BLACKROCK MUNIYIELD QUALITY FUND III, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

Investment Company Act file number 811-06540

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: 07/31/2017

Date of reporting period: 01/31/2017


Item 1 – Report to Stockholders


JANUARY 31, 2017

 

 

 

 

 

SEMI-ANNUAL REPORT (UNAUDITED)

 

    LOGO

 

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

BlackRock MuniYield California Quality Fund, Inc. (MCA)

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

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


The Markets in Review

 

Dear Shareholder,

The 12 months ended January 31, 2017 was an exceptionally strong period for risk assets (such as stocks and high yield bonds), while higher-quality assets generated muted returns after struggling in the latter part of 2016. As the period began, worries about slowing growth in China and the instability of oil prices had global equity prices sliding. However, the broad market momentum shifted in the second half of 2016 as reflationary expectations in the United States helped drive a pick-up in global growth.

Markets were remarkably resilient during the period. Big surprises such as the United Kingdom’s vote to leave the European Union and the outcome of the U.S. presidential election brought spikes in equity market volatility, but they were ultimately short-lived. Instead, investors used the sell-offs to seize upon buying opportunities, allowing markets to quickly rebound. We believe this reinforces the case for taking the long view rather than reacting to short-term market noise.

The global reflationary theme — rising nominal growth, wages and inflation — was the dominant driver of asset returns during the period, outweighing significant political upheavals and uncertainty. This trend accelerated after the U.S. election and continued into the beginning of 2017, stoked by expectations for an extra boost to U.S. growth via fiscal policy.

Although economic momentum is gaining traction, the capacity for rapid global growth is restrained by structural factors including an aging population, low productivity growth and excess savings. A tempered economic growth trend and high valuations across most assets have set the stage for muted investment returns going forward.

Equity markets still have room to move, although the disparity between winners and losers is widening, making stock selection increasingly important. Fixed income investors are also facing challenges as bond markets recalibrate to accommodate rising rates and higher inflation expectations. And in a world where political risk and policy uncertainty abound, there is no lack of potential catalysts for higher volatility.

In this environment, investors need to think globally, extend their scope across a broad array of asset classes and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of January 31, 2017  
    6-month     12-month  

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

    5.96     20.04

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

    12.43       33.53  

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

    3.49       12.03  

Emerging market equities
(MSCI Emerging Markets Index)

    4.92       25.41  

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

    0.20       0.37  

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

    (7.87     (3.26

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

    (2.95     1.45  

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

    (2.94     0.24  

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

    6.09       20.77  
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.  

 

                
2    THIS PAGE NOT PART OF YOUR FUND REPORT      


Table of Contents     

 

 

     Page  

The Markets in Review

    2  

Semi-Annual Report:

 

Municipal Market Overview

    4  

The Benefits and Risks of Leveraging

    5  

Derivative Financial Instruments

    5  

Fund Summaries

    6  

Financial Statements:

 

Schedules of Investments

    14  

Statements of Assets and Liabilities

    39  

Statements of Operations

    40  

Statements of Changes in Net Assets

    41  

Statements of Cash Flows

    42  

Financial Highlights

    43  

Notes to Financial Statements

    47  

Officers and Directors

    57  

Additional Information

    58  

 

 

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    3


Municipal Market Overview     

 

For the Reporting Period Ended January 31, 2017      

Municipal Market Conditions

Municipal bonds generated modestly positive performance for the period, in spite of vastly rising interest rates as a result of generally stronger economic data, signs of inflation pressures, Fed monetary policy normalization, and market expectations for pro-growth fiscal policy. However, ongoing reassurance from the Fed that rates would be increased gradually and would likely remain low overall resulted in strong demand for fixed income investments. Investors favored the income, relative yield, and stability of municipal bonds amid bouts of interest rate volatility (bond prices rise as rates fall) resulting from the United Kingdom’s decision to leave the European Union, the contentious U.S. election, and widening central bank divergence — i.e., policy easing outside the United States while the Fed slowly commences policy tightening. During the 12 months ended January 31, 2017, municipal bond funds garnered net inflows of approximately $24 billion (based on data from the Investment Company Institute).

For the same 12-month period, total new issuance remained robust from a historical perspective at $451 billion (significantly above the $394 billion issued in the prior 12-month period). A noteworthy portion of new supply during this period was attributable to refinancing activity (roughly 60%) as issuers continued to take advantage of low interest rates and a flatter yield curve to reduce their borrowing costs.

S&P Municipal Bond Index

Total Returns as of January 31, 2017

  6 months:   (2.94)%

12 months:    0.24%

A Closer Look at Yields

 

LOGO

From January 31, 2016 to January 31, 2017, yields on AAA-rated 30-year municipal bonds increased by 33 basis points (“bps”) from 2.75% to 3.08%, while 10-year rates rose by 61 bps from 1.71% to 2.32% and 5-year rates increased 63 bps from 1.00% to 1.63% (as measured by Thomson Municipal Market Data). The municipal yield curve modestly flattened over the 12-month period with the spread between 2- and 30-year maturities flattening by 9 bps and the spread between 10- and 30-year maturities flattening by 28 bps.

During the same time period, on a relative basis, tax-exempt municipal bonds broadly underperformed U.S. Treasuries with the greatest underperformance experienced in the intermediate part of the yield curve. In absolute terms, the positive performance of municipal bonds was driven largely by a supply/demand imbalance within the municipal market as investors sought income and incremental yield in an environment where opportunities became increasingly scarce. More broadly, municipal bonds came under pressure post the November U.S. election, erasing a bulk of year-to-date performance and influencing a strong pattern of mutual fund inflows to turn negative in the closing months of the period. The asset class is known for its lower relative volatility and preservation of principal with an emphasis on income as tax rates rise.

Financial Conditions of Municipal Issuers

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

The opinions expressed are those of BlackRock as of January 31, 2017, and are subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of any individual holdings or market sectors. Investing involves risk including loss of principal. Bond values fluctuate in price so the value of your investment can go down depending on market conditions. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

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

 

                
4    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


The Benefits and Risks of Leveraging     

 

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

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

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

However, in order to benefit Common Shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Funds’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage. Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Funds’ obligations under their respective leverage arrangements generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Funds’ NAVs positively or negatively. Changes in the future direction of interest rates are very

difficult to predict accurately, and there is no assurance that a Fund’s intended leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Fund’s NAV, market price and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV and market price of a Fund’s Common Shares than if the Fund were not leveraged. In addition, 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 the Funds to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund incurs expenses in connection with the use of leverage, all of which are borne by Common Shareholders and may reduce income to the Common Shares. Moreover, to the extent the calculation of the Funds’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Funds’ investment adviser will be higher than if the Funds did not use leverage.

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

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

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

 

 

Derivative Financial Instruments     

 

The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security commodity, index, market, and/or other asset without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instru-

ment and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

 

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    5


Fund Summary as of January 31, 2017    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). The municipal obligations in which the Fund primarily invests are either rated investment grade quality, or are considered by the Fund’s adviser to be of comparable quality, at the time of investment. 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.

 

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, 2017 ($13.47)1

  5.70%

Tax Equivalent Yield2

  10.07%

Current Monthly Distribution per Common Share3

  $0.064

Current Annualized Distribution per Common Share3

  $0.768

Economic Leverage as of January 31, 20174

  38%

 

  1   

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

 

  2   

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

 

  3   

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

 

  4   

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

 

Performance      

Returns for the six months ended January 31, 2017 were as follows:

 

    Returns Based On  
     Market Price     NAV  

MUE1,2

    (7.31)     (4.48)

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (7.34)     (5.63)

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

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

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

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

 

 

Municipal bonds lost ground in the six-month reporting period. After producing slightly positive returns in August, municipal bonds began to move lower in September and October due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to adjust their expectations in favor of stronger growth and tighter Fed policy. The municipal market subsequently stabilized and retraced some of its losses in December and January as the relative attractiveness of the asset class brought in new investors, but the modest rally was insufficient to make up for the earlier downturn.

 

 

At the sector level, the transportation, tax-backed state and health care sectors represented the largest detractors from performance due to their higher weightings. Reinvestment was a further drag on results, as the proceeds of higher-yielding bonds that matured or were called needed to be reinvested at materially lower prevailing rates.

 

 

The Fund continued to employ leverage in order to increase income. Since leverage also amplifies the effect of market movements, it was a net detractor from performance at a time of falling prices.

 

 

The Fund sought to manage interest rate risk using U.S. Treasury futures. Given that Treasury yields rose as prices fell, this aspect of the Fund’s positioning had a positive effect on returns. The Fund’s exposure to pre-refunded issues also benefited performance, as their low duration enabled them to hold up better than longer-duration bonds at a time of rising yields.

