UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08573
Name of Fund: BlackRock MuniHoldings California Insured Fund, Inc. (MUC)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive
Officer, BlackRock MuniHoldings California Insured Fund, Inc., 800
Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011,
Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 06/30/2008
Date of reporting period: 07/01/2007 - 06/30/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock MuniHoldings BLACKROCK
California Insured Fund, Inc.
(MUC)
ANNUAL REPORT | JUNE 30, 2008
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
--------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Annual Report:
Fund Summary ............................................................. 4
The Benefits and Risks of Leveraging ..................................... 5
Financial Statements:
Schedule of Investments .............................................. 6
Statement of Assets and Liabilities .................................. 11
Statement of Operations .............................................. 11
Statements of Changes in Net Assets .................................. 12
Financial Highlights ..................................................... 13
Notes to Financial Statements ............................................ 14
Report of Independent Registered Public Accounting Firm .................. 18
Important Tax Information (Unaudited) .................................... 18
Disclosure of Investment Advisory Agreement and Subadvisory Agreement .... 19
Automatic Dividend Reinvestment Plan ..................................... 23
Officers and Directors ................................................... 24
Additional Information ................................................... 28
2 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
A Letter to Shareholders
Dear Shareholder
Throughout the past year, investors were overwhelmed by lingering credit and
financial market troubles, surging oil prices and more recently, renewed
inflation concerns. Healthy nonfinancial corporate profits and robust exporting
activity remained among the few bright spots, helping the economy to grow at a
modest, but still positive, pace.
The Federal Reserve Board (the "Fed") has been aggressive in its attempts to
stoke economic growth and ease financial market instability. In addition to
slashing the target federal funds rate 325 basis points (3.25%) between
September 2007 and April 2008, the central bank introduced the new Term
Securities Lending Facility, granted broker-dealers access to the discount
window and used its own balance sheet to help negotiate the sale of Bear
Stearns. As widely anticipated, the end of the period saw a pause in Fed action,
as the central bank held the target rate steady at 2.0% amid rising inflationary
pressures.
As the Fed's bold response to the financial crisis helped ease credit turmoil
and investor anxiety, U.S. equity markets sank sharply over the last six months,
notwithstanding a brief rally in the spring. International markets were not
immune to the tumult, with most regions also registering declines.
Treasury securities also traded in a volatile fashion, but generally rallied
(yields fell as prices correspondingly rose), with investors continuing to seek
safety as part of a broader flight to quality. The yield on 10-year Treasury
issues, which fell to 3.34% in March 2008, climbed up to the 4.20% range in
mid-June as investors temporarily shifted out of Treasury issues in favor of
riskier assets (such as stocks and other high-quality fixed income sectors),
then reversed course and declined to 3.99% by period-end when credit fears
re-emerged.
Tax-exempt issues eked out gains for the reporting period, but underperformed
their taxable counterparts, as the group continued to be pressured by problems
among municipal bond insurers and the breakdown in the market for auction rate
securities.
The major benchmark indexes generated results that largely reflected heightened
investor risk aversion:
Total Returns as of June 30, 2008 6-month 12-month
============================================================================================================
U.S. equities (S&P 500 Index) (11.91)% (13.12)%
------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) (9.37)% (16.19)%
------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) (10.96)% (10.61)%
------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) 1.13% 7.12%
------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) 0.02% 3.23%
------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) (1.08)% (1.74)%
------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only. You cannot invest directly in an index.
As you navigate today's volatile markets, we encourage you to review your
investment goals with your financial professional and to make portfolio changes,
as needed. For more up-to-date commentary on the economy and financial markets,
we invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary as of June 30, 2008
Investment Objective
BlackRock MuniHoldings California Insured Fund, Inc. (MUC) (the "Fund") seeks to
provide shareholders with current income exempt from federal and California
income taxes. The Fund seeks to achieve this objective 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
and California income taxes.
Performance
For the 12 months ended June 30, 2008, the Fund returned (7.41)% based on market
price and 0.64% based on net asset value ("NAV"). For the same period, the
closed-end Lipper Single-State Insured Municipal Debt Funds category posted an
average return of (0.17)% on a NAV basis. All returns reflect reinvestment of
dividends. Throughout the 12 months, although we increased the allocation to
lower rated paper, we under-utilized the basket of funds permitted to be
committed to such investments. This was prudent during a period of widening
credit spreads. However, monoline insurer downgrades detracted from performance
in all insured products. Going forward, we will continue to focus on maximizing
coupon structure in order to maintain the Fund's income accrual for
shareholders.
The views expressed reflect the opinions of BlackRock as of the date of
this report and are subject to change based on changes in market, economic
or other conditions. These views are not intended to be a forecast of
future events and are no guarantee of future results.
Fund Information
Symbol on New York Stock Exchange .......................... MUC
Initial Offering Date ...................................... February 27, 1998
Yield on Closing Market Price as of June 30, 2008 ($12.24) 1 5.20%
Tax Equivalent Yield 2 ..................................... 8.00%
Current Monthly Distribution per Common Stock 3 ............ $0.053
Current Annualized Distribution per Common Stock 3 ......... $0.636
Leverage as of June 30, 2008 4 ............................. 43%
--------------------------------------------------------------------------------
1 Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
2 Tax equivalent yield assumes the maximum federal tax rate of 35%.
3 The distribution is not constant and is subject to change.
4 As a percentage of total managed assets, which is the total assets
of the Fund (including any assets attributable to Auction Market
Preferred Stock ("Preferred Stock") and tender option bond trusts
("TOBs")) minus the sum of accrued liabilities.
The table below summarizes the changes in the Fund's market price and net asset
value per share:
--------------------------------------------------------------------------------
6/30/08 6/30/07 Change High Low
--------------------------------------------------------------------------------
Market Price ........ $12.24 $13.92 (12.07)% $13.97 $12.00
Net Asset Value ..... $13.84 $14.48 (4.42)% $14.90 $12.99
--------------------------------------------------------------------------------
The following charts show the Fund's portfolio composition and credit quality
allocations of the Fund's long-term investments:
Portfolio Composition
Sector 6/30/08 6/30/07
--------------------------------------------------------------------------------
City, County & State ................................. 25% 22%
Education ............................................ 19 13
Water & Sewer ........................................ 14 12
Tax Revenue .......................................... 13 19
Lease Revenue ........................................ 8 18
Power ................................................ 8 6
Transportation ....................................... 8 6
Hospital ............................................. 4 3
Housing .............................................. 1 1
--------------------------------------------------------------------------------
Credit Quality Allocations 5
Credit Rating 6/30/08 6/30/07
--------------------------------------------------------------------------------
AAA/Aaa .............................................. 27% 97%
AA/Aa ................................................ 58 3
A/A .................................................. 14 --
BBB/Baa .............................................. 1 --
--------------------------------------------------------------------------------
5 Using the higher of Standard & Poor's or Moody's Investors Service
ratings.
4 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
The Benefits and Risks of Leveraging
The Fund utilizes leverage to seek to enhance the yield and NAV 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 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 income based on long-term interest rates.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's NAV will
reflect the full decline in the price of the portfolio's investments, since the
value of the fund's Preferred Stock does not fluctuate. In addition to the
decline in NAV, the market value of the fund's Common Stock may also decline.
In addition, the Fund may from time to time leverage its assets through the use
of tender option bond ("TOB") programs. In a typical TOB program, the Fund
transfers one or more municipal bonds to a TOB trust, which issues short-term
variable rate securities to third-party investors and a residual interest to the
Fund. The cash received by the TOB trust from the issuance of the short-term
securities (less transaction expenses) is paid to the Fund, which invests the
cash in additional portfolio securities. The distribution rate on the short-term
securities is reset periodically (typically every seven days) through a
remarketing of the short-term securities. Any income earned on the bonds in the
TOB trust, net of expenses incurred by the TOB trust, that is not paid to the
holders of the short-term securities is paid to the Fund. In connection with
managing the Fund's assets, the Fund's investment advisor may at any time
retrieve the bonds out of the TOB trust typically within seven days. TOB
investments generally will provide the Fund with economic benefits in periods of
declining short-term interest rates, but expose the Fund to risks during periods
of rising short-term interest rates similar to those associated with Preferred
Stock issued by the Fund, as described above. Additionally, fluctuations in the
market value of municipal securities deposited into the TOB trust may adversely
affect the Fund's NAV per share. (See Note 1 of the Notes to Financial
Statements for details of municipal bonds transferred to TOB trusts.)
Under the Investment Company Act of 1940, the Fund is permitted to issue
Preferred Stock in an amount up to 50% of its total managed assets at the time
of issuance. The Fund also anticipates that its total economic leverage from
Preferred Stock and TOBs will not exceed 50% of its total managed assets. As of
June 30, 2008, the Fund had leverage from Preferred Stock and TOBs of 43% of
managed assets.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 5
Schedule of Investments June 30, 2008
(Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
California -- 128.2%
-------------------------------------------------------------------------------
ABAG Finance Authority for Nonprofit Corporations,
California, COP (Children's Hospital Medical Center),
6%, 12/01/09 (a)(b)(p) $ 1,000 $ 1,062,290
-------------------------------------------------------------------------------
ABC California Unified School District, GO, Series A,
5.625%, 8/01/20 (c)(d) 3,345 3,418,958
-------------------------------------------------------------------------------
Alameda County, California, Joint Powers Authority,
Lease Revenue Refunding Bonds, 5%, 12/01/34 (c) 10,000 10,084,100
-------------------------------------------------------------------------------
Alhambra, California, Unified School District, GO
(Election of 2004), Series A, 5%, 8/01/29 (e) 7,360 7,154,141
-------------------------------------------------------------------------------
Banning, California, Unified School District, GO
(Election of 2006), Series A, 5%, 8/01/27 (e) 2,825 2,794,066
-------------------------------------------------------------------------------
Berkeley, California, Unified School District, GO,
Series I (b)(c):
5.75%, 8/01/08 2,000 2,026,980
5.875%, 8/01/08 4,520 4,581,427
-------------------------------------------------------------------------------
Bonita, California, Unified School District, GO
(Election of 2004), Series B, 5%, 8/01/29 (e) 8,350 8,200,201
-------------------------------------------------------------------------------
Cajon Valley, California, Union School District, GO,
Series B, 5.50%, 8/01/27 (f) 2,925 3,061,510
-------------------------------------------------------------------------------
California Community College Financing Authority,
Lease Revenue Bonds (Grossmont-Palomar-Shasta),
Series A, 5.625%, 4/01/26 (f) 2,180 2,274,983
-------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds,
VRDN, AMT (c)(g):
Series B, 1.60%, 8/01/33 6,375 6,375,000
Series N, 1.55%, 8/01/21 2,900 2,900,000
-------------------------------------------------------------------------------
California HFA, S/F Mortgage Revenue Bonds, AMT,
Class II (f):
Series A-1, 6%, 8/01/20 170 170,671
Series C-2, 5.625%, 8/01/20 (h) 1,160 1,165,556
-------------------------------------------------------------------------------
California Health Facilities Financing Authority
Revenue Bonds (Kaiser Permanente), Series A,
5.50%, 6/01/22 (c)(d) 9,250 9,448,320
-------------------------------------------------------------------------------
California State, GO:
5.25%, 4/01/27 15 15,222
5.50%, 6/01/25 (e) 2,000 2,046,660
-------------------------------------------------------------------------------
California State, GO, Refunding, 5.25%, 2/01/26 (f) 6,000 6,102,300
-------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue
Bonds (University of California -- Institution Project),
Series C, 5%, 4/01/30 (a) 5,000 5,045,250
-------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue
Refunding Bonds (Various Community College Project),
Series B, 5.625%, 3/01/19 (a) 2,625 2,629,804
-------------------------------------------------------------------------------
California State University, Systemwide Revenue
Refunding Bonds:
Series A, 5%, 11/01/29 (c) 5,000 5,072,900
Series A, 5%, 11/01/30 (a) 6,000 6,016,800
Series C, 5%, 11/01/28 (f) 16,215 16,312,776
-------------------------------------------------------------------------------
California State, Various Purpose, GO,
5.50%, 11/01/33 7,050 7,199,530
-------------------------------------------------------------------------------
California Statewide Communities Development
Authority, Health Facility Revenue Bonds (Memorial
Health Services), Series A, 6%, 10/01/23 4,915 5,113,861
-------------------------------------------------------------------------------
California Statewide Communities Development
Authority Revenue Bonds:
(Adventist), Series B, 5%, 3/01/37 (i) 7,500 7,320,900
(Los Angeles Orthopedic Hospital Foundation),
5.50%, 6/01/19 (a) 1,090 1,097,107
(Sutter Health), Series C, 5.05%, 8/15/38 (c) 10,000 9,968,700
-------------------------------------------------------------------------------
California Statewide Communities Development
Authority, Revenue Refunding Bonds:
(Kaiser Hospital Asset Management, Inc.),
Series C, 5.25%, 8/01/31 5,000 4,920,900
(Kaiser Permanente), Series A, 5%, 4/01/31 900 859,896
-------------------------------------------------------------------------------
Chino Basin, California, Regional Financing Authority,
Revenue Refunding Bonds (Inland Empire Utility
Agency), Series A, 5%, 11/01/33 (a) 3,675 3,597,237
-------------------------------------------------------------------------------
