such conditions only with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Funds may be required to pay more at settlement than the security is worth. In addition, the purchaser is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed-delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations.
The TOB may also be terminated without the consent of the Fund upon the occurrence of certain events as defined in the TOB agreements. Such termination events may include the bankruptcy or default of the municipal security, a substantial downgrade in credit quality of the municipal security, the inability of the TOB to obtain quarterly or annual renewal of the liquidity support agreement, a substantial decline in market value of the municipal security or the inability to remarket the short-term floating rate certificates to third party investors.
The cash received by the TOB from the sale of the short-term floating rate certificates, less transaction expenses, is paid to the Fund, which typically invest the cash in additional municipal bonds. Each Fund’s transfer of the municipal bonds to a TOB is accounted for as a secured borrowing, therefore the municipal bonds deposited into a TOB are presented in the Funds’ Schedules of Investments and the proceeds from the issuance of the short-term floating rate certificates are shown on the Statements of Assets and Liabilities as trust certificates.
Interest income from the underlying securities is recorded by the Funds on an accrual basis. Interest expense incurred on the secured borrowing and other expenses related to remarketing, administration and trustee services to a TOB are reported as expenses of the Funds. The floating rate certificates have interest rates that generally reset weekly and their holders have the option to tender certificates to the TOB for redemption at par at each reset date. As of January 31, 2009, the aggregate value of the underlying municipal bonds transferred to TOBs, the related liability for trust certificates and the range of interest rates were as follows:
Financial transactions executed through TOBs generally will underperform the market for fixed rate municipal bonds when interest rates rise, but tend to outperform the market for fixed rate bonds when interest rates decline or remain relatively stable. Should short-term interest rates rise, each Fund’s investment in TOBs may adversely affect each Fund’s investment income and distributions to shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB may adversely affect each Fund’s net asset values per share.
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Notes to Financial Statements (continued) |
Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. Dividends and distributions to preferred shareholders are accrued and determined as described in Note 5.
Income Taxes: It is each Fund’s policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.
The Funds file US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on MuniHoldings Insured II’s US federal tax returns remains open for the three years ended September 30, 2007 and the period ended August 31, 2008. The statute of limitations on MuniYield California Insured, MuniYield Insured, MuniYield Michigan Insured II and MuniYield New York Insured’s US federal tax returns remain open for the three years ended October 31, 2007 and the period ended August 31, 2008. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Recent Accounting Pronouncement: In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (“FAS 161”), was issued and is effective for fiscal years beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The impact on the Funds’ financial statement disclosures, if any, is currently being assessed.
Deferred Compensation and Blackrock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Fund’s Board, non-interested Directors (“Independent Directors”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts have been invested in common shares of other BlackRock Closed-End Funds selected by the Independent Directors. This has approximately the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in other certain BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of the Funds. The Funds may, however elect to invest in common shares of other certain BlackRock Closed-End Funds selected by the Independent Directors in order to match their deferred compensation obligations.
Dividends and distributions from the BlackRock Closed-End Fund investments under the plan are included in income — affiliated on the Statements of Operations.
Bank Overdraft: MuniHoldings Insured II recorded a bank overdraft which resulted from estimates of available cash.
Other: Expenses directly related to each Fund are charged to that Fund. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
Each Fund has entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Advisor”), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and administration services. As of January 31, 2009, The PNC Financial Services Group, Inc. (“PNC”) and Bank of America Corporation (“BAC”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). BAC became a stockholder of BlackRock following its acquisition of Merrill Lynch & Co., Inc. (“Merrill Lynch”) on January 1, 2009. Prior to that date, both PNC and Merrill Lynch were considered affiliates of the Funds under the 1940 Act. Subsequent to the acquisition, PNC remains an affiliate, but due to the restructuring of Merrill Lynch’s ownership interest of BlackRock, BAC is not deemed to be an affiliate under the 1940 Act.
The Advisor is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Advisor a monthly fee at an annual rate of 0.55% for MuniHoldings Insured II, and 0.50% for MuniYield California Insured, MuniYield Insured, MuniYield Michigan Insured II, and MuniYield New York Insured, of each Fund’s average daily net assets. Average daily net assets is the average daily value of the Fund’s total assets minus the sum of its accrued liabilities.
The Advisor has voluntarily agreed to waive its advisory fee on the proceeds of Preferred Shares and TOBs that exceeds 35% of the average daily net assets of MuniHoldings Insured II, which is included in fees waived by advisor on the Statements of Operations. For the six months ended January 31, 2009, the Advisor waived its fees in the amount of $14,537.