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

 

                
6    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


     BlackRock MuniHoldings Quality Fund II, Inc.

 

 

Market Price and Net Asset Value Per Share Summary      

 

      1/31/17      7/31/16      Change      High      Low  

Market Price

   $ 13.47      $ 14.94        (9.84 )%     $ 15.04      $ 12.58  

Net Asset Value

   $ 14.01      $ 15.08        (7.10 )%     $ 15.08      $ 13.81  

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*
Sector Allocation              
     1/31/17     7/31/16  

Transportation

    40     42

County/City/Special District/School District

    25       21  

Utilities

    13       14  

Health

    11       11  

State

    5       6  

Education

    3       3  

Housing

    1       1  

Tobacco

    1       1  

Corporate

    1       1  

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

Credit Quality Allocation1              
     1/31/17     7/31/16  

AAA/Aaa

    5     8

AA/Aa

    61       59  

A

    28       27  

BBB/Baa

    4       5  

N/R

    2 2       1  

 

  1   

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

 

  2   

The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of January 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade represents 1% of the Fund’s total investments.

 
   
Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    1

2018

    24  

2019

    14  

2020

    4  

2021

    18  

 

  3   

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    7


Fund Summary as of January 31, 2017    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, or are considered by the Fund’s adviser to be of comparable quality, at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Fund Information     

Symbol on NYSE

  MCA

Initial Offering Date

  October 30, 1992

Yield on Closing Market Price as of January 31, 2017 ($14.81)1

  5.27%

Tax Equivalent Yield2

  10.74%

Current Monthly Distribution per Common Share3

  $0.065

Current Annualized Distribution per Common Share3

  $0.780

Economic Leverage as of January 31, 20174

  40%

 

  1   

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

 

  2   

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

 

  3   

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

 

  4   

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

 

Performance      

Returns for the six months ended January 31, 2017 were as follows:

    Returns Based On  
     Market Price     NAV  

MCA1,2

    (9.00)     (5.43)

Lipper California Municipal Debt Funds3

    (8.72)     (5.28)

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

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

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

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

 

 

Municipal bonds lost ground in the six-month reporting period. After producing slightly positive returns in August, municipal bonds began to move lower in September and October due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to adjust their expectations in favor of stronger growth and tighter Fed policy. The municipal market subsequently stabilized and retraced some of its losses in December and January as the relative attractiveness of the asset class brought in new investors, but the modest rally was insufficient to make up for the earlier downturn.

 

 

California underperformed the national tax-exempt market, reflecting an unwinding of previously tight credit spreads for state and local issues, together with a larger calendar of new issuance. Despite the after-tax value provided by California municipal bonds for retail investors subject to the state’s high tax brackets, California funds were not immune to the redemptions experienced by both the general market and high-yield products in the latter part of the period.

 

 

Positions in bonds with longer maturities declined the most in value since they typically have longer durations (above-average interest rate sensitivity). The Fund’s exposure to lower-coupon issues — such as those with 4% or 3% coupons — also detracted from results, as lower coupons generally underperform in rising rate environments. For the same reason, positions in zero-coupon bonds proved to be an additional detractor.

 

 

From a sector allocation perspective, the Fund’s exposure to school district and health care sectors were the largest detractors.

 

 

Portfolio income, which was enhanced by the Fund’s use of leverage, made a positive contribution during a period of falling prices. However, leverage also served to accentuate the price declines associated with rising yields.

 

 

The Fund sought to manage interest rate risk using U.S. Treasury futures. Given that Treasury yields rose as prices fell, this aspect of the Fund’s positioning had a positive effect on returns. Positions in high-quality, short-duration bonds — such as pre-refunded securities — held up relatively well in the down market due to their lower interest rate sensitivity.

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

 

                
8    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


     BlackRock MuniYield California Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                              
           
      1/31/17     

7/31/16

     Change      High      Low  

Market Price

   $ 14.81      $ 16.75        (11.58 )%     $ 16.87      $ 13.95  

Net Asset Value

   $ 15.41      $ 16.77        (8.11 )%     $ 16.80      $ 15.09  

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*
Sector Allocation              
     1/31/17    

7/31/16

 

County/City/Special District/School District

    38     41

Utilities

    20       18  

Health

    14       14  

Transportation

    13       13  

Education

    9       9  

State

    5       5  

Corporate

    1        

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

Credit Quality Allocation1              
     1/31/17    

7/31/16

 

AAA/Aaa

    13     15

AA/Aa

    76       75  

A

    9       8  

BBB/Baa

    1       1  

N/R

    1       1  

 

  1   

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

 
   
Call/Maturity Schedule2       

Calendar Year Ended December 31,

 

2017

    11

2018

    9  

2019

    17  

2020

    7  

2021

    12  

 

  2   

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    9


Fund Summary as of January 31, 2017    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, or are considered by the Fund’s adviser to be of comparable quality, at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Fund Information     

Symbol on NYSE

  MYN

Initial Offering Date

  February 28, 1992

Yield on Closing Market Price as of January 31, 2017 ($12.95)1

  5.00%

Tax Equivalent Yield2

  10.12%

Current Monthly Distribution per Common Share3

  $0.054

Current Annualized Distribution per Common Share3

  $0.648

Economic Leverage as of January 31, 20174

  40%

 

  1   

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

 

  2   

Tax equivalent yield assumes the maximum marginal federal and state tax rate of 50.59%, which includes the 3.8% Medicare tax. Actual tax rates will vary based on income, exemptions and deductions. Lower taxes will result in lower tax equivalent yields.

 

  3   

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

 

  4   

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

 

Performance      

Returns for the six months ended January 31, 2017 were as follows:

    Returns Based On  
     Market Price     NAV  

MYN1,2

    (7.86)     (5.97)

Lipper New York Municipal Debt Funds3

    (9.25)     (5.24)

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

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

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

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

 

 

Municipal bonds lost ground in the six-month reporting period. After producing slightly positive returns in August, municipal bonds began to move lower in September and October due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to adjust their expectations in favor of stronger growth and tighter Fed policy. The municipal market subsequently stabilized and retraced some of its losses in December and January as the relative attractiveness of the asset class brought in new investors, but the modest rally was insufficient to make up for the earlier downturn. The New York municipal market faced the added challenge of elevated new-issue supply in late 2016.

 

 

At the sector level, exposure to the transportation, local general obligation and education sectors detracted from performance. Holdings in longer-duration bonds, which were more sensitive to rising yields, also detracted. (Duration is a measure of interest-rate sensitivity.) Credit spreads widened during the period, whereby the Fund’s holdings in lower-rated investment-grade bonds were a further detractor.

 

 

Portfolio income, which was enhanced by the Fund’s use of leverage, made a positive contribution during a period of falling prices. However, leverage also served to accentuate the price declines associated with rising yields.

 

 

At a time when lower-quality, longer-dated bonds experienced the largest underperformance, the Fund’s positions in high-quality, short-dated issues performed relatively well and helped mitigate the impact of the market decline. The Fund sought to manage interest rate risk using U.S. Treasury futures. Given that Treasury yields rose as prices fell, this aspect of the Fund’s positioning had a positive effect on returns.

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

 

                
10    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


     BlackRock MuniYield New York Quality Fund, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                        
           
      1/31/17     

7/31/16

     Change      High      Low  

Market Price

     $12.95        $14.40        (10.07)%        $14.56        $12.50  

Net Asset Value

     $13.83        $15.07        (8.23)%        $15.08        $13.52  

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*
Sector Allocation              
     1/31/17    

7/31/16

 

Transportation

    24     20

County/City/Special District/School District

    20       25  

Education

    18       18  

Utilities

    14       13  

State

    12       13  

Health

    6       6  

Housing

    4       3  

Tobacco

    1       1  

Corporate

    1       1  

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

Credit Quality Allocation1              
     1/31/17    

7/31/16

 

AAA/Aaa

    20     19

AA/Aa

    55       59  

A

    19       16  

BBB/Baa

    4       4  

N/R2

    2       2  
  1   

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

 

  2   

The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of January 31, 2017 and July 31, 2016, the market value of unrated securities deemed by the investment adviser to be investment grade represents 1% and less than 1%, respectively, of the Fund’s total investments.

 

 
   
Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    9

2018

    6  

2019

    8  

2020

    4  

2021

    21  

 

  3   

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    11


Fund Summary as of January 31, 2017    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, or are considered by the Fund’s adviser to be of comparable quality, at the time of investment. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Fund Information     

Symbol on NYSE

  MYI

Initial Offering Date

  March 27, 1992

Yield on Closing Market Price as of January 31, 2017 ($13.95)1

  5.85%

Tax Equivalent Yield2

  10.34%

Current Monthly Distribution per Common Share3

  $0.068

Current Annualized Distribution per Common Share3

  $0.816

Economic Leverage as of January 31, 20174

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

 

Performance      

Returns for the six months ended January 31, 2017 were as follows:

 

    Returns Based On
     Market Price     NAV

MYI1,2

    (8.17 )%    (5.75)%

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (7.34 )%    (5.63)%

 

  1   

All returns reflect reinvestment of dividends and/or distributions.

