UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06540
Name of Fund: BlackRock MuniYield Insured Fund, Inc. (MYI)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive Officer,
BlackRock MuniYield Insured Fund, Inc., 800 Scudders Mill Road,
Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton, NJ
08543-9011
Registrant's telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 07/31/2008
Date of reporting period: 11/01/2007 - 07/31/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
Annual Report BLACKROCK
JULY 31, 2008
BlackRock MuniHoldings Insured Fund II, Inc. (MUE)
BlackRock MuniYield Insured Fund, Inc. (MYI)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
--------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Annual Report:
Fund Summaries ........................................................... 4
The Benefits and Risks of Leveraging ..................................... 6
Swap Agreements .......................................................... 6
Financial Statements:
Schedules of Investments ............................................. 7
Statements of Assets and Liabilities ................................. 17
Statements of Operations ............................................. 19
Statements of Changes in Net Assets .................................. 20
Statement of Cash Flows .............................................. 22
Financial Highlights ..................................................... 23
Notes to Financial Statements ............................................ 25
Report of Independent Registered Public Accounting Firm .................. 32
Important Tax Information (Unaudited) .................................... 33
Automatic Dividend Reinvestment Plan ..................................... 34
Disclosure of Investment Advisory Agreement and Subadvisory Agreement .... 35
Officers and Directors ................................................... 39
Additional Information ................................................... 42
2 ANNUAL REPORT JULY 31, 2008
A Letter to Shareholders
Dear Shareholder
For more than a year, investors have been besieged by a weak housing market, the
bursting of the credit bubble that has troubled the financial sector, and
surging food and oil prices, which have stoked inflation concerns. Healthy
nonfinancial corporate profits and robust exporting activity remained among the
few bright spots, helping the economy to grow at a modest, but still positive,
pace.
The Federal Reserve Board (the "Fed") has been aggressive in its attempts to
stimulate economic growth and stabilize financial markets. In addition to
slashing the target federal funds rate 325 basis points (3.25%) between
September 2007 and April 2008, the central bank introduced the new Term
Securities Lending Facility, granted broker-dealers access to the discount
window and used its own balance sheet to help negotiate the sale of Bear
Stearns. However, the end of the period saw a pause in Fed action; the central
bank held the target rate steady at 2.0% as it attempted to balance weak growth
and inflationary pressures.
The Fed's bold response to the financial crisis helped mitigate credit stress
and investor anxiety, albeit temporarily. U.S. equity markets sank sharply over
the reporting period, notwithstanding a brief rally in the spring and another in
mid-summer, and international markets followed suit.
Treasury securities also traded in a volatile fashion, but generally rallied
(yields fell as prices correspondingly rose), as the broader flight-to-quality
theme persisted. The yield on 10-year Treasury issues, which fell to 3.34% in
March, climbed to the 4.20% range in mid-June as investors temporarily shifted
out of Treasury issues in favor of riskier assets (such as stocks and other
high-quality fixed income sectors), then reversed course and declined to 3.99%
by period-end when credit fears re-emerged. Meanwhile, tax-exempt issues
underperformed their taxable counterparts, as problems among municipal bond
insurers and the failure in the market for auction rate securities continued to
pressure the group.
Overall, the major benchmark indexes generated results that reflected heightened
risk aversion:
Total Returns as of July 31, 2008 6-month 12-month
===========================================================================================================
U.S. equities (S&P 500 Index) (7.08)% (11.09)%
-----------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) 0.86 (6.71)
-----------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) (5.04) (12.19)
-----------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) (0.63) 6.15
-----------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) (0.85) 2.83
-----------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) (0.80) 0.52
-----------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only.
You cannot invest directly in an index.
Shortly before this shareholder report mailing, the investment landscape was
dramatically altered as the ongoing credit crisis intensified, resulting in a
widespread breakdown in the financial services sector and unprecedented
government intervention. Through periods of market turbulence, as ever,
BlackRock's full resources are dedicated to the management of our clients'
assets. For our most current views on the economy and financial markets, we
invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary as of July 31, 2008 BlackRock MuniHoldings Insured Fund II, Inc.
Investment Objective
BlackRock MuniHoldings Insured Fund II, Inc. (MUE) (the "Fund") seeks to provide
shareholders with current income exempt from federal income taxes by investing
primarily in a portfolio of long-term, investment grade municipal obligations
the interest on which, in the opinion of bond counsel to the issuer, is exempt
from federal income taxes.
Performance
For the 12 months ended July 31, 2008, the Fund returned (4.13)% based on market
price and (1.77)% based on net asset value ("NAV"). For the same period, the
closed-end Lipper Insured Municipal Debt Funds (Leveraged) category posted an
average return of (2.65)% on a NAV basis. All returns reflect reinvestment of
dividends. Several key factors influenced performance during the year. A
positive contributor to performance was the Fund's significant overweight in
pre-refunded bonds in the one- to five-year maturity range, as the yield curve
steepened and these issues outperformed. Conversely, problems within the
monoline insurance industry had a negative impact on the entire insured
municipal market, hampering the performance of the Fund and its peers.
The views expressed reflect the opinions of BlackRock as of the date of
this report and are subject to change based on changes in market, economic
or other conditions. These views are not intended to be a forecast of
future events and are no guarantee of future results.
Fund Information
Symbol on New York Stock Exchange .......................... MUE
Initial Offering Date ...................................... February 26, 1999
Yield on Closing Market Price as of July 31, 2008 ($11.30) 1 5.31%
Tax Equivalent Yield 2 ..................................... 8.17%
Current Monthly Distribution per share of Common Stock 3 ... $0.05
Current Annualized Distribution per share of Common Stock 3 $0.60
Leverage as of July 31, 2008 4 ............................. 44%
--------------------------------------------------------------------------------
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 Tax equivalent yield assumes the maximum federal tax rate of 35%.
3 The distribution is not constant and is subject to change.
4 As a percentage of total managed assets, which is the total assets of the
Fund (including any assets attributable to Auction Market Preferred Stock
("Preferred Stock") and tender option bond trusts ("TOBs")) minus the sum
of accrued liabilities.
The table below summarizes the changes in the Fund's market price and net asset
value per share:
--------------------------------------------------------------------------------
7/31/08 9/30/07 Change High Low
--------------------------------------------------------------------------------
Market Price .......... $11.30 $12.39 (8.80)% $12.64 $11.17
Net Asset Value ....... $12.84 $13.72 (6.41)% $13.97 $12.44
--------------------------------------------------------------------------------
The following unaudited charts show the portfolio composition and credit quality
allocations of the Fund's long-term investments:
Portfolio Composition
Sector 7/31/08 9/30/07
--------------------------------------------------------------------------------
Transportation ............................................. 23% 13%
City, County & State ....................................... 15 22
Hospital ................................................... 12 10
Lease Revenue .............................................. 10 7
Tax Revenue ................................................ 10 12
Power ...................................................... 9 8
Water & Sewer .............................................. 6 3
Housing .................................................... 6 9
Education .................................................. 5 9
Industrial & Pollution Control ............................. 4 7
--------------------------------------------------------------------------------
Credit Quality Allocations 5
Credit Rating 7/31/08 9/30/07
--------------------------------------------------------------------------------
AAA/Aaa .................................................... 48% 92%
AA/Aa ...................................................... 45 2
A/A ........................................................ 6 3
BBB/Baa .................................................... 1 3
--------------------------------------------------------------------------------
5 Using the higher of Standard & Poor's (S&P's) or Moody's Investors Service
(Moody's) ratings.
4 ANNUAL REPORT JULY 31, 2008
Fund Summary as of July 31, 2008 BlackRock MuniYield Insured Fund, Inc.
Investment Objective
BlackRock MuniYield Insured Fund, Inc. (MYI) (the "Fund") seeks to provide
shareholders with as high a level of current income exempt from federal income
taxes as is consistent with its investment policies and prudent investment
management by investing primarily in a portfolio of long-term, investment grade
municipal obligations the interest on which, in the opinion of bond counsel to
the issuer, is exempt from federal income taxes.
Performance
For the 12 months ended July 31, 2008, the Fund returned (5.32)% based on market
price and (8.44)% based on NAV. For the same period, the closed-end Lipper
Insured Municipal Debt Funds (Leveraged) category posted an average return of
(2.65)% on a NAV basis. All returns reflect reinvestment of dividends. A long
duration posture during a period of rising municipal bond yields detracted from
Fund performance over the year. Overweight positions in lower-rated bonds and
issues subject to the alternative minimum tax ("AMT") also negatively affected
results, as yield spreads in both sectors widened significantly. Moreover, Bond
Market Association ("BMA") swaps, utilized by management to reduce Fund
duration, underperformed the municipal cash market for much of the annual
period, which further hampered performance.
The views expressed reflect the opinions of BlackRock as of the date of
this report and are subject to change based on changes in market, economic
or other conditions. These views are not intended to be a forecast of
future events and are no guarantee of future results.
Fund Information
Symbol on New York Stock Exchange ............................. MYI
Initial Offering Date ......................................... March 27, 1992
Yield on Closing Market Price as of July 31, 2008 ($12.22) 1 .. 5.50%
Tax Equivalent Yield 2 ........................................ 8.46%
Current Monthly Distribution per share of Common Stock 3 ...... $0.056
Current Annualized Distribution per share of Common Stock 3 ... $0.672
Leverage as of July 31, 2008 4 ................................ 43%
--------------------------------------------------------------------------------
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 Tax equivalent yield assumes the maximum federal tax rate of 35%.
3 The distribution is not constant and is subject to change.
4 As a percentage of total managed assets, which is the total assets of the
Fund (including any assets attributable to Preferred Stock and TOBs) minus
the sum of accrued liabilities.
The table below summarizes the changes in the Fund's market price and net asset
value per share:
--------------------------------------------------------------------------------
7/31/08 10/31/07 Change High Low
--------------------------------------------------------------------------------
Market Price ......... $12.22 $13.04 (6.29)% $13.77 $11.87
Net Asset Value ...... $12.86 $14.57 (11.74)% $14.69 $12.47
--------------------------------------------------------------------------------
The following unaudited charts show the portfolio composition and credit quality
allocations of the Fund's long-term investments:
Portfolio Composition
Sector 7/31/08 10/31/07
--------------------------------------------------------------------------------
Transportation ............................................ 30% 30%
City, County & State ...................................... 15 16
Hospital .................................................. 12 9
Power ..................................................... 11 14
Education ................................................. 7 5
Housing ................................................... 6 7
Sales Tax ................................................. 6 7
Lease Revenue ............................................. 5 4
Water & Sewer ............................................. 4 4
Industrial & Pollution Control ............................ 3 3
Resource Recovery ......................................... 1 1
--------------------------------------------------------------------------------
Credit Quality Allocations 5
Credit Rating 7/31/08 10/31/07
--------------------------------------------------------------------------------
AAA/Aaa ................................................... 50% 83%
AA/Aa ..................................................... 37 7
A/A ....................................................... 9 6
BBB/Baa ................................................... 4 2
Not Rated ................................................. -- 2
--------------------------------------------------------------------------------
5 Using the higher of S&P's or Moody's ratings.
ANNUAL REPORT JULY 31, 2008 5
The Benefits and Risks of Leveraging
BlackRock MuniHoldings Insured Fund II, Inc. and BlackRock MuniYield Insured
Fund, Inc. (each a "Fund" and, collectively, the "Funds") utilize leverage to
seek to enhance the yield and NAV of their Common Stock. However, these
objectives cannot be achieved in all interest rate environments.
To leverage, each Fund issues Preferred Stock, which pays dividends at
prevailing short-term interest rates, and invests the proceeds in long-term
municipal bonds. The interest earned on these investments is paid to Common
Stock shareholders in the form of dividends, and the value of these portfolio
holdings is reflected in the per share net asset value of each Fund's Common
Stock. However, in order to benefit Common Stock shareholders, the yield curve
must be positively sloped; that is, short- term interest rates must be lower
than long-term interest rates. At the same time, a period of generally declining
interest rates will benefit Common Stock shareholders. If either of these
conditions change, then the risks of leveraging will begin to outweigh the
benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns income based on long-term interest rates.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's NAV will
reflect the full decline in the price of the portfolio's investments, since the
value of the fund's Preferred Stock does not fluctuate. In addition to the
decline in NAV, the market value of the fund's Common Stock may also decline.
In addition, the Funds may from time to time leverage their assets through the
use of tender option bond ("TOB") programs. In a typical TOB program, the Fund
transfers one or more municipal bonds to a TOB trust, which issues short-term
variable rate securities to third-party investors and a residual interest to the
Fund. The cash received by the TOB trust from the issuance of the short-term
securities (less transaction expenses) is paid to the Fund, which invests the
cash in additional portfolio securities. The distribution rate on the short-term
securities is reset periodically (typically every seven days) through a
remarketing of the short-term securities. Any income earned on the bonds in the
TOB trust, net of expenses incurred by the TOB trust, that is not paid to the
holders of the short-term securities is paid to the Fund. In connection with
managing the Funds' assets, the Funds' investment advisor may at any time
retrieve the bonds out of the TOB trust typically within seven days. TOB
investments generally will provide the Funds with economic benefits in periods
of declining short-term interest rates, but expose the Funds to risks during
periods of rising short-term interest rates similar to those associated with
Preferred Stock issued by the Funds, as described above. Additionally,
fluctuations in the market value of municipal securities deposited into the TOB
trust may adversely affect the Funds' NAVs per share. (See Note 1 of the Notes
to Financial Statements for details of municipal bonds transferred to TOB
trusts.)
Under the Investment Company Act of 1940, the Funds are permitted to issue
Preferred Stock in an amount of up to 50% of their total managed assets at the
time of issuance. Each Fund also anticipates that its total economic leverage
from Preferred Stock and TOBs will not exceed 50% of its total managed assets.
As of July 31, 2008, BlackRock MuniHoldings Insured Fund II, Inc. and BlackRock
MuniYield Insured Fund, Inc. had leverage from Preferred Stock and TOBs of 44%
and 43% of their total managed assets, respectively.
Swap Agreements
The Funds may invest in swap agreements, which are over-the-counter contracts in
which one party agrees to make periodic payments based on the change in market
value of a specified bond, basket of bonds, or index in return for periodic
payments based on a fixed or variable interest rate or the change in market
value of a different bond, basket of bonds or index. Swap agreements may be used
to obtain exposure to a bond or market without owning or taking physical custody
of securities. Swap agreements involve the risk that the party with whom each
Fund has entered into a swap will default on its obligation to pay the Fund and
the risk that the Fund will not be able to meet its obligations to pay the other
party to the agreement.
6 ANNUAL REPORT JULY 31, 2008
Schedule of Investments July 31, 2008
BlackRock MuniHoldings Insured Fund II, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Alabama -- 1.2%
Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5.50%, 1/01/22 $ 3,580 $ 3,392,766
===============================================================================
Alaska -- 1.4%
Anchorage, Alaska, Water Revenue Refunding
Bonds (a):
6%, 9/01/09 (b) 370 390,502
6%, 9/01/24 1,630 1,691,598
Matanuska-Susitna Boro, Alaska, GO, Series A,
6%, 3/01/10 (b)(c) 1,700 1,800,708
-------------
3,882,808
===============================================================================
Arkansas -- 4.3%
Arkansas State Development Finance Authority,
M/F Mortgage Revenue Refunding Bonds,
Series C, 5.35%, 12/01/35 (c)(d) 12,215 12,242,117
===============================================================================
California -- 14.3%
California State, Various Purpose, GO, 5.25%,
12/01/22 (e) 2,935 3,057,331
California State, Veterans, GO, Refunding, AMT,
Series BZ, 5.35%, 12/01/21 (c) 9,350 9,350,000
Dixon, California, Unified School District, GO
(Election of 2002), 5.20%, 8/01/44 (e) 2,405 2,422,148
Modesto, California, Schools Infrastructure Financing
Agency, Special Tax Bonds, 5.50%, 9/01/36 (a) 4,240 4,246,275
Port of Oakland, California, Revenue Bonds, AMT,
Series K, 5.75%, 11/01/21 (f) 3,000 3,001,410
Port of Oakland, California, Revenue Refunding
Bonds, AMT, Series L, 5.375%, 11/01/27 (c)(f) 5,000 4,791,350
Rancho Cucamonga, California, Redevelopment
Agency, Tax Allocation Refunding Bonds (Rancho
Redevelopment Project), Series A, 5%,
9/01/34 (c) 1,500 1,444,920
Roseville, California, Joint Union High School
District, GO (Election of 2004), Series A, 5%,
8/01/29 (f) 2,985 2,988,075
Sacramento, California, City Financing Authority,
Capital Improvement Revenue Bonds,
5%, 12/01/27 (a) 150 150,966
San Francisco, California, City and County Airport
Commission, International Airport, Special
Facilities Lease Revenue Bonds (SFO Fuel Company
LLC), AMT, Series A, 6.10%, 1/01/20 (e) 1,250 1,260,862
Stockton, California, Public Financing Revenue
Bonds (Redevelopment Projects), Series A (g):
5.25%, 9/01/31 495 454,687
5.25%, 9/01/34 2,930 2,641,952
Vista, California, COP (Community Projects),
5%, 5/01/37 (c) 5,400 5,231,520
-------------
41,041,496
===============================================================================
Colorado -- 3.9%
Aurora, Colorado, COP, 5.75%, 12/01/10 (a)(b) 6,285 6,767,625
Colorado HFA, Revenue Refunding Bonds
(S/F Program), AMT, Senior Series A-2,
7.50%, 4/01/31 200 208,324
Colorado Health Facilities Authority, Hospital Revenue
Refunding Bonds (Poudre Valley Health Care),
Series A, 5.75%, 12/01/09 (b)(e) 4,000 4,240,640
-------------
11,216,589
===============================================================================
Connecticut -- 0.5%
Connecticut State, GO, Refunding, Series D,
5%, 12/01/24 (c) 1,520 1,568,154
===============================================================================
District of Columbia -- 0.9%
District of Columbia, Deed Tax Revenue Bonds
(Housing Production Trust Fund -- New Communities
Project), Series A, 5%, 6/01/32 (c) 2,500 2,452,050
===============================================================================
Florida -- 27.0%
Brevard County, Florida, Health Facilities Authority,
Healthcare Facilities Revenue Bonds (Health
First Inc. Project), 5%, 4/01/34 2,600 2,352,714
Broward County, Florida, HFA, S/F Mortgage Revenue
Refunding Bonds, AMT, Series E, 5.90%,
10/01/39 (h)(i) 2,310 2,310,116
Broward County, Florida, School Board, COP, Series A,
5.25%, 7/01/33 (e) 5,600 5,561,248
Hillsborough County, Florida, HFA, S/F Mortgage
Revenue Bonds, AMT, Series 1, 5.375%,
10/01/49 (h)(i) 3,385 3,215,818
Hillsborough County, Florida, IDA, Hospital Revenue
Bonds (H. Lee Moffitt Cancer Center Project),
Series A, 5.25%, 7/01/37 4,700 4,376,640
Hillsborough County, Florida, IDA, PCR, Refunding
(Tampa Electric Company Project), Series B,
5.15%, 9/01/25 1,200 1,217,076
Lee Memorial Health System, Florida, Hospital
Revenue Bonds, Series A, 5%, 4/01/32 (a) 5,000 4,824,800
Miami, Florida, Special Obligation Revenue Bonds
(Street and Sidewalk Improvement Program),
5%, 1/01/37 (c) 3,500 3,317,055
Miami-Dade County, Florida, Aviation Revenue
Bonds, DRIVERS, AMT, Series A,
7.182%, 10/01/11 (e)(j) 34 27,646
Miami-Dade County, Florida, Aviation Revenue
Refunding Bonds (Miami International Airport),
AMT, Series A (e):
5.25%, 10/01/41 13,800 13,134,288
5.50%, 10/01/41 6,700 6,628,846
Portfolio Abbreviations
To simplify the listings of portfolio holdings in each Fund's Schedule of
Investments, the names of many of the securities have been abbreviated according
to the list on the right.
