UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08081
Name of Fund: BlackRock MuniHoldings Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock MuniHoldings Fund, Inc., 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 04/30/07
Date of reporting period: 05/01/06 - 10/31/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
Semi-Annual Reports
OCTOBER 31, 2006
(BLACKROCK logo)
BlackRock MuniHoldings Fund, Inc.
BlackRock MuniHoldings Insured Fund, Inc.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund,
Inc. seek to provide shareholders with current income exempt from federal
income taxes by investing primarily in portfolios 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. Under normal
circumstances, BlackRock MuniHoldings Insured Fund, Inc. invests at least 80%
of its total assets in municipal bonds that are covered by insurance.
These reports, including the financial information herein, are transmitted to
shareholders of BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings
Insured Fund, Inc. for their information. This is not a prospectus. Past
performance results shown in these reports should not be considered a
representation of future performance. The Funds have leveraged their Common
Stock and intend to remain leveraged by issuing Preferred Stock to provide the
Common Stock shareholders with potentially higher rates of return. Leverage
creates risks for Common Stock shareholders, including the likelihood of
greater volatility of net asset value and market price of shares of the Common
Stock, and the risk that fluctuations in the short-term dividend rates of the
Preferred Stock may affect the yield to Common Stock shareholders. Statements
and other information herein are as dated and are subject to change.
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free 1-800-441-7762; (2) on
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Funds vote proxies
relating to securities held in the Fund's portfolios during the most recent
12-month period ended June 30 is available (1) at www.blackrock.com and
(2) on the Securities and Exchange Commission's Web site at http://www.sec.gov.
BlackRock MuniHoldings Fund, Inc.
BlackRock MuniHoldings Insured Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS...logo)
It's Fast, Convenient, & Timely!
BlackRock MuniHoldings Fund, Inc.
BlackRock MuniHoldings Insured Fund, Inc.
Quality Profiles as of October 31, 2006
Percent of
BlackRock MuniHoldings Fund, Inc. by Total
S&P/Moody's Rating Investments
AAA/Aaa 37.8%
AA/Aa 7.4
A/A 13.8
BBB/Baa 16.4
BB/Ba 0.8
B/B 1.7
CCC/Caa 2.2
NR 19.2
Other* 0.7
* Includes portfolio holdings in short-term investments and
variable rate demand notes.
Percent of
BlackRock MuniHoldings Insured Total
Fund, Inc. by S&P/Moody's Rating Investments
AAA/Aaa 91.2%
AA/Aa 3.5
A/A 1.1
BBB/Baa 3.3
Other* 0.9
* Includes portfolio holdings in short-term investments and
variable rate demand notes.
Officers and Directors
Robert C. Doll, Jr., President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Jean Margo Reid, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg*, Director
Donald C. Burke, Vice President and Treasurer
John M. Loffredo, Senior Vice President
Jeffrey Hiller, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
* Mr. Zinbarg is expected to retire from the Board of Directors
effective January 1, 2007.
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street - 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street - 7 West
New York, NY 10286
NYSE Symbol
MHD BlackRock MuniHoldings Fund, Inc.
MUS BlackRock MuniHoldings Insured Fund, Inc.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
A Letter to Shareholders
Dear Shareholder
Ten months into 2006, we are able to say it has been an interesting year for
investors. After a volatile start and far-reaching mid-year correction, the
financial markets regained some positive momentum through late summer and
fall. For the six- and 12-month periods ended October 31, 2006, most major
market indexes managed to post positive returns:
Total Returns as of October 31, 2006 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) +6.11% +16.34%
Small cap U.S. equities (Russell 2000 Index) +0.90 +19.98
International equities (MSCI Europe, Australasia, Far East Index) +3.77 +27.52
Fixed income (Lehman Brothers Aggregate Bond Index) +4.60 + 5.19
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +4.12 + 5.75
High yield bonds (Credit Suisse High Yield Index) +4.66 +10.29
The Federal Reserve Board (the Fed), after raising the target short-term
interest rate 17 times between June 2004 and June 2006, finally opted to pause
on August 8, 2006. This left the federal funds rate at 5.25%, where it
remained through the September and October Fed meetings. In interrupting its
two-year rate-hiking campaign, the Fed acknowledged that economic growth is
slowing, led by softness in the housing market. However, the central bankers
continue to take a cautionary position on inflation, despite a decline in
energy prices in recent months. At the time of this writing, the price of oil
had settled into the $60-per-barrel range after reaching nearly $78 per barrel
earlier in the year.
Notwithstanding the mid-year correction, equity markets generally found
support in solid corporate earnings reports in the first three quarters of the
year. Overall corporate health, including strong company balance sheets,
helped to sustain robust dividend-distribution, share-buyback and merger-and-
acquisition activity. Many international equity markets fared equally well or
better, thanks in part to higher economic growth rates and low inflation.
In the U.S. bond market, prices declined for much of the year as investors
focused on decent economic activity and inflation concerns. Bond prices began
to improve in late June as the economy showed signs of weakening and inflation
pressures subsided. Notably, the Treasury curve inverted periodically, a
phenomenon typically associated with periods of economic weakness. At the end
of October, the one-month Treasury bill offered the highest yield on the curve
at 5.18%, while the 30-year Treasury bond had a yield of 4.72%.
Amid the uncertainty inherent in the financial markets, we encourage you to
review your goals periodically with your financial professional and to make
portfolio changes, as needed. For additional insight and timely "food for
thought" for investors, we also invite you to visit Shareholder magazine at
www.blackrock.com/shareholdermagazine. We are pleased to make our investor-
friendly magazine available to you online. We thank you for trusting BlackRock
with your investment assets, and we look forward to continuing to serve your
investment needs.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Director
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
A Discussion With Your Funds' Portfolio Manager
The Funds provided competitive total returns and above-average yields relative
to their Lipper peers, as we continued our efforts to enhance the level of
income provided to shareholders while muting net asset value volatility.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields generally moved lower during the six-month period as
bond prices, which move opposite of yields, rose. Early in the reporting
period, bond prices remained low as investors focused on solid U.S. economic
growth and rising commodity prices, which engendered fears of inflation. Bond
prices began to improve in late June as the economic data started to weaken.
Bond price improvement accelerated after the Federal Reserve Board (the Fed)
opted to refrain from raising the target interest rate at its August 8 meeting,
a move that came after 17 consecutive interest rate hikes since June 2004.
Additionally, declines in oil prices, and especially gasoline prices, helped
to reverse earlier inflationary concerns and further supported bond prices.
Over the past six months, 30-year U.S. Treasury bond yields fell 45 basis
points (.45%) to 4.72%. The recent Fed pause allowed the intermediate sector
of the bond market to improve, and the 10-year Treasury yield declined 46
basis points to 4.61%. The tax-exempt bond market generally mimicked its
taxable counterpart throughout most of the reporting period. As measured by
Municipal Market Data, yields on AAA-rated issues maturing in 30 years
declined 46 basis points to 4.07%, while AAA-rated issues maturing in 10 years
saw their yields decline 44 basis points to 3.64%.
Demand for municipal product by retail and institutional investors has
remained very strong despite the recent decline in bond yields. The strong
demand is reflected in continued flows into long-term, tax-exempt mutual
funds. As reported by the Investment Company Institute, long-term municipal
bond funds saw net new cash inflows of more than $1.3 billion during September
2006, a material increase from $344 million in July and $283 million in June.
During the first nine months of the year, long-term tax-exempt bond funds had
net new cash flows of over $9.6 billion, a 43% increase compared to the same
period a year earlier. Recent weekly fund flows, reported by AMG Data,
averaged $416 million in October 2006, well above the July average of
$247 million and the year-to-date weekly average of $315 million.
Also supporting municipal bond price improvement has been a decline in new
issuance. In the first 10 months of 2006, more than $295 billion in new long-
term municipal bonds was underwritten, a decline of over 12.5% versus the same
period a year ago. Notably, after declining for much of the year, refunding
activity increased slightly in October as the lower interest rate environment
sparked an increase in refinancing activity. On a year-to-date basis, however,
refunding activity has declined over 50% relative to last year's refunding
issuance.
Looking ahead, the positive technical framework in the municipal marketplace
suggests that the tax-exempt market should continue to perform well. New
supply is expected to remain manageable and tax-exempt bond yield ratios
remain in their recent range of 86% - 89% of comparable long-term U.S. Treasury
yields, well within their recent historic norms. These ratios argue for
continued strong demand from non-traditional, arbitrage-related accounts, which
continue to be attracted to the municipal bond market given its relatively
steep yield curve. Taken together, these factors suggest that the municipal
market is poised to continue to perform well as we approach year-end.
BlackRock MuniHoldings Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended October 31, 2006, the Common Stock of BlackRock
MuniHoldings Fund, Inc. had net annualized yields of 5.53% and 5.48%, based on
a period-end per share net asset value of $16.57 and a per share market price
of $16.71, respectively, and $.462 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +5.65%,
based on a change in per share net asset value from $16.14 to $16.57, and
assuming reinvestment of all distributions.
The Fund's total return, based on net asset value, paced the +5.66% average
return of the Lipper General Municipal Debt Funds (Leveraged) category for the
six-month period. (Funds in this Lipper category invest primarily in municipal
debt issues rated in the top four credit-rating categories. These funds can be
leveraged via use of debt, preferred equity and/or reverse repurchase
agreements.)
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
As in prior reporting periods, Fund performance continued to be driven by our
exposure to lower-rated, higher-yielding credits. As credit spreads contracted
marginally throughout the period, lower-rated instruments outperformed the
broader market and provided incremental yield for the Fund. It should be noted
that the spread contraction trend that we witnessed over the past three years
did slow considerably during this six-month period and, as such, the benefits
of our spread product exposure decreased. Still, positive security selection
contributed to competitive relative performance for the Fund.
For a description of the Fund's total investment return based on a change in
the per share market value of the Fund's Common Stock (as measured by the
trading price of the Fund's shares on the New York Stock Exchange), and
assuming reinvestment of dividends, please refer to the Financial Highlights
section of this report. As a closed-end fund, the Fund's shares may trade in
the secondary market at a premium or discount to the Fund's net asset value.
As a result, total investment returns based on changes in the market value of
the Fund's Common Stock may vary significantly from total investment returns
based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Activity during the reporting period was focused on taking advantage of the
further flattening of the municipal yield curve, as well as improving the
overall quality and diversification of the portfolio. We focused our buying
activity in the 10-year - 15-year maturity range. While we have been reluctant
to fund these purchases by selling bonds at the long end of the curve, which
may yet benefit from additional flattening, we believe the Fund will be better
served by a shift to the intermediate range.
In addition to pursuing our yield curve strategy, we also sought opportunities
to reduce our weighting in non-investment grade, high yield bonds. Given the
demand for high yield issues that was initially sparked by high call activity
in the low interest rate environment of the past few years, we were able to
sell bonds that we believed had become overvalued and were unlikely to
continue their outperformance. Despite the loss of yield associated with our
reductions in high yield paper, the Fund performed quite well throughout the
six-month period as the high yield positions that were retained in the
portfolio, particularly those in the health care and airline sectors,
continued to outperform.
For the six-month period ended October 31, 2006, the Fund's Auction Market
Preferred Stock had average yields of 3.51% for Series A, 3.45% for Series B
and 3.36% for Series C. The Fed raised short-term interest rates twice during
the six-month reporting period, but opted to keep the target rate on hold at
5.25% in August, September and October 2006. As such, the Fund's borrowing
costs began to stabilize and even move slightly lower as the period
progressed. The municipal yield curve maintained its positive slope and
continued to generate an income benefit to the Common Stock shareholder from
the leveraging of Preferred Stock. However, should the spread between short-
term and long-term interest rates narrow, the benefits of leverage will
decline and, as a result, reduce the yield on the Fund's Common Stock. (For a
more complete explanation of the benefits and risks of leveraging, see page 7
of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
At period-end, the Fund was neutrally positioned in terms of interest rate
risk, and our exposure to lower-rated securities had been reduced. Our yield
curve outlook changed during the period as it became likely that the Fed would
pause in its monetary tightening program, which it did in the third quarter of
2006. With the majority of the curve flattening likely behind us, we began the
process of reducing our exposure to the long end of the curve over the
reporting period. Where we now see the most attractive value is closer to the
middle of the curve, around the 10-year - 15-year range. We will continue to
use periods of market strength to sell high yield issues and those at the long
end of the yield curve in order to further improve the portfolio's credit
quality and allocate more assets to the intermediate part of the curve.
BlackRock MuniHoldings Insured Fund, Inc.
How did the Fund perform during the period?
For the six-month period ended October 31, 2006, the Common Stock of BlackRock
MuniHoldings Insured Fund, Inc. had net annualized yields of 4.44% and 4.88%,
based on a period-end per share net asset value of $14.22 and a per share
market price of $12.93, respectively, and $.318 per share income dividends.
Over the same period, the total investment return on the Fund's Common Stock
was +5.71%, based on a change in per share net asset value from $13.80 to
$14.22, and assuming reinvestment of all distributions.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
A Discussion With Your Funds' Portfolio Manager (concluded)
The Fund's total return, based on net asset value, exceeded the +5.07% average
return of the Lipper Insured Municipal Debt Funds (Leveraged) category for the
six-month period. (Funds in this Lipper category invest primarily in municipal
debt issues insured as to timely payment. These funds can be leveraged via use
of debt, preferred equity and/or reverse repurchase agreements.) The Fund's
high accrual rate contributed to its outperformance, and also allowed us to
provide shareholders with an above-average yield. Essentially, we maintained
our holdings in five-year - 10-year prerefunded bonds, which offered higher
yields than those currently available in the municipal market. Meanwhile, the
effect of our yield curve strategy was somewhat muted. For most of the period,
the Fund was overweight in bonds with maturities greater than 20 years. This
benefited performance as the yield curve flattened and longer-term bonds
outperformed short-term issues. However, we avoided the longest maturities
(30 years and greater) given the interest rate risk associated with longer-
duration products. This hindered performance somewhat as the 30-year sector
outperformed the rest of the municipal market.
For a description of the Fund's total investment return based on a change in
the per share market value of the Fund's Common Stock (as measured by the
trading price of the Fund's shares on the New York Stock Exchange), and
assuming reinvestment of dividends, please refer to the Financial Highlights
section of this report. As a closed-end fund, the Fund's shares may trade in
the secondary market at a premium or discount to the Fund's net asset value.
