BLACKROCK MUNIHOLDINGS NEW JERSEY QUALITY FUND, INC.

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: 811-08621

Name of Fund: BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock MuniHoldings New Jersey Quality Fund, Inc., 55 East 52nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 07/31/2014

Date of reporting period: 07/31/2014


Item 1 – Report to Stockholders


JULY 31, 2014

 

 

 

 

 

ANNUAL REPORT

 

    LOGO

 

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)

BlackRock MuniYield Investment Quality Fund (MFT)

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents     

 

     Page  

Dear Shareholder

    3   

Annual Report:

 

Municipal Market Overview

    4   

The Benefits and Risks of Leveraging

    5   

Derivative Financial Instruments

    5   

Fund Summaries

    6   
Financial Statements:  

Schedules of Investments

    18   

Statements of Assets and Liabilities

    44   

Statements of Operations

    45   

Statements of Changes in Net Assets

    46   

Statements of Cash Flows

    49   

Financial Highlights

    50   

Notes to Financial Statements

    56   

Report of Independent Registered Public Accounting Firm

    66   

Disclosure of Investment Advisory Agreements

    67   

Automatic Dividend Reinvestment Plan

    71   

Officers and Directors

    72   

Additional Information

    75   

 

                
2    ANNUAL REPORT    JULY 31, 2014   


Shareholder Letter

 

Dear Shareholder,

The latter part of 2013 was a strong period for equities and other risk assets such as high yield bonds, despite the mixed tone of economic and financial news and uncertainty as to when and by how much the U.S. Federal Reserve would begin to gradually reduce (or “taper”) its asset purchase programs. Stock markets rallied in September when the Fed defied investors’ expectations with its decision to delay tapering. The momentum was disrupted temporarily, however, when the U.S. debt ceiling debate led to a partial government shutdown, roiling financial markets globally until a compromise was struck in mid-October. The remainder of 2013 was generally positive for developed market stocks, while fixed income and emerging market investments struggled as Fed tapering became increasingly imminent. When the central bank ultimately announced its tapering plans in mid-December, equity investors reacted positively, as this action signaled the Fed’s perception of real improvement in the economy.

Most asset classes continued to move higher in 2014 despite the pull back in Fed stimulus. The year got off to a rocky start, however. A number of emerging economies showed signs of financial stress while facing the broader headwind of diminishing global liquidity. These risks, combined with disappointing U.S. economic data, caused equities to decline in January while bond markets found renewed strength from investors seeking relatively safer assets.

Although these headwinds persisted, equities were back on the rise in February as investors were encouraged by a one-year extension of the U.S. debt ceiling and market-friendly comments from the new Fed Chairwoman, Janet Yellen. While it was clear that U.S. economic data had softened, investors were assuaged by increasing evidence that the trend was temporary and weather-related, and continued to take on risk given expectations that growth would pick up later in the year.

In the months that followed, interest rates trended lower and bond prices climbed higher in the modest growth environment. Financial markets exhibited a remarkably low level of volatility despite rising geopolitical risks and mixed global economic news. Tensions in Russia and Ukraine and signs of decelerating growth in China caused some turbulence, but markets were resilient as investors focused on signs of improvement in the U.S. recovery, stronger corporate earnings and increased merger-and-acquisition activity. Importantly, investors were comforted by comments from the Fed offering reassurance that no changes to short-term interest rates were on the horizon.

In the low-rate environment, investors looked to equities as a source of yield, pushing major indices to record highs. As stock prices moved higher, investors soon became wary of stretched valuations and a new theme emerged in the markets. Stocks that had experienced significant price appreciation in 2013, particularly growth and momentum names, broadly declined as investors fled to stocks with cheaper valuations. This rotation resulted in the strongest performers of 2013 struggling most in 2014, and vice versa. Especially hard hit were U.S. small cap and European stocks where earnings growth had not kept pace with recent market gains. In contrast, emerging market stocks benefited from the trend. As a number of developing countries took steps to stabilize their finances, investors looked past political risks — hardly batting an eye at a military coup in Thailand — and poured back into these attractively priced investments.

Asset prices tend to be more vulnerable to bad news when investors believe valuations are stretched. Consequently, markets came under pressure in July as geopolitical tensions intensified with the tragic downing of a Malaysian civilian airliner over Ukraine, the continued fragmentation of Iraq and a ground war between Israel and Hamas in Gaza. As the period came to a close, financial troubles in Argentina and Portugal as well as new U.S. and European sanctions on Russia were additional headwinds for the markets.

Despite a host of challenges, most asset classes generated solid returns for the six- and 12-month periods ended July 31, 2014, with equities generally outperforming fixed income. Emerging market equities delivered impressive gains. Developed markets also performed well, although small cap stocks lagged due to relatively higher valuations. Most fixed income assets produced positive returns even as the Fed reduced its open-market purchases. Tax-exempt municipal bonds benefited from a favorable supply-and-demand environment. Short-term interest rates remained near zero, keeping yields on money market securities close to historic lows.

At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s world.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

LOGO

Asset prices pushed higher over the period despite modest global growth, geopolitical risks and a shift toward tighter U.S. monetary policy.

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of July 31, 2014  
    6-month     12-month  

U.S. large cap equities (S&P 500® Index)

    9.44     16.94

U.S. small cap equities
(Russell 2000® Index)

    (0.30     8.56   

International equities
(MSCI Europe, Australasia,
Far East Index)

    7.03        15.07   

Emerging market equities (MSCI Emerging
Markets Index)

    15.70        15.32   

3-month Treasury bills
(BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)

    0.02        0.05   

U.S. Treasury securities
(BofA Merrill Lynch 10-Year U.S. Treasury Index)

    2.71        3.50   

U.S. investment-grade
bonds (Barclays
U.S. Aggregate Bond Index)

    2.16        3.97   

Tax-exempt municipal
bonds (S&P Municipal
Bond Index)

    4.11        7.38   

U.S. high yield bonds

(Barclays U.S.
Corporate High Yield 2%
Issuer Capped Index)

    3.33        8.18   
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.    

 

                
   THIS PAGE NOT PART OF YOUR FUND REPORT       3


Municipal Market Overview     

 

For the Reporting Period Ended July 31, 2014      

Municipal Market Conditions

The latter part of 2013 was a generally negative period for municipal bond performance. Heightened uncertainty as to when the U.S. Federal Reserve would begin to reduce its bond-buying stimulus program (and by how much) caused interest rates to be volatile and generally move higher. (Bond prices fall as rates rise.) Municipal bond mutual funds saw strong outflows through year end when the Fed finally announced its plan to begin the gradual reduction of stimulus in January of 2014. Relieved of anxiety around policy changes, investors again sought the relative safety of municipal bonds in the New Year. Surprisingly, interest rates trended lower in the first half of 2014 even as the Fed pulled back on its open-market bond purchases. Softer U.S. economic data amid one of the harshest winters on record, coupled with reassurance from the Fed that short-term rates would remain low for a considerable amount of time, resulted in stronger demand for fixed income investments, with municipal bonds being one of the stronger performing sectors. Still, for the 12-month period ended July 31, 2014, municipal bond funds saw net outflows of approximately $35 billion (based on data from the Investment Company Institute).

High levels of interest rate volatility in the latter half of 2013, particularly on the long-end of the curve, resulted in a curtailment of tax-exempt issuance during the period. However, from a historical perspective, total new issuance for the 12 months ended July 31 remained relatively strong at $303 billion (but meaningfully lower than the $364 billion issued in the prior 12-month period). A noteworthy portion of new supply during this period was attributable to refinancing activity (roughly 40%) as issuers took advantage of lower interest rates to reduce their borrowing costs.

S&P Municipal Bond Index

Total Returns as of July 31, 2014

  6 months: 4.11%

12 months: 7.38%

A Closer Look at Yields

 

LOGO

From July 31, 2013 to July 31, 2014, muni yields on AAA-rated 30-year municipal bonds decreased by 90 basis points (“bps”) from 4.20% to 3.30%, while 10-year rates decreased 41 bps from 2.67% to 2.26% on and 5-year rates fell 5 bps from 1.27% to 1.22% (as measured by Thomson Municipal Market Data). Overall, the municipal yield curve remained relatively steep over the 12-month period even as the spread between 2- and 30-year maturities flattened by 78 bps and the spread between 2- and 10-year maturities flattened by 29 bps.

During the same time period, U.S. Treasury rates fell by 32 bps on 30-year and 2 bps on 10-year bonds, while moving up 37 bps in 5-years. Accordingly, tax-exempt municipal bonds outperformed Treasuries across the yield curve as investors sought to reduce interest rate risk later in the period. On the short and intermediate parts of the curve, the outperformance of municipal bonds versus Treasuries was driven largely by a supply/demand imbalance within the municipal market and a rotation from long-duration assets into short- and intermediate-duration investments, which are less sensitive to interest rate movements. Additionally, municipal bonds benefited from the increased appeal of tax-exempt investing in the new higher tax rate environment. The asset class is known for its lower relative volatility and preservation of principal with an emphasis on income as tax rates rise. The municipal market continues to be an attractive avenue for investors seeking yield in the low-rate environment. However, opportunities have not been as broad-based as in 2011 and 2012, warranting a more tactical approach going forward.

Financial Conditions of Municipal Issuers Continue to Improve

Following an extended period of nation-wide austerity and de-leveraging as states sought to balance their budgets, 16 consecutive quarters of positive revenue growth coupled with the elimination of more than 750,000 jobs in recent years have put state and local governments in a better financial position. Many local municipalities, however, continue to face increased health care and pension costs passed down from the state level. BlackRock maintains the view that municipal bond defaults will be minimal and remain in the periphery, and that the overall market is fundamentally sound. We continue to recognize that careful credit research, appropriate structure and security selection remain imperative amid uncertainty in a modestly improving economic environment.

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

 

                
4    ANNUAL REPORT    JULY 31, 2014   


The Benefits and Risks of Leveraging     

 

 

The Funds may utilize leverage to seek to enhance the yield and net asset value (“NAV”) of their common shares (“Common Shares”). However, these objectives cannot be achieved in all interest rate environments.

In general, the concept of leveraging is based on the premise that the financing cost of leverage, which will be based on short-term interest rates, will normally be lower than the income earned by a Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Fund’s shareholders will benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV.

To illustrate these concepts, assume a Fund’s Common Shares capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, the Fund’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the securities purchased by the Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, the Fund’s financing cost of leverage is significantly lower than the income earned on the Fund’s longer-term investments acquired from leverage proceeds, and therefore the holders of Common Shares (“Common Shareholders”) are the beneficiaries of the incremental net income.

However, in order to benefit Common Shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Fund’s return on assets purchased with leverage proceeds, income to shareholders will be lower than if the Fund had not used leverage. Furthermore, the value of the Trust’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Fund’s obligations under its leverage arrangement generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Fund’s NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that a Fund’s intended leveraging strategy will be successful.

Leverage also will generally cause greater changes in the Funds’ NAVs, market prices and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the net asset value and market price of a Fund’s Common Shares than if the Fund were not leveraged. In addition, the Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause the Fund to incur losses. The use of leverage may limit the Trust’s ability to invest in certain types of securities or use certain types of hedging strategies. The Fund will incur expenses in connection with the use of leverage, all of which are borne by Common Shareholders and may reduce income to the Common Shares.

To obtain leverage, each Trust has issued Variable Rate Demand Preferred Shares (“VRDP Shares”) or Variable Rate Muni Term Preferred Shares (“VMTP Shares”) (collectively, “Preferred Shares”) and/or leveraged its assets through the use of tender option bond trusts (“TOBs”) as described in the Notes to Financial Statements.

Under the Investment Company Act of 1940 (the “1940 Act”), each Fund is permitted to issue debt up to 33 1/3% of its total managed assets or equity securities (e.g., Preferred Shares) up to 50% of its total managed assets. A Fund may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Fund may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by the Preferred Shares’ governing instruments or by agencies rating the Preferred Shares, which may be more stringent than those imposed by the 1940 Act.

If a Fund segregates or designates on its books and records cash or liquid assets having a value not less than the value of the Fund’s obligations under the TOB (including accrued interest), a TOB will not be considered a senior security and will not be subject to the foregoing limitations and requirements under the 1940 Act.

 

Derivative Financial Instruments     

 

The Funds may invest in various derivative financial instruments, including financial futures contracts, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or interest rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Funds’ ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation a Fund can realize on an investment, may result in lower dividends paid to shareholders and/or may cause a Fund to hold an investment that it might otherwise sell. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    5


Fund Summary as of July 31, 2014    BlackRock MuniHoldings California Quality Fund, Inc.

 

Fund Overview      

BlackRock MuniHoldings California Quality Fund, Inc.’s (MUC) (the “Fund”) investment objective is to provide shareholders with current income exempt from federal and California income taxes. The Fund seeks to achieve its investment objective by investing primarily in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and California income taxes. Under normal market conditions, the Fund invests at least 80% of its assets in investment grade municipal obligations with remaining maturities of one year or more at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Performance      
Ÿ  

For the 12-month period ended July 31, 2014, the Fund returned 12.25% based on market price and 15.94% based on NAV. For the same period, the closed-end Lipper California Municipal Debt Funds category posted an average return of 15.36% based on market price and 15.42% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

 

Ÿ  

Tax-exempt rates declined during the period, supporting generally positive performance for municipal bonds. (Bond prices rise when rates fall.) Municipal bonds with longer durations (and greater sensitivity to interest rate movements) tended to provide the strongest returns. In this environment, the Fund’s exposure to the long end of the yield curve had a positive impact on performance. Security selection also helped performance, particularly with respect to the Fund’s holdings of high quality school district issues, which performed well amid the improvement in the State of California’s finances. In addition the Fund’s holdings in the health care, transportation and utilities sectors contributed to returns. The use of leverage, which was achieved through the use of tender option bonds contributed to performance as well.

 

Ÿ  

The Fund’s cash reserves were generally maintained at a minimal level. However, to the extent reserves were held, the cash holdings added little in the form of additional yield and provided no price appreciation in a generally positive period for the municipal market.

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 (“NYSE”)

  MUC

Initial Offering Date

  February 27, 1998

Yield on Closing Market Price as of July 31, 2014 ($14.04)1

  6.11%

Tax Equivalent Yield2

  12.45%

Current Monthly Distribution per Common Share3

  $0.0715

Current Annualized Distribution per Common Share3

  $0.8580

Economic Leverage as of July 31, 20144

  35%

 

  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 marginal federal and state tax rate of 50.93%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

The distribution rate is not constant and is subject to change.

 

  4   

Represents VMTP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5.

 

                
6    ANNUAL REPORT    JULY 31, 2014   


     BlackRock MuniHoldings California Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                        
           
      7/31/14      7/31/13      Change      High      Low  

Market Price

     $14.04         $13.31         5.48%         $14.64         $12.63   

Net Asset Value

     $15.82         $14.52         8.95%         $15.91         $13.94   

 

Market Price and Net Asset Value History For the Past Five Years      

 

LOGO

 

Overview of the Fund’s Long-Term Investments      

 

Sector Allocation    7/31/14     7/31/13  

County/City/Special District/School District

     37     36

Utilities

     25        24   

Transportation

     14        11   

Health

     12        10   

Education

     6        13   

State

     6        6   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Credit Quality Allocation1    7/31/14     7/31/13  

AAA/Aaa

     15     12

AA/Aa

     76        75   

A

     9        13   

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

   
Call/Maturity Schedule2        

Calendar Year Ended December 31,

  

2014

     2

2015

     8   

2016

     12   

2017

     14   

2018

     13   

 

  2   

Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years.

 

                
   ANNUAL REPORT    JULY 31, 2014    7


Fund Summary as of July 31, 2014    BlackRock MuniHoldings New Jersey Quality Fund, Inc.

 

 

Fund Overview      

BlackRock MuniHoldings New Jersey Quality Fund, Inc.’s (MUJ) (the “Fund”) investment objective is to provide shareholders with current income exempt from federal income tax and New Jersey personal income taxes. The Fund seeks to achieve its investment objective by investing primarily in long-term, investment grade municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and New Jersey personal income taxes. Under normal market conditions, the Fund invests at least 80% of its assets in municipal obligations with remaining maturities of one year or more at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Performance      
Ÿ  

For the 12-month period ended July 31, 2014, the Fund returned 13.24% based on market price and 15.79% based on NAV. For the same period, the closed-end Lipper New Jersey Municipal Debt Funds category posted an average return of 12.38% based on market price and 13.86% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

 

Ÿ  

Positive contributors to performance included the Fund’s exposure to the long-end of the municipal yield curve, as the curve flattened over the period. (Long-rates fell much more than short and intermediate rates.) The Fund’s duration exposure and corresponding interest rate sensitivity also added to returns as municipal rates declined. (Bond prices rise as rates fall.) The income generated from the Fund’s holdings of New Jersey state tax-exempt municipal bonds contributed to performance as well.

 

Ÿ  

The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results as credit spreads on these bonds widened materially due to investors’ lack of confidence and a weak local economy. The Fund sold its exposure to these securities early in the period.

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 NYSE

   MUJ

Initial Offering Date

   March 11, 1998

Yield on Closing Market Price as of July 31, 2014 ($14.11)1

   6.29%

Tax Equivalent Yield2

   12.21%

Current Monthly Distribution per Common Share3

   $0.074

Current Annualized Distribution per Common Share3

   $0.888

Economic Leverage as of July 31, 20144

   38%

 

  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 marginal federal and state tax rate of 48.48%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

The distribution rate is not constant and is subject to change.

 

  4   

Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5.

 

                
8    ANNUAL REPORT    JULY 31, 2014   


     BlackRock MuniHoldings New Jersey Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary      

 

      7/31/14      7/31/13      Change      High      Low  

Market Price

   $ 14.11       $ 13.30         6.09    $ 14.55       $ 12.52   

Net Asset Value

   $ 15.74       $ 14.51         8.48    $ 15.85       $ 13.87   

 

Market Price and Net Asset Value History For the Past Five Years      

 

LOGO

 

Overview of the Fund’s Long-Term Investments      

 

Sector Allocation    7/31/14     7/31/13  

Transportation

     23     21

State

     22        27   

Education

     18        15   

County/City/Special District/School District

     14        13   

Health

     12        11   

Housing

     6        7   

Utilities

     3        5   

Corporate

     2        1   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Credit Quality Allocation1    7/31/14     7/31/13  

AAA/Aaa

     9     9

AA/Aa

     51        46   

A

     33        38   

BBB/Baa

     7        7   

N/R2

              

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 

  2   

The investment advisor evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed certain of these unrated securities as investment grade quality. As of July 31, 2014, the market value of unrated securities deemed by the investment advisor to be investment grade was $10,039, representing less than 1%, of the Fund’s long-term investments.

 

   
Call/Maturity Schedule3        

Calendar Year Ended December 31,

  

2014

     3

2015

     7   

2016

     3   

2017

     7   

2018

     9   

 

  3   

Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years.

 

                
   ANNUAL REPORT    JULY 31, 2014    9

 


Fund Summary as of July 31, 2014    BlackRock MuniYield Investment Quality Fund

 

 

Fund Overview      

BlackRock MuniYield Investment Quality Fund’s (MFT) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax). Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Performance      
Ÿ  

For the 12-month period ended July 31, 2014, the Fund returned 16.10% based on market price and 16.40% based on NAV. For the same period, the closed-end Lipper General & Insured Municipal Debt Funds (Leveraged) category posted an average return of 14.52% based on market price and 14.95% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

 

Ÿ  

Tax-exempt rates declined during the period, supporting generally positive performance for municipal bonds. (Bond prices rise when rates fall.) The municipal yield curve flattened, meaning that longer-dated yields declined more than shorter-maturity yields. In this environment, the Fund’s duration exposure (sensitivity to interest rate movements) had a positive impact on performance. The Fund’s longer-dated holdings in the health care, education and transportation sectors experienced strong market appreciation, aiding performance. The Fund also benefited from its holdings in the State of California, as the continued improvement in the State’s economy was a catalyst for market appreciation during the period.

 

Ÿ  

The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results, as credit spreads on these bonds widened materially due to investors’ lack of confidence and the weak local economy. The Fund sold its exposure to these securities early in the period.

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 NYSE

   MFT

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of July 31, 2014 ($13.26)1

   6.43%

Tax Equivalent Yield2

   11.36%

Current Monthly Distribution per Common Share3

   $0.071

Current Annualized Distribution per Common Share3

   $0.852

Economic Leverage as of July 31, 20144

   38%

 

  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 marginal federal tax rate of 43.4%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

The distribution rate is not constant and is subject to change.

 

  4   

Represents VMTP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5.

 

                
10    ANNUAL REPORT    JULY 31, 2014   


     BlackRock MuniYield Investment Quality Fund

 

 

Market Price and Net Asset Value Per Share Summary      

 

      7/31/14      7/31/13      Change      High      Low  

Market Price

   $ 13.26       $ 12.20         8.69%       $ 13.78       $ 11.80   

Net Asset Value

   $ 14.83       $ 13.61         8.96%       $ 14.92       $ 13.01   

 

Market Price and Net Asset Value History For the Past Five Years      

 

LOGO

 

Overview of the Fund’s Long-Term Investments      

 

Sector Allocation   7/31/14     7/31/13  

Transportation

    36     27

Utilities

    21        23   

County/City/Special District/School District

    18        20   

Health

    11        11   

State

    9        10   

Education

    2        6   

Housing

    2        1   

Tobacco

    1        2   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Credit Quality Allocation1   7/31/14     7/31/13  

AAA/Aaa

    6     9

AA/Aa

    62        64   

A

    27        27   

BBB/Baa

    5          

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

   
Call/Maturity Schedule2        

Calendar Year Ended December 31,

  

2014

       

2015

       

2016

     2

2017

     2   

2018

     11   

 

  2   

Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years.

 

                
   ANNUAL REPORT    JULY 31, 2014    11


Fund Summary as of July 31, 2014    BlackRock MuniYield Michigan Quality Fund, Inc.

 

 

Fund Overview      

BlackRock MuniYield Michigan Quality Fund, Inc.’s (MIY) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal and Michigan income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and Michigan income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Performance      
Ÿ  

For the 12-month period ended July 31, 2014, the Fund returned 14.74% based on market price and 15.24% based on NAV. For the same period, the closed-end Lipper Other States Municipal Debt Funds category posted an average return of 12.67% based on market price and 12.42% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

 

Ÿ  

Positive contributors to performance included the Fund’s exposure to the long-end of the municipal yield curve, as the curve flattened over the period. (Long-rates fell much more than short and intermediate rates.) The Fund’s duration exposure and corresponding interest rate sensitivity also added to returns as municipal rates declined. (Bond prices rise as rates fall.) The income generated from the Fund’s holdings of Michigan state tax-exempt municipal bonds contributed to performance as well.

 

Ÿ  

The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results as credit spreads on these bonds widened materially due to investors’ lack of confidence and a weak local economy. The Fund sold its exposure to these securities early in the period.

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 NYSE

   MIY

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of July 31, 2014 ($13.47)1

   6.41%

Tax Equivalent Yield2

   11.83%

Current Monthly Distribution per Common Share3

   $0.072

Current Annualized Distribution per Common Share3

   $0.864

Economic Leverage as of July 31, 20144

   38%

 

  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 marginal federal and state tax rate of 45.81%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

The distribution rate is not constant and is subject to change.

 

  4   

Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5.

 

                
12    ANNUAL REPORT    JULY 31, 2014   


     BlackRock MuniYield Michigan Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                        
           
      7/31/14      7/31/13      Change      High      Low  

Market Price

     $13.47         $12.57         7.16%         $14.12         $11.94   

Net Asset Value

     $15.24         $14.16         7.63%         $15.30         $13.36   

 

Market Price and Net Asset Value History For the Past Five Years      

 

LOGO

 

Overview of the Fund’s Long-Term Investments      

 

Sector Allocation    7/31/14     7/31/13  

Education

     21     17

County/City/Special District/School District

     19        25   

Health

     18        14   

Utilities

     13        12   

State

     11        13   

Transportation

     9        10   

Housing

     6        6   

Corporate

     3        3   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Credit Quality Allocation1    7/31/14     7/31/13  

AAA/Aaa

     3     1

AA/Aa

     73        70   

A

     24        29   

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

   
Call/Maturity Schedule2        

Calendar Year Ended December 31,

  

2014

     2

2015

     7   

2016

     6   

2017

     8   

2018

     13   

 

  2   

Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years.

 

                
   ANNUAL REPORT    JULY 31, 2014    13


Fund Summary as of July 31, 2014    BlackRock MuniYield New Jersey Quality Fund, Inc.

 

 

Fund Overview      

BlackRock MuniYield New Jersey Quality Fund, Inc.’s (MJI) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal income taxes and New Jersey personal income tax as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and New Jersey personal income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Performance      
Ÿ  

For the 12-month period ended July 31, 2014, the Fund returned 13.85% based on market price and 16.64% based on NAV. For the same period, the closed-end Lipper New Jersey Municipal Debt Funds category posted an average return of 12.38% based on market price and 13.86% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

 

Ÿ  

Positive contributors to performance included the Fund’s exposure to the long-end of the municipal yield curve, as the curve flattened over the period. (Long-rates fell much more than short and intermediate rates.) The Fund’s duration exposure and corresponding interest rate sensitivity also added to returns as municipal rates declined. (Bond prices rise as rates fall.) The income generated from the Fund’s holdings of New Jersey state tax-exempt municipal bonds contributed to performance as well.

 

Ÿ  

The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results as credit spreads on these bonds widened materially due to investors’ lack of confidence and a weak local economy. The Fund sold its exposure to these securities early in the period.

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 NYSE

   MJI

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of July 31, 2014 ($14.15)1

   6.28%

Tax Equivalent Yield2

   12.19%

Current Monthly Distribution per Common Share3

   $0.074

Current Annualized Distribution per Common Share3

   $0.888

Economic Leverage as of July 31, 20144

   37%

 

  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 marginal federal and state tax rate of 48.48%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

The distribution rate is not constant and is subject to change.

 

  4   

Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5.

 

                
14    ANNUAL REPORT    JULY 31, 2014   


     BlackRock MuniYield New Jersey Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                        
           
      7/31/14      7/31/13      Change      High      Low  

Market Price

     $14.15         $13.27         6.63%         $14.54         $12.48   

Net Asset Value

     $15.61         $14.29         9.24%         $15.70         $13.58   

 

Market Price and Net Asset Value History For the Past Five Years      

 

LOGO

 

Overview of the Fund’s Long-Term Investments      

 

Sector Allocation    7/31/14     7/31/13  

Transportation

     24     20

Education

     22        17   

State

     17        24   

County/City/Special District/School District

     12        11   

Health

     11        10   

Housing

     6        7   

Utilities

     4        8   

Corporate

     4        3   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Credit Quality Allocation1    7/31/14     7/31/13  

AAA/Aaa

     6     6

AA/Aa

     51        45   

A

     36        42   

BBB/Baa

     7        7   

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

   
Call/Maturity Schedule2        

Calendar Year Ended December 31,

  

2014

     6

2015

     3   

2016

     3   

2017

     8   

2018

     8   

 

  2   

Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years.

 

                
   ANNUAL REPORT    JULY 31, 2014    15


Fund Summary as of July 31, 2014    BlackRock MuniYield Pennsylvania Quality Fund

 

 

Fund Overview      

BlackRock MuniYield Pennsylvania Quality Fund’s (MPA) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal and Pennsylvania income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and Pennsylvania income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

 

Performance      
Ÿ  

For the 12-month period ended July 31, 2014, the Fund returned 13.45% based on market price and 15.39% based on NAV. For the same period, the closed-end Lipper Pennsylvania Municipal Debt Funds category posted an average return of 16.01% based on market price and 13.04% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

 

Ÿ  

The Fund’s duration exposure (sensitivity to interest rate movements) contributed positively to performance as interest rates declined during the period. (Bond prices rise when rates fall.) The Fund’s exposure to long-maturity bonds benefited performance given that the yield curve flattened with rates falling more significantly in the 20- to 30-year maturity range. The income generated from coupon payments on the Fund’s portfolio of Pennsylvania tax-exempt bonds also contributed to performance.

 

Ÿ  

The Fund’s modest exposure to Puerto Rico government-related credits detracted from results. Credit spreads on these bonds widened materially due to investors’ lack of confidence and the weak local economy. The Fund sold its exposure to these securities early in the period.

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 NYSE

   MPA

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of July 31, 2014 ($13.89)1

   6.39%

Tax Equivalent Yield2

   11.65%

Current Monthly Distribution per Common Share3

   $0.074

Current Annualized Distribution per Common Share3

   $0.888

Economic Leverage as of July 31, 20144

   36%

 

  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 marginal federal and state tax rate of 45.14%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

The distribution rate is not constant and is subject to change.

 

  4   

Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5.

 

                
16    ANNUAL REPORT    JULY 31, 2014   


     BlackRock MuniYield Pennsylvania Quality Fund

 

 

Market Price and Net Asset Value Per Share Summary      

 

      7/31/14      7/31/13      Change      High      Low  

Market Price

   $ 13.89       $ 13.07         6.27%       $ 14.37       $ 12.30   

Net Asset Value

   $ 15.77       $ 14.59         8.09%       $ 15.85       $ 13.94   

 

Market Price and Net Asset Value History For the Past Five Years      

 

LOGO

 

Overview of the Fund’s Long-Term Investments      

 

Sector Allocation    7/31/14     7/31/13  

County/City/Special District/School District

     25     22

Health

     17        16   

State

     16        17   

Transportation

     11        13   

Education

     10        11   

Corporate

     8        7   

Utilities

     7        7   

Housing

     6        7   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Credit Quality Allocation1    7/31/14     7/31/13  

AAA/Aaa

     1     1

AA/Aa

     74        73   

A

     19        22   

BBB/Baa

     6        4   

N/R2

              

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

 

  2   

The investment advisor evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed certain of these unrated securities as investment grade quality. As of July 31, 2014 and July 31, 2013, the market value of unrated securities deemed by the investment advisor to be investment grade was $539,850, representing less than 1%, and $525,235, representing less than 1%, respectively, of the Fund’s long-term investments.

   
Call/Maturity Schedule3        

Calendar Year Ended December 31,

  

2014

     7

2015

     10   

2016

     11   

2017

     6   

2018

     12   

 

  3   

Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years.

