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: 07/31/2016

Date of reporting period: 01/31/2016


Item 1 – Report to Stockholders


JANUARY 31, 2016

 

 

SEMI-ANNUAL REPORT (UNAUDITED)

 

    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 Pennsylvania Quality Fund (MPA)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents     

 

     Page  

The Markets in Review

    3   

Semi-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

    16   

Statements of Assets and Liabilities

    41   

Statements of Operations

    42   

Statements of Changes in Net Assets

    43   

Statements of Cash Flows

    45   

Financial Highlights

    46   

Notes to Financial Statements

    51   

Officers and Directors

    64   

Additional Information

    65   

 

                
2    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


The Markets in Review

 

Dear Shareholder,

Diverging monetary policies and shifting economic outlooks across regions have been the overarching themes driving financial markets over the past couple of years. With U.S. growth outpacing the global economic recovery while inflationary pressures remained low, investors spent most of 2015 anticipating a short-term rate hike from the Federal Reserve (“Fed”), which ultimately came to fruition in December. In contrast, the European Central Bank and the Bank of Japan moved to a more accommodative stance over the year. In this environment, the U.S. dollar strengthened considerably, causing profit challenges for U.S. exporters and high levels of volatility in emerging market currencies and commodities.

Market volatility broadly increased in the latter part of 2015 and continued into 2016 given a collapse in oil prices and decelerating growth in China, while global growth and inflation failed to pick up. Oil prices were driven lower due to excess supply while the world’s largest oil producers had yet to negotiate a deal that would stabilize oil prices. In China, slower economic growth combined with a depreciating yuan and declining confidence in the country’s policymakers stoked worries about the potential impact to the broader global economy. After a long period in which global central bank policies had significant influence on investor sentiment and hence the direction of financial markets, in recent months, the underperformance of markets in Europe and Japan — where central banks had taken aggressive measures to stimulate growth and stabilize their currencies — highlighted the possibility that central banks could be losing their effectiveness.

In this environment, higher quality assets such as municipal bonds, U.S. Treasuries and investment grade corporate bonds outperformed risk assets including equities and high yield bonds. Large cap U.S. equities fared better than international developed and emerging markets.

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 markets.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of January 31, 2016  
    6-month     12-month  

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

    (6.77 )%      (0.67 )% 

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

    (15.80     (9.92

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

    (14.58     (8.43

Emerging market equities
(MSCI Emerging Markets
Index)

    (16.96     (20.91

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

Bill Index)

    0.05        0.05   

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

    3.36        (0.41

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

    1.33        (0.16

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

    3.67        2.66   

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

    (7.75     (6.58
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 January 31, 2016      

Municipal Market Conditions

Municipal bonds generated positive performance for the period, due to a favorable supply-and-demand environment. Interest rates were volatile in 2015 (bond prices rise as rates fall) leading up to a long-awaited rate hike from the U.S. Federal Reserve (the “Fed”) that ultimately came in December. However, ongoing reassurance from the Fed that rates would be increased gradually and would likely remain low overall resulted in strong demand for fixed income investments, with municipal bonds being one of the strongest-performing sectors. Investors favored the relative stability of municipal bonds amid bouts of volatility resulting from uneven U.S. economic data, falling oil prices, global growth concerns, geopolitical risks, and widening central bank divergence — i.e., policy easing outside the United States while the Fed was posturing to commence policy tightening. During the 12 months ended January 31, 2016, municipal bond funds garnered net inflows of approximately $16 billion (based on data from the Investment Company Institute).

For the same 12-month period, total new issuance remained relatively strong from a historical perspective at $392 billion (considerably higher than the $349 billion issued in the prior 12-month period). A noteworthy portion of new supply during this period was attributable to refinancing activity (roughly 60%) as issuers took advantage of low interest rates and a flatter yield curve to reduce their borrowing costs.

S&P Municipal Bond Index

Total Returns as of January 31, 2016

  6 months:   3.67%

12 months:   2.66%

A Closer Look at Yields

 

LOGO

From January 31, 2015 to January 31, 2016, yields on AAA-rated 30-year municipal bonds increased by 25 basis points (“bps”) from 2.50% to 2.75%, while 10-year rates fell by 1 bp from 1.72% to 1.71% and 5-year rates increased 6 bps from 0.94% to 1.00% (as measured by Thomson Municipal Market Data). The slope of the municipal yield curve remained unchanged over the 12-month period with the spread between 2- and 30-year

maturities holding steady at 209 bps as the spread between 2- and 10-year maturities flattened by 26 bps and the spread between 10- and 30-year maturities steepened by 26 bps.

During the same time period, U.S. Treasury rates increased by 50 bps on 30-year bonds, 25 bps on 10-year bonds and 14 bps on 5-year bonds. Accordingly, tax-exempt municipal bonds outperformed Treasuries, most notably in the intermediate and long-end of the curve as a result of manageable supply and robust demand. In absolute terms, the positive performance of municipal bonds was driven largely by a supply/demand imbalance within the municipal market as investors sought income and incremental yield in an environment where opportunities had become scarce. More broadly, municipal bonds benefited from the greater appeal of tax-exempt investing in light of the higher tax rates implemented in 2014. The asset class is known for its lower relative volatility and preservation of principal with an emphasis on income as tax rates rise.

Financial Conditions of Municipal Issuers

The majority of municipal credits remain strong, despite well-publicized distress among a few issuers. Four of the five states with the largest amount of debt outstanding — California, New York, Texas and Florida — have exhibited markedly improved credit fundamentals during the slow national recovery. However, several states with the largest unfunded pension liabilities have seen their bond prices decline noticeably and remain vulnerable to additional price deterioration. On the local level, Chicago’s credit quality downgrade is an outlier relative to other cities due to its larger pension liability and inadequate funding remedies. BlackRock maintains the view that municipal bond defaults will remain minimal and in the periphery while the overall market is fundamentally sound. We continue to advocate careful credit research and believe that a thoughtful approach to structure and security selection remains imperative amid uncertainty in a modestly improving economic environment.

The opinions expressed are those of BlackRock as of January 31, 2016, and are subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of any individual holdings or market sectors. Investing involves risk including loss of principal. Bond values fluctuate in price so the value of your investment can go down depending on market conditions. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

The Standard & Poor’s Municipal Bond Index, a broad, market value-weighted index, seeks to measure the performance of the US municipal bond market. All bonds in the index are exempt from US federal income taxes or subject to the alternative minimum tax. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index.

 

                
4    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


The Benefits and Risks of Leveraging     

 

The Funds may utilize leverage to seek to enhance the distribution rate on, 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 is based on short-term interest rates, is normally 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 Funds (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Funds’ shareholders 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, a 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 a Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Fund’s financing cost of leverage is significantly lower than the income earned on a 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 Funds’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage. Furthermore, the value of the Funds’ 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 Funds’ obligations under their respective leverage arrangements generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Funds’ 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 generally causes 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 NAV and market price of a Fund’s Common Shares than if the Funds were not leveraged. In addition, the Funds 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 Funds to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. The Funds 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. Moreover, to the extent the calculation of the Funds’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Funds’ investment advisor will be higher than if the Funds did not use leverage.

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

Under the Investment Company Act of 1940, as amended (the “1940 Act”), each Fund is permitted to issue debt up to 331/3% of its total managed assets or equity securities (e.g., VRDP 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 VRDP Shares’ governing instruments or by agencies rating the VRDP 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 a Fund’s obligations under the TOB Trust (including accrued interest), a TOB Trust is not considered a senior security and is not subject to the foregoing limitations and requirements under the 1940 Act.

 

 

Derivative Financial Instruments     

 

The Funds may invest in various derivative financial instruments. 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 manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage. Derivative financial instruments also 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 limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.

 

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    5


Fund Summary as of January 31, 2016    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.

 

Fund Information      

Symbol on New York Stock Exchange (“NYSE”)

   MUC

Initial Offering Date

   February 27, 1998

Yield on Closing Market Price as of January 31, 2016 ($15.05)1

     5.38%

Tax Equivalent Yield2

   10.96%

Current Monthly Distribution per Common Share3

   $0.0675

Current Annualized Distribution per Common Share3

   $0.8100

Economic Leverage as of January 31, 20164

   39%

 

  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 TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOB Trusts, 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.

 

Performance      

Returns for the six months ended January 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

MUC1,2

    8.33     5.07

Lipper California Municipal Debt Funds3

    10.81     5.97

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

The following discussion relates to the Fund’s absolute performance based on NAV:

 

 

Municipal bonds performed well during the six-month period, as the combination of falling U.S. Treasury yields and improving municipal finances created healthy buying interest in the asset class. (Prices rise as yields fall). Municipals also benefited from a general “flight to quality” caused by the elevated volatility in the higher-risk segments of the financial markets.

 

 

California municipal bonds outperformed the national tax-exempt market, reflecting the improvement in state finances that resulted from the combination of austerity measures and steady revenues from a diversified economy. In addition, the market benefited from the robust demand for tax-exempt investments in a state with a high income tax.

 

 

The Fund’s positions in longer-term bonds made a strong contribution to performance at a time in which yields fell. Its investments in AA-rated credits in the school district, transportation and health care sectors also aided performance. AA-rated bonds generally experienced rising valuations as a result of California’s improving credit profile. On a sector basis, investments in health care and utilities made the largest contributions to performance.

 

 

Using TOB Trusts, the Fund continued to employ leverage in order to increase income at a time in which the municipal yield curve was steep and short-term interest rates remained low. Leverage amplifies the effect of interest rate movements, which was a positive for Fund performance during the past six months given that yields declined.

 

 

The Fund utilized ten-year U.S. Treasury futures contracts to manage exposure to a rise in interest rates, which had a slightly negative impact on performance given that the Treasury market finished with positive returns.

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.

 

                
6    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


     BlackRock MuniHoldings California Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                        
           
      1/31/16      7/31/15      Change      High      Low  

Market Price

   $ 15.05       $ 14.28         5.39    $ 15.09       $ 14.02   

Net Asset Value

   $ 16.13       $ 15.78         2.22    $ 16.18       $ 15.60   

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*      
Sector Allocation    1/31/16     7/31/15  

County/City/Special District/School District

     40     40

Utilities

     20        24   

Health

     14        12   

Transportation

     13        12   

State

     6        6   

Education

     5        6   

Corporate

     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    1/31/16     7/31/15  

AAA/Aaa

     17     15

AA/Aa

     70        75   

A

     12        10   

N/R

     1          

 

  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,

  

2016

     7

2017

     10   

2018

     12   

2019

     15   

2020

     5   

 

  2   

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

 

  *   Excludes short-term securities.
 

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    7


Fund Summary as of January 31, 2016    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.

On December 5, 2014, the Boards of the Fund and BlackRock MuniYield New Jersey Quality Fund, Inc. (“MJI”) approved the reorganization of MJI with and into the Fund, with the Fund continuing as the surviving fund after the reorganization. At a special shareholder meeting on March 12, 2015, the requisite shareholders of the Fund and MJI approved the reorganization, which was effective on April 13, 2015.

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

 

Fund Information      

Symbol on NYSE

   MUJ

Initial Offering Date

   March 11, 1998

Yield on Closing Market Price as of January 31, 2016 ($14.49)1

     6.13%

Tax Equivalent Yield2

   11.90%

Current Monthly Distribution per Common Share3

   $0.074

Current Annualized Distribution per Common Share3

   $0.888

Economic Leverage as of January 31, 20164

   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 monthly distribution per Common Share, declared on March 1, 2016, was decreased to $0.071 per share. The yield on closing market price, current monthly distribution per Common Share and current annualized distribution per Common Share do not reflect the new distribution rate. The new distribution rate is not constant and is subject to change in the future.

 

  4   

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOB Trusts, 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.

 

Performance      

Returns for the six months ended January 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

MUJ1,2

    10.42     6.56

Lipper New Jersey Municipal Debt Funds3

    5.99     6.08

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

The following discussion relates to the Fund’s absolute performance based on NAV:

 

 

Municipal bonds performed well during the six-month period, as the combination of falling U.S. Treasury yields and improving municipal finances created healthy buying interest in the asset class. (Prices rise as yields fall). Municipals also benefited from a general “flight to quality” caused by the elevated volatility in the higher-risk segments of the financial markets.

 

 

New Jersey municipal bonds outperformed the national tax-exempt market during the period. The slump in the state’s bond market during the first half of 2015 led to a significant widening of yield spreads (the extra yield received when compared to U.S. government securities). Higher yields attracted buying interest in the state during the past six months, which helped boost prices at a time of dwindling supply.

 

 

The largest positive contribution to performance came from the Fund’s duration exposure, as municipal yields fell significantly during the reporting period. (Duration is a measure of interest-rate sensitivity). Income in the form of coupon payments made up a meaningful portion of the Fund’s total return. Performance also benefited from the Fund’s investments in the health care sector.

 

 

Using TOB Trusts, the Fund continued to employ leverage in order to increase income at a time in which the municipal yield curve was steep and short-term interest rates remained low. Leverage amplifies the effect of interest rate movements, which was a positive for Fund performance during the past six months given that yields declined.

 

 

The Fund’s use of U.S. Treasury futures contracts to manage interest rate risk had a slightly negative impact on performance at a time in which yields fell.

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.

 

                
8    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


     BlackRock MuniHoldings New Jersey Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary      

 

      1/31/16      7/31/15      Change      High      Low  

Market Price

   $ 14.49       $ 13.55         6.94    $ 14.63       $ 13.17   

Net Asset Value

   $ 16.12       $ 15.62         3.20    $ 16.14       $ 15.35   

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*      
Sector Allocation    1/31/16     7/31/15  

Transportation

     23     22

Education

     22        22   

State

     20        21   

County/City/Special District/School District

     15        15   

Health

     11        11   

Housing

     4        4   

Utilities

     3        3   

Corporate

     2        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.

   
Call/Maturity Schedule3        

Calendar Year Ended December 31,

  

2016

     6

2017

     7   

2018

     9   

2019

     4   

2020

     9   

 

  3   

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

 

  *   Excludes short-term securities.
Credit Quality Allocation1   1/31/16     7/31/15  

AAA/Aaa

    2      8

AA/Aa

    55     50   

A

    37        35   

BBB/Baa

      8        7   

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or 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   

Represents less than 1% of the Fund’s total investments.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    9

 


Fund Summary as of January 31, 2016    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.

 

Fund Information      

Symbol on NYSE

   MFT

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of January 31, 2016 ($14.41)1

     5.91%

Tax Equivalent Yield2

   10.44%

Current Monthly Distribution per Common Share3

   $0.071

Current Annualized Distribution per Common Share3

   $0.852

Economic Leverage as of January 31, 20164

   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 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 TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOB Trusts, 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.

 

Performance      

Returns for the six months ended January 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

MFT1,2

    11.13     5.53

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    9.89     5.99

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

The following discussion relates to the Fund’s absolute performance based on NAV:

 

 

Municipal bonds performed well during the six-month period, as the combination of falling U.S. Treasury yields and improving municipal finances created healthy buying interest in the asset class. (Prices rise as yields fall). Municipals also benefited from a general “flight to quality” caused by the elevated volatility in the higher-risk segments of the financial markets.

 

 

The Fund’s overweight position in A-rated bonds, which outperformed higher-rated issues amid investors’ continued search for yield, made a positive contribution to performance. Holdings in longer-dated, A-rated bonds in the transportation and health care sectors made particularly strong contributions. The Fund’s positions in long-term bonds, which outpaced their short-term counterparts, aided performance. Income generated in the form of coupon payments also made a meaningful contribution to the Fund’s total return.

 

 

Using TOB Trusts, the Fund continued to employ leverage in order to increase income. Leverage amplifies the effect of interest rate movements, which was a positive for Fund performance during the past six months given that yields declined.

 

 

The Fund’s positions in shorter-dated holdings, such as pre-refunded issues and bonds with very short call dates, detracted from performance.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
10    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


     BlackRock MuniYield Investment Quality Fund

 

 

Market Price and Net Asset Value Per Share Summary      

 

      1/31/16    7/31/15      Change      High      Low  

Market Price

   $14.41    $ 13.37         7.78%       $ 14.41       $ 13.08   

Net Asset Value

   $15.31    $ 14.95         2.41%       $ 15.35       $ 14.77   

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*      
Sector Allocation   1/31/16      7/31/15  

Transportation

    40      37

Utilities

    19         19   

County/City/Special District/School District

    15         18   

Health

    10         11   

State

    9         9   

Education

    3         2   

Housing

    2         2   

Tobacco

    1           

Corporate

    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   1/31/16     7/31/15  

AAA/Aaa

    6     7

AA/Aa

    60        61   

A

    29        26   

BBB/Baa

    5        6   

 

  1  

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or 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,

  

2016

     1

2017

     1   

2018

     11   

2019

     26   

2020

     5   

 

  2   

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    11


Fund Summary as of January 31, 2016    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.

On April 30, 2015, the Boards of the Fund and BlackRock MuniYield Michigan Quality Fund II, Inc. (“MYM”) approved the reorganization of MYM with and into the Fund, with the Fund continuing as the surviving fund after the reorganization. At a special shareholder meeting on August 6, 2015, the requisite shareholders of the Fund and MYM approved the reorganization, which was effective on September 14, 2015.

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

 

Fund Information      

Symbol on NYSE

   MIY

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of January 31, 2016 ($14.20)1

     5.83%

Tax Equivalent Yield2

   10.76%

Current Monthly Distribution per Common Share3

   $0.069

Current Annualized Distribution per Common Share3

   $0.828

Economic Leverage as of January 31, 20164

   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 TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOB Trusts, 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.

 

Performance      

Returns for the six months ended January 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

MIY1,2

    10.81     5.83

Lipper Other States Municipal Debt Funds3

    7.55     5.60

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

The following discussion relates to the Fund’s absolute performance based on NAV:

 

 

Municipal bonds performed well during the six-month period, as the combination of falling U.S. Treasury yields and improving municipal finances created healthy buying interest in the asset class. (Prices rise as yields fall). Municipals also benefited from a general “flight to quality” caused by the elevated volatility in the higher-risk segments of the financial markets. Michigan municipal bonds slightly outperformed the national tax-exempt market. Michigan’s market has been under stress in recent years due to the difficulties in Detroit. However, the state’s tax-exempt market strengthened during the past six months, reflecting lower new issuance and signs of improved fiscal stability.

 

 

The largest positive contribution to performance came from the Fund’s duration exposure, as municipal yields fell significantly during the reporting period. (Duration is a measure of interest-rate sensitivity). Income in the form of coupon payments made up a meaningful portion of the Fund’s total return. Performance also benefited from the Fund’s investments in the education sector.

 

 

Using TOB Trusts, the Fund continued to employ leverage in order to increase income at a time in which the municipal yield curve was steep and short-term interest rates remained low. Leverage amplifies the effect of interest rate movements, which was a positive for Fund performance during the past six months given that yields declined.

 

 

The Fund’s use of U.S. Treasury futures contracts to manage interest rate risk had a slightly negative impact on performance at a time in which yields fell.

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.

 

                
12    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


     BlackRock MuniYield Michigan Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                      
           
      1/31/16    7/31/15      Change      High      Low  

Market Price

   $14.20    $ 13.22         7.41%       $ 14.22       $ 12.95   

Net Asset Value

   $15.89    $ 15.48         2.65%       $ 15.93       $ 15.26   

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*      
Sector Allocation    1/31/16     7/31/15  

Health

     26     21

Education

     24        22   

County/City/Special District/School District

     16        16   

State

     10        14   

Utilities

     10        10   

Transportation

     7        9   

Housing

     4        5   

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   1/31/16     7/31/15  

AAA/Aaa

    3     1

AA/Aa

    68        73   

A

    26        23   

BBB/Baa

    2        2   

N/R

    1        1   

 

  1  

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or 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,

  

2016

     5

2017

     7   

2018

     12   

2019

     6   

2020

     5   

 

  2   

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    13


Fund Summary as of January 31, 2016    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.

 

Fund Information      

Symbol on NYSE

   MPA

Initial Offering Date

   October 30, 1992

Yield on Closing Market Price as of January 31, 2016 ($15.02)1

     5.71%

Tax Equivalent Yield2

   10.41%

Current Monthly Distribution per Common Share3

   $0.0715

Current Annualized Distribution per Common Share3

   $0.8580

Economic Leverage as of January 31, 20164

   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 monthly distribution per Common Share, declared on March 1, 2016, was decreased to $0.0683 per share. The yield on closing market price, current monthly distribution per Common Share and current annualized distribution per Common Share do not reflect the new distribution rate. The new distribution rate is not constant and is subject to change in the future.

 

  4   

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOB Trusts, 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.

 

Performance      

Returns for the six months ended January 31, 2016 were as follows:

 

    Returns Based On  
     Market Price     NAV  

MPA1,2

    14.66     6.00

Lipper Pennsylvania Municipal Debt Funds3

    11.39     5.41

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

The following discussion relates to the Fund’s absolute performance based on NAV:

 

 

Municipal bonds performed well during the six-month period, as the combination of falling U.S. Treasury yields and improving municipal finances created healthy buying interest in the asset class. (Prices rise as yields fall). Municipals also benefited from a general “flight to quality” caused by the elevated volatility in the higher-risk segments of the financial markets. Pennsylvania municipal bonds underperformed the national tax-exempt market, reflecting the ongoing political impasse regarding the state’s budget for the 2015-2016 fiscal year.

 

 

The Fund’s positions in longer-term bonds made a strong contribution to performance at a time in which yields fell. On a sector basis, the most significant contribution came from the Fund’s positions in health care and transportation issues. The Fund’s exposure to zero-coupon bonds, which outperformed current-coupon bonds, also benefited returns.

 

 

Using TOB Trusts, the Fund continued to employ leverage in order to increase income at a time in which the municipal yield curve was steep and short-term interest rates remained low. Leverage amplifies the effect of interest rate movements, which was a positive for Fund performance during the past six months given that yields declined.

 

 

The Fund’s use of U.S. Treasury futures contracts to manage interest rate risk had a slightly negative impact on performance at a time in which yields fell.

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.

 

                
14    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


     BlackRock MuniYield Pennsylvania Quality Fund

 

 

Market Price and Net Asset Value Per Share Summary      

 

      1/31/16    7/31/15      Change      High      Low  

Market Price

   $15.02    $ 13.50         11.26%       $ 15.61       $ 13.33   

Net Asset Value

   $16.22    $ 15.77         2.85%       $ 16.28       $ 15.58   

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*      
Sector Allocation    1/31/16     7/31/15  

Health

     22     20

County/City/Special District/School District

     21        19   

Education

     17        15   

State

     12        14   

Transportation

     9        12   

Corporate

     8        8   

Housing

     6        5   

Utilities

     5        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   1/31/16     7/31/15  

AAA/Aaa

    1     1

AA/Aa

    64        65   

A

    22        23   

BBB/Baa

    9        9   

BB

    1          

N/R2

    3        2   

 

  1   

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P or 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 January 31, 2016 and July 31, 2015, the market value of unrated securities deemed by the investment advisor to be investment grade each represents 1%, respectively, of the Fund’s total investments.