AMT Alternative Minimum Tax (subject to)
CABS Capital Appreciation Bonds
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
SIFMA Securities Industry and Financial Markets Association
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 7
Schedule of Investments (continued)
BlackRock MuniHoldings Insured Fund II, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Florida (concluded)
Miami-Dade County, Florida, School Board, COP,
Refunding, Series B (k):
5.25%, 5/01/28 $ 5,000 $ 5,018,500
5.25%, 5/01/31 3,600 3,621,528
Miami-Dade County, Florida, School Board, COP,
Series A, 5%, 5/01/21 (e)(f) 5,000 5,108,750
Miami-Dade County, Florida, Special Obligation
Revenue Bonds, Sub-Series A, 5.24%,
10/01/37 (c)(l) 3,670 652,159
Okaloosa County, Florida, Water and Sewer Revenue
Refunding Bonds, 5%, 7/01/36 (e) 2,100 2,096,766
Pasco County, Florida, Half-Cent Sales Tax Revenue
Bonds, 5.125%, 12/01/28 (a) 6,300 6,324,318
Saint Johns County, Florida, Water and Sewer
Revenue Bonds, CABS, 5.352%, 6/01/31 (a)(l) 5,065 1,336,755
Seminole County, Florida, Water and Sewer Revenue
Bonds, 5%, 10/01/31 6,250 6,291,250
-------------
77,416,273
===============================================================================
Idaho -- 0.1%
Idaho Housing and Finance Association,
S/F Mortgage Revenue Bonds, AMT, Series E,
6%, 1/01/32 360 369,763
===============================================================================
Illinois -- 3.7%
Chicago, Illinois, GO (Neighborhoods Alive 21
Program), Series A, 6%, 7/01/10 (b)(f) 2,185 2,356,173
Chicago, Illinois, O'Hare International Airport,
General Airport Revenue Refunding Bonds, Third
Lien, AMT, Series A, 5.75%, 1/01/19 (c) 3,125 3,138,250
Chicago, Illinois, O'Hare International Airport
Revenue Bonds, Third Lien, Series A, 5%,
1/01/31 (c) 1,430 1,350,764
Illinois State Finance Authority, Revenue Refunding
Bonds (Central DuPage Health System), VRDN,
Series B, 2.20%, 11/01/38 (j) 3,500 3,500,000
Lake, Cook, Kane and McHenry Counties, Illinois,
Community Unit School District Number 220, GO,
6%, 12/01/20 (f) 125 132,455
-------------
10,477,642
===============================================================================
Indiana -- 5.3%
Indiana Municipal Power Agency, Power Supply
System Revenue Bonds, Series A (c):
5%, 1/01/37 8,000 7,637,920
5%, 1/01/42 8,000 7,583,760
-------------
15,221,680
===============================================================================
Kansas -- 2.2%
Kansas State Development Finance Authority, Health
Facilities Revenue Bonds (Sisters of Charity
Leavenworth), Series J, 6.125%, 12/01/20 3,510 3,672,373
Sedgwick and Shawnee Counties, Kansas,
S/F Mortgage Revenue Bonds, AMT, Series A-2,
6.20%, 12/01/33 (i) 2,615 2,648,420
-------------
6,320,793
===============================================================================
Louisiana -- 0.5%
Louisiana State, Gas and Fuels Tax Revenue Bonds,
Series A, 5%, 5/01/41 (f) 1,600 1,554,688
===============================================================================
Michigan -- 3.7%
Michigan State Hospital Finance Authority, Revenue
Refunding Bonds (Mercy-Mount Clemens),
Series A, 6%, 5/15/09 (b)(c) 1,000 1,039,990
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison
Company Pollution Control Project), AMT (m):
Series A, 5.50%, 6/01/30 2,000 1,824,640
Series C, 5.65%, 9/01/29 5,000 4,558,250
Saint Clair County, Michigan, Economic Revenue
Refunding Bonds (Detroit Edison Co. Project),
Series AA, 6.40%, 8/01/24 (a) 3,000 3,067,230
-------------
10,490,110
===============================================================================
Minnesota -- 4.7%
Prior Lake, Minnesota, Independent School District
Number 719, GO (e):
5.50%, 2/01/16 2,555 2,671,252
5.50%, 2/01/17 1,830 1,913,265
5.50%, 2/01/18 3,570 3,732,435
5.50%, 2/01/19 2,840 2,969,220
Sauk Rapids, Minnesota, Independent School
District Number 47, GO, Series A, 5.625%,
2/01/18 (c) 2,185 2,330,630
-------------
13,616,802
===============================================================================
Nevada -- 0.0%
Nevada Housing Division, S/F Mortgage Revenue
Bonds, AMT, Series A-2, 6.30%, 4/01/22 (c) 95 96,243
===============================================================================
New Jersey -- 6.1%
New Jersey EDA, Cigarette Tax Revenue Bonds,
5.75%, 6/15/34 (k) 6,200 6,354,504
New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5.25%, 7/01/33 (c) 11,000 11,150,150
-------------
17,504,654
===============================================================================
New York -- 5.3%
Nassau Health Care Corporation, New York, Health
System Revenue Bonds, 5.75%, 8/01/09 (b)(e) 12,300 13,046,856
Tobacco Settlement Financing Corporation of
New York Revenue Bonds, Series A-1, 5.25%,
6/01/21 (a) 2,000 2,051,280
-------------
15,098,136
===============================================================================
North Carolina -- 0.4%
North Carolina HFA, Home Ownership Revenue
Bonds, AMT, Series 14-A, 5.35%, 1/01/22 (a) 1,235 1,218,673
===============================================================================
Ohio -- 1.0%
Aurora, Ohio, City School District, COP, 6.10%,
12/01/09 (b)(c) 1,745 1,857,971
Kent State University, Ohio, University Revenue
Bonds, 6%, 5/01/24 (a) 1,000 1,046,720
-------------
2,904,691
===============================================================================
Oklahoma -- 0.9%
Claremore, Oklahoma, Public Works Authority, Capital
Improvement Revenue Refunding Bonds, Series A,
5.25%, 6/01/14 (b)(e) 2,385 2,650,212
===============================================================================
Pennsylvania -- 0.1%
Washington County, Pennsylvania, Capital Funding
Authority Revenue Bonds (Capital Projects and
Equipment Program), 6.15%, 12/01/29 (a) 305 301,047
===============================================================================
See Notes to Financial Statements.
8 ANNUAL REPORT JULY 31, 2008
Schedule of Investments (continued)
BlackRock MuniHoldings Insured Fund II, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Rhode Island -- 3.7%
Providence, Rhode Island, Redevelopment Agency
Revenue Refunding Bonds (Public Safety and
Municipal Buildings), Series A, 5.75%,
4/01/10 (a)(b) $ 5,555 $ 5,928,407
Rhode Island State Health and Educational Building
Corporation Revenue Bonds (Rhode Island School
of Design), Series D, 5.50%, 8/15/31 (m) 4,685 4,684,859
-------------
10,613,266
===============================================================================
South Carolina -- 5.6%
South Carolina Housing Finance and Development
Authority, Mortgage Revenue Refunding Bonds,
AMT, Series A-2, 6.35%, 7/01/19 (e) 1,335 1,372,046
South Carolina State Public Service Authority,
Revenue Refunding Bonds, Series A,
5%, 1/01/42 (a) 15,000 14,665,650
-------------
16,037,696
===============================================================================
Tennessee -- 1.3%
Metropolitan Government of Nashville and Davidson
County, Tennessee, Health and Education Facilities
Board, Revenue Refunding Bonds (Ascension
Health Credit), Series A, 5.875%, 11/15/09 (a)(b) 3,500 3,707,375
===============================================================================
Texas -- 19.9%
Dallas-Fort Worth, Texas, International Airport, Joint
Revenue Bonds, AMT, Series B, 6%, 11/01/23 (c) 1,300 1,305,122
Dallas-Fort Worth, Texas, International Airport
Revenue Bonds, AMT, Series A, 5.50%,
11/01/33 (c) 16,000 15,183,680
Dallas-Fort Worth, Texas, International Airport
Revenue Refunding and Improvement Bonds,
AMT, Series A (m):
5.875%, 11/01/17 1,835 1,851,130
5.875%, 11/01/18 2,150 2,163,201
5.875%, 11/01/19 2,390 2,395,545
El Paso, Texas, Water and Sewer Revenue Refunding
and Improvement Bonds, Series A (e):
6%, 3/01/15 115 125,792
6%, 3/01/16 170 185,652
6%, 3/01/17 180 196,254
Houston, Texas, Community College System,
Participation Interests, COP (Alief Center Project),
5.75%, 8/15/22 (c) 4,341 4,451,431
Midland, Texas, Certificates of Obligation, GO,
6.10%, 3/01/10 (b)(f) 1,850 1,962,461
North Texas Tollway Authority, System Revenue
Refunding Bonds (c):
First Tier, 5.75%, 1/01/40 14,750 15,060,930
First Tier, Series B, 5.75%, 1/01/40 1,000 1,021,080
Series A, 5.625%, 1/01/33 10,975 11,146,759
-------------
57,049,037
===============================================================================
Washington -- 4.7%
Chelan County, Washington, Public Utility District
Number 001, Consolidated Revenue Bonds
(Chelan Hydro System), AMT, Series A, 5.45%,
7/01/37 (a) 3,840 3,638,017
Lewis County, Washington, GO, Refunding (a):
5.75%, 12/01/09 (b) 1,805 1,895,990
5.75%, 12/01/24 1,640 1,693,858
Seattle, Washington, Municipal Light and Power
Revenue Bonds, 6%, 10/01/09 (b)(c) 2,500 2,645,100
Seattle, Washington, Water System Revenue Bonds,
Series B, 6%, 7/01/09 (b)(f) 3,500 3,678,990
-------------
13,551,955
===============================================================================
Wisconsin -- 0.4%
Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Blood Center of
Southeastern Wisconsin Project), 5.75%, 6/01/34 1,250 1,231,700
-------------------------------------------------------------------------------
Puerto Rico -- 2.0%
Puerto Rico Commonwealth, Public Improvement,
GO, 5.125%, 7/01/30 (e) 5,725 5,765,532
-------------------------------------------------------------------------------
Total Municipal Bonds -- 125.1% 358,993,948
===============================================================================
===============================================================================
Municipal Bonds Transferred to
Tender Option Bond Trusts (n)
===============================================================================
California -- 10.7%
Palomar Pomerado Health Care District, California,
GO (Election of 2004), Series A, 5.125%,
8/01/37 (c) 7,364 7,425,081
Sacramento County, California, Airport System
Revenue Bonds, AMT, Senior Series B, 5.25%,
7/01/39 (e) 5,353 5,124,651
San Diego, California, Community College District,
GO (Election of 2002), 5%, 5/01/30 (e) 1,485 1,503,880
San Jose California, 5%, 9/1/30 (c) 3,805 3,828,961
Sequoia, California, Unified High School District, GO,
Refunding, Series B, 5.50%, 7/01/35 (e) 5,189 5,439,641
Tustin, California, Unified School District, Senior
Lien Special Tax Bonds (Community Facilities
District Number 97-1) Series A (e):
5%, 9/01/32 2,920 2,922,015
5%, 9/01/38 4,620 4,577,219
-------------
30,821,448
===============================================================================
Colorado -- 3.2%
Colorado Health Facilities Authority Revenue
Bonds (Catholic Health), Series C-3, 5.10%,
10/01/41 (e) 9,404 9,314,006
===============================================================================
Florida -- 10.0%
Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Baptist Medical
Center Project), 5%, 8/15/37 (e) 7,740 7,588,760
Lee County, Florida, HFA, S/F Mortgage Revenue
Bonds (Multi-County Program), AMT, Series A-2,
6, 9/01/40 (h)(i) 4,500 4,608,495
Miami-Dade County, Florida, Aviation Revenue
Bonds, AMT, Series A, 5%, 10/01/33 (e) 6,730 6,066,932
Orlando, Florida, Senior Tourist Development Tax
Revenue Bonds (6th Cent Contract Payments),
Series A, 5.25%, 11/01/38 (k) 4,000 3,945,920
Saint Petersburg Florida Public Utility Revenue, 5%,
10/1/35 (c) 6,492 6,415,417
-------------
28,625,524
===============================================================================
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 9
Schedule of Investments (concluded)
BlackRock MuniHoldings Insured Fund II, Inc.
(Percentages shown are based on Net Assets)
Municipal Bonds Transferred to Par
Tender Option Bond Trusts (n) (000) Value
===============================================================================
Georgia -- 2.3%
Augusta, Georgia, Water and Sewer Revenue Bonds,
5.25%, 10/1/34 (e) $ 6,296 $ 6,477,258
===============================================================================
Illinois -- 6.5%
Chicago, Illinois, O'Hare International Airport,
General Airport Revenue Refunding Bonds,
Third Lien, AMT, Series A, 5%, 1/01/38 (e) 15,000 14,648,400
Chicago, Illinois, Water Revenue Refunding Bonds,
Second Lien, 5.25%, 11/01/33 (e) 3,972 4,047,898
-------------
18,696,298
===============================================================================
Massachusetts -- 3.7%
Massachusetts Bay Transportation Authority
Massachusetts Sales Tax Revenue Refunding
Bonds, Series A, 5%, 7/1/35 5,535 5,537,768
Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A,
5%, 8/15/30 (e) 4,998 5,036,739
-------------
10,574,507
===============================================================================
New Jersey -- 1.1%
New Jersey State Turnpike Authority, Turnpike
Revenue Bonds, Series C, 5%, 1/01/30 (e) 2,998 3,025,956
===============================================================================
New York -- 2.4%
New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A, 5.25%,
10/15/27 (a) 6,750 6,987,735
===============================================================================
Washington -- 2.5%
Bellevue, Washington, 5.5%, 12/1/39 (c) 6,891 7,071,905
-------------------------------------------------------------------------------
Total Municipal Bonds Transferred to
Tender Option Bond Trusts -- 42.4% 121,594,637
===============================================================================
Total Long-Term Investments
(Cost -- $488,957,899) -- 167.5% 480,588,585
===============================================================================
===============================================================================
Short-Term Securities Shares
===============================================================================
Merrill Lynch Institutional Tax-Exempt Fund,
2.08% (o)(p) 24,818,464 24,818,464
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $24,818,464) -- 8.6% 24,818,464
===============================================================================
Total Investments (Cost -- $513,776,363*) -- 176.1% 505,407,049
Other Assets Less Liabilities -- 1.5% 4,332,953
Liability for Trust Certificates,
Including Interest Expense and Fees Payable -- (27.0)% (77,464,217)
Preferred Stock, at Redemption Value -- (50.6)% (145,342,669)
-------------
Net Assets Applicable to Common Stock -- 100.0% $ 286,933,116
=============
* The cost and unrealized appreciation (depreciation) of investments as of
July 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost .......................................... $435,887,084
============
Gross unrealized appreciation ........................... $ 5,110,064
Gross unrealized depreciation ........................... (12,774,358)
------------
Net unrealized depreciation ............................. $ (7,664,294)
============
(a) AMBAC Insured.
(b) U.S. government securities, held in escrow, are used to pay interest on
this security as well as to retire the bond in full at the date indicated,
typically at a premium to par.
(c) MBIA Insured.
(d) FHA Insured.
(e) FSA Insured.
(f) FGIC Insured.
(g) Radian Insured.
(h) FNMA/GNMA Collateralized.
(i) FHLMC Collateralized.
(j) Variable rate security. Rate shown is as of report date. Maturity shown is
the final maturity date.
(k) Assured Guaranty Insured.
(l) Represents a zero-coupon bond. Rate shown reflects the effective yield at
the time of purchase.
(m) XL Capital Insured.
(n) Securities represent bonds transferred to a tender option bond trust in
exchange for which the Fund acquired residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1 of
the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
(o) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 24,498,147 $304,246
--------------------------------------------------------------------------
(p) Represents the current yield as of report date.
See Notes to Financial Statements.