 

                
   ANNUAL REPORT    JULY 31, 2014    17


Schedule of Investments July 31, 2014

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

California — 120.4%

                

Corporate — 0.4%

  

City of Chula Vista California, Refunding RB, San Diego Gas & Electric, Series A, 5.88%, 2/15/34

   $ 2,435      $ 2,806,192   

County/City/Special District/School District — 37.9%

  

Centinela Valley Union High School District, GO, Election of 2010, Series A, 5.75%, 8/01/41

     9,100        10,803,611   

City of Garden Grove California, COP, Series A, Financing Project (AMBAC), 5.50%, 3/01/26

     4,040        4,055,958   

County of Kern California, COP, Capital Improvements Projects, Series A (AGC), 6.00%, 8/01/35

     3,500        4,074,980   

County of Los Angeles California Sanitation Districts Financing Authority, Refunding RB (BHAC), 5.00%, 10/01/34

     7,915        8,230,729   

County of Orange California Sanitation District, COP, Series A, 5.00%, 2/01/35

     2,500        2,820,050   

County of San Joaquin California Transportation Authority, Refunding RB, Limited Tax, Measure K, Series A, 6.00%, 3/01/36

     2,440        2,930,562   

County of Ventura California Community College District, GO, Election of 2002, Series C, 5.50%, 8/01/33

     5,050        5,813,207   

Culver City Redevelopment Finance Authority California, Refunding, Tax Allocation Bonds, Series A (AGM), 5.60%, 11/01/25

     3,750        3,765,113   

Foothill-De Anza Community College District, GO, Election of 2006, Series C, 5.00%, 8/01/40

     30,000        33,046,200   

Garden Grove Unified School District, GO, Election of 2010, Series C, 5.25%, 8/01/40

     5,500        6,242,170   

Grossmont Healthcare District, GO, Election of 2006, Series B, 6.13%, 7/15/40

     2,000        2,348,900   

Kern Community College District, GO, Safety Repair & Improvements, Series C:

    

5.25%, 11/01/32

     5,715        6,631,457   

5.75%, 11/01/34

     12,085        14,622,850   

Los Alamitos Unified School District, GO, Refunding, School Facilities Improvement, Series E, 5.25%, 8/01/39

     3,700        4,190,102   

Los Angeles Community College District, GO, Series E (AGM), 5.00%, 8/01/31

     11,215        11,953,396   

Los Angeles Community Redevelopment Agency California, RB, Bunker Hill Project, Series A (AGM), 5.00%, 12/01/27

     7,000        7,102,830   

Los Rios Community College District, GO, Election of 2008, Series A, 5.00%, 8/01/35

     11,000        12,123,650   

Oxnard Union High School District, GO, Refunding, Election of 2004, Series A (AGM), 5.00%, 8/01/35

     10,000        10,873,100   

Redlands Unified School District California, GO, Election of 2008 (AGM), 5.25%, 7/01/33

     5,000        5,634,400   

Riverside Community College District, GO, Election of 2004, Series C (AGM), 5.00%, 8/01/32

     8,750        9,623,512   

California (continued)

                

County/City/Special District/School District (concluded)

  

San Diego Regional Building Authority, RB, County Operations Center & Annex, Series A, 5.50%, 2/01/29

   $ 900      $ 1,049,382   

San Francisco California Bay Area Rapid Transit District, Refunding RB, Series A (NPFGC), 5.00%, 7/01/30

     23,100        23,828,805   

San Jose California Financing Authority, LRB, Convention Center Expansion & Renovation Project, Series A:

    

5.75%, 5/01/36

     2,560        2,738,867   

5.75%, 5/01/42

     4,500        5,290,380   

San Jose California Financing Authority, Refunding LRB, Convention Center Expansion & Renovation Project, Series A, 5.00%, 6/01/39

     20,000        21,770,000   

Snowline Joint Unified School District, COP, Refunding, Refining Project (AGC), 5.75%, 9/01/38

     5,635        6,556,604   

West Contra Costa California Unified School District, GO:

  

 

Election of 2005, Series A (AGM), 5.00%, 8/01/35

     5,000        5,066,200   

Election of 2010, Series A (AGM), 5.25%, 8/01/41

     5,390        5,883,724   

Election of 2010, Series B, 5.50%, 8/01/39

     3,195        3,610,957   

Election of 2012, Series A, 5.50%, 8/01/39

     2,500        2,827,500   
    

 

 

 
               245,509,196   

Education — 3.3%

  

California Educational Facilities Authority, RB, University of Southern California, Series A, 5.25%, 10/01/38

     2,300        2,594,630   

California Municipal Finance Authority, RB, Emerson College, 6.00%, 1/01/42

     2,750        3,154,965   

Gavilan Joint Community College District, GO, Election of 2004, Series D:

    

5.50%, 8/01/31

     2,170        2,504,310   

5.75%, 8/01/35

     8,400        9,779,616   

University of California, RB, Series L, 5.00%, 5/15/36

     3,030        3,258,038   
    

 

 

 
               21,291,559   

Health — 18.4%

  

ABAG Finance Authority for Nonprofit Corps., Refunding RB, Sharp Healthcare:

    

Series A, 6.00%, 8/01/30

     2,305        2,784,855   

Series B, 6.25%, 8/01/39

     6,305        7,284,734   

California Health Facilities Financing Authority, RB:

    

Children’s Hospital, Series A, 5.25%, 11/01/41

     8,620        9,314,341   

Kaiser Permanente, Series A, 5.25%, 4/01/39

     7,275        7,520,822   

Providence Health Services, Series B, 5.50%, 10/01/39

     4,130        4,761,518   

Sutter Health, Series A, 5.25%, 11/15/46

     7,500        7,944,300   

Sutter Health, Series B, 6.00%, 8/15/42

     9,655        11,556,070   

 

Portfolio Abbreviations

 

AGC    Assured Guaranty Corp.    EDA    Economic Development Authority    IDA    Industrial Development Authority
AGM    Assured Guaranty Municipal Corp.    EDC    Economic Development Corp.    IDB    Industrial Development Board
AMBAC    American Municipal Bond Assurance Corp.    ERB    Education Revenue Bonds    ISD    Independent School District
AMT    Alternative Minimum Tax (subject to)    GAB    Grant Anticipation Bonds    LRB    Lease Revenue Bonds
ARB    Airport Revenue Bonds    GARB    General Airport Revenue Bonds    M/F    Multi-Family
BARB    Building Aid Revenue Bonds    GO    General Obligation Bonds    NPFGC    National Public Finance Guarantee Corp.
BHAC    Berkshire Hathaway Assurance Corp.    HDA    Housing Development Authority    Q-SBLF    Qualified School Bond Loan Fund
CAB    Capital Appreciation Bonds    HFA    Housing Finance Agency    RB    Revenue Bonds
COP    Certificates of Participation    HUD    Department of Housing and Urban Development    S/F    Single-Family

 

See Notes to Financial Statements.

 

                
18    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (continued)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

California (continued)

                

Health (concluded)

  

California Health Facilities Financing Authority, Refunding RB:

    

Catholic Healthcare West, Series A, 6.00%, 7/01/34

   $ 3,700      $ 4,178,521   

Saint Joseph’s Health System, Series A, 5.00%, 7/01/37

     10,000        10,837,100   

Series A, 5.00%, 10/01/38

     10,970        12,129,529   

Stanford Hospital, Series A-3, 5.50%, 11/15/40

     3,065        3,494,253   

California Statewide Communities Development Authority, RB, Kaiser Permanente:

    

Series A, 5.00%, 4/01/42

     12,500        13,532,125   

Series B, 5.25%, 3/01/45

     12,505        12,887,528   

California Statewide Communities Development Authority, Refunding RB:

    

Kaiser Permanente, Series C, 5.25%, 8/01/31

     2,500        2,618,825   

Trinity Health Credit Group Composite Issue, 5.00%, 12/01/41

     6,235        6,684,918   

Washington Township Health Care District, GO, Series B, 5.50%, 8/01/38

     1,625        1,901,721   
    

 

 

 
               119,431,160   

State — 9.4%

  

California State Public Works Board, LRB:

    

Department of Education, Riverside Campus Project, Series B, 6.50%, 4/01/34

     3,670        4,367,997   

Various Capital Projects, Series I, 5.50%, 11/01/33

     2,015        2,381,831   

California State Public Works Board, RB, California State Prisons, Series C, 5.75%, 10/01/31

     1,205        1,406,211   

State of California, GO, Various Purposes:

    

6.00%, 3/01/33

     5,000        5,998,850   

6.00%, 4/01/38

     28,095        33,063,601   

University of California, RB, Limited Project, Series D (NPFGC), 5.00%, 5/15/41

     13,000        14,000,090   
    

 

 

 
               61,218,580   

Transportation — 20.5%

  

City & County of San Francisco California Airports Commission, ARB, Series E, 6.00%, 5/01/39

     9,650        11,438,821   

City & County of San Francisco California Airports Commission, Refunding ARB, AMT:

    

2nd Series 34E (AGM), 5.75%, 5/01/24

     5,000        5,679,750   

Series A, 5.00%, 5/01/29

     6,435        7,130,945   

City of Los Angeles California Department of Airports, ARB, Los Angeles International Airport, Senior Series D, 5.25%, 5/15/29

     2,590        2,979,536   

City of Los Angeles California Department of Airports, Refunding ARB, Los Angeles International Airport, Series A:

    

Senior, 5.00%, 5/15/40

     3,750        4,106,925   

5.25%, 5/15/39

     5,835        6,626,926   

City of San Jose California, Refunding ARB, Series A-1, AMT:

    

5.25%, 3/01/23

     3,785        4,343,931   

6.25%, 3/01/34

     1,400        1,619,380   

County of Los Angeles Metropolitan Transportation Authority, Refunding RB, Series A (AMBAC), 5.00%, 7/01/35

     9,000        9,314,190   

County of Orange California, ARB, Series B, 5.75%, 7/01/34

     6,345        7,125,245   

County of Sacramento California, ARB:

    

Senior Series A (AGC), 5.50%, 7/01/41

     8,190        9,279,516   

Senior Series B, 5.75%, 7/01/39

     2,650        3,023,094   

Senior Series B, AMT (AGM), 5.75%, 7/01/28

     13,275        15,133,234   

Senior Series B, AMT (AGM), 5.25%, 7/01/33

     19,530        20,718,791   

California (concluded)

                

Transportation (concluded)

  

County of San Bernardino California Transportation Authority, RB, Series A, 5.25%, 3/01/40

   4,545      5,239,703   

Los Angeles Harbor Department, RB, Series B, 5.25%, 8/01/34

     5,530        6,327,315   

San Francisco Bay Area Rapid Transit District, Refunding RB, Series A (NPFGC), 5.00%, 7/01/34

     2,500        2,577,950   

County of San Mateo California Transportation Authority, Refunding RB, Series A (NPFGC), 5.00%, 6/01/32

     10,000        10,296,700   
    

 

 

 
               132,961,952   

Utilities — 30.5%

  

Anaheim Public Financing Authority, RB, Electric System Distribution Facilities, Series A, 5.38%, 10/01/36

     2,200        2,521,970   

City of Los Angeles California Department of Water & Power, Refunding RB, Series A, 5.25%, 7/01/39

     16,000        17,771,040   

City of Los Angeles California Wastewater System, Refunding RB, Sub-Series A, 5.00%, 6/01/28

     2,000        2,305,260   

City of Napa California Water Revenue, RB (AMBAC), 5.00%, 5/01/35

     9,100        9,905,896   

City of San Francisco California Public Utilities Commission Water, RB, Series B, 5.00%, 11/01/30

     10,000        11,418,200   

County of Sacramento California Sanitation Districts Financing Authority, RB:

    

5.00%, 6/01/16 (a)

     3,490        3,790,768   

5.00%, 12/01/36

     1,010        1,066,126   

Dublin-San Ramon Services District, Refunding RB, 6.00%, 8/01/41

     4,000        4,840,440   

East Bay Municipal Utility District, Refunding RB:

    

Series A (NPFGC), 5.00%, 6/01/32

     10,000        11,052,400   

Series A (NPFGC), 5.00%, 6/01/37

     6,670        7,332,731   

Sub-Series A (AGM), 5.00%, 6/01/37

     11,190        12,301,839   

Sub-Series A (AMBAC), 5.00%, 6/01/33

     5,000        5,480,700   

East Bay Municipal Utility District Water System Revenue, RB, Series A (NPFGC):

    

5.00%, 6/01/15 (a)

     8,830        9,185,761   

5.00%, 6/01/35

     3,240        3,340,796   

Eastern Municipal Water District, COP, Series H, 5.00%, 7/01/33

     2,505        2,801,291   

El Dorado Irrigation District/El Dorado County Water Agency, Refunding RB, Series A (AGM), 5.25%, 3/01/39

     10,000        11,344,400   

Imperial Irrigation District, Refunding RB, Electric System, 5.13%, 11/01/38

     9,500        10,355,475   

Los Angeles Department of Water & Power, RB:

    

Series A, 5.38%, 7/01/38

     9,375        10,663,406   

Sub-Series A-2, (AGM), 5.00%, 7/01/35

     7,500        8,036,850   

Metropolitan Water District of Southern California, RB, Series A:

    

5.00%, 7/01/35

     12,870        13,319,292   

5.00%, 7/01/37

     5,500        6,017,605   

Metropolitan Water District of Southern California, Refunding RB, Series C, 5.00%, 7/01/35

     2,515        2,856,537   

San Diego Public Facilities Financing Authority Sewer, Refunding RB, Senior Series A:

    

5.25%, 5/15/34

     1,060        1,209,555   

5.25%, 5/15/39

     10,000        11,337,800   

San Diego Public Facilities Financing Authority Water, Refunding RB, Series B, 5.50%, 8/01/39

     8,000        9,292,960   

San Juan Water District, Refunding RB, San Juan & Citrus Heights, 5.25%, 2/01/33

     7,325        8,246,412   
    

 

 

 
               197,795,510   
Total Municipal Bonds — 120.4%              781,014,149   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    19


Schedule of Investments (continued)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

(Percentages shown are based on Net Assets)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
  

Par  

(000)

    Value  

California — 29.1%

                

County/City/Special District/School District — 18.0%

  

County of Alameda California Joint Powers Authority, Refunding LRB (AGM), 5.00%, 12/01/34

   $ 13,180      $ 14,556,255   

Desert Community College District California, GO, Series C (AGM), 5.00%, 8/01/37

     16,530        18,180,190   

Foothill-De Anza Community College District, GO, Series C, 5.00%, 8/01/40

     10,000        11,015,400   

Los Angeles Community College District California, GO:

    

Election of 2001, Series A (NPFGC), 5.00%, 8/01/32

     6,647        7,348,137   

Election of 2001, Series E-1, 5.00%, 8/01/33

     11,770        13,219,358   

Election of 2003, Series F-1, 5.00%, 8/01/33

     10,000        11,231,400   

Los Angeles Community College District California, GO, Refunding, Election of 2008, Series A, 6.00%, 8/01/33

     9,596        11,458,954   

Poway Unified School District, GO, Election of 2002, Improvement District 02, Series 1-B (AGM), 5.00%, 8/01/30

     10,000        10,935,400   

San Bernardino Community College District California, GO, Election of 2002, Series C (AGM), 5.00%, 8/01/31

     17,770        18,958,280   
    

 

 

 
               116,903,374   

Education — 4.9%

    

Riverside Community College District, GO, Election of 2004, Series C (NPFGC), 5.00%, 8/01/32

     8,910        9,799,485   

University of California, RB:

    

Limited Project, Series D (AGM), 5.00%, 5/15/41

     8,000        8,615,440   

Series O, 5.75%, 5/15/34

     11,190        13,100,543   
    

 

 

 
               31,515,468   
Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
  

Par  

(000)

    Value  

California (concluded)

                

Utilities — 6.2%

    

County of San Diego California Water Authority, COP, Refunding, Series A (AGM), 5.00%, 5/01/33

   16,740      18,549,762   

East Bay Municipal Utility District, Refunding RB, Sub-Series A (AMBAC), 5.00%, 6/01/37

     14,510        15,993,212   

Rancho Water District Financing Authority, Refunding RB, Series A (AGM), 5.00%, 8/01/34

     5,008        5,610,799   
    

 

 

 
               40,153,773   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 29.1%
        188,572,615   
Total Long-Term Investments
(Cost — $900,566,455) — 149.5%
        969,586,764   
    
                  
Short-Term Securities    Shares         

BIF California Municipal Money Fund, 0.00% (c)(d)

     2,207,320        2,207,320   

Total Short-Term Securities

(Cost — $2,207,320) — 0.3%

  

  

    2,207,320   
Total Investments (Cost — $902,773,775) — 149.8%        971,794,084   
Other Assets Less Liabilities — 2.9%        19,344,027   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (13.6)%

   

    (88,301,430
VMTP Shares, at Liquidation Value — (39.1)%        (254,000,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 648,836,681   
    

 

 

 

 

Notes to Schedule of Investments

 

(a)   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.

 

(b)   Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(c)   Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2013
      

Net

Activity

       Shares Held
at July 31,
2014
       Income  

BIF California Municipal Money Fund

       501,963           1,705,357           2,207,320         $ 206   

 

(d)   Represents the current yield as of report date.

 

Ÿ  

Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts
Sold
    Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
 
  (411   10-Year U.S. Treasury Note   Chicago Board of Trade   September 2014   $ 51,214,453      $ 98,963   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

  Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  Ÿ  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

 

See Notes to Financial Statements.

 

                
20    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (concluded)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

 

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Municipal Bonds1

            $ 969,586,764                   $ 969,586,764   

Short-Term Securities

  $ 2,207,320                               2,207,320   
 

 

 

 

Total

  $ 2,207,320         $ 969,586,764                   $ 971,794,084   
 

 

 

 

1    See above Schedule of Investments for values in each sector.

       

     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments2             

Assets:

                

Interest rate contracts

  $ 98,963                             $ 98,963   

2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

       

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:    
     Level 1        Level 2        Level 3        Total  

Assets:

                

Cash pledged for financial futures contracts

  $ 562,000                             $ 562,000   

Liabilities:

                

TOB trust certificates

            $ (88,271,444                  (88,271,444

VMTP Shares

              (254,000,000                  (254,000,000
 

 

 

 

Total

  $ 562,000         $ (342,271,444                $ (341,709,444
 

 

 

 

There were no transfers between levels during the year ended July 31, 2014.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    21


Schedule of Investments July 31, 2014

  

BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New Jersey — 138.8%

                

Corporate — 2.9%

  

 

County of Salem New Jersey Pollution Control Financing Authority, Refunding RB, Atlantic City Electric, AMT, Series A, 5.00%, 12/01/23

   $ 4,190      $ 4,635,942   

New Jersey EDA, Refunding RB, New Jersey American Water Co., Inc. Project, AMT:

    

Series A, 5.70%, 10/01/39

     2,500        2,739,450   

Series B, 5.60%, 11/01/34

     2,150        2,363,022   
    

 

 

 
               9,738,414   

County/City/Special District/School District — 18.2%

  

Borough of Hopatcong New Jersey, GO, Refunding, Sewer (AMBAC), 4.50%, 8/01/33

     2,690        2,758,272   

City of Perth Amboy New Jersey, GO, Refunding, CAB (AGM):

    

5.00%, 7/01/32

     4,605        4,813,008   

5.00%, 7/01/33

     1,395        1,455,250   

5.00%, 7/01/37

     1,470        1,518,628   

County of Essex New Jersey Improvement Authority, Refunding RB, Project Consolidation (NPFGC):

    

5.50%, 10/01/27

     250        315,768   

5.50%, 10/01/28

     4,840        6,145,832   

County of Hudson New Jersey Improvement Authority, RB:

    

County Secured, County Services Building Project (AGM), 5.00%, 4/01/27

     750        811,860   

Harrison Parking Facility Project, Series C (AGC), 5.25%, 1/01/39

     2,000        2,140,320   

Harrison Parking Facility Project, Series C (AGC), 5.38%, 1/01/44

     3,600        3,857,148   

County of Middlesex New Jersey Improvement Authority, RB, Senior Citizens Housing Project, AMT (AMBAC), 5.50%, 9/01/30

     500        501,805   

County of Monmouth New Jersey Improvement Authority, RB, Governmental Loan (AMBAC):

    

5.35%, 12/01/17

     5        5,019   

5.38%, 12/01/18

     5        5,019   

County of Union New Jersey, GO, Refunding:

    

4.00%, 3/01/29

     2,590        2,740,453   

4.00%, 3/01/30

     2,590        2,727,788   

4.00%, 3/01/31

     2,925        3,068,179   

County of Union New Jersey Utilities Authority, Refunding RB, Series A:

    

Resources Recovery Facility, Covanta Union, Inc., AMT, 5.25%, 12/01/31

     450        486,013   

Solid Waste System, County Deficiency Agreement, 5.00%, 6/15/41

     5,415        5,893,307   

Edgewater Borough Board of Education, GO, Refunding, (AGM):

    

4.25%, 3/01/34

     1,235        1,309,878   

4.25%, 3/01/35

     1,300        1,371,981   

4.30%, 3/01/36

     1,370        1,442,733   

Morristown Parking Authority, RB, (NPFGC):

    

5.00%, 8/01/30

     1,830        1,912,844   

5.00%, 8/01/33

     3,000        3,120,150   

New Jersey Sports & Exposition Authority, Refunding RB, (NPFGC):

    

5.50%, 3/01/21

     5,890        6,809,606   

5.50%, 3/01/22

     3,150        3,672,081   

New Jersey State Transit Corp., COP, Federal Transit Administration Grants, Subordinate, Series A (AGM) (NPFGC), 5.00%, 9/15/15 (a)

     2,000        2,090,080   
    

 

 

 
               60,973,022   

New Jersey (continued)

                

Education — 28.2%

    

New Jersey Educational Facilities Authority, RB:

    

Higher Education Capital Improvement Fund, 5.00%, 9/01/33

   4,310      4,739,750   

Montclair State University, Series A (AMBAC), 5.00%, 7/01/16 (a)

     1,200        1,306,500   

Montclair State University, Series A (AMBAC), 5.00%, 7/01/22

     2,880        3,113,539   

Richard Stockton College, Series F (NPFGC), 5.00%, 7/01/31

     2,625        2,780,479   

New Jersey Educational Facilities Authority, Refunding RB:

    

College of New Jersey, Series D (AGM), 5.00%, 7/01/35

     9,740        10,730,948   

Montclair State University, Series A, 5.00%, 7/01/39

     11,055        12,287,080   

Montclair State University, Series J (NPFGC), 4.25%, 7/01/30

     3,775        3,840,987   

Montclaire State University, Series A, 5.00%, 7/01/44

     2,520        2,794,201   

New Jersey Institute of Technology, Series H, 5.00%, 7/01/31

     3,000        3,288,450   

Ramapo College, Series B, 5.00%, 7/01/37

     345        372,331   

Ramapo College, Series I (AMBAC), 4.25%, 7/01/31

     1,250        1,271,238   

Seton Hall University, Series D, 5.00%, 7/01/38

     360        391,410   

Seton Hall University, Series D, 5.00%, 7/01/43

     430        467,010   

Stevens Institute of Technology, Series A, 5.00%, 7/01/27

     2,800        2,900,464   

Stevens Institute of Technology, Series A, 5.00%, 7/01/34

     900        920,286   

William Paterson University, Series C (AGC), 5.00%, 7/01/28

     250        277,670   

William Paterson University, Series C (AGC), 4.75%, 7/01/34

     4,000        4,244,600   

New Jersey Higher Education Student Assistance Authority, RB, Senior Student Loan, Series 1A, AMT:

    

4.00%, 12/01/28

     790        788,191   

4.50%, 12/01/28

     3,380        3,527,841   

4.00%, 12/01/29

     4,140        4,073,222   

4.00%, 12/01/29

     710        707,487   

4.50%, 12/01/29

     4,150        4,325,504   

4.63%, 12/01/30

     4,080        4,245,770   

4.00%, 12/01/31

     1,335        1,289,076   

4.25%, 12/01/32

     1,460        1,445,692   

4.13%, 12/01/35

     710        677,539   

4.50%, 12/01/36

     1,280        1,284,774   

New Jersey Higher Education Student Assistance Authority, Refunding RB, Series 1, AMT, 5.38%, 12/01/24

     1,500        1,684,470   

New Jersey Institute of Technology, RB, Series A, 5.00%, 7/01/42

     5,045        5,433,969   

Rutgers - The State University of New Jersey, Refunding RB, Series L:

    

5.00%, 5/01/30

     1,100        1,263,592   

5.00%, 5/01/43

     7,150        7,934,927   
    

 

 

 
               94,408,997   

Health — 19.1%

    

New Jersey Health Care Facilities Financing Authority, RB:

    

Greystone Park Psychiatric Hospital (AMBAC), 5.00%, 9/15/15 (a)

     10,775        11,358,143   

Meridian Health System Obligated Group, Series I (AGC), 5.00%, 7/01/38

     720        755,424   

 

                
22    ANNUAL REPORT    JULY 31, 2014   

See Notes to Financial Statements.


Schedule of Investments (continued)

  

BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New Jersey (continued)

                

Health (concluded)

    

Meridian Health System Obligated Group, Series II (AGC), 5.00%, 7/01/38

   $ 6,050      $ 6,347,660   

Meridian Health System Obligated Group, Series V (AGC), 5.00%, 7/01/38

     3,800        3,986,960   

Robert Wood Johnson University Hospital, Series A, 5.50%, 7/01/43

     4,885        5,424,011   

Virtua Health, Series A (AGC), 5.50%, 7/01/38

     3,035        3,271,366   

New Jersey Health Care Facilities Financing Authority, Refunding RB:

    

5.00%, 7/01/28

     2,130        2,415,441   

5.00%, 7/01/29

     510        574,831   

5.50%, 7/01/31

     2,880        3,212,323   

AHS Hospital Corp., 6.00%, 7/01/41

     3,080        3,565,685   

Catholic Health East Issue, 5.00%, 11/15/33

     1,375        1,465,668   

Hackensack University Medical (AGC), 5.13%, 1/01/27

     1,500        1,597,710   

Hackensack University Medical (AGM), 4.63%, 1/01/30

     5,480        5,743,040   

Kennedy Health System, 5.00%, 7/01/42

     360        377,978   

Meridian Health System Obligated Group, 5.00%, 7/01/25

     700        784,378   

Meridian Health System Obligated Group, 5.00%, 7/01/26

     1,590        1,764,089   

St. Barnabas Health Care System, Series A, 5.00%, 7/01/24

     1,820        2,030,155   

St. Barnabas Health Care System, Series A, 5.63%, 7/01/32

     4,010        4,390,068   

St. Barnabas Health Care System, Series A, 5.63%, 7/01/37

     3,560        3,866,089   

St. Luke’s Warren Hospital Obligated Group, 5.00%, 8/15/34

     740        789,869   

St. Luke’s Warren Hospital Obligated Group, 4.00%, 8/15/37

     440        415,888   
    

 

 

 
               64,136,776   

Housing — 9.0%

    

New Jersey Housing & Mortgage Finance Agency, RB:

    

Capital Fund Program, Series A (AGM), 5.00%, 5/01/27

     4,800        5,180,784   

Capital Fund Program, Series A (AGM) (HUD), 4.70%, 11/01/25

     6,120        6,272,021   

M/F Housing, Series A, 4.55%, 11/01/43

     3,575        3,603,350   

M/F Housing, Series A, AMT (NPFGC), 4.85%, 11/01/39

     935        918,890   

S/F Housing, Series AA, 6.50%, 10/01/38

     930        957,826   

S/F Housing, Series B, 4.50%, 10/01/30

     6,735        7,114,584   

New Jersey Housing & Mortgage Finance Agency, Refunding RB, AMT:

    

M/F Housing, Series 2, 4.60%, 11/01/38

     2,400        2,438,736   

M/F Housing, Series 2, 4.75%, 11/01/46

     3,015        3,058,898   

S/F Housing, Series T, 4.70%, 10/01/37

     615        620,486   
    

 

 

 
               30,165,575   

State — 29.6%

    

Garden State Preservation Trust, RB (AGM):

    

CAB, Series B, 0.00%, 11/01/23 (b)

     9,000        7,025,760   

CAB, Series B, 0.00%, 11/01/25 (b)

     10,000        7,210,400   

Election of 2005, Series A, 5.80%, 11/01/15 (a)

     1,960        2,095,828   

Election of 2005, Series A, 5.80%, 11/01/15 (a)

     2,730        2,919,189   

Garden State Preservation Trust, Refunding RB,
Series C (AGM):

    

5.25%, 11/01/20

     5,000        6,056,750   

5.25%, 11/01/21

     7,705        9,440,166   

New Jersey (continued)

                

State (concluded)

    

New Jersey EDA, LRB, Rutgers - The State University of New Jersey, College Avenue Redevelopment Project, 5.00%, 6/15/33

   2,185      2,477,593   

New Jersey EDA, RB:

    

Liberty State Park Project, Series C, 5.00%, 3/01/22

     2,670        2,740,301   

Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/24

     1,785        2,118,849   

Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/25

     4,000        4,764,760   

Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/26

     7,500        8,939,475   

Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/33

     11,105        11,223,046   

School Facilities Construction (AGC), 6.00%, 12/15/18 (a)

     2,775        3,375,121   

School Facilities Construction (AGC), 6.00%, 12/15/34

     25        28,968   

School Facilities Construction, Series L (AGM), 5.00%, 3/01/15 (a)

     9,000        9,254,430   

School Facilities Construction, Series O, 5.25%, 3/01/15 (a)

     1,420        1,461,947   

School Facilities Construction, Series U, 5.00%, 9/01/37

     2,475        2,696,388   

School Facilities Construction, Series Y, 5.00%, 9/01/33

     3,000        3,287,880   

New Jersey EDA, Refunding RB:

    

Cigarette Tax, 5.00%, 6/15/26

     895        984,885   

Cigarette Tax, 5.00%, 6/15/28

     1,520        1,654,900   

Cigarette Tax, 5.00%, 6/15/29

     2,000        2,163,300   

School Facilities Construction, Series N-1 (NPFGC), 5.50%, 9/01/27

     1,000        1,219,070   

School Facilities Construction, Series NN, 5.00%, 3/01/29

     4,500        4,923,270   

State of New Jersey, COP, Equipment Lease Purchase, Series A, 5.25%, 6/15/27

     1,080        1,208,099   
    

 

 

 
               99,270,375   

Transportation — 27.6%

    

Delaware River Port Authority, RB:

    

5.00%, 1/01/29

     1,250        1,414,275   

5.00%, 1/01/37

     4,465        4,881,986   

Series D (AGM), 5.00%, 1/01/40

     3,700        3,930,288   

Delaware River Port Authority, Refunding RB, Port District Project:

    

5.00%, 1/01/26

     1,745        1,887,392   

5.00%, 1/01/27

     1,300        1,396,408   

New Jersey EDA, RB, Private Activity Bond, The Goethals Bridge Replacement Project (AMT):

    