Chula Vista, California, IDR (San Diego Gas and
Electric Company), AMT, Series D, 5%, 12/01/27 (a) 3,330 3,050,879
-------------------------------------------------------------------------------
Chula Vista, California, Public Financing Authority,
Revenue Refunding Bonds, Series A, 5%, 9/01/29 (f) 2,750 2,669,397
-------------------------------------------------------------------------------
Coachella Valley, California, Unified School District,
GO (Election of 2005), Series A, 5%, 8/01/27 (e) 2,400 2,350,752
-------------------------------------------------------------------------------
Colton, California, Joint Unified School District, GO,
Series A, 5.375%, 8/01/26 (e) 2,500 2,591,000
-------------------------------------------------------------------------------
Corona, California, Department of Water and Power,
COP, 5%, 9/01/29 (f) 5,910 5,803,561
-------------------------------------------------------------------------------
Corona-Norco, California, Unified School District, GO
(Election of 2006), Series A, 5%, 8/01/31 (c) 5,000 5,087,500
-------------------------------------------------------------------------------
Portfolio Abbreviations
To simplify the listings of portfolio holdings in the Schedule of Investments,
the names of many of the securities have been abbreviated according to the list
on the right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
S/F Single-Family
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
6 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Schedule of Investments (continued) (Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
California (continued)
-------------------------------------------------------------------------------
Covina-Valley, California, Unified School District, GO,
Refunding, Series A, 5.50%, 8/01/26 (c) $ 2,395 $ 2,535,036
-------------------------------------------------------------------------------
Culver City, California, Redevelopment Finance
Authority, Tax Allocation Revenue Refunding Bonds,
Series A, 5.60%, 11/01/25 (c) 3,750 3,900,713
-------------------------------------------------------------------------------
East Bay, California, Municipal Utility District,
Wastewater System Revenue Refunding Bonds,
Sub-Series A (a):
5%, 6/01/33 6,545 6,577,463
5%, 6/01/37 6,015 6,023,301
-------------------------------------------------------------------------------
East Side Union High School District, California,
Santa Clara County, Capital Appreciation, GO
(Election of 2002), Series E, 5.125%,
8/01/28 (j)(k) 11,000 3,474,900
-------------------------------------------------------------------------------
Escondido, California, COP, Refunding, Series A,
5.75%, 9/01/24 (e) 465 485,297
-------------------------------------------------------------------------------
Foothill-De Anza, California, Community College
District, GO, Refunding, 5%, 8/01/30 (e) 5,000 5,040,200
-------------------------------------------------------------------------------
Fresno, California, Airport Revenue Bonds, AMT,
Series B, 5.50%, 7/01/20 (c) 4,455 4,499,104
-------------------------------------------------------------------------------
Fullerton, California, Joint Union High School District,
GO (Election of 2002), Series B, 5%, 8/01/29 (e) 5,200 5,258,500
-------------------------------------------------------------------------------
Garden Grove, California, COP (Financing Project),
Series A, 5.50%, 3/01/26 (a) 4,040 4,197,681
-------------------------------------------------------------------------------
Glendale, California, Unified School District, GO,
Series B, 5.125%, 9/01/23 (c) 5,200 5,263,336
-------------------------------------------------------------------------------
Hartnell, California, Community College District, GO
(Election of 2002), Series B, 5%, 6/01/31 (c) 2,155 2,183,037
-------------------------------------------------------------------------------
Hemet, California, Unified School District, GO:
Series A, 5.375%, 8/01/26 (f) 4,565 4,759,058
Series B, 5.125%, 8/01/37 (i)(l) 4,500 4,583,205
-------------------------------------------------------------------------------
Hollister, California, Joint Powers Finance Authority,
Wastewater Revenue Refunding Bonds (Refining
and Improvement Project), Series 1, 5%, 6/01/37 (c) 6,365 6,355,071
-------------------------------------------------------------------------------
Irvine, California, Unified School District, Special Tax
Refunding Bonds (Community Facilities District
Number 86-1), 5.80%, 11/01/20 (a) 4,665 4,766,744
-------------------------------------------------------------------------------
La Quinta, California, Financing Authority, Local
Agency Revenue Bonds, Series A (a):
5.125%, 9/01/34 7,165 7,126,667
5.25%, 9/01/24 2,500 2,572,725
-------------------------------------------------------------------------------
Little Lake, California, City School District, GO,
Series B, 5.25%, 7/01/22 (c) 1,210 1,276,284
-------------------------------------------------------------------------------
Lodi, California, Wastewater System Revenue Bonds,
COP, Refunding, Series A, 5%, 10/01/32 (c) 2,000 2,010,140
-------------------------------------------------------------------------------
Lompoc, California, Unified School District, GO
(Election of 2002), Series C, 5%, 6/01/32 (c) 1,485 1,505,211
-------------------------------------------------------------------------------
Long Beach, California, Harbor Revenue Refunding
Bonds, AMT, Series B, 5.20%, 5/15/27 (f) 20,000 19,762,000
-------------------------------------------------------------------------------
Los Angeles, California, Department of Water and
Power, Waterworks Revenue Bonds, Sub-Series A-2,
5%,7/01/35 (a) 2,000 2,001,300
-------------------------------------------------------------------------------
Los Angeles, California, M/F Housing Revenue
Refunding Bonds, Senior Series G, 5.65%,
1/01/14 (c) 150 151,239
-------------------------------------------------------------------------------
Los Angeles, California, Unified School District, GO:
(Election of 2004), Series H, 5%, 7/01/32 (c) 5,000 5,065,100
Refunding, Series A-1, 5%, 7/01/21 (e) 9,650 10,001,550
Series E, 5%, 7/01/30 (a) 10,000 10,029,300
-------------------------------------------------------------------------------
Los Angeles County, California, Metropolitan
Transportation Authority, Sales Tax Revenue
Refunding Bonds, Proposition A, First Tier
Senior Series A, 5%, 7/01/35 (a) 9,000 9,005,220
-------------------------------------------------------------------------------
Los Gatos, California, Unified School District, GO
(Election 2001), Series B, 5%, 8/01/30 (c) 2,735 2,769,160
-------------------------------------------------------------------------------
Los Rios, California, Community College District, GO
(Election of 2002), Series B, 5%, 8/01/27 (f) 1,890 1,896,804
-------------------------------------------------------------------------------
Madera, California, Public Financing Authority, Water
and Wastewater Revenue Refunding Bonds, 5%,
3/01/36 (f) 2,000 1,973,300
-------------------------------------------------------------------------------
Merced, California, Community College District,
GO (School Facilities District Number 1), 5%,
8/01/31 (f) 6,365 6,347,433
-------------------------------------------------------------------------------
Merced, California, Irrigation District, Electrical
System Revenue Refunding Bonds, 5.25%,
9/01/36 (j) 5,000 4,807,800
-------------------------------------------------------------------------------
Metropolitan Water District of Southern California,
Waterworks Revenue Bonds:
Series A, 5%, 7/01/35 (c) 3,550 3,591,784
Series B-1, 5%, 10/01/33 (e) 9,000 9,036,450
-------------------------------------------------------------------------------
Moorpark, California, Redevelopment Agency, Tax
Allocation Bonds (Moorpark Redevelopment Project),
5.125%, 10/01/31 (a) 4,150 4,072,271
-------------------------------------------------------------------------------
Napa, California, Water Revenue Bonds, 5%,
5/01/35 (a) 9,100 9,125,207
-------------------------------------------------------------------------------
Northern California Power Agency, Public Power
Revenue Refunding Bonds (Hydroelectric Project 1),
Series A (f):
5.125%, 7/01/08 (b) 645 651,502
5.125%, 7/01/23 2,630 2,657,936
-------------------------------------------------------------------------------
Oakland, California, Redevelopment Agency, Tax
Allocation Refunding Bonds (Coliseum Area
Redevelopment Project), Series B, 5%, 9/01/36 (a) 6,855 6,672,726
-------------------------------------------------------------------------------
Ohlone, California, Community College District, GO,
Series B, 5%, 8/01/30 (c) 5,000 5,071,250
-------------------------------------------------------------------------------
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 7
Schedule of Investments (continued) (Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
California (continued)
-------------------------------------------------------------------------------
Oxnard, California, Financing Authority, Wastewater
Revenue Bonds (Redwood Trunk Sewer and
Headworks Projects), Series A, 5.25%, 6/01/34 (e) $10,000 $ 10,037,900
-------------------------------------------------------------------------------
Oxnard, California, Financing Authority, Water
Revenue Bonds, 5%, 6/01/31 (f) 10,000 9,945,600
-------------------------------------------------------------------------------
Palm Springs, California, Financing Authority, Lease
Revenue Refunding Bonds (Convention Center
Project), Series A, 5.50%, 11/01/35 (f) 1,600 1,640,720
-------------------------------------------------------------------------------
Pleasanton, California, Unified School District, GO,
Series E, 5.50%, 8/01/08 (b)(e) 9,100 9,220,848
-------------------------------------------------------------------------------
Port of Oakland, California, Revenue Bonds, AMT,
Series K (e):
5.75%, 11/01/14 3,500 3,541,090
5.75%, 11/01/29 19,815 19,826,889
-------------------------------------------------------------------------------
Port of Oakland, California, Revenue Refunding
Bonds, AMT, Series L, 5.375%, 11/01/27 (e)(f) 25,350 24,914,487
-------------------------------------------------------------------------------
Poway, California, Redevelopment Agency, Tax
Allocation Refunding Bonds, 5%, 6/15/33 (f) 3,000 2,970,390
-------------------------------------------------------------------------------
Poway, California, Unified School District, Public
Financing Authority, Special Tax Revenue Bonds,
5%, 9/15/31 (a) 9,070 8,971,046
-------------------------------------------------------------------------------
Rancho Cucamonga, California, Redevelopment
Agency, Tax Allocation Refunding Bonds (Rancho
Redevelopment Project), Series A, 5%, 9/01/34 (f)(l) 2,500 2,433,300
-------------------------------------------------------------------------------
Redlands, California, Unified School District, GO
(Election of 2008), 5.25%, 7/01/33 (c) 5,000 5,157,050
-------------------------------------------------------------------------------
Redwoods, California, Community College District,
GO (Election of 2004), 5%, 8/01/31 (f) 4,630 4,617,221
-------------------------------------------------------------------------------
Richmond, California, Joint Powers Financing
Authority, Tax Allocation Revenue Bonds, Series A,
5.50%, 9/01/18 (f) 2,205 2,267,137
-------------------------------------------------------------------------------
Riverside, California, Unified School District, GO
(Election of 2001), Series B, 5%, 8/01/30 (f) 10,735 10,720,293
-------------------------------------------------------------------------------
Sacramento, California, Area Flood Control
Agency, Special Assessment Refunding Bonds
(Consolidated Capital Assessment District),
Series A, 5%, 10/01/32 (e) 2,125 2,092,551
-------------------------------------------------------------------------------
Sacramento, California, City Financing Authority,
Revenue Refunding Bonds, 5%, 12/01/29 (e) 8,775 8,560,539
-------------------------------------------------------------------------------
Sacramento, California, Municipal Utility District,
Electric Revenue Refunding Bonds, Series L, 5.125%,
7/01/22 (f) 10,825 10,874,795
-------------------------------------------------------------------------------
Sacramento, California, Municipal Utility District
Financing Authority Revenue Bonds (Consumers
Project), 5.125%, 7/01/29 (f) 36,760 35,033,383
-------------------------------------------------------------------------------
Saddleback Valley, California, Unified School District,
GO, 5%, 8/01/29 (c) 4,115 4,177,342
-------------------------------------------------------------------------------
Salinas, California, Union High School District, GO
(Election of 2002), Series B, 5%, 6/01/26 (f) 3,490 3,517,082
-------------------------------------------------------------------------------
San Bernardino, California, Joint Powers
Financing Authority, Lease Revenue Bonds
(Department of Transportation Lease), Series A,
5.50%, 12/01/20 (f) 5,440 5,450,173
-------------------------------------------------------------------------------
San Bernardino County, California, COP, Refunding
(Medical Center Financing Project), 5.50%,
8/01/19 (f) 1,480 1,482,708
-------------------------------------------------------------------------------
San Diego County, California, COP (Edgemoor Project
and Regional System), Refunding, 5%, 2/01/29 (a) 1,500 1,506,615
-------------------------------------------------------------------------------
San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, 5.50%,
7/01/09 (b)(e) 6,795 7,118,170
-------------------------------------------------------------------------------
San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Refunding Bonds Series A,
5%, 7/01/34 (f) 2,500 2,503,650
-------------------------------------------------------------------------------
San Francisco, California, City and County Airport
Commission, International Airport Revenue Bonds,
AMT, Second Series, Issue 24A, 5.50%, 5/01/24 (c) 6,430 6,487,613
-------------------------------------------------------------------------------
San Francisco, California, Community College District,
GO (Election of 2001), Series C, 5%, 6/15/31 (c) 4,195 4,260,945
-------------------------------------------------------------------------------
San Joaquin County, California, COP, Refunding
(County Administration Building), 5%, 11/15/30 (f) 5,530 5,500,193
-------------------------------------------------------------------------------
San Jose, California, Financing Authority, Lease
Revenue Refunding Bonds (Civic Center Project),
Series B, 5%, 6/01/32 (a) 14,800 14,815,096
-------------------------------------------------------------------------------
San Jose-Evergreen, California, Community College
District, Capital Appreciation, GO (Election of 2004),
Refunding, Series A (f)(k):
5.17%, 9/01/24 10,410 4,439,969
5.34%, 9/01/29 7,250 2,303,615
-------------------------------------------------------------------------------
San Juan, California, Unified School District, GO:
(Election of 2002), 5%, 8/01/28 (f) 4,250 4,253,570
5.625%, 8/01/10 (b)(e) 7,785 8,338,202
-------------------------------------------------------------------------------
San Mateo County, California, Transit District,
Sales Tax Revenue Refunding Bonds, Series A, 5%,
6/01/29 (f) 5,650 5,627,965
-------------------------------------------------------------------------------
Sanger, California, Unified School District, GO
(Election of 2006), 5%, 8/01/27 (c) 7,345 7,561,751
-------------------------------------------------------------------------------
Santa Clara, California, Redevelopment Agency, Tax
Allocation Bonds (Bayshore North Project), Series A,
5.50%, 6/01/23 (a) 14,000 14,313,320
-------------------------------------------------------------------------------
Santa Clara, California, Subordinated Electric
Revenue Bonds, Series A, 5%, 7/01/28 (f) 6,050 6,034,815
-------------------------------------------------------------------------------
Santa Monica, California, Redevelopment Agency,
Tax Allocation Bonds (Earthquake Recovery
Redevelopment Project), 6%, 7/01/09 (a)(b) 5,110 5,378,326
-------------------------------------------------------------------------------
Santa Monica-Malibu Unified School District,
California, GO (Election of 2006), Series A, 5%,
8/01/32 (e) 5,000 5,028,800
-------------------------------------------------------------------------------
Santa Rosa, California, High School District, GO
(Election of 2002), 5%, 8/01/28 (f) 2,855 2,851,289
-------------------------------------------------------------------------------
See Notes to Financial Statements.