 

  2  

The Fund moved from a premium to NAV to a discount during the period, which accounts for the difference between performance based on price and performance based on NAV.

 

  3   

Average return.

 

      Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

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

 

 

Municipal bonds lost ground in the six-month reporting period. After producing slightly positive returns in August, municipal bonds began to move lower in September and October due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to adjust their expectations in favor of stronger growth and tighter U.S. Federal Reserve policy. The municipal market subsequently stabilized and retraced some of its losses in December and January as the relative attractiveness of the asset class brought in new investors, but the modest rally was insufficient to make up for the earlier downturn.

 

 

The Fund’s duration positioning detracted from performance on an absolute basis, reflecting the aggressive increase in municipal bond yields. (Duration is a measure of interest-rate sensitivity.) The Fund’s exposure to the long end of the yield curve also detracted, as longer-term bonds sold off more than shorter-term issues. Additionally, holdings in the healthcare-related sectors underperformed due to uncertainty surrounding the future of the Affordable Care Act.

 

 

Portfolio income, which was enhanced by the Fund’s use of leverage, made a positive contribution during a period of falling prices. However, leverage also served to accentuate the price declines associated with rising yields.

 

 

The Fund sought to manage interest rate risk using U.S. Treasury futures. Given that Treasury yields rose as prices fell, this aspect of the Trust’s positioning had a positive effect on returns.

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

 

                
12    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


     BlackRock MuniYield Quality Fund III, Inc.

 

 

Market Price and Net Asset Value Per Share Summary                                        
           
      1/31/17     

7/31/16

     Change      High      Low  

Market Price

   $ 13.95      $ 15.63        (10.75 )%     $ 15.80      $ 13.23  

Net Asset Value

   $ 14.19      $ 15.49        (8.39 )%     $ 15.49      $ 13.97  

 

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

 

LOGO

 

Overview of the Fund’s Total Investments*
Sector Allocation              
     1/31/17    

7/31/16

 

Transportation

    27     26

State

    17       16  

County/City/Special District/School District

    17       15  

Utilities

    13       17  

Health

    12       12  

Education

    9       9  

Corporate

    2       2  

Housing

    2       2  

Tobacco

    1       1  

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

Credit Quality Allocation1              
     1/31/17    

7/31/16

 

AAA/Aaa

    8     11

AA/Aa

    61       61  

A

    21       20  

BBB/Baa

    7       7  

N/R

    3 2       1  

 

  1   

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

 

  2   

The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of January 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade represents less than 1% of the Fund’s total investments.

 
   
Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    10

2018

    20  

2019

    12  

2020

    3  

2021

    9  

 

  3  

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

 

  *   Excludes short-term securities.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    13


Schedule of Investments January 31, 2017 (Unaudited)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Alabama — 2.2%

 

City of Birmingham Alabama Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC), 6.00%, 6/01/19 (a)

   $ 5,225     $ 5,793,219  

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

     940       1,043,419  
    

 

 

 
        6,836,638  

California — 23.6%

 

California Educational Facilities Authority, RB, University of Southern California, Series A,
5.25%, 10/01/18 (a)

     5,050       5,409,004  

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

     2,865       3,263,063  

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

     680       682,618  

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

    

2nd, 5.50%, 5/01/28

     1,800       2,079,792  

2nd, 5.25%, 5/01/33

     1,410       1,564,903  

5.00%, 5/01/44

     1,860       2,012,427  

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

     4,045       4,525,789  

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

     2,800       3,080,756  

County of Sacramento California, ARB, Senior Series A (AGC), 5.50%, 7/01/18 (a)

     3,500       3,722,005  

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

     3,175       3,389,884  

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

     1,875       2,141,100  

Golden Empire Schools Financing Authority, Refunding RB, Kern High School District Projects,
1.15%, 5/01/17 (b)

     2,850       2,850,000  

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

     2,445       2,886,249  

Los Angeles Community College District California, GO, Election of 2008, Series C, 5.25%, 8/01/20 (a)

     2,000       2,265,640  

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

     1,675       1,762,519  

Redondo Beach Unified School District, GO, Election of 2008, Series E, 5.50%, 8/01/21 (a)

     2,670       3,132,604  

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

     4,500       5,143,590  

State of California Public Works Board, LRB, Various Capital Projects, Series I:

    

5.50%, 11/01/30

     5,000       5,923,100  

5.50%, 11/01/31

     3,130       3,695,090  

5.50%, 11/01/33

     3,000       3,537,540  
Municipal Bonds   

Par  

(000)

    Value  

California (continued)

 

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

   $ 1,260     $ 1,474,943  

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

     940       1,075,069  

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

     7,580       8,709,723  
    

 

 

 
        74,327,408  

Colorado — 2.1%

 

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

    

5.50%, 11/15/28

     1,500       1,703,805  

5.50%, 11/15/30

     565       636,862  

5.50%, 11/15/31

     675       758,950  

Colorado Health Facilities Authority, RB, Hospital, NCMC, Inc. Project, Series B (AGM), 6.00%, 5/15/19 (a)

     3,300       3,654,387  
    

 

 

 
        6,754,004  

Connecticut — 1.0%

 

University of Connecticut, Refunding RB, Series A, 5.00%, 1/15/36

     2,830       3,151,460  

Florida — 20.5%

 

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

     405       464,150  

County of Broward Florida Airport System, ARB, Series A, AMT, 5.13%, 10/01/38

     5,665       6,143,013  

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

     1,440       1,554,365  

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

     2,995       3,383,422  

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

     2,500       2,767,400  

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

     300       302,922  

County of Miami-Dade Florida, RB, Seaport Department:

    

Series A, 5.38%, 10/01/33

     1,765       1,954,084  

Series A, 5.50%, 10/01/42

     3,000       3,382,350  

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

     800       947,512  

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

     1,060       1,221,056  

County of Miami-Dade Florida, Refunding RB, Water & Sewer System, Series B, 5.25%, 10/01/29

     3,130       3,612,834  

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

    

5.00%, 10/01/31

     5,155       5,621,012  

5.00%, 10/01/32

     5,000       5,430,450  

Miami International Airport (AGM),
5.50%, 10/01/18 (a)

     4,180       4,478,870  

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

     4,610       4,833,862  
 

 

Portfolio Abbreviations

 

AGC    Assured Guarantee Corp.      EDA    Economic Development Authority    IDRB    Industrial Development Revenue Bonds
AGM    Assured Guaranty Municipal Corp.      EDC    Economic Development Corp.    ISD    Independent School District
AMBAC    American Municipal Bond Assurance Corp.      ERB    Education Revenue Bonds    LRB    Lease Revenue Bonds
AMT    Alternative Minimum Tax (subject to)      FHA    Federal Housing Administration    M/F    Multi-Family
ARB    Airport Revenue Bonds      GAB    Grant Anticipation Bonds    NPFGC    National Public Finance Guarantee Corp.
BAM    Build America Mutual Assurance Co.      GARB    General Airport Revenue Bonds    PILOT    Payment in Lieu of Taxes
BARB    Building Aid Revenue Bonds      GO    General Obligation Bonds    PSF-GTD    Permanent School Fund Guaranteed
BHAC    Berkshire Hathaway Assurance Corp.      HAD    Housing Development Authority    Q-SBLF    Qualified School Bond Loan Fund
BOCES    Board of Cooperative Educational Services      HFA    Housing Finance Agency    RB    Revenue Bonds
CAB    Capital Appreciation Bonds      IDA    Industrial Development Authority    S/F    Single-Family
COP    Certificates of Participation      IDB    Industrial Development Board    SONYMA    State of New York Mortgage Agency

 

See Notes to Financial Statements.

