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: 811-07156
Name of Fund: BlackRock MuniYield Investment Quality Fund, Inc. (MFT)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock MuniYield Investment Quality Fund, Inc., 55 East 52nd Street, New York, NY 10055
Registrant’s telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 07/31/2014
Date of reporting period: 07/31/2014
| Item 1 – | Report to Stockholders |
JULY 31, 2014
ANNUAL REPORT
|  |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC)
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)
BlackRock MuniYield Investment Quality Fund (MFT)
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)
BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)
BlackRock MuniYield Pennsylvania Quality Fund (MPA)
| Not FDIC Insured • May Lose Value • No Bank Guarantee |
| Table of Contents | ||||
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| Financial Statements: | ||||
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| 2 | ANNUAL REPORT | JULY 31, 2014 |
| Shareholder Letter |
Dear Shareholder,
The latter part of 2013 was a strong period for equities and other risk assets such as high yield bonds, despite the mixed tone of economic and financial news and uncertainty as to when and by how much the U.S. Federal Reserve would begin to gradually reduce (or “taper”) its asset purchase programs. Stock markets rallied in September when the Fed defied investors’ expectations with its decision to delay tapering. The momentum was disrupted temporarily, however, when the U.S. debt ceiling debate led to a partial government shutdown, roiling financial markets globally until a compromise was struck in mid-October. The remainder of 2013 was generally positive for developed market stocks, while fixed income and emerging market investments struggled as Fed tapering became increasingly imminent. When the central bank ultimately announced its tapering plans in mid-December, equity investors reacted positively, as this action signaled the Fed’s perception of real improvement in the economy.
Most asset classes continued to move higher in 2014 despite the pull back in Fed stimulus. The year got off to a rocky start, however. A number of emerging economies showed signs of financial stress while facing the broader headwind of diminishing global liquidity. These risks, combined with disappointing U.S. economic data, caused equities to decline in January while bond markets found renewed strength from investors seeking relatively safer assets.
Although these headwinds persisted, equities were back on the rise in February as investors were encouraged by a one-year extension of the U.S. debt ceiling and market-friendly comments from the new Fed Chairwoman, Janet Yellen. While it was clear that U.S. economic data had softened, investors were assuaged by increasing evidence that the trend was temporary and weather-related, and continued to take on risk given expectations that growth would pick up later in the year.
In the months that followed, interest rates trended lower and bond prices climbed higher in the modest growth environment. Financial markets exhibited a remarkably low level of volatility despite rising geopolitical risks and mixed global economic news. Tensions in Russia and Ukraine and signs of decelerating growth in China caused some turbulence, but markets were resilient as investors focused on signs of improvement in the U.S. recovery, stronger corporate earnings and increased merger-and-acquisition activity. Importantly, investors were comforted by comments from the Fed offering reassurance that no changes to short-term interest rates were on the horizon.
In the low-rate environment, investors looked to equities as a source of yield, pushing major indices to record highs. As stock prices moved higher, investors soon became wary of stretched valuations and a new theme emerged in the markets. Stocks that had experienced significant price appreciation in 2013, particularly growth and momentum names, broadly declined as investors fled to stocks with cheaper valuations. This rotation resulted in the strongest performers of 2013 struggling most in 2014, and vice versa. Especially hard hit were U.S. small cap and European stocks where earnings growth had not kept pace with recent market gains. In contrast, emerging market stocks benefited from the trend. As a number of developing countries took steps to stabilize their finances, investors looked past political risks — hardly batting an eye at a military coup in Thailand — and poured back into these attractively priced investments.
Asset prices tend to be more vulnerable to bad news when investors believe valuations are stretched. Consequently, markets came under pressure in July as geopolitical tensions intensified with the tragic downing of a Malaysian civilian airliner over Ukraine, the continued fragmentation of Iraq and a ground war between Israel and Hamas in Gaza. As the period came to a close, financial troubles in Argentina and Portugal as well as new U.S. and European sanctions on Russia were additional headwinds for the markets.
Despite a host of challenges, most asset classes generated solid returns for the six- and 12-month periods ended July 31, 2014, with equities generally outperforming fixed income. Emerging market equities delivered impressive gains. Developed markets also performed well, although small cap stocks lagged due to relatively higher valuations. Most fixed income assets produced positive returns even as the Fed reduced its open-market purchases. Tax-exempt municipal bonds benefited from a favorable supply-and-demand environment. Short-term interest rates remained near zero, keeping yields on money market securities close to historic lows.
At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s world.
Sincerely,
Rob Kapito
President, BlackRock Advisors, LLC
Asset prices pushed higher over the period despite modest global growth, geopolitical risks and a shift toward tighter U.S. monetary policy.
Rob Kapito
President, BlackRock Advisors, LLC
| Total Returns as of July 31, 2014 | ||||||||
| 6-month | 12-month | |||||||
U.S. large cap equities (S&P 500® Index) | 9.44 | % | 16.94 | % | ||||
U.S. small cap equities | (0.30 | ) | 8.56 | |||||
International equities | 7.03 | 15.07 | ||||||
Emerging market equities (MSCI Emerging | 15.70 | 15.32 | ||||||
3-month Treasury bills | 0.02 | 0.05 | ||||||
U.S. Treasury securities | 2.71 | 3.50 | ||||||
U.S. investment-grade | 2.16 | 3.97 | ||||||
Tax-exempt municipal | 4.11 | 7.38 | ||||||
U.S. high yield bonds (Barclays U.S. | 3.33 | 8.18 | ||||||
| Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. | ||||||||
| THIS PAGE NOT PART OF YOUR FUND REPORT | 3 |
| Municipal Market Overview |
| For the Reporting Period Ended July 31, 2014 |
Municipal Market Conditions
The latter part of 2013 was a generally negative period for municipal bond performance. Heightened uncertainty as to when the U.S. Federal Reserve would begin to reduce its bond-buying stimulus program (and by how much) caused interest rates to be volatile and generally move higher. (Bond prices fall as rates rise.) Municipal bond mutual funds saw strong outflows through year end when the Fed finally announced its plan to begin the gradual reduction of stimulus in January of 2014. Relieved of anxiety around policy changes, investors again sought the relative safety of municipal bonds in the New Year. Surprisingly, interest rates trended lower in the first half of 2014 even as the Fed pulled back on its open-market bond purchases. Softer U.S. economic data amid one of the harshest winters on record, coupled with reassurance from the Fed that short-term rates would remain low for a considerable amount of time, resulted in stronger demand for fixed income investments, with municipal bonds being one of the stronger performing sectors. Still, for the 12-month period ended July 31, 2014, municipal bond funds saw net outflows of approximately $35 billion (based on data from the Investment Company Institute).
High levels of interest rate volatility in the latter half of 2013, particularly on the long-end of the curve, resulted in a curtailment of tax-exempt issuance during the period. However, from a historical perspective, total new issuance for the 12 months ended July 31 remained relatively strong at $303 billion (but meaningfully lower than the $364 billion issued in the prior 12-month period). A noteworthy portion of new supply during this period was attributable to refinancing activity (roughly 40%) as issuers took advantage of lower interest rates to reduce their borrowing costs.
S&P Municipal Bond Index |
Total Returns as of July 31, 2014 |
6 months: 4.11% |
12 months: 7.38% |
A Closer Look at Yields
From July 31, 2013 to July 31, 2014, muni yields on AAA-rated 30-year municipal bonds decreased by 90 basis points (“bps”) from 4.20% to 3.30%, while 10-year rates decreased 41 bps from 2.67% to 2.26% on and 5-year rates fell 5 bps from 1.27% to 1.22% (as measured by Thomson Municipal Market Data). Overall, the municipal yield curve remained relatively steep over the 12-month period even as the spread between 2- and 30-year maturities flattened by 78 bps and the spread between 2- and 10-year maturities flattened by 29 bps.
During the same time period, U.S. Treasury rates fell by 32 bps on 30-year and 2 bps on 10-year bonds, while moving up 37 bps in 5-years. Accordingly, tax-exempt municipal bonds outperformed Treasuries across the yield curve as investors sought to reduce interest rate risk later in the period. On the short and intermediate parts of the curve, the outperformance of municipal bonds versus Treasuries was driven largely by a supply/demand imbalance within the municipal market and a rotation from long-duration assets into short- and intermediate-duration investments, which are less sensitive to interest rate movements. Additionally, municipal bonds benefited from the increased appeal of tax-exempt investing in the new higher tax rate environment. The asset class is known for its lower relative volatility and preservation of principal with an emphasis on income as tax rates rise. The municipal market continues to be an attractive avenue for investors seeking yield in the low-rate environment. However, opportunities have not been as broad-based as in 2011 and 2012, warranting a more tactical approach going forward.
Financial Conditions of Municipal Issuers Continue to Improve
Following an extended period of nation-wide austerity and de-leveraging as states sought to balance their budgets, 16 consecutive quarters of positive revenue growth coupled with the elimination of more than 750,000 jobs in recent years have put state and local governments in a better financial position. Many local municipalities, however, continue to face increased health care and pension costs passed down from the state level. BlackRock maintains the view that municipal bond defaults will be minimal and remain in the periphery, and that the overall market is fundamentally sound. We continue to recognize that careful credit research, appropriate structure and security selection remain imperative amid uncertainty in a modestly improving economic environment.
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.
| 4 | ANNUAL REPORT | JULY 31, 2014 |
| The Benefits and Risks of Leveraging |
The Funds may utilize leverage to seek to enhance the yield and net asset value (“NAV”) of their common shares (“Common Shares”). However, these objectives cannot be achieved in all interest rate environments.
In general, the concept of leveraging is based on the premise that the financing cost of leverage, which will be based on short-term interest rates, will normally be lower than the income earned by a Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Fund’s shareholders will benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV.
To illustrate these concepts, assume a Fund’s Common Shares capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, the Fund’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the securities purchased by the Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, the Fund’s financing cost of leverage is significantly lower than the income earned on the Fund’s longer-term investments acquired from leverage proceeds, and therefore the holders of Common Shares (“Common Shareholders”) are the beneficiaries of the incremental net income.
However, in order to benefit Common Shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Fund’s return on assets purchased with leverage proceeds, income to shareholders will be lower than if the Fund had not used leverage. Furthermore, the value of the Trust’s portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Fund’s obligations under its leverage arrangement generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Fund’s NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that a Fund’s intended leveraging strategy will be successful.
Leverage also will generally cause greater changes in the Funds’ NAVs, market prices and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the net asset value and market price of a Fund’s Common Shares than if the Fund were not leveraged. In addition, the Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause the Fund to incur losses. The use of leverage may limit the Trust’s ability to invest in certain types of securities or use certain types of hedging strategies. The Fund will incur expenses in connection with the use of leverage, all of which are borne by Common Shareholders and may reduce income to the Common Shares.
To obtain leverage, each Trust has issued Variable Rate Demand Preferred Shares (“VRDP Shares”) or Variable Rate Muni Term Preferred Shares (“VMTP Shares”) (collectively, “Preferred Shares”) and/or leveraged its assets through the use of tender option bond trusts (“TOBs”) as described in the Notes to Financial Statements.
Under the Investment Company Act of 1940 (the “1940 Act”), each Fund is permitted to issue debt up to 33 1/3% of its total managed assets or equity securities (e.g., Preferred Shares) up to 50% of its total managed assets. A Fund may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Fund may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by the Preferred Shares’ governing instruments or by agencies rating the Preferred Shares, which may be more stringent than those imposed by the 1940 Act.
If a Fund segregates or designates on its books and records cash or liquid assets having a value not less than the value of the Fund’s obligations under the TOB (including accrued interest), a TOB will not be considered a senior security and will not be subject to the foregoing limitations and requirements under the 1940 Act.
| Derivative Financial Instruments |
The Funds may invest in various derivative financial instruments, including financial futures contracts, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or interest rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Funds’ ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation a Fund can realize on an investment, may result in lower dividends paid to shareholders and/or may cause a Fund to hold an investment that it might otherwise sell. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 5 |
| Fund Summary as of July 31, 2014 | BlackRock MuniHoldings California Quality Fund, Inc. | |||
| Fund Overview |
BlackRock MuniHoldings California Quality Fund, Inc.’s (MUC) (the “Fund”) investment objective is to provide shareholders with current income exempt from federal and California income taxes. The Fund seeks to achieve its investment objective by investing primarily in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and California income taxes. Under normal market conditions, the Fund invests at least 80% of its assets in investment grade municipal obligations with remaining maturities of one year or more at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
| Performance |
| Ÿ | For the 12-month period ended July 31, 2014, the Fund returned 12.25% based on market price and 15.94% based on NAV. For the same period, the closed-end Lipper California Municipal Debt Funds category posted an average return of 15.36% based on market price and 15.42% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. |
| Ÿ | Tax-exempt rates declined during the period, supporting generally positive performance for municipal bonds. (Bond prices rise when rates fall.) Municipal bonds with longer durations (and greater sensitivity to interest rate movements) tended to provide the strongest returns. In this environment, the Fund’s exposure to the long end of the yield curve had a positive impact on performance. Security selection also helped performance, particularly with respect to the Fund’s holdings of high quality school district issues, which performed well amid the improvement in the State of California’s finances. In addition the Fund’s holdings in the health care, transportation and utilities sectors contributed to returns. The use of leverage, which was achieved through the use of tender option bonds contributed to performance as well. |
| Ÿ | The Fund’s cash reserves were generally maintained at a minimal level. However, to the extent reserves were held, the cash holdings added little in the form of additional yield and provided no price appreciation in a generally positive period for the municipal market. |
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information |
Symbol on New York Stock Exchange (“NYSE”) | MUC | |
Initial Offering Date | February 27, 1998 | |
Yield on Closing Market Price as of July 31, 2014 ($14.04)1 | 6.11% | |
Tax Equivalent Yield2 | 12.45% | |
Current Monthly Distribution per Common Share3 | $0.0715 | |
Current Annualized Distribution per Common Share3 | $0.8580 | |
Economic Leverage as of July 31, 20144 | 35% |
| 1 | Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. |
| 2 | Tax equivalent yield assumes the maximum marginal federal and state tax rate of 50.93%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields. |
| 3 | The distribution rate is not constant and is subject to change. |
| 4 | Represents VMTP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5. |
| 6 | ANNUAL REPORT | JULY 31, 2014 |
| BlackRock MuniHoldings California Quality Fund, Inc. |
| Market Price and Net Asset Value Per Share Summary | ||||||||||||||||||||
| 7/31/14 | 7/31/13 | Change | High | Low | ||||||||||||||||
Market Price | $14.04 | $13.31 | 5.48% | $14.64 | $12.63 | |||||||||||||||
Net Asset Value | $15.82 | $14.52 | 8.95% | $15.91 | $13.94 | |||||||||||||||
| Market Price and Net Asset Value History For the Past Five Years |
| Overview of the Fund’s Long-Term Investments |
| Sector Allocation | 7/31/14 | 7/31/13 | ||||||
County/City/Special District/School District | 37 | % | 36 | % | ||||
Utilities | 25 | 24 | ||||||
Transportation | 14 | 11 | ||||||
Health | 12 | 10 | ||||||
Education | 6 | 13 | ||||||
State | 6 | 6 | ||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Credit Quality Allocation1 | 7/31/14 | 7/31/13 | ||||||
AAA/Aaa | 15 | % | 12 | % | ||||
AA/Aa | 76 | 75 | ||||||
A | 9 | 13 | ||||||
| 1 | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| Call/Maturity Schedule2 | ||||
Calendar Year Ended December 31, | ||||
2014 | 2 | % | ||
2015 | 8 | |||
2016 | 12 | |||
2017 | 14 | |||
2018 | 13 | |||
| 2 | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| ANNUAL REPORT | JULY 31, 2014 | 7 |
| Fund Summary as of July 31, 2014 | BlackRock MuniHoldings New Jersey Quality Fund, Inc. |
| Fund Overview |
BlackRock MuniHoldings New Jersey Quality Fund, Inc.’s (MUJ) (the “Fund”) investment objective is to provide shareholders with current income exempt from federal income tax and New Jersey personal income taxes. The Fund seeks to achieve its investment objective by investing primarily in long-term, investment grade municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and New Jersey personal income taxes. Under normal market conditions, the Fund invests at least 80% of its assets in municipal obligations with remaining maturities of one year or more at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
| Performance |
| Ÿ | For the 12-month period ended July 31, 2014, the Fund returned 13.24% based on market price and 15.79% based on NAV. For the same period, the closed-end Lipper New Jersey Municipal Debt Funds category posted an average return of 12.38% based on market price and 13.86% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. |
| Ÿ | Positive contributors to performance included the Fund’s exposure to the long-end of the municipal yield curve, as the curve flattened over the period. (Long-rates fell much more than short and intermediate rates.) The Fund’s duration exposure and corresponding interest rate sensitivity also added to returns as municipal rates declined. (Bond prices rise as rates fall.) The income generated from the Fund’s holdings of New Jersey state tax-exempt municipal bonds contributed to performance as well. |
| Ÿ | The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results as credit spreads on these bonds widened materially due to investors’ lack of confidence and a weak local economy. The Fund sold its exposure to these securities early in the period. |
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information |
Symbol on NYSE | MUJ | |
Initial Offering Date | March 11, 1998 | |
Yield on Closing Market Price as of July 31, 2014 ($14.11)1 | 6.29% | |
Tax Equivalent Yield2 | 12.21% | |
Current Monthly Distribution per Common Share3 | $0.074 | |
Current Annualized Distribution per Common Share3 | $0.888 | |
Economic Leverage as of July 31, 20144 | 38% |
| 1 | Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. |
| 2 | Tax equivalent yield assumes the maximum marginal federal and state tax rate of 48.48%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields. |
| 3 | The distribution rate is not constant and is subject to change. |
| 4 | Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5. |
| 8 | ANNUAL REPORT | JULY 31, 2014 |
| BlackRock MuniHoldings New Jersey Quality Fund, Inc. |
| Market Price and Net Asset Value Per Share Summary |
| 7/31/14 | 7/31/13 | Change | High | Low | ||||||||||||||||
Market Price | $ | 14.11 | $ | 13.30 | 6.09 | % | $ | 14.55 | $ | 12.52 | ||||||||||
Net Asset Value | $ | 15.74 | $ | 14.51 | 8.48 | % | $ | 15.85 | $ | 13.87 | ||||||||||
| Market Price and Net Asset Value History For the Past Five Years |
| Overview of the Fund’s Long-Term Investments |
| Sector Allocation | 7/31/14 | 7/31/13 | ||||||
Transportation | 23 | % | 21 | % | ||||
State | 22 | 27 | ||||||
Education | 18 | 15 | ||||||
County/City/Special District/School District | 14 | 13 | ||||||
Health | 12 | 11 | ||||||
Housing | 6 | 7 | ||||||
Utilities | 3 | 5 | ||||||
Corporate | 2 | 1 | ||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Credit Quality Allocation1 | 7/31/14 | 7/31/13 | ||||||
AAA/Aaa | 9 | % | 9 | % | ||||
AA/Aa | 51 | 46 | ||||||
A | 33 | 38 | ||||||
BBB/Baa | 7 | 7 | ||||||
N/R2 | — | — | ||||||
| 1 | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | The investment advisor evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed certain of these unrated securities as investment grade quality. As of July 31, 2014, the market value of unrated securities deemed by the investment advisor to be investment grade was $10,039, representing less than 1%, of the Fund’s long-term investments. |
| Call/Maturity Schedule3 | ||||
Calendar Year Ended December 31, | ||||
2014 | 3 | % | ||
2015 | 7 | |||
2016 | 3 | |||
2017 | 7 | |||
2018 | 9 | |||
| 3 | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| ANNUAL REPORT | JULY 31, 2014 | 9 |
| Fund Summary as of July 31, 2014 | BlackRock MuniYield Investment Quality Fund | |||
| Fund Overview |
BlackRock MuniYield Investment Quality Fund’s (MFT) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax). Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
| Performance |
| Ÿ | For the 12-month period ended July 31, 2014, the Fund returned 16.10% based on market price and 16.40% based on NAV. For the same period, the closed-end Lipper General & Insured Municipal Debt Funds (Leveraged) category posted an average return of 14.52% based on market price and 14.95% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. |
| Ÿ | Tax-exempt rates declined during the period, supporting generally positive performance for municipal bonds. (Bond prices rise when rates fall.) The municipal yield curve flattened, meaning that longer-dated yields declined more than shorter-maturity yields. In this environment, the Fund’s duration exposure (sensitivity to interest rate movements) had a positive impact on performance. The Fund’s longer-dated holdings in the health care, education and transportation sectors experienced strong market appreciation, aiding performance. The Fund also benefited from its holdings in the State of California, as the continued improvement in the State’s economy was a catalyst for market appreciation during the period. |
| Ÿ | The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results, as credit spreads on these bonds widened materially due to investors’ lack of confidence and the weak local economy. The Fund sold its exposure to these securities early in the period. |
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information |
Symbol on NYSE | MFT | |
Initial Offering Date | October 30, 1992 | |
Yield on Closing Market Price as of July 31, 2014 ($13.26)1 | 6.43% | |
Tax Equivalent Yield2 | 11.36% | |
Current Monthly Distribution per Common Share3 | $0.071 | |
Current Annualized Distribution per Common Share3 | $0.852 | |
Economic Leverage as of July 31, 20144 | 38% |
| 1 | Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. |
| 2 | Tax equivalent yield assumes the maximum marginal federal tax rate of 43.4%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields. |
| 3 | The distribution rate is not constant and is subject to change. |
| 4 | Represents VMTP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5. |
| 10 | ANNUAL REPORT | JULY 31, 2014 |
| BlackRock MuniYield Investment Quality Fund |
| Market Price and Net Asset Value Per Share Summary |
| 7/31/14 | 7/31/13 | Change | High | Low | ||||||||||||||||
Market Price | $ | 13.26 | $ | 12.20 | 8.69% | $ | 13.78 | $ | 11.80 | |||||||||||
Net Asset Value | $ | 14.83 | $ | 13.61 | 8.96% | $ | 14.92 | $ | 13.01 | |||||||||||
| Market Price and Net Asset Value History For the Past Five Years |
| Overview of the Fund’s Long-Term Investments |
| Sector Allocation | 7/31/14 | 7/31/13 | ||||||
Transportation | 36 | % | 27 | % | ||||
Utilities | 21 | 23 | ||||||
County/City/Special District/School District | 18 | 20 | ||||||
Health | 11 | 11 | ||||||
State | 9 | 10 | ||||||
Education | 2 | 6 | ||||||
Housing | 2 | 1 | ||||||
Tobacco | 1 | 2 | ||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Credit Quality Allocation1 | 7/31/14 | 7/31/13 | ||||||
AAA/Aaa | 6 | % | 9 | % | ||||
AA/Aa | 62 | 64 | ||||||
A | 27 | 27 | ||||||
BBB/Baa | 5 | — | ||||||
| 1 | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| Call/Maturity Schedule2 | ||||
Calendar Year Ended December 31, | ||||
2014 | — | |||
2015 | — | |||
2016 | 2 | % | ||
2017 | 2 | |||
2018 | 11 | |||
| 2 | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| ANNUAL REPORT | JULY 31, 2014 | 11 |
| Fund Summary as of July 31, 2014 | BlackRock MuniYield Michigan Quality Fund, Inc. | |||
| Fund Overview |
BlackRock MuniYield Michigan Quality Fund, Inc.’s (MIY) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal and Michigan income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and Michigan income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
| Performance |
| Ÿ | For the 12-month period ended July 31, 2014, the Fund returned 14.74% based on market price and 15.24% based on NAV. For the same period, the closed-end Lipper Other States Municipal Debt Funds category posted an average return of 12.67% based on market price and 12.42% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. |
| Ÿ | Positive contributors to performance included the Fund’s exposure to the long-end of the municipal yield curve, as the curve flattened over the period. (Long-rates fell much more than short and intermediate rates.) The Fund’s duration exposure and corresponding interest rate sensitivity also added to returns as municipal rates declined. (Bond prices rise as rates fall.) The income generated from the Fund’s holdings of Michigan state tax-exempt municipal bonds contributed to performance as well. |
| Ÿ | The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results as credit spreads on these bonds widened materially due to investors’ lack of confidence and a weak local economy. The Fund sold its exposure to these securities early in the period. |
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information |
Symbol on NYSE | MIY | |
Initial Offering Date | October 30, 1992 | |
Yield on Closing Market Price as of July 31, 2014 ($13.47)1 | 6.41% | |
Tax Equivalent Yield2 | 11.83% | |
Current Monthly Distribution per Common Share3 | $0.072 | |
Current Annualized Distribution per Common Share3 | $0.864 | |
Economic Leverage as of July 31, 20144 | 38% |
| 1 | Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. |
| 2 | Tax equivalent yield assumes the maximum marginal federal and state tax rate of 45.81%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields. |
| 3 | The distribution rate is not constant and is subject to change. |
| 4 | Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5. |
| 12 | ANNUAL REPORT | JULY 31, 2014 |
| BlackRock MuniYield Michigan Quality Fund, Inc. |
| Market Price and Net Asset Value Per Share Summary | ||||||||||||||||||||
| 7/31/14 | 7/31/13 | Change | High | Low | ||||||||||||||||
Market Price | $13.47 | $12.57 | 7.16% | $14.12 | $11.94 | |||||||||||||||
Net Asset Value | $15.24 | $14.16 | 7.63% | $15.30 | $13.36 | |||||||||||||||
| Market Price and Net Asset Value History For the Past Five Years |
| Overview of the Fund’s Long-Term Investments |
| Sector Allocation | 7/31/14 | 7/31/13 | ||||||
Education | 21 | % | 17 | % | ||||
County/City/Special District/School District | 19 | 25 | ||||||
Health | 18 | 14 | ||||||
Utilities | 13 | 12 | ||||||
State | 11 | 13 | ||||||
Transportation | 9 | 10 | ||||||
Housing | 6 | 6 | ||||||
Corporate | 3 | 3 | ||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Credit Quality Allocation1 | 7/31/14 | 7/31/13 | ||||||
AAA/Aaa | 3 | % | 1 | % | ||||
AA/Aa | 73 | 70 | ||||||
A | 24 | 29 | ||||||
| 1 | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| Call/Maturity Schedule2 | ||||
Calendar Year Ended December 31, | ||||
2014 | 2 | % | ||
2015 | 7 | |||
2016 | 6 | |||
2017 | 8 | |||
2018 | 13 | |||
| 2 | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| ANNUAL REPORT | JULY 31, 2014 | 13 |
| Fund Summary as of July 31, 2014 | BlackRock MuniYield New Jersey Quality Fund, Inc. | |||
| Fund Overview |
BlackRock MuniYield New Jersey Quality Fund, Inc.’s (MJI) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal income taxes and New Jersey personal income tax as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and New Jersey personal income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
| Performance |
| Ÿ | For the 12-month period ended July 31, 2014, the Fund returned 13.85% based on market price and 16.64% based on NAV. For the same period, the closed-end Lipper New Jersey Municipal Debt Funds category posted an average return of 12.38% based on market price and 13.86% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. |
| Ÿ | Positive contributors to performance included the Fund’s exposure to the long-end of the municipal yield curve, as the curve flattened over the period. (Long-rates fell much more than short and intermediate rates.) The Fund’s duration exposure and corresponding interest rate sensitivity also added to returns as municipal rates declined. (Bond prices rise as rates fall.) The income generated from the Fund’s holdings of New Jersey state tax-exempt municipal bonds contributed to performance as well. |
| Ÿ | The Fund’s modest exposure to Puerto Rico government-related credits in the earlier part of the period detracted from results as credit spreads on these bonds widened materially due to investors’ lack of confidence and a weak local economy. The Fund sold its exposure to these securities early in the period. |
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information |
Symbol on NYSE | MJI | |
Initial Offering Date | October 30, 1992 | |
Yield on Closing Market Price as of July 31, 2014 ($14.15)1 | 6.28% | |
Tax Equivalent Yield2 | 12.19% | |
Current Monthly Distribution per Common Share3 | $0.074 | |
Current Annualized Distribution per Common Share3 | $0.888 | |
Economic Leverage as of July 31, 20144 | 37% |
| 1 | Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. |
| 2 | Tax equivalent yield assumes the maximum marginal federal and state tax rate of 48.48%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields. |
| 3 | The distribution rate is not constant and is subject to change. |
| 4 | Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5. |
| 14 | ANNUAL REPORT | JULY 31, 2014 |
| BlackRock MuniYield New Jersey Quality Fund, Inc. |
| Market Price and Net Asset Value Per Share Summary | ||||||||||||||||||||
| 7/31/14 | 7/31/13 | Change | High | Low | ||||||||||||||||
Market Price | $14.15 | $13.27 | 6.63% | $14.54 | $12.48 | |||||||||||||||
Net Asset Value | $15.61 | $14.29 | 9.24% | $15.70 | $13.58 | |||||||||||||||
| Market Price and Net Asset Value History For the Past Five Years |
| Overview of the Fund’s Long-Term Investments |
| Sector Allocation | 7/31/14 | 7/31/13 | ||||||
Transportation | 24 | % | 20 | % | ||||
Education | 22 | 17 | ||||||
State | 17 | 24 | ||||||
County/City/Special District/School District | 12 | 11 | ||||||
Health | 11 | 10 | ||||||
Housing | 6 | 7 | ||||||
Utilities | 4 | 8 | ||||||
Corporate | 4 | 3 | ||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Credit Quality Allocation1 | 7/31/14 | 7/31/13 | ||||||
AAA/Aaa | 6 | % | 6 | % | ||||
AA/Aa | 51 | 45 | ||||||
A | 36 | 42 | ||||||
BBB/Baa | 7 | 7 | ||||||
| 1 | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| Call/Maturity Schedule2 | ||||
Calendar Year Ended December 31, | ||||
2014 | 6 | % | ||
2015 | 3 | |||
2016 | 3 | |||
2017 | 8 | |||
2018 | 8 | |||
| 2 | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| ANNUAL REPORT | JULY 31, 2014 | 15 |
| Fund Summary as of July 31, 2014 | BlackRock MuniYield Pennsylvania Quality Fund | |||
| Fund Overview |
BlackRock MuniYield Pennsylvania Quality Fund’s (MPA) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal and Pennsylvania income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from federal income taxes (except that the interest may be subject to the federal alternative minimum tax) and Pennsylvania income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
| Performance |
| Ÿ | For the 12-month period ended July 31, 2014, the Fund returned 13.45% based on market price and 15.39% based on NAV. For the same period, the closed-end Lipper Pennsylvania Municipal Debt Funds category posted an average return of 16.01% based on market price and 13.04% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. |
| Ÿ | The Fund’s duration exposure (sensitivity to interest rate movements) contributed positively to performance as interest rates declined during the period. (Bond prices rise when rates fall.) The Fund’s exposure to long-maturity bonds benefited performance given that the yield curve flattened with rates falling more significantly in the 20- to 30-year maturity range. The income generated from coupon payments on the Fund’s portfolio of Pennsylvania tax-exempt bonds also contributed to performance. |
| Ÿ | The Fund’s modest exposure to Puerto Rico government-related credits detracted from results. Credit spreads on these bonds widened materially due to investors’ lack of confidence and the weak local economy. The Fund sold its exposure to these securities early in the period. |
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| Fund Information |
Symbol on NYSE | MPA | |
Initial Offering Date | October 30, 1992 | |
Yield on Closing Market Price as of July 31, 2014 ($13.89)1 | 6.39% | |
Tax Equivalent Yield2 | 11.65% | |
Current Monthly Distribution per Common Share3 | $0.074 | |
Current Annualized Distribution per Common Share3 | $0.888 | |
Economic Leverage as of July 31, 20144 | 36% |
| 1 | Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. |
| 2 | Tax equivalent yield assumes the maximum marginal federal and state tax rate of 45.14%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields. |
| 3 | The distribution rate is not constant and is subject to change. |
| 4 | Represents VRDP Shares and TOBs as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VRDP Shares and TOBs, minus the sum of accrued liabilities. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 5. |
| 16 | ANNUAL REPORT | JULY 31, 2014 |
| BlackRock MuniYield Pennsylvania Quality Fund |
| Market Price and Net Asset Value Per Share Summary |
| 7/31/14 | 7/31/13 | Change | High | Low | ||||||||||||||||
Market Price | $ | 13.89 | $ | 13.07 | 6.27% | $ | 14.37 | $ | 12.30 | |||||||||||
Net Asset Value | $ | 15.77 | $ | 14.59 | 8.09% | $ | 15.85 | $ | 13.94 | |||||||||||
| Market Price and Net Asset Value History For the Past Five Years |
| Overview of the Fund’s Long-Term Investments |
| Sector Allocation | 7/31/14 | 7/31/13 | ||||||
County/City/Special District/School District | 25 | % | 22 | % | ||||
Health | 17 | 16 | ||||||
State | 16 | 17 | ||||||
Transportation | 11 | 13 | ||||||
Education | 10 | 11 | ||||||
Corporate | 8 | 7 | ||||||
Utilities | 7 | 7 | ||||||
Housing | 6 | 7 | ||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Credit Quality Allocation1 | 7/31/14 | 7/31/13 | ||||||
AAA/Aaa | 1 | % | 1 | % | ||||
AA/Aa | 74 | 73 | ||||||
A | 19 | 22 | ||||||
BBB/Baa | 6 | 4 | ||||||
N/R2 | — | — | ||||||
| 1 | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| 2 | The investment advisor evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment advisor has deemed certain of these unrated securities as investment grade quality. As of July 31, 2014 and July 31, 2013, the market value of unrated securities deemed by the investment advisor to be investment grade was $539,850, representing less than 1%, and $525,235, representing less than 1%, respectively, of the Fund’s long-term investments. |
| Call/Maturity Schedule3 | ||||
Calendar Year Ended December 31, | ||||
2014 | 7 | % | ||
2015 | 10 | |||
2016 | 11 | |||
2017 | 6 | |||
2018 | 12 | |||
| 3 | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| ANNUAL REPORT | JULY 31, 2014 | 17 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
California — 120.4% | ||||||||
Corporate — 0.4% |
| |||||||
City of Chula Vista California, Refunding RB, San Diego Gas & Electric, Series A, 5.88%, 2/15/34 | $ | 2,435 | $ | 2,806,192 | ||||
County/City/Special District/School District — 37.9% |
| |||||||
Centinela Valley Union High School District, GO, Election of 2010, Series A, 5.75%, 8/01/41 | 9,100 | 10,803,611 | ||||||
City of Garden Grove California, COP, Series A, Financing Project (AMBAC), 5.50%, 3/01/26 | 4,040 | 4,055,958 | ||||||
County of Kern California, COP, Capital Improvements Projects, Series A (AGC), 6.00%, 8/01/35 | 3,500 | 4,074,980 | ||||||
County of Los Angeles California Sanitation Districts Financing Authority, Refunding RB (BHAC), 5.00%, 10/01/34 | 7,915 | 8,230,729 | ||||||
County of Orange California Sanitation District, COP, Series A, 5.00%, 2/01/35 | 2,500 | 2,820,050 | ||||||
County of San Joaquin California Transportation Authority, Refunding RB, Limited Tax, Measure K, Series A, 6.00%, 3/01/36 | 2,440 | 2,930,562 | ||||||
County of Ventura California Community College District, GO, Election of 2002, Series C, 5.50%, 8/01/33 | 5,050 | 5,813,207 | ||||||
Culver City Redevelopment Finance Authority California, Refunding, Tax Allocation Bonds, Series A (AGM), 5.60%, 11/01/25 | 3,750 | 3,765,113 | ||||||
Foothill-De Anza Community College District, GO, Election of 2006, Series C, 5.00%, 8/01/40 | 30,000 | 33,046,200 | ||||||
Garden Grove Unified School District, GO, Election of 2010, Series C, 5.25%, 8/01/40 | 5,500 | 6,242,170 | ||||||
Grossmont Healthcare District, GO, Election of 2006, Series B, 6.13%, 7/15/40 | 2,000 | 2,348,900 | ||||||
Kern Community College District, GO, Safety Repair & Improvements, Series C: | ||||||||
5.25%, 11/01/32 | 5,715 | 6,631,457 | ||||||
5.75%, 11/01/34 | 12,085 | 14,622,850 | ||||||
Los Alamitos Unified School District, GO, Refunding, School Facilities Improvement, Series E, 5.25%, 8/01/39 | 3,700 | 4,190,102 | ||||||
Los Angeles Community College District, GO, Series E (AGM), 5.00%, 8/01/31 | 11,215 | 11,953,396 | ||||||
Los Angeles Community Redevelopment Agency California, RB, Bunker Hill Project, Series A (AGM), 5.00%, 12/01/27 | 7,000 | 7,102,830 | ||||||
Los Rios Community College District, GO, Election of 2008, Series A, 5.00%, 8/01/35 | 11,000 | 12,123,650 | ||||||
Oxnard Union High School District, GO, Refunding, Election of 2004, Series A (AGM), 5.00%, 8/01/35 | 10,000 | 10,873,100 | ||||||
Redlands Unified School District California, GO, Election of 2008 (AGM), 5.25%, 7/01/33 | 5,000 | 5,634,400 | ||||||
Riverside Community College District, GO, Election of 2004, Series C (AGM), 5.00%, 8/01/32 | 8,750 | 9,623,512 | ||||||
California (continued) | ||||||||
County/City/Special District/School District (concluded) |
| |||||||
San Diego Regional Building Authority, RB, County Operations Center & Annex, Series A, 5.50%, 2/01/29 | $ | 900 | $ | 1,049,382 | ||||
San Francisco California Bay Area Rapid Transit District, Refunding RB, Series A (NPFGC), 5.00%, 7/01/30 | 23,100 | 23,828,805 | ||||||
San Jose California Financing Authority, LRB, Convention Center Expansion & Renovation Project, Series A: | ||||||||
5.75%, 5/01/36 | 2,560 | 2,738,867 | ||||||
5.75%, 5/01/42 | 4,500 | 5,290,380 | ||||||
San Jose California Financing Authority, Refunding LRB, Convention Center Expansion & Renovation Project, Series A, 5.00%, 6/01/39 | 20,000 | 21,770,000 | ||||||
Snowline Joint Unified School District, COP, Refunding, Refining Project (AGC), 5.75%, 9/01/38 | 5,635 | 6,556,604 | ||||||
West Contra Costa California Unified School District, GO: |
| |||||||
Election of 2005, Series A (AGM), 5.00%, 8/01/35 | 5,000 | 5,066,200 | ||||||
Election of 2010, Series A (AGM), 5.25%, 8/01/41 | 5,390 | 5,883,724 | ||||||
Election of 2010, Series B, 5.50%, 8/01/39 | 3,195 | 3,610,957 | ||||||
Election of 2012, Series A, 5.50%, 8/01/39 | 2,500 | 2,827,500 | ||||||
|
| |||||||
| 245,509,196 | ||||||||
Education — 3.3% |
| |||||||
California Educational Facilities Authority, RB, University of Southern California, Series A, 5.25%, 10/01/38 | 2,300 | 2,594,630 | ||||||
California Municipal Finance Authority, RB, Emerson College, 6.00%, 1/01/42 | 2,750 | 3,154,965 | ||||||
Gavilan Joint Community College District, GO, Election of 2004, Series D: | ||||||||
5.50%, 8/01/31 | 2,170 | 2,504,310 | ||||||
5.75%, 8/01/35 | 8,400 | 9,779,616 | ||||||
University of California, RB, Series L, 5.00%, 5/15/36 | 3,030 | 3,258,038 | ||||||
|
| |||||||
| 21,291,559 | ||||||||
Health — 18.4% |
| |||||||
ABAG Finance Authority for Nonprofit Corps., Refunding RB, Sharp Healthcare: | ||||||||
Series A, 6.00%, 8/01/30 | 2,305 | 2,784,855 | ||||||
Series B, 6.25%, 8/01/39 | 6,305 | 7,284,734 | ||||||
California Health Facilities Financing Authority, RB: | ||||||||
Children’s Hospital, Series A, 5.25%, 11/01/41 | 8,620 | 9,314,341 | ||||||
Kaiser Permanente, Series A, 5.25%, 4/01/39 | 7,275 | 7,520,822 | ||||||
Providence Health Services, Series B, 5.50%, 10/01/39 | 4,130 | 4,761,518 | ||||||
Sutter Health, Series A, 5.25%, 11/15/46 | 7,500 | 7,944,300 | ||||||
Sutter Health, Series B, 6.00%, 8/15/42 | 9,655 | 11,556,070 | ||||||
| Portfolio Abbreviations |
| AGC | Assured Guaranty Corp. | EDA | Economic Development Authority | IDA | Industrial Development Authority | |||||
| AGM | Assured Guaranty Municipal Corp. | EDC | Economic Development Corp. | IDB | Industrial Development Board | |||||
| AMBAC | American Municipal Bond Assurance Corp. | ERB | Education Revenue Bonds | ISD | Independent School District | |||||
| AMT | Alternative Minimum Tax (subject to) | GAB | Grant Anticipation Bonds | LRB | Lease Revenue Bonds | |||||
| ARB | Airport Revenue Bonds | GARB | General Airport Revenue Bonds | M/F | Multi-Family | |||||
| BARB | Building Aid Revenue Bonds | GO | General Obligation Bonds | NPFGC | National Public Finance Guarantee Corp. | |||||
| BHAC | Berkshire Hathaway Assurance Corp. | HDA | Housing Development Authority | Q-SBLF | Qualified School Bond Loan Fund | |||||
| CAB | Capital Appreciation Bonds | HFA | Housing Finance Agency | RB | Revenue Bonds | |||||
| COP | Certificates of Participation | HUD | Department of Housing and Urban Development | S/F | Single-Family |
See Notes to Financial Statements.