8 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Schedule of Investments (continued) (Percentages shown are based on Net Assets)
Par
Municipal Bonds (000) Value
===============================================================================
California (concluded)
-------------------------------------------------------------------------------
Sierra, California, Joint Community College
District, GO (School Facility Improvement District
Number 2 -- Western Nevada), Series A,
5%, 8/01/28 (e) $ 1,550 $ 1,522,953
-------------------------------------------------------------------------------
Stockton, California, Public Financing Authority,
Water Revenue Bonds (Water System Capital
Improvement Projects), Series A, 5%, 10/01/31 (f) 3,200 3,191,040
-------------------------------------------------------------------------------
Tamalpais, California, Union High School District,
GO (Election of 2006), 5%, 8/01/28 (f) 4,400 4,487,780
-------------------------------------------------------------------------------
Tracy, California, Area Public Facilities Financing
Agency, Special Tax Refunding Bonds (Community
Facilities District Number 87-1), Series H, 5.875%,
10/01/19 (f) 13,025 13,855,344
-------------------------------------------------------------------------------
Turlock, California, Public Finance Authority, Sewer
Revenue Bonds, Series A, 5%, 9/15/33 (e) 6,655 6,477,777
-------------------------------------------------------------------------------
University of California, General Revenue Refunding
Bonds, Series A, 5%, 5/15/27 (a) 10,500 10,653,510
-------------------------------------------------------------------------------
Vista, California, COP (Community Projects), 5%,
5/01/37 (f) 6,750 6,608,250
-------------------------------------------------------------------------------
Vista, California, Unified School District, GO, Series B,
5%, 8/01/28 (e) 2,550 2,496,119
-------------------------------------------------------------------------------
Walnut Valley, California, Unified School District,
GO (Election of 2007 -- Measure S), Series A, 5%,
2/01/33 (c) 2,000 2,031,600
-------------------------------------------------------------------------------
Washington, California, Unified School District
(Yolo County), Capital Appreciation, GO (Election
of 2004), Series A, 4.98%, 8/01/29 (e)(k) 6,075 1,868,670
-------------------------------------------------------------------------------
West Contra Costa, California, Unified School
District, Capital Appreciation, GO (Election of 2002),
Series C, 5.78%, 8/01/29 (e)(k) 5,825 1,733,986
-------------------------------------------------------------------------------
West Contra Costa, California, Unified School
District, GO (Election of 2005), Series A, 5%,
8/01/26 (c) 2,595 2,660,211
-------------------------------------------------------------------------------
Yorba Linda, California, Redevelopment Agency,
Redevelopment Project Tax Allocation Revenue
Bonds (Subordinate Lien), Series B, 5%,
9/01/32 (a) 3,145 3,084,238
------------
725,122,066
===============================================================================
Puerto Rico -- 1.5%
-------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, Power Revenue
Refunding Bonds, Series UU, 5%, 7/01/24 (c) 8,120 8,327,141
-------------------------------------------------------------------------------
Total Municipal Bonds
(Cost -- $743,220,633) -- 129.7% 733,449,207
===============================================================================
Municipal Bonds Transferred to
Tender Option Bond Trusts (m)
===============================================================================
California
-------------------------------------------------------------------------------
Alameda County, California, Joint Powers, Lease
Revenue Refunding Bonds, 5%, 12/01/34 (c) 4,150 4,189,944
-------------------------------------------------------------------------------
Chaffey Community College District, California
(Election of 2002) -- Series B, 5%, 6/01/30 (f) 9,905 9,983,711
-------------------------------------------------------------------------------
Contra Costa, California, Community College
District (Election of 2002), 5%, 8/01/28 (f) 7,800 7,914,036
-------------------------------------------------------------------------------
Desert, California, Community College District,
GO, Series C, 5%, 8/01/37 (c) 7,498 7,581,525
-------------------------------------------------------------------------------
Los Angeles, California, Community College District
(Election of 2003) -- Series E , 5%, 8/01/31 (c) 11,215 11,398,510
-------------------------------------------------------------------------------
Los Angeles, California, Community Refunding Agency
Community Redeveloping Financing Authority (Bunker
Hill Project) -- Series A, 5%, 12/01/27 (c) 10,000 9,967,681
-------------------------------------------------------------------------------
Los Angeles, California, Water & Power Revenue Bonds
Series A-1, 5.125%, 7/01/31 (c) 4,992 5,053,791
-------------------------------------------------------------------------------
Palomar Pomerado Health California (Election of
2004) -- Series A, 5.125%, 8/01/37 (f) 9,299 9,407,322
-------------------------------------------------------------------------------
Peralta, California, Community College District, 5%,
8/01/32 (c) 6,980 7,096,985
-------------------------------------------------------------------------------
Peralta, California, Community College District, GO
(Election of 2000), Series D, 5%, 8/01/35 (c) 15,490 15,608,808
-------------------------------------------------------------------------------
Poway, California, Unified School District (Election of
2002) -- District 02-1-B, 5%, 8/01/30 (c) 10,000 10,164,179
-------------------------------------------------------------------------------
Rancho, California, Water District Financing Authority
Revenue Bonds -- Series A, 5%, 8/01/34 (c) 5,000 5,070,370
-------------------------------------------------------------------------------
Riverside, California, Community College District
(Election of 2004) -- Series C, 5%, 8/01/32 (c) 8,910 8,811,188
-------------------------------------------------------------------------------
San Diego County, California, Water Authority
Revenue Refunding Bonds, COP, Series 2008 A, 5%,
5/01/33 (c) 16,740 16,959,629
-------------------------------------------------------------------------------
San Diego County, California, Water Authority Water
Revenue Certificate Partner, Series A, 5%, 5/01/31 (c) 4,000 4,023,143
-------------------------------------------------------------------------------
San Diego County, California, Water Authority, Water
Revenue Refunding Bonds, COP, Series A, 5%,
5/01/32 (f) 10,000 10,071,900
-------------------------------------------------------------------------------
San Francisco, California, City and County Public
Utilities Commission, Water Revenue Refunding
Bonds, Series A, 5%, 11/01/32 (f) 13,500 13,423,860
-------------------------------------------------------------------------------
San Diego, California, Community College District
(Election of 2002), 5%, 5/01/30 (c) 12,551 12,757,512
-------------------------------------------------------------------------------
San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Refunding Bonds,
Series A, 5%, 7/01/30 (f) 23,100 23,262,624
-------------------------------------------------------------------------------
San Francisco, California, City and County Airport
Commission, International Airport Revenue Bonds,
AMT -- Second Series-34E, 5.75%, 5/01/24 (c) 4,993 5,251,194
-------------------------------------------------------------------------------
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 9
Schedule of Investments (concluded) (Percentages shown are based on Net Assets)
Municipal Bonds Transferred to Par
Tender Option Bond Trusts (m) (000) Value
===============================================================================
California (concluded)
-------------------------------------------------------------------------------
University of California, Limited Project Revenue
Bonds, Series B, 5%, 5/15/33 (c) $17,400 $ 17,575,392
-------------------------------------------------------------------------------
Vista, California, Unified School District -- Capital
Appreciation Series A, 5.25%, 8/01/25 (c) 10,000 10,437,634
-------------------------------------------------------------------------------
West Contra Costa, California, Unified School
District, GO (Election of 2002), Series B, 5%,
5/01/32 (c) 6,680 6,736,179
-------------------------------------------------------------------------------
Total Municipal Bonds Transferred to
Tender Option Bond Trusts
(Cost -- $236,313,366) -- 41.1% 232,747,117
-------------------------------------------------------------------------------
Short-Term Securities Shares
===============================================================================
CMA California Municipal Money Fund,
1.28% (n)(o) 21,532,376 21,532,376
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $21,532,376) -- 3.8% 21,532,376
===============================================================================
Total Investments (Cost -- $1,001,066,375*) -- 174.6% 987,728,700
Other Assets Less Liabilities -- 1.4% 8,277,403
Liabilities for Trust Certificates, Including
Interest Expense and Fees Payable -- (25.2%) (142,786,453)
Preferred Stock, at Redemption Value -- (50.8%) (287,462,233)
------------
Net Assets Applicable to Common Stock -- 100.0% $565,757,417
============
* The cost and unrealized appreciation (depreciation) of investments as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 860,852,942
=============
Gross unrealized appreciation .......................... $ 7,308,155
Gross unrealized depreciation .......................... (22,777,397)
-------------
Net unrealized depreciation ............................ $ (15,469,242)
=============
(a) AMBAC Insured.
(b) U.S. government securities, held in escrow, are used to pay interest on
this security as well as to retire the bond in full at the date indicated,
typically at a premium to par.
(c) FSA Insured.
(d) Security is collateralized by municipal or U.S. Treasury Obligations.
(e) FGIC Insured.
(f) MBIA Insured.
(g) Variable rate security. Rate shown is as of report date. Maturity shown is
the final maturity date.
(h) FHA Insured.
(i) Assured Guaranty Insured.
(j) XL Capital Insured.
(k) Represents a zero-coupon bond. Rate shown reflects the effective yield at
the time of purchase.
(l) When-issued security.
(m) Securities represent bonds transferred to a tender option bond trust in
exchange for which the Fund acquired residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1 of
the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
(n) 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
--------------------------------------------------------------------------
CMA California Municipal Money Fund 21,517,775 $324,121
--------------------------------------------------------------------------
(o) Represents the current yield as of report date.
(p) All or a portion of security has been pledged as collateral in connection
with open financial futures contracts.
See Notes to Financial Statements.
10 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Statement of Assets and Liabilities
June 30, 2008
===============================================================================
Assets
-------------------------------------------------------------------------------
Investments at value -- unaffiliated (cost -- $979,533,999) ... $ 966,196,324
Investments at value -- affiliated (cost -- $21,532,376) ...... 21,532,376
Interest receivable ........................................... 13,710,858
Investments sold receivable ................................... 2,300,400
Cash .......................................................... 79,406
Dividends receivable -- affiliated ............................ 183
Prepaid expenses .............................................. 28,502
Other assets .................................................. 14,658
---------------
Total assets .................................................. 1,003,862,707
---------------
===============================================================================
Accrued Liabilities
-------------------------------------------------------------------------------
Investments purchased payable ................................. 5,089,169
Income dividends payable -- Common Stock ...................... 2,166,346
Interest expense and fees payable ............................. 441,453
Investment advisory fees payable .............................. 399,042
Officer's and Directors' fees payable ......................... 18,030
Other affiliates payable ...................................... 7,631
Other accrued expenses payable ................................ 176,386
---------------
Total accrued liabilities ..................................... 8,298,057
---------------
===============================================================================
Other Liabilities
-------------------------------------------------------------------------------
Trust certificates1 ........................................... 142,345,000
---------------
Total Liabilities ............................................. 150,643,057
---------------
===============================================================================
Preferred Stock
-------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $0.10 per share
(1,415 Class A Shares, 2,859 Class B Shares, 2,358 Class C
Shares, 2,181 Class D Shares and 2,682 Class E Shares)
authorized, issued and outstanding at $25,000 per share
liquidation preference ...................................... 287,462,233
---------------
===============================================================================
Net Assets Applicable to Common Stock
-------------------------------------------------------------------------------
Net assets applicable to Common Stock ......................... $ 565,757,417
===============
===============================================================================
Net Assets Applicable to Common Stock Shareholders Consist of
-------------------------------------------------------------------------------
Common Stock, par value $0.10 per share (200,000,000 shares
authorized, 40,874,458 shares issued and outstanding) ....... $ 4,087,446
Paid-in capital in excess of par .............................. 603,025,455
Undistributed net investment income ........................... 592,505
Accumulated net realized loss ................................. (28,610,314)
Net unrealized appreciation/depreciation ...................... (13,337,675)
---------------
Net assets, $13.84 net asset value per share of Common Stock .. $ 565,757,417
===============
1 Represents short-term floating rate certificates issued by tender
option bond trusts.