5.13%, 1/01/34

     1,630        1,745,159   

5.38%, 1/01/43

     5,495        5,829,371   

New Jersey State Turnpike Authority, RB, Growth & Income Securities, Series B (AMBAC), 5.15%, 1/01/35 (c)

     7,615        7,832,637   

New Jersey State Turnpike Authority, Refunding RB:

    

Series A (AGM), 5.25%, 1/01/26

     4,900        5,969,621   

Series A (AGM), 5.25%, 1/01/29

     2,000        2,423,960   

Series A (AGM), 5.25%, 1/01/30

     4,000        4,855,160   

Series A (BHAC), 5.25%, 1/01/29

     500        616,315   

Series C (NPFGC), 6.50%, 1/01/16 (d)

     255        277,295   

Series C (NPFGC), 6.50%, 1/01/16 (d)

     1,535        1,593,453   

Series C (NPFGC), 6.50%, 1/01/16 (d)

     305        331,666   

Series C (NPFGC), 6.50%, 1/01/16

     605        656,310   

New Jersey Transportation Trust Fund Authority, RB:

    

CAB, Transportation System, Series C (AMBAC), 0.00%, 12/15/36 (b)

     7,210        2,311,454   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    23


Schedule of Investments (continued)

  

BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New Jersey (concluded)

                

Transportation (concluded)

    

CAB, Transportation System, Series A, 0.00%, 12/15/35 (b)

   $ 6,000      $ 2,049,360   

CAB, Transportation System, Series C (AGM), 0.00%, 12/15/32 (b)

     4,050        1,709,545   

CAB, Transportation System, Series C (AMBAC), 0.00%, 12/15/35 (b)

     1,400        473,228   

Transportation Program, Series AA, 5.00%, 6/15/33

     4,300        4,623,833   

Transportation System, Series A, 6.00%, 6/15/35

     4,365        5,225,080   

Transportation System, Series A (NPFGC), 5.75%, 6/15/24

     1,205        1,449,507   

Transportation System, Series A (AGC), 5.63%, 12/15/28

     2,000        2,339,040   

Transportation System, Series AA, 5.25%, 6/15/33

     4,050        4,495,054   

Transportation System, Series B, 5.50%, 6/15/31

     1,425        1,625,697   

Transportation System, Series B, 5.25%, 6/15/36

     1,775        1,930,419   

Port Authority of New York & New Jersey, ARB, Special Project, JFK International Air Terminal LLC Project:

    

Series 6, AMT (NPFGC), 5.75%, 12/01/25

     3,000        3,007,860   

Series 6, AMT (NPFGC), 6.25%, 12/01/15

     1,500        1,561,125   

Series 8, 6.00%, 12/01/42

     2,500        2,868,200   

Port Authority of New York & New Jersey, Refunding ARB, AMT:

    

178th Series, 5.00%, 12/01/33

     2,850        3,154,266   

Consolidated, 152nd Series, 5.75%, 11/01/30

     5,175        5,857,272   

South Jersey Transportation Authority, Refunding RB, Transportation System, Series A:

    

5.00%, 11/01/28

     1,025        1,103,074   

5.00%, 11/01/29

     1,025        1,096,361   
    

 

 

 
               92,521,671   

Utilities — 4.2%

    

County of Essex New Jersey Utilities Authority, Refunding RB, (AGC), 4.13%, 4/01/22

     1,330        1,436,812   

North Hudson Sewerage Authority, Refunding RB, Series A (NPFGC), 5.13%, 8/01/20 (d)

     4,335        5,196,495   

Rahway Valley Sewerage Authority, RB, CAB, Series A (NPFGC) (b):

    

0.00%, 9/01/28

     6,600        3,783,582   

0.00%, 9/01/29

     6,900        3,741,042   
    

 

 

 
               14,157,931   
Total Municipal Bonds in New Jersey        465,372,761   

Guam — 1.0%

                

State — 1.0%

    

Territory of Guam, RB, Business Privilege Tax Bonds:

    

Series A, 5.25%, 1/01/36

     305        325,417   

Series A, 5.13%, 1/01/42

     2,500        2,634,575   

Series B-1, 5.00%, 1/01/37

     395        414,177   
Total Municipal Bonds in Guam        3,374,169   
    

Puerto Rico — 0.5%

                

Health — 0.5%

    

Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities Financing Authority, RB, Hospital De La Concepcion, Series A, 6.50%, 11/15/20

     1,750        1,758,960   
Total Municipal Bonds — 140.3%        470,505,890   
    
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
  

Par  

(000)

    Value  

New Jersey — 19.2%

                

County/City/Special District/School District — 4.0%

  

County of Union New Jersey Utilities Authority, Refunding LRB, Resource Recovery Facility, Covanta Union, Inc., Series A, AMT, 5.25%, 12/01/31

   12,370      13,359,971   

Education — 0.3%

    

Rutgers - The State University of New Jersey, RB, Series F, 5.00%, 5/01/39

     990        1,099,151   

State — 5.0%

    

Garden State Preservation Trust, RB, Election of 2005, Series A (AGM), 5.75%, 11/01/28

     9,160        11,715,274   

New Jersey EDA, Refunding RB, 5.00%, 3/01/29 (f)

     4,780        5,229,901   
    

 

 

 
               16,945,175   

Transportation — 9.9%

  

New Jersey State Turnpike Authority, RB, Series A, 5.00%, 1/01/38 (f)

     5,200        5,645,224   

New Jersey Transportation Trust Fund Authority, RB, Transportation System, Series B, 5.25%, 6/15/36 (f)

     1,900        2,066,802   

Port Authority of New York & New Jersey, ARB, Consolidated, 163rd Series, AMT, 5.00%, 7/15/39

     11,456        12,902,963   

Port Authority of New York & New Jersey, RB, Consolidated, 169th Series, AMT, 5.00%, 10/15/41

     5,500        5,927,460   

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 152nd Series, AMT, 5.25%, 11/01/35

     5,998        6,548,290   
    

 

 

 
               33,090,739   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 19.2%
        64,495,036   
Total Long-Term Investments
(Cost — $498,648,550) — 159.5%
        535,000,926   
Short-Term Securities    Shares     Value  

BIF New Jersey Municipal Money Fund, 0.00% (g)(h)

     4,710,150        4,710,150   
Total Short-Term Securities
(Cost — $4,710,150) — 1.4%
             4,710,150   
Total Investments (Cost — $503,358,700) — 160.9%        539,711,076   
Other Assets Less Liabilities — 0.9%        3,119,362   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (10.3)%

   

    (34,705,693
VRDP Shares, at Liquidation Value — (51.5)%        (172,700,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 335,424,745   
    

 

 

 

 

See Notes to Financial Statements.

 

                
24    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (continued)

  

BlackRock MuniHoldings New Jersey Quality Fund, Inc.  (MUJ)

 

 

Notes to Schedule of Investments

 

(a)   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.

 

(b)   Zero-coupon bond.

 

(c)   Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

 

(d)   Security is collateralized by municipal or U.S. Treasury obligations.

 

(e)   Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(f)   All or a portion of security is subject to a recourse agreement, which may require the Fund to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire from June 15, 2019 to September 1, 2020 is $8,818,272.

 

(g)   Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2013
       Net
Activity
       Shares Held
at July 31,
2014
       Income  

BIF New Jersey Municipal Money Fund

       7,170,770           (2,460,620        4,710,150         $ 2   

 

(h)   Represents the current yield as of report date.

 

Ÿ  

Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts
Sold
    Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
 
  (205   10-Year U.S. Treasury Note   Chicago Board of Trade   September 2014   $ 25,544,922      $ 87,799   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

  Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  Ÿ  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Municipal Bonds1

            $ 535,000,926              $ 535,000,926   

Short-Term Securities

  $ 4,710,150                          4,710,150   
 

 

 

      

 

 

      

 

    

 

 

 

Total

  $ 4,710,150         $ 535,000,926              $ 539,711,076   
 

 

 

      

 

 

      

 

    

 

 

 

1    See above Schedule of Investments for values in each sector.

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2             

Assets:

                

Interest rate contracts

  $ 87,799                        $ 87,799   

2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

       

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    25


Schedule of Investments (concluded)

  

BlackRock MuniHoldings New Jersey Quality Fund, Inc.  (MUJ)

 

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:    
     Level 1        Level 2        Level 3      Total  

Assets:

                

Cash pledged for financial futures contracts

  $ 280,000                        $ 280,000   

Liabilities:

                

TOB trust certificates

            $ (34,699,311             (34,699,311

VRDP Shares

              (172,700,000             (172,700,000
 

 

 

      

 

 

      

 

    

 

 

 

Total

  $ 280,000         $ (207,399,311           $ (207,119,311
 

 

 

      

 

 

      

 

    

 

 

 

There were no transfers between levels during the year ended July 31, 2014.

 

See Notes to Financial Statements.

 

                
26    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments July 31, 2014

  

BlackRock MuniYield Investment Quality Fund (MFT)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Alabama — 4.4%

  

City of Birmingham Alabama Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC):

    

6.13%, 6/01/34

   $ 1,500      $ 1,747,545   

6.00%, 6/01/39

     2,985        3,460,719   

City of Selma Alabama IDB, RB, Gulf Opportunity Zone, International Paper Co. Project, Series A, 5.38%, 12/01/35

     350        382,515   
    

 

 

 
               5,590,779   

California — 19.9%

  

California Educational Facilities Authority, RB, University of Southern California, Series A, 5.25%, 10/01/38

     1,960        2,211,076   

California Health Facilities Financing Authority, RB, Sutter Health, Series B, 6.00%, 8/15/42

     1,150        1,376,435   

City & County of San Francisco California Airports Commission, Refunding ARB, 2nd Series A, AMT:

    

5.50%, 5/01/28

     720        831,794   

5.25%, 5/01/33

     560        619,931   

City of San Jose California, Refunding ARB, Series A-1, AMT:

    

5.50%, 3/01/30

     1,600        1,775,728   

6.25%, 3/01/34

     1,250        1,445,875   

County of Sacramento California, ARB, Senior Series A (AGC), 5.50%, 7/01/41

     1,400        1,586,242   

Kern Community College District, GO, Safety, Repair & Improvement, Election of 2002, Series C, 5.50%, 11/01/33

     970        1,144,804   

Los Angeles Community College District California, GO, Election of 2001, Series A (NPFGC), 5.00%, 8/01/32

     2,780        3,073,040   

Redondo Beach Unified School District, GO, Election of 2008, Series E, 5.50%, 8/01/34

     1,000        1,129,840   

San Diego Public Facilities Financing Authority Water, Refunding RB, Series B (AGC), 5.38%, 8/01/34

     1,020        1,172,031   

State of California, GO, Various Purposes (AGC), 5.50%, 11/01/39

     3,450        3,954,287   

State of California Public Works Board, RB:

    

Department of Corrections & Rehabilitation, Series F, 5.25%, 9/01/33

     490        560,315   

Various Capital Projects, Series I, 5.50%, 11/01/31

     1,000        1,181,180   

Township of Washington California Health Care District, GO, Election of 2004, Series B, 5.50%, 8/01/40

     370        430,965   

University of California, Refunding RB, The Regents of Medical Center, Series J, 5.25%, 5/15/38

     2,235        2,532,210   
    

 

 

 
               25,025,753   

Colorado — 2.1%

    

City & County of Denver Colorado Airport System, ARB, Series A, AMT:

    

5.50%, 11/15/28

     500        572,715   

5.50%, 11/15/30

     225        254,124   

5.50%, 11/15/31

     270        302,484   

Colorado Health Facilities Authority, RB, Hospital, NCMC, Inc. Project, Series B (AGM), 6.00%, 5/15/26

     1,300        1,479,907   
    

 

 

 
               2,609,230   

Florida — 11.4%

    

City of Jacksonville Florida, Refunding RB, Series A, 5.25%, 10/01/33

     270        303,161   

County of Hillsborough Florida Aviation Authority, Refunding ARB, Tampa International Airport, Series A, AMT, 5.50%, 10/01/29

     1,170        1,312,096   

County of Lee Florida, Refunding ARB, Series A, AMT, 5.38%, 10/01/32

     1,000        1,089,050   

County of Manatee Florida Housing Finance Authority, RB, S/F Housing, Series A, AMT (Ginnie Mae, Fannie Mae & Freddie Mac), 5.90%, 9/01/40

     120        122,381   

Florida (concluded)

    

County of Miami-Dade Florida, RB, Seaport:

    

Series A, 6.00%, 10/01/38

   1,840      2,109,321   

Series A, 5.50%, 10/01/42

     2,125        2,355,435   

Series B, AMT, 6.00%, 10/01/26

     590        710,690   

Series B, AMT, 6.00%, 10/01/27

     775        925,606   

Series B, AMT, 6.25%, 10/01/38

     310        362,288   

Series B, AMT, 6.00%, 10/01/42

     410        468,327   

County of Miami-Dade Florida, Refunding RB:

    

Seaport, Series D, AMT, 6.00%, 10/01/26

     735        885,352   

Water & Sewer System, Series B, 5.25%, 10/01/29

     500        574,000   

County of Miami-Dade Florida Aviation, Refunding ARB, Series A, AMT, 5.00%, 10/01/31

     2,165        2,328,501   

Reedy Creek Improvement District, GO, Series A, 5.25%, 6/01/32

     710        796,222   
    

 

 

 
               14,342,430   

Hawaii — 1.0%

    

State of Hawaii, Department of Transportation, COP, AMT:

    

5.25%, 8/01/25

     250        287,433   

5.25%, 8/01/26

     810        924,226   
    

 

 

 
               1,211,659   

Illinois — 23.1%

    

City of Chicago Illinois, GARB, O’Hare International Airport, 3rd Lien:

    

Series A, 5.75%, 1/01/39

     770        866,420   

Series C, 6.50%, 1/01/41

     3,680        4,402,752   

City of Chicago Illinois, GO, Refunding, Series A:

    

5.25%, 1/01/29

     1,000        1,058,590   

5.25%, 1/01/33

     570        593,609   

City of Chicago Illinois, Refunding RB, Series A:

    

Sales Tax, 5.25%, 1/01/38

     525        562,217   

Waterworks, 2nd Lien (AMBAC), 5.00%, 11/01/36

     1,165        1,201,406   

City of Chicago Illinois Transit Authority, RB:

    

Federal Transit Administration, Section 5309, Series A (AGC), 6.00%, 6/01/26

     1,400        1,558,732   

Sales Tax Receipts, 5.25%, 12/01/36

     1,000        1,087,990   

Sales Tax Receipts, 5.00%, 12/01/44

     1,235        1,320,277   

City of Chicago Illinois Transit Authority, Refunding RB, Federal Transit Administration, Section 5309 (AGM), 5.00%, 6/01/28

     3,000        3,185,010   

City of Chicago Illinois Wastewater Transmission, RB, 2nd Lien, 5.00%, 1/01/42

     1,375        1,434,634   

City of Chicago Illinois, Midway Airport, Refunding ARB, 2nd Lien, Series A, AMT, 5.00%, 1/01/41

     385        401,132   

County of Cook Illinois Community College District No. 508, GO, City College of Chicago:

    

5.50%, 12/01/38

     1,500        1,676,220   

5.25%, 12/01/43

     2,700        2,916,891   

Illinois Finance Authority, RB, Carle Foundation, Series A, 6.00%, 8/15/41

     1,555        1,763,495   

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     940        1,093,502   

6.00%, 6/01/28

     270        314,258   

State of Illinois, GO:

    

5.25%, 2/01/31

     585        615,841   

5.25%, 2/01/32

     1,000        1,047,220   

5.50%, 7/01/33

     1,500        1,602,300   

5.50%, 7/01/38

     280        296,570   
    

 

 

 
               28,999,066   

Indiana — 4.1%

    

Indiana Finance Authority, RB, Private Activity Bond, Ohio River Bridges East End Crossing Project, Series A, AMT, 5.00%, 7/01/40

     375        388,492   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    27


Schedule of Investments (continued)

  

BlackRock MuniYield Investment Quality Fund (MFT)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Indiana (concluded)

    

Indianapolis Local Public Improvement Bond Bank, Refunding RB, Waterworks Project, Series A (AGC), 5.50%, 1/01/38

   $ 4,310      $ 4,789,703   
    

 

 

 
               5,178,195   

Louisiana — 2.1%

    

City of New Orleans Louisiana Aviation Board, Refunding GARB, Restructuring (AGC):

    

Series A-1, 6.00%, 1/01/23

     375        430,399   

Series A-2, 6.00%, 1/01/23

     160        183,637   

Lake Charles Harbor & Terminal District, RB, Series B, AMT, 5.50%, 1/01/29

     1,000        1,131,790   

Tobacco Settlement Financing Corp., Refunding RB, Asset-Backed, Series A, 5.50%, 5/15/29

     805        880,573   
    

 

 

 
               2,626,399   

Massachusetts — 2.3%

    

Massachusetts Educational Financing Authority, RB, Education Loan, Issue I, AMT, 5.00%, 1/01/26

     880        960,608   

Massachusetts HFA, Refunding RB, Series C, AMT, 5.35%, 12/01/42

     1,910        1,962,773   
    

 

 

 
               2,923,381   

Michigan — 5.3%

    

City of Detroit Michigan, Refunding RB, Sewage Disposal System, Senior Lien (AGM):

    

Series B, 7.50%, 7/01/33

     660        722,291   

Series C-1, 7.00%, 7/01/27

     2,285        2,479,842   

City of Detroit Michigan Water Supply System, RB, 2nd Lien, Series B (AGM), 6.25%, 7/01/36

     1,800        1,839,510   

Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital, Series V, 8.25%, 9/01/18 (a)

     1,265        1,631,584   
    

 

 

 
               6,673,227   

Minnesota — 2.8%

    

City of Minneapolis Minnesota, Refunding RB, Fairview Health Services, Series B (AGC), 6.50%, 11/15/38

     3,000        3,529,980   

Mississippi — 1.5%

    

Mississippi Development Bank, RB, Special Obligation, Jackson Water & Sewer System Project (AGM), 6.88%, 12/01/40

     1,190        1,547,095   

Mississippi State University Educational Building Corp., Refunding RB, Mississippi State University Improvement Project, 5.25%, 8/01/38

     260        294,653   
    

 

 

 
               1,841,748   

Nevada — 4.3%

    

County of Clark Nevada, ARB, Las Vegas-McCarran International Airport, Series A (AGM), 5.25%, 7/01/39

     2,375        2,566,211   

County of Clark Nevada, GO, Limited Tax, 5.00%, 6/01/38

     1,000        1,081,780   

County of Clark Nevada Water Reclamation District, GO, Series A, 5.25%, 7/01/34

     1,500        1,715,100   
    

 

 

 
               5,363,091   

New Jersey — 6.4%

    

New Jersey EDA, RB:

    

Private Activity Bond, The Goethals Bridge Replacement Project, AMT, 5.38%, 1/01/43

     1,000        1,060,850   

School Facilities Construction (AGC), 6.00%, 12/15/18 (a)

     980        1,191,935   

School Facilities Construction (AGC), 6.00%, 12/15/34

     20        23,174   

The Goethals Bridge Replacement Project, AMT (AGM), 5.00%, 1/01/31

     530        574,043   

New Jersey (concluded)

    

New Jersey EDA, Refunding RB, School Facilities Construction, Series RR, 5.00%, 6/15/33

   500      540,430   

New Jersey Health Care Facilities Financing Authority, RB, Virtua Health, Series A (AGC), 5.50%, 7/01/38

     1,400        1,509,032   

New Jersey Transportation Trust Fund Authority, RB, Transportation System:

    

Series A, 5.50%, 6/15/41

     1,195        1,323,654   

Series AA, 5.50%, 6/15/39

     1,600        1,768,880   
    

 

 

 
               7,991,998   

New York — 5.5%

    

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Series FF-2, 5.50%, 6/15/40

     1,545        1,767,434   

City of New York New York Transitional Finance Authority Building Aid, BARB, Fiscal 2009, Series S-4 (AGC), 5.50%, 1/15/29

     2,000        2,316,600   

Port Authority of New York & New Jersey, Refunding ARB, Consolidated, 166th Series, 5.25%, 7/15/36

     2,500        2,807,575   
    

 

 

 
               6,891,609   

Ohio — 1.9%

    

State of Ohio Turnpike Commission, RB, Junior Lien, Infrastructure Projects, Series A-1:

    

5.25%, 2/15/30

     585        662,302   

5.25%, 2/15/31

     1,500        1,688,745   
    

 

 

 
               2,351,047   

Pennsylvania — 2.1%

    

Pennsylvania Turnpike Commission, RB:

    

Series A, 5.00%, 12/01/44

     440        481,994   

Sub-Series A, 6.00%, 12/01/41

     2,000        2,179,500   
    

 

 

 
               2,661,494   

South Carolina — 4.9%

    

County of Charleston South Carolina, RB, Special Source, 5.25%, 12/01/38

     1,470        1,690,941   

County of Charleston South Carolina Airport District, ARB, Series A, AMT:

    

5.50%, 7/01/26

     1,810        2,092,704   

6.00%, 7/01/38

     1,155        1,305,496   

5.50%, 7/01/41

     1,000        1,095,820   
    

 

 

 
               6,184,961   

Texas — 19.1%

    

Austin Community College District Public Facility Corp., RB, Educational Facilities Project, Round Rock Campus, 5.25%, 8/01/33

     2,250        2,520,045   

City of Beaumont Texas, GO, Certificates of Obligation, 5.25%, 3/01/37

     930        1,057,122   

City of Frisco Texas ISD, GO, School Building (AGC), 5.50%, 8/15/41

     1,210        1,427,643   

City of Houston Texas Utility System, Refunding RB, Combined 1st Lien, Series A (AGC):

    

6.00%, 11/15/35

     2,700        3,169,962   

6.00%, 11/15/36

     2,055        2,417,831   

5.38%, 11/15/38

     1,000        1,130,210   

Dallas-Fort Worth International Airport, ARB, Joint Improvement, Series H, AMT, 5.00%, 11/01/37

     980        1,026,011   

Dallas-Fort Worth International Airport, Refunding RB, Joint Revenue, Series E, 5.50%, 11/01/27

     2,500        2,866,825   

Lower Colorado River Authority, Refunding RB, 5.50%, 5/15/33

     730        824,272   

North Texas Tollway Authority, RB, Special Projects, Series A, 5.50%, 9/01/41

     2,750        3,129,280   

 

See Notes to Financial Statements.

 

                
28    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (continued)

  

BlackRock MuniYield Investment Quality Fund (MFT)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Texas (concluded)

    

North Texas Tollway Authority, Refunding RB, 1st Tier:

    

(AGM), 6.00%, 1/01/43

   $ 1,000      $ 1,124,800   

Series K-1 (AGC), 5.75%, 1/01/38

     1,400        1,594,768   

Red River Education Financing Corp., RB, Texas Christian University Project, 5.25%, 3/15/38

     420        476,288   

Tarrant County Cultural Education Facilities Finance Corp., Refunding RB (AGC):

    

6.50%, 1/01/19 (a)

     265        323,191   

6.50%, 7/01/37

     835        936,661   
    

 

 

 
               24,024,909   

Virginia — 1.3%

    

City of Lexington Virginia IDA, RB, Washington & Lee University, 5.00%, 1/01/43

     380        418,505   

Virginia Public School Authority, RB, Fluvanna County School Financing, 6.50%, 12/01/18 (a)

     1,000        1,233,120   
    

 

 

 
               1,651,625   

Washington — 1.5%

    

City of Seattle Washington Municipal Light & Power, Refunding RB, Series A, 5.25%, 2/01/36

     1,000        1,114,480   

State of Washington, GO, Various Purposes, Series B, 5.25%, 2/01/36

     725        827,631   
    

 

 

 
               1,942,111   
Total Municipal Bonds — 127.0%              159,614,692   
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
 

Alabama — 1.2%

    

City of Mobile Alabama Board of Water & Sewer Commissioners, RB (NPFGC), 5.00%, 1/01/31

     1,500        1,567,245   

District of Columbia — 0.7%

    

District of Columbia Water & Sewer Authority, Refunding RB, Senior Lien, Series A, 6.00%, 10/01/35 (c)

     760        873,914   

Florida — 2.4%

    

County of Hillsborough Florida Aviation Authority, ARB, Tampa International Airport, Series A, AMT (AGC), 5.50%, 10/01/38

     2,499        2,782,302   

County of Lee Florida Housing Finance Authority, RB, S/F Housing, Multi-County Program, Series A-2, AMT (Ginnie Mae), 6.00%, 9/01/40

     240        248,218   
    

 

 

 
               3,030,520   

Kentucky — 0.9%

    

Kentucky State Property & Building Commission, Refunding RB, Project No. 93 (AGC), 5.25%, 2/01/27

     1,002        1,140,772   

Nevada — 7.5%

    

County of Clark Nevada Water Reclamation District, GO:

    

Limited Tax, 6.00%, 7/01/38

     2,010        2,333,248   

Series B, 5.50%, 7/01/29

     1,994        2,337,151   

Las Vegas Valley Water District, GO, Refunding, Series C, 5.00%, 6/01/28

     4,200        4,737,474   
    

 

 

 
               9,407,873   

New Jersey — 2.2%

    

New Jersey Housing & Mortgage Finance Agency, RB, S/F Housing, Series CC, 5.25%, 10/01/29

     1,610        1,717,855   

New Jersey Transportation Trust Fund Authority, RB, Transportation System, Series B, 5.25%, 6/15/36 (c)

     1,000        1,087,791   
    

 

 

 
               2,805,646   

New York — 12.6%

    

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution:

    

Series BB, 5.25%, 6/15/44

   2,999      3,330,900   

Series FF-2, 5.50%, 6/15/40

     1,095        1,252,475   

City of New York New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-3, 5.25%, 1/15/39

     1,000        1,119,297   

Hudson Yards Infrastructure Corp., RB, Fiscal 2012, Series A, 5.75%, 2/15/47 (c)

     1,000        1,137,537   

New York Liberty Development Corp., RB, 1 World Trade Center Port Authority Consolidated Bonds, 5.25%, 12/15/43

     3,000        3,305,640   

New York Liberty Development Corp., Refunding RB, 4 World Trade Center Project, 5.75%, 11/15/51 (c)

     1,770        1,984,241   

New York State Dormitory Authority, ERB, Personal Income Tax, Series B, 5.25%, 3/15/38

     3,250        3,679,618   
    

 

 

 
               15,809,708   

Texas — 2.4%

    

City of San Antonio Texas Public Service Board, Refunding RB, Series A, 5.25%, 2/01/31 (c)

     2,609        2,959,373   

Utah — 0.9%

    

City of Riverton Utah, RB, IHC Health Services, Inc., 5.00%, 8/15/41

     1,004        1,068,160   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 30.8%
        38,663,211   
Total Long-Term Investments
(Cost — $180,889,379) — 157.8%
        198,277,903   
    
                  
Short-Term Securities    Shares         

FFI Institutional Tax-Exempt Fund, 0.03% (d)(e)

     2,565,273        2,565,273   
Total Short-Term Securities
(Cost — $2,565,273) — 2.0%
        2,565,273   
Total Investments (Cost — $183,454,652) — 159.8%        200,843,176   
Other Assets Less Liabilities — 1.3%        1,592,727   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (16.1)%

   

    (20,288,965
VMTP Shares, at Liquidation Value — (45.0)%        (56,500,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 125,646,938   
    

 

 

 

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    29


Schedule of Investments (continued)

  

BlackRock MuniYield Investment Quality Fund (MFT)

 

 

Notes to Schedule of Investments

 

(a)   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.

 

(b)   Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(c)   All or a portion of security is subject to a recourse agreement, which may require the Fund to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire from October 16, 2016 to November 15, 2019 is $4,647,054.

 

(d)   Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2013
       Net
Activity
       Shares Held
at July 31,
2014
       Income  

FFI Institutional Tax-Exempt Fund

       8,162,312           (5,597,039        2,565,273         $ 683   

 

(e)   Represents the current yield as of report date.

 

Ÿ  

Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts
Sold
    Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
 
  (79   10-Year U.S. Treasury Note   Chicago Board of Trade   September 2014   $ 9,844,141      $ 33,835   

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

  Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  Ÿ  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 198,277,903              $ 198,277,903   

Short-Term Securities

  $ 2,565,273                          2,565,273   
 

 

 

      

 

 

      

 

    

 

 

 

Total

  $ 2,565,273         $ 198,277,903              $ 200,843,176   
 

 

 

      

 

 

      

 

    

 

 

 

1    See above Schedule of Investments for values in each state or political subdivision.

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2             

Assets:

                

Interest rate contracts

  $ 33,835                        $ 33,835   

2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

       

 

See Notes to Financial Statements.

