BLACKROCK MUNIYIELD QUALITY FUND III, INC.
Table of Contents

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 811-06540

 

Name of Fund:   BlackRock MuniYield Quality Fund III, Inc. (MYI)
Fund Address:   100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock MuniYield Quality

Fund III, 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: 07/31/2013

Date of reporting period: 01/31/2013


Table of Contents
Item 1     Report to Stockholders


Table of Contents

JANUARY 31, 2013

 

 

 

 

 

SEMI-ANNUAL REPORT (UNAUDITED)

 

   

LOGO

 

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

BlackRock MuniYield California Quality Fund, Inc. (MCA)

BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


Table of Contents
Table of Contents     

 

 

     Page  

Dear Shareholder

    3   

Semi-Annual Report:

 

The Benefits and Risks of Leveraging

    4   

Derivative Financial Instruments

    4   

Municipal Market Overview

    5   

Fund Summaries

    6   

Financial Statements:

 

Schedules of Investments

    16   

Statements of Assets and Liabilities

    41   

Statements of Operations

    42   

Statements of Changes in Net Assets

    43   

Statements of Cash Flows

    45   

Financial Highlights

    46   

Notes to Financial Statements

    51   

Officers and Directors

    60   

Additional Information

    61   

 

                
2    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Dear Shareholder

 

Financial markets have substantially improved over the past year, providing investors with considerable relief compared to where things were during the global turmoil seen in 2011. Despite a number of headwinds, higher-risk asset classes boasted strong returns as investors sought meaningful yields in the ongoing low-interest-rate environment.

Rising investor confidence drove equity markets higher in early 2012, while climbing US Treasury yields pressured higher-quality fixed income assets. The second quarter, however, brought a market reversal as Europe’s debt crisis boiled over once again. Political instability in Greece and severe deficit and liquidity problems in Spain raised the specter of a euro collapse. Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, emerged as a particular concern. But as the outlook for the global economy worsened, investors grew increasingly optimistic that the world’s largest central banks would soon intervene to stimulate growth. This theme, along with the European Central Bank’s (“ECB’s”) firm commitment to preserve the euro currency bloc, drove most asset classes higher through the summer. Policy relief came in early September, when the ECB announced its decision to support the eurozone’s troubled peripheral countries with unlimited purchases of short term sovereign debt. Days later, the US Federal Reserve announced its own much-anticipated stimulus package.

Although financial markets world-wide were buoyed by accommodative monetary policy, risk assets weakened in the fall. Global trade slowed as many European countries fell into recession and growth continued to decelerate in China, where a once-a-decade leadership change compounded uncertainty. In the United States, stocks slid on lackluster corporate earnings reports and market volatility rose during the lead up to the US Presidential election. In the post-election environment, investors grew increasingly concerned over automatic tax increases and spending cuts that had been scheduled to take effect at the beginning of 2013 (known as the “fiscal cliff”). There was widespread fear that the fiscal cliff would push the nation into recession unless politicians could agree upon alternate measures to reduce the deficit before the end of 2012. Worries that bipartisan gridlock would preclude a timely budget deal triggered higher levels of volatility in financial markets around the world in the months leading up to the last day of the year. Ultimately, the United States averted the worst of the fiscal cliff with a last-minute tax deal; however, decisions relating to spending cuts and the debt ceiling continue to weigh on investors’ minds.

Investors shook off the nerve-wracking finale to 2012 and began the New Year with a powerful equity rally. Key indicators signaled broad-based improvements in the world’s major economies, particularly China. In the United States, economic data was mixed, but pointed to a continued recovery. The risk of inflation remained low and the US Federal Reserve showed no signs of curtailing its stimulus programs. Additionally, January saw the return of funds that investors had pulled out of the market in late 2012 amid uncertainty about tax-rate increases ahead of the fiscal cliff deadline. In fixed income markets, rising US Treasuries yields dragged down higher-quality asset classes, while high yield bonds continued to benefit from investor demand for yield in the low-rate environment.

On the whole, riskier asset classes outperformed lower-risk investments for the 6- and 12-month periods ended January 31, 2013. International equities were the strongest performers. US stocks and high yield bonds also generated significant returns. Emerging market equities were particularly volatile, but still posted gains for both the 6- and 12-month periods. US Treasury yields remained low, but experienced increasing volatility in recent months. Rising yields near the end of the period resulted in negative returns for Treasuries and investment-grade bonds for the 6-month period. Tax-exempt municipal bonds, however, benefited from favorable supply-and-demand dynamics. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

While investors continue to face a host of unknowns, we believe new opportunities abound. BlackRock was built to provide the global market insight, breadth of capabilities, unbiased investment advice and deep risk management expertise these times require. We encourage you to visit www.blackrock.com/newworld for more information.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

“Despite a number of headwinds, higher-risk asset classes boasted strong returns as investors sought meaningful yields in the ongoing low-interest-rate environment.”

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of January 31, 2013  
    6-month     12-month  

US large cap equities
(S&P 500® Index)

    9.91     16.78

US small cap equities
(Russell 2000® Index)

    15.51        15.47   

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

    18.61        17.25   

Emerging market equities
(MSCI Emerging Markets Index)

    13.11        7.64   

3-month Treasury bill
(BofA Merrill Lynch
3-Month US Treasury
Bill Index)

    0.07        0.11   

US Treasury securities
(BofA Merrill Lynch 10-Year US Treasury Index)

    (2.90     1.28   

US investment grade
bonds (Barclays US Aggregate Bond Index)

    (0.29     2.59   

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

    2.21        5.50   

US high yield bonds

(Barclays US Corporate High Yield 2% Issuer Capped Index)

    7.37        13.87   
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


Table of Contents
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.

To obtain leverage, the Funds issue Variable Rate Demand Preferred Shares (“VRDP Shares”) or Variable Rate Muni Term Preferred Shares (“VMTP Shares”) (VRDP Shares and VMTP Shares are collectively referred to as “Preferred Shares”). Preferred Shares pay dividends at prevailing short-term interest rates, and the Funds invest the proceeds in long-term municipal bonds. In general, the concept of leveraging is based on the premise that the financing cost of assets to be obtained from leverage, which will be based on short-term interest rates, will normally be lower than the income earned by each Fund on its longer-term portfolio investments. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, each 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. However, in order to benefit shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. If the yield curve becomes negatively sloped, meaning short-term interest rates exceed long-term interest rates, income to shareholders will be lower than if the Funds had not used leverage.

To illustrate these concepts, assume a Fund’s Common Shares capitalization is $100 million and it issues Preferred Shares for an additional $50 million, creating a total value of $150 million available for investment in long-term municipal bonds. If prevailing short-term interest rates are 3% and long-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, the Fund pays dividends on the $50 million of Preferred Shares based on the lower short-term interest rates. At the same time, the securities purchased by the Fund with assets received from Preferred Shares issuance earn income based on long-term interest rates. In this case, the dividends paid to holders of Preferred Shares (“Preferred Shareholders”) are significantly lower than the income earned on the Fund’s long-term investments, and therefore the holders of Common Shares (“Common Shareholders”) are the beneficiaries of the incremental net income.

If short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental net income pickup will be reduced or eliminated completely. Furthermore, if prevailing short-term interest rates rise above long-term interest rates, the yield curve has a negative slope. In this case, the Fund pays higher short-term interest rates whereas the Fund’s total portfolio earns income based on lower long-term interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the redemption value of the Funds’ Preferred Shares does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Funds’ NAVs positively or negatively in addition to the impact on Fund performance from leverage from Preferred Shares discussed above.

The Funds may also leverage their assets through the use of tender option bond trusts (“TOBs”), as described in Note 1 of the Notes to Financial Statements. TOB investments generally will provide the Funds with economic benefits in periods of declining short-term interest rates, but expose the Funds to risks during periods of rising short-term interest rates similar to those associated with Preferred Shares issued by the Funds, as described above. Additionally, fluctuations in the market value of municipal bonds deposited into the TOB trust may adversely affect each Fund’s NAV per share.

The use of leverage may enhance opportunities for increased income to the Funds and Common Shareholders, but as described above, it also creates risks as short- or long-term interest rates fluctuate. Leverage also will generally cause greater changes in the Funds’ NAVs, market prices and dividend rates than comparable portfolios without leverage. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, the Funds’ net income will be greater than if leverage had not been used. Conversely, if the income from the securities purchased is not sufficient to cover the cost of leverage, each Fund’s net income will be less than if leverage had not been used, and therefore the amount available for distribution to Common Shareholders will be reduced. Each 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 a Fund to incur losses. The use of leverage may limit each Fund’s ability to invest in certain types of securities or use certain types of hedging strategies, such as in the case of certain restrictions imposed by rating agencies that rate the Preferred Shares issued by the Funds. Each 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.

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Funds are permitted to issue senior securities in the form of equity securities (e.g., Preferred Shares) up to 50% of their total managed assets (each Fund’s total assets less the sum of its accrued liabilities). In addition, each Fund voluntarily limits its economic leverage to 45% of its total managed assets. As of January 31, 2013, the Funds had economic leverage from Preferred Shares and/or TOBs as a percentage of their total managed assets as follows:

 

     Percent of
Economic
Leverage
 

MUE

    39

MCA

    39

MYM

    36

MYN

    38

MYI

    37

 

Derivative Financial Instruments     

 

The Funds may invest in various derivative financial instruments, including financial futures contracts and options, as specified in Note 2 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 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.

 

                
4    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Municipal Market Overview     

 

For the Reporting Period Ended January 31, 2013      

Municipal bonds delivered strong performance during the reporting period ended January 31, 2013. Market conditions remained favorable even though supply picked up considerably in 2012. As the fiscal situation for municipalities continued to improve, the rate of new issuance came back in line with historical averages. Total new issuance for 2012 was $373 billion, nearly 30% greater than the $288 billion issued in 2011. In the first month of 2013, issuance exceeded market expectations at $26.5 billion, which is roughly 50% higher than January 2012. It is important to note that refunding activity has accounted for a large portion of supply during this period as issuers refinanced their debt at lower interest rates. Refunding issues are easily absorbed by the market because when seasoned bonds are refinanced, issuers re-enter the market via cheaper and predominantly shorter-maturity financing. Investors, in turn, support these new issues with the proceeds from bond maturities or coupon payments.

 

LOGO    
 

S&P Municipal
Bond Index

Total Returns as of
January 31, 2013
   6 months : +2.21%
12 months : +5.50%

   

Increased supply was met with strong demand during the period as investors were starved for yield in a low-rate environment. Investors poured into municipal bond mutual funds, particularly those with long-duration and high-yield investment mandates as they tend to provide higher levels of income. For the 12 months ended January 31, 2013, municipal bond fund inflows totaled $51.75 billion (according to the Investment Company Institute). Considering the extensive period of significant outflows from late 2010 through mid-2011, these robust inflows are telling of the complete turnaround in confidence and investors’ avid search for yield and income.

Municipal market supply-and-demand technicals typically strengthen considerably upon the conclusion of tax season as net negative supply takes hold (i.e., more bonds are being called and maturing than being issued) and this theme remained intact for 2012. In the spring, a resurgence of concerns about Europe’s financial crisis and weakening US economic data drove municipal bond yields lower and prices higher. In addition to income and capital preservation, investors were drawn to the asset class for its relatively low volatility. As global sentiment improved over the summer, municipal bonds outperformed the more volatile US Treasury market. The months of October and November, typically a period of waning demand and weaker performance, were positive for the municipal market in 2012 as supply-and-demand technicals continued to be strong going into the fourth quarter. Additionally, the perception of higher taxes given the outcome of the US Presidential election provided further support to municipal bond prices in November.

Seasonal year-end selling pressure typically results in elevated volatility in the final month of the year; however, December of 2012 was more volatile than the historical norm due to a partial unwinding of November’s rally coupled with uncertainty around the fiscal cliff (i.e., automatic tax increases and spending cuts that had been scheduled to take effect at the beginning of 2013 unless politicians could agree upon alternate measures to reduce the deficit before the end of 2012). Positive performance in January 2013 was the product of renewed demand in an asset class known for its lower volatility and preservation of earnings as tax rates rise. For the month, municipal bonds significantly outperformed the US Treasury market, where yields rose on an uptick in US economic data. As the period drew to a close, municipal market participants were focused on Washington and the scheduled spending cuts as well as the upcoming tax season.

From January 31, 2012 to January 31, 2013, yields declined by 28 basis points (“bps”) to 2.86% on AAA-rated 30-year municipal bonds, but rose 14 bps to 1.82% on 10-year bonds and 8 bps to 0.79% on 5-year bonds (as measured by Thomson Municipal Market Data). Overall, the municipal yield curve remained relatively steep, but flattened over the 12-month time period as the spread between 2- and 30-year maturities tightened by 29 bps, while the spread widened in the 2- to 10-year range 13 bps.

The fundamental picture for municipalities continues to improve. Austerity and de-leveraging have been the general themes across the country as states set their budgets, although a small number of states continue to rely on a “kick-the-can” approach to close their budget gaps, using aggressive revenue projections and accounting gimmicks. It has been over two years since the fiscal problems plaguing state and local governments first became highly publicized and the prophecy of widespread defaults across the municipal market has not materialized. BlackRock maintains the view that municipal bond defaults will be minimal and remain in the periphery and the overall market is fundamentally sound. We continue to recognize that careful credit research and security selection remain imperative amid uncertainty in this 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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    5


Table of Contents
Fund Summary as of January 31, 2013    BlackRock MuniHoldings Quality Fund II, Inc.

 

Fund Overview      

BlackRock MuniHoldings Quality Fund II, Inc.’s (MUE) (the “Fund”) investment objective is to provide shareholders with current income exempt from federal 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). 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      

For the six-month period ended January 31, 2013, the Fund returned 1.96% based on market price and 4.04% based on NAV. For the same period, the closed-end Lipper General & Insured Municipal Debt Funds (Leveraged) category posted an average return of 3.22% based on market price and 4.25% based on NAV. All returns reflect reinvestment of dividends. The Fund’s premium to NAV, which narrowed 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. The Fund’s holdings in the health and transportation sectors contributed positively to performance for the period. Holdings of lower-quality credits in those sectors were the strongest contributors due to strong demand from investors seeking higher-yielding investments in the low interest rate environment. Conversely, exposure to Puerto Rico sales tax bonds had a negative impact on performance as the continued decline of Puerto Rico’s economy and concerns about credit rating agency downgrades resulted in falling prices across all Puerto Rico securities.

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”)

  MUE

Initial Offering Date

  February 26, 1999

Yield on Closing Market Price as of January 31, 2013 ($15.42)1

  5.49%

Tax Equivalent Yield2

  9.70%

Current Monthly Distribution per Common Share3

  $0.0705

Current Annualized Distribution per Common Share3

  $0.8460

Economic Leverage as of January 31, 20134

  39%

 

  1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

  2   

Tax equivalent yield assumes the maximum marginal federal 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 4.

 

                
6    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
     BlackRock MuniHoldings Quality Fund II, Inc.

 

 

Market Price and Net Asset Value      

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        1/31/13        7/31/12        Change      High        Low  

Market Price

     $ 15.42         $ 15.55           (0.84 )%     $ 16.22         $ 14.70   

Net Asset Value

     $ 15.36         $ 15.18           1.19    $ 15.89         $ 14.95   

The following charts show the sector allocation, credit quality allocation and call/maturity structure of the Fund’s long-term investments:

 

Sector Allocation              
     1/31/13     7/31/12  

County/City/Special District/School District

    28     28

Transportation

    27        21   

Utilities

    15        17   

State

    10        15   

Health

    10        10   

Education

    8        6   

Housing

    1        2   

Tobacco

    1        1   

 

Call/Maturity Structure2       

Calendar Year Ended December 31,

 

2013

      

2014

      5

2015

    2   

2016

    2   

2017

    4   

 

  2   

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

 

Credit Quality Allocation1              
     1/31/13     7/31/12  

AAA/Aaa

    12     16

AA/Aa

    62        63   

A

    26        20   

BBB/Baa

           1   

 

  1   

Using the higher of Standard & Poor’s (“S&P’s”) or Moody’s Investors Service (“Moody’s”) ratings.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    7


Table of Contents
Fund Summary as of January 31, 2013    BlackRock MuniYield California Quality Fund, Inc.

 

Fund Overview      

BlackRock MuniYield California Quality Fund, Inc.’s (MCA) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal and California 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 California 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      

For the six-month period ended January 31, 2013, the Fund returned 2.52% based on market price and 3.82% based on NAV. For the same period, the closed-end Lipper California Municipal Debt Funds category posted an average return of 4.12% based on market price and 4.74% 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. The Fund’s concentration of holdings within the 20- to 25-year maturity range contributed positively to performance, as rates declined in that segment of the municipal yield curve. Investments in the health, education, transportation and utilities sectors were strong contributors as these segments outperformed the broader tax-exempt market during the period. Positive results also came from purchases of zero-coupon bonds that Fund management had identified as undervalued. In addition, exposure to higher-quality essential service revenue bonds enhanced performance. The Fund did not, however, hold exposure to the tobacco sector, which posted exceptional gains during 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

  MCA

Initial Offering Date

  October 30, 1992

Yield on Closing Market Price as of January 31, 2013 ($16.55)1

  5.51%

Tax Equivalent Yield2

  9.73%

Current Monthly Distribution per Common Share3

  $0.076

Current Annualized Distribution per Common Share3

  $0.912

Economic Leverage as of January 31, 20134

  39%

 

  1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

  2   

Tax equivalent yield assumes the maximum marginal federal 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 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 4.

 

                
8    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
     BlackRock MuniYield California Quality Fund, Inc.

 

 

Market Price and Net Asset Value      

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

        1/31/13        7/31/12        Change      High        Low  

Market Price

     $ 16.55         $ 16.59           (0.24)    $ 17.19         $ 15.76   

Net Asset Value

     $ 16.77         $ 16.60           1.02    $ 17.18         $ 16.36   

The following charts show the sector allocation, credit quality allocation and call/maturity structure of the Fund’s long-term investments:

 

 

Sector Allocation              
    

1/31/13

   

7/31/12

 

County/City/Special District/School District

    38     42

Utilities

    25        26   

Education

    12        10   

Transportation

    10        8   

Health

    10        10   

State

    4        4   

Corporate

    1          

 

Call/Maturity Structure2       

Calendar Year Ended December 31,

 

2013

    4

2014

    1   

2015

    17   

2016

    9   

2017

    16   

 

  2   

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

 

Credit Quality Allocation1              
    

1/31/13

   

7/31/12

 

AAA/Aaa

    12     11

AA/Aa

    72        76   

A

    16        13   

 

  1  

Using the higher of S&P’s or Moody’s ratings.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    9


Table of Contents
Fund Summary as of January 31, 2013    BlackRock MuniYield Michigan Quality Fund II, Inc.

 

Fund Overview      

BlackRock MuniYield Michigan Quality Fund II, Inc.’s (MYM) (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      

For the six-month period ended January 31, 2013, the Fund returned 4.09% based on market price and 3.29% based on NAV. For the same period, the closed-end Lipper Michigan Municipal Debt Funds category posted an average return of 5.47% based on market price and 3.27% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV. The Fund’s positive performance was derived largely from income accrual as well as spread compression (price appreciation) in certain sectors, most notably in health, education and school districts. Fund performance was negatively impacted by rising interest rates during the period (bond prices fall as rates rise). Exposure to Puerto Rico debt detracted from performance as concerns about credit rating agency downgrades resulted in wider credit spreads (falling prices) for Puerto Rico municipal securities broadly.

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

  MYM

Initial Offering Date

  February 28, 1992

Yield on Closing Market Price as of January 31, 2013 ($14.70)1

  5.63%

Tax Equivalent Yield2

  9.95%

Current Monthly Distribution per Common Share3

  $0.069

Current Annualized Distribution per Common Share3

  $0.828

Economic Leverage as of January 31, 20134

  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 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 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 4.

 

                
10    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
     BlackRock MuniYield Michigan Quality Fund II, Inc.

 

 

Market Price and Net Asset Value      

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

       

1/31/13

      

7/31/12

      

Change

    

High

      

Low

 

Market Price

     $ 14.70         $ 14.52           1.24    $ 15.74         $ 14.10   

Net Asset Value

     $ 15.21         $ 15.14           0.46    $ 15.63         $ 14.88   

The following charts show the sector allocation, credit quality allocation and call/maturity structure of the Fund’s long-term investments:

 

 

Sector Allocation              
    

1/31/13

   

7/31/12

 

County/City/Special District/School District

    27     27

Health

    16        18   

Utilities

    15        14   

State

    15        14   

Education

    10        12   

Transportation

    8        8   

Housing

    6        4   

Corporate

    3        3   

 

Call/Maturity Structure3       

Calendar Year Ended December 31,

 

2013

    6

2014

    10   

2015

    10   

2016

    5   

2017

    8   

 

  3   

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

 

Credit Quality Allocation1              
    

1/31/13

   

7/31/12

 

AAA/Aaa

    1     1

AA/Aa

    76        74   

A

    21        20   

BBB/Baa

    2        4   

Not Rated

    2       1   

 

  1   

Using the higher of S&P’s or Moody’s ratings.

 

  2   

The investment advisor has deemed certain of these non-rated securities to be of investment grade quality. As of January 31, 2013, the market value of these securities was $168,343, representing less than 1% of the Fund’s long-term investments.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    11


Table of Contents
Fund Summary as of January 31, 2013    BlackRock MuniYield New York Quality Fund, Inc.

 

Fund Overview      

BlackRock MuniYield New York Quality Fund, Inc.’s (MYN) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from federal income taxes and New York State and New York City personal 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 New York State and New York City 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      

For the six-month period ended January 31, 2013, the Fund returned 2.92% based on market price and 2.51% based on NAV. For the same period, the closed-end Lipper New York Municipal Debt Funds category posted an average return of 2.41% based on market price and 2.78% based on NAV. All returns reflect reinvestment of dividends. The Fund’s premium 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. The Fund benefited from its exposure to higher-yielding sectors and lower-quality bonds, which performed well due to strong demand from investors seeking higher-yielding investments in the low interest rate environment. The Fund’s heavy exposures to transportation and education boosted returns as these sectors performed well during the period. Holdings in the health sector also contributed positively. Additionally, the Fund benefited from the roll-down effect, whereby effective maturities become shorter with the passing of the year and therefore bonds are evaluated against lower yield levels, which, in a steep yield curve environment, results in higher prices. Detracting from performance was the Fund’s long duration posture (higher sensitivity to interest rates) as municipal bond yields moved slightly higher in most maturities, while remaining unchanged or moving slightly lower in the 20- to 25-year range. Also having a negative impact on results was the Fund’s exposure to the tax-backed sector (the Fund’s most significant credit exposure), which was one of the weaker performing sectors for the period. The strongest performing sector during the period was tobacco, in which the Fund held limited exposure. Exposure to Puerto Rico debt detracted from performance as concerns about credit rating agency downgrades resulted in wider credit spreads (falling prices) for Puerto Rico municipal securities broadly.

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

  MYN

Initial Offering Date

  February 28, 1992

Yield on Closing Market Price as of January 31, 2013 ($15.12)1

  5.63%

Tax Equivalent Yield2

  9.95%

Current Monthly Distribution per Common Share3

  $0.071

Current Annualized Distribution per Common Share3

  $0.852

Economic Leverage as of January 31, 20134

  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 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 4.

 

                
12    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
     BlackRock MuniYield New York Quality Fund, Inc.

 

 

Market Price and Net Asset Value      

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

       

1/31/13

      

7/31/12

      

Change

    

High

      

Low

 

Market Price

     $ 15.12         $ 15.11           0.07    $ 16.30         $ 14.63   

Net Asset Value

     $ 15.02         $ 15.07           (0.33 )%     $ 15.50         $ 14.81   

The following charts show the sector allocation, credit quality allocation and call/maturity structure of the Fund’s long-term investments:

 

 

Sector Allocation              
    

1/31/13

   

7/31/12

 

County/City/Special District/School District

    28     30

Transportation

    25        26   

Education

    14        13   

State

    13        10   

Utilities

    9        9   

Health

    6        6   

Housing

    3        3   

Corporate

    2        2   

Tobacco

           1   

 

Call/Maturity Structure3       

Calendar Year Ended December 31,

 

2013

    7

2014

    9   

2015

    14   

2016

    5   

2017

    10   

 

  3   

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

 

Credit Quality Allocation1              
    

1/31/13

   

7/31/12

 

AAA/Aaa

    13     13

AA/Aa

    49        48   

A

    27        29   

BBB/Baa

    8        9   

BB/Ba

    1        1   

Not Rated2

    2          

 

  1   

Using the higher of S&P’s or Moody’s ratings.

 

  2   

The investment advisor has deemed certain of these non-rated securities to be of investment grade quality. As of January 31, 2013 and July 31, 2012, the market value of these securities was $10,262,109, representing 1%, and $3,070,810, representing less than 1%, respectively, of the Fund’s long-term investments.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    13


Table of Contents
Fund Summary as of January 31, 2013    BlackRock MuniYield Quality Fund III, Inc.

 

Fund Overview      

BlackRock MuniYield Quality Fund III, Inc.’s (MYI) (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      

For the six-month period ended January 31, 2013, the Fund returned 1.86% based on market price and 3.98% based on NAV. For the same period, the closed-end Lipper General & Insured Municipal Debt Funds (Leveraged) category posted an average return of 3.22% based on market price and 4.25% based on NAV. All returns reflect reinvestment of dividends. The Fund’s premium to NAV, which narrowed 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. The Fund’s positive performance was derived largely from income accrual as well as spread compression (price appreciation) in certain sectors, most notably in health and transportation. Exposure to capital appreciation bonds (zero coupons) also had a positive impact on results as spreads generally tightened in this segment. Fund performance was negatively impacted by rising interest rates during the period (bond prices fall as rates rise). Exposure to Puerto Rico debt detracted from performance as concerns about credit rating agency downgrades resulted in wider credit spreads (falling prices) for Puerto Rico municipal securities broadly.