 

   
Call/Maturity Schedule3        

Calendar Year Ended December 31,

  

2016

     5

2017

     5   

2018

     11   

2019

     12   

2020

     7   

 

  3  

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    15


Schedule of Investments January 31, 2016 (Unaudited)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

California — 105.6%

                

Corporate — 3.4%

    

California Pollution Control Financing Authority, Refunding RB, Waste Management, Inc., AMT:

    

Series A-1, 3.38%, 7/01/25

   $ 5,000      $ 5,340,900   

Series B-1, 3.00%, 11/01/25

     14,000        14,510,020   

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

     2,435        2,816,443   
    

 

 

 
        22,667,363   

County/City/Special District/School District — 32.5%

  

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

     9,120        11,060,098   

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

     3,500        4,002,810   

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

     2,500        2,783,125   

County of Riverside California Public Financing Authority, RB, Capital Facility Project, 5.25%, 11/01/45

     10,000        11,825,300   

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

     2,665        3,248,235   

County of Ventura California Community College District, GO, Election of 2002, Series C, 5.50%, 8/01/18 (a)

     4,000        4,471,040   

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

     3,750        3,765,975   

Fremont Union High School District, GO, Refunding, 4.00%, 8/01/40

     2,500        2,674,825   

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

     5,500        6,451,170   

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

    

5.50%, 8/01/31

     2,170        2,566,871   

5.75%, 8/01/35

     8,400        10,021,200   

Grossmont California Healthcare District, GO, Election of 2006, Series B, 6.13%, 7/15/21 (a)

     2,000        2,536,780   

Imperial Irrigation District, Series A, Electric System Revenue:

    

5.13%, 11/01/18 (a)

     6,530        7,292,965   

5.13%, 11/01/38

     1,470        1,628,216   

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

    

5.25%, 11/01/32

     5,715        6,901,605   

5.75%, 11/01/34

     12,085        15,051,626   

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

     3,700        4,350,867   

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

     11,000        12,662,210   
Municipal Bonds    Par  
(000)
    Value  

California (continued)

                

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

  

Merced Union High School District, GO, CAB, Refunding (AGM) (b):

    

0.00%, 8/01/40

   $ 3,800      $ 1,205,512   

0.00%, 8/01/42

     4,125        1,164,529   

Mount San Jacinto Community College District, GO, Series A, 5.00%, 8/01/35

     3,565        4,274,827   

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

     10,000        11,347,600   

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

     5,000        5,501,550   

Rio Elementary School District, GO, Series A, 5.25%, 8/01/40

     5,865        6,954,658   

Riverside Community College District Foundation, GO, Election of 2004 (a):

    

Series C (AGM), 5.00%, 8/01/17

     8,750        9,341,588   

Series C (NPFGC), 5.00%, 8/01/17

     8,910        9,512,405   

San Bernardino Community College District, GO, Election of 2002, Series C (AGM), 5.00%, 8/01/16 (a)

     10,750        11,003,163   

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

     905        1,022,741   

San Diego Unified School District, GO, CAB, Series C (b):

    

Election of 2008, 0.00%, 7/01/42

     3,605        1,256,198   

Election of 2008, 0.00%, 7/01/43

     1,310        437,448   

Election of 2008, 0.00%, 7/01/45

     1,575        486,911   

0.00%, 7/01/47

     1,000        284,910   

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

    

5.75%, 5/01/36

     2,560        2,595,072   

5.75%, 5/01/42

     4,500        5,350,140   

San Jose California Financing Authority, Refunding LRB, Civic Center Project, Series A, 5.00%, 6/01/39

     5,800        6,686,704   

San Marcos Redevelopment Agency Successor Agency, Refunding, Tax Allocation Bonds, Series A:

    

5.00%, 10/01/32

     1,700        2,037,229   

5.00%, 10/01/33

     1,125        1,344,983   

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

     5,635        6,464,359   

West Contra Costa California Unified School District, GO:

    

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

     5,390        6,389,252   

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

     3,195        3,823,073   

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

     2,500        2,991,450   
    

 

 

 
        214,771,220   
 

 

Portfolio Abbreviations      

 

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

 

See Notes to Financial Statements.

 

                
16    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

 

Municipal Bonds    Par  
(000)
    Value  

California (continued)

                

Education — 1.9%

    

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

   $ 2,750      $ 3,293,455   

University of California, RB, Series D (AGM), 5.00%, 5/15/16 (a)

     2,500        2,560,425   

University of California, Refunding RB, Series AO, 5.00%, 5/15/40

     5,430        6,391,708   
    

 

 

 
        12,245,588   

Health — 15.6%

    

ABAG Finance Authority for Nonprofit Corps., Refunding RB, Sharp Healthcare, Series B, 6.25%, 8/01/39

     6,305        7,347,532   

California Health Facilities Financing Authority, RB:

    

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

     8,000        9,112,400   

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

     7,275        7,319,014   

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

     4,130        4,719,599   

Sutter Health, Series A, 5.00%, 11/15/41 (c)

     2,275        2,656,085   

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

     7,500        7,755,825   

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

     9,655        11,646,344   

California Health Facilities Financing Authority, Refunding RB, Series A:

    

Dignity Health, 6.00%, 7/01/34

     3,700        4,270,762   

Providence Health and Services, 5.00%, 10/01/38

     10,970        12,743,081   

St. Joseph Health System, 5.00%, 7/01/37

     10,000        11,588,400   

California Statewide Communities Development Authority, RB, Kaiser Permanente, Series B, 5.25%, 3/01/45

     12,505        12,552,894   

California Statewide Communities Development Authority, Refunding RB:

    

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

     2,500        2,552,675   

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

     6,235        7,004,648   

Township of Washington California Health Care District, GO, Election of 2004, Series B, 5.50%, 8/01/38

     1,625        1,971,466   
    

 

 

 
        103,240,725   

State — 9.7%

    

State of California, GO:

    

Various Purposes, 6.00%, 3/01/33

     5,000        5,990,200   

Various Purposes, 6.00%, 4/01/38

     27,765        32,050,805   

Refunding, Veterans Bond, 4.00%, 12/01/40

     4,000        4,266,760   

State of California Public Works Board, LRB:

    

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

     3,670        4,327,150   

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

     2,015        2,496,384   

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

     1,205        1,491,320   

University of California, RB, Limited Project, Series D (NPFGC), 5.00%, 5/15/16 (a)

     13,000        13,314,210   
    

 

 

 
        63,936,829   

Transportation — 20.9%

    

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

     9,650        11,164,857   

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

    

2nd Series 34E (AGM), 5.75%, 5/01/22

     4,950        5,495,836   

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

     5,000        5,551,350   

2nd Series A, 5.00%, 5/01/29

     6,435        7,455,334   
Municipal Bonds    Par  
(000)
    Value  

California (continued)

                

Transportation (continued)

    

City of Los Angeles California Department of Airports, ARB:

    

AMT, Senior Series A, 5.00%, 5/15/40

   $ 3,830      $ 4,383,626   

AMT, Series D, 5.00%, 5/15/35

     2,000        2,329,320   

AMT, Series D, 5.00%, 5/15/36

     1,500        1,741,695   

Los Angeles International Airport, Senior Series D, 5.25%, 5/15/29

     2,590        3,038,588   

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

    

Senior, 5.00%, 5/15/40

     5,000        5,672,550   

5.25%, 5/15/39

     5,845        6,577,729   

City of San Jose California, ARB, AMT, Series A (AMBAC), 5.00%, 3/01/37

     8,000        8,323,280   

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

    

5.25%, 3/01/23

     3,785        4,433,787   

6.25%, 3/01/34

     1,400        1,685,376   

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

     6,345        6,788,706   

County of Sacramento California, ARB:

    

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

     8,200        9,034,104   

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

     2,650        2,933,311   

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

     13,275        14,665,689   

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

     18,000        19,548,000   

Senior Series B, AMT (AGM), 5.25%, 7/01/39

     4,995        5,396,049   

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

     4,545        5,407,459   

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

     5,530        6,273,177   

Port of Los Angeles California Harbor Department, Refunding RB, Series A, AMT, 5.00%, 8/01/44

     500        564,570   
    

 

 

 
        138,464,393   

Utilities — 21.6%

    

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

     2,200        2,589,400   

City of Los Angeles California Department of Water & Power, RB:

    

Series A, 5.38%, 7/01/38

     9,375        10,492,687   

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

     5,000        5,100,200   

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

     16,000        18,482,720   

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

     2,000        2,328,580   

City of San Francisco California Public Utilities Commission Water Revenue, RB:

    

Series A, 5.00%, 11/01/39

     5,245        6,156,529   

Series B, 5.00%, 11/01/30

     10,000        11,405,000   

County of Sacramento California Sanitation Districts Financing Authority, RB (NPFGC), 5.00%, 12/01/36

     1,010        1,025,665   

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

     4,000        4,776,920   

East Bay California Municipal Utility District Wastewater System Revenue, Refunding RB, Sub-Series A (AMBAC), 5.00%, 6/01/17 (a)

     17,015        18,046,790   

East Bay California Municipal Utility District Water System Revenue, Refunding RB (a):

    

Series A (NPFGC), 5.00%, 6/01/17

     6,670        7,072,468   

Sub-Series A (AGM), 5.00%, 6/01/17

     10,000        10,603,400   

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

     2,505        2,738,190   
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    17


Schedule of Investments (continued)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

 

Municipal Bonds    Par  
(000)
    Value  

California (continued)

                

Utilities (continued)

    

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

   $ 10,000      $ 11,841,600   

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

    

5.25%, 5/15/34

     1,060        1,204,277   

5.25%, 5/15/39

     10,000        11,361,100   

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

     8,000        9,161,200   

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

     7,325        8,684,373   
    

 

 

 
        143,071,099   
Total Municipal Bonds — 105.6%              698,397,217   
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
            

California — 57.4%

                

County/City/Special District/School District — 33.0%

  

California Health Facilities Financing Authority, RB, Sutter Health, Series A, 5.00%, 8/15/52

     14,520        16,302,620   

City of Los Angeles Department of Airports, Series D, AMT, 5.00%, 5/15/41

     13,331        15,235,457   

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

     13,180        14,115,648   

County of San Luis Obispo Community College District, GO, Refunding, Election of 2014, Series A, 4.00%, 8/01/40

     6,585        6,975,027   

Desert Community College District California, GO, Series C (AGM), 5.00%, 8/01/17 (a)

     16,530        17,645,114   

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

     40,000        46,390,400   

Los Angeles Community College District California, GO (a):

    

Election of 2001, Series A (NPFGC), 5.00%, 8/01/17

     6,647        7,095,869   

Election of 2001, Series E-1, 5.00%, 8/01/18

     11,770        13,010,323   

Election of 2003, Series F-1, 5.00%, 8/01/18

     10,000        11,053,800   

Los Angeles Community College District California, GO, Refunding, Election of 2008, Series A, 6.00%, 8/01/19 (a)

     9,596        11,300,218   

Palomar California Community College District, GO, Election of 2006, Series C, 5.00%, 8/01/44

     15,140        17,778,599   

Poway Unified School District, GO, Election of 2002, Improvement District 02, Series 1-B (AGM), 5.00%, 8/01/16 (a)

     10,000        10,239,400   

Southwestern Community College District, GO, Election of 2008, Series D, 5.00%, 8/01/44

     10,820        12,646,957   

West Valley-Mission Community College District, GO, Election of 2012, Series B, 4.00%, 8/01/40

     17,000        18,222,300   
    

 

 

 
        218,011,732   

Education — 5.7%

    

University of California, RB:

    

Series AM, 5.25%, 5/15/44

     10,210        12,066,178   

Series O, 5.75%, 5/15/19 (a)

     11,190        12,974,842   

University of California, Refunding RB:

    

Series A, 5.00%, 11/01/43

     6,001        7,064,607   

Series AF, 5.00%, 5/15/39

     5,000        5,821,350   
    

 

 

 
        37,926,977   
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
   Par  
(000)
    Value  

California (continued)

                

Health — 6.7%

    

California Health Facilities Financing Authority, Refunding RB, Sutter Health, Series A, 5.00%, 8/15/43

   $ 19,425      $ 22,488,690   

California Statewide Communities Development Authority, RB, Kaiser Permanente, Series A, 5.00%, 4/01/42

     19,070        21,605,548   
    

 

 

 
        44,094,238   

Transportation — 0.9%

    

City of Los Angeles California Department of Airports, RB, Senior Revenue, Series A, AMT, 5.00%, 5/15/40

     5,500        6,295,025   

Utilities — 11.1%

    

City of Los Angeles California Wastewater System, RB, Green Bonds, Series A, 5.00%, 6/01/44

     13,790        16,205,457   

County of San Mateo Community College District, GO, Series A, 5.00%, 9/01/45

     17,615        20,821,245   

County of San Diego Water Authority Financing Corp., COP, Refunding, Series A (AGM):

    

5.00%, 5/01/18 (a)

     2,778        3,056,742   

5.00%, 5/01/33

     13,962        15,161,065   

East Bay California Municipal Utility District Water System Revenue, RB, Series C, 5.00%, 6/01/44

     11,000        12,805,980   

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

     5,008        5,489,507   
    

 

 

 
        73,539,996   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 57.4%
        379,867,968   

Total Long-Term Investments

(Cost — $999,909,107) — 163.0%

  

  

    1,078,265,185   
    
                  
Short-Term Securities    Shares         

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

     1,830,586        1,830,586   

Total Short-Term Securities

(Cost — $1,830,586) — 0.3%

  

  

    1,830,586   
Total Investments (Cost — $1,001,739,693) — 163.3%        1,080,095,771   
Other Assets Less Liabilities — 0.8%        5,019,262   

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (25.7)%

   

    (169,723,150
VMTP Shares, at Liquidation Value — (38.4)%        (254,000,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 661,391,883   
 

 

 

 
 

 

See Notes to Financial Statements.

 

                
18    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

 

 

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)   When-issued security.

 

(d)   Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details.

 

(e)   During the six months ended January 31, 2016, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at July 31,
2015
       Net
Activity
       Shares Held
at January 31,
2016
       Income  

BIF California Municipal Money Fund

       505,447           1,325,139           1,830,586         $ 7   

 

(f)   Current yield as of period end.

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.

 

Derivative Financial Instruments Outstanding as of Period End

 

Financial Futures Contracts       
Contracts
Short
    Issue      Expiration      Notional
Value
       Unrealized
Depreciation
      
  (70   5-Year U.S. Treasury Note      March 2016      $ 8,447,032         $ (121,436  
  (82   10-Year U.S. Treasury Note      March 2016      $ 10,625,406           (225,212  
  (36   Long U.S. Treasury Bond      March 2016      $ 5,797,125           (212,733  
  (10   Ultra U.S. Treasury Bond      March 2016      $ 1,661,875           (64,189    
  Total                     $ (623,570  
                

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

      Credit
Contracts
   Equity
Contracts
   Foreign
Currency
Exchange
Contracts
   Interest
Rate
Contracts
     Other
Contracts
   Total  
Liabilities — Derivative Financial Instruments                                  

Financial futures contracts

  Net unrealized depreciation1             $ 623,570          $ 623,570   

1    Includes cumulative appreciation (depreciation) on financial futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

For the six months ended January 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
  

Credit

Contracts

   Equity
Contracts
  

Foreign

Currency
Exchange
Contracts

   Interest
Rate
Contracts
     Other
Contacts
   Total  
Net Realized Gain (Loss) From:                                              

Financial futures contracts

               $ (36,079       $ (36,079

Net Change in Unrealized Appreciation (Depreciation) on:

  

Financial futures contracts

               $ (569,678       $ (569,678

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Financial futures contracts:

       

Average notional value of contracts — short

  $ 21,335,262   

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    19


Schedule of Investments (concluded)

  

BlackRock MuniHoldings California Quality Fund, Inc. (MUC)

 

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Long Term Investments1

            $ 1,078,265,185              $ 1,078,265,185   

Short-Term Securities

  $ 1,830,586                          1,830,586   
 

 

 

 

Total

  $ 1,830,586         $ 1,078,265,185              $ 1,080,095,771   
 

 

 

 

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

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2                 

Liabilities:

                

Interest rate contracts

  $ (623,570                     $ (623,570

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 period end, 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

  $ 366,500                        $ 366,500   

Liabilities:

                

Bank overdraft

            $ (42,983             (42,983

TOB Trust Certificates

              (169,698,729             (169,698,729

VMTP Shares

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

 

 

 

Total

  $ 366,500         $ (423,741,712           $ (423,375,212
 

 

 

 

During the six months ended January 31, 2016, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
20    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments January 31, 2016 (Unaudited)

  

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

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

New Jersey — 135.8%

  

Corporate — 2.7%

  

 

New Jersey EDA, Refunding RB:

    

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

   $ 7,500      $ 8,520,525   

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

     3,150        3,556,193   

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

     1,000        1,071,630   
    

 

 

 
        13,148,348   

County/City/Special District/School District — 20.0%

  

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

    

4.25%, 3/01/34

     1,535        1,654,883   

4.25%, 3/01/35

     1,600        1,723,664   

4.30%, 3/01/36

     1,670        1,802,047   

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

     3,440        3,475,054   

Casino Reinvestment Development Authority, Refunding RB:

    

5.25%, 11/01/39

     11,130        11,588,779   

5.25%, 11/01/44

     3,755        3,882,482   

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

    

5.00%, 7/01/17 (a)

     4,540        4,822,434   

5.00%, 7/01/32

     2,210        2,289,516   

5.00%, 7/01/33

     670        693,725   

5.00%, 7/01/35

     595        615,307   

5.00%, 7/01/37

     705        726,665   

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

    

AMT, 4.75%, 11/01/32

     1,000        1,031,920   

Project Consolidation, 5.50%, 10/01/27

     250        331,780   

Project Consolidation, 5.50%, 10/01/28

     4,840        6,473,984   

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

     1,000        1,042,230   

County of Hudson New Jersey Improvement Authority, RB:

    

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

     1,000        582,280   

County Secured, County Services Building Project (AGM), 5.00%, 4/01/17 (a)

     1,000        1,051,740   

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

     3,000        3,320,430   

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

     5,000        5,509,550   

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

     500        501,910   

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

    

5.00%, 12/01/17

     5        5,015   

5.35%, 12/01/17

     5        5,021   

5.00%, 12/01/18

     5        5,015   

5.38%, 12/01/18

     5        5,021   

5.00%, 12/01/19

     5        5,014   

County of Union New Jersey, GO, Refunding:

    

4.00%, 3/01/21 (a)

     225        256,851   

4.00%, 3/01/29

     3,575        3,866,434   

4.00%, 3/01/30

     3,580        3,861,710   

4.00%, 3/01/31

     4,045        4,347,202   

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

    

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

     650        723,352   
Municipal Bonds   

Par  

(000)

    Value  

New Jersey (continued)

  

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

  

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

    

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

   $ 7,570      $ 8,472,041   

Morristown New Jersey Parking Authority, RB (NPFGC):

    

5.00%, 8/01/30

     1,830        1,935,097   

5.00%, 8/01/33

     3,000        3,167,010   

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

    

5.50%, 3/01/21

     7,430        9,039,635   

5.50%, 3/01/22

     4,200        5,258,946   

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

     1,720        1,735,222   

Township of Irvington New Jersey, GO, Refunding Series A (AGM), 5.00%, 7/15/33

     1,355        1,555,079   
    

 

 

 
        97,364,045   

Education — 32.8%

    

County of Gloucester New Jersey Improvement Authority, RB, Rowan University:

    

5.00%, 7/01/44

     1,985        2,208,690   

General Capital Improvement Projects, Series A, 5.00%, 7/01/31

     1,950        2,278,458   

General Capital Improvement Projects, Series A, 5.00%, 7/01/32

     1,775        2,059,710   

General Capital Improvement Projects, Series A, 5.00%, 7/01/33

     2,250        2,600,910   

General Capital Improvement Projects, Series A, 5.00%, 7/01/34

     1,200        1,382,916   

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

     3,065        3,598,555   

New Jersey EDA, RB, Provident Group — Rowan Properties LLC, Series A:

    

5.00%, 1/01/35

     2,000        2,186,440   

5.00%, 1/01/48

     2,000        2,141,020   

New Jersey Educational Facilities Authority, RB:

    

Higher Educational Capital Improvement Fund, Series A, 5.00%, 9/01/33

     6,370        6,843,355   

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

     2,880        2,936,333   

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

     2,625        2,669,310   

New Jersey Educational Facilities Authority, Refunding RB:

    

College of New Jersey, Series D (AGM), 5.00%, 7/01/18 (a)

     3,285        3,615,307   

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

     10,260        11,140,411   

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

     15,555        17,619,615   

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

     3,540        3,976,517   

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

     6,540        6,613,575   

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

     4,000        4,509,040   

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

     2,500        2,546,300   

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

     2,575        2,809,866   

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

     500        561,485   

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

     600        666,648   
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    21


Schedule of Investments (continued)

  

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

 

Municipal Bonds   

Par  

(000)

    Value  

New Jersey (continued)

  

Education (continued)

  

New Jersey Educational Facilities Authority, Refunding RB (continued):

    

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

   $ 2,800      $ 2,923,844   

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

     2,400        2,510,976   

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

     250        270,738   

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

     5,115        5,503,228   

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

    

4.00%, 12/01/28

     1,500        1,568,460   

4.50%, 12/01/28

     4,080        4,413,050   

4.00%, 12/01/29

     1,000        1,046,410   

4.00%, 12/01/29

     5,715        5,933,256   

4.50%, 12/01/29

     5,110        5,535,612   

4.63%, 12/01/30

     4,980        5,392,195   

4.00%, 12/01/31

     1,625        1,677,699   

4.25%, 12/01/32

     2,050        2,130,606   

4.13%, 12/01/35

     1,000        1,029,030   

4.50%, 12/01/36

     1,805        1,901,152   

New Jersey Higher Education Student Assistance Authority, Refunding RB, Series 1, AMT:

    

5.38%, 12/01/24

     1,365        1,548,524   

5.50%, 12/01/26

     1,635        1,843,266   

New Jersey Institute of Technology, RB, Series A:

    

5.00%, 7/01/42

     6,945        7,759,371   

5.00%, 7/01/45

     7,500        8,421,750   

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

    

5.00%, 5/01/30

     1,565        1,858,484   

5.00%, 5/01/43

     10,000        11,406,900   
    

 

 

 
        159,639,012   

Health — 16.4%

    

County of Camden New Jersey Improvement Authority, Refunding RB, Cooper Healthcare System, Series A, 5.00%, 2/15/33

     2,000        2,249,000   

New Jersey Health Care Facilities Financing Authority, RB:

    

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

     1,405        1,507,958   

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

     6,950        7,493,629   

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

     4,685        5,051,461   

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

     7,105        8,320,097   

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

     4,035        4,549,785   

New Jersey Health Care Facilities Financing Authority, Refunding RB:

    

AHS Hospital Corp., 5.50%, 7/01/31

     4,055        4,816,326   

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

     4,180        5,016,000   

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

     1,925        2,185,818   

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

     1,500        1,603,515   

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

     7,795        8,376,819   

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

     1,000        1,181,950   

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

     3,720        4,369,847   

Princeton Healthcare System, 5.00%, 7/01/34

     1,330        1,538,158   
Municipal Bonds   

Par  

(000)

    Value  

New Jersey (continued)

  

Health (continued)

  

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

    

Princeton Healthcare System, 5.00%, 7/01/39

   $ 1,825      $ 2,088,019   

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

     3,640        4,188,366   

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

     4,450        5,244,859   

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

     4,860        5,654,999   

Virtua Health, 5.00%, 7/01/28

     3,000        3,530,040   

Virtua Health, 5.00%, 7/01/29

     715        836,572   
    

 

 

 
        79,803,218   

Housing — 6.8%

    

New Jersey Housing & Mortgage Finance Agency, RB:

    

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

     6,770        7,164,759   

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

     5,000        5,210,350   

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

     1,335        1,340,220   

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

     445        460,882   

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

     9,455        10,165,070   

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

    

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

     3,470        3,665,604   

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

     4,220        4,418,213   

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

     745        754,201   
    

 

 

 
        33,179,299   

State — 26.0%

    

Garden State Preservation Trust, RB, CAB, Series B (AGM) (b):

    

0.00%, 11/01/23

     15,725        13,437,956   

0.00%, 11/01/25

     10,000        8,031,200   

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

    

5.25%, 11/01/20

     5,000        5,843,950   

5.25%, 11/01/21

     7,705        9,184,360   

New Jersey EDA, RB:

    

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

     2,325        2,063,809   

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

     1,785        2,118,438   

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

     5,000        5,964,950   

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

     7,500        8,985,825   

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

     18,105        18,317,010   

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

     3,960        4,541,605   

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

     40        45,322   

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

     325        342,303   

School Facilities Construction, Series U, 5.00%, 9/01/17 (a)

     2,810        3,003,806   

School Facilities Construction, Series U (AMBAC), 5.00%, 9/01/17 (a)

     1,070        1,143,798   

School Facilities Construction, Series Y, 5.00%, 9/01/18 (a)

     3,000        3,322,980   

Series WW, 5.25%, 6/15/33

     380        417,134   

Series WW, 5.00%, 6/15/34

     5,500        5,890,775   

Series WW, 5.00%, 6/15/36

     3,115        3,318,814   

Series WW, 5.25%, 6/15/40

     8,375        9,063,927   
 

 

See Notes to Financial Statements.

