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 811-09191
Name of Fund: BlackRock MuniHoldings Insured Fund II, 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 Insured Fund II, 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: 09/30/07
Date of reporting period: 10/01/06 - 03/31/07
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
BlackRock MuniHoldings
Insured Fund II, Inc.
SEMI-ANNUAL REPORT
MARCH 31, 2007 (UNAUDITED)
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock MuniHoldings Insured Fund II, Inc. seeks to provide shareholders
with current income exempt from federal income taxes by investing primarily in
a portfolio of long-term, investment grade municipal obligations the interest
on which, in the opinion of bond counsel to the issuer, is exempt from federal
income taxes.
This report, including the financial information herein, is transmitted to
shareholders of BlackRock MuniHoldings Fund II, Inc. for their information. It
is not a prospectus. Past performance results shown in this report should not
be considered a representation of future performance. The Fund has leveraged
its Common Stock and intends to remain leveraged by issuing Preferred Stock to
provide the Common Stock shareholders with a potentially higher rate 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 Fund uses 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) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio 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 Insured Fund II, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... logo)
It's Fast, Convenient, & Timely!
BlackRock MuniHoldings Insured Fund II, Inc.
Portfolio Information as of March 31, 2007
Percent of
Quality Ratings by Total
S&P/Moody's Rating Investments
AAA/Aaa 88.0%
AA/Aa 3.8
A/A 3.3
BBB/Baa 2.9
Other* 2.0
* Includes portfolio holdings in short-term investments and variable
rate demand notes.
Announcement of Annual Stockholders Meeting
The Fund has determined that its annual stockholders meeting originally
scheduled to be held in April 2007 will be postponed and will be held in
September 2007. Proposals of stockholders intended to be presented at the
meeting must be received by the Fund by June 15, 2007 for inclusion in the
Fund's proxy statement and form of proxy for that meeting. The persons named
as proxies in the proxy materials for the Fund's 2007 annual meeting of stock
holders may exercise discretionary authority with respect to any stockholder
proposal presented at such meeting if written notice of such proposal has not
been received by the Fund by July 1, 2007. Written proposals and notices
should be sent to the Secretary of the Fund, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Kenneth A. Froot, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Donald C. Burke, Vice President and Treasurer
John M. Loffredo, Senior Vice President
Jeffrey Hiller, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and
Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agents
Common Stock:
Computershare Trust
Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
1-800-426-5523
Preferred Stock:
The Bank of New York
101 Barclay Street - 7 West
New York, NY 10286
NYSE Symbol
MUE
Effective April 13, 2007, Jeffrey Hiller resigned his position as Chief
Compliance Officer of the Fund. Also effective April 13, 2007, Karen Clark was
appointed Chief Compliance Officer of the Fund. Ms. Clark has been a Managing
Director of BlackRock, Inc. since 2007. She was a Director thereof from 2005
to 2007. Prior to that, Ms. Clark was a principal and senior compliance
officer at State Street Global Advisors from 2001 to 2005. Ms. Clark was a
principal consultant with PricewaterhouseCoopers, LLP from 1998 to 2001. From
1993 to 1998, Ms. Clark was Branch Chief, Division of Investment Management
and Office of Compliance Inspections and Examinations, with the U.S.
Securities and Exchange Commission.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
A Letter to Shareholders
Dear Shareholder
For most financial markets, 2007 opened just as 2006 ended - on a positive
trajectory. At the end of February and into March, however, global equity
markets registered their first significant decline since last summer. The
market jitters were triggered by a significant setback in the Chinese market
and were exacerbated by several concerns, notably a weakening economy, some
disappointing corporate earnings announcements, escalating geopolitical
concerns in the Middle East and increasing delinquencies in the subprime
mortgage market. Despite the recent spate of volatility, underlying stock
market fundamentals appear quite sound, supported by a generally favorable
global economic backdrop, tame inflation, relatively low interest rates and
attractive valuations.
Not unlike the equity market, the bond market also has seen volatility
recently as observers have attempted to interpret mixed economic signals. A
bond market rally late last year reversed itself early in 2007 as economic
data strengthened. Prices improved (and yields fell) again in February as
equities struggled, but retrenched slightly in March. Notably, the Treasury
curve remained inverted for much of 2006 and into 2007. The 30-year Treasury
yield stood at 4.84% at the end of March 2007, while the one-month Treasury
offered the highest yield on the curve at 5.07%.
For its part, the Federal Reserve Board (the Fed) has left the target short-
term interest rate on hold at 5.25% since first pausing in its interest rate-
hiking campaign on August 8, 2006. Although the central bankers continue to
express concern about potential inflationary pressures, they also have made
reference to signs of economic weakness in their public statements. Most
observers expect the Fed to keep interest rates on hold for now.
Notwithstanding some recent volatility, most major market indexes managed to
post positive returns for the annual and semi-annual reporting periods ended
March 31, 2007:
Total Returns as of March 31, 2007 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) + 7.38% +11.83%
Small cap U.S. equities (Russell 2000 Index) +11.02 + 5.91
International equities (MSCI Europe, Australasia, Far East Index) +14.85 +20.20
Fixed income (Lehman Brothers Aggregate Bond Index) + 2.76 + 6.59
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 1.93 + 5.43
High yield bonds (Credit Suisse High Yield Index) + 7.59 +11.82
If recent market movements are any guide, 2007 could be a year of enhanced
market volatility. As you navigate the uncertainties of the financial markets,
we encourage you to review your investment goals with your financial
professional and to make portfolio changes, as needed. For more reflection on
the markets, please ask your financial professional for the latest issue of
"What's Ahead in 2007: First Quarter Update," or view it online at
www.blackrock.com/funds. We thank you for trusting BlackRock with your
investment assets, and we look forward to continuing to serve you in the
months and years ahead.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
Fund President and Director
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
A Discussion With Your Fund's Portfolio Manager
We continued to emphasize preservation of net asset value while also seeking
opportunities to enhance yield in the portfolio.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields traded in a relatively narrow range over the past six
months and, despite ample volatility, ended the period little changed.