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

  MYI

Initial Offering Date

  March 27, 1992

Yield on Closing Market Price as of January 31, 2013 ($15.66)1

  5.52%

Tax Equivalent Yield2

  9.75%

Current Monthly Distribution per Common Share3

  $0.072

Current Annualized Distribution per Common Share3

  $0.864

Economic Leverage as of January 31, 20134

  37%

 

  1   

Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.

 

  2   

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

 

  3   

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

 

  4   

Represents 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 4.

 

                
14    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
     BlackRock MuniYield Quality Fund III, Inc.

 

 

Market Price and Net Asset Value      

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

       

1/31/13

      

7/31/12

      

Change

    

High

      

Low

 

Market Price

     $ 15.66         $ 15.81           (0.95)    $ 16.54         $ 15.06   

Net Asset Value

     $ 15.49         $ 15.32           1.11    $ 15.89         $ 15.08   

The following charts show the sector allocation, credit quality allocation and call/maturity structure of the Fund’s long-term investments:

 

 

Sector Allocation              
    

1/31/13

   

7/31/12

 

Transportation

    26     27

State

    19        23   

Utilities

    16        16   

County/City/Special District/School District

    16        12   

Health

    9        9   

Education

    9        8   

Housing

    4        4   

Corporate

    1        1   

 

Call/Maturity Structure2       

Calendar Year Ended December 31,

 

2013

    4

2014

    10   

2015

    1   

2016

    6   

2017

    18   

 

  2   

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

 

Credit Quality Allocation1              
    

1/31/13

   

7/31/12

 

AAA/Aaa

    10     11

AA/Aa

    65        64   

A

    23        22   

BBB/Baa

    2        3   

 

  1   

Using the higher of S&P’s or Moody’s ratings.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    15


Table of Contents

Schedule of Investments January 31, 2013 (Unaudited)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Alabama — 2.1%

    

Birmingham Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC), 6.00%, 6/01/39

   $ 5,225      $ 6,112,571   

Selma IDB, RB, International Paper Co. Project, Series A, 5.38%, 12/01/35

     940        1,039,019   
    

 

 

 
               7,151,590   

Arizona — 2.8%

    

Arizona Board of Regents, Refunding COP, University of Arizona, Series C, 5.00%, 6/01/28

     4,180        4,848,591   

Arizona Board of Regents, Refunding RB, Arizona State University System, Series A:

    

5.00%, 6/01/42

     1,705        1,950,861   

5.00%, 7/01/42

     2,460        2,817,487   
    

 

 

 
               9,616,939   

California — 14.4%

    

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

     5,050        5,954,657   

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

     2,865        3,443,186   

City of San Jose California, Refunding ARB, Series A-1, AMT, 5.50%, 3/01/30

     4,045        4,637,754   

City of Sunnyvale California, Refunding RB, 5.25%, 4/01/40

     2,800        3,232,712   

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

     3,500        4,063,395   

Emery Unified School District, GO, Election of 2010, Series A (AGM), 5.50%, 8/01/35

     1,875        2,205,937   

Los Angeles Community College District California, GO:

    

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

     5,000        5,717,950   

Election of 2008, Series C, 5.25%, 8/01/39

     2,000        2,426,560   

Oceanside Unified School District California, GO, Series A (AGC), 5.25%, 8/01/33

     1,675        1,876,503   

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

     2,670        3,194,094   

San Bernardino Community College District, GO, Election of 2002, Series A, 6.25%, 8/01/33

     2,165        2,623,504   

San Francisco City & County Airports Commission, RB, Specialty Facility Lease, SFO Fuel, Series A, AMT (AGM), 6.10%, 1/01/20

     1,250        1,254,238   
Municipal Bonds   

Par  

(000)

    Value  

California (concluded)

    

State of California, GO, Refunding:

    

Various Purpose, 5.00%, 9/01/41

   $ 4,760      $ 5,364,234   

Veterans, Series BZ, AMT (NPFGC), 5.35%, 12/01/21

     10        10,018   

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

     3,175        3,766,153   
    

 

 

 
               49,770,895   

Colorado — 1.6%

    

City & County of Denver Colorado, Refunding ARB, Series B, 5.00%, 11/15/37

     1,505        1,729,696   

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

     3,300        3,923,733   
    

 

 

 
               5,653,429   

Florida — 11.6%

    

City of Jacksonville Florida, RB, Series A, 5.25%, 10/01/26

     2,000        2,423,160   

City of Jacksonville Florida, Refunding RB, Better Jacksonville, Series A, 5.00%, 10/01/30

     1,885        2,199,248   

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

     2,500        2,809,025   

County of Miami-Dade Florida Aviation, Refunding RB, Series A, AMT:

    

5.00%, 10/01/31

     3,500        3,890,845   

Miami International Airport, (AGM) 5.25%, 10/01/41

     4,610        4,972,023   

Miami International Airport, (AGM) 5.50%, 10/01/41

     4,180        4,567,946   

Jacksonville Florida Port Authority, Refunding RB, AMT, 5.00%, 11/01/38

     2,215        2,407,174   

Orange County School Board, COP, Series A (AGC), 5.50%, 8/01/34

     7,600        8,792,212   

Tohopekaliga Water Authority, Refunding RB, Series A, 5.25%, 10/01/36

     6,965        8,129,757   
    

 

 

 
               40,191,390   

Idaho — 0.1%

    

Idaho Housing & Finance Association, RB, S/F Mortgage, Series E, AMT, 6.00%, 1/01/32

     230        230,407   

Illinois — 14.1%

    

Chicago Illinois Board of Education, GO, Refunding, Chicago School Reform Board, Series A (NPFGC), 5.50%, 12/01/26

     895        1,110,077   

 

Portfolio Abbreviations

 

To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:      ACA    American Capital Access Corp.    HDA    Housing Development Authority
     AGC    Assured Guaranty Corp.    HFA    Housing Finance Agency
     AGM    Assured Guaranty Municipal Corp.    IDA    Industrial Development Authority
     AMBAC    American Municipal Bond Assurance Corp.    IDB    Industrial Development Board
     AMT    Alternative Minimum Tax (subject to)    IDRB    Industrial Development Revenue Bonds
     ARB    Airport Revenue Bonds    ISD    Independent School District
     BARB    Building Aid Revenue Bonds    LRB    Lease Revenue Bonds
     BHAC    Berkshire Hathaway Assurance Corp.    MRB    Mortgage Revenue Bonds
     BOCES    Board of Cooperative Educational Services    NPFGC    National Public Finance Guarantee Corp.
     CAB    Capital Appreciation Bonds    PSF-GTD    Permanent School Fund Guaranteed
     COP    Certificates of Participation    PILOT    Payment in Lieu of Taxes
     EDA    Economic Development Authority    Q-SBLF    Qualified School Bond Loan Fund
     EDC    Economic Development Corp.    RB    Revenue Bonds
     ERB    Education Revenue Bonds    S/F    Single-Family
     FHA    Federal Housing Administration    SONYMA    State of New York Mortgage Agency
     GAB    Grant Anticipation Bonds    Syncora    Syncora Guarantee
     GARB    General Airport Revenue Bonds      
     GO    General Obligation Bonds      

 

See Notes to Financial Statements.

 

                
16    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Illinois (concluded)

    

Chicago Illinois Board of Education, GO, Series A:

    

5.50%, 12/01/39

   $ 3,405      $ 3,980,479   

5.00%, 12/01/42

     4,710        5,165,881   

Chicago Transit Authority, RB:

    

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

     3,400        3,951,038   

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

     1,060        1,223,367   

Sales Tax Receipts, 5.25%, 12/01/40

     3,135        3,589,638   

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

    

Series A, 5.75%, 1/01/39

     2,000        2,355,660   

Series C, 6.50%, 1/01/41

     9,085        11,748,268   

City of Chicago Illinois, Refunding RB, Sales Tax Revenue, Series A, 5.25%, 1/01/38

     1,310        1,511,373   

Cook County Forest Preserve District, GO, Refunding:

    

Limited Tax Project, Series B, 5.00%, 12/15/32

     455        524,032   

Unlimited Tax, Series C, 5.00%, 12/15/32

     965        1,111,410   

Metropolitan Pier & Exposition Authority, Refunding RB, McCormick Place Project, Series B, 5.00%, 12/15/28

     3,400        3,979,122   

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     2,350        2,795,701   

6.00%, 6/01/28

     670        804,610   

State of Illinois, RB, Build Illinois, Series B, 5.25%, 6/15/28

     4,000        4,715,840   
    

 

 

 
               48,566,496   

Indiana — 0.8%

    

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

     2,370        2,690,329   

Kansas — 1.3%

    

Kansas Development Finance Authority, Refunding RB, Adventist Health Sunbelt Obligation, Series A, 5.00%, 11/15/32

     4,000        4,633,640   

Massachusetts — 0.4%

    

Massachusetts Development Finance Agency, RB, Wellesley College, Series J, 5.00%, 7/01/42

     1,125        1,311,379   

Michigan — 4.2%

    

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

    

Series B, 7.50%, 7/01/33

     1,330        1,661,955   

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

     4,180        5,151,934   

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

     3,420        3,879,545   

Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital, 8.25%, 9/01/39

     3,115        3,983,026   
    

 

 

 
               14,676,460   

Minnesota — 0.7%

    

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

     1,975        2,425,715   

Mississippi — 2.0%

    

Mississippi Development Bank, RB, Refunding RB, Series A:

    

Jackson Public School District, 5.00%, 4/01/28

     940        1,071,797   

Water and Sewer System (AGM), 5.00%, 9/01/30

     4,930        5,745,817   
    

 

 

 
               6,817,614   
Municipal Bonds   

Par  

(000)

    Value  

Nevada — 2.4%

    

County of Clark Nevada, ARB:

    

Las Vegas-McCarran International Airport, Series A (AGM), 5.25%, 7/01/39

   $ 6,210      $ 6,990,038   

Subordinate Lien, Series A-2 (NPFGC), 5.00%, 7/01/36

     1,300        1,361,555   
    

 

 

 
               8,351,593   

New Jersey — 5.1%

    

New Jersey EDA, RB, Motor Vehicle Surcharge, Series A (NPFGC), 5.25%, 7/01/33

     6,625        6,999,246   

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

     3,400        3,793,890   

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

    

5.50%, 6/15/41

     3,030        3,521,254   

(AGC), 5.63%, 12/15/28

     2,930        3,493,088   
    

 

 

 
               17,807,478   

New York — 9.5%

    

Hudson New York Yards Infrastructure Corp., RB, Series A, 5.75%, 2/15/47

     940        1,121,711   

New York City Municipal Water Finance Authority, Refunding RB, Series EE:

    

5.25%, 6/15/40

     6,930        8,007,476   

Second General Resolution, 5.38%, 6/15/43

     2,220        2,605,592   

New York City Transitional Finance Authority, RB, Sub-Series S-2A, 5.00%, 7/15/30

     4,045        4,764,161   

New York State Dormitory Authority, RB, Series B:

    

5.00%, 3/15/37

     2,150        2,489,012   

5.00%, 3/15/42

     4,000        4,579,200   

New York State Thruway Authority, Refunding RB, Series I, 5.00%, 1/01/37

     1,740        1,974,030   

Sales Tax Asset Receivable Corp., Refunding RB, Series A (AMBAC), 5.25%, 10/15/27

     6,750        7,260,233   
    

 

 

 
               32,801,415   

North Carolina — 1.2%

    

North Carolina Medical Care Commission, RB, Duke University Health System, Series A, 5.00%, 6/01/32

     3,400        3,998,298   

Ohio — 1.3%

    

The Ohio State University, RB, Special Purpose General Receipts, Series A:

    

5.00%, 6/01/38

     1,510        1,761,959   

5.00%, 6/01/43

     2,260        2,613,283   
    

 

 

 
               4,375,242   

Pennsylvania — 1.2%

    

Pennsylvania Turnpike Commission, Subordinate Special RB, Motor License Fund, Enhanced Subordinate Special RB, 5.00%, 12/01/42

     3,650        4,111,725   

Puerto Rico — 1.1%

    

Puerto Rico Sales Tax Financing Corp., RB, First Sub-Series A, 6.38%, 8/01/39

     3,500        3,937,570   

South Carolina — 4.2%

    

City of North Charleston South Carolina, RB, Public Facilities Corp. Installment Purchase, 5.00%, 6/01/35

     3,380        3,879,158   

South Carolina State Public Service Authority, Refunding RB, Series A:

    

(AMBAC), 5.00%, 1/01/42

     7,000        7,840,560   

Santee Cooper, 5.50%, 1/01/38

     2,500        2,893,675   
    

 

 

 
               14,613,393   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    17


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Texas — 22.0%

    

City of Houston Texas, Refunding RB, Utility System, Series A (AGC), 6.00%, 11/15/35

   $ 6,700      $ 8,165,424   

Dallas Area Rapid Transit, Refunding RB, Senior Lien, 5.25%, 12/01/38

     4,555        5,272,868   

Dallas Fort Worth International Airport, Joint ARB, Series H, 5.00%, 11/01/42

     3,375        3,642,604   

Dallas Fort Worth International Airport, Refunding ARB, Series E, AMT, 5.00%, 11/01/35

     5,000        5,462,400   

Harris County Health Facilities Development Corp., Refunding RB, Memorial Hermann Healthcare System, Series B, 7.25%, 12/01/35

     1,000        1,245,830   

Katy ISD Texas, GO, Refunding, School Building, Series A (PSF-GTD), 5.00%, 2/15/42

     1,890        2,184,065   

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

     7,000        8,332,940   

North Texas Tollway Authority, Refunding RB, First Tier System:

    

Series A (NPFGC), 5.63%, 1/01/33

     10,975        12,557,705   

Series A (NPFGC), 5.75%, 1/01/40

     11,575        13,310,787   

Series B, 5.00%, 1/01/42

     1,030        1,148,264   

Series B (NPFGC), 5.75%, 1/01/40

     1,000        1,149,960   

Series K-2 (AGC), 6.00%, 1/01/38

     1,000        1,144,590   

Tarrant County Cultural Education Facilities Finance Corp., Refunding RB, Christus Health, Series A (AGC),
6.50%, 7/01/37

     3,000        3,565,260   

Texas Tech University, Refunding RB, Improvement Financing, 14th Series A, 5.00%, 8/15/29

     2,000        2,367,100   

Texas Transportation Commission, Refunding RB, Central Texas Turnpike System, First Tier, Series A, 5.00%, 8/15/41

     1,110        1,225,074   

University of Texas System, Refunding RB, Financing System, Series B, 5.00%, 8/15/43

     4,575        5,374,710   
    

 

 

 
               76,149,581   

Utah — 1.9%

    

Utah Transit Authority, Refunding RB, 5.00%, 6/15/42

     5,765        6,514,565   

Virginia — 2.5%

    

Fairfax County IDA, RB, Inova Health System, Series A, 5.00%, 5/15/40

     1,740        1,977,893   

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

     2,195        2,895,776   

Virginia Resources Authority, RB, Series A-1, 5.00%, 11/01/42

     3,110        3,620,848   
    

 

 

 
               8,494,517   

Washington — 1.4%

    

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

     2,400        2,805,720   

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

     1,865        2,194,844   
    

 

 

 
               5,000,564   

Wisconsin — 1.3%

    

Wisconsin Health & Educational Facilities Authority, RB, Ascension Health, Series D, 5.00%, 11/15/41

     3,125        3,519,656   

Wisconsin Health & Educational Facilities Authority, Refunding RB, Froedtert Health, Inc. Obligated Group, Series A, 5.00%, 4/01/42

     790        887,819   
    

 

 

 
               4,407,475   
Total Municipal Bonds — 111.2%              384,299,699   
Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
  

Par  

(000)

    Value  

Alabama — 1.2%

    

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

   $ 3,750      $ 4,082,737   

California — 2.2%

    

Sequoia Union High School District California, GO, Refunding, Election of 2004, Series B (AGM), 5.50%, 7/01/35

     5,189        5,831,694   

University of California, Refunding RB, Limited Project, Series G, 5.00%, 5/15/37

     1,500        1,739,003   
    

 

 

 
               7,570,697   

Colorado — 3.0%

    

Colorado Health Facilities Authority, RB, Catholic Health, Series C-3 (AGM), 5.10%, 10/01/41

     9,410        10,262,358   

District of Columbia — 0.6%

    

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

     1,700        2,063,823   

Florida — 7.9%

    

City of St. Petersburg Florida, Refunding RB (NPFGC), 5.00%, 10/01/35

     6,493        7,051,015   

County of Miami-Dade Florida, GO, Building Better Communities Program, Series B-1, 6.00%, 7/01/38

     12,500        14,779,625   

County of Miami-Dade Florida, RB, Transit System, Sales Surtax, 5.00% 7/01/22

     3,400        3,826,360   

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

     1,575        1,665,184   
    

 

 

 
               27,322,184   

Georgia — 1.9%

    

Augusta-Richmond County Georgia, RB, Water & Sewer (AGM), 5.25%, 10/01/34

     6,290        6,722,312   

Illinois — 6.9%

    

City of Chicago Illinois, ARB, O’Hare International Airport, Series A (AGM), 5.00%, 1/01/38

     15,000        16,497,900   

City of Chicago Illinois, Refunding RB, Water System:

    

5.00%, 11/01/42

     2,439        2,758,216   

Second Lien (AGM), 5.25%, 11/01/33

     3,969        4,587,412   
    

 

 

 
               23,843,528   

Kentucky — 0.8%

    

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

     2,304        2,662,959   

Massachusetts — 3.3%

    

Massachusetts School Building Authority, Sales Tax, RB:

    

Dedicated Sales Tax, Senior Series B, 5.00%, 10/15/41

     5,080        5,857,342   

Series A (AGM), 5.00%,
8/15/15 (a)

     644        708,071   

Series A (AGM), 5.00%, 8/15/30

     4,350        4,786,537   
    

 

 

 
               11,351,950   

Nevada — 6.4%

    

Clark County Water Reclamation District, GO:

    

Limited Tax, 6.00%, 7/01/38

     10,000        12,083,500   

Series B, 5.50%, 7/01/29

     8,247        10,075,266   
    

 

 

 
               22,158,766   

New Jersey — 1.7%

    

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

     3,861        4,286,881   

 

See Notes to Financial Statements.

 

                
18    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

(Percentages shown are based on Net Assets)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
  

Par  

(000)

    Value  

New Jersey (concluded)

    

New Jersey State Transporation Trust Fund, RB, 5.25%, 6/15/36

   $ 1,500      $ 1,719,480   
    

 

 

 
               6,006,361   

New York — 7.7%

    

New York City Municipal Water Finance Authority, Refunding RB, Series FF, 5.00%, 6/15/45

     5,958        6,789,346   

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

     2,300        2,581,071   

New York City Transitional Finance Authority, RB, Future Tax Secured, Sub-Series E-1, 5.00%, 2/01/42

     2,919        3,354,608   

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

     7,515        8,646,190   

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

     4,400        5,220,072   
    

 

 

 
               26,591,287   

Puerto Rico — 0.9%

    

Puerto Rico Sales Tax Financing Corp., Refunding RB, Sales Tax, Series C, 5.25%, 8/01/40

     3,020        3,285,277   

Texas — 1.7%

    

Waco Educational Finance Corp., Refunding RB, Baylor University, 5.00%, 3/01/43

     4,995        5,719,924   

Utah — 0.8%

    

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

     2,504        2,771,532   

Washington — 3.8%

    

City of Bellevue Washington, GO, Refunding (NPFGC), 5.50%, 12/01/14 (a)

   $ 6,883      $ 7,533,665   

University of Washington, Refunding RB, Series A, 5.00%, 7/01/41

     4,694        5,463,321   
    

 

 

 
               12,996,986   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 50.8%
        175,412,681   

Total Long-Term Investments

(Cost – $507,713,071) — 162.0%

  

  

    559,712,380   
    
   
Short-Term Securities    Shares         

FFI Institutional Tax-Exempt Fund, 0.01% (d)(e)

     883,107        883,107   

Total Short-Term Securities

(Cost — $883,107) — 0.3%

             883,107   
Total Investments (Cost — $508,596,178) — 162.3%        560,595,487   
Other Assets Less Liabilities — 1.1%        3,922,863   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (25.5)%

   

    (88,013,535
VMTP Shares, at Liquidation Value — (37.9)%        (131,000,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 345,504,815   
    

 

 

 

 

Notes to Schedule of investments

 

(a)   US 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)   Securities represent bonds transferred to a TOB in exchange for which the Fund acquired residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1 of the Notes to Financial Statements for details of municipal bonds transferred to 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 is $850,278.

 

(d)   Investments in issuers considered to be an affiliate of the Fund during the six months ended January 31, 2013, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate   Shares Held
at July 31,
2012
       Net
Activity
       Shares Held
at January 31,
2013
       Income  

FFI Institutional Tax-Exempt Fund

              883,107           883,107         $ 615   

 

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

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments. 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 and 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)

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 level in the fair value hierarchy within which the fair value measurement falls in its entirety 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 is based on the pricing transparency of the investment 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 other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    19


Table of Contents

Schedule of Investments (concluded)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of January 31, 2013:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $  559,712,380                   $  559,712,380   

Short-Term Securities

  $ 883,107                               883,107   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 883,107         $ 559,712,380                   $ 560,595,487   
 

 

 

      

 

 

      

 

 

      

 

 

 

 

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

      

    

Certain of the Fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of January 31, 2013, such liabilities are categorized within the disclosure hierachy as follows:

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

                

Bank overdraft

            $ (121,848                $ (121,848

TOB trust certificates

              (87,975,110                  (87,975,110

VMTP Shares

              (131,000,000                  (131,000,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

            $ (219,096,958                $ (219,096,958
 

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between levels during the six months ended January 31, 2013.

 

See Notes to Financial Statements.

 

                
20    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments January 31, 2013 (Unaudited)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

California — 85.2%

  

Corporate — 0.9%

    

City of Chula Vista California, Refunding RB, San Diego Gas & Electric:

    

AMT, 4.00%, 5/01/39

   $ 2,500      $ 2,546,375   

Series A, 5.88%, 2/15/34

     2,435        2,869,769   
    

 

 

 
               5,416,144   

County/City/Special District/School District — 26.1%

  

Bay Area Governments Association, Refunding RB, California Redevelopment Agency Pool, Series A (AGM),
6.00%, 12/15/24

     255        259,888   

California State Public Works Board, RB, Various Capital Projects, Sub-Series I-1, 6.13%, 11/01/29

     3,360        4,105,046   

Chabot-Las Positas Community College District, GO, CAB, Series C (AMBAC),5.06%, 8/01/37 (a)

     10,000        2,937,700   

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

     2,000        2,344,000   

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

     2,500        3,067,450   

Grossmont Union High School District, GO, Election of 2008, Series C, 5.50%, 8/01/33

     1,855        2,236,203   

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

     7,000        7,458,920   

Los Angeles County Metropolitan Transportation Authority, Refunding RB, Proposition A, First Tier, Senior Series A (AMBAC),5.00%, 7/01/27

     4,000        4,365,960   

Los Angeles Municipal Improvement Corp., Refunding RB, Real Property, Series B (AGC), 5.50%, 4/01/39

     2,045        2,296,515   

Merced Union High School District, GO, CAB, Election of 2008, Series C (a):

    

4.67%, 8/01/33

     2,500        970,400   

4.85%, 8/01/36

     4,000        1,297,720   

Ohlone Community College District, GO, Election of 2010, Series A, 5.25%, 8/01/41

     8,140        9,472,030   

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

     2,500        2,853,700   

Orange County Water District, COP, Refunding, 5.25%, 8/15/34

     9,045        10,674,276   

Orchard School District California, GO, Election of 2001, Series A (AGC), 5.00%, 8/01/34

     7,490        8,429,920   

Oxnard Union High School District California, GO, Refunding, Series A (NPFGC), 6.20%, 8/01/30

     9,645        10,916,983   

Pittsburg Unified School District, GO, Election of 2006, Series B (AGM):

    

5.50%, 8/01/34

     2,000        2,282,260   

5.63%, 8/01/39

     4,500        5,129,100   

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

     5,000        5,592,950   

San Diego County Water Authority, COP, Refunding, Series 2008-A (AGM), 5.00%, 5/01/38

     4,895        5,459,785   

San Jose Financing Authority, RB, Convention Center Expansion & Renovation Project:

    

5.75%, 5/01/36

     2,570        2,879,813   

5.75%, 5/01/42

     4,500        5,244,390   

San Jose Financing Authority, Refunding RB, Civic Center Project, Series B (AMBAC), 5.00%, 6/01/32

     11,400        11,437,506   

San Juan Unified School District, GO, Election of 2002 (AGM), 5.00%, 8/01/34

     6,475        7,343,621   

San Leandro Unified School District California, GO, Election of 2010, Series A, 5.75%, 8/01/41

     3,000        3,602,490   

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

     5,600        6,470,240   

Walnut Valley Unified School District, GO, Election of 2007, Series B, 5.75%, 8/01/41

     7,680        9,241,498   
Municipal Bonds    Par  
(000)
    Value  

California (continued)

                

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

 

West Contra Costa Unified School District California, GO, Election of 2010, Series A, 5.25%, 8/01/41

   $ 6,140      $ 7,090,042   

Westminster Redevelopment Agency California, Tax Allocation Bonds, Subordinate, Commercial Redevelopment Project No. 1 (AGC), 6.25%, 11/01/39

     4,300        5,152,303   
    

 

 

 
               150,612,709   

Education — 3.6%

  

Anaheim City School District California, GO, Election of 2010 (AGM), 6.25%, 8/01/40

     3,750        4,600,013   

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

     2,500        2,989,900   

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

    

5.50%, 8/01/31

     2,165        2,642,902   

5.75%, 8/01/35

     8,400        10,277,148   
    

 