10 ANNUAL REPORT JULY 31, 2008
Schedule of Investments July 31, 2008 BlackRock MuniYield Insured Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Alaska -- 0.5%
Alaska Energy Authority, Power Revenue Refunding
Bonds (Bradley Lake), Fourth Series, 6%,
7/01/18 (a) $ 3,695 $ 4,221,722
===============================================================================
Arizona -- 3.5%
Downtown Phoenix Hotel Corporation, Arizona,
Revenue Bonds, Senior Series A, 5%, 7/01/36 (b) 21,355 17,800,247
Maricopa County and Phoenix, Arizona, IDA, S/F
Mortgage Revenue Bonds, AMT, Series A-2, 5.80%,
7/01/40 (c)(d) 7,680 7,624,704
Phoenix, Arizona, Civic Improvement Corporation,
Wastewater System Revenue Refunding Bonds,
5%, 7/01/37 (e) 5,000 4,924,600
-------------
30,349,551
===============================================================================
California -- 16.9%
Alameda Corridor Transportation Authority, California,
Capital Appreciation Revenue Refunding Bonds,
Subordinate Lien, Series A, 5.40%,
10/01/24 (f)(g) 10,000 8,310,600
Antioch, California, Public Finance Authority, Lease
Revenue Refunding Bonds (Municipal Facilities
Project), Series A, 5.50%, 1/01/32 (e) 5,000 5,112,700
California State, GO, 5.50%, 4/01/30 (e) 10 10,228
California State, GO, Refunding:
5.50%, 8/01/24 4,000 4,236,640
5.25%, 3/01/38 2,000 2,001,400
California State Public Works Board, Lease Revenue
Bonds (Department of Corrections), Series C,
5.25%, 6/01/28 5,500 5,530,030
California State University, Revenue Refunding
Bonds, DRIVERS, Series 2646Z, 7.186%,
5/01/15 (a)(h) 3 2,521
California Statewide Communities Development
Authority Revenue Bonds:
(Kaiser Permanente), Series B, 5%, 3/01/41 10,000 9,763,900
(Sutter Health), Series D, 5.05%, 8/15/38 (a) 7,500 7,442,475
Fairfield-Suisun, California, Unified School District,
GO (Election of 2002), 5.50%, 8/01/28 (e) 5,800 6,007,408
Los Angeles, California, Municipal Improvement
Corporation, Lease Revenue Bonds, Series B1,
4.75%, 8/01/37 (b) 15,000 13,952,550
Mendocino-Lake Community College District,
California, GO (Election of 2006), Series A, 5%,
8/01/31 (e) 4,985 4,904,692
Monterey Peninsula Community College District,
California, GO, CABS, Series C (a)(g):
5.13%, 8/01/30 13,020 3,829,963
5.17%, 8/01/33 13,350 3,265,143
Port of Oakland, California, Revenue Refunding
Bonds, AMT, Series L, 5.375%, 11/01/27 (b)(e) 9,465 9,070,026
Redding, California, Electric System, COP, Series A,
5%, 6/01/30 (a) 2,900 2,915,486
Riverside, California, Electric Revenue Bonds,
Series D, 5%, 10/01/33 10,765 10,858,225
Riverside County, California, Public Financing
Authority, Tax Allocation Revenue Bonds
(Redevelopment Projects), 5%, 10/01/35 (i) 10,000 8,999,800
Sacramento County, California, Airport System
Revenue Bonds, AMT, Senior Series A, 5%,
7/01/41 (a) 18,000 17,798,580
San Jose, California, Airport Revenue Refunding
Bonds, AMT, Series A, 5.50%, 3/01/32 (f) 12,965 12,613,908
San Mateo, California, Union High School District,
COP (Phase One Projects), Series B, 4.486%,
12/15/43 (f)(g) 3,250 1,521,650
Stockton, California, Public Financing Authority,
Lease Revenue Bonds (Parking & Capital Projects),
5.25%, 9/01/34 (b) 8,310 8,309,585
-------------
146,457,510
===============================================================================
Colorado -- 0.7%
Colorado HFA, S/F Mortgage Revenue Refunding
Bonds, AMT, Series A-3, Class III, 4.80%,
11/01/37 (e) 7,000 5,669,230
===============================================================================
District of Columbia -- 1.1%
Metropolitan Washington Airports Authority, D.C.,
Airport System Revenue Bonds, AMT, Series B, 5%,
10/01/32 (f) 10,000 9,135,800
===============================================================================
Florida -- 10.4%
Broward County, Florida, School Board, COP,
Series A, 5.25%, 7/01/33 (a) 15,000 14,896,200
Miami-Dade County, Florida, Aviation Revenue
Refunding Bonds (Miami International
Airport), AMT:
5.375%, 10/01/25 (b) 10,750 10,228,517
5.375%, 10/01/27 (b) 1,000 939,580
Series A, 5%, 10/01/35 (i)(j) 10,000 9,037,900
Series A, 5%, 10/01/39 (e) 25,000 22,087,750
Series A, 5.50%, 10/01/41 (a) 15,000 14,840,700
Miami-Dade County, Florida, Aviation Revenue
Refunding Bonds, DRIVERS, AMT, Series 2586Z,
7.318%, 10/01/15 (h)(i)(j) 37 29,294
Miami-Dade County, Florida, Expressway Authority,
Toll System Revenue Bonds, 5%, 7/01/39 (f) 9,000 8,630,820
Miami-Dade County, Florida, School Board, COP,
Refunding, Series B (j):
5.25%, 5/01/26 5,000 5,087,400
5.25%, 5/01/31 4,125 4,149,667
-------------
89,927,828
===============================================================================
Georgia -- 1.4%
Main Street Natural Gas, Inc., Georgia, Gas Project
Revenue Bonds, Series A, 6.25%, 7/15/33 13,170 11,897,515
===============================================================================
Hawaii -- 0.2%
Hawaii State, GO, Series CX, 5.50%, 2/01/21 (a) 2,000 2,117,840
===============================================================================
Illinois -- 12.9%
Chicago, Illinois, O'Hare International Airport
Revenue Bonds, Third Lien, AMT, Series B-2 (e):
5.25%, 1/01/27 16,685 15,780,172
6%, 1/01/27 26,230 26,798,929
Illinois Health Facilities Authority Revenue Bonds
(Delnor Hospital):
Series B, 5.25%, 5/15/32 6,150 6,149,508
Series D, 5.25%, 5/15/32 10,000 9,999,200
Illinois Municipal Electric Agency, Power Supply
Revenue Bonds, Series A (b):
5%, 2/01/35 (e) 25,000 23,904,500
5.25%, 2/01/35 15,000 14,747,100
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 11
Schedule of Investments (continued) BlackRock MuniYield Insured Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Illinois (concluded)
McLean and Woodford Counties, Illinois, Community
Unit School District Number 005, GO, Refunding,
6.375%, 12/01/16 (a) $ 1,215 $ 1,340,109
Northern Illinois Municipal Power Agency, Power
Project Revenue Refunding Bonds (Prairie State
Project), Series A, 5%, 1/01/37 (e) 12,000 11,541,960
Regional Transportation Authority, Illinois, Revenue
Bonds, Series C, 7.75%, 6/01/20 (b) 1,000 1,245,500
-------------
111,506,978
===============================================================================
Indiana -- 1.5%
Indiana Bond Bank, Special Program Gas Revenue
Bonds, Series A, 5.25%, 10/15/20 10,955 10,638,072
Indiana Health Facilities Financing Authority,
Hospital Revenue Bonds (Deaconess Hospital Obligated
Group), Series A, 5.375%, 3/01/34 (f) 2,250 2,262,262
-------------
12,900,334
===============================================================================
Kentucky -- 2.3%
Louisville and Jefferson Counties, Kentucky,
Metropolitan Sewer District, Sewer and Drain
System Revenue Bonds, Series A, 5.25%,
5/15/37 (b) 20,005 20,079,418
===============================================================================
Louisiana -- 2.5%
Louisiana Local Government Environmental Facilities
and Community Development Authority, Revenue
Bonds (Capital Projects and Equipment Acquisition
Program), Series A, 6.30%, 7/01/30 (f) 3,750 3,826,050
Louisiana Public Facilities Authority, Mortgage
Revenue Refunding Bonds (Baton Rouge General
Medical Center Project), 5.25%, 7/01/33 (e) 15,000 14,875,650
New Orleans, Louisiana, GO (Public Improvements),
5%, 10/01/33 (e) 3,545 3,272,992
-------------
21,974,692
===============================================================================
Maryland -- 1.2%
Baltimore, Maryland, Wastewater Project Revenue
Bonds, Series A, 5%, 7/01/38 (a) 10,000 10,030,600
===============================================================================
Massachusetts -- 5.6%
Boston, Massachusetts, Housing Authority, Capital
Program Revenue Bonds (a):
5%, 4/01/23 2,000 2,060,160
5%, 4/01/27 2,000 2,030,520
5%, 4/01/28 2,720 2,748,914
Massachusetts State, HFA, Housing Development
Revenue Refunding Bonds, Series B, 5.40%,
12/01/28 (e) 2,500 2,567,250
Massachusetts State, HFA, S/F Housing Revenue
Bonds, AMT, Series 128, 4.875%, 12/01/38 (a) 12,900 10,650,369
Massachusetts State Port Authority, Special Facilities
Revenue Refunding Bonds (BOSFUEL Project),
AMT, 5%, 7/01/38 (b) 19,755 17,170,453
Massachusetts State Special Obligation Dedicated
Tax Revenue Bonds, 5.75%, 1/01/14 (a)(k) 10,000 11,018,200
-------------
48,245,866
===============================================================================
Michigan -- 2.7%
Michigan Higher Education Student Loan Authority,
Student Loan Revenue Bonds, AMT, Series XVII-Q,
5%, 3/01/31 (f) 4,325 3,445,382
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison
Company Pollution Control Project), AMT (i):
Series A, 5.50%, 6/01/30 8,000 7,298,560
Series C, 5.65%, 9/01/29 5,000 4,558,250
Michigan State, HDA, Rental Housing Revenue Bonds,
AMT, Series B, 4.95%, 4/01/44 (a) 10,000 8,223,700
-------------
23,525,892
===============================================================================
Missouri -- 1.2%
Missouri State Health and Educational Facilities
Authority, Health Facilities Revenue Bonds
(Saint Luke's Health System), Series A,
5.50%, 11/15/35 10,000 10,022,500
Missouri State Housing Development Commission,
S/F Mortgage Revenue Bonds (Homeownership
Loan Program), AMT, Series C-1, 7.15%, 3/01/32 (d) 100 104,899
-------------
10,127,399
===============================================================================
Nevada -- 5.4%
Clark County, Nevada, Airport System Subordinate
Lien Revenue Bonds, Series A-2, 5%, 7/01/30 (b) 25,000 24,127,750
Clark County, Nevada, IDR (Southwest Gas
Corporation Project), AMT, Series A, 5.25%,
7/01/34 (f) 12,675 10,308,831
Las Vegas, Nevada, Convention and Visitors Authority
Revenue Bonds, 5%, 7/01/37 (f) 11,950 11,524,819
Reno, Nevada, Capital Improvement Revenue Bonds,
5.50%, 6/01/19 (b) 1,165 1,189,849
-------------
47,151,249
===============================================================================
New Jersey -- 1.8%
New Jersey EDA, Cigarette Tax Revenue Bonds:
5.75%, 6/15/29 3,060 2,865,782
5.75%, 6/15/34 14,135 12,979,464
-------------
15,845,246
===============================================================================
New Mexico -- 0.2%
New Mexico Educational Assistance Foundation,
Student Loan Revenue Refunding Bonds (Student
Loan Program), AMT, First Sub-Series A-2, 6.65%,
11/01/25 1,605 1,651,304
New Mexico Mortgage Finance Authority, S/F
Mortgage Revenue Bonds, AMT, Series C-2, 6.95%,
9/01/31 (d) 335 349,599
-------------
2,000,903
===============================================================================
New York -- 5.8%
Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Refunding Bonds,
Series B, 5.125%, 7/01/24 (f)(l) 5,335 5,396,886
New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System, Revenue
Refunding Bonds, Series DD, 5%, 6/15/37 10,605 10,661,843
See Notes to Financial Statements.
12 ANNUAL REPORT JULY 31, 2008
Schedule of Investments (continued) BlackRock MuniYield Insured Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
New York (concluded)
New York City, New York, City Transitional Finance
Authority, Future Tax Secured, Revenue Refunding
Bonds, Sub-Series C-1, 5%, 11/01/27 $ 5,000 $ 5,133,800
New York City, New York, GO:
Series J, 5.25%, 5/15/24 10,000 10,290,500
Series J, 5.25%, 5/15/25 1,000 1,027,010
Series M, 5%, 4/01/30 (j) 15,000 15,108,900
New York State Dormitory Authority, State Supported
Debt Revenue Bonds (Mental Health Services
Facilities), Series B, 5%, 2/15/28 (a) 2,700 2,731,833
-------------
50,350,772
===============================================================================
Ohio -- 1.7%
Lorain County, Ohio, Hospital Revenue Refunding
Bonds (Catholic Healthcare Partners), Series C-2,
5%, 4/01/33 (a) 15,000 14,893,800
===============================================================================
Pennsylvania -- 3.2%
Pennsylvania State Turnpike Commission, Oil
Franchise Tax Revenue Bonds, Series C, 5%,
12/01/32 (e) 16,000 15,909,760
Pennsylvania State Turnpike Commission, Turnpike
Revenue Bonds, Series A1, 5%, 6/01/38 (j) 12,000 11,798,160
-------------
27,707,920
===============================================================================
Rhode Island -- 0.3%
Rhode Island State Economic Development
Corporation, Airport Revenue Bonds, AMT,
Series A, 5.25%, 7/01/38 (j) 3,000 2,782,800
===============================================================================
South Carolina -- 1.9%
Charleston Educational Excellence Financing
Corporation, South Carolina, Revenue Bonds
(Charleston County School District) (j):
5.25%, 12/01/28 3,895 3,965,850
5.25%, 12/01/29 3,465 3,515,277
5.25%, 12/01/30 1,160 1,173,990
Kershaw County, South Carolina, Public Schools
Foundation, Installment Power Revenue
Refunding Bonds (m):
5%, 12/01/30 3,775 3,575,491
5%, 12/01/31 3,690 3,499,928
South Carolina Housing Finance and Development
Authority, Mortgage Revenue Refunding Bonds,
AMT, Series A-2, 6.35%, 7/01/19 (a) 705 724,564
-------------
16,455,100
===============================================================================
Tennessee -- 0.6%
Tennessee HDA, Revenue Refunding Bonds
(Homeownership Program), AMT, Series A (a):
5.25%, 7/01/22 2,975 2,931,595
5.35%, 1/01/26 2,105 2,019,705
-------------
4,951,300
===============================================================================
Texas -- 24.1%
Canyon, Texas, Regional Water Authority, Contract
Revenue Bonds (Wells Ranch Project), 5%,
8/01/32 (f) 8,185 8,028,012
Dallas-Fort Worth, Texas, International Airport,
Joint Revenue Bonds, AMT, Series A, 5%,
11/01/35 (a) 1,000 924,430
Dallas-Fort Worth, Texas, International Airport
Revenue Refunding and Improvement Bonds,
AMT, Series A, 5.625%, 11/01/26 (b) 15,000 14,541,300
El Paso County, Texas, Hospital District, GO,
Series A, 5%, 8/15/37 (j) 5,000 4,880,150
Harris County-Houston Sports Authority, Texas,
Revenue Refunding Bonds, Senior Lien,
Series G (e):
5.75%, 11/15/19 1,665 1,707,674
5.75%, 11/15/20 3,500 3,575,845
5.25%, 11/15/30 10,000 9,495,600
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Methodist
Hospital Project), VRDN, Series C, 2.30%,
12/01/41 (a)(h) 24,375 24,375,000
Harris County, Texas, Hospital District, Senior Lien
Revenue Refunding Bonds, Series A, 5.25%,
2/15/37 (e) 10,000 9,941,200
Matagorda County, Texas, Navigation District
Number 1, PCR, Refunding (Central Power and
Light Company Project), AMT, 5.20%, 5/01/30 (e) 6,250 5,776,250
North Texas Tollway Authority, Dallas North Tollway
System Revenue Bonds, Series A, 5%,
1/01/15 (a)(k) 5,890 6,288,930
North Texas Tollway Authority, System Revenue
Refunding Bonds, First Tier:
Series A, 6%, 1/01/25 6,250 6,551,813
Series A, 5.125%, 1/01/28 (e) 25,500 24,721,230
Series B, 5.75%, 1/01/40 (e) 10,000 10,210,800
Northside, Texas, Independent School District, GO:
5.25%, 8/15/27 3,295 3,433,291
5%, 8/15/38 10,000 10,007,600
San Antonio Energy Acquisition Public Facilities
Corporation, Texas, Gas Supply Revenue
Bonds, 5.50%, 8/01/22 9,100 8,798,426
Texas State Department of Housing and Community
Affairs, S/F Mortgage Revenue Bonds, AMT,
Series A, 5.45%, 9/01/23 (d)(e) 4,705 4,614,758
Texas State Turnpike Authority, Central Texas Turnpike
System Revenue Bonds, First Tier, Series A (f):
5.50%, 8/15/39 10,000 10,147,700
5%, 8/15/42 10,000 9,548,800
Texas State University, System Financing Revenue
Refunding Bonds:
5.25%, 3/15/24 9,000 9,421,740
5.25%, 3/15/25 9,000 9,372,060
5.25%, 3/15/26 10,000 10,382,000
5.25%, 3/15/27 1,350 1,395,252
-------------
208,139,861
===============================================================================
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 13
Schedule of Investments (continued) BlackRock MuniYield Insured Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
Vermont -- 0.4%
Vermont HFA, Revenue Refunding Bonds, AMT,
Series C, 5.50%, 11/01/38 (a) $ 3,000 $ 2,775,810
Vermont HFA, S/F Housing Revenue Bonds, AMT,
Series 12B, 6.30%, 11/01/19 (a) 415 420,752
-------------
3,196,562
===============================================================================
Virginia -- 0.3%
Halifax County, Virginia, IDA, Exempt Facility Revenue
Refunding Bonds (Old Dominion Electric
Cooperative Project), AMT, 5.625%, 6/01/28 (f) 2,500 2,495,350
===============================================================================
Washington -- 6.8%
Bellevue, Washington, GO, Refunding (e):
5.25%, 12/01/26 2,545 2,620,739
5.25%, 12/01/27 2,455 2,513,208
5.25%, 12/01/28 2,850 2,908,225
5.25%, 12/01/29 3,000 3,051,480
Chelan County, Washington, Public Utility District
Number 001, Consolidated Revenue Bonds
(Chelan Hydro System), AMT:
Series A, 5.45%, 7/01/37 (f) 3,030 2,870,622
Series C, 5.65%, 7/01/32 (e) 6,000 5,976,300
Port of Seattle, Washington, Revenue Bonds,
RIB, AMT, Series 2553, 7.284%,
1/01/12 (e)(h) 3 2,089
Radford Court Properties, Washington, Student
Housing Revenue Bonds, 5.75%, 6/01/32 (e) 10,000 10,369,600
Seattle, Washington, Housing Authority Revenue
Bonds (High Rise Rehabilitation Program --
Phase 3), AMT, 5.15%, 11/01/27 (a) 6,255 5,803,702
Skagit County, Washington, Public Hospital District,
GO, Series A (e):
5.25%, 12/01/25 4,945 4,976,401
5.25%, 12/01/26 5,450 5,464,116
Tacoma, Washington, Regional Water Supply System,
Water Revenue Bonds, 5%, 12/01/32 (e) 5,300 5,248,113
Washington State Health Care Facilities Authority
Revenue Bonds (Providence Health System),
Series A, 5.25%, 10/01/21 (e) 7,000 7,200,900
-------------
59,005,495
===============================================================================
West Virginia -- 0.7%
Harrison County, West Virginia, County Commission
for Solid Waste Disposal Revenue Bonds
(Monongahela Power), AMT, Series C, 6.75%,
8/01/24 (f) 5,925 5,937,916
===============================================================================
Wisconsin -- 0.4%
Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (SynergyHealth Inc.),
6%, 11/15/32 3,395 3,373,170
-------------------------------------------------------------------------------
Total Municipal Bonds -- 118.2% 1,022,455,619
===============================================================================
===============================================================================
Municipal Bonds Transferred to
Tender Option Bond Trusts (n)
===============================================================================
California -- 13.1%
Alameda County, California, Joint Powers Authority,
Lease Revenue Refunding Bonds, 5%,
12/01/34 (a) 6,990 6,911,782
California State University, Systemwide Revenue
Refunding Bonds, Series A, 5%, 11/01/16 (f) 18,435 18,511,321
California Statewide Communities Development
Authority Revenue Bonds (Saint Joseph
Home Care), Series E, 5.25%, 7/01/47 (a) 12,000 12,026,160
Las Virgenes, California, Unified School District, GO,
Series A, 5%, 8/01/31 (a) 10,000 10,098,547
Los Angeles California Community College District,
5%, 8/01/32 (a) 15,000 15,195,300
Orange County, California, Sanitation District, COP,
Series B, 5%, 2/01/37 (a) 10,780 10,699,042
Riverside California Electric Revenue Bonds, 5%,
10/01/38 (a) 20,000 20,077,800
San Diego County, California, Water Authority, Water
Revenue Refunding Bonds, COP, Series A, 5%,
5/01/33 (a) 9,375 9,468,000
San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, 5%,
7/01/36 (a) 10,000 10,086,241
-------------
113,074,193
===============================================================================
Colorado -- 0.8%
Colorado Health Facilities Authority, Revenue
Refunding Bonds (Poudre Valley Health Care),
Series C, 5.25%, 3/01/40 (a) 7,004 7,001,065
===============================================================================
Connecticut -- 0.6%
Connecticut State Health and Educational Facilities
Authority Revenue Bonds (Yale University),
Series T-1, 4.70%, 7/01/29 5,009 5,007,796
===============================================================================
Florida -- 3.2%
Miami-Dade County, Florida, Aviation Revenue
Refunding Bonds (Miami International Airport),
AMT, 5%, 10/01/40 (i)(j) 15,000 13,085,029
Orlando, Florida, Senior Tourist Development Tax
Revenue Bonds (6th Cent Contract Payments),
Series A, 5.25%, 11/01/38 (j) 15,000 14,797,200
-------------
27,882,229
===============================================================================
Georgia -- 2.6%
Atlanta, Georgia, Airport General Revenue Refunding
Bonds, Series B, 5.25%, 1/01/33 (a) 12,500 12,651,492
Metropolitan Atlanta Rapit Transportation Authority,
Georgia Sale Tax Fund Revenue Bonds, Series B,
5%, 7/01/37 (a) 10,000 10,136,066
-------------
22,787,558
===============================================================================
See Notes to Financial Statements.