 

                
30    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (concluded)

  

BlackRock MuniYield Investment Quality Fund (MFT)

 

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:    
     Level 1        Level 2        Level 3      Total  

Assets:

                

Cash pledged for financial futures contracts

  $ 108,000                        $ 108,000   

Liabilities:

                

TOB trust certificates

            $ (20,283,757             (20,283,757

VMTP Shares

              (56,500,000             (56,500,000
 

 

 

      

 

 

      

 

    

 

 

 

Total

    $108,000         $ (76,783,757           $ (76,675,757
 

 

 

      

 

 

      

 

    

 

 

 

There were no transfers between levels during the year ended July 31, 2014.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    31


Schedule of Investments July 31, 2014

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Michigan — 136.9%

                

Corporate — 4.9%

  

County of Monroe EDC Michigan, Refunding RB, Detroit Edison Co. Project, Series AA (NPFGC), 6.95%, 9/01/22

   $ 10,695      $ 13,648,103   

County/City/Special District/School District — 25.1%

  

Anchor Bay School District, GO, Refunding (Q-SBLF):

    

4.38%, 5/01/27

     960        1,031,290   

4.50%, 5/01/29

     900        961,461   

Bay City School District Michigan, GO, School Building & Site (AGM) (Q-SBLF), 5.00%, 5/01/36

     2,800        2,946,160   

Birmingham City School District Michigan, GO, School Building & Site (AGM), 5.00%, 11/01/14 (a)

     1,000        1,012,150   

Charter Township of Canton Michigan, GO, Capital Improvement (AGM):

    

5.00%, 4/01/25

     1,840        2,026,171   

5.00%, 4/01/26

     2,000        2,204,020   

5.00%, 4/01/27

     500        545,475   

Chippewa Valley Schools, GO, Refunding, Unlimited Tax (Q-SBLF), 5.00%, 5/01/32

     1,970        2,180,002   

City of Oak Park Michigan, GO, Street Improvement (NPFGC), 5.00%, 5/01/30

     500        525,305   

Columbia Michigan School District, GO, Unlimited Tax, School Building & Site (Q-SBLF), 5.00%, 5/01/38

     3,215        3,495,026   

Comstock Park Public Schools, GO, School Building & Site, Series B (Q-SBLF):

    

5.50%, 5/01/36

     750        826,643   

5.50%, 5/01/41

     1,355        1,480,812   

County of Genesee Michigan, GO, Refunding, Series A (NPFGC), 5.00%, 5/01/19

     600        617,010   

Dearborn Brownfield Redevelopment Authority, GO, Limited Tax, Redevelopment, Series A (AGC), 5.50%, 5/01/39

     3,300        3,548,919   

Dearborn School District, GO, Series A (Q-SBLF):

    

5.00%, 5/01/32

     930        1,032,384   

5.00%, 5/01/33

     990        1,094,069   

5.00%, 5/01/34

     745        820,856   

Flint EDC, RB, Michigan Department of Human Services Office Building Project, 5.25%, 10/01/41

     3,070        3,207,597   

Fraser Public School District Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/25

     2,000        2,066,300   

Goodrich Area School District Michigan, GO, School Building & Site (Q-SBLF):

    

5.50%, 5/01/32

     600        668,118   

5.50%, 5/01/36

     1,200        1,322,628   

5.50%, 5/01/41

     1,575        1,721,239   

Harper Creek Community School District Michigan, GO, Refunding (AGM), 5.00%, 5/01/22

     1,125        1,162,294   

Hudsonville Public Schools, GO, School Building & Site (Q-SBLF), 5.25%, 5/01/41

     4,100        4,420,415   

L’Anse Creuse Public Schools Michigan, GO, School Building & Site (AGM):

    

5.00%, 5/01/24

     1,000        1,033,150   

5.00%, 5/01/25

     1,525        1,575,554   

5.00%, 5/01/26

     1,600        1,653,040   

5.00%, 5/01/35

     3,000        3,077,070   

Lincoln Consolidated School District Michigan, GO, Refunding (NPFGC), 4.63%, 5/01/28

     3,650        3,846,333   

Livonia Public Schools School District Michigan, GO, Series I (AGM), 5.00%, 5/01/43

     3,090        3,280,869   

Montrose Community Schools, GO, (NPFGC), 6.20%, 5/01/17

     625        675,494   

Parchment School District, County of Kalamazoo, State of Michigan, GO, School Building & Site (NPFGC), 5.00%, 5/01/25

     900        989,856   
Municipal Bonds    Par  
(000)
    Value  

Michigan (continued)

                

County/City/Special District/School District (concluded)

  

Romulus Community Schools, GO, Unlimited Tax, Refunding (AGM):

    

4.25%, 5/01/26

   $ 1,200      $ 1,285,716   

4.25%, 5/01/27

     1,200        1,275,168   

4.50%, 5/01/29

     1,025        1,094,567   

Thornapple Kellogg School District Michigan, GO, Refunding, School Building & Site (NPFGC), 5.00%, 5/01/32

     2,500        2,698,975   

Troy School District, GO (Q-SBLF), 5.00%, 5/01/28

     1,240        1,416,365   

Van Dyke Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/28

     1,250        1,384,975   

Walled Lake Consolidated School District, GO (Q-SBLF):

    

5.00%, 5/01/37

     1,770        1,929,919   

5.00%, 5/01/40

     1,630        1,766,708   
    

 

 

 
               69,900,103   

Education — 19.6%

  

Grand Valley State University, RB, (NPFGC), 5.50%, 2/01/18

     1,445        1,544,315   

Michigan Higher Education Facilities Authority, RB, Limited Obligation, Hillsdale College Project, 5.00%, 3/01/35

     1,720        1,721,170   

Michigan State University, Refunding RB, General:

    

Series A, 5.00%, 8/15/41

     4,980        5,530,041   

Series C, 5.00%, 2/15/40

     4,700        5,052,124   

Michigan Technological University, Refunding RB, Series A, 5.00%, 10/01/34

     1,650        1,784,953   

Oakland University, RB, General, Series A:

    

5.00%, 3/01/38

     8,485        9,089,641   

5.00%, 3/01/43

     13,865        14,780,506   

University of Michigan, RB, Series A, 5.00%, 4/01/39

     2,125        2,404,905   

Wayne State University, RB, Series A:

    

5.00%, 11/15/40

     2,000        2,150,560   

4.00%, 11/15/44

     620        620,546   

Western Michigan University, Refunding RB, General, University and College Improvements:

    

5.25%, 11/15/40

     2,100        2,286,585   

5.25%, 11/15/43

     5,255        5,730,840   

(AGM), 5.25%, 11/15/33

     620        687,214   

(AGM), 5.00%, 11/15/39

     1,085        1,173,677   
    

 

 

 
               54,557,077   

Health — 28.4%

  

Kalamazoo Hospital Finance Authority, RB, Bronson Methodist Hospital (AGM), 5.25%, 5/15/36

     4,750        5,051,292   

Kent Hospital Finance Authority Michigan, Refunding RB, Spectrum Health, Series A, 5.00%, 11/15/29

     4,500        4,964,220   

Michigan Finance Authority, RB, Sparrow Obligated Group, 5.00%, 11/15/36

     1,550        1,630,399   

Michigan Finance Authority, Refunding RB:

    

Hospital, Oakwood Obligated Group, 5.00%, 8/15/31

     1,745        1,892,784   

Trinity Health Credit Group, 5.00%, 12/01/31

     3,100        3,385,758   

Trinity Health Credit Group, 5.00%, 12/01/35

     4,100        4,414,839   

Trinity Health Credit Group, 5.00%, 12/01/39

     3,350        3,576,293   

Michigan State Hospital Finance Authority, RB:

    

Ascension Health Senior Credit Group, 5.00%, 11/15/25

     3,700        4,186,365   

McLaren Health Care, Series C, 5.00%, 8/01/35

     1,000        1,011,760   

MidMichigan Obligated Group, Series A, 5.00%, 4/15/26

     620        633,435   

MidMichigan Obligated Group, Series A, 5.00%, 4/15/36

     3,550        3,589,654   

 

                
32    ANNUAL REPORT    JULY 31, 2014   

See Notes to Financial Statements.


Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Michigan (continued)

                

Health (concluded)

  

Michigan State Hospital Finance Authority, Refunding RB:

  

 

Henry Ford Health System, Series A, 5.25%, 11/15/46

   $ 2,500      $ 2,533,000   

Hospital, Oakwood Obligated Group, 5.00%, 11/01/32

     4,000        4,290,120   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/21

     600        657,330   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/25

     3,260        3,422,087   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/37

     630        642,102   

Hospital, Sparrow Obligated Group, 5.00%, 11/15/31

     3,100        3,176,198   

McLaren Health Care, Series A, 5.00%, 6/01/35

     1,390        1,488,398   

McLaren Health Care, Series A, 5.75%, 5/15/38

     4,500        5,058,675   

Trinity Health Credit Group, Series A, 6.25%, 12/01/28

     930        1,084,789   

Trinity Health Credit Group, Series C, 4.00%, 12/01/32

     4,460        4,501,924   

Trinity Health Credit, Series A, 6.50%, 12/01/33

     1,000        1,173,180   

Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital:

    

Series D, 5.00%, 9/01/39

     11,000        11,750,640   

Series V, 8.25%, 9/01/18 (a)

     1,000        1,289,790   

Series W, 6.00%, 8/01/39

     925        1,029,784   

State of Michigan Hospital Finance Authority, Refunding RB, Henry Ford Health, 5.75%, 11/15/39

     1,965        2,117,622   

Sturgis Building Authority, RB, Sturgis Hospital Project (NPFGC), 4.75%, 10/01/14 (a)

     475        478,662   
    

 

 

 
               79,031,100   

Housing — 10.2%

  

Michigan State HDA, RB:

    

Deaconess Tower, AMT (Ginnie Mae), 5.25%, 2/20/48

     1,000        1,014,440   

Series A, 4.75%, 12/01/25

     4,235        4,501,974   

Series A, 4.45%, 10/01/34

     620        636,573   

Series A, 4.63%, 10/01/39

     2,165        2,213,778   

Series A, 4.75%, 10/01/44

     3,100        3,177,314   

Williams Pavilion, AMT (Ginnie Mae), 4.75%, 4/20/37

     3,615        3,639,510   

Michigan State HDA, Refunding RB:

    

Rental Housing, Series D, 4.50%, 10/01/48

     7,790        7,913,627   

Series A, 6.05%, 10/01/41

     4,825        5,261,421   
    

 

 

 
               28,358,637   

State — 14.4%

  

Michigan State Building Authority, Refunding RB:

    

5.00%, 10/15/31

     1,000        1,060,930   

Facilities Program, Series I, 6.25%, 10/15/38

     3,900        4,540,809   

Facilities Program, Series I (AGC), 5.25%, 10/15/24

     4,000        4,640,080   

Facilities Program, Series I (AGC), 5.25%, 10/15/25

     2,000        2,311,460   

Facilities Program, Series I (AGC), 5.25%, 10/15/26

     600        690,882   

Facilities Program, Series I-A, 5.50%, 10/15/45

     1,250        1,391,938   

Facilities Program, Series II (AGM), 5.00%, 10/15/26

     4,500        5,124,105   

Michigan State Finance Authority, RB, Local Government Loan Program, Series F:

    

5.00%, 4/01/31

     1,000        1,063,650   

5.25%, 10/01/41

     6,085        6,441,764   
Municipal Bonds    Par  
(000)
    Value  

Michigan (continued)

                

State (concluded)

  

Michigan Strategic Fund, Refunding RB, Cadillac Place Office Building Project, 5.25%, 10/15/31

   $ 4,350      $ 4,709,875   

State of Michigan, COP, (AMBAC), 0.00%, 6/01/22 (b)(c)

     3,000        2,513,040   

State of Michigan Trunk Line Fund, RB:

    

5.00%, 11/15/33

     1,850        2,065,081   

5.00%, 11/15/36

     3,125        3,441,187   
    

 

 

 
               39,994,801   

Transportation — 14.1%

  

State of Michigan, RB, GAB (AGM), 5.25%, 9/15/27

     5,250        5,906,197   

Wayne County Airport Authority, RB, Detroit Metropolitan Wayne County Airport, AMT (NPFGC):

    

5.25%, 12/01/25

     6,270        6,611,652   

5.25%, 12/01/26

     6,300        6,643,287   

5.00%, 12/01/34

     4,435        4,595,902   

Wayne County Airport Authority, Refunding RB, AMT (AGC):

    

5.75%, 12/01/25

     4,000        4,587,280   

5.75%, 12/01/26

     1,000        1,146,820   

5.38%, 12/01/32

     8,700        9,732,516   
    

 

 

 
               39,223,654   

Utilities — 20.2%

  

City of Detroit Michigan Sewage Disposal System, Refunding RB, Senior Lien, Series A, 5.25%, 7/01/39

     1,645        1,611,343   

City of Detroit Michigan Water Supply System, RB:

    

2nd Lien, Series B (AGM), 7.00%, 7/01/36

     3,000        3,226,080   

Senior Lien, Series A (NPFGC), 5.00%, 7/01/34

     6,000        5,910,480   

City of Detroit Michigan Water Supply System, Refunding RB, 2nd Lien, Series C (AGM), 5.00%, 7/01/29

     10,470        10,477,120   

City of Grand Rapids Michigan Sanitary Sewer System, RB:

  

 

5.00%, 1/01/37

     930        1,032,347   

4.00%, 1/01/42

     1,700        1,714,484   

City of Holland Michigan Electric Utility System, RB, Series A:

    

5.00%, 7/01/33

     1,860        2,088,296   

4.13%, 7/01/39

     1,450        1,479,275   

5.00%, 7/01/39

     7,575        8,394,994   

City of Lansing Michigan, RB, Board of Water & Light Utilities System, Series A:

    

5.00%, 7/01/27

     1,970        2,232,168   

5.00%, 7/01/31

     4,230        4,712,854   

5.00%, 7/01/37

     2,065        2,271,066   

5.50%, 7/01/41

     3,000        3,483,540   

City of Port Huron Michigan, RB, Water Supply System:

    

5.25%, 10/01/31

     310        333,520   

5.63%, 10/01/40

     1,000        1,084,120   

County of Genesee Michigan, GO, Water Supply System (NPFGC), 5.13%, 9/03/14 (a)

     1,000        1,004,440   

Michigan Municipal Bond Authority, RB, State Clean Water Revolving Fund:

    

5.00%, 10/01/27

     1,250        1,353,713   

5.00%, 10/01/29

     2,000        2,277,120   

Pooled Project, 5.00%, 10/01/27

     1,240        1,435,275   
    

 

 

 
               56,122,235   
Total Municipal Bonds in Michigan        380,835,710   
    

Guam — 3.5%

  

State — 3.5%

    

Territory of Guam, RB:

    

Business Privilege Tax Bonds, Series A, 5.25%, 1/01/36

     500        533,470   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    33


Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Guam (concluded)

                

State (concluded)

  

Territory of Guam RB (concluded):

    

Business Privilege Tax Bonds, Series A, 5.13%, 1/01/42

   $ 4,850      $ 5,111,076   

Business Privilege Tax Bonds, Series B-1, 5.00%, 1/01/32

     1,695        1,781,699   

Business Privilege Tax Bonds, Series B-1, 5.00%, 1/01/37

     665        697,286   

Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29

     1,400        1,532,118   
Total Municipal Bonds in Guam              9,655,649   
Total Municipal Bonds — 140.4%              390,491,359   
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
 

Michigan — 17.2%

                

County/City/Special District/School District — 4.4%

  

 

Lakewood Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/37

     6,770        7,309,418   

Portage Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/31

     4,650        5,070,453   
    

 

 

 
               12,379,871   

Education — 12.7%

  

Michigan State University, Refunding RB, General, Series A, 5.00%, 8/15/38

     6,220        6,947,740   

Saginaw Valley State University, Refunding RB, General (AGM), 5.00%, 7/01/31

     7,500        8,249,850   

Wayne State University, RB, General, Series A, 5.00%, 11/15/40

     6,190        6,655,983   

Wayne State University, Refunding RB, General (AGM), 5.00%, 11/15/35

     12,207        13,372,023   
    

 

 

 
               35,225,596   
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
  

Par  

(000)

    Value  

Michigan (concluded)

                

Health — 0.1%

                

Michigan Finance Authority, RB, Hospital, Trinity Health Credit Group, 5.00%, 12/01/39

   $ 190      $ 202,834   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 17.2%
        47,808,301   
Total Long-Term Investments
(Cost — $413,056,033) — 157.6%
        438,299,660   
    
                  
Short-Term Securities    Shares     Value  

BIF Michigan Municipal Money Fund, 0.00% (e)(f)

     3,889,640        3,889,640   

Total Short-Term Securities

(Cost — $3,889,640) — 1.4%

  

  

    3,889,640   
Total Investments (Cost — $416,945,673) — 159.0%        442,189,300   
Other Assets Less Liabilities — 1.4%        4,046,149   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (8.4)%

   

    (23,492,163
VRDP Shares, at Liquidation Value — (52.0)%        (144,600,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 278,143,286   
    

 

 

 

 

Notes to Schedule of Investments

 

(a)   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.

 

(b)   Zero-coupon bond.

 

(c)   Security is collateralized by municipal or U.S. Treasury obligations.

 

(d)   Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(e)   Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2013
      

Net

Activity

       Shares Held
at July 31,
2014
       Income  

BIF Michigan Municipal Money Fund

       479,667           3,409,973           3,889,640         $ 2   

 

(f)   Represents the current yield as of report date.

 

Ÿ  

Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts
Sold
    Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
 
  (140   10-Year U.S. Treasury Note   Chicago Board of Trade   September 2014   $ 17,445,313      $ 59,960   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

See Notes to Financial Statements.

 

                
34    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (concluded)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

  Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  Ÿ  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Municipal Bonds1

            $ 438,299,660                   $ 438,299,660   

Short-Term Securities

  $ 3,889,640                               3,889,640   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 3,889,640         $ 438,299,660                   $ 442,189,300   
 

 

 

      

 

 

      

 

 

      

 

 

 

1    See above Schedule of Investments for values in each sector.

       

     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments2                 

Assets:

                

Interest rate contracts

  $ 59,960                             $ 59,960   

2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

       

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:    
     Level 1        Level 2        Level 3        Total  

Assets:

                

Cash pledged for financial futures contracts

  $ 210,000                             $ 210,000   

Liabilities:

                

TOB trust certificates

            $ (23,487,000                  (23,487,000

VRDP Shares

              (144,600,000                  (144,600,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 210,000         $ (168,087,000                $ (167,877,000
 

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between levels during the year ended July 31, 2014.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    35


Schedule of Investments July 31, 2014

  

BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New Jersey — 126.7%

                

Corporate — 6.9%

  

 

County of Salem New Jersey Pollution Control Financing Authority, Refunding RB, Chambers Project, AMT, Series A, 5.00%, 12/01/23

   $ 1,710      $ 1,891,995   

New Jersey EDA, Refunding RB:

    

New Jersey American Water Co., Inc. Project, Series A, AMT, 5.70%, 10/01/39

     5,000        5,478,900   

New Jersey American Water Co., Inc. Project, Series B, AMT, 5.60%, 11/01/34

     1,000        1,099,080   

United Water of New Jersey, Inc., Series B (AMBAC), 4.50%, 11/01/25

     1,000        1,092,390   
    

 

 

 
               9,562,365   

County/City/Special District/School District — 15.3%

  

 

Borough of Hopatcong New Jersey, GO, Refunding, Sewer (AMBAC), 4.50%, 8/01/33

     750        769,035   

City of Perth Amboy New Jersey, GO, CAB, Refunding (AGM), 5.00%, 7/01/35

     1,250        1,295,900   

County of Essex New Jersey Improvement Authority, Refunding RB, AMT (NPFGC), 4.75%, 11/01/32

     1,000        1,026,580   

County of Hudson New Jersey, COP, Refunding (NPFGC), 6.25%, 12/01/16

     1,000        1,111,250   

County of Hudson New Jersey Improvement Authority, RB:

  

 

CAB, Series A-1 (NPFGC), 0.00%, 12/15/32 (a)

     1,000        459,310   

County Secured, County Services Building Project (AGM), 5.00%, 4/01/27

     250        270,620   

Harrison Parking Facility Project, Series C (AGC), 5.25%, 1/01/39

     1,000        1,070,160   

Harrison Parking Facility Project, Series C (AGC), 5.38%, 1/01/44

     1,400        1,500,002   

County of Monmouth New Jersey Improvement Authority, Refunding RB, Governmental Loan (AMBAC):

    

5.20%, 12/01/14

     5        5,019   

5.25%, 12/01/15

     5        5,018   

5.00%, 12/01/17

     5        5,015   

5.00%, 12/01/18

     5        5,013   

5.00%, 12/01/19

     5        5,012   

County of Union New Jersey, GO, Refunding:

    

4.00%, 3/01/29

     1,060        1,121,575   

4.00%, 3/01/30

     1,060        1,116,392   

4.00%, 3/01/31

     1,200        1,258,740   

County of Union New Jersey Utilities Authority, Refunding RB, Series A:

    

Resources Recovery Facility, Covanta Union, Inc., AMT, 5.25%, 12/01/31

     200        216,006   

Solid Waste System, County Deficiency Agreement, 5.00%, 6/15/41

     2,155        2,345,351   

Edgewater Borough Board of Education, GO, Refunding (AGM):

    

4.25%, 3/01/34

     300        318,189   

4.25%, 3/01/35

     300        316,611   

4.30%, 3/01/36

     300        315,927   

New Jersey Sports & Exposition Authority, Refunding RB (NPFGC):

    

5.50%, 3/01/21

     1,540        1,780,440   

5.50%, 3/01/22

     1,050        1,224,027   

New Jersey State Transit Corp., COP, Federal Transit Administration Grants, Subordinate, Series A (AGM) (NPFGC), 5.00%, 9/15/15 (b)

     1,000        1,045,040   

Newark Housing Authority, Refunding RB, Newark Redevelopment Project (NPFGC), 4.38%, 1/01/37

     2,720        2,724,869   
    

 

 

 
               21,311,101   
Municipal Bonds    Par  
(000)
    Value  

New Jersey (continued)

                

Education — 30.0%

  

 

New Jersey Educational Facilities Authority, RB:

    

Higher Education Capital Improvement Fund, 5.00%, 9/01/33

   $ 2,060      $ 2,265,403   

Montclair State University, Series A (AMBAC), 5.00%, 7/01/16 (b)

     1,600        1,742,000   

New Jersey Educational Facilities Authority, Refunding RB:

  

 

College of New Jersey, Series D (AGM), 5.00%, 7/01/35

     3,805        4,192,121   

Montclair State University, Series A, 5.00%, 7/01/39

     4,500        5,001,525   

Montclaire State University, Series A, 5.00%, 7/01/44

     1,020        1,130,986   

Montclair State University, Series J (NPFGC), 4.25%, 7/01/30

     2,765        2,813,332   

New Jersey Institute of Technology, Series H, 5.00%, 7/01/31

     1,000        1,096,150   

Ramapo College, Series I (AMBAC), 4.25%, 7/01/31

     1,250        1,271,238   

Rowan University, Series B (AGC), 5.00%, 7/01/26

     2,575        2,872,207   

Seton Hall University, Series D, 5.00%, 7/01/38

     140        152,215   

Seton Hall University, Series D, 5.00%, 7/01/43

     170        184,632   

Stevens Institute of Technology, Series A, 5.00%, 7/01/34

     1,500        1,533,810   

William Paterson University, Series C (AGC), 4.75%, 7/01/34

     1,115        1,183,182   

New Jersey Higher Education Student Assistance Authority, RB, Senior Student Loan, Series 1A, AMT:

    

4.00%, 12/01/28

     710        708,374   

4.50%, 12/01/28

     1,170        1,221,176   

4.00%, 12/01/29

     1,575        1,549,595   

4.00%, 12/01/29

     290        288,973   

4.50%, 12/01/29

     1,550        1,615,550   

4.63%, 12/01/30

     1,475        1,534,929   

4.00%, 12/01/31

     290        280,024   

4.25%, 12/01/32

     590        584,218   

4.13%, 12/01/35

     290        276,741   

4.50%, 12/01/36

     525        526,958   

New Jersey Higher Education Student Assistance Authority, Refunding RB, Series 1, AMT, 5.50%, 12/01/26

     1,800        2,010,816   

New Jersey Institute of Technology, RB, Series A, 5.00%, 7/01/42

     1,900        2,046,490   

Rutgers - The State University of New Jersey, Refunding RB, Series L:

    

5.00%, 5/01/30

     465        534,155   

5.00%, 5/01/43

     2,850        3,162,873   
    

 

 

 
               41,779,673   

Health — 14.7%

    

New Jersey Health Care Facilities Financing Authority, RB:

    

Meridian Health System Obligated Group, Series I (AGC), 5.00%, 7/01/38

     700        734,440   

Meridian Health System Obligated Group, Series II (AGC), 5.00%, 7/01/38

     975        1,022,970   

Meridian Health System Obligated Group, Series V (AGC), 5.00%, 7/01/38

     940        986,248   

Robert Wood Johnson University Hospital, Series A, 5.50%, 7/01/43

     2,220        2,464,955   

Virtua Health, Series A (AGC), 5.50%, 7/01/38

     1,000        1,077,880   

New Jersey Health Care Facilities Financing Authority, Refunding RB:

    

5.00%, 7/01/28

     870        986,589   

5.00%, 7/01/29

     205        231,059   

 

See Notes to Financial Statements.

 

                
36    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (continued)

  

BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New Jersey (continued)

                

Health (concluded)

    

New Jersey Health Care Facilities Financing Authority, Refunding RB (concluded):

    

5.50%, 7/01/31

   $ 1,175      $ 1,310,583   

AHS Hospital Corp., 6.00%, 7/01/41

     1,100        1,273,459   

Catholic Health East Issue, 5.00%, 11/15/33

     550        586,267   

Hackensack University Medical (AGM), 4.63%, 1/01/30

     2,315        2,426,120   

Kennedy Health System, 5.00%, 7/01/42

     140        146,992   

Meridian Health System Obligated Group, 5.00%, 7/01/25

     300        336,162   

Meridian Health System Obligated Group, 5.00%, 7/01/26

     2,130        2,363,214   

St. Barnabas Health Care System, Series A, 5.00%, 7/01/24

     1,820        2,030,155   

St. Barnabas Health Care System, Series A, 5.63%, 7/01/32

     440        481,703   

St. Barnabas Health Care System, Series A, 5.63%, 7/01/37

     1,300        1,411,774   

St. Luke’s Warren Hospital Obligated Group, 5.00%, 8/15/34

     300        320,217   

St. Luke’s Warren Hospital Obligated Group, 4.00%, 8/15/37

     180        170,136   
    

 

 

 
               20,360,923   

Housing — 9.6%

    

New Jersey Housing & Mortgage Finance Agency, RB:

  

 

Capital Fund Program, Series A (AGM), 5.00%, 5/01/27

     1,970        2,126,280   

Capital Fund Program, Series A (AGM) (HUD), 4.70%, 11/01/25

     2,475        2,536,479   

M/F Housing, Series A, 4.55%, 11/01/43

     1,425        1,436,300   

M/F Housing, Series A, AMT (NPFGC), 4.90%, 11/01/35

     820        820,238   

M/F Housing, Series A, AMT (NPFGC), 4.85%, 11/01/39

     400        393,108   

S/F Housing, Series AA, 6.50%, 10/01/38

     325        334,724   

S/F Housing, Series B, 4.50%, 10/01/30

     2,720        2,873,299   

New Jersey Housing & Mortgage Finance Agency, Refunding RB, AMT:

    

M/F Housing, Series 2, 4.60%, 11/01/38

     1,070        1,087,270   

M/F Housing, Series 2, 4.75%, 11/01/46

     1,205        1,222,545   

S/F Housing, Series T, 4.70%, 10/01/37

     445        448,969   
    

 

 

 
               13,279,212   

State — 19.0%

    

Garden State Preservation Trust, RB (AGM):

    

CAB, Series B, 0.00%, 11/01/23 (a)

     6,725        5,249,804   

Election of 2005, Series A, 5.80%, 11/01/15 (b)

     2,605        2,785,526   

New Jersey EDA, LRB, Rutgers - The State University of New Jersey, College Avenue Redevelopment Project, 5.00%, 6/15/33

     880        997,841   

New Jersey EDA, RB:

    

CAB, Motor Vehicle Surcharge, Series A (NPFGC), 0.00%, 7/01/21 (a)

     2,325        1,885,226   

Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/25

     1,000        1,191,190   

Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/33

     7,000        7,074,410   

School Facilities Construction (AGC), 6.00%, 12/15/18 (b)

     1,185        1,441,268   

School Facilities Construction (AGC), 6.00%, 12/15/34

     15        17,381   

School Facilities Construction, Series KK, 5.00%, 3/01/38

     380        403,047   
Municipal Bonds    Par  
(000)
    Value  

New Jersey (continued)

                

State (concluded)

    

New Jersey EDA, RB (concluded):

    

School Facilities Construction, Series U, 5.00%, 9/01/37

   $ 1,040      $ 1,133,028   

School Facilities Construction, Series U (AMBAC), 5.00%, 9/01/37

     365        397,649   

New Jersey EDA, Refunding RB:

    

Cigarette Tax, 5.00%, 6/15/26

     355        390,653   

Cigarette Tax, 5.00%, 6/15/28

     910        990,762   

Cigarette Tax, 5.00%, 6/15/29

     1,195        1,292,572   

School Facilities Construction, Series NN, 5.00%, 3/01/29

     500        547,030   

State of New Jersey, COP, Equipment Lease Purchase, Series A, 5.25%, 6/15/27

     500        559,305   
    

 

 

 
               26,356,692   

Transportation — 25.5%

    

Delaware River Port Authority, RB:

    

5.00%, 1/01/29

     750        848,565   

5.00%, 1/01/37

     2,865        3,132,562   

Series D, 5.05%, 1/01/35

     1,430        1,538,466   

Series D (AGM), 5.00%, 1/01/40

     1,500        1,593,360   

Delaware River Port Authority, Refunding RB, Port District Project:

    

5.00%, 1/01/26

     700        757,120   

5.00%, 1/01/27

     525        563,934   

New Jersey EDA, RB, Private Activity Bond, The Goethals Bridge Replacement Project (AMT):

    

5.38%, 1/01/43

     2,235        2,371,000   

5.13%, 1/01/34

     660        706,629   

New Jersey State Turnpike Authority, RB, Growth & Income Securities, Series B (AMBAC), 5.15%, 1/01/35 (c)

     3,005        3,090,883   

New Jersey State Turnpike Authority, Refunding RB, Series A (AGM), 5.25%, 1/01/29

     2,000        2,423,960   

New Jersey Transportation Trust Fund Authority, RB:

    

CAB, Transportation System, Series C (AGM), 0.00%, 12/15/32 (a)

     4,750        2,005,022   

CAB, Transportation System, Series C (AMBAC), 0.00%, 12/15/35 (a)

     2,760        932,935   

Transportation System, Series A, 6.00%, 6/15/35

     2,000        2,394,080   

Transportation System, Series A (AGC), 5.63%, 12/15/28

     780        912,226   

Transportation Program, Series AA, 5.00%, 6/15/33

     1,700        1,828,027   

Transportation System, Series AA, 5.25%, 6/15/33

     1,640        1,820,220   

Transportation System, Series B, 5.50%, 6/15/31

     730        832,813   

Transportation System, Series B, 5.25%, 6/15/36

     725        788,481   

Port Authority of New York & New Jersey, ARB:

    

Consolidated, 93rd Series, 6.13%, 6/01/94

     1,000        1,166,870   

Special Project, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/01/42

     1,500        1,720,920   

Port Authority of New York & New Jersey, Refunding RB, AMT:

    

5.00%, 12/01/33

     1,155        1,278,308   

Consolidated, 152nd Series, 5.75%, 11/01/30

     2,000        2,263,680   

South Jersey Transportation Authority, Refunding RB, Transportation System, Series A:

    

5.00%, 11/01/28

     200        215,234   

5.00%, 11/01/29

     200        213,924   
    

 

 

 
               35,399,219   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    37


Schedule of Investments (continued)

  

BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New Jersey (concluded)

                

Utilities — 5.7%

    

County of Essex New Jersey Utilities Authority, Refunding RB, (AGC), 4.13%, 4/01/22

   $ 670      $ 723,808   

North Hudson Sewerage Authority, Refunding RB, Series A (NPFGC), 5.13%, 8/01/20 (d)

     1,710        2,049,828   

Rahway Valley Sewerage Authority, RB, CAB, Series A (NPFGC) (a):

    

0.00%, 9/01/26

     4,100        2,614,980   

0.00%, 9/01/29

     2,750        1,490,995   

0.00%, 9/01/33

     2,350        1,031,885   
    

 

 

 
               7,911,496   

Total Municipal Bonds in New Jersey

  

    175,960,681   
    

Guam — 3.3%

  

State — 3.3%

    

Territory of Guam, RB, Business Privilege Tax Bonds:

    

Series A, 5.25%, 1/01/36

     120        128,033   

Series A, 5.13%, 1/01/42

     4,100        4,320,703   

Series B-1, 5.00%, 1/01/37

     155        162,525   
Total Municipal Bonds in Guam        4,611,261   
    

Puerto Rico — 3.1%

                

Health — 3.1%

    

Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities Financing Authority, RB, Hospital De La Concepcion, Series A, 6.13%, 11/15/30

     4,220        4,236,796   
Total Municipal Bonds — 133.1%        184,808,738   
    
                  

Municipal Bonds Transferred to

Tender Option Bond Trusts (e)

            

New Jersey — 23.6%

                

County/City/Special District/School District — 3.8%

  

 

County of Union New Jersey Utilities Authority, Refunding LRB, Resource Recovery Facility, Covanta Union, Inc., Series A, AMT, 5.25%, 12/01/31

     4,930        5,324,548   

Education — 3.2%

    

Rutgers - The State University of New Jersey, RB, Series F, 5.00%, 5/01/39

     4,003        4,446,565   

Municipal Bonds Transferred to

Tender Option Bond Trusts (e)

  

Par  

(000)

    Value  

New Jersey (concluded)

                

State — 4.6%

    

Garden State Preservation Trust, RB, Election of 2005, Series A (AGM), 5.75%, 11/01/28

   $ 3,300      $ 4,220,568   

New Jersey EDA, Refunding RB, 5.00%, 3/01/29 (f)

     1,918        2,098,518   
    

 

 

 
               6,319,086   

Transportation — 12.0%

    

New Jersey State Turnpike Authority, RB, Series A, 5.00%, 1/01/38 (f)

     4,100        4,451,042   

New Jersey Transportation Trust Fund Authority, RB, Transportation System, Series B, 5.25%, 6/15/36 (f)

     760        826,721   

Port Authority of New York & New Jersey, ARB, Consolidated, 163rd Series, AMT, 5.00%, 7/15/39

     4,089        4,604,984   

Port Authority of New York & New Jersey, RB, Consolidated, 169th Series, AMT, 5.00%, 10/15/41

     4,500        4,849,740   

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 152nd Series, AMT, 5.25%, 11/01/35

     1,829        1,997,228   
    

 

 

 
               16,729,715   

Total Municipal Bonds Transferred to

Tender Option Bond Trusts — 23.6%

  

  

    32,819,914   
Total Long-Term Investments
(Cost — $203,481,588) — 156.7%
        217,628,652   
    
   
Short-Term Securities    Shares         

BIF New Jersey Municipal Money Fund, 0.00% (g)(h)

     2,535,160        2,535,160   
Total Short-Term Securities
(Cost — $2,535,160) — 1.8%
        2,535,160   
Total Investments (Cost — $206,016,748) — 158.5%        220,163,812   
Other Assets Less Liabilities — 0.9%        1,174,285   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (13.0)%

   

    (18,047,428
VRDP Shares, at Liquidation Value — (46.4)%        (64,400,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 138,890,669   
    

 

 

 

 

Notes to Schedule of Investments

 

(a)   Zero-coupon bond.