 

 
               20,509,963   

Health — 15.9%

  

ABAG Finance Authority for Nonprofit Corps, Refunding RB, Sharp Healthcare, Series A, 6.00%, 8/01/30

     2,270        2,785,245   

California Health Facilities Financing Authority, RB:

    

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

     8,000        8,957,280   

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

     4,105        4,691,440   

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

     10,000        10,913,300   

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

     7,715        9,271,964   

California Health Facilities Financing Authority, Refunding RB:

    

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

     2,180        2,584,237   

Catholic Healthcare West, Series A, 6.00%, 7/01/39

     5,500        6,498,635   

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

     3,000        3,632,550   

California Statewide Communities Development Authority, RB:

    

Kaiser Permanente, Series A, 5.00%, 4/01/42

     24,180        27,143,259   

Kaiser Permanente, Series B, 5.25%, 3/01/45

     3,885        4,136,360   

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

     4,375        5,257,919   

California Statewide Communities Development Authority, Refunding RB, Catholic Healthcare West, Series D (BHAC), 5.50%, 7/01/31

     865        993,738   

City of Newport Beach California, Refunding RB, Hoag Memorial Hospital Presbyterian, 6.00%, 12/01/40

     3,825        4,706,127   
    

 

 

 
               91,572,054   

Housing — 0.0%

  

California Rural Home Mortgage Finance Authority, RB, Mortgage-Backed Securities Program, Series A, AMT (Ginnie Mae), 6.35%, 12/01/29

     50        51,029   

County of San Bernardino California, Refunding RB, Home Mortgage-Backed Securities, Series A-1, AMT (Ginnie Mae), 6.25%, 12/01/31

     80        86,402   
    

 

 

 
               137,431   

State — 6.6%

  

California State Public Works Board, RB, Department of Education, Riverside Campus Project, Series B, 6.50%, 4/01/34

     3,670        4,469,986   

State of California, GO, Various Purpose:

    

6.00%, 3/01/33

     7,000        8,704,570   

6.00%, 4/01/38

     17,115        20,507,193   

6.00%, 11/01/39

     3,455        4,192,090   
    

 

 

 
               37,873,839   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    21


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

California (continued)

                

Transportation — 15.3%

  

City of Los Angeles Department of Airports, Refunding RB, Los Angeles International Airport, Senior Series A,
5.25%, 5/15/39

   $ 2,785      $ 3,160,362   

City of San Jose California, Refunding ARB, Series A-1, AMT, 6.25%, 3/01/34

     1,400        1,685,376   

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

     5,000        5,771,550   

County of Sacramento California, ARB, Airport System:

    

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

     7,550        8,290,277   

Subordinated and Passenger Facility Charges/Grant, Series C (AGC), 5.75%, 7/01/39

     5,505        6,460,833   

Los Angeles Department of Airports, Refunding RB, Los Angeles International Airport, Senior Series A, 5.25%, 5/15/29

     3,760        4,360,510   

Los Angeles Harbor Department, RB, Series B:

    

5.25%, 8/01/34

     5,530        6,467,833   

5.25%, 8/01/39

     2,490        2,883,669   

San Diego County Regional Airport Authority, RB:

    

Senior Series A, 5.00%, 7/01/43

     7,105        8,189,294   

Senior Series B, AMT, 5.00%, 7/01/38

     5,500        6,184,145   

Senior Series B, AMT, 5.00%, 7/01/43

     1,065        1,191,565   

San Diego County Regional Airport Authority, Refunding RB, Series B, 5.00%, 7/01/40

     6,350        7,090,283   

San Francisco City & County Airports Commission, RB:

    

Series E, 6.00%, 5/01/39

     9,650        11,506,467   

Special Facility Lease, SFO Fuel, Series A, AMT (AGM), 6.10%, 1/01/20

     1,000        1,003,390   

Special Facility Lease, SFO Fuel, Series A, AMT (AGM), 6.13%, 1/01/27

     985        987,393   

San Francisco City & County Airports Commission, Refunding RB, Second Series 34E, AMT (AGM):

    

5.75%, 5/01/24

     5,000        5,779,450   

5.75%, 5/01/25

     3,500        4,011,735   

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

     2,400        2,995,344   
    

 

 

 
               88,019,476   

Utilities — 16.8%

  

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

     5,000        5,913,850   

City of Los Angeles California Wastewater System, Refunding RB:

    

Series A (NPFGC), 5.00%, 6/01/34

     15,000        16,319,400   

Sub-Series A, 5.00%, 6/01/28

     2,000        2,337,440   

Sub-Series A, 5.00%, 6/01/32

     3,000        3,473,460   

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

     4,000        4,863,760   

East Bay Municipal Utility District, RB, Series A (NPFGC), 5.00%, 6/01/37

     4,000        4,560,600   

East Bay Municipal Utility District, Refunding RB, Sub-Series A:

    

5.00%, 6/01/30

     5,000        5,898,700   

5.00%, 6/01/37

     10,000        11,401,500   

(AMBAC), 5.00%, 6/01/33

     3,000        3,417,750   

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

     5,560        6,232,371   

Los Angeles Department of Water & Power, Refunding RB, Series A:

    

5.25%, 7/01/39

     8,000        9,314,960   

Power System, Sub-Series A-2 (NPFGC), 5.00%, 7/01/27

     15,000        15,252,900   

California (concluded)

                

Utilities (concluded)

  

Metropolitan Water District of Southern California, RB, Series B-1 (NPFGC), 5.00%, 10/01/13 (b)

   $ 6,885      $ 7,104,562   

San Diego Public Facilities Financing Authority, Refunding RB, Senior Series A, 5.25%, 5/15/34

     1,000        1,149,660   
    

 

 

 
               97,240,913   
Total Municipal Bonds — 85.2%              491,382,529   
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
 

California — 77.3%

                

County/City/Special District/School District — 36.6%

  

Arcadia Unified School District California, GO, Election of 2006, Series A (AGM), 5.00%, 8/01/37

     7,925        8,524,425   

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

     12,150        13,235,238   

Fremont Unified School District Alameda County California, GO, Election of 2002, Series B (AGM), 5.00%, 8/01/15 (b)

     10,000        11,101,500   

Los Angeles Community College District California, GO:

    

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

     12,000        13,723,080   

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

     26,438        30,233,705   

Election of 2003, Series E (AGM), 5.00%, 8/01/31

     7,497        8,399,562   

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

     12,000        13,767,120   

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

     9,596        12,010,046   

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

     6,828        7,443,088   

Los Angeles County Sanitation Districts Financing Authority, Refunding RB, Capital Project 14 (BHAC), 5.00%, 10/01/34

     4,998        5,448,340   

Los Angeles Unified School District California, GO, Series I, 5.00%, 1/01/34

     5,000        5,627,750   

Ohlone Community College District, GO, Series B (AGM), 5.00%, 8/01/15 (b)

     19,998        22,274,860   

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

     10,000        10,811,900   

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

     7,550        8,335,653   

San Diego County Water Authority, COP, Series A (AGM), 5.00%, 5/01/30

     7,350        7,742,711   

San Francisco Bay Area Rapid Transit District, Refunding RB, Series A (NPFGC):

    

5.00%, 7/01/30

     19,630        21,374,322   

5.00%, 7/01/34

     10,497        11,429,917   
    

 

 

 
               211,483,217   

Education — 15.7%

  

California State University, Refunding RB, Systemwide, Series C (NPFGC), 5.00%, 11/01/35

     20,000        21,853,000   

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

     11,000        12,507,330   

 

See Notes to Financial Statements.

 

                
22    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

(Percentages shown are based on Net Assets)

 

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

California (continued)

                

Education (concluded)

    

University of California, RB:

    

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

   $ 8,000      $ 8,932,320   

Series L, 5.00%, 5/15/40

     7,398        8,303,588   

Series O, 5.75%, 5/15/34

     11,190        13,555,156   

University of California, Refunding RB, 5.00%, 5/15/37

     21,781        25,250,327   
    

 

 

 
               90,401,721   

Transportation — 1.0%

    

City of Los Angeles California Department of Airports, Refunding RB, Senior, Los Angeles International Airport, Series A, 5.00%, 5/15/40

     4,999        5,656,185   

Utilities — 24.0%

    

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

     9,070        9,837,413   

East Bay Municipal Utility District, RB, Sub-Series A (NPFGC), 5.00%, 6/01/35

     15,000        16,297,650   

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

     7,990        9,084,710   

Los Angeles Department of Water & Power, RB:

    

Power System, Sub-Series A-1 (AGM), 5.00%, 7/01/37

     13,525        15,233,698   

Sub-Series A-1 (AMBAC), 5.00%, 7/01/37

     5,029        5,664,693   

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

     7,500        8,418,975   

Metropolitan Water District of Southern California, RB, Series A, 5.00%, 7/01/37

     15,000        17,121,450   

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

     9,277        10,265,907   
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

California (concluded)

                

Utilities (concluded)

    

San Diego County Water Authority, COP, Series A (AGM), 5.00%, 5/01/31

   $ 10,000      $ 10,520,800   

San Diego County Water Authority, COP, Refunding, Series 2008-A (AGM), 5.00%, 5/01/33

     8,510        9,619,364   

San Francisco City & County Public Utilities Commission, RB, Water System Improvement Program, Sub-Series A,
5.00%, 11/01/37

     22,997        26,704,253   
    

 

 

 
               138,768,913   
Total Municipal Bonds
Transferred to
Tender Option Bond
Trusts — 77.3%
             446,310,036   

Total Long-Term Investments

(Cost — $853,734,599) — 162.5%

             937,692,565   
    
   
Short-Term Securities    Shares         

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

     4,581,630        4,581,630   

Total Short-Term Securities

(Cost — $4,581,630) — 0.8%

  

  

    4,581,630   
Total Investments
(Cost — $858,316,229) — 163.3%
       942,274,195   
Other Assets Less
Liabilities — 0.8%
       4,443,444   

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (35.2)%

   

    (203,290,505
VRDP Shares, at Liquidation Value — (28.9)%        (166,500,000
    

 

 

 
Net Assets Applicable to Common
Shares — 100.0%
     $ 576,927,134   
    

 

 

 
Notes to Schedule of Investments

 

(a)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(b)   US 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)   Securities represent bonds transferred to a TOB in exchange for which the Fund acquired residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(d)   Investments in issuers considered to be an affiliate of the Fund during the six months ended January 31, 2013, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2012
       Net
Activity
       Shares Held
at January 31,
2013
       Income  

BIF California Municipal Money Fund

       4,870,908           (289,278        4,581,630         $ 12   

 

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

 

Ÿ  

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 ratings group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Ÿ  

Financial futures contracts as of January 31, 2013 were as follows:

 

Contracts
Sold
  Issue   Exchange   Expiration     Notional
Value
    Unrealized
Appreciation
 
(170)   10-Year US Treasury Note   Chicago Board of Trade     March 2013      $ 22,317,813      $ 171,053   

 

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 and 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)

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    23


Table of Contents

Schedule of Investments (concluded)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

 

 

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 level in the fair value hierarchy within which the fair value measurement falls in its entirety 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 and other significant accounting policies, please refer to Note 1 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 January 31, 2013:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 937,692,565                   $  937,692,565   

Short-Term Securities

  $ 4,581,630                               4,581,630   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 4,581,630         $  937,692,565                   $ 942,274,195   
 

 

 

      

 

 

      

 

 

      

 

 

 

 

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

  $    171,053                             $         171,053   

 

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

 

Certain of the Fund’s assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of January 31, 2013, such assets and liabilities are categorized within the disclosure hierarchy as follows:

 

      

   

     Level 1        Level 2        Level 3        Total  

Assets:

                
Cash pledged as collateral for financial futures contracts   $    224,000                             $ 224,000   

Liabilities:

                

Bank overdraft

            $ (142,870                  (142,870

TOB trust certificates

              (203,182,546                  (203,182,546

VRDP Shares

              (166,500,000                  (166,500,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 224,000         $ (369,825,416                $ (369,601,416
 

 

 

      

 

 

      

 

 

      

 

 

 

 

There   were no transfers between levels during the six months ended January 31, 2013.

 

See Notes to Financial Statements.

 

                
24    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments January 31, 2013 (Unaudited)

  

BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Michigan — 125.1%

                

Corporate — 4.1%

    

Dickinson County EDC, Michigan, Refunding RB, International Paper Co. Project, Series A, 5.75%, 6/01/16

   $ 2,500      $ 2,508,450   

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

     3,805        5,113,464   
    

 

 

 
               7,621,914   

County/City/Special District/School District — 36.8%

  

Adrian City School District Michigan, GO (AGM), 5.00%, 5/01/14 (a)

     2,400        2,540,208   

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

    

4.13%, 5/01/25

     2,000        2,210,540   

4.25%, 5/01/26

     1,145        1,266,771   

4.38%, 5/01/27

     640        708,154   

4.00%, 5/01/28

     760        813,428   

4.38%, 5/01/28

     400        438,692   

4.00%, 5/01/29

     380        404,715   

4.50%, 5/01/29

     605        669,929   

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

     200        219,406   

Brighton Area School District, GO, School Building, Series I (Q-SBLF), 4.25%, 5/01/37

     1,430        1,483,239   

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

    

5.00%, 4/01/25

     1,250        1,423,112   

5.00%, 4/01/26

     1,250        1,405,025   

5.00%, 4/01/27

     500        562,010   

City of Jackson, GO, Capital Appreciation Downtown Development (AGM), 4.61%, 6/01/26 (b)

     2,710        1,475,893   

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

     600        655,632   

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

    

5.50%, 5/01/36

     450        522,378   

5.50%, 5/01/41

     830        957,007   

County of Genesee Michigan, GO, Water Supply System (NPFGC), 5.13%, 11/01/33

     500        514,195   

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

     400        430,360   

County of St. Clair, GO, Refunding, Limited Tax Refunding, 5.00%, 4/01/28

     915        1,064,657   

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

     2,000        2,253,780   

Detroit City School District Michigan, GO, School Building & Site Improvement (NPFGC) (a):

    

Series A, 5.38%, 5/01/13

     1,480        1,499,018   

Series B, 5.00%, 5/01/13

     1,600        1,619,056   

Eaton Rapids Public Schools Michigan, GO, School Building & Site (AGM), 5.25%, 5/01/14 (a)

     2,000        2,123,860   

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

     1,880        2,023,463   

Fowlerville Community Schools, GO, Refunding, Series C (Q-SBLF), 5.00%, 5/01/28

     1,000        1,155,220   

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

     1,255        1,367,774   

Gibraltar School District Michigan, GO, School Building & Site Improvement (NPFGC) (a):

    

5.00%, 5/01/14

     3,065        3,244,057   

5.00%, 5/01/14

     585        619,404   
Municipal Bonds    Par  
(000)
    Value  
    

Michigan (continued)

                

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

  

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

    

5.50%, 5/01/32

   $ 400      $ 471,304   

5.50%, 5/01/36

     800        929,928   

5.50%, 5/01/41

     1,000        1,152,240   

Gull Lake Community School District, GO, Refunding (AGM), 4.00%, 5/01/26

     500        530,175   

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

     1,000        1,089,860   

Harper Woods School District Michigan, GO, Refunding, School Building & Site (NPFGC), 5.00%, 5/01/14 (a)

     10        10,408   

Howell Public Schools, GO, Refunding (Q-SBLF), 4.50%, 5/01/29

     660        749,126   

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

     2,650        3,006,080   

Jonesville Community Schools Michigan, GO, Refunding (NPFGC), 5.00%, 5/01/29

     1,085        1,163,435   

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

    

5.00%, 5/01/25

     1,000        1,089,860   

5.00%, 5/01/26

     1,050        1,138,704   

5.00%, 5/01/35

     2,000        2,144,580   

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

     2,325        2,508,907   

Livonia Public Schools School District Michigan, GO, Refunding, Series A (NPFGC), 5.00%, 5/01/24

     500        524,480   

Ludington Area School District Michigan, GO (NPFGC), 5.25%, 5/01/23

     1,440        1,484,597   

New Lothrop Area Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/35

     1,200        1,304,064   

Parchment School District, County of Kalamazoo, State of Michigan, GO, School Building and Site, 5.00%, 5/01/25

     590        678,347   

Reed City Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/14 (a)

     1,000        1,059,070   

Romulus Community Schools, GO, Unlimited Tax, Refunding:

    

4.13%, 5/01/25

     715        779,929   

4.25%, 5/01/26

     740        809,789   

4.25%, 5/01/27

     725        789,830   

4.50%, 5/01/29

     630        691,343   

(AGM), 4.00%, 5/01/24

     500        543,025   

(AGM), 4.38%, 5/01/28

     1,335        1,458,528   

Southfield Public Schools Michigan, GO, School Building & Site, Series B (AGM), 5.00%, 5/01/14 (a)

     1,000        1,058,810   

Sparta Area Schools Michigan, GO, School Building & Site (NPFGC), 5.00%, 5/01/14 (a)

     1,000        1,057,770   

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

     1,500        1,669,725   

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

     750        856,755   

Zeeland Public Schools Michigan, GO, School Building & Site (NPFGC), 5.00%, 5/01/14 (a)

     1,230        1,302,336   
    

 

 

 
               67,723,988   

Education — 9.2%

    

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

    

4.50%, 10/01/23

     1,360        1,503,983   

4.50%, 10/01/24

     1,595        1,753,224   

4.50%, 10/01/25

     1,405        1,536,241   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    25


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Michigan (continued)

                

Education (concluded)

    

Lake Superior State University, Refunding RB (AGM):

    

4.00%, 11/15/26

   $ 475      $ 502,066   

4.00%, 11/15/27

     285        300,390   

4.00%, 11/15/28

     190        199,181   

4.00%, 11/15/29

     250        260,723   

4.00%, 11/15/30

     190        197,271   

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

     1,030        1,042,854   

Michigan State University, Refunding RB, General, Series C:

    

5.00%, 2/15/40

     3,770        4,184,587   

5.00%, 2/15/44

     1,000        1,104,010   

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

     1,000        1,134,450   

Saginaw Valley State University Michigan, Refunding RB, General (NPFGC), 5.00%, 7/01/24

     1,450        1,535,187   

Western Michigan University, Refunding RB, General, 5.25%, 11/15/40

     1,400        1,596,420   
    

 

 

 
               16,850,587   

Health — 23.5%

    

Flint Hospital Building Authority Michigan, Refunding RB, Hurley Medical Center (ACA):

    

6.00%, 7/01/20

     570        575,905   

Series A, 5.38%, 7/01/20

     385        385,589   

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

     2,750        3,100,460   

Kent Hospital Finance Authority Michigan, Refunding RB, Spectrum Health, Series A:

    

5.50%, 11/15/25

     750        895,800   

5.00%, 11/15/29

     3,000        3,408,270   

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

     950        1,053,892   

Michigan State Finance Authority, Refunding RB, Trinity Health Credit:

    

5.00%, 12/01/31

     1,900        2,177,001   

5.00%, 12/01/35

     1,900        2,133,282   

Michigan State Hospital Finance Authority, RB:

    

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

     2,300        2,673,773   

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

     1,585        1,703,431   

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

     380        401,698   

MidMichigan Obligation Group, Series A (AMBAC), 5.50%, 4/15/18

     1,000        1,002,840   

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

     145        168,343   

Trinity Health Credit, Series A, 5.00%, 12/01/26

     855        949,546   

Michigan State Hospital Finance Authority, Refunding RB:

    

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

     400        450,852   

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

     2,470        2,672,318   

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

     3,340        3,513,981   
Municipal Bonds    Par  
(000)
    Value  

Michigan (continued)

                

Health (concluded)

    

Michigan State Hospital Finance Authority, Refunding RB (concluded):

    

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

   $ 1,595      $ 1,700,286   

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

     1,500        1,732,890   

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

     860        955,408   

Trinity Health Credit, Series A, 6.13%, 12/01/23

     940        1,151,303   

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

     570        689,010   

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

     1,400        1,690,920   

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

     3,040        3,142,874   

Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital, 8.25%, 9/01/39

     1,000        1,278,660   

Sturgis Building Authority, RB, Sturgis Hospital Project (NPFGC), 4.75%, 10/01/34

     3,525        3,593,279   
    

 

 

 
               43,201,611   

Housing — 6.6%

    

Michigan State HDA, RB:

    

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

     1,000        1,039,520   

Series A, 4.75%, 12/01/25

     2,605        2,874,123   

Series A (NPFGC), 5.30%, 10/01/37

     20        20,020   

Michigan State HDA, Refunding RB:

    

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

     5,980        6,055,468   

Series A, 6.05%, 10/01/41

     2,000        2,167,960   
    

 

 

 
               12,157,091   

State — 15.7%

    

Michigan Municipal Bond Authority, Refunding RB, Local Government, Charter County Wayne, Series B (AGC),
5.38%, 11/01/24

     125        145,476   

Michigan State Building Authority, Refunding RB, Facilities Program:

    

Series A, 5.50%, 10/15/45

     750        867,780   

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

     3,000        3,428,820   

Series I, 6.25%, 10/15/38

     2,350        2,859,997   

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

     2,000        2,374,540   

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

     1,500        1,785,165   

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

     400        473,852   

Series I-A, 5.38%, 10/15/41

     2,175        2,505,078   

Series II (NPFGC), 5.00%, 10/15/29

     2,000        2,054,740   

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

     2,510        2,741,598   

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

     1,000        1,141,580   

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

     3,250        3,722,550   

State of Michigan Trunk Line Revenue, RB, Fund:

    

5.00%, 11/15/29

     750        891,232   

5.00%, 11/15/33

     1,150        1,348,789   

5.00%, 11/15/36

     2,220        2,584,924   
    

 

 

 
               28,926,121   

 

See Notes to Financial Statements.

 

                
26    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

Michigan (concluded)

                

Transportation — 11.1%

    

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

    

5.25%, 12/01/25

   $ 4,475      $ 4,724,123   

5.25%, 12/01/26

     3,700        3,898,690   

5.00%, 12/01/34

     3,550        3,676,735   

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

    

5.75%, 12/01/26

     3,060        3,451,405   

5.38%, 12/01/32

     4,300        4,680,464   
    

 

 

 
               16,850,587   

Utilities — 18.1%

    

City of Detroit Michigan Water Supply System, RB:

    

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

     2,000        2,423,420   

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

     4,000        4,023,240   

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

     6,275        6,621,003   

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

     1,500        1,880,970   

City of Grand Rapids Michigan Sanitary Sewer System, RB:

    

5.00%, 1/01/37

     570        657,102   

4.00%, 1/01/42

     1,050        1,083,852   

City of Port Huron Michigan, RB, Water Supply:

    

5.25%, 10/01/31

     190        211,656   

5.63%, 10/01/40

     500        560,930   

City of Wyoming Michigan, RB, Sewer System (NPFGC), 5.00%, 6/01/30

     5,300        5,703,754   

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

    

5.00%, 7/01/27

     1,210        1,419,245   

5.00%, 7/01/31

     2,600        3,024,086   

5.00%, 7/01/37

     1,270        1,456,639   

5.50%, 7/01/41

     2,000        2,369,420   

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

    

Pooled Project, 5.00%, 10/01/27

     760        924,092   

Subordinate, 5.00%, 10/01/27

     750        851,693   
    

 

 

 
               33,211,102   
Total Municipal Bonds in Michigan              230,123,831   
    

Guam — 2.8%

                

State — 2.0%

    

Government of Guam Business Privilege Tax Revenue, RB, Series A, 5.13%, 1/01/42

     1,800        2,003,364   

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

     850        951,218   

Territory of Guam, RB, Series B-1, 5.00%, 1/01/37

     715        794,208   
    

 

 

 
               3,748,790   

Utilities — 0.8%

    

Guam Power Authority, Refunding RB, Series A:

    

5.00%, 10/01/34

     335        373,682   

(AGM), 5.00%, 10/01/26

     600        685,032   

(AGM), 5.00%, 10/01/27

     390        444,647   
    

 

 

 
               1,503,361   
Total Municipal Bonds in Guam              5,252,151   
    
Municipal Bonds    Par  
(000)
    Value  

Puerto Rico — 7.2%

                

State — 5.6%

    

Puerto Rico Sales Tax Financing Corp., Refunding RB:

    

CAB, Series A (NPFGC), 5.60%, 8/01/43 (b)

   $ 12,500      $ 2,320,500   

CAB, Series A (NPFGC), 5.65%, 8/01/46 (b)

     30,000        4,636,800   

First Sub-Series C (AGM), 5.13%, 8/01/42

     3,200        3,397,216   
    

 

 

 
               10,354,516   

Transportation — 1.2%

    

Puerto Rico Highway & Transportation Authority, Refunding RB, Series CC (AGC), 5.50%, 7/01/31

     2,000        2,237,820   

Utilities — 0.4%

    

Puerto Rico Electric Power Authority, RB, Series WW, 5.50%, 7/01/38

     680        692,376   
Total Municipal Bonds in Puerto Rico              13,284,712   
Total Municipal Bonds — 135.1%              248,660,694   
    
   

Municipal Bonds Transferred to

Tender Option Bond Trusts (c)

 

Michigan — 18.5%

                

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

  

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

     3,970        4,569,490   

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

     2,850        3,161,590   
    

 

 

 
               7,731,080   

Education — 6.2%

    

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

     2,500        2,826,900   

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

     7,793        8,616,092   
    

 

 

 
               11,442,992   

Health — 1.0%

    

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

     1,650        1,837,918   

Housing — 2.5%

    

Michigan HDA, RB, Rental Housing, Series A, 6.00%, 10/01/45

     4,280        4,613,198   

Utilities — 4.6%

    

City of Grand Rapids Michigan, RB, Sanitary Sewer System (NPFGC), 5.00%, 1/01/34

     6,898        7,260,673   

Detroit Water and Sewerage Department, Refunding RB, Senior Lien, Series A, 5.25%, 7/01/39

     1,012        1,102,199   
    

 

 

 
               8,362,872   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 18.5%
        33,988,060   
Total Long-Term Investments
(Cost — $261,430,343) — 153.6%
             282,648,754   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    27


Table of Contents

Schedule of Investments (concluded)

  

BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)

(Percentages shown are based on Net Assets)

 

Short-Term Securities    Shares     Value  

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

     3,323,390      $ 3,323,390   
Total Short-Term Securities (Cost — $3,323,390) — 1.8%        3,323,390   
Total Investments (Cost — $264,753,733) — 155.4%        285,972,144   
Other Assets Less Liabilities — 1.1%        2,040,166   

Liability for TOB Trust Certificates, Including Interest

Expense and Fees Payable — (9.1)%

  

  

    (16,724,733
VRDP Shares, at Liquidation Value — (47.4)%        (87,300,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 183,987,577   
    

 

 

 

 

Notes to Schedule of Investments

 

(a)   US 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)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(c)   Securities represent bonds transferred to a TOB in exchange for which the Fund acquired residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs.