| 18 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (continued) | BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
California (continued) | ||||||||
Health (concluded) |
| |||||||
California Health Facilities Financing Authority, Refunding RB: | ||||||||
Catholic Healthcare West, Series A, 6.00%, 7/01/34 | $ | 3,700 | $ | 4,178,521 | ||||
Saint Joseph’s Health System, Series A, 5.00%, 7/01/37 | 10,000 | 10,837,100 | ||||||
Series A, 5.00%, 10/01/38 | 10,970 | 12,129,529 | ||||||
Stanford Hospital, Series A-3, 5.50%, 11/15/40 | 3,065 | 3,494,253 | ||||||
California Statewide Communities Development Authority, RB, Kaiser Permanente: | ||||||||
Series A, 5.00%, 4/01/42 | 12,500 | 13,532,125 | ||||||
Series B, 5.25%, 3/01/45 | 12,505 | 12,887,528 | ||||||
California Statewide Communities Development Authority, Refunding RB: | ||||||||
Kaiser Permanente, Series C, 5.25%, 8/01/31 | 2,500 | 2,618,825 | ||||||
Trinity Health Credit Group Composite Issue, 5.00%, 12/01/41 | 6,235 | 6,684,918 | ||||||
Washington Township Health Care District, GO, Series B, 5.50%, 8/01/38 | 1,625 | 1,901,721 | ||||||
|
| |||||||
| 119,431,160 | ||||||||
State — 9.4% |
| |||||||
California State Public Works Board, LRB: | ||||||||
Department of Education, Riverside Campus Project, Series B, 6.50%, 4/01/34 | 3,670 | 4,367,997 | ||||||
Various Capital Projects, Series I, 5.50%, 11/01/33 | 2,015 | 2,381,831 | ||||||
California State Public Works Board, RB, California State Prisons, Series C, 5.75%, 10/01/31 | 1,205 | 1,406,211 | ||||||
State of California, GO, Various Purposes: | ||||||||
6.00%, 3/01/33 | 5,000 | 5,998,850 | ||||||
6.00%, 4/01/38 | 28,095 | 33,063,601 | ||||||
University of California, RB, Limited Project, Series D (NPFGC), 5.00%, 5/15/41 | 13,000 | 14,000,090 | ||||||
|
| |||||||
| 61,218,580 | ||||||||
Transportation — 20.5% |
| |||||||
City & County of San Francisco California Airports Commission, ARB, Series E, 6.00%, 5/01/39 | 9,650 | 11,438,821 | ||||||
City & County of San Francisco California Airports Commission, Refunding ARB, AMT: | ||||||||
2nd Series 34E (AGM), 5.75%, 5/01/24 | 5,000 | 5,679,750 | ||||||
Series A, 5.00%, 5/01/29 | 6,435 | 7,130,945 | ||||||
City of Los Angeles California Department of Airports, ARB, Los Angeles International Airport, Senior Series D, 5.25%, 5/15/29 | 2,590 | 2,979,536 | ||||||
City of Los Angeles California Department of Airports, Refunding ARB, Los Angeles International Airport, Series A: | ||||||||
Senior, 5.00%, 5/15/40 | 3,750 | 4,106,925 | ||||||
5.25%, 5/15/39 | 5,835 | 6,626,926 | ||||||
City of San Jose California, Refunding ARB, Series A-1, AMT: | ||||||||
5.25%, 3/01/23 | 3,785 | 4,343,931 | ||||||
6.25%, 3/01/34 | 1,400 | 1,619,380 | ||||||
County of Los Angeles Metropolitan Transportation Authority, Refunding RB, Series A (AMBAC), 5.00%, 7/01/35 | 9,000 | 9,314,190 | ||||||
County of Orange California, ARB, Series B, 5.75%, 7/01/34 | 6,345 | 7,125,245 | ||||||
County of Sacramento California, ARB: | ||||||||
Senior Series A (AGC), 5.50%, 7/01/41 | 8,190 | 9,279,516 | ||||||
Senior Series B, 5.75%, 7/01/39 | 2,650 | 3,023,094 | ||||||
Senior Series B, AMT (AGM), 5.75%, 7/01/28 | 13,275 | 15,133,234 | ||||||
Senior Series B, AMT (AGM), 5.25%, 7/01/33 | 19,530 | 20,718,791 | ||||||
California (concluded) | ||||||||
Transportation (concluded) |
| |||||||
County of San Bernardino California Transportation Authority, RB, Series A, 5.25%, 3/01/40 | 4,545 | 5,239,703 | ||||||
Los Angeles Harbor Department, RB, Series B, 5.25%, 8/01/34 | 5,530 | 6,327,315 | ||||||
San Francisco Bay Area Rapid Transit District, Refunding RB, Series A (NPFGC), 5.00%, 7/01/34 | 2,500 | 2,577,950 | ||||||
County of San Mateo California Transportation Authority, Refunding RB, Series A (NPFGC), 5.00%, 6/01/32 | 10,000 | 10,296,700 | ||||||
|
| |||||||
| 132,961,952 | ||||||||
Utilities — 30.5% |
| |||||||
Anaheim Public Financing Authority, RB, Electric System Distribution Facilities, Series A, 5.38%, 10/01/36 | 2,200 | 2,521,970 | ||||||
City of Los Angeles California Department of Water & Power, Refunding RB, Series A, 5.25%, 7/01/39 | 16,000 | 17,771,040 | ||||||
City of Los Angeles California Wastewater System, Refunding RB, Sub-Series A, 5.00%, 6/01/28 | 2,000 | 2,305,260 | ||||||
City of Napa California Water Revenue, RB (AMBAC), 5.00%, 5/01/35 | 9,100 | 9,905,896 | ||||||
City of San Francisco California Public Utilities Commission Water, RB, Series B, 5.00%, 11/01/30 | 10,000 | 11,418,200 | ||||||
County of Sacramento California Sanitation Districts Financing Authority, RB: | ||||||||
5.00%, 6/01/16 (a) | 3,490 | 3,790,768 | ||||||
5.00%, 12/01/36 | 1,010 | 1,066,126 | ||||||
Dublin-San Ramon Services District, Refunding RB, 6.00%, 8/01/41 | 4,000 | 4,840,440 | ||||||
East Bay Municipal Utility District, Refunding RB: | ||||||||
Series A (NPFGC), 5.00%, 6/01/32 | 10,000 | 11,052,400 | ||||||
Series A (NPFGC), 5.00%, 6/01/37 | 6,670 | 7,332,731 | ||||||
Sub-Series A (AGM), 5.00%, 6/01/37 | 11,190 | 12,301,839 | ||||||
Sub-Series A (AMBAC), 5.00%, 6/01/33 | 5,000 | 5,480,700 | ||||||
East Bay Municipal Utility District Water System Revenue, RB, Series A (NPFGC): | ||||||||
5.00%, 6/01/15 (a) | 8,830 | 9,185,761 | ||||||
5.00%, 6/01/35 | 3,240 | 3,340,796 | ||||||
Eastern Municipal Water District, COP, Series H, 5.00%, 7/01/33 | 2,505 | 2,801,291 | ||||||
El Dorado Irrigation District/El Dorado County Water Agency, Refunding RB, Series A (AGM), 5.25%, 3/01/39 | 10,000 | 11,344,400 | ||||||
Imperial Irrigation District, Refunding RB, Electric System, 5.13%, 11/01/38 | 9,500 | 10,355,475 | ||||||
Los Angeles Department of Water & Power, RB: | ||||||||
Series A, 5.38%, 7/01/38 | 9,375 | 10,663,406 | ||||||
Sub-Series A-2, (AGM), 5.00%, 7/01/35 | 7,500 | 8,036,850 | ||||||
Metropolitan Water District of Southern California, RB, Series A: | ||||||||
5.00%, 7/01/35 | 12,870 | 13,319,292 | ||||||
5.00%, 7/01/37 | 5,500 | 6,017,605 | ||||||
Metropolitan Water District of Southern California, Refunding RB, Series C, 5.00%, 7/01/35 | 2,515 | 2,856,537 | ||||||
San Diego Public Facilities Financing Authority Sewer, Refunding RB, Senior Series A: | ||||||||
5.25%, 5/15/34 | 1,060 | 1,209,555 | ||||||
5.25%, 5/15/39 | 10,000 | 11,337,800 | ||||||
San Diego Public Facilities Financing Authority Water, Refunding RB, Series B, 5.50%, 8/01/39 | 8,000 | 9,292,960 | ||||||
San Juan Water District, Refunding RB, San Juan & Citrus Heights, 5.25%, 2/01/33 | 7,325 | 8,246,412 | ||||||
|
| |||||||
| 197,795,510 | ||||||||
| Total Municipal Bonds — 120.4% | 781,014,149 | |||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 19 |
Schedule of Investments (continued) | BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| Municipal Bonds Transferred to Tender Option Bond Trusts (b) | Par (000) | Value | ||||||
California — 29.1% | ||||||||
County/City/Special District/School District — 18.0% |
| |||||||
County of Alameda California Joint Powers Authority, Refunding LRB (AGM), 5.00%, 12/01/34 | $ | 13,180 | $ | 14,556,255 | ||||
Desert Community College District California, GO, Series C (AGM), 5.00%, 8/01/37 | 16,530 | 18,180,190 | ||||||
Foothill-De Anza Community College District, GO, Series C, 5.00%, 8/01/40 | 10,000 | 11,015,400 | ||||||
Los Angeles Community College District California, GO: | ||||||||
Election of 2001, Series A (NPFGC), 5.00%, 8/01/32 | 6,647 | 7,348,137 | ||||||
Election of 2001, Series E-1, 5.00%, 8/01/33 | 11,770 | 13,219,358 | ||||||
Election of 2003, Series F-1, 5.00%, 8/01/33 | 10,000 | 11,231,400 | ||||||
Los Angeles Community College District California, GO, Refunding, Election of 2008, Series A, 6.00%, 8/01/33 | 9,596 | 11,458,954 | ||||||
Poway Unified School District, GO, Election of 2002, Improvement District 02, Series 1-B (AGM), 5.00%, 8/01/30 | 10,000 | 10,935,400 | ||||||
San Bernardino Community College District California, GO, Election of 2002, Series C (AGM), 5.00%, 8/01/31 | 17,770 | 18,958,280 | ||||||
|
| |||||||
| 116,903,374 | ||||||||
Education — 4.9% | ||||||||
Riverside Community College District, GO, Election of 2004, Series C (NPFGC), 5.00%, 8/01/32 | 8,910 | 9,799,485 | ||||||
University of California, RB: | ||||||||
Limited Project, Series D (AGM), 5.00%, 5/15/41 | 8,000 | 8,615,440 | ||||||
Series O, 5.75%, 5/15/34 | 11,190 | 13,100,543 | ||||||
|
| |||||||
| 31,515,468 | ||||||||
| Municipal Bonds Transferred to Tender Option Bond Trusts (b) | Par (000) | Value | ||||||
California (concluded) | ||||||||
Utilities — 6.2% | ||||||||
County of San Diego California Water Authority, COP, Refunding, Series A (AGM), 5.00%, 5/01/33 | 16,740 | 18,549,762 | ||||||
East Bay Municipal Utility District, Refunding RB, Sub-Series A (AMBAC), 5.00%, 6/01/37 | 14,510 | 15,993,212 | ||||||
Rancho Water District Financing Authority, Refunding RB, Series A (AGM), 5.00%, 8/01/34 | 5,008 | 5,610,799 | ||||||
|
| |||||||
| 40,153,773 | ||||||||
| Total Municipal Bonds Transferred to Tender Option Bond Trusts — 29.1% | 188,572,615 | |||||||
| Total Long-Term Investments (Cost — $900,566,455) — 149.5% | 969,586,764 | |||||||
| Short-Term Securities | Shares | |||||||
BIF California Municipal Money Fund, 0.00% (c)(d) | 2,207,320 | 2,207,320 | ||||||
Total Short-Term Securities (Cost — $2,207,320) — 0.3% |
| 2,207,320 | ||||||
| Total Investments (Cost — $902,773,775) — 149.8% | 971,794,084 | |||||||
| Other Assets Less Liabilities — 2.9% | 19,344,027 | |||||||
Liability for TOB Trust Certificates, Including Interest |
| (88,301,430 | ) | |||||
| VMTP Shares, at Liquidation Value — (39.1)% | (254,000,000 | ) | ||||||
|
| |||||||
| Net Assets Applicable to Common Shares — 100.0% | $ | 648,836,681 | ||||||
|
| |||||||
| Notes to Schedule of Investments |
| (a) | U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par. |
| (b) | Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs. |
| (c) | Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: |
| Affiliate | Shares Held at July 31, 2013 | Net Activity | Shares Held at July 31, 2014 | Income | ||||||||||||
BIF California Municipal Money Fund | 501,963 | 1,705,357 | 2,207,320 | $ | 206 | |||||||||||
| (d) | Represents the current yield as of report date. |
| Ÿ | Financial futures contracts outstanding as of July 31, 2014 were as follows: |
| Contracts Sold | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation | |||||||||||
| (411 | ) | 10-Year U.S. Treasury Note | Chicago Board of Trade | September 2014 | $ | 51,214,453 | $ | 98,963 | ||||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Ÿ | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
See Notes to Financial Statements.
| 20 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (concluded) | BlackRock MuniHoldings California Quality Fund, Inc. (MUC) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
| Investments: | ||||||||||||||||
Municipal Bonds1 | — | $ | 969,586,764 | — | $ | 969,586,764 | ||||||||||
Short-Term Securities | $ | 2,207,320 | — | — | 2,207,320 | |||||||||||
|
| |||||||||||||||
Total | $ | 2,207,320 | $ | 969,586,764 | — | $ | 971,794,084 | |||||||||
|
| |||||||||||||||
1 See above Schedule of Investments for values in each sector. |
| |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Financial Instruments2 | ||||||||||||||||
Assets: | ||||||||||||||||
Interest rate contracts | $ | 98,963 | — | — | $ | 98,963 | ||||||||||
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| |||||||||||||||
| The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash pledged for financial futures contracts | $ | 562,000 | — | — | $ | 562,000 | ||||||||||
Liabilities: | ||||||||||||||||
TOB trust certificates | — | $ | (88,271,444 | ) | — | (88,271,444 | ) | |||||||||
VMTP Shares | — | (254,000,000 | ) | — | (254,000,000 | ) | ||||||||||
|
| |||||||||||||||
Total | $ | 562,000 | $ | (342,271,444 | ) | — | �� | $ | (341,709,444 | ) | ||||||
|
| |||||||||||||||
There were no transfers between levels during the year ended July 31, 2014.
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 21 |
Schedule of Investments July 31, 2014 | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey — 138.8% | ||||||||
Corporate — 2.9% |
| |||||||
County of Salem New Jersey Pollution Control Financing Authority, Refunding RB, Atlantic City Electric, AMT, Series A, 5.00%, 12/01/23 | $ | 4,190 | $ | 4,635,942 | ||||
New Jersey EDA, Refunding RB, New Jersey American Water Co., Inc. Project, AMT: | ||||||||
Series A, 5.70%, 10/01/39 | 2,500 | 2,739,450 | ||||||
Series B, 5.60%, 11/01/34 | 2,150 | 2,363,022 | ||||||
|
| |||||||
| 9,738,414 | ||||||||
County/City/Special District/School District — 18.2% |
| |||||||
Borough of Hopatcong New Jersey, GO, Refunding, Sewer (AMBAC), 4.50%, 8/01/33 | 2,690 | 2,758,272 | ||||||
City of Perth Amboy New Jersey, GO, Refunding, CAB (AGM): | ||||||||
5.00%, 7/01/32 | 4,605 | 4,813,008 | ||||||
5.00%, 7/01/33 | 1,395 | 1,455,250 | ||||||
5.00%, 7/01/37 | 1,470 | 1,518,628 | ||||||
County of Essex New Jersey Improvement Authority, Refunding RB, Project Consolidation (NPFGC): | ||||||||
5.50%, 10/01/27 | 250 | 315,768 | ||||||
5.50%, 10/01/28 | 4,840 | 6,145,832 | ||||||
County of Hudson New Jersey Improvement Authority, RB: | ||||||||
County Secured, County Services Building Project (AGM), 5.00%, 4/01/27 | 750 | 811,860 | ||||||
Harrison Parking Facility Project, Series C (AGC), 5.25%, 1/01/39 | 2,000 | 2,140,320 | ||||||
Harrison Parking Facility Project, Series C (AGC), 5.38%, 1/01/44 | 3,600 | 3,857,148 | ||||||
County of Middlesex New Jersey Improvement Authority, RB, Senior Citizens Housing Project, AMT (AMBAC), 5.50%, 9/01/30 | 500 | 501,805 | ||||||
County of Monmouth New Jersey Improvement Authority, RB, Governmental Loan (AMBAC): | ||||||||
5.35%, 12/01/17 | 5 | 5,019 | ||||||
5.38%, 12/01/18 | 5 | 5,019 | ||||||
County of Union New Jersey, GO, Refunding: | ||||||||
4.00%, 3/01/29 | 2,590 | 2,740,453 | ||||||
4.00%, 3/01/30 | 2,590 | 2,727,788 | ||||||
4.00%, 3/01/31 | 2,925 | 3,068,179 | ||||||
County of Union New Jersey Utilities Authority, Refunding RB, Series A: | ||||||||
Resources Recovery Facility, Covanta Union, Inc., AMT, 5.25%, 12/01/31 | 450 | 486,013 | ||||||
Solid Waste System, County Deficiency Agreement, 5.00%, 6/15/41 | 5,415 | 5,893,307 | ||||||
Edgewater Borough Board of Education, GO, Refunding, (AGM): | ||||||||
4.25%, 3/01/34 | 1,235 | 1,309,878 | ||||||
4.25%, 3/01/35 | 1,300 | 1,371,981 | ||||||
4.30%, 3/01/36 | 1,370 | 1,442,733 | ||||||
Morristown Parking Authority, RB, (NPFGC): | ||||||||
5.00%, 8/01/30 | 1,830 | 1,912,844 | ||||||
5.00%, 8/01/33 | 3,000 | 3,120,150 | ||||||
New Jersey Sports & Exposition Authority, Refunding RB, (NPFGC): | ||||||||
5.50%, 3/01/21 | 5,890 | 6,809,606 | ||||||
5.50%, 3/01/22 | 3,150 | 3,672,081 | ||||||
New Jersey State Transit Corp., COP, Federal Transit Administration Grants, Subordinate, Series A (AGM) (NPFGC), 5.00%, 9/15/15 (a) | 2,000 | 2,090,080 | ||||||
|
| |||||||
| 60,973,022 | ||||||||
New Jersey (continued) | ||||||||
Education — 28.2% | ||||||||
New Jersey Educational Facilities Authority, RB: | ||||||||
Higher Education Capital Improvement Fund, 5.00%, 9/01/33 | 4,310 | 4,739,750 | ||||||
Montclair State University, Series A (AMBAC), 5.00%, 7/01/16 (a) | 1,200 | 1,306,500 | ||||||
Montclair State University, Series A (AMBAC), 5.00%, 7/01/22 | 2,880 | 3,113,539 | ||||||
Richard Stockton College, Series F (NPFGC), 5.00%, 7/01/31 | 2,625 | 2,780,479 | ||||||
New Jersey Educational Facilities Authority, Refunding RB: | ||||||||
College of New Jersey, Series D (AGM), 5.00%, 7/01/35 | 9,740 | 10,730,948 | ||||||
Montclair State University, Series A, 5.00%, 7/01/39 | 11,055 | 12,287,080 | ||||||
Montclair State University, Series J (NPFGC), 4.25%, 7/01/30 | 3,775 | 3,840,987 | ||||||
Montclaire State University, Series A, 5.00%, 7/01/44 | 2,520 | 2,794,201 | ||||||
New Jersey Institute of Technology, Series H, 5.00%, 7/01/31 | 3,000 | 3,288,450 | ||||||
Ramapo College, Series B, 5.00%, 7/01/37 | 345 | 372,331 | ||||||
Ramapo College, Series I (AMBAC), 4.25%, 7/01/31 | 1,250 | 1,271,238 | ||||||
Seton Hall University, Series D, 5.00%, 7/01/38 | 360 | 391,410 | ||||||
Seton Hall University, Series D, 5.00%, 7/01/43 | 430 | 467,010 | ||||||
Stevens Institute of Technology, Series A, 5.00%, 7/01/27 | 2,800 | 2,900,464 | ||||||
Stevens Institute of Technology, Series A, 5.00%, 7/01/34 | 900 | 920,286 | ||||||
William Paterson University, Series C (AGC), 5.00%, 7/01/28 | 250 | 277,670 | ||||||
William Paterson University, Series C (AGC), 4.75%, 7/01/34 | 4,000 | 4,244,600 | ||||||
New Jersey Higher Education Student Assistance Authority, RB, Senior Student Loan, Series 1A, AMT: | ||||||||
4.00%, 12/01/28 | 790 | 788,191 | ||||||
4.50%, 12/01/28 | 3,380 | 3,527,841 | ||||||
4.00%, 12/01/29 | 4,140 | 4,073,222 | ||||||
4.00%, 12/01/29 | 710 | 707,487 | ||||||
4.50%, 12/01/29 | 4,150 | 4,325,504 | ||||||
4.63%, 12/01/30 | 4,080 | 4,245,770 | ||||||
4.00%, 12/01/31 | 1,335 | 1,289,076 | ||||||
4.25%, 12/01/32 | 1,460 | 1,445,692 | ||||||
4.13%, 12/01/35 | 710 | 677,539 | ||||||
4.50%, 12/01/36 | 1,280 | 1,284,774 | ||||||
New Jersey Higher Education Student Assistance Authority, Refunding RB, Series 1, AMT, 5.38%, 12/01/24 | 1,500 | 1,684,470 | ||||||
New Jersey Institute of Technology, RB, Series A, 5.00%, 7/01/42 | 5,045 | 5,433,969 | ||||||
Rutgers - The State University of New Jersey, Refunding RB, Series L: | ||||||||
5.00%, 5/01/30 | 1,100 | 1,263,592 | ||||||
5.00%, 5/01/43 | 7,150 | 7,934,927 | ||||||
|
| |||||||
| 94,408,997 | ||||||||
Health — 19.1% | ||||||||
New Jersey Health Care Facilities Financing Authority, RB: | ||||||||
Greystone Park Psychiatric Hospital (AMBAC), 5.00%, 9/15/15 (a) | 10,775 | 11,358,143 | ||||||
Meridian Health System Obligated Group, Series I (AGC), 5.00%, 7/01/38 | 720 | 755,424 | ||||||
| 22 | ANNUAL REPORT | JULY 31, 2014 |
See Notes to Financial Statements.
Schedule of Investments (continued) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey (continued) | ||||||||
Health (concluded) | ||||||||
Meridian Health System Obligated Group, Series II (AGC), 5.00%, 7/01/38 | $ | 6,050 | $ | 6,347,660 | ||||
Meridian Health System Obligated Group, Series V (AGC), 5.00%, 7/01/38 | 3,800 | 3,986,960 | ||||||
Robert Wood Johnson University Hospital, Series A, 5.50%, 7/01/43 | 4,885 | 5,424,011 | ||||||
Virtua Health, Series A (AGC), 5.50%, 7/01/38 | 3,035 | 3,271,366 | ||||||
New Jersey Health Care Facilities Financing Authority, Refunding RB: | ||||||||
5.00%, 7/01/28 | 2,130 | 2,415,441 | ||||||
5.00%, 7/01/29 | 510 | 574,831 | ||||||
5.50%, 7/01/31 | 2,880 | 3,212,323 | ||||||
AHS Hospital Corp., 6.00%, 7/01/41 | 3,080 | 3,565,685 | ||||||
Catholic Health East Issue, 5.00%, 11/15/33 | 1,375 | 1,465,668 | ||||||
Hackensack University Medical (AGC), 5.13%, 1/01/27 | 1,500 | 1,597,710 | ||||||
Hackensack University Medical (AGM), 4.63%, 1/01/30 | 5,480 | 5,743,040 | ||||||
Kennedy Health System, 5.00%, 7/01/42 | 360 | 377,978 | ||||||
Meridian Health System Obligated Group, 5.00%, 7/01/25 | 700 | 784,378 | ||||||
Meridian Health System Obligated Group, 5.00%, 7/01/26 | 1,590 | 1,764,089 | ||||||
St. Barnabas Health Care System, Series A, 5.00%, 7/01/24 | 1,820 | 2,030,155 | ||||||
St. Barnabas Health Care System, Series A, 5.63%, 7/01/32 | 4,010 | 4,390,068 | ||||||
St. Barnabas Health Care System, Series A, 5.63%, 7/01/37 | 3,560 | 3,866,089 | ||||||
St. Luke’s Warren Hospital Obligated Group, 5.00%, 8/15/34 | 740 | 789,869 | ||||||
St. Luke’s Warren Hospital Obligated Group, 4.00%, 8/15/37 | 440 | 415,888 | ||||||
|
| |||||||
| 64,136,776 | ||||||||
Housing — 9.0% | ||||||||
New Jersey Housing & Mortgage Finance Agency, RB: | ||||||||
Capital Fund Program, Series A (AGM), 5.00%, 5/01/27 | 4,800 | 5,180,784 | ||||||
Capital Fund Program, Series A (AGM) (HUD), 4.70%, 11/01/25 | 6,120 | 6,272,021 | ||||||
M/F Housing, Series A, 4.55%, 11/01/43 | 3,575 | 3,603,350 | ||||||
M/F Housing, Series A, AMT (NPFGC), 4.85%, 11/01/39 | 935 | 918,890 | ||||||
S/F Housing, Series AA, 6.50%, 10/01/38 | 930 | 957,826 | ||||||
S/F Housing, Series B, 4.50%, 10/01/30 | 6,735 | 7,114,584 | ||||||
New Jersey Housing & Mortgage Finance Agency, Refunding RB, AMT: | ||||||||
M/F Housing, Series 2, 4.60%, 11/01/38 | 2,400 | 2,438,736 | ||||||
M/F Housing, Series 2, 4.75%, 11/01/46 | 3,015 | 3,058,898 | ||||||
S/F Housing, Series T, 4.70%, 10/01/37 | 615 | 620,486 | ||||||
|
| |||||||
| 30,165,575 | ||||||||
State — 29.6% | ||||||||
Garden State Preservation Trust, RB (AGM): | ||||||||
CAB, Series B, 0.00%, 11/01/23 (b) | 9,000 | 7,025,760 | ||||||
CAB, Series B, 0.00%, 11/01/25 (b) | 10,000 | 7,210,400 | ||||||
Election of 2005, Series A, 5.80%, 11/01/15 (a) | 1,960 | 2,095,828 | ||||||
Election of 2005, Series A, 5.80%, 11/01/15 (a) | 2,730 | 2,919,189 | ||||||
Garden State Preservation Trust, Refunding RB, | ||||||||
5.25%, 11/01/20 | 5,000 | 6,056,750 | ||||||
5.25%, 11/01/21 | 7,705 | 9,440,166 | ||||||
New Jersey (continued) | ||||||||
State (concluded) | ||||||||
New Jersey EDA, LRB, Rutgers - The State University of New Jersey, College Avenue Redevelopment Project, 5.00%, 6/15/33 | 2,185 | 2,477,593 | ||||||
New Jersey EDA, RB: | ||||||||
Liberty State Park Project, Series C, 5.00%, 3/01/22 | 2,670 | 2,740,301 | ||||||
Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/24 | 1,785 | 2,118,849 | ||||||
Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/25 | 4,000 | 4,764,760 | ||||||
Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/26 | 7,500 | 8,939,475 | ||||||
Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/33 | 11,105 | 11,223,046 | ||||||
School Facilities Construction (AGC), 6.00%, 12/15/18 (a) | 2,775 | 3,375,121 | ||||||
School Facilities Construction (AGC), 6.00%, 12/15/34 | 25 | 28,968 | ||||||
School Facilities Construction, Series L (AGM), 5.00%, 3/01/15 (a) | 9,000 | 9,254,430 | ||||||
School Facilities Construction, Series O, 5.25%, 3/01/15 (a) | 1,420 | 1,461,947 | ||||||
School Facilities Construction, Series U, 5.00%, 9/01/37 | 2,475 | 2,696,388 | ||||||
School Facilities Construction, Series Y, 5.00%, 9/01/33 | 3,000 | 3,287,880 | ||||||
New Jersey EDA, Refunding RB: | ||||||||
Cigarette Tax, 5.00%, 6/15/26 | 895 | 984,885 | ||||||
Cigarette Tax, 5.00%, 6/15/28 | 1,520 | 1,654,900 | ||||||
Cigarette Tax, 5.00%, 6/15/29 | 2,000 | 2,163,300 | ||||||
School Facilities Construction, Series N-1 (NPFGC), 5.50%, 9/01/27 | 1,000 | 1,219,070 | ||||||
School Facilities Construction, Series NN, 5.00%, 3/01/29 | 4,500 | 4,923,270 | ||||||
State of New Jersey, COP, Equipment Lease Purchase, Series A, 5.25%, 6/15/27 | 1,080 | 1,208,099 | ||||||
|
| |||||||
| 99,270,375 | ||||||||
Transportation — 27.6% | ||||||||
Delaware River Port Authority, RB: | ||||||||
5.00%, 1/01/29 | 1,250 | 1,414,275 | ||||||
5.00%, 1/01/37 | 4,465 | 4,881,986 | ||||||
Series D (AGM), 5.00%, 1/01/40 | 3,700 | 3,930,288 | ||||||
Delaware River Port Authority, Refunding RB, Port District Project: | ||||||||
5.00%, 1/01/26 | 1,745 | 1,887,392 | ||||||
5.00%, 1/01/27 | 1,300 | 1,396,408 | ||||||
New Jersey EDA, RB, Private Activity Bond, The Goethals Bridge Replacement Project (AMT): | ||||||||
5.13%, 1/01/34 | 1,630 | 1,745,159 | ||||||
5.38%, 1/01/43 | 5,495 | 5,829,371 | ||||||
New Jersey State Turnpike Authority, RB, Growth & Income Securities, Series B (AMBAC), 5.15%, 1/01/35 (c) | 7,615 | 7,832,637 | ||||||
New Jersey State Turnpike Authority, Refunding RB: | ||||||||
Series A (AGM), 5.25%, 1/01/26 | 4,900 | 5,969,621 | ||||||
Series A (AGM), 5.25%, 1/01/29 | 2,000 | 2,423,960 | ||||||
Series A (AGM), 5.25%, 1/01/30 | 4,000 | 4,855,160 | ||||||
Series A (BHAC), 5.25%, 1/01/29 | 500 | 616,315 | ||||||
Series C (NPFGC), 6.50%, 1/01/16 (d) | 255 | 277,295 | ||||||
Series C (NPFGC), 6.50%, 1/01/16 (d) | 1,535 | 1,593,453 | ||||||
Series C (NPFGC), 6.50%, 1/01/16 (d) | 305 | 331,666 | ||||||
Series C (NPFGC), 6.50%, 1/01/16 | 605 | 656,310 | ||||||
New Jersey Transportation Trust Fund Authority, RB: | ||||||||
CAB, Transportation System, Series C (AMBAC), 0.00%, 12/15/36 (b) | 7,210 | 2,311,454 | ||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 23 |
Schedule of Investments (continued) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey (concluded) | ||||||||
Transportation (concluded) | ||||||||
CAB, Transportation System, Series A, 0.00%, 12/15/35 (b) | $ | 6,000 | $ | 2,049,360 | ||||
CAB, Transportation System, Series C (AGM), 0.00%, 12/15/32 (b) | 4,050 | 1,709,545 | ||||||
CAB, Transportation System, Series C (AMBAC), 0.00%, 12/15/35 (b) | 1,400 | 473,228 | ||||||
Transportation Program, Series AA, 5.00%, 6/15/33 | 4,300 | 4,623,833 | ||||||
Transportation System, Series A, 6.00%, 6/15/35 | 4,365 | 5,225,080 | ||||||
Transportation System, Series A (NPFGC), 5.75%, 6/15/24 | 1,205 | 1,449,507 | ||||||
Transportation System, Series A (AGC), 5.63%, 12/15/28 | 2,000 | 2,339,040 | ||||||
Transportation System, Series AA, 5.25%, 6/15/33 | 4,050 | 4,495,054 | ||||||
Transportation System, Series B, 5.50%, 6/15/31 | 1,425 | 1,625,697 | ||||||
Transportation System, Series B, 5.25%, 6/15/36 | 1,775 | 1,930,419 | ||||||
Port Authority of New York & New Jersey, ARB, Special Project, JFK International Air Terminal LLC Project: | ||||||||
Series 6, AMT (NPFGC), 5.75%, 12/01/25 | 3,000 | 3,007,860 | ||||||
Series 6, AMT (NPFGC), 6.25%, 12/01/15 | 1,500 | 1,561,125 | ||||||
Series 8, 6.00%, 12/01/42 | 2,500 | 2,868,200 | ||||||
Port Authority of New York & New Jersey, Refunding ARB, AMT: | ||||||||
178th Series, 5.00%, 12/01/33 | 2,850 | 3,154,266 | ||||||
Consolidated, 152nd Series, 5.75%, 11/01/30 | 5,175 | 5,857,272 | ||||||
South Jersey Transportation Authority, Refunding RB, Transportation System, Series A: | ||||||||
5.00%, 11/01/28 | 1,025 | 1,103,074 | ||||||
5.00%, 11/01/29 | 1,025 | 1,096,361 | ||||||
|
| |||||||
| 92,521,671 | ||||||||
Utilities — 4.2% | ||||||||
County of Essex New Jersey Utilities Authority, Refunding RB, (AGC), 4.13%, 4/01/22 | 1,330 | 1,436,812 | ||||||
North Hudson Sewerage Authority, Refunding RB, Series A (NPFGC), 5.13%, 8/01/20 (d) | 4,335 | 5,196,495 | ||||||
Rahway Valley Sewerage Authority, RB, CAB, Series A (NPFGC) (b): | ||||||||
0.00%, 9/01/28 | 6,600 | 3,783,582 | ||||||
0.00%, 9/01/29 | 6,900 | 3,741,042 | ||||||
|
| |||||||
| 14,157,931 | ||||||||
| Total Municipal Bonds in New Jersey | 465,372,761 | |||||||
Guam — 1.0% | ||||||||
State — 1.0% | ||||||||
Territory of Guam, RB, Business Privilege Tax Bonds: | ||||||||
Series A, 5.25%, 1/01/36 | 305 | 325,417 | ||||||
Series A, 5.13%, 1/01/42 | 2,500 | 2,634,575 | ||||||
Series B-1, 5.00%, 1/01/37 | 395 | 414,177 | ||||||
| Total Municipal Bonds in Guam | 3,374,169 | |||||||
Puerto Rico — 0.5% | ||||||||
Health — 0.5% | ||||||||
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities Financing Authority, RB, Hospital De La Concepcion, Series A, 6.50%, 11/15/20 | 1,750 | 1,758,960 | ||||||
| Total Municipal Bonds — 140.3% | 470,505,890 | |||||||
| Municipal Bonds Transferred to Tender Option Bond Trusts (e) | Par (000) | Value | ||||||
New Jersey — 19.2% | ||||||||
County/City/Special District/School District — 4.0% |
| |||||||
County of Union New Jersey Utilities Authority, Refunding LRB, Resource Recovery Facility, Covanta Union, Inc., Series A, AMT, 5.25%, 12/01/31 | 12,370 | 13,359,971 | ||||||
Education — 0.3% | ||||||||
Rutgers - The State University of New Jersey, RB, Series F, 5.00%, 5/01/39 | 990 | 1,099,151 | ||||||
State — 5.0% | ||||||||
Garden State Preservation Trust, RB, Election of 2005, Series A (AGM), 5.75%, 11/01/28 | 9,160 | 11,715,274 | ||||||
New Jersey EDA, Refunding RB, 5.00%, 3/01/29 (f) | 4,780 | 5,229,901 | ||||||
|
| |||||||
| 16,945,175 | ||||||||
Transportation — 9.9% |
| |||||||
New Jersey State Turnpike Authority, RB, Series A, 5.00%, 1/01/38 (f) | 5,200 | 5,645,224 | ||||||
New Jersey Transportation Trust Fund Authority, RB, Transportation System, Series B, 5.25%, 6/15/36 (f) | 1,900 | 2,066,802 | ||||||
Port Authority of New York & New Jersey, ARB, Consolidated, 163rd Series, AMT, 5.00%, 7/15/39 | 11,456 | 12,902,963 | ||||||
Port Authority of New York & New Jersey, RB, Consolidated, 169th Series, AMT, 5.00%, 10/15/41 | 5,500 | 5,927,460 | ||||||
Port Authority of New York & New Jersey, Refunding RB, Consolidated, 152nd Series, AMT, 5.25%, 11/01/35 | 5,998 | 6,548,290 | ||||||
|
| |||||||
| 33,090,739 | ||||||||
| Total Municipal Bonds Transferred to Tender Option Bond Trusts — 19.2% | 64,495,036 | |||||||
| Total Long-Term Investments (Cost — $498,648,550) — 159.5% | 535,000,926 | |||||||
| Short-Term Securities | Shares | Value | ||||||
BIF New Jersey Municipal Money Fund, 0.00% (g)(h) | 4,710,150 | 4,710,150 | ||||||
| Total Short-Term Securities (Cost — $4,710,150) — 1.4% | 4,710,150 | |||||||
| Total Investments (Cost — $503,358,700) — 160.9% | 539,711,076 | |||||||
| Other Assets Less Liabilities — 0.9% | 3,119,362 | |||||||
Liability for TOB Trust Certificates, Including Interest |
| (34,705,693 | ) | |||||
| VRDP Shares, at Liquidation Value — (51.5)% | (172,700,000 | ) | ||||||
|
| |||||||
| Net Assets Applicable to Common Shares — 100.0% | $ | 335,424,745 | ||||||
|
| |||||||
See Notes to Financial Statements.