As a result, total investment returns based on changes in the market value of
the Fund's Common Stock may vary significantly from total investment returns
based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Throughout the period, we continued to focus on securities that we felt
represented the best relative value in the insured municipal marketplace. The
lack of new-issue supply and increased demand for municipal bonds caused
spreads to narrow in all sectors of the municipal market. In light of the
tight spreads, we increased our exposure to tax-exempt bonds in high demand
states, such as New York and New Jersey. We believe this strategy should prove
beneficial with any shift in the demand/supply imbalance.
We also started shifting the Fund's focus from the 20-year sector of the yield
curve to the 10-year - 15-year area. The flattening of the curve has enabled
this restructuring to be accomplished with very little yield sacrifice and, we
believe, positions the Fund for favorable performance should the municipal
yield curve resteepen in the future.
For the six months ended October 31, 2006, the Fund's Auction Market Preferred
Stock had average yields of 3.43% for Series A and 3.45% for Series B. The Fed
raised short-term interest rates twice during the six-month reporting period,
but opted to keep the target rate on hold at 5.25% in August, September and
October 2006. As such, the Fund's borrowing costs began to stabilize and even
move slightly lower as the period progressed. The municipal yield curve
maintained its positive slope and continued to generate an income benefit to
the Common Stock shareholder from the leveraging of Preferred Stock. However,
should the spread between short-term and long-term interest rates narrow, the
benefits of leverage will decline and, as a result, reduce the yield on the
Fund's Common Stock. (For a more complete explanation of the benefits and
risks of leveraging, see page 7 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
At period-end, the portfolio was fully invested and market neutral with
respect to interest rate risk. After concentrating on the long end of the
yield curve for some time, we are shifting our focus back down the curve
somewhat given the possibility that the yield curve flattening trend is
nearing its conclusion. Overall, we continue to emphasize competitive yield
and preservation of net asset value in our management of the portfolio.
Theodore R. Jaeckel Jr., CFA
Portfolio Manager
BlackRock MuniHoldings Fund, Inc.
Robert D. Sneeden
Portfolio Manager
BlackRock MuniHoldings Insured Fund, Inc.
November 29, 2006
Effective October 2, 2006, Portfolio Manager Theodore R. Jaeckel Jr. assumed
responsibility for the day-to-day management of BlackRock MuniHoldings Fund's
portfolio and Portfolio Manager Robert D. Sneeden assumed responsibility for
the day-to-day management of BlackRock MuniHoldings Insured Fund's portfolio.
Mr. Jaeckel is a Managing Director with BlackRock, Inc. (BlackRock).
Previously, he was a Managing Director in the Municipal Tax-Exempt Fund
Management group with Merrill Lynch Investment Managers (MLIM) from 2005 to
2006, a Director thereof from 1997 to 2005 and a Vice President from 1991 to
1997. Mr. Sneeden is a Director with BlackRock since 2006. Previously, he was
a Director in the Municipal Tax-Exempt Fund Management group with MLIM from
2005 to 2006, a Vice President thereof from 1998 to 2005 and an Assistant Vice
President from 1994 to 1998.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
The Benefits and Risks of Leveraging
The Funds utilize leveraging to seek to enhance the yield and net asset value
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 the 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 on the fund's Common Stock
(that is, its price as listed on the New York Stock Exchange), may, as a
result, decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price of the
portfolio's investments, since the value of the fund's Preferred Stock does
not fluctuate. In addition to the decline in net asset value, the market value
of the fund's Common Stock may also decline.
As of October 31, 2006, BlackRock MuniHoldings Fund, Inc. and BlackRock
MuniHoldings Insured Fund, Inc. had leverage amounts, due to Auction Market
Preferred Stock, of 35.22% and 42.24% of total net assets, respectively,
before the deduction of Preferred Stock.
As a part of their investment strategy, tAt October 31, 2006, the leverage
amount of BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured
Fund, Inc. was 35.22% and 42.24%, respectively, of total net assets, before
the deduction of Preferred Stock. The Funds may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters
will decrease when short-term interest rates increase and increase when short-
term interest rates decrease. Investments in inverse floaters may be
characterized as derivative securities and may subject the Funds to the risks
of reduced or eliminated interest payments and losses of invested principal.
In addition, inverse floaters have the effect of providing investment leverage
and, as a result, the market value of such securities will generally be more
volatile than that of fixed-rate, tax-exempt securities. To the extent the
Funds invest in inverse floaters, the market value of each Fund's portfolio
and the net asset value of each Fund's shares may also be more volatile than
if the Funds did not invest in these securities.
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.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Proxy Results BlackRock MuniHoldings Fund, Inc.
During the six-month period ended October 31, 2006, BlackRock MuniHoldings
Fund, Inc.'s Common Stock shareholders voted on the following proposal, which
was approved at an annual shareholders' meeting on August 15, 2006. A
description of the proposal and number of shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
To elect the Fund's Directors: Robert C. Doll, Jr. 10,264,008 537,787
Cynthia A. Montgomery 10,253,218 548,577
Jean Margo Reid 10,253,218 548,577
Roscoe S. Suddarth 10,265,674 536,121
Edward D. Zinbarg 10,264,430 537,365
During the six-month period ended October 31, 2006, BlackRock MuniHoldings
Fund, Inc.'s Preferred Stock shareholders (Series A - C) voted on the
following proposal, which was approved at an annual shareholders' meeting on
August 15, 2006. A description of the proposal and number of shares voted were
as follows:
Shares Voted Shares Withheld
For From Voting
To elect the Fund's Directors: Ronald W. Forbes 3,041 13
Richard R. West 3,038 16
During the six-month period ended October 31, 2006, BlackRock MuniHoldings
Fund, Inc.'s Common Stock and Preferred Stock shareholders voted on the
following proposals, which were approved at an annual shareholders' meeting on
August 15, 2006. A description of the proposals and number of shares voted
were as follows:
Shares Voted Shares Voted Shares Voted
For Against Abstain
To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 7,584,798 182,794 401,314
To approve a contingent subadvisory agreement
with BlackRock Advisors, Inc. 7,554,653 173,284 440,969
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Proxy Results BlackRock MuniHoldings Insured Fund, Inc.
During the six-month period ended October 31, 2006, BlackRock MuniHoldings
Insured Fund, Inc.'s Common Stock shareholders voted on the following
proposal, which was approved at an annual shareholders' meeting on August 15,
2006. A description of the proposal and number of shares voted were as
follows:
Shares Voted Shares Withheld
For From Voting
To elect the Fund's Directors: Robert C. Doll, Jr. 8,402,992 549,805
Cynthia A. Montgomery 8,406,193 546,604
Jean Margo Reid 8,404,955 547,842
Roscoe S. Suddarth 8,405,093 547,704
Edward D. Zinbarg 8,405,093 547,704
During the six-month period ended October 31, 2006, BlackRock MuniHoldings
Insured Fund, Inc.'s Preferred Stock (Series A & B) shareholders voted on the
following proposal, which was approved at an annual shareholders' meeting on
August 15, 2006. A description of the proposal and number of shares voted were
as follows:
Shares Voted Shares Withheld
For From Voting
To elect the Fund's Directors: Ronald W. Forbes and Richard R. West 3,562 66
During the six-month period ended October 31, 2006, BlackRock MuniHoldings
Insured Fund, Inc.'s Common Stock and Preferred Stock shareholders voted on
the following proposals, which were approved at an annual shareholders'
meeting on August 15, 2006. A description of the proposals and number of
shares voted were as follows:
Shares Voted Shares Voted Shares Voted
For Against Abstain
To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 6,412,269 271,702 307,014
To approve a contingent subadvisory agreement
with BlackRock Advisors, Inc. 6,416,597 269,770 304,618
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 Statement of Net Assets, which comprises part of the financial information
included in these reports.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments as of October 31, 2006
BlackRock MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Alabama--2.9%
$ 1,750 Camden, Alabama, IDB, Exempt Facilities Revenue
Bonds (Weyerhaeuser Company), Series A, 6.125%
due 12/01/2024 $ 1,930
4,550 Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5% due 1/01/2024 4,767
Arizona--3.1%
Maricopa County, Arizona, IDA, Education Revenue
Bonds (Arizona Charter Schools Project 1), Series A:
900 6.50% due 7/01/2012 913
2,200 6.75% due 7/01/2029 2,210
2,215 Phoenix, Arizona, IDA, Airport Facility, Revenue
Refunding Bonds (America West Airlines Inc.
Project), AMT, 6.30% due 4/01/2023 2,261
1,000 Pinal County, Arizona, COP, 5% due 12/01/2029 1,037
610 Show Low, Arizona, Improvement District Number 5,
Special Assessment Bonds, 6.375% due 1/01/2015 627
Arkansas--0.9%
2,000 University of Arkansas, University Construction
Revenue Bonds (UAMS Campus), Series B, 5%
due 11/01/2023 (h) 2,122
California--19.1%
875 Agua Caliente Band of Cahuilla Indians, California,
Casino Revenue Bonds, 5.60% due 7/01/2013 911
2,965 California Infrastructure and Economic Development
Bank, Insured Revenue Bonds (Rand Corporation),
Series A, 5.50% due 4/01/2032 (b) 3,199
California State, GO:
300 5.50% due 4/01/2014 (i) 337
2,200 5.50% due 4/01/2028 2,431
6,800 California State Public Works Board, Lease Revenue
Bonds (Department of Corrections), Series C, 5.25%
due 6/01/2028 7,238
3,870 California Statewide Communities Development
Authority, Health Facility Revenue Bonds (Memorial
Health Services), Series A, 6% due 10/01/2023 4,309
2,000 East Side Union High School District, California, Santa
Clara County, GO (Election of 2002), Series D, 5%
due 8/01/2021 (k) 2,149
1,165 Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds,
Series A-3, 7.875% due 6/01/2042 1,432
8,745 Los Angeles, California, Unified School District, GO,
Series A, 5% due 1/01/2028 (h) 9,247
Montebello, California, Unified School District,
GO (c)(m):
2,405 5.61% due 8/01/2022 1,219
2,455 5.61% due 8/01/2023 1,186
2,095 Oceanside, California, Unified School District,
GO (Election of 2000), Series C, 5.25%
due 8/01/2032 (h) 2,238
Face
Amount Municipal Bonds Value
California (concluded)
$ 3,490 Sequoia, California, Unified High School District,
GO, Refunding, Series B, 5.50% due 7/01/2035 (e) $ 3,912
1,000 Sunnyvale, California, School District, GO (Election
of 2004), Series A, 5% due 9/01/2026 (e) 1,067
2,915 Tustin, California, Unified School District, Senior
Lien Special Tax Bonds (Community Facilities
District Number 97-1), Series A, 5% due 9/01/2032 (e) 3,035
Colorado--1.7%
2,645 Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee), Series A, 7.35%
due 9/01/2031 2,823
1,000 Plaza Metropolitan District Number 1, Colorado,
Tax Allocation Revenue Bonds (Public Improvement
Fees), 8.125% due 12/01/2025 1,007
Connecticut--2.4%
2,165 Connecticut State Development Authority, Airport
Facility Revenue Bonds (Learjet Inc. Project), AMT,
7.95% due 4/01/2026 2,607
2,735 Connecticut State Development Authority, IDR (AFCO
Cargo BDL-LLC Project), AMT, 8% due 4/01/2030 2,972
Florida--8.0%
2,340 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%
due 10/01/2037 (h)(m) 494
Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds:
2,250 Series A, 6.25% due 5/01/2037 2,464
2,550 Series B, 6.50% due 5/01/2037 2,832
3,225 Orange County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Orlando Regional
Healthcare), 6% due 12/01/2012 (i) 3,620
2,095 Orlando, Florida, Greater Orlando Aviation Authority,
Airport Facilities Revenue Bonds (JetBlue Airways
Corp.), AMT, 6.50% due 11/15/2036 2,193
800 Orlando, Florida, Urban Community Development
District, Capital Improvement Special Assessment
Bonds, Series A, 6.95% due 5/01/2033 864
725 Palm Coast Park Community Development District,
Florida, Special Assessment Revenue Bonds, 5.70%
due 5/01/2037 740
1,645 Preserve at Wilderness Lake, Florida, Community
Development District, Capital Improvement Bonds,
Series A, 5.90% due 5/01/2034 1,714
1,000 Tern Bay Community Development District, Florida,
Capital Improvement Revenue Refunding Bonds,
Series A, 5.375% due 5/01/2037 1,014
2,300 West Villages Improvement District, Florida, Special
Assessment Revenue Refunding Bonds (Unit of
Development Number 2), 5.80% due 5/01/2036 2,397
Portfolio Abbreviations
To simplify the listings of portfolio holdings in the Schedules of
Investments, we have abbreviated the names of many of the securities
according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
DATES Daily Adjustable Tax-Exempt Securities
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
VRDN Variable Rate Demand Notes
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments (continued)
BlackRock MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Georgia--0.8%
$ 1,750 Atlanta, Georgia, Tax Allocation Bonds (Atlantic
Station Project), 7.90% due 12/01/2024 $ 1,947
Illinois--3.7%
695 Beardstown, Illinois, IDR (Jefferson Smurfit Corp.
Project), 8% due 10/01/2016 711
1,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American Airlines
Inc. Project), 8.20% due 12/01/2024 1,031
1,200 Chicago, Illinois, Special Assessment Bonds (Lake
Shore East), 6.75% due 12/01/2032 1,300
4,000 Illinois HDA, Homeowner Mortgage Revenue Bonds,
AMT, Sub-Series C-2, 5.35% due 2/01/2027 4,127
700 Illinois State Finance Authority Revenue Bonds
(Landing At Plymouth Place Project), Series A, 6%
due 5/15/2025 741
625 Naperville, Illinois, IDR (General Motors Corporation),
Refunding, VRDN, 8% due 12/01/2012 (f) 625
Indiana--2.6%
8,985 Allen County, Indiana, Redevelopment District Tax
Increment Revenue Bonds (General Motors
Development Area), 7% due 5/15/2008 (i)(m) 6,038
Kentucky--0.9%
2,000 Louisville and Jefferson Counties, Kentucky,
Metropolitan Sewer District, Sewer and Drain
System Revenue Bonds, Series A, 5.50%
due 5/15/2034 (h) 2,173
Louisiana--4.3%
4,115 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Franciscan Missionaries of Our Lady Health
System, Inc.), Series A, 5.25% due 8/15/2036 4,352
1,750 New Orleans, Louisiana, Financing Authority Revenue
Bonds (Xavier University of Louisiana Project), 5.30%
due 6/01/2026 (h) 1,846
3,540 New Orleans, Louisiana, GO (Public Improvements),
5% due 10/01/2033 (h) 3,688
Maryland--2.9%
1,875 Anne Arundel County, Maryland, Special Obligation
Revenue Bonds (Arundel Mills Project), 7.10%
due 7/01/2009 (i) 2,073
1,760 Maryland State Economic Development Corporation,
Student Housing Revenue Bonds (University of
Maryland College Park Project), 6% due 6/01/2013 (i) 1,990
2,750 Maryland State Energy Financing Administration,
Limited Obligation Revenue Bonds (Cogeneration-AES
Warrior Run), AMT, 7.40% due 9/01/2019 2,771
Massachusetts--3.6%
2,900 Massachusetts State, HFA, Housing Revenue Bonds,
AMT, Series A, 5.25% due 12/01/2048 2,994
5,000 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (e) 5,310
Michigan--2.6%
1,400 Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A,
6% due 7/01/2020 (a) 1,526
3,000 Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Pollution Control Project), AMT, Series B, 5.65%
due 9/01/2029 3,177
Face
Amount Municipal Bonds Value
Michigan (concluded)
$ 1,300 Michigan State Strategic Fund, PCR (General
Motors Corporation Project), VRDN, 7.10%
due 12/01/2008 (f) $ 1,300
Minnesota--1.7%
3,500 Minneapolis, Minnesota, Community Development
Agency, Supported Development Revenue Refunding
Bonds, Series G-3, 5.45% due 12/01/2011 (i) 3,797
Mississippi--5.3%
7,675 Claiborne County, Mississippi, PCR, Refunding (System
Energy Resources Inc. Project), 6.20% due 2/01/2026 7,680
2,500 Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources Inc.
