackRock and its affiliates by the Funds for services such as call center and fund accounting; (c) Fund operating expenses and how BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Funds’ investment objectives, policies and restrictions; (e) the Funds’ compliance with their Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity procedures; (k) analyses of contractual and actual management fee ratios for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.
Board Considerations in Approving the Agreements
The Approval Process: Prior to the April 14, 2011 meeting, the Boards requested and received materials specifically relating to the Agreements. The Boards are engaged in a process with BlackRock to review periodically the nature and scope of the information provided to better assist their deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses and the investment performance of the Funds as compared with a peer group of funds as determined by Lipper and a customized peer group selected by BlackRock (collectively, “Peers”); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates and significant shareholders; (c) general analyses provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients and open-end funds, under similar investment mandates, as applicable; (d) the impact of economies of scale; (e) a summary of aggregate amounts paid by each Fund to BlackRock and (f) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.
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68 | SEMI-ANNUAL REPORT | OCTOBER 31, 2011 |
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued) |
At an in-person meeting held on April 14, 2011, the Boards reviewed materials relating to their consideration of the Agreements. As a result of the discussions that occurred during the April 14, 2011 meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 12–13, 2011 Board meeting.
At an in-person meeting held on May 12–13, 2011, each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Fund and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to its Fund, each for a one-year term ending June 30, 2012. In approving the continuation of the Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Funds and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Funds; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with the Funds; and (f) other factors deemed relevant by the Board Members.
The Boards also considered other matters they deemed important to the approval process, such as services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates and significant shareholders from their relationship with Funds and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by BlackRock: The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Funds. Throughout the year, the Boards compared Fund performance to the performance of a comparable group of closed-end funds and/or the performance of a relevant benchmark, if any. The Boards met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook.
The Boards considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and their Funds’ portfolio management teams, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance, BlackRock’s credit analysis capabilities, BlackRock’s risk analysis capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to their Funds’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.
In addition to advisory services, the Boards considered the quality of the administrative and non-investment advisory services provided to the Funds. BlackRock and its affiliates provide the Funds with certain services (in addition to any such services provided to the Funds by third parties) and officers and other personnel as are necessary for the operations of the Funds. In addition to investment advisory services, BlackRock and its affiliates provide the Funds with other services, including (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Funds; (iii) assisting with daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; and (viii) performing other administrative functions necessary for the operation of the Funds, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of the Funds and BlackRock: The Boards, including the Independent Board Members, also reviewed and considered the performance history of their Funds. In preparation for the April 14, 2011 meeting, the Boards worked with BlackRock and Lipper to develop a template for, and was provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Fund as compared to funds in that Fund’s applicable Lipper category and a customized peer group selected by BlackRock. The Boards were provided with a description of the methodology used by Lipper to select peer funds. The Boards and each Board’s Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of the Funds throughout the year.
The Board of each of MUA, MEN, MHD, MUH, MUI and MVT noted that, in general, its respective Fund performed better than its Peers in that the Fund’s performance was at or above the median of its Customized Lipper Peer Group Composite in each of the one-, three- and five-year periods reported.
The Board of MUS noted that, in general, MUS performed better than its Peers in that MUS’s performance was at or above the median of its Customized Lipper Peer Group Composite in two of the one-, three- and five-year periods reported.
The Boards noted that BlackRock has made changes to the organization of the overall fixed income group management structure designed to result in a strengthened leadership team.
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| SEMI-ANNUAL REPORT | OCTOBER 31, 2011 | 69 |
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued) |
C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds: Each Board, including the Independent Board Members, reviewed its Fund’s contractual management fee ratio compared with the other funds in its Lipper category. It also compared the Fund’s total expense ratio, as well as actual management fee ratio, to those of other funds in its Lipper category. Each Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.
The Boards received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided the Funds. The Boards were also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Funds. The Boards reviewed BlackRock’s profitability with respect to the Funds and other funds the Boards currently oversee for the year ended December 31, 2010 compared to available aggregate profitability data provided for the years ended December 31, 2009, and December 31, 2008. The Boards reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Boards recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.
The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards considered BlackRock’s overall operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising closed-end funds, among other product types. That data indicates that operating margins for BlackRock, in general and with respect to its registered funds, are generally consistent with margins earned by similarly situated publicly traded competitors. In addition, the Boards considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. That third party data indicates that larger asset bases do not, in themselves, translate to higher profit margins.
In addition, the Boards considered the cost of the services provided to the Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Funds and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s methodology in allocating its costs to the management of the Funds. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Boards.
The Board of each Fund noted that its respective Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the Fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers.