| 24 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (continued) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) |
| Notes to Schedule of Investments |
| (a) | U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par. |
| (b) | Zero-coupon bond. |
| (c) | Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date. |
| (d) | Security is collateralized by municipal or U.S. Treasury obligations. |
| (e) | Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs. |
| (f) | All or a portion of security is subject to a recourse agreement, which may require the Fund to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire from June 15, 2019 to September 1, 2020 is $8,818,272. |
| (g) | Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: |
| Affiliate | Shares Held at July 31, 2013 | Net Activity | Shares Held at July 31, 2014 | Income | ||||||||||||
BIF New Jersey Municipal Money Fund | 7,170,770 | (2,460,620 | ) | 4,710,150 | $ | 2 | ||||||||||
| (h) | Represents the current yield as of report date. |
| Ÿ | Financial futures contracts outstanding as of July 31, 2014 were as follows: |
| Contracts Sold | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation | |||||||||||
| (205 | ) | 10-Year U.S. Treasury Note | Chicago Board of Trade | September 2014 | $ | 25,544,922 | $ | 87,799 | ||||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Ÿ | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
| Investments: | ||||||||||||||
Municipal Bonds1 | — | $ | 535,000,926 | — | $ | 535,000,926 | ||||||||
Short-Term Securities | $ | 4,710,150 | — | — | 4,710,150 | |||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 4,710,150 | $ | 535,000,926 | — | $ | 539,711,076 | |||||||
|
|
|
|
|
|
| ||||||||
1 See above Schedule of Investments for values in each sector. |
| |||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Derivative Financial Instruments2 | ||||||||||||||
Assets: | ||||||||||||||
Interest rate contracts | $ | 87,799 | — | — | $ | 87,799 | ||||||||
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| |||||||||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 25 |
Schedule of Investments (concluded) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) |
| The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows: | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
Cash pledged for financial futures contracts | $ | 280,000 | — | — | $ | 280,000 | ||||||||
Liabilities: | ||||||||||||||
TOB trust certificates | — | $ | (34,699,311 | ) | — | (34,699,311 | ) | |||||||
VRDP Shares | — | (172,700,000 | ) | — | (172,700,000 | ) | ||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 280,000 | $ | (207,399,311 | ) | — | $ | (207,119,311 | ) | |||||
|
|
|
|
|
|
| ||||||||
There were no transfers between levels during the year ended July 31, 2014.
See Notes to Financial Statements.
| 26 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments July 31, 2014 | BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Alabama — 4.4% |
| |||||||
City of Birmingham Alabama Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC): | ||||||||
6.13%, 6/01/34 | $ | 1,500 | $ | 1,747,545 | ||||
6.00%, 6/01/39 | 2,985 | 3,460,719 | ||||||
City of Selma Alabama IDB, RB, Gulf Opportunity Zone, International Paper Co. Project, Series A, 5.38%, 12/01/35 | 350 | 382,515 | ||||||
|
| |||||||
| 5,590,779 | ||||||||
California — 19.9% |
| |||||||
California Educational Facilities Authority, RB, University of Southern California, Series A, 5.25%, 10/01/38 | 1,960 | 2,211,076 | ||||||
California Health Facilities Financing Authority, RB, Sutter Health, Series B, 6.00%, 8/15/42 | 1,150 | 1,376,435 | ||||||
City & County of San Francisco California Airports Commission, Refunding ARB, 2nd Series A, AMT: | ||||||||
5.50%, 5/01/28 | 720 | 831,794 | ||||||
5.25%, 5/01/33 | 560 | 619,931 | ||||||
City of San Jose California, Refunding ARB, Series A-1, AMT: | ||||||||
5.50%, 3/01/30 | 1,600 | 1,775,728 | ||||||
6.25%, 3/01/34 | 1,250 | 1,445,875 | ||||||
County of Sacramento California, ARB, Senior Series A (AGC), 5.50%, 7/01/41 | 1,400 | 1,586,242 | ||||||
Kern Community College District, GO, Safety, Repair & Improvement, Election of 2002, Series C, 5.50%, 11/01/33 | 970 | 1,144,804 | ||||||
Los Angeles Community College District California, GO, Election of 2001, Series A (NPFGC), 5.00%, 8/01/32 | 2,780 | 3,073,040 | ||||||
Redondo Beach Unified School District, GO, Election of 2008, Series E, 5.50%, 8/01/34 | 1,000 | 1,129,840 | ||||||
San Diego Public Facilities Financing Authority Water, Refunding RB, Series B (AGC), 5.38%, 8/01/34 | 1,020 | 1,172,031 | ||||||
State of California, GO, Various Purposes (AGC), 5.50%, 11/01/39 | 3,450 | 3,954,287 | ||||||
State of California Public Works Board, RB: | ||||||||
Department of Corrections & Rehabilitation, Series F, 5.25%, 9/01/33 | 490 | 560,315 | ||||||
Various Capital Projects, Series I, 5.50%, 11/01/31 | 1,000 | 1,181,180 | ||||||
Township of Washington California Health Care District, GO, Election of 2004, Series B, 5.50%, 8/01/40 | 370 | 430,965 | ||||||
University of California, Refunding RB, The Regents of Medical Center, Series J, 5.25%, 5/15/38 | 2,235 | 2,532,210 | ||||||
|
| |||||||
| 25,025,753 | ||||||||
Colorado — 2.1% | ||||||||
City & County of Denver Colorado Airport System, ARB, Series A, AMT: | ||||||||
5.50%, 11/15/28 | 500 | 572,715 | ||||||
5.50%, 11/15/30 | 225 | 254,124 | ||||||
5.50%, 11/15/31 | 270 | 302,484 | ||||||
Colorado Health Facilities Authority, RB, Hospital, NCMC, Inc. Project, Series B (AGM), 6.00%, 5/15/26 | 1,300 | 1,479,907 | ||||||
|
| |||||||
| 2,609,230 | ||||||||
Florida — 11.4% | ||||||||
City of Jacksonville Florida, Refunding RB, Series A, 5.25%, 10/01/33 | 270 | 303,161 | ||||||
County of Hillsborough Florida Aviation Authority, Refunding ARB, Tampa International Airport, Series A, AMT, 5.50%, 10/01/29 | 1,170 | 1,312,096 | ||||||
County of Lee Florida, Refunding ARB, Series A, AMT, 5.38%, 10/01/32 | 1,000 | 1,089,050 | ||||||
County of Manatee Florida Housing Finance Authority, RB, S/F Housing, Series A, AMT (Ginnie Mae, Fannie Mae & Freddie Mac), 5.90%, 9/01/40 | 120 | 122,381 | ||||||
Florida (concluded) | ||||||||
County of Miami-Dade Florida, RB, Seaport: | ||||||||
Series A, 6.00%, 10/01/38 | 1,840 | 2,109,321 | ||||||
Series A, 5.50%, 10/01/42 | 2,125 | 2,355,435 | ||||||
Series B, AMT, 6.00%, 10/01/26 | 590 | 710,690 | ||||||
Series B, AMT, 6.00%, 10/01/27 | 775 | 925,606 | ||||||
Series B, AMT, 6.25%, 10/01/38 | 310 | 362,288 | ||||||
Series B, AMT, 6.00%, 10/01/42 | 410 | 468,327 | ||||||
County of Miami-Dade Florida, Refunding RB: | ||||||||
Seaport, Series D, AMT, 6.00%, 10/01/26 | 735 | 885,352 | ||||||
Water & Sewer System, Series B, 5.25%, 10/01/29 | 500 | 574,000 | ||||||
County of Miami-Dade Florida Aviation, Refunding ARB, Series A, AMT, 5.00%, 10/01/31 | 2,165 | 2,328,501 | ||||||
Reedy Creek Improvement District, GO, Series A, 5.25%, 6/01/32 | 710 | 796,222 | ||||||
|
| |||||||
| 14,342,430 | ||||||||
Hawaii — 1.0% | ||||||||
State of Hawaii, Department of Transportation, COP, AMT: | ||||||||
5.25%, 8/01/25 | 250 | 287,433 | ||||||
5.25%, 8/01/26 | 810 | 924,226 | ||||||
|
| |||||||
| 1,211,659 | ||||||||
Illinois — 23.1% | ||||||||
City of Chicago Illinois, GARB, O’Hare International Airport, 3rd Lien: | ||||||||
Series A, 5.75%, 1/01/39 | 770 | 866,420 | ||||||
Series C, 6.50%, 1/01/41 | 3,680 | 4,402,752 | ||||||
City of Chicago Illinois, GO, Refunding, Series A: | ||||||||
5.25%, 1/01/29 | 1,000 | 1,058,590 | ||||||
5.25%, 1/01/33 | 570 | 593,609 | ||||||
City of Chicago Illinois, Refunding RB, Series A: | ||||||||
Sales Tax, 5.25%, 1/01/38 | 525 | 562,217 | ||||||
Waterworks, 2nd Lien (AMBAC), 5.00%, 11/01/36 | 1,165 | 1,201,406 | ||||||
City of Chicago Illinois Transit Authority, RB: | ||||||||
Federal Transit Administration, Section 5309, Series A (AGC), 6.00%, 6/01/26 | 1,400 | 1,558,732 | ||||||
Sales Tax Receipts, 5.25%, 12/01/36 | 1,000 | 1,087,990 | ||||||
Sales Tax Receipts, 5.00%, 12/01/44 | 1,235 | 1,320,277 | ||||||
City of Chicago Illinois Transit Authority, Refunding RB, Federal Transit Administration, Section 5309 (AGM), 5.00%, 6/01/28 | 3,000 | 3,185,010 | ||||||
City of Chicago Illinois Wastewater Transmission, RB, 2nd Lien, 5.00%, 1/01/42 | 1,375 | 1,434,634 | ||||||
City of Chicago Illinois, Midway Airport, Refunding ARB, 2nd Lien, Series A, AMT, 5.00%, 1/01/41 | 385 | 401,132 | ||||||
County of Cook Illinois Community College District No. 508, GO, City College of Chicago: | ||||||||
5.50%, 12/01/38 | 1,500 | 1,676,220 | ||||||
5.25%, 12/01/43 | 2,700 | 2,916,891 | ||||||
Illinois Finance Authority, RB, Carle Foundation, Series A, 6.00%, 8/15/41 | 1,555 | 1,763,495 | ||||||
Railsplitter Tobacco Settlement Authority, RB: | ||||||||
5.50%, 6/01/23 | 940 | 1,093,502 | ||||||
6.00%, 6/01/28 | 270 | 314,258 | ||||||
State of Illinois, GO: | ||||||||
5.25%, 2/01/31 | 585 | 615,841 | ||||||
5.25%, 2/01/32 | 1,000 | 1,047,220 | ||||||
5.50%, 7/01/33 | 1,500 | 1,602,300 | ||||||
5.50%, 7/01/38 | 280 | 296,570 | ||||||
|
| |||||||
| 28,999,066 | ||||||||
Indiana — 4.1% | ||||||||
Indiana Finance Authority, RB, Private Activity Bond, Ohio River Bridges East End Crossing Project, Series A, AMT, 5.00%, 7/01/40 | 375 | 388,492 | ||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 27 |
Schedule of Investments (continued) | BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Indiana (concluded) | ||||||||
Indianapolis Local Public Improvement Bond Bank, Refunding RB, Waterworks Project, Series A (AGC), 5.50%, 1/01/38 | $ | 4,310 | $ | 4,789,703 | ||||
|
| |||||||
| 5,178,195 | ||||||||
Louisiana — 2.1% | ||||||||
City of New Orleans Louisiana Aviation Board, Refunding GARB, Restructuring (AGC): | ||||||||
Series A-1, 6.00%, 1/01/23 | 375 | 430,399 | ||||||
Series A-2, 6.00%, 1/01/23 | 160 | 183,637 | ||||||
Lake Charles Harbor & Terminal District, RB, Series B, AMT, 5.50%, 1/01/29 | 1,000 | 1,131,790 | ||||||
Tobacco Settlement Financing Corp., Refunding RB, Asset-Backed, Series A, 5.50%, 5/15/29 | 805 | 880,573 | ||||||
|
| |||||||
| 2,626,399 | ||||||||
Massachusetts — 2.3% | ||||||||
Massachusetts Educational Financing Authority, RB, Education Loan, Issue I, AMT, 5.00%, 1/01/26 | 880 | 960,608 | ||||||
Massachusetts HFA, Refunding RB, Series C, AMT, 5.35%, 12/01/42 | 1,910 | 1,962,773 | ||||||
|
| |||||||
| 2,923,381 | ||||||||
Michigan — 5.3% | ||||||||
City of Detroit Michigan, Refunding RB, Sewage Disposal System, Senior Lien (AGM): | ||||||||
Series B, 7.50%, 7/01/33 | 660 | 722,291 | ||||||
Series C-1, 7.00%, 7/01/27 | 2,285 | 2,479,842 | ||||||
City of Detroit Michigan Water Supply System, RB, 2nd Lien, Series B (AGM), 6.25%, 7/01/36 | 1,800 | 1,839,510 | ||||||
Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital, Series V, 8.25%, 9/01/18 (a) | 1,265 | 1,631,584 | ||||||
|
| |||||||
| 6,673,227 | ||||||||
Minnesota — 2.8% | ||||||||
City of Minneapolis Minnesota, Refunding RB, Fairview Health Services, Series B (AGC), 6.50%, 11/15/38 | 3,000 | 3,529,980 | ||||||
Mississippi — 1.5% | ||||||||
Mississippi Development Bank, RB, Special Obligation, Jackson Water & Sewer System Project (AGM), 6.88%, 12/01/40 | 1,190 | 1,547,095 | ||||||
Mississippi State University Educational Building Corp., Refunding RB, Mississippi State University Improvement Project, 5.25%, 8/01/38 | 260 | 294,653 | ||||||
|
| |||||||
| 1,841,748 | ||||||||
Nevada — 4.3% | ||||||||
County of Clark Nevada, ARB, Las Vegas-McCarran International Airport, Series A (AGM), 5.25%, 7/01/39 | 2,375 | 2,566,211 | ||||||
County of Clark Nevada, GO, Limited Tax, 5.00%, 6/01/38 | 1,000 | 1,081,780 | ||||||
County of Clark Nevada Water Reclamation District, GO, Series A, 5.25%, 7/01/34 | 1,500 | 1,715,100 | ||||||
|
| |||||||
| 5,363,091 | ||||||||
New Jersey — 6.4% | ||||||||
New Jersey EDA, RB: | ||||||||
Private Activity Bond, The Goethals Bridge Replacement Project, AMT, 5.38%, 1/01/43 | 1,000 | 1,060,850 | ||||||
School Facilities Construction (AGC), 6.00%, 12/15/18 (a) | 980 | 1,191,935 | ||||||
School Facilities Construction (AGC), 6.00%, 12/15/34 | 20 | 23,174 | ||||||
The Goethals Bridge Replacement Project, AMT (AGM), 5.00%, 1/01/31 | 530 | 574,043 | ||||||
New Jersey (concluded) | ||||||||
New Jersey EDA, Refunding RB, School Facilities Construction, Series RR, 5.00%, 6/15/33 | 500 | 540,430 | ||||||
New Jersey Health Care Facilities Financing Authority, RB, Virtua Health, Series A (AGC), 5.50%, 7/01/38 | 1,400 | 1,509,032 | ||||||
New Jersey Transportation Trust Fund Authority, RB, Transportation System: | ||||||||
Series A, 5.50%, 6/15/41 | 1,195 | 1,323,654 | ||||||
Series AA, 5.50%, 6/15/39 | 1,600 | 1,768,880 | ||||||
|
| |||||||
| 7,991,998 | ||||||||
New York — 5.5% | ||||||||
City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Series FF-2, 5.50%, 6/15/40 | 1,545 | 1,767,434 | ||||||
City of New York New York Transitional Finance Authority Building Aid, BARB, Fiscal 2009, Series S-4 (AGC), 5.50%, 1/15/29 | 2,000 | 2,316,600 | ||||||
Port Authority of New York & New Jersey, Refunding ARB, Consolidated, 166th Series, 5.25%, 7/15/36 | 2,500 | 2,807,575 | ||||||
|
| |||||||
| 6,891,609 | ||||||||
Ohio — 1.9% | ||||||||
State of Ohio Turnpike Commission, RB, Junior Lien, Infrastructure Projects, Series A-1: | ||||||||
5.25%, 2/15/30 | 585 | 662,302 | ||||||
5.25%, 2/15/31 | 1,500 | 1,688,745 | ||||||
|
| |||||||
| 2,351,047 | ||||||||
Pennsylvania — 2.1% | ||||||||
Pennsylvania Turnpike Commission, RB: | ||||||||
Series A, 5.00%, 12/01/44 | 440 | 481,994 | ||||||
Sub-Series A, 6.00%, 12/01/41 | 2,000 | 2,179,500 | ||||||
|
| |||||||
| 2,661,494 | ||||||||
South Carolina — 4.9% | ||||||||
County of Charleston South Carolina, RB, Special Source, 5.25%, 12/01/38 | 1,470 | 1,690,941 | ||||||
County of Charleston South Carolina Airport District, ARB, Series A, AMT: | ||||||||
5.50%, 7/01/26 | 1,810 | 2,092,704 | ||||||
6.00%, 7/01/38 | 1,155 | 1,305,496 | ||||||
5.50%, 7/01/41 | 1,000 | 1,095,820 | ||||||
|
| |||||||
| 6,184,961 | ||||||||
Texas — 19.1% | ||||||||
Austin Community College District Public Facility Corp., RB, Educational Facilities Project, Round Rock Campus, 5.25%, 8/01/33 | 2,250 | 2,520,045 | ||||||
City of Beaumont Texas, GO, Certificates of Obligation, 5.25%, 3/01/37 | 930 | 1,057,122 | ||||||
City of Frisco Texas ISD, GO, School Building (AGC), 5.50%, 8/15/41 | 1,210 | 1,427,643 | ||||||
City of Houston Texas Utility System, Refunding RB, Combined 1st Lien, Series A (AGC): | ||||||||
6.00%, 11/15/35 | 2,700 | 3,169,962 | ||||||
6.00%, 11/15/36 | 2,055 | 2,417,831 | ||||||
5.38%, 11/15/38 | 1,000 | 1,130,210 | ||||||
Dallas-Fort Worth International Airport, ARB, Joint Improvement, Series H, AMT, 5.00%, 11/01/37 | 980 | 1,026,011 | ||||||
Dallas-Fort Worth International Airport, Refunding RB, Joint Revenue, Series E, 5.50%, 11/01/27 | 2,500 | 2,866,825 | ||||||
Lower Colorado River Authority, Refunding RB, 5.50%, 5/15/33 | 730 | 824,272 | ||||||
North Texas Tollway Authority, RB, Special Projects, Series A, 5.50%, 9/01/41 | 2,750 | 3,129,280 | ||||||
See Notes to Financial Statements.
| 28 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (continued) | BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Texas (concluded) | ||||||||
North Texas Tollway Authority, Refunding RB, 1st Tier: | ||||||||
(AGM), 6.00%, 1/01/43 | $ | 1,000 | $ | 1,124,800 | ||||
Series K-1 (AGC), 5.75%, 1/01/38 | 1,400 | 1,594,768 | ||||||
Red River Education Financing Corp., RB, Texas Christian University Project, 5.25%, 3/15/38 | 420 | 476,288 | ||||||
Tarrant County Cultural Education Facilities Finance Corp., Refunding RB (AGC): | ||||||||
6.50%, 1/01/19 (a) | 265 | 323,191 | ||||||
6.50%, 7/01/37 | 835 | 936,661 | ||||||
|
| |||||||
| 24,024,909 | ||||||||
Virginia — 1.3% | ||||||||
City of Lexington Virginia IDA, RB, Washington & Lee University, 5.00%, 1/01/43 | 380 | 418,505 | ||||||
Virginia Public School Authority, RB, Fluvanna County School Financing, 6.50%, 12/01/18 (a) | 1,000 | 1,233,120 | ||||||
|
| |||||||
| 1,651,625 | ||||||||
Washington — 1.5% | ||||||||
City of Seattle Washington Municipal Light & Power, Refunding RB, Series A, 5.25%, 2/01/36 | 1,000 | 1,114,480 | ||||||
State of Washington, GO, Various Purposes, Series B, 5.25%, 2/01/36 | 725 | 827,631 | ||||||
|
| |||||||
| 1,942,111 | ||||||||
| Total Municipal Bonds — 127.0% | 159,614,692 | |||||||
| Municipal Bonds Transferred to Tender Option Bond Trusts (b) | ||||||||
Alabama — 1.2% | ||||||||
City of Mobile Alabama Board of Water & Sewer Commissioners, RB (NPFGC), 5.00%, 1/01/31 | 1,500 | 1,567,245 | ||||||
District of Columbia — 0.7% | ||||||||
District of Columbia Water & Sewer Authority, Refunding RB, Senior Lien, Series A, 6.00%, 10/01/35 (c) | 760 | 873,914 | ||||||
Florida — 2.4% | ||||||||
County of Hillsborough Florida Aviation Authority, ARB, Tampa International Airport, Series A, AMT (AGC), 5.50%, 10/01/38 | 2,499 | 2,782,302 | ||||||
County of Lee Florida Housing Finance Authority, RB, S/F Housing, Multi-County Program, Series A-2, AMT (Ginnie Mae), 6.00%, 9/01/40 | 240 | 248,218 | ||||||
|
| |||||||
| 3,030,520 | ||||||||
Kentucky — 0.9% | ||||||||
Kentucky State Property & Building Commission, Refunding RB, Project No. 93 (AGC), 5.25%, 2/01/27 | 1,002 | 1,140,772 | ||||||
Nevada — 7.5% | ||||||||
County of Clark Nevada Water Reclamation District, GO: | ||||||||
Limited Tax, 6.00%, 7/01/38 | 2,010 | 2,333,248 | ||||||
Series B, 5.50%, 7/01/29 | 1,994 | 2,337,151 | ||||||
Las Vegas Valley Water District, GO, Refunding, Series C, 5.00%, 6/01/28 | 4,200 | 4,737,474 | ||||||
|
| |||||||
| 9,407,873 | ||||||||
New Jersey — 2.2% | ||||||||
New Jersey Housing & Mortgage Finance Agency, RB, S/F Housing, Series CC, 5.25%, 10/01/29 | 1,610 | 1,717,855 | ||||||
New Jersey Transportation Trust Fund Authority, RB, Transportation System, Series B, 5.25%, 6/15/36 (c) | 1,000 | 1,087,791 | ||||||
|
| |||||||
| 2,805,646 | ||||||||
New York — 12.6% | ||||||||
City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution: | ||||||||
Series BB, 5.25%, 6/15/44 | 2,999 | 3,330,900 | ||||||
Series FF-2, 5.50%, 6/15/40 | 1,095 | 1,252,475 | ||||||
City of New York New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-3, 5.25%, 1/15/39 | 1,000 | 1,119,297 | ||||||
Hudson Yards Infrastructure Corp., RB, Fiscal 2012, Series A, 5.75%, 2/15/47 (c) | 1,000 | 1,137,537 | ||||||
New York Liberty Development Corp., RB, 1 World Trade Center Port Authority Consolidated Bonds, 5.25%, 12/15/43 | 3,000 | 3,305,640 | ||||||
New York Liberty Development Corp., Refunding RB, 4 World Trade Center Project, 5.75%, 11/15/51 (c) | 1,770 | 1,984,241 | ||||||
New York State Dormitory Authority, ERB, Personal Income Tax, Series B, 5.25%, 3/15/38 | 3,250 | 3,679,618 | ||||||
|
| |||||||
| 15,809,708 | ||||||||
Texas — 2.4% | ||||||||
City of San Antonio Texas Public Service Board, Refunding RB, Series A, 5.25%, 2/01/31 (c) | 2,609 | 2,959,373 | ||||||
Utah — 0.9% | ||||||||
City of Riverton Utah, RB, IHC Health Services, Inc., 5.00%, 8/15/41 | 1,004 | 1,068,160 | ||||||
| Total Municipal Bonds Transferred to Tender Option Bond Trusts — 30.8% | 38,663,211 | |||||||
| Total Long-Term Investments (Cost — $180,889,379) — 157.8% | 198,277,903 | |||||||
| Short-Term Securities | Shares | |||||||
FFI Institutional Tax-Exempt Fund, 0.03% (d)(e) | 2,565,273 | 2,565,273 | ||||||
| Total Short-Term Securities (Cost — $2,565,273) — 2.0% | 2,565,273 | |||||||
| Total Investments (Cost — $183,454,652) — 159.8% | 200,843,176 | |||||||
| Other Assets Less Liabilities — 1.3% | 1,592,727 | |||||||
Liability for TOB Trust Certificates, Including Interest |
| (20,288,965 | ) | |||||
| VMTP Shares, at Liquidation Value — (45.0)% | (56,500,000 | ) | ||||||
|
| |||||||
| Net Assets Applicable to Common Shares — 100.0% | $ | 125,646,938 | ||||||
|
| |||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 29 |
Schedule of Investments (continued) | BlackRock MuniYield Investment Quality Fund (MFT) |
| Notes to Schedule of Investments | ||
| (a) | U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par. |
| (b) | Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs. |
| (c) | All or a portion of security is subject to a recourse agreement, which may require the Fund to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire from October 16, 2016 to November 15, 2019 is $4,647,054. |
| (d) | Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: |
| Affiliate | Shares Held at July 31, 2013 | Net Activity | Shares Held at July 31, 2014 | Income | ||||||||||||
FFI Institutional Tax-Exempt Fund | 8,162,312 | (5,597,039 | ) | 2,565,273 | $ | 683 | ||||||||||
| (e) | Represents the current yield as of report date. |
| Ÿ | Financial futures contracts outstanding as of July 31, 2014 were as follows: |
| Contracts Sold | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation | |||||||||||
| (79 | ) | 10-Year U.S. Treasury Note | Chicago Board of Trade | September 2014 | $ | 9,844,141 | $ | 33,835 | ||||||||
| Ÿ | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
| Investments: | ||||||||||||||
Long-Term Investments1 | — | $ | 198,277,903 | — | $ | 198,277,903 | ||||||||
Short-Term Securities | $ | 2,565,273 | — | — | 2,565,273 | |||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 2,565,273 | $ | 198,277,903 | — | $ | 200,843,176 | |||||||
|
|
|
|
|
|
| ||||||||
1 See above Schedule of Investments for values in each state or political subdivision. |
| |||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Derivative Financial Instruments2 | ||||||||||||||
Assets: | ||||||||||||||
Interest rate contracts | $ | 33,835 | — | — | $ | 33,835 | ||||||||
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| |||||||||||||
See Notes to Financial Statements.
| 30 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (concluded) | BlackRock MuniYield Investment Quality Fund (MFT) |
| The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows: | ||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
Cash pledged for financial futures contracts | $ | 108,000 | — | — | $ | 108,000 | ||||||||
Liabilities: | ||||||||||||||
TOB trust certificates | — | $ | (20,283,757 | ) | — | (20,283,757 | ) | |||||||
VMTP Shares | — | (56,500,000 | ) | — | (56,500,000 | ) | ||||||||
|
|
|
|
|
|
| ||||||||
Total | $108,000 | $ | (76,783,757 | ) | — | $ | (76,675,757 | ) | ||||||
|
|
|
|
|
|
| ||||||||
There were no transfers between levels during the year ended July 31, 2014.