 

(d)   Investments in issuers considered to be an affiliate of the Fund during the six months ended January 31, 2013, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2012
       Net
Activity
       Shares Held
at January 31,
2013
       Income  

BIF Michigan Municipal Money Fund

       6,554,292           (3,230,902        3,323,390             

 

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

 

Ÿ  

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 ratings group indexes, and/or as defined by Fund management. 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. 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 and 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)

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 level in the fair value hierarchy within which the fair value measurement falls in its entirety 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 is based on the pricing transparency of the investment 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 other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of January 31, 2013:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 282,648,754                   $ 282,648,754   

Short-Term Securities

  $ 3,323,390                               3,323,390   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 3,323,390         $  282,648,754                   $  285,972,144   
 

 

 

      

 

 

      

 

 

      

 

 

 

 

1   

See above Schedule of Investments for values in each sector.

Certain of the Fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of January 31, 2013, such liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

                

Bank overdraft

            $ (74,910                $ (74,910

TOB trust certificates

              (16,718,184                  (16,718,184

VRDP Shares

              (87,300,000                  (87,300,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

            $ (104,093,094                $ (104,093,094
 

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between levels during the six months ended January 31, 2013.

 

See Notes to Financial Statements.

 

                
28    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments January 31, 2013 (Unaudited)

  

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New York — 107.8%

                

Corporate — 2.8%

  

New York City Industrial Development Agency, Refunding RB, AMT:

    

Series A, 5.00%, 7/01/28

     $       930      $ 990,320   

Terminal One Group Association Project, 5.50%, 1/01/24 (a)

     1,500        1,600,470   

New York Liberty Development Corp., RB, Goldman Sachs Headquarters, 5.25%, 10/01/35

     3,400        4,040,662   

New York State Energy Research & Development Authority, Refunding RB, Brooklyn Union Gas/Keyspan, Series A, AMT (NPFGC), 4.70%, 2/01/24

     4,750        5,007,545   

Suffolk County Industrial Development Agency New York, RB, Keyspan, Port Jefferson, AMT, 5.25%, 6/01/27

     4,625        4,686,235   
    

 

 

 
               16,325,232   

County/City/Special District/School District — 32%

  

Buffalo & Erie County Industrial Land Development Corp., Refunding RB, Buffalo State College Foundation Housing Corp. Project, Series A, 5.38%, 10/01/41

     1,040        1,194,138   

City of New York, New York, GO:

    

Series A-1, 5.00%, 8/01/35

     1,950        2,262,917   

Sub-Series A-1, 4.00%, 10/01/34

     990        1,062,191   

Sub-Series A-1, 5.00%, 10/01/34

     1,845        2,176,325   

Sub-Series D-1, 5.00%, 10/01/33

     8,350        9,796,721   

City of New York, New York, GO, Refunding:

    

Series B, 3.00%, 8/01/31

     1,700        1,680,926   

Series E, 5.00%, 8/01/27

     1,070        1,270,111   

Series I, 5.00%, 8/01/32

     490        580,273   

County of Onondaga New York, RB, Syracuse University Project:

    

5.00%, 12/01/30

     1,190        1,397,643   

5.00%, 12/01/36

     1,150        1,336,956   

Erie County Industrial Development Agency, RB, School District of Buffalo Project, Series A:

    

5.25%, 5/01/31

     2,305        2,659,578   

5.25%, 5/01/32

     1,000        1,146,780   

Hudson New York Yards Infrastructure Corp., RB, Series A:

    

(AGC), 5.00%, 2/15/47

     4,300        4,577,092   

(AGM), 5.00%, 2/15/47

     4,580        4,875,135   

(NPFGC), 4.50%, 2/15/47

     17,525        18,164,137   

(NPFGC), 5.00%, 2/15/47

     3,415        3,627,071   

(NPFGC), 5.00%, 2/15/47

     550        585,442   

New York City Industrial Development Agency, RB, PILOT:

    

CAB, Yankee Stadium (AGC), 4.52%, 3/01/39 (b)

     5,000        1,556,700   

CAB, Yankee Stadium (AGC), 4.70%, 3/01/43 (b)

     4,330        1,069,120   

Queens Baseball Stadium (AMBAC), 5.00%, 1/01/36

     8,800        8,868,024   

Queens Baseball Stadium (AMBAC), 5.00%, 1/01/39

     1,750        1,761,043   

Yankee Stadium (AGC), 6.38%, 1/01/39

     1,000        1,173,820   

Yankee Stadium (NPFGC), 5.00%, 3/01/36

     2,250        2,349,563   

Yankee Stadium (NPFGC), 5.00%, 3/01/46

     9,650        9,971,827   

New York City Transitional Finance Authority, RB, Future Tax Secured:

    

Series C, 5.00%, 2/01/33

     10,020        10,411,281   

Series C (NPFGC), 5.00%, 2/01/14 (c)

     2,375        2,483,846   

Series E (NPFGC), 5.25%, 2/01/13 (c)

     2,445        2,445,000   

Series E (NPFGC), 5.25%, 2/01/22

     55        55,225   

New York (continued)

                

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

  

New York City Transitional Finance Authority, Refunding RB, Future Tax Secured Revenue, Series A (NPFGC), 5.00%, 11/15/26

     $       260      $ 260,928   

New York Convention Center Development Corp., RB, Hotel Unit Fee Secured (AMBAC):

    

5.00%, 11/15/30

     1,500        1,639,005   

5.00%, 11/15/35

     11,600        12,674,972   

5.00%, 11/15/44

     14,470        15,790,098   

New York Liberty Development Corp., Refunding RB:

    

4 World Trade Center Project, 5.00%, 11/15/31

     2,570        2,947,302   

4 World Trade Center Project, 5.75%, 11/15/51

     3,460        4,104,875   

7 World Trade Center Project, Class 2, 5.00%, 9/15/43

     3,900        4,337,229   

North Country Development Authority, Refunding RB (AGM), 6.00%, 5/15/15

     630        664,927   

Sales Tax Asset Receivable Corp., Refunding RB, Series A (AMBAC):

    

5.25%, 10/15/27

     9,500        10,218,105   

5.00%, 10/15/32

     27,200        29,083,328   

Syracuse Industrial Development Agency New York, RB, Carousel Center Project, Series A, AMT (Syncora),
5.00%, 1/01/36

     3,400        3,436,584   

Tompkins County Industrial Development Agency, RB, Civic Facility Cornell University Project, Series A, 5.00%, 7/01/37

     675        785,599   

Town of Huntington New York, GO, Refunding (AMBAC), 5.50%, 4/15/13

     455        460,005   

Town of North Hempstead New York, GO, Refunding, Series B (NPFGC):

    

6.40%, 4/01/13

     1,745        1,762,398   

6.40%, 4/01/17

     555        674,719   
    

 

 

 
               189,378,959   

Education — 16.4%

  

Amherst Development Corp.,

    

Refunding RB, University at Buffalo Foundation Faculty-Student Housing Corp., Series A (AGM), 4.63%, 10/01/40

     2,000        2,164,040   

City of Troy Capital Resource Corp., Refunding RB, Rensselaer Polytechnic Institute Project, Series A, 5.13%, 9/01/40

     5,725        6,347,823   

Madison County Industrial Development Agency New York, RB, Colgate University Project, Series A (AMBAC):

    

5.00%, 7/01/30

     5,410        5,750,018   

5.00%, 7/01/35

     2,675        2,823,730   

Monroe County Industrial Development Corp., RB, University of Rochester Project, Series B, 4.50%, 7/01/35

     3,885        4,225,093   

New York City Industrial Development Agency, Refunding RB, Nightingale-Bamford School (AMBAC), 5.25%, 1/15/18

     1,275        1,279,590   

New York City Trust for Cultural Resources, Refunding RB:

    

American Museum of Natural History, Series A (NPFGC), 5.00%, 7/01/36

     4,750        5,006,547   

American Museum of Natural History, Series A (NPFGC), 5.00%, 7/01/44

     500        527,005   

Carnegie Hall, Series A, 4.75%, 12/01/39

     3,550        3,871,524   

Carnegie Hall, Series A, 5.00%, 12/01/39

     2,150        2,380,201   

Museum of Modern Art, Series 1A, 5.00%, 4/01/31

     1,000        1,164,600   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    29


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New York (continued)

                

Education (concluded)

  

New York State Dormitory Authority, RB:

    

Convent of the Sacred Heart (AGM),
5.75%, 11/01/40

   $ 2,075      $ 2,467,486   

Fordham University, Series A,
5.00%, 7/01/28

     325        378,807   

Fordham University, Series A,
5.50%, 7/01/36

     1,550        1,819,933   

General Purpose, Series A, 4.50%, 3/15/35

     2,000        2,217,820   

Haverstraw King’s Daughters Public Library, 4.00%, 7/01/28

     565        612,867   

Haverstraw King’s Daughters Public Library, 4.00%, 7/01/29

     585        631,332   

Haverstraw King’s Daughters Public Library, 4.00%, 7/01/30

     610        655,158   

Mount Sinai School of Medicine, 5.13%, 7/01/39

     665        734,246   

New School (AGM), 5.50%, 7/01/43

     4,050        4,617,527   

New York University, Series 1 (AMBAC), 5.50%, 7/01/40

     4,580        6,148,421   

New York University, Series B,
5.00%, 7/01/34

     1,000        1,157,100   

New York University, Series B,
5.00%, 7/01/37

     600        694,590   

New York University, Series B,
5.00%, 7/01/42

     3,500        4,020,905   

New York University, Series C,
5.00%, 7/01/38

     2,000        2,255,180   

State University Dormitory Facilities, Series A, 5.00%, 7/01/35

     800        911,944   

State University Dormitory Facilities, Series A, 5.00%, 7/01/40

     2,035        2,277,938   

New York State Dormitory Authority, Refunding RB:

    

Cornell University, Series A, 5.00%, 7/01/40

     1,000        1,158,000   

Mount Sinai School of Medicine at NYU (NPFGC), 5.00%, 7/01/35

     7,100        7,577,049   

New York University, Series A,
5.00%, 7/01/37

     4,775        5,527,779   

Rochester Institute of Technology, 4.00%, 7/01/32

     2,355        2,538,878   

Rochester Institute of Technology, 5.00%, 7/01/38

     500        578,385   

Rochester Institute Technology, 5.00%, 7/01/42

     750        859,650   

Rockefeller University, Series B, 4.00%, 7/01/38

     3,085        3,271,334   

Saint John’s University, Series A, 5.00%, 7/01/27

     430        510,169   

State University Educational Facilities, Series A, 5.00%, 5/15/29

     1,000        1,192,340   

Rensselaer County Industrial Development Agency New York, RB, Polytechnic Institute, Series B (AMBAC),
5.50%, 8/01/22

     1,255        1,259,794   

Schenectady County Capital Resource Corp., Refunding RB, Union College, 5.00%, 7/01/32

     1,120        1,310,557   

St. Lawrence County Industrial Development Agency, RB, Clarkson University Project, 5.38%, 9/01/41

     500        574,570   

Tompkins County Development Corp., RB, Ithaca College Project (AGM):

    

5.50%, 7/01/33

     500        584,420   

5.25%, 7/01/36

     860        982,412   

Troy Industrial Development Authority, RB, Rensselaer Polytechnic Institute Project,
Series E, 5.20%, 4/01/37

     2,280        2,557,978   
    

 

 

 
               97,624,740   

New York (continued)

                

Health — 9.6%

  

Dutchess County Industrial Development Agency, RB, Vassar Brothers Medical Center (AGC):

    

5.50%, 4/01/30

   $ 250      $ 284,795   

5.50%, 4/01/34

     490        559,266   

Monroe County Industrial Development Corp., Refunding RB, Unity Hospital of Rochester Project (FHA),
5.50%, 8/15/40

     4,650        5,374,191   

New York City Health & Hospital Corp., Refunding RB, Health System, Series A, 5.00%, 2/15/30

     2,200        2,483,250   

New York State Dormitory Authority, RB:

    

Healthcare, Series A, 5.00%, 3/15/38

     2,000        2,297,720   

Hudson Valley Hospital (BHAC), 5.00%, 8/15/36

     6,500        7,148,895   

Montefiore Hospital (NPFGC),
5.00%, 8/01/33

     1,500        1,592,715   

New York & Presbyterian Hospital (AGM), 5.00%, 8/15/14 (c)

     4,925        5,270,636   

New York University Hospitals Center, Series A, 5.75%, 7/01/31

     3,450        4,064,031   

New York University Hospitals Center, Series A, 6.00%, 7/01/40

     1,100        1,296,317   

North Shore-Long Island Jewish Health System, Series A, 5.50%, 5/01/37

     2,075        2,371,082   

North Shore-Long Island Jewish Health System, Series C, 4.25%, 5/01/39

     1,500        1,594,275   

North Shore-Long Island Jewish Health System, Series D, 4.25%, 5/01/39

     1,750        1,859,988   

North Shore-Long Island Jewish Health System, Series D, 5.00%, 5/01/39

     640        724,454   

New York State Dormitory Authority, Refunding RB:

    

New York University Hospitals Center, Series A, 5.00%, 7/01/36

     1,500        1,592,550   

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 5/01/32

     4,000        4,502,800   

North Shore-Long Island Jewish Obligated Group, Series A, 5.25%, 5/01/34

     9,220        10,609,362   

Saint Luke’s Roosevelt Hospital (FHA), 4.90%, 8/15/31

     2,900        3,115,209   
    

 

 

 
               56,741,536   

Housing — 3.4%

  

Monroe County Industrial Development Agency, IDRB, Southview Towers Project, AMT (SONYMA):

    

6.13%, 2/01/20

     780        782,293   

6.25%, 2/01/31

     1,125        1,127,509   

New York City Housing Development Corp., RB, AMT:

    

Series A-1-A, 5.00%, 11/01/30

     750        784,432   

Series A-1-A, 5.45%, 11/01/46

     1,335        1,387,546   

Series C, 5.00%, 11/01/26

     1,500        1,562,025   

Series C, 5.05%, 11/01/36

     2,000        2,071,460   

Series H-1, 4.70%, 11/01/40

     1,340        1,371,436   

Series H-2-A, 5.20%, 11/01/35

     840        879,875   

Series H-2-A, 5.35%, 5/01/41

     600        637,338   

New York Mortgage Agency, Refunding RB, AMT:

    

Homeowner Mortgage, Series 97, 5.50%, 4/01/31

     555        555,694   

Series 133, 4.95%, 10/01/21

     520        541,065   

Series 143, 4.85%, 10/01/27

     1,100        1,146,651   

Series 143, 4.90%, 10/01/37

     792        819,004   

Series 143 (NPFGC), 4.85%, 10/01/27

     2,485        2,611,934   

New York State HFA, RB, State Philips Housing, Series A, AMT (Fannie Mae), 4.65%, 11/15/38

     1,500        1,543,935   

 

See Notes to Financial Statements.

 

                
30    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New York (continued)

                

Housing (concluded)

  

Yonkers Industrial Development Agency New York, RB, Monastery Manor Associates LP Project, AMT (SONYMA), 5.25%, 4/01/37

     $    2,445      $ 2,523,093   
    

 

 

 
               20,345,290   

State — 11.1%

  

New York City Transitional Finance Authority, BARB:

    

Fiscal 2008, Series S-1, 4.50%, 1/15/38

     1,700        1,790,950   

Fiscal 2009, Series S-1 (AGC), 5.50%, 7/15/38

     6,000        6,817,500   

Fiscal 2009, Series S-4 (AGC), 5.50%, 1/15/33

     5,500        6,427,575   

Fiscal 2009, Series S-4 (AGC), 5.50%, 1/15/39

     1,500        1,718,955   

Series S-1, 4.00%, 7/15/42

     1,385        1,445,995   

Series S-2 (AGM), 5.00%, 1/15/37

     5,000        5,368,350   

Series S-2 (NPFGC), 4.25%, 1/15/34

     5,980        6,218,243   

New York State Dormitory Authority, RB:

    

Master BOCES Program Lease (AGC), 5.00%, 8/15/28

     1,750        1,983,048   

Mental Health Services Facilities, Series B, 5.25%, 2/15/14 (c)

     1,570        1,647,935   

School Districts Financing Program, Series C (AGM), 5.00%, 10/01/37

     4,050        4,458,604   

Series B, 5.00%, 3/15/42

     1,500        1,717,200   

Series C, 5.00%, 12/15/31

     6,230        7,063,823   

New York State Dormitory Authority, Refunding RB, School Districts Financing Program, Series A (AGM),
5.00%, 10/01/35

     550        607,910   

New York State Thruway Authority, Second General, RB:

    

Series A (AMBAC), 5.00%, 4/01/26

     4,380        4,898,942   

Series B, 5.00%, 4/01/27

     1,500        1,707,405   

New York State Urban Development Corp., RB, State Personal Income Tax:

    

Series A, 3.50%, 3/15/28

     1,500        1,603,920   

Series C-1 (NPFGC), 5.00%, 3/15/13 (c)

     3,000        3,017,580   

State Facilities, Series A-1 (NPFGC), 5.00%, 3/15/14 (c)

     5,000        5,266,100   

Tobacco Settlement Financing Corp. New York, RB,

    

Series B-1C, 5.50%, 6/01/22

     1,900        1,931,198   
    

 

 

 
               65,691,233   

Tobacco — 0.8%

  

Tobacco Settlement Financing Corp. New York, RB,

    

Series A-1 (AMBAC), 5.25%, 6/01/20

     5,000        5,079,650   

Transportation — 22.0%

  

Metropolitan Transportation Authority, RB:

    

Series 2008C, 6.50%, 11/15/28

     3,200        4,071,872   

Series H, 4.00%, 11/15/34

     1,295        1,352,589   

Transportation, Series A, 5.00%, 11/15/27

     1,000        1,174,820   

Transportation, Series D, 5.25%, 11/15/41

     4,000        4,580,800   

Metropolitan Transportation Authority, Refunding RB:

    

Series B, 5.00%, 11/15/34

     1,500        1,702,680   

Series F, 5.00%, 11/15/30

     1,580        1,846,262   

Transportation, Series D, 5.25%, 11/15/29

     1,000        1,159,720   

New York Liberty Development Corp., RB, 1 World Trade Center Port Authority Consolidated:

    

5.00%, 12/15/41

     6,000        6,788,640   

5.25%, 12/15/43

     3,500        4,026,925   

New York (continued)

                

Transportation (concluded)

  

New York State Thruway Authority, Refunding RB:

    

Series F (AMBAC), 5.00%, 1/01/30

     $    6,000      $ 6,458,040   

Series G (AGM), 4.75%, 1/01/29

     7,250        7,830,507   

Series G (AGM), 4.75%, 1/01/30

     9,000        9,746,370   

Series G (AGM), 5.00%, 1/01/30

     2,000        2,182,240   

Series G (AGM), 5.00%, 1/01/32

     1,030        1,125,141   

Series I, 5.00%, 1/01/37

     3,500        3,970,750   

Series I, 4.13%, 1/01/42

     1,850        1,929,217   

Series I, 5.00%, 1/01/42

     2,250        2,534,062   

Niagara Falls Bridge Commission, Refunding RB, Bridge System, Series A (AGC), 4.00%, 10/01/19

     1,900        2,092,679   

Niagara Frontier Transportation Authority New York, RB, Buffalo Niagara International Airport, Series B (NPFGC), 5.50%, 4/01/19

     2,705        2,737,325   

Port Authority of New York & New Jersey, RB:

    

124th Series, AMT (NPFGC),
5.00%, 8/01/36

     500        501,705   

163rd Series, 5.00%, 7/15/35

     2,500        2,869,550   

Consolidated, 37th Series, AMT (AGM), 5.13%, 7/15/30

     2,500        2,652,300   

JFK International Air Terminal, Special Project, Series 6, AMT (NPFGC), 6.25%, 12/01/13

     4,425        4,510,978   

JFK International Air Terminal, Special Project, Series 6, AMT (NPFGC), 6.25%, 12/01/14

     7,380        7,664,942   

JFK International Air Terminal, Special Project, Series 6, AMT (NPFGC), 5.75%, 12/01/22

     10,160        10,163,759   

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

     3,500        3,500,945   

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 177th Series, AMT, 4.00%, 1/15/43 (d)

     4,000        4,029,400   

Triborough Bridge & Tunnel Authority, RB (c):

    

Sub-Series A (NPFGC), 5.25%, 11/15/13

     6,000        6,199,860   

Subordinate Bonds (AMBAC), 5.00%, 11/15/13

     1,965        2,037,784   

Triborough Bridge & Tunnel Authority, Refunding RB:

    

General, Series A, 5.00%, 11/15/38

     1,000        1,159,320   

General, Series B, 5.00%, 11/15/31

     495        591,871   

General, Series B, 4.00%, 11/15/32

     500        544,340   

Series C, 5.00%, 11/15/38

     2,000        2,340,700   

Series E (NPFGC), 5.25%, 11/15/23

     630        632,457   

Series E (NPFGC), 5.00%, 11/15/32

     8,115        8,141,049   

Sub-Series A, 5.00%, 11/15/28

     2,500        2,998,525   

Sub-Series A, 5.00%, 11/15/29

     875        1,045,152   

Sub-Series A, 3.13%, 11/15/31

     2,045        1,991,769   
    

 

 

 
               130,887,045   

Utilities — 9.7%

  

Buffalo Sewer Authority New York, Refunding RB, Series F (NPFGC), 6.00%, 7/01/13

     1,175        1,199,052   

Long Island Power Authority, RB:

    

General, Series A (AGM), 5.00%, 5/01/36

     3,775        4,261,182   

Series A (AMBAC), 5.00%, 9/01/29

     7,000        7,390,530   

Long Island Power Authority, Refunding RB:

    

General, Series A (AGC), 6.00%, 5/01/33

     1,500        1,796,205   

General, Series B (AGM), 5.00%, 12/01/35

     4,000        4,404,320   

Series A (AGC), 5.75%, 4/01/39

     1,015        1,212,641   

New York City Municipal Water Finance Authority, RB, Series B, 5.00%, 6/15/36

     2,000        2,229,040   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    31


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)
    Value  

New York (continued)

                

Utilities (concluded)

  

New York City Municipal Water Finance Authority, Refunding RB:

    

Second General Resolution, Fiscal 2011, Series BB, 5.00%, 6/15/31

     $    1,000      $ 1,164,850   

Second General Resolution, Series FF, 5.00%, 6/15/31

     1,500        1,747,275   

Series D (AGM), 5.00%, 6/15/37

     9,000        9,764,010   

Series DD, 5.00%, 6/15/32

     6,750        7,763,107   

Series DD (AGM), 4.50%, 6/15/39

     1,000        1,049,980   

Series FF, 4.00%, 6/15/45

     1,975        2,058,069   

Series FF, 5.00%, 6/15/45

     2,100        2,392,971   

New York State Environmental Facilities Corp., Refunding RB, Revolving Funds, New York City Municipal Water:

    

5.00%, 6/15/36

     2,100        2,473,485   

Series B, 5.00%, 6/15/33

     1,040        1,193,806   

New York State Power Authority, Refunding RB, Series A, 5.00%, 11/15/38

     4,920        5,695,638   
    

 

 

 
               57,796,161   

Total Municipal Bonds in New York

  

    639,869,846   
    

Guam — 1.0%

                

Transportation — 0.7%

  

Guam International Airport Authority, Refunding RB, Series C, AMT (NPFGC):

    

5.25%, 10/01/21

     2,240        2,244,211   

5.25%, 10/01/22

     2,050        2,053,567   
    

 

 

 
        4,297,778   

Utilities — 0.3%

  

Guam Power Authority, RB, Series A (AGM), 5.00%, 10/01/37

     1,380        1,474,972   

Total Municipal Bonds in Guam

  

    5,772,750   
    

Puerto Rico — 10.4%

  

Housing — 0.6%

  

Puerto Rico Housing Finance Authority, Refunding RB, Subordinate, Capital Fund Modernization, 5.13%, 12/01/27

     3,500        3,757,845   

State — 6.5%

  

Commonwealth of Puerto Rico, GO, Refunding (NPFGC):

    

Public Improvement, Series A, 5.50%, 7/01/20

     2,000        2,176,100   

Sub-Series C-7, 6.00%, 7/01/27

     1,400        1,469,706   

Sub-Series C-7, 6.00%, 7/01/28

     4,775        4,994,316   

Puerto Rico Infrastructure Financing Authority, RB, CAB, Series A (b):

    

(AMBAC), 6.48%, 7/01/35

     3,900        933,309   

(AMBAC), 6.55%, 7/01/43

     8,000        1,128,080   

(NPFGC), 6.10%, 7/01/31

     22,030        7,282,016   

Puerto Rico Public Buildings Authority, Refunding RB, Government Facilities Series M-3 (NPFGC), 6.00%, 7/01/28

     2,850        2,994,666   

Puerto Rico Sales Tax Financing Corp., RB, First Sub-Series A:

    

5.63%, 8/01/30

     2,000        2,076,300   

5.75%, 8/01/37

     7,150        7,728,292   

(AGM), 5.00%, 8/01/40

     2,100        2,208,780   

New York (concluded)

                

State (concluded)

  

Puerto Rico Sales Tax Financing Corp., Refunding RB:

    

CAB, Series A (NPFGC), 5.60%, 8/01/41 (b)

     $    12,800      $ 2,653,696   

CAB, Series A (NPFGC), 5.60%, 8/01/43 (b)

     4,000        742,560   

Senior Series C, 5.25%, 8/01/40

     2,035        2,213,714   
    

 

 

 
               38,601,535   

Transportation — 2.7%

  

Puerto Rico Highway & Transportation Authority, RB, Series Y (AGM), 6.25%, 7/01/21

     6,275        7,513,810   

Puerto Rico Highway & Transportation Authority, Refunding RB (AGM):

    

Series AA-1, 4.95%, 7/01/26

     3,000        3,233,130   

Series CC, 5.50%, 7/01/29

     2,050        2,324,475   

Series CC, 5.50%, 7/01/31

     2,500        2,797,275   
    

 

 

 
               15,868,690   

Utilities — 0.6%

  

Puerto Rico Electric Power Authority, RB, Series RR (NPFGC), 5.00%, 7/01/24

     1,000        1,011,520   

Puerto Rico Electric Power Authority, Refunding RB, Series VV (NPFGC), 5.25%, 7/01/30

     2,245        2,288,665   
    

 

 

 
               3,300,185   
Total Municipal Bonds in Puerto Rico        61,528,255   

Total Municipal Bonds — 119.2%

  

    707,170,851   
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
 

New York — 36.4%

  

County/City/Special District/School District — 11.3%

  

City of New York, New York, GO:

    

Series J, 5.00%, 5/15/23

     6,750        7,146,900   

Sub-Series C-3, (AGC), 5.75%, 8/15/28 (f)

     14,400        17,669,520   

New York City Transitional Finance Authority, RB, Future Tax Secured, Sub-Series D-1, 5.00%, 11/01/38

     4,125        4,765,901   

New York Convention Center Development Corp., RB, Hotel Unit Fee Secured (AMBAC), 5.00%, 11/15/35

     20,000        21,853,400   

New York Liberty Development Corp., RB, Class 1, 7 World Trade Center Project, 4.00%, 9/15/35

     2,490        2,586,438   

New York Liberty Development Corp., Refunding RB:

    

4 World Trade Center Project, 5.00%, 11/15/44

     2,000        2,242,880   

Class 1, 7 World Trade Center Project, 5.00%, 9/15/40

     3,645        4,163,501   

New York State Dormitory Authority, RB, State University Dormitory Facilities, Series A, 5.25%, 7/01/29

     6,000        6,945,480   
    

 

 

 
        67,374,020   

Education — 5.2%

  

New York State Dormitory Authority, LRB, State University Dormitory Facilities, Series A, 5.00%, 7/01/35

     5,198        6,011,827   

New York State Dormitory Authority, RB:

    

New York University, Series A, 5.00%, 7/01/38

     6,498        7,327,482   

New York University, Series A (AMBAC), 5.00%, 7/01/37

     5,707        6,316,765   

Series B, 5.75%, 3/15/36

     7,850        9,522,992   

 

See Notes to Financial Statements.