Project), 5.90% due 5/01/2022 2,508
Mississippi Development Bank, Special Obligation
Revenue Refunding Bonds (Gulfport Water and
Sewer System Project) (e):
1,000 5.25% due 7/01/2017 1,114
810 5.25% due 7/01/2019 898
Missouri--1.4%
1,915 Fenton, Missouri, Tax Increment Revenue Refunding
and Improvement Bonds (Gravois Bluffs), 7%
due 10/01/2011 (i) 2,216
1,000 Missouri State Development Finance Board,
Infrastructure Facilities Revenue Refunding
Bonds (Branson), Series A, 5.50% due 12/01/2032 1,048
New Jersey--12.7%
New Jersey EDA, Cigarette Tax Revenue Bonds:
5,385 5.75% due 6/15/2029 5,859
2,280 5.75% due 6/15/2034 2,465
New Jersey EDA, Retirement Community Revenue
Bonds, Series A:
1,475 (Cedar Crest Village Inc. Facility), 7.25%
due 11/15/2031 1,604
2,600 (Seabrook Village Inc.), 8.25% due 11/15/2030 2,902
1,965 New Jersey EDA, School Facilities Construction
Revenue Bonds, Series O, 5.125% due 3/01/2030 2,092
New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT:
1,000 6.625% due 9/15/2012 1,071
2,950 6.25% due 9/15/2029 3,049
3,325 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (South Jersey Hospital), 6%
due 7/01/2012 (i) 3,700
3,500 New Jersey State Turnpike Authority, Turnpike Revenue
Bonds, Series C, 5% due 1/01/2030 (e) 3,709
2,315 Tobacco Settlement Financing Corporation of
New Jersey, Asset-Backed Revenue Bonds, 7%
due 6/01/2041 2,679
New Mexico--2.7%
2,000 Farmington, New Mexico, PCR, Refunding (Public
Service Company of New Mexico--San Juan
Project), Series A, 6.30% due 12/01/2016 2,043
3,720 New Mexico Finance Authority, Senior Lien State
Transportation Revenue Bonds, Series A, 5.125%
due 6/15/2018 (h) 4,038
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments (continued)
BlackRock MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
New York--14.1%
$ 1,185 Dutchess County, New York, IDA, Civic Facility
Revenue Refunding Bonds (Saint Francis Hospital),
Series A, 7.50% due 3/01/2029 $ 1,306
535 New York City, New York, City IDA, Civic Facility
Revenue Bonds, Series C, 6.80% due 6/01/2028 590
New York City, New York, City IDA, Special Facility
Revenue Bonds (Continental Airlines Inc. Project),
AMT:
725 8% due 11/01/2012 801
725 8.375% due 11/01/2016 806
9,115 New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A, 5%
due 10/15/2020 (h) 9,821
3,680 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (h) 3,974
Tobacco Settlement Financing Corporation of New York
Revenue Bonds:
3,150 Series A-1, 5.50% due 6/01/2018 3,417
3,500 Series C-1, 5.50% due 6/01/2017 3,756
3,800 Series C-1, 5.50% due 6/01/2020 (c) 4,150
1,400 Series C-1, 5.50% due 6/01/2022 1,528
2,080 Westchester County, New York, IDA, Continuing Care
Retirement, Mortgage Revenue Bonds (Kendal on
Hudson Project), Series A, 6.50% due 1/01/2034 2,226
Oklahoma--0.7%
200 Oklahoma State Industries Authority, Revenue Refunding
Bonds (Integris Baptist), VRDN, Series B, 3.63%
due 8/15/2029 (f)(h) 200
1,425 Tulsa, Oklahoma, Municipal Airport Trust Revenue
Refunding Bonds (AMR Corporation), AMT, Series A,
5.375% due 12/01/2035 1,425
Pennsylvania--6.8%
1,700 Bucks County, Pennsylvania, IDA, Retirement Community
Revenue Bonds (Ann's Choice, Inc.), Series A, 6.25%
due 1/01/2035 1,797
3,500 Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue Bonds (National Gypsum
Company), AMT, Series B, 6.125% due 11/01/2027 3,663
725 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development, 7.75% due 12/01/2017 727
2,500 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development (Days Inn), Refunding,
Series B, 6.50% due 2/01/2007 (i) 2,566
Philadelphia, Pennsylvania, Authority for Industrial
Development, Senior Living Revenue Bonds:
1,105 (Arbor House, Inc. Project), Series E, 6.10%
due 7/01/2033 1,162
1,245 (Saligman House Project), Series C, 6.10%
due 7/01/2033 1,310
100 Philadelphia, Pennsylvania, Hospitals and Higher
Education Facilities Authority, Hospital Revenue
Refunding Bonds (Children's Hospital Project),
VRDN, Series D, 3.61% due 7/01/2031 (f)(h) 100
3,500 Sayre, Pennsylvania, Health Care Facilities Authority
Revenue Bonds (Guthrie Healthcare System),
Series B, 7.125% due 12/01/2031 4,195
Rhode Island--1.4%
2,820 Rhode Island State Health and Educational Building
Corporation, Hospital Financing Revenue Bonds
(Lifespan Obligation Group), 6.50% due 8/15/2012 (i) 3,229
Face
Amount Municipal Bonds Value
South Carolina--1.6%
$ 3,020 Medical University Hospital Authority, South Carolina,
Hospital Facilities Revenue Refunding Bonds,
Series A, 6.375% due 8/15/2012 (i) $ 3,453
Tennessee--8.3%
4,280 Hardeman County, Tennessee, Correctional Facilities
Corporation Revenue Bonds, 7.75% due 8/01/2017 4,414
4,575 Shelby County, Tennessee, Health, Educational and
Housing Facility Board, Hospital Revenue Refunding
Bonds (Methodist Healthcare), 6.50% due 9/01/2012 (i) 5,264
3,400 Tennessee Educational Loan Revenue Bonds (Educational
Funding South Inc.), AMT, Senior Series B, 6.20%
due 12/01/2021 3,403
5,200 Tennessee Energy Acquisition Corporation, Gas Revenue
Bonds, Series A, 5.25% due 9/01/2026 5,892
Texas--12.7%
1,300 Alliance Airport Authority, Inc., Texas, Special
Facilities Revenue Bonds (American Airlines Inc.
Project), AMT, 7.50% due 12/01/2029 1,326
4,000 Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises, Inc.), First Tier,
Series A, 6.70% due 1/01/2028 4,265
1,000 Brazos River Authority, Texas, PCR, Refunding (TXU
Energy Company LLC Project), Series B, 4.75%
due 5/01/2029 1,000
2,340 Brazos River Authority, Texas, Revenue Refunding
Bonds (Reliant Energy, Inc. Project), Series B,
7.75% due 12/01/2018 2,490
3,655 Brazos River, Texas, Harbor Navigation District,
Brazoria County Environmental Revenue Refunding
Bonds (Dow Chemical Company Project), AMT,
Series A-7, 6.625% due 5/15/2033 4,100
500 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Texas
Children's Hospital), VRDN, Series B-1, 3.62%
due 10/01/2029 (f)(h) 500
1,800 Houston, Texas, Health Facilities Development
Corporation, Retirement Facility Revenue Bonds
(Buckingham Senior Living Community), Series A,
7.125% due 2/15/2034 2,004
3,000 Lower Colorado River Authority, Texas, PCR
(Samsung Austin Semiconductor), AMT, 6.375%
due 4/01/2027 3,094
1,485 Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (Reliant Energy, Inc.),
Series C, 8% due 5/01/2029 1,579
1,425 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 8.25%
due 11/01/2031 1,474
4,455 Texas State Department of Housing and Community
Affairs, Residential Mortgage Revenue Bonds, AMT,
Series A, 5.70% due 1/01/2033 (d) 4,515
2,785 Texas State Department of Housing and Community
Affairs, Residential Mortgage Revenue Refunding
Bonds, AMT, Series B, 5.25% due 7/01/2022 (d) 2,874
Vermont--1.1%
2,370 Vermont Educational and Health Buildings Financing
Agency, Revenue Bonds (Developmental and Mental
Health), Series A, 6% due 6/15/2017 2,493
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments (concluded)
BlackRock MuniHoldings Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Virginia--5.3%
$ 1,150 Chesterfield County, Virginia, IDA, PCR (Virginia
Electric and Power Company), Series A, 5.875%
due 6/01/2017 $ 1,245
3,000 Fairfax County, Virginia, EDA, Resource Recovery
Revenue Refunding Bonds, AMT, Series A, 6.10%
due 2/01/2011 (b) 3,271
Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds (i):
3,825 Senior Series A, 5.50% due 8/15/2008 4,027
1,500 Senior Series B, 8.40% due 8/15/2008 (m) 423
300 Senior Series B, 8.80% due 8/15/2008 (m) 80
3,035 Tobacco Settlement Financing Corporation of
Virginia, Asset Backed Revenue Bonds, 5.625%
due 6/01/2037 3,238
Washington--0.6%
1,360 Seattle, Washington, Housing Authority Revenue
Bonds (Replacement Housing Project), 6.125%
due 12/01/2032 1,397
Wisconsin--1.2%
Wisconsin State Health and Educational Facilities
Authority Revenue Bonds:
825 (New Castle Place Project), Series A, 7%
due 12/01/2031 858
1,755 (SynergyHealth Inc.), 6% due 11/15/2032 1,917
Puerto Rico--1.2%
710 Puerto Rico Commonwealth, Public Improvement,
GO, Refunding, Series B, 5.25% due 7/01/2032 767
2,060 Puerto Rico Industrial, Medical and Environmental
Pollution Control Facilities Financing Authority,
Special Facilities Revenue Bonds (American Airlines
Inc.), Series A, 6.45% due 12/01/2025 2,090
U.S. Virgin Islands--1.7%
3,460 Virgin Islands Government Refinery Facilities,
Revenue Refunding Bonds (Hovensa Coker Project),
AMT, 6.50% due 7/01/2021 3,903
Total Municipal Bonds
(Cost--$300,099)--140.0% 321,815
Face
Amount Municipal Bonds Held in Trust (g) Value
California--3.2%
$ 6,810 California Pollution Control Financing Authority,
PCR, Refunding (Pacific Gas and Electric), AMT,
Series A, 5.35% due 12/01/2016 (h) $ 7,326
Maryland--5.1%
10,835 Baltimore, Maryland, Convention Center Hotel
Revenue Bonds, Senior Series A, 5.25%
due 9/01/2039 (k) 11,780
New York--2.0%
4,240 New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A, 5.25%
due 10/15/2027 (b) 4,607
South Carolina--5.2%
11,600 South Carolina State Ports Authority, Ports Revenue
Bonds, AMT, 5.30% due 7/01/2026 (e) 11,934
Texas--5.3%
11,760 Harris County, Texas, Toll Road Revenue Refunding
Bonds, Senior Lien, Series A, 5.25%,
due 10/15/2027 (b) 12,347
Total Municipal Bonds Held in Trust
(Cost--$47,598)--20.8% 47,994
Shares
Held Short-Term Securities
9 Merrill Lynch Institutional Tax-Exempt Fund,
3.38% (j)(l) 9
Total Short-Term Securities
(Cost--$9)--0.0% 9
Total Investments (Cost--$347,706*)--160.8% 369,818
Other Assets Less Liabilities--3.5% 7,997
Liability for Trust Certificates,
Including Interest Expense Payable--(9.9%) (22,826)
Preferred Stock, at Redemption Value--(54.4%) (125,062)
----------
Net Assets Applicable to Common Stock--100.0% $ 229,927
==========
* The cost and unrealized appreciation (depreciation) of investments
as of October 31, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 324,742
===============
Gross unrealized appreciation $ 22,582
Gross unrealized depreciation (129)
---------------
Net unrealized appreciation $ 22,453
===============
(a) ACA Insured.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) FNMA/GNMA Collateralized.
(e) FSA Insured.
(f) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(g) Securities represent underlying bonds transferred to a separate
securitization trust established in a tender option bond transaction
in which the Fund acquired the residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1(c)
to Financial Statements for details of Municipal Bonds Held in Trust.
(h) MBIA Insured.
(i) Prerefunded.
(j) 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 Dividend
Affiliate Activity Income
Merrill Lynch Institutional Tax-Exempt Fund -- --++
++ Amount is less than $1,000.
(k) XL Capital Insured.
(l) Represents the current yield as of October 31, 2006.