 

                
22    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

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

 

Municipal Bonds   

Par  

(000)

    Value  

New Jersey (continued)

  

State (continued)

  

New Jersey EDA, Refunding RB:

    

Cigarette Tax, 5.00%, 6/15/24

   $ 5,000      $ 5,479,600   

Cigarette Tax, 5.00%, 6/15/26

     1,250        1,355,088   

Cigarette Tax, 5.00%, 6/15/28

     2,430        2,614,923   

Cigarette Tax, 5.00%, 6/15/29

     3,195        3,425,519   

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

     1,000        1,210,760   

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

     5,000        5,416,000   

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

     1,580        1,694,487   
    

 

 

 
        126,234,339   

Transportation — 26.0%

    

Delaware River Port Authority, RB:

    

5.00%, 1/01/29

     2,000        2,371,500   

5.00%, 1/01/37

     8,830        10,154,147   

Series D, 5.05%, 1/01/35

     1,430        1,596,581   

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

     5,200        5,800,184   

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

    

5.13%, 1/01/34

     2,290        2,563,953   

5.38%, 1/01/43

     7,730        8,617,481   

New Jersey State Turnpike Authority, RB:

    

Growth & Income Securities, Series B (AMBAC), 5.15%, 1/01/17 (a)

     10,620        11,072,730   

Series E, 5.00%, 1/01/45

     8,000        9,096,480   

New Jersey State Turnpike Authority, Refunding RB:

    

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

     4,000        5,172,280   

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

     4,000        5,209,600   

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

     500        656,855   

New Jersey Transportation Trust Fund Authority, RB:

    

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

     6,000        2,256,840   

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

     7,210        2,761,502   

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

     8,800        4,320,272   

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

     4,160        1,681,264   

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

     3,000        3,188,100   

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

     5,690        6,200,962   

Transportation Program, Series AA, 5.25%, 6/15/34

     1,305        1,432,524   

Transportation Program, Series AA, 5.00%, 6/15/38

     2,340        2,484,542   

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

     6,365        7,225,675   

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

     2,780        3,143,068   

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

     1,205        1,474,462   

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

     2,500        2,674,700   

Transportation System, Series D, 5.00%, 6/15/32

     3,300        3,564,891   

Port Authority of New York & New Jersey, ARB:

    

Consolidated, 93rd Series, 6.13%, 6/01/94

     1,000        1,238,170   

Special Project, JFK International Air Terminal LLC Project, Series 6, AMT (NPFGC), 5.75%, 12/01/25

     3,000        3,080,400   

Special Project, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/01/42

     4,000        4,663,560   
Municipal Bonds   

Par  

(000)

    Value  

New Jersey (continued)

  

Transportation (continued)

  

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

    

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

   $ 4,005      $ 4,630,301   

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

     7,175        7,887,406   
    

 

 

 
        126,220,430   

Utilities — 5.1%

    

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

     2,000        2,164,800   

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

     6,045        7,137,392   

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

    

0.00%, 9/01/26

     4,100        3,051,097   

0.00%, 9/01/28

     6,600        4,531,098   

0.00%, 9/01/29

     9,650        6,361,569   

0.00%, 9/01/33

     2,350        1,330,617   
    

 

 

 
               24,576,573   

Total Municipal Bonds in New Jersey

  

    660,165,264   
    

Puerto Rico — 1.3%

  

Health — 1.3%

    

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        1,786,802   

6.13%, 11/15/30

     4,220        4,388,800   
Total Municipal Bonds in Puerto Rico        6,175,602   

Total Municipal Bonds — 137.1%

  

    666,340,866   
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
       

New Jersey — 20.2%

  

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

     17,300        19,252,305   

Education — 1.1%

    

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

     4,993        5,564,230   

State — 4.7%

    

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

     12,460        15,570,515   

New Jersey EDA, Refunding RB, School Facilities Construction, 5.00%, 3/01/29 (e)

     6,698        7,255,447   
    

 

 

 
        22,825,962   

Transportation — 10.4%

    

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

     9,300        10,541,550   

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

     2,661        2,846,534   

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

     15,545        17,674,799   

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

     10,000        11,014,500   
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    23


Schedule of Investments (continued)

  

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

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
  

Par  

(000)

    Value  

New Jersey (continued)

  

Transportation (continued)

    

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

   $ 7,827      $ 8,477,580   
    

 

 

 
               50,554,963   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 20.2%
        98,197,460   

Total Long-Term Investments

(Cost — $699,148,065) — 157.3%

  

  

    764,538,326   
Short-Term Securities    Shares     Value  

BIF New Jersey Municipal Money Fund, 0.01% (f)(g)

     7,070,011      $ 7,070,011   

Total Short-Term Securities

(Cost — $7,070,011) — 1.5%

             7,070,011   
Total Investments (Cost — $706,218,076) — 158.8%        771,608,337   
Other Assets Less Liabilities — 0.9%        4,193,066   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (10.9)%

   

    (52,753,205
VRDP Shares, at Liquidation Value — (48.8)%        (237,100,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 485,948,198   
 

 

 

 
 
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 bonds or U.S. Treasury obligations.

 

(d)   Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details.

 

(e)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire between June 15, 2019 to September 1, 2020, is $13,907,845. See Note 4 of the Notes to Financial Statements for details.

 

(f)   During the six months ended January 31, 2016, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at July 31,
2015
      

Net

Activity

       Shares Held
at January 31,
2016
       Income  

BIF New Jersey Municipal Money Fund

       11,186,598           (4,116,587        7,070,011         $ 511   

 

(g)   Current yield as of period end.

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.

 

Derivative Financial Instruments Outstanding as of Period End      

Financial Futures Contracts

 

Contracts
Short
    Issue      Expiration      Notional
Value
    Unrealized
Depreciation
 
  (60   5-Year U.S. Treasury Note      March 2016      $ 7,240,313      $ (105,590
  (97   10-Year U.S. Treasury Note      March 2016      $ 12,569,078        (271,200
  (36   Long U.S. Treasury Bond      March 2016      $ 5,797,125        (210,615
  (3   Ultra U.S. Treasury Bond      March 2016      $ 498,563        (24,520
  Total                  $ (611,925
             

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

       

Credit

Contracts

  

Equity

Contracts

  

Foreign

Currency

Exchange

Contracts

  

Interest

Rate

Contracts

     Other
Contracts
   Total  
Liabilities — Derivative Financial Instruments        

Financial futures contracts

    Net unrealized depreciation 1              $ 611,925          $ 611,925   

1    Includes cumulative appreciation (depreciation) on financial futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

 

See Notes to Financial Statements.

 

                
24    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (concluded)

  

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

 

For the six months ended January 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
  

Credit

Contracts

   Equity
Contracts
  

Foreign

Currency
Exchange
Contracts

   Interest
Rate
Contracts
     Other
Contacts
   Total  
Net Realized Gain (Loss) From:                   

Financial futures contracts

               $ (158,668       $ (158,668

Net Change in Unrealized Appreciation (Depreciation) on:

              

Financial futures contracts

               $ (455,245       $ (455,245

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments      

 

Financial futures contracts:

       

Average notional value of contracts — short

  $ 20,763,934   

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 764,538,326              $ 764,538,326   

Short-Term Securities

  $ 7,070,011                          7,070,011   
 

 

 

 

Total

  $ 7,070,011         $ 764,538,326              $ 771,608,337   
 

 

 

 

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

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2             

Liabilities:

                

Interest rate contracts

  $ (611,925                     $ (611,925

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 period end, 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

  $ 344,000                        $ 344,000   

Liabilities:

                

TOB Trust Certificates

            $ (52,743,580             (52,743,580

VRDP Shares

              (237,100,000             (237,100,000
 

 

 

 

Total

  $ 344,000         $ (289,843,580           $ (289,499,580
 

 

 

 

During the six months ended January 31, 2016, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    25


Schedule of Investments January 31, 2016 (Unaudited)

  

BlackRock MuniYield Investment Quality Fund (MFT)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Alabama — 4.3%

    

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

    

6.00%, 6/01/19

   $ 2,985      $ 3,479,734   

6.13%, 6/01/19

     1,500        1,754,760   

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

     350        389,840   
    

 

 

 
               5,624,334   

California — 21.4%

    

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

     1,960        2,187,497   

California Health Facilities Financing Authority, RB, Sutter Health:

    

Series A, 5.00%, 11/15/46 (b)

     105        122,043   

Series B, 6.00%, 8/15/42

     1,150        1,387,188   

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

    

2nd, 5.50%, 5/01/28

     720        877,255   

2nd, 5.25%, 5/01/33

     560        651,896   

5.00%, 5/01/44

     745        835,264   

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

    

5.50%, 3/01/30

     1,600        1,868,384   

6.25%, 3/01/34

     1,250        1,504,800   

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

     1,400        1,542,408   

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

     970        1,188,522   

Los Angeles California Community College District, GO, Election of 2001, Series A (NPFGC), 5.00%, 8/01/17 (a)

     1,780        1,900,079   

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

     1,000        1,184,040   

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

     2,235        2,659,203   

Riverside County Public Financing Authority, RB, Capital Facilities Project, 5.25%, 11/01/40

     2,000        2,378,060   

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

     1,020        1,159,924   

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

     3,450        3,982,093   

State of California Public Works Board, LRB, Various Capital Projects, Series I, 5.50%, 11/01/31

     1,000        1,241,320   

State of California Public Works Board, RB, Department of Corrections & Rehabilitation, Series F, 5.25%, 9/01/33

     490        589,744   

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

     370        446,701   
    

 

 

 
        27,706,421   

Colorado — 2.0%

    

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

    

5.50%, 11/15/28

     500        596,580   

5.50%, 11/15/30

     225        266,769   

5.50%, 11/15/31

     270        318,854   

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

     1,300        1,456,286   
    

 

 

 
        2,638,489   

Florida — 13.1%

    

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

     270        325,088   

City of Miami Beach Florida Parking Revenue, RB, 5.00%, 9/01/45

     1,000        1,142,270   
Municipal Bonds   

Par  

(000)

    Value  

Florida (continued)

    

County of Broward Florida Airport System Revenue, ARB, Series A, AMT, 5.00%, 10/01/45

   $ 575      $ 645,225   

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

     1,170        1,387,585   

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

     1,000        1,131,380   

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

     145        145,297   

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

     90        91,545   

County of Miami-Dade Florida, RB, Seaport:

    

Series A, 6.00%, 10/01/38

     1,840        2,252,436   

Series A, 5.50%, 10/01/42

     2,125        2,483,402   

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

     590        737,181   

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

     775        968,487   

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

     310        385,789   

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

     410        489,376   

County of Miami-Dade Florida, Refunding RB:

    

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

     735        918,353   

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

     500        598,905   

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

     2,165        2,451,040   

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

     710        842,770   
    

 

 

 
        16,996,129   

Hawaii — 1.8%

    

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

    

5.25%, 8/01/25

     250        299,272   

5.25%, 8/01/26

     810        967,545   

State of Hawaii, Department of Transportation, RB, Series A, AMT, 5.00%, 7/01/45

     1,000        1,119,480   
    

 

 

 
        2,386,297   

Illinois — 19.3%

    

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

    

Series A, 5.75%, 1/01/39

     770        899,191   

Series C, 6.50%, 1/01/41

     3,680        4,441,024   

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

     1,010        1,105,223   

City of Chicago Illinois Transit Authority, RB:

    

Federal Transit Administration, Section 5309, Series A (AGC), 6.00%, 12/01/18 (a)

     1,400        1,601,292   

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

     1,000        1,102,190   

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

     3,000        3,240,060   

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

     1,375        1,465,475   

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

    

5.50%, 12/01/38

     1,500        1,740,840   

5.25%, 12/01/43

     2,700        3,043,035   

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

     1,555        1,845,754   

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     940        1,112,377   

6.00%, 6/01/28

     270        324,953   
 

 

See Notes to Financial Statements.

 

                
26    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

BlackRock MuniYield Investment Quality Fund (MFT)

 

Municipal Bonds   

Par  

(000)

    Value  

Illinois (continued)

    

State of Illinois, GO:

    

5.25%, 2/01/32

   $ 1,000      $ 1,090,630   

5.50%, 7/01/33

     1,500        1,683,105   

5.50%, 7/01/38

     280        310,335   
    

 

 

 
        25,005,484   

Indiana — 4.1%

    

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

     375        406,125   

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

     4,310        4,865,818   
    

 

 

 
        5,271,943   

Louisiana — 2.1%

    

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

    

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

     375        425,490   

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

     160        180,753   

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

     1,000        1,173,550   

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

     805        886,603   
    

 

 

 
               2,666,396   

Massachusetts — 1.5%

    

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

     1,910        1,996,695   

Michigan — 2.7%

    

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

     1,800        2,036,466   

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

     1,265        1,504,895   
    

 

 

 
               3,541,361   

Minnesota — 2.6%

    

City of Minneapolis Minnesota, Refunding RB, Fairview Health Services, Series B (AGC):

    

6.50%, 11/15/18 (a)

     460        530,854   

6.50%, 11/15/38

     2,540        2,880,334   
    

 

 

 
               3,411,188   

Mississippi — 1.5%

    

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

     1,190        1,597,825   

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

     260        306,124   
    

 

 

 
               1,903,949   

Nevada — 4.2%

    

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

     2,375        2,668,574   

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

     1,000        1,083,080   

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

     1,500        1,697,700   
    

 

 

 
               5,449,354   

New Jersey — 5.8%

    

New Jersey EDA, RB:

    

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

     980        1,123,932   

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

     20        22,661   
Municipal Bonds   

Par  

(000)

    Value  

New Jersey (continued)

    

New Jersey EDA, RB (continued):

    

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

   $ 1,000      $ 1,114,810   

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

     530        595,254   

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

     1,400        1,578,612   

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

    

Series A, 5.50%, 6/15/41

     1,195        1,292,978   

Series AA, 5.50%, 6/15/39

     1,600        1,763,760   
    

 

 

 
               7,492,007   

New York — 5.3%

    

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

     1,545        1,763,061   

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

     2,000        2,265,540   

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

     2,500        2,881,750   
    

 

 

 
               6,910,351   

Ohio — 1.4%

    

State of Ohio Turnpike Commission, RB, Junior Lien, Infrastructure Projects, Series A-1, 5.25%, 2/15/31

     1,500        1,797,030   

Pennsylvania — 3.4%

    

Pennsylvania Turnpike Commission, RB:

    

Series B, 5.00%, 12/01/40

     1,000        1,145,410   

Series B, 5.00%, 12/01/45

     1,000        1,137,290   

Sub-Series A, 6.00%, 12/01/16 (a)

     2,000        2,093,820   
    

 

 

 
        4,376,520   

South Carolina — 7.8%

    

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

     1,470        1,749,182   

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

    

5.50%, 7/01/26

     1,810        2,169,665   

6.00%, 7/01/38

     1,155        1,365,453   

5.50%, 7/01/41

     1,000        1,143,050   

South Carolina Ports Authority, RB, AMT, 5.25%, 7/01/50

     750        841,433   

South Carolina State Public Service Authority, Refunding RB, Obligations, Series C, 5.00%, 12/01/46

     2,535        2,852,610   
    

 

 

 
        10,121,393   

Tennessee — 0.3%

    

Metropolitan Nashville Airport Authority, ARB, Series B, AMT, 5.00%, 7/01/40

     370        418,970   

Texas — 19.7%

    

Austin Community College District Public Facility Corp., RB, Educational Facilities Project, Round Rock Campus, 5.25%, 8/01/18 (a)

     2,250        2,497,860   

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

     930        1,079,451   

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

     1,210        1,389,479   

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

    

6.00%, 11/15/35

     2,700        3,151,116   

6.00%, 11/15/36

     2,055        2,398,350   

5.38%, 11/15/38

     1,000        1,123,180   
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    27


Schedule of Investments (continued)

  

BlackRock MuniYield Investment Quality Fund (MFT)

 

Municipal Bonds   

Par  

(000)

    Value  

Texas (continued)

    

County of Tarrant Texas Cultural Education Facilities Finance Corp., Refunding RB, Christus Health, Series A (AGC):

    

6.50%, 1/01/19 (a)

   $ 265      $ 306,703   

6.50%, 7/01/37

     835        944,686   

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

     980        1,081,763   

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

     2,500        3,053,575   

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

     730        870,875   

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

     2,750        3,256,495   

North Texas Tollway Authority, Refunding RB:

    

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

     1,000        1,185,060   

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

     1,400        1,568,196   

Series B, 5.00%, 1/01/40

     1,000        1,135,530   

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

     420        488,120   
    

 

 

 
        25,530,439   

Virginia — 1.2%

    

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

     380        433,557   

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

     1,000        1,159,660   
    

 

 

 
        1,593,217   

Washington — 1.6%

    

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

     1,000        1,164,300   

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

     725        849,802   
    

 

 

 
               2,014,102   
Total Municipal Bonds — 127.1%        164,852,069   
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
              

Connecticut — 1.1%

    

Connecticut State Health & Educational Facility Authority, Refunding RB, Trinity Health Credit Group, 5.00%, 12/01/45

     1,216        1,402,137   

District of Columbia — 0.7%

    

District of Columbia Water & Sewer Authority, Refunding RB, Senior Lien, Series A, 6.00%, 10/01/18 (a)(d)

     760        863,404   

Florida — 2.1%

    

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

     2,499        2,743,027   

Kentucky — 0.9%

    

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

     1,002        1,123,928   

Nevada — 7.3%

    

County of Clark Nevada Water Reclamation District, GO:

    

Limited Tax, 6.00%, 7/01/18 (a)

     2,010        2,261,773   

Series B, 5.50%, 7/01/29

     1,994        2,281,949   
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

Nevada (continued)

    

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

   $ 4,200      $ 4,937,478   
    

 

 

 
               9,481,200   

New Jersey — 2.1%

  

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

     1,610        1,715,698   

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

     1,000        1,070,126   
    

 

 

 
               2,785,824   

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        3,560,670   

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

     1,095        1,249,376   

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

     1,000        1,112,067   

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

     1,000        1,164,157   

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

     3,000        3,487,386   

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

     1,770        2,070,227   

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

     3,250        3,656,445   
    

 

 

 
               16,300,328   

Texas — 2.2%

  

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

     2,609        2,914,490   

Utah — 0.8%

  

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

     1,005        1,100,139   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 29.8%
        38,714,477   

Total Long-Term Investments

(Cost — $181,730,586) — 156.9%

  

  

    203,566,546   
    
   
Short-Term Securities    Shares         

BlackRock Liquidity Funds, MuniCash, 0.02% (e)(f)

     1,071,269        1,071,269   
Total Short-Term Securities
(Cost — $1,071,269) — 0.8%
        1,071,269   
Total Investments (Cost — $182,801,855) — 157.7%        204,637,815   
Other Assets Less Liabilities — 1.4%        1,806,890   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (15.6)%

   

    (20,188,242
VMTP Shares, at Liquidation Value — (43.5)%        (56,500,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 129,756,463   
    

 

 

 
 

 

See Notes to Financial Statements.

 

                
28    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


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)   When-issued security.

 

(c)   Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details.

 

(d)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire between October 1, 2016 to November, 15, 2019, is $4,627,654. See Note 4 of the Notes to Financial Statements for details.