Overall, financial conditions remained fairly balanced, with moderate economic
activity and well-contained inflationary pressures. Recent commentary from the
Federal Reserve Board (the Fed) has supported the narrow trading range. The
Fed is expected to maintain its current "balanced" economic assessment at
least into mid-year.
At the end of March 2007, 30-year U.S. Treasury bond yields stood at 4.84%,
an increase of seven basis points (.07%) over the past six months. Ten-year
U.S. Treasury note yields rose one basis point to 4.65% over the same period.
In the tax-exempt market, yields on AAA-rated issues maturing in 30 years
declined five basis points to 4.12%, as measured by Municipal Market Data.
Yields on 10-year, AAA-rated municipal bonds rose nine basis points to end
the reporting period at 3.77%.
Investor demand for municipal product continued to strengthen throughout the
reporting period. The Investment Company Institute reports that long-term
municipal bond funds received more than $6.7 billion in net new cash flows
during the first two months of 2007 - a 36% increase compared to the first two
months of 2006. Similarly, AMG Data reports that weekly fund flows also have
risen. Weekly inflows during first quarter 2007 averaged over $474 million, up
from a $400 million weekly average in fourth quarter 2006.
The recent improvement in retail investor demand has reflected, in large part,
increased investor acceptance of lower nominal yields and bond coupon
structures. Throughout much of 2006, retail-oriented municipal bond broker/
dealers noted significant individual investor resistance to purchasing tax-
exempt issues with yields below 4.50% and/or issues bearing sub-5% nominal
coupons. As tax-exempt bond yields stabilized in recent months, retail
investors have become increasingly comfortable purchasing tax-exempt bonds
with those characteristics. We believe this acceptance should help support
municipal bond market performance going forward.
Issuance of long-term municipal bonds has increased over the past six months,
with $225 billion in new tax-exempt bonds issued, an increase of more than 30%
compared to the same six months a year ago. New issuance surged in the latter
three months of the period, with over $104 billion in new long-term tax-exempt
bonds issued, an increase of nearly 50% compared to first quarter 2006 levels.
In March alone we saw more than $40 billion in new municipal bonds
underwritten as issuers continued to take advantage of historically low
interest rates both to refinance outstanding debt and finance new capital
projects. The State of California issued over $4 billion in refunding bonds in
March as part of its ongoing program to refinance all of its outstanding
general obligation debt. Thus far in 2007, there have been eight underwritings
exceeding $1 billion in size. These "mega-deals" have continued to be
relatively easily absorbed by tax-exempt market participants, especially non-
traditional and foreign buyers who find the liquidity of these transactions to
be particularly attractive.
Looking ahead, we believe investor demand will be critical in maintaining the
tax-exempt market's strong technical position. The increase in new bond supply
seen so far this year is unlikely to abate significantly. However, stable
yield ratios compared to taxable bonds and the continued relative steepness of
the municipal bond yield curve should continue to attract both traditional and
non-traditional investors to the municipal market. As such, we believe demand
should remain adequate to absorb any increases in new-bond issuance and,
consequently, help support the tax-exempt market's performance into mid-2007.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended March 31, 2007, the Common Stock of BlackRock
MuniHoldings Insured Fund II, Inc. had net annualized yields of 4.46% and
4.80%, based on a period-end per share net asset value of $14.07 and a per
share market price of $13.09, respectively, and $.313 per share income
dividends. Over the same period, the total investment return on the Fund's
Common Stock was +1.85%, based on a change in per share net asset value from
$14.15 to $14.07, and assuming reinvestment of all distributions.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
The Fund's total return, based on net asset value, modestly lagged the +1.94%
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.) Fund performance was hindered somewhat by a slightly defensive
posture early in the period, when the bond market rallied. We reduced that
defensive stance in December and Fund performance improved accordingly in the
latter half of the six-month period.
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 distributions, 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?
Our efforts remained focused on capturing the greatest relative value in the
municipal market, with emphasis on protecting the Fund's underlying value and
enhancing yield in the portfolio.
Toward the end of the six month period, we sold some shorter-dated prerefunded
bonds and with the proceeds purchased longer-dated securities for their
incremental yield advantage. Specifically, we sold prerefunded bonds and bonds
with maturities of 15 years to 20 years and looked to buy bonds in the 25-year
to 30-year maturity range with coupons in the area of 5%. We also selectively
used the Fund's uninsured "basket" to add higher-yielding credits to the
portfolio. The Fund is required to invest 80% of its net assets in insured
municipal bonds, with some flexibility to invest in uninsured issues. Overall,
we increased exposure to uninsured credits just 2% - 3% during the period in
an effort to capitalize on yield-enhancement opportunities.
From a sector perspective, we bought some healthcare-related issues,
reflecting supply trends in the market but also our perception of attractive
relative value. In particular, we purchased some Florida hospital bonds that
were available with relatively attractive yields.
For the six months ended March 31, 2007, the Fund's Auction Market Preferred
Stock had average yields of 3.51% for Series A, 3.48% for Series B and 3.51%
for Series C. There was no material change in the Fund's borrowing costs over
the course of the period, as the Fed left the short-term interest rate target
unchanged at 5.25%. Although flat by historical standards, the tax-exempt
yield curve maintained a positive slope throughout the period (particularly
compared to the U.S. Treasury curve), allowing us to borrow at a lower rate
than where we invest. This continued to generate an income benefit to the
holders of Common Stock from the leveraging of Preferred Stock. However,
should the spread between short-term and long-term interest rates narrow, the
benefits of leveraging 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 6 of this report to shareholders.
How would you characterize the Fund's position at the close of the period?
The Fund ended the period in a slightly defensive position. We are awaiting
occasions to approach a more neutral duration as the market presents
opportunities further along in the seasonal cycle. Typically, March tends to
be a relatively weak time for the market as tax season prompts many investors
to draw on their municipal assets for liquidity. We expect strength to return
to the market in the May-June timeframe and would then look to continue our
strategy of selling prerefunded bonds with shorter maturities and investing in
the 20-year to 30-year area of the municipal curve, where we continue to see
the most compelling relative value.