(m) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments as of October 31, 2006
BlackRock MuniHoldings Insured Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Alabama--1.3%
$ 2,170 Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5.50% due 1/01/2022 $ 2,370
California--35.1%
California State, GO:
190 5.50% due 4/01/2014 (f) 214
1,110 5.50% due 4/01/2028 1,226
2,000 California State Public Works Board, Lease Revenue
Bonds (Department of General Services--Capitol East
End Complex), Series A, 5% due 12/01/2027 (a) 2,089
5,955 California State, Various Purpose, GO, 5.25%
due 12/01/2022 (d) 6,462
East Side Union High School District, California, Santa
Clara County, GO (Election of 2002):
1,800 Series B, 5% due 8/01/2027 (b) 1,892
1,335 Series D, 5% due 8/01/2021 (g) 1,435
5,155 Series D, 5% due 8/01/2029 (g) 5,458
Los Angeles, California, Unified School District, GO:
2,000 (Election of 1997), Series F, 5% due 1/01/2028 (b) 2,115
6,850 Series A, 5% due 1/01/2028 (e) 7,243
2,565 Modesto, California, Schools Infrastructure Financing
Agency, Special Tax Bonds, 5.50% due 9/01/2036 (a) 2,812
5,005 San Francisco, California, City and County, GO
(California Academy of Sciences Improvements),
Series E, 5% due 6/15/2023 (e) 5,327
1,265 San Jose, California, GO (Libraries, Parks and Public
Safety Projects), 5% due 9/01/2030 (e) 1,332
San Pablo, California, Joint Powers Financing Authority,
Tax Allocation Revenue Refunding Bonds (e)(n):
2,635 5.66% due 12/01/2024 1,093
2,355 5.66% due 12/01/2025 922
2,355 5.66% due 12/01/2026 875
4,265 Santa Ana, California, Unified School District, GO, 5%
due 8/01/2032 (e) 4,448
3,145 Sequoia, California, Unified High School District, GO,
Refunding, Series B, 5.50% due 7/01/2035 (d) 3,525
4,540 Stockton, California, Public Financing Revenue Bonds
(Redevelopment Projects), Series A, 5.25%
due 9/01/2031 (h) 4,868
Tustin, California, Unified School District, Senior Lien
Special Tax Bonds (Community Facilities District
Number 97-1), Series A (d):
2,180 5% due 9/01/2032 2,270
2,800 5% due 9/01/2038 2,909
2,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series Q, 5% due 9/01/2022 (d) 2,116
3,480 West Contra Costa, California, Unified School District,
GO, Series C, 5% due 8/01/2021 (b) 3,711
Colorado--6.3%
10,620 Aurora, Colorado, COP, 5.75% due 12/01/2010 (a)(f) 11,475
Florida--5.4%
2,225 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%
due 10/01/2037 (e)(n) 470
3,850 Pasco County, Florida, Half-Cent Sales Tax Revenue
Bonds, 5.125% due 12/01/2028 (a) 4,076
600 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan
Program), DATES, VRDN, 3.65% due 12/01/2015 (a)(i) 600
Face
Amount Municipal Bonds Value
Florida (concluded)
$ 1,100 Sarasota County, Florida, Public Hospital Board,
Hospital Revenue Bonds (Sarasota Memorial Hospital),
VRDN, Series A, 3.64% due 7/01/2037 (a)(i) $ 1,100
South Florida Water Management District, COP (a):
1,175 5% due 10/01/2031 1,250
2,275 5% due 10/01/2036 2,416
Georgia--2.4%
4,000 Augusta, Georgia, Water and Sewer Revenue Bonds,
5.25% due 10/01/2034 (d) 4,325
Illinois--9.1%
7,965 Chicago, Illinois, GO, Series A, 6% due 7/01/2010 (b)(f) 8,690
2,965 Chicago, Illinois, Park District, Limited Tax, GO,
Series A, 5.75% due 1/01/2011 (b)(f) 3,214
4,500 Illinois State, GO, First Series, 6% due 1/01/2018 (b) 4,806
45 Lake, Cook, Kane and McHenry Counties, Illinois,
Community Unit School District Number 220, GO,
5.75% due 12/01/2019 (b) 48
Indiana--1.2%
2,000 Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A, 5.25% due 6/01/2029 (b) 2,153
Massachusetts--9.5%
3,375 Massachusetts Bay Transportation Authority, Sales Tax
Revenue Refunding Bonds, Senior Series A, 5%
due 7/01/2035 3,502
2,105 Massachusetts Bay Transportation Authority, Special
Assessment Revenue Refunding Bonds, Series A,
5% due 7/01/2015 (f) 2,305
565 Massachusetts State, HFA, Housing Development
Revenue Refunding Bonds, AMT, Series A, 5.15%
due 6/01/2011 (e) 568
2,440 Massachusetts State, HFA, Rental Housing Mortgage
Revenue Bonds, AMT, Series C, 5.50%
due 7/01/2032 (d) 2,598
8,000 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A,
5% due 8/15/2030 (d) 8,496
Michigan--2.3%
2,035 Boyne City, Michigan, Public School District, GO,
5.75% due 5/01/2009 (b)(f) 2,142
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds, AMT (g):
400 DRIVERS, Series 858Z, 7.08% due 12/01/2011(j) 463
1,500 (Detroit Edison Pollution), Series B, 5.65%
due 9/01/2029 1,598
Minnesota--2.4%
4,015 Sauk Rapids, Minnesota, Independent School District
Number 47, GO, Series A, 5.65% due 2/01/2019 (e) 4,325
Missouri--5.1%
2,000 Cape Girardeau, Missouri, School District Number 063,
GO (Missouri Direct Deposit Program), 5.50%
due 3/01/2018 (b) 2,109
Mehlville, Missouri, School District Number R-9, COP,
Series A (d):
1,925 5.50% due 3/01/2014 2,064
2,175 5.50% due 3/01/2015 2,328
1,170 5.50% due 3/01/2016 1,254
1,500 5.50% due 3/01/2017 1,607
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments (continued)
BlackRock MuniHoldings Insured Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Nebraska--2.1%
Omaha Convention Hotel Corporation, Nebraska,
Convention Center Revenue Bonds, First Tier,
Series A (a):
$ 1,585 5.50% due 4/01/2020 $ 1,721
2,000 5.50% due 4/01/2021 2,164
New Jersey--17.6%
New Jersey EDA, Cigarette Tax Revenue Bonds:
1,800 5.625% due 6/15/2018 1,875
5,295 5.75% due 6/15/2029 5,761
3,800 5.75% due 6/15/2034 (l) 4,246
6,700 New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5.25% due 7/01/2033 (e) 7,216
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series D (d):
3,020 5% due 6/15/2015 (f) 3,305
3,685 5% due 6/15/2019 3,972
5,500 New Jersey State Turnpike Authority, Turnpike Revenue
Bonds, Series C, 5% due 1/01/2030 (d) 5,828
New Mexico--2.0%
3,325 New Mexico Finance Authority, Senior Lien State
Transportation Revenue Bonds, Series A, 5.125%
due 6/15/2018 (e) 3,609
New York--26.3%
10,000 Nassau Health Care Corporation, New York, Health
System Revenue Bonds, 5.75% due 8/01/2009 (d)(f) 10,772
New York City, New York, GO (d):
4,000 Series E, 5% due 11/01/2017 4,323
7,085 Series G, 5.75% due 10/15/2007 (f) 7,303
New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A:
4,055 5% due 10/15/2020 (e) 4,369
4,095 5.25% due 10/15/2027 (a) 4,450
4,000 5% due 10/15/2032 (a) 4,239
3,505 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (e) 3,785
Tobacco Settlement Financing Corporation of New York
Revenue Bonds, Series C-1:
4,900 5.50% due 6/01/2017 5,258
3,430 5.50% due 6/01/2020 (b) 3,746
Oregon--0.8%
1,400 Portland, Oregon, Urban Renewal and Redevelopment
Tax Allocation Bonds (Oregon Convention Center),
Series A, 5.75% due 6/15/2015 (a) 1,509
Pennsylvania--12.6%
3,900 Pennsylvania State Higher Educational Facilities
Authority, State System of Higher Education Revenue
Bonds, Series O, 5.125% due 6/15/2024 (a) 3,931
6,045 Philadelphia, Pennsylvania, Airport Revenue Bonds
(Philadelphia Airport System), AMT, Series B, 5.50%
due 6/15/2017 (b) 6,218
3,390 Pittsburgh, Pennsylvania, GO, Refunding, Series B,
5.25% due 9/01/2017 (d) 3,780
2,615 Pittsburgh, Pennsylvania, GO, Series C, 5.25%
due 9/01/2017 (d) 2,916
2,015 Seneca Valley, Pennsylvania, School District, GO, 5%
due 1/01/2019 (b) 2,178
Face
Amount Municipal Bonds Value
Pennsylvania (concluded)
$ 1,800 Washington County, Pennsylvania, Capital Funding
Authority Revenue Bonds (Capital Projects and
Equipment Program), 6.15% due 12/01/2029 (a) $ 1,925
1,885 York County, Pennsylvania, School of Technology
Authority, Lease Revenue Refunding Bonds, 5.50%
due 2/15/2022 (b) 2,057
Rhode Island--4.7%
5,000 Providence, Rhode Island, Redevelopment Agency
Revenue Refunding Bonds (Public Safety and
Municipal Buildings), Series A, 5.75%
due 4/01/2010 (a)(f) 5,395
2,870 Rhode Island State Health and Educational Building
Corporation Revenue Bonds (Rhode Island School of
Design), Series D, 5.50% due 8/15/2031 (g) 3,147
South Carolina--0.9%
1,525 Medical University Hospital Authority, South Carolina,
Hospital Facilities, Revenue Refunding Bonds, Series A,
5.25% due 2/15/2025 (c)(e) 1,638
Tennessee--2.8%
Tennessee HDA, Revenue Refunding Bonds
(Homeownership Program), AMT, Series A (d):
2,580 5.25% due 7/01/2022 2,659
2,370 5.35% due 1/01/2026 2,442
Texas--2.2%
600 Bell County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Scott & White
Memorial Hospital), VRDN, Series 2001-1, 3.63%
due 8/15/2031 (e)(i) 600
500 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Texas
Children's Hospital), VRDN, Series B-1, 3.62%
due 10/01/2029 (e)(i) 500
2,759 Houston, Texas, Community College System, Participation
Interests, COP (Alief Center Project), 5.75%
due 8/15/2022 (e) 2,883
Virginia--0.8%
1,500 Virginia State, HDA, Commonwealth Mortgage
Revenue Bonds, Series H, Sub-Series H-1, 5.35%
due 7/01/2031 (e) 1,557
Washington--4.8%
4,000 Bellevue, Washington, GO, Refunding, 5.50%
due 12/01/2039 (e) 4,437
2,310 Chelan County, Washington, Public Utility District
Number 001, Consolidated Revenue Bonds
(Chelan Hydro System), AMT, Series A, 5.45%
due 7/01/2037 (a) 2,479
1,810 Snohomish County, Washington, Public Utility District
Number 001, Electric Revenue Bonds, 5.50%
due 12/01/2022 (d) 1,974
West Virginia--2.8%
5,000 West Virginia State Housing Development Fund,
Housing Finance Revenue Refunding Bonds, Series D,
5.20% due 11/01/2021 (e) 5,190
Wisconsin--0.3%
500 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Blood Center of
Southeastern Wisconsin Project), 5.50% due
6/01/2024 535
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Schedule of Investments (concluded)
BlackRock MuniHoldings Insured Fund, Inc. (In Thousands)
Face
Amount Municipal Bonds Value
Wyoming--0.9%
$ 1,500 Wyoming Student Loan Corporation, Student Loan
Revenue Refunding Bonds, Series A, 6.20%
due 6/01/2024 $ 1,595
Puerto Rico--1.4%
605 Puerto Rico Commonwealth, Public Improvement, GO,
Refunding, Series B, 5.25% due 7/01/2032 654
1,870 Puerto Rico Public Buildings Authority, Government
Facilities Revenue Refunding Bonds, Series D, 5.25%
due 7/01/2036 1,969
Total Municipal Bonds
(Cost--$287,252)--163.1% 298,804
Municipal Bonds Held in Trust (o)
Arkansas--4.3%
7,420 Arkansas State Development Finance Authority,
M/F Mortgage Revenue Refunding Bonds, Series C,
5.35% due 12/01/2035 (c)(e) 7,788
California--3.8%
6,500 California Pollution Control Financing Authority,
PCR, Refunding (Pacific Gas and Electric), AMT,
Series A, 5.35% due 12/01/2016 (e) 6,993
Illinois--2.6%
4,300 Chicago, Illinois, O'Hare International Airport
Revenue Bonds, Third Lien, AMT, Series B-2,
6% due 1/01/2029 (g) 4,824
Face
Amount Municipal Bonds Held in Trust (o) Value
Michigan--2.7%
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Pollution Control Project), AMT (g):
$ 1,200 Series A, 5.50% due 6/01/2030 $ 1,294
3,500 Series C, 5.65% due 9/1/2029 3,729
Texas--4.7%
8,000 Dallas Forth Worth, Texas, International
Airport Revenue Bonds, Series A, 5.50%
due 11/01/2033 (e) 8,610
Total Municipal Bonds Held in Trust
(Cost--$32,001)--18.1% 33,238
Shares
Held Short-Term Securities
21 Merrill Lynch Institutional Tax-Exempt Fund,
3.38% (k)(m) 21
Total Short-Term Securities
(Cost--$21)--0.0% 21
Total Investments (Cost--$319,274*)--181.2% 332,063
Other Assets Less Liabilities--0.5% 829
Liability for Trust Certificates,
Including Interest Expense Payable--(8.5%) (15,612)
Preferred Stock, at Redemption Value--(73.2%) (134,038)
----------
Net Assets Applicable to Common Stock--100.0% $ 183,242
==========
* The cost and unrealized appreciation (depreciation) of investments
as of October 31, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 305,157
==============
Gross unrealized appreciation $ 11,547
Gross unrealized depreciation (101)
--------------
Net unrealized appreciation $ 11,446
==============
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHA Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) XL Capital Insured.
(h) Radian Insured.
(i) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(j) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(k) 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 Dividend
Affiliate Activity Income
Merrill Lynch Institutional Tax-Exempt Fund -- --++
++ Amount is less than $1,000.
(l) Assured Guaranty Insured.
(m) Represents the current yield as of October 31, 2006.
(n) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(o) Securities represent underlying bonds transferred to a separate
securitization trust established in a tender option bond transaction
in which the Fund acquired the residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1(c)
to Financial Statements for details of Municipal Bonds Held in Trust.
o Forward interest rate swaps outstanding as of October 31, 2006
were as follows:
Notional Unrealized
Amount Depreciation
Pay a fixed rate of 3.856%
and receive a floating rate
based on 1-week USD Bond
Market Association rate
Broker, JPMorgan Chase
Expires December 2016 $15,700 $ (271)
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Statements of Net Assets
BlackRock
BlackRock MuniHoldings
MuniHoldings Insured
As of October 31, 2006 Fund, Inc. Fund, Inc.