 

                
14    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

Municipal Bonds   

Par  

(000)

    Value  

Florida (continued)

 

County of Orange Florida School Board, COP, Series A (AGC), 5.50%, 8/01/19 (a)

   $ 7,600     $ 8,396,176  

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

     1,805       2,076,905  

Tohopekaliga Water Authority, Refunding RB, Series A, 5.25%, 10/01/21 (a)

     6,965       8,083,091  
    

 

 

 
        64,653,474  

Hawaii — 1.6%

 

State of Hawaii Department of Transportation, COP, AMT:

    

5.25%, 8/01/25

     740       833,558  

5.25%, 8/01/26

     1,205       1,345,756  

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

     2,805       3,011,981  
    

 

 

 
        5,191,295  

Illinois — 15.1%

 

City of Chicago Illinois Midway International Airport, Refunding GARB, 2nd Lien, Series A:

    

5.00%, 1/01/41

     1,140       1,206,131  

AMT, 5.50%, 1/01/28

     1,000       1,140,980  

AMT, 5.50%, 1/01/29

     1,500       1,705,365  

AMT, 5.38%, 1/01/33

     2,000       2,216,240  

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

    

Series A, 5.75%, 1/01/39

     2,000       2,244,220  

Series C, 6.50%, 1/01/21 (a)

     9,085       10,806,517  

City of Chicago Illinois Transit Authority, RB:

    

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

     3,400       3,700,288  

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

     2,940       3,141,184  

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

     1,500       1,599,225  

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

     2,985       3,135,981  

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

    

5.25%, 12/01/30

     1,270       1,372,108  

5.50%, 12/01/38

     1,205       1,292,700  

5.25%, 12/01/43

     2,960       3,123,007  

Illinois Finance Authority, Refunding RB, Presence Health Network, Series C:

    

4.00%, 2/15/41

     1,155       959,100  

5.00%, 2/15/41

     975       979,563  

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     2,350       2,648,662  

6.00%, 6/01/28

     670       761,730  

State of Illinois, GO:

    

5.25%, 2/01/31

     1,495       1,527,471  

5.25%, 2/01/32

     2,320       2,364,869  

5.50%, 7/01/33

     1,000       1,042,140  

5.50%, 7/01/38

     700       723,632  
    

 

 

 
        47,691,113  

Indiana — 1.0%

 

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

     460       466,735  

Indianapolis Local Public Improvement Bond Bank, Refunding RB, Waterworks Project, Series A (AGC):

    

5.50%, 1/01/19 (a)

     465       503,139  

5.50%, 1/01/38

     1,905       2,052,923  
    

 

 

 
        3,022,797  

Kentucky — 0.8%

 

Kentucky State Property & Building Commission, Refunding RB, (AGC):

    

5.25%, 2/01/19 (a)

     2,040       2,202,976  

5.25%, 2/01/27

     260       278,083  
    

 

 

 
        2,481,059  
Municipal Bonds   

Par  

(000)

    Value  

Louisiana — 1.5%

 

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

   $ 2,225     $ 2,555,079  

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

     2,020       2,134,493  
    

 

 

 
        4,689,572  

Massachusetts — 0.9%

 

Massachusetts Development Finance Agency, RB, Emerson College Issue, Series A:

    

5.00%, 1/01/47

     420       446,309  

5.25%, 1/01/42

     940       1,024,919  

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

     1,160       1,229,832  
    

 

 

 
        2,701,060  

Michigan — 2.3%

 

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

     3,420       3,795,448  

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

     3,115       3,461,481  
    

 

 

 
        7,256,929  

Minnesota — 0.7%

 

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

    

6.50%, 11/15/18 (a)

     305       333,917  

6.50%, 11/15/38

     1,670       1,803,466  
    

 

 

 
        2,137,383  

Mississippi — 1.3%

 

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

     2,405       3,044,610  

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

     1,000       1,139,580  
    

 

 

 
        4,184,190  

Nevada — 2.8%

 

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

     3,210       3,473,702  

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

     5,000       5,211,600  
    

 

 

 
        8,685,302  

New Jersey — 4.8%

 

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

    

5.38%, 1/01/43

     1,940       2,050,483  

(AGM), 5.00%, 1/01/31

     1,355       1,482,343  

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

     3,400       3,670,946  

New Jersey Health Care Facilities Financing Authority, Refunding RB, RWJ Barnabas Health Obligated Group, Series A, 5.00%, 7/01/43

     1,600       1,737,552  

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

    

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

     2,930       3,158,745  

Series AA, 5.50%, 6/15/39

     3,040       3,158,834  
    

 

 

 
        15,258,903  

New York — 8.1%

 

City of New York New York Municipal Water Finance Authority, Refunding RB, 2nd General Resolution, Series EE:

    

Fiscal 2009, 5.25%, 6/15/40

     6,930       7,529,653  

Water & Sewer System, 5.38%, 6/15/43

     2,220       2,503,516  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    15


Schedule of Investments (continued)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

Municipal Bonds   

Par  

(000)

    Value  

New York (continued)

 

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

   $ 940     $ 1,063,958  

Metropolitan Transportation Authority, RB:

    

Series A, 5.25%, 11/15/38

     8,500       9,610,525  

Series A-1, 5.25%, 11/15/39

     1,550       1,752,539  

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

     2,000       2,230,380  

TSASC, Inc., Refunding RB, Series A, 5.00%, 6/01/41

     895       954,938  
    

 

 

 
        25,645,509  

Ohio — 0.9%

 

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

     2,500       2,851,525  

Pennsylvania — 2.5%

 

Pennsylvania HFA, Refunding RB, S/F Housing Mortgage, Series 121, 3.10%, 10/01/36

     1,710       1,525,457  

Pennsylvania Turnpike Commission, RB, Series B, 5.00%, 12/01/45

     2,300       2,519,811  

Township of Bristol Pennsylvania School District, GO:

    

5.25%, 6/01/37

     2,500       2,758,425  

5.25%, 6/01/43

     1,100       1,213,707  
    

 

 

 
        8,017,400  

South Carolina — 6.3%

 

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

     3,760       4,309,035  

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

    

6.00%, 7/01/38

     2,940       3,337,370  

5.50%, 7/01/41

     2,500       2,765,375  

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

     1,870       2,024,481  

State of South Carolina Public Service Authority, Refunding RB:

    

Series A, 5.50%, 1/01/19 (a)

     2,300       2,490,026  

Series C, 5.00%, 12/01/46

     1,000       1,101,230  

Series E, 5.25%, 12/01/55

     3,500       3,833,585  
    

 

 

 
        19,861,102  

Tennessee — 1.0%

 

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

     3,000       3,254,910  

Texas — 18.2%

 

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

     2,345       2,655,830  

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

    

6.00%, 5/15/19 (a)

     6,345       7,029,435  

6.00%, 11/15/35

     355       392,190  

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

    

6.50%, 1/01/19 (a)

     620       681,448  

6.50%, 7/01/37

     2,380       2,563,070  

Dallas Area Rapid Transit, Refunding RB,
Senior Lien (a):

    

5.25%, 12/01/18

     2,605       2,802,198  

5.25%, 12/01/18

     1,950       2,097,615  

Dallas-Fort Worth International Airport, ARB, Joint Improvement, AMT:

    

Series A, 5.00%, 11/01/38

     1,615       1,712,191  

Series H, 5.00%, 11/01/37

     1,810       1,946,637  

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

     2,155       2,472,216  

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

     5,480       6,233,445  
Municipal Bonds   

Par  

(000)

    Value  

Texas (continued)

 

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

    

(NPFGC), 5.75%, 1/01/18 (a)

   $ 4,340     $ 4,528,399  

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

     1,400       1,450,022  

Series A, 5.63%, 1/01/18 (a)

     4,895       5,101,961  

Series A, 5.63%, 1/01/33

     6,080       6,290,368  

Series K-2 (AGC), 6.00%, 1/01/19 (a)

     1,000       1,091,070  

Series S, 5.75%, 1/01/18 (a)

     855       892,116  

Series S, 5.75%, 1/01/18 (a)

     5,835       6,088,297  

Series SE, 5.75%, 1/01/40

     145       150,384  

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

     1,070       1,204,338  
    

 

 

 
        57,383,230  

Virginia — 1.1%

 

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

     945       1,043,053  

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

     2,195       2,411,252  
    

 

 

 
        3,454,305  

Washington — 1.5%

 

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

     2,400       2,674,176  

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

     1,865       2,089,434  
    

 

 

 
        4,763,610  

Wyoming — 0.2%

 

Wyoming Municipal Power Agency Inc, Refunding RB, Series A (BAM), 5.00%, 1/01/42

     570       634,028  
Total Municipal Bonds — 122.0%       384,888,206  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
              

California — 2.7%

 

Sacramento Area Flood Control Agency, Refunding, Consolidated Capital Assessment District No.2, Series A, 5.00%, 10/01/47

     7,499       8,485,463  

Colorado — 3.1%

 

Colorado Health Facilities Authority, RB, Catholic Health, Series C-3 (AGM), 5.10%, 4/29/18 (a)

     9,410       9,887,934  

Connecticut — 1.1%

 

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

     3,061       3,347,504  

District of Columbia — 0.6%

 

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

     1,699       1,837,353  

Florida — 4.2%

 

County of Miami-Dade Florida, GO, Building Better Communities Program, Series B-1,
6.00%, 7/01/18 (a)

     12,500       13,369,500  

Illinois — 5.8%

 

City of Chicago Illinois, ARB, O’Hare International Airport, Series A (AGM), 5.00%, 1/01/18 (a)

     5,000       5,183,400  

City of Chicago Illinois, Refunding RB, Waterworks, 2nd Lien (AGM), 5.25%, 11/01/33

     3,967       4,117,795  

State of Illinois Toll Highway Authority, RB, Senior:

    

Priority, Series A, 5.00%, 1/01/40

     1,980       2,177,023  

Series B, 5.00%, 1/01/40

     6,148       6,774,444  
    

 

 

 
        18,252,662  
 

 

See Notes to Financial Statements.