In terms of the broader picture, we expect the Fed to keep interest rates on
hold and, against this backdrop, anticipate crosscurrents of strength and
weakness in the market. Given the healthy supply in the municipal market,
rates have increased recently (while prices have fallen). As we move into May
and June, we anticipate positive fundamentals to prevail, setting the stage
for a more favorable environment for municipal bonds.
Robert Sneeden
Portfolio Manager
April 10, 2007
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
The Benefits and Risks of Leveraging
BlackRock MuniHoldings Insured Fund II, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. However, these
objectives cannot be achieved in all interest rate environments. To leverage,
the 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, net of dividends to Preferred Stock, 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 the
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. Of course, increases in short-term interest
rates would reduce (and even eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the beneficiaries
of the incremental yield. However, if short-term interest rates rise,
narrowing the differential between short-term and long-term interest rates,
the incremental yield pickup on the Common Stock will be reduced or eliminated
completely. At the same time, the market value of the fund's Common Stock
(that is, its price as listed on the New York Stock Exchange) may, as a
result, decline. Furthermore, if long-term interest rates rise, the Common
Stock's 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 March 31, 2007, the Fund's leverage amount, due to Auction Market
Preferred Stock, was 39.42% of total net assets, before the deduction of
Preferred Stock.
As a part of its investment strategy, the Fund 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 Fund 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 Fund invests in inverse floaters, the market value of the
Fund's portfolio and net asset value of the Fund's shares may also be more
volatile than if the Fund did not invest in these securities.
Swap Agreements
The Fund 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 the Fund has entered into the 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.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Schedule of Investments as of March 31, 2007 (Unaudited) (In Thousands)
Face
Amount Municipal Bonds Value
Alabama--2.9%
$ 3,580 Jefferson County, Alabama, Limited Obligation
School Warrants, Series A, 5.50% due 1/01/2022 $ 3,882
5,000 Mobile, Alabama, GO, Refunding, 5.25%
due 8/15/2020 (a) 5,358
Alaska--1.3%
2,000 Anchorage, Alaska, Water Revenue Refunding Bonds,
6% due 9/01/2024 (a) 2,119
1,700 Matanuska-Susitna Boro, Alaska, GO, Series A, 6%
due 3/01/2010 (i)(j) 1,810
California--28.5%
California State, GO:
2,005 5.50% due 4/01/2014 (j) 2,231
95 5.50% due 4/01/2028 104
2,935 California State, Various Purpose, GO, 5.25%
due 12/01/2022 (f) 3,158
9,350 California State, Veterans, GO, Refunding, AMT,
Series BZ, 5.35% due 12/01/2021 (i) 9,414
2,405 Dixon, California, Unified School District, GO
(Election of 2002), 5.20% due 8/01/2044 (f) 2,519
East Side Union High School District, California, Santa
Clara County, GO (Election of 2002), Series D (n):
2,185 5% due 8/01/2020 2,337
8,460 5% due 8/01/2029 8,919
8,155 Los Angeles, California, Unified School District, GO,
Series A, 5% due 7/01/2013 (i)(j) 8,789
4,240 Modesto, California, Schools Infrastructure Financing
Agency, Special Tax Bonds, 5.50% due 9/01/2036 (a) 4,628
5,000 Port of Oakland, California, Revenue Refunding Bonds,
AMT, Series L, 5.375% due 11/01/2027 (c) 5,313
2,985 Roseville, California, Joint Union High School District,
GO (Election of 2004), Series A, 5% due 8/01/2029 (c) 3,142
Sacramento, California, City Financing Authority, Capital
Improvement Revenue Bonds (a):
1,980 5% due 12/01/2013 (j) 2,139
150 5% due 12/01/2027 158
1,480 San Diego, California, Community College District, GO
(Election of 2002), 5% due 5/01/2030 (f) 1,563
1,250 San Francisco, California, City and County Airport
Commission, International Airport, Special Facilities
Lease Revenue Bonds (SFO Fuel Company LLC), AMT,
Series A, 6.10% due 1/01/2020 (f) 1,295
5,075 San Francisco, California, City and County, GO
(California Academy of Sciences Improvements),
Series E, 5% due 6/15/2022 (i) 5,392
3,800 San Jose, California, GO (Libraries, Parks and Public
Safety Projects), 5% due 9/01/2030 (i) 3,982
5,190 Sequoia, California, Unified High School District, GO,
Refunding, Series B, 5.50% due 7/01/2035 (f) 5,787
Face
Amount Municipal Bonds Value
California (concluded)
Stockton, California, Public Financing Revenue Bonds
(Redevelopment Projects), Series A (k):
$ 4,485 5.25% due 9/01/2031 $ 4,773
2,930 5.25% due 9/01/2034 3,116
Tustin, California, Unified School District, Senior
Lien Special Tax Bonds (Community Facilities
District Number 97-1), Series A (f):
2,915 5% due 9/01/2032 3,022
4,620 5% due 9/01/2038 4,781
3,000 University of California Revenue Bonds (Multiple
Purpose Projects), Series Q, 5% due 9/01/2022 (f) 3,154
Colorado--3.6%
6,285 Aurora, Colorado, COP, 5.75% due 12/01/2010 (a)(j) 6,723
240 Colorado HFA, Revenue Refunding Bonds (S/F Program),
AMT, Senior Series A-2, 7.50% due 4/01/2031 242
4,000 Colorado Health Facilities Authority, Hospital Revenue
Refunding Bonds (Poudre Valley Health Care),