Assets
Investments in unaffiliated securities, at value* $ 369,808,904 $ 332,041,787
Investments in affiliated securities, at value** 8,920 20,845
Cash 33,649 48,260
Receivable for securities sold 2,116,422 11,990,501
Interest receivable 6,060,336 4,806,698
Prepaid expenses 2,182 2,351
--------------- ---------------
Total assets 378,030,413 348,910,442
--------------- ---------------
Liabilities
Trust certificates 22,622,500 15,460,000
Unrealized depreciation on forward interest rate swaps -- 270,841
Payable for securities purchased -- 15,494,938
Interest expense payable 203,567 151,569
Payable to investment adviser 159,514 126,126
Payable to other affiliates 2,280 2,040
Dividends payable to Common Stock shareholders -- 86,251
Offering costs payable 10,000 --
Accrued expenses 43,098 38,231
--------------- ---------------
Total liabilities 23,040,959 31,629,996
--------------- ---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.10 per share*** of
AMPS+++ at $25,000 per share liquidation preference 125,062,428 134,038,410
--------------- ---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 229,927,026 $ 183,242,036
=============== ===============
Net Assets Consist of
Undistributed investment income--net $ 1,904,771 $ 643,728
Accumulated realized capital losses--net (722,353) (21,674,303)
Unrealized appreciation--net 22,112,285 12,517,476
--------------- ---------------
Total accumulated earnings (losses)--net 23,294,703 (8,513,099)
--------------- ---------------
Common Stock, par value $.10 per share++ 1,387,874 1,288,620
Paid-in capital in excess of par 205,244,449 190,466,515
--------------- ---------------
Net Assets $ 229,927,026 $ 183,242,036
=============== ===============
Net asset value per share of Common Stock $ 16.57 14.22
=============== ===============
Market price $ 16.71 12.93
=============== ===============
* Identified cost of unaffiliated securities $ 347,696,619 $ 319,253,470
=============== ===============
** Identified cost of affiliated securities $ 8,920 $ 20,845
=============== ===============
*** Preferred Stock authorized, issued and outstanding:
Series A Shares 2,200 2,680
=============== ===============
Series B Shares 2,200 2,680
=============== ===============
Series C Shares 600 --
=============== ===============
++ Common Stock issued and outstanding 13,878,738 12,886,200
=============== ===============
+++ Auction Market Preferred Stock.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Statements of Operations
BlackRock
BlackRock MuniHoldings
MuniHoldings Insured
For the Six Months Ended October 31, 2006 Fund, Inc. Fund, Inc.
Investment Income
Interest and amortization of premium and discount earned $ 9,907,190 $ 7,657,906
Dividends from affiliates 152 353
--------------- ---------------
Total income 9,907,342 7,658,259
--------------- ---------------
Expenses
Investment advisory fees 971,368 867,662
Interest expense and fees 420,832 304,213
Commission fees 159,921 172,756
Accounting services 64,338 59,339
Professional fees 30,568 27,208
Transfer agent fees 28,182 24,423
Directors' fees and expenses 16,019 15,932
Printing and shareholder reports 12,097 9,973
Custodian fees 10,584 9,667
Pricing fees 9,389 7,587
Listing fees 8,420 8,452
Other 20,134 20,840
--------------- ---------------
Total expenses before waiver and/or reimbursement 1,751,852 1,528,052
Waiver and/or reimbursement of expenses (9) (104,400)
--------------- ---------------
Total expenses after waiver and/or reimbursement 1,751,843 1,423,652
--------------- ---------------
Investment income--net 8,155,499 6,234,607
--------------- ---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on investments--net (549,571) 25,684
Change in unrealized appreciation/depreciation on:
Investments--net 7,034,128 5,989,684
Forward interest rate swaps--net -- (270,841)
--------------- ---------------
Total change in unrealized appreciation/depreciation--net 7,034,128 5,718,843
--------------- ---------------
Total realized and unrealized gain--net 6,484,557 5,744,527
--------------- ---------------
Dividends to Preferred Stock Shareholders
Investment income--net (2,183,183) (2,326,222)
--------------- ---------------
Net Increase in Net Assets Resulting from Operations $ 12,456,873 $ 9,652,912
=============== ===============
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Statements of Changes in Net Assets (As Restated for the Year Ended April 30, 2006. See Note 6)
BlackRock MuniHoldings
Fund, Inc.
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 2006 2006
Operations
Investment income--net $ 8,155,499 $ 16,071,908
Realized gain (loss)--net (549,571) 3,410,926
Change in unrealized appreciation--net 7,034,128 (3,458,804)
Dividends to Preferred Stock shareholders (2,183,183) (3,250,051)
--------------- ---------------
Net increase in net assets resulting from operations 12,456,873 12,773,979
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (6,475,808) (14,886,804)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (6,475,808) (14,886,804)
--------------- ---------------
Stock Transactions
Offering and underwriting costs resulting from the issuance of Preferred Stock -- (253,446)
Value of shares issued to Common Stock shareholders in reinvestment of dividends 288,359 805,613
--------------- ---------------
Net increase in net assets resulting from stock transactions 288,359 552,167
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock 6,269,424 (1,560,658)
Beginning of period 223,657,602 225,218,260
--------------- ---------------
End of period* $ 229,927,026 $ 223,657,602
=============== ===============
* Undistributed investment income--net $ 1,904,771 $ 2,408,263
=============== ===============
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Statements of Changes in Net Assets (As Restated for the Year Ended April 30, 2006. See Note 6)
BlackRock MuniHoldings
Insured Fund, Inc.
For the Six For the
Months Ended Year Ended
October 31, April 30,
Increase (Decrease) in Net Assets: 2006 2006
Operations
Investment income--net $ 6,234,607 $ 12,512,241
Realized gain--net 25,684 2,359,520
Change in unrealized appreciation/depreciation--net 5,718,843 (8,816,645)
Dividends to Preferred Stock shareholders (2,326,222) (3,639,222)
--------------- ---------------
Net increase in net assets resulting from operations 9,652,912 2,415,894
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (4,200,901) (10,717,062)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (4,200,901) (10,717,062)
--------------- ---------------
Stock Transactions
Value of shares issued to Common Stock shareholders in reinvestment of dividends -- 269,995
--------------- ---------------
Net increase in net assets resulting from stock transactions -- 269,995
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock 5,452,011 (8,031,173)
Beginning of period 177,790,025 185,821,198
--------------- ---------------
End of period* $ 183,242,036 $ 177,790,025
=============== ===============
* Undistributed investment income--net $ 643,728 $ 936,244
=============== ===============
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Financial Highlights (As Restated for the Years Ended April 30, 2006, 2005, 2004, 2003 and 2002. See Note 6)
BlackRock MuniHoldings Fund, Inc.
For the Six
The following per share data and ratios Months Ended
have been derived from information October 31, For the Year Ended April 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 16.14 $ 16.31 $ 15.54 $ 15.07 $ 14.50 $ 13.76
----------- ----------- ----------- ----------- ----------- -----------
Investment income--net .59++++ 1.16++++ 1.20++++ 1.25++++ 1.25++++ 1.17
Realized and unrealized gain (loss)--net .47 --++++++ .84 .40 .40 .66
Less dividends to Preferred Stock
shareholders from investment income--net (.16) (.23) (.12) (.07) (.10) (.16)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations .90 .93 1.92 1.58 1.55 1.67
----------- ----------- ----------- ----------- ----------- -----------
Less dividends to Common Stock
shareholders from investment income--net (.47) (1.08) (1.15) (1.11) (.98) (.93)
----------- ----------- ----------- ----------- ----------- -----------
Offering and underwriting costs resulting
from the issuance of Preferred Stock -- (.02) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 16.57 $ 16.14 $ 16.31 $ 15.54 $ 15.07 $ 14.50
=========== =========== =========== =========== =========== ===========
Market price per share, end of period $ 16.71 $ 16.20 $ 16.12 $ 14.43 $ 14.43 $ 13.38
=========== =========== =========== =========== =========== ===========
Total Investment Return++
Based on net asset value per share 5.65%+++ 5.69% 12.95% 10.94% 11.54% 12.64%
=========== =========== =========== =========== =========== ===========
Based on market price per share 6.15%+++ 7.34% 20.22% 7.58% 15.75% 8.51%
=========== =========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Common Stock
Total expenses, net of reimbursement
and excluding interest expense** 1.17%* 1.15% 1.13% 1.14% 1.18% 1.21%
=========== =========== =========== =========== =========== ===========
Total expenses, net of reimbursement** 1.54%* 1.32% 1.20% 1.23% 1.37% 1.46%
=========== =========== =========== =========== =========== ===========
Total expenses** 1.54%* 1.32% 1.20% 1.24% 1.37% 1.46%
=========== =========== =========== =========== =========== ===========
Total investment income--net** 7.18%* 7.15% 7.61% 7.98% 8.40% 8.03%
=========== =========== =========== =========== =========== ===========
Amount of dividends to Preferred
Stock shareholders 1.92%* 1.45% .74% .45% .66% 1.08%
=========== =========== =========== =========== =========== ===========
Investment income--net, to Common
Stock shareholders 5.26%* 5.70% 6.87% 7.53% 7.74% 6.95%
=========== =========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Preferred Stock
Dividends to Preferred Stock shareholders 3.46% 2.76% 1.47% .88% 1.23% 1.96%
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets applicable to Common Stock,
end of period (in thousands) $ 229,927 $ 223,658 $ 225,218 $ 214,473 $ 207,960 $ 200,091
=========== =========== =========== =========== =========== ===========
Preferred Stock outstanding at
liquidation preference, end of
period (in thousands) $ 125,000 $ 125,000 $ 110,000 $ 110,000 $ 110,000 $ 110,000
=========== =========== =========== =========== =========== ===========
Portfolio turnover 8% 45% 34% 41% 46% 56%
=========== =========== =========== =========== =========== ===========
Leverage
Asset coverage per $1,000 $ 2,839 $ 2,789 $ 3,047 $ 2,950 $ 2,891 $ 2,819
=========== =========== =========== =========== =========== ===========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 442 $ 688 $ 366 $ 220 $ 315 $ 492
=========== =========== =========== =========== =========== ===========
Series B--Investment income--net $ 435 $ 684 $ 365 $ 223 $ 302 $ 490
=========== =========== =========== =========== =========== ===========
Series C***--Investment income--net $ 424 $ 389 -- -- -- --
=========== =========== =========== =========== =========== ===========
* Annualized.
** Do not reflect the effect of dividends to Preferred
Stock shareholders.
*** Series C was issued October 19, 2005.
++ Total investment returns based on market price, 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.
++++ Based on average shares outstanding.
++++++ Amount is less than $(.01).
+++ Aggregate total investment return.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Financial Highlights (As Restated for the Years Ended April 30, 2006, 2005, 2004, 2003 and 2002. See Note 6)
BlackRock MuniHoldings Insured Fund, Inc.
For the Six
The following per share data and ratios Months Ended
have been derived from information October 31, For the Year Ended April 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 13.80 $ 14.44 $ 14.12 $ 14.48 $ 13.78 $ 13.29
----------- ----------- ----------- ----------- ----------- -----------
Investment income--net .48++++ .97++++ 1.01++++ 1.04++++ 1.06++++ 1.07
Realized and unrealized gain (loss)--net .45 (.50) .38 (.42) .62 .44
Less dividends to Preferred Stock
shareholders from investment income--net (.18) (.28) (.16) (.09) (.13) (.21)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations .75 .19 1.23 .53 1.55 1.30
----------- ----------- ----------- ----------- ----------- -----------
Less dividends to Common Stock shareholders
from investment income--net (.33) (.83) (.91) (.89) (.85) (.81)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 14.22 $ 13.80 $ 14.44 $ 14.12 $ 14.48 $ 13.78
=========== =========== =========== =========== =========== ===========
Market price per share, end of period $ 12.93 $ 13.10 $ 13.70 $ 12.64 $ 13.50 $ 12.65
=========== =========== =========== =========== =========== ===========
Total Investment Return**
Based on net asset value per share 5.71%++ 1.46% 9.35% 4.07% 12.04% 10.28%
=========== =========== =========== =========== =========== ===========
Based on market price per share 1.25%++ 1.51% 15.90% (.07%) 13.79% 4.38%
=========== =========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Common Stock
Total expenses, net of waiver and reimbursement
and excluding interest expense*** 1.24%* 1.24% 1.24% 1.24% 1.28% 1.30%
=========== =========== =========== =========== =========== ===========
Total expenses, net of waiver and
reimbursement*** 1.58%* 1.82% 1.60% 1.25% 1.36% 1.48%
=========== =========== =========== =========== =========== ===========
Total expenses*** 1.69%* 1.93% 1.70% 1.35% 1.46% 1.58%
=========== =========== =========== =========== =========== ===========
Total investment income--net*** 6.91%* 6.87% 7.09% 7.12% 7.55% 7.75%
=========== =========== =========== =========== =========== ===========
Amount of dividends to Preferred Stock
shareholders 2.58%* 2.00% 1.09% .65% .91% 1.50%
=========== =========== =========== =========== =========== ===========
Investment income--net, to Common Stock
shareholders 4.33%* 4.87% 6.00% 6.47% 6.64% 6.25%
=========== =========== =========== =========== =========== ===========
Ratios Based on Average Net Assets Applicable to Preferred Stock
Dividends to Preferred Stock shareholders 3.44% 2.72% 1.50% .90% 1.23% 1.99%
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets applicable to Common Stock,
end of period (in thousands) $ 183,242 $ 177,790 $ 185,821 $ 181,726 $ 186,372 $ 177,286
=========== =========== =========== =========== =========== ===========
Preferred Stock outstanding at liquidation
preference, end of period (in thousands) $ 134,000 $ 134,000 $ 134,000 $ 134,000 $ 134,000 $ 134,000
=========== =========== =========== =========== =========== ===========
Portfolio turnover 17% 59% 43% 41% 48% 47%
=========== =========== =========== =========== =========== ===========
Leverage
Asset coverage per $1,000 $ 2,367 $ 2,327 $ 2,387 $ 2,356 $ 2,391 $ 2,323
=========== =========== =========== =========== =========== ===========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 433 $ 686 $ 372 $ 225 $ 313 $ 502
=========== =========== =========== =========== =========== ===========
Series B--Investment income--net $ 435 $ 672 $ 376 $ 228 $ 302 $ 491
=========== =========== =========== =========== =========== ===========
* Annualized.
** 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.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, MuniHoldings Fund, Inc. and MuniHoldings Insured Fund,
Inc. were renamed BlackRock MuniHoldings Fund, Inc. and BlackRock MuniHoldings
Insured Fund, Inc. (the "Funds" or individually as the "Fund"), respectively.