14 ANNUAL REPORT JULY 31, 2008
Schedule of Investments (continued) BlackRock MuniYield Insured Fund, Inc.
(Percentages shown are based on Net Assets)
Municipal Bonds Transferred to Par
Tender Option Bond Trusts (n) (000) Value
===============================================================================
Illinois -- 2.4%
Chicago, Illinois, O'Hare International Airport
Revenue Refunding Bonds, Third Lien, AMT,
Series C-2, 5.25%, 1/01/30 (a) $16,400 $ 15,551,136
Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Refunding Bonds
(McCormick Place Expansion Project), Series B,
5.75%, 6/15/23 (e) 4,798 5,127,136
-------------
20,678,272
===============================================================================
Indiana -- 1.3%
Indianapolis, Indiana, Gas Utility Revenue Refunding
Bonds, Second Lien, Series B, 5.25%, 8/15/27 (j) 11,000 11,145,420
===============================================================================
Louisiana -- 2.7%
Louisiana State Gas and Fuels Tax Revenue Bonds,
Series A, 5%, 5/01/36 (a) 10,005 9,944,770
New Orleans, Louisiana, Aviation Board Revenue
Bonds, AMT, Series A, 5.25%, 1/01/32 (a) 14,030 13,270,697
-------------
23,215,467
===============================================================================
Massachusetts -- 1.4%
Massachusetts State, Housing Finance Agency
Housing Revenue Bonds, Series A, 5.15%,
7/01/26 (a) 11,915 11,824,012
===============================================================================
Michigan -- 0.5%
Wayne County, Michigan, Airport Authority, Revenue
Refunding Bonds, AMT, 5.375%, 12/01/32 (j) 4,995 4,885,160
===============================================================================
New Jersey -- 1.3%
Garden State Preservation Trust of New Jersey,
Open Space and Farmland Preservation
Revenue Bonds, Series A, 5.75%, 11/01/28 (a)(o) 10,000 11,417,900
===============================================================================
New York -- 5.7%
New York State Dormitory Authority, Non-State
Supported Debt Revenue Bonds (Presbyterian
Hospital of New York), 5.25, 2/15/31 (a) 20,000 20,236,600
New York State Dormitory Authority Revenue Bonds,
Non State Supported Debt, 5%, 8/15/36 (a)(o) 10,000 9,880,839
Port Authority of New York and New Jersey,
Consolidated Revenue Bonds, AMT,
137th Series, 5.125%, 7/15/30 (a) 19,492 19,176,144
-------------
49,293,583
===============================================================================
Ohio -- 0.5%
Montgomery County, Ohio, Revenue Bonds,
Series C, 5%, 10/01/41 (a) 4,993 4,865,830
===============================================================================
Pennsylvania -- 1.9%
Pennsylvania State Turnpike Commission, Turnpike
Revenue Bonds, Series A, 5.50%, 12/01/31 (f) 15,600 16,111,836
===============================================================================
Texas -- 5.0%
Friendswood, Texas, Independent School District,
GO, 5%, 2/15/37 12,955 12,818,658
Houston Texas Independent School District, 5%,
2/15/23 10,000 9,971,684
Houston Texas Utility System Revenue Refunding --
Comb-First Lien-Series A, 5%, 11/15/36 (a) 10,695 10,566,553
Judson, Texas, Independent School District,
School Building, GO, 5%, 2/01/37 (j) 10,000 9,791,594
-------------
43,148,489
===============================================================================
Virginia -- 0.4%
University of Virginia Revenue Bonds, 11.05%,
6/01/40 3,945 4,018,417
===============================================================================
Washington -- 11.1%
Bellevue, Washington, GO, Refunding,
Series 2736-1, 10.65%, 12/01/34 (e) 17,600 17,471,269
Central Puget Sound Regional Transportation
Authority, Washington, Sales and Use Tax
Revenue Bonds, Series A, 5%, 11/01/34 (a) 17,000 16,942,060
King County, Washington, Public Hospital
District Number 001, GO, Refunding,
Series A, 5%, 12/01/37 (j) 15,000 14,528,100
King County, Washington, Sewer Revenue Revenue
Bonds, 5%, 1/01/37 (a) 15,785 15,736,823
Port of Seattle, Washington, Revenue Refunding
Bonds, AMT, Series B, 5.20%, 7/01/29 (e) 20,565 18,874,763
Washington State, 5%, 7/01/31 (a) 12,035 12,097,031
-------------
95,650,046
-------------------------------------------------------------------------------
Total Municipal Bonds Transferred to
Tender Option Bond Trusts -- 54.5% 472,007,273
===============================================================================
Total Long-Term Investments
(Cost -- $1,538,903,204) -- 172.7% 1,494,462,892
===============================================================================
===============================================================================
Short-Term Securities Shares
===============================================================================
Merrill Lynch Institutional Tax-Exempt Fund,
2.08% (p)(q) 26,154,406 26,154,406
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $26,154,406) -- 3.0% 26,154,406
===============================================================================
Total Investments (Cost -- $1,565,057,610*) -- 175.7% 1,520,617,298
Other Assets Less Liabilities -- 1.2% 10,818,060
Liability for Trust Certificates,
Including Interest Expense and Fees Payable -- (33.3)% (288,548,552)
Preferred Stock, at Redemption Value -- (43.6)% (377,439,884)
-------------
Net Assets Applicable to Common Stock -- 100.0% $ 865,446,922
=============
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 15
Schedule of Investments (concluded) BlackRock MuniYield Insured Fund, Inc.
* The cost and unrealized appreciation (depreciation) of investments as of
July 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ....................................... $ 1,286,910,513
===============
Gross unrealized appreciation ........................ $ 5,882,087
Gross unrealized depreciation ........................ (59,806,410)
---------------
Net unrealized depreciation .......................... $ (53,924,323)
===============
(a) FSA Insured.
(b) FGIC Insured.
(c) FHLMC Collateralized.
(d) FNMA/GNMA Collateralized.
(e) MBIA Insured.
(f) AMBAC Insured.
(g) Represents a zero-coupon bond. Rate shown reflects the effective yield at
the time of purchase.
(h) Variable rate security. Rate shown is as of report date. Maturity shown is
the final maturity date.
(i) XL Capital Insured.
(j) Assured Guaranty Insured.
(k) U.S. government securities, held in escrow, are used to pay interest on
this security as well as to retire the bond in full at the date indicated,
typically at a premium to par.
(l) Security is collateralized by Municipal or U.S. Treasury Obligations.
(m) CIFG Insured.
(n) Securities represent bonds transferred to a tender option bond trust in
exchange for which the Fund acquired residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1 of
the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
(o) FHA Insured.
(p) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 21,252,053 $460,001
--------------------------------------------------------------------------
(q) Represents the current yield as of report date.
o Forward interest rate swaps outstanding as of July 31, 2008 were as
follows:
--------------------------------------------------------------------------
Notional
Amount Unrealized
(000) Depreciation
--------------------------------------------------------------------------
Pay a fixed rate of 3.913% and receive a
floating rate based on 1-Week SIFMA Rate
Broker, JPMorgan Chase
Expires October 2028 $125,000 $(1,951,000)
--------------------------------------------------------------------------
See Notes to Financial Statements.
16 ANNUAL REPORT JULY 31, 2008
Statements of Assets and Liabilities
BlackRock BlackRock
MuniHoldings MuniYield
Insured Insured
July 31, 2008 Fund II, Inc. Fund, Inc.
====================================================================================================================================
Assets
------------------------------------------------------------------------------------------------------------------------------------
Investments at value -- unaffiliated 1 ......................................................... $ 480,588,585 $1,494,462,892
Investments at value -- affiliated 2 ........................................................... 24,818,464 26,154,406
Cash ........................................................................................... 85,693 5,253,243
Interest receivable ............................................................................ 5,680,892 16,204,384
Investment sold receivable ..................................................................... -- 33,637,232
Dividends from affiliates ...................................................................... -- 282
Prepaid expenses ............................................................................... 17,771 54,307
Other assets ................................................................................... -- 34,418
--------------------------------
Total assets ................................................................................... 511,191,405 1,575,801,164
--------------------------------
====================================================================================================================================
Accrued Liabilities
------------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps ......................................... -- 1,951,000
Interest expense and fees payable .............................................................. 279,958 917,444
Investments purchased payable .................................................................. -- 37,620,070
Income dividends payable -- common shares ...................................................... 1,117,621 3,768,975
Investment advisory fees payable ............................................................... 199,409 657,048
Officer's and Directors' payable ............................................................... 777 37,279
Other affiliates payable ....................................................................... 4,662 13,729
Accrued expenses payable ....................................................................... 128,934 317,705
--------------------------------
Total accrued liabilities ...................................................................... 1,731,361 45,283,250
--------------------------------
====================================================================================================================================
Other Liabilities
------------------------------------------------------------------------------------------------------------------------------------
Trust certificates 3 ........................................................................... 77,184,259 287,631,108
--------------------------------
Total Liabilities .............................................................................. 78,915,620 332,914,358
--------------------------------
====================================================================================================================================
Preferred Stock at Redemption Value
------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at $0.10 par value per share at $25,000 per share liquidation preference 4,5 .. 145,342,669 377,439,884
--------------------------------
====================================================================================================================================
Net Assets Applicable to Common Stock
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock .......................................................... $ 286,933,116 $ 865,446,922
================================
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 17
Statements of Assets and Liabilities (concluded)
BlackRock BlackRock
MuniHoldings MuniYield
Insured Insured
July 31, 2008 Fund II, Inc. Fund, Inc.
===================================================================================================================================
Net Assets Applicable to Common Stock Consist of
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.10 per share 6 .................................................. $ 2,235,243 $ 6,730,313
Paid-in capital in excess of par ........................................................... 296,180,166 943,024,418
Undistributed net investment income ........................................................ 1,930,588 5,152,178
Accumulated net realized loss .............................................................. (5,043,567) (43,068,675)
Net unrealized appreciation/depreciation ................................................... (8,369,314) (46,391,312)
-----------------------------------
Net Assets Applicable to Common Stock ...................................................... $ 286,933,116 $ 865,446,922
===================================
Net asset value per share of Common Stock .................................................. $ 12.84 $ 12.86
===================================
1 Investments at cost -- unaffiliated .................................................... $ 488,957,899 $ 1,538,903,204
===================================
2 Investments at cost -- affiliated ...................................................... $ 24,818,464 $ 26,154,406
===================================
3 Represents short-term floating rate certificates issued by tender option bond trusts.
4 Preferred Stock issued and outstanding:
Series A Shares ........................................................................ 1,492 1,456
===================================
Series B Shares ........................................................................ 1,492 1,456
===================================
Series C Shares ........................................................................ 2,828 1,456
===================================
Series D Shares ........................................................................ -- 1,456
===================================
Series E Shares ........................................................................ -- 2,647
===================================
Series F Shares ........................................................................ -- 1,588
===================================
Series G Shares ........................................................................ -- 1,588
===================================
Series H Shares ........................................................................ -- 1,720
===================================
Series I Shares ........................................................................ -- 1,720
===================================
5 Preferred Stock authorized ............................................................. 8,180 22,800
===================================
6 Common Stock issued and outstanding .................................................... 22,352,426 67,303,125
===================================
See Notes to Financial Statements.
18 ANNUAL REPORT JULY 31, 2008
Statements of Operations
BlackRock MuniHoldings BlackRock MuniYield
Insured Fund II, Inc. Insured Fund, Inc.
------------------------------- -------------------------------
Period Year Ended Period Year Ended
Oct. 1, 2007 to September 30, Nov. 1, 2007 to October 31,
July 31, 2008 2007 July 31, 2008 2007
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Interest ................................................... $ 20,762,994 $ 26,030,731 $ 58,157,441 $ 86,746,322
Income from affiliates ..................................... 304,246 339,612 460,001 222,053
-------------------------------------------------------------------
Total income ............................................... 21,067,240 26,370,343 58,617,442 86,968,375
-------------------------------------------------------------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Investment advisory ........................................ 2,327,048 2,831,673 5,694,615 7,896,713
Commissions for Preferred Stock ............................ 419,891 521,380 1,039,196 1,443,298
Accounting services ........................................ 119,396 158,040 244,199 356,750
Professional ............................................... 135,707 83,760 317,181 121,396
Transfer agent ............................................. 21,669 60,099 31,831 152,087
Printing ................................................... 35,194 51,114 53,776 80,291
Custodian .................................................. 25,298 29,588 55,879 79,230
Officer and Directors ...................................... 24,084 24,731 71,771 52,028
Registration ............................................... 8,811 9,436 22,062 23,482
Miscellaneous .............................................. 73,924 77,652 165,547 157,909
-------------------------------------------------------------------
Total expenses excluding interest expense and fees ......... 3,191,022 3,847,473 7,696,057 10,363,184
Interest expense and fees 1 ................................. 786,838 1,151,782 4,088,375 6,875,689
-------------------------------------------------------------------
Total expenses ............................................. 3,977,860 4,999,255 11,784,432 17,238,873
Less fees waived by advisor ................................ (243,738) (220,257) (35,197) (11,868)
Less fees paid indirectly .................................. (128) -- (778) --
-------------------------------------------------------------------
Total expenses after waiver and fees paid indirectly ....... 3,733,994 4,778,998 11,748,457 17,227,005
-------------------------------------------------------------------
Net investment income ...................................... 17,333,246 21,591,345 46,868,985 69,741,370
-------------------------------------------------------------------
===================================================================================================================================
Realized and Unrealized Gain (Loss)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................ (975,689) 2,069,420 (13,481,491) (2,406,263)
Futures and swaps ...................................... -- (616,000) (11,647,657) (1,476,132)
-------------------------------------------------------------------
(975,689) 1,453,420 (25,129,148) (3,882,395)
-------------------------------------------------------------------
Net change in unrealized appreciation/depreciation on:
Investments ............................................ (19,379,156) (11,557,931) (85,903,075) (49,385,551)
Futures and swaps ...................................... -- 260,075 (2,592,525) 413,713
-------------------------------------------------------------------
(19,379,156) (11,297,856) (88,495,600) (48,971,838)
-------------------------------------------------------------------
Total realized and unrealized loss ......................... (20,354,845) (9,844,436) (113,624,748) (52,854,233)
-------------------------------------------------------------------
===================================================================================================================================
Dividends to Preferred Stock Shareholders From
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income ...................................... (5,637,611) (7,380,240) (14,617,148) (20,832,026)
-------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Applicable to Common
Stock Shareholders Resulting from Operations ............. $ (8,659,210) $ 4,366,669 $ (81,372,911) $ (3,944,889)
===================================================================
1 Related to tender option bond trusts.
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 19
Statements of Changes in Net Assets
BlackRock MuniHoldings Insured Fund II, Inc.
Period Year Ended
Oct. 1, 2007 September 30,
to July 31, -------------------------------
Increase (Decrease) in Net Assets: 2008 2007 2006
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income ........................................................ $ 17,333,246 $ 21,591,345 $ 20,844,142
Net realized gain (loss) ..................................................... (975,689) 1,453,420 1,337,449
Net change in unrealized appreciation/depreciation ........................... (19,379,156) (11,297,856) (801,023)
Dividends to Preferred Stock shareholders from net investment income ......... (5,637,611) (7,380,240) (6,534,409)
-------------------------------------------------
Net increase (decrease) in net assets applicable to Common Stock shareholders
resulting from operations .................................................. (8,659,210) 4,366,669 14,846,159
-------------------------------------------------
===================================================================================================================================
Dividends to Common Stock Shareholders From
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income ........................................................ (11,176,213) (13,813,799) (16,674,910)
-------------------------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock ...................... (19,835,423) (9,447,130) (1,828,751)
Beginning of period .......................................................... 306,768,539 316,215,669 318,044,420
-------------------------------------------------
End of period ................................................................ $ 286,933,116 $ 306,768,539 $ 316,215,669
=================================================
End of period undistributed net investment income ............................ $ 1,930,588 $ 1,649,057 $ 1,251,751
=================================================
See Notes to Financial Statements.
20 ANNUAL REPORT JULY 31, 2008
Statements of Changes in Net Assets BlackRock MuniYield Insured Fund, Inc.