Series A, 5.75% due 12/01/2009 (f)(j) 4,244
Connecticut--0.5%
1,520 Connecticut State, GO, Refunding, Series D, 5%
due 12/01/2024 (i) 1,614
Florida--7.0%
5,400 Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Baptist Medical Center
Project), Series A, 5% due 8/15/2037 5,563
5,000 Lee Memorial Health System, Florida, Hospital Revenue
Bonds, Series A, 5% due 4/01/2032 5,151
3,670 Miami-Dade County, Florida, Subordinate Special
Obligation Revenue Bonds, Series A, 5.24%
due 10/01/2037 (i)(m) 792
6,300 Pasco County, Florida, Half-Cent Sales Tax Revenue
Bonds, 5.125% due 12/01/2028 (a) 6,632
3,725 South Florida Water Management District, COP, 5%
due 10/01/2036 (a) 3,921
Georgia--2.2%
6,290 Augusta, Georgia, Water and Sewer Revenue Bonds,
5.25% due 10/01/2034 (f) 6,766
Idaho--0.2%
580 Idaho Housing and Finance Association, S/F Mortgage
Revenue Bonds, AMT, Series E, 6% due 1/01/2032 590
Illinois--9.6%
Chicago, Illinois, GO:
7,500 (City Colleges), 5% due 1/01/2039 7,890
2,185 (Neighborhoods Alive 21 Program), Series A,
6% due 7/01/2010 (c)(j) 2,360
18,130 Series A, 6% due 7/01/2010 (c)(j) 19,580
125 Lake, Cook, Kane and McHenry Counties, Illinois,
Community Unit School District Number 220, GO,
6% due 12/01/2020 (c) 134
Portfolio Abbreviations
To simplify the listings of BlackRock MuniHoldings Insured Fund II, Inc.'s
portfolio holdings in the Schedule 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
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Indiana--3.1%
$ 9,280 Shelbyville, Indiana, Elementary School Building
Corporation Revenue Bonds, First Mortgage, 5.75%
due 1/15/2009 (f)(j) $ 9,703
Kansas--2.1%
3,510 Kansas State Development Finance Authority, Health
Facilities Revenue Bonds (Sisters of Charity
Leavenworth), Series J, 6.125% due 12/01/2020 3,763
2,805 Sedgwick and Shawnee Counties, Kansas, S/F
Mortgage Revenue Bonds, AMT, Series A-2, 6.20%
due 12/01/2033 (e)(g) 2,821
Massachusetts--8.4%
5,535 Massachusetts Bay Transportation Authority, Sales
Tax Revenue Refunding Bonds, Senior Series A, 5%
due 7/01/2035 5,699
2,000 Massachusetts State Development Finance Agency,
Education Revenue Bonds (Belmont Hill School),
4.50% due 9/01/2036 1,961
5,000 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (f) 5,280
12,345 Massachusetts State Special Obligation Dedicated Tax
Revenue Bonds, 5.25% due 1/01/2014 (c)(j) 13,425
Michigan--0.3%
1,000 Michigan State Hospital Finance Authority, Revenue
Refunding Bonds (Mercy-Mount Clemens), Series A,
6% due 5/15/2014 (i) 1,051
Minnesota--4.3%
Prior Lake, Minnesota, Independent School District
Number 719, GO (f):
2,555 5.50% due 2/01/2016 2,675
1,830 5.50% due 2/01/2017 1,916
3,570 5.50% due 2/01/2018 3,738
2,840 5.50% due 2/01/2019 2,974
2,185 Sauk Rapids, Minnesota, Independent School District
Number 47, GO, Series A, 5.625% due 2/01/2018 (i) 2,330
Nebraska--1.8%
Omaha Convention Hotel Corporation, Nebraska,
Convention Center Revenue Bonds, First Tier,
Series A (a):
1,410 5.50% due 4/01/2020 1,519
3,985 5.50% due 4/01/2022 4,278
Nevada--3.3%
120 Nevada Housing Division, S/F Mortgage Revenue
Bonds, AMT, Series A-2, 6.30% due 4/01/2022 (i) 121
9,445 Truckee Meadows, Nevada, Water Authority, Water
Revenue Bonds, Series A, 5.50% due 7/01/2011 (f)(j) 10,116
New Jersey--16.7%
New Jersey EDA, Cigarette Tax Revenue Bonds:
2,980 5.625% due 6/15/2018 3,077
8,590 5.75% due 6/15/2029 9,284
6,200 5.75% due 6/15/2034 (b) 6,922
11,000 New Jersey EDA, Motor Vehicle Surcharge Revenue
Bonds, Series A, 5.25% due 7/01/2033 (i) 11,793
New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series D:
4,220 5% due 6/15/2018 (a) 4,520
12,950 5% due 6/15/2020 (f) 13,792
3,000 New Jersey State Turnpike Authority, Turnpike Revenue
Bonds, Series C, 5% due 1/01/2030 (f) 3,165
Face
Amount Municipal Bonds Value
New Mexico--3.5%
$ 5,000 Farmington, New Mexico, PCR, Refunding (Public
Service Company of New Mexico--San Juan
Project), Series C, 5.70% due 12/01/2016 (a) $ 5,108
5,480 New Mexico Finance Authority, Senior Lien State
Transportation Revenue Bonds, Series A, 5.125%
due 6/15/2018 (i) 5,905
New York--11.9%
14,000 Nassau Health Care Corporation, New York, Health
System Revenue Bonds, 5.75% due 8/01/2009 (f)(j) 14,935
5,000 New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A, 5%
due 10/15/2020 (i) 5,343
5,755 New York State Dormitory Authority Revenue Bonds
(School Districts Financing Program), Series D,
5.25% due 10/01/2023 (i) 6,172
Tobacco Settlement Financing Corporation of New York
Revenue Bonds:
2,000 Series A-1, 5.25% due 6/01/2021 (a) 2,144
7,850 Series C-1, 5.50% due 6/01/2017 8,335
500 Triborough Bridge and Tunnel Authority, New York,
General Purpose Revenue Refunding Bonds, VRDN,
Series C, 3.61% due 1/01/2032 (a)(l) 500
North Carolina--0.4%
1,305 North Carolina HFA, Home Ownership Revenue Bonds,
AMT, Series 14-A, 5.35% due 1/01/2022 (a) 1,346
Ohio--0.9%
1,745 Aurora, Ohio, City School District, COP, 6.10%
due 12/01/2009 (i)(j) 1,870
1,000 Kent State University, Ohio, University Revenue Bonds,
6% due 5/01/2024 (a) 1,073
Oklahoma--0.8%
2,385 Claremore, Oklahoma, Public Works Authority, Capital
Improvement Revenue Refunding Bonds, Series A,
5.25% due 6/01/2027 (f) 2,578
Pennsylvania--9.6%
5,600 Lycoming County, Pennsylvania, College Authority
Revenue Bonds (Pennsylvania College of Technology),
5.25% due 7/01/2007 (i)(j) 5,677
6,435 Pennsylvania State Higher Educational Facilities