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 31 |
Schedule of Investments July 31, 2014 | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Michigan — 136.9% | ||||||||
Corporate — 4.9% |
| |||||||
County of Monroe EDC Michigan, Refunding RB, Detroit Edison Co. Project, Series AA (NPFGC), 6.95%, 9/01/22 | $ | 10,695 | $ | 13,648,103 | ||||
County/City/Special District/School District — 25.1% |
| |||||||
Anchor Bay School District, GO, Refunding (Q-SBLF): | ||||||||
4.38%, 5/01/27 | 960 | 1,031,290 | ||||||
4.50%, 5/01/29 | 900 | 961,461 | ||||||
Bay City School District Michigan, GO, School Building & Site (AGM) (Q-SBLF), 5.00%, 5/01/36 | 2,800 | 2,946,160 | ||||||
Birmingham City School District Michigan, GO, School Building & Site (AGM), 5.00%, 11/01/14 (a) | 1,000 | 1,012,150 | ||||||
Charter Township of Canton Michigan, GO, Capital Improvement (AGM): | ||||||||
5.00%, 4/01/25 | 1,840 | 2,026,171 | ||||||
5.00%, 4/01/26 | 2,000 | 2,204,020 | ||||||
5.00%, 4/01/27 | 500 | 545,475 | ||||||
Chippewa Valley Schools, GO, Refunding, Unlimited Tax (Q-SBLF), 5.00%, 5/01/32 | 1,970 | 2,180,002 | ||||||
City of Oak Park Michigan, GO, Street Improvement (NPFGC), 5.00%, 5/01/30 | 500 | 525,305 | ||||||
Columbia Michigan School District, GO, Unlimited Tax, School Building & Site (Q-SBLF), 5.00%, 5/01/38 | 3,215 | 3,495,026 | ||||||
Comstock Park Public Schools, GO, School Building & Site, Series B (Q-SBLF): | ||||||||
5.50%, 5/01/36 | 750 | 826,643 | ||||||
5.50%, 5/01/41 | 1,355 | 1,480,812 | ||||||
County of Genesee Michigan, GO, Refunding, Series A (NPFGC), 5.00%, 5/01/19 | 600 | 617,010 | ||||||
Dearborn Brownfield Redevelopment Authority, GO, Limited Tax, Redevelopment, Series A (AGC), 5.50%, 5/01/39 | 3,300 | 3,548,919 | ||||||
Dearborn School District, GO, Series A (Q-SBLF): | ||||||||
5.00%, 5/01/32 | 930 | 1,032,384 | ||||||
5.00%, 5/01/33 | 990 | 1,094,069 | ||||||
5.00%, 5/01/34 | 745 | 820,856 | ||||||
Flint EDC, RB, Michigan Department of Human Services Office Building Project, 5.25%, 10/01/41 | 3,070 | 3,207,597 | ||||||
Fraser Public School District Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/25 | 2,000 | 2,066,300 | ||||||
Goodrich Area School District Michigan, GO, School Building & Site (Q-SBLF): | ||||||||
5.50%, 5/01/32 | 600 | 668,118 | ||||||
5.50%, 5/01/36 | 1,200 | 1,322,628 | ||||||
5.50%, 5/01/41 | 1,575 | 1,721,239 | ||||||
Harper Creek Community School District Michigan, GO, Refunding (AGM), 5.00%, 5/01/22 | 1,125 | 1,162,294 | ||||||
Hudsonville Public Schools, GO, School Building & Site (Q-SBLF), 5.25%, 5/01/41 | 4,100 | 4,420,415 | ||||||
L’Anse Creuse Public Schools Michigan, GO, School Building & Site (AGM): | ||||||||
5.00%, 5/01/24 | 1,000 | 1,033,150 | ||||||
5.00%, 5/01/25 | 1,525 | 1,575,554 | ||||||
5.00%, 5/01/26 | 1,600 | 1,653,040 | ||||||
5.00%, 5/01/35 | 3,000 | 3,077,070 | ||||||
Lincoln Consolidated School District Michigan, GO, Refunding (NPFGC), 4.63%, 5/01/28 | 3,650 | 3,846,333 | ||||||
Livonia Public Schools School District Michigan, GO, Series I (AGM), 5.00%, 5/01/43 | 3,090 | 3,280,869 | ||||||
Montrose Community Schools, GO, (NPFGC), 6.20%, 5/01/17 | 625 | 675,494 | ||||||
Parchment School District, County of Kalamazoo, State of Michigan, GO, School Building & Site (NPFGC), 5.00%, 5/01/25 | 900 | 989,856 | ||||||
| Municipal Bonds | Par (000) | Value | ||||||
Michigan (continued) | ||||||||
County/City/Special District/School District (concluded) |
| |||||||
Romulus Community Schools, GO, Unlimited Tax, Refunding (AGM): | ||||||||
4.25%, 5/01/26 | $ | 1,200 | $ | 1,285,716 | ||||
4.25%, 5/01/27 | 1,200 | 1,275,168 | ||||||
4.50%, 5/01/29 | 1,025 | 1,094,567 | ||||||
Thornapple Kellogg School District Michigan, GO, Refunding, School Building & Site (NPFGC), 5.00%, 5/01/32 | 2,500 | 2,698,975 | ||||||
Troy School District, GO (Q-SBLF), 5.00%, 5/01/28 | 1,240 | 1,416,365 | ||||||
Van Dyke Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/28 | 1,250 | 1,384,975 | ||||||
Walled Lake Consolidated School District, GO (Q-SBLF): | ||||||||
5.00%, 5/01/37 | 1,770 | 1,929,919 | ||||||
5.00%, 5/01/40 | 1,630 | 1,766,708 | ||||||
|
| |||||||
| 69,900,103 | ||||||||
Education — 19.6% |
| |||||||
Grand Valley State University, RB, (NPFGC), 5.50%, 2/01/18 | 1,445 | 1,544,315 | ||||||
Michigan Higher Education Facilities Authority, RB, Limited Obligation, Hillsdale College Project, 5.00%, 3/01/35 | 1,720 | 1,721,170 | ||||||
Michigan State University, Refunding RB, General: | ||||||||
Series A, 5.00%, 8/15/41 | 4,980 | 5,530,041 | ||||||
Series C, 5.00%, 2/15/40 | 4,700 | 5,052,124 | ||||||
Michigan Technological University, Refunding RB, Series A, 5.00%, 10/01/34 | 1,650 | 1,784,953 | ||||||
Oakland University, RB, General, Series A: | ||||||||
5.00%, 3/01/38 | 8,485 | 9,089,641 | ||||||
5.00%, 3/01/43 | 13,865 | 14,780,506 | ||||||
University of Michigan, RB, Series A, 5.00%, 4/01/39 | 2,125 | 2,404,905 | ||||||
Wayne State University, RB, Series A: | ||||||||
5.00%, 11/15/40 | 2,000 | 2,150,560 | ||||||
4.00%, 11/15/44 | 620 | 620,546 | ||||||
Western Michigan University, Refunding RB, General, University and College Improvements: | ||||||||
5.25%, 11/15/40 | 2,100 | 2,286,585 | ||||||
5.25%, 11/15/43 | 5,255 | 5,730,840 | ||||||
(AGM), 5.25%, 11/15/33 | 620 | 687,214 | ||||||
(AGM), 5.00%, 11/15/39 | 1,085 | 1,173,677 | ||||||
|
| |||||||
| 54,557,077 | ||||||||
Health — 28.4% |
| |||||||
Kalamazoo Hospital Finance Authority, RB, Bronson Methodist Hospital (AGM), 5.25%, 5/15/36 | 4,750 | 5,051,292 | ||||||
Kent Hospital Finance Authority Michigan, Refunding RB, Spectrum Health, Series A, 5.00%, 11/15/29 | 4,500 | 4,964,220 | ||||||
Michigan Finance Authority, RB, Sparrow Obligated Group, 5.00%, 11/15/36 | 1,550 | 1,630,399 | ||||||
Michigan Finance Authority, Refunding RB: | ||||||||
Hospital, Oakwood Obligated Group, 5.00%, 8/15/31 | 1,745 | 1,892,784 | ||||||
Trinity Health Credit Group, 5.00%, 12/01/31 | 3,100 | 3,385,758 | ||||||
Trinity Health Credit Group, 5.00%, 12/01/35 | 4,100 | 4,414,839 | ||||||
Trinity Health Credit Group, 5.00%, 12/01/39 | 3,350 | 3,576,293 | ||||||
Michigan State Hospital Finance Authority, RB: | ||||||||
Ascension Health Senior Credit Group, 5.00%, 11/15/25 | 3,700 | 4,186,365 | ||||||
McLaren Health Care, Series C, 5.00%, 8/01/35 | 1,000 | 1,011,760 | ||||||
MidMichigan Obligated Group, Series A, 5.00%, 4/15/26 | 620 | 633,435 | ||||||
MidMichigan Obligated Group, Series A, 5.00%, 4/15/36 | 3,550 | 3,589,654 | ||||||
| 32 | ANNUAL REPORT | JULY 31, 2014 |
See Notes to Financial Statements.
Schedule of Investments (continued) | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Michigan (continued) | ||||||||
Health (concluded) |
| |||||||
Michigan State Hospital Finance Authority, Refunding RB: |
| |||||||
Henry Ford Health System, Series A, 5.25%, 11/15/46 | $ | 2,500 | $ | 2,533,000 | ||||
Hospital, Oakwood Obligated Group, 5.00%, 11/01/32 | 4,000 | 4,290,120 | ||||||
Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/21 | 600 | 657,330 | ||||||
Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/25 | 3,260 | 3,422,087 | ||||||
Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/37 | 630 | 642,102 | ||||||
Hospital, Sparrow Obligated Group, 5.00%, 11/15/31 | 3,100 | 3,176,198 | ||||||
McLaren Health Care, Series A, 5.00%, 6/01/35 | 1,390 | 1,488,398 | ||||||
McLaren Health Care, Series A, 5.75%, 5/15/38 | 4,500 | 5,058,675 | ||||||
Trinity Health Credit Group, Series A, 6.25%, 12/01/28 | 930 | 1,084,789 | ||||||
Trinity Health Credit Group, Series C, 4.00%, 12/01/32 | 4,460 | 4,501,924 | ||||||
Trinity Health Credit, Series A, 6.50%, 12/01/33 | 1,000 | 1,173,180 | ||||||
Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital: | ||||||||
Series D, 5.00%, 9/01/39 | 11,000 | 11,750,640 | ||||||
Series V, 8.25%, 9/01/18 (a) | 1,000 | 1,289,790 | ||||||
Series W, 6.00%, 8/01/39 | 925 | 1,029,784 | ||||||
State of Michigan Hospital Finance Authority, Refunding RB, Henry Ford Health, 5.75%, 11/15/39 | 1,965 | 2,117,622 | ||||||
Sturgis Building Authority, RB, Sturgis Hospital Project (NPFGC), 4.75%, 10/01/14 (a) | 475 | 478,662 | ||||||
|
| |||||||
| 79,031,100 | ||||||||
Housing — 10.2% |
| |||||||
Michigan State HDA, RB: | ||||||||
Deaconess Tower, AMT (Ginnie Mae), 5.25%, 2/20/48 | 1,000 | 1,014,440 | ||||||
Series A, 4.75%, 12/01/25 | 4,235 | 4,501,974 | ||||||
Series A, 4.45%, 10/01/34 | 620 | 636,573 | ||||||
Series A, 4.63%, 10/01/39 | 2,165 | 2,213,778 | ||||||
Series A, 4.75%, 10/01/44 | 3,100 | 3,177,314 | ||||||
Williams Pavilion, AMT (Ginnie Mae), 4.75%, 4/20/37 | 3,615 | 3,639,510 | ||||||
Michigan State HDA, Refunding RB: | ||||||||
Rental Housing, Series D, 4.50%, 10/01/48 | 7,790 | 7,913,627 | ||||||
Series A, 6.05%, 10/01/41 | 4,825 | 5,261,421 | ||||||
|
| |||||||
| 28,358,637 | ||||||||
State — 14.4% |
| |||||||
Michigan State Building Authority, Refunding RB: | ||||||||
5.00%, 10/15/31 | 1,000 | 1,060,930 | ||||||
Facilities Program, Series I, 6.25%, 10/15/38 | 3,900 | 4,540,809 | ||||||
Facilities Program, Series I (AGC), 5.25%, 10/15/24 | 4,000 | 4,640,080 | ||||||
Facilities Program, Series I (AGC), 5.25%, 10/15/25 | 2,000 | 2,311,460 | ||||||
Facilities Program, Series I (AGC), 5.25%, 10/15/26 | 600 | 690,882 | ||||||
Facilities Program, Series I-A, 5.50%, 10/15/45 | 1,250 | 1,391,938 | ||||||
Facilities Program, Series II (AGM), 5.00%, 10/15/26 | 4,500 | 5,124,105 | ||||||
Michigan State Finance Authority, RB, Local Government Loan Program, Series F: | ||||||||
5.00%, 4/01/31 | 1,000 | 1,063,650 | ||||||
5.25%, 10/01/41 | 6,085 | 6,441,764 | ||||||
| Municipal Bonds | Par (000) | Value | ||||||
Michigan (continued) | ||||||||
State (concluded) |
| |||||||
Michigan Strategic Fund, Refunding RB, Cadillac Place Office Building Project, 5.25%, 10/15/31 | $ | 4,350 | $ | 4,709,875 | ||||
State of Michigan, COP, (AMBAC), 0.00%, 6/01/22 (b)(c) | 3,000 | 2,513,040 | ||||||
State of Michigan Trunk Line Fund, RB: | ||||||||
5.00%, 11/15/33 | 1,850 | 2,065,081 | ||||||
5.00%, 11/15/36 | 3,125 | 3,441,187 | ||||||
|
| |||||||
| 39,994,801 | ||||||||
Transportation — 14.1% |
| |||||||
State of Michigan, RB, GAB (AGM), 5.25%, 9/15/27 | 5,250 | 5,906,197 | ||||||
Wayne County Airport Authority, RB, Detroit Metropolitan Wayne County Airport, AMT (NPFGC): | ||||||||
5.25%, 12/01/25 | 6,270 | 6,611,652 | ||||||
5.25%, 12/01/26 | 6,300 | 6,643,287 | ||||||
5.00%, 12/01/34 | 4,435 | 4,595,902 | ||||||
Wayne County Airport Authority, Refunding RB, AMT (AGC): | ||||||||
5.75%, 12/01/25 | 4,000 | 4,587,280 | ||||||
5.75%, 12/01/26 | 1,000 | 1,146,820 | ||||||
5.38%, 12/01/32 | 8,700 | 9,732,516 | ||||||
|
| |||||||
| 39,223,654 | ||||||||
Utilities — 20.2% |
| |||||||
City of Detroit Michigan Sewage Disposal System, Refunding RB, Senior Lien, Series A, 5.25%, 7/01/39 | 1,645 | 1,611,343 | ||||||
City of Detroit Michigan Water Supply System, RB: | ||||||||
2nd Lien, Series B (AGM), 7.00%, 7/01/36 | 3,000 | 3,226,080 | ||||||
Senior Lien, Series A (NPFGC), 5.00%, 7/01/34 | 6,000 | 5,910,480 | ||||||
City of Detroit Michigan Water Supply System, Refunding RB, 2nd Lien, Series C (AGM), 5.00%, 7/01/29 | 10,470 | 10,477,120 | ||||||
City of Grand Rapids Michigan Sanitary Sewer System, RB: |
| |||||||
5.00%, 1/01/37 | 930 | 1,032,347 | ||||||
4.00%, 1/01/42 | 1,700 | 1,714,484 | ||||||
City of Holland Michigan Electric Utility System, RB, Series A: | ||||||||
5.00%, 7/01/33 | 1,860 | 2,088,296 | ||||||
4.13%, 7/01/39 | 1,450 | 1,479,275 | ||||||
5.00%, 7/01/39 | 7,575 | 8,394,994 | ||||||
City of Lansing Michigan, RB, Board of Water & Light Utilities System, Series A: | ||||||||
5.00%, 7/01/27 | 1,970 | 2,232,168 | ||||||
5.00%, 7/01/31 | 4,230 | 4,712,854 | ||||||
5.00%, 7/01/37 | 2,065 | 2,271,066 | ||||||
5.50%, 7/01/41 | 3,000 | 3,483,540 | ||||||
City of Port Huron Michigan, RB, Water Supply System: | ||||||||
5.25%, 10/01/31 | 310 | 333,520 | ||||||
5.63%, 10/01/40 | 1,000 | 1,084,120 | ||||||
County of Genesee Michigan, GO, Water Supply System (NPFGC), 5.13%, 9/03/14 (a) | 1,000 | 1,004,440 | ||||||
Michigan Municipal Bond Authority, RB, State Clean Water Revolving Fund: | ||||||||
5.00%, 10/01/27 | 1,250 | 1,353,713 | ||||||
5.00%, 10/01/29 | 2,000 | 2,277,120 | ||||||
Pooled Project, 5.00%, 10/01/27 | 1,240 | 1,435,275 | ||||||
|
| |||||||
| 56,122,235 | ||||||||
| Total Municipal Bonds in Michigan | 380,835,710 | |||||||
Guam — 3.5% |
| |||||||
State — 3.5% | ||||||||
Territory of Guam, RB: | ||||||||
Business Privilege Tax Bonds, Series A, 5.25%, 1/01/36 | 500 | 533,470 | ||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 33 |
Schedule of Investments (continued) | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Guam (concluded) | ||||||||
State (concluded) |
| |||||||
Territory of Guam RB (concluded): | ||||||||
Business Privilege Tax Bonds, Series A, 5.13%, 1/01/42 | $ | 4,850 | $ | 5,111,076 | ||||
Business Privilege Tax Bonds, Series B-1, 5.00%, 1/01/32 | 1,695 | 1,781,699 | ||||||
Business Privilege Tax Bonds, Series B-1, 5.00%, 1/01/37 | 665 | 697,286 | ||||||
Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29 | 1,400 | 1,532,118 | ||||||
| Total Municipal Bonds in Guam | 9,655,649 | |||||||
| Total Municipal Bonds — 140.4% | 390,491,359 | |||||||
| Municipal Bonds Transferred to Tender Option Bond Trusts (d) | ||||||||
Michigan — 17.2% | ||||||||
County/City/Special District/School District — 4.4% |
| |||||||
Lakewood Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/37 | 6,770 | 7,309,418 | ||||||
Portage Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/31 | 4,650 | 5,070,453 | ||||||
|
| |||||||
| 12,379,871 | ||||||||
Education — 12.7% |
| |||||||
Michigan State University, Refunding RB, General, Series A, 5.00%, 8/15/38 | 6,220 | 6,947,740 | ||||||
Saginaw Valley State University, Refunding RB, General (AGM), 5.00%, 7/01/31 | 7,500 | 8,249,850 | ||||||
Wayne State University, RB, General, Series A, 5.00%, 11/15/40 | 6,190 | 6,655,983 | ||||||
Wayne State University, Refunding RB, General (AGM), 5.00%, 11/15/35 | 12,207 | 13,372,023 | ||||||
|
| |||||||
| 35,225,596 | ||||||||
| Municipal Bonds Transferred to Tender Option Bond Trusts (d) | Par (000) | Value | ||||||
Michigan (concluded) | ||||||||
Health — 0.1% | ||||||||
Michigan Finance Authority, RB, Hospital, Trinity Health Credit Group, 5.00%, 12/01/39 | $ | 190 | $ | 202,834 | ||||
| Total Municipal Bonds Transferred to Tender Option Bond Trusts — 17.2% | 47,808,301 | |||||||
| Total Long-Term Investments (Cost — $413,056,033) — 157.6% | 438,299,660 | |||||||
| Short-Term Securities | Shares | Value | ||||||
BIF Michigan Municipal Money Fund, 0.00% (e)(f) | 3,889,640 | 3,889,640 | ||||||
Total Short-Term Securities (Cost — $3,889,640) — 1.4% |
| 3,889,640 | ||||||
| Total Investments (Cost — $416,945,673) — 159.0% | 442,189,300 | |||||||
| Other Assets Less Liabilities — 1.4% | 4,046,149 | |||||||
Liability for TOB Trust Certificates, Including Interest |
| (23,492,163 | ) | |||||
| VRDP Shares, at Liquidation Value — (52.0)% | (144,600,000 | ) | ||||||
|
| |||||||
| Net Assets Applicable to Common Shares — 100.0% | $ | 278,143,286 | ||||||
|
| |||||||
| Notes to Schedule of Investments |
| (a) | U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par. |
| (b) | Zero-coupon bond. |
| (c) | Security is collateralized by municipal or U.S. Treasury obligations. |
| (d) | Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs. |
| (e) | Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: |
| Affiliate | Shares Held at July 31, 2013 | Net Activity | Shares Held at July 31, 2014 | Income | ||||||||||||
BIF Michigan Municipal Money Fund | 479,667 | 3,409,973 | 3,889,640 | $ | 2 | |||||||||||
| (f) | Represents the current yield as of report date. |
| Ÿ | Financial futures contracts outstanding as of July 31, 2014 were as follows: |
| Contracts Sold | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation | |||||||||||
| (140 | ) | 10-Year U.S. Treasury Note | Chicago Board of Trade | September 2014 | $ | 17,445,313 | $ | 59,960 | ||||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
See Notes to Financial Statements.
| 34 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (concluded) | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) |
| Ÿ | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
| Investments: | ||||||||||||||||
Municipal Bonds1 | — | $ | 438,299,660 | — | $ | 438,299,660 | ||||||||||
Short-Term Securities | $ | 3,889,640 | — | — | 3,889,640 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,889,640 | $ | 438,299,660 | — | $ | 442,189,300 | |||||||||
|
|
|
|
|
|
|
| |||||||||
1 See above Schedule of Investments for values in each sector. |
| |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Financial Instruments2 | ||||||||||||||||
Assets: | ||||||||||||||||
Interest rate contracts | $ | 59,960 | — | — | $ | 59,960 | ||||||||||
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| |||||||||||||||
| The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash pledged for financial futures contracts | $ | 210,000 | — | — | $ | 210,000 | ||||||||||
Liabilities: | ||||||||||||||||
TOB trust certificates | — | $ | (23,487,000 | ) | — | (23,487,000 | ) | |||||||||
VRDP Shares | — | (144,600,000 | ) | — | (144,600,000 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 210,000 | $ | (168,087,000 | ) | — | $ | (167,877,000 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
There were no transfers between levels during the year ended July 31, 2014.
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 35 |
Schedule of Investments July 31, 2014 | BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey — 126.7% | ||||||||
Corporate — 6.9% |
| |||||||
County of Salem New Jersey Pollution Control Financing Authority, Refunding RB, Chambers Project, AMT, Series A, 5.00%, 12/01/23 | $ | 1,710 | $ | 1,891,995 | ||||
New Jersey EDA, Refunding RB: | ||||||||
New Jersey American Water Co., Inc. Project, Series A, AMT, 5.70%, 10/01/39 | 5,000 | 5,478,900 | ||||||
New Jersey American Water Co., Inc. Project, Series B, AMT, 5.60%, 11/01/34 | 1,000 | 1,099,080 | ||||||
United Water of New Jersey, Inc., Series B (AMBAC), 4.50%, 11/01/25 | 1,000 | 1,092,390 | ||||||
|
| |||||||
| 9,562,365 | ||||||||
County/City/Special District/School District — 15.3% |
| |||||||
Borough of Hopatcong New Jersey, GO, Refunding, Sewer (AMBAC), 4.50%, 8/01/33 | 750 | 769,035 | ||||||
City of Perth Amboy New Jersey, GO, CAB, Refunding (AGM), 5.00%, 7/01/35 | 1,250 | 1,295,900 | ||||||
County of Essex New Jersey Improvement Authority, Refunding RB, AMT (NPFGC), 4.75%, 11/01/32 | 1,000 | 1,026,580 | ||||||
County of Hudson New Jersey, COP, Refunding (NPFGC), 6.25%, 12/01/16 | 1,000 | 1,111,250 | ||||||
County of Hudson New Jersey Improvement Authority, RB: |
| |||||||
CAB, Series A-1 (NPFGC), 0.00%, 12/15/32 (a) | 1,000 | 459,310 | ||||||
County Secured, County Services Building Project (AGM), 5.00%, 4/01/27 | 250 | 270,620 | ||||||
Harrison Parking Facility Project, Series C (AGC), 5.25%, 1/01/39 | 1,000 | 1,070,160 | ||||||
Harrison Parking Facility Project, Series C (AGC), 5.38%, 1/01/44 | 1,400 | 1,500,002 | ||||||
County of Monmouth New Jersey Improvement Authority, Refunding RB, Governmental Loan (AMBAC): | ||||||||
5.20%, 12/01/14 | 5 | 5,019 | ||||||
5.25%, 12/01/15 | 5 | 5,018 | ||||||
5.00%, 12/01/17 | 5 | 5,015 | ||||||
5.00%, 12/01/18 | 5 | 5,013 | ||||||
5.00%, 12/01/19 | 5 | 5,012 | ||||||
County of Union New Jersey, GO, Refunding: | ||||||||
4.00%, 3/01/29 | 1,060 | 1,121,575 | ||||||
4.00%, 3/01/30 | 1,060 | 1,116,392 | ||||||
4.00%, 3/01/31 | 1,200 | 1,258,740 | ||||||
County of Union New Jersey Utilities Authority, Refunding RB, Series A: | ||||||||
Resources Recovery Facility, Covanta Union, Inc., AMT, 5.25%, 12/01/31 | 200 | 216,006 | ||||||
Solid Waste System, County Deficiency Agreement, 5.00%, 6/15/41 | 2,155 | 2,345,351 | ||||||
Edgewater Borough Board of Education, GO, Refunding (AGM): | ||||||||
4.25%, 3/01/34 | 300 | 318,189 | ||||||
4.25%, 3/01/35 | 300 | 316,611 | ||||||
4.30%, 3/01/36 | 300 | 315,927 | ||||||
New Jersey Sports & Exposition Authority, Refunding RB (NPFGC): | ||||||||
5.50%, 3/01/21 | 1,540 | 1,780,440 | ||||||
5.50%, 3/01/22 | 1,050 | 1,224,027 | ||||||
New Jersey State Transit Corp., COP, Federal Transit Administration Grants, Subordinate, Series A (AGM) (NPFGC), 5.00%, 9/15/15 (b) | 1,000 | 1,045,040 | ||||||
Newark Housing Authority, Refunding RB, Newark Redevelopment Project (NPFGC), 4.38%, 1/01/37 | 2,720 | 2,724,869 | ||||||
|
| |||||||
| 21,311,101 | ||||||||
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey (continued) | ||||||||
Education — 30.0% |
| |||||||
New Jersey Educational Facilities Authority, RB: | ||||||||
Higher Education Capital Improvement Fund, 5.00%, 9/01/33 | $ | 2,060 | $ | 2,265,403 | ||||
Montclair State University, Series A (AMBAC), 5.00%, 7/01/16 (b) | 1,600 | 1,742,000 | ||||||
New Jersey Educational Facilities Authority, Refunding RB: |
| |||||||
College of New Jersey, Series D (AGM), 5.00%, 7/01/35 | 3,805 | 4,192,121 | ||||||
Montclair State University, Series A, 5.00%, 7/01/39 | 4,500 | 5,001,525 | ||||||
Montclaire State University, Series A, 5.00%, 7/01/44 | 1,020 | 1,130,986 | ||||||
Montclair State University, Series J (NPFGC), 4.25%, 7/01/30 | 2,765 | 2,813,332 | ||||||
New Jersey Institute of Technology, Series H, 5.00%, 7/01/31 | 1,000 | 1,096,150 | ||||||
Ramapo College, Series I (AMBAC), 4.25%, 7/01/31 | 1,250 | 1,271,238 | ||||||
Rowan University, Series B (AGC), 5.00%, 7/01/26 | 2,575 | 2,872,207 | ||||||
Seton Hall University, Series D, 5.00%, 7/01/38 | 140 | 152,215 | ||||||
Seton Hall University, Series D, 5.00%, 7/01/43 | 170 | 184,632 | ||||||
Stevens Institute of Technology, Series A, 5.00%, 7/01/34 | 1,500 | 1,533,810 | ||||||
William Paterson University, Series C (AGC), 4.75%, 7/01/34 | 1,115 | 1,183,182 | ||||||
New Jersey Higher Education Student Assistance Authority, RB, Senior Student Loan, Series 1A, AMT: | ||||||||
4.00%, 12/01/28 | 710 | 708,374 | ||||||
4.50%, 12/01/28 | 1,170 | 1,221,176 | ||||||
4.00%, 12/01/29 | 1,575 | 1,549,595 | ||||||
4.00%, 12/01/29 | 290 | 288,973 | ||||||
4.50%, 12/01/29 | 1,550 | 1,615,550 | ||||||
4.63%, 12/01/30 | 1,475 | 1,534,929 | ||||||
4.00%, 12/01/31 | 290 | 280,024 | ||||||
4.25%, 12/01/32 | 590 | 584,218 | ||||||
4.13%, 12/01/35 | 290 | 276,741 | ||||||
4.50%, 12/01/36 | 525 | 526,958 | ||||||
New Jersey Higher Education Student Assistance Authority, Refunding RB, Series 1, AMT, 5.50%, 12/01/26 | 1,800 | 2,010,816 | ||||||
New Jersey Institute of Technology, RB, Series A, 5.00%, 7/01/42 | 1,900 | 2,046,490 | ||||||
Rutgers - The State University of New Jersey, Refunding RB, Series L: | ||||||||
5.00%, 5/01/30 | 465 | 534,155 | ||||||
5.00%, 5/01/43 | 2,850 | 3,162,873 | ||||||
|
| |||||||
| 41,779,673 | ||||||||
Health — 14.7% | ||||||||
New Jersey Health Care Facilities Financing Authority, RB: | ||||||||
Meridian Health System Obligated Group, Series I (AGC), 5.00%, 7/01/38 | 700 | 734,440 | ||||||
Meridian Health System Obligated Group, Series II (AGC), 5.00%, 7/01/38 | 975 | 1,022,970 | ||||||
Meridian Health System Obligated Group, Series V (AGC), 5.00%, 7/01/38 | 940 | 986,248 | ||||||
Robert Wood Johnson University Hospital, Series A, 5.50%, 7/01/43 | 2,220 | 2,464,955 | ||||||
Virtua Health, Series A (AGC), 5.50%, 7/01/38 | 1,000 | 1,077,880 | ||||||
New Jersey Health Care Facilities Financing Authority, Refunding RB: | ||||||||
5.00%, 7/01/28 | 870 | 986,589 | ||||||
5.00%, 7/01/29 | 205 | 231,059 | ||||||
See Notes to Financial Statements.
| 36 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (continued) | BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey (continued) | ||||||||
Health (concluded) | ||||||||
New Jersey Health Care Facilities Financing Authority, Refunding RB (concluded): | ||||||||
5.50%, 7/01/31 | $ | 1,175 | $ | 1,310,583 | ||||
AHS Hospital Corp., 6.00%, 7/01/41 | 1,100 | 1,273,459 | ||||||
Catholic Health East Issue, 5.00%, 11/15/33 | 550 | 586,267 | ||||||
Hackensack University Medical (AGM), 4.63%, 1/01/30 | 2,315 | 2,426,120 | ||||||
Kennedy Health System, 5.00%, 7/01/42 | 140 | 146,992 | ||||||
Meridian Health System Obligated Group, 5.00%, 7/01/25 | 300 | 336,162 | ||||||
Meridian Health System Obligated Group, 5.00%, 7/01/26 | 2,130 | 2,363,214 | ||||||
St. Barnabas Health Care System, Series A, 5.00%, 7/01/24 | 1,820 | 2,030,155 | ||||||
St. Barnabas Health Care System, Series A, 5.63%, 7/01/32 | 440 | 481,703 | ||||||
St. Barnabas Health Care System, Series A, 5.63%, 7/01/37 | 1,300 | 1,411,774 | ||||||
St. Luke’s Warren Hospital Obligated Group, 5.00%, 8/15/34 | 300 | 320,217 | ||||||
St. Luke’s Warren Hospital Obligated Group, 4.00%, 8/15/37 | 180 | 170,136 | ||||||
|
| |||||||
| 20,360,923 | ||||||||
Housing — 9.6% | ||||||||
New Jersey Housing & Mortgage Finance Agency, RB: |
| |||||||
Capital Fund Program, Series A (AGM), 5.00%, 5/01/27 | 1,970 | 2,126,280 | ||||||
Capital Fund Program, Series A (AGM) (HUD), 4.70%, 11/01/25 | 2,475 | 2,536,479 | ||||||
M/F Housing, Series A, 4.55%, 11/01/43 | 1,425 | 1,436,300 | ||||||
M/F Housing, Series A, AMT (NPFGC), 4.90%, 11/01/35 | 820 | 820,238 | ||||||
M/F Housing, Series A, AMT (NPFGC), 4.85%, 11/01/39 | 400 | 393,108 | ||||||
S/F Housing, Series AA, 6.50%, 10/01/38 | 325 | 334,724 | ||||||
S/F Housing, Series B, 4.50%, 10/01/30 | 2,720 | 2,873,299 | ||||||
New Jersey Housing & Mortgage Finance Agency, Refunding RB, AMT: | ||||||||
M/F Housing, Series 2, 4.60%, 11/01/38 | 1,070 | 1,087,270 | ||||||
M/F Housing, Series 2, 4.75%, 11/01/46 | 1,205 | 1,222,545 | ||||||
S/F Housing, Series T, 4.70%, 10/01/37 | 445 | 448,969 | ||||||
|
| |||||||
| 13,279,212 | ||||||||
State — 19.0% | ||||||||
Garden State Preservation Trust, RB (AGM): | ||||||||
CAB, Series B, 0.00%, 11/01/23 (a) | 6,725 | 5,249,804 | ||||||
Election of 2005, Series A, 5.80%, 11/01/15 (b) | 2,605 | 2,785,526 | ||||||
New Jersey EDA, LRB, Rutgers - The State University of New Jersey, College Avenue Redevelopment Project, 5.00%, 6/15/33 | 880 | 997,841 | ||||||
New Jersey EDA, RB: | ||||||||
CAB, Motor Vehicle Surcharge, Series A (NPFGC), 0.00%, 7/01/21 (a) | 2,325 | 1,885,226 | ||||||
Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/25 | 1,000 | 1,191,190 | ||||||
Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/33 | 7,000 | 7,074,410 | ||||||
School Facilities Construction (AGC), 6.00%, 12/15/18 (b) | 1,185 | 1,441,268 | ||||||
School Facilities Construction (AGC), 6.00%, 12/15/34 | 15 | 17,381 | ||||||
School Facilities Construction, Series KK, 5.00%, 3/01/38 | 380 | 403,047 | ||||||
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey (continued) | ||||||||
State (concluded) | ||||||||
New Jersey EDA, RB (concluded): | ||||||||
School Facilities Construction, Series U, 5.00%, 9/01/37 | $ | 1,040 | $ | 1,133,028 | ||||
School Facilities Construction, Series U (AMBAC), 5.00%, 9/01/37 | 365 | 397,649 | ||||||
New Jersey EDA, Refunding RB: | ||||||||
Cigarette Tax, 5.00%, 6/15/26 | 355 | 390,653 | ||||||
Cigarette Tax, 5.00%, 6/15/28 | 910 | 990,762 | ||||||
Cigarette Tax, 5.00%, 6/15/29 | 1,195 | 1,292,572 | ||||||
School Facilities Construction, Series NN, 5.00%, 3/01/29 | 500 | 547,030 | ||||||
State of New Jersey, COP, Equipment Lease Purchase, Series A, 5.25%, 6/15/27 | 500 | 559,305 | ||||||
|
| |||||||
| 26,356,692 | ||||||||
Transportation — 25.5% | ||||||||
Delaware River Port Authority, RB: | ||||||||
5.00%, 1/01/29 | 750 | 848,565 | ||||||
5.00%, 1/01/37 | 2,865 | 3,132,562 | ||||||
Series D, 5.05%, 1/01/35 | 1,430 | 1,538,466 | ||||||
Series D (AGM), 5.00%, 1/01/40 | 1,500 | 1,593,360 | ||||||
Delaware River Port Authority, Refunding RB, Port District Project: | ||||||||
5.00%, 1/01/26 | 700 | 757,120 | ||||||
5.00%, 1/01/27 | 525 | 563,934 | ||||||
New Jersey EDA, RB, Private Activity Bond, The Goethals Bridge Replacement Project (AMT): | ||||||||
5.38%, 1/01/43 | 2,235 | 2,371,000 | ||||||
5.13%, 1/01/34 | 660 | 706,629 | ||||||
New Jersey State Turnpike Authority, RB, Growth & Income Securities, Series B (AMBAC), 5.15%, 1/01/35 (c) | 3,005 | 3,090,883 | ||||||
New Jersey State Turnpike Authority, Refunding RB, Series A (AGM), 5.25%, 1/01/29 | 2,000 | 2,423,960 | ||||||
New Jersey Transportation Trust Fund Authority, RB: | ||||||||
CAB, Transportation System, Series C (AGM), 0.00%, 12/15/32 (a) | 4,750 | 2,005,022 | ||||||
CAB, Transportation System, Series C (AMBAC), 0.00%, 12/15/35 (a) | 2,760 | 932,935 | ||||||
Transportation System, Series A, 6.00%, 6/15/35 | 2,000 | 2,394,080 | ||||||
Transportation System, Series A (AGC), 5.63%, 12/15/28 | 780 | 912,226 | ||||||
Transportation Program, Series AA, 5.00%, 6/15/33 | 1,700 | 1,828,027 | ||||||
Transportation System, Series AA, 5.25%, 6/15/33 | 1,640 | 1,820,220 | ||||||
Transportation System, Series B, 5.50%, 6/15/31 | 730 | 832,813 | ||||||
Transportation System, Series B, 5.25%, 6/15/36 | 725 | 788,481 | ||||||
Port Authority of New York & New Jersey, ARB: | ||||||||
Consolidated, 93rd Series, 6.13%, 6/01/94 | 1,000 | 1,166,870 | ||||||
Special Project, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/01/42 | 1,500 | 1,720,920 | ||||||
Port Authority of New York & New Jersey, Refunding RB, AMT: | ||||||||
5.00%, 12/01/33 | 1,155 | 1,278,308 | ||||||
Consolidated, 152nd Series, 5.75%, 11/01/30 | 2,000 | 2,263,680 | ||||||
South Jersey Transportation Authority, Refunding RB, Transportation System, Series A: | ||||||||
5.00%, 11/01/28 | 200 | 215,234 | ||||||
5.00%, 11/01/29 | 200 | 213,924 | ||||||
|
| |||||||
| 35,399,219 | ||||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 37 |
Schedule of Investments (continued) | BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
New Jersey (concluded) | ||||||||
Utilities — 5.7% | ||||||||
County of Essex New Jersey Utilities Authority, Refunding RB, (AGC), 4.13%, 4/01/22 | $ | 670 | $ | 723,808 | ||||
North Hudson Sewerage Authority, Refunding RB, Series A (NPFGC), 5.13%, 8/01/20 (d) | 1,710 | 2,049,828 | ||||||
Rahway Valley Sewerage Authority, RB, CAB, Series A (NPFGC) (a): | ||||||||
0.00%, 9/01/26 | 4,100 | 2,614,980 | ||||||
0.00%, 9/01/29 | 2,750 | 1,490,995 | ||||||
0.00%, 9/01/33 | 2,350 | 1,031,885 | ||||||
|
| |||||||
| 7,911,496 | ||||||||
Total Municipal Bonds in New Jersey |
| 175,960,681 | ||||||
Guam — 3.3% |
| |||||||
State — 3.3% | ||||||||
Territory of Guam, RB, Business Privilege Tax Bonds: | ||||||||
Series A, 5.25%, 1/01/36 | 120 | 128,033 | ||||||
Series A, 5.13%, 1/01/42 | 4,100 | 4,320,703 | ||||||
Series B-1, 5.00%, 1/01/37 | 155 | 162,525 | ||||||
| Total Municipal Bonds in Guam | 4,611,261 | |||||||
Puerto Rico — 3.1% | ||||||||
Health — 3.1% | ||||||||
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities Financing Authority, RB, Hospital De La Concepcion, Series A, 6.13%, 11/15/30 | 4,220 | 4,236,796 | ||||||
| Total Municipal Bonds — 133.1% | 184,808,738 | |||||||
Municipal Bonds Transferred to Tender Option Bond Trusts (e) | ||||||||
New Jersey — 23.6% | ||||||||
County/City/Special District/School District — 3.8% |
| |||||||
County of Union New Jersey Utilities Authority, Refunding LRB, Resource Recovery Facility, Covanta Union, Inc., Series A, AMT, 5.25%, 12/01/31 | 4,930 | 5,324,548 | ||||||
Education — 3.2% | ||||||||
Rutgers - The State University of New Jersey, RB, Series F, 5.00%, 5/01/39 | 4,003 | 4,446,565 | ||||||
Municipal Bonds Transferred to Tender Option Bond Trusts (e) | Par (000) | Value | ||||||
New Jersey (concluded) | ||||||||
State — 4.6% | ||||||||
Garden State Preservation Trust, RB, Election of 2005, Series A (AGM), 5.75%, 11/01/28 | $ | 3,300 | $ | 4,220,568 | ||||
New Jersey EDA, Refunding RB, 5.00%, 3/01/29 (f) | 1,918 | 2,098,518 | ||||||
|
| |||||||
| 6,319,086 | ||||||||
Transportation — 12.0% | ||||||||
New Jersey State Turnpike Authority, RB, Series A, 5.00%, 1/01/38 (f) | 4,100 | 4,451,042 | ||||||
New Jersey Transportation Trust Fund Authority, RB, Transportation System, Series B, 5.25%, 6/15/36 (f) | 760 | 826,721 | ||||||
Port Authority of New York & New Jersey, ARB, Consolidated, 163rd Series, AMT, 5.00%, 7/15/39 | 4,089 | 4,604,984 | ||||||
Port Authority of New York & New Jersey, RB, Consolidated, 169th Series, AMT, 5.00%, 10/15/41 | 4,500 | 4,849,740 | ||||||
Port Authority of New York & New Jersey, Refunding RB, Consolidated, 152nd Series, AMT, 5.25%, 11/01/35 | 1,829 | 1,997,228 | ||||||
|
| |||||||
| 16,729,715 | ||||||||
Total Municipal Bonds Transferred to Tender Option Bond Trusts — 23.6% |
| 32,819,914 | ||||||
| Total Long-Term Investments (Cost — $203,481,588) — 156.7% | 217,628,652 | |||||||
| Short-Term Securities | Shares | |||||||
BIF New Jersey Municipal Money Fund, 0.00% (g)(h) | 2,535,160 | 2,535,160 | ||||||
| Total Short-Term Securities (Cost — $2,535,160) — 1.8% | 2,535,160 | |||||||
| Total Investments (Cost — $206,016,748) — 158.5% | 220,163,812 | |||||||
| Other Assets Less Liabilities — 0.9% | 1,174,285 | |||||||
Liability for TOB Trust Certificates, Including Interest |
| (18,047,428 | ) | |||||
| VRDP Shares, at Liquidation Value — (46.4)% | (64,400,000 | ) | ||||||
|
| |||||||
| Net Assets Applicable to Common Shares — 100.0% | $ | 138,890,669 | ||||||
|
| |||||||
| Notes to Schedule of Investments |
| (a) | Zero-coupon bond. |
| (b) | U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par. |
| (c) | Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date. |
| (d) | Security is collateralized by municipal or U.S. Treasury obligations. |
| (e) | Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs. |
| (f) | All or a portion of security is subject to a recourse agreement, which may require the Fund to pay the liquidity provider in the event there is a shortfall between the TOB trust certificates and proceeds received from the sale of the security contributed to the TOB trust. In the case of a shortfall, the aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire from June 15, 2019 to September 1, 2020 is $5,098,359. |
See Notes to Financial Statements.
| 38 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (concluded) | BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI) |
| (g) | Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: |
| Affiliate | Shares Held at July 31, 2013 | Net Activity | Shares Held at July 31, 2014 | Income | ||||||||||||
BIF New Jersey Municipal Money Fund | 3,764,692 | (1,229,532 | ) | 2,535,160 | $ | 7 | ||||||||||
| (h) | Represents the current yield as of report date. |
| Ÿ | Financial futures contracts outstanding as of July 31, 2014 were as follows: |
| Contracts Sold | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation | |||||||||||
| (85 | ) | 10-Year U.S. Treasury Note | Chicago Board of Trade | September 2014 | $ | 10,591,797 | $ | 36,404 | ||||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Ÿ | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
| Investments: | ||||||||||||||
Municipal Bonds 1 | — | $ | 217,628,652 | — | $ | 217,628,652 | ||||||||
Short-Term Securities | $ | 2,535,160 | — | — | 2,535,160 | |||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 2,535,160 | $ | 217,628,652 | — | $ | 220,163,812 | |||||||
|
|
|
|
|
|
| ||||||||
1 See above Schedule of Investments for values in each sector. |
| |||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
| Derivative Financial Instruments 2 | ||||||||||||||
Assets: | ||||||||||||||
Interest rate contracts | $ | 36,404 | — | — | $ | 36,404 | ||||||||
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| |||||||||||||
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows: |
| |||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets: | ||||||||||||||
Cash pledged for financial futures contracts | $ | 158,000 | — | — | $ | 158,000 | ||||||||
Liabilities: | ||||||||||||||
TOB trust certificates | — | $ | (18,044,269 | ) | — | (18,044,269 | ) | |||||||
VRDP Shares | — | (64,400,000 | ) | — | (64,400,000 | ) | ||||||||
|
|
|
|
|
|
| ||||||||
Total | $ | 158,000 | $ | (82,444,269 | ) | — | $ | (82,286,269 | ) | |||||
|
|
|
|
|
|
| ||||||||
There were no transfers between levels during the year ended July 31, 2014.