The Advisor has agreed to waive its advisory fee by the amount of investment advisory fees each Fund pays to the Advisor indirectly through its investment in affiliated money market funds, which are included in fees
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52 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 |
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Notes to Financial Statements (continued) |
waived by advisor on the Statements of Operations. For the six months ended January 31, 2009, the amounts waived were as follows:
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| | Fees Waived
by Advisor | |
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MuniHoldings Insured II | | $ | 314,973 | |
MuniYield California Insured | | $ | 49,331 | |
MuniYield Insured | | $ | 53,510 | |
MuniYield Michigan Insured II | | $ | 11,327 | |
MuniYield New York Insured | | $ | 52,696 | |
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The Advisor has entered into separate sub-advisory agreements with BlackRock Investment Management, LLC (“BIM”), an affiliate of the Advisor, with respect to each Fund, under which the Advisor pays BIM for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by each Fund to the Advisor.
For the six months ended January 31, 2009, each Fund reimbursed the Advisor for certain accounting services, which are included in accounting services in the Statements of Operations. The reimbursements were as follows:
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| | Accounting
Services | |
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MuniHoldings Insured II | | $ | 4,057 | |
MuniYield California Insured | | $ | 6,167 | |
MuniYield Insured | | $ | 10,848 | |
MuniYield Michigan Insured II | | $ | 2,341 | |
MuniYield New York Insured | | $ | 6,887 | |
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Pursuant to the terms of the custody agreement, custodian fees may be reduced by amounts calculated on uninvested cash balances, which are shown on the Statements of Operations as fees paid indirectly.
Certain officers and/or directors of the Funds are officers and/or directors of BlackRock, Inc. or its affiliates. The Funds reimburse the Advisor for the compensation paid to the Funds’ Chief Compliance Officer.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six months ended January 31, 2009 were as follows:
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| | Total Purchases | | Total Sales | |
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MuniHoldings Insured II | | $ | 59,649,307 | | $ | 103,537,476 | |
MuniYield California Insured | | $ | 41,134,145 | | $ | 124,916,173 | |
MuniYield Insured Fund | | $ | 179,053,280 | | $ | 338,893,320 | |
MuniYield Michigan Insured II | | $ | 12,049,288 | | $ | 31,147,425 | |
MuniYield New York Insured | | $ | 76,886,575 | | $ | 151,129,944 | |
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4. Concentration, Market and Credit Risk:
The Funds invest a substantial amount of its assets in issuers located in a single state or limited number of states. Please see the Schedules of Investments for concentrations in specific states.
Many municipalities insure repayment of their bonds, which reduces the risk of loss due to issuer default. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the issuer will meet its obligation.
In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to credit risk, the Funds may be exposed to counterparty risk, or the risk that an entity with which the Funds has unsettled or open transactions may default. Financial assets, which potentially expose the Funds to credit and counterparty risks, consist principally of investments and cash due from counterparties. The extent of the Funds’ exposure to credit and counterparty risks with respect to these financial assets is approximated by their value recorded in the Funds’ Statements of Assets and Liabilities.
5. Capital Share Transactions:
Each Fund is authorized to issue 200,000,000 shares, including Preferred Shares all of which were initially classified as Common Shares, with a par value of $0.10 per share. Each Board is authorized, however, to reclassify any unissued shares of common shares without approval of Common Shareholders.
Common Shares
Shares issued and outstanding during the six months ended January 31, 2009, the period November 1, 2007 (October 1, 2007 for MuniHoldings Insured II) to July 31, 2008 and the year ended October 31, 2007 (September 30, 2007 for MuniHoldings Insured II) remained constant for the Funds.
Preferred Shares
The Preferred Shares are redeemable at the option of each Fund, in whole or in part, on any dividend payment date at their liquidation preference plus any accumulated or unpaid dividends whether or not declared. The Preferred Shares are also subject to mandatory redemption at their liquidation preference per share plus any accumulated or unpaid dividends, whether or not declared, if certain requirements relating to the composition of the assets and liabilities of each Fund, as set forth in each Fund’s Articles Supplementary, are not satisfied.
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
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SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 53 |
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Notes to Financial Statements (continued) |
to elect two Directors for a 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.