Authority, State System of Higher Education Revenue
Bonds, Series O, 5.125% due 6/15/2024 (a) 6,451
Pittsburgh, Pennsylvania, GO, Series C (f):
4,290 5.25% due 9/01/2017 4,720
6,415 5.25% due 9/01/2018 7,041
Seneca Valley, Pennsylvania, School District, GO (c):
1,390 5% due 1/01/2020 1,484
2,260 5% due 1/01/2021 2,408
2,090 Washington County, Pennsylvania, Capital Funding
Authority Revenue Bonds (Capital Projects and
Equipment Program), 6.15% due 12/01/2029 (a) 2,249
Rhode Island--3.5%
5,555 Providence, Rhode Island, Redevelopment Agency
Revenue Refunding Bonds (Public Safety and Municipal
Buildings), Series A, 5.75% due 4/01/2010 (a)(j) 5,934
4,685 Rhode Island State Health and Educational Building
Corporation Revenue Bonds (Rhode Island School of
Design), Series D, 5.50% due 8/15/2031 (n) 5,108
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
South Carolina--0.6%
$ 1,880 South Carolina Housing Finance and Development
Authority, Mortgage Revenue Refunding Bonds, AMT,
Series A-2, 6.35% due 7/01/2019 (f) $ 1,951
Tennessee--1.6%
3,500 Metropolitan Government of Nashville and Davidson
County, Tennessee, Health and Education Facilities
Board Revenue Refunding Bonds (Ascension Health
Credit), Series A, 5.875% due 11/15/2009 (a)(j) 3,721
1,080 Tennessee HDA, Revenue Bonds (Homeownership
Program), AMT, Series 2C, 6% due 7/01/2011 1,107
110 Tennessee HDA, Revenue Refunding Bonds
(Homeownership Program), AMT, Series 1, 6.05%
due 7/01/2014 (i) 111
Texas--10.7%
1,750 Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), Trust Certificates,
Second Tier, Series B, 6% due 1/01/2011 (j) 1,887
16,800 Dallas, Texas, Area Rapid Transit, Senior Lien Revenue
Refunding Bonds, 5% due 12/01/2036 (a) 17,749
Dallas-Fort Worth, Texas, International Airport Revenue
Refunding and Improvement Bonds, AMT, Series A (c):
1,835 5.875% due 11/01/2017 1,973
2,150 5.875% due 11/01/2018 2,312
2,390 5.875% due 11/01/2019 2,570
El Paso, Texas, Water and Sewer Revenue Refunding
and Improvement Bonds, Series A (f):
115 6% due 3/01/2015 126
170 6% due 3/01/2016 187
180 6% due 3/01/2017 197
4,529 Houston, Texas, Community College System, Participation
Interests, COP (Alief Center Project), 5.75%
due 8/15/2022 (i) 4,695
1,850 Midland, Texas, Certificates of Obligation, GO, 6.10%
due 3/01/2010 (c)(j) 1,974
Utah--0.2%
610 Weber County, Utah, Municipal Building Authority,
Lease Revenue Refunding Bonds, 5.75%
due 12/15/2007 (i)(j) 625
Washington--6.9%
6,885 Bellevue, Washington, GO, Refunding, 5.50%
due 12/01/2039 (i) 7,575
3,840 Chelan County, Washington, Public Utility District
Number 001, Consolidated Revenue Bonds
(Chelan Hydro System), AMT, Series A, 5.45%
due 7/01/2037 (a) 4,072
Lewis County, Washington, GO, Refunding (a):
1,805 5.75% due 12/01/2009 (j) 1,901
1,640 5.75% due 12/01/2024 1,720
2,500 Seattle, Washington, Municipal Light and Power
Revenue Bonds, 6% due 10/01/2009 (i)(j) 2,663
3,500 Seattle, Washington, Water System Revenue Bonds,
Series B, 6% due 7/01/2009 (c)(j) 3,710
Face
Amount Municipal Bonds Value
West Virginia--2.0%
$ 6,210 West Virginia State Housing Development Fund,
Housing Finance Revenue Refunding Bonds, Series D,
5.20% due 11/01/2021 (i) $ 6,416
Wisconsin--0.4%
1,250 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Blood Center of
Southeastern Wisconsin Project), 5.75%
due 6/01/2034 1,354
Puerto Rico--2.8%
1,200 Puerto Rico Commonwealth Highway and Transportation
Authority, Transportation Revenue Refunding Bonds,
Series M, 5% due 7/01/2037 1,255
6,225 Puerto Rico Commonwealth, Public Improvement, GO,
5.125% due 7/01/2030 (f) 6,520
1,010 Puerto Rico Commonwealth, Public Improvement, GO,
Refunding, Series B, 5.25% due 7/01/2032 1,081
Total Municipal Bonds
(Cost--$459,052)--151.6% 476,843
Municipal Bonds Held in Trust (p)
Arkansas--4.0%
12,210 Arkansas State Development Finance Authority,
M/F Mortgage Revenue Refunding Bonds, Series C,
5.35% due 12/01/2035 (d)(i) 12,736
California--4.6%
10,710 California Pollution Control Financing Authority, PCR,
Refunding (Pacific Gas and Electric), AMT, Series A,
5.35% due 12/01/2016 (i) 11,439
3,000 Port of Oakland, California, Revenue Bonds, AMT,
Series K, 5.75% due 11/01/2021 (c) 3,161
Illinois--2.6%
7,300 Chicago, Illinois, O'Hare International Airport
Revenue Bonds, Third Lien, AMT, Series B-2, 6%
due 1/01/2029 (n) 8,162
Michigan--3.4%
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Company
Pollution Control Project), AMT, Series C (n):
5,000 5.65% due 9/01/2029 5,299
2,000 5.50% due 6/01/2030 2,149
3,000 Saint Clair County, Michigan, Economic Revenue
Refunding Bonds (Detroit Edison Co. Project),
Series AA, 6.40% due 8/01/2024 (a) 3,157
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Schedule of Investments (concluded) (In Thousands)
Face
Amount Municipal Bonds Held in Trust (p) Value
New York--2.3%
$ 6,750 New York City, New York, Sales Tax Asset Receivable
Corporation Revenue Bonds, Series A, 5.25%
due 10/15/2027 (a) $ 7,308
Texas--5.5%
16,000 Dallas-Fort Worth, Texas, International Airport
Revenue Bonds, AMT, Series A, 5.50%
due 11/01/2033 (i) 17,157
Total Municipal Bonds Held in Trust
(Cost--$68,405)--22.4% 70,568
Shares
Held Short-Term Securities Value
10,432 Merrill Lynch Institutional Tax-Exempt
Fund 3.51% (h)(o) $ 10,432
Total Short-Term Securities
(Cost--$10,432)--3.3% 10,432
Total Investments (Cost--$537,889*)--177.3% 557,843
Liabilities in Excess of Other Assets--(1.7%) (5,301)