Period Year Ended
November 1, October 31,
2007 to July 31, -----------------------------------
Increase (Decrease) in Net Assets: 2008 2007 2006
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income .................................................. $ 46,868,985 $ 69,741,370 $ 65,901,797
Net realized loss ...................................................... (25,129,148) (3,882,395) (894,104)
Net change in unrealized appreciation/depreciation ..................... (88,495,600) (48,971,838) 32,084,422
Dividends and distributions to Preferred Stock shareholders from:
Net investment income .............................................. (14,617,148) (20,832,026) (16,899,454)
Net realized gain .................................................. -- -- (2,997,462)
-------------------------------------------------------
Net increase (decrease) in net assets applicable to Common Stock
shareholders resulting from operations ............................... (81,372,911) (3,944,889) 77,195,199
-------------------------------------------------------
===================================================================================================================================
Dividends and Distributions to Common Stock Shareholders From
-----------------------------------------------------------------------------------------------------------------------------------
Net investment income .................................................. (33,920,775) (45,362,306) (52,496,438)
Net realized gain ...................................................... -- -- (22,672,673)
-------------------------------------------------------
Decrease in net assets resulting from dividends and distributions to
Common Stock shareholders ............................................ (33,920,775) (45,362,306) (75,169,111)
-------------------------------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock ..... (115,293,686) (49,307,195) 2,026,088
Beginning of period .................................................... 980,740,608 1,030,047,803 1,028,021,715
-------------------------------------------------------
End of period .......................................................... $ 865,446,922 $ 980,740,608 $ 1,030,047,803
=======================================================
End of period undistributed net investment income ...................... $ 5,152,178 $ 9,065,982 $ 5,518,944
=======================================================
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 21
Statement of Cash Flows BlackRock MuniYield Insured Fund, Inc.
For the Period
Nov. 1, 2007 to
July 31, 2008
===================================================================================================================================
Cash Provided by Operating Activities
-----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations, excluding dividends to Preferred Stock shareholders ...... $ (66,755,763)
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by
operating activities:
Decrease in receivables .................................................................................... 8,140,181
Increase in prepaid expenses and other assets .............................................................. (83,255)
Decrease in other liabilities .............................................................................. (9,382,897)
Net realized and unrealized loss ............................................................................... 100,585,146
Amortization of premium and discount on investments ............................................................ 2,498,791
Proceeds from sales and paydowns of long-term securities ....................................................... 1,212,426,405
Purchases of long-term securities .............................................................................. (1,111,323,489)
Net purchases of short-term investments ........................................................................ (6,305,000)
---------------
Cash provided by operating activities .......................................................................... 129,800,119
---------------
===================================================================================================================================
Cash Used for Financing Activities
-----------------------------------------------------------------------------------------------------------------------------------
Payments on redemption of Preferred Stock ...................................................................... (192,825,000)
Cash receipts from Trust Certificates .......................................................................... 297,721,108
Cash payments from Trust Certificates .......................................................................... (180,727,500)
Cash dividends paid to Common Stock shareholders ............................................................... (33,920,775)
Cash dividends paid to Preferred Stock shareholders ............................................................ (14,892,244)
---------------
Cash used for financing activities ............................................................................. (124,644,411)
---------------
===================================================================================================================================
Cash
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash ........................................................................................... 5,155,708
Cash at beginning of period .................................................................................... 97,535
---------------
Cash at end of period .......................................................................................... $ 5,253,243
===============
See Notes to Financial Statements.
22 ANNUAL REPORT JULY 31, 2008
Financial Highlights BlackRock MuniHoldings Insured Fund II, Inc.
Period
October 1,
2007 Year Ended September 30,
to July 31, --------------------------
2008 2007 2006
===============================================================================================================================
Per Share Operating Performance
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................................. $ 13.72 $ 14.15 $ 14.23
----------------------------------------
Net investment income 1 ........................................................... 0.78 0.97 0.93
Net realized and unrealized gain (loss) ........................................... (0.91) (0.45) 0.03
Dividends to Preferred Stock shareholders from net investment income .............. (0.25) (0.33) (0.29)
----------------------------------------
Net increase (decrease) from investment operations ................................ (0.38) 0.19 0.67
----------------------------------------
Dividends to Common Stock shareholders from net investment income ................. (0.50) (0.62) (0.75)
----------------------------------------
Net asset value, end of period .................................................... $ 12.84 $ 13.72 $ 14.15
========================================
Market price, end of period ....................................................... $ 11.30 $ 12.39 $ 12.96
========================================
===============================================================================================================================
Total Investment Return 3
-------------------------------------------------------------------------------------------------------------------------------
Based on net asset value .......................................................... (2.41)% 4 1.73% 5.19%
========================================
Based on market price ............................................................. (4.89)% 4 0.31% (1.37)%
========================================
===============================================================================================================================
Ratios to Average Net Assets Applicable to Common Stock
-------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and fees paid indirectly and excluding interest expense
and fees 5,6 .................................................................... 1.15% 7 1.17% 1.16%
========================================
Total expenses after waiver and fees paid indirectly 5 ............................ 1.45% 7 1.54% 1.57%
========================================
Total expenses after waiver and before fees paid indirectly 5 ..................... 1.45% 7 1.54% 1.57%
========================================
Total expenses 5 .................................................................. 1.55% 7 1.61% 1.64%
========================================
Net investment income 5 ........................................................... 6.74% 7 6.94% 6.70%
========================================
Dividends to Preferred Stock shareholders ......................................... 2.19% 7 2.37% 2.10%
========================================
Net investment income to Common Stock shareholders ................................ 4.55% 7 4.57% 4.60%
========================================
===============================================================================================================================
Supplemental Data
-------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period (000) ........................ $ 286,933 $ 306,769 $ 316,216
========================================
Preferred Stock outstanding at liquidation preference, end of period (000) ........ $ 145,300 $ 204,500 $ 204,500
========================================
Portfolio turnover ................................................................ 43% 43% 35%
========================================
Asset coverage end of period per $1,000 ........................................... $ 2,975 $ 2,500 $ 2,546
========================================
Year Ended September 30,
------------------------------------------
2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................................. $ 14.41 $ 14.37 $ 14.48
------------------------------------------
Net investment income 1 ........................................................... 0.97 1.00 1.02
Net realized and unrealized gain (loss) ........................................... (0.09) -- 2 (0.17)
Dividends to Preferred Stock shareholders from net investment income .............. (0.18) (0.09) (0.10)
------------------------------------------
Net increase (decrease) from investment operations ................................ 0.70 0.91 0.75
------------------------------------------
Dividends to Common Stock shareholders from net investment income ................. (0.88) (0.87) (0.86)
------------------------------------------
Net asset value, end of period .................................................... $ 14.23 $ 14.41 $ 14.37
==========================================
Market price, end of period ....................................................... $ 13.90 $ 13.25 $ 13.13
==========================================
=================================================================================================================================
Total Investment Return 3
---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value .......................................................... 5.35% 7.12% 5.95%
==========================================
Based on market price ............................................................. 11.92% 7.80% 3.45%
==========================================
=================================================================================================================================
Ratios to Average Net Assets Applicable to Common Stock
---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and fees paid indirectly and excluding interest expense
and fees 5,6 .................................................................... 1.15% 1.12% 1.14%
==========================================
Total expenses after waiver and fees paid indirectly 5 ............................ 1.32% 1.17% 1.21%
==========================================
Total expenses after waiver and before fees paid indirectly 5 ..................... 1.32% 1.17% 1.21%
==========================================
Total expenses 5 .................................................................. 1.38% 1.27% 1.30%
==========================================
Net investment income 5 ........................................................... 6.72% 6.93% 7.19%
==========================================
Dividends to Preferred Stock shareholders ......................................... 1.27% 0.63% 0.69%
==========================================
Net investment income to Common Stock shareholders ................................ 5.45% 6.30% 6.50%
==========================================
=================================================================================================================================
Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period (000) ........................ $ 318,044 $ 322,072 $ 321,270
==========================================
Preferred Stock outstanding at liquidation preference, end of period (000) ........ $ 204,500 $ 204,500 $ 204,500
==========================================
Portfolio turnover ................................................................ 46% 45% 50%
==========================================
Asset coverage end of period per $1,000 ........................................... $ 2,555 $ 2,575 $ 2,571
==========================================
1 Based on average shares outstanding.
2 Amount is less than $(0.01) per share.
3 Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns.
Total investment returns exclude the effects of sales charges.
4 Aggregate total investment return.
5 Do not reflect the effect of dividends to Preferred Stock shareholders.
6 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
7 Annualized.
See Notes to Financial Statements.
ANNUAL REPORT JULY 31, 2008 23
Financial Highlights BlackRock MuniYield Insured Fund, Inc.
Period
November 1,
2007 Year Ended October 31,
to July 31, --------------------------
2008 2007 2006
=================================================================================================================================
Per Share Operating Performance
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................................. $ 14.57 $ 15.30 $ 15.27
------------------------------------------
Net investment income 1 ........................................................... 0.70 1.04 0.98
Net realized and unrealized gain (loss) ........................................... (1.69) (0.79) 0.46
Dividends and distributions to Preferred Stock shareholders from:
Net investment income ......................................................... (0.22) (0.31) (0.25)
Net realized gain ............................................................. -- -- (0.04)
------------------------------------------
Net increase (decrease) from investment operations ................................ (1.21) (0.06) 1.15
------------------------------------------
Dividends and distributions to Common Stock shareholders from:
Net investment income ......................................................... (0.50) (0.67) (0.78)
Net realized gain ............................................................. -- -- (0.34)
------------------------------------------
Total dividends and distributions to Common Stock shareholders .................... (0.50) (0.67) (1.12)
------------------------------------------
Capital charges with respect to issuance of Preferred Stock ....................... -- -- --
------------------------------------------
Net asset value, end of period .................................................... $ 12.86 $ 14.57 $ 15.30
==========================================
Market price, end of period ....................................................... $ 12.22 $ 13.04 $ 14.36
==========================================
=================================================================================================================================
Total Investment Return 3
---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value .......................................................... (8.22)% 4 (0.06)% 8.09%
==========================================
Based on market price ............................................................. (2.55)% 4 (4.70)% 5.38%
==========================================
=================================================================================================================================
Ratios to Average Net Assets of Common Stock
---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and fees paid indirectly and excluding interest expense
and fees 5,6 .................................................................... 1.06% 7 1.03% 1.02%
==========================================
Total expenses after waiver and fees paid indirectly 5 ............................ 1.63% 7 1.71% 1.67%
==========================================
Total expenses after waiver and before fees paid indirectly 5 ..................... 1.63% 7 1.71% 1.67%
==========================================
Total expenses 5 .................................................................. 1.64% 7 1.71% 1.67%
==========================================
Net investment income 5 ........................................................... 6.51% 7 6.94% 6.52%
==========================================
Dividends to Preferred Stock shareholders ......................................... 2.03% 7 2.06% 1.67%
==========================================
Net investment income to Common Stock shareholders ................................ 4.48% 7 4.88% 4.85%
==========================================
=================================================================================================================================
Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period (000) ........................ $ 865,447 $ 980,741 $1,030,048
==========================================
Preferred Stock outstanding at liquidation preference, end of period (000) ........ $ 377,175 $ 570,000 $ 570,000
==========================================
Portfolio turnover ................................................................ 70% 117% 95%
==========================================
Asset coverage end of period per $1,000 ........................................... $ 3,295 $ 2,721 $ 2,807
==========================================
Year Ended October 31,
------------------------------------------
2005 2004 2003
=================================================================================================================================
Per Share Operating Performance
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .............................................. $ 15.59 $ 15.36 $ 15.15
------------------------------------------
Net investment income 1 ........................................................... 1.04 1.04 1.08
Net realized and unrealized gain (loss) ........................................... (0.22) 0.25 0.16
Dividends and distributions to Preferred Stock shareholders from:
Net investment income ......................................................... (0.16) (0.07) (0.08)
Net realized gain ............................................................. (0.02) -- --
------------------------------------------
Net increase (decrease) from investment operations ................................ 0.64 1.22 1.16
------------------------------------------
Dividends and distributions to Common Stock shareholders from:
Net investment income ......................................................... (0.95) (0.97) (0.95)
Net realized gain ............................................................. (0.01) -- --
------------------------------------------
Total dividends and distributions to Common Stock shareholders .................... (0.96) (0.97) (0.95)
------------------------------------------
Capital charges with respect to issuance of Preferred Stock ....................... -- 2 (0.02) --
------------------------------------------
Net asset value, end of period .................................................... $ 15.27 $ 15.59 $ 15.36
==========================================
Market price, end of period ....................................................... $ 14.70 $ 14.57 $ 14.51
==========================================
=================================================================================================================================
Total Investment Return 3
---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value .......................................................... 4.54% 8.52% 8.18%
==========================================
Based on market price ............................................................. 7.69% 7.36% 8.19%
==========================================
=================================================================================================================================
Ratios to Average Net Assets of Common Stock
---------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and fees paid indirectly and excluding interest expense
and fees 5,6 .................................................................... 1.01% 0.95% 0.94%
==========================================
Total expenses after waiver and fees paid indirectly 5 ............................ 1.60% 1.19% 1.18%
==========================================
Total expenses after waiver and before fees paid indirectly 5 ..................... 1.60% 1.19% 1.18%
==========================================
Total expenses 5 .................................................................. 1.60% 1.19% 1.18%
==========================================
Net investment income 5 ........................................................... 6.62% 6.77% 6.99%
==========================================
Dividends to Preferred Stock shareholders ......................................... 1.05% 0.51% 0.49%
==========================================
Net investment income to Common Stock shareholders ................................ 5.57% 6.26% 6.50%
==========================================
=================================================================================================================================
Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period (000) ........................ $1,028,022 $1,049,423 $ 953,662
==========================================
Preferred Stock outstanding at liquidation preference, end of period (000) ........ $ 570,000 $ 570,000 $ 440,000
==========================================
Portfolio turnover ................................................................ 105% 122% 95%
==========================================
Asset coverage end of period per $1,000 ........................................... $ 2,804 $ 2,841 $ 3,167
==========================================
1 Based on average shares outstanding.
2 Amount is less than $0.01 per share.
3 Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns.
Total investment returns exclude the effects of sales charges.
4 Aggregate total investment return.
5 Do not reflect the effect of dividends to Preferred Stock shareholders.
6 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
7 Annualized.
See Notes to Financial Statements.
24 ANNUAL REPORT JULY 31, 2008
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock MuniHoldings Insured Fund II, Inc. and BlackRock MuniYield Insured
Fund, Inc. (the "Funds" or individually as the "Fund"), are registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as non-diversified,
closed-end management investment companies. The Funds' financial statements are
prepared in conformity with accounting principles generally accepted in the
United States of America, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. The Funds recently
changed their fiscal year end to July 31. The Funds determine, and make
available for publication, the net asset values of their Common Stock on a daily
basis.
The following is a summary of significant accounting policies followed by the
Funds:
Valuation of Investments: Municipal investments (including commitments to
purchase such investments on a "when-issued" basis) are valued on the basis of
prices provided by dealers or pricing services selected under the supervision of
each Fund's Board of Directors (the "Board"). In determining the value of a
particular investment, pricing services may use certain information with respect
to transactions in such investments, quotations from dealers, pricing matrixes,
market transactions in comparable investments and various relationships between
investments. Financial futures contracts traded on exchanges are valued at their
last sale price. Swaps are valued by quoted fair values received daily by each
Fund's pricing service or through brokers. Short-term securities are valued at
amortized cost. Investments in open-end investment companies are valued at net
asset value each business day
In the event that application of these methods of valuation results in a price
for an investment which is deemed not to be representative of the market value
of such investment, the investment will be valued by a method approved by the
Board as reflecting fair value ("Fair Value Assets"). When determining the price
for Fair Value Assets, the investment advisor and/or sub-advisor seeks to
determine the price that the Funds might reasonably expect to receive from the
current sale of that asset in an arm's-length transaction. Fair value
determinations shall be based upon all available factors that the investment
advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets
is subsequently reported to the Board or a committee thereof.
Derivative Financial Instruments: The Funds may engage in various portfolio
investment strategies both to increase the return of the Funds and to hedge, or
protect, their exposure to interest rate movements and movements in the
securities markets. Losses may arise if the value of the contract decreases due
to an unfavorable change in the price of the underlying security or if the
counterparty does not perform under the contract.
o Financial futures contracts -- Each Fund may purchase or sell financial
futures contracts and options on such financial futures contracts. Futures
contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as margin variation and are
recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
at the time it was closed.
o Forward interest rate swaps -- Each Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. Changes in the value of the forward interest rate swap are
recognized as unrealized gains and losses. When the agreement is closed,
the Funds record a realized gain or loss in an amount equal to the value
of the agreement. The Funds generally intend to close each forward
interest rate swap before the effective date specified in the agreement
and therefore avoid entering into the interest rate swap underlying each
forward interest rate swap.
Forward Commitments and When-Issued Delayed Delivery Securities: The Funds may
purchase securities on a when-issued basis and may purchase or sell securities
on a forward commitment basis. Settlement of such transactions normally occurs
within a month or more after the purchase or sale commitment is made. The Funds
may purchase securities under 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. Upon making a
commitment to purchase a security on a when-issued basis, the Funds will hold
liquid assets worth at least the equivalent of the amount due.
Municipal Bonds Transferred to Tender Option Bond Trusts: The Funds leverage
their assets through the use of tender option bond trusts ("TOBs"). A TOB is
established by a third party sponsor forming a special purpose entity, into
which one or more funds, or an agent on behalf of the funds, transfers municipal
securities. Other funds managed by the investment advisor may also contribute
municipal securities to a TOB into which each Fund has contributed securities. A
TOB typically issues two classes of beneficial interests: short-term floating
rate certificates, which are sold to third party investors, and residual
certificates ("TOB Residuals"), which are generally issued to the participating
fund that made the transfer. The TOB Residuals held by the Funds includes the
right of each Fund (1) to cause the holders of a proportional share of the
floating rate certificates to tender their certificates at par, and (2) to
transfer, within
ANNUAL REPORT JULY 31, 2008 25
Notes to Financial Statements (continued)
seven days, a corresponding share of the municipal securities from the TOB to
the Fund. 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 invests the cash in additional municipal securities. Each Fund's
transfer of the municipal securities to a TOB is accounted for as a secured
borrowing, therefore the municipal securities deposited into a TOB are presented
in the Funds' Schedules of Investments and the proceeds from the transaction are
reported as a liability of the Funds.
Interest income from the underlying security 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. At July
31, 2008, the aggregate value of the underlying municipal securities transferred
to TOBs, the related liability for trust certificates and the range of interest
rates were as follows:
--------------------------------------------------------------------------------
Underlying
Municipal
Securities Liability Range of
Transferred to for Trust Interest
TOBs Certificates Rates
--------------------------------------------------------------------------------
BlackRock MuniHoldings
Insured Fund II, Inc. ..... $121,594,637 $ 77,184,259 1.536% -- 2.719%
BlackRock MuniYield
Insured Fund, Inc. ........ $472,007,273 $287,631,108 1.685% -- 2.618%
--------------------------------------------------------------------------------
Financial transactions executed through TOBs generally will underperform the
market for fixed rate municipal bonds in a rising interest rate environment, 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 likely will adversely affect each Fund's investment income
and dividends to common stock shareholders. Fluctuations in the market value of
municipal securities deposited into the TOB may adversely affect each Fund's net
asset value per share.
Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally
issued at a significant discount from face value and do not provide for periodic
interest payments. Zero-coupon bonds may experience greater volatility in market
value than similar maturity debt obligations which provide for regular interest
payments.
Segregation: In cases in which the 1940 Act and the interpretive positions of
the Securities and Exchange Commission ("SEC") require that the Funds segregate
assets in connection with certain investments (e.g., futures and swaps) and
certain borrowings, each Fund will, consistent with certain interpretive letters
issued by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.
Investment Transactions and Investment Income: Investment transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual method. The Funds amortize all
premiums and discounts on debt securities.
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 4.
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.
Effective March 31 and April 30, 2008, BlackRock MuniHoldings Insured Fund II,
Inc. and BlackRock MuniYield Insured Fund, Inc., respectively, implemented
Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109"
("FIN 48"). FIN 48 prescribes the minimum recognition threshold a tax position
must meet in connection with accounting for uncertainties in income tax
positions taken or expected to be taken by an entity, including investment
companies, before being measured and recognized in the financial statements. The
investment advisor has evaluated the application of FIN 48 to each Fund, and has
determined that the adoption of FIN 48 does not have a material impact on each
Fund's financial statements. The Funds file U.S. federal and various state and
local tax returns. No income tax returns are currently under examination. The
statute of limitations on BlackRock MuniHoldings Insured Fund II, Inc. and
BlackRock MuniYield Insured Fund, Inc.'s U.S. federal tax returns remains open
for the years ended September 30, 2005 through September 30, 2007 and October
31, 2005 through October 31, 2007, respectively. 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 Pronouncements: In September 2006, Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The impact on each Fund's financial
statement disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. FAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value
26 ANNUAL REPORT JULY 31, 2008
Notes to Financial Statements (continued)
that are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on each Fund's financial
statement disclosures, if any, is currently being assessed.
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. The impact on each Fund's
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
certain 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 each Fund. Each
Fund may, however elect to invest in common stock of other certain BlackRock
Closed-End Funds selected by the Independent Directors in order to match their
deferred compensation obligations. Investments to cover the Funds' deferred
compensation liabilities are included in other assets on the Statements of
Assets and Liabilities. Dividends and distributions from the BlackRock
Closed-End Fund investments under the plan are included in income from
affiliates in the Statements of Operations.
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.
Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services
Group, Inc. are principal owners of BlackRock, Inc.
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 BlackRock
MuniHoldings Insured Fund II, Inc. and 0.50% for BlackRock MuniYield Insured
Fund, Inc. of the 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 Stock and TOBs that exceeds 35% of the average daily net assets of
BlackRock MuniHoldings Insured Fund II, Inc. For the period October 1, 2007
through July 31, 2008 and the year ended September 30, 2007, these amounts were
$215,209 and $200,897, respectively. These amounts are included in the fees
waived by advisor on the Statements of Operations.
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. For the period October 1, 2007 through July 31,
2008 and the year ended September 30, 2007, $28,529 and $19,360, respectively,
were waived with respect to BlackRock MuniHoldings Insured Fund II, Inc. For the
period November 1, 2007 through July 31, 2008 and the year ended October 31,
2007, $35,197 and $11,868, respectively, were waived with respect to BlackRock
MuniYield Insured Fund, Inc. These amounts are included in the fees waived by
advisor on the Statements of Operations.
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 period ended October 1, 2007 to July 31, 2008 and the year ended
September 30, 2007, BlackRock MuniHoldings Insured Fund II, Inc. reimbursed the
Advisor $6,919 and $10,645, respectively, for certain accounting services, which
are included in accounting services on the Statements of Operations. For the
period ended November 1, 2007 to July 31, 2008 and the year ended October 31,
2007, BlackRock MuniYield Insured Fund, Inc. reimbursed the Advisor $18,501 and
$29,566, respectively, for certain accounting services, which are included in
accounting services on the Statements of Operations.
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 Fund are officers and/or directors of
BlackRock, Inc. or its affiliates. The Funds reimburse the Advisor for
compensation paid to the Funds' Chief Compliance Officer.
ANNUAL REPORT JULY 31, 2008 27
Notes to Financial Statements (continued)
3. Investments:
BlackRock MuniHoldings Insured Fund II, Inc.
Purchases and sales of investments, excluding short-term securities, for the
period October 1, 2007 to July 31, 2008, were $218,521,407, and $254,670,776,
respectively.
BlackRock MuniYield Insured Fund, Inc.
Purchases and sales of investments, excluding short-term securities, for the
period November 1, 2007 to July 31, 2008, were $1,094,749,211, and
$1,214,481,280, respectively.
4. Capital Stock Transactions:
Each Fund is authorized to issue 200,000,000 shares of stock, including
Preferred Stock, par value $0.10 per share, all of which were initially
classified as Common Stock. Each Board is authorized, however, to reclassify any
unissued shares of common stock without approval of the holders of Common Stock.
Common Stock
BlackRock MuniHoldings Insured Fund II, Inc.
Shares issued and outstanding during the period October 1, 2007 to July 31, 2008
and the years ended September 30, 2007 and September 30, 2006 remained constant
for the Fund.
BlackRock MuniYield Insured Fund, Inc.
Shares issued and outstanding during the period November 1, 2007 to July 31,
2008 and the years ended October 31, 2007 and October 31, 2006 remained constant
for the Fund.
Preferred Stock
Preferred Stock of the Funds has a par value of $0.10 per share and a
liquidation preference of $25,000 per share, plus accrued and unpaid dividends,
that entitles their holders to receive cash dividends at varying annualized
rates for each dividend period. The yields in effect at July 31, 2008 were as
follows:
--------------------------------------------------------------------------------
BlackRock BlackRock
MuniHoldings MuniYield
Insured Insured
Fund II, Inc. Fund, Inc.
--------------------------------------------------------------------------------
Series A .................................... 3.579% 1 3.351% 1
Series B .................................... 3.427% 1 3.427% 1
Series C .................................... 3.503% 1 2.579% 1
Series D .................................... -- 2.480% 1
Series E .................................... -- 3.427% 1
Series F .................................... -- 2.557% 1
Series G .................................... -- 3.579% 1
Series H .................................... -- 4.132% 2
Series I .................................... -- 4.354% 2
--------------------------------------------------------------------------------
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.
2 The maximum applicable rate on this series of Preferred Stock is the
higher of 110% times or plus 110% of the Telerate/BBA LIBOR or 110% times
or plus 110% of 90% of the Kenny S&P 30-day High Grade Index rate divided
by 1.00 minus the marginal tax rate.
BlackRock MuniHoldings Insured Fund II, Inc. pays commissions to certain
broker-dealers at the end of each auction at an annual rate of 0.25%, calculated
on the aggregate principal amount. For the period October 1, 2007 to July 31,
2008 and the year ended September 30, 2007, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch,
earned commissions of $180,351 and $186,241, respectively.
BlackRock MuniYield Insured Fund, Inc. pays commissions to certain
broker-dealers at the end of each auction at an annual rate of 0.25%, calculated
on the aggregate principal amount. For the period November 1, 2007 to July 31,
2008 and the year ended October 31, 2007, MLPF&S, a wholly owned subsidiary of
Merrill Lynch, earned commissions of $367,397 and $472,650, respectively.
On June 4, 2008, the Funds announced the following redemptions of Preferred
Stock at a price of $25,000 per share plus any accrued and unpaid dividends
through the redemption date:
BlackRock MuniHoldings Insured Fund II, Inc.
--------------------------------------------------------------------------------
Redemption Shares Aggregate
Date Redeemed Principal
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
28 ANNUAL REPORT JULY 31, 2008
Notes to Financial Statements (continued)
BlackRock MuniYield Insured Fund, Inc.
--------------------------------------------------------------------------------
Redemption Shares Aggregate
Date Redeemed Principal
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
The Funds financed the Preferred Stock redemptions with cash received from TOB
transactions.
Shares issued and outstanding during the years ended September 30, 2006 and
September 30, 2007 for BlackRock MuniHoldings Insured Fund II, Inc. and October
31, 2006 and October 31, 2007 for BlackRock MuniYield Insured Fund, Inc.
remained constant.
Dividends on seven-day Preferred Stock are cumulative at a rate, which is reset
every seven days based on the results of an auction. Dividends on 28-day
Preferred Stock are cumulative at a rate which is reset every 28 days based on
results of an auction. If the Preferred Stock fails to clear the auction on an
auction date, each Fund is required to pay the maximum applicable rate on the
Preferred Stock to holders of such shares for each successive dividend periods
until such time as the stock is successfully auctioned. The maximum applicable
rate on the Preferred Stock is footnoted as applicable on the above chart.
During the period ended July 31, 2008, the Preferred Stock of each Fund was
successfully auctioned at each auction date until February 13, 2008. The low,
high and average dividend rates on the Preferred Stock of BlackRock MuniHoldings
Insured Fund II, Inc. for the period October 1, 2007 to July 31, 2008 and the
low, high and average dividend rates on the Preferred Stock for each Fund for
the period November 1, 2007 to July 31, 2008 were as follows:
--------------------------------------------------------------------------------
Series Low High Average
--------------------------------------------------------------------------------
BlackRock MuniHoldings A 2.458% 4.600% 3.423%
Insured Fund II, Inc. B 2.480% 4.400% 3.360%
C 2.535% 4.500% 3.280%
--------------------------------------------------------------------------------
BlackRock MuniYield A 2.559% 4.600% 3.468%
Insured Fund, Inc. B 2.535% 4.600% 3.456%
C 2.579% 4.900% 3.482%
D 2.483% 4.400% 3.480%
E 2.483% 4.356% 3.281%
F 2.502% 4.750% 3.488%
G 2.483% 4.508% 3.375%
H 2.930% 5.198% 3.895%
I 3.000% 5.198% 3.822%
--------------------------------------------------------------------------------
Since February 13, 2008, the Preferred Stock of the Funds failed to clear any of
their auctions. As a result, the Preferred Stock dividend rates were reset to
the maximum applicable rate, which ranged from 2.458% to 5.198%. A failed
auction is not an event of default for the Fund but has a negative impact on the
liquidity of Preferred Stock. A failed auction occurs when there are more
sellers of a Fund's auction rate preferred stock than buyers. It is impossible
to predict how long this imbalance will last. A successful auction for the
Funds' Preferred Stock may not occur for some time, if ever, and even if
liquidity does resume, holders of the Preferred Stock may not have the ability
to sell the Preferred Stock at its liquidation preference.
The Funds may not declare dividends or make other distributions on Common Stock
or purchase any such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding Preferred Stock is less
than 200%.
The Preferred Stock is redeemable at the option of each Fund, in whole or in
part, on any dividend payment date at $25,000 per share plus any accumulated
unpaid dividends whether or not declared. The Preferred Stock is also subject to
mandatory redemption at $25,000 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 Stock have voting rights equal to the holders of Common
Stock (one vote per share) and will vote together with holders of Common Stock
(one vote per share) as a single class. However, the holders of Preferred Stock,
voting as a separate class, are also entitled 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 Stock, voting separately as a class, would be required to
(a) adopt any plan of reorganization that would adversely affect the Preferred
Stock (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.
5. Income Tax Information:
Reclassifications: Accounting principles generally accepted in the United States
of America require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. These
reclassifications have no effect on net assets or net asset values per share.
During the current year, $11,418,540 has been reclassified in BlackRock
MuniHoldings Insured Fund II, Inc. between paid-in capital in excess of par and
accumulated net realized loss and $237,891 has been reclassified between
undistributed net investment income and accumulated net realized loss as a
result of a permanent difference attributable to the expiration of a capital
loss carryforward, amortization methods on fixed income securities and the
classification of income.
ANNUAL REPORT JULY 31, 2008 29
Notes to Financial Statements (continued)
During the current year, $2,244,866 has been reclassified in BlackRock MuniYield
Insured Fund, Inc. between undistributed net investment income and accumulated
net realized loss as a result of permanent differences attributable to
amortization methods on fixed income securities and the reclassification of
distributions.
BlackRock MuniHoldings Insured Fund II, Inc.
The tax character of distributions paid during the period October 1, 2007 to
July 31, 2008 and the years ended September 30, 2007 and September 30, 2006 were
as follows:
--------------------------------------------------------------------------------
Period Year Year
10/1/07 to Ended Ended
7/31/08 9/30/07 9/30/06
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .............. $16,813,824 $21,194,039 $23,209,319
-------------------------------------------
Total distributions .............. $16,813,824 $21,194,039 $23,209,319
===========================================
As of July 31, 2008, the components of accumulated loss on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt net income ......................... $ 1,344,576
Undistributed long-term net capital gains ................... --
------------
Total undistributed net earnings ............................ 1,344,576
Capital loss carryforward ................................... (306,103)*
Net unrealized losses ....................................... (12,520,766)**
------------
Total accumulated net loss .................................. $(11,482,293)
============
* On July 31, 2008, the Fund had a capital loss carryforward of $306,103,
all of which expires in 2012. This amount will be available to offset
future realized capital gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on straddles, the
deferral of post-October capital losses for tax purposes and the
difference between the book and tax treatment of residual interests in
tender option bond trusts.
BlackRock MuniYield Insured Fund, Inc.
The tax character of distributions paid during the period November 1, 2007 to
July 31, 2008 and the years ended October 31, 2007 and October 31, 2006 were as
follows:
--------------------------------------------------------------------------------
Period Year Year
11/1/07 to Ended Ended
7/31/08 10/31/07 10/31/06
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income ............... $48,537,923 $66,194,332 $69,395,892
Ordinary income ................. -- -- 5,734,611
Long-term capital gain .......... -- -- 19,935,524
-----------------------------------------
Total distributions ............... $48,537,923 $66,194,332 $95,066,027
=========================================
As of July 31, 2008, the components of accumulated loss on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt net income ......................... $ 3,505,548
Undistributed long-term net capital gains ................... --
------------
Total undistributed net earnings ............................ 3,505,548
Capital loss carryforward ................................... (30,918,530)*
Net unrealized losses ....................................... (56,894,827)**
------------
Total accumulated net loss .................................. $(84,307,809)
============
* On July 31, 2008, the Fund had a capital loss carryforward of $30,918,530,
of which, $1,489,118 expires in 2014, $5,979,955 expires in 2015 and
$23,449,457 expires in 2016. This amount will be available to offset
future taxable gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on wash sales, the
tax deferral of losses on straddles, the difference between book and tax
amortization methods for premiums and discounts on fixed income
securities, the deferral of compensation to trustees and the difference
between the book and tax treatment of residual interests in tender option
bond trusts.
6. Concentration Risk:
Each Fund's investments are concentrated in certain states, which may be
affected by adverse financial, social, environmental, economic, regulatory and
political factors.
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 insurer will meet its obligation.
7. Restatement Information:
Subsequent to the initial issuance of BlackRock MuniYield Insured Fund, Inc.'s
October 31, 2006 financial statements and BlackRock MuniHoldings Insured Fund
II, Inc.'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 BlackRock MuniYield Insured Fund, Inc., and for each of the three
years in the period ended September 30, 2005 with respect to BlackRock
MuniHoldings Insured Fund II, Inc., 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.
30 ANNUAL REPORT JULY 31, 2008
Notes to Financial Statements (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights for BlackRock MuniYield Insured Fund, Inc.
For the Years Ended October 31, 2005, 2004 and 2003
------------------------------------------------------------------------------------------------------------------------------------
2005 2004 2003
------------------------ ------------------------ ------------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
------------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver 1 ................. 1.01% 1.60% 0.95% 1.19% 0.94% 1.18%
Total expenses 1 ................................ 1.01% 1.60% 0.95% 1.19% 0.95% 1.18%
Portfolio turnover .............................. 123.85% 105% 144.40% 122% 114.05% 95%
------------------------------------------------------------------------------------------------------------------------------------
1 Do not reflect the effect of dividends to Preferred Stock shareholders.
------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights for BlackRock MuniHoldings Insured Fund II, Inc.
For the Years Ended September 30, 2005, 2004 and 2003
------------------------------------------------------------------------------------------------------------------------------------
2005 2004 2003
------------------------ ------------------------ ------------------------
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
------------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and reimbursement 1 1.15% 1.32% 1.12% 1.17% 1.14% 1.21%
Total expenses 1 ................................ 1.21% 1.38% 1.21% 1.27% 1.23% 1.30%
Portfolio turnover .............................. 58.19% 46% 45.89% 45% 52.00% 50%
------------------------------------------------------------------------------------------------------------------------------------
1 Do not reflect the effect of dividends to Preferred Stock shareholders.
8. Subsequent Events:
Each Fund paid a net investment income dividend to holders of its Common Stock
on September 2, 2008 to shareholders of record on August 15, 2008. The amount of
the tax-exempt income dividend per share was as follows:
--------------------------------------------------------------------------------
Per Share
Amount
--------------------------------------------------------------------------------
BlackRock MuniHoldings Insured Fund II, Inc. ...................... $0.050000
BlackRock MuniYield Insured Fund, Inc. ............................ $0.056000
--------------------------------------------------------------------------------
The dividends declared on Preferred Stock for the period August 1, 2008 to
August 31, 2008 for the Funds were as follows:
--------------------------------------------------------------------------------
Series Amount
--------------------------------------------------------------------------------
BlackRock MuniHoldings Insured Fund II, Inc. A $ 76,704
B $ 77,450
C $148,781
--------------------------------------------------------------------------------
BlackRock MuniYield Insured Fund, Inc. A $ 93,577
B $ 95,688
C $ 72,014
D $ 69,247
E $145,717
F $ 77,876
G $ 93,581
H $156,881
I $127,892
--------------------------------------------------------------------------------
On September 12, 2008, the Board of Directors of BlackRock MuniHoldings Insured
Fund II, Inc. and BlackRock MuniYield Insured Fund, Inc. 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 interests of the Funds'
shareholders and to better meet the Funds' investment objectives.
On September 15, 2008, Bank of America Corporation announced that it has agreed
to acquire Merrill Lynch, one of the principal owners of BlackRock, Inc. The
purchase has been approved by the directors of both companies. Subject to
shareholder and regulatory approvals, the transaction is expected to close in
the first quarter of 2009.
