The dividends declared on Preferred Shares for the period May 1, 2009 to May 31, 2009 for the Funds were as follows:
On June 15, 2009, the Funds’ Boards approved the following redemptions of Preferred Shares at a price of $25,000 per share plus any accrued and unpaid dividends through the redemption date:
The Funds will finance the Preferred Share redemptions with cash received from tender option bond transactions (See Note 1 of the Notes to Financial Statements for details of municipal bonds transferred to tender option bond trusts).
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Report of Independent Registered Public Accounting Firm |
To the Shareholders and Boards of Directors of:
BlackRock Apex Municipal Fund, Inc.
BlackRock MuniAssets Fund, Inc.
BlackRock MuniEnhanced Fund, Inc.
BlackRock MuniHoldings Fund, Inc.
BlackRock MuniHoldings Fund II, Inc.
BlackRock MuniHoldings Insured Fund, Inc.
BlackRock Muni Intermediate Duration Fund, Inc.
BlackRock MuniVest Fund II, Inc.
(Collectively, the “Funds”)
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Apex Municipal Fund, Inc. as of April 30, 2009, and the related statements of operations for the period July 1, 2008 to April 30, 2009 and for the year ended June 30, 2008, the statements of changes in net assets for the period July 1, 2008 to April 30, 2009 and for each of the two years in the period ended June 30, 2008, and the financial highlights for the period July 1, 2008 to April 30, 2009 and for each of the five years in the period ended June 30, 2008. We have also audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock MuniAssets Fund, Inc. as of April 30, 2009, and the related statements of operations for the period June 1, 2008 to April 30, 2009 and for the year ended May 31, 2008, the statements of changes in net assets for the period June 1, 2008 to April 30, 2009 and for each of the two years in the period ended May 31, 2008, and the financial highlights for the period June 1, 2008 to April 30, 2009 and for each of the five years in the period ended May 31, 2008. We have also audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock MuniEnhanced Fund, Inc. as of April 30, 2009, and the related statements of operations for the period February 1, 2009 to April 30, 2009 and for the year ended January 31, 2009, the statement of cash flows for the year ended January 31, 2009, the statements of changes in net assets for the period February 1, 2009 to April 30, 2009 and for each of the two years in the period ended January 31, 2009, and the financial highlights for the period February 1, 2009 to April 30, 2009 and for each of the five years in the period ended January 31, 2009. We have also audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc. as of April 30, 2009, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. We have also audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock MuniHoldings Fund II, Inc. as of April 30, 2009, and the related statements of operations for the period August 1, 2008 to April 30, 2009 and for the year ended July 31, 2008, the related statement of cash flows for the period August 1, 2008 to April 30, 2009, the statements of changes in net assets for the period August 1, 2008 to April 30, 2009 and for each of the two years in the period ended July 31, 2008, and the financial highlights for the period August 1, 2008 to April 30, 2009 and for each of the three years in the period ended July 31, 2008. We have also audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock Muni Intermediate Duration Fund, Inc. as of April 30, 2009, and the related statements of operations for the period June 1, 2008 to April 30, 2009 and for the year ended May 31, 2008, the statements of changes in net assets for the period June 1, 2008 to April 30, 2009 and for each of the two years in the period ended May 31, 2008, and the financial highlights for the period June 1, 2008 to April 30, 2009 and for each of the three years in the period ended May 31, 2008. We have also audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock MuniVest Fund II, Inc. as of April 30, 2009, and the related statements of operations for the period November 1, 2008 to April 30, 2009 and for the year ended October 31, 2008, the statement of cash flows for the period November 1, 2008 to April 30, 2009, the statements of changes in net assets for the period November 1, 2008 to April 30, 2009 and for each of the two years in the period ended October 31, 2008, and the financial highlights for the period November 1, 2008 to April 30, 2009 and for each of the five years in the period ended October 31, 2008. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc. for the year ended April 30, 2005 (before the restatement described in Note 7) were audited by other auditors whose report, dated June 10, 2005, expressed a qualified opinion on the financial highlights because of the errors described in Note 7. The financial highlights for BlackRock MuniHoldings Fund II, Inc. for each of the two years in the period ended July 31, 2005 (before the restatement described in Note 7) were audited by other auditors whose report, dated September 12, 2005, expressed a qualified opinion on those financial highlights because of the errors described in Note 7. The financial highlights for BlackRock Muni Intermediate Duration Fund, Inc. for the year ended May 31, 2005 (before the restatement described in Note 7) were audited by other auditors whose report, dated July 13, 2005, expressed a qualified opinion on the financial highlights because of the errors described in Note 7. The financial highlights for BlackRock Muni Intermediate Duration Fund, Inc. for the period August 1, 2003 (commencement of operations) to May 31, 2004 were audited by other auditors whose report, dated July 13, 2005, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public 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. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of April 30, 2009, by correspondence with the custodians and brokers, where replies were not received from custodians and brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
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ANNUAL REPORT | APRIL 30, 2009 | 77 |