Liability for Trust Certificates, Including Interest
Expense Payable--(10.6%) (33,375)
Preferred Stock, at Redemption Value--(65.0%) (204,589)
----------
Net Assets Applicable to Common Stock--100.0% $ 314,578
==========
* The cost and unrealized appreciation (depreciation) of investments
as of March 31, 2007, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 505,915
===============
Gross unrealized appreciation $ 19,321
Gross unrealized depreciation (378)
---------------
Net unrealized appreciation $ 18,943
===============
(a) AMBAC Insured.
(b) Assured Guaranty Insured.
(c) FGIC Insured.
(d) FHA Insured.
(e) FNMA Collateralized.
(f) FSA Insured.
(g) GNMA Collateralized.
(h) 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 5,816 $208
(i) MBIA Insured.
(j) Prerefunded.
(k) Radian Insured.
(l) 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.
(m) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(n) XL Capital Insured.
(o) Represents the current yield as of March 31, 2007.
(p) Securities represent underlying bonds transferred to a separate
securitization trust established in a tender option bond transaction
in which the Fund may have acquired the residual interest certificates.
These securities serve as collateral in a financing transaction.
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Statement of Net Assets
As of March 31, 2007 (Unaudited)
Assets
Investments in unaffiliated securities, at value (identified cost--$527,456,877) $ 547,410,357
Investments in affiliated securities, at value (identified cost--$10,432,203) 10,432,203
Cash 59,877
Receivables:
Interest $ 7,297,200
Securities sold 3,901,170 11,198,370
---------------
Prepaid expenses 11,258
---------------
Total assets 569,112,065
---------------
Liabilities
Trust certificates 32,985,000
Payables:
Securities purchased 15,036,246
Dividends to Common Stock shareholders 1,162,326
Interest expense 390,277
Investment adviser 232,611
Other affiliates 5,028 16,826,488
---------------
Accrued expenses 133,845
---------------
Total liabilities 49,945,333
---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.10 per share (2,100 Series A
Shares, 2,100 Series B Shares and 3,980 Series C Shares of AMPS*, authorized,
issued and outstanding at $25,000 per share liquidation preference) 204,588,728
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 314,578,004
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (22,352,426 shares issued and outstanding) $ 2,235,243
Paid-in capital in excess of par 313,735,958
Undistributed investment income--net $ 957,624
Accumulated realized capital losses--net (22,304,301)
Unrealized appreciation--net 19,953,480
---------------
Total accumulated losses--net (1,393,197)
---------------
Total--Equivalent to $14.07 net asset value per share of Common Stock
(market price--$13.09) $ 314,578,004
===============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Statement of Operations
For the Six Months Ended March 31, 2007 (Unaudited)
Investment Income
Interest $ 12,570,596
Dividends from affiliates 207,649
---------------
Total income 12,778,245
---------------
Expenses
Investment advisory fees $ 1,427,778
Interest expense and fees 660,782
Commission fees 257,911
Accounting services 87,085
Transfer agent fees 31,452
Professional fees 28,720
Printing and shareholder reports 25,042
Custodian fees 14,476
Directors' fees and expenses 12,261
Pricing fees 10,226
Listing fees 4,662
Other 28,431
---------------
Total expenses before waiver and reimbursement 2,588,826
Waiver and reimbursement of expenses (106,122)
---------------
Total expenses after waiver and reimbursement 2,482,704
---------------
Investment income--net 10,295,541
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 1,626,680
Forward interest rate swaps--net (616,000) 1,010,680
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (2,614,293)
Forward interest rate swaps--net 260,075 (2,354,218)
--------------- ---------------
Total realized and unrealized loss--net (1,343,538)
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (3,571,007)
---------------
Net Increase in Net Assets Resulting from Operations $ 5,380,996
===============
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Statements of Changes in Net Assets (As restated for 2006. See Note 7)
For the Six For the
Months Ended Year Ended
March 31,2007 September 30,
Increase (Decrease) in Net Assets: (Unaudited) 2006
Operations
Investment income--net $ 10,295,541 $ 20,844,142
Realized gain--net 1,010,680 1,337,449
Change in unrealized appreciation/depreciation--net (2,354,218) (801,023)
Dividends to Preferred Stock shareholders (3,571,007) (6,534,409)
--------------- ---------------
Net increase in net assets resulting from operations 5,380,996 14,846,159
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (7,018,661) (16,674,910)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (7,018,661) (16,674,910)
--------------- ---------------
Net Assets Applicable to Common Stock
Total decrease in net assets applicable to Common Stock (1,637,665) (1,828,751)
Beginning of period 316,215,669 318,044,420
--------------- ---------------
End of period* $ 314,578,004 $ 316,215,669
=============== ===============
* Undistributed investment income--net $ 957,624 $ 1,251,751
=============== ===============
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Financial Highlights (As restated for 2006, 2005, 2004, 2003 and 2002. See Note 7.)