 

                
16    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

Nevada — 6.3%

 

County of Clark Nevada Water Reclamation District, GO (a):

    

Limited Tax, 6.00%, 7/01/18

   $ 10,000     $ 10,700,000  

Series B, 5.50%, 7/01/19

     8,247       9,089,528  
    

 

 

 
        19,789,528  

New Jersey — 1.8%

 

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

     3,861       3,996,127  

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

     1,500       1,524,230  
    

 

 

 
        5,520,357  

New York — 7.1%

 

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Series FF,
5.00%, 6/15/45

     5,958       6,594,990  

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

     2,300       2,456,003  

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

     7,515       8,391,539  

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

     4,400       5,008,034  
    

 

 

 
        22,450,566  

Pennsylvania — 0.7%

 

County of Westmoreland Pennsylvania Municipal Authority, Refunding RB (BAM), 5.00%, 8/15/38

     1,963       2,166,726  
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

Texas — 1.5%

 

County of Tarrant Texas Cultural Education Facilities Finance Corp., RB, Baylor Health Care System Project, Series A, 5.00%, 11/15/38

   $ 4,296     $ 4,700,330  

Utah — 0.8%

 

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

     2,504       2,655,490  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 35.7%
      112,463,413  
Total Long-Term Investments
(Cost — $464,105,677) — 157.7%
      497,351,619  
    
                  
Short-Term Securities    Shares         

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.50% (e)(f)

     6,399,391       6,400,031  
Total Short-Term Securities
(Cost — $6,399,798) — 2.0%
      6,400,031  
Total Investments (Cost — $470,505,475) — 159.7%       503,751,650  
Other Assets Less Liabilities — 1.6%       5,078,902  

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (19.8)%

 

    (62,396,626

VMTP Shares at Liquidation Value — (41.5)%

 

    (131,000,000
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 315,433,926  
    

 

 

 
 
Notes to Schedule of Investments

 

(a)   U.S. Government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.

 

(b)   Variable rate security. Rate as of period end.

 

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

 

(d)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire between May 7, 2018 to November 15, 2019, is $4,827,875. See Note 4 of the Notes to Financial Statements for details.

 

(e)   During the six months ended January 31, 2017, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares Held
at July 31,
2016
     Net
Activity
     Shares Held
at January 31,
2017
     Value at
January 31,
2017
     Income      Net Realized
Gain
    

Change in
Unrealized
Appreciation

(Depreciation)

 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     627,379        5,772,012        6,399,391      $ 6,400,031      $ 3,939      $ 329      $ 233  

 

(f)   Current yield as of period end.

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts                               
Contracts
Short
       Issue   Expiration   Notional
Value
    Unrealized
Depreciation
        
  (39      5-Year U.S. Treasury Note   March 2017   $ 4,596,820     $ (10,406  
  (121      10-Year U.S. Treasury Note   March 2017   $ 15,060,719       (52,606  
  (68      Long U.S. Treasury Bond   March 2017   $ 10,257,375       (17,171  
  (9      Ultra U.S. Treasury Bond   March 2017   $ 1,446,188       (11,406        
 

Total

    $ (91,589  
          

 

 

 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    17


Schedule of Investments (concluded)

  

BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

   Net unrealized depreciation1           $ 91,589       $ 91,589          

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

     

 

For the six months ended January 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

Net Realized Gain (Loss) from:   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

                          $ 1,128,892           $ 1,128,892  

Net Change in Unrealized Appreciation (Depreciation) on:

                                                       

Futures contracts

                          $ (30,573         $ (30,573

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:       

Average notional value of contracts — short

  $ 22,723,504  

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3        Total  

Assets:

                
Investments:                 

Long-Term Investments1

           $ 497,351,619                 $ 497,351,619  

Short-Term Securities

  $ 6,400,031                            6,400,031  
 

 

 

 

Total

  $ 6,400,031        $ 497,351,619                 $ 503,751,650  
 

 

 

 
                
Derivative Financial Instruments2                                         

Liabilities:

                

Interest rate contracts

  $ (91,589                        $ (91,589

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

     

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

     

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

                

TOB Trust Certificates

           $ (62,324,733               $ (62,324,733

VMTP Shares at Liquidation Value

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

 

 

 

Total

           $ (193,324,733               $ (193,324,733
 

 

 

 

During the six months ended January 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
18    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments January 31, 2017 (Unaudited)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

California — 92.4%

 

Corporate — 1.3%

 

California Pollution Control Financing Authority, RB, AMT, 4.75%, 11/01/46

   $ 4,000     $ 4,190,600  

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

     2,435       2,659,799  
    

 

 

 
        6,850,399  

County/City/Special District/School District — 37.5%

 

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

     7,925       7,946,635  

City & County of San Francisco California, COP, Port Facilities Project, Series C, AMT, 5.25%, 3/01/32

     1,050       1,177,344  

County of Kern California, COP, Capital Improvements Projects, Series A (AGC), 6.00%, 2/01/19 (a)

     2,000       2,192,120  

County of Los Angeles Metropolitan Transportation Authority, Refunding RB, Series A,
5.00%, 7/01/42 (b)

     4,000       4,647,800  

County of Orange California Sanitation District, COP, Series A, 5.00%, 2/01/19 (a)

     2,500       2,692,400  

County of Orange California Water District, COP, Refunding, 5.25%, 8/15/19 (a)

     9,045       9,957,098  

County of Orange California Water District Revenue (b):

    

5.00%, 8/15/32

     1,000       1,189,720  

5.00%, 8/15/34

     2,110       2,486,150  

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

     2,755       3,187,948  

El Monte City School District, GO, Los Angeles Country, California Series B, 5.50%, 8/01/46

     4,265       5,043,960  

Foothill-De Anza Community College District, COP, Refunding, 5.00%, 4/01/34

     695       775,919  

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

     1,150       1,196,886  

Garden Grove Unified School District, GO, Election of 2010, Series C, 5.25%, 8/01/37

     2,725       3,120,997  

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

    

5.50%, 8/01/31

     2,165       2,448,442  

5.75%, 8/01/35

     8,400       9,573,396  

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

     2,500       2,996,975  

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

     1,880       2,134,721  

Imperial Irrigation District, Series A, Electric System Revenue (a):

    

5.13%, 11/01/18

     4,085       4,377,241  

5.13%, 11/01/18

     915       980,459  

Kern Community College District, GO, Safety Repair & Improvements, Series C, 5.25%, 11/01/32

     5,715       6,662,204  

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

     22,440       22,917,523  

Los Angeles Municipal Improvement Corp., Refunding LRB, Real Property, Series B (AGC),
5.50%, 4/01/19 (a)

     2,075       2,264,551  

Mount San Antonio Community College District, GO, Refunding, Election of 2008, Series 2013 A,
5.00%, 8/01/34

     4,500       5,093,190  

Ohlone Community College District, GO, Election of 2010, Series A, 5.25%, 8/01/21 (a)

     8,140       9,466,006  

Orchard School District, GO, Election of 2001, Series A (AGC), 5.00%, 8/01/19 (a)

     7,490       8,193,461  

Perris Union High School District, GO, Election of 2012, Series B, 5.25%, 9/01/39

     2,715       3,092,629  
Municipal Bonds   

Par  

(000)

    Value  

California (continued)

                

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

 

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

    

5.50%, 8/01/34

   $ 2,000     $ 2,122,300  

5.63%, 8/01/18 (a)

     4,500       4,807,800  

Poway Unified School District Public Financing Authority, 5.00%, 9/01/29 (b)

     1,735       1,949,238  

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

     5,000       5,273,050  

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

    

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

     2,900       968,948  

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

     1,000       319,190  

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

     1,300       378,469  

0.00%, 7/01/47

     830       221,137  

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

    

5.75%, 5/01/36

     2,570       2,576,913  

5.75%, 5/01/42

     4,500       5,113,305  

San Jose California Financing Authority, Refunding LRB, Civic Center Project, Series A:

    