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Report of Independent Registered Public Accounting Firm (concluded) |
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Apex Municipal Fund, Inc. as of April 30, 2009, the results of its operations for the period July 1, 2008 to April 30, 2009 and for the year ended June 30, 2008, the changes in net assets for the period July 1, 2008 to April 30, 2009 and for each of the two years in the period ended June 30, 2008, and the financial highlights for the period July 1, 2008 to April 30, 2009 and for each of the five years in the period ended June 30, 2008, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock MuniAssets Fund, Inc. as of April 30, 2009, the results of its operations for the period June 1, 2008 to April 30, 2009 and for the year ended May 31, 2008, the changes in net assets for the period June 1, 2008 to April 30, 2009 and for each of the two years in the period ended May 31, 2008, and the financial highlights for the period June 1, 2008 to April 30, 2009 and for each of the five years in the period ended May 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock MuniEnhanced Fund, Inc. as of April 30, 2009, the results of its operations for the period February 1, 2009 to April 30, 2009 and for the year ended January 31, 2009, the changes in net assets for the period February 1, 2009 to April 30, 2009 and for each of the two years in the period ended January 31, 2009, its cash flows for the year ended January 31, 2009, and the financial highlights for the period February 1, 2009 to April 30, 2009 and for each of the five years in the period ended January 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc. as of April 30, 2009, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock MuniHoldings Fund II, Inc. as of April 30, 2009, the results of its operations for the period August 1, 2008 to April 30, 2009 and for the year ended July 31, 2008, the changes in net assets for the period August 1, 2008 to April 30, 2009 and for each of the two years in the period ended July 31, 2008, its cash flows for the period August 1, 2008 to April 30, 2009 and for the year ended July 31, 2008, and the financial highlights for the period August 1, 2008 to April 30, 2009 and for each of the three years in the period ended July 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Muni Intermediate Duration Fund, Inc. as of April 30, 2009, the results of its operations for the period June 1, 2008 to April 30, 2009 and for the year ended May 31, 2008, the changes in net assets for the period June 1, 2008 to April 30, 2009 and for each of the two years in the period ended May 31, 2008, and the financial highlights for the period June 1, 2008 to April 30, 2009 and for each of the three years in the period ended May 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock MuniVest Fund II, Inc. as of April 30, 2009, the results of its operations for the period November 1, 2008 to April 30, 2009 and for the year ended October 31, 2008, the changes in net assets for the period November 1, 2008 to April 30, 2009 and for each of the two years in the period ended October 31, 2008, its cash flows for the period November 1, 2008 to April 30, 2009, and the financial highlights for the period November 1, 2008 to April 30, 2009 and for each of the five years in the period ended October 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
We also have audited the adjustments, applied by management, to restate certain financial highlights for the year ended April 30, 2005 for BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc., for each of the two years in the period ended July 31, 2005 for BlackRock Muni-Holdings Fund II, Inc., and for the year ended May 31, 2005 for BlackRock Muni Intermediate Duration Fund, Inc. to correct the errors described in Note 7. These adjustments are the responsibility of the Funds’ management. The audit procedures that we performed with respect to the adjustments included such tests as we considered necessary in the circumstances and were designed to obtain reasonable assurance about whether the adjustments are appropriate and have been properly applied, in all material respects, to the restated financial highlights for the year ended April 30, 2005 for BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc., for each of the two years in the period ended July 31, 2005 for BlackRock MuniHoldings Fund II, Inc., and for the year ended May 31, 2005 for BlackRock Muni Intermediate Duration Fund, Inc. We did not perform any audit procedures designed to assess whether any additional adjustments to such financial highlights might be necessary in order for such financial highlights to be presented in conformity with generally accepted accounting principles. In our opinion, the adjustments to the financial highlights for the year ended April 30, 2005 for BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc., for each of the two years in the period ended July 31, 2005 for BlackRock MuniHoldings Fund II, Inc., and for the year ended May 31, 2005 for BlackRock Muni Intermediate Duration Fund, Inc. described in Note 7 are appropriate and have been properly applied, in all material respects. However, we were not engaged to audit, review, or apply any procedures to such financial highlights other than with respect to the adjustments described in Note 7 and, accordingly, we do not express an opinion or any other form of assurance on such financial highlights.
Deloitte & Touche LLP
Princeton, New Jersey
June 26, 2009
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78 | ANNUAL REPORT | APRIL 30, 2009 |
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Important Tax Information |
All of the net investment income distributions paid by BlackRock Apex Municipal Fund, Inc., BlackRock MuniAssets Fund, Inc., BlackRock MuniEnhanced Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc. during the taxable year ended April 30, 2009 qualify as tax-exempt interest dividends for federal income tax purposes.
The following table summarizes the taxable per share distributions paid by the following Funds during the taxable year ended April 30, 2009.