The Funds had the following series of Preferred Shares outstanding and effective yields at January 31, 2009:
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| | Series | | | Shares | | Yield | | Reset
Frequency | |
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MuniHoldings Insured II | | A | | | 1,4921 | | 0.716% | | 7 | | |
| | B | | | 1,4921 | | 0.746% | | 7 | | |
| | C | | | 2,8281 | | 0.731% | | 7 | | |
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MuniYield California Insured | | A | | | 1,2591 | | 0.594% | | 28 | | |
| | B | | | 1,2591 | | 0.655% | | 7 | | |
| | C | | | 1,1191 | | 0.731% | | 7 | | |
| | D | | | 1,3981 | | 0.655% | | 28 | | |
| | E | | | 1,3981 | | 0.716% | | 7 | | |
| | F | | | 1,2592 | | 1.778% | | 7 | | |
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MuniYield Insured | | A | | | 1,4561 | | 0.868% | | 28 | | |
| | B | | | 1,4561 | | 0.640% | | 28 | | |
| | C | | | 1,4561 | | 0.655% | | 28 | | |
| | D | | | 1,4561 | | 0.746% | | 28 | | |
| | E | | | 2,6471 | | 0.746% | | 7 | | |
| | F | | | 1,5881 | | 0.594% | | 28 | | |
| | G | | | 1,5881 | | 0.655% | | 7 | | |
| | H | | | 1,7202 | | 1.715% | | 7 | | |
| | I | | | 1,7202 | | 1.695% | | 7 | | |
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MuniYield Michigan Insured II | | A | | | 1,9411 | | 0.655% | | 7 | | |
| | B | | | 1,2001 | | 0.731% | | 7 | | |
| | C | | | 3532 | | 1.778% | | 7 | | |
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MuniYield New York Insured | | A | | | 1,4511 | | 1.142% | | 28 | | |
| | B | | | 1,4511 | | 0.655% | | 7 | | |
| | C | | | 2,3901 | | 0.655% | | 7 | | |
| | D | | | 1,6731 | | 0.731% | | 7 | | |
| | E | | | 1,8781 | | 0.746% | | 28 | | |
| | F | | | 1,5362 | | 1.751% | | 7 | | |
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| 1 | The maximum applicable rate on this series of Preferred Stock is the higher of 110% of the AA commercial paper rate or 110% of 90% of the Kenny S&P 30-day High Grade Index rate divided by 1.00 minus the marginal tax rate. |
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| 2 | The maximum applicable rate on this series of Preferred Stock is the higher of 110% plus or times (i) the Telerate/BBA LIBOR or (ii) 90% of the Kenny S&P 30-day High Grade Index rate divided by 1.00 minus the marginal tax rate. |
Dividends on seven-day Preferred Shares are cumulative at a rate, which is reset every seven days based on the results of an auction. Dividends on 28-day Preferred Shares are cumulative at a rate which is reset every 28 days based on the results of an auction. If the Preferred Shares fail to clear the auction on an auction date, the Fund is required to pay the maximum applicable rate on the Preferred Shares to holders of such shares for successive dividend periods until such time as the stock is successfully auctioned. The maximum applicable rate on the Preferred Shares is footnoted as applicable on the above chart. The low, high and average dividend rates on the Preferred Shares for each Fund for the six months ended January 31, 2009 were as follows:
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| | Series | | Low | | High | | Average | |
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MuniHoldings Insured II | | A | | 0.594 | % | | 12.261 | % | | 3.049 | % | |
| | B | | 0.640 | % | | 12.565 | % | | 3.064 | % | |
| | C | | 0.594 | % | | 11.347 | % | | 3.044 | % | |
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MuniYield California Insured | | A | | 0.594 | % | | 11.728 | % | | 3.521 | % | |
| | B | | 0.594 | % | | 11.728 | % | | 3.116 | % | |
| | C | | 0.594 | % | | 11.347 | % | | 3.044 | % | |
| | D | | 0.655 | % | | 8.682 | % | | 3.010 | % | |
| | E | | 0.594 | % | | 12.261 | % | | 3.049 | % | |
| | F | | 1.682 | % | | 12.523 | % | | 3.862 | % | |
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MuniYield Insured | | A | | 0.868 | % | | 5.757 | % | | 2.956 | % | |
| | B | | 0.640 | % | | 12.565 | % | | 3.742 | % | |
| | C | | 0.655 | % | | 8.651 | % | | 3.016 | % | |
| | D | | 0.746 | % | | 7.494 | % | | 2.631 | % | |
| | E | | 0.640 | % | | 12.565 | % | | 3.160 | % | |
| | F | | 0.594 | % | | 10.205 | % | | 3.341 | % | |
| | G | | 0.594 | % | | 10.205 | % | | 3.086 | % | |
| | H | | 1.640 | % | | 12.246 | % | | 3.848 | % | |