ANNUAL REPORT JULY 31, 2008 31
Report of Independent Registered Public Accounting Firm
To the Shareholders and Boards of Directors of BlackRock MuniHoldings Insured
Fund II, Inc. and BlackRock MuniYield Insured Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of BlackRock MuniHoldings Insured Fund II, Inc. as
of July 31, 2008, and the related statements of operations for the period
October 1, 2007 to July 31, 2008 and for the year ended September 30, 2007, the
statements of changes in net assets for the period October 1, 2007 to July 31,
2008 and for each of the two years in the period ended September 30, 2007, and
the financial highlights for the period October 1, 2007 to July 31, 2008 and for
each of the two years in the period ended September 30, 2007. We have also
audited the accompanying statement of assets and liabilities, including the
schedule of investments, of BlackRock MuniYield Insured Fund, Inc. as of July
31, 2008, and the related statements of operations for the period November 1,
2007 to July 31, 2008 and for the year ended October 31, 2007, the statements of
changes in net assets for the period November 1, 2007 to July 31, 2008 and for
each of the two years in the period ended October 31, 2007, the statement of
cash flows for the period November 1, 2007 to July 31, 2008, and the financial
highlights for the period November 1, 2007 to July 31, 2008 and for each of the
two years in the period ended October 31, 2007. BlackRock MuniHoldings Insured
Fund II, Inc. and BlackRock MuniYield Insured Fund, Inc. are collectively
referred to as the "Funds." 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 of BlackRock MuniHoldings Insured Fund
II, Inc. for each of the three years in the period ended September 30, 2005
(before the restatement described in Note 7) were audited by other auditors
whose report, dated November 9, 2005, expressed a qualified opinion on those
financial highlights because of the errors described in Note 7. The financial
highlights of BlackRock MuniYield Insured Fund, Inc. for each of the three years
in the period ended October 31, 2005 (before the restatement described in Note
7) were audited by other auditors whose report, dated December 9, 2005,
expressed a qualified opinion on those financial highlights because of the
errors described in Note 7.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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 July 31, 2008, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock MuniHoldings Insured Fund II, Inc. as of July 31, 2008, and the
results of its operations for the period October 1, 2007 to July 31, 2008 and
for the year ended September 30, 2007, the changes in its net assets for the
period October 1, 2007 to July 31, 2008 and for each of the two years in the
period ended September 30, 2007, and the financial highlights for the period
October 1, 2007 to July 31, 2008 and for each of the two years in the period
ended September 30, 2007, 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 MuniYield Insured
Fund, Inc. as of July 31, 2008, the results of its operations for the period
November 1, 2007 to July 31, 2008 and for the year ended October 31, 2007, the
changes in its net assets for the period November 1, 2007 to July 31, 2008 and
for each of the two years in the period ended October 31, 2007, its cash flows
for the period November 1, 2007 to July 31, 2008, and the financial highlights
for the period November 1, 2007 to July 31, 2008 and for each of the two years
in the period ended October 31, 2007, in conformity with accounting principles
generally accepted in the United States of America.
We have audited the adjustments, applied by management, to restate certain
BlackRock MuniHoldings Insured Fund II, Inc. ("Insured Fund II") financial
highlights for each of the three years in the period ended September 30, 2005 to
correct the errors described in Note 7. We have also audited the adjustments,
applied by management, to restate certain BlackRock MuniYield Insured Fund, Inc.
("Insured Fund") financial highlights for each of the three years in the period
ended October 31, 2005 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 information in
Insured Fund II's financial highlights for each of the three years in the period
ended September 30, 2005 and Insured Fund's financial highlights for each of the
three years in the period ended October 31, 2005. We did not perform any audit
procedures designed to assess whether any additional adjustments or disclosures
to Insured Fund II's or Insured Fund's financial highlights for each of the
three years in the period ended September 30, 2005 and October 31, 2005,
respectively, might be necessary in order for such financial highlights to be
presented
32 ANNUAL REPORT JULY 31, 2008
Report of Independent Registered Public Accounting Firm (concluded)
in conformity with accounting principles generally accepted in the United States
of America. In our opinion, the adjustments to the financial highlights of
Insured Fund II for each of the three years in the period ended September 30,
2005, for the restatement 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 the Insured Fund II's financial
highlights for each of the three years in the period ended September 30, 2005,
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 the Insured Fund
II's financial highlights for each of the three years in the period ended
September 30, 2005. Additionally, in our opinion, the adjustments to the
financial highlights of Insured Fund for each of the three years in the period
ended October 31, 2005, for the restatement 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 the Insured Fund's
financial highlights for each of the three years in the period ended October 31,
2005, 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 the
Insured Fund's financial highlights for each of the three years in the period
ended October 31, 2005.
Deloitte & Touche LLP
Princeton, New Jersey
September 25, 2008
Important Tax Information (Unaudited)
All of the net investment income distributions paid by BlackRock MuniHoldings
Insured Fund II, Inc. and BlackRock MuniYield Insured Fund, Inc., during the
period ended July 31, 2008 qualify as tax-exempt interest dividends for federal
income tax purposes.
ANNUAL REPORT JULY 31, 2008 33
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Funds offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by Computershare Trust
Company, N.A. (the "Plan Agent"). Under the Plan, whenever the Fund declares a
dividend, participants in the Plan will receive the equivalent in shares of
Common Stock of the Fund. The Plan Agent 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 shares of Common Stock on the open market on the New York Stock
Exchange or elsewhere. If, on the dividend payment date, the 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 Agent will invest the dividend amount in newly issued
shares. If the 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 Agent
will invest the dividend amount by purchasing on the open market additional
shares. If the Plan Agent is 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 Agent 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
shares of Common Stock of the Funds 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 the 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 the Funds. 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 the 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 Agent's service fees for handling the reinvestment of
distributions are paid for by the Funds. However, brokerage commissions may be
incurred when the Funds purchases 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. Participation in the Plan generally will not affect the tax-exempt status
of exempt interest dividends paid by the Funds. If, when the Funds' shares are
trading at a market premium, the Funds issue 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 the Funds' 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 Computershare
Trust Company, N.A., P.O. Box 43010, Providence, RI 02940-3010, Telephone: (800)
426-5523.
34 ANNUAL REPORT JULY 31, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
The Board of Directors (collectively, the "Board," the members of which are
referred to as "Directors") of the BlackRock MuniHoldings Insured Fund II, Inc.
("MUE") and BlackRock MuniYield Insured Fund, Inc. ("MYI," and together with
MUE, the "Funds") met in April and May 2008 to consider approving the
continuation of each Fund's investment advisory agreement (each, an "Advisory
Agreement") with BlackRock Advisors, LLC (the "Advisor"), each Fund's investment
adviser. The Board also considered the approval of each Fund's subadvisory
agreement (each, a "Subadvisory Agreement" and, together with the "Advisory
Agreement," the "Agreements") between the Advisor and BlackRock Investment
Management, LLC (the "Subadvisor"). The Advisor and the Subadvisor are
collectively referred to herein as the "Advisors" and, together with BlackRock,
Inc., "BlackRock."
Activities and Composition of the Board
The Board of each Fund consists of thirteen individuals, eleven of whom are not
"interested persons" of the Funds as defined in the Investment Company Act of
1940 (the "1940 Act") (the "Independent Directors"). The Directors are
responsible for the oversight of the operations of the Funds and perform the
various duties imposed on the directors of investment companies by the 1940 Act.
The Independent Directors have retained independent legal counsel to assist them
in connection with their duties. The Chairman of the Board is an Independent
Director. The Board has established four standing committees: an Audit
Committee, a Governance and Nominating Committee, a Compliance Committee and a
Performance Oversight Committee.
Advisory Agreement and Subadvisory Agreement
Upon the consummation of the combination of BlackRock, Inc.'s investment
management business with Merrill Lynch & Co., Inc.'s investment management
business, including Merrill Lynch Investment Managers, L.P., and certain
affiliates, each Fund entered into an Advisory Agreement and a Subadvisory
Agreement, each with an initial two-year term. Consistent with the 1940 Act,
after the Advisory Agreement's and Subadvisory Agreement's respective initial
two-year term, the Board is required to consider the continuation of each Fund's
Advisory Agreement and Subadvisory Agreement on an annual basis. In connection
with this process, the Board assessed, among other things, the nature, scope and
quality of the services provided to each Fund by the personnel of BlackRock and
its affiliates, including investment advisory services, administrative services,
secondary market support services, oversight of fund accounting and custody, and
assistance in meeting legal and regulatory requirements. The Board also received
and assessed information regarding the services provided to each Fund by certain
unaffiliated service providers.
Throughout the year, the Board also considered a range of information in
connection with its oversight of the services provided by BlackRock and its
affiliates. Among the matters the Board considered were: (a) investment
performance for one-, three- and five-year periods, as applicable, against peer
funds, as well as senior management and portfolio managers' analysis of the
reasons for underperformance, if applicable; (b) fees, including advisory,
administration and other fees paid to BlackRock and its affiliates by each Fund,
as applicable; (c) Fund operating expenses paid to third parties; (d) the
resources devoted to and compliance reports relating to each Fund's investment
objective, policies and restrictions; (e) each Fund's compliance with its Code
of Ethics and compliance policies and procedures; (f) the nature, cost and
character of non-investment management services provided by BlackRock and its
affiliates; (g) BlackRock's and other service providers' internal controls; (h)
BlackRock's implementation of the proxy voting guidelines approved by the Board;
(i) execution quality; (j) valuation and liquidity procedures; and (k) reviews
of BlackRock's business, including BlackRock's response to the increasing scale
of its business.
Board Considerations in Approving the Advisory Agreement and Subadvisory
Agreement
To assist the Board in its evaluation of the Agreements, the Directors received
information from BlackRock in advance of the April 22, 2008 meeting which
detailed, among other things, the organization, business lines and capabilities
of the Advisors, including: (a) the responsibilities of various departments and
key personnel and biographical information relating to key personnel; (b)
financial statements for BlackRock; (c) the advisory and/or administrative fees
paid by each Fund to the Advisors, including comparisons, compiled by Lipper
Inc. ("Lipper"), an independent third party, with the management fees, which
include advisory and administration fees, of funds with similar investment
objectives ("Peers"); (d) the profitability of BlackRock and certain industry
profitability analyses for advisers to registered investment companies; (e) the
expenses of BlackRock in providing various services; (f) non-investment advisory
reimbursements, if applicable, and "fallout" benefits to BlackRock; (g)
economies of scale, if any, generated through the Advisors' management of all of
the BlackRock closed-end funds (the "Fund Complex"); (h) the expenses of each
Fund, including comparisons of each such Fund's expense ratios (both before and
after any fee waivers) with the expense ratios of its Peers; (i) an internal
comparison of management fees classified by Lipper, if applicable; and (j) each
Fund's performance for the past one-, three- and five-year periods, as
applicable, as well as each Fund's performance compared to its Peers.
ANNUAL REPORT JULY 31, 2008 35
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
The Board also considered other matters it deemed important to the approval
process, where applicable, such as payments made to BlackRock or its affiliates
relating to the distribution of Fund shares, services related to the valuation
and pricing of Fund portfolio holdings, and direct and indirect benefits to
BlackRock and its affiliates from their relationship with the Funds.
In addition to the foregoing materials, independent legal counsel to the
Independent Directors provided a legal memorandum outlining, among other things,
the duties of the Board under the 1940 Act, as well as the general principles of
relevant law in reviewing and approving advisory contracts, the requirements of
the 1940 Act in such matters, an adviser's fiduciary duty with respect to
advisory agreements and compensation, and the standards used by courts in
determining whether investment company boards of directors have fulfilled their
duties and the factors to be considered by boards in voting on advisory
agreements.
The Independent Directors reviewed this information and discussed it with
independent legal counsel prior to the meeting on April 22, 2008. At the Board
meeting on April 22, 2008, BlackRock made a presentation to and responded to
questions from the Board. Following the meeting on April 22, 2008, the Board
presented BlackRock with questions and requests for additional information.
BlackRock responded to these requests with additional written materials provided
to the Directors prior to the meetings on May 29 and 30, 2008. At the Board
meetings on May 29 and 30, 2008, BlackRock responded to further questions from
the Board. In connection with BlackRock's presentations, the Board considered
each Agreement and, in consultation with independent legal counsel, reviewed the
factors set out in judicial decisions and Securities and Exchange Commission
("SEC") statements relating to the renewal of the Agreements.
Matters Considered by the Board
In connection with its deliberations with respect to the Agreements, the Board
considered all factors it believed relevant with respect to each Fund, including
the following: the nature, extent and quality of the services provided by the
Advisors; the investment performance of each Fund; the costs of the services to
be provided and profits to be realized by the Advisors and their affiliates from
their relationship with the Funds; the extent to which economies of scale would
be realized as the Fund Complex grows; and whether BlackRock realizes other
benefits from its relationship with the Funds.
A. Nature, Extent and Quality of the Services: In evaluating the nature, extent
and quality of the Advisors' services, the Board reviewed information concerning
the types of services that the Advisors provide and are expected to provide to
each Fund, narrative and statistical information concerning each Fund's
performance record and how such performance compares to each Fund's Peers,
information describing BlackRock's organization and its various departments, the
experience and responsibilities of key personnel and available resources. The
Board noted the willingness of the personnel of BlackRock to engage in open,
candid discussions with the Board. The Board further considered the quality of
the Advisors' investment process in making portfolio management decisions.
In addition to advisory services, the Directors considered the quality of the
administrative and non-investment advisory services provided to the Funds. The
Advisors and their affiliates provided each Fund with such administrative and
other services, as applicable (in addition to any such services provided by
others for the Funds), and officers and other personnel as are necessary for the
operations of the respective Fund. In addition to investment management
services, the Advisors and their affiliates provided each Fund with services
such as: preparing shareholder reports and communications, including annual and
semi-annual financial statements and the Funds' websites; communications with
analysts to support secondary market trading; assisting with daily accounting
and pricing; preparing periodic filings with regulators and stock exchanges;
overseeing and coordinating the activities of other service providers;
administering and organizing Board meetings and preparing the Board materials
for such meetings; providing legal and compliance support (such as helping to
prepare proxy statements and responding to regulatory inquiries); and performing
other Fund administrative tasks necessary for the operation of the respective
Fund (such as tax reporting and fulfilling regulatory filing requirements). The
Board considered the Advisors' policies and procedures for assuring compliance
with applicable laws and regulations.
B. The Investment Performance of the Funds and BlackRock: As previously noted,
the Board received performance information regarding each Fund and its Peers.
Among other things, the Board received materials reflecting each Fund's historic
performance and each Fund's performance compared to its Peers. More
specifically, each Fund's one-, three- and five-year total returns (as
applicable) were evaluated relative to its Peers (including the Peers' median
performance).
36 ANNUAL REPORT JULY 31, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
The Board reviewed a narrative and statistical analysis of the Lipper data that
was prepared by BlackRock, which analyzed various factors that affect Lipper
rankings.
The Board noted that each of MUE and MYI performed below the median of their
respective Peers in at least two of the one-, three- and five-year periods
reported. The Board then discussed with representatives of BlackRock the reasons
for each of MUE's and MYI's underperformance during these periods compared with
their respective Peers. The Board noted that the underperformance of MUE was
largely due to its defensive duration in the face of a long-term municipal bond
rally, where conditions would have enhanced the Fund's performance if the Fund
had a longer duration. The Board noted that the underperformance of MYI was due
to Alternative Minimum Tax bond yield spread increases versus the Municipal
Market Data scale.
The Board concluded that BlackRock was committed to providing the resources
necessary to assist the portfolio managers and to continue improving each Fund's
performance. Based on its review, the Board generally was satisfied with
BlackRock's efforts to manage each of the Funds.
After considering this information, the Boards concluded that the performance of
each Fund, in light of and after considering the other facts and circumstances
applicable to each Fund, supports a conclusion that each Fund's Agreements
should be renewed.
C. Consideration of the Advisory Fees and the Cost of the Services and Profits
to be Realized by BlackRock and its Affiliates from their Relationship with the
Funds: In evaluating the management fees and expenses that each Fund is expected
to bear, the Board considered each Fund's current management fee structure and
each Fund's expense ratios in absolute terms as well as relative to the fees and
expense ratios of its applicable Peers. The Board, among other things, reviewed
comparisons of each Fund's gross management fees before and after any applicable
reimbursements and fee waivers and total expense ratios before and after any
applicable waivers with those of applicable Peers. The Board also reviewed a
narrative analysis of the Peer rankings prepared by Lipper and summarized by
BlackRock at the request of the Board. This summary placed the Peer rankings
into context by analyzing various factors that affect these comparisons.
The Board noted that the Funds paid contractual management fees lower than or
equal to the median contractual fees paid by each Fund's respective Peers. This
comparison was made without giving effect to any expense reimbursements or fee
waivers.
The Board also compared the management fees charged and services provided by the
Advisors to closed-end funds in general versus other types of clients (such as
open-end investment companies and separately managed institutional accounts) in
similar investment categories. The Board noted certain differences in services
provided and costs incurred by the Advisor with respect to closed-end funds
compared to these other types of clients and the reasons for such differences.
In connection with the Board's consideration of the fees and expense
information, the Board reviewed the considerable investment management
experience of the Advisors and considered the high level of investment
management, administrative and other services provided by the Advisors. In light
of these factors and the other facts and circumstances applicable to each Fund,
the Board concluded that the fees paid and level of expenses incurred by each
Fund under its Agreements support a conclusion that each Fund's Agreements
should be renewed.
D. Profitability of BlackRock: The Board also considered BlackRock's
profitability in conjunction with its review of fees. The Board reviewed
BlackRock's profitability with respect to the Fund Complex and other fund
complexes managed by the Advisors. In reviewing profitability, the Board
recognized that one of the most difficult issues in determining profitability is
establishing a method of allocating expenses. The Board also reviewed
BlackRock's assumptions and methodology of allocating expenses, noting the
inherent limitations in allocating costs among various advisory products. The
Board also recognized that individual fund or product line profitability of
other advisors is generally not publicly available.
The Board recognized that profitability may be affected by numerous factors
including, among other things, the types of funds managed, expense allocations
and business mix, and therefore comparability of profitability is somewhat
limited. Nevertheless, to the extent available, the Board considered BlackRock's
operating margin compared to the operating margin estimated by BlackRock for a
leading investment management firm whose operations consist primarily of
advising closed-end funds. The comparison indicated that BlackRock's operating
margin was approximately the same as the operating margin of such firm.
ANNUAL REPORT JULY 31, 2008 37
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(concluded)
In evaluating the reasonableness of the Advisors' compensation, the Board also
considered any other revenues paid to the Advisors, including partial
reimbursements paid to the Advisors for certain non-investment advisory
services, if applicable. The Board noted that these payments were less than the
Advisors' costs for providing these services. The Board also considered indirect
benefits (such as soft dollar arrangements) that the Advisors and their
affiliates are expected to receive, which are attributable to their management
of the Fund.
The Board concluded that BlackRock's profitability, in light of all the other
facts and circumstances applicable to each Fund, supports a conclusion that each
Fund's Agreements should be renewed.
E. Economies of Scale: In reviewing each Fund's fees and expenses, the Board
examined the potential benefits of economies of scale, and whether any economies
of scale should be reflected in the Fund's fee structure, for example through
the use of breakpoints for the Fund or the Fund Complex. In this regard, the
Board reviewed information provided by BlackRock, noting that most closed-end
fund complexes do not have fund-level breakpoints because closed-end funds
generally do not experience substantial growth after their initial public
offering and each fund is managed independently consistent with its own
investment objectives. The Board noted that only three closed-end funds in the
Fund Complex have breakpoints in their fee structures. Information provided by
Lipper also revealed that only one closed-end fund complex used a complex-level
breakpoint structure. The Board found, based on its review of comparable funds,
that each Fund's management fee is appropriate in light of the scale of the
respective Fund.