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BlackRock MuniHoldings Fund, Inc. | | Payable
Date | | Ordinary
Income | | Long-Term
Capital
Gains | |
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Common Shareholders | | 12/31/2008 | | $ | 0.001458 | | $ | 0.015930 | |
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Preferred Shareholders: | | | | | | | | | |
Series A | | 12/10/2008 | | $ | 0.88 | | $ | 12.12 | |
| | 12/17/2008 | | $ | 0.91 | | $ | 7.52 | |
| | 12/24/2008 | | $ | 0.06 | | $ | 0.52 | |
| | | | | | | | | |
Series B | | 12/12/2008 | | $ | 0.83 | | $ | 9.15 | |
| | 12/19/2008 | | $ | 0.71 | | $ | 7.72 | |
| | 12/26/2008 | | $ | 0.30 | | $ | 3.17 | |
| | | | | | | | | |
Series C | | 12/09/2008 | | $ | 1.17 | | $ | 16.14 | |
| | 12/16/2008 | | $ | 0.93 | | $ | 6.73 | |
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BlackRock MuniHoldings Fund II, Inc. | | | | Payable Date | | Ordinary
Income | |
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Common Shareholders | | | | 12/31/2008 | | $ | 0.019911 | |
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Preferred Shareholders: | | | | | | | | |
Series A | | | | 12/03/2008 | | $ | 11.68 | |
| | | | 12/10/2008 | | $ | 13.00 | |
| | | | 12/17/2008 | | $ | 6.89 | |
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Series B | | | | 12/01/2008 | | $ | 11.57 | |
| | | | 12/08/2008 | | $ | 10.65 | |
| | | | 12/15/2008 | | $ | 8.70 | |
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BlackRock Muni Intermediate Duration Fund, Inc. | | | | Payable Date | | Ordinary
Income | |
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Common Shareholders | | | | 12/31/2008 | | $ | 0.003013 | |
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Preferred Shareholders: | | | | | | | | |
Series TH7 | | | | 12/19/2008 | | $ | 4.84 | |
Series TH28 | | | | 12/19/2008 | | $ | 5.15 | |
Series W7 | | | | 12/18/2008 | | $ | 4.90 | |
Series F7 | | | | 12/15/2008 | | $ | 4.81 | |
Series T7 | | | | 12/10/2008 | | $ | 4.91 | |
Series M7 | | | | 12/09/2008 | | $ | 4.84 | |
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BlackRock MuniVest Fund II, Inc. | | | | Payable Date | | Ordinary
Income | |
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Common Shareholders | | | | 12/31/2008 | | $ | 0.004573 | |
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Preferred Shareholders: | | | | | | | | |
Series A | | | | 12/18/2008 | | $ | 6.13 | |
Series B | | | | 12/26/2008 | | $ | 6.01 | |
Series C | | | | 12/18/2008 | | $ | 5.67 | |
Series D | | | | 12/23/2008 | | $ | 6.40 | |
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All of the other net investment income distributions paid by the Funds qualify as tax-exempt interest dividends for federal income tax purposes.
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ANNUAL REPORT | APRIL 30, 2009 | 79 |
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Automatic Dividend Reinvestment Plans |
How the Plan Works — The Funds offer a Dividend Reinvestment Plan (the “Plan”) under which income and capital gains dividends paid by each Fund are automatically reinvested in additional Common Shares of each Fund. The Plan is administered on behalf of the shareholders by BNY Mellon Shareowner Services for BlackRock MuniYield Fund, Inc. and BlackRock MuniYield Quality Fund II, Inc. and Computershare Trust Company, N.A. for BlackRock MuniYield Quality Fund, Inc. (individually, the “Plan Agent” or together, the “Plan Agents”). Under the Plan, whenever the Funds declare a dividend, participants in the Plan will receive the equivalent in shares of Common Shares of the Fund. The Plan Agents will acquire the shares for the participant’s account either (i) through receipt of additional unissued but authorized shares of the Fund (“newly issued shares”) or (ii) by purchase of outstanding Common Shares on the open market on the New York Stock Exchange or elsewhere. If, on the dividend payment date, a Fund’s net asset value per share is equal to or less than the market price per share plus estimated brokerage commissions (a condition often referred to as a “market premium”), the Plan Agents will invest the dividend amount in newly issued shares. If a Fund’s net asset value per share is greater than the market price per share (a condition often referred to as a “market discount”), the Plan Agents will invest the dividend amount by purchasing on the open market additional shares. If the Plan Agents are unable to invest the full dividend amount in open market purchases, or if the market discount shifts to a market premium during the purchase period, the Plan Agents will invest any uninvested portion in newly issued shares. The shares acquired are credited to each shareholder’s account. The amount credited is determined by dividing the dollar amount of the dividend by either (i) when the shares are newly issued, the net asset value per share on the date the shares are issued or (ii) when shares are purchased in the open market, the average purchase price per share.
Participation in the Plan — Participation in the Plan is automatic, that is, a shareholder is automatically enrolled in the Plan when he or she purchases Common Shares of a Fund unless the shareholder specifically elects not to participate in the Plan. Shareholders who elect not to participate will receive all dividend distributions in cash. Shareholders who do not wish to participate in the Plan, must advise their Plan Agent in writing (at the address set forth below) that they elect not to participate in the Plan. Participation in the Plan is completely voluntary and may be terminated or resumed at any time without penalty by writing to the Plan Agent.
Benefits of the Plan — The Plan provides an easy, convenient way for shareholders to make additional, regular investments in a Fund. The Plan promotes a long-term strategy of investing at a lower cost. All shares acquired pursuant to the Plan receive voting rights. In addition, if the market price plus commissions of a Fund’s shares is above the net asset value, participants in the Plan will receive shares of the Fund for less than they could otherwise purchase them and with a cash value greater than the value of any cash distribution they would have received. However, there may not be enough shares available in the market to make distributions in shares at prices below the net asset value. Also, since the Funds do not redeem shares, the price on resale may be more or less than the net asset value.