 

                
32    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

(Percentages shown are based on Net Assets)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
   Par  
(000)
    Value  

New York (continued)

  

Education (concluded)

  

New York State Dormitory Authority, Refunding, LRB, State University Dormitory Facilities, Series A, 5.00%, 7/01/42

     $    1,480      $ 1,706,780   
    

 

 

 
        30,885,846   

State — 1.2%

  

New York State Dormitory Authority, RB, Mental Health Services Facilities, Series C, AMT (AGM), 5.40%, 2/15/33

     6,297        6,874,401   

Transportation — 14.6%

  

Hudson New York Yards Infrastructure Corp., RB, Series A, 5.75%, 2/15/47

     9,739        11,621,822   

Metropolitan Transportation Authority, RB, Series A (NPFGC), 5.00%, 11/15/31

     3,901        4,398,572   

New York Liberty Development Corp., RB, 1 World Trade Center Project, 5.25%, 12/15/43

     18,000        20,709,438   

New York State Thruway Authority, Refunding RB:

    

Series A, 5.00%, 3/15/31

     3,940        4,676,110   

Series G (AGM), 5.00%, 1/01/32

     16,000        17,477,920   

Series H (AGM), 5.00%, 1/01/37

     10,000        11,215,800   

Port Authority of New York & New Jersey, RB, Consolidated, 169th Series, AMT:

    

5.00%, 10/15/25

     7,990        9,362,265   

5.00%, 10/15/26

     6,000        7,003,200   
    

 

 

 
        86,465,127   

Utilities — 4.1%

  

New York City Municipal Water Finance Authority, RB, Fiscal 2009, Series A, 5.75%, 6/15/40

     4,094        4,882,504   

New York City Municipal Water Finance Authority, Refunding RB:

    

Second General Resolution, Fiscal 2012, Series B, 5.00%, 6/15/44

     3,991        4,525,725   

New York (concluded)

  

Utilities (concluded)

  

New York City Municipal Water Finance Authority, Refunding RB (concluded):

    

Second General Resolution, Series HH,
5.00%, 6/15/32

     $    9,900      $ 11,555,379   

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

     2,759        3,256,918   
    

 

 

 
               24,220,526   

Total Municipal Bonds Transferred to Tender Option Bond Trusts in New York

             215,819,920   
    

Puerto Rico — 1.4%

  

State — 1.4%

  

Puerto Rico Sales Tax Financing Corp., Refunding RB, Series C, 5.00%, 8/01/40

     8,000        8,559,760   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 37.8%
        224,379,680   

Total Long-Term Investments

(Cost — $860,586,508) — 157.0%

  

  

    931,550,531   
    
   
Short-Term Securities    Shares         

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

     5,165,456        5,165,456   
Total Short-Term Securities
(Cost — $5,165,456) — 0.8%
        5,165,456   
Total Investments (Cost — $865,751,964) — 157.8%        936,715,987   
Other Assets Less Liabilities — 2.5%        15,090,136   

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (18.6)%

   

    (110,322,180
VRDP Shares, at Liquidation Value — (41.7)%        (247,700,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 593,783,943   
    

 

 

 
Notes to Schedule of investments

 

(a)   Variable rate security. Rate shown is as of report date.

 

(b)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(c)   US 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.

 

(d)   When-issued security. Unsettled when-issued transactions were as follows:

 

Counterparty      Value        Unrealized
Depreciation
 

Wells Fargo & Co.

     $ 4,029,400         $ (36,240

 

(e)   Securities represent bonds transferred to a TOB in exchange for which the Fund acquired residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1 of the Notes to Financial Statements for details of municipal bonds transferred to 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 is $7,200,000.

 

(h)   Investments in issuers considered to be an affiliate of the Fund during the six months ended January 31, 2013, for purposes of Section 2(a)(3) of the 1940 act, were as follows:

 

Affiliate      Shares Held
at July 31,
2012
       Net
Activity
      

Shares Held

at January 31,
2013

       Income  

BIF New York Municipal Money Fund.

       10,257,884           (5,092,428        5,165,456         $ 139   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    33


Table of Contents

Schedule of Investments (concluded)

  

BlackRock MuniYield New York Quality Fund, Inc. (MYN)

 

 

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

 

Ÿ  

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 ratings group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

Ÿ  

Financial futures contracts as of January 31, 2013 were as follows:

 

Contracts
Sold
    Issue   Exchange   Expiration   Notional
Value
    Unrealized
Depreciation
 
  (74   30-Year US Treasury Bond   Chicago Board of Trade   March 2013   $ 10,616,688      $ (19,772

 

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 and 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 level in the fair value hierarchy within which the fair value measurement falls in its entirety 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 and other significant accounting policies, please refer to Note 1 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 January 31, 2013:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 931,550,531                   $ 931,550,531   

Short-Term Securities

  $ 5,165,456                               5,165,456   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 5,165,456         $ 931,550,531                   $ 936,715,987   
 

 

 

      

 

 

      

 

 

      

 

 

 

 

1  

See above Schedule of Investments for values in each sector.

 

     Level 1        Level 2      Level 3        Total  
Derivative Financial Instruments2          

Liabilities:

                

Interest rate contracts

  $ (19,772                     $        (19,772)   

 

2   

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

Certain of the Fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of January 31, 2013, such liabilities are categorized within the disclosure hierarchy as follows:

 

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

                

Bank overdraft

            $ (212,547                $ (212,547

TOB trust certificates

              (110,274,961                  (110,274,961

VRDP Shares

              (247,700,000                  (247,700,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

            $ (358,187,508                $ (358,187,508
 

 

 

      

 

 

      

 

 

      

 

 

 

There were no transfers between levels during the six months ended January 31, 2013.

 

See Notes to Financial Statements.

 

                
34    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments January 31, 2013 (Unaudited)

   BlackRock MuniYield Quality Fund III, Inc. (MYI)
(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Alabama — 0.4%

    

Birmingham Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC), 6.00%, 6/01/39

   $ 3,605      $ 4,217,381   

Alaska — 2.0%

    

Alaska Housing Finance Corp., RB, General Housing, Series B (NPFGC), 5.25%, 12/01/30

     2,000        2,085,420   

Alaska Housing Finance Corp., Refunding RB, General Mortgage, Series A, 4.13%, 12/01/37

     3,455        3,556,819   

Alaska Industrial Development & Export Authority, RB, Providence Health Services, Series A, 5.50%, 10/01/41

     2,690        3,154,913   

Borough of Matanuska-Susitna Alaska, RB, Goose Creek Correctional Center (AGC), 6.00%, 9/01/28

     10,150        12,581,026   
    

 

 

 
                    21,378,178   

Arizona — 0.5%

    

Maricopa County & Phoenix Industrial Development Authority, Refunding RB, S/F Housing, Series A-2, AMT (Ginnie Mae), 5.80%, 7/01/40

     625        644,213   

State of Arizona, COP, Department of Administration, Series A (AGM), 5.00%, 10/01/27

     3,725        4,260,245   
    

 

 

 
               4,904,458   

California — 14.3%

    

Alameda Corridor Transportation Authority, Refunding RB, CAB, Subordinate Lien, Series A (AMBAC),
5.40%, 10/01/24 (a)

     10,000        11,194,600   

California Health Facilities Financing Authority, RB:

    

Saint Joseph Health System, Series A, 5.75%, 7/01/39

     1,550        1,786,329   

Sutter Health, Series B, 5.88%, 8/15/31

     3,200        3,876,640   

California HFA, RB, Home Mortgage, Series K, AMT, 5.50%, 2/01/42

     2,785        2,884,759   

California State University, RB, Systemwide, Series A:

    

5.50%, 11/01/39

     1,525        1,743,533   

(NPFGC), 5.00%, 5/01/13 (b)

     9,865        9,983,281   

California State University, Refunding RB, Systemwide, Series A (AGM), 5.00%, 11/01/37

     3,545        3,955,263   

California Statewide Communities Development Authority, RB:

    

Kaiser Permanente, Series A, 5.00%, 4/01/42

     4,030        4,523,877   

Saint Joseph Health System, Series E (AGM), 5.25%, 7/01/47

     4,000        4,498,760   

City of Redding California, COP, Refunding, Series A (AGM), 5.00%, 6/01/30

     1,900        2,153,707   

City of San Jose California, Refunding ARB, AMT:

    

Series A (AMBAC), 5.50%, 3/01/32

     11,965        12,834,855   

Series A-1, 5.75%, 3/01/34

     2,300        2,668,552   

Coast Community College District, GO, Election of 2002, Series C (AGM), 5.32%, 8/01/33 (c)

     8,100        2,759,184   

County of Sacramento California, RB, Senior Series A (AGM), 5.00%, 7/01/41

     12,500        13,602,125   

Dublin Unified School District California, GO, CAB, Election of 2004, Series D, 5.87%, 8/01/34 (c)

     5,000        1,442,900   

Fairfield-Suisun Unified School District California, GO, Election of 2002 (NPFGC), 5.50%, 8/01/14 (b)

     5,800        6,245,092   

Grossmont Union High School District, GO, CAB, Election of 2004, 4.41%, 8/01/31 (c)

     5,110        2,280,082   

Long Beach Unified School District, GO, Election of 2008, Series B, 4.64%, 8/01/34 (c)

     5,000        1,864,950   

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

     1,200        1,372,308   

Norwalk-La Mirada Unified School District California, GO, CAB, Refunding, Election of 2002, Series E (AGC),
4.82%, 8/01/38 (c)

     7,620        2,264,816   

Oceanside Unified School District California, GO, Series A (AGC), 5.25%, 8/01/33

     2,500        2,800,750   

California (concluded)

    

Poway Unified School District, GO, Refunding, CAB, School Facilities Improvement, Election of 2008,
Series B (c):

    

4.58%, 8/01/35

   $ 7,820      $ 2,821,769   

4.63%, 8/01/36

     10,000        3,410,800   

Rio Hondo Community College District California, GO, CAB, Election of 2004, Series C (c):

    

4.64%, 8/01/37

     8,000        2,599,040   

4.68%, 8/01/38

     12,940        3,975,556   

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

     2,165        2,390,290   

San Diego Unified School District California, GO, Refunding, CAB, Series R-1, 4.20%, 7/01/31 (c)

     3,485        1,620,908   

San Francisco Bay Area Rapid Transit District, RB, Sales Tax Revenue (AGM), 5.00%, 7/01/14 (b)

     10,000        10,662,400   

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

     1,830        2,283,950   

San Marcos Unified School District, GO, Election of 2010, Series A:

    

5.00%, 8/01/34

     1,800        2,048,076   

5.00%, 8/01/38

     1,600        1,801,440   

State of California, GO:

    

5.50%, 3/01/40

     1,020        1,192,237   

Series 2007-2 (NPFGC), 5.50%, 4/01/30

     10        10,483   

Various Purpose, 5.00%, 4/01/42

     2,000        2,266,960   

State of California, GO, Refunding:

    

5.00%, 2/01/38

     4,000        4,542,440   

5.00%, 10/01/41

     2,555        2,882,014   

Various Purpose, 5.00%, 9/01/41

     2,700        3,042,738   

Walnut Valley Unified School District, GO, CAB, Election of 2007, Series B, 4.73%, 8/01/36 (c)

     6,545        2,183,150   

West Valley-Mission Community College District, GO, Refunding, Election of 2004, Series A (AGM), 5.00%, 8/01/30

     3,600        4,012,164   
    

 

 

 
                  150,482,778   

Florida — 10.9%

    

Broward County School Board Florida, COP, Series A (AGM), 5.25%, 7/01/33

     13,100        14,885,661   

Broward County Water & Sewer Utility, Refunding RB, Series A, 5.25%, 10/01/34

     2,250        2,604,578   

City of Jacksonville, Refunding RB, Transportation, Series A, 5.00%, 10/01/30

     770        901,185   

Collier County School Board, COP (AGM), 5.00%, 2/15/23

     5,000        5,571,150   

County of Lee Florida, Refunding RB, Series A, AMT:

    

5.63%, 10/01/26

     2,600        3,047,226   

5.38%, 10/01/32

     3,440        3,865,218   

County of Miami-Dade Florida, GO, Building Better Communities Program:

    

Series B, 6.38%, 7/01/28

     6,000        7,298,100   

Series B-1, 5.75%, 7/01/33

     3,700        4,328,038   

County of Miami-Dade Florida, RB Transit System Sales Surtax (AGM), 5.00%, 7/01/35

     2,800        3,092,936   

County of Miami-Dade Florida, Refunding RB:

    

Miami International Airport, AMT (AGC), 5.00%, 10/01/40

     11,000        11,607,200   

Miami International Airport, Series A, AMT (AGM), 5.50%, 10/01/41

     19,020        20,785,246   

Series C (BHAC), 6.00%, 10/01/23

     20,095        24,644,910   

Special Obligation, Series B, 5.00%, 10/01/37

     1,940        2,173,440   

Highlands County Health Facilities Authority, RB, Adventist Health System/Sunbelt, Series B, 6.00%, 11/15/37

     1,750        2,058,455   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    35


Table of Contents

Schedule of Investments (continued)

   BlackRock MuniYield Quality Fund III, Inc. (MYI)
(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Florida (concluded)

    

Sarasota County Public Hospital District, RB, Sarasota Memorial Hospital Project, Series A, 5.63%, 7/01/39

   $ 5,135      $ 5,691,737   

Tampa-Hillsborough County Expressway Authority, Refunding RB, Series A, 5.00%, 7/01/37

     1,465        1,656,270   
    

 

 

 
               114,211,350   

Georgia — 1.7%

    

Burke County Development Authority, Refunding RB, Oglethorpe Power Corp., Vogtle Project, Series C,
5.70%, 1/01/43

     6,450        7,019,406   

City of Atlanta Georgia, Refunding RB, General, Series B (AGM), 5.25%, 1/01/33

     10,000        10,556,200   
    

 

 

 
                    17,575,606   

Illinois — 17.8%

    

Chicago Illinois Board of Education, GO, Series A, 5.50%, 12/01/39

     6,470        7,563,495   

Chicago Illinois Transit Authority, RB, Sales Tax Receipts, 5.25%, 12/01/36

     1,620        1,869,674   

Chicago Park District, GO, Harbor Facilities, Series C:

    

5.25%, 1/01/37

     4,000        4,590,440   

5.25%, 1/01/40

     1,505        1,716,964   

City of Chicago Illinois, GARB, O’Hare International Airport, Third Lien, AMT (NPFGC):

    

Series A, 5.75%, 1/01/39

     9,000        10,600,470   

Series B-2, 5.25%, 1/01/27

     10,000        10,220,000   

Series B-2, 6.00%, 1/01/27

     26,230        27,307,528   

City of Chicago Illinois, GO, CAB, City Colleges (NPFGC) (c):

    

4.26%, 1/01/29

     4,000        2,044,920   

4.51%, 1/01/33

     7,950        3,270,392   

City of Chicago Illinois, Refunding GARB, O’Hare International Airport, Third Lien, Series C-2, AMT (AGM),
5.25%, 1/01/30

     16,400        16,694,872   

City of Chicago Illinois, Refunding RB, Water System, Second Lien, Series A (AMBAC), 5.00%, 11/01/36

     3,500        3,873,205   

Cook County Forest Preserve District, GO Refunding:

    

Limited Tax Project, Series B, 5.00%, 12/15/37

     775        886,484   

Unlimited Tax, Series C, 5.00%, 12/15/37

     890        1,021,916   

Illinois Finance Authority, RB, Series A, 5.75%, 8/15/34

     8,700        10,346,040   

Illinois Finance Authority, Refunding RB, Northwestern Memorial Hospital, Series A, 6.00%, 8/15/39

     5,250        6,168,540   

Illinois Municipal Electric Agency, RB, Series A (NPFGC):

    

5.00%, 2/01/35

     17,935        19,388,990   

5.25%, 2/01/35

     15,000        16,676,400   

Illinois State Toll Highway Authority, RB, Series B:

    

5.50%, 1/01/33

     4,000        4,553,840   

(BHAC), 5.50%, 1/01/33

     2,000        2,288,880   

Kane, Kendall, Etc. Counties Community College District No. 516 Illinois, GO, CAB, Series E (NPFGC), 4.94%, 12/15/25 (c)

     5,000        2,668,650   

Metropolitan Pier & Exposition Authority, RB, CAB, McCormick Place Expansion Project, Series A (NPFGC) (c):

    

3.73%, 12/15/26

     9,600        5,749,440   

4.40%, 6/15/32

     14,000        6,025,040   

4.52%, 12/15/34

     41,880        15,755,675   

Metropolitan Pier & Exposition Authority, Refunding RB, CAB, McCormick Place Expansion Project, Series B (AGM), 4.85%, 6/15/44 (c)

     9,430        2,096,949   

Railsplitter Tobacco Settlement Authority, RB, 6.00%, 6/01/28

     1,700        2,041,547   

Regional Transportation Authority, RB, Series C (NPFGC), 7.75%, 6/01/20

     1,000        1,252,140   
    

 

 

 
               186,672,491   

Indiana — 2.8%

    

City of Indianapolis Indiana, Refunding RB, Second Lien, Series B (AGC), 5.25%, 8/15/27

   $ 5,000      $ 5,579,300   

Indiana Finance Authority, RB, Wastewater Utility, 5.25%, 10/01/38

     2,900        3,361,013   

Indiana Municipal Power Agency, RB:

    

Series A (NPFGC), 5.00%, 1/01/37

     3,850        4,201,466   

Series B, 5.75%, 1/01/34

     1,050        1,094,006   

Series B, 6.00%, 1/01/39

     5,000        5,990,250   
    

Indianapolis Local Public Improvement Bond Bank, Refunding RB, Waterworks Project, Series A:

    

5.75%, 1/01/38

     2,900        3,314,120   

(AGC), 5.25%, 1/01/29

     1,350        1,526,796   

(AGC), 5.50%, 1/01/38

     4,250        4,824,430   
    

 

 

 
               29,891,381   

Iowa — 3.3%

    

Iowa Finance Authority, RB, Series A (AGC), 5.63%, 8/15/37

     12,650        14,422,771   

Iowa Student Loan Liquidity Corp., RB, Senior Series A-2, AMT:

    

5.60%, 12/01/26

     4,530        5,186,895   

5.70%, 12/01/27

     4,530        5,196,318   

5.75%, 12/01/28

     2,400        2,742,888   

5.80%, 12/01/29

     3,060        3,496,325   

5.85%, 12/01/30

     3,170        3,617,002   
    

 

 

 
               34,662,199   

Kentucky — 1.0%

    

Kentucky State Property & Buildings Commission, Refunding RB, Project No. 93 (AGC), 5.25%, 2/01/28

     4,000        4,712,760   

Louisville & Jefferson County Metropolitan Sewer District Kentucky, RB, Series A (NPFGC), 5.25%, 5/15/37

     5,000        5,306,850   
    

 

 

 
               10,019,610   

Louisiana — 1.1%

    

New Orleans Aviation Board Louisiana, RB, New Orleans Aviation, Series A, AMT (AGM), 5.25%, 1/01/32

     6,405        6,952,243   

Parish of St. Charles Louisiana Gulf Opportunity Zone, RB, Valero Energy Corp. Project, 4.00%, 12/01/40 (d)

     4,270        4,710,323   
    

 

 

 
                    11,662,566   

Maine — 0.1%

    

Maine State Housing Authority, Refunding RB, Series B-1, AMT, 4.00%, 11/15/27

     920        960,425   

Massachusetts — 3.7%

    

Massachusetts HFA, RB:

    

S/F Housing, Series 128, AMT (AGM), 4.88%, 12/01/38 (d)

     10,670        10,998,209   

Series B, 7.00%, 12/01/38

     3,150        3,633,557   

Massachusetts HFA, Refunding RB, AMT:

    

Rental Housing, Series A (AGM), 5.15%, 7/01/26

     12,005        12,095,638   

Series C, 5.35%, 12/01/42

     3,100        3,344,528   

Massachusetts Port Authority, Refunding RB, BOSFUEL Project, AMT (NPFGC), 5.00%, 7/01/38

     8,275        8,576,210   
    

 

 

 
               38,648,142   

Michigan — 7.0%

    

City of Detroit Michigan, RB, Series B (AGM):

    

Second Lien, 6.25%, 7/01/36

     1,075        1,254,299   

Second Lien, 7.00%, 7/01/36

     500        605,855   

Senior Lien, 7.50%, 7/01/33

     1,000        1,249,590   

City of Detroit Michigan, Refunding RB:

    

Senior Lien, Series C-1 (AGM), 7.00%, 7/01/27

     1,500        1,848,780   

Senior Lien, Series D (AGM), 5.00%, 7/01/23

     5,000        5,405,950   

Series D (NPFGC), 5.00%, 7/01/33

     5,000        5,232,850   

 

See Notes to Financial Statements.