The Funds are registered under the Investment Company Act of 1940, as amended,
as non-diversified, closed-end management investment companies. The Funds'
financial statements are prepared in conformity with U.S. generally accepted
accounting principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to present a fair statement of the results for the
interim period. All such adjustments are of a normal, recurring nature. The
Funds determine and make available for publication the net asset value of
their Common Stock on a daily basis. The Funds' Common Stock shares are listed
on the New York Stock Exchange under the symbols MHD and MUS, respectively.
The following is a summary of significant accounting policies followed by the
Funds.
(a) Valuation of investments--Municipal bonds are traded primarily in the over-
the-counter ("OTC") markets and are valued at the last available bid price in
the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Funds under the general
direction of the Board of Directors. Such valuations and procedures are
reviewed periodically by the Board of Directors of the Funds. Financial
futures contracts and options thereon, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges. Options
written or purchased are valued at the last sale price in the case of exchange-
traded options. Options traded in the OTC market are valued at the last asked
price (options written) or the last bid price (options purchased). Swap
agreements are valued by quoted fair values received daily by the Funds'
pricing service. Short-term investments with a remaining maturity of 60 days
or less are valued at amortized cost, which approximates market value, under
which method the investment is valued at cost and any premium or discount is
amortized on a straight line basis to maturity. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Funds.
(b) Derivative financial instruments--Each Fund may engage in various
portfolio investment strategies both to increase the return of the Fund and to
hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Financial futures contracts--Each Fund may purchase or sell financial
futures contracts and options on such financial futures contracts. Financial
futures contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
* Options--Each Fund may write covered call options and purchase call and put
options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked-to-market to reflect the
current market value of the option written. When a security is purchased or
sold through an exercise of an option, the related premium paid (or received)
is added to (or deducted from) the basis of the security acquired or deducted
from (or added to) the proceeds of the security sold. When an option expires
(or the Fund enters into a closing transaction), the Fund realizes a gain or
loss on the option to the extent of the premiums received or paid (or gain or
loss to the extent the cost of the closing transaction exceeds the premium
paid or received).
Written and purchased options are non-income producing investments.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Notes to Financial Statements (continued)
* 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. When the
agreement is closed, the Fund records a realized gain or loss in an amount
equal to the value of the agreement.
* Swaps--Each Fund may enter into swap agreements, which are OTC contracts in
which the Fund and a counterparty agree to make periodic net payments on a
specified notional amount. The net payments can be made for a set period of
time or may be triggered by a predetermined credit event. The net periodic
payments may be based on a fixed or variable interest rate; the change in
market value of a specified security, basket of securities, or index; or the
return generated by a security. These periodic payments received or made by
the Fund are recorded in the accompanying Statement of Operations as realized
gains or losses, respectively. Gains or losses are also realized upon
termination of the swap agreements. Swaps are marked-to-market daily and
changes in value are recorded as unrealized appreciation (depreciation). Risks
include changes in the returns of the underlying instruments, failure of the
counterparties to perform under the contracts' terms and the possible lack of
liquidity with respect to the swap agreements.
(c) Municipal bonds held in trust--Certain Funds invest in leveraged residual
certificates ("TOB Residuals") issued by tender option bond trusts ("TOBs"). A
TOB is established by a third party sponsor forming a special purpose entity,
into which a Fund, or an agent on behalf of the Fund, transfers municipal
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, which are generally issued to the Fund which made the
transfer or to affiliates of the Fund. Each Fund's transfers of the municipal
securities to a TOB do not qualify for sale treatment under Statement of
Financial Accounting Standards No. 140 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities," therefore the
municipal securities deposited into a TOB are presented in the Funds'
schedules of investments and the proceeds from the transactions are reported
as a liability for trust certificates of the Funds. Similarly, proceeds from
residual certificates issued to affiliates, if any, from the transaction are
included in the liability for trust certificates. 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 a Fund. 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. The residual
interests held by the Funds include the right of the Funds (1) to cause the
holders of a proportional share of floating rate certificates to tender their
certificates at par, and (2) to transfer a corresponding share of the
municipal securities from the TOB to the Funds. At October 31, 2006, the
aggregate value of the underlying municipal securities transferred to TOBs and
the related liability for trust certificates were:
Underlying
Municipal
Liability for Range of Bonds
Trust Interest Transferred
Payable Rates to TOBs
BlackRock MuniHoldings 3.60% -
Fund, Inc. $22,622,500 3.61% $47,994,043
BlackRock MuniHoldings 3.60% -
Insured Fund, Inc. $15,460,000 3.63% $33,238,172
Financial transactions executed through TOBs generally will under perform 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,
the Funds' investment in TOB Residuals likely will adversely affect the Funds'
investment income-net and distributions to shareholders. Fluctuations in the
market value of municipal securities deposited into the TOB may adversely
affect the Funds' net asset value per share.
While the Funds' investment policies and restrictions expressly permit
investments in inverse floating rate securities such as TOB Residuals, they
generally do not allow the Funds to borrow money for purposes of making
investments. The Funds' management believes that the Funds' restrictions on
borrowings do not apply to the secured borrowings deemed to have occurred for
accounting purposes.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Funds amortize all
premiums and discounts on debt securities.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Notes to Financial Statements (continued)
(e) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(f) Offering costs--Direct expenses relating to the public offering of the
BlackRock MuniHoldings Fund, Inc. Preferred Stock were charged to capital at
the time of issuance of the shares.
(g) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109." 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 mutual funds before being
measured and recognized in the financial statements. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006. The impact on
each of the Fund's financial statements, if any, is currently being assessed.
In addition, 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. Management is currently evaluating
the implications of FAS 157. At this time its impact on each of the Fund's
financial statements has not been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset
Management, L.P. ("FAM"), with BlackRock, Inc. to create a new independent
company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest
in the combined company and The PNC Financial Services Group, Inc. has
approximately a 34% economic and voting interest. The new company operates
under the BlackRock name and is governed by a board of directors with a
majority of independent members.
On August 15, 2006, shareholders of each Fund approved a new Investment
Advisory Agreement with BlackRock Advisors, Inc. (the "Manager"), an indirect,
wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was
recently reorganized into a limited liability company and renamed BlackRock
Advisors, LLC. The new Investment Advisory Agreement between each Fund and the
Manager became effective on September 29, 2006. Prior to September 29, 2006,
FAM was the Investment Adviser. The general partner of FAM is Princeton
Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch,
which is the limited partner.
The Manager 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 a monthly fee at an annual rate of .55% of the Fund's average daily
net assets, including proceeds from the issuance of Preferred Stock. The
Manager (and formerly FAM) has agreed to reimburse its management fee by the
amount of management fees each Fund pays to the Manager and/or FAM indirectly
through its investment in the Merrill Lynch Institutional Tax-Exempt Fund. The
reimbursements were as follows:
For the Period For the Period
May 1, 2006 to Sept. 30, 2006
Sept. 29, 2006 to Oct. 31, 2006
Reimbursement Reimbursement
by FAM by the Manager
BlackRock MuniHoldings
Fund, Inc. $ 8 $ 1
BlackRock MuniHoldings
Insured Fund, Inc. $ 17 $ 3
In addition, FAM and/or the Manager has agreed to waive its management
fee based on the proceeds of Preferred Stock that exceeds 35% of each
Fund's total net assets. The waivers were as follows:
FAM
For the Period For the Period
May 1, 2006 to May 1, 2006 to
Sept. 29, 2006 Sept. 29, 2006
Fees Earned Fees Waived
BlackRock MuniHoldings
Insured Fund, Inc. $725,103 $ 87,950
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Notes to Financial Statements (continued)
Manager
For the Period For the Period
Sept. 30, 2006 Sept. 30, 2006
to Oct. 31, 2006 to Oct. 31, 2006
Fees Earned Fees Waived
BlackRock MuniHoldings
Insured Fund, Inc. $142,559 $ 16,430
In addition, the Manager has entered into a sub-advisory agreement with
BlackRock Investment Management, LLC an affiliate of the Manager, under which
the Manager pays the Sub-Adviser for services it provides a fee equal to 59%
of the management fee paid by each Fund to the Manager.
The Funds reimbursed FAM and/or the Manager for certain accounting services.
The reimbursements were as follows:
For the Period For the Period
May 1, 2006 to Sept. 30, 2006
Sept. 29, 2006 to Oct. 31, 2006
Reimbursement Reimbursement
to FAM to the Manager
BlackRock MuniHoldings
Fund, Inc. $1,700 $1,995
BlackRock MuniHoldings
Insured Fund, Inc. $1,495 $1,828
Prior to September 29, 2006, certain officers and/or directors of the Funds
were officers and/or directors of Merrill Lynch, FAM, MLIM, and/or PSI.
Commencing September 29, 2006, certain officers and/or directors of the Fund
are officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended October 31, 2006 were as follows:
BlackRock
BlackRock MuniHoldings
MuniHoldings Insured
Fund, Inc. Fund, Inc.
Total Purchases $33,372,144 $59,956,412
Total Sales $30,719,488 $56,632,511
4. Stock Transactions:
Each Fund is authorized to issue 200,000,000 shares of stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. The Board of Directors is authorized, however,
to reclassify any unissued shares of stock without approval of holders of
Common Stock.
Common Stock
BlackRock MuniHoldings Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2006
and during the year ended April 30, 2006 increased by 17,588 and 49,412,
respectively, as a result of dividend reinvestment.
BlackRock MuniHoldings Insured Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2006
remained constant. Shares issued and outstanding during the year ended April
30, 2006 increased by 18,659 as a result of dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Funds,
with a par value of $.10 per share and a liquidation preference of $25,000 per
share, plus accrued and unpaid dividends, that entitle their holders to
receive cash dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at October 31, 2006 were as follows:
BlackRock
BlackRock MuniHoldings
MuniHoldings Insured
Fund, Inc. Fund, Inc.
Series A 3.29% 3.50%
Series B 3.49% 3.42%
Series C 3.48% --
BlackRock MuniHolding Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2006
remained constant. Shares issued and outstanding during the year ended April
30, 2006 increased by 600 from the issuance of an additional series of
Preferred Stock.
BlackRock MuniHoldings Insured Fund, Inc.
Shares issued and outstanding during the six months ended October 31, 2006 and
the year ended April 30, 2006 remained constant.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Notes to Financial Statements (continued)
Each Fund pays commissions to certain broker-dealers at the end of each
auction at an annual rate ranging from .25% to .375%, calculated on the
proceeds of each auction. For the six months ended October 31, 2006, MLPF&S
earned commissions as follows:
Commissions
BlackRock MuniHoldings Fund, Inc. $83,774
BlackRock MuniHoldings Insured Fund, Inc. $85,876
5. Distributions to Shareholders:
Each Fund paid a tax-exempt income dividend to holders of Common Stock in the
amounts of $.077000 per share and $.053000 per share relating to BlackRock
MuniHoldings Fund, Inc. and BlackRock MuniHoldings Insured Fund, Inc.,
respectively, on November 29, 2006 to shareholders of record on November
14, 2006.
6. Capital Loss Carryforward:
BlackRock MuniHoldings Fund, Inc.
On April 30, 2006, the Fund had a net capital loss carryforward of $44,718,
all of which expires in 2009. This amount will be available to offset like
amounts of any future taxable gains.
BlackRock MuniHoldings Insured Fund, Inc.
On April 30, 2006, the Fund had a net capital loss carryforward of
$18,567,763, of which $8,983,850 expires in 2008 and $9,583,913 expires in
2009. This amount will be available to offset like amounts of any future
taxable gains.
7. Restatement Information:
Prior to the issuance of its October 31, 2006 financial statements, the Funds
determined that the criteria for sale accounting in Statement of Financial
Accounting Standards No. 140 had not been met for certain transfers of
municipal bonds during the fiscal years ended April 30, 2006, 2005, 2004, 2003
and 2002, and that transfers should have been accounted for as secured
borrowings rather than as sales. Accordingly, the Funds have restated as of
April 30, 2006 the statements of changes in net assets for the year then
ended, the financial highlights for each of the five years in the period then
ended 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.
Statements of Changes in Net Assets
For the Year Ended April 30, 2006
BlackRock MuniHoldings BlackRock MuniHoldings
Fund, Inc. Insured Fund, Inc.
Previously Previously
Reported Restated Reported Restated
Realized gain--net $ 3,393,460 $ 3,410,926 $ 2,414,485 $ 2,359,520
Change in unrealized appreciation/depreciation--net $ (3,441,338) $ (3,458,804) $ (8,871,610) $ (8,816,645)
Financial Highlights for BlackRock MuniHoldings Fund, Inc.
For the Year Ended April 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
Total expenses, net of reimbursement** 1.15% 1.32% 1.13% 1.20% 1.14% 1.23%
Total expenses** 1.15% 1.32% 1.13% 1.20% 1.15% 1.24%
Portfolio turnover 53.60% 45% 36.23% 34% 42.89% 41%
** Do not reflect the effect of dividends to Preferred Stock shareholders.
2003 2002
Previously Previously
Reported Restated Reported Restated
Total expenses, net of reimbursement** 1.18% 1.37% 1.21% 1.46%
Total expenses** 1.18% 1.37% 1.21% 1.46%
Portfolio turnover 50.68% 46% 62.94% 56%
** Do not reflect the effect of dividends to Preferred Stock shareholders.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Notes to Financial Statements (concluded)
Financial Highlights for BlackRock MuniHoldings Insured Fund, Inc.
For the Year Ended April 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004
Previously Previously Previously
Reported Restated Reported Restated Reported Restated
Total expenses, net of waiver and reimbursement*** 1.24% 1.82% 1.24% 1.60% 1.24% 1.25%
Total expenses*** 1.35% 1.93% 1.35% 1.70% 1.34% 1.35%
Portfolio turnover 63.53% 59% 51.81% 43% 39.94% 41%
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
2003 2002
Previously Previously
Reported Restated Reported Restated
Total expenses, net of waiver and reimbursement*** 1.28% 1.36% 1.30% 1.48%
Total expenses*** 1.38% 1.46% 1.39% 1.58%
Portfolio turnover 49.59% 48% 46.69% 47%
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
While the Statements of Net Assets for the Funds as of April 30, 2006, 2005,
2004, 2003 and 2002, not presented herein, have not been reissued to give
effect to the restatement, the principal effects of the restatement would
be to increase investments and payable for floating rate certificates by
corresponding amounts at each year, with no effect on previously reported net
assets.
The Statements of Operations for each of the Funds for the years ended April
30, 2006, 2005, 2004, 2003 and 2002, not presented herein, have not been
reissued to give effect to the restatement. However, the principal effects of
the restatement would be to increase interest income and interest expense and
fees by corresponding amounts each year, and where applicable, to revise
realized gain (loss) on investments--net, and the change in unrealized
appreciation/depreciation on investments--net, by corresponding and offsetting
amounts.