| | I | | 0.655 | % | | 11.762 | % | | 3.786 | % | |
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MuniYield Michigan Insured II | | A | | 0.594 | % | | 10.205 | % | | 3.086 | % | |
| | B | | 0.594 | % | | 11.347 | % | | 3.044 | % | |
| | C | | 1.682 | % | | 12.523 | % | | 3.862 | % | |
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MuniYield New York Insured | | A | | 1.097 | % | | 7.158 | % | | 2.823 | % | |
| | B | | 0.594 | % | | 10.205 | % | | 3.086 | % | |
| | C | | 0.594 | % | | 11.728 | % | | 3.103 | % | |
| | D | | 0.594 | % | | 11.347 | % | | 3.044 | % | |
| | E | | 0.746 | % | | 7.494 | % | | 2.631 | % | |
| | F | | 1.640 | % | | 12.246 | % | | 3.848 | % | |
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For the six months ended January 31, 2009, the Preferred Shares of each Fund failed to clear any of their auctions. As a result, the Preferred Shares dividend rates were reset to the maximum applicable rate, which ranged from 0.594% to 12.565%. A failed auction is not an event of default for the Funds but it has a negative impact on the liquidity of the Preferred Shares. A failed auction occurs when there are more sellers of a fund’s auction rate preferred shares than buyers. It is impossible to predict how long this imbalance will last. A successful auction for each Fund’s Preferred Shares may not occur for some time, if ever, and even if liquidity does resume, Preferred Shareholders may not have the ability to sell the Preferred Shares at their liquidation preference.
The Funds may not declare dividends or make other distributions on Common Shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding Preferred Shares is less than 200%.
Prior to December 1, 2008, the Funds paid commissions to certain broker-dealers at the end of each auction at an annual rate of 0.25%, calculated on the aggregate principal amount. In December 2008, commissions paid to broker-dealers on Preferred Shares that experience a failed auction were reduced to 0.15% on the aggregate principal amount. The
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54 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 |
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Notes to Financial Statements (continued) |
Funds will continue to pay commissions of 0.25% on the aggregate principal amount of all shares that successfully clear their auctions. Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly owned subsidiary of Merrill Lynch, earned commissions for the period August 1, 2008 through December 31, 2008 as follows.
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| | Commissions | |
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MuniHoldings Insured II | | $ | 176,638 | |
MuniYield California Insured | | $ | 201,675 | |
MuniYield Insured | | $ | 370,576 | |
MuniYield Michigan Insured II | | $ | 109,435 | |
MuniYield New York Insured | | $ | 353,527 | |
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Subsequent to that date, neither MLPF&S or Merrill Lynch are considered affiliates of the Funds.
On June 4, 2008, MuniHoldings Insured II and MuniYield Insured and on May 19, 2008 MuniYield California Insured, MuniYield Michigan Insured II and MuniYield New York Insured announced the following redemptions of Preferred Shares at a price of $25,000 per share plus any accrued and unpaid dividends through the redemption date:
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MuniHoldings Insured II | | | | | | | | | |
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| | Redemption
Date | | Shares
Redeemed | | Aggregate
Principal | |
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Series A | | 6/27/08 | | 608 | | | $ | 15,200,000 | |
Series B | | 6/26/08 | | 608 | | | $ | 15,200,000 | |
Series C | | 6/25/08 | | 1,152 | | | $ | 28,800,000 | |
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MuniYield California Insured | | | | | | | | | |
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| | Redemption
Date | | Shares
Redeemed | | | Aggregate
Principal | |
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Series A | | 7/07/08 | | 541 | | | $ | 13,525,000 | |
Series B | | 6/30/08 | | 541 | | | $ | 13,525,000 | |
Series C | | 6/25/08 | | 481 | | | $ | 12,025,000 | |