 

(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)   Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

 

(d)   Security is collateralized by municipal or U.S. Treasury obligations.

 

(e)   Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(f)   All or a portion of security is subject to a recourse agreement, which may require the Fund to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire from June 15, 2019 to September 1, 2020 is $5,098,359.

 

See Notes to Financial Statements.

 

                
38    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (concluded)

  

BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)

 

 

(g)   Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2013
       Net
Activity
       Shares Held
at July 31,
2014
       Income  

BIF New Jersey Municipal Money Fund

       3,764,692           (1,229,532        2,535,160         $ 7   

 

(h)   Represents the current yield as of report date.

 

Ÿ  

Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts Sold     Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
 
  (85   10-Year U.S. Treasury Note   Chicago Board of Trade   September 2014   $ 10,591,797      $ 36,404   

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

  Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  Ÿ  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Municipal Bonds 1

            $ 217,628,652              $ 217,628,652   

Short-Term Securities

  $ 2,535,160                          2,535,160   
 

 

 

      

 

 

      

 

    

 

 

 

Total

  $ 2,535,160         $ 217,628,652              $ 220,163,812   
 

 

 

      

 

 

      

 

    

 

 

 

1    See above Schedule of Investments for values in each sector.

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments 2             

Assets:

                

Interest rate contracts

  $ 36,404                        $ 36,404   

2    Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

       

 

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

   

     Level 1        Level 2        Level 3      Total  

Assets:

                

Cash pledged for financial futures contracts

  $ 158,000                        $ 158,000   

Liabilities:

                

TOB trust certificates

            $ (18,044,269             (18,044,269

VRDP Shares

              (64,400,000             (64,400,000
 

 

 

      

 

 

      

 

    

 

 

 

Total

  $ 158,000         $ (82,444,269           $ (82,286,269
 

 

 

      

 

 

      

 

    

 

 

 

There were no transfers between levels during the year ended July 31, 2014.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    39


Schedule of Investments July 31, 2014

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Pennsylvania — 116.0%

                

Corporate — 12.8%

  

Beaver County IDA, Refunding RB, Series B, 3.50%, 12/01/35 (a)

   $ 3,235      $ 3,274,111   

County of Beaver Pennsylvania IDA, Refunding RB, First Energy, Nuclear Energy Corp. Project, Mandatory Put Bonds, Series A, 3.38%, 1/01/35 (a)

     1,200        1,221,060   

County of Delaware Pennsylvania IDA, Refunding RB, Water Facilities, Aqua Pennsylvania, Inc. Project, Series B, AMT (NPFGC), 5.00%, 11/01/36

     2,520        2,582,521   

County of Northumberland Pennsylvania IDA, Refunding RB, Aqua Pennsylvania, Inc. Project, AMT (NPFGC), 5.05%, 10/01/39

     4,500        4,507,920   

Pennsylvania Economic Development Financing Authority, RB:

    

American Water Co. Project, 6.20%, 4/01/39

     1,300        1,490,229   

Aqua Pennsylvania, Inc. Project, Series B, 4.50%, 12/01/42

     2,630        2,708,743   

Waste Management, Inc. Project, Series A, AMT, 5.10%, 10/01/27

     1,200        1,246,488   

Pennsylvania Economic Development Financing Authority, Refunding RB, Amtrak Project, Series A, AMT, 5.00%, 11/01/41

     5,865        6,180,537   
    

 

 

 
               23,211,609   

County/City/Special District/School District — 38.4%

  

Bristol Township School District, GO, 5.00%, 6/01/40

     775        838,752   

Chambersburg Area School District, GO:

    

5.25%, 9/01/15 (b)

     640        675,123   

5.25%, 3/01/27

     1,860        1,948,462   

(NPFGC), 5.25%, 3/01/26

     2,115        2,219,291   

City of Philadelphia Pennsylvania, GO, Refunding, Series A:

    

(AGM), 5.25%, 12/15/32

     5,000        5,326,600   

(AGC), 5.00%, 8/01/24

     2,000        2,202,740   

City of Pittsburgh Pennsylvania, GO, Series B, 5.00%, 9/01/26

     970        1,099,621   

Commonwealth of Pennsylvania, GO, 5.00%, 6/15/26

     2,420        2,883,091   

County of Lycoming Pennsylvania Water & Sewer Authority, RB, (AGM), 5.00%, 11/15/41

     400        422,584   

County of York Pennsylvania, GO, Refunding, 5.00%, 3/01/36

     400        440,896   

East Stroudsburg Area School District, GO, Refunding, Series A (AGM), 5.00%, 9/01/25

     3,000        3,309,180   

East Stroudsburg Area School District, GO, Series A:

    

7.75%, 9/01/17 (b)

     960        1,167,485   

7.75%, 9/01/27

     1,040        1,240,938   

Erie County Conventional Center Authority, RB, 5.00%, 1/15/36

     8,850        8,891,595   

Lower Merion School District, GO, Refunding, Series A, 3.25%, 11/15/27

     2,035        2,058,016   

Marple Newtown School District, GO, (AGM), 5.00%, 6/01/31

     3,500        3,934,980   

Northeastern School District York County, GO, Series B (NPFGC), 5.00%, 4/01/32

     1,585        1,708,709   

Philadelphia Redevelopment Authority, RB, Quality Redevelopment Neighborhood, Series B, AMT (NPFGC), 5.00%, 4/15/27

     4,645        4,762,100   

Philadelphia School District, GO, Series E, 6.00%, 9/01/38

     3,300        3,611,256   

Philipsburg-Osceola Pennsylvania Area School District, GO (AGM), 5.00%, 4/01/41

     755        799,960   

Shaler Area School District Pennsylvania, GO, CAB (Syncora), 0.00%, 9/01/30 (c)

     6,145        3,260,291   

Pennsylvania (continued)

                

County/City/Special District/School District (concluded)

  

State Public School Building Authority, RB (AGM):

    

Community College, Allegheny County Project, 5.00%, 7/15/34

   $ 1,880      $ 2,021,489   

Corry Area School District, CAB, 0.00%, 12/15/22 (c)

     1,640        1,259,897   

Corry Area School District, CAB, 0.00%, 12/15/23 (c)

     1,980        1,449,499   

Corry Area School District, CAB, 0.00%, 12/15/24 (c)

     1,980        1,384,990   

Corry Area School District, CAB, 0.00%, 12/15/25 (c)

     1,770        1,181,387   

State Public School Building Authority, Refunding RB:

    

Harrisburg School District Project, Series A (AGC), 5.00%, 11/15/33

     1,065        1,116,141   

School District Philadelphia Project, Series B (AGM), 5.00%, 6/01/26

     1,500        1,615,965   

Township of Bristol Pennsylvania School District, GO, 5.25%, 6/01/43

     5,120        5,648,128   

Township of Falls Authority, RB, Water & Sewer Authority, 5.00%, 12/01/37

     1,070        1,150,036   
    

 

 

 
               69,629,202   

Education — 6.9%

    

County of Adams Pennsylvania IDA, Refunding RB, Gettysburg College, 5.00%, 8/15/26

     100        109,526   

Pennsylvania Higher Educational Facilities Authority, RB:

    

Drexel University, Series A (NPFGC), 5.00%, 5/01/37

     1,500        1,608,225   

Shippensburg University Student Services, Student Housing, 5.00%, 10/01/44

     1,195        1,204,488   

Pennsylvania Higher Educational Facilities Authority, Refunding RB:

    

Drexel University, Series A, 5.25%, 5/01/41

     2,750        2,968,295   

La Salle University, 5.00%, 5/01/37

     985        1,033,098   

La Salle University, 5.00%, 5/01/42

     1,600        1,675,856   

State System of Higher Education, Series AL, 5.00%, 6/15/35

     280        306,404   

Thomas Jefferson University, 4.00%, 3/01/37

     375        368,392   

Widener University, Series A, 5.25%, 7/15/33

     1,360        1,450,998   

Widener University, Series A, 5.50%, 7/15/38

     340        364,568   

Swarthmore Borough Authority, Refunding RB, Swarthmore College Project, 5.00%, 9/15/38

     830        927,857   

Township of East Hempfield IDA, RB, Student Services, Inc., Student Housing Project at Millersville University of Pennsylvania:

    

5.00%, 7/01/35

     385        396,146   

5.00%, 7/01/45

     200        203,446   
    

 

 

 
               12,617,299   

Health — 16.7%

    

County of Allegheny Pennsylvania Hospital Development Authority, RB, Health Center, UPMC Health, Series B (NPFGC), 6.00%, 7/01/26

     2,000        2,503,720   

County of Berks Pennsylvania Municipal Authority, Refunding RB, Reading Hospital & Medical Center, Series A, 5.00%, 11/01/40

     765        819,185   

County of Centre Pennsylvania Hospital Authority, RB, Mount Nittany Medical Center Project, 7.00%, 11/15/46

     2,020        2,400,810   

County of Cumberland Pennsylvania Municipal Authority, Refunding RB, Diakon Lutheran, 6.38%, 1/01/39

     500        539,850   

County of Lehigh Pennsylvania, RB, Lehigh Valley Health Network, Series A (AGM), 5.00%, 7/01/33

     7,995        8,373,483   

 

See Notes to Financial Statements.

 

                
40    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (continued)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Pennsylvania (continued)

                

Health (concluded)

    

County of Montgomery Pennsylvania Higher Education & Health Authority, Refunding RB, Abington Memorial Hospital Obligated Group, Series A, 5.13%, 6/01/33

   $ 490      $ 514,422   

County of Montgomery Pennsylvania IDA, RB, Acts Retirement-Life Community:

    

Series A, 4.50%, 11/15/36

     55        54,538   

Series A-1, 6.25%, 11/15/29

     235        264,732   

County of Montgomery Pennsylvania IDA, Refunding RB, Acts Retirement-Life Communities:

    

5.00%, 11/15/27

     690        735,809   

5.00%, 11/15/28

     445        472,056   

Lancaster IDA, Refunding RB:

    

5.38%, 5/01/28

     420        442,579   

5.75%, 5/01/35

     745        794,476   

Pennsylvania Higher Educational Facilities Authority, RB, University of Pennsylvania Health System, Series A, 4.00%, 8/15/39

     7,600        7,552,272   

Philadelphia Hospitals & Higher Education Facilities Authority, Refunding RB, Presbyterian Medical Center, 6.65%, 12/01/19 (d)

     2,390        2,793,097   

South Fork Municipal Authority, Refunding RB, Conemaugh Valley Memorial Hospital, Series B (AGC), 5.38%, 7/01/35

     1,840        1,985,121   
    

 

 

 
               30,246,150   

Housing — 7.2%

    

Pennsylvania HFA, RB, S/F Mortgage, Series 114-C:

    

3.65%, 10/01/37

     1,915        1,865,172   

3.70%, 10/01/42

     3,345        3,171,863   

Pennsylvania HFA, Refunding RB, S/F Mortgage:

    

Series 092-A, AMT, 4.75%, 4/01/31

     595        597,213   

Series 096-A, AMT, 4.70%, 10/01/37

     2,730        2,771,168   

Series 099-A, AMT, 5.15%, 4/01/38

     855        901,991   

Series 110-B, 4.75%, 10/01/39

     655        681,521   

Philadelphia Housing Authority, RB, Capital Fund Program, Series A (AGM), 5.50%, 12/01/18

     3,000        3,039,390   
    

 

 

 
               13,028,318   

State — 6.0%

    

Commonwealth of Pennsylvania, GO, 1st Series:

    

5.00%, 11/15/24

     1,000        1,171,980   

5.00%, 4/01/26

     1,140        1,336,342   

5.00%, 6/01/28

     2,300        2,651,141   

5.00%, 6/15/29

     1,000        1,168,830   

Pennsylvania Economic Development Financing Authority, Refunding RB, Unemployment Compensation, Series B, 5.00%, 7/01/23

     600        625,452   

Pennsylvania Turnpike Commission, RB, Oil Franchise Tax, Remarketing, Series C (NPFGC), 5.00%, 12/01/32

     3,600        3,985,020   
    

 

 

 
               10,938,765   

Transportation — 16.7%

    

City of Philadelphia Pennsylvania, ARB, Series A:

    

5.00%, 6/15/40

     2,500        2,642,975   

AMT (AGM), 5.00%, 6/15/37

     5,595        5,708,579   

Delaware River Port Authority, RB:

    

5.00%, 1/01/37

     1,970        2,153,978   

Series D (AGM), 5.00%, 1/01/40

     1,560        1,657,094   

Pennsylvania Turnpike Commission, RB:

    

CAB, Sub-Series A-3, 0.00%, 12/01/42 (c)

     4,100        965,386   

CAB, Sub-Series A-3 (AGM), 0.00%, 12/01/40 (c)

     1,100        318,714   

Series A (AMBAC), 5.25%, 12/01/32

     350        354,851   

Pennsylvania (concluded)

                

Transportation (concluded)

    

Series A (AMBAC), 5.50%, 12/01/31

   $ 7,800      $ 7,914,582   

Sub-Series A, 6.00%, 12/01/41

     700        762,825   

Pennsylvania Turnpike Commission, Refunding RB, Sub-Series B (AGM), 5.25%, 6/01/39

     3,500        3,839,955   

Southeastern Pennsylvania Transportation Authority, RB, Capital Grant Receipts:

    

5.00%, 6/01/28

     1,570        1,723,954   

5.00%, 6/01/29

     2,080        2,274,688   
    

 

 

 
               30,317,581   

Utilities — 11.3%

    

Allegheny County Sanitary Authority, Refunding RB, Series A (NPFGC), 5.00%, 12/01/30

     5,000        5,233,800   

City of Philadelphia Pennsylvania Gas Works, RB:

    

1998 General Ordinance, 4th Series (AGM), 5.00%, 8/01/32

     3,300        3,310,197   

9th Series, 5.25%, 8/01/40

     1,430        1,600,470   

City of Philadelphia Pennsylvania Water & Wastewater, RB:

    

Series A, 5.25%, 1/01/36

     700        748,230   

Series C (AGM), 5.00%, 8/01/40

     3,000        3,208,140   

County of Allegheny Pennsylvania Sanitary Authority, RB, Sewer Improvement, 5.25%, 12/01/41

     1,215        1,338,225   

County of Bucks Pennsylvania Water & Sewer Authority, RB, Water System (AGM), 5.00%, 12/01/41

     150        163,523   

County of Delaware Pennsylvania Regional Water Quality Control Authority, RB, Sewer Improvements, 5.00%, 5/01/33

     350        390,096   

Pennsylvania Economic Development Financing Authority, RB, Philadelphia Biosolids Facility, 6.25%, 1/01/32

     1,420        1,549,249   

Reading Area Water Authority Pennsylvania, RB (AGM), 5.00%, 12/01/27

     2,680        2,930,982   
    

 

 

 
               20,472,912   
Total Municipal Bonds in Pennsylvania              210,461,836   
    

Guam — 0.5%

                

State — 0.5%

    

Territory of Guam, RB, Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29

     805        880,968   
Total Municipal Bonds — 116.5%              211,342,804   
    
                  

Municipal Bonds Transferred to

Tender Option Bond Trusts (e)

 

Pennsylvania — 38.4%

                

Education — 9.1%

    

Pennsylvania Higher Educational Facilities Authority, RB:

    

Series AE (NPFGC), 4.75%, 6/15/32

     8,845        9,272,116   

University of Pennsylvania Health System, Series A, 5.75%, 8/15/41

     4,270        4,808,020   

University of Pittsburgh, RB, The Commonwealth System of Higher Education, Capital Project, Series B, 5.00%, 9/15/28

     2,202        2,509,022   
    

 

 

 
               16,589,158   

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    41


Schedule of Investments (continued)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds Transferred to

Tender Option Bond Trusts (e)

   Par  
(000)
    Value  

Pennsylvania (continued)

                

Health — 9.9%

    

Geisinger Authority Pennsylvania, RB, Health System:

    

Series A, 5.13%, 6/01/34

   $ 2,500      $ 2,708,000   

Series A, 5.25%, 6/01/39

     3,128        3,378,434   

Series A-1, 5.13%, 6/01/41

     6,272        6,759,357   

Philadelphia Hospitals & Higher Education Facilities Authority, RB, The Children’s Hospital of Philadelphia Project, Series C, 5.00%, 7/01/41

     4,680        5,027,443   
    

 

 

 
               17,873,234   

Housing — 1.7%

    

Pennsylvania HFA, Refunding RB, S/F Mortgage, Series 115A, AMT, 4.20%, 10/01/33

     3,000        3,011,820   

State — 17.7%

    

Commonwealth of Pennsylvania, GO, Series 1, 5.00%, 3/15/28

     5,203        5,938,561   

Pennsylvania Turnpike Commission, RB, Oil Franchise Tax, Senior Series C (NPFGC), 5.00%, 12/01/32

     10,000        11,069,500   

State Public School Building Authority, Refunding RB, School Distric of Philadelphia Project, Series B (AGM), 5.00%, 6/01/26

     14,026        15,110,549   
    

 

 

 
               32,118,610   

Pennsylvania (concluded)

                

State (concluded)

    

Total Municipal Bonds Transferred to

Tender Option Bond Trusts — 38.4%

           $ 69,592,822   
Total Long-Term Investments
(Cost — $265,617,397) — 154.9%
             280,935,626   
    
                  
Short-Term Securities    Shares         

BIF Pennsylvania Municipal Money Fund, 0.00% (f)(g)

     1,714,474        1,714,474   

Total Short-Term Securities

(Cost — $1,714,474) — 0.9%

  

  

    1,714,474   
Total Investments (Cost — $267,331,871) — 155.8%        282,650,100   
Other Assets Less Liabilities — 1.1%        2,181,430   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (20.4)%

   

    (37,072,914
VRDP Shares, at Liquidation Value — (36.5)%        (66,300,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 181,458,616   
    

 

 

 

 

Notes to Schedule of Investments

 

(a)   Variable rate security. Rate shown is as of report date.

 

(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)   Zero-coupon bond.

 

(d)   Security is collateralized by municipal or U.S. Treasury obligations.

 

(e)   Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(f)   Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2013
      

Net

Activity

       Shares Held
at July 31,
2014
       Income  

BIF Pennsylvania Municipal Money Fund

       3,198,164           (1,483,690        1,714,474             

 

(g)   Represents the current yield as of report date.

 

Ÿ  

Financial futures contracts outstanding as of July 31, 2014 were as follows:

 

Contracts
Sold
    Issue   Exchange   Expiration   Notional
Value
    Unrealized
Appreciation
(Depreciation)
 
  (92   10-Year U.S. Treasury Note   Chicago Board of Trade   September 2014   $ 11,464,063      $ 12,698   
  (25   U.S. Treasury Long Bond   Chicago Board of Trade   September 2014     3,435,156        (53,941
  Total              $ (41,243
         

 

 

 

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Ÿ  

Fair Value Measurements—Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

 

  Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  Ÿ  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  Ÿ  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

 

See Notes to Financial Statements.

 

                
42    ANNUAL REPORT    JULY 31, 2014   


Schedule of Investments (concluded)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

(Percentages shown are based on Net Assets)

 

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments 1

            $ 280,935,626                   $ 280,935,626   

Short-Term Securities

  $ 1,714,474                               1,714,474   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 1,714,474$           280,935,626                   $ 282,650,100   
 

 

 

      

 

 

      

 

 

      

 

 

 

1    See above Schedule of Investments for values in each sector.

       

     Level 1        Level 2        Level 3        Total  
Derivative Financial Instruments 2                 

Assets:

                

Interest rate contracts

  $ 12,698                             $ 12,698   

Liabilities:

                

Interest rate contracts

    (53,941                            (53,941
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ (41,243                          $ (41,243
 

 

 

      

 

 

      

 

 

      

 

 

 

2   Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

      

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:    
     Level 1        Level 2        Level 3        Total  

Assets:

                

Cash

  $ 56,238                             $ 56,238   

Cash pledged for financial futures contracts

    175,000                               175,000   

Liabilities:

                

TOB trust certificates

            $ (37,066,212                  (37,066,212

VRDP Shares

              (66,300,000                  (66,300,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 231,238         $ (103,366,212      $         $ (103,134,974
 

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between levels during the year ended July 31, 2014.

 

See Notes to Financial Statements.

 

                
   ANNUAL REPORT    JULY 31, 2014    43


Statements of Assets and Liabilities     

 

July 31, 2014  

BlackRock
MuniHoldings
California

Quality

Fund, Inc.
(MUC)

   

BlackRock
MuniHoldings
New Jersey
Quality

Fund, Inc.
(MUJ)

    BlackRock
MuniYield
Investment
Quality
Fund
(MFT)
    BlackRock
MuniYield
Michigan
Quality
Fund, Inc.
(MIY)
   

BlackRock
MuniYield

New Jersey
Quality

Fund, Inc.
(MJI)

    BlackRock
MuniYield
Pennsylvania
Quality
Fund
(MPA)
 
           
Assets                                                

Investments at value — unaffiliated1

  $ 969,586,764      $ 535,000,926      $ 198,277,903      $ 438,299,660      $ 217,628,652      $ 280,935,626   

Investments at value — affiliated2

    2,207,320        4,710,150        2,565,273        3,889,640        2,535,160        1,714,474   

Cash

                                       56,238   

Cash pledged for financial futures contracts

    562,000        280,000        108,000        210,000        158,000        175,000   

Interest receivable

    13,573,992        4,391,626        2,183,798        5,137,891        1,596,070        2,770,257   

Investments sold receivable

    15,911,035               15,369                        

Variation margin receivable on financial futures contracts

    19,264        9,608        3,703        6,562        3,984        6,656   

Deferred offering costs

    72,363        328,428        19,490        256,667        220,881        200,136   

Prepaid expenses

    34,892        27,319        25,125        27,100        24,841        25,805   
 

 

 

 

Total assets

    1,001,967,630        544,748,057        203,198,661        447,827,520        222,167,588        285,884,192   
 

 

 

 
           
Accrued Liabilities                                                

Income dividends payable — Common Shares

    2,931,678        1,576,638        601,596        1,313,921        658,239        851,328   

Investments purchased payable

    7,041,758                                      

Investment advisory fees payable

    464,120        239,816        85,740        189,037        93,545        120,716   

Officer’s and Directors’ fees payable

    244,501        4,396        1,652        3,644        1,808        2,426   

Interest expense and fees payable

    29,986        6,382        5,208        5,163        3,159        6,702   

Other accrued expenses payable

    147,462        96,769        73,770        85,469        75,899        78,192   
 

 

 

 

Total accrued liabilities

    10,859,505        1,924,001        767,966        1,597,234        832,650        1,059,364   
 

 

 

 
           
Other Liabilities                                                

TOB trust certificates

    88,271,444        34,699,311        20,283,757        23,487,000        18,044,269        37,066,212   

VRDP Shares, at liquidation value of $100,000 per share3,4

           172,700,000               144,600,000        64,400,000        66,300,000   

VMTP Shares, at liquidation value of $100,000 per share3,4

    254,000,000               56,500,000                        
 

 

 

 

Total other liabilities

    342,271,444        207,399,311        76,783,757        168,087,000        82,444,269        103,366,212   
 

 

 

 

Total liabilities

    353,130,949        209,323,312        77,551,723        169,684,234        83,276,919        104,425,576   
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 648,836,681      $ 335,424,745      $ 125,646,938      $ 278,143,286      $ 138,890,669      $ 181,458,616   
 

 

 

 
           
Net Assets Applicable to Common Shareholders Consist of   

Paid-in capital5,6,7

  $ 586,006,297      $ 299,214,869      $ 118,012,879      $ 261,336,487      $ 125,356,076      $ 170,185,735   

Undistributed net investment income

    7,238,325        4,839,680        1,975,590        2,374,959        2,375,083       
1,741,993
  

Accumulated net realized loss

    (13,527,213     (5,069,979     (11,763,890     (10,871,747     (3,023,958     (5,746,098

Net unrealized appreciation/depreciation

    69,119,272        36,440,175        17,422,359        25,303,587        14,183,468        15,276,986   
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 648,836,681      $ 335,424,745      $ 125,646,938      $ 278,143,286      $ 138,890,669      $ 181,458,616   
 

 

 

 

Net asset value per Common Share

  $ 15.82      $ 15.74      $ 14.83      $ 15.24      $ 15.61      $ 15.77   
 

 

 

 

1   Investments at cost — unaffiliated

  $ 900,566,455      $ 498,648,550      $ 180,889,379      $ 413,056,033      $ 203,481,588      $ 265,617,397   

2   Investments at cost — affiliated

  $ 2,207,320      $ 4,710,150      $ 2,565,273      $ 3,889,640      $ 2,535,160      $ 1,714,474   

3   Preferred Shares outstanding:

           

Par value $0.05 per share

                  565                      663   

Par value $0.10 per share

    2,540        1,727               1,446        644          

4    Preferred Shares authorized

    18,140        9,847        1,000,565        8,046        3,584        1,000,663   

5    Common Shares outstanding

    41,002,483        21,305,921        8,473,184        18,248,909        8,895,127        11,504,433   

6    Par value per Common Share

  $ 0.10      $ 0.10      $ 0.10      $ 0.10      $ 0.10      $ 0.10   

7    Common Shares authorized

    200 million        200 million        unlimited        200 million        200 million        unlimited   

 

 

See Notes to Financial Statements.      
                
44    ANNUAL REPORT    JULY 31, 2014   


Statements of Operations     

 

Year Ended July 31, 2014  

BlackRock
MuniHoldings
California

Quality Fund,
Inc.