 

(e)   During the six months ended January 31, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at July 31,
2015
      

Net

Activity

       Shares Held
at January 31,
2016
       Income  

BlackRock Liquidity Funds, MuniCash

                 1,071,269           1,071,269         $ 131   

FFI Institutional Tax-Exempt Fund

       2,437,027           (2,437,027                $ 13   

 

(f)   Current yield as of period end.

 

Derivative Financial Instruments Outstanding as of Period End

Financial Futures Contracts

 

Contracts
Short
    Issue      Expiration      Notional
Value
       Unrealized
Depreciation
      
  (25   5-Year U.S. Treasury Note      March 2016      $ 3,016,797         $ (47,564  
  (28   10-Year U.S. Treasury Note      March 2016      $ 3,628,188           (83,052  
  (9   Long U.S. Treasury Bond      March 2016      $ 1,449,281           (57,292  
  (2   Ultra U.S. Treasury Bond      March 2016      $ 332,375           (14,503    
  Total                     $ (202,411  
                

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

       

Credit

Contracts

  

Equity

Contracts

  

Foreign

Currency

Exchange

Contracts

  

Interest

Rate

Contracts

     Other
Contracts
   Total  
Liabilities — Derivative Financial Instruments                                 

Financial futures contracts

    Net unrealized depreciation 1              $ 202,411          $ 202,411   

1    Includes cumulative appreciation (depreciation) on financial futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

For the six months ended January 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
  

Credit

Contracts

   Equity
Contracts
  

Foreign

Currency
Exchange
Contracts

   Interest
Rate
Contracts
     Other
Contacts
   Total  
Net Realized Gain (Loss) From:                     

Financial futures contracts

               $ (73,716       $ (73,716

Net Change in Unrealized Appreciation (Depreciation) on:

              

Financial futures contracts

               $ (187,745       $ (187,745

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments     

 

Financial futures contracts:        

Average notional value of contracts — short

  $ 6,094,793   

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Fair Value Hierarchy as of Period End      

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    29


Schedule of Investments (concluded)

  

BlackRock MuniYield Investment Quality Fund (MFT)

 

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 203,566,546              $ 203,566,546   

Short-Term Securities

  $ 1,071,269                          1,071,269   
 

 

 

 

Total

  $ 1,071,269         $ 203,566,546              $ 204,637,815   
 

 

 

 

1    See above Schedule of Investments for values in each state or political sub-division.

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2             

Liabilities:

                

Interest rate contracts

  $ (202,411                     $ (202,411

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 period end, 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

  $ 106,550                        $ 106,550   

Liabilities:

                

TOB Trust Certificates

            $ (20,184,337             (20,184,337

VMTP Shares

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

 

 

 

Total

  $ 106,550         $ (76,684,337           $ (76,577,787
 

 

 

 

During the six months ended January 31, 2016, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
30    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments January 31, 2016 (Unaudited)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Michigan — 135.5%

                

Corporate — 4.1%

  

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

   $ 14,500      $ 19,183,210   

County/City/Special District/School District — 21.4%

  

 

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

    

4.38%, 5/01/27

     1,600        1,791,776   

4.50%, 5/01/29

     1,505        1,683,553   

Berkley School District, GO, School Building & Site (Q-SBLF), 5.00%, 5/01/35

     2,965        3,454,047   

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

    

5.00%, 4/01/25

     3,090        3,240,514   

5.00%, 4/01/26

     3,250        3,409,510   

5.00%, 4/01/27

     1,000        1,045,580   

City of Oak Park Michigan, GO, Street Improvement (NPFGC), 5.00%, 5/01/16 (a)

     1,100        1,113,409   

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

     5,185        5,943,928   

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

    

5.50%, 5/01/36

     1,200        1,399,380   

5.50%, 5/01/41

     2,185        2,548,038   

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

     1,000        1,010,410   

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

     5,300        5,917,344   

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

    

5.00%, 5/01/32

     1,500        1,755,915   

5.00%, 5/01/33

     1,600        1,864,400   

5.00%, 5/01/34

     1,200        1,392,828   

Farmington Public School District, GO, Refunding, School Building & Site (AGM):

    

5.00%, 5/01/33

     1,500        1,766,025   

5.00%, 5/01/34

     1,500        1,764,690   

5.00%, 5/01/35

     1,000        1,172,010   

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

     4,950        5,352,237   

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

    

5.50%, 5/01/32

     1,000        1,169,790   

5.50%, 5/01/36

     2,000        2,332,300   

5.50%, 5/01/41

     2,575        3,002,836   

Grandville Public Schools, GO, School Building & Site (AGM), Series II, 5.00%, 5/01/40

     3,250        3,706,885   

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

     6,750        7,817,175   

Kentwood Public Schools, GO, School Building & Site (b):

    

5.00%, 5/01/41

     1,120        1,300,208   

5.00%, 5/01/44

     1,815        2,100,137   

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

     4,425        4,466,197   

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

     5,000        5,612,800   

Mattawan Consolidated School District, GO, Series I (Q-SBLF), 5.00%, 5/01/39

     3,375        3,866,906   

Thornapple Kellogg School District Michigan, GO, Refunding, School Building & Site (NPFGC) (Q-SBLF), 5.00%, 5/01/17 (a)

     3,000        3,167,580   

Township of Montrose Michigan Community Schools, GO (NPFGC) (Q-SBLF), 6.20%, 5/01/17

     415        428,948   
Municipal Bonds   

Par  

(000)

    Value  

Michigan (continued)

                

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

  

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

   $ 2,000      $ 2,389,360   

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

    

5.00%, 5/01/37

     2,850        3,277,842   

5.00%, 5/01/40

     2,630        2,989,495   

5.00%, 5/01/43

     1,530        1,730,109   

Zeeland Public Schools, GO, School Building & Site, Series A (AGM):

    

5.00%, 5/01/33

     1,000        1,161,420   

5.00%, 5/01/34

     1,000        1,157,040   

5.00%, 5/01/35

     1,000        1,150,950   
    

 

 

 
        100,453,572   

Education — 25.8%

    

City of Grand Rapids Michigan, EDC, RB, Ferris State University Project, Series A, 5.50%, 10/01/35

     760        862,167   

Ferris State University, Refunding RB, General (AGM):

    

4.50%, 10/01/24

     1,595        1,737,848   

4.50%, 10/01/25

     1,405        1,530,832   

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

     765        791,278   

Michigan Finance Authority, Refunding RB:

    

College for Creative Studies, 4.00%, 12/01/33

     1,720        1,738,077   

College for Creative Studies, 5.00%, 12/01/36

     1,550        1,681,564   

College for Creative Studies, 5.00%, 12/01/40

     2,900        3,099,375   

College for Creative Studies, 5.00%, 12/01/45

     4,400        4,672,052   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/28

     8,750        9,070,075   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/29

     5,900        6,095,349   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/30

     2,850        2,931,510   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/31

     3,150        3,233,129   

Michigan State University, Refunding RB, General:

    

Series A, 5.00%, 8/15/41

     5,000        5,736,050   

Series C, 5.00%, 2/15/40

     8,470        9,470,476   

Series C, 5.00%, 2/15/44

     1,000        1,118,120   

Michigan Technological University, RB, General, Series A, 5.00%, 10/01/45

     1,800        2,043,558   

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

     840        968,990   

Oakland University, RB, General:

    

5.00%, 3/01/32

     400        455,904   

Series A, 5.00%, 3/01/38

     5,490        6,272,929   

Series A, 5.00%, 3/01/43

     16,845        18,833,215   

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

     3,425        4,021,053   

University of Michigan, Refunding RB:

    

5.00%, 4/01/40

     2,500        2,996,075   

5.00%, 4/01/46

     10,000        11,896,300   

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

     3,000        3,405,210   

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

    

5.25%, 11/15/40

     3,500        3,925,740   

5.25%, 11/15/43

     8,475        9,778,455   

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

     1,000        1,171,220   

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

     1,750        1,975,995   
    

 

 

 
        121,512,546   

Health — 35.6%

    

Grand Traverse County Hospital Finance Authority, RB, Series A:

    

5.00%, 7/01/44

     4,230        4,689,251   
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    31


Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds

    

 

Par  

(000

  

    Value   

Michigan (continued)

                

Health (continued)

    

Grand Traverse County Hospital Finance Authority, RB, Series A (continued):

    

5.00%, 7/01/47

   $ 2,200      $ 2,432,386   

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

     7,500        8,174,850   

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

     7,500        8,623,125   

Michigan Finance Authority, RB:

    

Beaumont Health Credit Group, 4.00%, 11/01/46 (b)

     6,835        6,822,629   

Sparrow Obligated Group, 5.00%, 11/15/36

     2,500        2,758,275   

Sparrow Obligated Group, 5.00%, 11/15/45

     3,750        4,265,775   

Michigan Finance Authority, Refunding RB:

    

Hospital, McLaren Health Care, 5.00%, 5/15/32

     1,000        1,166,430   

Hospital, McLaren Health Care, 5.00%, 5/15/33

     2,000        2,322,720   

Hospital, McLaren Health Care, 5.00%, 5/15/34

     5,000        5,792,450   

Hospital, McLaren Health Care, 5.00%, 5/15/34

     1,500        1,737,735   

Hospital, McLaren Health Care, 5.00%, 5/15/35

     4,945        5,707,074   

MidMichigan Health, 5.00%, 6/01/39

     1,500        1,682,190   

Trinity Health Credit Group, 5.00%, 12/01/21 (a)

     20        24,273   

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

     5,000        5,669,200   

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

     6,500        7,294,885   

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

     4,980        5,591,843   

Michigan State Hospital Finance Authority, RB:

    

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

     6,000        6,790,620   

MidMichigan Obligated Group, Series A, 5.00%, 4/15/16 (a)

     1,000        1,009,990   

MidMichigan Obligated Group, Series A, 5.00%, 4/15/16 (a)

     3,550        3,585,465   

Trinity Health Credit, Series A, 5.00%, 12/01/16 (a)

     855        887,439   

Michigan State Hospital Finance Authority, Refunding RB:

    

Henry Ford Health System, 5.75%, 11/15/39

     3,165        3,613,955   

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

     2,500        2,583,825   

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

     4,000        4,501,360   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/17 (a)

     1,000        1,064,260   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/17 (a)

     5,730        6,098,210   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/17 (a)

     3,970        4,225,112   

Hospital, Sparrow Obligated Group, 5.00%, 11/15/17 (a)

     3,330        3,588,774   

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

     1,365        1,441,508   

McLaren Health Care, Series A, 5.75%, 5/15/18 (a)

     6,000        6,673,920   

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

     2,250        2,530,035   

Trinity Health, 6.50%, 12/01/18 (a)

     425        492,333   

Trinity Health, 6.50%, 12/01/33

     80        91,140   

Trinity Health Credit Group, 6.50%, 12/01/18 (a)

     1,895        2,193,481   

Trinity Health Credit Group, Series A, 6.13%, 12/01/18 (a)

     940        1,078,199   

Trinity Health Credit Group, Series A, 6.25%, 12/01/18 (a)

     1,500        1,725,780   

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

     5,300        5,619,431   
Municipal Bonds   

Par  

(000)

    Value  

Michigan (continued)

                

Health (continued)

    

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

    

Series D, 5.00%, 9/01/39

   $ 25,505      $ 28,637,524   

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

     2,000        2,379,280   

Series W, 6.00%, 8/01/19 (a)

     1,500        1,761,315   
    

 

 

 
        167,328,047   

Housing — 6.9%

    

Michigan State HDA, RB:

    

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

     2,000        2,026,920   

M/F Housing, Rental Housing Revenue, Series A, 4.45%, 10/01/34

     1,000        1,072,210   

M/F Housing, Rental Housing Revenue, Series A, 4.63%, 10/01/39

     3,490        3,675,843   

M/F Housing, Rental Housing Revenue, Series A, 4.75%, 10/01/44

     5,000        5,244,250   

M/F Housing, Series A, 4.30%, 10/01/40

     3,320        3,426,638   

S/F Housing, Series A, 4.75%, 12/01/25

     6,840        7,415,312   

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

     3,485        3,526,158   

Michigan State HDA, Refunding RB, M/F Housing, Series A, 6.05%, 10/01/41

     5,460        5,942,063   
    

 

 

 
        32,329,394   

State — 14.9%

  

Michigan Finance Authority, Refunding RB:

    

Detroit Regional Convention Facility Authority Local Project Bonds, 5.00%, 10/01/39

     5,400        6,074,190   

Michigan State Finance Authority, RB, Local Government Loan Program, Series F, 5.00%, 4/01/31

     1,000        1,099,730   

Michigan Strategic Fund, RB, Michigan Senate Offices Project, Series A, 5.25%, 10/15/40

     3,000        3,455,610   

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

     7,000        8,041,040   

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

     3,000        2,719,620   

State of Michigan Building Authority, RB, Local Government Loan Program, Series F, 5.25%, 10/01/41

     8,595        9,339,327   

State of Michigan Building Authority, Refunding RB, Facilities Program:

    

Series I, 6.25%, 10/15/18 (a)

     3,780        4,328,629   

Series I, 6.25%, 10/15/38

     2,470        2,797,374   

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

     6,000        6,854,100   

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

     3,500        3,992,765   

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

     1,000        1,138,840   

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

     2,000        2,265,040   

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

     7,500        8,473,725   

State of Michigan Trunk Line Fund, RB:

    

5.00%, 11/15/33

     3,000        3,512,190   

5.00%, 11/15/36

     5,345        6,209,714   
    

 

 

 
        70,301,894   

Transportation — 11.3%

  

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

     8,500        9,117,610   

Wayne County Airport Authority, RB:

    

Detroit Metropolitan Wayne County Airport, AMT (NPFGC), 5.00%, 12/01/39

     1,475        1,607,912   

Series D, 5.00%, 12/01/35

     3,850        4,441,360   

Series D, 5.00%, 12/01/45

     5,000        5,597,400   
 

 

See Notes to Financial Statements.

 

                
32    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds   

Par  

(000)

    Value  

Michigan (continued)

                

Transportation (continued)

  

Wayne County Airport Authority, Refunding RB, AMT:

    

(AGC), 5.75%, 12/01/25

   $ 4,000      $ 4,473,040   

(AGC), 5.75%, 12/01/26

     4,060        4,540,136   

(AGC), 5.38%, 12/01/32

     13,000        14,343,940   

Series F, 5.00%, 12/01/34

     8,000        8,955,840   
    

 

 

 
        53,077,238   

Utilities — 15.5%

  

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

     2,655        2,952,360   

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

     16,745        16,907,929   

City of Detroit Michigan Water Supply System Revenue, RB, Series A (NPFGC), 5.00%, 7/01/34

     10        10,033   

City of Grand Rapids Michigan Sanitary Sewer System, Refunding RB, Series A (NPFGC), 5.50%, 1/01/22

     1,500        1,724,250   

City of Holland Michigan Electric Utility System, RB, Series A, 5.00%, 7/01/39

     10,000        11,509,200   

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

    

5.00%, 7/01/27

     3,180        3,753,004   

5.00%, 7/01/31

     6,830        7,838,108   

5.00%, 7/01/37

     3,335        3,827,246   

5.50%, 7/01/41

     5,000        5,916,100   

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

    

5.25%, 10/01/31

     500        555,225   

5.63%, 10/01/40

     1,500        1,699,725   

Michigan Finance Authority, Refunding RB:

    

Government Loan Program, 5.00%, 7/01/34

     2,000        2,301,340   

Government Loan Program, 5.00%, 7/01/35

     750        859,703   

Senior Lien, Detroit Water and Sewer, Series C-3 (AGM), 5.00%, 7/01/31

     1,000        1,155,100   

Senior Lien, Detroit Water and Sewer, Series C-3 (AGM), 5.00%, 7/01/32

     5,250        6,013,612   

Senior Lien, Detroit Water and Sewer, Series C-3 (AGM), 5.00%, 7/01/33

     3,000        3,424,380   

Michigan Municipal Bond Authority, RB, State Clean Water Revolving Fund, Pooled Project, 5.00%, 10/01/27

     2,000        2,337,580   
    

 

 

 
        72,784,895   
Total Municipal Bonds in Michigan        636,970,796   
    

Guam — 0.5%

                

State — 0.5%

  

Territory of Guam, RB, Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29

     2,250        2,510,438   
Total Municipal Bonds — 136.0%        639,481,234   
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
       

Michigan — 22.2%

                

County/City/Special District/School District — 4.2%

  

Lakewood Public Schools Michigan, GO, School Building & Site (AGM) (Q-SBLF), 5.00%, 5/01/17 (a)

     10,925        11,535,260   

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

     7,500        8,043,525   
    

 

 

 
        19,578,785   
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
  

Par  

(000)

    Value  

Michigan (continued)

                

Education — 11.8%

    

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

   $ 10,000      $ 11,589,900   

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

     10,000        10,789,700   

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

     10,000        11,350,700   

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

     20,000        21,897,372   
    

 

 

 
        55,627,672   

Health — 6.2%

    

Michigan Finance Authority, RB:

    

Beaumont Health Credit Group, 5.00%, 11/01/44

     10,002        11,230,910   

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

     190        211,607   

Hospital, Trinity Health Series 2016, 5.00%, 12/01/45

     10,000        11,516,382   

Michigan State Building Authority, Refunding RB, Facilities Program, Series I, 5.00%, 10/15/45

     5,150        5,890,570   
    

 

 

 
        28,849,469   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 22.2%
        104,055,926   
Total Long-Term Investments
(Cost — $686,736,994) — 158.2%
        743,537,160   
    
                  
Short-Term Securities    Shares         

BlackRock Liquidity Funds, MuniCash, 0.02% (d)(e)

     14,539,075        14,539,075   
Total Short-Term Securities
(Cost — $14,539,075) — 3.1%
        14,539,075   
Total Investments (Cost — $701,276,069) — 161.3%        758,076,235   
Liabilities in Excess of Other Assets — (1.1)%        (4,858,676

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (10.9)%

   

    (51,231,800
VRDP Shares, at Liquidation Value — (49.3)%        (231,900,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 470,085,759   
 

 

 

 
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    33


Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

 

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)   When-issued security.

 

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

 

(d)   Zero-coupon bond.

 

(e)   Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details.

 

(f)   During the six months ended January 31, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at July 31,
2015
       Net
Activity
       Shares Held
at January 31,
2016
       Income  

BlackRock Liquidity Funds, MuniCash

                 14,539,075           14,539,075         $ 89   

FFI Institutional Tax-Exempt Fund

       1,873,459           (1,873,459                $ 174   

 

(g)   Current yield as of period end.

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.

 

Derivative Financial Instruments Outstanding as of Period End

Financial Futures Contracts

 

Contracts
Short
    Issue      Expiration      Notional
Value
    Unrealized
Depreciation
      
  (50   5-Year U.S. Treasury Note      March 2016      USD     6,033,594      $ (87,218  
  (77   10-Year U.S. Treasury Note      March 2016      USD     9,977,516        (216,644  
  (30   Long U.S. Treasury Bond      March 2016      USD       4,830,938        (180,101  
  (3   Ultra U.S. Treasury Bond      March 2016      USD     498,563        (24,520    
  Total                    $ (508,483  
               

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

       

Credit

Contracts

  

Equity

Contracts

  

Foreign

Currency

Exchange

Contracts

  

Interest

Rate

Contracts

     Other
Contracts
   Total  
Liabilities — Derivative Financial Instruments                                         

Financial futures contracts

    Net unrealized depreciation 1              $ 508,483          $ 508,483   

1    Includes cumulative appreciation (depreciation) on financial futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

For the six months ended January 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

     Commodity
Contracts
  

Credit

Contracts

   Equity
Contracts
   Foreign
Currency
Exchange
Contracts
   Interest
Rate
Contracts
     Other
Contacts
   Total  
Net Realized Gain (Loss) From:                    

Financial futures contracts

              $ 97,313          $ 97,313   

Net Change in Unrealized Appreciation (Depreciation) on:

                   

Financial futures contracts

              $ (438,034       $ (438,034

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Financial futures contracts:        

Average notional value of contracts — short

  $ 16,949,840   

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

See Notes to Financial Statements.