 

                
36    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
    

 

Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Michigan (concluded)

    

Lansing Board of Water & Light Utilities System, RB, Series A, 5.50%, 7/01/41

   $ 3,185      $ 3,773,301   

Michigan State Building Authority, Refunding RB, Facilities Program:

    

Series I, 6.25%, 10/15/38

     3,125        3,803,188   

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

     1,750        2,077,723   

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

     3,250        3,867,857   

Series I-A, 5.38%, 10/15/36

     2,075        2,412,022   

Series II-A, 5.38%, 10/15/41

     1,900        2,188,344   

Series II-A (AGM), 5.25%, 10/15/36

     8,040        9,316,430   

Michigan State HDA, RB, Series C, 5.50%, 12/01/28

     2,735        2,962,634   

Michigan Strategic Fund, Refunding RB, Detroit Edison Co. Project, Series A (Syncora), 5.50%, 6/01/30

     2,500        2,529,050   

State of Michigan, RB, GAB (AGM):

    

5.25%, 9/15/22

     10,000        11,552,700   

5.25%, 9/15/26

     6,650        7,596,694   

Wayne County Airport Authority, Refunding RB, AMT (AGC), 5.38%, 12/01/32

     5,000        5,442,400   
    

 

 

 
               73,119,667   

Minnesota — 0.6%

    

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

     5,500        6,755,155   

Mississippi — 0.2%

    

Medical Center Educational Building Corp., RB, University of Mississippi Medical Center Facilities and Expansion and Renovation Project, Series A, 5.00%, 6/01/41

     2,000        2,274,560   
    

Nebraska — 0.3%

    

Central Plains Energy Project Nebraska, RB, Gas Project No. 3, 5.25%, 9/01/37

     2,825        3,192,956   

Nevada — 2.7%

    

City of Las Vegas Nevada, GO, Limited Tax, Performing Arts Center, 6.00%, 4/01/34

     2,250        2,648,115   

County of Clark Nevada, ARB:

    

Las Vegas-McCarran International Airport, Series A (AGC), 5.25%, 7/01/39

     5,170        5,819,404   

Subordinate Lien, Series A-2 (NPFGC), 5.00%, 7/01/30

     19,250        20,136,655   
    

 

 

 
                    28,604,174   

New Jersey — 4.2%

    

New Jersey EDA, RB, Cigarette Tax, 5.75%, 6/15/14 (b)

     4,000        4,300,120   

New Jersey EDA, Refunding RB, School Facilities Construction, Series N-1:

    

(AMBAC), 5.50%, 9/01/24

     6,500        8,294,650   

(NPFGC), 5.50%, 9/01/28

     1,685        2,201,335   

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

    

5.50%, 12/01/25

     1,250        1,422,400   

5.50%, 12/01/26

     1,800        2,035,044   

5.75%, 12/01/28

     200        226,772   

5.88%, 12/01/33

     6,895        7,840,442   

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

    

CAB, Series A, 4.55%, 12/15/35 (c)

     18,525        6,617,130   

CAB, Series C (AGC), 3.86%, 12/15/25 (c)

     10,000        6,114,000   

Series A (NPFGC), 5.75%, 6/15/25

     4,000        5,190,480   
    

 

 

 
               44,242,373   

New York — 5.1%

    

City of New York, New York, GO, Series J, 5.25%, 5/15/14 (b)

     10,000        10,634,200   

Hudson New York Yards Infrastructure Corp., RB, 5.75%, 2/15/47

     1,920        2,291,155   

New York (concluded)

    

New York City Transitional Finance Authority, RB, Fiscal 2009, Series S-4, 5.50%, 1/15/34

   $ 7,250      $ 8,398,690   

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

     3,250        3,800,582   

New York State Thruway Authority, Refunding RB, Series I, 5.00%, 1/01/37

     3,210        3,641,745   

Port Authority of New York & New Jersey, RB, Consolidated, 37th Series, AMT, (AGM), 5.13%, 7/15/30

     19,500        20,687,940   

Port Authority of New York & New Jersey, Refunding RB, Consolidated 172nd Series, AMT, 4.50%, 4/01/37

     3,970        4,327,618   
    

 

 

 
                    53,781,930   

North Carolina — 0.2%

    

North Carolina Medical Care Commission, RB, Novant Health Obligation, Series A, 4.75%, 11/01/43

     2,075        2,220,520   

Ohio — 0.6%

    

County of Allen Ohio, Refunding RB, Catholic HealthCare Partners, Series A 5.00%, 5/01/42

     2,030        2,272,138   

County of Lucas Ohio, Refunding RB, Promedica Healthcare, Series A, 6.50%, 11/15/37

     3,000        3,771,390   
    

 

 

 
               6,043,528   

Pennsylvania — 2.6%

    

Pennsylvania Turnpike Commission, RB:

    

Series A (AMBAC), 5.50%, 12/01/31

     15,600        16,846,284   

Sub-Series C (AGC), 6.25%, 6/01/38

     5,695        6,890,039   

Subordinate, Special Motor License Fund, 6.00%, 12/01/36

     2,575        3,175,335   
    

 

 

 
               26,911,658   

Puerto Rico — 3.1%

    

Puerto Rico Sales Tax Financing Corp., RB, First Sub-Series A:

    

5.75%, 8/01/37

     2,000        2,161,760   

6.38%, 8/01/39

     10,195        11,469,579   

5.50%, 8/01/42

     5,155        5,496,673   

Puerto Rico Sales Tax Financing Corp., Refunding RB:

    

CAB, Series A (NPFGC), 5.60%, 8/01/41 (c)

     15,000        3,109,800   

CAB, Series A, (NPFGC) 5.60% 8/01/42 (c)

     3,190        624,730   

CAB, Series C, 5.56%, 8/01/38 (c)

     9,400        2,321,612   

CAB, Series C, 5.57%, 8/01/39 (c)

     24,000        5,596,800   

First Sub-Series C, 6.00%, 8/01/39

     1,180        1,313,836   
    

 

 

 
               32,094,790   

South Carolina — 0.4%

    

South Carolina Jobs-EDA, Refunding RB, Palmetto Health, Series A (AGM), 6.50%, 8/01/39

     3,600        4,411,872   

Tennessee — 0.1%

    

Memphis Center City Revenue Finance Corp., RB, Pyramid and Pinch Distribution, Series B (AGM), 5.25%, 11/01/30

     485        568,410   

Texas — 14.1%

    

Bexar County, Refunding RB, Venue Project, 5.00%, 8/15/39

     3,870        4,287,612   

City of Houston Texas, Refunding RB, Combined, First Lien, Series A:

    

(AGC), 6.00%, 11/15/35

     5,700        6,946,704   

(AGC), 5.38%, 11/15/38

     3,650        4,268,602   

(AGM), 5.00%, 11/15/36

     10,000        11,375,000   

Dallas ISD, GO, School Building (PSF-GTD), 6.38%, 2/15/34

     10,000        12,302,700   

Dallas/Fort Worth International Airport, RB:

    

Series D, AMT, 5.00%, 11/01/38

     5,500        5,987,080   

Series H, 5.00%, 11/01/37

     8,865        9,677,654   

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    37


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Texas (concluded)

    

Grand Prairie ISD Texas, GO, CAB, Refunding, 5.34%, 8/15/28 (c)

   $ 10,000      $ 4,408,100   

Harris County Hospital District, Refunding RB, Senior Lien, Series A (NPFGC), 5.25%, 2/15/37

     4,055        4,321,616   

Judson ISD Texas, GO, School Building (AGC), 5.00%, 2/01/37

     10,000             10,993,900   

Midland County Fresh Water Supply District No. 1. RB, CAB, City of Midland Project, Series A, 4.48%, 9/15/36 (c)

     5,810        2,038,148   

North Texas Tollway Authority, Refunding RB, First Tier:

    

Series A, 6.00%, 1/01/28

     6,275        7,441,648   

System, Series A (NPFGC), 5.13%, 1/01/28

     20,000        21,948,000   

System, Series B (NPFGC), 5.75%, 1/01/40

     10,000        11,499,600   

San Antonio Public Facilities Corp., Refunding LRB, Convention Center Refinancing and Expansion Project:

    

4.00%, 9/15/42

     4,400        4,479,464   

CAB, 4.58%, 9/15/35 (c)

     7,160        2,568,507   

CAB, 4.66%, 9/15/36 (c)

     12,195        4,108,373   

CAB, 4.72%, 9/15/37 (c)

     8,730        2,770,204   

Texas Department of Housing & Community Affairs, MRB, Series A, AMT (NPFGC), 5.45%, 9/01/23

     3,545        3,550,885   

Texas Municipal Gas Acquisition & Supply Corp. III, RB, Natural Gas Utility Improvements:

    

5.00%, 12/15/28

     400        437,500   

5.00%, 12/15/29

     3,240        3,535,391   

Texas State Turnpike Authority, RB, CAB (AMBAC),
5.97%, 8/15/31 (c)

     20,265        6,807,216   

Texas Transportation Commission, Refunding RB, Central Texas Turnpike System, First Tier, Series A,
4.00%, 8/15/38

     2,860        2,862,202   
    

 

 

 
               148,616,106   

Utah — 1.6%

    

Utah Transit Authority, Refunding RB, CAB, Sub-Series A (c):

    

(AGC), 3.20%, 6/15/20

     10,000        7,916,000   

(NPFGC), 4.11%, 6/15/24

     13,930        8,773,114   
    

 

 

 
               16,689,114   

Vermont — 0.1%

    

Vermont HFA, Refunding RB, Multiple Purpose, Series C, AMT (AGM), 5.50%, 11/01/38 (d)

     1,510        1,609,162   

Washington — 1.1%

    

Washington Health Care Facilities Authority, RB, Series A:

    

5.00%, 10/01/39

     1,125        1,226,622   

5.25%, 10/01/39

     2,725        3,037,612   

5.00%, 8/15/44

     1,020        1,129,201   

Washington Healthcare Facilities Authority, Refunding RB, Catholic Health Initiatives, Series D, 6.38%, 10/01/36

     5,400        6,575,472   
    

 

 

 
               11,968,907   

Wisconsin — 0.9%

    

Wisconsin Health & Educational Facilities Authority, RB:

    

Ascension Health Senior Credit Group, 5.00%, 11/15/33

     3,745        4,247,204   

SynergyHealth Inc., 6.00%, 8/01/13 (b)

     3,395        3,492,437   

Wisconsin Health & Educational Facilities Authority, Refunding RB, 5.00%, 4/01/42

     1,300        1,460,966   
    

 

 

 
               9,200,607   
Total Municipal Bonds – 104.5%              1,097,592,054   

Arizona — 1.5%

    

Arizona School Facilities Board, COP (AGC), 5.13%, 9/01/21 (f)

   $ 10,000      $ 11,410,200   

Salt River Project Agricultural Improvement & Power District, RB, Series A, 5.00%, 1/01/38

     3,500        3,982,265   
    

 

 

 
               15,392,465   

California — 10.6%

    

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

     6,990        7,773,090   

California State University, RB, Systemwide, Series A (AGM):

    

5.00%, 11/01/33 (f)

     7,996        8,947,244   

5.00%, 11/01/37

     18,435        20,569,055   

City of Riverside California, RB, Issue D (AGM), 5.00%, 10/01/38

     20,000        21,775,600   

Foothill-De Anza Community College District, GO, Election of 1999, Series C (NPFGC), 5.00%, 8/01/36

     7,500        8,178,075   

Las Virgenes Unified School District California, GO, Series A (AGM), 5.00%, 8/01/31

     10,000        10,756,675   

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

     5,248        6,567,994   

Orange County Sanitation District, COP, Series B (AGM), 5.00%, 2/01/37

     10,780        12,106,048   

San Diego Community College District California, GO, Election of 2002, 5.25%, 8/01/33

     1,047        1,272,615   

San Diego County Water Authority, COP, Refunding, Series 2008-A (AGM), 5.00%, 5/01/33

     9,370        10,591,473   

University of California, RB, Series O, 5.75%, 5/15/34

     2,205        2,671,056   
    

 

 

 
                  111,208,925   

Colorado — 0.3%

    

Colorado Health Facilities Authority, Refunding RB, Catholic Healthcare, Series A, 5.50%, 7/01/34 (f)

     2,469        2,827,272   

Connecticut — 0.5%

    

Connecticut State Health & Educational Facility Authority, RB, Yale University, Series T-1, 4.70%, 7/01/29

     5,010        5,633,194   

District of Columbia — 2.6%

    

District of Columbia, RB, Series A,
5.50%, 12/01/30 (f)

     2,595        3,168,374   

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

     4,281        5,195,978   

Metropolitan Washington Airports Authority, RB, Series B, AMT (AMBAC), 5.00%, 10/01/32

     10,000        10,864,500   

Metropolitan Washington Airports Authority, Refunding RB, Series B, AMT, 5.00%, 10/01/30

     6,880        7,896,245   
    

 

 

 
               27,125,097   

Florida — 6.4%

    

City of Tallahassee Florida, RB, Energy System (NPFGC), 5.00%, 10/01/32 (f)

     3,300        3,701,049   

County of Miami-Dade Florida, RB:

    

(AGM), 5.00%, 10/01/39

     11,701        13,097,454   

(Syncora), 5.00%, 7/01/31

     19,800        21,800,196   

County of Miami-Dade Florida, Refunding RB, 5.00%, 7/12/42

     4,840        5,446,936   

Florida State Board of Education, GO, Series D, 5.00%, 6/01/37 (f)

     3,299        3,775,348   

Highlands County Health Facilities Authority, RB, Adventist, Series C, 5.25%, 11/15/36 (d)

     5,400        5,987,358   

Orange County School Board, COP, Series A (AGC), 5.50%, 8/01/34

     12,013        13,897,924   
    

 

 

 
               67,706,265   

 

See Notes to Financial Statements.

 

                
38    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
  

Par  

(000)

    Value  

Georgia — 1.1%

    

Metropolitan Atlanta Rapid Transit Authority, Refunding RB, Third Indenture, Series B (AGM), 5.00%, 7/01/37

   $ 10,000      $ 11,323,759   

Hawaii — 1.0%

    

Honolulu City & County Board of Water Supply, RB, Series A (NPFGC), 5.00%, 7/01/14 (b)

     9,830        10,486,939   

Illinois — 3.4%

    

City of Chicago Illinois, GO, Refunding, Series A (AGC), 5.25%, 1/01/24 (f)

     11,000        12,423,730   

City of Chicago Illinois, RB, Motor Fuel Tax, Series A (AGC), 5.00%, 1/01/38

     4,000        4,257,600   

City of Chicago Illinois, Refunding RB, Sales Tax Revenue, Series A, 5.00%, 1/01/41

     2,190        2,455,734   

Illinois Finance Authority, RB, University of Chicago, Series B, 6.25%, 7/01/38

     10,000        12,368,200   

Metropolitan Pier & Exposition Authority, RB, McCormick Place Expansion Project, Series A, 5.00%, 6/15/42

     720        811,998   

State of Illinois, RB, Build Illinois, Series B, 5.25%, 6/15/34 (f)

     3,499        4,009,124   
    

 

 

 
               36,326,386   

Kentucky — 0.7%

    

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

     5,985        6,916,776   

Louisiana — 1.1%

    

State of Louisiana Gas & Fuels, RB, Series A (AGM), 5.00%, 5/01/36

     10,000        11,130,900   

Michigan — 1.2%

    

Michigan Finance Authority, Refunding RB, Trinity Health, 5.00%, 12/01/39

     11,600        12,921,124   

Nevada — 0.6%

    

Clark County Water Reclamation District, GO, Series B:

    

5.50%, 7/01/29

     510        622,835   

5.75%, 7/01/34

     4,813        5,929,714   
    

 

 

 
               6,552,549   

New Jersey — 1.8%

    

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

     10,000        13,564,300   

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

     4,960        5,685,747   
    

 

 

 
               19,250,047   

New York — 2.9%

    

New York City Municipal Water Finance Authority, Refunding RB, Series DD, 5.00%, 6/15/37

     17,567        19,959,617   

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 143rd Series, AMT, 5.00%, 10/01/30

     5,180        5,661,895   

Triborough Bridge & Tunnel Authority, RB, General, Series A-2, 5.25%, 11/15/34 (f)

     4,500        5,366,115   
    

 

 

 
               30,987,627   

North Carolina — 0.9%

    

North Carolina HFA, RB, Series 31-A, AMT, 5.25%, 7/01/38

     9,456        9,891,054   

Ohio — 0.7%

    

County of Montgomery Ohio, RB, Catholic Health, Series C-1 (AGM), 5.00%, 10/01/41

     4,990               5,320,737   

State of Ohio, RB, Cleveland Clinic Health, Series B, 5.50%, 1/01/34

     1,520        1,742,300   
    

 

 

 
               7,063,037   
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
  

Par  

(000)

    Value  

Puerto Rico — 0.7%

    

Puerto Rico Sales Tax Financing Corp., Refunding RB, Senior Series C, 5.25%, 8/01/40

   $ 6,540      $ 7,114,474   

South Carolina — 0.4%

    

South Carolina State Housing Finance & Development Authority, Refunding RB, Series B-1, 5.55%, 7/01/39

     4,018        4,336,748   

South Dakota — 0.1%

    

South Dakota HDA, Refunding RB, Homeownership Mortgage, Series K, 5.05%, 5/01/36

     623        637,916   

Texas — 4.0%

    

Friendswood ISD Texas, GO, Schoolhouse (PSF-GTD), 5.00%, 2/15/37

     12,955        14,670,124   

Houston ISD, GO, Schoolhouse (PSF-GTD), 5.00%, 2/15/33

     10,000        11,251,900   

North East ISD Texas, GO, School Building, Series A, 5.00%, 8/01/37 (f)

     3,500        4,010,755   

Texas State University Systems, Refunding RB, 5.25%, 3/15/26

     10,000        11,789,100   
    

 

 

 
               41,721,879   

Virginia — 0.4%

    

University of Virginia, Refunding RB, General, 5.00%, 6/01/40

     3,944        4,547,736   

Washington — 5.5%

    

Central Puget Sound Regional Transit Authority, RB, Series A (AGM), 5.00%, 11/01/34

     16,770        19,297,826   

County of King Washington, RB (AGM), 5.00%, 1/01/37

     15,785        17,910,013   

Port of Seattle Washington, Refunding RB, Series B, AMT (NPFGC), 5.20%, 7/01/29

     20,565        20,736,055   
    

 

 

 
               57,943,894   

Wisconsin — 2.5%

    

State of Wisconsin, Refunding RB, Series A, 6.00%, 5/01/36

     14,780        18,055,839   

Wisconsin Health & Educational Facilities Authority, Refunding RB, Froedtert & Community Health, Inc.,
5.25%, 4/01/39 (f)

     7,459        8,290,739   
    

 

 

 
               26,346,578   
Total Municipal Bonds Transferred to Tender Option Bond Trusts — 50.9%              535,392,641   
Total Long-Term Investments
(Cost — $1,462,091,285) — 155.4%
             1,632,984,695   
    
   
Short-Term Securities    Shares         

FFI Institutional Tax-Exempt Fund, 0.01% (g)(h)

     19,825        19,824,998   
Total Short-Term Securities
(Cost — $19,824,998) — 1.9%
             19,824,998   
Total Investments (Cost — $1,481,916,283) — 157.3%        1,652,809,693   
Other Assets Less Liabilities — 1.2%        12,444,284   

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (24.6)%

   

    (258,425,922
VRDP Shares, at Liquidation Value — (33.9)%        (356,400,000
    

 

 

 
Net Assets Applicable to Common Shares — 100.0%      $ 1,050,428,055   
    

 

 

 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    39


Table of Contents

Schedule of Investments (concluded)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Notes to Schedule of Investments

 

(a)   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.

 

(b)   US 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 zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(d)   Variable rate security. Rate shown is as of report date.

 

(e)   Securities represent bonds transferred to a TOB in exchange for which the Fund acquired residual interest certificates. These securities serve as collateral in a financing transaction. See Note 1 of the Notes to Financial Statements for details of municipal bonds transferred to 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 is $32,378,149.

 

(g)   Investments in issuers considered to be an affiliate of the Fund during the six months ended January 31, 2013, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate      Shares Held
at July 31,
2012
       Net
Activity
       Shares Held
at January 31,
2013
       Income  

FFI Institutional Tax-Exempt Fund.

       21,624,366           (1,799,368        19,824,998         $ 1,257   

 

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

 

Ÿ  

Fair Value Measurements — Various inputs are used in determining the fair value of investments. 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 and 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)

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 level in the fair value hierarchy within which the fair value measurement falls in its entirety 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 is based on the pricing transparency of the investment 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 other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of January 31, 2013:

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments1

            $ 1,632,984,695                   $ 1,632,984,695   

Short-Term Securities

  $ 19,824,998                               19,824,998   
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 19,824,998         $ 1,632,984,695                   $ 1,652,809,693   
 

 

 

      

 

 

      

 

 

      

 

 

 

 

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

 

Certain of the Fund’s liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of January 31, 2013, such liabilities are categorized within the disclosure hierarchy as follows:

 

      

   

     Level 1        Level 2        Level 3        Total  

Liabilites:

                

TOB trust certificates

            $ (258,312,052                $ (258,312,052

VRDP Shares

              (356,400,000                  (356,400,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

            $ (614,712,052                $ (614,712,052
 

 

 

      

 

 

      

 

 

      

 

 

 
There were no transfers between levels during the six months ended January 31, 2013.   

 

See Notes to Financial Statements.

 

                
40    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Statements of Assets and Liabilities     

 

January 31, 2013 (Unaudited)   BlackRock
MuniHoldings
Quality
Fund II, Inc.
(MUE)
    BlackRock
MuniYield
California
Quality
Fund, Inc.
(MCA)
    BlackRock
MuniYield
Michigan
Quality
Fund II, Inc.
(MYM)
    BlackRock
MuniYield
New York
Quality
Fund, Inc.
(MYN)
    BlackRock
MuniYield
Quality
Fund III, Inc.
(MYI)
 
         
Assets                                        

Investments at value — unaffiliated1

  $ 559,712,380      $ 937,692,565      $ 282,648,754      $ 931,550,531      $ 1,632,984,695   

Investments at value — affiliated2

    883,107        4,581,630        3,323,390        5,165,456        19,824,998   

Cash pledged as collateral for financial futures contracts

           224,000                        

Interest receivable

    5,813,222        12,441,348        2,898,890        9,762,500        17,159,064   

Investments sold receivable

                         12,659,186        671,817   

Deferred offering costs

    148,405        320,228        225,326        425,635        560,514   

Prepaid expenses

    12,808        20,731        6,504        21,282        37,450   
 

 

 

 

Total assets

    566,569,922        955,280,502        289,102,864        959,584,590        1,671,238,538   
 

 

 

 
         
Accrued Liabilities                                        

Bank overdraft

    121,848        142,870        74,910        212,547          

Income dividends payable — Common Shares

    1,585,897        2,614,145        834,791        2,807,149        4,883,897   

Investments purchased payable

           5,165,776               4,074,973          

Investment advisory fees payable

    248,787        400,643        122,436        403,944        705,580   

Officer’s and Directors’ fees payable

    3,396        149,445        1,916        161,225        270,684   

Interest expense and fees payable

    38,425        107,959        6,549        47,219        113,870   

Variation margin payable

           15,938               19,772          

Other accrued expenses payable

    91,644        74,046        56,501        98,857        124,400   
 

 

 

 

Total accrued liabilities

    2,089,997        8,670,822        1,097,103        7,825,686        6,098,431   
 

 

 

 
         
Other Liabilities                                        

TOB trust certificates

    87,975,110        203,182,546        16,718,184        110,274,961        258,312,052   

VMTP Shares, at liquidation value of $100,000 per share3,4

    131,000,000                               

VRDP Shares, at liquidation value of $100,000 per share3,4

           166,500,000        87,300,000        247,700,000        356,400,000   
 

 

 

 

Total other liabilities

    218,975,110        369,682,546        104,018,184        357,974,961        614,712,052   
 

 

 

 

Total liabilities

    221,065,107        378,353,368        105,115,287        365,800,647        620,810,483   
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 345,504,815      $ 576,927,134      $ 183,987,577      $ 593,783,943      $ 1,050,428,055   
 

 

 

 
         
Net Assets Applicable to Common Shareholders Consist of   

Paid-in capital5

  $ 299,933,629      $ 492,943,551      $ 162,599,683      $ 534,922,411      $ 954,313,225   

Undistributed net investment income

    4,122,400        7,784,834        1,769,848        8,352,234        15,905,690   

Accumulated net realized loss

    (10,550,523     (7,930,270     (1,600,365     (20,434,953     (90,684,270

Net unrealized appreciation/depreciation

    51,999,309        84,129,019        21,218,411        70,944,251        170,893,410   
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 345,504,815      $ 576,927,134      $ 183,987,577      $ 593,783,943      $ 1,050,428,055   
 

 

 

 

Net asset value per Common Share

  $ 15.36      $ 16.77      $ 15.21      $ 15.02      $ 15.49   
 

 

 

 

1 Investments at cost — unaffiliated

  $ 507,713,071      $ 853,734,599      $ 261,430,343      $ 860,586,508      $ 1,462,091,285   

2 Investments at cost — affiliated

  $ 883,107      $ 4,581,630      $ 3,323,390      $ 5,165,456      $ 19,824,998   

3 VMTP/VRDP Shares outstanding, par value $0.10 per share

    1,310        1,665        873        2,477        3,564   

4 Preferred Shares authorized, including Auction Market Preferred Shares (“AMPS”)

    8,180        12,665        4,833        14,637        26,364   

5 Common Shares outstanding, 200 million shares authorized, $0.10 par value

    22,494,997        34,396,651        12,098,420        39,537,306        67,831,896   

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    41


Table of Contents
Statements of Operations     

 

Six Months Ended January 31, 2013 (Unaudited)   BlackRock
MuniHoldings
Quality
Fund II, Inc.
(MUE)
    BlackRock
MuniYield
California
Quality
Fund, Inc.
(MCA)
    BlackRock
MuniYield
Michigan
Quality
Fund II, Inc.
(MYM)
    BlackRock
MuniYield
New York
Quality
Fund, Inc.
(MYN)
   

BlackRock
MuniYield
Quality
Fund III, Inc.