Series D | | 7/11/08 | | 602 | | | $ | 15,050,000 | |
Series E | | 6/27/08 | | 602 | | | $ | 15,050,000 | |
Series F | | 6/26/08 | | 541 | | | $ | 13,525,000 | |
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MuniYield Insured | | | | | | | | | |
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| | Redemption
Date | | Shares
Redeemed | | Aggregate
Principal | |
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Series A | | 6/26/08 | | 744 | | | $ | 18,600,000 | |
Series B | | 7/03/08 | | 744 | | | $ | 18,600,000 | |
Series C | | 7/10/08 | | 744 | | | $ | 18,600,000 | |
Series D | | 7/17/08 | | 744 | | | $ | 18,600,000 | |
Series E | | 6/26/08 | | 1,353 | | | $ | 33,825,000 | |
Series F | | 7/08/08 | | 812 | | | $ | 20,300,000 | |
Series G | | 6/24/08 | | 812 | | | $ | 20,300,000 | |
Series H | | 6/27/08 | | 880 | | | $ | 22,000,000 | |
Series I | | 6/23/08 | | 880 | | | $ | 22,000,000 | |
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MuniYield Michigan Insured II | | | | | | | | | |
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| | Redemption
Date | | Shares
Redeemed | | Aggregate
Principal | |
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Series A | | 6/17/08 | | 259 | | | $ | 6,475,000 | |
Series B | | 6/25/08 | | 160 | | | $ | 4,000,000 | |
Series C | | 6/26/08 | | 47 | | | $ | 1,175,000 | |
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MuniYield New York Insured | | | | | | | | | |
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| | Redemption
Date | | Shares
Redeemed | | Aggregate
Principal | |
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Series A | | 6/24/08 | | 249 | | | $ | 6,225,000 | |
Series B | | 6/17/08 | | 249 | | | $ | 6,225,000 | |
Series C | | 6/23/08 | | 410 | | | $ | 10,250,000 | |
Series D | | 6/25/08 | | 287 | | | $ | 7,175,000 | |
Series E | | 7/17/08 | | 322 | | | $ | 8,050,000 | |
Series F | | 6/27/08 | | 264 | | | $ | 6,600,000 | |
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The Funds financed the Preferred Share redemptions with cash received from TOBs.
Shares issued and outstanding during the six months ended January 31, 2009 and the year ended October 31, 2007 (September 30, 2007 for MuniHoldings Insured II) remained constant.
6. Income Tax Information:
As of July 31, 2008, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:
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Expires
July 31, | | MuniHoldings
Insured II | | MuniYield
California
Insured | | MuniYield
Insured | | MuniYield
Michigan
Insured II | | MuniYield
New York
Insured | |
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2010 | | | — | | | — | | | — | | $ | 1,050,253 | | $ | 3,007,157 | |
2011 | | | — | | $ | 4,417,434 | | | — | | | — | | | — | |
2012 | | $ | 306,103 | | | 2,675,948 | | | — | | | 1,288,851 | | | 16,583,200 | |
2014 | | | — | | | — | | $ | 1,489,118 | | | — | | | 3,107,506 | |
2015 | | | — | | | 1,362,395 | | | 5,979,955 | | | — | | | — | |
2016 | | | — | | | — | | | 27,543,068 | | | 823,067 | | | 2,330,288 | |
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Total | | $ | 306,103 | | $ | 8,455,777 | | $ | 35,012,141 | | $ | 3,162,171 | | $ | 25,028,151 | |
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SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 55 |
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Notes to Financial Statements (concluded) |
7. Restatement Information:
Subsequent to the initial issuance of MuniYield Insured’s October 31, 2006 financial statements and MuniHoldings Insured II’s September 30, 2006 financial statements, the Funds determined that the criteria for sale accounting in FAS 140 had not been met for certain transfers of municipal bonds and that these transfers should have been accounted for as secured borrowings rather than as sales. As a result, certain financial highlights for each of the three years in the period ended October 31, 2005 with respect to MuniYield Insured, and for each of the three years in the period ended September 30, 2005 with respect to MuniHoldings Insured II, have been restated to give effect to recording the transfers of the municipal bonds as secured borrowings, including recording interest on the bonds as interest income and interest on the secured borrowings as interest expense.