2 Related to tender option bond trusts.
Statement of Operations
Year Ended June 30, 2008
===============================================================================
Investment Income
-------------------------------------------------------------------------------
Interest ...................................................... $ 47,834,431
Dividends (including $324,121 from affiliates) ................ 324,530
---------------
Total income .................................................. 48,158,961
---------------
===============================================================================
Expenses
-------------------------------------------------------------------------------
Investment advisory ........................................... 5,370,672
Commissions for Preferred Stock ............................... 991,432
Accounting services ........................................... 268,478
Professional .................................................. 214,788
Officer and Directors ......................................... 53,581
Custodian ..................................................... 47,285
Printing ...................................................... 45,689
Transfer agent ................................................ 39,646
Registration .................................................. 13,455
Miscellaneous ................................................. 110,778
---------------
Total expenses excluding interest expense and fees ............ 7,155,804
Interest expense and fees2 .................................... 2,111,129
---------------
Total expenses ................................................ 9,266,933
Less fees waived by advisor ................................... (484,759)
---------------
Total expenses after waiver ................................... 8,782,174
---------------
Net investment income ......................................... 39,376,787
---------------
===============================================================================
Realized and Unrealized Gain (Loss)
-------------------------------------------------------------------------------
Net realized gain from:
Investments ............................................... 7,866,360
Futures ................................................... 61,753
---------------
7,928,113
---------------
Net change in unrealized appreciation/depreciation
on investments .............................................. (32,808,030)
---------------
Total realized and unrealized loss ............................ (24,879,917)
---------------
===============================================================================
Dividends to Preferred Stock Shareholders From
-------------------------------------------------------------------------------
Net investment income ......................................... (13,165,738)
---------------
Net Increase in Net Assets Resulting from Operations .......... $ 1,331,132
===============
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 11
Statements of Changes in Net Assets
Year Ended
June 30,
-------------------------------
Increase (Decrease) in Net Assets: 2008 2007
===============================================================================================================================
Operations
-------------------------------------------------------------------------------------------------------------------------------
Net investment income ...................................................................... $ 39,376,787 $ 41,177,095
Net realized gain .......................................................................... 7,928,113 4,531,770
Net change in unrealized appreciation/depreciation ......................................... (32,808,030) (1,281,142)
Dividends to Preferred Stock shareholders from net investment income ....................... (13,165,738) (12,734,644)
-------------------------------
Net increase in net assets applicable to Common Stock shareholders resulting from operations 1,331,132 31,693,079
-------------------------------
===============================================================================================================================
Dividends to Common Stock Shareholders From
-------------------------------------------------------------------------------------------------------------------------------
Net investment income ...................................................................... (27,627,211) (29,867,063)
-------------------------------
===============================================================================================================================
Capital Stock Transactions
-------------------------------------------------------------------------------------------------------------------------------
Reinvestment of dividends .................................................................. -- 823,540
-------------------------------
===============================================================================================================================
Net Assets Applicable to Common Stock Shareholders
-------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock ......................... (26,296,079) 2,649,556
Beginning of year .......................................................................... 592,053,496 589,403,940
-------------------------------
End of year ................................................................................ $ 565,757,417 $ 592,053,496
===============================
End of year undistributed net investment income ............................................ $ 592,505 $ 2,399,315
===============================
See Notes to Financial Statements.
12 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Financial Highlights
Year Ended June 30,
----------------------------------------------------------------
2008 2007 2006 2005 2004
==================================================================================================================================
Per Share Operating Performance
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ........................... $ 14.48 $ 14.44 $ 15.40 $ 14.73 $ 15.53
----------------------------------------------------------------
Net investment income 1 ...................................... 0.96 1.01 1.05 1.07 1.05
Net realized and unrealized gain (loss) ...................... (0.60) 0.07 (0.85) 0.69 (0.84)
Dividends to Preferred Stock shareholders from net investment
income ..................................................... (0.32) (0.31) (0.25) (0.14) (0.08)
----------------------------------------------------------------
Net increase (decrease) from investment operations ........... 0.04 0.77 (0.05) 1.62 0.13
----------------------------------------------------------------
Dividends to Common Stock shareholders from net investment
income ..................................................... (0.68) (0.73) (0.91) (0.95) (0.93)
----------------------------------------------------------------
Net asset value, end of year ................................. $ 13.84 $ 14.48 $ 14.44 $ 15.40 $ 14.73
================================================================
Market price, end of year .................................... $ 12.24 $ 13.92 $ 13.94 $ 14.97 $ 13.36
================================================================
==================================================================================================================================
Total Investment Return 2
----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ..................................... 0.64% 5.46% (0.29)% 11.56% 1.28%
================================================================
Based on market price ........................................ (7.41)% 5.02% (0.98)% 19.56% (3.93)%
================================================================
==================================================================================================================================
Ratios to Average Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and excluding interest expense and
fees 3,4 ................................................... 1.14% 1.12% 1.10% 1.11% 1.10%
================================================================
Total expenses after waiver 4 ................................ 1.50% 1.60% 1.35% 1.16% 1.17%
================================================================
Total expenses 4 ............................................. 1.58% 1.66% 1.41% 1.22% 1.24%
================================================================
Net investment income ........................................ 6.72% 6.81% 7.01% 6.99% 6.87%
================================================================
Dividends to Preferred Stock shareholders .................... 2.22% 2.11% 1.68% 0.93% 0.53%
================================================================
Net investment income to Common Stock shareholders ........... 4.50% 4.70% 5.33% 6.06% 6.34%
================================================================
==================================================================================================================================
Supplemental Data
----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of year (000) ..... $565,757 $592,053 $589,404 $626,109 $598,908
================================================================
Preferred Stock outstanding at liquidation preference, end of
year (000) ................................................. $287,375 $390,000 $390,000 $390,000 $390,000
================================================================
Portfolio turnover ........................................... 43% 35% 34% 47% 35%
================================================================
Asset coverage end of year (000) ............................. $ 2,969 $ 2,518 $ 2,511 $ 2,605 $ 2,536
================================================================
1 Based on average shares outstanding.
2 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 effect of sales
charges.
3 Interest expense and fees relate to tender option bond trusts. See Note 1
of the Notes to Financial Statements for details of municipal bonds
transferred to tender option bond trusts.
4 Does not reflect the effect of dividends to Preferred Stock shareholders.
See Notes to Financial Statements.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 13
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock MuniHoldings California Insured Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
non-diversified, closed-end management investment company. The Fund's financial
statements are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The Fund determines and makes available for publication the net asset
value of its Common Stock on a daily basis.
The following is a summary of significant accounting policies followed by the
Fund:
Valuation of Investments: Municipal investments (including commitments to
purchase such investments on a "when-issued" basis) are valued on the basis of
prices provided by dealers or pricing services selected under the supervision of
the Fund's Board of Directors (the "Board"). In determining the value of a
particular investment, pricing services may use certain information with respect
to transactions in such investments, quotations from bond dealers, pricing
matrixes, market transactions in comparable investments and various
relationships between investments. Financial futures contracts traded on
exchanges are valued at their last sale price. Short-term securities are valued
at amortized cost. Investments in open-end investment companies are valued at
net asset value each business day.
In the event that application of these methods of valuation results in a price
for an investment which is deemed not to be representative of the market value
of such investment, the investment will be valued by a method approved by the
Board as reflecting fair value ("Fair Value Assets"). When determining the price
for Fair Value Assets, the investment advisor and/or sub-advisor seeks to
determine the price that the Fund might reasonably expect to receive from the
current sale of that asset in an arm's-length transaction. Fair value
determinations shall be based upon all available factors that the investment
advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets
is subsequently reported to the Board or a committee thereof.
Derivative Financial Instruments: The Fund may engage in various portfolio
investment strategies 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 if the value of the contract decreases due to an
unfavorable change in the price of the underlying security or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits, and maintains as collateral, such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from, or pay to, the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as margin variation and are recognized 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.
Forward Commitments and When-Issued Delayed Delivery Securities: The Fund may
purchase securities on a when-issued basis and may purchase or sell securities
on a forward commitment basis. Settlement of such transactions normally occurs
within a month or more after the purchase or sale commitment is made. The Fund
may purchase securities under such conditions only with the intention of
actually acquiring them, but may enter into a separate agreement to sell the
securities before the settlement date. Since the value of securities purchased
may fluctuate prior to settlement, the Fund may be required to pay more at
settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement. Upon making a
commitment to purchase a security on a when-issued basis, the Fund will hold
liquid assets worth at least the equivalent of the amount due.
Municipal Bonds Transferred to Tender Option Bond Trusts: The Fund leverages its
assets through the use of tender option bond trusts ("TOBs"). A TOB is
established by a third party sponsor forming a special purpose entity, into
which one or more funds, or an agent on behalf of the funds, transfers municipal
securities. Other funds managed by the investment advisor may also contribute
municipal securities to a TOB into which the Fund has contributed securities. A
TOB typically issues two classes of beneficial interests: short-term floating
rate certificates, which are sold to third party investors, and residual
certificates ("TOB Residuals"), which are generally issued to the participating
funds that made the transfer. The TOB Residuals 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, within seven days, a corresponding share of the municipal securities
from the TOB to the Fund. The cash received by the TOB from the sale of the
short-term floating rate certificates, less transaction expenses, is paid to the
Fund, which typically invests the cash in additional municipal securities. The
Fund's transfer of the municipal securities to a TOB is accounted for as a
secured borrowing, therefore the municipal securities deposited into a TOB are
presented in the Fund's Schedule of Investments and the proceeds from the
transaction are reported as a liability of the Fund.
Interest income from the underlying securities 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
14 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Notes to Financial Statements (continued)
certificates have interest rates that generally reset weekly and their holders
have the option to tender certificates to the TOB for redemption at par at each
reset date. As of June 30, 2008, the aggregate value of the underlying municipal
securities transferred to TOBs was $232,747,117, the related liability for trust
certificates was $142,345,000 and the range of interest rates on the trust
certificates was 1.598% to 2.918%.
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 TOBs likely will adversely affect the Fund's investment income
and dividends to Common Stock shareholders. Fluctuations in the market value of
municipal securities deposited into the TOB may adversely affect the Fund's net
asset value per share.
Zero-Coupon Bonds: The Fund may invest in zero-coupon bonds, which are normally
issued at a significant discount from face value and do not provide periodic
interest payments. Zero-coupon bonds may experience greater volatility in market
value than similar maturity debt obligations which provide regular interest
payments.
Segregation: In cases in which the 1940 Act and the interpretive positions of
the Securities and Exchange Commission ("SEC") require that the Fund segregate
assets in connection with certain investments (e.g., futures) or certain
borrowings, the Fund will, consistent with certain interpretive letters issued
by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.
Investment Transactions and Investment Income: Investment transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual method. The Fund amortizes all
premiums and discounts on debt securities.
Dividends and Distributions: Dividends from net investment income are declared
and paid monthly. Distributions of capital gains are recorded on the ex-dividend
dates. Dividends and distributions to Preferred Stock shareholders are accrued
and determined as described in Note 4.
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.
Effective December 31, 2007, the Fund implemented Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes -- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. The investment advisor has
evaluated the application of FIN 48 to the Fund, and has determined that the
adoption of FIN 48 does not have a material impact on the Fund's financial
statements. The Fund files U.S. federal and various state and local tax returns.
No income tax returns are currently under examination. The statute of
limitations on the Fund's U.S. federal tax returns remains open for the years
ended June 30, 2005 through June 30, 2007. The statutes of limitations on the
Fund's state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
Recent Accounting Pronouncements: In September 2006, Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The impact on the Fund's financial
statement disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. FAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. FAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. The impact on the Fund's financial statement disclosures, if any,
is currently being assessed.
In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures
about Derivative Instruments and Hedging Activities -- an amendment of FASB
Statement No. 133" ("FAS 161"), was issued and is effective for fiscal years
beginning after November 15, 2008. FAS 161 is intended to improve financial
reporting for derivative instruments by requiring enhanced disclosure that
enables investors to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect an entity's
results of operations and financial position. The impact on the Fund's financial
statement disclosures, if any, is currently being assessed.
Deferred Compensation and BlackRock Closed-End Stock Equivalent Investment Plan:
Under the deferred compensation plan approved by the Fund's Board,
non-interested Directors ("Independent Directors") may defer a portion of their
annual complex-wide compensation. Deferred amounts earn an approximate return as
though equivalent dollar amounts had been invested in common shares of other
certain BlackRock Closed-End Funds selected by the Independent Directors. This
has approximately the same economic effect for the Independent Directors as if
the
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 15
Notes to Financial Statements (continued)
Independent Directors had invested the deferred amounts directly in other
certain BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Fund. The
Fund may, however, elect to invest in common stock of other certain BlackRock
Closed-End Funds selected by the Independent Directors in order to match its
deferred compensation obligations. Investments to cover the Fund's deferred
compensation liability are included in other assets on the Statement of Assets
and Liabilities.