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 39 |
Schedule of Investments July 31, 2014 | BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Pennsylvania — 116.0% | ||||||||
Corporate — 12.8% |
| |||||||
Beaver County IDA, Refunding RB, Series B, 3.50%, 12/01/35 (a) | $ | 3,235 | $ | 3,274,111 | ||||
County of Beaver Pennsylvania IDA, Refunding RB, First Energy, Nuclear Energy Corp. Project, Mandatory Put Bonds, Series A, 3.38%, 1/01/35 (a) | 1,200 | 1,221,060 | ||||||
County of Delaware Pennsylvania IDA, Refunding RB, Water Facilities, Aqua Pennsylvania, Inc. Project, Series B, AMT (NPFGC), 5.00%, 11/01/36 | 2,520 | 2,582,521 | ||||||
County of Northumberland Pennsylvania IDA, Refunding RB, Aqua Pennsylvania, Inc. Project, AMT (NPFGC), 5.05%, 10/01/39 | 4,500 | 4,507,920 | ||||||
Pennsylvania Economic Development Financing Authority, RB: | ||||||||
American Water Co. Project, 6.20%, 4/01/39 | 1,300 | 1,490,229 | ||||||
Aqua Pennsylvania, Inc. Project, Series B, 4.50%, 12/01/42 | 2,630 | 2,708,743 | ||||||
Waste Management, Inc. Project, Series A, AMT, 5.10%, 10/01/27 | 1,200 | 1,246,488 | ||||||
Pennsylvania Economic Development Financing Authority, Refunding RB, Amtrak Project, Series A, AMT, 5.00%, 11/01/41 | 5,865 | 6,180,537 | ||||||
|
| |||||||
| 23,211,609 | ||||||||
County/City/Special District/School District — 38.4% |
| |||||||
Bristol Township School District, GO, 5.00%, 6/01/40 | 775 | 838,752 | ||||||
Chambersburg Area School District, GO: | ||||||||
5.25%, 9/01/15 (b) | 640 | 675,123 | ||||||
5.25%, 3/01/27 | 1,860 | 1,948,462 | ||||||
(NPFGC), 5.25%, 3/01/26 | 2,115 | 2,219,291 | ||||||
City of Philadelphia Pennsylvania, GO, Refunding, Series A: | ||||||||
(AGM), 5.25%, 12/15/32 | 5,000 | 5,326,600 | ||||||
(AGC), 5.00%, 8/01/24 | 2,000 | 2,202,740 | ||||||
City of Pittsburgh Pennsylvania, GO, Series B, 5.00%, 9/01/26 | 970 | 1,099,621 | ||||||
Commonwealth of Pennsylvania, GO, 5.00%, 6/15/26 | 2,420 | 2,883,091 | ||||||
County of Lycoming Pennsylvania Water & Sewer Authority, RB, (AGM), 5.00%, 11/15/41 | 400 | 422,584 | ||||||
County of York Pennsylvania, GO, Refunding, 5.00%, 3/01/36 | 400 | 440,896 | ||||||
East Stroudsburg Area School District, GO, Refunding, Series A (AGM), 5.00%, 9/01/25 | 3,000 | 3,309,180 | ||||||
East Stroudsburg Area School District, GO, Series A: | ||||||||
7.75%, 9/01/17 (b) | 960 | 1,167,485 | ||||||
7.75%, 9/01/27 | 1,040 | 1,240,938 | ||||||
Erie County Conventional Center Authority, RB, 5.00%, 1/15/36 | 8,850 | 8,891,595 | ||||||
Lower Merion School District, GO, Refunding, Series A, 3.25%, 11/15/27 | 2,035 | 2,058,016 | ||||||
Marple Newtown School District, GO, (AGM), 5.00%, 6/01/31 | 3,500 | 3,934,980 | ||||||
Northeastern School District York County, GO, Series B (NPFGC), 5.00%, 4/01/32 | 1,585 | 1,708,709 | ||||||
Philadelphia Redevelopment Authority, RB, Quality Redevelopment Neighborhood, Series B, AMT (NPFGC), 5.00%, 4/15/27 | 4,645 | 4,762,100 | ||||||
Philadelphia School District, GO, Series E, 6.00%, 9/01/38 | 3,300 | 3,611,256 | ||||||
Philipsburg-Osceola Pennsylvania Area School District, GO (AGM), 5.00%, 4/01/41 | 755 | 799,960 | ||||||
Shaler Area School District Pennsylvania, GO, CAB (Syncora), 0.00%, 9/01/30 (c) | 6,145 | 3,260,291 | ||||||
Pennsylvania (continued) | ||||||||
County/City/Special District/School District (concluded) |
| |||||||
State Public School Building Authority, RB (AGM): | ||||||||
Community College, Allegheny County Project, 5.00%, 7/15/34 | $ | 1,880 | $ | 2,021,489 | ||||
Corry Area School District, CAB, 0.00%, 12/15/22 (c) | 1,640 | 1,259,897 | ||||||
Corry Area School District, CAB, 0.00%, 12/15/23 (c) | 1,980 | 1,449,499 | ||||||
Corry Area School District, CAB, 0.00%, 12/15/24 (c) | 1,980 | 1,384,990 | ||||||
Corry Area School District, CAB, 0.00%, 12/15/25 (c) | 1,770 | 1,181,387 | ||||||
State Public School Building Authority, Refunding RB: | ||||||||
Harrisburg School District Project, Series A (AGC), 5.00%, 11/15/33 | 1,065 | 1,116,141 | ||||||
School District Philadelphia Project, Series B (AGM), 5.00%, 6/01/26 | 1,500 | 1,615,965 | ||||||
Township of Bristol Pennsylvania School District, GO, 5.25%, 6/01/43 | 5,120 | 5,648,128 | ||||||
Township of Falls Authority, RB, Water & Sewer Authority, 5.00%, 12/01/37 | 1,070 | 1,150,036 | ||||||
|
| |||||||
| 69,629,202 | ||||||||
Education — 6.9% | ||||||||
County of Adams Pennsylvania IDA, Refunding RB, Gettysburg College, 5.00%, 8/15/26 | 100 | 109,526 | ||||||
Pennsylvania Higher Educational Facilities Authority, RB: | ||||||||
Drexel University, Series A (NPFGC), 5.00%, 5/01/37 | 1,500 | 1,608,225 | ||||||
Shippensburg University Student Services, Student Housing, 5.00%, 10/01/44 | 1,195 | 1,204,488 | ||||||
Pennsylvania Higher Educational Facilities Authority, Refunding RB: | ||||||||
Drexel University, Series A, 5.25%, 5/01/41 | 2,750 | 2,968,295 | ||||||
La Salle University, 5.00%, 5/01/37 | 985 | 1,033,098 | ||||||
La Salle University, 5.00%, 5/01/42 | 1,600 | 1,675,856 | ||||||
State System of Higher Education, Series AL, 5.00%, 6/15/35 | 280 | 306,404 | ||||||
Thomas Jefferson University, 4.00%, 3/01/37 | 375 | 368,392 | ||||||
Widener University, Series A, 5.25%, 7/15/33 | 1,360 | 1,450,998 | ||||||
Widener University, Series A, 5.50%, 7/15/38 | 340 | 364,568 | ||||||
Swarthmore Borough Authority, Refunding RB, Swarthmore College Project, 5.00%, 9/15/38 | 830 | 927,857 | ||||||
Township of East Hempfield IDA, RB, Student Services, Inc., Student Housing Project at Millersville University of Pennsylvania: | ||||||||
5.00%, 7/01/35 | 385 | 396,146 | ||||||
5.00%, 7/01/45 | 200 | 203,446 | ||||||
|
| |||||||
| 12,617,299 | ||||||||
Health — 16.7% | ||||||||
County of Allegheny Pennsylvania Hospital Development Authority, RB, Health Center, UPMC Health, Series B (NPFGC), 6.00%, 7/01/26 | 2,000 | 2,503,720 | ||||||
County of Berks Pennsylvania Municipal Authority, Refunding RB, Reading Hospital & Medical Center, Series A, 5.00%, 11/01/40 | 765 | 819,185 | ||||||
County of Centre Pennsylvania Hospital Authority, RB, Mount Nittany Medical Center Project, 7.00%, 11/15/46 | 2,020 | 2,400,810 | ||||||
County of Cumberland Pennsylvania Municipal Authority, Refunding RB, Diakon Lutheran, 6.38%, 1/01/39 | 500 | 539,850 | ||||||
County of Lehigh Pennsylvania, RB, Lehigh Valley Health Network, Series A (AGM), 5.00%, 7/01/33 | 7,995 | 8,373,483 | ||||||
See Notes to Financial Statements.
| 40 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (continued) | BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
| Municipal Bonds | Par (000) | Value | ||||||
Pennsylvania (continued) | ||||||||
Health (concluded) | ||||||||
County of Montgomery Pennsylvania Higher Education & Health Authority, Refunding RB, Abington Memorial Hospital Obligated Group, Series A, 5.13%, 6/01/33 | $ | 490 | $ | 514,422 | ||||
County of Montgomery Pennsylvania IDA, RB, Acts Retirement-Life Community: | ||||||||
Series A, 4.50%, 11/15/36 | 55 | 54,538 | ||||||
Series A-1, 6.25%, 11/15/29 | 235 | 264,732 | ||||||
County of Montgomery Pennsylvania IDA, Refunding RB, Acts Retirement-Life Communities: | ||||||||
5.00%, 11/15/27 | 690 | 735,809 | ||||||
5.00%, 11/15/28 | 445 | 472,056 | ||||||
Lancaster IDA, Refunding RB: | ||||||||
5.38%, 5/01/28 | 420 | 442,579 | ||||||
5.75%, 5/01/35 | 745 | 794,476 | ||||||
Pennsylvania Higher Educational Facilities Authority, RB, University of Pennsylvania Health System, Series A, 4.00%, 8/15/39 | 7,600 | 7,552,272 | ||||||
Philadelphia Hospitals & Higher Education Facilities Authority, Refunding RB, Presbyterian Medical Center, 6.65%, 12/01/19 (d) | 2,390 | 2,793,097 | ||||||
South Fork Municipal Authority, Refunding RB, Conemaugh Valley Memorial Hospital, Series B (AGC), 5.38%, 7/01/35 | 1,840 | 1,985,121 | ||||||
|
| |||||||
| 30,246,150 | ||||||||
Housing — 7.2% | ||||||||
Pennsylvania HFA, RB, S/F Mortgage, Series 114-C: | ||||||||
3.65%, 10/01/37 | 1,915 | 1,865,172 | ||||||
3.70%, 10/01/42 | 3,345 | 3,171,863 | ||||||
Pennsylvania HFA, Refunding RB, S/F Mortgage: | ||||||||
Series 092-A, AMT, 4.75%, 4/01/31 | 595 | 597,213 | ||||||
Series 096-A, AMT, 4.70%, 10/01/37 | 2,730 | 2,771,168 | ||||||
Series 099-A, AMT, 5.15%, 4/01/38 | 855 | 901,991 | ||||||
Series 110-B, 4.75%, 10/01/39 | 655 | 681,521 | ||||||
Philadelphia Housing Authority, RB, Capital Fund Program, Series A (AGM), 5.50%, 12/01/18 | 3,000 | 3,039,390 | ||||||
|
| |||||||
| 13,028,318 | ||||||||
State — 6.0% | ||||||||
Commonwealth of Pennsylvania, GO, 1st Series: | ||||||||
5.00%, 11/15/24 | 1,000 | 1,171,980 | ||||||
5.00%, 4/01/26 | 1,140 | 1,336,342 | ||||||
5.00%, 6/01/28 | 2,300 | 2,651,141 | ||||||
5.00%, 6/15/29 | 1,000 | 1,168,830 | ||||||
Pennsylvania Economic Development Financing Authority, Refunding RB, Unemployment Compensation, Series B, 5.00%, 7/01/23 | 600 | 625,452 | ||||||
Pennsylvania Turnpike Commission, RB, Oil Franchise Tax, Remarketing, Series C (NPFGC), 5.00%, 12/01/32 | 3,600 | 3,985,020 | ||||||
|
| |||||||
| 10,938,765 | ||||||||
Transportation — 16.7% | ||||||||
City of Philadelphia Pennsylvania, ARB, Series A: | ||||||||
5.00%, 6/15/40 | 2,500 | 2,642,975 | ||||||
AMT (AGM), 5.00%, 6/15/37 | 5,595 | 5,708,579 | ||||||
Delaware River Port Authority, RB: | ||||||||
5.00%, 1/01/37 | 1,970 | 2,153,978 | ||||||
Series D (AGM), 5.00%, 1/01/40 | 1,560 | 1,657,094 | ||||||
Pennsylvania Turnpike Commission, RB: | ||||||||
CAB, Sub-Series A-3, 0.00%, 12/01/42 (c) | 4,100 | 965,386 | ||||||
CAB, Sub-Series A-3 (AGM), 0.00%, 12/01/40 (c) | 1,100 | 318,714 | ||||||
Series A (AMBAC), 5.25%, 12/01/32 | 350 | 354,851 | ||||||
Pennsylvania (concluded) | ||||||||
Transportation (concluded) | ||||||||
Series A (AMBAC), 5.50%, 12/01/31 | $ | 7,800 | $ | 7,914,582 | ||||
Sub-Series A, 6.00%, 12/01/41 | 700 | 762,825 | ||||||
Pennsylvania Turnpike Commission, Refunding RB, Sub-Series B (AGM), 5.25%, 6/01/39 | 3,500 | 3,839,955 | ||||||
Southeastern Pennsylvania Transportation Authority, RB, Capital Grant Receipts: | ||||||||
5.00%, 6/01/28 | 1,570 | 1,723,954 | ||||||
5.00%, 6/01/29 | 2,080 | 2,274,688 | ||||||
|
| |||||||
| 30,317,581 | ||||||||
Utilities — 11.3% | ||||||||
Allegheny County Sanitary Authority, Refunding RB, Series A (NPFGC), 5.00%, 12/01/30 | 5,000 | 5,233,800 | ||||||
City of Philadelphia Pennsylvania Gas Works, RB: | ||||||||
1998 General Ordinance, 4th Series (AGM), 5.00%, 8/01/32 | 3,300 | 3,310,197 | ||||||
9th Series, 5.25%, 8/01/40 | 1,430 | 1,600,470 | ||||||
City of Philadelphia Pennsylvania Water & Wastewater, RB: | ||||||||
Series A, 5.25%, 1/01/36 | 700 | 748,230 | ||||||
Series C (AGM), 5.00%, 8/01/40 | 3,000 | 3,208,140 | ||||||
County of Allegheny Pennsylvania Sanitary Authority, RB, Sewer Improvement, 5.25%, 12/01/41 | 1,215 | 1,338,225 | ||||||
County of Bucks Pennsylvania Water & Sewer Authority, RB, Water System (AGM), 5.00%, 12/01/41 | 150 | 163,523 | ||||||
County of Delaware Pennsylvania Regional Water Quality Control Authority, RB, Sewer Improvements, 5.00%, 5/01/33 | 350 | 390,096 | ||||||
Pennsylvania Economic Development Financing Authority, RB, Philadelphia Biosolids Facility, 6.25%, 1/01/32 | 1,420 | 1,549,249 | ||||||
Reading Area Water Authority Pennsylvania, RB (AGM), 5.00%, 12/01/27 | 2,680 | 2,930,982 | ||||||
|
| |||||||
| 20,472,912 | ||||||||
| Total Municipal Bonds in Pennsylvania | 210,461,836 | |||||||
Guam — 0.5% | ||||||||
State — 0.5% | ||||||||
Territory of Guam, RB, Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29 | 805 | 880,968 | ||||||
| Total Municipal Bonds — 116.5% | 211,342,804 | |||||||
Municipal Bonds Transferred to Tender Option Bond Trusts (e) | ||||||||
Pennsylvania — 38.4% | ||||||||
Education — 9.1% | ||||||||
Pennsylvania Higher Educational Facilities Authority, RB: | ||||||||
Series AE (NPFGC), 4.75%, 6/15/32 | 8,845 | 9,272,116 | ||||||
University of Pennsylvania Health System, Series A, 5.75%, 8/15/41 | 4,270 | 4,808,020 | ||||||
University of Pittsburgh, RB, The Commonwealth System of Higher Education, Capital Project, Series B, 5.00%, 9/15/28 | 2,202 | 2,509,022 | ||||||
|
| |||||||
| 16,589,158 | ||||||||
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 41 |
Schedule of Investments (continued) | BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
Municipal Bonds Transferred to Tender Option Bond Trusts (e) | Par (000) | Value | ||||||
Pennsylvania (continued) | ||||||||
Health — 9.9% | ||||||||
Geisinger Authority Pennsylvania, RB, Health System: | ||||||||
Series A, 5.13%, 6/01/34 | $ | 2,500 | $ | 2,708,000 | ||||
Series A, 5.25%, 6/01/39 | 3,128 | 3,378,434 | ||||||
Series A-1, 5.13%, 6/01/41 | 6,272 | 6,759,357 | ||||||
Philadelphia Hospitals & Higher Education Facilities Authority, RB, The Children’s Hospital of Philadelphia Project, Series C, 5.00%, 7/01/41 | 4,680 | 5,027,443 | ||||||
|
| |||||||
| 17,873,234 | ||||||||
Housing — 1.7% | ||||||||
Pennsylvania HFA, Refunding RB, S/F Mortgage, Series 115A, AMT, 4.20%, 10/01/33 | 3,000 | 3,011,820 | ||||||
State — 17.7% | ||||||||
Commonwealth of Pennsylvania, GO, Series 1, 5.00%, 3/15/28 | 5,203 | 5,938,561 | ||||||
Pennsylvania Turnpike Commission, RB, Oil Franchise Tax, Senior Series C (NPFGC), 5.00%, 12/01/32 | 10,000 | 11,069,500 | ||||||
State Public School Building Authority, Refunding RB, School Distric of Philadelphia Project, Series B (AGM), 5.00%, 6/01/26 | 14,026 | 15,110,549 | ||||||
|
| |||||||
| 32,118,610 | ||||||||
Pennsylvania (concluded) | ||||||||
State (concluded) | ||||||||
Total Municipal Bonds Transferred to Tender Option Bond Trusts — 38.4% | $ | 69,592,822 | ||||||
| Total Long-Term Investments (Cost — $265,617,397) — 154.9% | 280,935,626 | |||||||
| Short-Term Securities | Shares | |||||||
BIF Pennsylvania Municipal Money Fund, 0.00% (f)(g) | 1,714,474 | 1,714,474 | ||||||
Total Short-Term Securities (Cost — $1,714,474) — 0.9% |
| 1,714,474 | ||||||
| Total Investments (Cost — $267,331,871) — 155.8% | 282,650,100 | |||||||
| Other Assets Less Liabilities — 1.1% | 2,181,430 | |||||||
Liability for TOB Trust Certificates, Including Interest |
| (37,072,914 | ) | |||||
| VRDP Shares, at Liquidation Value — (36.5)% | (66,300,000 | ) | ||||||
|
| |||||||
| Net Assets Applicable to Common Shares — 100.0% | $ | 181,458,616 | ||||||
|
| |||||||
| Notes to Schedule of Investments |
| (a) | Variable rate security. Rate shown is as of report date. |
| (b) | U.S. government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par. |
| (c) | Zero-coupon bond. |
| (d) | Security is collateralized by municipal or U.S. Treasury obligations. |
| (e) | Represent bonds transferred to a TOB. In exchange for which the Fund received cash and residual interest certificates. These bonds serve as collateral in a financing transaction. See Note 3 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs. |
| (f) | Investments in issuers considered to be an affiliate of the Fund during the year ended July 31, 2014, for purposes of Section 2(a)(3) of the 1940 Act, were as follows: |
| Affiliate | Shares Held at July 31, 2013 | Net Activity | Shares Held at July 31, 2014 | Income | ||||||||||||
BIF Pennsylvania Municipal Money Fund | 3,198,164 | (1,483,690 | ) | 1,714,474 | — | |||||||||||
| (g) | Represents the current yield as of report date. |
| Ÿ | Financial futures contracts outstanding as of July 31, 2014 were as follows: |
| Contracts Sold | Issue | Exchange | Expiration | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||
| (92 | ) | 10-Year U.S. Treasury Note | Chicago Board of Trade | September 2014 | $ | 11,464,063 | $ | 12,698 | ||||||||
| (25 | ) | U.S. Treasury Long Bond | Chicago Board of Trade | September 2014 | 3,435,156 | (53,941 | ) | |||||||||
| Total | $ | (41,243 | ) | |||||||||||||
|
| |||||||||||||||
For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
| Ÿ | Fair Value Measurements—Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| Ÿ | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| Ÿ | Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| Ÿ | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
See Notes to Financial Statements.
| 42 | ANNUAL REPORT | JULY 31, 2014 |
Schedule of Investments (concluded) | BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
| Investments: | ||||||||||||||||
Long-Term Investments 1 | — | $ | 280,935,626 | — | $ | 280,935,626 | ||||||||||
Short-Term Securities | $ | 1,714,474 | — | — | 1,714,474 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,714,474$ | 280,935,626 | — | $ | 282,650,100 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
1 See above Schedule of Investments for values in each sector. |
| |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative Financial Instruments 2 | ||||||||||||||||
Assets: | ||||||||||||||||
Interest rate contracts | $ | 12,698 | — | — | $ | 12,698 | ||||||||||
Liabilities: | ||||||||||||||||
Interest rate contracts | (53,941 | ) | — | — | (53,941 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (41,243 | ) | — | — | $ | (41,243 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
2 Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| |||||||||||||||
| The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of July 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows: | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash | $ | 56,238 | — | — | $ | 56,238 | ||||||||||
Cash pledged for financial futures contracts | 175,000 | — | — | 175,000 | ||||||||||||
Liabilities: | ||||||||||||||||
TOB trust certificates | — | $ | (37,066,212 | ) | — | (37,066,212 | ) | |||||||||
VRDP Shares | — | (66,300,000 | ) | — | (66,300,000 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 231,238 | $ | (103,366,212 | ) | $ | — | $ | (103,134,974 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
There were no transfers between levels during the year ended July 31, 2014.
See Notes to Financial Statements.