(MUC)

    BlackRock
MuniHoldings
New Jersey
Quality Fund,
Inc.
(MUJ)
    BlackRock
MuniYield
Investment
Quality Fund
(MFT)
    BlackRock
MuniYield
Michigan
Quality Fund,
Inc.
(MIY)
   

BlackRock
MuniYield

New Jersey
Quality Fund,
Inc.
(MJI)

    BlackRock
MuniYield
Pennsylvania
Quality Fund
(MPA)
 
           
Investment Income                                                

Interest

  $ 43,002,249      $ 23,416,752      $ 9,173,892      $ 19,701,379      $ 9,759,312      $ 12,553,244   

Income — affiliated

    206        2        683        2        7          
 

 

 

 

Total income

    43,002,455        23,416,754        9,174,575        19,701,381        9,759,319        12,553,244   
 

 

 

 
           
Expenses                                                

Investment advisory

    5,561,196        2,895,790        984,600        2,164,356        1,069,246        1,392,968   

Liquidity fees

           816,395                      304,435          

Accounting services

    127,235        78,342        34,517        63,666        36,811        45,347   

Professional

    107,943        87,761        52,821        66,843        60,973        57,556   

Officer and Directors

    81,591        30,781        11,069        25,297        12,383        16,355   

Custodian

    42,695        27,314        13,278        23,869        12,929        16,201   

Transfer agent

    40,181        31,622        22,761        31,458        23,071        28,829   

Printing

    15,773        11,421        7,920        10,467        8,134        8,638   

Registration

    13,720        8,967        8,978        8,962        9,054        8,966   

Remarketing fees on Preferred Shares

           127,562                      47,568          

Miscellaneous

    86,523        65,238        59,339        59,374        61,956        59,666   
 

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    6,076,857        4,181,193        1,195,283        2,454,292        1,646,560        1,634,526   

Interest expense, fees and amortization of offering costs1

    3,611,786        1,035,187        794,875        1,606,798        427,185        927,307   
 

 

 

 

Total expenses

    9,688,643        5,216,380        1,990,158        4,061,090        2,073,745        2,561,833   

Less fees waived by Manager

    (333,001     (204,612     (932     (106     (2,408     (106
 

 

 

 

Total expenses after fees waived

    9,355,642        5,011,768        1,989,226        4,060,984        2,071,337        2,561,727   
 

 

 

 

Net investment income

    33,646,813        18,404,986        7,185,349        15,640,397        7,687,982        9,991,517   
 

 

 

 
           
Realized and Unrealized Gain (Loss)                                                
Net realized loss from:            

Investments

    (4,185,803     (3,483,900     (4,220,643     (5,935,201     (1,698,932     (1,581,394

Financial futures contracts

    (1,028,070     (515,507     (173,905     (311,437     (215,085     (702,026
 

 

 

 
    (5,213,873     (3,999,407     (4,394,548     (6,246,638     (1,914,017     (2,283,420
 

 

 

 
Net change in unrealized appreciation/depreciation on:            

Investments

    60,215,989        30,793,386        14,754,036        26,719,701        13,935,458        16,150,572   

Financial futures contracts

    98,963        87,799        33,835        59,960        36,404        (41,243
 

 

 

 
    60,314,952        30,881,185        14,787,871        26,779,661        13,971,862        16,109,329   
 

 

 

 

Net realized and unrealized gain

    55,101,079        26,881,778        10,393,323        20,533,023        12,057,845        13,825,909   
 

 

 

 
           

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ 88,747,892      $ 45,286,764      $ 17,578,672      $ 36,173,420      $ 19,745,827      $ 23,817,426   
 

 

 

 

1    Related to TOBs, VRDP Shares and/or VMTP Shares.

       

   

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    JULY 31, 2014    45


Statements of Changes in Net Assets     

 

    BlackRock MuniHoldings California
Quality Fund, Inc. (MUC)
        BlackRock MuniHoldings New
Jersey Quality Fund, Inc. (MUJ)
 
    Year Ended July 31,         Year Ended July 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2014     2013         2014     2013  
         
Operations                       

Net investment income

  $ 33,646,813      $ 35,078,128        $ 18,404,986      $ 18,297,716   

Net realized gain (loss)

    (5,213,873     4,123,267          (3,999,407     640,240   

Net change in unrealized appreciation/depreciation

    60,314,952        (78,639,908       30,881,185        (43,197,563
 

 

 

     

 

 

   

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    88,747,892        (39,438,513       45,286,764        (24,259,607
 

 

 

     

 

 

 
         
Dividends and Distributions to Common Shareholders From1                                    
Net investment income     (35,180,130     (38,222,539       (18,919,661     (18,910,036

Net realized gain

                    (107,719       
 

 

 

     

 

 

 

Decrease in net assets resulting from dividends and distributions to Common Shareholders

    (35,180,130     (38,222,539       (19,027,380     (18,910,036
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Reinvestment of common dividends

           1,852,754                 497,797   
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase (decrease) in net assets applicable to Common Shareholders

    53,567,762        (75,808,298       26,259,384        (42,671,846

Beginning of year

    595,268,919        671,077,217          309,165,361        351,837,207   
 

 

 

     

 

 

 

End of year

  $ 648,836,681      $ 595,268,919        $ 335,424,745      $ 309,165,361   
 

 

 

     

 

 

 

Undistributed net investment income, end of year

  $ 7,238,325      $ 8,922,327        $ 4,839,680      $ 5,341,924   
 

 

 

     

 

 

 

1    Dividends and distributions for annual periods determined in accordance with federal income tax regulations.

       

   

 

 

See Notes to Financial Statements.      
                
46    ANNUAL REPORT    JULY 31, 2014   


Statements of Changes in Net Assets     

 

    BlackRock MuniYield Investment
Quality Fund (MFT)
        BlackRock MuniYield Michigan
Quality Fund, Inc. (MIY)
 
    Year Ended July 31,         Year Ended July 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2014     2013         2014     2013  
         
Operations                                    

Net investment income

  $ 7,185,349      $ 7,093,951        $ 15,640,397      $ 16,382,871   

Net realized gain (loss)

    (4,394,548     563,514          (6,246,638     630,209   

Net change in unrealized appreciation/depreciation

    14,787,871        (18,405,631       26,779,661        (37,218,376
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    17,578,672        (10,748,166       36,173,420        (20,205,296
 

 

 

     

 

 

 
         
Dividends to Common Shareholders From1                                    

Net investment income

    (7,219,153     (7,217,546       (16,371,077     (16,743,706
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Reinvestment of common dividends

           93,174                 485,894   
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase (decrease) in net assets applicable to Common Shareholders

    10,359,519        (17,872,538       19,802,343        (36,463,108

Beginning of year

    115,287,419        133,159,957          258,340,943        294,804,051   
 

 

 

     

 

 

 

End of year

  $ 125,646,938      $ 115,287,419        $ 278,143,286      $ 258,340,943   
 

 

 

     

 

 

 

Undistributed net investment income, end of year

  $ 1,975,590      $ 1,964,734        $ 2,374,959      $ 3,122,486   
 

 

 

     

 

 

 

1    Dividends for annual periods determined in accordance with federal income tax regulations.

         

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    JULY 31, 2014    47


Statements of Changes in Net Assets     

 

    BlackRock MuniYield New Jersey
Quality Fund, Inc. (MJI)
        BlackRock MuniYield Pennsylvania
Quality Fund (MPA)
 
    Year Ended July 31,         Year Ended July 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2014     2013         2014     2013  
         
Operations                                    

Net investment income

  $ 7,687,982      $ 7,643,570        $ 9,991,517      $ 10,296,569   

Net realized loss

    (1,914,017     (311,747       (2,283,420     141,354   

Net change in unrealized appreciation/depreciation

    13,971,862        (17,628,493       16,109,329        (22,994,319

Distributions to VRDP Shareholders from net realized gain

           (5,857                
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    19,745,827        (10,302,527       23,817,426        (12,556,396
 

 

 

     

 

 

 
         
Dividends and Distributions to Common Shareholders From1                                    

Net investment income

    (7,898,872     (7,777,215       (10,215,936     (10,214,489

Net realized gain

    (38,170     (254,189                
 

 

 

     

 

 

 

Decrease in net assets resulting from dividends and distributions to Common Shareholders

    (7,937,042     (8,031,404       (10,215,936     (10,214,489
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Reinvestment of common dividends

           473,838                 65,526   
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase (decrease) in net assets applicable to Common Shareholders

    11,808,785        (17,860,093       13,601,490        (22,705,359

Beginning of year

    127,081,884        144,941,977          167,857,126        190,562,485   
 

 

 

     

 

 

 

End of year

  $ 138,890,669      $ 127,081,884        $ 181,458,616      $ 167,857,126   
 

 

 

     

 

 

 

Undistributed net investment income, end of year

  $ 2,375,083      $ 2,577,866        $ 1,741,993      $ 2,030,860   
 

 

 

     

 

 

 

1    Dividends and distributions for annual periods determined in accordance with federal income tax regulations.

       

       

 

 

See Notes to Financial Statements.      
                
48    ANNUAL REPORT    JULY 31, 2014   


Statements of Cash Flows     

 

Year Ended July 31, 2014  

BlackRock
MuniHoldings
California
Quality

Fund, Inc.
(MUC)

   

BlackRock
MuniHoldings
New Jersey
Quality

Fund, Inc.
(MUJ)

    BlackRock
MuniYield
Investment
Quality
Fund
(MFT)
   

BlackRock
MuniYield
Michigan
Quality

Fund, Inc.
(MIY)

   

BlackRock
MuniYield

New Jersey

Quality

Fund, Inc.
(MJI)

    BlackRock
MuniYield
Pennsylvania
Quality
Fund
(MPA)
 
           
Cash Provided by Operating Activities                                                

Net increase in net assets resulting from operations

  $ 88,747,892      $ 45,286,764      $ 17,578,672      $ 36,173,420      $ 19,745,827      $ 23,817,426   

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:

           

(Increase) decrease in interest receivable

    713,493        382,322        69,267        (381,497     242,149        377,705   

Increase in variation margin receivable on financial futures contracts

    (19,264     (9,608     (3,703     (6,562     (3,984     (6,656

(Increase) decrease in prepaid expenses

    30,450        (21,719     (22,929     (22,371     (22,604     (22,719

Increase in cash pledged for financial futures contracts

    (562,000     (280,000     (108,000     (210,000     (158,000     (175,000

Increase (decrease) in investment advisory fees payable

    (24,683     14,669        (2,490     560        2,867        (2,711

Decrease in interest expense and fees payable

    (54,562     (7,797     (7,154     (4,578     (4,092     (11,909

Increase (decrease) in other accrued expenses payable

    (21,581     (139,583     11,709        (24,973     (32,359     7,147   

Increase (decrease) in Officer’s and Directors’ fees payable

    48,447        243        (343     61        (187     (183

Net realized loss on investments

    4,185,803        3,483,900        4,220,643        5,935,201        1,698,932        1,581,394   

Net unrealized gain on investments

    (60,215,989     (30,793,386     (14,754,036     (26,719,701     (13,935,458     (16,150,572

Amortization of premium and accretion of discount on investments

    5,030,074        (226,909     635,505        1,035,659        (407,456     385,407   

Proceeds from sales of long-term investments

    332,365,869        84,625,364        70,450,844        83,303,472        38,486,565        58,717,883   

Purchases of long-term investments

    (249,389,378     (82,216,323     (66,568,867     (67,826,440     (36,406,441     (43,785,766

Net proceeds from sales (purchases) of short-term securities

    (1,705,357     2,460,620        7,901,962        (3,409,973     1,229,532        1,483,690   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

    119,129,214        22,558,557        19,401,080        27,842,278        10,435,291        26,215,136   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           
Cash Used for Financing Activities                                                

Proceeds from TOB trust certificates

                         95,000               4,701,559   

Repayments of TOB trust certificates

    (84,044,488     (3,531,804     (12,228,010     (11,483,787     (2,500,724     (20,645,249

Cash dividends paid to Common Shareholders

    (35,180,130     (19,027,380     (7,219,153     (16,453,198     (7,937,042     (10,215,936

Decrease in bank overdraft

    (12,651     (8,444     (4,529     (7,264     (4,566     (5,337

Amortization of deferred offering costs

    108,055        9,071        50,612        6,971        7,041        6,065   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

    (119,129,214     (22,558,557     (19,401,080     (27,842,278     (10,435,291     (26,158,898
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           
Cash                                                

Net increase in cash

                                       56,238   

Cash at beginning of year

                                         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash at end of year

                                     $ 56,238   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           
Supplemental Disclosure of Cash Flow Information                                                

Cash paid during the year for interest and fees

  $ 3,558,293      $ 1,033,913      $ 751,417      $ 1,604,405      $ 424,236      $ 933,151   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    JULY 31, 2014    49


Financial Highlights    BlackRock MuniHoldings California Quality Fund, Inc.  (MUC)

 

    Year Ended July 31,  
    2014     2013     2012     2011     2010  
         
Per Share Operating Performance                           

Net asset value, beginning of year

  $ 14.52      $ 16.41      $ 14.27      $ 14.55      $ 13.21   
 

 

 

 

Net investment income1

    0.82        0.86        0.95        0.97        0.92   

Net realized and unrealized gain (loss)

    1.34        (1.82     2.13        (0.33     1.24   

Dividends to AMPS Shareholders from net investment income

                  (0.01     (0.02     (0.03
 

 

 

 

Net increase (decrease) from investment operations

    2.16        (0.96     3.07        0.62        2.13   
 

 

 

 

Dividends to Common Shareholders from net investment income2

    (0.86     (0.93     (0.93     (0.90     (0.79
 

 

 

 

Net asset value, end of year

  $ 15.82      $ 14.52      $ 16.41      $ 14.27      $ 14.55   
 

 

 

 

Market price, end of year

  $ 14.04      $ 13.31      $ 16.36      $ 13.15      $ 14.04   
 

 

 

 
         
Total Return Applicable to Common Shareholders3                            

Based on net asset value

    15.94%        (6.16)%        22.26%        4.88%        16.96%   
 

 

 

 

Based on market price

    12.25%        (13.71)%        32.27%        0.16%        22.40%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                           

Total expenses

    1.57%        1.64%        1.48% 4      1.38% 4      1.23% 4 
 

 

 

 

Total expenses after fees waived

    1.51%        1.56%        1.39% 4      1.25% 4      1.12% 4 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees, and amortization of offering costs5

    0.93%        0.92%        1.01% 4,6      1.02% 4      0.98% 4 
 

 

 

 

Net investment income

    5.44%        5.27%        6.14% 4      6.93% 4      6.52% 4 
 

 

 

 

Dividends to AMPS shareholders

                  0.06%        0.16%        0.18%   
 

 

 

 

Net investment income to Common Shareholders

    5.44%        5.27%        6.08%        6.77%        6.34%   
 

 

 

 
         
Supplemental Data                           

Net assets applicable to Common Shareholders, end of year (000)

  $  648,837      $  595,269      $  671,077      $  583,400      $  594,734   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of year (000)

                       $ 254,000      $ 254,000   
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 254,000      $ 254,000      $ 254,000                 
 

 

 

 

Portfolio turnover rate

    25%        34%        46%        24%        25%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of year (000)

                       $ 82,421      $ 83,538   
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $ 355,448      $ 334,358      $ 364,204                 
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Dividends for annual periods determined in accordance with federal income tax regulations.

 

  3   

Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

 

  4   

Does not reflect the effect of dividends to AMPS shareholders.

 

  5   

Interest expense, fees and amortization of offering costs related to TOBs and/or VMTP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VMTP Shares, respectively.

 

  6   

For the year ended July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.97%.

 

 

See Notes to Financial Statements.      
                
50    ANNUAL REPORT    JULY 31, 2014   


Financial Highlights    BlackRock MuniHoldings New Jersey Quality Fund, Inc.  (MUJ)

 

    Year Ended July 31,  
    2014     2013     2012     2011     2010  
         
Per Share Operating Performance                           

Net asset value, beginning of year

  $ 14.51      $ 16.54      $ 14.73      $ 15.19      $ 14.40   
 

 

 

 

Net investment income1

    0.86        0.86        0.83        0.93        1.00   

Net realized and unrealized gain (loss)

    1.27        (2.00     1.87        (0.47     0.67   
Dividends and distributions to AMPS shareholders from:          

Net investment income

                         (0.03     (0.03

Net realized gain

                                (0.00 )2 
 

 

 

 

Net increase (decrease) from investment operations

    2.13        (1.14     2.70        0.43        1.64   
 

 

 

 
Dividends and distributions to Common Shareholders from:3          

Net investment income

    (0.89     (0.89     (0.89     (0.89     (0.84

Net realized gain

    (0.01                          (0.01
 

 

 

 

Total dividends and distributions to Common Shareholders

    (0.90     (0.89     (0.89     (0.89     (0.85
 

 

 

 

Net asset value, end of year

  $ 15.74      $ 14.51      $ 16.54      $ 14.73      $ 15.19   
 

 

 

 

Market price, end of year

  $ 14.11      $ 13.30      $ 16.05      $ 13.74      $ 15.05   
 

 

 

 
         
Total Return Applicable to Common Shareholders4                            

Based on net asset value

    15.79%        (7.19)%        18.96%        3.28%        11.95%   
 

 

 

 

Based on market price

    13.24%        (12.33)%        23.76%        (2.77 )%      19.37%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                           

Total expenses

    1.64%        1.61%        1.81%        1.21% 5      1.13% 5 
 

 

 

 

Total expenses after fees waived

    1.57%        1.58%        1.78%        1.17% 5      1.08% 5 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs6

    1.25% 7      1.33% 7      1.43% 7      1.11% 5      1.05% 5 
 

 

 

 

Net investment income

    5.78%        5.28%        5.28%        6.36% 5      6.71% 5 
 

 

 

 

Dividends to AMPS shareholders

                         0.21%        0.22%   
 

 

 

 

Net investment income to Common Shareholders

    5.78%        5.28%        5.28%        6.15%        6.49%   
 

 

 

 
         
Supplemental Data                           

Net assets applicable to Common Shareholders, end of year (000)

  $  335,425      $  309,165      $  351,837      $  313,084      $  322,681   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of year (000)

                              $ 172,700   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 172,700      $ 172,700      $ 172,700      $ 172,700          
 

 

 

 

Portfolio turnover rate

    16%        10%        17%        12%        13%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of year

                              $ 71,713   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 294,224      $ 279,019      $ 303,727      $ 281,288          
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Amount is greater than $(0.005) per share.

 

  3   

Dividends and distributions for annual periods determined in accordance with federal income tax regulations.

 

  4   

Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

 

  5   

Does not reflect the effect of dividends to AMPS shareholders.

 

  6   

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

  7   

For the years ended July 31, 2014, July 31, 2013 and July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.95%, 0.93% and 1.01%, respectively.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    JULY 31, 2014    51


Financial Highlights    BlackRock MuniYield Investment Quality Fund (MFT)

 

    Year Ended July 31,  
    2014     2013     2012     2011     2010  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 13.61      $ 15.73      $ 13.40      $ 13.87      $ 12.83   
 

 

 

 

Net investment income1

    0.85        0.84        0.87        0.91        0.92   

Net realized and unrealized gain (loss)

    1.22        (2.11     2.32        (0.49     0.98   

Dividends to AMPS shareholders from net investment income

                  (0.01     (0.04     (0.04
 

 

 

 

Net increase (decrease) from investment operations

    2.07        (1.27     3.18        0.38        1.86   
 

 

 

 

Dividends to Common Shareholders from net investment income2

    (0.85     (0.85     (0.85     (0.85     (0.82
 

 

 

 

Net asset value, end of year

  $ 14.83      $ 13.61      $ 15.73      $ 13.40      $ 13.87   
 

 

 

 

Market price, end of year

  $ 13.26      $ 12.20      $ 15.47      $ 12.39      $ 14.28   
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    16.40%        (8.41)%        24.51%        3.20%        14.99%   
 

 

 

 

Based on market price

    16.10%        (16.52)%        32.43%        (7.32)%        28.72%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    1.67%        1.72%        1.58% 4      1.23% 4      1.19% 4 
 

 

 

 

Total expenses after fees waived

    1.67%        1.72%        1.58% 4      1.23% 4      1.19% 4 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs5

    1.00%        1.00%        1.08% 4,6      1.11% 4      1.09% 4 
 

 

 

 

Net investment income

    6.04%        5.36%        5.94% 4      6.91% 4      6.80% 4 
 

 

 

 

Dividends to AMPS shareholders

                  0.08%        0.28%        0.29%   
 

 

 

 

Net investment income to Common Shareholders

    6.04%        5.36%        5.86%        6.63%        6.51%   
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 125,647      $ 115,287      $ 133,160      $  113,423      $  117,341   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of year (000)

                       $ 56,525      $ 56,525   
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 56,500      $ 56,500      $ 56,500                 
 

 

 

 

Portfolio turnover rate

    32%        51%        43%        29%        38%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of year (000)

                       $ 75,165      $ 76,900   
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $  322,384      $  304,049      $  335,681                 
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Dividends for annual periods determined in accordance with federal income tax regulations.

 

  3   

Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

 

  4   

Does not reflect the effect of dividends to AMPS shareholders.

 

  5   

Interest expense, fees and amortization of offering costs related to TOBs and/or VMTP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VMTP Shares, respectively.

 

  6   

For the year ended July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 1.05%.

 

 

See Notes to Financial Statements.      
                
52    ANNUAL REPORT    JULY 31, 2014   


Financial Highlights    BlackRock MuniYield Michigan Quality Fund, Inc.  (MIY)

 

    Year Ended July 31,  
    2014     2013     2012     2011     2010  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 14.16      $ 16.18      $ 14.63      $ 14.92      $ 13.93   
 

 

 

 

Net investment income1

    0.86        0.90        0.87        0.93        0.98   

Net realized and unrealized gain (loss)

    1.12        (2.00     1.61        (0.26     0.94   

Dividends to AMPS shareholders from net investment income

                         (0.04     (0.05
 

 

 

 

Net increase (decrease) from investment operations

    1.98        (1.10     2.48        0.63        1.87   
 

 

 

 

Dividends to Common Shareholders from net investment income2

    (0.90     (0.92     (0.93     (0.92     (0.88
 

 

 

 

Net asset value, end of year

  $ 15.24      $ 14.16      $ 16.18      $ 14.63      $ 14.92   
 

 

 

 

Market price, end of year

  $ 13.47      $ 12.57      $ 16.05      $ 13.39      $ 14.55   
 

 

 

 
         
Total Return Applicable to Common Shareholders3                            

Based on net asset value

    15.24%        (7.09)%        17.60%        4.78%        14.31%   
 

 

 

 

Based on market price

    14.74%        (16.86)%        27.46%        (1.67)%        26.76%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                           

Total expenses

    1.54%        1.50%        1.72%        1.37% 4      1.07% 4 
 

 

 

 

Total expenses after fees waived

    1.54%        1.50%        1.72%        1.36% 4      1.07% 4 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs5

    0.93%        0.89%        1.38% 6      1.23% 4      1.03% 4 
 

 

 

 

Net investment income

    5.94%        5.62%        5.65%        6.48% 4      6.72% 4 
 

 

 

 

Dividends to AMPS shareholders

                         0.25%        0.31%   
 

 

 

 

Net investment income to Common Shareholders

    5.94%        5.62%        5.65%        6.23%        6.41%   
 

 

 

 
         
Supplemental Data                           

Net assets applicable Common Shareholders, end of year (000)

  $ 278,143      $ 258,341      $ 294,804      $ 266,326      $ 271,609   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of year (000)

                              $  144,650   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $  144,600      $  144,600      $  144,600      $  144,600          
 

 

 

 

Portfolio turnover rate

    16%        17%        19%        16%        15%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of year

                              $ 71,945   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 292,354      $ 278,659      $ 303,876      $ 284,181          
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Dividends for annual periods determined in accordance with federal income tax regulations.

 

  3   

Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

 

  4   

Does not reflect the effect of dividends to AMPS shareholders.

 

  5   

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

  6   

For the year ended July 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs, liquidity and remarketing fees was 0.98%.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    JULY 31, 2014    53


Financial Highlights    BlackRock MuniYield New Jersey Quality Fund, Inc.  (MJI)

 

    Year Ended July 31,  
    2014     2013     2012     2011     2010  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 14.29      $ 16.35      $ 14.53      $ 15.00      $ 14.07   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income1

    0.86        0.86        0.82        0.91        0.98   

Net realized and unrealized gain (loss)

    1.35        (2.01     1.89        (0.48     0.94   

Distributions to VRDP Shareholders from net realized gain

           (0.00 )2                      
Dividends and distributions to AMPS shareholders from:          

Net investment income

                         (0.04     (0.04

Net realized gain

                                (0.01
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from investment operations

    2.21        (1.15     2.71        0.39        1.87   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Dividends and distributions to Common Shareholders from:3          

Net investment income

    (0.89     (0.88     (0.89     (0.86     (0.84

Net realized gain

    (0.00 )2      (0.03                   (0.10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions to Common Shareholders

    (0.89     (0.91     (0.89     (0.86     (0.94
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of year

  $ 15.61      $ 14.29      $ 16.35      $ 14.53      $ 15.00   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market price, end of year

  $ 14.15      $ 13.27      $ 16.31      $ 13.16      $ 14.92   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         
Total Return Applicable to Common Shareholders4                                        

Based on net asset value

    16.64%        (7.41)%        19.32%        3.10%        13.90%   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Based on market price

    13.85%        (13.81)%        31.42%        (6.12)%        24.34%   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    1.58%        1.54%        1.71% 5      1.13% 5      1.06% 5 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses after fees waived

    1.58%        1.53%        1.70% 5      1.12% 5      1.05% 5 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs6

    1.25% 7      1.29% 7      1.38% 5,7      1.08% 5      1.02% 5 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

    5.86%        5.34%        5.31% 5      6.32% 5      6.64% 5 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends to AMPS shareholders

                         0.31%        0.29%   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income to Common Shareholders

    5.86%        5.34%        5.31%        6.01%        6.35%   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $  138,891      $  127,082      $  144,942      $  128,481      $  132,281   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of year (000)

                              $ 64,475   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 64,400      $ 64,400      $ 64,400      $ 64,400          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio turnover rate

    17%        11%        21%        12%        12%   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of year

                              $ 76,294   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 315,669      $ 297,332      $ 325,065      $ 299,505          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Amount is greater than $(0.005) per share.

 

  3   

Dividends and distributions for annual periods determined in accordance with federal income tax regulations.

 

  4   

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

 

  5   

Does not reflect the effect of dividends to AMPS shareholders.

 

  6   

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

  7   

For the years ended July 31, 2014, July 31, 2013 and July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.98%, 0.93% and 0.99%, respectively.

 

 

See Notes to Financial Statements.      
                
54    ANNUAL REPORT    JULY 31, 2014   


Financial Highlights    BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

    Year Ended July 31,  
    2014     2013     2012     2011     2010  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 14.59      $ 16.57      $ 14.97      $ 15.38      $ 14.28   
 

 

 

 

Net investment income1

    0.87        0.90        0.85        0.92        0.92   

Net realized and unrealized gain (loss)

    1.20        (1.99     1.66        (0.38     1.02   

Dividends to AMPS Shareholders from net investment income

                         (0.03     (0.03
 

 

 

 

Net increase (decrease) from investment operations

    2.07        (1.09     2.51        0.51        1.91   
 

 

 

 

Dividends to Common Shareholders from net investment income2

    (0.89     (0.89     (0.91     (0.92     (0.81
 

 

 

 

Net asset value, end of year

  $ 15.77      $ 14.59      $ 16.57      $ 14.97      $ 15.38   
 

 

 

 

Market price, end of year

  $ 13.89      $ 13.07      $ 15.98      $ 13.94      $ 15.26   
 

 

 

 
         
Total Return Applicable to Common Shareholders3                            

Based on net asset value

    15.39%        (6.78)%        17.34%        3.84%        14.18%   
 

 

 

 

Based on market price

    13.45%        (13.42)%        21.53%        (2.55)%        25.70%   
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                           

Total expenses

    1.48%        1.53%        1.65%        1.37% 4      1.15% 4 
 

 

 

 

Total expenses after fees waived

    1.48%        1.53%        1.65%        1.36% 4      1.15% 4 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs5

    0.95%        0.94%        1.28% 6      1.14% 4      1.00% 4 
 

 

 

 

Net investment income

    5.79%        5.46%        5.38%        6.24% 4      6.17% 4 
 

 

 

 

Dividends to AMPS Shareholders

                         0.18%        0.22%   
 

 

 

 

Net investment income to Common Shareholders

    5.79%        5.46%        5.38%        6.06%        5.95%   
 

 

 

 
         
Supplemental Data                           

Net assets applicable Common Shareholders, end of year (000)

  $  181,459      $  167,857      $  190,562      $  171,938      $  176,530   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of year (000)

                              $ 66,350   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 66,300      $ 66,300      $ 66,300      $ 66,300          
 

 

 

 

Portfolio turnover rate

    16%        8%        23%        11%        6%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of year

                              $ 91,517   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 373,693      $ 353,178      $ 387,425      $ 359,333          
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Dividends for annual periods determined in accordance with federal income tax regulations.

 

  3   

Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

 

  4   

Does not reflect the effect of dividends to AMPS Shareholders.

 

  5   

Interest expense, fees and amortization of offering costs relate to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

  6   

For the year ended July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.99%.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    JULY 31, 2014    55


Notes to Financial Statements     

 

1. Organization:

BlackRock MuniHoldings California Quality Fund, Inc. (“MUC”), BlackRock MuniHoldings New Jersey Quality Fund, Inc. (“MUJ”), BlackRock MuniYield Investment Quality Fund (“MFT”), BlackRock MuniYield Michigan Quality Fund, Inc. (“MIY”), BlackRock MuniYield New Jersey Quality Fund, Inc. (“MJI”) and BlackRock MuniYield Pennsylvania Quality Fund (“MPA”) (collectively, the “Funds”) are registered under the Investment Company Act of 1940, as non-diversified, closed-end management investment companies. MUC, MUJ, MIY and MJI are organized as Maryland corporations. MFT and MPA are organized as Massachusetts business trusts. The Boards of Directors and the Boards of Trustees of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board”, and the directors/trustees thereof are collectively referred to throughout this report as “Directors.” The Funds determine and make available for publication the NAVs of their Common Shares on a daily basis.

2. Significant Accounting Policies:

The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Funds:

Valuation: U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.

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. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day.

In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each 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 Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., financial futures contracts) or certain borrowings (e.g., TOBs) that would be “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Fund’s future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security”. Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Dividends and distributions to Preferred Shareholders are accrued and determined as described in Note 9.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Fund’s Board, the independent 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 certain other BlackRock Closed-End Funds selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

 

                
56    ANNUAL REPORT    JULY 31, 2014   


Notes to Financial Statements (continued)     

 

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund. Deferred compensation liabilities are included in officer’s and directors’ fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Funds until such amounts are distributed in accordance with the Plan.

Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Funds’ financial statement disclosures.

Other: Expenses directly related to a 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.

The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

3. Securities and Other Investments:

Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Forward Commitments and When-Issued Delayed Delivery Securities: The Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Funds may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Funds may be required to pay more at settlement than the security is worth. In addition, the Funds are not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the Funds’ maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions, which is shown in the Schedules of Investments.

Municipal Bonds Transferred to TOBs: The Funds leverage their assets through the use of TOBs. A TOB is a special purpose entity established by a third party sponsor, into which a fund, or an agent on behalf of a fund, transfers municipal bonds into a trust (“TOB Trust”). Other funds managed by the investment advisor may also contribute municipal bonds to a TOB into which a Fund has contributed bonds. A TOB typically issues two classes of beneficial interests: short-term floating rate certificates (“TOB Trust Certificates”), which are sold to third party investors, and residual certificates (“TOB Residuals”), which are generally issued to the participating funds that contributed the municipal bonds to the TOB Trust. If multiple funds participate in the same TOB, the rights and obligations under the TOB Residual will be shared among the funds ratably in proportion to their participation

The TOB Residuals held by a Fund include the right of a Fund (1) to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates at par plus accrued interest upon the occurrence of certain mandatory tender events defined in the TOB agreements, and (2) to transfer, subject to a specified number of days’ prior notice, a corresponding share of the municipal bonds from the TOB to a Fund. The TOB may also be collapsed without the consent of a Fund, as the TOB Residual holder, upon the occurrence of certain termination events as defined in the TOB agreements. Such termination events may include the bankruptcy or default of the municipal bond, a substantial downgrade in credit quality of the municipal bond, the inability of the TOB to obtain renewal of the liquidity support agreement, a substantial decline in market value of the municipal bond and a judgment or ruling that interest on the municipal bond is subject to federal income taxation. Upon the occurrence of a termination event, the TOB would generally be liquidated in full with the proceeds typically applied first to any accrued fees owed to the trustee, remarketing agent and liquidity provider, and then to the holders of the TOB Trust Certificates up to par plus accrued interest owed on the TOB Trust Certificates, with the balance paid out to the TOB Residual holder. During the year ended July 31, 2014, no TOBs in which the Funds participated were terminated without the consent of the Funds.