Other: Expenses directly related to the Fund are charged to that Fund. Other
operating expenses shared by several funds are pro-rated among those funds on
the basis of relative net assets or other appropriate methods.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
The Fund entered into an Investment Advisory Agreement with BlackRock Advisors,
LLC (the "Advisor"), an indirect, wholly owned subsidiary of BlackRock, Inc., to
provide investment advisory and administration services. Merrill Lynch & Co.,
Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. are principal
owners of BlackRock, Inc.
The Advisor is responsible for the management of 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 the Advisor a monthly fee at an annual rate of 0.55% of the Fund's average
daily net assets. Average daily net assets is the average daily value of the
Fund's total assets minus the sum of its accrued liabilities.
The Advisor has agreed to waive its advisory fee by the amount of investment
advisory fees the Fund pays to the Advisor indirectly through its investment in
affiliated money market funds. For the year ended June 30, 2008, the Advisor
waived $71,028, which is included in fees waived by advisor on the Statement of
Operations.
The Advisor has also agreed to waive its investment advisory fee based on the
proceeds of Preferred Stock and TOBs that exceeds 35% of the Fund's total net
assets. This amount is included in fees waived by advisor on the Statement of
Operations. For the year ended June 30, 2008, the Advisor waived $413,731, which
is included in fees waived by advisor on the Statement of Operations.
The Advisor has entered into a separate sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the
Advisor pays BIM for services it provides, a monthly fee that is a percentage of
the investment advisory fee paid by the Fund to the Advisor.
For the year ended June 30, 2008, the Fund reimbursed the Advisor $16,570 for
certain accounting services, which is included in accounting services in the
Statement of Operations.
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
year ended June 30, 2008 were $430,730,967 and $483,890,881, respectively.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of stock, including Preferred
Stock, par value $0.10 per share, all of which were initially classified as
Common Stock. The Board is authorized, however, to reclassify any unissued
shares of stock without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the year ended June 30, 2008 remained
constant and during the year ended June 30, 2007 increased 54,952 as a result of
dividend reinvestment.
Preferred Stock
Preferred Stock of the Fund has a par value of $0.10 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 June 30, 2008 were as
follows: Series A, 2.623%; Series B, 2.612%; Series C, 2.568%; Series D, 2.601%;
and Series E, 2.568%.
On June 2, 2008, the Fund announced the following redemptions of Preferred Stock
at a price of $25,000 per share plus any accrued and unpaid dividends through
the redemption date:
--------------------------------------------------------------------------------
Redemption Shares Aggregate
Series Date Redeemed Price
--------------------------------------------------------------------------------
A ................................... 6/24/2008 505 $12,625,000
B ................................... 6/23/2008 1,021 $25,525,000
C ................................... 6/27/2008 842 $21,050,000
D ................................... 6/26/2008 779 $19,475,000
E ................................... 6/25/2008 958 $23,950,000
--------------------------------------------------------------------------------
The Fund financed the Preferred Stock redemptions with cash received from TOB
transactions.
Shares issued and outstanding during the year ended June 30, 2007 remained
constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate of 0.25%, calculated on the aggregated principal amount. For
the year ended June 30, 2008, Merrill Lynch, Pierce,
16 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Notes to Financial Statements (continued)
Fenner & Smith Incorporated, a wholly owned subsidiary of Merrill Lynch, earned
commissions of $284,090.
Dividends on seven-day Preferred Stock are cumulative at a rate which is reset
every seven days based on the results of an auction. If the Preferred Stock
fails to clear the auction on an auction date, the Fund is required to pay the
maximum applicable rate on the Preferred Stock to holders of such shares for
successive dividend periods until such time as the stock is successfully
auctioned. The maximum applicable rate on Preferred Stock is the higher of 110%
of the AA commercial paper rate or 110% of 90% of the Kenny S&P 30-day High
Grade Index rate divided by 1.00 minus the marginal tax rate. During the year
ended June 30, 2008, the Preferred Stock of the Fund was successfully auctioned
at each auction date until February 13, 2008. The low, high and average dividend
rates on the Preferred Stock for the Fund for the year ended June 30, 2008 were
as follows:
--------------------------------------------------------------------------------
Series Low High Average
--------------------------------------------------------------------------------
A ................................... 2.483% 4.503% 3.237%
B ................................... 2.483% 4.503% 3.155%
C ................................... 2.400% 4.503% 3.159%
D ................................... 2.000% 4.356% 3.117%
E ................................... 2.535% 4.356% 3.222%
--------------------------------------------------------------------------------
Since February 13, 2008, the Preferred Stock of the Fund failed to clear any of
its auctions. As a result, the Preferred Stock dividend rates were reset to the
maximum applicable rate, which ranged from 2.48% to 4.50%. A failed auction is
not an event of default for the Fund but has a negative impact on the liquidity
of the Preferred Stock. A failed auction occurs when there are more sellers of a
Fund's auction rate preferred stock than buyers. It is impossible to predict how
long this imbalance will last. An auction for the Fund's Preferred Stock may not
occur for some time, if ever, and even if liquidity does resume, holders of
Preferred Stock may not have the ability to sell the Preferred Stock at its
liquidation preference.
The Fund may not declare dividends or make other distributions on Common Stock
or purchase any such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding Preferred Stock is less
than 200%.
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $25,000 per share plus any accumulated
unpaid dividends whether or not declared. The Preferred Stock is also subject to
mandatory redemption at $25,000 per share plus any accumulated or unpaid
dividends, whether or not declared, if certain requirements relating to the
composition of the assets and liabilities of the Fund, as set forth in the
Fund's Articles Supplementary, are not satisfied.
The holders of Preferred Stock have voting rights equal to the holders of Common
Stock (one vote per share) and will vote together with holders of Common Stock
(one vote per share) as a single class. However, the holders of Preferred Stock,
voting as a separate class, are also entitled to elect two Directors for the
Fund. In addition, the 1940 Act requires that along with approval by
shareholders that might otherwise be required, the approval of the holders of a
majority of any outstanding Preferred Stock, voting separately as a class, would
be required to (a) adopt any plan of reorganization that would adversely affect
the Preferred Stock, (b) change the Fund's subclassification as a closed-end
investment company or change its fundamental investment restrictions or (c)
change its business so as to cease to be an investment company.
5. Income Tax Information:
Reclassification: Accounting principles generally accepted in the United States
of America require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. Accordingly, during
the current year, $551,791 has been reclassified between undistributed net
investment income and accumulated net realized capital losses as a result of a
permanent difference attributable to amortization methods on fixed income
securities. This reclassification has no effect on net assets or net asset
values per share.
The tax character of distributions paid during the fiscal years ended June 30,
2008 and June 30, 2007 was as follows:
--------------------------------------------------------------------------------
6/30/2008 6/30/2007
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .............................. $40,337,041 $42,601,707
Ordinary income ................................ 455,908 --
---------------------------
Total distributions .............................. $40,792,949 $42,601,707
===========================
As of June 30, 2008, the components of accumulated losses on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt net income ......................... $ 843,891
Undistributed long-term net capital gains ................... --
------------
Total undistributed net earnings ............................ 843,891
Capital loss carryforward ................................... (24,411,362)*
Net unrealized losses ....................................... (17,788,013)**
------------
Total accumulated net losses ................................ $(41,355,484)
============
* On June 30, 2008, the Fund had a capital loss carryforward of $24,411,362,
of which $21,303,995 expires in 2009 and $3,107,367 expires in 2012. This
amount, subject to limitations, will be available to offset future
realized capital gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on straddles, the
difference between book and tax amortization methods for premiums and
discounts on fixed income securities, the difference between book and tax
treatment of residual interests in tender option bond trusts and the
deferral of compensation to trustees.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 17
Notes to Financial Statements (concluded)
6. Concentration Risk:
The Fund's investments are concentrated in California, which may be affected by
adverse financial, social, environmental, economic, regulatory and political
factors.
Many municipalities insure repayment of their bonds, which reduces the risk of
loss due to issuer default. The market value of these bonds may fluctuate for
other reasons, including market perception of the value of such insurance, and
there is no guarantee that the insurer will meet its obligation.
7. Subsequent Events:
The Fund paid a net investment income dividend to holders of Common Stock in the
amount of $0.053 per share on August 1, 2008 to shareholders of record on July
15, 2008.
The dividends declared on Preferred Stock for the period July 1, 2008 to July
31, 2008 were as follows: Series A, $76,325; Series B, $156,016; Series C,
$152,492; Series D, $150,533; and Series E, $184,414.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BlackRock MuniHoldings California
Insured Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of BlackRock MuniHoldings California Insured Fund,
Inc. (the "Fund") as of June 30, 2008, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of June 30, 2008 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock MuniHoldings California Insured Fund, Inc. as of June 30, 2008, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
August 25, 2008
Important Tax Information (Unaudited)
The following table summarizes the taxable per share distributions paid by
BlackRock MuniHoldings California Insured Fund, Inc. during the year:
--------------------------------------------------------------------------------
Payable Ordinary
Date Income
--------------------------------------------------------------------------------
Common Stock Shareholders 12/31/2007 $0.007404
--------------------------------------------------------------------------------
Preferred Stock Shareholders:
Series A 11/27/2007 $ 9.83
Series B 11/26/2007 $ 9.89
Series C 11/30/2007 $ 9.77
Series D 11/29/2007 $ 9.68
Series E 11/28/2007 $ 9.92
--------------------------------------------------------------------------------
All other net investment income distributions paid by the Fund during the
taxable year ended June 30, 2008 qualify as tax-exempt interest dividends for
federal income tax purposes.
18 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
The Board of Directors (the "Board," the members of which are referred to as
"Directors") of the BlackRock MuniHoldings California Insured Fund, Inc. (the
"Fund") met in April and May 2008 to consider approving the continuation of the
Fund's investment advisory agreement (the "Advisory Agreement") with BlackRock
Advisors, LLC (the "Advisor"), the Fund's investment adviser. The Board also
considered the approval of the Fund's subadvisory agreement (the "Subadvisory
Agreement" and, together with the "Advisory Agreement," the "Agreements")
between the Advisor and BlackRock Investment Management, LLC (the "Subadvisor").
The Advisor and the Subadvisor are collectively referred to herein as the
"Advisors" and, together with BlackRock, Inc., "BlackRock."
Activities and Composition of the Board
The Board of Directors of the Fund consists of thirteen individuals, eleven of
whom are not "interested persons" of the Fund as defined in the Investment
Company Act of 1940 (the "1940 Act") (the "Independent Directors"). The
Directors are responsible for the oversight of the operations of the Fund and
perform the various duties imposed on the directors of investment companies by
the 1940 Act. The Independent Directors have retained independent legal counsel
to assist them in connection with their duties. The Chairman of the Board is an
Independent Director. The Board has established four standing committees: an
Audit Committee, a Governance and Nominating Committee, a Compliance Committee
and a Performance Oversight Committee.
Advisory Agreement and Subadvisory Agreement
Upon the consummation of the combination of BlackRock, Inc.'s investment
management business with Merrill Lynch & Co., Inc.'s investment management
business, including Merrill Lynch Investment Managers, L.P., and certain
affiliates, the Fund entered into the Advisory Agreement and the Subadvisory
Agreement, each with an initial two-year term. Consistent with the 1940 Act,
after the Advisory Agreement's and Subadvisory Agreement's respective initial
two-year term, the Board is required to consider the continuation of the Fund's
Advisory Agreement and Subadvisory Agreement on an annual basis. In connection
with this process, the Board assessed, among other things, the nature, scope and
quality of the services provided to the Fund by the personnel of BlackRock and
its affiliates, including investment advisory services, administrative services,
secondary market support services, oversight of fund accounting and custody, and
assistance in meeting legal and regulatory requirements. The Board also received
and assessed information regarding the services provided to the Fund by certain
unaffiliated service providers.
Throughout the year, the Board also considered a range of information in
connection with its oversight of the services provided by BlackRock and its
affiliates. Among the matters the Board considered were: (a) investment
performance for one-, three- and five-year periods, as applicable, against peer
funds, as well as senior management and portfolio managers' analysis of the
reasons for underperformance, if applicable; (b) fees, including advisory,
administration and other fees paid to BlackRock and its affiliates by the Fund,
as applicable; (c) Fund operating expenses paid to third parties; (d) the
resources devoted to and compliance reports relating to the Fund's investment
objective, policies and restrictions; (e) the Fund's compliance with its Code of
Ethics and compliance policies and procedures; (f) the nature, cost and
character of non-investment management services provided by BlackRock and its
affiliates; (g) BlackRock's and other service providers' internal controls; (h)
BlackRock's implementation of the proxy voting guidelines approved by the Board;
(i) execution quality; (j) valuation and liquidity procedures; and (k) reviews
of BlackRock's business, including BlackRock's response to the increasing scale
of its business.
Board Considerations in Approving the Advisory Agreement and Subadvisory
Agreement
To assist the Board in its evaluation of the Agreements, the Directors received
information from BlackRock in advance of the April 22, 2008 meeting which
detailed, among other things, the organization, business lines and capabilities
of the Advisors, including: (a) the responsibilities of various departments and
key personnel and biographical information relating to key personnel; (b)
financial statements for BlackRock; (c) the advisory and/or administrative fees
paid by the Fund to the Advisors, including comparisons, compiled by Lipper,
Inc. ("Lipper"), an independent third party, with the management fees, which
include advisory and administration fees, of funds with similar investment
objectives ("Peers"); (d) the profitability of BlackRock and certain industry
profitability analyses for advisers to registered investment companies; (e) the
expenses of BlackRock in providing various services; (f) non-investment advisory
reimbursements, if applicable, and "fallout" benefits to BlackRock; (g)
economies of scale, if any, generated through the Advisors' management of all of
the BlackRock closed-end funds (the "Fund Complex"); (h) the expenses of the
Fund, including comparisons of the Fund's expense ratios (both before and after
any fee waivers) with the expense ratios of its Peers; (i) an internal
comparison of management fees classified by Lipper, if applicable; and (j) the
Fund's performance for the past one-, three- and five-year periods, as
applicable, as well as the Fund's performance compared to its Peers.