| ANNUAL REPORT | JULY 31, 2014 | 43 |
| Statements of Assets and Liabilities |
| July 31, 2014 | BlackRock Quality Fund, Inc. | BlackRock Fund, Inc. | BlackRock MuniYield Investment Quality Fund (MFT) | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) | BlackRock New Jersey Fund, Inc. | BlackRock MuniYield Pennsylvania Quality Fund (MPA) | ||||||||||||||||||
| Assets | ||||||||||||||||||||||||
Investments at value — unaffiliated1 | $ | 969,586,764 | $ | 535,000,926 | $ | 198,277,903 | $ | 438,299,660 | $ | 217,628,652 | $ | 280,935,626 | ||||||||||||
Investments at value — affiliated2 | 2,207,320 | 4,710,150 | 2,565,273 | 3,889,640 | 2,535,160 | 1,714,474 | ||||||||||||||||||
Cash | — | — | — | — | — | 56,238 | ||||||||||||||||||
Cash pledged for financial futures contracts | 562,000 | 280,000 | 108,000 | 210,000 | 158,000 | 175,000 | ||||||||||||||||||
Interest receivable | 13,573,992 | 4,391,626 | 2,183,798 | 5,137,891 | 1,596,070 | 2,770,257 | ||||||||||||||||||
Investments sold receivable | 15,911,035 | — | 15,369 | — | — | — | ||||||||||||||||||
Variation margin receivable on financial futures contracts | 19,264 | 9,608 | 3,703 | 6,562 | 3,984 | 6,656 | ||||||||||||||||||
Deferred offering costs | 72,363 | 328,428 | 19,490 | 256,667 | 220,881 | 200,136 | ||||||||||||||||||
Prepaid expenses | 34,892 | 27,319 | 25,125 | 27,100 | 24,841 | 25,805 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total assets | 1,001,967,630 | 544,748,057 | 203,198,661 | 447,827,520 | 222,167,588 | 285,884,192 | ||||||||||||||||||
|
| |||||||||||||||||||||||
| Accrued Liabilities | ||||||||||||||||||||||||
Income dividends payable — Common Shares | 2,931,678 | 1,576,638 | 601,596 | 1,313,921 | 658,239 | 851,328 | ||||||||||||||||||
Investments purchased payable | 7,041,758 | — | — | — | — | — | ||||||||||||||||||
Investment advisory fees payable | 464,120 | 239,816 | 85,740 | 189,037 | 93,545 | 120,716 | ||||||||||||||||||
Officer’s and Directors’ fees payable | 244,501 | 4,396 | 1,652 | 3,644 | 1,808 | 2,426 | ||||||||||||||||||
Interest expense and fees payable | 29,986 | 6,382 | 5,208 | 5,163 | 3,159 | 6,702 | ||||||||||||||||||
Other accrued expenses payable | 147,462 | 96,769 | 73,770 | 85,469 | 75,899 | 78,192 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total accrued liabilities | 10,859,505 | 1,924,001 | 767,966 | 1,597,234 | 832,650 | 1,059,364 | ||||||||||||||||||
|
| |||||||||||||||||||||||
| Other Liabilities | ||||||||||||||||||||||||
TOB trust certificates | 88,271,444 | 34,699,311 | 20,283,757 | 23,487,000 | 18,044,269 | 37,066,212 | ||||||||||||||||||
VRDP Shares, at liquidation value of $100,000 per share3,4 | — | 172,700,000 | — | 144,600,000 | 64,400,000 | 66,300,000 | ||||||||||||||||||
VMTP Shares, at liquidation value of $100,000 per share3,4 | 254,000,000 | — | 56,500,000 | — | — | — | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total other liabilities | 342,271,444 | 207,399,311 | 76,783,757 | 168,087,000 | 82,444,269 | 103,366,212 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total liabilities | 353,130,949 | 209,323,312 | 77,551,723 | 169,684,234 | 83,276,919 | 104,425,576 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net Assets Applicable to Common Shareholders | $ | 648,836,681 | $ | 335,424,745 | $ | 125,646,938 | $ | 278,143,286 | $ | 138,890,669 | $ | 181,458,616 | ||||||||||||
|
| |||||||||||||||||||||||
| Net Assets Applicable to Common Shareholders Consist of | ||||||||||||||||||||||||
Paid-in capital5,6,7 | $ | 586,006,297 | $ | 299,214,869 | $ | 118,012,879 | $ | 261,336,487 | $ | 125,356,076 | $ | 170,185,735 | ||||||||||||
Undistributed net investment income | 7,238,325 | 4,839,680 | 1,975,590 | 2,374,959 | 2,375,083 | | 1,741,993 | | ||||||||||||||||
Accumulated net realized loss | (13,527,213 | ) | (5,069,979 | ) | (11,763,890 | ) | (10,871,747 | ) | (3,023,958 | ) | (5,746,098 | ) | ||||||||||||
Net unrealized appreciation/depreciation | 69,119,272 | 36,440,175 | 17,422,359 | 25,303,587 | 14,183,468 | 15,276,986 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net Assets Applicable to Common Shareholders | $ | 648,836,681 | $ | 335,424,745 | $ | 125,646,938 | $ | 278,143,286 | $ | 138,890,669 | $ | 181,458,616 | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value per Common Share | $ | 15.82 | $ | 15.74 | $ | 14.83 | $ | 15.24 | $ | 15.61 | $ | 15.77 | ||||||||||||
|
| |||||||||||||||||||||||
1 Investments at cost — unaffiliated | $ | 900,566,455 | $ | 498,648,550 | $ | 180,889,379 | $ | 413,056,033 | $ | 203,481,588 | $ | 265,617,397 | ||||||||||||
2 Investments at cost — affiliated | $ | 2,207,320 | $ | 4,710,150 | $ | 2,565,273 | $ | 3,889,640 | $ | 2,535,160 | $ | 1,714,474 | ||||||||||||
3 Preferred Shares outstanding: | ||||||||||||||||||||||||
Par value $0.05 per share | — | — | 565 | — | — | 663 | ||||||||||||||||||
Par value $0.10 per share | 2,540 | 1,727 | — | 1,446 | 644 | — | ||||||||||||||||||
4 Preferred Shares authorized | 18,140 | 9,847 | 1,000,565 | 8,046 | 3,584 | 1,000,663 | ||||||||||||||||||
5 Common Shares outstanding | 41,002,483 | 21,305,921 | 8,473,184 | 18,248,909 | 8,895,127 | 11,504,433 | ||||||||||||||||||
6 Par value per Common Share | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | ||||||||||||
7 Common Shares authorized | 200 million | 200 million | unlimited | 200 million | 200 million | unlimited | ||||||||||||||||||
| See Notes to Financial Statements. | ||||||
| 44 | ANNUAL REPORT | JULY 31, 2014 | ||||
| Statements of Operations |
| Year Ended July 31, 2014 | BlackRock Quality Fund, (MUC) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) | BlackRock MuniYield Investment Quality Fund (MFT) | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) | BlackRock New Jersey | BlackRock MuniYield Pennsylvania Quality Fund (MPA) | ||||||||||||||||||
| Investment Income | ||||||||||||||||||||||||
Interest | $ | 43,002,249 | $ | 23,416,752 | $ | 9,173,892 | $ | 19,701,379 | $ | 9,759,312 | $ | 12,553,244 | ||||||||||||
Income — affiliated | 206 | 2 | 683 | 2 | 7 | — | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total income | 43,002,455 | 23,416,754 | 9,174,575 | 19,701,381 | 9,759,319 | 12,553,244 | ||||||||||||||||||
|
| |||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||
Investment advisory | 5,561,196 | 2,895,790 | 984,600 | 2,164,356 | 1,069,246 | 1,392,968 | ||||||||||||||||||
Liquidity fees | — | 816,395 | — | — | 304,435 | — | ||||||||||||||||||
Accounting services | 127,235 | 78,342 | 34,517 | 63,666 | 36,811 | 45,347 | ||||||||||||||||||
Professional | 107,943 | 87,761 | 52,821 | 66,843 | 60,973 | 57,556 | ||||||||||||||||||
Officer and Directors | 81,591 | 30,781 | 11,069 | 25,297 | 12,383 | 16,355 | ||||||||||||||||||
Custodian | 42,695 | 27,314 | 13,278 | 23,869 | 12,929 | 16,201 | ||||||||||||||||||
Transfer agent | 40,181 | 31,622 | 22,761 | 31,458 | 23,071 | 28,829 | ||||||||||||||||||
Printing | 15,773 | 11,421 | 7,920 | 10,467 | 8,134 | 8,638 | ||||||||||||||||||
Registration | 13,720 | 8,967 | 8,978 | 8,962 | 9,054 | 8,966 | ||||||||||||||||||
Remarketing fees on Preferred Shares | — | 127,562 | — | — | 47,568 | — | ||||||||||||||||||
Miscellaneous | 86,523 | 65,238 | 59,339 | 59,374 | 61,956 | 59,666 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total expenses excluding interest expense, fees and amortization of offering costs | 6,076,857 | 4,181,193 | 1,195,283 | 2,454,292 | 1,646,560 | 1,634,526 | ||||||||||||||||||
Interest expense, fees and amortization of offering costs1 | 3,611,786 | 1,035,187 | 794,875 | 1,606,798 | 427,185 | 927,307 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total expenses | 9,688,643 | 5,216,380 | 1,990,158 | 4,061,090 | 2,073,745 | 2,561,833 | ||||||||||||||||||
Less fees waived by Manager | (333,001 | ) | (204,612 | ) | (932 | ) | (106 | ) | (2,408 | ) | (106 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Total expenses after fees waived | 9,355,642 | 5,011,768 | 1,989,226 | 4,060,984 | 2,071,337 | 2,561,727 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net investment income | 33,646,813 | 18,404,986 | 7,185,349 | 15,640,397 | 7,687,982 | 9,991,517 | ||||||||||||||||||
|
| |||||||||||||||||||||||
| Realized and Unrealized Gain (Loss) | ||||||||||||||||||||||||
| Net realized loss from: | ||||||||||||||||||||||||
Investments | (4,185,803 | ) | (3,483,900 | ) | (4,220,643 | ) | (5,935,201 | ) | (1,698,932 | ) | (1,581,394 | ) | ||||||||||||
Financial futures contracts | (1,028,070 | ) | (515,507 | ) | (173,905 | ) | (311,437 | ) | (215,085 | ) | (702,026 | ) | ||||||||||||
|
| |||||||||||||||||||||||
| (5,213,873 | ) | (3,999,407 | ) | (4,394,548 | ) | (6,246,638 | ) | (1,914,017 | ) | (2,283,420 | ) | |||||||||||||
|
| |||||||||||||||||||||||
| Net change in unrealized appreciation/depreciation on: | ||||||||||||||||||||||||
Investments | 60,215,989 | 30,793,386 | 14,754,036 | 26,719,701 | 13,935,458 | 16,150,572 | ||||||||||||||||||
Financial futures contracts | 98,963 | 87,799 | 33,835 | 59,960 | 36,404 | (41,243 | ) | |||||||||||||||||
|
| |||||||||||||||||||||||
| 60,314,952 | 30,881,185 | 14,787,871 | 26,779,661 | 13,971,862 | 16,109,329 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net realized and unrealized gain | 55,101,079 | 26,881,778 | 10,393,323 | 20,533,023 | 12,057,845 | 13,825,909 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations | $ | 88,747,892 | $ | 45,286,764 | $ | 17,578,672 | $ | 36,173,420 | $ | 19,745,827 | $ | 23,817,426 | ||||||||||||
|
| |||||||||||||||||||||||
1 Related to TOBs, VRDP Shares and/or VMTP Shares. |
| |||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||
| ANNUAL REPORT | JULY 31, 2014 | 45 | ||||
| Statements of Changes in Net Assets |
| BlackRock MuniHoldings California Quality Fund, Inc. (MUC) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) | |||||||||||||||||
| Year Ended July 31, | Year Ended July 31, | |||||||||||||||||
| Increase (Decrease) in Net Assets Applicable to Common Shareholders: | 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Operations | ||||||||||||||||||
Net investment income | $ | 33,646,813 | $ | 35,078,128 | $ | 18,404,986 | $ | 18,297,716 | ||||||||||
Net realized gain (loss) | (5,213,873 | ) | 4,123,267 | (3,999,407 | ) | 640,240 | ||||||||||||
Net change in unrealized appreciation/depreciation | 60,314,952 | (78,639,908 | ) | 30,881,185 | (43,197,563 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations | 88,747,892 | (39,438,513 | ) | 45,286,764 | (24,259,607 | ) | ||||||||||||
|
|
|
| |||||||||||||||
| Dividends and Distributions to Common Shareholders From1 | ||||||||||||||||||
| Net investment income | (35,180,130 | ) | (38,222,539 | ) | (18,919,661 | ) | (18,910,036 | ) | ||||||||||
Net realized gain | — | — | (107,719 | ) | — | |||||||||||||
|
|
|
| |||||||||||||||
Decrease in net assets resulting from dividends and distributions to Common Shareholders | (35,180,130 | ) | (38,222,539 | ) | (19,027,380 | ) | (18,910,036 | ) | ||||||||||
|
|
|
| |||||||||||||||
| Capital Share Transactions | ||||||||||||||||||
Reinvestment of common dividends | — | 1,852,754 | — | 497,797 | ||||||||||||||
|
|
|
| |||||||||||||||
| Net Assets Applicable to Common Shareholders | ||||||||||||||||||
Total increase (decrease) in net assets applicable to Common Shareholders | 53,567,762 | (75,808,298 | ) | 26,259,384 | (42,671,846 | ) | ||||||||||||
Beginning of year | 595,268,919 | 671,077,217 | 309,165,361 | 351,837,207 | ||||||||||||||
|
|
|
| |||||||||||||||
End of year | $ | 648,836,681 | $ | 595,268,919 | $ | 335,424,745 | $ | 309,165,361 | ||||||||||
|
|
|
| |||||||||||||||
Undistributed net investment income, end of year | $ | 7,238,325 | $ | 8,922,327 | $ | 4,839,680 | $ | 5,341,924 | ||||||||||
|
|
|
| |||||||||||||||
1 Dividends and distributions for annual periods determined in accordance with federal income tax regulations. |
| |||||||||||||||||
| See Notes to Financial Statements. | ||||||
| 46 | ANNUAL REPORT | JULY 31, 2014 | ||||
| Statements of Changes in Net Assets |
| BlackRock MuniYield Investment Quality Fund (MFT) | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) | |||||||||||||||||
| Year Ended July 31, | Year Ended July 31, | |||||||||||||||||
| Increase (Decrease) in Net Assets Applicable to Common Shareholders: | 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Operations | ||||||||||||||||||
Net investment income | $ | 7,185,349 | $ | 7,093,951 | $ | 15,640,397 | $ | 16,382,871 | ||||||||||
Net realized gain (loss) | (4,394,548 | ) | 563,514 | (6,246,638 | ) | 630,209 | ||||||||||||
Net change in unrealized appreciation/depreciation | 14,787,871 | (18,405,631 | ) | 26,779,661 | (37,218,376 | ) | ||||||||||||
|
|
|
| |||||||||||||||
Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations | 17,578,672 | (10,748,166 | ) | 36,173,420 | (20,205,296 | ) | ||||||||||||
|
|
|
| |||||||||||||||
| Dividends to Common Shareholders From1 | ||||||||||||||||||
Net investment income | (7,219,153 | ) | (7,217,546 | ) | (16,371,077 | ) | (16,743,706 | ) | ||||||||||
|
|
|
| |||||||||||||||
| Capital Share Transactions | ||||||||||||||||||
Reinvestment of common dividends | — | 93,174 | — | 485,894 | ||||||||||||||
|
|
|
| |||||||||||||||
| Net Assets Applicable to Common Shareholders | ||||||||||||||||||
Total increase (decrease) in net assets applicable to Common Shareholders | 10,359,519 | (17,872,538 | ) | 19,802,343 | (36,463,108 | ) | ||||||||||||
Beginning of year | 115,287,419 | 133,159,957 | 258,340,943 | 294,804,051 | ||||||||||||||
|
|
|
| |||||||||||||||
End of year | $ | 125,646,938 | $ | 115,287,419 | $ | 278,143,286 | $ | 258,340,943 | ||||||||||
|
|
|
| |||||||||||||||
Undistributed net investment income, end of year | $ | 1,975,590 | $ | 1,964,734 | $ | 2,374,959 | $ | 3,122,486 | ||||||||||
|
|
|
| |||||||||||||||
1 Dividends for annual periods determined in accordance with federal income tax regulations. | ||||||||||||||||||
| See Notes to Financial Statements. | ||||||
| ANNUAL REPORT | JULY 31, 2014 | 47 | ||||
| Statements of Changes in Net Assets |
| BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI) | BlackRock MuniYield Pennsylvania Quality Fund (MPA) | |||||||||||||||||
| Year Ended July 31, | Year Ended July 31, | |||||||||||||||||
| Increase (Decrease) in Net Assets Applicable to Common Shareholders: | 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Operations | ||||||||||||||||||
Net investment income | $ | 7,687,982 | $ | 7,643,570 | $ | 9,991,517 | $ | 10,296,569 | ||||||||||
Net realized loss | (1,914,017 | ) | (311,747 | ) | (2,283,420 | ) | 141,354 | |||||||||||
Net change in unrealized appreciation/depreciation | 13,971,862 | (17,628,493 | ) | 16,109,329 | (22,994,319 | ) | ||||||||||||
Distributions to VRDP Shareholders from net realized gain | — | (5,857 | ) | — | — | |||||||||||||
|
|
|
| |||||||||||||||
Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations | 19,745,827 | (10,302,527 | ) | 23,817,426 | (12,556,396 | ) | ||||||||||||
|
|
|
| |||||||||||||||
| Dividends and Distributions to Common Shareholders From1 | ||||||||||||||||||
Net investment income | (7,898,872 | ) | (7,777,215 | ) | (10,215,936 | ) | (10,214,489 | ) | ||||||||||
Net realized gain | (38,170 | ) | (254,189 | ) | — | — | ||||||||||||
|
|
|
| |||||||||||||||
Decrease in net assets resulting from dividends and distributions to Common Shareholders | (7,937,042 | ) | (8,031,404 | ) | (10,215,936 | ) | (10,214,489 | ) | ||||||||||
|
|
|
| |||||||||||||||
| Capital Share Transactions | ||||||||||||||||||
Reinvestment of common dividends | — | 473,838 | — | 65,526 | ||||||||||||||
|
|
|
| |||||||||||||||
| Net Assets Applicable to Common Shareholders | ||||||||||||||||||
Total increase (decrease) in net assets applicable to Common Shareholders | 11,808,785 | (17,860,093 | ) | 13,601,490 | (22,705,359 | ) | ||||||||||||
Beginning of year | 127,081,884 | 144,941,977 | 167,857,126 | 190,562,485 | ||||||||||||||
|
|
|
| |||||||||||||||
End of year | $ | 138,890,669 | $ | 127,081,884 | $ | 181,458,616 | $ | 167,857,126 | ||||||||||
|
|
|
| |||||||||||||||
Undistributed net investment income, end of year | $ | 2,375,083 | $ | 2,577,866 | $ | 1,741,993 | $ | 2,030,860 | ||||||||||
|
|
|
| |||||||||||||||
1 Dividends and distributions for annual periods determined in accordance with federal income tax regulations. |
| |||||||||||||||||
| See Notes to Financial Statements. | ||||||
| 48 | ANNUAL REPORT | JULY 31, 2014 | ||||
| Statements of Cash Flows |
| Year Ended July 31, 2014 | BlackRock Fund, Inc. | BlackRock Fund, Inc. | BlackRock MuniYield Investment Quality Fund (MFT) | BlackRock Fund, Inc. | BlackRock New Jersey Quality Fund, Inc. | BlackRock MuniYield Pennsylvania Quality Fund (MPA) | ||||||||||||||||||
| Cash Provided by Operating Activities | ||||||||||||||||||||||||
Net increase in net assets resulting from operations | $ | 88,747,892 | $ | 45,286,764 | $ | 17,578,672 | $ | 36,173,420 | $ | 19,745,827 | $ | 23,817,426 | ||||||||||||
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: | ||||||||||||||||||||||||
(Increase) decrease in interest receivable | 713,493 | 382,322 | 69,267 | (381,497 | ) | 242,149 | 377,705 | |||||||||||||||||
Increase in variation margin receivable on financial futures contracts | (19,264 | ) | (9,608 | ) | (3,703 | ) | (6,562 | ) | (3,984 | ) | (6,656 | ) | ||||||||||||
(Increase) decrease in prepaid expenses | 30,450 | (21,719 | ) | (22,929 | ) | (22,371 | ) | (22,604 | ) | (22,719 | ) | |||||||||||||
Increase in cash pledged for financial futures contracts | (562,000 | ) | (280,000 | ) | (108,000 | ) | (210,000 | ) | (158,000 | ) | (175,000 | ) | ||||||||||||
Increase (decrease) in investment advisory fees payable | (24,683 | ) | 14,669 | (2,490 | ) | 560 | 2,867 | (2,711 | ) | |||||||||||||||
Decrease in interest expense and fees payable | (54,562 | ) | (7,797 | ) | (7,154 | ) | (4,578 | ) | (4,092 | ) | (11,909 | ) | ||||||||||||
Increase (decrease) in other accrued expenses payable | (21,581 | ) | (139,583 | ) | 11,709 | (24,973 | ) | (32,359 | ) | 7,147 | ||||||||||||||
Increase (decrease) in Officer’s and Directors’ fees payable | 48,447 | 243 | (343 | ) | 61 | (187 | ) | (183 | ) | |||||||||||||||
Net realized loss on investments | 4,185,803 | 3,483,900 | 4,220,643 | 5,935,201 | 1,698,932 | 1,581,394 | ||||||||||||||||||
Net unrealized gain on investments | (60,215,989 | ) | (30,793,386 | ) | (14,754,036 | ) | (26,719,701 | ) | (13,935,458 | ) | (16,150,572 | ) | ||||||||||||
Amortization of premium and accretion of discount on investments | 5,030,074 | (226,909 | ) | 635,505 | 1,035,659 | (407,456 | ) | 385,407 | ||||||||||||||||
Proceeds from sales of long-term investments | 332,365,869 | 84,625,364 | 70,450,844 | 83,303,472 | 38,486,565 | 58,717,883 | ||||||||||||||||||
Purchases of long-term investments | (249,389,378 | ) | (82,216,323 | ) | (66,568,867 | ) | (67,826,440 | ) | (36,406,441 | ) | (43,785,766 | ) | ||||||||||||
Net proceeds from sales (purchases) of short-term securities | (1,705,357 | ) | 2,460,620 | 7,901,962 | (3,409,973 | ) | 1,229,532 | 1,483,690 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by operating activities | 119,129,214 | 22,558,557 | 19,401,080 | 27,842,278 | 10,435,291 | 26,215,136 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Cash Used for Financing Activities | ||||||||||||||||||||||||
Proceeds from TOB trust certificates | — | — | — | 95,000 | — | 4,701,559 | ||||||||||||||||||
Repayments of TOB trust certificates | (84,044,488 | ) | (3,531,804 | ) | (12,228,010 | ) | (11,483,787 | ) | (2,500,724 | ) | (20,645,249 | ) | ||||||||||||
Cash dividends paid to Common Shareholders | (35,180,130 | ) | (19,027,380 | ) | (7,219,153 | ) | (16,453,198 | ) | (7,937,042 | ) | (10,215,936 | ) | ||||||||||||
Decrease in bank overdraft | (12,651 | ) | (8,444 | ) | (4,529 | ) | (7,264 | ) | (4,566 | ) | (5,337 | ) | ||||||||||||
Amortization of deferred offering costs | 108,055 | 9,071 | 50,612 | 6,971 | 7,041 | 6,065 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash used for financing activities | (119,129,214 | ) | (22,558,557 | ) | (19,401,080 | ) | (27,842,278 | ) | (10,435,291 | ) | (26,158,898 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Cash | ||||||||||||||||||||||||
Net increase in cash | — | — | — | — | — | 56,238 | ||||||||||||||||||
Cash at beginning of year | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash at end of year | — | — | — | — | — | $ | 56,238 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||||||||||||||
Cash paid during the year for interest and fees | $ | 3,558,293 | $ | 1,033,913 | $ | 751,417 | $ | 1,604,405 | $ | 424,236 | $ | 933,151 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| See Notes to Financial Statements. | ||||||
| ANNUAL REPORT | JULY 31, 2014 | 49 | ||||
| Financial Highlights | BlackRock MuniHoldings California Quality Fund, Inc. (MUC) |
| Year Ended July 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.52 | $ | 16.41 | $ | 14.27 | $ | 14.55 | $ | 13.21 | ||||||||||
|
| |||||||||||||||||||
Net investment income1 | 0.82 | 0.86 | 0.95 | 0.97 | 0.92 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.34 | (1.82 | ) | 2.13 | (0.33 | ) | 1.24 | |||||||||||||
Dividends to AMPS Shareholders from net investment income | — | — | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) from investment operations | 2.16 | (0.96 | ) | 3.07 | 0.62 | 2.13 | ||||||||||||||
|
| |||||||||||||||||||
Dividends to Common Shareholders from net investment income2 | (0.86 | ) | (0.93 | ) | (0.93 | ) | (0.90 | ) | (0.79 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 15.82 | $ | 14.52 | $ | 16.41 | $ | 14.27 | $ | 14.55 | ||||||||||
|
| |||||||||||||||||||
Market price, end of year | $ | 14.04 | $ | 13.31 | $ | 16.36 | $ | 13.15 | $ | 14.04 | ||||||||||
|
| |||||||||||||||||||
| Total Return Applicable to Common Shareholders3 | ||||||||||||||||||||
Based on net asset value | 15.94% | (6.16)% | 22.26% | 4.88% | 16.96% | |||||||||||||||
|
| |||||||||||||||||||
Based on market price | 12.25% | (13.71)% | 32.27% | 0.16% | 22.40% | |||||||||||||||
|
| |||||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||||||||||||||
Total expenses | 1.57% | 1.64% | 1.48% | 4 | 1.38% | 4 | 1.23% | 4 | ||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived | 1.51% | 1.56% | 1.39% | 4 | 1.25% | 4 | 1.12% | 4 | ||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived and excluding interest expense, fees, and amortization of offering costs5 | 0.93% | 0.92% | 1.01% | 4,6 | 1.02% | 4 | 0.98% | 4 | ||||||||||||
|
| |||||||||||||||||||
Net investment income | 5.44% | 5.27% | 6.14% | 4 | 6.93% | 4 | 6.52% | 4 | ||||||||||||
|
| |||||||||||||||||||
Dividends to AMPS shareholders | — | — | 0.06% | 0.16% | 0.18% | |||||||||||||||
|
| |||||||||||||||||||
Net investment income to Common Shareholders | 5.44% | 5.27% | 6.08% | 6.77% | 6.34% | |||||||||||||||
|
| |||||||||||||||||||
| Supplemental Data | ||||||||||||||||||||
Net assets applicable to Common Shareholders, end of year (000) | $ | 648,837 | $ | 595,269 | $ | 671,077 | $ | 583,400 | $ | 594,734 | ||||||||||
|
| |||||||||||||||||||
AMPS outstanding at $25,000 liquidation preference, end of year (000) | — | — | — | $ | 254,000 | $ | 254,000 | |||||||||||||
|
| |||||||||||||||||||
VMTP Shares outstanding at $100,000 liquidation value, end of year (000) | $ | 254,000 | $ | 254,000 | $ | 254,000 | — | — | ||||||||||||
|
| |||||||||||||||||||
Portfolio turnover rate | 25% | 34% | 46% | 24% | 25% | |||||||||||||||
|
| |||||||||||||||||||
Asset coverage per AMPS at $25,000 liquidation preference, end of year (000) | — | — | — | $ | 82,421 | $ | 83,538 | |||||||||||||
|
| |||||||||||||||||||
Asset coverage per VMTP Shares at $100,000 liquidation value, end of year | $ | 355,448 | $ | 334,358 | $ | 364,204 | — | — | ||||||||||||
|
| |||||||||||||||||||
| 1 | Based on average Common Shares outstanding. |
| 2 | Dividends for annual periods determined in accordance with federal income tax regulations. |
| 3 | Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions. |
| 4 | Does not reflect the effect of dividends to AMPS shareholders. |
| 5 | Interest expense, fees and amortization of offering costs related to TOBs and/or VMTP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VMTP Shares, respectively. |
| 6 | For the year ended July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.97%. |
| See Notes to Financial Statements. | ||||||
| 50 | ANNUAL REPORT | JULY 31, 2014 | ||||
| Financial Highlights | BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) |
| Year Ended July 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.51 | $ | 16.54 | $ | 14.73 | $ | 15.19 | $ | 14.40 | ||||||||||
|
| |||||||||||||||||||
Net investment income1 | 0.86 | 0.86 | 0.83 | 0.93 | 1.00 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.27 | (2.00 | ) | 1.87 | (0.47 | ) | 0.67 | |||||||||||||
| Dividends and distributions to AMPS shareholders from: | ||||||||||||||||||||
Net investment income | — | — | — | (0.03 | ) | (0.03 | ) | |||||||||||||
Net realized gain | — | — | — | — | (0.00 | )2 | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) from investment operations | 2.13 | (1.14 | ) | 2.70 | 0.43 | 1.64 | ||||||||||||||
|
| |||||||||||||||||||
| Dividends and distributions to Common Shareholders from:3 | ||||||||||||||||||||
Net investment income | (0.89 | ) | (0.89 | ) | (0.89 | ) | (0.89 | ) | (0.84 | ) | ||||||||||
Net realized gain | (0.01 | ) | — | — | — | (0.01 | ) | |||||||||||||
|
| |||||||||||||||||||
Total dividends and distributions to Common Shareholders | (0.90 | ) | (0.89 | ) | (0.89 | ) | (0.89 | ) | (0.85 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 15.74 | $ | 14.51 | $ | 16.54 | $ | 14.73 | $ | 15.19 | ||||||||||
|
| |||||||||||||||||||
Market price, end of year | $ | 14.11 | $ | 13.30 | $ | 16.05 | $ | 13.74 | $ | 15.05 | ||||||||||
|
| |||||||||||||||||||
| Total Return Applicable to Common Shareholders4 | ||||||||||||||||||||
Based on net asset value | 15.79% | (7.19)% | 18.96% | 3.28% | 11.95% | |||||||||||||||
|
| |||||||||||||||||||
Based on market price | 13.24% | (12.33)% | 23.76% | (2.77 | )% | 19.37% | ||||||||||||||
|
| |||||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||||||||||||||
Total expenses | 1.64% | 1.61% | 1.81% | 1.21% | 5 | 1.13% | 5 | |||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived | 1.57% | 1.58% | 1.78% | 1.17% | 5 | 1.08% | 5 | |||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs6 | 1.25% | 7 | 1.33% | 7 | 1.43% | 7 | 1.11% | 5 | 1.05% | 5 | ||||||||||
|
| |||||||||||||||||||
Net investment income | 5.78% | 5.28% | 5.28% | 6.36% | 5 | 6.71% | 5 | |||||||||||||
|
| |||||||||||||||||||
Dividends to AMPS shareholders | — | — | — | 0.21% | 0.22% | |||||||||||||||
|
| |||||||||||||||||||
Net investment income to Common Shareholders | 5.78% | 5.28% | 5.28% | 6.15% | 6.49% | |||||||||||||||
|
| |||||||||||||||||||
| Supplemental Data | ||||||||||||||||||||
Net assets applicable to Common Shareholders, end of year (000) | $ | 335,425 | $ | 309,165 | $ | 351,837 | $ | 313,084 | $ | 322,681 | ||||||||||
|
| |||||||||||||||||||
AMPS outstanding at $25,000 liquidation preference, end of year (000) | — | — | — | — | $ | 172,700 | ||||||||||||||
|
| |||||||||||||||||||
VRDP Shares outstanding at $100,000 liquidation value, end of year (000) | $ | 172,700 | $ | 172,700 | $ | 172,700 | $ | 172,700 | — | |||||||||||
|
| |||||||||||||||||||
Portfolio turnover rate | 16% | 10% | 17% | 12% | 13% | |||||||||||||||
|
| |||||||||||||||||||
Asset coverage per AMPS at $25,000 liquidation preference, end of year | — | — | — | — | $ | 71,713 | ||||||||||||||
|
| |||||||||||||||||||
Asset coverage per VRDP Shares at $100,000 liquidation value, end of year | $ | 294,224 | $ | 279,019 | $ | 303,727 | $ | 281,288 | — | |||||||||||
|
| |||||||||||||||||||
| 1 | Based on average Common Shares outstanding. |
| 2 | Amount is greater than $(0.005) per share. |
| 3 | Dividends and distributions for annual periods determined in accordance with federal income tax regulations. |
| 4 | Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions. |
| 5 | Does not reflect the effect of dividends to AMPS shareholders. |
| 6 | Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively. |
| 7 | For the years ended July 31, 2014, July 31, 2013 and July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.95%, 0.93% and 1.01%, respectively. |
| See Notes to Financial Statements. | ||||||
| ANNUAL REPORT | JULY 31, 2014 | 51 | ||||
| Financial Highlights | BlackRock MuniYield Investment Quality Fund (MFT) |
| Year Ended July 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||
Net asset value, beginning of year | $ | 13.61 | $ | 15.73 | $ | 13.40 | $ | 13.87 | $ | 12.83 | ||||||||||
|
| |||||||||||||||||||
Net investment income1 | 0.85 | 0.84 | 0.87 | 0.91 | 0.92 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.22 | (2.11 | ) | 2.32 | (0.49 | ) | 0.98 | |||||||||||||
Dividends to AMPS shareholders from net investment income | — | — | (0.01 | ) | (0.04 | ) | (0.04 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) from investment operations | 2.07 | (1.27 | ) | 3.18 | 0.38 | 1.86 | ||||||||||||||
|
| |||||||||||||||||||
Dividends to Common Shareholders from net investment income2 | (0.85 | ) | (0.85 | ) | (0.85 | ) | (0.85 | ) | (0.82 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 14.83 | $ | 13.61 | $ | 15.73 | $ | 13.40 | $ | 13.87 | ||||||||||
|
| |||||||||||||||||||
Market price, end of year | $ | 13.26 | $ | 12.20 | $ | 15.47 | $ | 12.39 | $ | 14.28 | ||||||||||
|
| |||||||||||||||||||
| Total Return Applicable to Common Shareholders3 | ||||||||||||||||||||
Based on net asset value | 16.40% | (8.41)% | 24.51% | 3.20% | 14.99% | |||||||||||||||
|
| |||||||||||||||||||
Based on market price | 16.10% | (16.52)% | 32.43% | (7.32)% | 28.72% | |||||||||||||||
|
| |||||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||||||||||||||
Total expenses | 1.67% | 1.72% | 1.58% | 4 | 1.23% | 4 | 1.19% | 4 | ||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived | 1.67% | 1.72% | 1.58% | 4 | 1.23% | 4 | 1.19% | 4 | ||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs5 | 1.00% | 1.00% | 1.08% | 4,6 | 1.11% | 4 | 1.09% | 4 | ||||||||||||
|
| |||||||||||||||||||
Net investment income | 6.04% | 5.36% | 5.94% | 4 | 6.91% | 4 | 6.80% | 4 | ||||||||||||
|
| |||||||||||||||||||
Dividends to AMPS shareholders | — | — | 0.08% | 0.28% | 0.29% | |||||||||||||||
|
| |||||||||||||||||||
Net investment income to Common Shareholders | 6.04% | 5.36% | 5.86% | 6.63% | 6.51% | |||||||||||||||
|
| |||||||||||||||||||
| Supplemental Data | ||||||||||||||||||||
Net assets applicable to Common Shareholders, end of year (000) | $ | 125,647 | $ | 115,287 | $ | 133,160 | $ | 113,423 | $ | 117,341 | ||||||||||
|
| |||||||||||||||||||
AMPS outstanding at $25,000 liquidation preference, end of year (000) | — | — | — | $ | 56,525 | $ | 56,525 | |||||||||||||
|
| |||||||||||||||||||
VMTP Shares outstanding at $100,000 liquidation value, end of year (000) | $ | 56,500 | $ | 56,500 | $ | 56,500 | — | — | ||||||||||||
|
| |||||||||||||||||||
Portfolio turnover rate | 32% | 51% | 43% | 29% | 38% | |||||||||||||||
|
| |||||||||||||||||||
Asset coverage per AMPS at $25,000 liquidation preference, end of year (000) | — | — | — | $ | 75,165 | $ | 76,900 | |||||||||||||
|
| |||||||||||||||||||
Asset coverage per VMTP Shares at $100,000 liquidation value, end of year | $ | 322,384 | $ | 304,049 | $ | 335,681 | — | — | ||||||||||||
|
| |||||||||||||||||||
| 1 | Based on average Common Shares outstanding. |
| 2 | Dividends for annual periods determined in accordance with federal income tax regulations. |
| 3 | Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions. |
| 4 | Does not reflect the effect of dividends to AMPS shareholders. |
| 5 | Interest expense, fees and amortization of offering costs related to TOBs and/or VMTP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VMTP Shares, respectively. |
| 6 | For the year ended July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 1.05%. |
| See Notes to Financial Statements. | ||||||
| 52 | ANNUAL REPORT | JULY 31, 2014 | ||||
| Financial Highlights | BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) |
| Year Ended July 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.16 | $ | 16.18 | $ | 14.63 | $ | 14.92 | $ | 13.93 | ||||||||||
|
| |||||||||||||||||||
Net investment income1 | 0.86 | 0.90 | 0.87 | 0.93 | 0.98 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.12 | (2.00 | ) | 1.61 | (0.26 | ) | 0.94 | |||||||||||||
Dividends to AMPS shareholders from net investment income | — | — | — | (0.04 | ) | (0.05 | ) | |||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) from investment operations | 1.98 | (1.10 | ) | 2.48 | 0.63 | 1.87 | ||||||||||||||
|
| |||||||||||||||||||
Dividends to Common Shareholders from net investment income2 | (0.90 | ) | (0.92 | ) | (0.93 | ) | (0.92 | ) | (0.88 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 15.24 | $ | 14.16 | $ | 16.18 | $ | 14.63 | $ | 14.92 | ||||||||||
|
| |||||||||||||||||||
Market price, end of year | $ | 13.47 | $ | 12.57 | $ | 16.05 | $ | 13.39 | $ | 14.55 | ||||||||||
|
| |||||||||||||||||||
| Total Return Applicable to Common Shareholders3 | ||||||||||||||||||||
Based on net asset value | 15.24% | (7.09)% | 17.60% | 4.78% | 14.31% | |||||||||||||||
|
| |||||||||||||||||||
Based on market price | 14.74% | (16.86)% | 27.46% | (1.67)% | 26.76% | |||||||||||||||
|
| |||||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||||||||||||||
Total expenses | 1.54% | 1.50% | 1.72% | 1.37% | 4 | 1.07% | 4 | |||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived | 1.54% | 1.50% | 1.72% | 1.36% | 4 | 1.07% | 4 | |||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs5 | 0.93% | 0.89% | 1.38% | 6 | 1.23% | 4 | 1.03% | 4 | ||||||||||||
|
| |||||||||||||||||||
Net investment income | 5.94% | 5.62% | 5.65% | 6.48% | 4 | 6.72% | 4 | |||||||||||||
|
| |||||||||||||||||||
Dividends to AMPS shareholders | — | — | — | 0.25% | 0.31% | |||||||||||||||
|
| |||||||||||||||||||
Net investment income to Common Shareholders | 5.94% | 5.62% | 5.65% | 6.23% | 6.41% | |||||||||||||||
|
| |||||||||||||||||||
| Supplemental Data | ||||||||||||||||||||
Net assets applicable Common Shareholders, end of year (000) | $ | 278,143 | $ | 258,341 | $ | 294,804 | $ | 266,326 | $ | 271,609 | ||||||||||
|
| |||||||||||||||||||
AMPS outstanding at $25,000 liquidation preference, end of year (000) | — | — | — | — | $ | 144,650 | ||||||||||||||
|
| |||||||||||||||||||
VRDP Shares outstanding at $100,000 liquidation value, end of year (000) | $ | 144,600 | $ | 144,600 | $ | 144,600 | $ | 144,600 | — | |||||||||||
|
| |||||||||||||||||||
Portfolio turnover rate | 16% | 17% | 19% | 16% | 15% | |||||||||||||||
|
| |||||||||||||||||||
Asset coverage per AMPS at $25,000 liquidation preference, end of year | — | — | — | — | $ | 71,945 | ||||||||||||||
|
| |||||||||||||||||||
Asset coverage per VRDP Shares at $100,000 liquidation value, end of year | $ | 292,354 | $ | 278,659 | $ | 303,876 | $ | 284,181 | — | |||||||||||
|
| |||||||||||||||||||
| 1 | Based on average Common Shares outstanding. |
| 2 | Dividends for annual periods determined in accordance with federal income tax regulations. |
| 3 | Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions. |
| 4 | Does not reflect the effect of dividends to AMPS shareholders. |
| 5 | Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively. |
| 6 | For the year ended July 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs, liquidity and remarketing fees was 0.98%. |
| See Notes to Financial Statements. | ||||||
| ANNUAL REPORT | JULY 31, 2014 | 53 | ||||
| Financial Highlights | BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI) |
| Year Ended July 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.29 | $ | 16.35 | $ | 14.53 | $ | 15.00 | $ | 14.07 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income1 | 0.86 | 0.86 | 0.82 | 0.91 | 0.98 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.35 | (2.01 | ) | 1.89 | (0.48 | ) | 0.94 | |||||||||||||
Distributions to VRDP Shareholders from net realized gain | — | (0.00 | )2 | — | — | — | ||||||||||||||
| Dividends and distributions to AMPS shareholders from: | ||||||||||||||||||||
Net investment income | — | — | — | (0.04 | ) | (0.04 | ) | |||||||||||||
Net realized gain | — | — | — | — | (0.01 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net increase (decrease) from investment operations | 2.21 | (1.15 | ) | 2.71 | 0.39 | 1.87 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| Dividends and distributions to Common Shareholders from:3 | ||||||||||||||||||||
Net investment income | (0.89 | ) | (0.88 | ) | (0.89 | ) | (0.86 | ) | (0.84 | ) | ||||||||||
Net realized gain | (0.00 | )2 | (0.03 | ) | — | — | (0.10 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total dividends and distributions to Common Shareholders | (0.89 | ) | (0.91 | ) | (0.89 | ) | (0.86 | ) | (0.94 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net asset value, end of year | $ | 15.61 | $ | 14.29 | $ | 16.35 | $ | 14.53 | $ | 15.00 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Market price, end of year | $ | 14.15 | $ | 13.27 | $ | 16.31 | $ | 13.16 | $ | 14.92 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| Total Return Applicable to Common Shareholders4 | ||||||||||||||||||||
Based on net asset value | 16.64% | (7.41)% | 19.32% | 3.10% | 13.90% | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Based on market price | 13.85% | (13.81)% | 31.42% | (6.12)% | 24.34% | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||||||||||||||
Total expenses | 1.58% | 1.54% | 1.71% | 5 | 1.13% | 5 | 1.06% | 5 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses after fees waived | 1.58% | 1.53% | 1.70% | 5 | 1.12% | 5 | 1.05% | 5 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs6 | 1.25% | 7 | 1.29% | 7 | 1.38% | 5,7 | 1.08% | 5 | 1.02% | 5 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income | 5.86% | 5.34% | 5.31% | 5 | 6.32% | 5 | 6.64% | 5 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Dividends to AMPS shareholders | — | — | — | 0.31% | 0.29% | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net investment income to Common Shareholders | 5.86% | 5.34% | 5.31% | 6.01% | 6.35% | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| Supplemental Data | ||||||||||||||||||||
Net assets applicable to Common Shareholders, end of year (000) | $ | 138,891 | $ | 127,082 | $ | 144,942 | $ | 128,481 | $ | 132,281 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
AMPS outstanding at $25,000 liquidation preference, end of year (000) | — | — | — | — | $ | 64,475 | ||||||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
VRDP Shares outstanding at $100,000 liquidation value, end of year (000) | $ | 64,400 | $ | 64,400 | $ | 64,400 | $ | 64,400 | — | |||||||||||
|
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|
|
|
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|
| |||||||||||
Portfolio turnover rate | 17% | 11% | 21% | 12% | 12% | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Asset coverage per AMPS at $25,000 liquidation preference, end of year | — | — | — | — | $ | 76,294 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Asset coverage per VRDP Shares at $100,000 liquidation value, end of year | $ | 315,669 | $ | 297,332 | $ | 325,065 | $ | 299,505 | — | |||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
| 1 | Based on average Common Shares outstanding. |
| 2 | Amount is greater than $(0.005) per share. |
| 3 | Dividends and distributions for annual periods determined in accordance with federal income tax regulations. |
| 4 | Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions. |
| 5 | Does not reflect the effect of dividends to AMPS shareholders. |
| 6 | Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively. |
| 7 | For the years ended July 31, 2014, July 31, 2013 and July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.98%, 0.93% and 0.99%, respectively. |
| See Notes to Financial Statements. | ||||||
| 54 | ANNUAL REPORT | JULY 31, 2014 | ||||
| Financial Highlights | BlackRock MuniYield Pennsylvania Quality Fund (MPA) |
| Year Ended July 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
| Per Share Operating Performance | ||||||||||||||||||||
Net asset value, beginning of year | $ | 14.59 | $ | 16.57 | $ | 14.97 | $ | 15.38 | $ | 14.28 | ||||||||||
|
| |||||||||||||||||||
Net investment income1 | 0.87 | 0.90 | 0.85 | 0.92 | 0.92 | |||||||||||||||
Net realized and unrealized gain (loss) | 1.20 | (1.99 | ) | 1.66 | (0.38 | ) | 1.02 | |||||||||||||
Dividends to AMPS Shareholders from net investment income | — | — | — | (0.03 | ) | (0.03 | ) | |||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) from investment operations | 2.07 | (1.09 | ) | 2.51 | 0.51 | 1.91 | ||||||||||||||
|
| |||||||||||||||||||
Dividends to Common Shareholders from net investment income2 | (0.89 | ) | (0.89 | ) | (0.91 | ) | (0.92 | ) | (0.81 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of year | $ | 15.77 | $ | 14.59 | $ | 16.57 | $ | 14.97 | $ | 15.38 | ||||||||||
|
| |||||||||||||||||||
Market price, end of year | $ | 13.89 | $ | 13.07 | $ | 15.98 | $ | 13.94 | $ | 15.26 | ||||||||||
|
| |||||||||||||||||||
| Total Return Applicable to Common Shareholders3 | ||||||||||||||||||||
Based on net asset value | 15.39% | (6.78)% | 17.34% | 3.84% | 14.18% | |||||||||||||||
|
| |||||||||||||||||||
Based on market price | 13.45% | (13.42)% | 21.53% | (2.55)% | 25.70% | |||||||||||||||
|
| |||||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders | ||||||||||||||||||||
Total expenses | 1.48% | 1.53% | 1.65% | 1.37% | 4 | 1.15% | 4 | |||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived | 1.48% | 1.53% | 1.65% | 1.36% | 4 | 1.15% | 4 | |||||||||||||
|
| |||||||||||||||||||
Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs5 | 0.95% | 0.94% | 1.28% | 6 | 1.14% | 4 | 1.00% | 4 | ||||||||||||
|
| |||||||||||||||||||
Net investment income | 5.79% | 5.46% | 5.38% | 6.24% | 4 | 6.17% | 4 | |||||||||||||
|
| |||||||||||||||||||
Dividends to AMPS Shareholders | — | — | — | 0.18% | 0.22% | |||||||||||||||
|
| |||||||||||||||||||
Net investment income to Common Shareholders | 5.79% | 5.46% | 5.38% | 6.06% | 5.95% | |||||||||||||||
|
| |||||||||||||||||||
| Supplemental Data | ||||||||||||||||||||
Net assets applicable Common Shareholders, end of year (000) | $ | 181,459 | $ | 167,857 | $ | 190,562 | $ | 171,938 | $ | 176,530 | ||||||||||
|
| |||||||||||||||||||
AMPS outstanding at $25,000 liquidation preference, end of year (000) | — | — | — | — | $ | 66,350 | ||||||||||||||
|
| |||||||||||||||||||
VRDP Shares outstanding at $100,000 liquidation value, end of year (000) | $ | 66,300 | $ | 66,300 | $ | 66,300 | $ | 66,300 | — | |||||||||||
|
| |||||||||||||||||||
Portfolio turnover rate | 16% | 8% | 23% | 11% | 6% | |||||||||||||||
|
| |||||||||||||||||||
Asset coverage per AMPS at $25,000 liquidation preference, end of year | — | — | — | — | $ | 91,517 | ||||||||||||||
|
| |||||||||||||||||||
Asset coverage per VRDP Shares at $100,000 liquidation value, end of year | $ | 373,693 | $ | 353,178 | $ | 387,425 | $ | 359,333 | — | |||||||||||
|
| |||||||||||||||||||
| 1 | Based on average Common Shares outstanding. |
| 2 | Dividends for annual periods determined in accordance with federal income tax regulations. |
| 3 | Total investment returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions. |
| 4 | Does not reflect the effect of dividends to AMPS Shareholders. |
| 5 | Interest expense, fees and amortization of offering costs relate to TOBs and/or VRDP Shares. See Note 3 and Note 9 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively. |
| 6 | For the year ended July 31, 2012, the total expense ratio after fees waived and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.99%. |
| See Notes to Financial Statements. | ||||||
| ANNUAL REPORT | JULY 31, 2014 | 55 | ||||
| Notes to Financial Statements | ||||
1. Organization:
BlackRock MuniHoldings California Quality Fund, Inc. (“MUC”), BlackRock MuniHoldings New Jersey Quality Fund, Inc. (“MUJ”), BlackRock MuniYield Investment Quality Fund (“MFT”), BlackRock MuniYield Michigan Quality Fund, Inc. (“MIY”), BlackRock MuniYield New Jersey Quality Fund, Inc. (“MJI”) and BlackRock MuniYield Pennsylvania Quality Fund (“MPA”) (collectively, the “Funds”) are registered under the Investment Company Act of 1940, as non-diversified, closed-end management investment companies. MUC, MUJ, MIY and MJI are organized as Maryland corporations. MFT and MPA are organized as Massachusetts business trusts. The Boards of Directors and the Boards of Trustees of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board”, and the directors/trustees thereof are collectively referred to throughout this report as “Directors.” The Funds determine and make available for publication the NAVs of their Common Shares on a daily basis.