Plan Fees — There are no enrollment fees or brokerage fees for participating in the Plan. The Plan Agents’ service fees for handling the reinvestment of distributions are paid for by each Fund. However, brokerage commissions may be incurred when a Fund purchase shares on the open market and shareholders will pay a pro rata share of any such commissions.
Tax Implications — 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. Therefore, income and capital gains may still be realized even though shareholders do not receive cash. 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 a Fund’s shares are trading at a market premium, a 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 the discount from the market value (which may not exceed 5% of the fair market value of a 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.
Contact Information — All correspondence concerning the Plan, including any questions about the Plan, should be directed to the Plan Agent at the following addresses: Shareholders of BlackRock Apex Municipal Fund, Inc., BlackRock MuniAssets Fund, Inc., BlackRock MuniHoldings Fund, Inc., BlackRock MuniHoldings Fund II, Inc., BlackRock MuniHoldings Insured Fund, Inc., and BlackRock MuniVest Fund II, Inc. should contact BNY Mellon Shareowner Services, P.0. Box 358035, Pittsburgh, PA 15252-8035, Telephone: (866) 216-0242 and shareholders of BlackRock MuniEnhanced Fund, Inc. and BlackRock Muni Intermediate Duration Fund, Inc. should contact Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078, Telephone: (800) 699-1BFM or overnight correspondence should be directed to the Plan Agent at 250 Royall Street, Canton, MA 02021.
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80 | ANNUAL REPORT | APRIL 30, 2009 |
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Name, Address
and Year of Birth | | Position(s)
Held with
Funds | | Length of
Time Served
as a Director2 | | Principal Occupation(s) During Past Five Years | | Number of
BlackRock-
Advised Funds
and Portfolios
Overseen | | Public Directorships |
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Non-Interested Directors1 | | | | | | | | |
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Richard E. Cavanagh
40 East 52nd Street
New York, NY 10022
1946 | | Chairman of
the Board
and Director | | Since 2007 | | Trustee, Aircraft Finance Trust since 1999; Director, The Guardian Life Insurance Company of America since 1998; Trustee, Educational Testing Service since 1997; Senior Advisor since 2008 and Director since 1996, The Fremont Group; Adjunct Lecturer, Harvard University since 2007; Formerly President and Chief Executive Officer of The Conference Board, Inc. (global business research organization) from 1995 to 2007. | | 106 Funds
103 Portfolios | | Arch Chemical (chemical and allied products) |
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Karen P. Robards
40 East 52nd Street
New York, NY 10022
1950 | | Vice Chair
of the Board,
Chair of
the Audit
Committee
and Director | | Since 2007 | | Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development, (a not-for-profit organization) since 1987; Formerly Director of Enable Medical Corp. from 1996 to 2005; Formerly an investment banker at Morgan Stanley from 1976 to 1987. | | 106 Funds
103 Portfolios | | AtriCure, Inc. (medical devices); Care Investment Trust, Inc. (health care real estate investment trust) |
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G. Nicholas Beckwith, III
40 East 52nd Street
New York, NY 10022
1945 | | Director | | Since 2007 | | Chairman and Chief Executive Officer, Arch Street Management, LLC (Beckwith Family Foundation) and various Beckwith property companies since 2005; Chairman of the Board of Directors, University of Pittsburgh Medical Center since 2002; Board of Directors, Shady Side Hospital Foundation since 1977; Board of Directors, Beckwith Institute for Innovation In Patient Care since 1991; Member, Advisory Council on Biology and Medicine, Brown University since 2002; Trustee, Claude Worthington Benedum Foundation (charitable foundation) since 1989; Board of Trustees, Chatham University since 1981; Board of Trustees, University of Pittsburgh since 2002; Emeritus Trustee, Shady Side Academy since 1977; Formerly Chairman and Manager, Penn West Industrial Trucks LLC (sales, rental and servicing of material handling equipment) from 2005 to 2007; Formerly Chairman, President and Chief Executive Officer, Beckwith Machinery Company (sales, rental and servicing of construction and equipment) from 1985 to 2005; Formerly Member of the Board of Directors, National Retail Properties (REIT) from 2006 to 2007. | | 106 Funds
103 Portfolios | | None |
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Kent Dixon
40 East 52nd Street
New York, NY 10022
1937 | | Director and
Member of
the Audit
Committee | | Since 2007 | | Consultant/Investor since 1988. | | 106 Funds
103 Portfolios | | None |
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Frank J. Fabozzi
40 East 52nd Street
New York, NY 10022
1948 | | Director and
Member of
the Audit
Committee | | Since 2007 | | Consultant/Editor of The Journal of Portfolio Management since 2006; Professor in the Practice of Finance and Becton Fellow, Yale University, School of Management, since 2006; Formerly Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006. | | 106 Funds
103 Portfolios | | None |
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Kathleen F. Feldstein
40 East 52nd Street
New York, NY 10022
1941 | | Director | | Since 2007 | | President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. since 2005; Member of the Corporation of Partners HealthCare since 1995; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting Committee to the Harvard University Art Museum since 2003. | | 106 Funds
103 Portfolios | | The McClatchy Company (publishing) |
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James T. Flynn
40 East 52nd Street
New York, NY 10022
1939 | | Director and
Member of
the Audit
Committee | | Since 2007 | | Formerly Chief Financial Officer of JPMorgan & Co., Inc. from 1990 to 1995. | | 106 Funds
103 Portfolios | | None |
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Jerrold B. Harris
40 East 52nd Street
New York, NY 10022