The Board also considered other matters it deemed important to the approval
process, where applicable, such as payments made to BlackRock or its affiliates
relating to the distribution of Fund shares, services related to the valuation
and pricing of Fund portfolio holdings, and direct and indirect benefits to
BlackRock and its affiliates from their relationship with the Fund.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 19
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
In addition to the foregoing materials, independent legal counsel to the
Independent Directors provided a legal memorandum outlining, among other things,
the duties of the Board under the 1940 Act, as well as the general principles of
relevant law in reviewing and approving advisory contracts, the requirements of
the 1940 Act in such matters, an adviser's fiduciary duty with respect to
advisory agreements and compensation, and the standards used by courts in
determining whether investment company boards of directors have fulfilled their
duties and the factors to be considered by boards in voting on advisory
agreements.
The Independent Directors reviewed this information and discussed it with
independent legal counsel prior to the meeting on April 22, 2008. At the Board
meeting on April 22, 2008, BlackRock made a presentation to and responded to
questions from the Board. Following the meeting on April 22, 2008, the Board
presented BlackRock with questions and requests for additional information.
BlackRock responded to these requests with additional written materials provided
to the Directors prior to the meetings on May 29 and 30, 2008. At the Board
meetings on May 29 and 30, 2008, BlackRock responded to further questions from
the Board. In connection with BlackRock's presentations, the Board considered
each Agreement and, in consultation with independent legal counsel, reviewed the
factors set out in judicial decisions and Securities and Exchange Commission
("SEC") statements relating to the renewal of the Agreements.
Matters Considered by the Board
In connection with its deliberations with respect to the Agreements, the Board
considered all factors it believed relevant with respect to the Fund, including
the following: the nature, extent and quality of the services provided by the
Advisors; the investment performance of the Fund; the costs of the services to
be provided and profits to be realized by the Advisors and their affiliates from
their relationship with the Fund; the extent to which economies of scale would
be realized as the Fund Complex grows; and whether BlackRock realizes other
benefits from its relationship with the Fund.
A. Nature, Extent and Quality of the Services: In evaluating the nature, extent
and quality of the Advisors' services, the Board reviewed information concerning
the types of services that the Advisors provide and are expected to provide to
the Fund, narrative and statistical information concerning the Fund's
performance record and how such performance compares to the Fund's Peers,
information describing BlackRock's organization and its various departments, the
experience and responsibilities of key personnel and available resources. The
Board noted the willingness of the personnel of BlackRock to engage in open,
candid discussions with the Board. The Board further considered the quality of
the Advisors' investment process in making portfolio management decisions.
In addition to advisory services, the Directors considered the quality of the
administrative and non-investment advisory services provided to the Fund. The
Advisors and their affiliates provided the Fund with such administrative and
other services, as applicable (in addition to any such services provided by
others for the Fund), and officers and other personnel as are necessary for the
operations of the Fund. In addition to investment management services, the
Advisors and their affiliates provided the Fund with services such as: preparing
shareholder reports and communications, including annual and semi-annual
financial statements and the Fund's website; communications with analysts to
support secondary market trading; assisting with daily accounting and pricing;
preparing periodic filings with regulators and stock exchanges; overseeing and
coordinating the activities of other service providers; administering and
organizing Board meetings and preparing the Board materials for such meetings;
providing legal and compliance support (such as helping to prepare proxy
statements and responding to regulatory inquiries); and performing other Fund
administrative tasks necessary for the operation of the Fund (such as tax
reporting and fulfilling regulatory filing requirements). The Board considered
the Advisors' policies and procedures for assuring compliance with applicable
laws and regulations.
B. The Investment Performance of the Fund and BlackRock: As previously noted,
the Board received performance information regarding the Fund and its Peers.
Among other things, the Board received materials reflecting the Fund's historic
performance and the Fund's performance compared to its Peers. More specifically,
the Fund's one-, three- and five-year total returns (as applicable) were
evaluated relative to its Peers (including the Peers' median performance).
The Board reviewed a narrative and statistical analysis of the Lipper data that
was prepared by BlackRock, which analyzed various factors that affect Lipper
rankings.
The Board noted that, although the Fund underperformed its Peers in at least two
of the one-, three- and five-year periods reported, the Fund had outperformed
its Peers in at least two of such periods based on a customized performance
comparison provided by BlackRock utilizing a subset of the Lipper universe which
gives a greater significance to current distributions, providing a more accurate
comparison.
After considering this information, the Boards concluded that the performance of
the Fund, in light of and after considering the other facts and circumstances
applicable to the Fund, supports a conclusion that the Fund's Agreements should
be renewed.
20 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(continued)
C. Consideration of the Advisory Fees and the Cost of the Services and Profits
to be Realized by BlackRock and its Affiliates from their Relationship with the
Fund: In evaluating the management fees and expenses that a Fund is expected to
bear, the Board considered the Fund's current management fee structure and the
Fund's expense ratios in absolute terms as well as relative to the fees and
expense ratios of its applicable Peers. The Board, among other things, reviewed
comparisons of the Fund's gross management fees before and after any applicable
reimbursements and fee waivers and total expense ratios before and after any
applicable waivers with those of applicable Peers. The Board also reviewed a
narrative analysis of the Peer rankings prepared by Lipper and summarized by
BlackRock at the request of the Board. This summary placed the Peer rankings
into context by analyzing various factors that affect these comparisons.
The Board noted that the Fund paid contractual management fees lower than or
equal to the median contractual fees paid by its Peers. This comparison was made
without giving effect to any expense reimbursements or fee waivers.
The Board also compared the management fees charged and services provided by the
Advisors to closed-end funds in general versus other types of clients (such as
open-end investment companies and separately managed institutional accounts) in
similar investment categories. The Board noted certain differences in services
provided and costs incurred by the Advisor with respect to closed-end funds
compared to these other types of clients and the reasons for such differences.
In connection with the Board's consideration of the fees and expense
information, the Board reviewed the considerable investment management
experience of the Advisors and considered the high level of investment
management, administrative and other services provided by the Advisors. In light
of these factors and the other facts and circumstances applicable to the Fund,
the Board concluded that the fees paid and level of expenses incurred by the
Fund under its Agreements support a conclusion that the Fund's Agreements should
be renewed.
D. Profitability of BlackRock: The Board also considered BlackRock's
profitability in conjunction with its review of fees. The Board reviewed
BlackRock's profitability with respect to the Fund Complex and other fund
complexes managed by the Advisors. In reviewing profitability, the Board
recognized that one of the most difficult issues in determining profitability is
establishing a method of allocating expenses. The Board also reviewed
BlackRock's assumptions and methodology of allocating expenses, noting the
inherent limitations in allocating costs among various advisory products. The
Board also recognized that individual fund or product line profitability of
other advisors is generally not publicly available.
The Board recognized that profitability may be affected by numerous factors
including, among other things, the types of funds managed, expense allocations
and business mix, and therefore comparability of profitability is somewhat
limited. Nevertheless, to the extent available, the Board considered BlackRock's
operating margin compared to the operating margin estimated by BlackRock for a
leading investment management firm whose operations consist primarily of
advising closed-end funds. The comparison indicated that BlackRock's operating
margin was approximately the same as the operating margin of such firm.
In evaluating the reasonableness of the Advisors' compensation, the Board also
considered any other revenues paid to the Advisors, including partial
reimbursements paid to the Advisors for certain non-investment advisory
services, if applicable. The Board noted that these payments were less than the
Advisors' costs for providing these services. The Board also considered indirect
benefits (such as soft dollar arrangements) that the Advisors and their
affiliates are expected to receive which are attributable to their management of
the Fund.
The Board concluded that BlackRock's profitability, in light of all the other
facts and circumstances applicable to the Fund, supports a conclusion that the
Fund's Agreements should be renewed.
E. Economies of Scale: In reviewing the Fund's fees and expenses, the Board
examined the potential benefits of economies of scale, and whether any economies
of scale should be reflected in the Fund's fee structure, for example through
the use of breakpoints for the Fund or the Fund Complex. In this regard, the
Board reviewed information provided by BlackRock, noting that most closed-end
fund complexes do not have fund-level breakpoints because closed-end funds
generally do not experience substantial growth after their initial public
offering and each fund is managed independently consistent with its own
investment objectives. The Board noted that only three closed-end funds in the
Fund Complex have breakpoints in their fee structures. Information provided by
Lipper also revealed that only one closed-end fund complex used a complex-level
breakpoint structure. The Board found, based on its review of comparable funds,
that the Fund's management fee is appropriate in light of the scale of the Fund.
F. Other Factors: In evaluating fees, the Board also considered indirect
benefits or profits the Advisors or their affiliates may receive as a result of
their relationships with the Fund ("fall-out benefits"). The Directors,
including the Independent Directors, considered the intangible benefits that
accrue to the Advisors and their affiliates by virtue of their relationships
with the Fund, including potential benefits accruing to the Advisors and their
affiliates as a result of participating in offerings of the Fund's shares,
potentially stronger relationships with members of the broker-dealer community,
increased name recognition of the Advisors and their affiliates, enhanced sales
of other investment funds and products sponsored by the Advisors and their
affiliates and increased assets under management which may increase the benefits
realized by the Advisors from soft dollar arrangements with broker-dealers. The
Board also considered the unquantifiable nature of these potential benefits.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 21
Disclosure of Investment Advisory Agreement and Subadvisory Agreement
(concluded)
Conclusion with Respect to the Agreements
In reviewing the Agreements, the Directors did not identify any single factor
discussed above as all-important or controlling and different Directors may have
attributed different weights to the various factors considered. The Directors,
including the Independent Directors, unanimously determined that each of the
factors described above, in light of all the other factors and all of the facts
and circumstances applicable to the Fund, was acceptable for the Fund and
supported the Directors' conclusion that the terms of each Agreement were fair
and reasonable, that the Fund's fees are reasonable in light of the services
provided to the Fund and that each Agreement should be approved.
22 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by The BNY Mellon Shareowner
Services (the "Plan Agent"). Under the Plan, whenever the Fund declares a
dividend, participants in the Plan will receive the equivalent in shares of
Common Stock of the Fund. The Plan Agent will acquire the shares for the
participant's account either (i) through receipt of additional unissued but
authorized shares of the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares of Common Stock on the open market on the New York Stock
Exchange or elsewhere. If, on the dividend payment date, the Fund's net asset
value per share is equal to or less than the market price per share plus
estimated brokerage commissions (a condition often referred to as a "market
premium"), the Plan Agent will invest the dividend amount in newly issued
shares. If the Fund's net asset value per share is greater than the market price
per share (a condition often referred to as a "market discount"), the Plan Agent
will invest the dividend amount by purchasing on the open market additional
shares. If the Plan Agent is unable to invest the full dividend amount in open
market purchases, or if the market discount shifts to a market premium during
the purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the dividend
by either (i) when the shares are newly issued, the net asset value per share on
the date the shares are issued or (ii) when shares are purchased in the open
market, the average purchase price per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value, participants
in the Plan will receive shares of the Fund for less than they could otherwise
purchase them and with a cash value greater than the value of any cash
distribution they would have received. However, there may not be enough shares
available in the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price on resale
may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. Participation in the Plan generally will not affect the tax-exempt status
of exempt interest dividends paid by the Fund. If, when the Fund's shares are
trading at a market premium, the Fund issues shares pursuant to the Plan that
have a greater fair market value than the amount of cash reinvested, it is
possible that all or a portion of the discount from the market value (which may
not exceed 5% of the fair market value of the Fund's shares) could be viewed as
a taxable distribution. If the discount is viewed as a taxable distribution, it
is also possible that the taxable character of this discount would be allocable
to all the shareholders, including shareholders who do not participate in the
Plan. Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their
allocable share of the discount.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at The BNY Mellon
Shareowner Services, P.O. Box 358035, Pittsburgh, PA 15252-8035, Telephone:
(866) 216-0242.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 23
Officers and Directors
Length of Number of
Time BlackRock-
Position(s) Served Advised Funds
Name, Address Held with as a Principal Occupation(s) and Portfolios
and Year of Birth Fund Director(2) During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Directors(1)
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Cavanagh Chairman of Since 2007 Trustee, Aircraft Finance Trust 113 Funds Arch Chemical
40 East 52nd Street the Board and since 1999; Director, The Guardian 110 Portfolios (chemical and
New York, NY 10022 Director Life Insurance Company of America allied products)
1946 since 1998; Chairman and Trustee,
Educational Testing Service since
1997; Director, The Fremont Group
since 1996; Formerly President and
Chief Executive Officer of The
Conference Board, Inc. (global
business research organization) from
1995 to 2007.
------------------------------------------------------------------------------------------------------------------------------------
Karen P. Robards Vice Chair Since 2007 Partner of Robards & Company, LLC 112 Funds AtriCure, Inc.