5.00%, 6/01/32

     3,375       3,815,606  

5.00%, 6/01/39

     5,800       6,439,624  

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

     6,475       7,125,220  

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

     3,000       3,428,700  

Snowline Joint Unified School District, COP, Refunding, Refining Project (AGC), 5.75%, 9/01/19 (a)

     5,600       6,247,192  

Walnut Valley Unified School District, GO, Election of 2007, Series B, 5.75%, 8/01/21 (a)

     7,680       9,093,888  

West Contra Costa California Unified School District, GO:

    

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

     6,140       6,926,288  

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

     3,000       3,488,010  

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

     2,500       2,906,675  
    

 

 

 
        199,017,328  

Education — 1.6%

 

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

     2,750       3,119,050  

California School Finance Authority,
5.00%, 7/01/36 (d)

     755       758,057  

University of California, RB, 5.25%, 5/15/36

     3,680       4,283,741  
    

 

 

 
        8,160,848  

Health — 8.9%

 

California Health Facilities Financing Authority, RB:

    

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

     10,000       11,049,300  

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

     4,205       4,579,498  

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

     7,715       8,786,922  

California Health Facilities Financing Authority, Refunding RB, Series A (a):

    

Catholic Healthcare West, 6.00%, 7/01/19

     5,500       6,111,545  

Dignity Health, 6.00%, 7/01/19

     2,370       2,633,520  

California Statewide Communities Development Authority, RB, Sutter Health, Series A,
6.00%, 8/15/42

     5,130       5,842,762  

California Statewide Communities Development Authority, Refunding RB:

    

Catholic Healthcare West, Series D (BHAC), 5.50%, 7/01/17 (a)

     865       880,345  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    19


Schedule of Investments (continued)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

 

Municipal Bonds   

Par  

(000)

    Value  

California (continued)

 

Health (continued)

 

California Statewide Communities Development Authority, Refunding RB (continued):

    

CHF Irvine LLC, 5.00%, 5/15/40

   $ 2,250     $ 2,397,825  

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

     2,860       3,172,512  

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

     1,625       1,859,650  
    

 

 

 
        47,313,879  

State — 7.5%

 

State of California, GO, Various Purposes:

    

6.00%, 3/01/33

     5,500       6,225,505  

6.00%, 4/01/38

     17,180       18,846,975  

6.00%, 11/01/39

     3,510       3,920,740  

State of California Public Works Board, LRB:

    

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

     3,670       4,060,121  

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

     2,575       3,036,389  

Various Capital Projects, Sub-Series I-1,
6.13%, 11/01/19 (a)

     3,365       3,814,228  
    

 

 

 
        39,903,958  

Transportation — 17.0%

 

Alameda Corridor Transportation Authority, Refunding RB, Series B, 5.00%, 10/01/35

     1,500       1,638,060  

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

    

Series E, 6.00%, 5/01/39

     9,650       10,613,938  

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

     545       547,098  

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

     985       988,713  

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

    

2nd Series 34E (AGM), 5.75%, 5/01/18 (a)

     3,500       3,672,690  

2nd Series A, 5.25%, 5/01/33

     1,900       2,108,734  

Series A, 5.00%, 5/01/40

     3,785       4,105,211  

Series A, 5.00%, 5/01/44

     2,660       2,877,987  

City & County of San Francisco California Airports Commission, Refunding RB, AMT (AGM):

    

2nd Series 32, 5.75%, 5/01/18 (a)

     2,285       2,418,170  

Balance 2nd, 5.75%, 5/01/24

     2,715       2,863,212  

City of Los Angeles California Department of Airports, ARB:

    

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

     2,000       2,233,960  

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

     1,500       1,667,445  

Los Angeles International Airoport, Sub-Series B, 5.00%, 5/15/40

     2,500       2,755,925  

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

     4,760       5,163,791  

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

     1,400       1,607,564  

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

     5,000       5,095,600  

County of Sacramento California, ARB:

    

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

     7,000       7,351,890  

Subordinated & Passenger Facility Charges/Grant, Series C (AGC), 5.75%, 7/01/18 (a)

     5,555       5,926,852  

County of Sacramento California, Refunding ARB, Senior Series A, 5.00%, 7/01/41

     2,500       2,787,925  

County of Sacramento California Airport System Revenue, Refunding ARB, Airport System Subordinate Revenue, SubSeries B,
5.00%, 7/01/41

     1,750       1,944,145  
Municipal Bonds   

Par  

(000)

    Value  

California (continued)

 

Transportation (continued)

 

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

   $ 4,500     $ 5,178,870  

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

     6,350       6,933,121  

Los Angeles Harbor Department, RB, Series B,
5.25%, 8/01/19 (a)

     2,760       3,034,013  

Port of Los Angeles California Harbor Department, RB, Series B, 5.25%, 8/01/19 (a)

     5,530       6,079,018  

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

     200       218,948  
    

 

 

 
        89,812,880  

Utilities — 18.6%

 

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

     5,000       5,621,750  

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

    

5.25%, 7/01/39

     8,000       9,039,120  

5.00%, 7/01/46

     50       57,058  

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

     2,000       2,206,560  

City of San Francisco California Public Utilities Commission Water Revenue, RB, Sub-Series A, 5.00%, 11/01/37

     10,000       11,272,800  

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

    

5.25%, 11/01/19 (a)

     6,280       6,975,510  

5.00%, 11/01/36

     5,335       6,075,978  

County of Los Angeles Sanitation Districts Financing Authority, RB, Series A, 4.00%, 10/01/42

     8,210       8,328,142  

County of San Diego California Water Authority, COP, Refunding, Series A (AGM), 5.00%, 5/01/18 (a)

     4,895       5,142,785  

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

     4,000       4,609,200  

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

     2,500       2,535,625  

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

    

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

     3,000       3,043,080  

Sub-Series A, 5.00%, 6/01/30

     5,000       5,545,150  

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

     5,000       5,668,600  

Los Angeles Department of Water & Power, RB (AMBAC), 5.00%, 7/01/37

     5,025       5,098,214  

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

     15,000       15,236,400  

San Diego Public Facilities Financing Authority Sewer, Refunding RB, Senior Series A, 5.25%, 5/15/19 (a)

     2,000       2,186,400  
    

 

 

 
        98,642,372  
Total Municipal Bonds — 92.4%       489,701,664  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
            

California — 72.8%

 

County/City/Special District/School District — 24.7%

 

City of Los Angeles Department of Airports, RB, Los Angeles International Airport, AMT, Series A,
5.00%, 5/15/46

     5,000       5,486,150  
 

 

See Notes to Financial Statements.

 

                
20    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
  

Par  

(000)

    Value  

California (continued)

                

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

 

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

   $ 10,000     $ 11,405,667  

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

     6,585       6,713,470  

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

     17,615       20,077,135  

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

    

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

     12,000       12,255,360  

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

     12,000       12,723,000  

Los Angeles Community College District California, GO, Refunding, Election of 2008, 6.00%, 8/01/33 (a)

     9,596       10,730,218  

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

     5,000       5,408,850  

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

     15,140       17,034,165  

Sacramento Area Flood Control Agency, Refunding RB, Consolidated Capital Assessment District No.2, 5.00%, 10/01/43

     10,005       11,340,467  

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

     17,000       17,709,240  
    

 

 

 
        130,883,722  

Education — 13.9%

 

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

     11,000       12,092,850  

University of California, RB:

    

Series AM, 5.25%, 5/15/44

     9,210       10,655,141  

Series O, 5.75%, 5/15/34 (a)

     11,193       12,349,124  

University of California, Refunding RB:

    

Series A, 5.00%, 11/01/43

     13,002       14,785,543  

Series I, 5.00%, 5/15/40

     21,105       23,916,321  
    

 

 

 
        73,798,979  

Health — 14.4%

 

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

     10,000       10,772,600  

California Health Facilities Financing Authority, Refunding RB:

    

Lucile Salter Packard Childern’s Hospital,
Series B, 5.00%, 8/15/55

     4,500       4,962,330  

Sutter Health, Series A, 5.00%, 8/15/43

     24,940       27,467,669  

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

     19,860       21,588,614  

Regents of the University of California Medical Center Pooled Revenue, Refunding RB, Series L,
5.00%, 5/15/41

     10,375       11,713,682  
    

 

 

 
        76,504,895  

State — 0.9%

 

State of California, GO, Refunding, 4.00%, 9/01/37

     4,575       4,707,126  

Transportation — 4.7%

 

City of Los Angeles California Department of Airports, RB, AMT:

    

Los Angeles International Airport, Series B, 5.00%, 5/15/41

     3,641       4,010,441  

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

     5,500       6,113,965  

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

     13,311       14,756,797  
    

 

 

 
               24,881,203  
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
  

Par  

(000)