D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund. Based on the ad hoc Joint Product Pricing Committee’s and each Board’s review and consideration of this issue, each Board concluded that closed-end funds are typically priced at scale at a fund’s inception; therefore, the implementation of breakpoints was not necessary.
The Boards noted that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. The Boards noted that only one closed-end fund in the Fund Complex has breakpoints in its advisory fee structure.
E. Other Factors Deemed Relevant by the Board Members: The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates and significant shareholders may derive from their respective relationships with the Funds, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Funds, including securities lending services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that BlackRock’s funds may invest in affiliated ETFs without any offset against the management fees payable by the funds to BlackRock.
In connection with its consideration of the Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar prac-tices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
The Boards noted the competitive nature of the closed-end fund market-place and that shareholders are able to sell their Fund shares in the secondary market if they believe that the Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
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70 | SEMI-ANNUAL REPORT | OCTOBER 31, 2011 |
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded) |
Conclusion
Each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Fund for a one-year term ending June 30, 2012 and the Sub-Advisory Agreement between the Manager and the Sub-Advisor, with respect to its Fund, for a one-year term ending June 30, 2012. As part of its approval, each Board considered the detailed review of BlackRock’s fee structure, as it applies to its Fund, conducted by the ad hoc Joint Product Pricing Committee. Based upon its evaluation of all of the aforementioned factors in their totality, each Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of its Fund and its shareholders. In arriving at its decision to approve the Agreements, no Board identified any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making these determinations. The contractual fee arrangements for the Funds reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.
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| SEMI-ANNUAL REPORT | OCTOBER 31, 2011 | 71 |
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Richard E. Cavanagh, Chairman of the Board and Director |
Karen P. Robards, Vice Chairperson of the Board, |
Chairperson of the Audit Committee and Director |
Paul L. Audet, Director |
Michael Castellano, Director and Member of the Audit Committee |
Frank J. Fabozzi, Director and Member of the Audit Committee |
Kathleen F. Feldstein, Director |
James T. Flynn, Director and Member of the Audit Committee |
Henry Gabbay, Director |
Jerold B. Harris, Director |
R. Glenn Hubbard, Director |
W. Carl Kester, Director and Member of the Audit Committee |
John M. Perlowski, President and Chief Executive Officer |
Anne Ackerley, Vice President |
Brendan Kyne, Vice President |
Neal Andrews, Chief Financial Officer |
Jay Fife, Treasurer |
Brian Kindelan, Chief Compliance Officer and |
Anti-Money Laundering Officer |
Ira P. Shapiro, Secretary |
|
Effective July 28, 2011, Richard S. Davis resigned as Director of
the Funds, and Paul L. Audet became Director of the Funds. |
|
Investment Advisor |
|
BlackRock Advisors, LLC |
Wilmington, DE 19809 |
|
|
Sub-Advisor |
|
BlackRock Investment Management, LLC |
Princeton, NJ 08540 |
|
Custodians |
|
The Bank of New York Mellon1 |
New York, NY 10286 |
|
State Street Bank and Trust Company2 |
Boston, MA 02110 |
|
Transfer Agents |
|
Common Shares: |
BNY Mellon Shareowner Services1 |
Jersey City, NJ 07310 |
|
Computershare Trust Company, N.A.2 |
Providence, RI 02940 |
|
AMPS Auction Agent |
|
BNY Mellon Shareowner Services3 |
Jersey City, NJ 07310 |
|
VRDP Tender and Paying Agent |
|
The Bank of New York Mellon4 |
New York, NY 10289 |
|
VRDP Remarketing Agents |
|
Citigroup Global Markets Inc.5 |
New York, NY 10179 |
|
J.P. Morgan Securities LLC6 |
New York, NY 10179 |
|
Accounting Agent |
|
State Street Bank and Trust Company |
Boston, MA 02110 |
|
Independent Registered Public Accounting Firm |
|
Deloitte & Touche LLP |
Boston, MA 02116 |
|
Legal Counsel |
|
Skadden, Arps, Slate, Meagher & Flom LLP |
New York, NY 10036 |
|
Address of the Funds |
|
100 Bellevue Parkway |
Wilmington, DE 19809 |
| | |
| 1 | For MUA, MHD, MUH, MUS and MVT. |
|
| 2 | For MEN and MUI. |
|
| 3 | For MUH, MUS and MVT. |
|
| 4 | For MEN, MHD and MUI. |
|
| 5 | For MEN. |
|
| 6 | For MUI. |
| | |
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72 | SEMI-ANNUAL REPORT | OCTOBER 31, 2011 |
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|
Additional Information |
|
Proxy Results |
The Annual Meeting of Shareholders was held on July 28, 2011, for shareholders of record on May 31, 2011, to elect director nominees for each Fund. There were no broker non-votes with regard to any of the Funds.