1942 | | Director | | Since 2007 | | Trustee, Ursinus College since 2000; Director, Troemner LLC (scientific equipment) since 2000. | | 106 Funds
103 Portfolios | | BlackRock Kelso Capital Corp. |
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ANNUAL REPORT | APRIL 30, 2009 | 81 |
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Officers and Directors (continued) |
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Name, Address
and Year of Birth | | Position(s)
Held with
Funds | | Length of
Time Served
as a Director2 | | Principal Occupation(s) During Past Five Years | | Number of
BlackRock-
Advised Funds
and Portfolios
Overseen | | Public Directorships |
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Non-Interested Directors1 (concluded) | | | | | | |
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R. Glenn Hubbard
40 East 52nd Street
New York, NY 10022
1958 | | Director | | Since 2007 | | Dean of Columbia Business School since 2004; Columbia faculty member since 1988; Formerly Co-Director of Columbia Business School’s Entrepre-neurship Program from 1997 to 2004; Visiting Professor at the John F. Kennedy School of Government at Harvard University and the Harvard Business School since 1985 and at the University of Chicago since 1994; Formerly Chairman of the U.S. Council of Economic Advisers under the President of the United States from 2001 to 2003. | | 106 Funds
103 Portfolios | | ADP (data and information services); KKR Financial Corporation (finance); Metropolitan Life Insurance Company (insurance) |
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W. Carl Kester
40 East 52nd Street
New York, NY 10022
1951 | | Director and
Member of
the Audit
Committee | | Since 2007 | | George Fisher Baker Jr. Professor of Business Administration, Harvard Business School; Deputy Dean for Academic Affairs since 2006; Unit Head, Finance, Harvard Business School from 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program of Harvard Business School from 1999 to 2005; Member of the faculty of Harvard Business School since 1981; Independent Consultant since 1978. | | 106 Funds
103 Portfolios | | None |
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1 | Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. |
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2 | Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows directors as joining the Funds’ board in 2007, each director first became a member of the board of directors of other legacy MLIM or legacy BlackRock Funds as follows: G. Nicholas Beckwith, III, 1999; Richard E. Cavanagh, 1994; Kent Dixon, 1988; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1998 and Karen P. Robards, 1998. |
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Interested Directors3 | | | | | | | | |
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Richard S. Davis
40 East 52nd Street
New York, NY 10022
1945 | | Director | | Since 2007 | | Managing Director, BlackRock, Inc. since 2005; Formerly Chief Executive Officer, State Street Research & Management Company from 2000 to 2005; Formerly Chairman of the Board of Trustees, State Street Research Mutual Funds from 2000 to 2005; Formerly Chairman, SSR Realty from 2000 to 2004. | | 175 Funds
285 Portfolios | | None |
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Henry Gabbay
40 East 52nd Street
New York, NY 10022
1947 | | Director | | Since 2007 | | Formerly Consultant, BlackRock, Inc. from 2007 to 2008; Formerly Managing Director, BlackRock, Inc. from 1989 to 2007; Formerly Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; Formerly President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007; Formerly Treasurer of certain closed-end Funds in the BlackRock fund complex from 1989 to 2006. | | 175 Funds
285 Portfolios. | | None |
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3 | Mr. Davis is an “interested person,” as defined in the Investment Company Act of 1940, of the Funds based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an “interested person” of the Funds based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and PNC securities. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. |
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| Effective January 1, 2009, Robert S. Salomon, Jr. retired as Director of the Funds. The Board wishes Mr. Salomon well in his retirement. | |
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82 | ANNUAL REPORT | APRIL 30, 2009 |
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Officers and Directors (concluded) |
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Name, Address
and Year of Birth | | Position(s)
Held with
Funds | | Length of
Time
Served | | Principal Occupation(s) During Past Five Years |
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Funds Officers1 | | | | | | |
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Donald C. Burke
40 East 52nd Street
New York, NY 10022
1960 | | President
and Chief
Executive
Officer | | Since 2007 | | Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of Merrill Lynch Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. (“FAM”) in 2006, First Vice President thereof from 1997 to 2005, Treasurer thereof from 1999 to 2006 and Vice President thereof from 1990 to 1997. |
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Anne F. Ackerley
40 East 52nd Street
New York, NY 10022
1962 | | Vice
President | | Since 2007 | | Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer of BlackRock’s U.S. Retail Group since 2006; Formerly Head of BlackRock’s Mutual Fund Group from 2000 to 2006. |
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Neal J. Andrews
40 East 52nd Street
New York, NY 10022
1966 | | Chief
Financial
Officer | | Since 2007 | | Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. (formerly PFPC Inc.) from 1992 to 2006. |
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Jay M. Fife
40 East 52nd Street
New York, NY 10022
1970 | | Treasurer | | Since 2007 | | Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly Assistant Treasurer of the MLIM/FAM-advised Funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006. |
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Brian P. Kindelan
40 East 52nd Street
New York, NY 10022
1959 | | Chief
Compliance