The cash received by the TOB from the sale of the TOB Trust Certificates, less transaction expenses, is paid to a Fund. The Funds typically invest the cash received in additional municipal bonds. Each Fund’s transfer of the municipal bonds to a TOB Trust is accounted for as a secured borrowing; therefore, the municipal bonds deposited into a TOB are presented in the Funds’ Schedules of Investments and the TOB Trust Certificates are shown in other liabilities in the Statements of Assets and Liabilities. The carrying amount of each Fund’s payable to the holder of the TOB Trust Certificates, as reported in the Statements of Assets and Liabilities as TOB Trust Certificates, approximates its fair value.

The Funds may invest in TOBs on either a non-recourse or recourse basis. TOB Trusts are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity Provider”) that allows the holders of the TOB Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par plus accrued interest on any business day prior to the occurrence of the termination events described above. When a

 

                
   ANNUAL REPORT    JULY 31, 2014    57


Notes to Financial Statements (continued)     

 

Fund invests in TOBS on a non-recourse basis, and the Liquidity Provider is required to make a payment under the liquidity facility due to a termination event, the Liquidity Provider will typically liquidate all or a portion of the municipal securities held in the TOB Trust and then fund, on a net basis, the balance, if any, of the amount owed under the liquidity facility over the liquidation proceeds (the “Liquidation Shortfall”). If a Fund invests in a TOB on a recourse basis, the Funds will typically enter into a reimbursement agreement with the Liquidity Provider where the Funds is required to repay the Liquidity Provider the amount of any Liquidation Shortfall. As a result, a Fund investing in a recourse TOB will bear the risk of loss with respect to any Liquidation Shortfall. If multiple Funds participate in any such TOB, these losses will be shared ratably, including the maximum potential amounts owed by the Funds at July 31, 2014, in proportion to their participation. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by the Funds at July 31, 2014.

Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by the Funds on an accrual basis. Interest expense incurred on the secured borrowing and other expenses related to remarketing, administration and trustee services to a TOB are shown as interest expense, fees and amortization of offering costs in the Statements of Operations. The TOB Trust Certificates have interest rates that generally reset weekly and their holders have the option to tender such certificates to the TOB for redemption at par at each reset date. At July 31, 2014, the aggregate value of the underlying municipal bonds transferred to TOBs, the related liability for TOB Trust Certificates and the range of interest rates on the liability for TOB Trust Certificates were as follows:

 

    

Underlying

Municipal

Bonds
Transferred to
TOBs

    

Liability for

TOB Trust

Certificates

    

Range of

Interest Rates

 

MUC

  $ 188,572,615       $ 88,271,444         0.06% - 0.14%   

MUJ

  $ 64,495,036       $ 34,699,311         0.06% - 0.13%   

MFT

  $ 38,663,211       $ 20,283,757         0.06% - 0.31%   

MIY

  $ 47,808,301       $ 23,487,000         0.04% - 0.21%   

MJI

  $ 32,819,914       $ 18,044,269         0.06% - 0.13%   

MPA

  $ 69,592,822       $ 37,066,212         0.07% - 0.18%   

For the year ended July 31, 2014, the Funds’ average TOB Trust Certificates outstanding and the daily weighted average interest rate, including fees, were as follows:

 

    

Average TOB

Trust

Certificates

Outstanding

    

Daily Weighted

Average

Interest Rate

 

MUC

  $ 138,395,091         0.58%   

MUJ

  $ 35,118,477         0.66%   

MFT

  $ 21,403,900         0.68%   

MIY

  $ 24,835,072         0.55%   

MJI

  $ 18,253,985         0.69%   

MPA

  $ 39,661,319         0.63%   

Should short-term interest rates rise, the Funds’ investments in TOBs may adversely affect the Funds’ net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect the Funds’ NAVs per share.

4. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to economically hedge their exposure to certain risks such as interest rate risk. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Financial Futures Contracts: The Funds purchase and/or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk). Financial futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited, if any, is recorded on the Statements of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Funds as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.

 

                
58    ANNUAL REPORT    JULY 31, 2014   


Notes to Financial Statements (continued)     

 

When the contract is closed, the Funds record 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. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure:

 

     Fair Values of Derivative Financial Instruments as of July 31, 2014  
        Value  
        MUC   MUJ          MFT  
     Statements of Assets and Liabilities Location   Derivative
Assets
    Derivative
Liabilities
        Derivative
Assets
    Derivative
Liabilities
        Derivative
Assets
    Derivative
Liabilities
 

Interest rate contracts

  Net unrealized appreciation/depreciation1   $ 98,963                 $ 87,799                 $ 33,835          
         MIY   MJI          MPA  
       Derivative
Assets
    Derivative
Liabilities
        Derivative
Assets
    Derivative
Liabilities
        Derivative
Assets
    Derivative
Liabilities
 

Interest rate contracts

  Net unrealized appreciation/depreciation1   $ 59,960                 $ 36,404                 $ 12,698      $ (53,941

 

  1  

Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

 

The Effect of Derivative Financial Instruments in the Statements of Operations

Year Ended July 31, 2014

 
    Net Realized Loss From          Net Change in Unrealized Appreciation/Depreciation on  
    MUC      MUJ      MFT          MUC      MUJ      MFT  
Interest rate contracts:                   

Financial futures contracts

  $ (1,028,070    $ (515,507    $ (173,905        $ 98,963       $ 87,799       $ 33,835   
    MIY      MJI      MPA          MIY      MJI      MPA  
Interest rate contracts:                   

Financial futures contracts

  $ (311,437    $ (215,085    $ (702,026        $ 59,960       $ 36,404       $ (41,243

For the year ended July 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:

 

     MUC      MUJ      MFT      MIY      MJI      MPA  
Financial futures contracts:                 

Average number of contracts sold

    453         156         93         104         66         158   

Average notional value of contracts sold

  $ 56,777,832       $ 19,527,441       $ 11,633,230       $ 12,978,262       $ 8,281,895       $ 19,754,957   

Counterparty Credit Risk: A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund.

With exchange-traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

Each Fund entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:

 

     MUC       

MUJ

       MFT        MIY        MJI        MPA  

Investment advisory fee

    0.55%           0.55%           0.50%           0.50%           0.50%           0.50%   

 

                
   ANNUAL REPORT    JULY 31, 2014    59


Notes to Financial Statements (continued)     

 

Average daily net assets are the average daily value of each Fund’s total assets minus its total accrued liabilities.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Statements of Operations. For the year ended July 31, 2014, the amounts waived were:

 

     MUC        MUJ        MFT        MIY        MJI        MPA  

Amounts waived

  $ 3,985         $ 5,345         $ 932         $ 106         $ 2,408         $ 106   

The Manager, for MUC and MUJ, voluntarily agreed to waive its investment advisory fee on the proceeds of the Preferred Shares and TOBs that exceed 35% of total assets minus the sum of its accrued liabilities. This amount is included in fees waived by Manager in the Statements of Operations. For the year ended July 31, 2014, the waivers were:

 

MUC

  $ 329,016   

MUJ

  $ 199,267   

Prior to July 1, 2014, BlackRock Investment Management, LLC (“BIM”), an affiliate of the Manager, served as a sub-advisor to each Fund pursuant to sub-advisory agreements with the Manager, and received for its services a monthly fee from the Manager at an annual rate equal to a percentage of the investment advisory fees paid by each Fund to the Manager under the Investment Advisory Agreements. Effective July 1, 2014, the sub-advisory agreements between the Manager and BIM, with respect to each Fund, expired.

Certain officers and/or Directors of the Funds are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for compensation paid to the Funds’ Chief Compliance Officer, which is included in officer and directors in the Statements of Operations.

The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended July 31, 2014, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

 

     MUC      MFT  

Purchases

  $ 1,567,211         —     

Sales

    —         $ 1,906,715   

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities, for the year ended July 31, 2014 were as follows:

 

     MUC      MUJ      MFT      MIY      MJI      MPA  

Purchases

  $ 250,452,318       $ 82,216,323       $ 61,410,971       $ 67,826,440       $ 36,406,441       $ 43,785,766   

Sales

  $ 337,974,257       $ 84,625,364       $ 68,792,391       $ 81,674,466       $ 38,486,565       $ 58,305,350   

7. Income Tax Information:

It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, 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.

Each 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 Funds’ U.S. federal tax returns remains open for each of the four years ended July 31, 2014. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application the Funds’ facts and circumstances and does not believe that there are any uncertain tax positions that require recognition of a tax liability.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of July 31, 2014, the following permanent differences attributable to amortization methods on fixed income securities, non-deductible expenses, the reclassification of distributions and distributions received from a regulated investment company were reclassified to the following accounts:

 

     MUC      MUJ      MFT      MIY      MJI      MPA  

Paid-in capital

  $ (112,615    $ (12,171    $ (51,627    $ (9,567    $ (8,196    $ (7,257

Undistributed net investment income

  $ (150,685    $ 12,431       $ 44,660       $ (16,847    $ 8,107       $ (64,448

Accumulated net realized loss

  $ 263,300       $ (260    $ 6,967       $ 26,414       $ 89       $ 71,705   

 

                
60    ANNUAL REPORT    JULY 31, 2014   


Notes to Financial Statements (continued)     

 

The tax character of distributions paid was as follows:

 

            MUC      MUJ      MFT      MIY      MJI      MPA  

Tax-exempt income1

    7/31/14      $ 37,867,090       $ 19,712,925       $ 7,817,944       $ 17,810,213       $ 8,194,726       $ 10,885,337   
    7/31/13        41,098,361         19,503,101         7,857,658         18,306,103         7,934,464         10,932,517   

Ordinary income2

    7/31/14        4,953                         21,887         39,156         101   
    7/31/13        1,849                         3,619         121,948           

Long-term capital gains3

    7/31/14                110,815                                   
    7/31/13                                        203,299           
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

    7/31/14      $ 37,872,043       $ 19,823,740       $ 7,817,944       $ 17,832,100       $ 8,233,882       $ 10,885,438   
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
    7/31/13      $ 41,100,210       $ 19,503,101       $ 7,857,658       $ 18,309,722       $ 8,259,711       $ 10,932,517   
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  1  

The Funds designate these amounts paid during the fiscal year ended July 31, 2014, as exempt-interest dividends.

 

  2  

Ordinary income consists primarily of taxable income recognized from market discount and net short-term capital gains. Additionally, all ordinary income distributions are comprised of interest-related dividends and qualified short-term capital dividends for non-U.S. residents and are eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

 

  3  

The Fund designates the amount paid during the fiscal year ended July 31, 2014, as a capital gain dividend.

As of July 31, 2014, the tax components of accumulated net earnings were as follows:

 

     MUC      MUJ      MFT      MIY      MJI      MPA  

Undistributed tax-exempt income

  $ 7,328,987       $ 4,069,637       $ 1,876,211       $ 2,312,339       $ 2,028,350       $ 1,416,369   

Undistributed ordinary income

    175         2,989         215                 2,047         2,914   

Capital loss carryforwards

    (13,209,170      (3,805,742      (10,745,672      (9,953,666      (2,198,376      (3,459,717

Net unrealized gains (losses)4

    68,710,392         36,048,146         17,126,318         24,530,062         13,792,616         14,162,566   

Qualified late-year losses5

            (105,154      (623,013      (81,936      (90,044      (849,251
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  $ 62,830,384       $ 36,209,876       $ 7,634,059       $ 16,806,799       $ 13,534,593       $ 11,272,881   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

4    The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, and straddles, amortization methods of premiums and discounts on fixed income securities, the realization for tax purposes of unrealized gains/losses on certain futures contracts, the treatment of residual interests in tender option bond trusts and the deferral of compensation to Directors.

 

5    The Funds have elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

 

         

       

 

As of July 31, 2014, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

 

   

Expires July 31,   MUC      MUJ      MFT      MIY      MJI      MPA  

2016

                $ 1,401,889                   

2017

  $ 6,504,940               2,031,132               $ 1,066,968   

2018

             $ 4,616,682                         893,908   

2019

                                       50,303   

No expiration6

    6,704,230       $ 3,805,742         6,128,990         6,520,645       $ 2,198,376         1,448,538   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  $ 13,209,170       $ 3,805,742       $ 10,745,672       $ 9,953,666       $ 2,198,376       $ 3,459,717   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

6   Must be utilized prior to losses subject to expiration.

 

As of July 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

 
     MUC      MUJ      MFT      MIY      MJI      MPA  

Tax cost

  $ 814,552,102       $ 468,963,618       $ 163,431,449       $ 393,508,995       $ 188,326,894       $ 231,005,973   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross unrealized appreciation

  $ 69,052,605       $ 37,325,099       $ 17,313,877       $ 26,636,935       $ 14,490,688       $ 15,691,674   

Gross unrealized depreciation

    (82,067      (1,276,952      (185,907      (1,443,630      (698,039      (1,113,759
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net unrealized appreciation

  $ 68,970,538       $ 36,048,147       $ 17,127,970       $ 25,193,305       $ 13,792,649       $ 14,577,915   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

8. Concentration, Market and Credit Risk:

MUC, MUJ, MIY, MJI, and MPA invest a substantial amount of their assets in issuers located in a single state or limited number of states. Please see the Schedules of Investments for concentrations in specific states or U.S. territories.

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. 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.

In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall

 

                
   ANNUAL REPORT    JULY 31, 2014    61


Notes to Financial Statements (continued)     

 

market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

The Funds invest a significant portion of their assets in fixed-income securities and/or uses derivatives tied to the fixed income markets. See the Schedules of Investments for these securities and/or derivatives. Changes in market interest rates or economic conditions, including the Federal Reserve’s decision in December 2013 to taper its quantitative easing policy, may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

As of July 31, 2014, MUC and MPA invested a significant portion of their assets in securities in the county/city/special district/school district sector. MIY and MJI invested a significant portion of their assets in securities in the education sector. MUJ invested a significant portion of their assets in securities in the state sector. MUJ, MFT and MJI invested a significant portion of their assets in securities in the transportation sector. MUC and MFT also invested a significant portion of their assets in securities in the utilities sector. Changes in economic conditions affecting such sectors would have a greater impact on the Funds and could affect the value, income and/or liquidity of positions in such securities.

The Funds may hold a significant amount of bonds subject to calls by the issuers at defined dates and prices. When bonds are called by issuers and the Funds reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total return performance of a fund.

On December 10, 2013, regulators published final rules implementing section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”), which prohibit banking entities from engaging in proprietary trading of certain instruments and limit such entities’ investments in, and relationships with, “covered funds”, as defined in the rules. Banking entities subject to the Volcker Rule are required to fully comply by July 21, 2015. The Volcker Rule may preclude banking entities and their affiliates from (i) sponsoring TOB trust programs (as such programs are presently structured) and (ii) continuing relationships with or services for existing TOB trust programs. As a result, TOB trusts may need to be restructured or unwound. There can be no assurances that TOB trusts can be restructured, that new sponsors of TOB trusts will develop, or that alternative forms of leverage will be available to the Fund. Any alternative forms of leverage may be more or less advantageous to the Fund than existing TOB leverage.

TOB transactions constitute an important component of the municipal bond market. Accordingly, implementation of the Volcker Rule may adversely impact the municipal market, including through reduced demand for and liquidity of municipal bonds and increased financing costs for municipal issuers. Any such developments could adversely affect the Fund. The ultimate impact of these rules on the TOB market and the overall municipal market is not yet certain.

9. Capital Share Transactions:

MFT and MPA are authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. The par value for each Fund’s Common Shares is $0.10. The par value for each Fund’s Preferred Shares outstanding is $0.05. Each Fund’s Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without approval of Common Shareholders.

MUC, MUJ, MIY and MJI are authorized to issue 200 million shares, par value $0.10 per share, all of which were initially classified as Common Shares. Each Fund’s Board is authorized, however, to reclassify any unissued Common Shares without approval of Common Shareholders.

Common Shares

For the years shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

Year Ended      MUC        MUJ        MFT        MIY        MJI        MPA  

July 31, 2014

                                                           

July 31, 2013

       111,790           29,853           5,789           29,750           28,723           3,912   

Preferred Shares

Each Fund’s Preferred Shares rank prior to the Fund’s Common Shares as to the payment of dividends by the Fund and distribution of assets upon dissolution or liquidation of the Fund. The 1940 Act prohibits the declaration of any dividend on the Fund’s Common Shares or the repurchase of the Fund’s Common Shares if the Fund fails to maintain the asset coverage of at least 200% of the liquidation preference of the outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, the Fund is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with the Preferred Shares or repurchasing such shares if the Fund fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares’ governing instruments or comply with the basic maintenance amount requirement of the agencies rating the Preferred Shares.

 

                
62    ANNUAL REPORT    JULY 31, 2014   


Notes to Financial Statements (continued)     

 

The holders of Preferred Shares have voting rights equal to the holders of Common Shares (one vote per share) and will vote together with holders of Common Shares (one vote per share) as a single class. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Directors for each Fund. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.

VRDP Shares

MUJ, MIY, MJI and MPA (collectively, the “VRDP Funds”), have issued Series W-7 VRDP Shares, $100,000 liquidation value per share, in a privately negotiated offering. The VRDP Shares were offered to qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act of 1933, as amended, (the “Securities Act”) and include a liquidity feature, pursuant to a liquidity agreement, that allows the holders of VRDP Shares to have their shares purchased by the liquidity provider in the event of a failed remarketing. The VRDP Funds are required to redeem the VRDP Shares owned by the liquidity provider after six months of continuous, unsuccessful remarketing. Upon the occurrence of the first unsuccessful remarketing, the VRDP Funds are required to segregate liquid assets to fund the redemption. The VRDP Shares are subject to certain restrictions on transfer.

The VRDP Shares outstanding as of July 31, 2014 were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Maturity Date  

MUJ

    6/30/11         1,727       $ 172,700,000         7/01/41   

MIY

    4/21/11         1,446       $ 144,600,000         5/01/41   

MJI

    6/30/11         644       $ 64,400,000         7/01/41   

MPA

    5/19/11         663       $ 66,300,000         6/01/41   

The VRDP Funds entered into a fee agreement with the liquidity provider that may require an initial commitment and a per annum liquidity fee payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations.

The fee agreement between MUJ, MIY, MJI and MPA and the liquidity provider are scheduled to expire, unless renewed or terminated in advance, as follows:

 

    

MUJ

     MIY      MJI      MPA  

Expiration date

    4/19/17         7/09/15         4/19/17         7/09/15   

In the event the fee agreement is not renewed or is terminated in advance, and the VRDP Funds do not enter into a fee agreement with an alternate liquidity provider, the VRDP Shares will be subject to mandatory purchase by the liquidity provider prior to the termination of the fee agreement. The VRDP Funds are required to redeem any VRDP Shares purchased by the liquidity provider six months after the purchase date. Immediately after the purchase of any VRDP Shares by the liquidity provider, the VRDP Funds are required to begin to segregate liquid assets with the VRDP Fund’s custodian to fund the redemption. There is no assurance the VRDP Funds will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.

Each VRDP Fund is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six months prior to the maturity date, each VRDP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, each VRDP Fund is required to redeem certain of its outstanding VRDP Shares if it fails to maintain certain asset coverage, basic maintenance amount or leverage requirements.

Subject to certain conditions, the VRDP Shares may be redeemed, in whole or in part, at any time at the option of the VRDP Funds. The redemption price per VRDP Share is equal to the liquidation value per share plus any outstanding unpaid dividends. In the event of an optional redemption of the VRDP Shares prior to the initial termination date of the fee agreement, the VRDP Funds must pay the respective liquidity provider fees on such redeemed VRDP Shares for the remaining term of the fee agreement up to the initial termination date.

Dividends on the VRDP Shares are payable monthly at a variable rate set weekly by the remarketing agent. Such dividend rates are generally based upon a spread over a base rate and cannot exceed a maximum rate. In the event of a failed remarketing, the dividend rate of the VRDP Shares will be reset to a maximum rate. The maximum rate is determined based on, among other things, the long-term preferred share rating assigned to the VRDP Shares and the length of time that the VRDP Shares fail to be remarketed. At the date of issuance, the VRDP Shares were assigned a long-term rating of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VRDP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of July 31, 2014, the VRDP Shares were assigned a long-term rating of Aa2 from Moody’s under its new ratings methodology. The VRDP Shares continue to be assigned a long-term rating of AAA from Fitch.

The short-term ratings on the VRDP Shares are directly related to the short-term ratings of the liquidity provider for such VRDP Shares. Changes in the credit quality of the liquidity provider could cause a change in the short-term credit ratings of the VRDP Shares as rated by Moody’s, Fitch and/or S&P. A change in the short-term credit rating of the liquidity provider or the VRDP Shares may adversely affect the dividend rate paid on such shares, although the dividend

 

                
   ANNUAL REPORT    JULY 31, 2014    63


Notes to Financial Statements (continued)     

 

rate paid on the VRDP Shares is not directly related based upon either short-term rating. The liquidity provider may be terminated prior to the scheduled termination date if the liquidity provider fails to maintain short-term debt ratings in one of the two highest rating categories. The short-term ratings on the VRDP Shares were withdrawn by Moody’s, Fitch and/or S&P at the commencement of the special rate period, as described below.

For financial reporting purposes, the VRDP Shares are considered debt of the issuer; therefore, the liquidation value, which approximates fair value, of the VRDP Shares is recorded as a liability in the Statements of Assets and Liabilities. Unpaid dividends are included in interest expense and fees payable in the Statements of Assets and Liabilities, and the dividends accrued and paid on the VRDP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP Shares are treated as equity for tax purposes. Dividends paid to holders of the VRDP Shares are generally classified as tax-exempt income for tax-reporting purposes.

MUJ and MJI incur remarketing fees of 0.01% on the aggregate principal amount of all the VRDP Shares, which, if any, are included in remarketing fees on Preferred Shares in the Statements of Operations. All of the remarketable VRDP Shares that were tendered for remarketing during the year ended July 31, 2014 were successfully remarketed.

The annualized dividend rates for the VRDP Shares for the year ended July 31, 2014 were as follows:

 

    

MUJ

       MIY        MJI        MPA  

Rate

    0.46%           1.01%           0.46%           1.01%   

On June 21, 2012, MIY and MPA commenced a three-year term ending June 24, 2015 (“special rate period”) with respect to their VRDP Shares. The implementation of the special rate period resulted in a mandatory tender of the VRDP Shares prior to the commencement of the special rate period. The mandatory tender event was not the result of a failed remarketing.

On April 17, 2014, MUJ and MJI commenced a three-year term ending April 19, 2017 with respect to their VRDP Shares. The implementation of the special rate period resulted in a mandatory tender of the VRDP Shares prior to the commencement of the special rate period. The mandatory tender event was not the result of a failed remarketing.

The liquidity and fee agreements remain in effect for the duration of the special rate period and the VRDP shares are still subject to mandatory redemption by the VRDP Funds on maturity date. The VRDP Shares will not be remarketed or subject to optional or mandatory tender events during such time. During the special rate period, the VRDP Funds are required to maintain the same asset coverage, basic maintenance amount and leverage requirements for the VRDP Shares. The VRDP Funds will not pay any liquidity and remarketing fees during the special rate period and instead will pay dividends monthly based on the sum of Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index and a percentage per annum based on the long-term ratings assigned to the VRDP Shares. The short-term ratings were withdrawn by Moody’s, Fitch and/or S&P. Short-term ratings may be re-assigned upon the termination of the special rate period when the VRDP Shares revert back to remarketable securities.

If the VRDP Funds redeems the VRDP Shares on a date that is one year or more before the end of the special rate period and the VRDP Shares are rated above A1/A by Moody’s and Fitch respectively, then such redemption is subject to a redemption premium payable to the holder of the VRDP Shares based on the time remaining in the special rate period, subject to certain exceptions for redemptions that are required to maintain minimum asset coverage requirements. After June 24, 2015 for MIY and MPA and April 19, 2017 for MUJ and MJI the holder of the VRDP Shares and the VRDP Funds may mutually agree to extend the special rate period. If the special rate period is not extended, the VRDP Shares will revert back to remarketable securities and will be remarketed and available for purchase by qualified institutional investors.

VRDP Shares issued and outstanding remained constant for the year ended July 31, 2014.

VMTP Shares

MUC and MFT (collectively, the “VMTP Funds”), have issued Series W-7 VMTP Shares, $100,000 liquidation value per share , in a privately negotiated offering and sale of VMTP Shares exempt from registration under the Securities Act.

The VMTP Shares outstanding as of the year ended July 31, 2014 were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Term Date  

MUC

    3/22/12         2,540       $ 254,000,000         4/01/15   

MFT

    12/16/11         565       $ 56,500,000         12/31/15   

Each VMTP Fund is required to redeem its VMTP Shares on the term date, unless earlier redeemed or repurchased or unless extended. The term date for VMTP Shares of MFT was extended to December 31, 2015 in June 2014. There is no assurance that the term of a Fund’s VMTP Shares will be extended or that a Fund’s VMTP Shares will be replaced with any other preferred shares or other form of leverage upon the redemption or repurchase of the VMTP Shares. Six months prior to term date, each VMTP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, each VMTP Fund is required to redeem certain of its outstanding VMTP Shares if it fails to maintain certain asset coverage, basic maintenance amount or leverage requirements.

 

 

                
64    ANNUAL REPORT    JULY 31, 2014   


Notes to Financial Statements (concluded)     

 

Subject to certain conditions, a Fund’s VMTP Shares may be redeemed, in whole or in part, at any time at the option of the Fund. The redemption price per VMTP Share is equal to the liquidation value per share plus any outstanding unpaid dividends and applicable redemption premium. If the Fund redeems the VMTP Shares on a date that is one year or more prior to the term date and the VMTP Shares are rated above A1/A+ by Moody’s and Fitch, respectively, then such redemption is subject to a prescribed redemption premium (up to 3% of the liquidation preference) payable to the holder of the VMTP Shares based on the time remaining to the term date, subject to certain exceptions for redemptions that are required to maintain minimum asset coverage requirements. The VMTP Shares are subject to certain restrictions on transfer, and a Fund may also be required to register the VMTP Shares for sale under the Securities Act under certain circumstances. In addition, amendments to the VMTP governing document generally require the consent of the holders of VMTP Shares.

Dividends on the VMTP Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the SIFMA Municipal Swap Index. The fixed spread is determined based on the long-term preferred share rating assigned to the VMTP Shares by Moody’s and Fitch. At the date of issuance, the VMTP Shares were assigned long-term ratings of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VMTP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of July 31, 2014, the VMTP Shares were assigned a long-term rating of Aa1 and Aa2 from Moody’s under its new rating methodology. The VMTP Shares continue to be assigned a long-term rating of AAA from Fitch. The dividend rate on the VMTP Shares is subject to a step-up spread if the Fund fails to comply with certain provisions, including, among other things, the timely payment of dividends, redemptions or gross-up payments, and maintaining certain asset coverage and leverage requirements.

The average annualized dividend rates for the VMTP Shares for the year ended July 31, 2014 were as follows:

 

    

MUC

       MFT  

Rate

    1.06%           1.06%   

For financial reporting purposes, the VMTP Shares are considered debt of the issuer; therefore the liquidation value, which approximates fair value, of the VMTP Shares is recorded as a liability in the Statements of Assets and Liabilities. Unpaid dividends are included in interest expense and fees payable in the Statements of Assets and Liabilities, and the dividends accrued and paid on the VMTP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VMTP Shares are treated as equity for tax purposes. Dividends paid to holders of the VMTP Shares are generally classified as tax-exempt income for tax-reporting purposes.

VMTP Shares issued and outstanding remained constant for the year ended July 31, 2014.

Offering Costs: The Funds incurred costs in connection with the issuance of VRDP Shares and/or VMTP Shares. For VRDP Shares, these costs were recorded as a deferred charge and will be amortized over the 30-year life of the VRDP Shares with the exception of upfront fees paid to the liquidity provider which were amortized over the life of the liquidity agreement. For VMTP Shares, these costs were recorded as a deferred charge and will be amortized over the 3-year life of the VMTP Shares. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.

10. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:

Each Fund paid a net investment income dividend on September 2, 2014 to Common Shareholders of record on August 15, 2014 as follows:

 

    

Common

Dividend

Per Share

 

MUC

  $ 0.0715   

MUJ

  $ 0.0740   

MFT

  $ 0.0710   

MIY

  $ 0.0720   

MJI

  $ 0.0740   

MPA

  $ 0.0740   

Additionally, the Funds declared a net investment income dividend on September 2, 2014 payable to Common Shareholders of record on September 15, 2014 for the same amounts noted above.