The Statements of Changes in Net Assets for each of the Funds for the years
ended April 30, 2005, 2004, 2003 and 2002, not presented herein, have not been
reissued to give effect to the restatement, but the principal effects of a
restatement, where applicable, would be to revise previously reported realized
gain (loss) on investments--net, and change in unrealized appreciation/
depreciation--net, by corresponding and offsetting amounts.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreements--Matters Considered by the Boards
In connection with the combination of Merrill Lynch's investment advisory
business, including Fund Asset Management, L.P. (the "Previous Investment
Adviser"), with that of BlackRock, Inc. ("BlackRock") to create a new
independent company ("New BlackRock") (the "Transaction"), each Fund's Board
of Directors considered and approved a new investment advisory agreement (each
a "BlackRock Investment Advisory Agreement") between the Fund and BlackRock
Advisors, LLC ("BlackRock Advisors"). Each Fund's shareholders subsequently
approved the Fund's BlackRock Investment Advisory Agreement and it became
effective on September 29, 2006, replacing the Fund's investment advisory
agreement with the Previous Investment Adviser (each a "Previous Investment
Advisory Agreement").
Each Fund's Board discussed the Fund's BlackRock Investment Advisory Agreement
at telephonic and in-person meetings held during April and May 2006. Each
Fund's Board, including the independent directors, approved the Fund's
BlackRock Investment Advisory Agreement at an in-person meeting held on May
12, 2006.
To assist each Fund's Board in its consideration of the Fund's BlackRock
Investment Advisory Agreement, BlackRock provided materials and information
about BlackRock, including its financial condition and asset management
capabilities and organization, and Merrill Lynch provided materials and
information about the Transaction. Each Fund's independent directors, through
their independent legal counsel, also requested and received additional
information from Merrill Lynch and BlackRock in connection with their
consideration of the Fund's BlackRock Investment Advisory Agreement. The
additional information was provided in advance of the May 12, 2006 meetings.
In addition, each Fund's independent directors consulted with their counsel
and Fund counsel on numerous occasions, discussing, among other things, the
legal standards and certain other considerations relevant to the directors'
deliberations.
At each Fund's Board meetings, the directors discussed with Merrill Lynch
management and certain BlackRock representatives the Transaction, its
strategic rationale and BlackRock's general plans and intentions regarding the
Fund. At these Board meetings, representatives of Merrill Lynch and BlackRock
made presentations to and responded to questions from the Boards. The
directors also inquired about the plans for and anticipated roles and
responsibilities of certain employees and officers of the Previous Investment
Adviser, and of its affiliates, to be transferred to BlackRock in connection
with the Transaction. The independent directors also conferred separately and
with their counsel about the Transaction and other matters related to the
Transaction on a number of occasions, including in connection with the April
and May 2006 meetings. After the presentations and after reviewing the written
materials provided, each Fund's independent directors met in executive
sessions with their counsel to consider the Fund's BlackRock Investment
Advisory Agreement.
In connection with the directors' review of each Fund's BlackRock Investment
Advisory Agreement, Merrill Lynch and/or BlackRock advised the directors about
a variety of matters. The advice included the following, among other matters:
* that there was not expected to be any diminution in the nature, quality and
extent of services provided to either of the Funds or their shareholders by
BlackRock Advisors, including compliance services;
* that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented
professionals;
* that each Fund was expected to benefit from having access to BlackRock's
state of the art technology and risk management analytic tools, including
investment tools, provided under the BlackRock Solutions (R) brand name;
* that BlackRock had no present intention to alter any applicable expense
waivers or reimbursements that were currently in effect and, while it
reserved the right to do so in the future, it would seek Board approval
before making any changes;
* that in connection with the Transaction, Merrill Lynch and BlackRock had
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in compliance
with the conditions of Section 15(f) of the Investment Company Act of 1940
(the "1940 Act") in relation to any public funds advised by BlackRock or
the Previous Investment Adviser (or affiliates), respectively; and
* that Merrill Lynch and BlackRock would derive benefits from the Transaction
and that, as a result, they had a financial interest in the matters being
considered that was different from that of Fund shareholders.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement (continued)
The directors considered the information provided by Merrill Lynch and
BlackRock above, and, among other factors, the following:
* the potential benefits to each Fund's shareholders from being part of a
combined fund family with BlackRock-sponsored funds, including possible
economies of scale and access to investment opportunities;
* the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength and
resources of New BlackRock;
* the compliance policies and procedures of BlackRock Advisors;
* the terms and conditions of each Fund's BlackRock Investment Advisory
Agreement, including the fact that neither Fund's schedule of total
advisory fees would increase under the pertinent BlackRock Investment
Advisory Agreement, but would remain the same;
* that in November 2005, each Fund's Board had performed a full annual review
of the pertinent Previous Investment Advisory Agreement, as required by the
1940 Act, and had determined that the Previous Investment Adviser had the
capabilities, resources and personnel necessary to provide the advisory and
administrative services that were then being provided to the Fund; and that
the advisory and/or management fees paid by the Fund, taking into account
any applicable agreed-upon fee waivers and breakpoints, had represented
reasonable compensation to the Previous Investment Adviser in light of the
services provided, the costs to the Previous Investment Adviser of
providing those services, economies of scale, the fees and other expenses
paid by similar funds (including information provided by Lipper Inc.
["Lipper"]), and such other matters as the directors had considered
relevant in the exercise of their reasonable judgment; and
* that Merrill Lynch had agreed to pay all expenses of each Fund in
connection with the consideration by the Board of the Fund's BlackRock
Investment Advisory Agreement and related agreements and all costs of
shareholder approval of the BlackRock Investment Advisory Agreement and as
a result the Fund would bear no costs in obtaining shareholder approval of
the BlackRock Investment Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the Fund's BlackRock Investment Advisory Agreement, each
Fund's Board assessed the nature, quality and scope of the services to be
provided to the Fund by the personnel of BlackRock Advisors and its affiliates,
including administrative services, shareholder services, oversight of fund
accounting and assistance in meeting legal and regulatory requirements. In its
review of the Fund's BlackRock Investment Advisory Agreement, each Fund's
Board also considered a range of information in connection with its oversight
of the services to be provided by BlackRock Advisors and its affiliates. Among
the matters considered for each Fund were: (a) fees (in addition to management
fees) to be paid to BlackRock Advisors and its affiliates by the Fund; (b) Fund
operating expenses paid to third parties; (c) the resources devoted to and
compliance reports relating to the Fund's investment objective, policies and
restrictions, and its compliance with its Code of Ethics and BlackRock
Advisors' compliance policies and procedures; and (d) the nature, cost and
character of non-investment management services to be provided by BlackRock
Advisors and its affiliates.
In the period prior to each Fund's Board meeting to consider renewal of the
Fund's Previous Investment Advisory Agreement, the Board had requested and
received materials specifically relating to the Previous Investment Advisory
Agreement. For each Fund, these materials included (a) information compiled by
Lipper on the fees and expenses and the investment performance of the Fund as
compared to a comparable group of funds as classified by Lipper; (b)
information comparing the Fund's market price with its net asset value per
share; (c) a discussion by the Fund's portfolio management team on investment
strategies used by the Fund during its most recent fiscal year; (d)
information on the profitability to the Previous Investment Adviser of the
Fund's Previous Investment Advisory Agreement and other payments received by
the Previous Investment Adviser and its affiliates from the Fund; and (e)
information provided by the Previous Investment Adviser concerning services
related to the valuation and pricing of Fund portfolio holdings, the Fund's
portfolio turnover statistics, and direct and indirect benefits to the
Previous Investment Adviser and its affiliates from their relationship with
the Fund.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
In their deliberations, each Fund's directors considered information received
in connection with their most recent approval of the continuance of the Fund's
Previous Investment Advisory Agreement, in addition to information provided by
BlackRock and BlackRock Advisors in connection with their evaluation of the
terms and conditions of the Fund's BlackRock Investment Advisory Agreement.
The directors of neither Fund identified any particular information that was
all-important or controlling, and each director attributed different weights
to the various factors. Each Fund's directors, including a majority of the
independent directors, concluded that the terms of the Fund's BlackRock
Investment Advisory Agreement are appropriate, that the fees to be paid are
reasonable in light of the services to be provided to the Fund, and that the
BlackRock Investment Advisory Agreement should be approved and recommended to
Fund shareholders.
Nature, Quality and Extent of Services Provided--Each Fund's Board reviewed
the nature, quality and scope of services provided by the Previous Investment
Adviser, including the investment advisory services and the resulting
performance of the Fund, as well as the nature, quality and extent of services
expected to be provided by BlackRock Advisors. Each Fund's Board focused
primarily on the Previous Investment Adviser's investment advisory services
and the Fund's investment performance, but also considered certain areas in
which both the Previous Investment Adviser and the Fund received services as
part of the Merrill Lynch complex. Each Fund's Board compared the Fund's
performance - both including and excluding the effects of fees and expenses -
to the performance of a comparable group of funds, and the performance of a
relevant index or combination of indexes. While each Board reviews performance
data at least quarterly, consistent with the Previous Investment Adviser's
investment goals, the Board attaches more importance to performance over
relatively long periods of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under each Fund's BlackRock Investment Advisory Agreement,
the directors considered, among other things, the expected impact of the
Transaction on the operations, facilities, organization and personnel of
BlackRock Advisors and how it would affect the Fund; the ability of BlackRock
Advisors to perform its duties after the Transaction; and any anticipated
changes to the investment and other practices of the Fund.
Each Fund's directors were given information with respect to the potential
benefits to the Fund and its shareholders from having access to BlackRock's
state of the art technology and risk management analytic tools, including the
investment tools provided under the BlackRock Solutions brand name.
Each Fund's directors were advised that, as a result of Merrill Lynch's equity
interest in BlackRock after the Transaction, the Fund would continue to be
subject to restrictions concerning certain transactions involving Merrill
Lynch affiliates (for example, transactions with a Merrill Lynch broker-dealer
acting as principal) absent revised or new regulatory relief. Each Fund's
directors were advised that a revision of existing regulatory relief with
respect to these restrictions was being sought from the Securities and
Exchange Commission and were advised of the possibility of the receipt of such
revised regulatory relief.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, each Fund's
directors determined that the nature and quality of services to be provided to
the Fund under the Fund's BlackRock Investment Advisory Agreement were
expected to be as good as or better than that provided under the Fund's
Previous Investment Advisory Agreement. The directors were advised that
BlackRock Advisors did not plan to change either of the Funds' portfolio
management team upon the closing of the transaction. It was noted, however,
that other changes in personnel were expected to follow the Transaction and
the combination of the operations of the Previous Investment Adviser and its
affiliates with those of BlackRock. Each Fund's directors noted that if
current portfolio managers or other personnel were to cease to be available
prior to the closing of the Transaction, the Board would consider all
available options, including seeking the investment advisory or other services
of BlackRock affiliates. Accordingly, each Fund's directors concluded that,
overall, they were satisfied at the present time with assurances from
BlackRock and BlackRock Advisors as to the expected nature, quality and extent
of the services to be provided to the Fund under the Fund's BlackRock
Investment Advisory Agreement.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement (concluded)
Costs of Services Provided and Profitability--It was noted that, in
conjunction with their most recent review of the Fund's Previous Investment
Advisory Agreement, each Fund's directors had received, among other things, a
report from Lipper comparing the Fund's fees and expenses to those of a peer
group selected by Lipper, and information as to the fees charged by the
Previous Investment Adviser or its affiliates to other registered investment
company clients for investment management services. Each Fund's Board reviewed
the Fund's contractual management fee rate and actual management fee rate as a
percentage of total assets at common asset levels - the actual rate includes
advisory fees and the effects of any fee waivers - compared to the other funds
in its Lipper category. Each Fund's Board also compared the Fund's total
expenses to those of other comparable funds. The information showed that each
Fund had fees and expenses within the range of fees and expenses of comparable
funds. Each Fund's Board considered the services to be provided by and the
fees to be charged by BlackRock Advisors to other funds with similar
investment mandates and noted that the fees charged by BlackRock Advisors in
those cases, including fee waivers and expense reimbursements, were generally
comparable to those being charged to the Fund. Each Fund's Board concluded
that the Fund's management fee rate and overall expense ratio were reasonable
compared to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the Fund's BlackRock Investment Advisory Agreement, each Fund's
directors considered, among other things, whether advisory fees or other
expenses would change as a result of the Transaction. Based on their review
of the materials provided and the fact that the Fund's BlackRock Investment
Advisory Agreement is substantially similar to the Fund's Previous Investment
Advisory Agreement in all material respects, including the rate of
compensation, each Fund's directors determined that the Transaction should not
increase the total fees payable, including any fee waivers and expense
reimbursements, for advisory and administrative services. Each Fund's
directors noted that it was not possible to predict how the Transaction would
affect BlackRock Advisors' profitability from its relationship with the Fund.
Each Fund's directors discussed with BlackRock Advisors its general
methodology to be used in determining New BlackRock's profitability with
respect to its relationship with the Fund. Each Fund's directors noted that
they expect to receive profitability information from BlackRock Advisors on at
least an annual basis and thus be in a position to evaluate whether any
adjustments in Fund fees and/or fee breakpoints would be appropriate.
Fees and Economies of Scale--Each Fund's Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in
order to enable the Fund to participate in these economies of scale. Each
Board determined that changes were not currently necessary.
In reviewing the Transaction, the directors considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that each Fund's BlackRock Investment Advisory
Agreement is substantially similar to the Fund's Previous Investment Advisory
Agreement in all material respects, including the rate of compensation, the
Fund's directors determined that as a result of the Transaction, the Fund's
total advisory fees would be no higher than the fees under the Fund's Previous
Investment Advisory Agreement. Each Fund's directors noted that in conjunction
with their most recent deliberations concerning the Fund's Previous Investment
Advisory Agreement, they had determined that the total fees for advisory and
administrative services for the Fund were reasonable in light of the services
provided. It was noted that in conjunction with the most recent review of each
Fund's Previous Investment Advisory Agreement, the Fund's directors had
received, among other things, a report from Lipper comparing the Fund's fees,
expenses and performance to those of a peer group selected by Lipper, and
information as to the fees charged by the Previous Investment Adviser to other
registered investment company clients for investment management services. Each
Fund's directors concluded that because the rates for advisory fees for the
Fund would be no higher than the fee rates in effect at the time, the proposed
management fee structure, including any fee waivers, was reasonable in
relation to the services provided and that no additional changes were
currently necessary.