Officer | | Since 2007 | | Chief Compliance Officer of the BlackRock-advised Funds since 2007; Managing Director and Senior Counsel of BlackRock, Inc. since 2005; Formerly Director and Senior Counsel of BlackRock Advisors, Inc. from 2001 to 2004. |
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Howard B. Surloff
40 East 52nd Street
New York, NY 10022
1965 | | Secretary | | Since 2007 | | Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs Asset Management, L.P. from 1993 to 2006. |
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1 | Officers of the Funds serve at the pleasure of the Board of Directors. |
Custodians
State Street Bank and Trust Company2
Boston, MA 02101
The Bank of New York Mellon3
New York, NY 10286
Transfer Agent
Common Shares:
Computershare Trust Companies, N.A.2
Providence, RI 02940
Auction Agent
Preferred Shares:
BNY Mellon Shareowner Services2
Jersey City, NJ 07310
Transfer Agent
Common Shares and Preferred Shares:
BNY Mellon Shareowner Services3
Jersey City, NJ 07310
Accounting Agent
State Street Bank and Trust Company
Princeton, NJ 08540
Independent Registered Public
Accounting Firm
Deloitte & ToucheLLP
Princeton, NJ 08540
Legal Counsel
Skadden, Arps, Slate, Meagher & FlomLLP
New York, NY 10036
Funds Address
BlackRock Closed-End Funds
c/o BlackRock Advisors, LLC
100 Bellevue Parkway
Wilmington, DE 19809
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2 | For BlackRock MuniEnhanced Fund, Inc. and BlackRock Muni Intermediate Duration Fund, Inc. |
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3 | For BlackRock Apex Municipal Fund, Inc., BlackRock MuniAssets Fund, Inc., BlackRock MuniHoldings Fund, Inc., BlackRock MuniHoldings Fund II, Inc., BlackRock MuniHoldings Insured Fund, Inc. and BlackRock MuniVest Fund II, Inc. |
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ANNUAL REPORT | APRIL 30, 2009 | 83 |
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.
The Funds are listed for trading on the New York Stock Exchange (“NYSE”) and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. Each Fund filed with the Securities and Exchange Commission (“SEC”) the certification of their chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.
On September 12, 2008, the Board of MuniHoldings Insured voted unanimously to change certain investment guidelines. Under normal market conditions, MuniHoldings Insured is required to invest at least 80% of its total assets in municipal bonds either (i) insured under an insurance policy purchased by the Fund or (ii) insured under an insurance policy obtained by the issuer of the municipal bond or any other party. Historically, MuniHoldings Insured has had an additional non-fundamental investment policy limiting its purchase of insured municipal bonds to those bonds insured by insurance providers with claims-paying abilities rated AAA or Aaa at the time of investment.
Following the onset of the credit and liquidity crises currently troubling the financial markets, the applicable rating agencies lowered the claims-paying ability rating of most of the municipal bond insurance providers below the highest rating category. As a result, the Advisor recommended, and the Board approved, an amended policy with respect to the purchase of insured municipal bonds that such bonds must be insured by insurance providers or other entities with claims-paying abilities rated at least investment grade. This investment grade restriction is measured at the time of investment, and MuniHoldings Insured will not be required to dispose of municipal bonds it holds in the event of subsequent downgrades. The approved changes do not alter MuniHoldings Insured’s investment objective.
The Advisor and the Board believe the amended policies will allow the Advisor to better manage MuniHoldings Insured’s portfolio in the best interests of shareholders and to better meet its investment objective.
Effective September 13, 2008, following approval by the Funds’ Board and the applicable rating agencies, the Board amended the terms of the Funds’ Articles Supplementary, as applicable, in order to allow the Funds that have issued Preferred Shares to enter into TOB transactions, the proceeds of which were used to redeem a portion of the Funds’ Preferred Shares. Accordingly, the definition of Inverse Floaters was amended to incorporate the Funds’ permissible ratio of floating rate instruments into inverse floating rate instruments. Additionally, conforming changes and certain formula modifications concerning inverse floaters were made to the definitions of Moody’s Discount Factor and S&P Discount Factor, as applicable, to integrate the Funds’ investments in TOBs into applicable calculations.
The amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Each Fund will send you a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes.
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| | Total Fiscal Year-to-Date
Cumulative Distributions by Character | | Percentage of Fiscal Year-to-Date
Cumulative Distributions by Character | |
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| | Net
Investment
Income | | Net
Realized
Capital
Gains | | Return
of
Capital | | Total Per
Common
Share | | Net
Investment
Income | | Net
Realized
Capital
Gains | | Return
of
Capital | | Total Per
Common
Share | |
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BlackRock MuniHoldings Fund, Inc. | | $ | 0.85346 | | | $ | 0.01593 | | | — | | $ | 0.86939 | | 98 | % | | 2% | | 0% | | 100% | |
BlackRock MuniHoldings Fund II, Inc. | | $ | 0.58691 | | | | — | | | — | | $ | 0.58691 | | 100 | % | | 0% | | 0% | | 100% | |
BlackRock Muni Intermediate Duration Fund, Inc. | | $ | 0.64101 | | | | — | | | — | | $ | 0.64101 | | 100 | % | | 0% | | 0% | | 100% | |
BlackRock MuniVest Fund II, Inc. | | $ | 0.43057 | | | | — | | | — | | $ | 0.43057 | | 100 | % | | 0% | | 0% | | 100% | |
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84 | ANNUAL REPORT | APRIL 30, 2009 |
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Additional Information (continued) |
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 website 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’ websites 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.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. 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 it 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 contact the Funds at (800) 441-7762.