 

                
34    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (concluded)

  

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 743,537,160              $ 743,537,160   

Short-Term Securities

  $ 14,539,075                          14,539,075   
 

 

 

 

Total

  $ 14,539,075         $ 743,537,160              $ 758,076,235   
 

 

 

 

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

                
     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2             

Liabilities:

                

Interest rate contracts

  $ (508,483                     $ (508,483

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 period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:    
     Level 1        Level 2        Level 3      Total  

Assets:

                

Cash

  $ 11,792,083                        $ 11,792,083   

Cash pledged for financial futures contracts

    283,950                          283,950   

Liabilities:

                

TOB Trust Certificates

            $ (51,227,057             (51,227,057

VRDP Shares

              (231,900,000             (231,900,000
 

 

 

 

Total

  $ 12,076,033         $ (283,127,057           $ (271,051,024
 

 

 

 

During the six months ended January 31, 2016, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    35


Schedule of Investments January 31, 2016 (Unaudited)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Pennsylvania — 120.1%

                

Corporate — 12.4%

  

County of Beaver Pennsylvania IDA, Refunding RB, First Energy Nuclear Energy Project, Series B, 3.50%, 12/01/35 (a)

   $ 3,745      $ 3,826,042   

Pennsylvania Economic Development Financing Authority, RB:

    

American Water Co. Project, 6.20%, 4/01/39

     1,510        1,723,242   

Aqua Pennsylvania, Inc. Project, Series A, AMT, 6.75%, 10/01/18

     1,900        2,164,556   

Aqua Pennsylvania, Inc. Project, Series B, 4.50%, 12/01/42

     2,630        2,774,808   

Pennsylvania Bridge Finco LP, AMT, 5.00%, 6/30/42

     7,500        8,254,650   

Waste Management, Inc. Project, Series A, AMT, 5.10%, 10/01/27

     1,200        1,216,872   

Pennsylvania Economic Development Financing Authority, Refunding RB, AMT:

    

Amtrak Project, Series A, 5.00%, 11/01/41

     6,025        6,541,584   

Aqua Pennsylvania, Inc. Project, Series A, 5.00%, 12/01/34

     180        197,969   

National Gypson Co., 5.50%, 11/01/44

     135        140,895   
    

 

 

 
        26,840,618   

County/City/Special District/School District — 32.5%

  

Allentown Neighborhood Improvement Zone Development Authority, Refunding RB, Series A:

    

5.00%, 5/01/35

     190        204,184   

5.00%, 5/01/42

     450        477,729   

Bethlehem Area School District, GO, BAM, Series A:

    

5.00%, 8/01/34

     1,610        1,874,587   

5.00%, 8/01/35

     1,210        1,404,507   

Borough of West Chester Pennsylvania, GO, Refunding, 3.50%, 11/15/35

     1,095        1,128,244   

Boyertown Area School District, GO:

    

5.00%, 10/01/36

     610        704,989   

5.00%, 10/01/38

     920        1,054,596   

Bristol Township School District, GO, 5.00%, 6/01/40

     775        855,437   

City of Philadelphia Pennsylvania, GO, Refunding, Series A:

    

(AGM), 5.25%, 12/15/32

     5,000        5,496,950   

(AGC), 5.00%, 8/01/24

     2,370        2,674,142   

City of Pittsburgh Pennsylvania, GO, Series B, 5.00%, 9/01/26

     1,095        1,285,990   

County of Bucks Pennsylvania Water & Sewer Authority, RB, Series A (AGM):

    

5.00%, 12/01/37

     780        898,342   

5.00%, 12/01/40

     1,000        1,135,940   

County of Lycoming Pennsylvania Water & Sewer Authority, RB (AGM), 5.00%, 11/15/41

     500        557,495   

County of Northampton Pennsylvania IDA, Route 33 Project, Tax Allocation Bond, 7.00%, 7/01/32

     180        197,537   

County of York Pennsylvania, GO, Refunding, 5.00%, 3/01/36

     500        568,030   

Delaware County Authority, RB, Villanova University:

    

5.00%, 8/01/40

     1,005        1,163,860   

5.00%, 8/01/45

     3,610        4,174,171   

East Stroudsburg Area School District, GO, Refunding, Series A (AGM), 5.00%, 9/01/25

     3,000        3,182,340   

East Stroudsburg Area School District, GO, Series A (NPFGC), 7.75%, 9/01/17 (b)

     2,000        2,225,199   

Lower Merion School District, GO, Refunding, Series A, 3.25%, 11/15/27

     2,035        2,132,497   

Marple Newtown School District, GO (AGM), 5.00%, 6/01/31

     4,100        4,572,320   

Northeastern School District York County, GO, Series B (NPFGC), 5.00%, 4/01/17 (b)

     1,585        1,667,769   
Municipal Bonds   

Par  

(000)

    Value  

Pennsylvania (continued)

                

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

  

Owen J. Roberts School District, GO, 4.75%, 11/15/25

   $ 700      $ 757,883   

Philadelphia School District, GO:

    

2015, Series E, 6.00%, 9/01/18 (b)

     5        5,662   

2015-2, Series E, 6.00%, 9/01/18 (b)

     5        5,659   

2015-3, Series F, 6.00%, 9/01/38

     3,340        3,698,582   

Philipsburg-Osceola Pennsylvania Area School District, GO (AGM), 5.00%, 10/01/16 (b)

     910        938,538   

Shaler Area School District Pennsylvania, GO, CAB (Syncora), 0.00%, 9/01/30 (c)

     6,145        3,996,954   

State Public School Building Authority, RB (AGM):

    

Community College, Allegheny County Project, 5.00%, 7/15/34

     2,190        2,439,441   

Corry Area School District, CAB, 0.00%, 12/15/22 (c)

     1,640        1,402,692   

Corry Area School District, CAB, 0.00%, 12/15/23 (c)

     1,980        1,636,272   

Corry Area School District, CAB, 0.00%, 12/15/24 (c)

     1,980        1,585,663   

Corry Area School District, CAB, 0.00%, 12/15/25 (c)

     1,770        1,363,732   

State Public School Building Authority, Refunding RB, Harrisburg School District, Series A (AGC):

    

5.00%, 5/15/19 (b)

     215        243,606   

5.00%, 11/15/33

     1,070        1,171,950   

Township of Bristol Pennsylvania School District, GO, 5.25%, 6/01/43

     6,925        7,919,707   

Township of Falls Pennsylvania, Refunding RB, Water & Sewer Authority, 5.00%, 12/01/37

     1,270        1,428,229   

Township of Lower Paxton Pennsylvania, GO (d):

    

5.00%, 4/01/42

     435        491,598   

5.00%, 4/01/46

     1,435        1,617,317   
    

 

 

 
        70,340,340   

Education — 17.4%

  

County of Adams Pennsylvania IDA, Refunding RB, Gettysburg College:

    

5.00%, 8/15/24

     100        114,215   

5.00%, 8/15/25

     100        113,886   

5.00%, 8/15/26

     100        113,886   

County of Chester Pennsylvania IDA, Refunding RB, Renaissance Academy Charter School, 5.00%, 10/01/34

     160        172,286   

County of Cumberland Pennsylvania Municipal Authority, RB, AICUP Financing Program, Dickinson College Project, 5.00%, 11/01/39

     200        214,612   

County of Cumberland Pennsylvania Municipal Authority, Refunding RB, Diakon Lutheran:

    

6.38%, 1/01/19 (b)

     900        1,039,815   

6.38%, 1/01/39

     100        114,195   

County of Delaware Pennsylvania Authority, Refunding RB:

    

Haverford College, 5.00%, 11/15/35

     415        467,701   

Villanova University, 5.25%, 12/01/31

     100        113,306   

County of Northampton Pennsylvania General Purpose Authority, Refunding RB, Moravian College (d):

    

5.00%, 10/01/36

     610        694,284   

3.88%, 10/01/45

     1,330        1,321,914   

Pennsylvania Higher Educational Facilities Authority, RB:

    

Drexel University, Series A (NPFGC), 5.00%, 5/01/37

     1,650        1,752,366   

Series AE (NPFGC), 4.75%, 6/15/16 (b)

     5,845        5,942,962   

Shippensburg University Student Services, Student Housing, 5.00%, 10/01/44

     1,460        1,535,073   

Thomas Jefferson University, 5.00%, 3/01/40

     1,000        1,077,990   
 

 

See Notes to Financial Statements.

 

                
36    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

Municipal Bonds   

Par  

(000)

    Value  

Pennsylvania (continued)

                

Education (continued)

  

Pennsylvania Higher Educational Facilities Authority, Refunding RB:

    

Drexel University, Series A, 5.25%, 5/01/41

   $ 3,930      $ 4,366,898   

La Salle University, 5.00%, 5/01/37

     1,325        1,423,779   

La Salle University, 5.00%, 5/01/42

     1,855        1,969,027   

State System of Higher Education, Series AL, 5.00%, 6/15/35

     280        316,061   

Thomas Jefferson University, 4.00%, 3/01/37

     445        462,893   

Thomas Jefferson University, 5.00%, 9/01/45

     2,000        2,253,340   

University of the Sciences Philadelphia, 5.00%, 11/01/30

     940        1,105,045   

University of the Sciences Philadelphia, 5.00%, 11/01/31

     775        907,362   

Widener University, Series A, 5.25%, 7/15/33

     1,580        1,800,189   

Widener University, Series A, 5.50%, 7/15/38

     385        438,969   

Pennsylvania State University, RB, 5.00%, 3/01/40

     1,000        1,122,450   

Philadelphia Authority for Industrial Development, Refunding RB, 1st Series, 5.00%, 4/01/45

     2,170        2,467,182   

Swarthmore Borough Authority, Refunding RB, Swarthmore College Project, 5.00%, 9/15/38

     830        967,000   

Township of East Hempfield Pennsylvania IDA, RB, Student Services, Inc., Student Housing Project at Millersville University of Pennsylvania:

    

5.00%, 7/01/35

     920        982,131   

5.00%, 7/01/45

     300        314,964   

5.00%, 7/01/47

     820        862,755   

Township of East Hempfield Pennsylvania IDA, Refunding RB, Willow Valley Communities Program (d):

    

5.00%, 12/01/31

     170        196,877   

5.00%, 12/01/39

     305        342,771   

University of Pittsburgh Pennsylvania, RB, Commonwealth System of Higher Educatoin Capital Project, Series B, 5.00%, 9/15/28

     610        683,877   
    

 

 

 
        37,772,061   

Health — 20.9%

  

County of Allegheny Pennsylvania Hospital Development Authority, RB, Health Center, UPMC Health, Series B (NPFGC), 6.00%, 7/01/26

     2,000        2,666,980   

County of Allegheny Pennsylvania Hospital Development Authority, Refunding RB, UPMC Health, Series A-1, 1.23%, 2/01/37 (a)

     2,500        2,360,700   

County of Berks Pennsylvania Municipal Authority, Refunding RB, Reading Hospital & Medical Center Project:

    

Series A, 5.00%, 11/01/40

     765        846,580   

Series A3, 5.50%, 11/01/31

     500        572,065   

County of Centre Pennsylvania Hospital Authority, RB, Mount Nittany Medical Center Project, 7.00%, 11/15/46

     2,410        2,920,510   

County of Cumberland Pennsylvania Municipal Authority, Refunding RB:

    

Asbury Pennsylvania Obligated Group, 5.25%, 1/01/41

     210        220,046   

Diakon Lutheran Social Ministries, 5.00%, 1/01/38

     2,600        2,852,720   

County of Dauphin Pennsylvania General Authority, Refunding RB, Pinnacle Health System Project, Series A, 6.00%, 6/01/29

     500        575,895   

County of Franklin Pennsylvania IDA, Refunding RB, Chambersburg Hospital Project, 5.38%, 7/01/42

     415        456,969   
Municipal Bonds   

Par  

(000)

    Value  

Pennsylvania (continued)

                

Health (continued)

  

County of Lancaster Pennsylvania Hospital Authority, Refunding RB, Masonic Villages of The Grand Lodge of Pennsylvania Project:

    

5.00%, 11/01/28

   $ 575      $ 686,889   

5.00%, 11/01/35

     425        486,944   

County of Lehigh Pennsylvania, RB, Lehigh Valley Health Network, Series A (AGM), 5.00%, 7/01/33

     7,995        8,514,275   

County of Montgomery Pennsylvania Higher Education & Health Authority, Refunding RB, Abington Memorial Hospital Obligated Group, Series A, 5.13%, 6/01/33

     490        533,571   

County of Montgomery Pennsylvania IDA, RB, Acts Retirement-Life Communities:

    

Series A, 4.50%, 11/15/36

     120        120,626   

Series A-1, 6.25%, 11/15/29

     235        266,610   

County of Montgomery Pennsylvania IDA, Refunding RB:

    

Acts Retirement-Life Communities, 5.00%, 11/15/27

     865        950,895   

Acts Retirement-Life Communities, 5.00%, 11/15/28

     555        608,247   

Whitemarsh Continuing Care Retirement Community, 5.25%, 1/01/40

     220        221,626   

County of Union Pennsylvania Hospital Authority, Refunding RB, Evangelical Community Hospital Project, 7.00%, 8/01/41

     460        548,361   

Geisinger Authority Pennsylvania, RB, Health System, Series A, 5.25%, 6/01/39

     1,000        1,103,070   

Lancaster IDA, Refunding RB, Garden Spot Village Project:

    

5.38%, 5/01/28

     520        578,328   

5.75%, 5/01/35

     865        967,537   

Pennsylvania Higher Educational Facilities Authority, RB, University of Pennsylvania Health System, Series A, 4.00%, 8/15/39

     7,815        8,148,544   

Pennsylvania Higher Educational Facilities Authority, Refunding RB, University of Pittsburgh Medical Center, Series E, 5.00%, 5/15/31

     1,000        1,118,030   

Philadelphia Hospitals & Higher Education Facilities Authority, RB, The Children’s Hospital of Philadelphia Project, Series C, 5.00%, 7/01/41

     940        1,057,434   

Philadelphia Hospitals & Higher Education Facilities Authority, Refunding RB, Presbyterian Medical Center, 6.65%, 12/01/19 (e)

     1,695        1,907,909   

South Fork Municipal Authority, Refunding RB, Conemaugh Valley Memorial Hospital, Series B (AGC), 5.38%, 7/01/20 (b)

     2,055        2,440,025   

Southcentral Pennsylvania General Authority, Refunding RB, Wellspan Health Obligation Group, Series A:

    

6.00%, 12/01/18 (b)

     595        678,592   

6.00%, 6/01/29

     655        729,624   
    

 

 

 
        45,139,602   

Housing — 7.4%

  

Pennsylvania HFA, RB:

    

Brinton Manor Apartments & Brinton Towers, M/F Housing, Series A, 4.25%, 10/01/35

     400        414,436   

Brinton Manor Apartments & Brinton Towers, M/F Housing, Series A, 4.50%, 10/01/40

     400        417,852   

S/F Housing Mortgage, Series 114-C, 3.65%, 10/01/37

     2,305        2,343,954   

S/F Housing Mortgage, Series 114-C, 3.70%, 10/01/42

     3,065        3,074,226   

S/F Housing Mortgage, Series 118B, 4.05%, 10/01/40

     1,000        1,031,690   
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    37


Schedule of Investments (continued)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

Municipal Bonds   

Par  

(000)

    Value  

Pennsylvania (continued)

                

Housing (continued)

  

Pennsylvania HFA, RB (continued):

    

S/F Housing Mortgage, Series 2015-117B, 4.05%, 10/01/40

   $ 1,600      $ 1,636,384   

Pennsylvania HFA, Refunding RB, S/F Housing Mortgage, AMT:

    

Series 096-A, 4.70%, 10/01/37

     735        740,094   

Series 097-A, 4.65%, 10/01/31

     1,300        1,316,510   

Series 099-A, 5.15%, 4/01/38

     1,065        1,145,322   

Series 115-A, 4.20%, 10/01/33

     750        802,838   

Philadelphia Housing Authority, RB, Capital Fund Program, M/F Housing, Series A (AGM), 5.50%, 12/01/18

     3,000        3,033,090   
    

 

 

 
        15,956,396   

State — 6.9%

  

Commonwealth of Pennsylvania, GO, 1st Series:

    

5.00%, 4/01/26

     1,385        1,656,972   

5.00%, 3/15/28

     825        918,258   

5.00%, 6/01/28

     4,460        5,216,550   

5.00%, 3/15/33

     1,775        2,070,449   

Pennsylvania Turnpike Commission, RB, Oil Franchise Tax, Remarketing, Series C (NPFGC), 5.00%, 12/01/32

     4,600        5,058,896   
    

 

 

 
        14,921,125   

Transportation — 14.7%

    

City of Philadelphia Pennsylvania, ARB, Series A:

    

5.00%, 6/15/40

     3,825        4,290,273   

AMT (AGM), 5.00%, 6/15/37

     5,900        6,158,243   

Delaware River Port Authority, RB:

    

5.00%, 1/01/29

     475        563,231   

5.00%, 1/01/37

     2,285        2,627,659   

Series D, 5.00%, 1/01/40

     750        835,957   

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

     1,560        1,740,055   

Pennsylvania Turnpike Commission, RB:

    

CAB, Sub-Series A-3, 0.00%, 12/01/42 (c)

     4,760        1,614,259   

CAB, Sub-Series A-3 (AGM), 0.00%, 12/01/40 (c)

     1,275        502,987   

Sub-Series A, 6.00%, 12/01/16 (b)

     800        837,528   

Sub-Series A, 5.13%, 12/01/26

     100        116,644   

Pennsylvania Turnpike Commission, Refunding RB:

    

Sub-Series A-1, 5.25%, 12/01/45

     3,270        3,772,141   

Sub-Series B (AGM), 5.25%, 6/01/39

     3,500        3,899,805   

Southeastern Pennsylvania Transportation Authority, RB, Capital Grant Receipts:

    

5.00%, 6/01/28

     1,860        2,131,951   

5.00%, 6/01/29

     2,465        2,817,939   
    

 

 

 
        31,908,672   

Utilities — 7.9%

  

City of Philadelphia Pennsylvania Gas Works, RB, 9th Series, 5.25%, 8/01/40

     1,700        1,908,828   

City of Philadelphia Pennsylvania Gas Works, Refunding RB:

    

5.00%, 8/01/30

     800        943,376   

5.00%, 8/01/31

     600        704,028   

5.00%, 8/01/32

     800        932,912   

5.00%, 8/01/33

     400        465,020   

5.00%, 8/01/34

     700        811,272   

City of Philadelphia Pennsylvania Water & Wastewater, RB:

    

Series A, 5.25%, 1/01/36

     800        881,344   

Series C (AGM), 5.00%, 8/01/40

     3,350        3,775,149   

County of Allegheny Pennsylvania Sanitary Authority, RB, Sewer Improvement (BAM), 5.25%, 12/01/41

     1,410        1,635,431   
Municipal Bonds   

Par  

(000)

    Value  

Pennsylvania (continued)

                

Utilities (continued)

  

County of Bucks Pennsylvania Water & Sewer Authority, RB, Water System (AGM), 5.00%, 12/01/41

   $ 30      $ 34,146   

County of Delaware Pennsylvania Regional Water Quality Control Authority, RB, Sewer Improvements, 5.00%, 5/01/33

     420        486,242   

Pennsylvania Economic Development Financing Authority, RB, Philadelphia Biosolids Facility, 6.25%, 1/01/32

     1,605        1,778,115   

Reading Area Water Authority Pennsylvania, RB (AGM), 5.00%, 6/01/17 (b)

     2,680        2,837,665   
    

 

 

 
        17,193,528   
Total Municipal Bonds in Pennsylvania        260,072,342   
    

Guam — 0.5%

                

State — 0.5%

  

Territory of Guam, RB, Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29

     955        1,065,541   
Total Municipal Bonds — 120.6%        261,137,883   
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (f)
       

Pennsylvania — 35.4%

                

Education — 9.3%

  

Pennsylvania Higher Educational Facilities Authority, RB, University of Pennsylvania Health System, Series A, 5.75%, 8/15/41

     5,120        6,040,371   

Pennsylvania Higher Educational Facilities Authority, Series AR, 4.00%, 6/15/38

     11,335        11,711,519   

University of Pittsburgh, RB, The Commonwealth System of Higher Education, Capital Project, Series B, 5.00%, 9/15/28

     2,202        2,468,736   
    

 

 

 
        20,220,626   

Health — 13.2%

  

 

Geisinger Authority Pennsylvania, RB, Health System:

    

Series A, 5.13%, 6/01/34

     3,000        3,304,320   

Series A, 5.25%, 6/01/39

     3,128        3,450,894   

Series A-1, 5.13%, 6/01/41

     7,430        8,273,062   

Pennsylvania Economic Development Financing Authority, RB, UPMC, Series B, 4.00%, 3/15/40

     8,000        8,264,720   

Philadelphia Hospitals & Higher Education Facilities Authority, RB, The Children’s Hospital of Philadelphia Project, Series C, 5.00%, 7/01/41

     4,680        5,264,673   
    

 

 

 
        28,557,669   

Housing — 1.5%

  

 

Pennsylvania HFA, Refunding RB, S/F Mortgage, Series 115A, AMT, 4.20%, 10/01/33

     3,000        3,211,350   

State — 11.4%

    

Commonwealth of Pennsylvania, GO, Series 1, 5.00%, 3/15/28

     5,203        5,791,555   

General Authority of Southcentral Pennsylvania, Refunding RB, Wellspan Health Obligated Group, Series A, 5.00%, 6/01/44

     7,000        7,910,070   
 

 

See Notes to Financial Statements.

 

                
38    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Schedule of Investments (continued)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (f)
  

Par  

(000)

    Value  

Pennsylvania (continued)

                

State (continued)

    

Pennsylvania Turnpike Commission, RB, Oil Franchise Tax, Senior Series C (NPFGC), 5.00%, 12/01/32

   $ 10,000      $ 10,997,600   
    

 

 

 
        24,699,225   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 35.4%
        76,688,870   
Total Long-Term Investments
(Cost — $312,407,198) — 156.0%
        337,826,753   
Short-Term Securities    Shares     Value  

BlackRock Liquidity Funds, MuniCash, 0.02% (g)(h)

     2,442,032      $ 2,442,032   
Total Short-Term Securities
(Cost — $2,442,032) — 1.1%
        2,442,032   
Total Investments (Cost — $314,849,230) — 157.1%        340,268,785   
Liabilities in Excess of Other Assets — (0.5)%        (1,095,036

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (18.5)%

   

    (40,031,662
VRDP Shares, at Liquidation Value — (38.1)%        (82,600,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 216,542,087   
    

 

 

 
 
Notes to Schedule of Investments

 

(a)   Variable rate security. Rate as of period end.

 

(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)   When-issued security.

 

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

 

(f)   Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details.

 

(g)   During the six months ended January 31, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate      Shares Held
at July 31,
2015
       Net
Activity
       Shares Held
at January 31,
2016
       Income  

BlackRock Liquidity Funds, MuniCash

                 2,442,032           2,442,032         $ 162   

BlackRock Pennsylvania Municipal Money Fund

       383,495           (383,495                $ 12   

FFI Institutional Tax Exempt Fund

                                   $ 33   

 

(h)   Current yield as of period end.

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.