2. Significant Accounting Policies:
The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Funds:
Valuation: U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.
Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end registered investment companies are valued at NAV each business day.
In the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant consistent with the principles of fair value measurement. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.
Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., financial futures contracts) or certain borrowings (e.g., TOBs) that would be “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Fund’s future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security”. Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.
Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Dividends and distributions to Preferred Shareholders are accrued and determined as described in Note 9.
Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Fund’s Board, the independent Directors (“Independent Directors”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.
| 56 | ANNUAL REPORT | JULY 31, 2014 |
| Notes to Financial Statements (continued) |
The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund. Deferred compensation liabilities are included in officer’s and directors’ fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Funds until such amounts are distributed in accordance with the Plan.
Recent Accounting Standard: In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of reverse repurchase agreements and other similar transactions. The guidance will require expanded disclosure for entities that enter into reverse repurchase agreements and similar transactions accounted for as secured borrowings. It is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years. Management is evaluating the impact, if any, of this guidance on the Funds’ financial statement disclosures.
Other: Expenses directly related to a Fund are charged to that Fund. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropriate methods.
The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.
3. Securities and Other Investments:
Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.
Forward Commitments and When-Issued Delayed Delivery Securities: The Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Funds may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Funds may be required to pay more at settlement than the security is worth. In addition, the Funds are not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the Funds’ maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions, which is shown in the Schedules of Investments.
Municipal Bonds Transferred to TOBs: The Funds leverage their assets through the use of TOBs. A TOB is a special purpose entity established by a third party sponsor, into which a fund, or an agent on behalf of a fund, transfers municipal bonds into a trust (“TOB Trust”). Other funds managed by the investment advisor may also contribute municipal bonds to a TOB into which a Fund has contributed bonds. A TOB typically issues two classes of beneficial interests: short-term floating rate certificates (“TOB Trust Certificates”), which are sold to third party investors, and residual certificates (“TOB Residuals”), which are generally issued to the participating funds that contributed the municipal bonds to the TOB Trust. If multiple funds participate in the same TOB, the rights and obligations under the TOB Residual will be shared among the funds ratably in proportion to their participation
The TOB Residuals held by a Fund include the right of a Fund (1) to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates at par plus accrued interest upon the occurrence of certain mandatory tender events defined in the TOB agreements, and (2) to transfer, subject to a specified number of days’ prior notice, a corresponding share of the municipal bonds from the TOB to a Fund. The TOB may also be collapsed without the consent of a Fund, as the TOB Residual holder, upon the occurrence of certain termination events as defined in the TOB agreements. Such termination events may include the bankruptcy or default of the municipal bond, a substantial downgrade in credit quality of the municipal bond, the inability of the TOB to obtain renewal of the liquidity support agreement, a substantial decline in market value of the municipal bond and a judgment or ruling that interest on the municipal bond is subject to federal income taxation. Upon the occurrence of a termination event, the TOB would generally be liquidated in full with the proceeds typically applied first to any accrued fees owed to the trustee, remarketing agent and liquidity provider, and then to the holders of the TOB Trust Certificates up to par plus accrued interest owed on the TOB Trust Certificates, with the balance paid out to the TOB Residual holder. During the year ended July 31, 2014, no TOBs in which the Funds participated were terminated without the consent of the Funds.
The cash received by the TOB from the sale of the TOB Trust Certificates, less transaction expenses, is paid to a Fund. The Funds typically invest the cash received in additional municipal bonds. Each Fund’s transfer of the municipal bonds to a TOB Trust is accounted for as a secured borrowing; therefore, the municipal bonds deposited into a TOB are presented in the Funds’ Schedules of Investments and the TOB Trust Certificates are shown in other liabilities in the Statements of Assets and Liabilities. The carrying amount of each Fund’s payable to the holder of the TOB Trust Certificates, as reported in the Statements of Assets and Liabilities as TOB Trust Certificates, approximates its fair value.
The Funds may invest in TOBs on either a non-recourse or recourse basis. TOB Trusts are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity Provider”) that allows the holders of the TOB Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par plus accrued interest on any business day prior to the occurrence of the termination events described above. When a
| ANNUAL REPORT | JULY 31, 2014 | 57 |
| Notes to Financial Statements (continued) | ||||
Fund invests in TOBS on a non-recourse basis, and the Liquidity Provider is required to make a payment under the liquidity facility due to a termination event, the Liquidity Provider will typically liquidate all or a portion of the municipal securities held in the TOB Trust and then fund, on a net basis, the balance, if any, of the amount owed under the liquidity facility over the liquidation proceeds (the “Liquidation Shortfall”). If a Fund invests in a TOB on a recourse basis, the Funds will typically enter into a reimbursement agreement with the Liquidity Provider where the Funds is required to repay the Liquidity Provider the amount of any Liquidation Shortfall. As a result, a Fund investing in a recourse TOB will bear the risk of loss with respect to any Liquidation Shortfall. If multiple Funds participate in any such TOB, these losses will be shared ratably, including the maximum potential amounts owed by the Funds at July 31, 2014, in proportion to their participation. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by the Funds at July 31, 2014.
Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by the Funds on an accrual basis. Interest expense incurred on the secured borrowing and other expenses related to remarketing, administration and trustee services to a TOB are shown as interest expense, fees and amortization of offering costs in the Statements of Operations. The TOB Trust Certificates have interest rates that generally reset weekly and their holders have the option to tender such certificates to the TOB for redemption at par at each reset date. At July 31, 2014, the aggregate value of the underlying municipal bonds transferred to TOBs, the related liability for TOB Trust Certificates and the range of interest rates on the liability for TOB Trust Certificates were as follows:
Underlying Municipal Bonds | Liability for TOB Trust Certificates | Range of Interest Rates | ||||||||||
MUC | $ | 188,572,615 | $ | 88,271,444 | 0.06% - 0.14% | |||||||
MUJ | $ | 64,495,036 | $ | 34,699,311 | 0.06% - 0.13% | |||||||
MFT | $ | 38,663,211 | $ | 20,283,757 | 0.06% - 0.31% | |||||||
MIY | $ | 47,808,301 | $ | 23,487,000 | 0.04% - 0.21% | |||||||
MJI | $ | 32,819,914 | $ | 18,044,269 | 0.06% - 0.13% | |||||||
MPA | $ | 69,592,822 | $ | 37,066,212 | 0.07% - 0.18% | |||||||
For the year ended July 31, 2014, the Funds’ average TOB Trust Certificates outstanding and the daily weighted average interest rate, including fees, were as follows:
Average TOB Trust Certificates Outstanding | Daily Weighted Average Interest Rate | |||||||
MUC | $ | 138,395,091 | 0.58% | |||||
MUJ | $ | 35,118,477 | 0.66% | |||||
MFT | $ | 21,403,900 | 0.68% | |||||
MIY | $ | 24,835,072 | 0.55% | |||||
MJI | $ | 18,253,985 | 0.69% | |||||
MPA | $ | 39,661,319 | 0.63% | |||||
Should short-term interest rates rise, the Funds’ investments in TOBs may adversely affect the Funds’ net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect the Funds’ NAVs per share.
4. Derivative Financial Instruments:
The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to economically hedge their exposure to certain risks such as interest rate risk. These contracts may be transacted on an exchange or over-the-counter (“OTC”).
Financial Futures Contracts: The Funds purchase and/or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk). Financial futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.
Upon entering into a financial futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedules of Investments and cash deposited, if any, is recorded on the Statements of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Funds as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.
| 58 | ANNUAL REPORT | JULY 31, 2014 |
| Notes to Financial Statements (continued) |
When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure:
| Fair Values of Derivative Financial Instruments as of July 31, 2014 | ||||||||||||||||||||||||||||||
| Value | ||||||||||||||||||||||||||||||
| MUC | MUJ | MFT | ||||||||||||||||||||||||||||
| Statements of Assets and Liabilities Location | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||
Interest rate contracts | Net unrealized appreciation/depreciation1 | $ | 98,963 | — | $ | 87,799 | — | $ | 33,835 | — | ||||||||||||||||||||
| MIY | MJI | MPA | ||||||||||||||||||||||||||||
| Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | Derivative Assets | Derivative Liabilities | |||||||||||||||||||||||||
Interest rate contracts | Net unrealized appreciation/depreciation1 | $ | 59,960 | — | $ | 36,404 | — | $ | 12,698 | $ | (53,941 | ) | ||||||||||||||||||
| 1 | Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The Effect of Derivative Financial Instruments in the Statements of Operations Year Ended July 31, 2014 | ||||||||||||||||||||||||||
| Net Realized Loss From | Net Change in Unrealized Appreciation/Depreciation on | |||||||||||||||||||||||||
| MUC | MUJ | MFT | MUC | MUJ | MFT | |||||||||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||||||||
Financial futures contracts | $ | (1,028,070 | ) | $ | (515,507 | ) | $ | (173,905 | ) | $ | 98,963 | $ | 87,799 | $ | 33,835 | |||||||||||
| MIY | MJI | MPA | MIY | MJI | MPA | |||||||||||||||||||||
| Interest rate contracts: | ||||||||||||||||||||||||||
Financial futures contracts | $ | (311,437 | ) | $ | (215,085 | ) | $ | (702,026 | ) | $ | 59,960 | $ | 36,404 | $ | (41,243 | ) | ||||||||||
For the year ended July 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
| Financial futures contracts: | ||||||||||||||||||||||||
Average number of contracts sold | 453 | 156 | 93 | 104 | 66 | 158 | ||||||||||||||||||
Average notional value of contracts sold | $ | 56,777,832 | $ | 19,527,441 | $ | 11,633,230 | $ | 12,978,262 | $ | 8,281,895 | $ | 19,754,957 | ||||||||||||
Counterparty Credit Risk: A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund.
With exchange-traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
5. Investment Advisory Agreement and Other Transactions with Affiliates:
The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).
Each Fund entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
Investment advisory fee | 0.55% | 0.55% | 0.50% | 0.50% | 0.50% | 0.50% | ||||||||||||||||||
| ANNUAL REPORT | JULY 31, 2014 | 59 |
| Notes to Financial Statements (continued) | ||||
Average daily net assets are the average daily value of each Fund’s total assets minus its total accrued liabilities.
The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Statements of Operations. For the year ended July 31, 2014, the amounts waived were:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
Amounts waived | $ | 3,985 | $ | 5,345 | $ | 932 | $ | 106 | $ | 2,408 | $ | 106 | ||||||||||||
The Manager, for MUC and MUJ, voluntarily agreed to waive its investment advisory fee on the proceeds of the Preferred Shares and TOBs that exceed 35% of total assets minus the sum of its accrued liabilities. This amount is included in fees waived by Manager in the Statements of Operations. For the year ended July 31, 2014, the waivers were:
MUC | $ | 329,016 | ||
MUJ | $ | 199,267 |
Prior to July 1, 2014, BlackRock Investment Management, LLC (“BIM”), an affiliate of the Manager, served as a sub-advisor to each Fund pursuant to sub-advisory agreements with the Manager, and received for its services a monthly fee from the Manager at an annual rate equal to a percentage of the investment advisory fees paid by each Fund to the Manager under the Investment Advisory Agreements. Effective July 1, 2014, the sub-advisory agreements between the Manager and BIM, with respect to each Fund, expired.
Certain officers and/or Directors of the Funds are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for compensation paid to the Funds’ Chief Compliance Officer, which is included in officer and directors in the Statements of Operations.
The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended July 31, 2014, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:
| MUC | MFT | |||||||
Purchases | $ | 1,567,211 | — | |||||
Sales | — | $ | 1,906,715 | |||||
6. Purchases and Sales:
Purchases and sales of investments, excluding short-term securities, for the year ended July 31, 2014 were as follows:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
Purchases | $ | 250,452,318 | $ | 82,216,323 | $ | 61,410,971 | $ | 67,826,440 | $ | 36,406,441 | $ | 43,785,766 | ||||||||||||
Sales | $ | 337,974,257 | $ | 84,625,364 | $ | 68,792,391 | $ | 81,674,466 | $ | 38,486,565 | $ | 58,305,350 | ||||||||||||
7. Income Tax Information:
It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.
Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ U.S. federal tax returns remains open for each of the four years ended July 31, 2014. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application the Funds’ facts and circumstances and does not believe that there are any uncertain tax positions that require recognition of a tax liability.
U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of July 31, 2014, the following permanent differences attributable to amortization methods on fixed income securities, non-deductible expenses, the reclassification of distributions and distributions received from a regulated investment company were reclassified to the following accounts:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
Paid-in capital | $ | (112,615 | ) | $ | (12,171 | ) | $ | (51,627 | ) | $ | (9,567 | ) | $ | (8,196 | ) | $ | (7,257 | ) | ||||||
Undistributed net investment income | $ | (150,685 | ) | $ | 12,431 | $ | 44,660 | $ | (16,847 | ) | $ | 8,107 | $ | (64,448 | ) | |||||||||
Accumulated net realized loss | $ | 263,300 | $ | (260 | ) | $ | 6,967 | $ | 26,414 | $ | 89 | $ | 71,705 | |||||||||||
| 60 | ANNUAL REPORT | JULY 31, 2014 |
| Notes to Financial Statements (continued) |
The tax character of distributions paid was as follows:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||||||
Tax-exempt income1 | 7/31/14 | $ | 37,867,090 | $ | 19,712,925 | $ | 7,817,944 | $ | 17,810,213 | $ | 8,194,726 | $ | 10,885,337 | |||||||||||||||
| 7/31/13 | 41,098,361 | 19,503,101 | 7,857,658 | 18,306,103 | 7,934,464 | 10,932,517 | ||||||||||||||||||||||
Ordinary income2 | 7/31/14 | 4,953 | — | — | 21,887 | 39,156 | 101 | |||||||||||||||||||||
| 7/31/13 | 1,849 | — | — | 3,619 | 121,948 | — | ||||||||||||||||||||||
Long-term capital gains3 | 7/31/14 | — | 110,815 | — | — | — | — | |||||||||||||||||||||
| 7/31/13 | — | — | — | — | 203,299 | — | ||||||||||||||||||||||
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Total | 7/31/14 | $ | 37,872,043 | $ | 19,823,740 | $ | 7,817,944 | $ | 17,832,100 | $ | 8,233,882 | $ | 10,885,438 | |||||||||||||||
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| 7/31/13 | $ | 41,100,210 | $ | 19,503,101 | $ | 7,857,658 | $ | 18,309,722 | $ | 8,259,711 | $ | 10,932,517 | ||||||||||||||||
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| 1 | The Funds designate these amounts paid during the fiscal year ended July 31, 2014, as exempt-interest dividends. |
| 2 | Ordinary income consists primarily of taxable income recognized from market discount and net short-term capital gains. Additionally, all ordinary income distributions are comprised of interest-related dividends and qualified short-term capital dividends for non-U.S. residents and are eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. |
| 3 | The Fund designates the amount paid during the fiscal year ended July 31, 2014, as a capital gain dividend. |
As of July 31, 2014, the tax components of accumulated net earnings were as follows:
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
Undistributed tax-exempt income | $ | 7,328,987 | $ | 4,069,637 | $ | 1,876,211 | $ | 2,312,339 | $ | 2,028,350 | $ | 1,416,369 | ||||||||||||
Undistributed ordinary income | 175 | 2,989 | 215 | — | 2,047 | 2,914 | ||||||||||||||||||
Capital loss carryforwards | (13,209,170 | ) | (3,805,742 | ) | (10,745,672 | ) | (9,953,666 | ) | (2,198,376 | ) | (3,459,717 | ) | ||||||||||||
Net unrealized gains (losses)4 | 68,710,392 | 36,048,146 | 17,126,318 | 24,530,062 | 13,792,616 | 14,162,566 | ||||||||||||||||||
Qualified late-year losses5 | — | (105,154 | ) | (623,013 | ) | (81,936 | ) | (90,044 | ) | (849,251 | ) | |||||||||||||
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Total | $ | 62,830,384 | $ | 36,209,876 | $ | 7,634,059 | $ | 16,806,799 | $ | 13,534,593 | $ | 11,272,881 | ||||||||||||
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4 The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, and straddles, amortization methods of premiums and discounts on fixed income securities, the realization for tax purposes of unrealized gains/losses on certain futures contracts, the treatment of residual interests in tender option bond trusts and the deferral of compensation to Directors.
5 The Funds have elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.
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As of July 31, 2014, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:
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| Expires July 31, | MUC | MUJ | MFT | MIY | MJI | MPA | ||||||||||||||||||
2016 | — | $ | 1,401,889 | — | — | |||||||||||||||||||
2017 | $ | 6,504,940 | 2,031,132 | — | $ | 1,066,968 | ||||||||||||||||||
2018 | — | $ | 4,616,682 | — | — | 893,908 | ||||||||||||||||||
2019 | — | — | — | — | 50,303 | |||||||||||||||||||
No expiration6 | 6,704,230 | $ | 3,805,742 | 6,128,990 | 6,520,645 | $ | 2,198,376 | 1,448,538 | ||||||||||||||||
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Total | $ | 13,209,170 | $ | 3,805,742 | $ | 10,745,672 | $ | 9,953,666 | $ | 2,198,376 | $ | 3,459,717 | ||||||||||||
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6 Must be utilized prior to losses subject to expiration.
As of July 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:
| ||||||||||||||||||||||||
| MUC | MUJ | MFT | MIY | MJI | MPA | |||||||||||||||||||
Tax cost | $ | 814,552,102 | $ | 468,963,618 | $ | 163,431,449 | $ | 393,508,995 | $ | 188,326,894 | $ | 231,005,973 | ||||||||||||
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Gross unrealized appreciation | $ | 69,052,605 | $ | 37,325,099 | $ | 17,313,877 | $ | 26,636,935 | $ | 14,490,688 | $ | 15,691,674 | ||||||||||||
Gross unrealized depreciation | (82,067 | ) | (1,276,952 | ) | (185,907 | ) | (1,443,630 | ) | (698,039 | ) | (1,113,759 | ) | ||||||||||||
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Net unrealized appreciation | $ | 68,970,538 | $ | 36,048,147 | $ | 17,127,970 | $ | 25,193,305 | $ | 13,792,649 | $ | 14,577,915 | ||||||||||||
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8. Concentration, Market and Credit Risk:
MUC, MUJ, MIY, MJI, and MPA invest a substantial amount of their assets in issuers located in a single state or limited number of states. Please see the Schedules of Investments for concentrations in specific states or U.S. territories.
Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.
In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall
| ANNUAL REPORT | JULY 31, 2014 | 61 |
| Notes to Financial Statements (continued) | ||||
market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.
The Funds invest a significant portion of their assets in fixed-income securities and/or uses derivatives tied to the fixed income markets. See the Schedules of Investments for these securities and/or derivatives. Changes in market interest rates or economic conditions, including the Federal Reserve’s decision in December 2013 to taper its quantitative easing policy, may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.
As of July 31, 2014, MUC and MPA invested a significant portion of their assets in securities in the county/city/special district/school district sector. MIY and MJI invested a significant portion of their assets in securities in the education sector. MUJ invested a significant portion of their assets in securities in the state sector. MUJ, MFT and MJI invested a significant portion of their assets in securities in the transportation sector. MUC and MFT also invested a significant portion of their assets in securities in the utilities sector. Changes in economic conditions affecting such sectors would have a greater impact on the Funds and could affect the value, income and/or liquidity of positions in such securities.
The Funds may hold a significant amount of bonds subject to calls by the issuers at defined dates and prices. When bonds are called by issuers and the Funds reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total return performance of a fund.
On December 10, 2013, regulators published final rules implementing section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”), which prohibit banking entities from engaging in proprietary trading of certain instruments and limit such entities’ investments in, and relationships with, “covered funds”, as defined in the rules. Banking entities subject to the Volcker Rule are required to fully comply by July 21, 2015. The Volcker Rule may preclude banking entities and their affiliates from (i) sponsoring TOB trust programs (as such programs are presently structured) and (ii) continuing relationships with or services for existing TOB trust programs. As a result, TOB trusts may need to be restructured or unwound. There can be no assurances that TOB trusts can be restructured, that new sponsors of TOB trusts will develop, or that alternative forms of leverage will be available to the Fund. Any alternative forms of leverage may be more or less advantageous to the Fund than existing TOB leverage.
TOB transactions constitute an important component of the municipal bond market. Accordingly, implementation of the Volcker Rule may adversely impact the municipal market, including through reduced demand for and liquidity of municipal bonds and increased financing costs for municipal issuers. Any such developments could adversely affect the Fund. The ultimate impact of these rules on the TOB market and the overall municipal market is not yet certain.
9. Capital Share Transactions:
MFT and MPA are authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. The par value for each Fund’s Common Shares is $0.10. The par value for each Fund’s Preferred Shares outstanding is $0.05. Each Fund’s Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without approval of Common Shareholders.
MUC, MUJ, MIY and MJI are authorized to issue 200 million shares, par value $0.10 per share, all of which were initially classified as Common Shares. Each Fund’s Board is authorized, however, to reclassify any unissued Common Shares without approval of Common Shareholders.
Common Shares
For the years shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:
| Year Ended | MUC | MUJ | MFT | MIY | MJI | MPA | ||||||||||||||||||
July 31, 2014 | — | — | — | — | — | — | ||||||||||||||||||
July 31, 2013 | 111,790 | 29,853 | 5,789 | 29,750 | 28,723 | 3,912 | ||||||||||||||||||
Preferred Shares
Each Fund’s Preferred Shares rank prior to the Fund’s Common Shares as to the payment of dividends by the Fund and distribution of assets upon dissolution or liquidation of the Fund. The 1940 Act prohibits the declaration of any dividend on the Fund’s Common Shares or the repurchase of the Fund’s Common Shares if the Fund fails to maintain the asset coverage of at least 200% of the liquidation preference of the outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, the Fund is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with the Preferred Shares or repurchasing such shares if the Fund fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares’ governing instruments or comply with the basic maintenance amount requirement of the agencies rating the Preferred Shares.
| 62 | ANNUAL REPORT | JULY 31, 2014 |
| Notes to Financial Statements (continued) |
The holders of Preferred Shares have voting rights equal to the holders of Common Shares (one vote per share) and will vote together with holders of Common Shares (one vote per share) as a single class. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Directors for each Fund. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.
VRDP Shares
MUJ, MIY, MJI and MPA (collectively, the “VRDP Funds”), have issued Series W-7 VRDP Shares, $100,000 liquidation value per share, in a privately negotiated offering. The VRDP Shares were offered to qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act of 1933, as amended, (the “Securities Act”) and include a liquidity feature, pursuant to a liquidity agreement, that allows the holders of VRDP Shares to have their shares purchased by the liquidity provider in the event of a failed remarketing. The VRDP Funds are required to redeem the VRDP Shares owned by the liquidity provider after six months of continuous, unsuccessful remarketing. Upon the occurrence of the first unsuccessful remarketing, the VRDP Funds are required to segregate liquid assets to fund the redemption. The VRDP Shares are subject to certain restrictions on transfer.
The VRDP Shares outstanding as of July 31, 2014 were as follows:
| Issue Date | Shares Issued | Aggregate Principal | Maturity Date | |||||||||||||
MUJ | 6/30/11 | 1,727 | $ | 172,700,000 | 7/01/41 | |||||||||||
MIY | 4/21/11 | 1,446 | $ | 144,600,000 | 5/01/41 | |||||||||||
MJI | 6/30/11 | 644 | $ | 64,400,000 | 7/01/41 | |||||||||||
MPA | 5/19/11 | 663 | $ | 66,300,000 | 6/01/41 | |||||||||||
The VRDP Funds entered into a fee agreement with the liquidity provider that may require an initial commitment and a per annum liquidity fee payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations.
The fee agreement between MUJ, MIY, MJI and MPA and the liquidity provider are scheduled to expire, unless renewed or terminated in advance, as follows:
MUJ | MIY | MJI | MPA | |||||||||||||
Expiration date | 4/19/17 | 7/09/15 | 4/19/17 | 7/09/15 | ||||||||||||
In the event the fee agreement is not renewed or is terminated in advance, and the VRDP Funds do not enter into a fee agreement with an alternate liquidity provider, the VRDP Shares will be subject to mandatory purchase by the liquidity provider prior to the termination of the fee agreement. The VRDP Funds are required to redeem any VRDP Shares purchased by the liquidity provider six months after the purchase date. Immediately after the purchase of any VRDP Shares by the liquidity provider, the VRDP Funds are required to begin to segregate liquid assets with the VRDP Fund’s custodian to fund the redemption. There is no assurance the VRDP Funds will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.
Each VRDP Fund is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six months prior to the maturity date, each VRDP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, each VRDP Fund is required to redeem certain of its outstanding VRDP Shares if it fails to maintain certain asset coverage, basic maintenance amount or leverage requirements.
Subject to certain conditions, the VRDP Shares may be redeemed, in whole or in part, at any time at the option of the VRDP Funds. The redemption price per VRDP Share is equal to the liquidation value per share plus any outstanding unpaid dividends. In the event of an optional redemption of the VRDP Shares prior to the initial termination date of the fee agreement, the VRDP Funds must pay the respective liquidity provider fees on such redeemed VRDP Shares for the remaining term of the fee agreement up to the initial termination date.
Dividends on the VRDP Shares are payable monthly at a variable rate set weekly by the remarketing agent. Such dividend rates are generally based upon a spread over a base rate and cannot exceed a maximum rate. In the event of a failed remarketing, the dividend rate of the VRDP Shares will be reset to a maximum rate. The maximum rate is determined based on, among other things, the long-term preferred share rating assigned to the VRDP Shares and the length of time that the VRDP Shares fail to be remarketed. At the date of issuance, the VRDP Shares were assigned a long-term rating of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VRDP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of July 31, 2014, the VRDP Shares were assigned a long-term rating of Aa2 from Moody’s under its new ratings methodology. The VRDP Shares continue to be assigned a long-term rating of AAA from Fitch.
The short-term ratings on the VRDP Shares are directly related to the short-term ratings of the liquidity provider for such VRDP Shares. Changes in the credit quality of the liquidity provider could cause a change in the short-term credit ratings of the VRDP Shares as rated by Moody’s, Fitch and/or S&P. A change in the short-term credit rating of the liquidity provider or the VRDP Shares may adversely affect the dividend rate paid on such shares, although the dividend
| ANNUAL REPORT | JULY 31, 2014 | 63 |
| Notes to Financial Statements (continued) | ||||
rate paid on the VRDP Shares is not directly related based upon either short-term rating. The liquidity provider may be terminated prior to the scheduled termination date if the liquidity provider fails to maintain short-term debt ratings in one of the two highest rating categories. The short-term ratings on the VRDP Shares were withdrawn by Moody’s, Fitch and/or S&P at the commencement of the special rate period, as described below.
For financial reporting purposes, the VRDP Shares are considered debt of the issuer; therefore, the liquidation value, which approximates fair value, of the VRDP Shares is recorded as a liability in the Statements of Assets and Liabilities. Unpaid dividends are included in interest expense and fees payable in the Statements of Assets and Liabilities, and the dividends accrued and paid on the VRDP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP Shares are treated as equity for tax purposes. Dividends paid to holders of the VRDP Shares are generally classified as tax-exempt income for tax-reporting purposes.
MUJ and MJI incur remarketing fees of 0.01% on the aggregate principal amount of all the VRDP Shares, which, if any, are included in remarketing fees on Preferred Shares in the Statements of Operations. All of the remarketable VRDP Shares that were tendered for remarketing during the year ended July 31, 2014 were successfully remarketed.
The annualized dividend rates for the VRDP Shares for the year ended July 31, 2014 were as follows:
MUJ | MIY | MJI | MPA | |||||||||||||
Rate | 0.46% | 1.01% | 0.46% | 1.01% | ||||||||||||
On June 21, 2012, MIY and MPA commenced a three-year term ending June 24, 2015 (“special rate period”) with respect to their VRDP Shares. The implementation of the special rate period resulted in a mandatory tender of the VRDP Shares prior to the commencement of the special rate period. The mandatory tender event was not the result of a failed remarketing.
On April 17, 2014, MUJ and MJI commenced a three-year term ending April 19, 2017 with respect to their VRDP Shares. The implementation of the special rate period resulted in a mandatory tender of the VRDP Shares prior to the commencement of the special rate period. The mandatory tender event was not the result of a failed remarketing.
The liquidity and fee agreements remain in effect for the duration of the special rate period and the VRDP shares are still subject to mandatory redemption by the VRDP Funds on maturity date. The VRDP Shares will not be remarketed or subject to optional or mandatory tender events during such time. During the special rate period, the VRDP Funds are required to maintain the same asset coverage, basic maintenance amount and leverage requirements for the VRDP Shares. The VRDP Funds will not pay any liquidity and remarketing fees during the special rate period and instead will pay dividends monthly based on the sum of Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index and a percentage per annum based on the long-term ratings assigned to the VRDP Shares. The short-term ratings were withdrawn by Moody’s, Fitch and/or S&P. Short-term ratings may be re-assigned upon the termination of the special rate period when the VRDP Shares revert back to remarketable securities.
If the VRDP Funds redeems the VRDP Shares on a date that is one year or more before the end of the special rate period and the VRDP Shares are rated above A1/A by Moody’s and Fitch respectively, then such redemption is subject to a redemption premium payable to the holder of the VRDP Shares based on the time remaining in the special rate period, subject to certain exceptions for redemptions that are required to maintain minimum asset coverage requirements. After June 24, 2015 for MIY and MPA and April 19, 2017 for MUJ and MJI the holder of the VRDP Shares and the VRDP Funds may mutually agree to extend the special rate period. If the special rate period is not extended, the VRDP Shares will revert back to remarketable securities and will be remarketed and available for purchase by qualified institutional investors.
VRDP Shares issued and outstanding remained constant for the year ended July 31, 2014.
VMTP Shares
MUC and MFT (collectively, the “VMTP Funds”), have issued Series W-7 VMTP Shares, $100,000 liquidation value per share , in a privately negotiated offering and sale of VMTP Shares exempt from registration under the Securities Act.
The VMTP Shares outstanding as of the year ended July 31, 2014 were as follows:
| Issue Date | Shares Issued | Aggregate Principal | Term Date | |||||||||||||
MUC | 3/22/12 | 2,540 | $ | 254,000,000 | 4/01/15 | |||||||||||
MFT | 12/16/11 | 565 | $ | 56,500,000 | 12/31/15 | |||||||||||
Each VMTP Fund is required to redeem its VMTP Shares on the term date, unless earlier redeemed or repurchased or unless extended. The term date for VMTP Shares of MFT was extended to December 31, 2015 in June 2014. There is no assurance that the term of a Fund’s VMTP Shares will be extended or that a Fund’s VMTP Shares will be replaced with any other preferred shares or other form of leverage upon the redemption or repurchase of the VMTP Shares. Six months prior to term date, each VMTP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, each VMTP Fund is required to redeem certain of its outstanding VMTP Shares if it fails to maintain certain asset coverage, basic maintenance amount or leverage requirements.
| 64 | ANNUAL REPORT | JULY 31, 2014 |
| Notes to Financial Statements (concluded) |
Subject to certain conditions, a Fund’s VMTP Shares may be redeemed, in whole or in part, at any time at the option of the Fund. The redemption price per VMTP Share is equal to the liquidation value per share plus any outstanding unpaid dividends and applicable redemption premium. If the Fund redeems the VMTP Shares on a date that is one year or more prior to the term date and the VMTP Shares are rated above A1/A+ by Moody’s and Fitch, respectively, then such redemption is subject to a prescribed redemption premium (up to 3% of the liquidation preference) payable to the holder of the VMTP Shares based on the time remaining to the term date, subject to certain exceptions for redemptions that are required to maintain minimum asset coverage requirements. The VMTP Shares are subject to certain restrictions on transfer, and a Fund may also be required to register the VMTP Shares for sale under the Securities Act under certain circumstances. In addition, amendments to the VMTP governing document generally require the consent of the holders of VMTP Shares.
Dividends on the VMTP Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the SIFMA Municipal Swap Index. The fixed spread is determined based on the long-term preferred share rating assigned to the VMTP Shares by Moody’s and Fitch. At the date of issuance, the VMTP Shares were assigned long-term ratings of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VMTP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of July 31, 2014, the VMTP Shares were assigned a long-term rating of Aa1 and Aa2 from Moody’s under its new rating methodology. The VMTP Shares continue to be assigned a long-term rating of AAA from Fitch. The dividend rate on the VMTP Shares is subject to a step-up spread if the Fund fails to comply with certain provisions, including, among other things, the timely payment of dividends, redemptions or gross-up payments, and maintaining certain asset coverage and leverage requirements.
The average annualized dividend rates for the VMTP Shares for the year ended July 31, 2014 were as follows:
MUC | MFT | |||||||
Rate | 1.06% | 1.06% | ||||||
For financial reporting purposes, the VMTP Shares are considered debt of the issuer; therefore the liquidation value, which approximates fair value, of the VMTP Shares is recorded as a liability in the Statements of Assets and Liabilities. Unpaid dividends are included in interest expense and fees payable in the Statements of Assets and Liabilities, and the dividends accrued and paid on the VMTP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VMTP Shares are treated as equity for tax purposes. Dividends paid to holders of the VMTP Shares are generally classified as tax-exempt income for tax-reporting purposes.
VMTP Shares issued and outstanding remained constant for the year ended July 31, 2014.