    Value  

California (continued)

 

Utilities — 14.2%

 

Anaheim Public Financing Authority, RB, Refunding, Series A:

    

5.00%, 5/01/39

   $ 6,000     $ 6,628,200  

5.00%, 5/01/46

     13,500       14,840,550  

City & County of San Francisco California Public Utilities Commission, RB, Water Revenue, Series B,
5.00%, 11/01/39 (a)

     4,380       4,835,564  

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

     6,290       7,102,353  

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

    

5.00%, 5/01/33

     1,412       1,483,275  

5.00%, 5/01/33

     7,098       7,457,501  

Los Angeles Department of Water, Refunding RB,
Series A, 5.00%, 7/01/46

     8,413       9,600,284  

Los Angeles Department of Water & Power, RB, Power System, Sub-Series A-1 (AGM), 5.00%, 7/01/37

     13,525       13,721,991  

Rancho Water District Financing Authority, Refunding RB, Series A (AGM):

    

5.00%, 8/01/34 (a)

     3,729       3,937,415  

5.00%, 8/01/34

     5,548       5,858,368  
    

 

 

 
        75,465,501  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 72.8%
      386,241,426  
Total Long-Term Investments
(Cost — $838,564,794) — 165.2%
      875,943,090  
    
                  
Short-Term Securities    Shares         

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.50% (f)(g)

     194,785       194,805  
Total Short-Term Securities
(Cost — $194,805) — 0.0%
      194,805  
Total Investments (Cost — $838,759,599) — 165.2%       876,137,895  

Other Assets Less Liabilities — 1.2%

 

    6,525,633  

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (35.1)%

 

    (186,102,536

VRDP Shares at Liquidation Value, Net of Deferred Offering Costs — (31.3)%

 

    (166,222,490
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 530,338,502  
    

 

 

 
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    21


Schedule of Investments (continued)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

 

 

Notes to Schedule of Investments

 

(a)   U.S. Government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.

 

(b)   When-issued security.

 

(c)   Zero-coupon bond.

 

(d)   Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

 

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

 

(f)   During the six months ended January 31, 2017, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares Held
at July 31,
2016
     Net
Activity
     Shares Held
at January 31,
2017
     Value at
January 31,
2017
     Income      Net
Realized
Loss1
     Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     143,051        51,734        194,785      $ 194,805      $ 16,310      $ (156       

1   Includes net capital gain distributions.

    

        

 

(g)   Current yield as of period end.

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

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts                      
Contracts
Short
       Issue   Expiration   Notional
Value
    Unrealized
Depreciation
        
  (67      5-Year U.S. Treasury Note   March 2017   $ 7,897,102     $ (22,655  
  (212      10-Year U.S. Treasury Note   March 2017   $ 26,387,375       (99,575  
  (127      Long U.S. Treasury Bond   March 2017   $ 19,157,156       (65,189  
  (30      Ultra U.S. Treasury Bond   March 2017   $ 4,820,625       (21,441        
 

Total

    $ (208,860  
          

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

  Net unrealized depreciation1                           $ 208,860           $ 208,860  

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

     

For the six months ended January 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

Net Realized Gain (Loss) from:   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

                          $ 2,679,501           $ 2,679,501  

Net Change in Unrealized Appreciation (Depreciation) on:

                                                       

Futures contracts

                          $ (13,270         $ (13,270

 

See Notes to Financial Statements.

 

                
22    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (concluded)

  

BlackRock MuniYield California Quality Fund, Inc. (MCA)

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:       

Average notional value of contracts – short

  $ 44,055,863  

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

 

Fair Value Hierarchy as of Period End      

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

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

 

     Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:  

Long-Term Investments1

           $ 875,943,090                 $ 875,943,090  

Short-Term Securities

  $ 194,805                            194,805  
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 194,805        $ 875,943,090                 $ 876,137,895  
 

 

 

      

 

 

      

 

 

      

 

 

 
                
Derivative Financial Instruments 2  

Liabilities:

 

Interest rate contracts

  $ (208,860                        $ (208,860

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

     

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

     

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

 

TOB Trust Certificates

           $ (185,697,579               $ (185,697,579

VRDP Shares at Liquidation Value

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

 

 

      

 

 

      

 

 

      

 

 

 

Total

           $ (352,197,579               $ (352,197,579
 

 

 

      

 

 

      

 

 

      

 

 

 

During the six months ended January 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    23


Schedule of Investments January 31, 2017 (Unaudited)

  

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

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

New York — 122.0%

 

Corporate — 1.9%

 

City of New York New York Industrial Development Agency, Refunding RB, Transportation Infrastructure Properties LLC, Series A, AMT, 5.00%, 7/01/28

   $ 930     $ 985,781  

County of Onondaga New York Industrial Development Agency, RB, Bristol-Meyers Squibb Co. Project, AMT, 5.75%, 3/01/24

     2,500       2,980,575  

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

     5,600       6,678,224  
    

 

 

 
        10,644,580  

County/City/Special District/School District — 26.9%

 

Brooklyn Arena Local Development Corp., Refunding RB, Barclays Center Project, Series A, 5.00%, 7/15/42

     2,430       2,632,054  

City of New York New York, GO:

    

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

     1,950       2,178,072  

Series B-1, 4.00%, 12/01/43

     2,000       2,034,120  

Sub-Series A-1, 5.00%, 8/01/33

     2,100       2,367,498  

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

     8,350       9,354,672  

Sub-Series D-1, Fiscal 2014, 5.00%, 8/01/31

     1,300       1,489,670  

City of New York New York, GO, Refunding:

    

Fiscal 2012, Series I, 5.00%, 8/01/32

     490       554,558  

Fiscal 2014, Series E, 5.00%, 8/01/32

     2,040       2,324,519  

Series E, 5.50%, 8/01/25

     6,230       7,491,201  

City of New York New York Convention Center Development Corp., RB, Sub Lien, Hotel Unit Fee, Series B (a):

    

0.00%, 11/15/46

     4,000       972,800  

(AGM), 0.00%, 11/15/56

     7,825       1,271,171  

City of New York New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured:

    

5.00%, 11/15/40

     6,000       6,728,640  

5.00%, 11/15/45

     13,995       15,638,153  

City of New York New York Industrial Development Agency, RB, PILOT:

    

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 3/01/39 (a)

     5,000       1,907,350  

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 3/01/43 (a)

     4,330       1,369,319  

Queens Baseball Stadium (AGC),
6.38%, 1/01/39

     1,000       1,085,400  

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

     6,400       6,413,184  

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

     1,750       1,753,658  

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

     2,250       2,282,805  

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

     9,650       9,721,024  

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

    

Sub-Series A-1, 5.00%, 11/01/38

     1,000       1,138,370  

Sub-Series B-1, 5.00%, 11/01/35

     2,510       2,834,794  

Sub-Series B-1, 5.00%, 11/01/36

     1,690       1,903,988  

Sub-Series B-1, 5.00%, 11/01/38

     4,000       4,529,200  

Sub-Series E-1, 5.00%, 2/01/30

     1,000       1,170,340  

City of New York New York Transitional Finance Authority Future Tax Secured, Refunding RB, Series C, 5.00%, 11/01/30

     1,470       1,701,216  

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

     1,040       1,149,231  
Municipal Bonds   

Par  

(000)

    Value  

New York (continued)

 

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

 

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

    

5.25%, 5/01/31

   $ 2,305     $ 2,570,836  

5.25%, 5/01/32

     1,000       1,114,050  

County of Erie New York Industrial Development Agency, Refunding RB:

    

5.00%, 5/01/29

     4,060       4,741,958  

City School District of Buffalo Project, 5.00%, 5/01/28

     1,000       1,177,290  

County of Nassau New York, GO:

    

Series A, 5.00%, 1/15/31

     1,770       2,056,156  

Series B, 5.00%, 10/01/30

     1,550       1,804,867  

Hudson Yards Infrastructure Corp., RB:

    

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

     550       554,180  

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

     4,300       4,332,680  

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

     4,580       4,614,808  

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

     11,175       11,194,109  

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

     4,665       4,700,454  

New York Liberty Development Corp., Refunding RB:

    

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

     2,570       2,862,003  

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

     2,000       2,193,100  

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

     3,000       3,414,390  

7 World Trade Center Project, Class 1, 4.00%, 9/15/35

     1,090       1,151,509  

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

     3,725       4,074,330  

Town of North Hempstead New York, GO, Refunding, Series B (NPFGC), 6.40%, 4/01/17

     555       560,117  
    

 

 

 
        147,113,844  

Education — 23.1%

 

Albany Capital Resource Corp., Refunding RB, Albany College of Pharmacy and Health Sciences, Series A:

    