 

Derivative Financial Instruments Outstanding as of Period End      

Financial Futures Contracts

 

Contracts
Short
    Issue      Expiration      Notional
Value
       Unrealized
Depreciation
      
  (30   5-Year U.S. Treasury Note      March 2016      $ 3,620,156         $ (55,039  
  (47   10-Year U.S. Treasury Note      March 2016      $ 6,090,172           (139,390  
  (15   Long U.S. Treasury Bond      March 2016      $ 2,415,469           (86,628  
  (4   Ultra U.S. Treasury Bond      March 2016      $ 664,750           (26,083    
  Total                     $ (307,140  
                

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

       

Credit

Contracts

  

Equity

Contracts

  

Foreign

Currency

Exchange

Contracts

  

Interest

Rate

Contracts

     Other
Contracts
   Total  
Liabilities — Derivative Financial Instruments                

Financial futures contracts

    Net unrealized depreciation 1              $ 307,140          $ 307,140   

1    Includes cumulative appreciation (depreciation) on financial futures contracts, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

        

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    39


Schedule of Investments (concluded)

  

BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

For the six months ended January 31, 2016, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

     Commodity
Contracts
   Credit
Contracts
   Equity
Contracts
   Foreign
Currency
Exchange
Contracts
   Interest
Rate
Contracts
     Other
Contacts
   Total  
Net Realized Gain (Loss) From:              

Financial futures contracts

              $ (126,789       $ (126,789

Net Change in Unrealized Appreciation (Depreciation) on:

                   

Financial futures contracts

              $ (277,750       $ (277,750

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Financial futures contracts:        

Average notional value of contracts — short

  $ 9,458,113   

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 337,826,753              $ 337,826,753   

Short-Term Securities

  $ 2,442,032                          2,442,032   
 

 

 

 

Total

  $ 2,442,032         $ 337,826,753              $ 340,268,785   
 

 

 

 

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

       

                
     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2                 

Liabilities:

                

Interest rate contracts

  $ (307,140                     $ (307,140

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 period end, 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

  $ 169,800                        $ 169,800   

Liabilities:

                

TOB Trust Certificates

            $ (40,028,345             (40,028,345

VRDP Shares

              (82,600,000             (82,600,000
 

 

 

 

Total

  $ 169,800         $ (122,628,345           $ (122,458,545
 

 

 

 

During the period ended January 31, 2016, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
40    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Statements of Assets and Liabilities     

 

January 31, 2016 (Unaudited)   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
Pennsylvania
Quality
Fund
(MPA)
 
         
Assets                                        

Investments at value — unaffiliated1

  $ 1,078,265,185      $ 764,538,326      $ 203,566,546      $ 743,537,160      $ 337,826,753   

Investments at value — affiliated2

    1,830,586        7,070,011        1,071,269        14,539,075        2,442,032   

Cash

                         11,792,083          

Cash pledged for financial futures contracts

    366,500        344,000        106,550        283,950        169,800   
Receivables:          

Interest

    15,926,685        5,645,480        2,156,586        8,001,939        3,249,696   

Investments sold

           480,610        1,030,315        8,358,269        1,810,358   

TOB Trust

                         5,002,060          

Deferred offering costs

           519,712               448,234        285,937   

Prepaid expenses

    24,869        18,840        7,260        18,120        9,923   
 

 

 

 

Total assets

    1,096,413,825        778,616,979        207,938,526        791,980,890        345,794,499   
 

 

 

 
         
Accrued Liabilities                                        

Variation margin payable on financial futures contracts

    111,517        109,954        33,914        90,001        53,594   

Bank overdraft

    42,983                               
Payables:          

Investments purchased

    7,483,412               699,126        36,302,540        5,345,879   

Income dividends — Common Shares

    2,767,668        2,231,386        601,596        2,040,901        954,694   

Investment advisory fees

    473,199        327,766        87,059        308,887        140,569   

Officer’s and Directors’ fees

    251,782        3,771        1,244        1,326        8,108   

Other accrued expenses

    168,217        118,168        70,751        18,988        80,198   

Interest expense and fees

    24,435        9,625        4,036        5,431        3,604   

Reorganization costs

           24,531                      37,421   
 

 

 

 

Total accrued liabilities

    11,323,213        2,825,201        1,497,726        38,768,074        6,624,067   
 

 

 

 
         
Other Liabilities                                        

TOB Trust Certificates

    169,698,729        52,743,580        20,184,337        51,227,057        40,028,345   

VRDP Shares, at liquidation value of $100,000 per share3,4

           237,100,000               231,900,000        82,600,000   

VMTP Shares, at liquidation value of $100,000 per share3,4

    254,000,000               56,500,000                 
 

 

 

 

Total other liabilities

    423,698,729        289,843,580        76,684,337        283,127,057        122,628,345   
 

 

 

 

Total liabilities

    435,021,942        292,668,781        78,182,063        321,895,131        129,252,412   
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 661,391,883      $ 485,948,198      $ 129,756,463      $ 470,085,759      $ 216,542,087   
 

 

 

 
         
Net Assets Applicable to Common Shareholders Consist of                                        

Paid-in capital5,6

  $ 585,933,933      $ 424,146,641      $ 117,993,390      $ 423,641,055      $ 197,882,397   

Undistributed net investment income

    5,415,728        5,082,532        1,828,898        2,206,603        717,366   

Accumulated net realized loss

    (7,690,286     (8,059,311     (11,699,374     (12,053,582     (7,170,091

Net unrealized appreciation (depreciation)

    77,732,508        64,778,336        21,633,549        56,291,683        25,112,415   
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 661,391,883      $ 485,948,198      $ 129,756,463      $ 470,085,759      $ 216,542,087   
 

 

 

 

Net asset value per Common Share

  $ 16.13      $ 16.12      $ 15.31      $ 15.89      $ 16.22   
 

 

 

 

1    Investments at cost — unaffiliated

  $ 999,909,107      $ 699,148,065      $ 181,730,586      $ 686,736,994      $ 312,407,198   

2    Investments at cost — affiliated

  $ 1,830,586      $ 7,070,011      $ 1,071,269      $ 14,539,075      $ 2,442,032   

3    Preferred Shares outstanding:

         

Par value $0.05 per share

                  565               826   

Par value $0.10 per share

    2,540        2,371               2,319          

4    Preferred Shares authorized

    18,140        9,847        1,000,000        8,046        1,000,000   

5    Common Shares outstanding, par value $0.10 per share

    41,002,483        30,153,865        8,473,184        29,578,269        13,352,365   

6    Common Shares authorized

    199,981,860        199,990,153        unlimited        199,991,954        unlimited   

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    41


Statements of Operations     

 

Six Months Ended January 31, 2016 (Unaudited)   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
Pennsylvania
Quality
Fund
(MPA)
 
         
Investment Income                                        

Interest — unaffiliated

  $ 21,064,181      $ 16,400,538      $ 4,541,697      $ 13,952,117      $ 6,902,247   

Dividends — affiliated

    7        511        144        263        207   
 

 

 

 

Total income

    21,064,188        16,401,049        4,541,841        13,952,380        6,902,454   
 

 

 

 
         
Expenses                                        

Investment advisory

    2,957,600        1,917,245        510,894        1,646,498        816,592   

Professional

    70,693        60,749        30,566        22,968        49,704   

Accounting services

    66,035        52,774        17,692        53,762        27,433   

Reorganization costs

                         205,002          

Transfer agent

    20,262        19,155        10,881        20,433        15,118   

Officer and Directors

    23,229        21,488        5,923        18,420        9,359   

Custodian

    21,735        16,398        5,732        13,597        9,543   

Printing

    6,466        5,298        3,153        11,029        4,065   

Registration

    6,453        3,780        3,779        3,780        4,506   

Liquidity fees

           12,173                        

Remarketing fees on Preferred Shares

           11,954                        

Rating agency

    18,113        18,042        17,963        18,031        17,984   

Miscellaneous

    26,384        25,590        15,643        35,715        20,628   
 

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    3,216,970        2,164,646        622,226        2,049,235        974,932   

Interest expense, fees and amortization of offering costs1

    1,742,913        1,281,709        361,596        1,082,701        514,620   
 

 

 

 

Total expenses

    4,959,883        3,446,355        983,822        3,131,936        1,489,552   

Less fees waived by the Manager

    (191,472     (358     (2     (134     (554
 

 

 

 

Total expenses after fees waived

    4,768,411        3,445,997        983,820        3,131,802        1,488,998   
 

 

 

 

Net investment income

    16,295,777        12,955,052        3,558,021        10,820,578        5,413,456   
 

 

 

 
         
Realized and Unrealized Gain (Loss)                                        

Net realized gain (loss) from:

         

Investments

    1,502,272        126,112        125,889        1,931,289        282,605   

Financial futures contracts

    (36,079     (158,668     (73,716     97,313        (126,789
 

 

 

 
    1,466,193        (32,556     52,173        2,028,602        155,816   
 

 

 

 
Net change in unrealized appreciation (depreciation) on:          

Investments

    13,922,437        16,140,614        3,247,954        12,322,528        6,430,164   

Financial futures contracts

    (569,678     (455,245     (187,745     (438,034     (277,750
 

 

 

 
    13,352,759        15,685,369        3,060,209        11,884,494        6,152,414   
 

 

 

 

Net realized and unrealized gain

    14,818,952        15,652,813        3,112,382        13,913,096        6,308,230   
 

 

 

 

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ 31,114,729      $ 28,607,865      $ 6,670,403      $ 24,733,674      $ 11,721,686   
 

 

 

 

1   Related to TOB Trusts, VRDP and/or VMTP Shares.

      

 

 

See Notes to Financial Statements.      
                
42    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Statements of Changes in Net Assets     

 

    BlackRock MuniHoldings California
Quality Fund, Inc. (MUC)
        BlackRock MuniHoldings New
Jersey Quality Fund, Inc. (MUJ)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended
July 31,
2015
        Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended
July 31,
2015
 
         
Operations                                    

Net investment income

  $ 16,295,777      $ 31,891,095        $ 12,955,052      $ 20,128,100   

Net realized gain (loss)

    1,466,193        4,449,083          (32,556     (30,115

Net change in unrealized appreciation (depreciation)

    13,352,759        (4,739,523       15,685,369        (5,936,701
 

 

 

     

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    31,114,729        31,600,655          28,607,865        14,161,284   
 

 

 

     

 

 

 
         
Distributions to Common Shareholders1                                    

From net investment income

    (16,620,151     (33,540,031       (13,606,057     (19,867,803
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Net proceeds from the issuance of common shares due to reorganization

                           141,228,164   
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase (decrease) in net assets applicable to Common Shareholders

    14,494,578        (1,939,376       15,001,808        135,521,645   

Beginning of period

    646,897,305        648,836,681          470,946,390        335,424,745   
 

 

 

     

 

 

 

End of period

  $ 661,391,883      $ 646,897,305        $ 485,948,198      $ 470,946,390   
 

 

 

     

 

 

 

Undistributed net investment income, end of period

  $ 5,415,728      $ 5,740,102        $ 5,082,532      $ 5,733,537   
 

 

 

     

 

 

 

1    Distributions for annual periods determined in accordance with federal income tax regulations.

       

       

 

    BlackRock MuniYield Investment
Quality Fund (MFT)
        BlackRock MuniYield Michigan
Quality Fund, Inc. (MIY)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended
July 31,
2015
        Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended
July 31,
2015
 
         
Operations                                    

Net investment income

  $ 3,558,021      $ 7,103,506        $ 10,820,578      $ 15,097,053   

Net realized gain

    52,173        13,364          2,028,602        1,743,414   

Net change in unrealized appreciation (depreciation)

    3,060,209        1,150,981          11,884,494        3,262,712   
 

 

 

     

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    6,670,403        8,267,851          24,733,674        20,103,179   
 

 

 

     

 

 

 
         
Distributions to Common Shareholders1                                    

From net investment income

    (3,609,576     (7,219,153       (10,460,427     (15,712,311
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Net proceeds from the issuance of common shares due to reorganization

                    173,278,358          
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase in net assets applicable to Common Shareholders

    3,060,827        1,048,698          187,551,605        4,390,868   

Beginning of period

    126,695,636        125,646,938          282,534,154        278,143,286   
 

 

 

     

 

 

 

End of period

  $ 129,756,463      $ 126,695,636        $ 470,085,759      $ 282,534,154   
 

 

 

     

 

 

 

Undistributed net investment income, end of period

  $ 1,828,898      $ 1,880,453        $ 2,206,603      $ 1,782,557   
 

 

 

     

 

 

 

 

  1   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    43


Statements of Changes in Net Assets     

 

    BlackRock MuniYield Pennsylvania
Quality Fund (MPA)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended
July 31,
2015
 
   
Operations                

Net investment income

  $ 5,413,456      $ 9,735,486   

Net realized gain

    155,816        338,698   

Net change in unrealized appreciation (depreciation)

    6,152,414        (245,483
 

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    11,721,686        9,828,701   
 

 

 

 
   
Distributions to Common Shareholders1                

From net investment income

    (5,728,165     (10,405,017
 

 

 

 
   
Capital Share Transactions                

Net proceeds from the issuance of common shares due to reorganization

           29,666,266   
 

 

 

 
   
Net Assets Applicable to Common Shareholders                

Total increase in net assets applicable to Common Shareholders

    5,993,521        29,089,950   

Beginning of period

    210,548,566        181,458,616   
 

 

 

 

End of period

  $ 216,542,087      $ 210,548,566   
 

 

 

 

Undistributed net investment income, end of period

  $ 717,366      $ 1,032,075   
 

 

 

 

 

  1   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
44    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Statements of Cash Flows     

 

Six Months Ended January 31, 2016 (Unaudited)   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
Pennsylvania
Quality
Fund
(MPA)
 
         
Cash Provided by (Used for) Operating Activities                                        

Net increase in net assets resulting from operations

  $ 31,114,729      $ 28,607,865      $ 6,670,403      $ 24,733,674      $ 11,721,686   

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities:

         

Proceeds from sales of long-term investments

    124,635,584        45,322,181        17,143,186        80,120,740 1      18,866,134   

Purchases of long-term investments

    (132,151,204     (48,009,893     (19,262,371     (68,804,266 )1      (31,108,588

Net proceeds from sales (purchases) of short-term securities

    (1,325,139     4,116,587        1,365,758        (12,665,616     (2,058,537

Net realized gain on investments

    (1,545,255     (126,112     (125,889     (1,931,289     (282,605

Net unrealized appreciation on investments

    (13,922,437     (16,140,614     (3,247,954     (12,341,223     (6,430,164

Amortization of premium and accretion of discount on investments

    3,225,561        (45,060     320,160        1,021,110        249,756   

(Increase) decrease in assets:

         

Cash pledged for financial futures contracts

    (197,750     70,000        19,000        (72,450 )1      (94,200

Interest receivable

    (1,442,055     127,022        35,245        666,033 1      (87,843

Prepaid expenses

    9,961        10,180        19,070        10,075 1      17,723   

Increase (decrease) in liabilities:

         

Payables:

         

Investment advisory fees

    11,227        6,478        1,319        (47,774 )1      8,887   

Officer’s and Directors’ fees

    (5,437     (1,456     (248     (3,501 )1      (928

Other accrued expenses

    9,428        2,490        (943     (135,333 )1      29,802   

Interest expense and fees

    (4,638     (6,185     (1,899     (38,034 )1      (682

Reorganization costs

           (267,605            (180,904 )1      (188,233

Variation margin payable on financial futures contracts

    37,298        (69,421     (21,305     39,688 1      20,344   
 

 

 

 

Net cash provided by (used for) operating activities

    8,449,873        13,596,457        2,913,532        10,370,930        (9,337,448
 

 

 

 
         
Cash Provided by (Used for) Financing Activities                                        

Proceeds from TOB Trust Certificates

    19,382,970               810,977        7,945,000        15,060,000   

Repayments of TOB Trust Certificates

    (11,255,675            (114,933              

Cash distributions paid to Common Shareholders

    (16,620,151     (13,606,057     (3,609,576     (10,895,197 )1      (5,728,165

Increase in bank overdraft

    42,983                               

Amortization of deferred offering costs

           9,600               8,077 1      5,613   
 

 

 

 

Net cash provided by (used for) financing activities

    (8,449,873     (13,596,457     (2,913,532     (2,942,120     9,337,448   
 

 

 

 
         
Cash                                        

Net increase in cash

                         7,428,810          

Cash at beginning of period

                         4,363,273 2        
 

 

 

 

Cash at end of period

                         11,792,083          
 

 

 

 
         
Supplemental Disclosure of Cash Flow Information                                        

Cash paid during the period for interest expense

  $ 1,747,551      $ 1,278,294      $ 363,495      $ 1,104,581      $ 509,689   
 

 

 

 
         
Non-Cash Financing Activities                                   

Fair Value of investments acquired in reorganization

                       $ 268,842,773          

Common Shares issued in reorganization

                       $ 173,278,358          

Preferred Shares issued in reorganization

                       $ 87,300,000          
 

 

 

 

 

  1  

Includes assets and liabilities acquired in reorganization.

 

  2  

Includes cash acquired in reorganization of $4,363,273.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    45


Financial Highlights    BlackRock MuniHoldings California Quality Fund, Inc.  (MUC)

 

    Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended July 31,  
      2015     2014     2013     2012     2011  
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 15.78      $ 15.82      $ 14.52      $ 16.41      $ 14.27      $ 14.55   
 

 

 

 

Net investment income1

    0.40        0.78        0.82        0.86        0.95        0.97   

Net realized and unrealized gain (loss)

    0.36        (0.00 )2      1.34        (1.82     2.13        (0.33

Distributions to AMPS Shareholders from net investment income

                                (0.01     (0.02
 

 

 

 

Net increase (decrease) from investment operations

    0.76        0.78        2.16        (0.96     3.07        0.62   
 

 

 

 

Distributions to Common Shareholders from net investment income3

    (0.41     (0.82     (0.86     (0.93     (0.93     (0.90
 

 

 

 

Net asset value, end of period

  $ 16.13      $ 15.78      $ 15.82      $ 14.52      $ 16.41      $ 14.27   
 

 

 

 

Market price, end of period

  $ 15.05      $ 14.28      $ 14.04      $ 13.31      $ 16.36      $ 13.15   
 

 

 

 
           
Total Return Applicable to Common Shareholders4                                                

Based on net asset value

    5.07% 5      5.52%        15.94%        (6.16)%        22.26%        4.88%   
 

 

 

 

Based on market price

    8.33% 5      7.60%        12.25%        (13.71)%        32.27%        0.16%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses

    1.52% 6      1.47%        1.57%        1.64%        1.48% 7      1.38% 7 
 

 

 

 

Total expenses after fees waived

    1.46% 6      1.45%        1.51%        1.56%        1.39% 7      1.25% 7 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs8

    0.93% 6      0.93%        0.93%        0.92%        1.01% 7,9      1.02% 7 
 

 

 

 

Net investment income

    4.98% 6      4.88%        5.44%        5.27%        6.14% 7      6.93% 7 
 

 

 

 

Distributions to AMPS Shareholders

                                0.06%        0.16%   
 

 

 

 

Net investment income to Common Shareholders

    4.98% 6      4.88%        5.44%        5.27%        6.08%        6.77%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of period (000)

  $ 661,392      $ 646,897      $ 648,837      $ 595,269      $ 671,077      $ 583,400   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of period (000)

                                     $ 254,000   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period (000)

                                     $ 82,421   
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 254,000      $ 254,000      $ 254,000      $ 254,000      $ 254,000          
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of period

  $ 360,391      $ 354,684      $  355,448      $  334,358      $  364,204          
 

 

 

 

Borrowings outstanding, end of period (000)

  $  169,699      $  161,571      $ 88,271      $ 172,316      $ 185,775      $  179,443   
 

 

 

 

Portfolio turnover rate

    11%        25%        25%        34%        46%        24%   
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Amount is greater than $(0.005) per share.

 

  3   

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 distributions.

 

  5   

Aggregate total return.

 

  6   

Annualized.

 

  7   

Does not reflect the effect of distributions to AMPS Shareholders.

 

  8   

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VMTP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  9   

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.      
                
46    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


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

 

    Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended July 31,  
      2015     2014     2013     2012     2011  
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 15.62      $ 15.74      $ 14.51      $ 16.54      $ 14.73      $ 15.19   
 

 

 

 

Net investment income1

    0.43        0.84        0.86        0.86        0.83        0.93   

Net realized and unrealized gain (loss)

    0.52        (0.07     1.27        (2.00     1.87        (0.47

Distributions to AMPS Shareholders from net investment income

                                       (0.03
 

 

 

 

Net increase (decrease) from investment operations

    0.95        0.77        2.13        (1.14     2.70        0.43   
 

 

 

 
Distributions to Common Shareholders:2            

From net investment income

    (0.45     (0.89     (0.89     (0.89     (0.89     (0.89

From net realized gain

                  (0.01                     
 

 

 

 

Total distributions to Common Shareholders

    (0.45     (0.89     (0.90     (0.89     (0.89     (0.89
 

 

 

 

Net asset value, end of period

  $ 16.12      $ 15.62      $ 15.74      $ 14.51      $ 16.54      $ 14.73   
 

 

 

 

Market price, end of period

  $ 14.49      $ 13.55      $ 14.11      $ 13.30      $ 16.05      $ 13.74   
 

 

 

 
           
Total Return Applicable to Common Shareholders3                                                

Based on net asset value

    6.56% 4      5.59%        15.79%        (7.19)%        18.96%        3.28%   
 

 

 

 

Based on market price

    10.42% 4      2.18%        13.24%        (12.33)%        23.76%        (2.77)%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses

    1.45% 5      1.62% 6      1.64%        1.61%        1.81%        1.21% 7 
 

 

 

 

Total expenses after fees waived and/or reimbursed

    1.45% 5      1.57% 6      1.57%        1.58%        1.78%        1.17% 7 
 

 

 

 

Total expenses after fees waived and/or reimbursed and excluding interest expense, fees and amortization of offering costs8

    0.91% 5,9      1.02% 6,9      1.25% 9      1.33% 9      1.43% 9      1.11% 7 
 

 

 

 

Net investment income

    5.45% 5      5.27% 6      5.78%        5.28%        5.28%        6.36% 7 
 

 

 

 

Distributions to AMPS Shareholders

                                       0.21%   
 

 

 

 

Net investment income to Common Shareholders

    5.45% 5      5.27%        5.78%        5.28%        5.28%        6.15%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable Common Shareholders, end of period (000)

  $ 485,948      $ 470,946      $ 335,425      $ 309,165      $ 351,837      $ 313,084   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 237,100      $ 237,100      $ 172,700      $ 172,700      $ 172,700      $ 172,700   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $  304,955      $  298,628      $  294,224      $  279,019      $  303,727      $  281,288   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 52,744      $ 52,744      $ 34,699      $ 38,231      $ 29,719      $ 13,263   
 

 

 

 

Portfolio turnover rate

    6%        10%        16%        10%        17%        12%   
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

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 distributions.

 

  4   

Aggregate total return.

 

  5   

Annualized.

 

  6   

Includes reorganization costs associated with the Fund’s reorganization. Without these costs, total expenses, total expenses, after fees waived and/or reimbursed, and total expenses after fees waived and/or reimbursed and excluding interest expense, fees and amortization of offering costs would have been 1.52%, 1.50% and 0.95%, respectively.

 

  7   

Does not reflect the effect of distributions to AMPS Shareholders.