Fall-Out Benefits--In evaluating the fall-out benefits to be received by
BlackRock Advisors under the Fund's BlackRock Investment Advisory Agreement,
each Fund's directors considered whether BlackRock Advisors would experience
such benefits to the same extent that the Previous Investment Adviser was
experiencing such benefits under the Fund's Previous Investment Advisory
Agreement. Based on their review of the materials provided, including
materials received in connection with their most recent approval of the
continuance of the Fund's Previous Investment Advisory Agreement, and their
discussions with management of the Previous Investment Adviser and BlackRock,
each Fund's directors determined that BlackRock Advisors' fall-out benefits
could include increased ability for BlackRock to distribute shares of its funds
and other investment products. The directors noted that any fall-out benefits
were difficult to quantify with certainty at this time, and indicated that
they would continue to evaluate them going forward.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Investment Performance--Each Fund's Board considered investment performance
for the Fund. Each Fund's directors compared the Fund's performance - both
including and excluding the effects of fees and expenses - to the performance
of a comparable group of funds, and the performance of a relevant index or
combination of indexes. The comparative information received from Lipper
showed each Fund's performance at various levels within the range of
performance of comparable funds over different time periods. While each Board
reviews performance data at least quarterly, consistent with the Previous
Investment Adviser's investment goals, each Board attaches more importance
over relatively long periods of time, typically three to five years. Each
Fund's directors believed the Fund's performance was satisfactory. Also, each
Board took into account the investment performance of funds advised by
BlackRock Advisors. Each Board considered comparative information from Lipper
which showed that the performance of the funds advised by BlackRock Advisors
was within the range of performance of comparable funds over different time
periods. Each Fund's Board noted BlackRock's considerable investment
management experience and capabilities, but was unable to predict what effect,
if any, consummation of the Transaction would have on the future performance
of the Fund.
Conclusion--After the independent directors of each Fund deliberated in
executive session, each Fund's entire Board, including the independent
directors, approved the Fund's BlackRock Investment Advisory Agreement,
concluding that the management fee rate was reasonable in relation to the
services provided and that the BlackRock Investment Advisory Agreement was in
the best interests of the shareholders. In approving the Fund's BlackRock
Investment Advisory Agreement, each Fund's Board noted that it anticipated
reviewing the continuance of the agreement in advance of the expiration of the
initial two-year period.
New BlackRock Sub-Advisory Agreements--Matters Considered by the Boards
At an in-person meeting held on August 14 - 16, 2006, each Fund's Board of
Directors, including the independent directors, discussed and approved the
Fund's sub-advisory agreement (each, a "BlackRock Sub-Advisory Agreement")
between BlackRock Advisors and its affiliate, BlackRock Investment Management,
LLC (the "Sub-Adviser"). Each Fund's BlackRock Sub-Advisory Agreement became
effective on September 29, 2006, at the same time the Fund's BlackRock
Investment Advisory Agreement became effective.
Pursuant to each Fund's BlackRock Sub-Advisory Agreement, the Sub-Adviser
receives a monthly fee from BlackRock Advisors equal to 59% of the advisory
fee received by BlackRock Advisors from the Fund. BlackRock Advisors pays the
Sub-Adviser out of its own resources, and there is no increase in the expenses
of any of the Funds as a result of the Fund's BlackRock Sub-Advisory
Agreement.
In approving the Fund's BlackRock Sub-Advisory Agreement at the August in-
person meeting, each Fund's Board reviewed its considerations in connection
with its approval of the Fund's BlackRock Investment Advisory Agreement in May
2006. Each Fund's Board relied on the same information and considered the same
factors as those discussed above in connection with the approval of the Fund's
BlackRock Investment Advisory Agreement. In reviewing the sub-advisory fee
rate provided in each Fund's BlackRock Sub-Advisory Agreement, the Fund's
Board noted the fact that both BlackRock Advisors and the Sub-Adviser have
significant responsibilities under their respective advisory agreements.
BlackRock Advisors remains responsible for oversight of each Fund's operations
and administration, and the Sub-Adviser provides advisory services to the Fund
and is responsible for the day-to-day management of the Fund's portfolio under
the Fund's BlackRock Sub-Advisory Agreement. Each Fund's Board also took into
account the fact that there is no increase in total advisory fees paid by the
Fund as a result of the Fund's BlackRock Sub-Advisory Agreement. Under all of
the circumstances, each Fund's Board concluded that it was a reasonable
allocation of fees for the Sub-Adviser to receive 59% of the advisory fee paid
by the Fund to BlackRock Advisors.
After each Fund's independent directors deliberated in executive session, each
Fund's entire Board, including the independent directors, approved the Fund's
BlackRock Sub-Advisory Agreement, concluding that the sub-advisory fee was
reasonable in relation to the services provided and that the BlackRock Sub-
Advisory Agreement was in the best interests of shareholders.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
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 nonpublic 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 nonpublic 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 Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any
nonpublic personal information about its Clients, except as permitted by law
or as is necessary to service Client accounts. These nonaffiliated 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
nonpublic 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 nonpublic personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Availability of Quarterly Schedule of Investments
The Funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters
of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the
SEC's Web site at http://www.sec.gov. The Funds' Forms N-Q may also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Funds' Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Funds' electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial adviser. Please note that not all investment
advisers, banks or brokerages may offer this service.
SEMI-ANNUAL REPORTS OCTOBER 31, 2006
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-
annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this semi-
annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this semi-
annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of October 31, 2006
(a)(1) BlackRock MuniHoldings Fund, Inc. is managed by a team of
investment professionals comprised of Theodore R. Jaeckel, Jr., CFA,
Managing Director at BlackRock, and Walter O'Connor, Managing
Director at BlackRock. Each is a member of BlackRock's municipal tax-
exempt management group. Mr. Jaeckel and Mr. O'Connor are
responsible for setting the Fund's overall investment strategy and
overseeing the management of the Fund. Mr. O'Connor is also the
Fund's lead portfolio manager and is responsible for the day-to-day
management of the Fund's portfolio and the selection of its
investments. Mr. Jaeckel has been a member of the Fund's management
team since 2006 and Mr. O'Connor has been the Fund's portfolio
manager since 2006.
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.
(a)(2) As of October 31, 2006:
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
Other Other
(i) Name of Registered Other Pooled Registered Other Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
Walter
O'Connor 82 0 0 0 0 0
$ 30,160,658,023 $ 0 $ 0 $ 0 $ 0 $ 0
Theodore R.
Jaeckel, Jr. 82 0 0 0 0 0
$ 30,160,658,023 $ 0 $ 0 $ 0 $ 0 $ 0
(iv) Potential Material Conflicts of Interest
BlackRock has built a professional working environment, firm-wide
compliance culture and compliance procedures and systems designed to
protect against potential incentives that may favor one account over
another. BlackRock has adopted policies and procedures that address
the allocation of investment opportunities, execution of portfolio
transactions, personal trading by employees and other potential
conflicts of interest that are designed to ensure that all client
accounts are treated equitably over time. Nevertheless, BlackRock
furnishes investment management and advisory services to numerous
clients in addition to the Fund, and BlackRock may, consistent with
applicable law, make investment recommendations to other clients or
accounts (including accounts which are hedge funds or have
performance or higher fees paid to BlackRock, or in which portfolio
managers have a personal interest in the receipt of such fees),
which may be the same as or different from those made to the Fund.
In addition, BlackRock, its affiliates and 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
and employees of any of them has any substantial economic interest
or possesses material non-public information. Each portfolio manager
also may manage accounts whose investment strategies may at times be
opposed to the strategy utilized for the Fund. In this connection,
it should be noted that certain portfolio managers currently manage
certain accounts that are subject to performance fees. In addition,
certain portfolio managers 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 October 31, 2006:
Portfolio Manager Compensation
The portfolio manager compensation program of BlackRock and its
affiliates, including the Investment Adviser, is critical to BlackRock's
ability to attract and retain the most talented asset management professionals.
This program ensures that compensation is aligned with maximizing investment
returns and it provides a competitive pay opportunity for competitive
performance.
Compensation Program
The elements of total compensation for certain BlackRock and its
affiliates portfolio managers are a fixed base salary, annual performance-based
cash and stock compensation (cash and stock bonus) and other benefits.
BlackRock has balanced these components of pay to provide portfolio managers
with a powerful incentive to achieve consistently superior investment
performance. By design, portfolio manager compensation levels fluctuate--both
up and down--with the relative investment performance of the portfolios that
they manage.
Base Salary
Under the BlackRock approach, like that of many asset management firms,
base salaries represent a relatively small portion of a portfolio manager's
total compensation. This approach serves to enhance the motivational value of
the performance-based (and therefore variable) compensation elements of the
compensation program.
Performance-Based Compensation
BlackRock believes that the best interests of investors are served by
recruiting and retaining exceptional asset management talent and managing their
compensation within a consistent and disciplined framework that emphasizes pay
for performance in the context of an intensely competitive market for talent.
To that end, certain BlackRock and its affiliates portfolio manager incentive
compensation is based on a formulaic compensation program.
BlackRock's formulaic portfolio manager compensation program includes:
investment performance relative to a subset of general closed-end, leveraged,
municipal debt funds over 1-, 3- and 5-year performance periods and a measure
of operational efficiency. Portfolio managers are compensated based on the pre-
tax performance of the products they manage. If a portfolio manager's tenure is
less than 5-years, performance periods will reflect time in position. Portfolio
managers are compensated based on the products they manage. A discretionary
element of portfolio manager compensation may include consideration of:
financial results, expense control, profit margins, strategic planning and
implementation, quality of client service, market share, corporate reputation,
capital allocation, compliance and risk control, leadership, workforce
diversity, supervision, technology and innovation. All factors are considered
collectively by BlackRock management.
Cash Bonus
Performance-based compensation is distributed to portfolio managers in a
combination of cash and stock. Typically, the cash bonus, when combined with
base salary, represents more than 60% of total compensation for portfolio
managers.
Stock Bonus
A portion of the dollar value of the total annual performance-based bonus
is paid in restricted shares of BlackRock stock. Paying a portion of annual
bonuses in stock puts compensation earned by a portfolio manager for a given
year "at risk" based on the Company's ability to sustain and improve its
performance over future periods.
The ultimate value of stock bonuses is dependent on future BlackRock stock
price performance. As such, the stock bonus aligns each portfolio manager's
financial interests with those of BlackRock shareholders and encourages a
balance between short-term goals and long-term strategic objectives. Management
strongly believes that providing a significant portion of competitive
performance-based compensation in stock is in the best interests of investors
and shareholders. This approach ensures that portfolio managers participate as
shareholders in both the "downside risk" and "upside opportunity" of the
Company's performance. Portfolio managers therefore have a direct incentive to
protect BlackRock's reputation for integrity.
Other Compensation Programs
Portfolio managers who meet relative investment performance and financial
management objectives during a performance year are eligible to participate in
a deferred cash program. Awards under this program are in the form of deferred
cash that may be benchmarked to a menu of certain BlackRock mutual funds
(including their own funds) during a five-year vesting period. The deferred
cash program aligns the interests of participating portfolio managers with the
investment results of BlackRock products and promotes continuity of successful
portfolio management teams.
Other Benefits
Portfolio managers are also eligible to participate in broad-based plans
offered generally to BlackRock employees, including broad-based retirement,
401(k), health, and other employee benefit plans.
(a)(4) Beneficial Ownership of Securities. As of October 31, 2006,
Mr. O'Connor does not beneficially own any stock issued by
the Fund. As of October 31, 2006, Mr. Jaeckel beneficially
owns stock issued by the Fund in the range of $1 - $10,000.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The Registrant's principal executive and principal financial
officers have evaluated the Registrant's disclosure controls and
procedures, including internal control over financial reporting,
within 90 days of this filing. Such principal officers have
concluded that the Registrant's disclosure controls and procedures
were effective in design and operation to reasonably ensure that
information required to be disclosed by the Registrant in this Form
N-CSR was recorded, processed, summarized, and reported within the
required time periods, and were sufficient to form the basis of the
certifications required by Rule 30a-(2) of the Investment Company
Act of 1940, as amended. Prior to reaching that conclusion, such
principal officers had become aware of matters relating to the
Registrant's participation in certain inverse floater structures
that necessitated adjustments to financial information included in
Item 1 of this filing. As a result, management of the Registrant has
reevaluated certain disclosure controls and procedures determined
not to be effective, as discussed more fully below.
Management of the Registrant is responsible for establishing and
maintaining effective internal control over financial reporting. In
fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related
costs of controls. The Registrant's internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. Such internal
control includes policies and procedures that provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of a registrant's assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
A control deficiency exists when the design or operation of a
control does not allow management or employees, in the normal course
of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a
control deficiency, or combination of control deficiencies, that
adversely affects the Registrant's ability to initiate, authorize,
record, process or report financial data reliably in accordance with
generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the Registrant's
annual or interim financial statements that is more than
inconsequential will not be prevented or detected. A material
weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a
material misstatement of the annual or interim financial statements
will not be prevented or detected.
Prior to the filing of this Form N-CSR, the Registrant identified
the following control deficiency, that was determined to be a
material weakness, as defined above, in the Registrant's internal
control over financial reporting. The Registrant's controls related
to the review and analysis of relevant terms and conditions of
transfers of certain assets pertaining to inverse floater structures
were not operating effectively to appropriately determine whether
the transfers of assets qualified for sale accounting under the
provisions of Statement of Financial Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS 140"). Accordingly, the
Registrant's financial statements as of and for the period ended
October 31, 2006, including prior periods where applicable, were
adjusted prior to being issued to appropriately reflect transfers of
such securities as secured borrowings and to report the related
income and expense. These adjustments had no impact on net assets,
net asset value per share or total return.
Management of the Registrant believes that subsequent to the
adjustments, the Registrant's accounting treatment of such transfers
is appropriate under SFAS 140. Additionally, management of the
Registrant is taking such further actions as are necessary to
enhance its internal control over financial reporting, and in doing
so, increase the effectiveness of such controls, so that such
transfers of assets are reviewed and evaluated appropriately under
the provisions of SFAS 140.
11(b) - There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940, as amended) that occurred during the
second half of the Registrant's fiscal year that have materially
affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting. However, as
discussed above, subsequent to October 31, 2006, the Registrant is
further enhancing controls related to the application of SFAS 140.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
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 MuniHoldings Fund, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock MuniHoldings Fund, Inc.
Date: January 18, 2007
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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock MuniHoldings Fund, Inc.
Date: January 18, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock MuniHoldings Fund, Inc.
Date: January 18, 2007