Approved the Class I Directors as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | Paul L. Audet | | Michael J. Castellano | | R. Glenn Hubbard | |
| | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | |
MUA | | 32,119,362 | | 1,290,980 | | 0 | | 32,105,120 | | 1,305,222 | | 0 | | 32,133,705 | | 1,276,637 | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | W. Carl Kester | | | | | | | | | | | | | | | | | | | |
| | Votes For | | Votes
Withheld | | Abstain | | | | | | | | | | | | | | | | | | | |
MUA | | 32,136,303 | | 1,274,039 | | 0 | | | | | | | | | | | | | | | | | | | |
For the Trust listed above, Directors whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Richard E. Cavanagh, Frank J. Fabozzi, Kathleen F. Feldstein, James T. Flynn, Henry Gabbay, Jerrold B. Harris and Karen P. Robards.
Approved the Directors as follows:
| | | | | | | | | | | | | | | | | | | |
|
| | Paul L. Audet | | Michael J. Castellano | | Richard E. Cavanagh | |
| | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | |
MEN | | 24,547,599 | | 506,964 | | 0 | | 24,503,067 | | 551,497 | | 0 | | 24,530,219 | | 524,344 | | 0 | |
MHD | | 12,605,951 | | 285,605 | | 0 | | 12,573,930 | | 317,626 | | 0 | | 12,596,548 | | 295,008 | | 0 | |
MUH | | 9,405,000 | | 579,274 | | 0 | | 9,441,559 | | 542,715 | | 0 | | 9,451,432 | | 532,842 | | 0 | |
MUS | | 9,558,088 | | 549,432 | | 0 | | 9,539,774 | | 567,746 | | 0 | | 9,540,484 | | 567,036 | | 0 | |
MUI | | 36,168,801 | | 691,778 | | 0 | | 36,142,165 | | 718,414 | | 0 | | 36,196,742 | | 663,837 | | 0 | |
MVT | | 18,060,117 | | 724,267 | | 0 | | 18,058,413 | | 725,971 | | 0 | | 18,037,270 | | 747,114 | | 0 | |
| | | | | | | | | | | | | | | | | | | |
| | Frank J. Fabozzi1 | | Kathleen F. Feldstein | | James T. Flynn | |
| | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | |
MEN | | 750 | | 275 | | 0 | | 24,387,878 | | 666,686 | | 0 | | 24,410,701 | | 643,862 | | 0 | |
MHD | | 2,969 | | 14 | | 0 | | 12,538,842 | | 352,714 | | 0 | | 12,555,965 | | 335,591 | | 0 | |
MUH | | 1,615 | | 28 | | 0 | | 9,390,492 | | 593,782 | | 0 | | 9,426,054 | | 558,220 | | 0 | |
MUS | | 1,864 | | 26 | | 0 | | 9,474,948 | | 632,572 | | 0 | | 9,492,069 | | 615,451 | | 0 | |
MUI | | 2,215 | | 656 | | 0 | | 36,091,671 | | 768,908 | | 0 | | 36,115,832 | | 744,747 | | 0 | |
MVT | | 4,490 | | 81 | | 0 | | 18,034,858 | | 749,525 | | 0 | | 18,061,269 | | 723,115 | | 0 | |
|
| | Henry Gabbay | | Jerrold B. Harris | | R. Glenn Hubbard | |
| | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | |
MEN | | 24,543,095 | | 511,468 | | 0 | | 24,519,856 | | 534,707 | | 0 | | 24,517,286 | | 537,277 | | 0 | |
MHD | | 12,609,016 | | 282,540 | | 0 | | 12,533,482 | | 358,074 | | 0 | | 12,599,371 | | 292,185 | | 0 | |
MUH | | 9,398,527 | | 585,747 | | 0 | | 9,396,352 | | 587,922 | | 0 | | 9,429,591 | | 554,683 | | 0 | |
MUS | | 9,548,005 | | 559,515 | | 0 | | 9,482,106 | | 625,414 | | 0 | | 9,556,788 | | 550,732 | | 0 | |
MUI | | 36,153,148 | | 707,431 | | 0 | | 36,138,625 | | 721,954 | | 0 | | 36,174,226 | | 686,353 | | 0 | |
MVT | | 18,058,882 | | 725,502 | | 0 | | 18,019,802 | | 764,582 | | 0 | | 18,107,191 | | 677,192 | | 0 | |
|
| | W. Carl Kester1 | | Karen P. Robards | | | | | | | |
| | Votes For | | Votes
Withheld | | Abstain | | Votes For | | Votes
Withheld | | Abstain | | | | | | | |
MEN | | 750 | | 275 | | 0 | | 24,538,118 | | 516,445 | | 0 | | | | | | | |
MHD | | 2,969 | | 14 | | 0 | | 12,615,410 | | 276,146 | | 0 | | | | | | | |
MUH | | 1,615 | | 28 | | 0 | | 9,405,247 | | 579,027 | | 0 | | | | | | | |
MUS | | 1,864 | | 26 | | 0 | | 9,560,224 | | 547,296 | | 0 | | | | | | | |
MUI | | 2,215 | | 656 | | 0 | | 36,125,210 | | 735,369 | | 0 | | | | | | | |
MVT | | 4,490 | | 81 | | 0 | | 18,043,337 | | 741,047 | | 0 | | | | | | | |
| |
1 | Voted on by holders of AMPS only. |
| | | |
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| SEMI-ANNUAL REPORT | OCTOBER 31, 2011 | 73 |
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|
Additional Information (continued) |
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Dividend Policy |
The Funds’ dividend policy is to distribute all or a portion of their net investment income to their shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the Funds 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 Funds for any particular month may be more or less than the amount of net investment income earned by the Funds during such month. The Funds’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.