 

  8   

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  9   

For the six months ended July 31, 2016 and the years ended July 31, 2015, July 31, 2014, July 31, 2013 and July 31, 2012, the total expense ratio after fees waived and/or reimbursed and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.90%, 1.01%, 0.95%, 0.93% and 1.01%, respectively.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    47


Financial Highlights    BlackRock MuniYield Investment Quality Fund (MFT)

 

    Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended July 31,  
      2015     2014     2013     2012     2011  
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 14.95      $ 14.83      $ 13.61      $ 15.73      $ 13.40      $ 13.87   
 

 

 

 

Net investment income1

    0.42        0.84        0.85        0.84        0.87        0.91   

Net realized and unrealized gain (loss)

    0.37        0.13        1.22        (2.11     2.32        (0.49

Distributions to AMPS Shareholders from net investment income

                                (0.01     (0.04
 

 

 

 

Net increase (decrease) from investment operations

    0.79        0.97        2.07        (1.27     3.18        0.38   
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.43     (0.85     (0.85     (0.85     (0.85     (0.85
 

 

 

 

Net asset value, end of period

  $ 15.31      $ 14.95      $ 14.83      $ 13.61      $ 15.73      $ 13.40   
 

 

 

 

Market price, end of period

  $ 14.41      $ 13.37      $ 13.26      $ 12.20      $ 15.47      $ 12.39   
 

 

 

 
           
Total Return Applicable to Common Shareholders3                                                

Based on net asset value

    5.53% 4      7.25%        16.40%        (8.41)%        24.51%        3.20%   
 

 

 

 

Based on market price

    11.13% 4      7.27%        16.10%        (16.52)%        32.43%        (7.32)%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses

    1.54% 6      1.56%        1.67%        1.72%        1.58% 5      1.23% 5 
 

 

 

 

Total expenses after fees waived

    1.54% 6      1.56%        1.67%        1.72%        1.58% 5      1.23% 5 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs7

    0.97% 6      0.98%        1.00%        1.00%        1.08% 5,8      1.11% 5 
 

 

 

 

Net investment income

    5.56% 6      5.52%        6.04%        5.36%        5.94% 5      6.91% 5 
 

 

 

 

Distributions to AMPS Shareholders

                                0.08%        0.28%   
 

 

 

 

Net investment income to Common Shareholders

    5.56% 6      5.52%        6.04%        5.36%        5.86%        6.63%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of period (000)

  $ 129,756      $ 126,696      $ 125,647      $ 115,287      $ 133,160      $  113,423   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of period (000)

                                     $ 56,525   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period (000)

                                     $ 75,165   
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 56,500      $ 56,500      $ 56,500      $ 56,500      $ 56,500          
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of period

  $  329,657      $  324,240      $  322,384      $  304,049      $  335,681          
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 20,184      $ 19,488      $ 20,284      $ 28,192      $ 34,106      $ 15,680   
 

 

 

 

Portfolio turnover rate

    9%        13%        32%        51%        43%        29%   
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

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 distributions.

 

  4   

Aggregate total return.

 

  5   

Does not reflect the effect of distributions to AMPS Shareholders.

 

  6   

Annualized.

 

  7   

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VMTP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  8   

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.      
                
48    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Financial Highlights    BlackRock MuniYield Michigan Quality Fund, Inc.  (MIY)

 

    Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended July 31,  
      2015     2014     2013     2012     2011  
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 15.48      $ 15.24      $ 14.16      $ 16.18      $ 14.63      $ 14.92   
 

 

 

 

Net investment income1

    0.40        0.83        0.86        0.90        0.87        0.93   

Net realized and unrealized gain (loss)

    0.44        0.27        1.12        (2.00     1.61        (0.26

Distributions to AMPS Shareholders from net investment income

                                       (0.04
 

 

 

 

Net increase (decrease) from investment operations

    0.84        1.10        1.98        (1.10     2.48        0.63   
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.43     (0.86     (0.90     (0.92     (0.93     (0.92
 

 

 

 

Net asset value, end of period

  $ 15.89      $ 15.48      $ 15.24      $ 14.16      $ 16.18      $ 14.63   
 

 

 

 

Market price, end of period

  $ 14.20      $ 13.22      $ 13.47      $ 12.57      $ 16.05      $ 13.39   
 

 

 

 
           
Total Return Applicable to Common Shareholders3                                                

Based on net asset value

    5.83% 4      8.08%        15.24%        (7.09)%        17.60%        4.78%   
 

 

 

 

Based on market price

    10.81% 4      4.43%        14.74%        (16.86)%        27.46%        (1.67)%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses

    1.49% 5,6      1.52%        1.54%        1.50%        1.72%        1.37% 7 
 

 

 

 

Total expenses after fees waived and/or reimbursed

    1.49% 5,6      1.48%        1.54%        1.50%        1.72%        1.36% 7 
 

 

 

 

Total expenses after fees waived and/or reimbursed and excluding interest expense, fees and amortization of offering costs8

    0.98% 5,6      0.93%        0.93%        0.89%        1.38% 9      1.23% 7 
 

 

 

 

Net investment income

    5.15% 5      5.30%        5.94%        5.62%        5.65%        6.48% 7 
 

 

 

 

Distributions to AMPS Shareholders

                                       0.25%   
 

 

 

 

Net investment income to Common Shareholders

    5.15% 5      5.30%        5.94%        5.62%        5.65%        6.23%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of period (000)

  $ 470,086      $ 282,534      $ 278,143      $ 258,341      $ 294,804      $ 266,326   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $  231,900      $  144,600      $  144,600      $  144,600      $  144,600      $  144,600   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 302,711      $ 295,390      $ 292,354      $ 278,659      $ 303,876      $ 284,181   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 51,227      $ 23,487      $ 23,487      $ 34,876      $ 29,568      $ 16,190   
 

 

 

 

Portfolio turnover rate

    14%        19%        16%        17%        19%        16%   
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

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 distributions.

 

  4   

Aggregate total return.

 

  5   

Annualized.

 

  6   

Includes reorganization costs associated with the Fund’s reorganization. Without these costs total expenses, total expenses after fees waived and/or reimbursed, and total expenses after fees waived and/or reimbursed and excluding interest expense, fees and amortization of offering costs would have been 1.39%, 1.39% and 0.88%, respectively.

 

  7   

Does not reflect the effect of distributions to AMPS Shareholders.

 

  8   

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  9   

For the year ended July 31, 2012, the total expense ratio after fees waived and/or reimbursed and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.98%.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    49


Financial Highlights    BlackRock MuniYield Pennsylvania Quality Fund (MPA)

 

    Six Months Ended
January 31,
2016
(Unaudited)
    Year Ended July 31,  
      2015     2014     2013     2012     2011  
           
Per Share Operating Performance                                                

Net asset value, beginning of period

  $ 15.77      $ 15.77      $ 14.59      $ 16.57      $ 14.97      $ 15.38   
 

 

 

 

Net investment income1

    0.41        0.81        0.87        0.90        0.85        0.92   

Net realized and unrealized gain (loss)

    0.47        0.07        1.20        (1.99     1.66        (0.38

Distributions to AMPS Shareholders from net investment income

                                       (0.03
 

 

 

 

Net increase (decrease) from investment operations

    0.88        0.88        2.07        (1.09     2.51        0.51   
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.43     (0.88     (0.89     (0.89     (0.91     (0.92
 

 

 

 

Net asset value, end of period

  $ 16.22      $ 15.77      $ 15.77      $ 14.59      $ 16.57      $ 14.97   
 

 

 

 

Market price, end of period

  $ 15.02      $ 13.50      $ 13.89      $ 13.07      $ 15.98      $ 13.94   
 

 

 

 
           
Total Return Applicable to Common Shareholders3                                                

Based on net asset value

    6.00% 4      6.33%        15.39%        (6.78)%        17.34%        3.84%   
 

 

 

 

Based on market price

    14.66% 4      3.34%        13.45%        (13.42)%        21.53%        (2.55)%   
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses

    1.40% 5      1.54% 6      1.48%        1.53%        1.65%        1.37% 7 
 

 

 

 

Total expenses after fees waived and/or reimbursed

    1.40% 5      1.45% 6      1.48%        1.53%        1.65%        1.36% 7 
 

 

 

 

Total expenses after fees waived and/or reimbursed and excluding interest expense, fees and amortization of offering costs8

    0.91% 5      0.96% 6      0.95%        0.94%        1.28% 9      1.14% 7 
 

 

 

 

Net investment income

    5.08% 5      5.05%        5.79%        5.46%        5.38%        6.24% 7 
 

 

 

 

Distributions to AMPS Shareholders

                                       0.18%   
 

 

 

 

Net investment income to Common Shareholders

    5.08% 5      5.05%        5.79%        5.46%        5.38%        6.06%   
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of period (000)

  $ 216,542      $ 210,549      $ 181,459      $ 167,857      $ 190,562      $ 171,938   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 82,600      $ 82,600      $ 66,300      $ 66,300      $ 66,300      $ 66,300   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $  362,157      $  354,901      $  373,693      $  353,178      $  387,425      $  359,333   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 40,028      $ 28,468      $ 37,066      $ 53,010      $ 50,860      $ 33,765   
 

 

 

 

Portfolio turnover rate

    6%        21%        16%        8%        23%        11%   
 

 

 

 

 

  1   

Based on average Common Shares outstanding.

 

  2   

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3   

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 distributions.

 

  4   

Aggregate total return.

 

  5   

Annualized.

 

  6   

Includes reorganization costs associated with the Fund’s reorganization. Without these costs, total expenses, total expenses after fees waived and/or reimbursed, and total expenses after fees waived and/or reimbursed and excluding interest expense, fees and amortization of offering costs would have been 1.40%, 1.40% and 0.91%, respectively.

 

  7   

Does not reflect the effect of distributions to AMPS Shareholders.

 

  8   

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  9   

For the year ended July 31, 2012, the total expense ratio after fees waived and/or reimbursed and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.99%.

 

 

See Notes to Financial Statements.      
                
50    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (Unaudited)     

 

1. Organization:

The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end management investment companies and are referred to herein collectively as the “Funds”, or individually, a “Fund”:

 

Fund Name   Herein Referred To As    Organized    Diversification
Classification

BlackRock MuniHoldings California Quality Fund, Inc.

  MUC    Maryland    Non-diversified

BlackRock MuniHoldings New Jersey Quality Fund, Inc.

  MUJ    Maryland    Non-diversified

BlackRock MuniYield Investment Quality Fund, Inc.

  MFT    Massachusetts    Non-diversified

BlackRock MuniYield Michigan Quality Fund, Inc.

  MIY    Maryland    Non-diversified

BlackRock MuniYield Pennsylvania Quality Fund, Inc.

  MPA    Massachusetts    Non-diversified

The Boards of Directors/Trustees of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board,” and the directors 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.

The Funds, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of closed-end funds referred to as the Closed-End Complex.

Reorganizations: The Board and shareholders of MIY and the Board and shareholders of BlackRock MuniYield Michigan Quality Fund II, Inc. (“MYM”) approved the reorganizations of MYM into MIY. As a result, MIY acquired substantially all of the assets and assumed substantially all of the liabilities of MYM in exchange for an equal aggregate value of newly-issued Common Shares and Preferred Shares of MIY.

Each MYM Common Shareholder received Common Shares of MIY in an amount equal to the aggregate NAV of such Common Shareholder’s MYM Common Shares, as determined at the close of business on September 11, 2015, less the costs of MYM’s reorganization. Cash was distributed for any fractional Common Shares.

Each MYM VRDP Shareholder received on a one-for-one basis one newly issued VRDP Share of MIY, par value $0.10 per share and with a liquidation preference of $100,000 per share, in exchange for each MYM VRDP Share held by such MYM VRDP Shareholder.

The reorganizations were accomplished by a tax-free exchange of common shares and VRDP Shares of MIY in the following amounts and at the following conversion ratios:

 

Target Fund   Shares Prior to
Reorganization
     Conversion Ratio      Shares of MIY  

MYM Common Shares

    12,098,420         0.93643508         11,329,360   

MYM VRDP Shares

    873         1         873   

MYM’s common net assets and composition of common net assets on September 11, 2015, the valuation date of the reorganization, were as follows:

 

     MYM  

Net assets Applicable to Common Shares

  $ 173,278,358   

Paid-in-capital

  $ 162,329,528   

Undistributed net investment income

  $ 63,895   

Accumulated net realized loss

  $ (4,955,955

Net unrealized appreciation (depreciation)

  $ 15,840,890   

For financial reporting purposes, assets received and shares issued by MIY were recorded at fair value. However, the cost basis of the investments received from MYM were carried forward to align ongoing reporting of MIY’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The net assets applicable to common shareholders of MIY before the acquisition were $279,109,521. The aggregate net assets of MIY immediately after the acquisition amounted to $452,388,270. MYM’s fair value and cost of investments prior to the reorganization were as follows:

 

     Fair Value of
Investments and
Derivative
Financial
Instruments
     Cost of
Investments
     TOB Trust Certificates      Preferred Shares
Value
 

MYM

  $ 268,842,773       $ 253,001,883       $ 14,792,998       $ 87,300,000   

The purpose of the transactions was to combine two funds managed by the Manager with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on September 14, 2015.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    51


Notes to Financial Statements (continued)     

 

Assuming the acquisition had been completed on August 1, 2015, the beginning of the fiscal reporting period of MIY, the pro forma results of operations for the six months ended January 31, 2016, are as follows:

 

 

Net investment income: $11,718,112

 

 

Net realized and change in unrealized gain (loss) on investments: $13,132,962

 

 

Net increase in net assets resulting from operations: $24,851,074

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of MYM that have been included in MIY’s Statement of Operations since September 14, 2015.

Reorganization costs incurred in connection with the reorganization were expensed by MIY.

The Board and shareholders of MUJ and the Board and shareholders of BlackRock MuniYield New Jersey Quality Fund, Inc. (“MJI”) approved the reorganizations of MJI into MUJ. As a result, MUJ acquired substantially all of the assets and assumed substantially all of the liabilities of MJI in exchange for an equal aggregate value of newly-issued Common Shares of MUJ. The purpose of the transaction was to combine two funds managed by the Manager with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on April 13, 2015.

Each MJI Common Shareholder received Common Shares of MUJ in an amount equal to the aggregate NAV of such Common Shareholder’s Common Shares, as determined at the close of business on April 10, 2015. Cash was distributed for any fractional Common Shares.

Each MJI VRDP Shareholder received on a one-for-one basis one newly issued VRDP Share of MUJ, par value $0.10 per share and with a liquidation preference of $100,000 per share, in exchange for each MJI VRDP Share held by such MJI VRDP Shareholder.

The reorganization was accomplished by a tax-free exchange of common shares and VRDP Shares of MUJ in the following amounts and at the following conversion ratios:

 

     Shares Prior to
Reorganization
     Conversion Ratio      Shares of MUJ  

MJI Common Shares

    8,895,127         0.99469981         8,847,944   

MJI VRDP Shares

    644         1         644   

MJI’s common net assets and composition of common net assets on April 10, 2015, the valuation date of the reorganization, was as follows:

 

     MJI  

Net assets Applicable to Common Shares

  $ 141,228,164   

Paid-in-capital

  $ 125,203,503   

Undistributed net investment income

  $ 359,403   

Accumulated net realized loss

  $ (2,924,235

Net unrealized appreciation (depreciation)

  $ 18,589,493   

For financial reporting purposes, assets received and shares issued by MUJ were recorded at fair value. However, the cost basis of the investments received from MJI were carried forward to align ongoing reporting of MUJ’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The net assets applicable to Common Shareholders of MUJ before the acquisition were $340,079,718. The aggregate net assets of MUJ immediately after the acquisition amounted to $481,307,882. The following key components of MJI prior to the reorganization were as follows:

 

     Fair Value of
Investments and
Derivative
Financial
Instruments
     Cost of
Investments
     TOB Trust Certificates      Preferred Shares
Value
 

MJI

  $ 219,532,138       $ 200,972,102       $ 18,044,269       $ 64,400,000   

Assuming the acquisition had been completed on August 1, 2014, the beginning of the fiscal reporting period of MUJ, the pro forma results of operations for the year ended July 31, 2015, are as follows:

 

 

Net investment income: $25,519,981

 

 

Net realized and change in unrealized gain (loss) on investments: $(1,461,068)

 

 

Net increase in net assets resulting from operations: $24,058,913

 

 

                
52    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (continued)     

 

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of MJI that have been included in MUJ’s Statement of Operations since April 13, 2015.

Reorganization costs incurred in connection with the MJI reorganization were expensed by MUJ.

The Board and shareholders of MPA and the Board and shareholders of BlackRock Pennsylvania Strategic Municipal Trust (“BPS”) approved the reorganizations of BPS into MPA. As a result, MPA acquired substantially all of the assets and assumed substantially all of the liabilities of BPS in exchange for an equal aggregate value of newly-issued Common Shares of MPA. The purpose of the transaction was to combine two funds managed by the Manager with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on April 13, 2015.

Each BPS Common Shareholder received Common Shares of MPA in an amount equal to the aggregate NAV of such Common Shareholder’s Common Shares, as determined at the close of business on April 10, 2015. Cash was distributed for any fractional Common Shares.

Each BPS VRDP Shareholder received on a one-for-one basis one newly issued VRDP Share of MPA, par value $0.05 per share and with a liquidation preference of $100,000 per share, in exchange for each BPS VRDP Share held by such BPS VRDP Shareholder.

The reorganization was accomplished by a tax-free exchange of common shares and VRDP Shares of MPA in the following amounts and at the following conversion ratios:

 

     Shares Prior to
Reorganization
     Conversion Ratio      Shares of MPA  

BPS Common Shares

    2,032,115         0.90936725         1,847,932   

BPS VRDP Shares

    163         1         163   

BPS’s common net assets and composition of common net assets on April 10, 2015, the valuation date of the reorganization, was as follows:

 

     BPS  

Net assets Applicable to Common Shares

  $ 29,666,266   

Paid-in-capital

  $ 28,259,598   

Undistributed net investment income

  $ 37,581   

Accumulated net realized loss

  $ (2,559,411

Net unrealized appreciation (depreciation)

  $ 3,928,498   

For financial reporting purposes, assets received and shares issued by MPA were recorded at fair value. However, the cost basis of the investments received from BPS were carried forward to align ongoing reporting of MPA’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The net assets applicable to common shareholders of MPA before the acquisition were $184,689,308. The aggregate net assets of MPA immediately after the acquisition amounted to $ 214,355,574. The following key components of BPS prior to the reorganization were as follows:

 

     Fair Value of
Investments and
Derivative
Financial
Instruments
     Cost of
Investments
     TOB Trust Certificates      Preferred Shares
Value
 

BPS

  $ 46,378,342       $ 42,453,248       $ 1,543,441       $ 16,300,000   

Assuming the acquisition had been completed on August 1, 2014, the beginning of the fiscal reporting period of MPA, the pro forma results of operations for the year ended July 31, 2015, are as follows:

 

 

Net investment income: $10,513,377

 

 

Net realized and change in unrealized gain (loss) on investments: $1,230,564

 

 

Net increase in net assets resulting from operations: $11,743,941

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of BPS that have been included in MPA’s Statement of Operations since April 13, 2015.

Reorganization costs incurred in connection with the BPS reorganization were expensed by MPA.

2. Significant Accounting Policies:

The 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,

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    53


Notes to Financial Statements (continued)     

 

disclosure of contingent assets and liabilities at the date of 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. Below is a summary of significant accounting policies:

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., financial futures contracts) or certain borrowings (e.g., TOB transactions) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its 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 Funds 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. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Distributions: Distributions 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 distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Distributions to Preferred Shareholders are accrued and determined as described in Note 10.

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.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund, if applicable. 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 April 2015, the Financial Accounting Standards Board issued guidance to simplify the presentation of debt issuance costs in financial statements. Under the new guidance, a Fund is required to present such costs in the Statements of Assets and Liabilities as a direct deduction from the carrying value of the related debt liability rather than as an asset.

The standard is effective for financial statements with fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Although still evaluating the potential impact of this new guidance, management expects that the effects of the Funds’ adoption will be limited to the reclassification of any unamortized debt issuance costs on the Statements of Assets and Liabilities and the modification of related accounting policy disclosures in the Notes to Financial Statements.

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to a Fund are charged to that Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

The Funds have an arrangement with their 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. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time) (or if the reporting date falls on a day the NYSE is closed, investments are valued at fair value as of the report date). 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 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.

 

                
54    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (continued)     

 

Fair Value Inputs and Methodologies: The following methods (or “techniques”) and inputs are used to establish the fair value of each Fund’s assets and liabilities:

 

 

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.

 

 

Investments in open-end U.S. mutual funds are valued at NAV each business day.

 

 

Financial futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such instruments, or 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 Valued Investments”). When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability 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 Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

 

 

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

 

 

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)

 

 

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each 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. The significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments are typically categorized as Level 3. The fair value hierarchy for each Fund’s investments and derivative financial instruments has been included in the Schedules of Investments.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Fund’s policy, transfers between different levels of the fair value 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 investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. Securities and Other Investments:

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain 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. A Fund 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, a Fund may be required to pay more at settlement than the security is worth. In addition, a Fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Fund assumes 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, a Fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    55


Notes to Financial Statements (continued)     

 

Municipal Bonds Transferred to TOB Trusts: Certain Funds leverage their assets through the use of TOB transactions. The Funds transfer municipal bonds into a special purpose trust (a “TOB Trust”). A TOB Trust generally issues two classes of beneficial interests: short-term floating rate interests (“TOB Trust Certificates”), which are sold to third party investors, and residual inverse floating rate interests (“TOB Residuals”), which are generally issued to the participating funds that contributed the municipal bonds to the TOB Trust. The TOB Trust Certificates have interest rates that generally reset weekly and their holders have the option to tender such certificates to the TOB Trust for redemption at par and any accrued interest at each reset date. The TOB Residuals held by a Fund generally provide the Fund with the right to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates to the TOB Trust at par plus accrued interest. The Funds may withdraw a corresponding share of the municipal bonds from the TOB Trust. Other funds managed by the investment advisor may also contribute municipal bonds to a TOB Trust into which a Fund has contributed bonds. If multiple BlackRock advised funds participate in the same TOB Trust, the economic rights and obligations under the TOB Residual will be shared among the funds ratably in proportion to their participation in the TOB Trust.

TOB Trusts are generally supported by a liquidity facility provided by a third party 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 of par plus accrued interest on any business day. The tendered TOB Trust Certificates may be purchased by the Liquidity Provider and are usually remarketed by a Remarketing Agent, which is typically an affiliated entity of the Liquidity Provider. The Remarketing Agent may also purchase the tendered TOB Trust Certificates for its own account in the event of a failed remarketing.

The TOB Trust may be collapsed without the consent of a Fund, upon the occurrence of tender option termination events (“TOTEs”) or mandatory termination events (“MTEs”), as defined in the TOB Trust agreements. TOTEs include the bankruptcy or default of the issuer of the municipal bonds held in the TOB Trust, a substantial downgrade in the credit quality of the issuer of the municipal bonds held in the TOB Trust, failure of any scheduled payment of principal or interest on the municipal bonds, and/or a judgment or ruling that interest on the municipal bond is subject to federal income taxation. MTEs may include, among other things, a failed remarketing of the TOB Trust Certificates, the inability of the TOB Trust to obtain renewal of the liquidity support agreement and a substantial decline in the market value of the municipal bonds held in the TOB Trust. Upon the occurrence of a TOTE or an MTE, the TOB Trust would be liquidated with the proceeds applied first to any accrued fees owed to the trustee of the TOB Trust, the Remarketing Agent and the Liquidity Provider (defined below). In the case of an MTE, after the payment of fees, the TOB Trust Certificate holders would be paid before the TOB Residual holders (i.e., the Funds). In contrast, in the case of a TOTE, after payment of fees, the TOB Trust Certificate holders and the TOB Residual holders would be paid pro rata in proportion to the respective face values of their certificates. During the six months ended January 31, 2016, no TOB Trusts in which a Fund participated were terminated without the consent of a Fund.