For the Six
The following per share data and ratios Months Ended
have been derived from information March 31, 2007 For the Year Ended September 30,
provided in the financial statements. (Unaudited) 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 14.15 $ 14.23 $ 14.41 $ 14.37 $ 14.48 $ 13.94
---------- ---------- ---------- ---------- ---------- ----------
Investment income--net .46++ .93++ .97++ 1.00++ 1.02++ 1.03
Realized and unrealized gain (loss)--net (.07) .03 (.09) --++++ (.17) .47
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.16) (.29) (.18) (.09) (.10) (.13)
Realized gain--net -- -- -- -- -- --++++++
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations .23 .67 .70 .91 .75 1.37
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.31) (.75) (.88) (.87) (.86) (.83)
Realized gain--net -- -- -- -- -- --++++++
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and distributions to Common
Stock shareholders (.31) (.75) (.88) (.87) (.86) (.83)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 14.07 $ 14.15 $ 14.23 $ 14.41 $ 14.37 $ 14.48
========== ========== ========== ========== ========== ==========
Market price per share, end of period $ 13.09 $ 12.96 $ 13.90 $ 13.25 $ 13.13 $ 13.55
========== ========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 1.85%+++ 5.19% 5.35% 7.12% 5.95% 10.67%
========== ========== ========== ========== ========== ==========
Based on market price per share 3.46%+++ (1.37%) 11.92% 7.80% 3.45% 10.71%
========== ========== ========== ========== ========== ==========
Ratios Based on Average Net Assets Applicable to Common Stock
Total expenses, net of waiver and reimbursement
and excluding interest expense and fees** 1.16%*** 1.16% 1.15% 1.12% 1.14% 1.18%
========== ========== ========== ========== ========== ==========
Total expenses, net of waiver and reimbursement** 1.58%*** 1.57% 1.32% 1.17% 1.21% 1.28%
========== ========== ========== ========== ========== ==========
Total expenses** 1.64%*** 1.64% 1.38% 1.27% 1.30% 1.37%
========== ========== ========== ========== ========== ==========
Total investment income--net** 6.53%*** 6.70% 6.72% 6.93% 7.19% 7.44%
========== ========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock shareholders 2.27%*** 2.10% 1.27% .63% .69% .97%
========== ========== ========== ========== ========== ==========
Investment income--net, to Common Stock shareholders 4.26%*** 4.60% 5.45% 6.30% 6.50% 6.47%
========== ========== ========== ========== ========== ==========
Ratios Based on Average Net Assets Applicable to Preferred Stock
Dividends to Preferred Stock shareholders 3.50%*** 3.20% 1.99% .99% 1.08% 1.46%
========== ========== ========== ========== ========== ==========
Supplemental Data
Net assets applicable to Common Stock,
end of period (in thousands) $ 314,578 $ 316,216 $ 318,044 $ 322,072 $ 321,270 $ 323,678
========== ========== ========== ========== ========== ==========
Preferred Stock outstanding at liquidation
preference, end of period (in thousands) $ 204,500 $ 204,500 $ 204,500 $ 204,500 $ 204,500 $ 204,500
========== ========== ========== ========== ========== ==========
Portfolio turnover 14% 35% 46% 45% 50% 51%
========== ========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,538 $ 2,546 $ 2,555 $ 2,575 $ 2,571 $ 2,583
========== ========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 438 $ 797 $ 505 $ 253 $ 268 $ 362
========== ========== ========== ========== ========== ==========
Series B--Investment income--net $ 434 $ 792 $ 494 $ 241 $ 267 $ 338
========== ========== ========== ========== ========== ==========
Series C--Investment income--net $ 437 $ 804 $ 504 $ 251 $ 271 $ 381
========== ========== ========== ========== ========== ==========
* 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.
*** Annualized.
++ Based on average shares outstanding.
++++ Amount is less than $.01 per share.
++++++ Amount is less than $(.01) per share.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Notes to Financial Statements (Unaudited)
1. Significant Accounting Policies:
BlackRock MuniHoldings Insured Fund II, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended, as a non-diversified, closed-
end management investment company. The Fund's 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 Fund determines and makes available for
publication the net asset value of its Common Stock on a daily basis. The
Fund's Common Stock shares are listed on the New York Stock Exchange under the
symbol MUE. The following is a summary of significant accounting policies
followed by the Fund.
(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 Fund under the general
direction of the Board of Directors. Such valuations and procedures are
reviewed periodically by the Board of Directors of the Fund. 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. In the case of options traded in the OTC market, valuation is 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 Fund's
pricing service. Valuation of short-term investment vehicles is generally
based on the net asset value of the underlying investment vehicle or amortized
cost. 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 Fund.
(b) Derivative financial instruments--The 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 due to an unfavorable change in the price of the underlying security
or if the counterparty does not perform under the contract.
* Financial futures contracts--The 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--The Fund may purchase and write 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 the 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.
* Forward interest rate swaps--The 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.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Notes to Financial Statements (continued)
* Swaps--The 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--The Fund invests 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 the 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. The transfer of the municipal securities
to a TOB does 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 Fund's schedule of
investments and the proceeds from the transaction are reported as a liability
for trust certificates of the Fund. 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 Fund on an accrual basis. Interest expense
incurred on the secured borrowing and other expenses related to remarketing,
administration and trustee services to a TOB are reported as expenses of the
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 Fund
include the right of the Fund (1) to cause the holders of a proportional share
of the floating rate certificates to tender their certificates at par, and
(2) to transfer a corresponding share of the municipal securities from the
TOB to the Fund. At March 31, 2007, the aggregate value of the underlying
municipal securities transferred to TOBs was $70,568,192, the related liability
for trust certificates was $32,985,000 and the range of interest rates was
3.67% to 3.75%.