The dividends declared on Preferred Shares for the period August 1, 2014 to August 31, 2014 were as follows:

 

     Preferred
Shares
       Series       

Dividends

Declared

 

MUC

    VMTP Shares           W-7         $ 226,930   

MUJ

    VRDP Shares           W-7         $ 136,693   

MFT

    VMTP Shares           W-7         $ 50,478   

MIY

    VRDP Shares           W-7         $ 303,282   

MJI

    VRDP Shares           W-7         $ 50,973   

MPA

    VRDP Shares           W-7         $ 56,419   

 

                
   ANNUAL REPORT    JULY 31, 2014    65


Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors of

BlackRock MuniHoldings California Quality Fund, Inc.,

BlackRock MuniHoldings New Jersey Quality Fund, Inc.,

BlackRock MuniYield Michigan Quality Fund, Inc., and

BlackRock MuniYield New Jersey Quality Fund, Inc.

and to the Shareholders and Board of Trustees of

BlackRock MuniYield Investment Quality Fund and

BlackRock MuniYield Pennsylvania Quality Fund:

We have audited the accompanying statements of assets and liabilities of BlackRock MuniHoldings California Quality Fund, Inc., BlackRock MuniHoldings New Jersey Quality Fund, Inc., BlackRock MuniYield Investment Quality Fund, BlackRock MuniYield Michigan Quality Fund, Inc., BlackRock MuniYield New Jersey Quality Fund, Inc., and BlackRock MuniYield Pennsylvania Quality Fund (collectively, the “Funds”), including the schedules of investments, as of July 31, 2014, and the related statements of operations and the statements of cash flows 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 periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2014, 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, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of BlackRock MuniHoldings California Quality Fund, Inc., BlackRock MuniHoldings New Jersey Quality Fund, Inc., BlackRock MuniYield Investment Quality Fund, BlackRock MuniYield Michigan Quality Fund, Inc., BlackRock MuniYield New Jersey Quality Fund, Inc., and BlackRock MuniYield Pennsylvania Quality Fund as of July 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts

September 24, 2014

 

                
66    ANNUAL REPORT    JULY 31, 2014   


Disclosure of Investment Advisory Agreements     

 

The Board of Directors or Trustees, as applicable, (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock MuniHoldings California Quality Fund, Inc. (“MUC”), BlackRock MuniHoldings New Jersey Quality Fund, Inc. (“MUJ”), BlackRock MuniYield Investment Quality Fund (“MFT”), BlackRock MuniYield Michigan Quality Fund, Inc. (“MIY”), BlackRock MuniYield New Jersey Quality Fund, Inc. (“MJI”) and BlackRock MuniYield Pennsylvania Quality Fund (“MPA” and together with MUC, MUJ, MFT, MIY and MJI, each a “Fund,” and, collectively, the “Funds”) met in person on May 9, 2014 (the “May Meeting”) and June 5-6, 2014 (the “June Meeting”) to consider the approval of each Fund’s investment advisory agreement (each, an “Advisory Agreement,” and, collectively, the “Advisory Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. At the June Meeting, it was noted that the sub-advisory agreement among the Manager, BlackRock Investment Management, LLC and each Fund would expire effective July 1, 2014. It was also noted that the non-renewal of each Fund’s sub-advisory agreement would not result in any change in the nature or quality of services provided to such Fund, or in the portfolio management team that serves such Fund. The Manager is referred to herein as “BlackRock.”

Activities and Composition of the Board

Each Board consists of eleven individuals, nine of whom are not “interested persons” of such Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of each Board is an Independent Board Member. Each Board has established six standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee, and a Leverage Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee and the Leverage Committee, each of which also has one interested Board Member).

The Advisory Agreements

Pursuant to the 1940 Act, the Boards are required to consider the continuation of the Advisory Agreements on an annual basis. The Boards have four quarterly meetings per year, each extending over two days, and a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Advisory Agreements. In connection with this process, the Boards assessed, among other things, the nature, scope and quality of the services provided to the Funds by BlackRock, its personnel and its affiliates, including, as applicable, investment management, administrative, and shareholder services; oversight of fund service providers; marketing services; risk oversight; compliance and assistance in meeting applicable legal and regulatory requirements.

The Boards, acting directly and through their respective committees, consider at each of their meetings, and from time to time as appropriate, factors that are relevant to their annual consideration of the renewal of the Advisory Agreements, including the services and support provided by BlackRock to the Funds and their shareholders. Among the matters the Boards considered were: (a) investment performance for one-year, three-year, five-year and/or since inception periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance against their peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Funds for services such as call center; (c) Fund operating expenses and how BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Funds’ investment objective, policies and restrictions, and meeting new regulatory requirements; (e) the Funds’ compliance with their Code of Ethics and other 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 and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Boards have engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. BlackRock also furnished information to the Boards in response to specific questions. These questions covered issues such as: BlackRock’s profitability; investment performance; subadvisory and advisory relationships with other clients (including mutual funds sponsored by third parties); investment professional investment in funds they manage; and management fee levels and breakpoints. The Boards further discussed with BlackRock: BlackRock’s management structure; portfolio turnover; BlackRock’s portfolio manager compensation and performance accountability; marketing support for the Funds; services provided to the Funds by BlackRock affiliates; and BlackRock’s oversight of relationships with third party service providers.

The Board of each Fund considered BlackRock’s efforts during the past year with regard to refinancing outstanding AMPS, as well as ongoing time and resources devoted to other forms of preferred shares and alternative leverage. As of the date of this report, each Fund has redeemed 100% of its outstanding AMPS.

Board Considerations in Approving the Advisory Agreements

The Approval Process: Prior to the May Meeting, the Boards requested and received materials specifically relating to the Advisory Agreements. The Boards are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist their deliberations. The materials provided in connection with the May Meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses as compared with a peer group of funds as determined by Lipper (“Expense Peers”) and the investment performance of the Funds as compared with a peer group of funds as determined by Lipper1 Funds are ranked by Lipper in quartiles, ranging from first to

1   

Funds are ranked by Lipper in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

 

                
   ANNUAL REPORT    JULY 31, 2014    67


Disclosure of Investment Advisory Agreements (continued)     

 

fourth, where first is the most desirable quartile position and fourth is the least desirable. and a customized peer group selected by BlackRock; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Advisory Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients and open-end funds, under similar investment mandates, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Fund to BlackRock and (g) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.

At the May Meeting, the Boards reviewed materials relating to their consideration of the Advisory Agreements. As a result of the discussions that occurred during the May Meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.

At the June Meeting, each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreements between the Manager and its Fund for a one-year term ending June 30, 2015. In approving the continuation of the Advisory Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Funds and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Funds; (d) the Funds’ costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance comparison as previously discussed; (e) economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Funds; and (g) other factors deemed relevant by the Board Members.

The Boards also considered other matters they deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock

The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the

Funds. Throughout the year, each Board compared its Fund’s performance to the performance of a comparable group of closed-end funds and/or the performance of a relevant benchmark, as applicable. The Boards met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team

discussing the Fund’s performance and the Fund’s investment objective, strategies and outlook.

The Boards considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and their Funds’ portfolio management teams; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to the Funds’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Boards considered the quality of the administrative and other non-investment advisory services provided to the Funds. BlackRock and its affiliates provide the Funds with certain services (in addition to any such services provided to the Funds by third parties) and officers and other personnel as are necessary for the operations of the Funds. In particular, BlackRock and its affiliates provide the Funds with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Funds; (iii) oversight of daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger or consolidation of certain closed-end funds; and (ix) performing other administrative functions necessary for the operation of the Funds, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, shareholder services, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Funds and BlackRock Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Fund. In preparation for the May Meeting, the Boards worked with their independent legal counsel, BlackRock and Lipper to develop a template for, and were provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Fund as compared to other funds in that Fund’s applicable Lipper category and the customized peer group selected by BlackRock. The Boards were provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review its methodology. Each Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of its Fund throughout the year.

 

 

 

                
68    ANNUAL REPORT    JULY 31, 2014   


Disclosure of Investment Advisory Agreements (continued)    

 

The Board of each of MUC and MIY noted that for each of the one-, three- and five-year periods reported, its respective Fund ranked in the second quartile against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MUC and MIY in that it measures a blend of total return and yield.

The Board of MJI noted that for the one-, three- and five-year periods reported, MJI ranked in the first, third and second quartiles, respectively, against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MJI in that it measures a blend of total return and yield. The Board of MJI and BlackRock reviewed and discussed the reasons for MJI’s underperformance during the three-year period and noted that they will monitor MJI’s performance.

The Board of MUJ noted that for the one-, three- and five-year periods reported, MUJ ranked in the first, third and fourth quartiles, respectively, against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MUJ in that it measures a blend of total return and yield. MUJ’s Board also noted the Fund’s improved performance during the one-year period. The Board of MUJ’s and BlackRock reviewed and discussed the reasons for the Fund’s underperformance during the three- and five-year periods. MUJ’s Board was informed that, among other things, the most significant factor impacting the Fund’s performance compared to its Customized Lipper Peer Group Composite is its below average yield. The single largest issue confronting the Fund was the dearth of New Jersey specific municipal bonds, especially diversified new issuance. In the performance periods under discussion, this prevented a more aggressive posture from being implemented, but more importantly, this inhibited the Fund from increasing its respective leverage to use to enhance the Fund’s yield. When compared to other states represented in the Customized Lipper Peer Group Composite, New Jersey has a relatively smaller amount of issuers eligible to use for leveraging.

The Board of MFT noted that for the one-, three- and five-year periods reported, MFT ranked in the fourth, third and third quartiles, respectively, against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MFT in that it measures a blend of total return and yield. The Board of MFT and BlackRock reviewed and discussed the reasons for the Fund’s underperformance during these periods. MFT’s Board was informed that, among other things, the most significant factor impacting the Fund’s performance compared to its Customized Lipper Peer Group Composite is its below average yield. Impacting performance during the one-year period was the Fund’s large leverage and duration position compared to its peers, given the rising rate environment. Holdings in health care, transportation and higher quality university bonds also contributed to poor performance.

The Board of MPA noted that for each of the one-, three- and five-year periods reported, the Fund ranked in the fourth quartile against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MPA in that it measures a blend of total return and yield. The Board of MPA and BlackRock reviewed and discussed the reasons for the Fund’s underperformance during these periods. MPA’s Board was informed that, among other things, Pennsylvania bond prices were under negative pressure in 2012. Security selection reflects a negative attribute due to the Fund’s higher quality bias during a period where investor appetite for yield drove demand for lower rated securities that resulted in tighter credit spreads. Further and significantly, during the summer and fall of 2013, the Fund sold all of its positions in Puerto Rican government-related debt as a result of the Fund management’s conviction that the Commonwealth’s challenges will only intensify. These positions were generally higher-yielding and resulted in realized losses, which impacted performance.

The Boards of MUJ, MFT and MPA BlackRock also discussed BlackRock’s strategy for improving each Fund’s performance and BlackRock’s commitment to providing the resources necessary to assist the Funds’ portfolio managers in seeking to improve the Funds’ performance.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds The Board, including the Independent Board Members, reviewed its Fund’s contractual management fee rate compared with the other funds in its Lipper category. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Fund’s total expense ratio, as well as its actual management fee rate, to those of other funds in its Lipper category. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Boards considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts.

The Boards received and reviewed statements relating to BlackRock’s financial condition. The Boards were also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Funds. The Boards reviewed BlackRock’s profitability with respect to the Funds and other funds the Boards currently oversee for the year ended December 31, 2013 compared to available aggregate profitability data provided for the prior two years. The Boards reviewed BlackRock’s profitability with respect to certain other fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Boards recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Boards considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

 

                
   ANNUAL REPORT    JULY 31, 2014    69


Disclosure of Investment Advisory Agreements (concluded)    

 

In addition, the Boards considered the cost of the services provided to the Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Funds and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s methodology in allocating its costs to the management of the Funds. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Advisory Agreements and to continue to provide the high quality of services that is expected by the Boards. The Boards further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk and liability profile in servicing the Funds in contrast to what is required of BlackRock with respect to other products with similar investment objectives across the open-end fund, ETF, closed-end fund and institutional account product channels, as applicable.

The Board of each of MUC, MIY, MJI and MPA noted that its respective Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers.

The Board of MUJ noted that MUJ’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers.

The Board of MFT noted that MFT’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers.

D. Economies of Scale Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund.

Based on the Boards’ review and consideration of the issue, the Boards concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.

E. Other Factors Deemed Relevant by the Board Members The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Funds, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Funds, including securities lending and cash management services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that it had considered the investment by BlackRock’s funds in exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Advisory Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar practices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Boards noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that their Fund’s fees and expenses are too high or if they are dissatisfied with the performance of their Fund.

The Boards also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included completion of the refinancing of auction rate preferred securities; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: continuing communications concerning the refinancing efforts related to auction rate preferred securities; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreements between the Manager and its Fund for a one-year term ending June 30, 2015. Based upon their evaluation of all of the aforementioned factors in their totality, the Boards, including the Independent Board Members, were satisfied that the terms of the Advisory Agreements were fair and reasonable and in the best interest of the Funds and their shareholders. In arriving at their decision to approve the Advisory Agreements, the Boards did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Funds reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 

                
70    ANNUAL REPORT    JULY 31, 2014   


Automatic Dividend Reinvestment Plans     

 

Pursuant to each Fund’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Fund’s shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Funds declare a dividend or determine to make a capital gain distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Funds (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Fund’s primary exchange (“open-market purchases”) . If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open market purchases. If the Reinvestment 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 Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.

Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of dividends and distributions will be paid by each Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions.

Each Fund reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan. However, each Fund reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants in MPA that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. Participants in MUC, MUJ, MFT, MIY and MJI that request a sale of shares are subject to a $0.02 per share sold brokerage commission. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A., through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 30170, College Station, TX 77842-3170, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 211 Quality Circle, Suite 210, College Station, TX 77845.

 

                
   ANNUAL REPORT    JULY 31, 2014    71


Officers and Directors     

 

Name, Address1

and Year of Birth

 

Position(s)

Held with

Funds

 

Length

of Time
Served as
a Director3

  Principal Occupation(s) During Past Five Years  

Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of

investment Portfolios
(“Portfolios”) Overseen

 

Public

Directorships

Independent Directors2               

Richard E. Cavanagh

 

1946

  Chairman of the Board and Director  

Since

2007

  Trustee, Aircraft Finance Trust from 1999 to 2009; Director, The Guardian Life Insurance Company of America since 1998; Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.  

82 RICs consisting of

82 Portfolios

  None

Karen P. Robards

 

1950

  Vice Chairperson of the Board, Chairperson of the Audit Committee and Director  

Since

2007

  Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Care Investment Trust, Inc. (health care real estate investment trust) from 2007 to 2010; Investment Banker at Morgan Stanley from 1976 to 1987.  

82 RICs consisting of

82 Portfolios

  AtriCure, Inc. (medical devices); Greenhill & Co., Inc.

Michael J. Castellano

 

1946

  Director and Member of the Audit Committee  

Since

2011

  Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) since 2009; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012.  

82 RICs consisting of

82 Portfolios

  None

Frank J. Fabozzi4

 

1948

  Director and Member of the Audit Committee  

Since

2007

  Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006.  

115 RICs consisting of

237 Portfolios

  None

Kathleen F. Feldstein

 

1941

  Director  

Since

2007

  President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. from 2005 to 2009; Member of the Corporation of Partners HealthCare since 1995; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting Committee to the Harvard University Art Museum since 2003; Director, Catholic Charities of Boston since 2009.  

82 RICs consisting of

82 Portfolios

  The McClatchy Company (publishing)

James T. Flynn

 

1939

  Director and Member of the Audit Committee  

Since

2007

  Chief Financial Officer of JPMorgan & Co., Inc. from 1990 to 1995.  

82 RICs consisting of

82 Portfolios

  None

Jerrold B. Harris

 

1942

  Director  

Since

2007

  Trustee, Ursinus College since 2000; Director, Ducks Unlimited, Inc. (conservations) since 2013; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999.  

82 RICs consisting of

82 Portfolios

  BlackRock Kelso Capital Corp. (business development company)

R. Glenn Hubbard

 

1958

  Director  

Since

2007

  Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.  

82 RICs consisting of

82 Portfolios

  ADP (data and information services); Metropolitan Life Insurance Company (insurance)

 

                
72    ANNUAL REPORT    JULY 31, 2014   


Officers and Directors (continued)     

 

Name, Address1

and Year of Birth

 

Position(s)

Held with

Funds

 

Length

of Time
Served as
a Director3

  Principal Occupation(s) During Past Five Years  

Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of

investment Portfolios
(“Portfolios”) Overseen

 

Public

Directorships

Independent Directors2 (concluded)                    

W. Carl Kester

 

1951

  Director and Member of the Audit Committee  

Since

2007

  George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008, Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit, 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981.  

82 RICs consisting of

82 Portfolios

  None
 

1   The address of each Officer and Director is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.

 

2   Independent Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 74. The maximum age limitation may be waived as to any Director by action of a majority of the Directors upon finding good cause thereof. In 2013, the Board of Directors unanimously approved extending the mandatory retirement age for James T. Flynn by one additional year, which the Board believed would be in the best interest of shareholders. Mr. Flynn can serve until December 31 of the year in which he turns 75. Mr. Flynn turns 75 in 2014.

 

3   Date shown is the earliest date a person has served for the Funds covered by this annual report. 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 Funds’ board in 2007, those Directors first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995; and Karen P. Robards, 1998.

4  Dr. Fabozzi is also a board member of the BlackRock Equity-Liquidity Complex.

Interested Directors5     

Paul L. Audet

 

1953

  Director  

Since

2011

  Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees since 2008; and Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.  

144 RICs consisting of

334 Portfolios

  None

Henry Gabbay

 

1947

  Director  

Since

2007

  Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares (formerly BlackRock Band Allocation Target Shares) from 2005 to 2007; Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.  

144 RICs consisting of

334 Portfolios.

  None
 

5   Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Funds based on his position with BlackRock and its affiliates as well as his ownership of BlackRock securities. Mr. Gabbay is an “interested person” of the Funds based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of two complexes of BlackRock registered open-end funds, the BlackRock Equity-Liquidity Complex and the BlackRock Equity-Bond Complex. Interested Directors of the BlackRock Closed-End Complex serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Director by action of a majority of the Directors upon finding good cause thereof.

 

 

                
   ANNUAL REPORT    JULY 31, 2014    73


Officers and Directors (concluded)     

 

Name, Address1
and Year of Birth
  Position(s)
Held with
Funds
  Length of
Time Served
  Principal Occupation(s) During Past Five Years
Officers2                         

John M. Perlowski

 

1964

  President and Chief Executive Officer  

Since

2011

  Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.

Brendan Kyne

 

1977

  Vice President  

Since

2009

  Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Americas Product Development for BlackRock since 2013; Head of Product Development and Management for BlackRock’s U.S. Retail Group from 2009 to 2013 and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008.

Robert W. Crothers

 

1981

  Vice President  

Since

2012

  Director of BlackRock since 2011; Vice President of BlackRock from 2008 to 2010.

Neal Andrews

 

1966

  Chief
Financial Officer
 

Since

2007

  Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay Fife

 

1970

  Treasurer  

Since

2007

  Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Charles Park

 

1967

  Chief Compliance Officer and Anti-Money Laundering Officer  

Since

2014

  Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.

Janey Ahn

 

1975

  Secretary  

Since

2012

  Director of BlackRock since 2009; Vice President of BlackRock from 2008 to 2009; Assistant Secretary of the Funds from 2008 to 2012.
 

1   The address of each Officer and Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055.

   

2   Officers of the Funds serve at the pleasure of the Board.

 

Effective June 6, 2014, Brian Kindelan resigned as Chief Compliance Officer and Anti-Money Laundering Officer of the Funds and Charles Park became Chief Compliance Officer and Anti-Money Laundering Officer of the Funds.

 

         

Investment Advisor
BlackRock Advisors, LLC

Wilmington, DE 19809

 

Custodians
State Street Bank and
Trust Company
1
Boston, MA 02110

The Bank of
New York Mellon
2
New York, NY 10286

 

VRDP Tender and Paying
Agent and VMTP Redemption
and Paying Agent

The Bank of New York Mellon
New York, NY 10289

  Accounting Agent
State Street Bank
and Trust Company
Boston, MA 02110
 

Legal Counsel
Skadden, Arps, Slate,

Meagher & Flom LLP
New York, NY 10036

 

Transfer Agent

Common Shares:
Computershare Trust
Company, N.A.
Canton, MA 02021

 

VRDP Liquidity Providers
Citibank, N.A.
3

New York, NY 10179

 

Bank of America, N.A.4
New York, NY 10036

 

Independent Registered
Public Accounting Firm

Deloitte & Touche LLP
Boston, MA 02116

 

Address of the Funds
100 Bellevue Parkway

Wilmington, DE 19809

 

VRDP Remarketing Agents
Citigroup Global Markets  Inc.
3

New York, NY 10179

 

Merrill Lynch, Pierce,
Fenner & Smith Incorporated
4

New York, NY 10036

   

1    For MPA.

2    For MUC, MUJ, MFT, MIY and MJI.

3    For MIY and MPA.

4    For MUJ and MJI.

     

 

                
74    ANNUAL REPORT    JULY 31, 2014   


Additional Information     

 

Dividend Policy

 

Each 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 Funds may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any particular month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Funds for any particular month may be more or less than the amount of net investment income earned by the Funds during such month. The Funds’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

 

General Information

 

The Funds do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.

During the period, there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

Electronic Delivery

Electronic copies of most financial reports are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Funds’ electronic delivery program.

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor to enroll. Please note that not all investment advisors, banks or brokerages may offer this service.

Householding

The Funds will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and 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 call the Funds at (800) 882-0052.

 

                
   ANNUAL REPORT    JULY 31, 2014    75


Additional Information (continued)     

 

General Information (concluded)

 

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 882-0052 and (2) on the SEC’s website at http://www.sec.gov.

Availability of Fund Updates

BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to periodically check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

Shelf Offering Program

 

From time-to-time, each Fund may seek to raise additional equity capital through an equity shelf program (a “Shelf Offering”). In a Shelf Offering, a Fund may, subject to market conditions, raise additional equity capital by issuing new Common Shares from time to time in varying amounts at a net price at or above the Fund’s net asset value (“NAV”) per Common Share (calculated within 48 hours of pricing). While any such Shelf Offering may allow a Fund to pursue additional investment opportunities without the need to sell existing portfolio investments, it could also entail risks — including that the issuance of additional Common Shares may limit the extent to which the Common Shares are able to trade at a premium to NAV in the secondary market. The Funds have not filed a registration statement with respect to any Shelf Offerings. This report is not an offer to sell Fund Common Shares and is not a solicitation of an offer to buy Fund Common Shares. If a Fund files a registration statement with respect to any Shelf Offering, the prospectus contained therein will contain more complete information about the Fund and should be read carefully before investing.

 

                
76    ANNUAL REPORT    JULY 31, 2014   


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.

 

                
   ANNUAL REPORT    JULY 31, 2014    77


Proxy Results     

 

The Annual Meeting of Shareholders was held on July 30, 2014 for shareholders of record on June 3, 2014, to elect director nominees for each Fund. There were no broker non-votes with regard to any of the Funds.

 

    Paul L. Audet     Michael J. Castellano     Richard E. Cavanagh  
    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain  

MUC

    35,313,878        1,261,791        0        35,428,251        1,147,418        0        35,517,694        1,057,975        0   

MUJ

    18,785,649        477,528        0        18,738,334        524,843        0        18,783,064        480,113        0   

MFT

    7,339,922        361,319        0        7,323,361        377,880        0        7,337,859        363,382        0   

MJI

    7,249,349        146,953        0        7,249,347        146,955        0        7,191,527        204,775        0   

MPA

    9,998,981        235,360        0        9,929,640        304,701        0        9,930,642        303,699        0   

MIY

    13,864,314        794,922        0        13,949,583        709,653        0        13,947,226        712,010        0   
    Frank J. Fabozzi¹     Kathleen F. Feldstein     James T. Flynn  
    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain  

MUC

    2,540        0        0        35,381,576        1,194,093        0        35,187,502        1,388,167        0   

MUJ

    1,727        0        0        18,655,302        607,875        0        18,742,368        520,809        0   

MFT

    565        0        0        7,314,874        386,367        0        7,336,097        365,144        0   

MJI

    644        0        0        7,244,668        151,634        0        7,249,585        146,717        0   

MPA

    663        0        0        9,786,533        447,808        0        9,829,732        404,609        0   

MIY

    1,446        0        0        13,881,954        777,281        0        13,940,623        718,612        0   
    Henry Gabbay     Jerrold B. Harris     R. Glenn Hubbard  
    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain  

MUC

    35,302,760        1,272,909        0        35,438,597        1,137,072        0        35,457,876        1,117,793        0   

MUJ

    18,750,984        512,193        0        18,707,373        555,804        0        18,696,501        566,676        0   

MFT

    7,337,859        363,382        0        7,300,453        400,788        0        7,324,722        376,519        0   

MJI

    7,249,349        146,953        0        7,249,349        146,953        0        7,191,527        204,775        0   

MPA

    9,930,425        303,916        0        9,878,156        356,185        0        9,944,440        289,901        0   

MIY

    13,874,671        784,565        0        13,942,572        716,663        0        13,723,460        935,776        0   
    W. Carl Kester¹     Karen P. Robards        
    

Votes

For

    Votes
Withheld
    Abstain    

Votes

For

    Votes
Withheld
    Abstain                    

MUC

    2,540        0        0        35,352,547        1,223,122        0         

MUJ

    1,727        0        0        18,706,671        556,506        0         

MFT

    565        0        0        7,337,783        363,458        0         

MJI

    644        0        0        7,245,140        151,162        0         

MPA

    663        0        0        9,947,624        286,717        0         

MIY

    1,446        0        0        13,891,992        767,244        0                           

 

  ¹   Voted on by holders of preferred shares only.

 

                
78    ANNUAL REPORT    JULY 31, 2014   


This report is intended for existing shareholders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in the short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

 

LOGO

 

MHMYINS6-7/14-AR   

LOGO


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, principal accounting officer or controller, 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 (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:
   Michael Castellano
   Frank J. Fabozzi
   James T. Flynn
   W. Carl Kester
   Karen P. Robards
   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. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

2


Item 4 –    Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

      (a) Audit Fees    (b) Audit-Related Fees1    (c) Tax Fees2    (d) All Other Fees3
Entity Name    Current
Fiscal Year
End
   Previous
Fiscal Year
End
   Current
Fiscal Year
End
   Previous
Fiscal Year
End
   Current
Fiscal Year
End
   Previous
Fiscal Year
End
   Current
Fiscal Year
End
   Previous
Fiscal Year
End
BlackRock MuniHoldings New Jersey Quality Fund, Inc.    $33,263    $32,563    $0    $0    $14,100    $14,100    $0    $0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

 

      Current Fiscal Year End    Previous Fiscal Year End

(b) Audit-Related Fees1

   $0    $0

(c) Tax Fees2

   $0    $0

(d) All Other Fees3

   $2,555,000    $2,865,000

1 The nature of the services includes 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 includes tax compliance, tax advice and tax planning.

3 Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

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 Investment Adviser and Fund 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 operations 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 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

 

3


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 the Committee Chairman 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 Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

 

Entity Name    Current Fiscal
Year End
   Previous Fiscal
Year End
BlackRock MuniHoldings New Jersey Quality Fund, Inc.    $14,100    $14,100

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,555,000 and $2,865,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Fund Service Providers 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.

 

Item 5 –    Audit Committee of Listed Registrants
   (a)    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)):
      Michael Castellano
      Frank J. Fabozzi
      James T. Flynn
      W. Carl Kester
      Karen P. Robards
   (b)    Not Applicable

 

4


Item 6 –    Investments
   (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
   (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous
Form N-CSR filing.
Item 7 –    Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight 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 Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.
Item 8 –    Portfolio Managers of Closed-End Management Investment Companies – as of July 31, 2014.
   (a)(1)    The registrant is managed by a team of investment professionals comprised of Michael Kalinoski, CFA, Director at BlackRock, Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, and Walter O’Connor, CFA, Managing Director at BlackRock. Each is a member of BlackRock’s municipal tax-exempt management group. Each is jointly responsible for the day-to-day management of the registrant’s portfolio, which includes setting the registrant’s overall investment strategy, overseeing the management of the registrant and/or selection of its investments. Messrs. Kalinoski, Jaeckel and O’Connor have been members of the registrant’s portfolio management team since 2011, 2006 and 2006, respectively.

 

Portfolio Manager    Biography
Michael Kalinoski, CFA    Director of BlackRock since 2006; Director of Merrill Lynch Investment Managers, L.P. (“MLIM”) from 1999 to 2006.
Theodore R. Jaeckel, Jr., CFA    Managing Director of BlackRock since 2006; Managing Director of MLIM from 2005 to 2006; Director of MLIM from 1997 to 2005.

 

5


Walter O’Connor, CFA    Managing Director of BlackRock since 2006; Managing Director of MLIM from 2003 to 2006; Director of MLIM from 1998 to 2003.

(a)(2) As of July 31, 2014:

 

     

(ii) Number of Other Accounts Managed

and Assets by Account Type

  

(iii) Number of Other Accounts and

Assets for Which Advisory Fee is

Performance-Based

(i) Name of

Portfolio Manager

  

Other

Registered

Investment

Companies

  

Other

Pooled

Investment

Vehicles

  

Other

Accounts

  

Other

Registered

Investment

Companies

  

Other Pooled

Investment

Vehicles

  

Other

Accounts

Theodore R. Jaeckel, Jr., CFA

   64    0    0    0    0    0
     $25.98 Billion    $0    $0    $0    $0    $0

Michael Kalinoski, CFA

   12    0    0    0    0    0
     $7.73 Billion    $0    $0    $0    $0    $0

Walter O’Connor, CFA

   64    0    0    0    0    0
     $25.98 Billion    $0    $0    $0    $0    $0

 

  (iv) Portfolio Manager Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, 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, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that a portfolio manager may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Such portfolio managers may therefore be entitled to receive a portion of any incentive fees earned on such accounts. Currently, the portfolio managers of this fund are not entitled to receive a portion of incentive fees of other accounts.

 

6


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, Inc. has adopted policies that are intended to ensure 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, as appropriate.

(a)(3) As of July 31, 2014:

Portfolio Manager Compensation Overview

The discussion below describes the portfolio managers’ compensation as of July 31, 2014.

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.

Base compensation. Generally, portfolio managers receive base compensation based on their position with the firm.

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 performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Funds and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are: a combination of market-based indices (e.g., Standard & Poor’s Municipal Bond Index), certain customized indices and certain fund industry peer groups.

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. For some portfolio managers,

 

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discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of discretionary incentive compensation in BlackRock, Inc. 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. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.

Long-Term Incentive Plan Awards — From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance. Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. Messrs. Jaeckel and O’Connor have unvested long-term incentive awards.

Deferred Compensation Program — A portion of the compensation paid to eligible United States-based BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firm’s investment products. Any portfolio manager who is either a managing director or director at BlackRock with compensation above a specified threshold is eligible to participate in the deferred compensation program.

Other Compensation Benefits. In addition to base salary 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, Inc. 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 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($260,000 for 2014). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. 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 of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.

 

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(a)(4) Beneficial Ownership of Securities – As of July 31, 2014.

 

Portfolio Manager   

Dollar Range of Equity Securities

of the Fund Beneficially Owned

Michael Kalinoski

   None

Theodore R. Jaeckel, Jr.

   None

 

     (b) Not Applicable
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 – There have been no material changes to these procedures.
Item 11 –    Controls and Procedures
   (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.
   (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
   (a)(1) – Code of Ethics – See Item 2
   (a)(2) – Certifications – Attached hereto
   (a)(3) – Not Applicable
   (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.

 

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BlackRock MuniHoldings New Jersey Quality Fund, Inc.

 

By:

 

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock MuniHoldings New Jersey Quality Fund, Inc.
Date:   October 1, 2014

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/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock MuniHoldings New Jersey Quality Fund, Inc.
Date:   October 1, 2014
By:  

/s/ Neal J. Andrews

  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of
  BlackRock MuniHoldings New Jersey Quality Fund, Inc.
Date:   October 1, 2014

 

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