On June 10, 2010, the Manager announced that the directors of MUI had received a demand letter sent on behalf of certain of MUI Common Shareholders. The demand letter alleged that the Manager and MUI’s officers and Board of Directors (the “Board”) breached their fiduciary duties owed to MUI and its Common Shareholders by redeeming at par certain of MUI’s AMPS, and demanded that the Board take action to remedy those alleged breaches. In response to the demand letter, the Board established a Demand Review Committee (the “Committee”) of the Independent Directors to investigate the claims made in the demand letter with the assistance of independent counsel. Based upon its investigation, the Committee recommended that the Board reject the demand specified in the letter. After reviewing the findings of the Committee, the Board unanimously adopted the Committee’s recommendation and unanimously voted to reject the demand.
The Funds do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.
During the period, there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolio.
Quarterly performance, semi-annual and annual reports and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s web-site is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website into this report.
Electronic Delivery
Electronic copies of most financial reports are available on the Funds’ web-sites or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Funds’ electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.
Householding
The Funds will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call (800) 441-7762.
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74 | SEMI-ANNUAL REPORT | OCTOBER 31, 2011 |
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Additional Information (concluded) |
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General Information (concluded) |
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.
Availability of Fund Updates
BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com. Investors and others are advised to periodically check the website for updated performance information and the release of other material information about the Funds.
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BlackRock Privacy Principles |
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
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| SEMI-ANNUAL REPORT | OCTOBER 31, 2011 | 75 |
This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. Certain of the Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in the short-term dividend rates of the Preferred Shares, including AMPS, which are currently set at the maximum reset rate as a result of failed auctions, may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.
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#CEMUNI7-10/11-SAR | 
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Item 2 – | Code of Ethics – Not Applicable to this semi-annual report |
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Item 3 – | Audit Committee Financial Expert – Not Applicable to this semi-annual report |
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Item 4 – | Principal Accountant Fees and Services – Not Applicable to this semi-annual report |
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Item 5 – | Audit Committee of Listed Registrants – Not Applicable to this semi-annual report |
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Item 6 – | Investments |
| (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. |
| (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. |
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Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable to this semi-annual report |
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Item 8 – | Portfolio Managers of Closed-End Management Investment Companies |
| (a) Not Applicable to this semi-annual report |
| (b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR. |
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Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable |
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Item 10 – | Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures. |
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Item 11 – | Controls and Procedures |
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| (a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended. |
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| (b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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Item 12 – | Exhibits attached hereto |
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| (a)(1) – Code of Ethics – Not Applicable to this semi-annual report |
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| (a)(2) – Certifications – Attached hereto |
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| (a)(3) – Not Applicable |
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| (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. |
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| BlackRock MuniHoldings Fund II, Inc. |
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| By: | /s/ John M. Perlowski | |
| | John M. Perlowski |
| | Chief Executive Officer (principal executive officer) of |
| | BlackRock MuniHoldings Fund II, Inc. |
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| Date: January 03, 2012 |
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| 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. |
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| By: | /s/ John M. Perlowski | |
| | John M. Perlowski |
| | Chief Executive Officer (principal executive officer) of |
| | BlackRock MuniHoldings Fund II, Inc. |
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| Date: January 03, 2012 |
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| By: | /s/ Neal J. Andrews | |
| | Neal J. Andrews |
| | Chief Financial Officer (principal financial officer) of |
| | BlackRock MuniHoldings Fund II, Inc. |
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| Date: January 03, 2012 |