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Financial Highlights for MuniYield Insured
For the Years Ended October 31, 2005, 2004 and 2003 |
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| | 2005 | | 2004 | | 2003 | |
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| | Previously
Reported | | Restated | | Previously
Reported | | Restated | | Previously
Reported | | Restated | |
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Total expenses, net of waiver1 | | | 1.01 | % | | 1.60 | % | | 0.95 | % | | 1.19 | % | | 0.94 | % | | 1.18 | % |
Total expenses1 | | | 1.01 | % | | 1.60 | % | | 0.95 | % | | 1.19 | % | | 0.95 | % | | 1.18 | % |
Portfolio turnover | | | 123.85 | % | | 105 | % | | 144.40 | % | | 122 | % | | 114.05 | % | | 95 | % |
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1 | Do not reflect the effect of dividends to Preferred Shareholders. |
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Financial Highlights for MuniHoldings Insured II
For the Years Ended September 30, 2005, 2004 and 2003 |
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| | 2005 | | 2004 | | 2003 | |
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| | Previously
Reported | | Restated | | Previously
Reported | | Restated | | Previously
Reported | | Restated | |
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Total expenses, net of waiver and reimbursement1 | | | 1.15 | % | | 1.32 | % | | 1.12 | % | | 1.17 | % | | 1.14 | % | | 1.21 | % |
Total expenses1 | | | 1.21 | % | | 1.38 | % | | 1.21 | % | | 1.27 | % | | 1.23 | % | | 1.30 | % |
Portfolio turnover | | | 58.19 | % | | 46 | % | | 45.89 | % | | 45 | % | | 52 | % | | 50 | % |
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1 | Do not reflect the effect of dividends to Preferred Shareholders. |
8. Subsequent Events:
Each Fund paid a net investment income dividend to Common Shareholders on March 2, 2009 to shareholders of record on February 13, 2009.The amount of the net investment income dividend per share was as follows:
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| | Distribution
Per Share | |
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MuniHoldings Insured II | | $ | 0.050000 | |
MuniYield California Insured | | $ | 0.053500 | |
MuniYield Insured | | $ | 0.056000 | |
MuniYield Michigan Insured II | | $ | 0.054000 | |
MuniYield New York Insured | | $ | 0.052500 | |
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The dividends declared on Preferred Shares for the period February 1, 2009 to February 28, 2009 for the Funds were as follows:
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| | MuniHoldings
Insured II | | MuniYield
California
Insured | | MuniYield
Insured | | MuniYield
Michigan
Insured II | | MuniYield
New York
Insured | |
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Series A | | $ | 21,899 | | $ | 15,876 | | $ | 18,558 | | $ | 24,777 | | $ | 20,346 | |
Series B | | $ | 21,951 | | $ | 17,918 | | $ | 18,960 | | $ | 24,948 | | $ | 20,495 | |
Series C | | $ | 39,972 | | $ | 15,816 | | $ | 20,624 | | $ | 20,642 | | $ | 34,014 | |
Series D | | | — | | $ | 20,039 | | $ | 21,625 | | $ | 29,783 | | $ | 23,647 | |
Series E | | | — | | $ | 20,520 | | $ | 38,944 | | | — | | $ | 27,893 | |
Series F | | | — | | $ | 43,389 | | $ | 20,024 | | | — | | $ | 52,935 | |
Series G | | | — | | | — | | $ | 22,430 | | | — | | | — | |
Series H | | | — | | | — | | $ | 59,276 | | | — | | | — | |
Series I | | | — | | | — | | $ | 58,569 | | | — | | | — | |
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56 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 |
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Officers and Directors |
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Richard E. Cavanagh, Chairman of the Board and Director |
Karen P. Robards, Vice Chair of the Board,
Chair of the Audit Committee and Director |
G. Nicholas Beckwith, III, Director |
Richard S. Davis, Director |
Kent Dixon, Director |
Frank J. Fabozzi, Director |
Kathleen F. Feldstein, Director |
James T. Flynn, Director |
Henry Gabbay, Director |
Jerrold B. Harris, Director |
R. Glenn Hubbard, Director |
W. Carl Kester, Director |
Donald C. Burke, Fund President and Chief Executive Officer |
Anne F. Ackerley, Vice President |
Neal J. Andrews, Chief Financial Officer |
Jay M. Fife, Treasurer |
Brian P. Kindelan, Chief Compliance Officer of the Funds |
Howard B. Surloff, Secretary |
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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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BlackRock MuniHoldings Insured Fund II, Inc.,
BlackRock MuniYield California Insured Fund, Inc. and
BlackRock MuniYield Insured Fund, Inc.:
Custodian
State Street Bank and
Trust Company
Boston, MA 02101
Transfer Agent
Common Stock
Computershare Trust
Company, N.A.