40 East 52nd Street of the Board, (financial advisory firm) since 109 Portfolios (medical devices);
New York, NY 10022 Chair of 1987; Co-founder and Director of the Care Investment
1950 the Audit Cooke Center for Learning and Trust, Inc. (health
Committee Development (a not-for-profit care REIT)
and Director organization) since 1987; Formerly
Director of Enable Medical Corp.
from 1996 to 2005; Formerly an
investment banker at Morgan Stanley
from 1976 to 1987.
------------------------------------------------------------------------------------------------------------------------------------
G. Nicholas Beckwith, III Director Since 2007 Chairman and Chief Executive 112 Funds None
40 East 52nd Street Officer, Arch Street Management, LLC 109 Portfolios
New York, NY 10022 (Beckwith Family Foundation) and
1945 various Beckwith property companies
since 2005; Chairman of the Board of
Directors, University of Pittsburgh
Medical Center since 2002; Board of
Directors, Shady Side Hospital
Foundation since 1977; Board of
Directors, Beckwith Institute for
Innovation In Patient Care since
1991; Member, Advisory Council on
Biology and Medicine, Brown
University since 2002; Trustee,
Claude Worthington Benedum
Foundation (charitable foundation)
since 1989; Board of Trustees,
Chatham College since 1981; Board of
Trustees, University of Pittsburgh
since 2002; Emeritus Trustee, Shady
Side Academy since 1977; Formerly
Chairman and Manager, Penn West
Industrial Trucks LLC (sales, rental
and servicing of material handling
equipment) from 2005 to 2007;
Formerly Chairman, President and
Chief Executive Officer, Beckwith
Machinery Company (sales, rental and
servicing of construction and
equipment) from 1985 to 2005;
Formerly Board of Directors,
National Retail Properties (REIT)
from 2006 to 2007.
------------------------------------------------------------------------------------------------------------------------------------
Kent Dixon Director And Since 2007 Consultant/Investor since 1988. 113 Funds None
40 East 52nd Street Member of 110 Portfolios
New York, NY 10022 the Audit
1937 Committee
------------------------------------------------------------------------------------------------------------------------------------
Frank J. Fabozzi Director and Since 2007 Consultant/Editor of The Journal of 113 Funds None
40 East 52nd Street Member of Portfolio Management since 2006; 110 Portfolios
New York, NY 10022 the Audit Professor in the Practice of Finance
1948 Committee and Becton Fellow, Yale University,
School of Management, since 2006;
Formerly Adjunct Professor of
Finance and Becton Fellow, Yale
University from 1994 to 2006.
------------------------------------------------------------------------------------------------------------------------------------
Kathleen F. Feldstein Director Since 2007 President of Economics Studies, Inc. 113 Funds The McClatchy
40 East 52nd Street (private economic consulting firm) 110 Portfolios Company
New York, NY 10022 since 1987; Chair, Board of (publishing)
1941 Trustees, McLean Hospital since
2000; Member of the Corporation of
Partners Community Healthcare, Inc.
since 2005; Member of the
Corporation of Partners HealthCare
since 1995; Member of the
Corporation of Sherrill House
(healthcare) since 1990; Trustee,
Museum of Fine Arts, Boston since
1992; Member of the Visiting
Committee to the Harvard University
Art Museum since 2003; Trustee, The
Committee for Economic Development
(research organization) since 1990;
Member of the Advisory Board to the
International School of Business,
Brandeis University since 2002;
Formerly Director of Bell South
(communications) from 1998 to 2006;
Formerly Director of Ionics (water
purification) from 1992 to 2005;
Formerly Director of John Hancock
Financial Services from 1994 to
2003; Formerly Director of Knight
Ridder (media) from 1998 to 2006.
------------------------------------------------------------------------------------------------------------------------------------
24 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Officers and Directors (continued)
Length of Number of
Time BlackRock-
Position(s) Served Advised Funds
Name, Address Held with as a Principal Occupation(s) and Portfolios
and Year of Birth Fund Director(2) During Past Five Years Overseen Public Directorships
====================================================================================================================================
Non-Interested Directors1 (concluded)
------------------------------------------------------------------------------------------------------------------------------------
James T. Flynn Director and Since 2007 Formerly Chief Financial Officer of 112 Funds None
40 East 52nd Street Member of JPMorgan & Co., Inc. from 1990 to 109 Portfolios
New York, NY 10022 the Audit 1995.
1939 Committee
------------------------------------------------------------------------------------------------------------------------------------
Jerrold B. Harris Director Since 2007 Trustee, Ursinus College since 2000; 112 Funds BlackRock-Kelso
40 East 52nd Street Director, Troemner LLC (scientific 109 Portfolios Capital Corp.
New York, NY 10022 equipment) since 2000.
1942
------------------------------------------------------------------------------------------------------------------------------------
R. Glenn Hubbard Director Since 2007 Dean of Columbia Business School 113 Funds ADP (data and infor-
40 East 52nd Street since 2004; Columbia faculty member 110 Portfolios mation services);
New York, NY 10022 since 1988; Formerly Co-Director of KKR Financial Corpo-
1958 Columbia Business School's ration (finance);
Entrepreneurship Program from 1997 Duke Realty (real
to 2004; Visiting Professor at the estate); Metropolitan
John F. Kennedy School of Government Life Insurance
at Harvard University and the Company (insur-
Harvard Business School since 1985 ance); Information
and at the University of Chicago Services Group
since 1994; Formerly Chairman of the (media/technology)
U.S. Council of Economic Advisers
under the President of the United
States from 2001 to 2003.
------------------------------------------------------------------------------------------------------------------------------------
W. Carl Kester Director and Since 2007 Mizuho Financial Group Professor of 112 Funds None
40 East 52nd Street Member of Finance, Harvard Business School; 109 Portfolios
New York, NY 10022 the Audit Deputy Dean for Academic Affairs
1951 Committee since 2006; Unit Head, Finance,
Harvard Business School from 2005 to
2006; Senior Associate Dean and
Chairman of the MBA Program of
Harvard Business School from 1999 to
2005; Member of the faculty of
Harvard Business School since 1981;
Independent Consultant since 1978.
------------------------------------------------------------------------------------------------------------------------------------
Robert S. Salomon, Jr. Director and Since 2002 Formerly Principal of STI Management 112 Funds None
40 East 52nd Street Member of LLC (investment adviser) from 1994 109 Portfolios
New York, NY 10022 the Audit to 2005.
1936 Committee
---------------------------------------------------------------------------------------------------------
(1) Directors serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
(2) Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc.
("BlackRock") in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were
realigned and consolidated into three new Fund boards in 2007. As a result, although the chart
shows certain directors as joining the Fund's board in 2007, each director first became a member of
the board of directors of other legacy MLIM or legacy BlackRock Funds as follows: G. Nicholas
Beckwith, III since 1999; Richard E. Cavanagh since 1994; Kent Dixon since 1988; Frank J. Fabozzi
since 1988; Kathleen F. Feldstein since 2005; James T. Flynn since 1996; Jerrold B. Harris since
1999; R. Glenn Hubbard since 2004; W. Carl Kester since 1998; Karen P. Robards since 1998 and
Robert S. Salomon, Jr. since 1996.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 25
Officers and Directors (continued)
Length of Number of
Time BlackRock-
Position(s) Served Advised Funds
Name, Address Held with as a Principal Occupation(s) and Portfolios
and Year of Birth Fund Director During Past Five Years Overseen Public Directorships
====================================================================================================================================
Interested Directors(1)
------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis Director Since 2007 Managing Director, BlackRock, Inc. 185 Funds None
40 East 52nd Street since 2005; Formerly Chief Executive 295 Portfolios
New York, NY 10022 Officer, State Street Research &
1945 Management Company from 2000 to
2005; Formerly Chairman of the Board
of Trustees, State Street Research
Mutual Funds from 2000 to 2005;
Formerly Chairman, SSR Realty from
2000 to 2004.
------------------------------------------------------------------------------------------------------------------------------------
Henry Gabbay Director Since 2007 Consultant, BlackRock, Inc. since 184 Funds None
40 East 52nd Street 2007; Formerly Managing Director, 294 Portfolios
New York, NY 10022 BlackRock, Inc. from 1989 to 2007;
1947 Formerly Chief Administrative
Officer, BlackRock Advisors, LLC
from 1998 to 2007; Formerly
President of BlackRock Funds and
BlackRock Bond Allocation Target
Shares from 2005 to 2007; Formerly
Treasurer of certain closed-end
funds in the BlackRock fund complex
from 1989 to 2006.
---------------------------------------------------------------------------------------------------------
(1) Messrs. Davis and Gabbay are both "interested persons," as defined in the Investment Company Act of
1940, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Directors serve
until their resignation, removal or death, or until December 31 of the year in which they turn 72.
26 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Officers and Directors (concluded)
Position(s) Length of
Name, Address Held with Time
and Year of Birth Fund Served Principal Occupation(s) During Past Five Years
====================================================================================================================================
Fund Officers(1)
------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Fund Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director
40 East 52nd Street President and of Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset
New York, NY 10022 Chief Executive Management, L.P. ("FAM") in 2006; First Vice President thereof from 1997 to
1960 Officer 2005; Treasurer thereof from 1999 to 2006 and Vice President thereof from
1990 to 1997.
------------------------------------------------------------------------------------------------------------------------------------
Anne F. Ackerley Vice President Since 2007 Managing Director of BlackRock, Inc. since 2000; Chief Operating Officer of
40 East 52nd Street BlackRock's U.S. Retail Group since 2006; Head of BlackRock's Mutual Fund
New York, NY 10022 Group from 2000 to 2006; Merrill Lynch & Co., Inc. from 1984 to 1986 and
1962 from 1988 to 2000, most recently as First Vice President and Operating
Officer of the Mergers and Acquisitions Group.
------------------------------------------------------------------------------------------------------------------------------------
Neal J. Andrews Chief Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice
40 East 52nd Street Financial President and Line of Business Head of Fund Accounting and Administration
New York, NY 10022 Officer at PFPC Inc. from 1992 to 2006.
1966
------------------------------------------------------------------------------------------------------------------------------------
Jay M. Fife Treasurer Since 2007 Managing Director of BlackRock, Inc. since 2007 and Director in 2006;
40 East 52nd Street Formerly Assistant Treasurer of the MLIM/FAM-advised Funds from 2005 to
New York, NY 10022 2006; Director of MLIM Fund Services Group from 2001 to 2006.
1970
------------------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Chief Since 2007 Chief Compliance Officer of the BlackRock-advised Funds since 2007;
40 East 52nd Street Compliance Anti-Money Laundering Officer of the BlackRock-advised Funds since 2007;
New York, NY 10022 Officer of Managing Director and Senior Counsel of BlackRock, Inc. since 2005;
1959 the Fund Director and Senior Counsel of BlackRock Advisors, Inc. from 2001 to 2004
and Vice President and Senior Counsel thereof from 1998 to 2000; Formerly
Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary Since 2007 Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman
New York, NY 10022 Sachs Asset Management, L.P. from 1993 to 2006.
1965
---------------------------------------------------------------------------------------------------------
(1) Officers of the Fund serve at the pleasure of the Board of Directors.
Custodian
The Bank of New York Mellon
New York, NY 10286
Transfer Agent
Common Stock and
Preferred Stock:
BNY Mellon Shareowner Services
Jersey City, NJ 07310
Accounting Agent
State Street Bank and
Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, NY 10036
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 27
Additional Information
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 Assets and
Liabilities, which comprises part of the financial information included in this
report.
Fund Certification
The Fund is listed for trading on the New York Stock Exchange ("NYSE") and has
filed with the NYSE its annual chief executive officer certification regarding
compliance with the NYSE's listing standards. The Fund filed with the SEC the
certification of its chief executive officer and chief financial officer
required by section 302 of the Sarbanes-Oxley Act.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the 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 website at http://www.sec.gov and may also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained upon request
and without charge by calling (800) 441-7762.
General Information
The Fund does not make available copies of its Statements of Additional
Information because the Fund's shares are not continuously offered, which means
that the Statement of Additional Information of the Fund has not been updated
after completion of the Fund's offering and the information contained in the
Fund's Statement of Additional Information may have become outdated.
During the period, there were no material changes in the Fund's investment
objective or policies or to the Fund's charter or by-laws that were not approved
by the shareholders or in the principal risk factors associated with investment
in the Fund. There have been no changes in the persons who are primarily
responsible for the day-to-day management of the Fund's portfolio.
The Fund will mail only one copy of shareholder documents, including annual and
semi-annual reports and proxy statements, to shareholders with multiple accounts
at the same address. This practice is commonly called "householding" and it is
intended to reduce expenses and eliminate duplicate mailings of shareholder
documents. Mailings of your shareholder documents may be householded
indefinitely unless you instruct us otherwise. If you do not want the mailing of
these documents to be combined with those for other members of your household,
please contact the Fund at (800) 441-7762.
Quarterly performance, semi-annual and annual reports and other information
regarding the Fund may be found on BlackRock's website, which can be accessed at
http://www.blackrock.com. This reference to BlackRock's website is intended to
allow investors public access to information regarding the Fund and does not,
and is not intended to, incorporate BlackRock's website into this report.