(MYI)

 
         
Investment Income                                        

Interest

  $ 11,812,422      $ 19,474,350      $ 6,304,678      $ 20,984,205      $ 37,300,869   

Income — affiliated

    615        12               139        1,257   
 

 

 

 

Total income

    11,813,037        19,474,362        6,304,678        20,984,344        37,302,126   
 

 

 

 
         
Expenses                                        

Investment advisory

    1,561,466        2,369,383        725,637        2,412,720        4,164,333   

Professional

    70,713        87,438        53,215        88,978        113,641   

Accounting services

    47,771        63,355        30,874        75,033        102,107   

Transfer agent

    24,973        21,586        10,664        30,855        60,122   

Officer and Directors

    19,371        41,382        10,424        43,888        75,978   

Custodian

    14,905        18,922        6,611        21,099        33,515   

Printing

    5,515        4,077        4,359        7,674        7,407   

Registration

    4,777        5,945        4,705        6,791        11,638   

Miscellaneous

    31,822        43,471        37,324        37,815        54,656   
 

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    1,781,313        2,655,559        883,813        2,724,853        4,623,397   

Interest expense, fees and amortization of offering costs1

    1,109,832        1,615,688        544,785        1,844,113        2,831,537   
 

 

 

 

Total expenses

    2,891,145        4,271,247        1,428,598        4,568,966        7,454,934   

Less fees waived by Manager

    (92,967     (7,801     (995     (5,796     (4,371
 

 

 

 

Total expenses after fees waived

    2,798,178        4,263,446        1,427,603        4,563,170        7,450,563   
 

 

 

 

Net investment income

    9,014,859        15,210,916        4,877,075        16,421,174        29,851,563   
 

 

 

 
         
Realized and Unrealized Gain (Loss)                                        
Net realized gain (loss) from:          

Investments

    3,906,649        1,879,021        268,794        659,959        952,879   

Financial futures contracts

           148,953        (68,935            (401,075
 

 

 

 
    3,906,649        2,027,974        199,859        659,959        551,804   
 

 

 

 
Net change in unrealized appreciation/depreciation on:          

Investments

    671,011        3,982,993        761,711        (2,426,286     10,512,380   

Financial futures contracts

           171,053               (19,772       
 

 

 

 
    671,011        4,154,046        761,711        (2,446,058     10,512,380   
 

 

 

 

Total realized and unrealized gain (loss)

    4,577,660        6,182,020        961,570        (1,786,099     11,064,184   
 

 

 

 

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ 13,592,519      $ 21,392,936      $ 5,838,645      $ 14,635,075      $ 40,915,747   
 

 

 

 

1  Related to TOBs, VMTP Shares and/or VRDP Shares.

     

       

 

 

See Notes to Financial Statements.      
                
42    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Statements of Changes in Net Assets     

 

 

 

    BlackRock MuniHoldings
Quality Fund II, Inc. (MUE)
        BlackRock MuniYield
California Quality Fund, Inc. (MCA)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   Six Months Ended
January 31, 2013
(Unaudited)
    Year Ended
July 31,
2012
        Six Months Ended
January 31, 2013
(Unaudited)
    Year Ended
July 31,
2012
 
         
Operations                                    

Net investment income

  $ 9,014,859      $ 19,274,032        $ 15,210,916      $ 30,950,945   

Net realized gain

    3,906,649        6,203,078          2,027,974        7,279,735   

Net change in unrealized appreciation/depreciation

    671,011        41,808,358          4,154,046        71,266,940   

Dividends to AMPS shareholders from net investment income

           (130,644                
 

 

 

     

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    13,592,519        67,154,824          21,392,936        109,497,620   
 

 

 

     

 

 

 
         
Dividends to Common Shareholders From                                    

Net investment income

    (9,660,796     (19,801,506 )1        (15,676,032     (30,736,093 )1 
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Refund of offering costs previously charged to paid-in capital

                    57,806          

Reinvestment of common dividends

    428,690        434,788          593,203          
 

 

 

     

 

 

 

Net increase in net assets derived from capital share transactions

    428,690        434,788          651,009          
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase in net assets applicable to Common Shareholders

    4,360,413        47,788,106          6,367,913        78,761,527   

Beginning of period

    341,144,402        293,356,296          570,559,221        491,797,694   
 

 

 

     

 

 

 

End of period

  $ 345,504,815      $ 341,144,402        $ 576,927,134      $ 570,559,221   
 

 

 

     

 

 

 

Undistributed net investment income

  $ 4,122,400      $ 4,768,337        $ 7,784,834      $ 8,249,950   
 

 

 

     

 

 

 

 

    BlackRock MuniYield
Michigan Quality Fund II, Inc. (MYM)
        BlackRock MuniYield
New York Quality Fund, Inc. (MYN)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:  

Six Months Ended

January 31, 2013
(Unaudited)

    Year Ended
July 31,
2012
        Six Months Ended
January 31, 2013
(Unaudited)
    Year Ended
July 31,
2012
 
         
Operations                                    

Net investment income

  $ 4,877,075      $ 9,682,216        $ 16,421,174      $ 32,644,363   

Net realized gain (loss)

    199,859        642,666          659,959        (1,622,452

Net change in unrealized appreciation/depreciation

    761,711        19,657,656          (2,446,058     67,246,756   
 

 

 

     

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    5,838,645        29,982,538          14,635,075        98,268,667   
 

 

 

     

 

 

 
         
Dividends to Common Shareholders From                                    

Net investment income

    (5,007,651     (10,519,402 )1        (16,825,612     (33,617,202 )1 
 

 

 

     

 

 

 
         
Capital Share Transactions                                    

Reinvestment of common dividends

    80,916        336,204          1,167,190        97,586   
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                    

Total increase (decrease) in net assets applicable to Common Shareholders

    911,910        19,799,340          (1,023,347     64,749,051   

Beginning of period

    183,075,667        163,276,327          594,807,290        530,058,239   
 

 

 

     

 

 

 

End of period

  $ 183,987,577      $ 183,075,667        $ 593,783,943      $ 594,807,290   
 

 

 

     

 

 

 

Undistributed net investment income

  $ 1,769,848      $ 1,900,424        $ 8,352,234      $ 8,756,672   
 

 

 

     

 

 

 

 

1   

Dividends are determined in accordance with federal income tax regulations.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    43


Table of Contents
Statements of Changes in Net Assets     

 

 

 

    BlackRock MuniYield
Quality Fund III, Inc. (MYI)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   Six Months Ended
January 31, 2013
(Unaudited)
    Year Ended
July 31,
2012
 
   
Operations                

Net investment income

  $ 29,851,563      $ 58,623,097   

Net realized gain

    551,804        2,233,203   

Net change in unrealized appreciation/depreciation

    10,512,380        141,075,518   
 

 

 

 

Net increase in net assets applicable to Common Shareholders resulting from operations

    40,915,747        201,931,818   
 

 

 

 
   
Dividends to Common Shareholders From                

Net investment income

    (29,465,723     (58,495,073 )1 
 

 

 

 
   
Capital Share Transactions                

Reinvestment of common dividends

    2,956,363        1,599,734   
 

 

 

 
   
Net Assets Applicable to Common Shareholders                

Total increase in net assets applicable to Common Shareholders

    14,406,387        145,036,479   

Beginning of period

    1,036,021,668        890,985,189   
 

 

 

 

End of period

  $ 1,050,428,055      $ 1,036,021,668   
 

 

 

 

Undistributed net investment income

  $ 15,905,690      $ 15,519,850   
 

 

 

 

 

1   

Dividends are determined in accordance with federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
44    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Statements of Cash Flows     

 

Six Months Ended January 31, 2013 (Unaudited)  

BlackRock
MuniHoldings
Quality

Fund II, Inc.

(MUE)

   

BlackRock
MuniYield
California

Quality

Fund, Inc.

(MCA)

   

BlackRock
MuniYield
Michigan
Quality

Fund II, Inc.

(MYM)

   

BlackRock
MuniYield

New York

Quality

Fund, Inc.

(MYN)

   

BlackRock
MuniYield
Quality
Fund III, Inc.

(MYI)

 
         
Cash Provided by Operating Activities        

Net increase in net assets resulting from operations

  $ 13,592,519      $ 21,392,936      $ 5,838,645      $ 14,635,075      $ 40,915,747   

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:

         

(Increase) decrease in interest receivable

    (390,044     282,895        41,065        98,091        (93,828

Increase in cash pledged as collateral for financial futures contracts

           (224,000                     

Increase in prepaid expenses

    (4,988     (7,784     (2,366     (7,837     (13,725

Increase in investment advisory fees payable

    7,341        7,841        1,888        300        17,904   

Increase (decrease) in interest expense and fees payable

    2,114        (3,850     (35     (7,501     5,076   

Increase in other accrued expenses payable

    28,387        9,610        19,277        10,800        12,346   

Increase in variation margin payable

           15,938               19,772          

Increase in Officer’s and Directors’ fees payable

    2,770        25,994        1,561        27,871        48,110   

Net realized and unrealized (gain) loss on investments

    (4,577,660     (5,862,014     (1,030,505     1,766,327        (11,465,259

Amortization of premium and accretion of discount on investments

    1,062,957        1,782,440        47,516        518,135        (1,653,454

Amortization of deferred offering costs

    37,082        3,422        3,314        5,239        5,993   

Proceeds from sales of long-term investments

    85,711,872        99,437,620        17,337,513        43,573,842        70,842,238   

Purchases of long-term investments

    (83,432,531     (105,521,944     (20,637,317     (42,606,742     (85,508,812

Net proceeds from sales (purchases) of short-term securities

    (883,107     289,278        3,230,902        5,092,428        1,799,368   
 

 

 

 

Cash provided by operating activities

    11,156,712        11,628,382        4,851,458        23,125,800        14,911,704   
 

 

 

 
         
Cash Used for Financing Activities                

Cash receipts from TOB trust certificates

    3,574,868        10,890,882               8,064,595        29,009,862   

Cash payments for TOB trust certificates

    (3,695,614     (7,581,999            (15,750,000     (17,425,968

Cash dividends paid to Common Shareholders

    (9,297,545     (15,080,135     (4,926,368     (15,652,942     (26,495,598

Increase (decrease) in bank overdraft

    (1,738,421     142,870        74,910        212,547          
 

 

 

 

Cash used for financing activities

    (11,156,712     (11,628,382     (4,851,458     (23,125,800     (14,911,704
 

 

 

 
         
Cash                

Net increase (decrease) in cash

                                  

Cash at beginning of period

                                  
 

 

 

 

Cash at end of period

                                  
 

 

 

 
         
Cash Flow Information                

Cash paid during the period for interest

  $ 1,068,193      $ 1,613,834      $ 540,815      $ 1,844,031      $ 2,816,506   
 

 

 

 
         
Non-cash Financing Activities                

Capital shares issued in reinvestment of dividends paid to Common Shareholders

  $ 428,690      $ 593,203      $ 80,916      $ 1,167,190      $ 2,956,363   
 

 

 

 

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    45


Table of Contents
Financial Highlights    BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

   

Six Months Ended
January 31,
2013

(Unaudited)

    Year Ended July 31,    

Period
October 1, 2007
to July 31,

2008

   

Year Ended
September 30,

2007

 
      2012     2011     2010     2009      
             
Per Share Operating Performance                                                        

Net asset value, beginning of period

  $ 15.18      $ 13.07      $ 13.57      $ 12.27      $ 12.84      $ 13.72      $ 14.15   
 

 

 

 

Net investment income1

    0.40        0.86        0.89        0.92        0.90        0.78        0.97   

Net realized and unrealized gain (loss)

    0.21        2.14        (0.49     1.26        (0.71     (0.91     (0.45

Dividends to AMPS shareholders from net investment income

           (0.01     (0.02     (0.02     (0.12     (0.25     (0.33
 

 

 

 

Net increase (decrease) from investment operations

    0.61        2.99        0.38        2.16        0.07        (0.38     0.19   
 

 

 

 

Dividends to Common Shareholders from net investment income

    (0.43     (0.88 )2      (0.88 )2      (0.86 )2      (0.64 )2      (0.50 )2      (0.62 )2 
 

 

 

 

Net asset value, end of period

  $ 15.36      $ 15.18      $ 13.07      $ 13.57      $ 12.27      $ 12.84      $ 13.72   
 

 

 

 

Market price, end of period

  $ 15.42      $ 15.55      $ 12.46      $ 14.26      $ 11.40      $ 11.30      $ 12.39   
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders3                                                        

Based on net asset value

    4.04% 4      23.64%        3.19%        18.04%        1.58%        (2.41)% 4      1.73%   
 

 

 

 

Based on market price

    1.96% 4      32.85%        (6.38)%        33.51%        7.24%        (4.89)% 4      0.31%   
 

 

 

 
             
Ratio to Average Net Assets Applicable to Common Shareholders                                                   

Total expenses

    1.66% 5      1.52% 6      1.30% 6      1.28% 6      1.66% 6      1.55% 5,6      1.61% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.61% 5      1.46% 6      1.23% 6      1.15% 6      1.45% 6      1.45% 5,6      1.54% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs7

    0.97% 5      1.00% 6,8      1.07% 6      0.99% 6      1.04% 6      1.15% 5,6      1.17% 6 
 

 

 

 

Net investment income

    5.19% 5      6.05% 6      6.93% 6      6.92% 6      7.61% 6      6.74% 5,6      6.94% 6 
 

 

 

 

Dividends to AMPS shareholders

           0.04%        0.17%        0.18%        1.03%        2.19% 5      2.37%   
 

 

 

 

Net investment income to Common Shareholders

    5.19% 5      6.01%        6.76%        6.74%        6.58%        4.55% 5      4.57%   
 

 

 

 
             
Supplemental Data                                                        

Net assets applicable to Common Shareholders, end of
period (000)

  $ 345,505      $ 341,144      $ 293,356      $ 303,667      $ 274,342      $ 286,933      $ 306,769   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of
period (000)

                $ 131,000      $ 131,000      $ 131,000      $ 145,300      $ 204,500   
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of
period (000)

  $ 131,000      $ 131,000                                      
 

 

 

 

Portfolio turnover

    13%        36%        24%        20%        37%        43%        43%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period

                $ 80,983      $ 82,953      $ 77,357      $ 74,376      $ 62,514   
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of period

  $ 363,744      $ 360,416                                      
 

 

 

 

 

1   

Based on average Common Shares outstanding.

 

2   

Dividends are determined in accordance with federal income tax regulations.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Aggregate total investment return.

 

5   

Annualized.

 

6   

Do not reflect the effect of dividends to AMPS shareholders.

 

7   

Interest expense, fees and amortization of offering costs relate to TOBs and/or VMTP Shares. See Note 1 and Note 7 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VMTP Shares, respectively.

 

8   

For the year ended July 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs and remarketing fees was 0.97%.

 

 

See Notes to Financial Statements.      
                
46    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Financial Highlights    BlackRock MuniYield California Quality Fund, Inc. (MCA)

 

   

Six Months Ended

January 31,

2013

(Unaudited)

    Year Ended July 31,    

Period
November 1, 2007
to July 31,

2008

   

Year Ended
October 31,

2007

 
      2012     2011     2010     2009      
             
Per Share Operating Performance                                           

Net asset value, beginning of period

  $ 16.60      $ 14.31      $ 14.66      $ 13.43      $ 13.86      $ 14.63      $ 15.09   
 

 

 

 

Net investment income1

    0.44        0.90        0.91        0.87        0.86        0.68        0.92   

Net realized and unrealized gain (loss)

    0.19        2.28        (0.37     1.15        (0.51     (0.75     (0.42

Dividends to AMPS shareholders from net investment income

                  (0.02     (0.03     (0.12     (0.20     (0.28
 

 

 

 

Net increase (decrease) from investment operations

    0.63        3.18        0.52        1.99        0.23        (0.27     0.22   
 

 

 

 

Dividends to Common Shareholders from net investment income

    (0.46     (0.89 )2      (0.87 )2      (0.76 )2      (0.66 )2      (0.50 )2      (0.68 )2 
 

 

 

 

Net asset value, end of period

  $ 16.77      $ 16.60      $ 14.31      $ 14.66      $ 13.43      $ 13.86      $ 14.63   
 

 

 

 

Market price, end of period

  $ 16.55      $ 16.59      $ 13.00      $ 14.02      $ 12.08      $ 12.33      $ 13.16   
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders3                                           

Based on net asset value

    3.82% 4      23.15%        4.21%        15.69%        3.03%        (1.54)% 4      1.76%   
 

 

 

 

Based on market price

    2.52% 4      35.48%        (1.01)%        23.00%        4.17%        (2.63)% 4      (5.65)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                           

Total expenses

    1.47% 5      1.62%        1.50% 6      1.11% 6      1.40% 6      1.38% 5,6      1.53% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.47% 5      1.61%        1.49% 6      1.10% 6      1.38% 6      1.36% 5,6      1.53% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs7

    0.91% 5      1.20% 8      1.15% 6      0.95% 6      1.02% 6      1.04% 5,6      1.03% 6 
 

 

 

 

Net investment income

    5.25% 5      5.79%        6.49% 6      6.10% 6      6.60% 6      6.15% 5,6      6.22% 6 
 

 

 

 

Dividends to AMPS shareholders

                  0.16%        0.20%        0.91%        1.78% 5      1.87%   
 

 

 

 

Net investment income to Common Shareholders

    5.25% 5      5.79%        6.33%        5.90%        5.69%        4.37% 5      4.35%   
 

 

 

 
             
Supplemental Data                                           

Net assets applicable to Common Shareholders, end of
period (000)

  $ 576,927      $ 570,559      $ 491,798      $ 503,869      $ 461,505      $ 476,235      $ 502,855   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of
period (000)

                       $ 166,525      $ 166,525      $ 192,300      $ 275,000   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 166,500      $ 166,500      $ 166,500                               
 

 

 

 

Portfolio turnover

    10%        34%        26%        30%        25%        25%        25%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period

                       $ 100,648      $ 94,289      $ 86,933      $ 70,733   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 446,503      $ 442,678      $ 395,374                               
 

 

 

 

 

1   

Based on average Common Shares outstanding.

 

2   

Dividends are determined in accordance with federal income tax regulations.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Aggregate total investment return.

 

5   

Annualized.

 

6   

Do not reflect the effect of dividends to AMPS shareholders.

 

7   

Interest expense, fees and amortization of offering costs relate to TOBs and/or VRDP Shares. See Note 1 and Note 7 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

8   

For the year ended July 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.95%.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    47


Table of Contents
Financial Highlights    BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)

 

   

Six Months Ended
January 31,
2013

(Unaudited)

    Year Ended July 31,    

Period

November 1, 2007
to July 31,

2008

   

Year Ended
October 31,

2007

 
      2012     2011     2010     2009      
             
Per Share Operating Performance                                           

Net asset value, beginning of period

  $ 15.14      $ 13.53      $ 13.82      $ 12.87      $ 13.24      $ 14.13      $ 14.60   
 

 

 

 

Net investment income1

    0.40        0.80        0.86        0.91        0.93        0.70        0.97   

Net realized and unrealized gain (loss)

    0.08        1.68        (0.26     0.90        (0.49     (0.88     (0.47

Dividends to AMPS shareholders from net investment income

                  (0.03     (0.04     (0.14     (0.21     (0.29
 

 

 

 

Net increase (decrease) from investment operations

    0.48        2.48        0.57        1.77        0.30        (0.39     0.21   
 

 

 

 

Dividends to Common Shareholders from net investment income

    (0.41     (0.87 )2      (0.86 )2      (0.82 )2      (0.67 )2      (0.50 )2      (0.68 )2 
 

 

 

 

Net asset value, end of period

  $ 15.21      $ 15.14      $ 13.53      $ 13.82      $ 12.87      $ 13.24      $ 14.13   
 

 

 

 

Market price, end of period

  $ 14.70      $ 14.52      $ 12.28      $ 13.67      $ 11.58      $ 11.63      $ 12.61   
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders3                                           

Based on net asset value

    3.29% 4      19.01%        4.74%        14.62%        3.81%        (2.48)% 4      1.78%   
 

 

 

 

Based on market price

    4.09% 4      25.76%        (3.89)%        26.01%        6.34%        (4.01)% 4      (5.07)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                           

Total expenses

    1.54% 5      1.71%        1.32% 6      1.08% 6      1.28% 6      1.48% 5,6      1.69% 6 
 

 

 

 

Total expenses after fees waived

    1.54% 5      1.71%        1.31% 6      1.07% 6      1.26% 6      1.45% 5,6      1.68% 6 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs7

    0.95% 5      1.37% 8      1.21% 6      1.03% 6      1.12% 6      1.14% 5,6      1.14% 6 
 

 

 

 

Net investment income

    5.26% 5      5.56%        6.46% 6      6.74% 6      7.43% 6      6.61% 5,6      6.77% 6 
 

 

 

 

Dividends to AMPS shareholders

                  0.23%        0.28%        1.15%        1.98% 5      2.05%   
 

 

 

 

Net investment income to Common Shareholders

    5.26% 5      5.56%        6.23%        6.46%        6.28%        4.63% 5      4.72%   
 

 

 

 
             
Supplemental Data                                           

Net assets applicable to Common Shareholders, end of
period (000)

  $ 183,988      $ 183,076      $ 163,276      $ 166,773      $ 155,360      $ 159,759      $ 170,559   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of
period (000)

                       $ 87,350      $ 87,350      $ 87,350      $ 99,000   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 87,300      $ 87,300      $ 87,300                               
 

 

 

 

Portfolio turnover

    6%        19%        18%        18%        9%        20%        10%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period

                       $ 72,733      $ 69,467      $ 70,730      $ 68,076   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 310,753      $ 309,709      $ 287,029                               
 

 

 

 

 

1   

Based on average Common Shares outstanding.

 

2   

Dividends are determined in accordance with federal income tax regulations.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Aggregate total investment return.

 

5   

Annualized.

 

6   

Do not reflect the effect of dividends to AMPS shareholders.

 

7   

Interest expense, fees and amortization of offering costs relate to TOBs and/or VRDP Shares. See Note 1 and Note 7 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

8   

For the year ended July 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.98%.

 

 

See Notes to Financial Statements.      
                
48    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Financial Highlights    BlackRock MuniYield New York Quality Fund, Inc. (MYN)

 

   

Six Months Ended
January 31,
2013

(Unaudited)

    Year Ended July 31,    

Period
November 1, 2007
to July 31,

2008

   

Year Ended
October 31,

2007

 
      2012     2011     2010     2009      
             
Per Share Operating Performance                                           

Net asset value, beginning of period

  $ 15.07      $ 13.44      $ 13.89      $ 12.65      $ 13.16      $ 13.94      $ 14.40   
 

 

 

 

Net investment income1

    0.42        0.83        0.87        0.90        0.87        0.66        0.84   

Net realized and unrealized gain (loss)

    (0.04     1.65        (0.44     1.08        (0.61     (0.77     (0.38

Dividends to AMPS shareholders from net investment income.

                  (0.03     (0.04     (0.13     (0.19     (0.27
 

 

 

 

Net increase (decrease) from investment operations

    0.38        2.48        0.40        1.94        0.13        (0.30     0.19   
 

 

 

 

Dividends to Common Shareholders from net investment income

    (0.43     (0.85 )2      (0.85 )2      (0.70 )2      (0.64 )2      (0.48 )2      (0.65 )2 
 

 

 

 

Net asset value, end of period

  $ 15.02      $ 15.07      $ 13.44      $ 13.89      $ 12.65      $ 13.16      $ 13.94   
 

 

 

 

Market price, end of period

  $ 15.12      $ 15.11      $ 12.60      $ 13.57      $ 11.36      $ 11.80      $ 12.80   
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders3                                           

Based on net asset value

    2.51% 4      19.10%        3.36%        16.15%        2.29%        (1.86)% 4      1.66%   
 

 

 

 

Based on market price

    2.92% 4      27.38%        (0.81)%        26.36%        2.44%        (4.16)% 4      (4.67)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                           

Total expenses

    1.52% 5      1.65%        1.34% 6      1.11% 6      1.34% 6      1.48% 5,6      1.64% 6 
 

 

 

 

Total expenses after fees waived

    1.52% 5      1.65%        1.33% 6      1.10% 6      1.32% 6      1.46% 5,6      1.63% 6 
 

 

 

 

Total expenses after fees waived and excluding interest expense, fees and amortization of offering costs7

    0.91% 5      1.27% 8      1.14% 6      1.00% 6      1.06% 6      1.04% 5,6      1.04% 6 
 

 

 

 

Net investment income

    5.47% 5      5.78%        6.55% 6      6.69% 6      7.11% 6      6.36% 5,6      5.96% 6 
 

 

 

 

Dividends to AMPS shareholders

                  0.21%        0.27%        1.09%        1.82% 5      1.88%   
 

 

 

 

Net investment income to Common Shareholders

    5.47% 5      5.78%        6.34%        6.42%        6.02%        4.54% 5      4.08%   
 

 

 

 
             
Supplemental Data                                           

Net assets applicable to Common Shareholders, end of
period (000)

  $ 593,784      $ 594,807      $ 530,058      $ 547,812      $ 499,093      $ 518,912      $ 549,910   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of
period (000)

                       $ 247,700      $ 247,700      $ 259,475      $ 304,000   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 247,700      $ 247,700      $ 247,700                               
 

 

 

 

Portfolio turnover

    5%        17%        18%        7%        22%        17%        25%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period

                       $ 80,293      $ 75,376      $ 75,011      $ 70,242   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 339,719      $ 340,132      $ 313,992                               
 

 

 

 

 

1   

Based on average Common Shares outstanding.

 

2   

Dividends are determined in accordance with federal tax income regulations.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Aggregate total investment return.

 

5   

Annualized.

 

6   

Do not reflect the effect of dividends to AMPS shareholders.