Providence, RI 02490
Auction Agent
Preferred Shares
BNY Mellon Shareowner Services
Jersey City, NJ 07310
BlackRock MuniYield Michigan Insured Fund II, Inc. and
BlackRock MuniYield New York Insured Fund, Inc.:
Custodian
The Bank of New York Mellon
New York, NY 10286
Transfer Agent & Auction Agent
Common and Preferred Shares
BNY Mellon Shareowner Services
Jersey City, NJ 07310
For All Funds:
Accounting Agent
State Street Bank and
Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, NY 10036
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Additional Information |
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Section 19 Notices |
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The amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts 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 MuniYield New York Insured Fund, Inc. | | $0.302 | | — | | $0.018 | | $0.320 | | 94% | | — | | 6% | | 100% | |
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SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 57 |
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Additional Information (continued) |
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Proxy Results |
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The Annual Meeting of Shareholders was held on September 12, 2008 for shareholders of record on July 14, 2008 to elect director nominees of each Fund:
Approved the Directors as follows:
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| | G. Nicholas Beckwith, III | | Kent Dixon | | R. Glenn Hubbard | |
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| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Fund II, Inc. | | | 19,399,814 | | | 1,770,064 | | | 19,395,147 | | | 1,774,731 | | | 19,388,443 | | | 1,781,435 | |
BlackRock MuniYield California Insured Fund, Inc. | | | 30,387,789 | | | 788,028 | | | 30,373,785 | | | 802,032 | | | 30,462,091 | | | 713,726 | |
BlackRock MuniYield Insured Fund, Inc. | | | 62,264,689 | | | 2,158,268 | | | 62,261,398 | | | 2,161,559 | | | 62,260,558 | | | 2,162,399 | |
BlackRock MuniYield Michigan Insured Fund II, Inc. | | | 10,966,906 | | | 574,369 | | | 10,960,187 | | | 581,088 | | | 10,962,463 | | | 578,812 | |
BlackRock MuniYield New York Insured Fund, Inc. | | | 34,928,672 | | | 1,562,530 | | | 34,920,239 | | | 1,570,963 | | | 34,917,212 | | | 1,573,990 | |
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| | W. Carl Kester | | Robert S. Salomon, Jr. | | Richard S. Davis | |
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| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Fund II, Inc. | | | 4,456 | 1 | | 102 | 1 | | 19,394,947 | | | 1,774,931 | | | 19,395,147 | | | 1,774,731 | |
BlackRock MuniYield California Insured Fund, Inc. | | | 5,912 | 1 | | 307 | 1 | | 30,395,706 | | | 780,111 | | | 30,444,222 | | | 731,595 | |
BlackRock MuniYield Insured Fund, Inc. | | | 12,904 | 1 | | 805 | 1 | | 62,257,608 | | | 2,165,349 | | | 62,285,325 | | | 2,137,632 | |
BlackRock MuniYield Michigan Insured Fund II, Inc. | | | 2,837 | 1 | | 558 | 1 | | 10,965,117 | | | 576,158 | | | 10,975,379 | | | 565,896 | |
BlackRock MuniYield New York Insured Fund, Inc. | | | 8,170 | 1 | | 2,077 | 1 | | 34,911,937 | | | 1,579,265 | | | 34,933,464 | | | 1,557,738 | |
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| | Frank J. Fabozzi | | James T. Flynn | | Karen P. Robards | |
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| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Fund II, Inc. | | | 4,4561 | | | 1021 | | | 19,394,947 | | | 1,774,931 | | | 19,395,147 | | | 1,774,731 | |
BlackRock MuniYield California Insured Fund, Inc. | | | 5,9121 | | | 3071 | | | 30,456,523 | | | 719,294 | | | 30,397,588 | | | 778,229 | |
BlackRock MuniYield Insured Fund, Inc. | | | 12,9041 | | | 8051 | | | 62,274,712 | | | 2,148,245 | | | 62,271,813 | | | 2,151,144 | |
BlackRock MuniYield Michigan Insured Fund II, Inc. | | | 2,8371 | | | 5581 | | | 10,972,636 | | | 568,639 | | | 10,974,697 | | | 566,578 | |
BlackRock MuniYield New York Insured Fund, Inc. | | | 8,1701 | | | 2,0771 | | | 34,923,564 | | | 1,567,638 | | | 34,930,074 | | | 1,561,128 | |
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| | Richard E. Cavanagh | | Kathleen F. Feldstein | | Henry Gabbay | |
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| | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | | Votes For | | Votes
Withheld | |
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BlackRock MuniHoldings Insured Fund II, Inc. | | | 19,400,147 | | | 1,769,731 | | | 19,395,810 | | | 1,774,068 | | | 19,395,147 | | | 1,774,731 | |
BlackRock MuniYield California Insured Fund, Inc. | | | 30,456,814 | | | 719,003 | | | 30,395,488 | | | 780,329 | | | 30,443,791 | | | 732,026 | |
BlackRock MuniYield Insured Fund, Inc. | | | 62,261,746 | | | 2,161,211 | | | 62,243,677 | | | 2,179,280 | | | 62,291,979 | | | 2,130,978 | |
BlackRock MuniYield Michigan Insured Fund II, Inc. | | | 10,972,837 | | | 568,438 | | | 10,968,912 | | | 572,363 | | | 10,970,197 | | | 571,078 | |
BlackRock MuniYield New York Insured Fund, Inc. | | | 34,932,779 | | | 1,558,423 | | | 34,908,370 | | | 1,582,832 | | | 34,932,392 | | | 1,558,810 | |