28 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
Additional Information (continued)
Electronic Delivery
Electronic copies of most financial reports are available on the Fund's website
or shareholders can sign up for e-mail notifications of quarterly statements,
annual and semi-annual reports by enrolling in the Fund's electronic delivery
program.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
Deposit Securities
Effective May 30, 2008, following approval by the Fund's Board and the
applicable ratings agencies, the definition of "Deposited Securities" in the
Fund's Articles Supplementary was amended as follows in order to facilitate the
redemption of the Fund's Preferred Stock. The following phrase was added to the
definition of "Deposit Securities" found in the Fund's Articles Supplementary:
; provided, however, that solely in connection with any redemption of
AMPS, the term Deposit Securities shall include (i) any committed
financing pursuant to a credit agreement, reverse repurchase agreement
facility or similar credit arrangement, in each case which makes available
to the Corporation, no later than the day preceding the applicable
redemption date, cash in an amount not less than the aggregate amount due
to Holders by reason of the redemption of their shares of AMPS on such
redemption date; and (ii) cash amounts due and payable to the Corporation
out of a sale of its securities if such cash amount is not less than the
aggregate amount due to Holders by reason of the redemption of their
shares of AMPS on such redemption date and such sale will be settled not
later than the day preceding the applicable redemption date.
BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008 29
Additional Information (concluded)
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
Proxy Voting Policy
The Board has delegated the voting of proxies for Fund securities to the
Investment Advisor pursuant to the Investment Advisor's proxy voting guidelines.
Under these guidelines, the Investment Advisor will vote proxies related to Fund
securities in the best interests of the Fund and its stockholders. From time to
time, a vote may present a conflict between the interests of the Fund's
stockholders, on the one hand, and those of the Investment Advisor, or any
affiliated person of the Fund or the Investment Advisor, on the other. In such
event, provided that the Investment Advisor's Equity Investment Policy Oversight
Committee, or a sub-committee thereof (the "Committee") is aware of the real or
potential conflict or material non-routine matter and if the Committee does not
reasonably believe it is able to follow its general voting guidelines (or if the
particular proxy matter is not addressed in the guidelines) and vote
impartially, the Committee may retain an independent fiduciary to advise the
Committee on how to vote or to cast votes on behalf of the Investment Advisor's
clients. If the Investment Advisor determines not to retain an independent
fiduciary, or does not desire to follow the advice of such independent
fiduciary, the Committee shall determine how to vote the proxy after consulting
with the Investment Advisor's Portfolio Management Group and/or the Investment
Advisor's Legal and Compliance Department and concluding that the vote cast is
in its client's best interest notwithstanding the conflict.
30 BLACKROCK MUNIHOLDINGS CALIFORNIA INSURED FUND, INC. JUNE 30, 2008
This report is transmitted to shareholders only. It is not a prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its Common Stock,
which 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, currently set at the maximum reset rate as a result of failed
auctions, may affect the yield to Common Stock shareholders. Statements and
other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free (800) 441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's website
at http://www.sec.gov. Information about how the Fund voted proxies relating to
securities held in the Fund's portfolio during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the Securities and
Exchange Commission's website at http://www.sec.gov.
BlackRock MuniHoldings California Insured Fund, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
# HOLDCA-6/08
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report,
applicable to the registrant's principal executive officer,
principal financial officer and principal accounting officer, or
persons performing similar functions. During the period covered by
this report, there have been no amendments to or waivers granted
under the code of ethics. A copy of the code of ethics is available
without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors or trustees, as applicable (the "board of directors") has
determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent:
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
James T. Flynn (term began effective November 1, 2007)
Joe Grills (term ended effective November 1, 2007)
W. Carl Kester (term began effective November 1, 2007)
Karen P. Robards (term began effective November 1, 2007)
Robert S. Salomon, Jr.
The registrant's board of directors has determined that W. Carl
Kester and Karen P. Robards qualify as financial experts pursuant to
Item 3(c)(4) of Form N-CSR.
Prof. Kester has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Prof.
Kester has been involved in providing valuation and other financial
consulting services to corporate clients since 1978. Prof. Kester's
financial consulting services present a breadth and level of
complexity of accounting issues that are generally comparable to the
breadth and complexity of issues that can reasonably be expected to
be raised by the registrant's financial statements.
Ms. Robards has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Ms.
Robards has been President of Robards & Company, a financial
advisory firm, since 1987. Ms. Robards was formerly an investment
banker for more than 10 years where she was responsible for
evaluating and assessing the performance of companies based on their
financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is a member of the audit
committee of one publicly held company and a non-profit
organization.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
-----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
-----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
-----------------------------------------------------------------------------------------------------------------------------------
BlackRock $33,000 $57,350 $3,500 $3,500 $6,100 $6,100 $1,049 $0
MuniHoldings
California Insured
Fund, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services reasonably
related to the performance of the audit of financial statements not included in
Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
3 The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). The term of any general pre-approval is 12 months
from the date of the pre-approval, unless the Committee provides for
a different period. Tax or other non-audit services provided to the
registrant which have a direct impact on the operation or financial
reporting of the registrant will only be deemed pre-approved
provided that any individual project does not exceed $10,000
attributable to the registrant or $50,000 for all of the registrants
the Committee oversees. For this purpose, multiple projects will be
aggregated to determine if they exceed the previously mentioned cost
levels.
Any proposed services exceeding the pre-approved cost levels
will require specific pre-approval by the Committee, as will any
other services not subject to general pre-approval (e.g.,
unanticipated but permissible services). The Committee is informed
of each service approved subject to general pre-approval at the next
regularly scheduled in-person board meeting. At this meeting, an
analysis of such services is presented to the Committee for
ratification. The Committee may delegate to one or more of its
members the authority to approve the provision of and fees for any
specific engagement of permitted non-audit services, including
services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
BlackRock MuniHoldings California
Insured Fund, Inc. $298,149 $2,970,500
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $287,500, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):
James H. Bodurtha (term ended effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
James T. Flynn (term began effective November 1, 2007)
Kenneth A. Froot (term ended effective November 1, 2007)
Joe Grills (term ended effective November 1, 2007)
W. Carl Kester (term began effective November 1, 2007)
Herbert I. London (term ended effective November 1, 2007)
Roberta Cooper Ramo (term ended effective November 1, 2007)
Karen P. Robards (term began effective November 1, 2007)
Robert S. Salomon, Jr.
Item 6 - Investments
(a) The registrant's Schedule of Investments is included as part of
the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual
period covered since the previous Form N-CSR filing.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - The registrant has delegated the
voting of proxies relating to Fund portfolio securities to its
investment adviser, BlackRock Advisors, LLC and its sub-adviser, as
applicable. The Proxy Voting Policies of the Fund are attached
hereto as Exhibit 99.PROXYPOL.
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 without charge (1) at www.blackrock.com
and (2) on the Commission's web site at http://www.sec.gov.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of June 30, 2008.
(a)(1) BlackRock MuniHoldings California Insured 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 the day-to-day management of the
Fund's portfolio, including setting the Fund's overall investment
strategy, overseeing the management of the Fund and/or selecting the
Fund's investments. Mr. Jaeckel has been the Fund's portfolio
manager since 2006. Mr. O'Connor has been the Fund's portfolio
manager since 1997.
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 June 30, 2008:
-----------------------------------------------------------------------------------------------------------------------
Number of Other Accounts and
Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
-----------------------------------------------------------------------------------------------------------------------
Other Other Other Other
Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
Theodore R.
Jaeckel, Jr. 81 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$27.7 Billion $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
Walter O'Connor 81 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------
$27.7 Billion $0 $0 $0 $0 $0
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
BlackRock, Inc. and its affiliates (collectively, herein
"BlackRock") has built a professional working environment, firm-wide
compliance culture and compliance procedures and systems designed to
protect against potential incentives that may favor one account over
another. BlackRock has adopted policies and procedures that address
the allocation of investment opportunities, execution of portfolio
transactions, personal trading by employees and other potential
conflicts of interest that are designed to ensure that all client
accounts are treated equitably over time. Nevertheless, BlackRock
furnishes investment management and advisory services to numerous
clients in addition to the Fund, and BlackRock may, consistent with
applicable law, make investment recommendations to other clients or
accounts (including accounts which are hedge funds or have
performance or higher fees paid to BlackRock, or in which portfolio
managers have a personal interest in the receipt of such fees),
which may be the same as or different from those made 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
or employees of any of them has any substantial economic interest or
possesses material non-public information. Each portfolio manager
also may manage accounts whose investment strategies may at times be
opposed to the strategy utilized for 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 June 30, 2008:
Portfolio Manager Compensation Overview
BlackRock's financial arrangements with its portfolio managers, its
competitive compensation and its career path emphasis at all levels
reflect the value senior management places on key resources.
Compensation may include a variety of components and may vary from
year to year based on a number of factors. The principal components
of compensation include a base salary, a performance-based
discretionary bonus, participation in various benefits programs and
one or more of the incentive compensation programs established by
BlackRock such as its Long-Term Retention and Incentive Plan.
Base compensation. Generally, portfolio managers receive base
compensation based on their seniority and/or their position with the
firm. Senior portfolio managers who perform additional management
functions within the portfolio management group or within BlackRock
may receive additional compensation for serving in these other
capacities.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several
components: the performance of BlackRock, Inc., the performance of
the portfolio manager's group within BlackRock, the investment
performance, including risk-adjusted returns, of the firm's assets
under management or supervision by that portfolio manager relative
to predetermined benchmarks, and the individual's seniority, role
within the portfolio management team, teamwork and contribution to
the overall performance of these portfolios and BlackRock. In most
cases, including for the portfolio managers of the Fund, these
benchmarks are the same as the benchmark or benchmarks against which
the performance of the Fund or other accounts managed by the
portfolio managers are measured. BlackRock's Chief Investment
Officers determine the benchmarks against which the performance of
funds and other accounts managed by each portfolio manager is
compared and the period of time over which performance is evaluated.
With respect to the portfolio managers, such benchmarks for the Fund
include a combination of market-based indices (e.g., Lehman Brothers
Municipal Bond Index), certain customized indices and certain fund
industry peer groups.
BlackRock's Chief Investment Officers make a subjective
determination with respect to the portfolio managers' compensation
based on the performance of the funds and other accounts managed by
each portfolio manager relative to the various benchmarks noted
above. Performance is measured on both a pre-tax and after-tax basis
over various time periods including 1, 3, 5 and 10-year periods, as
applicable.
Distribution of Discretionary Incentive Compensation
Discretionary incentive compensation is distributed to portfolio
managers in a combination of cash and BlackRock, Inc. restricted
stock units which vest ratably over a number of years. The
BlackRock, Inc. restricted stock units, if properly vested, will be
settled in BlackRock, Inc. common stock. Typically, the cash bonus,
when combined with base salary, represents more than 60% of total
compensation for the portfolio managers. Paying a portion of annual
bonuses in stock puts compensation earned by a portfolio manager for
a given year "at risk" based on BlackRock's ability to sustain and
improve its performance over future periods.
Long-Term Retention and Incentive Plan ("LTIP") --The LTIP is
a long-term incentive plan that seeks to reward certain key
employees. Beginning in 2006, awards are granted under the LTIP in
the form of BlackRock, Inc. restricted stock units that, if properly
vested and subject to the attainment of certain performance goals,
will be settled in BlackRock, Inc. common stock. Each portfolio
manager has received awards under the LTIP.
Deferred Compensation Program --A portion of the compensation
paid to eligible BlackRock employees may be voluntarily deferred
into an account that tracks the performance of certain of the firm's
investment products. Each participant in the deferred compensation
program is permitted to allocate his deferred amounts among the
various investment options. Each portfolio manager has participated
in the deferred compensation program.
Other compensation benefits. In addition to base compensation and
discretionary incentive compensation, portfolio managers may be
eligible to receive or participate in one or more of the following:
Incentive Savings Plans -- BlackRock, Inc. has created a
variety of incentive savings plans in which BlackRock employees are
eligible to participate, including a 401(k) plan, the BlackRock
Retirement Savings Plan (RSP), and the BlackRock Employee Stock
Purchase Plan (ESPP). The employer contribution components of the
RSP include a company match equal to 50% of the first 6% of eligible
pay contributed to the plan capped at $4,000 per year, and a company
retirement contribution equal to 3% of eligible compensation, plus
an additional contribution of 2% for any year in which BlackRock has
positive net operating income. The RSP offers a range of investment
options, including registered investment companies managed by the
firm. BlackRock contributions follow the investment direction set by
participants for their own contributions or, absent employee
investment direction, are invested into a balanced portfolio. The
ESPP allows for investment in BlackRock common stock at a 5%
discount on the fair market value of the stock on the purchase date.
Annual participation in the ESPP is limited to the purchase of 1,000
shares or a dollar value of $25,000. Each portfolio manager is
eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities. As of June 30, 2008,
neither of Mr. Jaeckel or Mr. O'Connor beneficially owned any
stock issued by the Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable due to no such
purchases during the period covered by this report.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider
nominees to the board of directors recommended by shareholders when
a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations that include biographical
information and set forth the qualifications of the proposed nominee
to the registrant's Secretary. There have been no material changes
to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock MuniHoldings California Insured Fund, Inc.
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Executive Officer of
BlackRock MuniHoldings California Insured Fund, Inc.
Date: August 22, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock MuniHoldings California Insured Fund, Inc.
Date: August 22, 2008
By: /s/ Donald C. Burke
-----------------------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock MuniHoldings California Insured Fund, Inc.
Date: August 22, 2008