While a Fund’s investment policies and restrictions expressly permit investments in inverse floating rate securities, such as TOB Residuals, they generally do not allow a Fund to borrow money for purposes of making investments. The Funds’ management believes that a Fund’s restrictions on borrowings do not apply to the secured borrowings. Each Fund’s transfer of the municipal bonds to a TOB Trust is considered a secured borrowing for financial reporting purposes. The cash received by the TOB Trust from the sale of the TOB Trust Certificates, less certain transaction expenses, is paid to a Fund. A Fund typically invests the cash received in additional municipal bonds. The municipal bonds deposited into a TOB Trust are presented in a Fund’s Schedule of Investments and the TOB Trust Certificates are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust to purchase tendered TOB Trust Certificates would be shown as Loan for TOB Trust Certificates.

Volcker Rule Impact: 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 precludes banking entities and their affiliates from sponsoring and investing in TOB Trusts. Banking entities subject to the Volcker Rule were required to fully comply by July 21, 2015, with respect to investments in and relationships with TOB Trusts established after December 31, 2013 (“Non-Legacy TOB Trusts”), and by July 21, 2016, with respect to investments in and relationships with TOB Trusts established prior to December 31, 2013 (“Legacy TOB Trusts”).

As a result, a new structure for TOB Trusts has been designed to ensure that no banking entity is sponsoring the TOB Trust. Specifically, a Fund will establish, structure and “sponsor” the TOB Trusts in which it holds TOB Residuals. In such a structure, certain responsibilities that previously belonged to a third party bank will be performed by, or on behalf of, the Funds. The Funds have restructured any Non-Legacy TOB Trusts and are in the process of restructuring Legacy TOB Trusts in conformity with regulatory guidelines. Until all restructurings are completed, a Fund may, for a period of time, hold TOB Residuals in both Legacy TOB Trusts and non-bank sponsored restructured TOB Trusts.

Under the new TOB Trust structure, the Liquidity Provider or Remarketing Agent will no longer purchase the tendered TOB Trust Certificates even in the event of failed remarketing. This may increase the likelihood that a TOB Trust will need to be collapsed and liquidated in order to purchase the tendered TOB Trust Certificates. The TOB Trust may draw upon a loan from the Liquidity Provider to purchase the tendered TOB Trust Certificates. Any loans made by the Liquidity Provider will be secured by the purchased TOB Trust Certificates held by the TOB Trust and will be subject to an increased interest rate based on the number of days the loan is outstanding.

Accounting for TOB Trusts: The municipal bonds deposited into a TOB Trust are presented in a Fund’s Schedule of Investments and the TOB Trust Certificates are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust to purchase tendered TOB Trust Certificates are shown as Loan for TOB Trust Certificates. The carrying amount of a 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.

 

                
56    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (continued)     

 

Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by a Fund on an accrual basis. Interest expense incurred on the TOB transaction and other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust are shown as interest expense, fees and amortization of offering costs in the Statements of Operations. Fees paid upon creation of the TOB Trust are recorded as debt issuance costs and are amortized to interest expense, fees and amortization of offering costs in the Statements of Operations to the expected maturity of the TOB Trust. In connection with the restructurings of the TOB Trusts to comply with the Volcker Rule, a Fund incurred non-recurring, legal and restructuring fees, which are recorded as interest expense, fees and amortization of deferred offering costs in the Statements of Operations.

For the six months ended January 31, 2016, the following table is a summary of the Funds’ TOB Trusts:

 

     Underlying
Municipal
Bonds
Transferred to
TOB Trusts1
     Liability for
TOB Trust
Certificates2
     Range of
Interest Rates
     Average TOB
Trust
Certificates
Outstanding
     Daily
Weighted
Average
Interest Rate
 

MUC

  $ 379,867,968       $ 169,698,729         0.01% - 0.21%       $ 165,585,644         0.62%   

MUJ

  $ 98,197,460       $ 52,743,580         0.01% - 0,21%       $ 52,743,580         0.70%   

MFT

  $ 38,714,477       $ 20,184,337         0.01% - 0.21%       $ 19,448,395         0.68%   

MIY

  $ 104,055,926       $ 51,227,057         0.01% - 0.16%       $ 36,825,072         0.53%   

MPA

  $ 76,688,870       $ 40,028,345         0.02% - 0.07%       $ 37,230,519         0.63%   

 

  1   

The municipal bonds transferred to a TOB Trust are generally high grade municipal bonds. In certain cases, when municipal bonds transferred are lower grade municipal bonds, the TOB transaction may include a credit enhancement feature that provides for the timely payment of principal and interest on the bonds to the TOB Trust by a credit enhancement provider in the event of default of the municipal bond. The TOB Trust would be responsible for the payment of the credit enhancement fee and the Funds, as TOB Residual holders, would be responsible for reimbursement of any payments of principal and interest made by the credit enhancement provider. The municipal bonds transferred to TOB Trusts with a credit enhancement are identified in the Schedules of Investments including the maximum potential amounts owed by the Funds.

 

  2   

The Funds may invest in TOB Trusts on either a non-recourse or recourse basis. When a Fund invests in TOB Trusts on a non-recourse basis, and the Liquidity Provider is required to make a payment under the liquidity facility, the Liquidity Provider will typically liquidate all or a portion of the municipal bonds held in the TOB Trust and then fund 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 Trust on a recourse basis, the Funds will usually enter into a reimbursement agreement with the Liquidity Provider where the Funds are required to reimburse the Liquidity Provider the amount of any Liquidation Shortfall. As a result, if a Fund invests in a recourse TOB Trust, a Fund will bear the risk of loss with respect to any Liquidation Shortfall. If multiple funds participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed by the Funds at January 31, 2016, in proportion to their participation in the TOB Trust. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by the Funds at January 31, 2016.

5. 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 manage economically their exposure to certain risks such as interest rate risk. These contracts may be transacted on an exchange.

Financial Futures Contracts: Certain Funds invest in long and/or short positions in 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 (depreciation) and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.

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.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory Fees

Each Fund entered into an Investment Advisory Agreement with 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

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    57


Notes to Financial Statements (continued)     

 

provides the personnel, facilities, equipment and certain other services necessary 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 plus the proceeds of any debt securities or outstanding borrowings used for leverage at the following annual rates:

 

     MUC      MUJ      MFT      MIY      MPA  

Investment advisory fee

    0.55%         0.50%         0.50%         0.49%         0.49%   

Average daily net assets are the average daily value of each Fund’s total assets minus its total accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of preferred shares).

Prior to September 14, 2015, the annual rate as a percentage of average daily net assets for MIY was 0.50%.

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. These amounts are included in fees waived by the Manager in the Statements of Operations. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investments in other affiliated investment companies, if any. For the six months ended January 31, 2016, the amounts waived were as follows:

 

     MUC      MUJ      MFT      MIY      MPA  

Amount waived

  $ 2       $ 358       $ 2       $ 134       $ 554   

The Manager for MUC voluntarily agreed to waive its investment advisory fee on the proceeds of the Preferred Shares and TOB Trusts that exceed 35% of total assets minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of preferred shares). This amount is included in fees waived by the Manager in the Statements of Operations. For the six months ended January 31, 2016 the amounts waived were as follows:.

 

MUC

  $ 191,470   

Officers and Directors Fees

Certain officers and/or directors of the Funds are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in Officer and Directors in the Statements of Operations.

7. Purchases and Sales:

For the six months ended January 31, 2016, purchases and sales of investments, excluding short-term securities, were as follows:

 

     MUC      MUJ      MFT      MIY      MPA  

Purchases

  $ 139,634,616       $ 48,009,893       $ 19,961,497       $ 102,299,537       $ 36,454,467   

Sales

  $ 124,635,584       $ 45,802,791       $ 18,173,501       $ 88,479,009       $ 20,377,801   

8. Income Tax Information:

It is the Funds’ 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 their taxable income to their 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 each Fund’s U.S. federal tax returns remains open for each of the four years ended July 31, 2015. 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 to the Funds as of January 31, 2016, inclusive of the open tax return years, and does not believe there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

As of period end, 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      MPA  

No expiration date1

  $ 1,817,695       $ 6,366,914       $ 6,786,532       $ 4,968,778       $ 2,856,939   

2016

                            1,401,889         598,405   

2017

    6,504,940                         2,031,132         1,653,517   

2018

                    4,616,682                 893,908   

2019

                                    50,303   
 

 

 

 

Total

  $ 8,322,635       $ 6,366,914       $ 11,403,214       $ 8,401,799       $ 6,053,072   
 

 

 

 

 

  1   

Must be utilized prior to losses subject to expiration.

 

                
58    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (continued)     

 

As of period end, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

     MUC      MUJ      MFT      MIY      MPA  

Tax cost

  $ 832,593,295       $ 654,289,459       $ 162,845,714       $ 650,114,215       $ 275,578,215   
 

 

 

 

Gross unrealized appreciation

  $ 78,513,194       $ 66,144,378       $ 21,842,786       $ 56,800,165       $ 25,399,981   

Gross unrealized depreciation

    (709,447      (1,569,080      (235,022      (65,202      (737,756
 

 

 

 

Net unrealized appreciation

  $ 77,803,747       $ 64,575,298       $ 21,607,764       $ 56,734,963       $ 24,662,225   
 

 

 

 

9. Principal Risks:

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.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Fund’s ability to buy or sell bonds. As a result, a Fund may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Fund needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

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 to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers of securities owned by the Funds. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

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.

The new TOB Trust structure resulting from the compliance with Volcker Rule remains untested. It is possible that regulators could take positions that could limit the market for such newly structured TOB Trust transactions or the Funds’ ability to hold TOB Residuals. Under the new TOB Trust structure, the Funds will have certain additional duties and responsibilities, which may give rise to certain additional risks including, but not limited to, compliance, securities law and operational risks.

There can be no assurance that the Funds can successfully enter into restructured TOB Trust transactions in order to refinance their existing TOB Residual holdings prior to the compliance date for the Volcker Rule, which may require that the Funds unwind existing TOB Trusts. There can be no assurance that alternative forms of leverage will be available to the Funds and any alternative forms of leverage may be more or less advantageous to the Funds than existing TOB leverage.

Should short-term interest rates rise, the Funds’ investments in TOB transactions 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.

The SEC and various federal banking and housing agencies recently adopted credit risk retention rules for securitizations (the “Risk Retention Rules”), which take effect in December 2016. The Risk Retention Rules would require the sponsor of a TOB Trust to retain at least 5% of the credit risk of the underlying assets supporting the TOB Trust’s Municipal Bonds. The Risk Retention Rules may adversely affect the Funds’ ability to engage in TOB Trust transactions or increase the costs of such transactions in certain circumstances.

TOB Trust 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 Funds. The ultimate impact of these rules on the TOB market and the overall municipal market is not yet certain.

Counterparty Credit Risk: Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes 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 approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    59


Notes to Financial Statements (continued)     

 

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). 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.

Concentration Risk: MUC, MUJ, MIY and MPA invest a substantial amount of their assets in issuers located in a single state or limited number of states. This may subject each Fund to the risk that economic, political or social issues impacting a particular state or group of states could have an adverse and disproportionate impact on the income from, or the value or liquidity of, the Funds’ respective portfolios. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.

As of period end, certain Funds invested a significant portion of their assets in securities in the County/City/Special District/School District, Health and Transportation sectors. 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 invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions 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.

10. Capital Share Transactions:

Common Shares

MFT and MPA are authorized to issue an unlimited number of Common Shares and 1 million Preferred 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. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without approval of Common Shareholders.

MUC, MUJ and MIY are authorized to issue 200 million 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 $0.10. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without approval of Common Shareholders.

For the six months ended January 31, 2016 for MUC, MUJ, MFT and MPA and the year ended July 31, 2015 for MUC, MFT and MIY, shares issued and outstanding remained constant for those Funds.

For the six months ended January 31, 2016, shares issued and outstanding increased by 11,329,360 due to the reorganization for MIY.

For the year ended July 31, 2015, shares issued and outstanding increased by 8,847,944 and 1,847,932 due to the reorganizations for MUJ and MPA, respectively.

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 a Fund. The 1940 Act prohibits the declaration of any dividend on a Fund’s Common Shares or the repurchase of a Fund’s Common Shares if a 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, a 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 a 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.

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.

 

                
60    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (continued)     

 

VRDP Shares

MUJ, MIY and MPA (collectively, the “VRDP Funds”), have issued Series W-7 VRDP Shares, $100,000 liquidation value per share, in privately negotiated offerings. 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”). The VRDP Shares include a liquidity feature and are currently in a special rate period, each as described below.

As of period end, the VRDP Shares outstanding of each Fund were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Maturity Date  

MUJ

    6/30/11         1,727       $ 172,700,000         7/01/41   
    4/13/15         644       $ 64,400,000         7/01/41   

MIY

    4/21/11         1,446       $ 144,600,000         5/01/41   
    9/14/15         873       $ 87,300,000         5/01/41   

MPA

    5/19/11         663       $ 66,300,000         6/01/41   
      4/13/15         163       $ 16,300,000         7/01/42   

Redemption Terms: 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, VRDP Funds are 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 also be redeemed, in whole or in part, at any time at the option of 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, 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.

Liquidity Feature: 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 agreements between the VRDP Funds and the liquidity provider are for a 364 day term and are scheduled to expire, unless renewed or terminated in advance, as follows:

 

     MUJ      MIY      MPA  

Expiration date

    4/19/17         7/07/16         7/07/16   

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. In the event of such mandatory purchase, the VRDP Funds are required to redeem the VRDP Shares six months after the purchase date. Immediately after such mandatory purchase, VRDP Funds are required to begin to segregate liquid assets with their 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.

Remarketing: The VRDP Funds may incur remarketing fees of 0.10% 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. No remarketing fees are incurred during any special rate period (as described below).

Dividends: 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. As of period end, the VRDP Shares were assigned a long-term rating of Aa2 from Moody’s and a long-term rating of AAA from Fitch.

For the six months ended January 31, 2016, the annualized dividend rates for the VRDP Shares were as follows:

 

     MUJ      MIY      MPA  

Rate

    0.89%         0.91%         0.91%   

Financial Reporting: 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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    61


Notes to Financial Statements (continued)     

 

Ratings: 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 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.

Special Rate Period: 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. In May 2015, the special rate period was extended to June 22, 2016. 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 commenced a three-year term ending April 19, 2017 (“special rate period”) with respect to its 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 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.

If the VRDP Funds redeem 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. Prior to June 22, 2016 for MIY and MPA, and April 19, 2017 for MUJ, the holder of the VRDP Shares and 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. No short-term ratings were assigned to the VRDP Shares at issuance but such ratings may be assigned upon termination of the special rate period when the VRDP Shares revert to remarketable securities.

For the six months ended January 31, 2016, VRDP Shares issued and outstanding for MUJ and MPA remained constant, and the VRDP Shares issued and outstanding increased by 873 due to the reorganization of MIY.

VMTP Shares

MUC and MFT (collectively, the “VMTP Funds”), have issued Series W-7 VMTP Shares, $100,000 liquidation value per share, in privately negotiated offerings and sale of VMTP Shares exempt from registration under the Securities Act.

As of period end, the VMTP Shares outstanding of each Fund were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Term Date  

MUC

    3/22/12         2,540       $ 254,000,000         3/30/19   

MFT

    12/16/11         565       $ 56,500,000         1/02/19   

Redemption Terms: Each VMTP Fund is required to redeem its VMTP Shares on the term date, unless earlier redeemed or repurchased or unless extended. There is no assurance that the term of a Fund’s VMTP Shares will be extended further 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.

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: Dividends on the VMTP Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the Securities Industry and Financial Markets Association (“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 period end, the VMTP Shares were assigned a long-term rating of Aa1 for MFT and Aa2 for MUC 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 Funds fail 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.

 

                
62    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Notes to Financial Statements (concluded)     

 

For the six months ended January 31, 2016, the average annualized dividend rates for the VMTP Shares were as follows:

 

     MUC      MFT  

Rate

    0.93%         1.01%   

Financial Reporting: 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.

For the six months ended January 31, 2016, VMTP Shares issued and outstanding of each Fund remained constant.

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.

11. 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:

The Funds paid a net investment income dividend in the following amounts per share on March 1, 2016 to shareholders of record on February 16, 2016:

 

     Common
Dividend
Per Share
 

MUC

  $ 0.0675   

MUJ

  $ 0.0740   

MFT

  $ 0.0710   

MIY

  $ 0.0690   

MPA

  $ 0.0715  

Additionally, the Funds declared a net investment income dividend in the following amounts per share on March 1, 2016, payable to Common Shareholders of record on March 15, 2016:

 

     Common
Dividend
Per Share
 

MUC

  $ 0.0675   

MUJ

  $ 0.0710   

MFT

  $ 0.0710   

MIY

  $ 0.0690   

MPA

  $ 0.0683  

The dividends declared on Preferred Shares for the period February 1, 2016 to February 29, 2016 for the Funds were as follows:

 

     Preferred
Share
     Series     
Dividends
Declared
 

MUC

    VMTP Shares         W-7       $ 187,169   

MUJ

    VRDP Shares         W-7       $ 167,201   

MFT

    VMTP Shares         W-7       $ 45,215   

MIY

    VRDP Shares         W-7       $ 167,209   

MPA

    VRDP Shares         W-7       $ 59,558   

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    63


Officers and Directors     

 

Richard E. Cavanagh, Chair of the Board and Director

Karen P. Robards, Vice Chair of the Board, Chairperson of the Audit Committee and Director

Michael J. Castellano, Director and Member of the Audit Committee

Frank J. Fabozzi, Director and Member of the Audit Committee

Jerrold B. Harris, Director

R. Glenn Hubbard, Director

W. Carl Kester, Director and Member of the Audit Committee

Barbara G. Novick, Director

John M. Perlowski, Director, President and Chief Executive Officer

Jonathan Diorio, Vice President

Neal J. Andrews, Chief Financial Officer

Jay M. Fife, Treasurer

Charles Park, Chief Compliance Officer

Janey Ahn, Secretary

 

Effective September 18, 2015, Robert W. Crothers resigned as a Vice President of the Funds and Jonathan Diorio became a Vice President of the Funds.

Effective December 31, 2015, Kathleen F. Feldstein and James T. Flynn retired as Directors of the Funds.

Effective January 11, 2016, Phillip Soccio became co-portfolio manger of MUC. The other portfolio managers of MUC are Ted Jaeckel and Walter O’Connor.

Effective March 1, 2016, Catherine A. Lynch was appointed to serve as a Director and Member of the Audit Committee of the Funds.

 

         

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

 

Accounting Agent and Custodian

State Street Bank and
Trust Company

Boston, MA 02110

 

 

VRDP Tender and Paying
Agent and VMTP Redemption
and Paying Agent

The Bank of New York Mellon

New York, NY 10289

 

Independent Registered
Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

 

Address of the Funds

100 Bellevue Parkway

Wilmington, DE 19809

 

Transfer Agent

Common Shares

Computershare Trust
Company, N.A.

Canton, MA 02021

 

VRDP Liquidity Providers

Citibank, N.A.1

New York, NY 10179

 

Bank of America, N.A.2

New York, NY 10036

 

Legal Counsel

Skadden, Arps, Slate,
Meagher & Flom LLP

Boston, MA 02116

 
   

VRDP Remarketing Agents

Citigroup Global Markets Inc.1

New York, NY 10179

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated2

New York, NY 10036

   

 

  1   

For MIY and MPA.

 

  2   

For MUJ.

 

                
64    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Additional Information     

 

Proxy Results

At a joint special meeting of shareholders of BlackRock MuniYield Michigan Quality Fund, Inc. (the “Fund”) held on Thursday, August 6, 2015, Fund shareholders were asked to vote on the following proposals:

The preferred shareholders of the Fund were asked to vote as a separate class, to approve an Agreement and Plan of Reorganization between the Fund and the BlackRock MuniYield Michigan Quality Fund II and the transactions contemplated therein, including the issuance of additional VRDP shares.

With respect to this Proposal, the shares of the Fund were voted as follows:

 

For    Against    Abstain
1,446    0    0

The common and preferred shareholders of the Fund were asked to vote as a single class, to approve the issuance of additional shares of common stock of the Fund in connection with the Agreement and Plan of Reorganization between BlackRock MuniYield Michigan Quality Fund II, Inc. and the Fund.

With respect to this Proposal, the shares of the Fund were voted as follows:

 

For    Against    Abstain
8,608,146    1,121,854    365,599

 

Fund Certification

Certain Funds are listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Funds filed with the SEC the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

 

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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    65


Additional Information (continued)     

 

 

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

Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.

To enroll in electronic delivery:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. 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.

 

                
66    SEMI-ANNUAL REPORT    JANUARY 31, 2016   


Additional Information (concluded)     

 

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, D.C. 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 upon request and without charge (1) 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 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.

 

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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2016    67


This report is intended for current holders. 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 short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

LOGO

 

MQUAL5-1/16-SAR    LOGO


Item 2 – Code of Ethics – Not Applicable to this semi-annual report

 

Item 3 – Audit Committee Financial Expert – Not Applicable to this semi-annual report

 

Item 4 – Principal Accountant Fees and Services – Not Applicable to this semi-annual report

 

Item 5 – Audit Committee of Listed Registrants – Not Applicable to this semi-annual report

 

Item 6 – 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 – Not Applicable to this semi-annual report

 

Item 8 – Portfolio Managers of Closed-End Management Investment Companies
  (a) Not Applicable to this semi-annual report
  (b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.

 

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable

 

Item 10 – Submission of Matters to a Vote of Security Holders – 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 – Not Applicable to this semi-annual report

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) –     Certifications – Attached hereto

 

2


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock MuniHoldings 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: April 1, 2016

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: April 1, 2016

 

By:    

  /s/ Neal J. Andrews                    
  Neal J. Andrews
 

Chief Financial Officer (principal financial officer) of

BlackRock MuniHoldings New Jersey Quality Fund, Inc.

Date: April 1, 2016

 

3