F. Other Factors: In evaluating fees, the Board also considered indirect
benefits or profits the Advisors or their affiliates may receive as a result of
their relationships with the Funds ("fall-out benefits"). The Directors,
including the Independent Directors, considered the intangible benefits that
accrue to the Advisors and their affiliates by virtue of their relationships
with the Funds, including potential benefits accruing to the Advisors and their
affiliates as a result of participating in offerings of the Funds' shares,
potentially stronger relationships with members of the broker-dealer community,
increased name recognition of the Advisors and their affiliates, enhanced sales
of other investment funds and products sponsored by the Advisors and their
affiliates and increased assets under management which may increase the benefits
realized by the Advisors from soft dollar arrangements with broker-dealers. The
Board also considered the unquantifiable nature of these potential benefits.
Conclusion with Respect to the Agreements
In reviewing the Agreements, the Directors did not identify any single factor
discussed above as all-important or controlling and different Directors may have
attributed different weights to the various factors considered. The Directors,
including the Independent Directors, unanimously determined that each of the
factors described above, in light of all the other factors and all of the facts
and circumstances applicable to each respective Fund, was acceptable for each
Fund and supported the Directors' conclusion that the terms of each Agreement
were fair and reasonable, that each Fund's fees are reasonable in light of the
services provided to the respective Fund and that each Agreement should be
approved.
38 ANNUAL REPORT JULY 31, 2008
Officers and Directors
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Served Principal Occupation(s) and Portfolios
and Year of Birth Fund as a Director(2) During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Directors(1)
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Cavanagh Chairman of Since 2007 Trustee, Aircraft Finance Trust 113 Funds Arch Chemical
40 East 52nd Street the Board since 1999; Director, The 110 Portfolios (chemical and allied
New York, NY 10022 and Director Guardian Life Insurance Company products)
1946 of America since 1998; Trustee,
Educational Testing Service
since 1997; Director, The
Fremont Group since 1996;
Formerly President and Chief
Executive Officer of The
Conference Board, Inc. (global
business research organization)
from 1995 to 2007.
------------------------------------------------------------------------------------------------------------------------------------
Karen P. Robards Vice Chair of Since 2007 Partner of Robards & Company, 112 Funds AtriCure, Inc.
40 East 52nd Street the Board, LLC (financial advisory firm) 109 Portfolios (medical devices);
New York, NY 10022 Chair of since 1987; Co-founder and Care Investment
1950 the Audit Director of the Cooke Center Trust, Inc. (health
Committee for Learning and Development care REIT)
and Director (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.
------------------------------------------------------------------------------------------------------------------------------------
G. Nicholas Beckwith, III Director Since 2007 Chairman and Chief Executive 112 Funds None
40 East 52nd Street Officer, Arch Street 109 Portfolios
New York, NY 10022 Management, LLC (Beckwith
1945 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
Board of Directors, National
Retail Properties (REIT) from
2006 to 2007.
------------------------------------------------------------------------------------------------------------------------------------
Kent Dixon Director and Since 2007 Consultant/Investor since 1988. 113 Funds None
40 East 52nd Street Member of 110 Portfolios
New York, NY 10022 the Audit
1937 Committee
------------------------------------------------------------------------------------------------------------------------------------
Frank J. Fabozzi Director and Since 2007 Consultant/Editor of The 113 Funds None
40 East 52nd Street Member of Journal of Portfolio Management 110 Portfolios
New York, NY 10022 the Audit since 2006; Professor in the
1948 Committee 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.
------------------------------------------------------------------------------------------------------------------------------------
Kathleen F. Feldstein Director Since 2007 President of Economics Studies, 113 Funds The McClatchy
40 East 52nd Street Inc. (private economic 110 Portfolios Company
New York, NY 10022 consulting firm) since 1987; (newspaper
1941 Chair, Board of Trustees, publishing)
McLean Hospital from 2000 to
2008 and Trustee Emeritus
thereof since 2008; Member of
the Corporation of Partners
Community Healthcare, Inc.
since 2005; Member of the
Corporation of Partners
HealthCare since 1995; Member
of the Corporation of Sherrill
House (health care) since 1990;
Trustee, Museum of Fine Arts,
Boston since 1992; Member of
the Visiting Committee to the
Harvard University Art Museum
since 2003; Trustee, The
Committee for Economic
Development (research
organization) since 1990;
Member of the Advisory Board to
the International School of
Business, Brandeis University
since 2002.
------------------------------------------------------------------------------------------------------------------------------------
ANNUAL REPORT JULY 31, 2008 39
Officers and Directors (continued)
Number of
BlackRock-
Position(s) Length of Advised Funds
Name, Address Held with Time Served Principal Occupation(s) and Portfolios
and Year of Birth Fund as a Director(2) During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Directors(1) (concluded)
------------------------------------------------------------------------------------------------------------------------------------
James T. Flynn Director and Since 2007 Formerly Chief Financial 112 Funds None
40 East 52nd Street Member of Officer of JPMorgan & Co., Inc. 109 Portfolios
New York, NY 10022 the Audit from 1990 to 1995.
1939 Committee
------------------------------------------------------------------------------------------------------------------------------------
Jerrold B. Harris Director Since 2007 Trustee, Ursinus College since 112 Funds BlackRock-Kelso
40 East 52nd Street 2000; Director, Troemner LLC 109 Portfolios Capital Corp.
New York, NY 10022 (scientific equipment) since
1942 2000.
------------------------------------------------------------------------------------------------------------------------------------
R. Glenn Hubbard Director Since 2007 Dean of Columbia Business 113 Funds ADP (data and
40 East 52nd Street School since 2004; Columbia 110 Portfolios information services);
New York, NY 10022 faculty member since 1988; KKR Financial
1958 Formerly Co-Director of Corporation (finance);
Columbia Business School's Duke Realty (real
Entrepreneurship Program from estate); Metropolitan
1997 to 2004; Visiting Life Insurance Com-
Professor at the John F. pany (insurance);
Kennedy School of Government at Information
Harvard University and the Services Group
Harvard Business School since (media/technology)
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.
------------------------------------------------------------------------------------------------------------------------------------
W. Carl Kester Director and Since 2007 Mizuho Financial Group 112 Funds None
40 East 52nd Street Member of Professor of Finance, Harvard 109 Portfolios
New York, NY 10022 the Audit Business School; Deputy Dean
1951 Committee 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.
------------------------------------------------------------------------------------------------------------------------------------
Robert S. Salomon, Jr. Director and Since Formerly Principal of STI 112 Funds None
40 East 52nd Street Member of 1996 (MYI) Management LLC (investment 109 Portfolios
New York, NY 10022 the Audit 1999 (MUE) adviser) from 1994 to 2005.
1936 Committee
---------------------------------------------------------------------------------------------------------
(1) Directors serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
(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 certain directors as joining the Fund's 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 since 1999; Richard E. Cavanagh since 1994; Kent Dixon since 1988; Frank J. Fabozzi
since 1988; Kathleen F. Feldstein since 2005; James T. Flynn since 1996; Jerrold B. Harris since
1999; R. Glenn Hubbard since 2004; W. Carl Kester since 1998; Karen P. Robards since 1998; and
Robert S. Salomon, Jr. since 1996.
====================================================================================================================================
Interested Directors(3)
------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis Director Since 2007 Managing Director, BlackRock, 185 Funds None
40 East 52nd Street Inc. since 2005; Formerly Chief 295 Portfolios
New York, NY 10022 Executive Officer, State Street
1945 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.
------------------------------------------------------------------------------------------------------------------------------------
Henry Gabbay Director Since 2007 Consultant, BlackRock, Inc. 184 Funds None
40 East 52nd Street since 2007; Formerly Managing 294 Portfolios
New York, NY 10022 Director, BlackRock, Inc. from
1947 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.
---------------------------------------------------------------------------------------------------------
(3) Messrs. Davis and Gabbay are both "interested persons," as defined in the Investment Company Act of
1940, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Directors serve
until their resignation, removal or death, or until December 31 of the year in which they turn 72.
40 ANNUAL REPORT JULY 31, 2008
Officers and Directors (concluded)
Position(s) Length of
Name, Address Held with Time
and Year of Birth Fund Served Principal Occupation(s) During Past Five Years
====================================================================================================================================
Fund Officers(1)
------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Fund Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Managing
40 East 52nd Street President and Director of Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund
New York, NY 10022 Chief Executive Asset Management, L.P. ("FAM") in 2006; First Vice President thereof
1960 Officer from 1997 to 2005; Treasurer thereof from 1999 to 2006 and Vice
President thereof from 1990 to 1997.
------------------------------------------------------------------------------------------------------------------------------------
Anne F. Ackerley Vice Since 2007 Managing Director of BlackRock, Inc. since 2000; Chief Operating
40 East 52nd Street President Officer of BlackRock's U.S. Retail Group since 2006; Head of
New York, NY 10022 BlackRock's Mutual Fund Group from 2000 to 2006; Merrill Lynch & Co.,
1962 Inc. from 1984 to 1986 and from 1988 to 2000, most recently as First
Vice President and Operating Officer of the Mergers and Acquisitions
Group.
------------------------------------------------------------------------------------------------------------------------------------
Neal J. Andrews Chief Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice
40 East 52nd Street Financial President and Line of Business Head of Fund Accounting and
New York, NY 10022 Officer Administration at PNC Global Investment Servicing (U.S.) Inc. (formerly
1966 PFPC Inc.) from 1992 to 2006.
------------------------------------------------------------------------------------------------------------------------------------
Jay M. Fife Treasurer Since 2007 Managing Director of BlackRock, Inc. since 2007 and Director in 2006;
40 East 52nd Street Formerly Assistant Treasurer of the MLIM/FAM-advised Funds from 2005 to
New York, NY 10022 2006; Director of MLIM Fund Services Group from 2001 to 2006.
1970
------------------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Chief Since 2007 Chief Compliance Officer of the BlackRock-advised Funds since 2007;
40 East 52nd Street Compliance Anti-Money Laundering Officer of the BlackRock-advised Funds since
New York, NY 10022 Officer of 2007; Managing Director and Senior Counsel of BlackRock, Inc. since
1959 the Fund 2005; Director and Senior Counsel of BlackRock Advisors, Inc. from 2001
to 2004 and Vice President and Senior Counsel thereof from 1998 to
2000; Formerly Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary Since 2007 Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds
40 East 52nd Street at BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of
New York, NY 10022 Goldman Sachs Asset Management, L.P. from 1993 to 2006.
1965
---------------------------------------------------------------------------------------------------------
(1) Officers of the Fund serve at the pleasure of the Board of Directors.
------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and
Trust Company
Boston, MA 02109
Transfer Agents
Common Stock:
Computershare Trust
Company, N.A.
Providence, RI 02940
Preferred Stock:
BNY Mellon
Shareowner Services
Jersey City, NJ 07310
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
ANNUAL REPORT JULY 31, 2008 41
Additional Information
Dividend Policy
The Funds' dividend policy is to distribute all or a portion of their net
investment income to their shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Funds may
at times pay out less than the entire amount of net investment income earned in
any particular month and may at times in any particular month pay out such
accumulated but undistributed income in addition to net investment income earned
in that month. As a result, the dividends paid by the Funds for any particular
month may be more or less than the amount of net investment income earned by the
Funds during such month. The Funds' current accumulated but undistributed net
investment income, if any, is disclosed in the Statements of Assets and
Liabilities, which comprises part of the financial information included in this
report.
Fund Certification
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.
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms
N-Q are available on the SEC's website at http://www.sec.gov and may also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on 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 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.
General Information
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 Statements of Additional Information of the Funds have not been updated
after completion of the Funds' offering and the information contained in the
Funds' Statements 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' portfolios.
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.
42 ANNUAL REPORT JULY 31, 2008
Additional Information (concluded)
Deposit Securities
Effective May 30, 2008, following approval by the Funds' Board and the
applicable ratings agencies, the definition of "Deposit Securities" in the
Funds' Articles Supplementary was amended as follows in order to facilitate the
redemption of the Funds' Preferred Stock. The following phrase was added to the
definition of "Deposit Securities" found in the Funds' Articles Supplementary:
; provided, however, that solely in connection with any redemption of
Preferred Stock, the term Deposit Securities shall include (i) any
committed financing pursuant to a credit agreement, reverse repurchase
agreement facility or similar credit arrangement, in each case which makes
available to the Corporation, no later than the day preceding the
applicable redemption date, cash in an amount not less than the aggregate
amount due to Holders by reason of the redemption of their shares of
Preferred Stock on such redemption date; and (ii) cash amounts due and
payable to the Corporation out of a sale of its securities if such cash
amount is not less than the aggregate amount due to Holders by reason of
the redemption of their shares of Preferred Stock on such redemption date
and such sale will be settled not later than the day preceding the
applicable redemption date.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
Proxy Voting Policy
The Boards of the Funds have delegated the voting of proxies for Fund securities
to the Advisor pursuant to the Advisor's proxy voting guidelines. Under these
guidelines, the Advisor will vote proxies related to Fund securities in the best
interests of each Fund and its stockholders. From time to time, a vote may
present a conflict between the interests of the Funds' stockholders, on the one
hand, and those of the Advisor, or any affiliated person of the Funds or the
Advisor, on the other. In such event, provided that the Advisor's Equity
Investment Policy Oversight Committee, or a sub-committee thereof (the
"Committee") is aware of the real or potential conflict or material non-routine
matter and if the 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 Committee may retain an independent
fiduciary to advise the Committee on how to vote or to cast votes on behalf of
the Advisor's clients. If the Advisor determines not to retain an independent
fiduciary, or does not desire to follow the advice of such independent
fiduciary, the Committee shall determine how to vote the proxy after consulting
with the Advisor's Portfolio Management Group and/or the Advisor's Legal and
Compliance Department and concluding that the vote is in its client's best
interest notwithstanding the conflict.
ANNUAL REPORT JULY 31, 2008 43
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
Stock, which creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price of the
Common Stock, and the risk that fluctuations in the short-term dividend rates of
the Preferred Stock, currently set at the maximum reset rate as a result of
failed auctions, may affect the yield to Common Stock shareholders. Statements
and other information herein are as dated and are subject to change.
A description of the policies and procedures that the 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 Insured Fund, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#MY2-7/08
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.
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 (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
James T. Flynn (term began effective November 1, 2007)
Joe Grills (term ended effective November 1, 2007)
W. Carl Kester (term began effective November 1, 2007)
Karen P. Robards (term began effective November 1, 2007)
Robert S. Salomon, Jr.
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.
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.
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
-----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
-----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
-----------------------------------------------------------------------------------------------------------------------------------
BlackRock MuniYield
Insured Fund, Inc. $32,300 $57,350 $3,500 $3,500 $6,100 $6,100 $1,049 $1,042
-----------------------------------------------------------------------------------------------------------------------------------
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:
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:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
BlackRock MuniYield Insured
Fund, Inc. $298,149 $295,142
--------------------------------------------------------------------
(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) - $287,500, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):
James H. Bodurtha (term ended effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
James T. Flynn (term began effective November 1, 2007)
Kenneth A. Froot (term ended effective November 1, 2007)
Joe Grills (term ended effective November 1, 2007)
W. Carl Kester (term began effective November 1, 2007)
Herbert I. London (term ended effective November 1, 2007)
Roberta Cooper Ramo (term ended effective November 1, 2007)
Karen P. Robards (term began effective November 1, 2007)
Robert S. Salomon, Jr.
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.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - The Board of Directors of the Fund
has delegated the voting of proxies for the Fund securities to the
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
"Committee") is aware of the real or potential conflict or material
non-routine matter and if the 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 Committee may retain an independent fiduciary to
advise the 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
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.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of July 31, 2008.
(a)(1) BlackRock Investment Quality Municipal Income Trust is
managed by a team of investment professionals comprised of William
R. Bock, Theodore R. Jaeckel and Walter O'Connor. Each is a member
of BlackRock's municipal tax-exempt management group. Each is
jointly responsible for the day-to-day management of the Fund's
portfolio, which includes setting the Fund's overall investment
strategy, overseeing the management of the Fund and/or selection of
its investments. Messrs. Jaeckel and O'Connor have been members of
the Fund's management team since 2006. Mr. Bock has been a member of
the Fund's management team since 1993.
Mr. Jaeckel joined BlackRock in 2006. Prior to joining BlackRock, he
was a Managing Director (Municipal Tax-Exempt Fund Management) of
Merrill Lynch Investment Managers, L.P. ("MLIM") from 2005 to 2006
and a Director of MLIM from 1997 to 2005. He has been a portfolio
manager with BlackRock or MLIM since 1991.
Mr. O'Connor joined BlackRock in 2006. Prior to joining BlackRock,
he was a Managing Director (Municipal Tax-Exempt Fund Management) of
MLIM from 2003 to 2006 and was a Director of MLIM from 1997 to 2002.
He has been a portfolio manager with BlackRock or MLIM since 1991.
Mr. Bock joined BlackRock in 2006. Prior to joining BlackRock, he
was a Director (Municipal Tax-Exempt Fund Management) of MLIM from
2005 to 2006. He has been a portfolio manager with BlackRock or MLIM
since 1989.
(a)(2) As of July 31, 2008:
-----------------------------------------------------------------------------------------------------------------------
Number of Other Accounts and
Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
-----------------------------------------------------------------------------------------------------------------------
Other Other Other Other
Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
William R. Bock 3 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$752 Million $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
Theodore R.
Jaeckel, Jr. 81 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$18.63 Billion $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
Walter O'Connor 81 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$18.63 Billion $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
BlackRock, Inc. 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 for the Fund.
In addition, BlackRock, its affiliates 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 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') officers,
directors or employees are directors or officers, or companies as to
which BlackRock or any of its affiliates or the officers, directors
or 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 regard, 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.
(a)(3) As of July 31, 2008:
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. Lehman Brothers
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. Each portfolio
manager except Mr. Bock has 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. Each portfolio manager has 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% of eligible compensation, plus
an additional contribution of 2% for any year in which BlackRock has
positive net operating income. 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. Each portfolio manager is
eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities. As of July 31, 2008, none
of Messrs. Bock, Jaeckel or O'Connor beneficially owned any
stock issued by the Fund.
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.
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.
Item 11 - Controls and Procedures
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
13a-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.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
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 MuniYield Insured Fund, Inc.
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer of
BlackRock MuniYield Insured Fund, Inc.
Date: September 19, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock MuniYield Insured Fund, Inc.
Date: September 19, 2008
By: /s/ Neal J. Andrews
-------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock MuniYield Insured Fund, Inc.
Date: September 19, 2008