Offering Costs: The Funds incurred costs in connection with the issuance of VRDP Shares and/or VMTP Shares. For VRDP Shares, these costs were recorded as a deferred charge and will be amortized over the 30-year life of the VRDP Shares with the exception of upfront fees paid to the liquidity provider which were amortized over the life of the liquidity agreement. For VMTP Shares, these costs were recorded as a deferred charge and will be amortized over the 3-year life of the VMTP Shares. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.
10. Subsequent Events:
Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:
Each Fund paid a net investment income dividend on September 2, 2014 to Common Shareholders of record on August 15, 2014 as follows:
Common Dividend Per Share | ||||
MUC | $ | 0.0715 | ||
MUJ | $ | 0.0740 | ||
MFT | $ | 0.0710 | ||
MIY | $ | 0.0720 | ||
MJI | $ | 0.0740 | ||
MPA | $ | 0.0740 | ||
Additionally, the Funds declared a net investment income dividend on September 2, 2014 payable to Common Shareholders of record on September 15, 2014 for the same amounts noted above.
The dividends declared on Preferred Shares for the period August 1, 2014 to August 31, 2014 were as follows:
| Preferred Shares | Series | Dividends Declared | ||||||||||
MUC | VMTP Shares | W-7 | $ | 226,930 | ||||||||
MUJ | VRDP Shares | W-7 | $ | 136,693 | ||||||||
MFT | VMTP Shares | W-7 | $ | 50,478 | ||||||||
MIY | VRDP Shares | W-7 | $ | 303,282 | ||||||||
MJI | VRDP Shares | W-7 | $ | 50,973 | ||||||||
MPA | VRDP Shares | W-7 | $ | 56,419 | ||||||||
| ANNUAL REPORT | JULY 31, 2014 | 65 |
| Report of Independent Registered Public Accounting Firm | ||
To the Shareholders and Board of Directors of
BlackRock MuniHoldings California Quality Fund, Inc.,
BlackRock MuniHoldings New Jersey Quality Fund, Inc.,
BlackRock MuniYield Michigan Quality Fund, Inc., and
BlackRock MuniYield New Jersey Quality Fund, Inc.
and to the Shareholders and Board of Trustees of
BlackRock MuniYield Investment Quality Fund and
BlackRock MuniYield Pennsylvania Quality Fund:
We have audited the accompanying statements of assets and liabilities of BlackRock MuniHoldings California Quality Fund, Inc., BlackRock MuniHoldings New Jersey Quality Fund, Inc., BlackRock MuniYield Investment Quality Fund, BlackRock MuniYield Michigan Quality Fund, Inc., BlackRock MuniYield New Jersey Quality Fund, Inc., and BlackRock MuniYield Pennsylvania Quality Fund (collectively, the “Funds”), including the schedules of investments, as of July 31, 2014, and the related statements of operations and the statements of cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2014, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of BlackRock MuniHoldings California Quality Fund, Inc., BlackRock MuniHoldings New Jersey Quality Fund, Inc., BlackRock MuniYield Investment Quality Fund, BlackRock MuniYield Michigan Quality Fund, Inc., BlackRock MuniYield New Jersey Quality Fund, Inc., and BlackRock MuniYield Pennsylvania Quality Fund as of July 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
September 24, 2014
| 66 | ANNUAL REPORT | JULY 31, 2014 |
| Disclosure of Investment Advisory Agreements |
The Board of Directors or Trustees, as applicable, (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock MuniHoldings California Quality Fund, Inc. (“MUC”), BlackRock MuniHoldings New Jersey Quality Fund, Inc. (“MUJ”), BlackRock MuniYield Investment Quality Fund (“MFT”), BlackRock MuniYield Michigan Quality Fund, Inc. (“MIY”), BlackRock MuniYield New Jersey Quality Fund, Inc. (“MJI”) and BlackRock MuniYield Pennsylvania Quality Fund (“MPA” and together with MUC, MUJ, MFT, MIY and MJI, each a “Fund,” and, collectively, the “Funds”) met in person on May 9, 2014 (the “May Meeting”) and June 5-6, 2014 (the “June Meeting”) to consider the approval of each Fund’s investment advisory agreement (each, an “Advisory Agreement,” and, collectively, the “Advisory Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. At the June Meeting, it was noted that the sub-advisory agreement among the Manager, BlackRock Investment Management, LLC and each Fund would expire effective July 1, 2014. It was also noted that the non-renewal of each Fund’s sub-advisory agreement would not result in any change in the nature or quality of services provided to such Fund, or in the portfolio management team that serves such Fund. The Manager is referred to herein as “BlackRock.”
Activities and Composition of the Board
Each Board consists of eleven individuals, nine of whom are not “interested persons” of such Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of each Board is an Independent Board Member. Each Board has established six standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee, and a Leverage Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee and the Leverage Committee, each of which also has one interested Board Member).
The Advisory Agreements
Pursuant to the 1940 Act, the Boards are required to consider the continuation of the Advisory Agreements on an annual basis. The Boards have four quarterly meetings per year, each extending over two days, and a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Advisory Agreements. In connection with this process, the Boards assessed, among other things, the nature, scope and quality of the services provided to the Funds by BlackRock, its personnel and its affiliates, including, as applicable, investment management, administrative, and shareholder services; oversight of fund service providers; marketing services; risk oversight; compliance and assistance in meeting applicable legal and regulatory requirements.
The Boards, acting directly and through their respective committees, consider at each of their meetings, and from time to time as appropriate, factors that are relevant to their annual consideration of the renewal of the Advisory Agreements, including the services and support provided by BlackRock to the Funds and their shareholders. Among the matters the Boards considered were: (a) investment performance for one-year, three-year, five-year and/or since inception periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance against their peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Funds for services such as call center; (c) Fund operating expenses and how BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Funds’ investment objective, policies and restrictions, and meeting new regulatory requirements; (e) the Funds’ compliance with their Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.
The Boards have engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. BlackRock also furnished information to the Boards in response to specific questions. These questions covered issues such as: BlackRock’s profitability; investment performance; subadvisory and advisory relationships with other clients (including mutual funds sponsored by third parties); investment professional investment in funds they manage; and management fee levels and breakpoints. The Boards further discussed with BlackRock: BlackRock’s management structure; portfolio turnover; BlackRock’s portfolio manager compensation and performance accountability; marketing support for the Funds; services provided to the Funds by BlackRock affiliates; and BlackRock’s oversight of relationships with third party service providers.
The Board of each Fund considered BlackRock’s efforts during the past year with regard to refinancing outstanding AMPS, as well as ongoing time and resources devoted to other forms of preferred shares and alternative leverage. As of the date of this report, each Fund has redeemed 100% of its outstanding AMPS.
Board Considerations in Approving the Advisory Agreements
The Approval Process: Prior to the May Meeting, the Boards requested and received materials specifically relating to the Advisory Agreements. The Boards are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist their deliberations. The materials provided in connection with the May Meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses as compared with a peer group of funds as determined by Lipper (“Expense Peers”) and the investment performance of the Funds as compared with a peer group of funds as determined by Lipper1 Funds are ranked by Lipper in quartiles, ranging from first to
| 1 | Funds are ranked by Lipper in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. |
| ANNUAL REPORT | JULY 31, 2014 | 67 |
| Disclosure of Investment Advisory Agreements (continued) | ||||
fourth, where first is the most desirable quartile position and fourth is the least desirable. and a customized peer group selected by BlackRock; (b) information on the profits realized by BlackRock and its affiliates pursuant to the Advisory Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients and open-end funds, under similar investment mandates, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; (f) a summary of aggregate amounts paid by each Fund to BlackRock and (g) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.
At the May Meeting, the Boards reviewed materials relating to their consideration of the Advisory Agreements. As a result of the discussions that occurred during the May Meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.
At the June Meeting, each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreements between the Manager and its Fund for a one-year term ending June 30, 2015. In approving the continuation of the Advisory Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Funds and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Funds; (d) the Funds’ costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance comparison as previously discussed; (e) economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Funds; and (g) other factors deemed relevant by the Board Members.
The Boards also considered other matters they deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by BlackRock
The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the
Funds. Throughout the year, each Board compared its Fund’s performance to the performance of a comparable group of closed-end funds and/or the performance of a relevant benchmark, as applicable. The Boards met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team
discussing the Fund’s performance and the Fund’s investment objective, strategies and outlook.
The Boards considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and their Funds’ portfolio management teams; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to the Funds’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.
In addition to advisory services, the Boards considered the quality of the administrative and other non-investment advisory services provided to the Funds. BlackRock and its affiliates provide the Funds with certain services (in addition to any such services provided to the Funds by third parties) and officers and other personnel as are necessary for the operations of the Funds. In particular, BlackRock and its affiliates provide the Funds with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Funds; (iii) oversight of daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger or consolidation of certain closed-end funds; and (ix) performing other administrative functions necessary for the operation of the Funds, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, shareholder services, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.
B. The Investment Performance of the Funds and BlackRock Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Fund. In preparation for the May Meeting, the Boards worked with their independent legal counsel, BlackRock and Lipper to develop a template for, and were provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Fund as compared to other funds in that Fund’s applicable Lipper category and the customized peer group selected by BlackRock. The Boards were provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review its methodology. Each Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of its Fund throughout the year.
| 68 | ANNUAL REPORT | JULY 31, 2014 |
| Disclosure of Investment Advisory Agreements (continued) |
The Board of each of MUC and MIY noted that for each of the one-, three- and five-year periods reported, its respective Fund ranked in the second quartile against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MUC and MIY in that it measures a blend of total return and yield.
The Board of MJI noted that for the one-, three- and five-year periods reported, MJI ranked in the first, third and second quartiles, respectively, against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MJI in that it measures a blend of total return and yield. The Board of MJI and BlackRock reviewed and discussed the reasons for MJI’s underperformance during the three-year period and noted that they will monitor MJI’s performance.
The Board of MUJ noted that for the one-, three- and five-year periods reported, MUJ ranked in the first, third and fourth quartiles, respectively, against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MUJ in that it measures a blend of total return and yield. MUJ’s Board also noted the Fund’s improved performance during the one-year period. The Board of MUJ’s and BlackRock reviewed and discussed the reasons for the Fund’s underperformance during the three- and five-year periods. MUJ’s Board was informed that, among other things, the most significant factor impacting the Fund’s performance compared to its Customized Lipper Peer Group Composite is its below average yield. The single largest issue confronting the Fund was the dearth of New Jersey specific municipal bonds, especially diversified new issuance. In the performance periods under discussion, this prevented a more aggressive posture from being implemented, but more importantly, this inhibited the Fund from increasing its respective leverage to use to enhance the Fund’s yield. When compared to other states represented in the Customized Lipper Peer Group Composite, New Jersey has a relatively smaller amount of issuers eligible to use for leveraging.
The Board of MFT noted that for the one-, three- and five-year periods reported, MFT ranked in the fourth, third and third quartiles, respectively, against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MFT in that it measures a blend of total return and yield. The Board of MFT and BlackRock reviewed and discussed the reasons for the Fund’s underperformance during these periods. MFT’s Board was informed that, among other things, the most significant factor impacting the Fund’s performance compared to its Customized Lipper Peer Group Composite is its below average yield. Impacting performance during the one-year period was the Fund’s large leverage and duration position compared to its peers, given the rising rate environment. Holdings in health care, transportation and higher quality university bonds also contributed to poor performance.
The Board of MPA noted that for each of the one-, three- and five-year periods reported, the Fund ranked in the fourth quartile against its Customized Lipper Peer Group Composite. BlackRock believes that the Customized Lipper Peer Group Composite is an appropriate performance metric for MPA in that it measures a blend of total return and yield. The Board of MPA and BlackRock reviewed and discussed the reasons for the Fund’s underperformance during these periods. MPA’s Board was informed that, among other things, Pennsylvania bond prices were under negative pressure in 2012. Security selection reflects a negative attribute due to the Fund’s higher quality bias during a period where investor appetite for yield drove demand for lower rated securities that resulted in tighter credit spreads. Further and significantly, during the summer and fall of 2013, the Fund sold all of its positions in Puerto Rican government-related debt as a result of the Fund management’s conviction that the Commonwealth’s challenges will only intensify. These positions were generally higher-yielding and resulted in realized losses, which impacted performance.
The Boards of MUJ, MFT and MPA BlackRock also discussed BlackRock’s strategy for improving each Fund’s performance and BlackRock’s commitment to providing the resources necessary to assist the Funds’ portfolio managers in seeking to improve the Funds’ performance.
C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds The Board, including the Independent Board Members, reviewed its Fund’s contractual management fee rate compared with the other funds in its Lipper category. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Fund’s total expense ratio, as well as its actual management fee rate, to those of other funds in its Lipper category. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Boards considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts.
The Boards received and reviewed statements relating to BlackRock’s financial condition. The Boards were also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Funds. The Boards reviewed BlackRock’s profitability with respect to the Funds and other funds the Boards currently oversee for the year ended December 31, 2013 compared to available aggregate profitability data provided for the prior two years. The Boards reviewed BlackRock’s profitability with respect to certain other fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Boards recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.
The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Boards considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.
| ANNUAL REPORT | JULY 31, 2014 | 69 |
| Disclosure of Investment Advisory Agreements (concluded) | ||||
In addition, the Boards considered the cost of the services provided to the Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Funds and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s methodology in allocating its costs to the management of the Funds. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Advisory Agreements and to continue to provide the high quality of services that is expected by the Boards. The Boards further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk and liability profile in servicing the Funds in contrast to what is required of BlackRock with respect to other products with similar investment objectives across the open-end fund, ETF, closed-end fund and institutional account product channels, as applicable.
The Board of each of MUC, MIY, MJI and MPA noted that its respective Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Fund’s Expense Peers.
The Board of MUJ noted that MUJ’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers.
The Board of MFT noted that MFT’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Fund’s Expense Peers.
D. Economies of Scale Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund.
Based on the Boards’ review and consideration of the issue, the Boards concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.
E. Other Factors Deemed Relevant by the Board Members The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Funds, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Funds, including securities lending and cash management services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that it had considered the investment by BlackRock’s funds in exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.
In connection with its consideration of the Advisory Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar practices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
The Boards noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that their Fund’s fees and expenses are too high or if they are dissatisfied with the performance of their Fund.
The Boards also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included completion of the refinancing of auction rate preferred securities; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: continuing communications concerning the refinancing efforts related to auction rate preferred securities; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.
Conclusion
Each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreements between the Manager and its Fund for a one-year term ending June 30, 2015. Based upon their evaluation of all of the aforementioned factors in their totality, the Boards, including the Independent Board Members, were satisfied that the terms of the Advisory Agreements were fair and reasonable and in the best interest of the Funds and their shareholders. In arriving at their decision to approve the Advisory Agreements, the Boards did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Funds reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.
| 70 | ANNUAL REPORT | JULY 31, 2014 |
| Automatic Dividend Reinvestment Plans |
Pursuant to each Fund’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Fund’s shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.
After the Funds declare a dividend or determine to make a capital gain distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Funds (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Fund’s primary exchange (“open-market purchases”) . If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.
Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.
The Reinvestment Plan Agent’s fees for the handling of the reinvestment of dividends and distributions will be paid by each Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions.
Each Fund reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan. However, each Fund reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants in MPA that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. Participants in MUC, MUJ, MFT, MIY and MJI that request a sale of shares are subject to a $0.02 per share sold brokerage commission. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A., through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 30170, College Station, TX 77842-3170, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 211 Quality Circle, Suite 210, College Station, TX 77845.
| ANNUAL REPORT | JULY 31, 2014 | 71 |
| Officers and Directors |
Name, Address1 and Year of Birth | Position(s) Held with Funds | Length of Time | Principal Occupation(s) During Past Five Years | Number of BlackRock- investment Portfolios | Public Directorships | |||||
| Independent Directors2 | ||||||||||
Richard E. Cavanagh
1946 | Chairman of the Board and Director | Since 2007 | Trustee, Aircraft Finance Trust from 1999 to 2009; Director, The Guardian Life Insurance Company of America since 1998; Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007. | 82 RICs consisting of 82 Portfolios | None | |||||
Karen P. Robards
1950 | Vice Chairperson of the Board, Chairperson of the Audit Committee and Director | Since 2007 | Partner of Robards & Company, LLC (financial advisory firm) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Director of Care Investment Trust, Inc. (health care real estate investment trust) from 2007 to 2010; Investment Banker at Morgan Stanley from 1976 to 1987. | 82 RICs consisting of 82 Portfolios | AtriCure, Inc. (medical devices); Greenhill & Co., Inc. | |||||
Michael J. Castellano
1946 | Director and Member of the Audit Committee | Since 2011 | Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) since 2009; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012. | 82 RICs consisting of 82 Portfolios | None | |||||
Frank J. Fabozzi4
1948 | Director and Member of the Audit Committee | Since 2007 | Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011; Adjunct Professor of Finance and Becton Fellow, Yale University from 1994 to 2006. | 115 RICs consisting of 237 Portfolios | None | |||||
Kathleen F. Feldstein
1941 | Director | Since 2007 | President of Economics Studies, Inc. (private economic consulting firm) since 1987; Chair, Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus thereof since 2008; Member of the Board of Partners Community Healthcare, Inc. from 2005 to 2009; Member of the Corporation of Partners HealthCare since 1995; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting Committee to the Harvard University Art Museum since 2003; Director, Catholic Charities of Boston since 2009. | 82 RICs consisting of 82 Portfolios | The McClatchy Company (publishing) | |||||
James T. Flynn
1939 | Director and Member of the Audit Committee | Since 2007 | Chief Financial Officer of JPMorgan & Co., Inc. from 1990 to 1995. | 82 RICs consisting of 82 Portfolios | None | |||||
Jerrold B. Harris
1942 | Director | Since 2007 | Trustee, Ursinus College since 2000; Director, Ducks Unlimited, Inc. (conservations) since 2013; Director, Troemner LLC (scientific equipment) since 2000; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999. | 82 RICs consisting of 82 Portfolios | BlackRock Kelso Capital Corp. (business development company) | |||||
R. Glenn Hubbard
1958 | Director | Since 2007 | Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988. | 82 RICs consisting of 82 Portfolios | ADP (data and information services); Metropolitan Life Insurance Company (insurance) | |||||
| 72 | ANNUAL REPORT | JULY 31, 2014 |
| Officers and Directors (continued) |
Name, Address1 and Year of Birth | Position(s) Held with Funds | Length of Time | Principal Occupation(s) During Past Five Years | Number of BlackRock- investment Portfolios | Public Directorships | |||||
| Independent Directors2 (concluded) | ||||||||||
W. Carl Kester
1951 | Director and Member of the Audit Committee | Since 2007 | George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008, Deputy Dean for Academic Affairs from 2006 to 2010; Chairman of the Finance Unit, 2005 to 2006; Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981. | 82 RICs consisting of 82 Portfolios | None | |||||
1 The address of each Officer and Director is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055. | ||||||||||
2 Independent Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 74. The maximum age limitation may be waived as to any Director by action of a majority of the Directors upon finding good cause thereof. In 2013, the Board of Directors unanimously approved extending the mandatory retirement age for James T. Flynn by one additional year, which the Board believed would be in the best interest of shareholders. Mr. Flynn can serve until December 31 of the year in which he turns 75. Mr. Flynn turns 75 in 2014. | ||||||||||
3 Date shown is the earliest date a person has served for the Funds covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Directors as joining the Funds’ board in 2007, those Directors first became members of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Kathleen F. Feldstein, 2005; James T. Flynn, 1996; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995; and Karen P. Robards, 1998. 4 Dr. Fabozzi is also a board member of the BlackRock Equity-Liquidity Complex. | ||||||||||
| Interested Directors5 | ||||||||||
Paul L. Audet
1953 | Director | Since 2011 | Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees since 2008; and Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005. | 144 RICs consisting of 334 Portfolios | None | |||||
Henry Gabbay
1947 | Director | Since 2007 | Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares (formerly BlackRock Band Allocation Target Shares) from 2005 to 2007; Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006. | 144 RICs consisting of 334 Portfolios. | None | |||||
5 Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Funds based on his position with BlackRock and its affiliates as well as his ownership of BlackRock securities. Mr. Gabbay is an “interested person” of the Funds based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of two complexes of BlackRock registered open-end funds, the BlackRock Equity-Liquidity Complex and the BlackRock Equity-Bond Complex. Interested Directors of the BlackRock Closed-End Complex serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Director by action of a majority of the Directors upon finding good cause thereof. | ||||||||||
| ANNUAL REPORT | JULY 31, 2014 | 73 |
| Officers and Directors (concluded) |
| Name, Address1 and Year of Birth | Position(s) Held with Funds | Length of Time Served | Principal Occupation(s) During Past Five Years | |||||||
| Officers2 | ||||||||||
John M. Perlowski
1964 | President and Chief Executive Officer | Since 2011 | Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009. | |||||||
Brendan Kyne
1977 | Vice President | Since 2009 | Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 2008 to 2009; Head of Americas Product Development for BlackRock since 2013; Head of Product Development and Management for BlackRock’s U.S. Retail Group from 2009 to 2013 and Co-head thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008. | |||||||
Robert W. Crothers
1981 | Vice President | Since 2012 | Director of BlackRock since 2011; Vice President of BlackRock from 2008 to 2010. | |||||||
Neal Andrews
1966 | Chief Financial Officer | Since 2007 | Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006. | |||||||
Jay Fife
1970 | Treasurer | Since 2007 | Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006. | |||||||
Charles Park
1967 | Chief Compliance Officer and Anti-Money Laundering Officer | Since 2014 | Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012. | |||||||
Janey Ahn
1975 | Secretary | Since 2012 | Director of BlackRock since 2009; Vice President of BlackRock from 2008 to 2009; Assistant Secretary of the Funds from 2008 to 2012. | |||||||
1 The address of each Officer and Trustee is c/o BlackRock, Inc., Park Avenue Plaza, 55 East 52nd Street, New York, NY 10055. | ||||||||||
2 Officers of the Funds serve at the pleasure of the Board. | ||||||||||
Effective June 6, 2014, Brian Kindelan resigned as Chief Compliance Officer and Anti-Money Laundering Officer of the Funds and Charles Park became Chief Compliance Officer and Anti-Money Laundering Officer of the Funds.
Investment Advisor Wilmington, DE 19809 | Custodians The Bank of | VRDP Tender and Paying | Accounting Agent State Street Bank and Trust Company Boston, MA 02110 | Legal Counsel Meagher & Flom LLP | ||||
Transfer Agent Common Shares: | VRDP Liquidity Providers New York, NY 10179
Bank of America, N.A.4 | Independent Registered Deloitte & Touche LLP | Address of the Funds Wilmington, DE 19809 | |||||
VRDP Remarketing Agents New York, NY 10179
Merrill Lynch, Pierce, New York, NY 10036 | ||||||||
1 For MPA. 2 For MUC, MUJ, MFT, MIY and MJI. 3 For MIY and MPA. 4 For MUJ and MJI. | ||||||||
| 74 | ANNUAL REPORT | JULY 31, 2014 |
| Additional Information | ||||
| Dividend Policy |
Each Fund’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the Funds may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any particular month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the dividends paid by the Funds for any particular month may be more or less than the amount of net investment income earned by the Funds during such month. The Funds’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.
| General Information |
The Funds do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.
During the period, there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
Electronic Delivery
Electronic copies of most financial reports are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Funds’ electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all investment advisors, banks or brokerages may offer this service.
Householding
The Funds will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 882-0052.
| ANNUAL REPORT | JULY 31, 2014 | 75 |
| Additional Information (continued) |
| General Information (concluded) |
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 882-0052 and (2) on the SEC’s website at http://www.sec.gov.
Availability of Fund Updates
BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to periodically check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
| Shelf Offering Program |
From time-to-time, each Fund may seek to raise additional equity capital through an equity shelf program (a “Shelf Offering”). In a Shelf Offering, a Fund may, subject to market conditions, raise additional equity capital by issuing new Common Shares from time to time in varying amounts at a net price at or above the Fund’s net asset value (“NAV”) per Common Share (calculated within 48 hours of pricing). While any such Shelf Offering may allow a Fund to pursue additional investment opportunities without the need to sell existing portfolio investments, it could also entail risks — including that the issuance of additional Common Shares may limit the extent to which the Common Shares are able to trade at a premium to NAV in the secondary market. The Funds have not filed a registration statement with respect to any Shelf Offerings. This report is not an offer to sell Fund Common Shares and is not a solicitation of an offer to buy Fund Common Shares. If a Fund files a registration statement with respect to any Shelf Offering, the prospectus contained therein will contain more complete information about the Fund and should be read carefully before investing.
| 76 | ANNUAL REPORT | JULY 31, 2014 |
| Additional Information (concluded) | ||||
| BlackRock Privacy Principles |
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
| ANNUAL REPORT | JULY 31, 2014 | 77 |
| Proxy Results | ||||
The Annual Meeting of Shareholders was held on July 30, 2014 for shareholders of record on June 3, 2014, to elect director nominees for each Fund. There were no broker non-votes with regard to any of the Funds.
| Paul L. Audet | Michael J. Castellano | Richard E. Cavanagh | ||||||||||||||||||||||||||||||||||
Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | ||||||||||||||||||||||||||||
MUC | 35,313,878 | 1,261,791 | 0 | 35,428,251 | 1,147,418 | 0 | 35,517,694 | 1,057,975 | 0 | |||||||||||||||||||||||||||
MUJ | 18,785,649 | 477,528 | 0 | 18,738,334 | 524,843 | 0 | 18,783,064 | 480,113 | 0 | |||||||||||||||||||||||||||
MFT | 7,339,922 | 361,319 | 0 | 7,323,361 | 377,880 | 0 | 7,337,859 | 363,382 | 0 | |||||||||||||||||||||||||||
MJI | 7,249,349 | 146,953 | 0 | 7,249,347 | 146,955 | 0 | 7,191,527 | 204,775 | 0 | |||||||||||||||||||||||||||
MPA | 9,998,981 | 235,360 | 0 | 9,929,640 | 304,701 | 0 | 9,930,642 | 303,699 | 0 | |||||||||||||||||||||||||||
MIY | 13,864,314 | 794,922 | 0 | 13,949,583 | 709,653 | 0 | 13,947,226 | 712,010 | 0 | |||||||||||||||||||||||||||
| Frank J. Fabozzi¹ | Kathleen F. Feldstein | James T. Flynn | ||||||||||||||||||||||||||||||||||
Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | ||||||||||||||||||||||||||||
MUC | 2,540 | 0 | 0 | 35,381,576 | 1,194,093 | 0 | 35,187,502 | 1,388,167 | 0 | |||||||||||||||||||||||||||
MUJ | 1,727 | 0 | 0 | 18,655,302 | 607,875 | 0 | 18,742,368 | 520,809 | 0 | |||||||||||||||||||||||||||
MFT | 565 | 0 | 0 | 7,314,874 | 386,367 | 0 | 7,336,097 | 365,144 | 0 | |||||||||||||||||||||||||||
MJI | 644 | 0 | 0 | 7,244,668 | 151,634 | 0 | 7,249,585 | 146,717 | 0 | |||||||||||||||||||||||||||
MPA | 663 | 0 | 0 | 9,786,533 | 447,808 | 0 | 9,829,732 | 404,609 | 0 | |||||||||||||||||||||||||||
MIY | 1,446 | 0 | 0 | 13,881,954 | 777,281 | 0 | 13,940,623 | 718,612 | 0 | |||||||||||||||||||||||||||
| Henry Gabbay | Jerrold B. Harris | R. Glenn Hubbard | ||||||||||||||||||||||||||||||||||
Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | ||||||||||||||||||||||||||||
MUC | 35,302,760 | 1,272,909 | 0 | 35,438,597 | 1,137,072 | 0 | 35,457,876 | 1,117,793 | 0 | |||||||||||||||||||||||||||
MUJ | 18,750,984 | 512,193 | 0 | 18,707,373 | 555,804 | 0 | 18,696,501 | 566,676 | 0 | |||||||||||||||||||||||||||
MFT | 7,337,859 | 363,382 | 0 | 7,300,453 | 400,788 | 0 | 7,324,722 | 376,519 | 0 | |||||||||||||||||||||||||||
MJI | 7,249,349 | 146,953 | 0 | 7,249,349 | 146,953 | 0 | 7,191,527 | 204,775 | 0 | |||||||||||||||||||||||||||
MPA | 9,930,425 | 303,916 | 0 | 9,878,156 | 356,185 | 0 | 9,944,440 | 289,901 | 0 | |||||||||||||||||||||||||||
MIY | 13,874,671 | 784,565 | 0 | 13,942,572 | 716,663 | 0 | 13,723,460 | 935,776 | 0 | |||||||||||||||||||||||||||
| W. Carl Kester¹ | Karen P. Robards | |||||||||||||||||||||||||||||||||||
Votes For | Votes Withheld | Abstain | Votes For | Votes Withheld | Abstain | |||||||||||||||||||||||||||||||
MUC | 2,540 | 0 | 0 | 35,352,547 | 1,223,122 | 0 | ||||||||||||||||||||||||||||||
MUJ | 1,727 | 0 | 0 | 18,706,671 | 556,506 | 0 | ||||||||||||||||||||||||||||||
MFT | 565 | 0 | 0 | 7,337,783 | 363,458 | 0 | ||||||||||||||||||||||||||||||
MJI | 644 | 0 | 0 | 7,245,140 | 151,162 | 0 | ||||||||||||||||||||||||||||||
MPA | 663 | 0 | 0 | 9,947,624 | 286,717 | 0 | ||||||||||||||||||||||||||||||
MIY | 1,446 | 0 | 0 | 13,891,992 | 767,244 | 0 | ||||||||||||||||||||||||||||||
| ¹ | Voted on by holders of preferred shares only. |
| 78 | ANNUAL REPORT | JULY 31, 2014 |
This report is intended for existing shareholders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in the short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.
| MHMYINS6-7/14-AR |
|
| Item 2 – | Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com. | |
| Item 3 – | Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: | |
| Michael Castellano | ||
| Frank J. Fabozzi | ||
| James T. Flynn | ||
| W. Carl Kester | ||
| Karen P. Robards | ||
| The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR. | ||
| Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements. | ||
| Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization. | ||
| Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors. | ||
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| Item 4 – | Principal Accountant Fees and Services | |
| The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund: | ||
(a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees3 | |||||||||||||
| Entity Name | Current Fiscal Year End | Previous Fiscal Year End | Current Fiscal Year End | Previous Fiscal Year End | Current Fiscal Year End | Previous Fiscal Year End | Current Fiscal Year End | Previous Fiscal Year End | ||||||||
| BlackRock MuniYield Investment Quality Fund, Inc. | $31,363 | $30,663 | $0 | $0 | $10,600 | $10,600 | $0 | $0 | ||||||||
The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):
| Current Fiscal Year End | Previous Fiscal Year End | |||
(b) Audit-Related Fees1 | $0 | $0 | ||
(c) Tax Fees2 | $0 | $0 | ||
(d) All Other Fees3 | $2,555,000 | $2,865,000 |
1 The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.
2 The nature of the services includes tax compliance, tax advice and tax planning.
3 Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the registered closed-end funds and some of the registered open-end funds advised by BlackRock.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.
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Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:
| Entity Name | Current Fiscal Year End | Previous Fiscal Year End | ||
| BlackRock MuniYield Investment Quality Fund, Inc. | $10,600 | $10,600 |
Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,555,000 and $2,865,000, respectively, were billed by D&T to the Investment Adviser.
(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5 – | Audit Committee of Listed Registrants | |||
| (a) | The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)): | |||
| Michael Castellano | ||||
| Frank J. Fabozzi | ||||
| James T. Flynn | ||||
| W. Carl Kester | ||||
| Karen P. Robards | ||||
| (b) | Not Applicable | |||
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| Item 6 – | Investments | |||
| (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form. | ||||
| (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. | ||||
| Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov. | |||
| Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – as of July 31, 2014. | |||
| (a)(1) | The registrant is managed by a team of investment professionals comprised of Robert Sneeden, Director at BlackRock, Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, and Walter O’Connor, CFA, Managing Director at BlackRock. Each is a member of BlackRock’s municipal tax-exempt management group. Each is jointly responsible for the day-to-day management of the registrant’s portfolio, which includes setting the registrant’s overall investment strategy, overseeing the management of the registrant and/or selection of its investments. Messrs. Sneeden, Jaeckel and O’Connor have been members of the registrant’s portfolio management team since 2002, 2006 and 2006, respectively. | |||
| Portfolio Manager | Biography | |
| Theodore R. Jaeckel, Jr., CFA | Managing Director of BlackRock since 2006; Managing Director of Merrill Lynch Investment Managers, L.P. (“MLIM”) from 2005 to 2006; Director of MLIM from 1997 to 2005. | |
| Walter O’Connor, CFA | Managing Director of BlackRock since 2006; Managing Director of MLIM from 2003 to 2006; Director of MLIM from 1998 to 2003. |
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| Robert Sneeden | Director of BlackRock since 2006; Vice President of MLIM from 1998 to 2006. |
(a)(2) As of July 31, 2014:
(ii) Number of Other Accounts Managed and Assets by Account Type | (iii) Number of Other Accounts and Assets for Which Advisory Fee is Performance-Based | |||||||||||
(i) Name of Portfolio Manager | Other Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | Other Registered Investment Companies | Other Pooled Investment Vehicles | Other Accounts | ||||||
Theodore R. Jaeckel, Jr., CFA | 64 | 0 | 0 | 0 | 0 | 0 | ||||||
| $26.19 Billion | $0 | $0 | $0 | $0 | $0 | |||||||
Walter O’Connor, CFA | 64 | 0 | 0 | 0 | 0 | 0 | ||||||
| $26.19 Billion | $0 | $0 | $0 | $0 | $0 | |||||||
Robert Sneeden | 11 | 0 | 0 | 0 | 0 | 0 | ||||||
| $2.00 Billion | $0 | $0 | $0 | $0 | $0 | |||||||
| (iv) | Portfolio Manager Potential Material Conflicts of Interest |
BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock , Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that a portfolio manager may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Such portfolio managers may therefore be entitled to receive a portion of any incentive fees earned on such accounts.
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Currently, the portfolio managers of this fund are not entitled to receive a portion of incentive fees of other accounts.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.
(a)(3) As of July 31, 2014:
Portfolio Manager Compensation Overview
The discussion below describes the portfolio managers’ compensation as of July 31, 2014.
BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.
Base compensation. Generally, portfolio managers receive base compensation based on their position with the firm.
Discretionary Incentive Compensation. Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Funds and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are: a combination of market-based indices (e.g., Standard & Poor’s Municipal Bond Index), certain customized indices and certain fund industry peer groups.
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Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. For some portfolio managers, discretionary incentive compensation is also distributed in deferred cash awards that notionally track the returns of select BlackRock investment products they manage and that vest ratably over a number of years. The BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc. common stock. Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of discretionary incentive compensation in BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results.
Long-Term Incentive Plan Awards — From time to time long-term incentive equity awards are granted to certain key employees to aid in retention, align their interests with long-term shareholder interests and motivate performance. Equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in BlackRock, Inc. common stock. Messrs. Jaeckel and O’Connor have unvested long-term incentive awards.
Deferred Compensation Program — A portion of the compensation paid to eligible United States-based BlackRock employees may be voluntarily deferred at their election for defined periods of time into an account that tracks the performance of certain of the firm’s investment products. Any portfolio manager who is either a managing director or director at BlackRock with compensation above a specified threshold is eligible to participate in the deferred compensation program.
Other Compensation Benefits. In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:
Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($260,000 for 2014). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.
8
(a)(4) Beneficial Ownership of Securities – As of July 31, 2014.
| Portfolio Manager | Dollar Range of Equity Securities of the Fund Beneficially Owned | |
Theodore R. Jaeckel, Jr., CFA
| None | |
Walter O’Connor, CFA
| None | |
Robert Sneeden
| None |
| (b) Not Applicable | ||
| Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report. | |
| Item 10 – | Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures. | |
| Item 11 – | Controls and Procedures | |
| (a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended. | ||
| (b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. | ||
| Item 12 – | Exhibits attached hereto | |
| (a)(1) – Code of Ethics – See Item 2 | ||
| (a)(2) – Certifications – Attached hereto | ||
| (a)(3) – Not Applicable | ||
| (b) – Certifications – Attached hereto | ||
9
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 MuniYield Investment Quality Fund, Inc.
By: | /s/ John M. Perlowski | |||
| John M. Perlowski | ||||
| Chief Executive Officer (principal executive officer) of | ||||
| BlackRock MuniYield Investment Quality Fund, Inc. | ||||
Date: October 1, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ John M. Perlowski | |||
| John M. Perlowski | ||||
| Chief Executive Officer (principal executive officer) of | ||||
| BlackRock MuniYield Investment Quality Fund, Inc. | ||||
Date: October 1, 2014
By: | /s/ Neal J. Andrews | |||
| Neal J. Andrews | ||||
| Chief Financial Officer (principal financial officer) of | ||||
| BlackRock MuniYield Investment Quality Fund, Inc. | ||||
Date: October 1, 2014
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