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (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 Commission’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 the operation of the Public Reference Room 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 toll-free (800) 441-7762; (2) at www.blackrock.com; and (3) on the Securities and Exchange Commission’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 www.blackrock.com or by calling (800) 441-7762 and (2) on the Securities and Exchange Commission’s website at http://www.sec.gov.
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ANNUAL REPORT | APRIL 30, 2009 | 85 |
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Additional Information (concluded) |
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BlackRock Privacy Principles |
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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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86 | ANNUAL REPORT | APRIL 30, 2009 |
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, currently set at the maximum reset rate as a result of failed auctions, may affect the yield to Common Shareholders. Statements and other information herein are as dated and are subject to change.
#CEMUN18-4/09
| Item 2 – | Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com. |
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Item 3 – | Audit Committee Financial Expert – The registrant’s board of directors or trustees, as applicable (the “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: |
| | Kent Dixon Frank J. Fabozzi James T. Flynn W. Carl Kester Karen P. Robards Robert S. Salomon, Jr. (retired effective December 31, 2008) |
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| | The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR. |
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| | Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements. |
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| | Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization. Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. |
| Item 4 – | Principal Accountant Fees and Services |
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| (a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees3 |
Entity Name | Current Fiscal Year End | Previous Fiscal Year End | Current Fiscal Year End | Previous Fiscal Year End | Current Fiscal Year End | Previous Fiscal Year End | Current Fiscal Year End | Previous Fiscal Year End |
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BlackRock MuniEnhanced Fund, Inc. | $23,200 | $33,300 | $3,500 | $3,500 | $6,100 | $6,100 | $0 | $1,028 |
1 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.
2 The nature of the services include tax compliance, tax advice and tax planning.
3 The nature of the services include a review of compliance procedures and attestation thereto.
| | (e)(1) Audit Committee Pre-Approval Policies and Procedures: |
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| | 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”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operation or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 for all of the registrants the Committee oversees. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels. 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. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to one or more of its members the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels. (e)(2) None of the services described in each of Items 4(b) through (d) were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not Applicable |
| | (g) Affiliates’ Aggregate Non-Audit Fees: |
| | Entity Name | Current Fiscal Year End | Previous Fiscal Year End |
| BlackRock MuniEnhanced Fund, Inc. | $417,100 | $415,628 |
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| | (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 (not including any non-affiliated sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by 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) – $407,500, 0% |
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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 Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)): |
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| | Kent Dixon Frank J. Fabozzi James T. Flynn W. Carl Kester Karen P. Robards Robert S. Salomon, Jr. (retired effective December 31, 2008) |
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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 – The board of directors has delegated the voting of proxies for the Fund securities to the Fund’s investment adviser (“Investment Adviser”) pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio |
| | Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov. |
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| Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – as of April 30, 2009. |
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| (a)(1) | The registrant (or “Fund”) is managed by a team of investment professionals comprised of Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, Walter O’Connor, Managing Director at BlackRock and Michael A. Kalinoski, Director at BlackRock. Each is a member of BlackRock’s municipal tax-exempt management group. Each is jointly responsible for the day-to-day management of the registrant’s portfolio, which includes setting the registrant’s overall investment strategy, overseeing the management of the registrant and/or selection of its investments. Messrs. Jaeckel, O’Connor and Kalinoski have been members of the registrant’s portfolio management team since 2006, 2006 and 2000, respectively. |
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Portfolio Manager | Biography |
Theodore R. Jaeckel, Jr. | Managing Director at BlackRock, Inc. since 2006; Managing Director of Merrill Lynch Investment Managers, L.P. (“MLIM”) from 2005 to 2006; Director of MLIM from 1997 to 2005. |
Walter O’Connor | Managing Director of BlackRock, Inc. since 2006; Managing Director of MLIM from 2003 to 2006; Director of MLIM from 1998 to 2003. |
Michael A. Kalinoski | Director of BlackRock, Inc. since 2006; Director of MLIM from 1999 to 2006. |
| (a)(2) | As of April 30, 2009: |
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| (ii) Number of Other Accounts Managed and Assets by Account Type | (iii) Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based |
(i) Name of Portfolio Manager | Other Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | Other Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts |
Theodore R. Jaeckel, Jr. | 76 | 0 | 0 | 0 | 0 | 0 |
| $17.16 Billion | $0 | $0 | $0 | $0 | $0 |
Walter O’Connor | 76 | 0 | 0 | 0 | 0 | 0 |
| $17.16 Billion | $0 | $0 | $0 | $0 | $0 |
Michael A. Kalinoski | 6 | 0 | 0 | 0 | 0 | 0 |
| $2.63 Billion | $0 | $0 | $0 | $0 | $0 |
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| (iv) | Potential Material Conflicts of Interest |
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| | BlackRock and its affiliates (collectively, herein “BlackRock”) has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to |
| | protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, its affiliates and significant shareholders and any officer, director, stockholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, or any of its affiliates or significant shareholders, or any officer, director, stockholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Each portfolio manager also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. In this connection, it should be noted that a portfolio manager may currently manage certain accounts that are subject to performance fees. In addition, a portfolio manager may assist in managing certain hedge funds and may be entitled to receive a portion of any incentive fees earned on such funds and a portion of such incentive fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the future manage other such accounts or funds and may be entitled to receive incentive fees. As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock has adopted a policy that is intended to ensure that investment opportunities are allocated fairly and equitably among client accounts over time. This policy also seeks to achieve reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base. |
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| (a)(3) | As of April 30, 2009: |
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| | Portfolio Manager Compensation Overview BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock such as its Long-Term Retention and Incentive Plan. |
| | Base compensation. Generally, portfolio managers receive base compensation based on their seniority and/or their position with the firm. Senior portfolio managers who perform additional management functions within the portfolio management group or within BlackRock may receive additional compensation for serving in these other capacities. Discretionary Incentive Compensation Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s seniority, role within the portfolio management team, teamwork and contribution to the overall performance of these portfolios and BlackRock. In most cases, including for the portfolio managers of the Fund, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Fund or other accounts managed by the portfolio managers are measured. BlackRock’s Chief Investment Officers determine the benchmarks against which the performance of funds and other accounts managed by each portfolio manager is compared and the period of time over which performance is evaluated. With respect to the portfolio managers, such benchmarks for the Fund include a combination of market-based indices (e.g., Barclays Capital Municipal Bond Index), certain customized indices and certain fund industry peer groups. BlackRock’s Chief Investment Officers make a subjective determination with respect to the portfolio managers’ compensation based on the performance of the funds and other accounts managed by each portfolio manager relative to the various benchmarks noted above. Performance is measured on both a pre-tax and after-tax basis over various time periods including 1, 3, 5 and 10-year periods, as applicable. Distribution of Discretionary Incentive Compensation Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. The BlackRock, Inc. restricted stock units, if properly vested, will be settled in BlackRock, Inc. common stock. Typically, the cash bonus, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. Long-Term Retention and Incentive Plan (“LTIP”) — The LTIP is a long-term incentive plan that seeks to reward certain key employees. Beginning in 2006, awards are granted under the LTIP in the form of BlackRock, Inc. restricted stock units that, if properly vested and subject to the attainment of certain performance goals, will be settled in BlackRock, Inc. common stock. Messrs. Jaeckel and O’Connor have each received awards under the LTIP. Deferred Compensation Program — A portion of the compensation paid to eligible BlackRock employees may be voluntarily deferred into an account that tracks the performance of certain of the firm’s investment products. Each participant in the deferred compensation program is permitted to allocate his deferred amounts among the various investment options. Messrs. Jaeckel, O’Connor and Kalinoski have each participated in the deferred compensation program. |
| | Other compensation benefits. In addition to base compensation and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following: Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 6% of eligible pay contributed to the plan capped at $4,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation. The RSP offers a range of investment options, including registered investment companies managed by the firm. BlackRock contributions follow the investment direction set by participants for their own contributions or, absent employee investment direction, are invested into a balanced portfolio. The ESPP allows for investment in BlackRock common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares or a dollar value of $25,000. Messrs. Jaeckel, O’Connor and Kalinoski are eligible to participate in these plans. |
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| (a)(4) | Beneficial Ownership of Securities – April 30, 2009. |
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Portfolio Manager | Dollar Range of Equity Securities Beneficially Owned |
Theodore R. Jaeckel, Jr. | None |
Walter O’Connor | None |
Michael A. Kalinoski | None |
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Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report. |
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| Item 10 – | Submission of Matters to a Vote of Security Holders – The registrant’s Nominating and Governance Committee will consider nominees to the board of directors recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations that include biographical information and set forth the qualifications of the proposed nominee to the registrant’s Secretary. There have been no material changes to these procedures. |
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| Item 11 – | Controls and Procedures |
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11(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 13(a)-15(b) under the Securities Exchange Act of 1934, as amended. |
11(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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| 12(a)(1) – | Code of Ethics – See Item 2 |
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| 12(a)(2) – | Certifications – Attached hereto |
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| 12(a)(3) – | Not Applicable |
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12(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. BlackRock MuniEnhanced Fund, Inc. |
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| | By: | /s/ Donald C. Burke | |
| | | Donald C. Burke |
| | | Chief Executive Officer of |
| | | BlackRock MuniEnhanced Fund, Inc. |
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| | Date: June 19, 2009 |
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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/ Donald C. Burke | |
| | | Donald C. Burke |
| | | Chief Executive Officer (principal executive officer) of |
| | | BlackRock MuniEnhanced Fund, Inc. |
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| | Date: June 19, 2009 |
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| | By: | /s/ Neal J. Andrews | |
| | | Neal J. Andrews |
| | | Chief Financial Officer (principal financial officer) of |
| | | BlackRock MuniEnhanced Fund, Inc. |
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| | Date: June 19, 2009 |