 

7   

Interest expense, fees and amortization of offering costs relate to TOBs and/or VRDP Shares. See Note 1 and Note 7 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

8   

For the year ended July 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.92%.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    49


Table of Contents
Financial Highlights    BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

   

Six Months Ended
January 31,
2013

(Unaudited)

    Year Ended July 31,    

Period
November 1, 2007
to July 31,

2008

   

Year Ended
October 31,

2007

 
      2012     2011     2010     2009      
             
Per Share Operating Performance                                           

Net asset value, beginning of period

  $ 15.32      $ 13.19      $ 13.67      $ 12.27      $ 12.86      $ 14.57      $ 15.30   
 

 

 

 

Net investment income1

    0.44        0.87        0.89        0.89        0.87        0.70        1.04   

Net realized and unrealized gain (loss)

    0.16        2.13        (0.48     1.31        (0.66     (1.69     (0.79

Dividends to AMPS shareholders from net investment income

                  (0.03     (0.03     (0.12     (0.22     (0.31
 

 

 

 

Net increase (decrease) from investment operations

    0.60        3.00        0.38        2.17        0.09        (1.21     (0.06
 

 

 

 

Dividends to Common Shareholders from net investment income

    (0.43     (0.87 )2      (0.86 )2      (0.77 )2      (0.68 )2      (0.50 )2      (0.67 )2 
 

 

 

 

Net asset value, end of period

  $ 15.49      $ 15.32      $ 13.19      $ 13.67      $ 12.27      $ 12.86      $ 14.57   
 

 

 

 

Market price, end of period

  $ 15.66      $ 15.81      $ 12.17      $ 14.17      $ 12.12      $ 12.22      $ 13.04   
 

 

 

 
             
Total Investment Return Applicable to Common Shareholders3                                           

Based on net asset value

    3.98% 4      23.45%        3.22%        18.19%        1.70%        (8.22)% 4      (0.06)%   
 

 

 

 

Based on market price

    1.86% 4      38.08%        (8.12)%        24.03%        5.72%        (2.55)% 4      (4.70)%   
 

 

 

 
             
Ratios to Average Net Assets Applicable to Common Shareholders                                           

Total expenses

    1.41% 5      1.57%        1.32% 6      1.11% 6      1.46% 6      1.64% 5,6      1.71% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.41% 5      1.56%        1.32% 6      1.11% 6      1.45% 6      1.63% 5,6      1.71% 6 
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense and fees7

    0.88% 5      1.19% 8      1.12% 6      0.97% 6      1.06% 6      1.06% 5,6      1.03% 6 
 

 

 

 

Net investment income

    5.67% 5      6.04%        6.85% 6      6.73% 6      7.52% 6      6.51% 5,6      6.94% 6 
 

 

 

 

Dividends to AMPS shareholders

                  0.22%        0.26%        1.04%        2.03% 5      2.06%   
 

 

 

 

Net investment income to Common Shareholders

    5.67% 5      6.04%        6.63%        6.47%        6.48%        4.48% 5      4.88%   
 

 

 

 
             
Supplemental Data                                           

Net assets applicable to Common Shareholders, end of
period (000)

  $ 1,050,428      $ 1,036,022      $ 890,985      $ 920,234      $ 825,622      $ 865,447      $ 980,741   
 

 

 

 

AMPS outstanding at $25,000 liquidation preference, end of
period (000)

                       $ 356,450      $ 358,625      $ 377,175      $ 570,000   
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 356,400      $ 356,400      $ 356,400                               
 

 

 

 

Portfolio turnover

    4%        18%        12%        13%        30%        70%        117%   
 

 

 

 

Asset coverage per AMPS at $25,000 liquidation preference, end of period

                       $ 89,545      $ 82,559      $ 82,381      $ 68,039   
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 394,733      $ 390,691      $ 349,996                               
 

 

 

 

 

1   

Based on average Common Shares outstanding.

 

2   

Dividends are determined in accordance with federal income tax regulations.

 

3   

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4   

Aggregate total investment return.

 

5   

Annualized.

 

6   

Do not reflect the effect of dividends to AMPS shareholders.

 

7   

Interest expense, fees and amortization of offering costs relate to TOBs and/or VRDP Shares. See Note 1 and Note 7 of the Notes to Financial Statements for details of municipal bonds transferred to TOBs and VRDP Shares, respectively.

 

8   

For the year ended July 31, 2012, the total expense ratio after fees waived and paid directly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.90%.

 

 

See Notes to Financial Statements.      
                
50    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Notes to Financial Statements (Unaudited)     

 

1. Organization and Significant Accounting Policies:

BlackRock MuniHoldings Quality Fund II, Inc. (“MUE”), BlackRock MuniYield California Quality Fund, Inc. (“MCA”), BlackRock MuniYield Michigan Quality Fund II, Inc. (“MYM”), BlackRock MuniYield New York Quality Fund, Inc. (“MYN”) and BlackRock MuniYield Quality Fund III, Inc. (“MYI”), (collectively, the “Funds” or individually a “Fund”), are registered under the 1940 Act, as non-diversified, closed-end management investment companies. The Funds are organized as Maryland corporations. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US 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. The Boards of Directors of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board,” and the directors thereof are collectively referred to throughout this report as “Directors.” The Funds determine, and make available for publication the NAVs of their Common Shares on a daily basis.

The following is a summary of significant accounting policies followed by the Funds:

Valuation: US 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 value 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. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

In the event that 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, deem relevant consistent with the principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of each Fund’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    51


Table of Contents
Notes to Financial Statements (continued)     

 

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 six months ended January 31, 2013, no TOBs in which the Funds participated were terminated without the consent of the Trusts.

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 invests 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 the Funds’ payable to the holder of the TOB Trust Certificates, as reported in 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 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 Fund will typically enter into a reimbursement agreement with the Liquidity Provider where the Fund 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 in proportion to their participation. The recourse TOB Trusts, if any, are identified in the Schedules of Investments.

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 January 31, 2013, the aggregate value of the underlying municipal bonds transferred to TOBs, the related liability for TOB Trust Certificates and the range of interest rates on the liability for TOB Trust Certificates were as follows:

 

    

Underlying

Municipal Bonds
Transferred to TOBs

   

Liability
for TOB Trust

Certificates

   

Range of

Interest Rates

 

MUE

  $ 175,412,681      $ 87,975,110        0.09% - 0.34%   

MCA

  $ 446,310,036      $ 203,182,546        0.09% - 0.20%   

MYM

  $ 33,988,060      $ 16,718,184        0.11% - 0.35%   

MYN

  $ 224,379,680      $ 110,274,961        0.09% - 0.22%   

MYI

  $ 535,392,641      $ 258,312,052        0.10% - 0.18%   

For the six months ended January 31, 2013, 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
 

MUE

  $ 87,397,013        0.71

MCA

  $ 199,019,215        0.68

MYM

  $ 16,718,184        0.68

MYN

  $ 113,760,930        0.81

MYI

  $ 250,698,411        0.67

 

                
52    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Notes to Financial Statements (continued)     

 

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.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Funds either deliver collateral or segregate assets in connection with certain investments (e.g., TOBs and financial futures contracts), the Funds will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on their books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, a Fund engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

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 dates. 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 dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP. Dividends and distributions to Preferred Shareholders are accrued and determined as described in Note 7.

Income Taxes: It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

Each Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns remains open for each of the four years ended July 31, 2012. 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 does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standards: In December 2011, the Financial Accounting Standards Board (the “FASB”) issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements, which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. In January 2013, the FASB issued guidance that clarifies which investments and transactions are subject to the offsetting disclosure requirements. The scope of the disclosure requirements for offsetting will be limited to derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Fund’s Board, the independent Directors (“Independent Directors”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund. 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.

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.

2. 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, or protect, their exposure to certain risks such as interest rate risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Funds’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. For OTC options purchased, the Funds bear the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral received on the options should the counterparty fail to perform under the contracts. Counterparty risk related to exchange-traded financial futures contracts and options is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    53


Table of Contents
Notes to Financial Statements (continued)     

 

 

The Funds may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between a Fund and each of its respective counterparties. An ISDA Master Agreement allows each Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Funds manage counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of their ISDA Master Agreements, which would cause the Funds to accelerate payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Funds purchase 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 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. 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 and are recorded by the Funds as unrealized appreciation or depreciation. 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 rates and the underlying assets.

Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including interest rate risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised), the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Funds purchase (write) an option, an amount equal to the premium paid (received) by the Funds is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Funds enter into a closing transaction), the Funds realize a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Funds write a call option, such option is “covered,” meaning that the Funds hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Funds may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security at a price different from the current market value.

 

Derivative Financial Instruments Categorized by Risk Exposure:

                   
Fair Values of Derivative Financial Instruments as of January 31, 2013  
Asset Derivatives  
    

MCA

 
      Statements of Assets
and Liabilites Location
         Value  
Interest rate contracts:         

Financial futures contracts

   Net unrealized appreciation1         $ 171,053   
Liability Derivatives  
    

MYN

 
      Statements of Assets
and Liabilites Location
         Value  
Interest rate contracts:         

Financial futures contracts

   Net unrealized depreciation1         $ (19,772

 

  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.

 

                
54    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Notes to Financial Statements (continued)     

 

 

The Effect of Derivative Financial Instruments in the Statements of Operations
Six Months Ended January 31, 2013
 
    Net Realized Gain (Loss) From  

 

  MCA     MYM     MYN     MYI  
Interest rate contracts:          

Financial futures contracts

    $ 148,953      $ (68,935          $ (401,075

Options1

                    $(193,373       
   

 

 

 

Total

    $ 148,953      $ (68,935     $(193,373   $ (401,075
   

 

 

 
                                     
         
                Net Change in Unrealized
Appreciation/Depreciation on
 
                  

MCA

   

MYN

 
Interest rate contracts:        

Financial futures contracts

  

    $171,053        $(19,772

1   Options purchased are included in the net realized gain (loss) from investments.

      

 
For the six months ended January 31, 2013, the average quarterly balances of outstanding derivative financial instruments were as follows:   
     MCA     MYM     MYN     MYI  
Financial future contracts:      

Average number of contracts purchased

           28 2             160 2 

Average number of contracts sold

    85        28 2      37        160 2 

Average notional value of contracts purchased

         $ 3,692,305 2           $ 21,482,500 2 

Average notional value of contracts sold

  $ 11,158,906      $ 3,657,930 2      $5,308,344      $ 21,282,500 2 
Options:      

Average number of option contracts purchased

                  1 2        

Average notional value of option contracts purchased

                  $   611,500 2        

 

2   Actual contract amount shown due to limited activity.

      

 

 

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) 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 necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee at an annual rate of each Fund’s average daily net assets at the following annual rates:

 

MUE

     0.55%   

MCA

     0.50%   

MYM

     0.50%   

MYN

     0.50%   

MYI

     0.50%   

Average daily net assets are the average daily value of each Fund’s total assets minus the sum of its 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 six months ended January 31, 2013, the amounts waived were as follows:

 

MUE

  $ 2,196   

MCA

  $ 7,801   

MYM

  $ 995   

MYN

  $ 5,796   

MYI

  $ 4,371   

The Manager, for MUE, voluntarily agreed to waive its investment advisory fee on the proceeds of 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 six months ended January 31, 2013 the waiver was $90,771.

The Manager entered into a sub-advisory agreement with BlackRock Investment Management, LLC (“BIM”), an affiliate of the Manager. The Manager pays BIM, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by each Fund to the Manager.

Certain officers and/Directors of the Funds are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in officer and directors in the Statement of Operations.

4. Investments:

Purchases and sales of investments excluding short-term securities for the six months ended January 31, 2013, were as follows:

 

     Purchases     Sales  

MUE

  $ 72,225,622      $ 73,526,741   

MCA

  $ 96,649,646      $ 96,525,685   

MYM

  $ 17,461,231      $ 17,337,513   

MYN

  $ 44,345,000      $ 56,162,824   

MYI

  $ 79,003,404      $ 69,662,072   

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    55


Table of Contents
Notes to Financial Statements (continued)     

 

5. Income Tax Information:

As of July 31, 2012, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires July 31,   MUE     MCA     MYM     MYN     MYI  

2014

                       $ 3,107,506      $ 1,213,491   

2015

         $ 1,362,395                      5,979,955   

2016

                $ 823,067        2,330,288        25,066,903   

2017

  $ 8,043,130        2,753,866        253,932        2,295,738        21,251,301   

2018

    6,013,130        5,944,218               3,370,191        26,460,028   

2019

                         1,287,746          
No expiration date1                          4,600,902        6,528,116   
 

 

 

 

Total

  $ 14,056,260      $ 10,060,479      $ 1,076,999      $ 16,992,371      $ 86,499,794   
 

 

 

 

 

1  Must be utilized prior to losses subject to expiration.

     

As of January 31 2013, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:   
         
     MUE     MCA     MYM     MYN     MYI  

Tax cost

  $ 421,061,342      $ 654,835,054      $ 248,403,952      $ 756,700,806      $ 1,225,983,270   
 

 

 

 

Gross unrealized appreciation

  $ 51,883,100      $ 84,353,758      $ 22,695,979      $ 74,995,303      $ 171,019,651   

Gross unrealized depreciation

    (324,065     (97,163     (1,845,971     (5,255,083     (2,505,280
 

 

 

 

Net unrealized appreciation

  $ 51,559,035      $ 84,256,595      $ 20,850,008      $ 69,740,220      $ 168,514,371   
 

 

 

 

 

6. Concentration, Market and Credit Risk:

MCA, MYM and MYN 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.

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.

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.

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 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.

As of January 31, 2013, MUE and MYN invested a significant portion of their assets in securities in the county/city/special district/school district and transportation sectors. MCA invested a significant portion of its assets in securities in the county/city/special district/school district and utilities sectors. MYM invested a significant portion of its assets in securities in the county/city/special district/school district sector. MYI invested a significant portion of its assets in securities in the transportation sector. Changes in economic conditions affecting the county/city/special district/school district, transportation and utilities sectors would have a greater impact on the Funds and could affect the value, income and/or liquidity of positions in such securities.

7. Capital Share Transactions:

Each Fund is authorized to issue 200 million shares, all of which were initially classified as Common Shares. The par value for each Fund’s Common Shares is $0.10. The par value for each Fund’s Preferred Shares outstanding is $0.10. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without approval of Common Shareholders.

Common Shares

For the periods shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

    

Six Months Ended

January 31, 2013

   

Year Ended

July 31, 2012

 

MUE

    27,834        30,480   

MCA

    35,451          

MYM

    5,323        23,376   

MYN

    77,179        6,634   

MYI

    191,138        109,295   

 

                
56    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Notes to Financial Statements (continued)     

 

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 Funds’ Common Shares or the repurchase of the Funds’ Common Shares if the Funds fail 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 instrument, the Funds are 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 Funds fail to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares governing instrument or comply with the basic maintenance amount requirement of the rating agencies then rating the Preferred Shares.

The holders of Preferred Shares have voting rights equal to the holders of Common Shares (one vote per share) and will vote together with holders of Common Shares (one vote per share) as a single class. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Directors for each Fund. In addition, the 1940 Act requires that along with approval by shareholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.

VRDP Shares

MCA, MYM, MYN and MYI (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 January 31, 2013 were as follows:

 

    

Issue

Date

   

Shares

Issued

    Aggregate
Principal
   

Maturity

Date

 

MCA

    4/21/11        1,665      $ 166,500,000        5/01/41   

MYM

    5/19/11        873      $ 87,300,000        6/01/41   

MYN

    4/21/11        2,477      $ 247,700,000        5/01/41   

MYI

    5/19/11        3,564      $ 356,400,000        6/01/41   

Each VRDP Fund entered into a fee agreement with the liquidity provider that required 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 each VRDP Fund and the liquidity provider is scheduled to expire on July 9, 2015 unless renewed or terminated in advance.

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 Funds’ custodians 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 their VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six months prior to the maturity date, each VRDP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, VRDP Funds are required to redeem certain of its outstanding VRDP Shares if it fails to maintain certain asset coverage, basic maintenance amount or leverage requirements.

Subject to certain conditions, VRDP Shares may be redeemed, in whole or in part, at any time at the option of VRDP Funds. The redemption price per VRDP Share is equal to the liquidation value per share plus any outstanding unpaid dividends.

Dividends on the VRDP Shares are payable monthly at a variable rate se 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. In May 2012, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of January 31, 2013, the VRDP Shares were assigned a long-term rating of Aa2 for MCA, MYM and MYN and Aa1 for MYI 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 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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    57


Table of Contents
Notes to Financial Statements (continued)     

 

For financial reporting purposes, VRDP Shares are considered debt of the issuer; therefore, the liquidation value, which approximates fair value, of 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. VRDP Shares are treated as equity for tax purposes. Dividends paid to holders of VRDP Shares are generally classified as tax-exempt income for tax-reporting purposes.

On June 21, 2012, the VRDP Funds announced a special rate period for a three-year term ending June 24, 2015 with respect to their VRDP Shares. 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 the 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 redeem the VRDP Shares on a date that is one year or more before the end of the special rate period and the VRDP Shares are rated above A1/A by Moody’s and Fitch respectively, then such redemption is subject to a redemption premium payable to the holder of the VRDP Shares based on the time remaining in the special rate period, subject to certain exceptions for redemptions that are required to maintain minimum asset coverage requirements. After June 24, 2015, 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.

The VRDP Funds may incurred remarketing fees of 0.10% on the aggregate principal amount of all VRDP Shares, which, if any, are included in remarketing fees on Preferred Shares in the Statements of Operations. All of the VRDP Shares successfully remarketed prior to the beginning of the special rate period.

The annualized dividend rates for the VRDP Shares for the six months ended January 31, 2013 were as follows:

 

      Rate  

MCA

     1.10%   

MYM

     1.10%   

MYN

     1.10%   

MYI

     1.10%   

VRDP Shares issued and outstanding remained constant for the six months ended January 31, 2013.

VMTP Shares

MUE has 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 January 31, 2013 were as follows:

 

    

Issue

Date

    Shares
Issued
    Aggregate
Principal
    Term
Date
 

MUE

    12/16/11        1,310      $ 131,000,000        1/02/15   

MUE is required to redeem its VMTP Shares on the term date, unless earlier redeemed or repurchased or unless extended. There is no assurance that the term of the Fund’s VMTP Shares will be extended or that the 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, the VMTP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, the VMTP Fund is required to redeem certain of its outstanding VMTP Shares if it fails to maintain certain asset coverage, basic maintenance amount or leverage requirements.

Subject to certain conditions, the 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 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 the 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. In May 2012, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of January 31, 2013, the VMTP Shares were assigned a long-term rating of Aa1 from Moody’s under its new rating methodology. 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 rate of the VMTP Shares for the six months ended January 31, 2013 for MUE was 1.15%.

 

                
58    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Notes to Financial Statements (concluded)     

 

For financial reporting purposes, VMTP Shares are considered debt of the issuer; therefore the liquidation value, which approximates fair value, of 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 paid on the VMTP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. VMTP Shares are treated as equity for tax purposes. Dividends paid to holders of VMTP Shares are generally classified as tax-exempt income for tax-reporting purposes.

VMTP Shares issued and outstanding remained constant for the six months ended January 31, 2013.

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.

AMPS

The AMPS were redeemable at the option of each Fund, in whole or in part, on any dividend payment date at their liquidation preference per share plus any accumulated and unpaid dividends whether or not declared. The AMPS were also subject to mandatory redemption at their liquidation preference plus any accumulated and unpaid dividends, whether or not declared, if certain requirements relating to the composition of the assets and liabilities of a Fund, as set forth in each Fund’s Articles of Supplementary (the “Governing Instrument”) were not satisfied.

From February 13, 2008 to the redemption date listed below, the AMPS of the Funds failed to clear any of their auctions. A failed auction was not an event of default for the Funds, but it had negative impact on the liquidity of AMPS. A failed auction occurs when there are more sellers of a fund’s AMPS than buyers.

As of January 31, 2013, the Funds did not have any AMPS outstanding.

During the year ended July 31, 2012, MUE announced the following redemptions of AMPS at a price of $25,000 per share plus any accrued and unpaid dividends through the redemption date:

 

     Series  

Redemption

Date

   

Shares

Redeemed

   

Aggregate

Principal

 

MUE

  A     1/06/12        1,345      $ 33,625,000   
  B     1/05/12        1,345      $ 33,625,000   
    C     1/11/12        2,550      $ 63,750,000   

MUE financed the AMPS redemptions with the proceeds received from the issuance of VMTP shares of $131,000,000.

8. 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 March 1, 2013 to Common Shareholders of record on February 15, 2013:

 

     Common Dividend Per Share  

MUE

  $ 0.0705   

MCA

  $ 0.0760   

MYM

  $ 0.0690   

MYN

  $ 0.0710   

MYI

  $ 0.0720   

Additionally, the Funds declared a net investment income dividend on March 1, 2013 payable to Common Shareholders of record on March 15, 2013 for the same amounts noted above.

The dividends declared on VMTP or VRDP Shares for the period February 1, 2013 to February 28, 2013 were as follows:

 

     Series    

Dividends

Declared

 

MUE VMTP Shares

    W-7      $ 110,830   

MCA VRDP Shares

    W-7      $ 134,477   

MYM VRDP Shares

    W-7      $ 70,510   

MYN VRDP Shares

    W-7      $ 200,060   

MYI VRDP Shares

    W-7      $ 287,854   

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    59


Table of Contents
Officers and Directors     

 

Richard E. Cavanagh, Chairman of the Board and Director

Karen P. Robards, Vice Chairperson of the Board, Chairperson of the Audit Committee and Director

Paul. L. Audet, Director

Michael J. Castellano, Director and Member of the Audit Committee

Frank J. Fabozzi, Director and Member of the Audit Committee

Kathleen F. Feldstein, Director

James T. Flynn, Director and Member of the Audit Committee

Henry Gabbay, Director

Jerrold B. Harris, Director

R. Glenn Hubbard, Director

W. Carl Kester, Director and Member of the Audit Committee

John M. Perlowski, President and Chief Executive Officer

Anne Ackerley, Vice President

Brendan Kyne, Vice President

Robert W. Crothers, Vice President

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Janey Ahn, Secretary

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisor

BlackRock Investment Management, LLC

Princeton, NJ 08540

Custodians

State Street Bank and Trust Company1

Boston, MA 02110

The Bank of New York Mellon2

New York, NY 10286

Transfer Agent

Common Shares:

Computershare Trust Company, N.A.

Canton, MA 02021

VRDP Tender and Paying Agent and

VMTP Redemption and Paying Agent

The Bank of New York Mellon

New York, NY 10289

VRDP Remarketing Agent

Citigroup Global Markets Inc.

New York, NY 10179

VRDP Liquidity Prorider

Citibank, N.A.

New York, NY 10179

Accounting Agent

State Street Bank and Trust Company

Boston, MA 02110

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom LLP

New York, NY 10036

Address of the Funds

100 Bellevue Parkway

Wilmington, DE 19809

 

1   

For MUE, MCA and MYI.

 

2   

For MYM and MYN.

 

                
60    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents
Additional Information     

 

Regulation Regarding Derivatives

 

Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”) adopted certain regulatory changes that subject registered investment companies and advisers to registered investment companies to regulation by the CFTC if a fund invests more than a prescribed level of its net assets in CFTC-regulated futures, options and swaps (“CFTC Derivatives”), or if the fund markets itself as providing investment exposure to such instruments. To the extent a Fund uses CFTC-regulated futures, options and swaps, it intends to do so below such prescribed levels and will not market itself as a “commodity pool” or a vehicle for trading such instruments. Accordingly, BlackRock Advisors, LLC has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act (“CEA”) pursuant to Rule 4.5 under the CEA. BlackRock Advisors, LLC is not, therefore, subject to registration or regulation as a “commodity pool operator” under the CEA in respect of each Fund.

 

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

 

On August 11, 2010, the Manager announced that a shareholder derivative complaint was filed on August 3, 2010 in the Supreme Court of the State of New York, New York County with respect to MCA and MYI, which had previously received a demand letter from a law firm on behalf of each fund’s common shareholders. The complaint was filed against the Manager, BlackRock, Inc., MCA, MYI and certain of the directors, officers and portfolio managers (collectively, the “BlackRock Parties”) in connection with the redemption of auction-market preferred shares, auction rate preferred securities, auction preferred shares and auction rate securities (collectively, “AMPS”). The complaint alleged, among other things, that the BlackRock Parties breached their fiduciary duties to the common shareholders of MCA and MYI (the “Shareholders”) by redeeming AMPS at their liquidation preference and alleges that such redemptions caused losses to the Shareholders. On April 16, 2012, the plaintiffs amended their complaint and filed a consolidated shareholder derivative complaint, which contains similar substantive allegations to the original complaint. The plaintiffs are seeking monetary damages for the alleged losses suffered and to enjoin MCA and MYI from future redemptions of AMPS at their liquidation preference. On July 20, 2012, the BlackRock Parties filed a motion to dismiss the Complaint (the “Dismissal Motion”). Plaintiffs, on September 14, 2012, moved to hold the defendants’ motion to dismiss in abeyance and allow plaintiffs limited discovery of the Demand Review Committee of the Board of Directors, including depositions of its members and documents upon which they relied. Argument on that motion occurred on March 14, 2013 and no decision has yet been rendered. The BlackRock Parties believe that the claims asserted in the complaint are without merit and intend to vigorously defend themselves in the litigation.

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.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2013    61


Table of Contents
Additional Information (concluded)     

 

General Information (concluded)

 

Quarterly performance, semi-annual and annual reports 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.

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.

 

 

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.

 

                
62    SEMI-ANNUAL REPORT    JANUARY 31, 2013   


Table of Contents

This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term dividend rates of the Preferred Shares may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

 

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#MHMYINS5-1/13-SAR    LOGO


Table of Contents
Item 2     Code of Ethics – Not Applicable to this semi-annual report
Item 3     Audit Committee Financial Expert – Not Applicable to this semi-annual report
Item 4     Principal Accountant Fees and Services – Not Applicable to this semi-annual report
Item 5     Audit Committee of Listed Registrants – Not Applicable to this semi-annual report
Item 6     Investments
    (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
    (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
Item 7     Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable to this semi-annual report
Item 8     Portfolio Managers of Closed-End Management Investment Companies
   

(a)  Not Applicable to this semi-annual report

   

(b)  As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.

Item 9     Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable
Item 10     Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11     Controls and Procedures
    (a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
    (b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12     Exhibits attached hereto
    (a)(1) – Code of Ethics – Not Applicable to this semi-annual report
    (a)(2) – Certifications – Attached hereto
    (a)(3) – Not Applicable
    (b) –   Certifications – Attached hereto

 

2


Table of Contents

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 Quality Fund III, Inc.

 

   By:   

/s/ John M. Perlowski

John M. Perlowski

Chief Executive Officer (principal executive officer) of

BlackRock MuniYield Quality Fund III, Inc.

Date: April 3, 2013

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 Quality Fund III, Inc.

Date: April 3, 2013

 

   By:   

/s/ Neal J. Andrews

Neal J. Andrews

Chief Financial Officer (principal financial officer) of

BlackRock MuniYield Quality Fund III, Inc.

Date: April 3, 2013

 

3