Financial transactions executed through TOBs generally will underperform the
market for fixed rate municipal bonds in a rising interest rate environment,
but tend to outperform the market for fixed rate bonds when interest rates
decline or remain relatively stable. Should short-term interest rates rise,
the Fund's investments in TOB Residuals likely will adversely affect the
Fund's investment income - net and distributions to shareholders. Fluctuations
in the market value of municipal securities deposited into the TOB may
adversely affect the Fund's net asset value per share.
While the Fund's investment policies and restrictions expressly permit
investments in inverse floating rate securities such as TOB Residuals, they
generally do not allow the Fund to borrow money for purposes of making
investments. The Fund's management believes that the Fund's restrictions on
borrowings do not apply to the secured borrowings deemed to have occurred for
accounting purposes.
(d) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(e) 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 Fund amortizes all
premiums and discounts on debt securities.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Notes to Financial Statements (continued)
(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 the last net asset value calculation in the first required
financial statement reporting period for fiscal years beginning after December
15, 2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
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. At this time, management is evaluating the implications of FAS
157 and its impact on the Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, FASB issued "Statement of Financial Accounting
Standards No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), which is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FAS 157. FAS 159 permits entities to choose
to measure many financial instruments and certain other items at fair value
that are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. At this time, management is
evaluating the implications of FAS 159 and its impact on the Fund's financial
statements, if any, has not been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Investment Advisory Agreement between the Fund and BlackRock Advisors, LLC
(the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc.
became effective on September 29, 2006. Prior to September 29, 2006, Fund
Asset Management, L.P. ("FAM") was the Fund's manager. The general partner of
FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly owned subsidiary
of Merrill Lynch & Co., Inc. ("Merrill Lynch"), which is the limited partner.
Merrill Lynch and The PNC Financial Services Group, Inc. are the principal
owners of BlackRock, Inc.
The Manager is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the 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. 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 monthly fee that is a
percentage of the management fee paid by the Fund to the Manager. The Manager
has agreed to waive its management fee on the proceeds of Preferred Stock that
exceeds 35% of the Fund's total net assets. For the six months ended March 31,
2007, the Manager earned fees of $1,427,778 of which $94,019 was waived. In
addition, the Manager has agreed to reimburse its advisory fee by the amount
of advisory fees the Fund pays to the Manager indirectly through its
investment in Merrill Lynch Institutional Tax-Exempt Fund. For the six months
ended March 31, 2007, the Manager reimbursed the Fund in the amount of
$12,103.
For the six months ended March 31, 2007 the Fund reimbursed the Manager $5,418
for certain accounting services.
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 March 31, 2007, were $83,279,314 and $78,400,036,
respectively.
4. Stock Transactions:
The 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.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Notes to Financial Statements (concluded)
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Fund, 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 March 31, 2007 were as follows:
Series A, 3.85%; Series B, 3.65%; and Series C, 3.75%.
The 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 March 31, 2007, Merrill Lynch, Pierce,
Fenner & Smith Incorporated earned $88,172 as commissions.
5. Capital Loss Carryforward:
On September 30, 2006, the Fund had a net capital loss carryforward of
$18,981,760, of which $7,155,971 expires in 2007, $11,519,686 expires in 2008
and $306,103 expires in 2012. This amount will be available to offset like
amounts of any future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.052000 per share on May 1, 2007 to shareholders of record on April
16, 2007.
7. Restatement Information:
During the six months ended March 31, 2007, the Fund 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 and that
these transfers should have been accounted for as secured borrowings rather
than as sales. Accordingly, the Fund has restated the Statement of Changes in
Net Assets for the year ended September 30, 2006 and certain financial
highlights for the years ended September 30, 2006, 2005, 2004, 2003 and 2002.
The effects of the restatements were to record the transfers of the municipal
bonds as secured borrowings, to give effect to offsetting changes in realized
gain - net and in the change in unrealized appreciation/depreciation - net on
the transferred municipal securities and to give effect to interest on the
bonds as interest income and interest on the secured borrowings as interest
expense.
Statement of Changes in Net Assets
For the Year Ended September 30, 2006
Previously
Reported Restated
Realized gain--net $ 1,350,779 $ 1,337,449
Change in unrealized appreciation/
depreciation--net $ (814,353) $ (801,023)
Financial Highlights for the Years Ended September 30, 2006, 2005, 2004, 2003 and 2002
2006 2005 2004 2003 2002
Previously Previously Previously Previously Previously
Reported Restated Reported Restated Reported Restated Reported Restated Reported Restated
Total expenses, net
of waiver and
reimbursement** 1.16% 1.57% 1.15% 1.32% 1.12% 1.17% 1.14% 1.21% 1.18% 1.28%
Total expenses** 1.23% 1.64% 1.21% 1.38% 1.21% 1.27% 1.23% 1.30% 1.27% 1.37%
Portfolio turnover 38.80% 35% 58.19% 46% 45.89% 45% 52.00% 50% 50.73% 51%
** Do not reflect the effect of dividends to Preferred Stock shareholders.
While the Statements of Net Assets as of September 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 liability for trust certificates by corresponding amounts at
each year, with no effect on previously reported net assets. The Statements of
Operations for the years ended September 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 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 the years ended September 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 - net, and change in
unrealized appreciation/depreciation - net, by corresponding and offsetting
amounts.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Fund 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 Fund for any
particular month may be more or less than the amount of net investment income
earned by the Fund during such month. The Fund's 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 this
report.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule 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 Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's 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 Fund's Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisers, banks or brokerages may offer this service.
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.
BLACKROCK MUNIHOLDINGS INSURED FUND II, INC. MARCH 31, 2007
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 -
Not Applicable to this semi-annual report
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 - The
registrant's Nominating Committee will consider nominees to the
Board recommended by shareholders when a vacancy becomes available.
Shareholders who wish to recommend a nominee should send nominations
which include biographical information and sets forth the
qualifications of the proposed nominee to the registrant's
Secretary. There have been no material changes to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
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 Insured Fund II, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock MuniHoldings Insured Fund II, Inc.
Date: May 21, 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 Insured Fund II, Inc.
Date: May 21, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock MuniHoldings Insured Fund II, Inc.
Date: May 21, 2007