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| | Jerrold B. Harris | | | | | | | | | | | | | |
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| | Votes For | | Votes
Withheld | | | | | | | | | | | | | |
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BlackRock MuniHoldings Insured Fund II, Inc. | | | 19,398,943 | | | 1,770,935 | | | | | | | | | | | | | |
BlackRock MuniYield California Insured Fund, Inc. | | | 30,402,575 | | | 773,242 | | | | | | | | | | | | | |
BlackRock MuniYield Insured Fund, Inc. | | | 62,248,633 | | | 2,174,324 | | | | | | | | | | | | | |
BlackRock MuniYield Michigan Insured Fund II, Inc. | | | 10,970,647 | | | 570,628 | | | | | | | | | | | | | |
BlackRock MuniYield New York Insured Fund, Inc. | | | 34,917,191 | | | 1,574,011 | | | | | | | | | | | | | |
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1 Voted on by holders of Preferred Shares only. | | | | | | | | | | | | |
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.
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58 | SEMI-ANNUAL REPORT | JANUARY 31, 2009 |
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Additional Information (concluded) |
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.
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.
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Availability of Quarterly Schedule of Investments |
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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 Securities and Exchange Commissions’ (the “SEC”) 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.
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.
On September 12, 2008, the Board of Directors of the Funds voted unanimously to change certain investment guidelines of the Funds. Under normal market conditions, the Funds are required to invest at least 80% of their total assets in municipal bonds either (i) insured under an insurance policy purchased by the Funds or (ii) insured under an insurance policy obtained by the issuer of the municipal bond or any other party. Historically, the Funds have 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 the Funds will not be required to dispose of municipal bonds they hold in the event of subsequent downgrades. The approved changes do not alter the Funds’ investment objectives.
The Advisor and the Board believe the amended policy will allow the Advisor to better manage the Funds’ portfolios in the best interest of the Funds’ shareholders and to better meet the Funds’ investment objectives.
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 in order to allow the Funds 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.
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SEMI-ANNUAL REPORT | JANUARY 31, 2009 | 59 |
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. 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.
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. 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.
BlackRock MuniHoldings Insured Fund II, Inc.
BlackRock MuniYield California Insured Fund, Inc.
BlackRock MuniYield Insured Fund, Inc.
BlackRock MuniYield Michigan Insured Fund II, Inc.
BlackRock MuniYield New York Insured Fund, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
#MHMYINS5—SAR-1/09
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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 |
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| (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. |
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| (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 – Not Applicable to this semi-annual report |
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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 – 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. |
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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 – Not Applicable to this semi-annual report |
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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 |
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| 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 MuniYield California Insured Fund, Inc. |
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| By: | /s/ Donald C. Burke |
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|
| | Donald C. Burke |
| | Chief Executive Officer of |
| | BlackRock MuniYield California Insured Fund, Inc. |
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| Date: March 25, 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 |
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|
| | Donald C. Burke |
| | Chief Executive Officer (principal executive officer) of |
| | BlackRock MuniYield California Insured Fund, Inc. |
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| Date: March 25, 2009 |
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| By: | /s/ Neal J. Andrews |
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|
| | Neal J. Andrews |
| | Chief Financial Officer (principal financial officer) of |
| | BlackRock MuniYield California Insured Fund, Inc. |
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| Date: March 25, 2009 |