5.00%, 12/01/31

     250       278,385  

5.00%, 12/01/32

     100       111,427  

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

     2,000       2,082,660  

Build NYC Resource Corp., RB, The Chapin School, Ltd. Project:

    

4.00%, 11/01/26

     640       726,931  

5.00%, 11/01/26

     950       1,163,845  

Build NYC Resource Corp., Refunding RB:

    

New York Law School Project, 5.00%, 7/01/41

     1,065       1,122,116  

New York Law School Project, 4.00%, 7/01/45

     370       348,407  

Series A, 5.00%, 6/01/43

     525       589,964  

City of New York Albany Capital Resource Corp., Refunding RB, Albany College of Pharmacy and Health Sciences, Series A, 4.00%, 12/01/34

     110       114,501  

City of New York New York Trust for Cultural Resources, Refunding RB:

    

American Museum of Natural History,
Series A, 5.00%, 7/01/37

     2,265       2,525,883  

American Museum of Natural History,
Series A, 5.00%, 7/01/41

     825       915,436  

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

     3,550       3,806,842  

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

     2,150       2,321,484  

Museum of Modern Art, Series 1A, 5.00%, 10/01/18 (b)

     1,000       1,065,330  

Wildlife Conservation Society, Series A, 5.00%, 8/01/42

     750       835,178  

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

     5,740       6,302,176  
 

 

See Notes to Financial Statements.

 

                
24    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

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

 

Municipal Bonds   

Par  

(000)

    Value  

New York (continued)

 

Education (continued)

 

County of Madison New York Capital Resource Corp., RB, Colgate University Project, Series B:

    

5.00%, 7/01/40

   $ 815     $ 926,981  

5.00%, 7/01/43

     2,940       3,339,311  

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

     3,885       4,167,906  

County of Monroe New York Industrial Development Corp., Refunding RB, University of Rochester Project, Series A:

    

5.00%, 7/01/38

     1,440       1,612,282  

4.00%, 7/01/39

     500       516,235  

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

    

5.00%, 12/01/30

     1,190       1,329,063  

5.00%, 12/01/36

     1,150       1,287,735  

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

     500       560,950  

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

    

5.50%, 7/01/33

     500       555,230  

5.25%, 7/01/36

     860       944,667  

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

     675       744,255  

State of New York Dormitory Authority, RB:

    

Columbia University, Series A-2, 5.00%, 10/01/46

     1,250       1,635,837  

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

     2,075       2,337,218  

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

     325       367,341  

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

     1,550       1,766,597  

General Purpose, Series A, 5.00%, 2/15/36

     5,500       6,164,675  

New School (AGM), 5.50%, 7/01/20 (b)

     4,050       4,600,597  

New York University Mount Sinai School of Medicine, 5.13%, 7/01/19 (b)

     665       726,313  

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

     4,580       5,848,477  

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

     1,000       1,078,550  

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

     600       676,506  

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

     3,240       3,625,236  

New York University, Series C,
5.00%, 7/01/18 (b)

     2,000       2,112,240  

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

     800       882,080  

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

     2,035       2,231,032  

State University Dormitory Facilities, Series A, 5.00%, 7/01/41

     1,500       1,659,510  

State of New York Dormitory Authority, Refunding RB:

    

3rd General Resolution, State University Educational Facilities Issue, Series A,
5.00%, 5/15/29

     1,000       1,146,320  

Barnard College, Series A, 5.00%, 7/01/34

     1,150       1,295,325  

Barnard College, Series A, 4.00%, 7/01/36

     530       541,013  

Barnard College, Series A, 4.00%, 7/01/37

     400       406,860  

Barnard College, Series A, 5.00%, 7/01/43

     2,500       2,790,575  

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

     700       772,548  

Fordham University, 5.00%, 7/01/44

     2,130       2,341,445  

Icahn School of Medicine at Mount Sinai, Series A, 5.00%, 7/01/35

     1,600       1,741,968  

New York University Mount Sinai School of Medicine (NPFGC), 5.00%, 7/01/17 (b)

     6,100       6,207,360  
Municipal Bonds   

Par  

(000)

    Value  

New York (continued)

 

Education (continued)

 

State of New York Dormitory Authority, Refunding RB (continued):

    

New York University, Series A, 5.00%, 7/01/31

   $ 3,955     $ 4,500,157  

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

     4,775       5,383,860  

Pratt Institute, 5.00%, 7/01/46

     1,210       1,347,311  

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

     750       827,618  

St. John’s University, Series A, 5.00%, 7/01/37

     2,680       2,956,415  

State University Dormitory Facilities, Series A, 5.25%, 7/01/30

     4,195       4,834,612  

State University Dormitory Facilities, Series A, 5.25%, 7/01/31

     8,735       10,000,265  

State University Dormitory Facilities, Series A, 5.00%, 7/01/42

     1,490       1,667,161  

State University Dormitory Facilities, Series B, 5.00%, 7/01/32

     500       572,680  

State University Dormitory Facilities, Series B, 5.00%, 7/01/33

     1,140       1,300,261  
    

 

 

 
        126,641,143  

Health — 10.4%

 

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

     2,200       2,363,130  

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

    

5.50%, 4/01/30

     250       276,438  

5.50%, 4/01/34

     490       538,289  

County of Dutchess New York Local Development Corp., RB, Health Quest Systems, Inc., Series B:

    

3.00%, 7/01/36

     1,360       1,156,109  

4.00%, 7/01/41

     1,055       1,037,192  

County of Monroe New York Industrial Development Corp., RB, Rochester General Hospital Project,
Series A:

    

5.00%, 12/01/32

     830       902,899  

5.00%, 12/01/37

     350       375,557  

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

     5,650       6,338,565  

County of Suffolk New York EDC, RB, Catholic Health Services, Series C, 5.00%, 7/01/32

     625       675,156  

County of Westchester New York Healthcare Corp., Refunding RB, Senior Lien, Remarketing, Series A, 5.00%, 11/01/30

     1,790       1,939,465  

State of New York Dormitory Authority, RB:

    

General Purpose, Series A, 5.00%, 2/15/42

     3,000       3,414,420  

Healthcare, Series A, 5.00%, 3/15/19 (b)

     2,000       2,161,560  

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

     6,500       6,624,930  

New York University Hospitals Center, Series A, 5.75%, 7/01/20 (b)

     3,450       3,947,697  

New York University Hospitals Center, Series A, 6.00%, 7/01/20 (b)

     1,100       1,267,827  

North Shore-Long Island Jewish Obligated Group, Series A, 5.50%, 5/01/19 (b)

     2,075       2,272,955  

North Shore-Long Island Jewish Obligated Group, Series C, 4.25%, 5/01/39

     1,000       1,036,610  

North Shore-Long Island Jewish Obligated Group, Series D, 4.25%, 5/01/39

     300       310,983  

State of New York Dormitory Authority, Refunding RB, Series A:

    

New York University Hospitals Center, 5.00%, 7/01/17 (b)

     1,500       1,526,520  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    25


Schedule of Investments (continued)

  

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

 

Municipal Bonds  

Par  

(000)

    Value  

New York (continued)

 

Health (continued)

 

State of New York Dormitory Authority, Refunding RB, Series A (continued):

   

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

  $ 3,525     $ 3,946,449  

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

    4,000       4,378,680  

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

    9,220       10,165,419  
   

 

 

 
        56,656,850  

Housing — 4.6%

 

City of New York New York Housing Development Corp., RB, M/F Housing:

   

Fund Grant Program, New York City Housing Authority Program, Series B1, 5.25%, 7/01/32

    6,865       7,764,590  

Fund Grant Program, New York City Housing Authority Program, Series B1, 5.00%, 7/01/33

    1,675       1,853,722  

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

    750       757,943  

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

    1,335       1,367,160  

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

    840       848,291  

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

    600       612,384  

Sustainable Neighborhood Bonds,Series C-1-A, 3.40%, 11/01/47

    3,150       2,781,544  

City of New York New York Housing Development Corp., Refunding RB, M/F Housing, 8 Spruce Street, Class F, 4.50%, 2/15/48

    1,230       1,253,985  

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

    2,445       2,450,575  

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

   

6.13%, 2/01/20

    305       305,991  

6.25%, 2/01/31

    1,125       1,127,700  

State of New York HFA, RB, Series A:

   

Affordable Housing (Fannie Mae), 4.00%, 11/01/42

    2,630       2,600,649  

St. Philip’s Housing, AMT (Fannie Mae), 4.65%, 11/15/38

    1,500       1,500,465  
   

 

 

 
        25,224,999  

State — 10.8%

 

City of New York New York Transitional Finance Authority, BARB:

   

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

    1,700       1,742,857  

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

    6,000       6,344,220  

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

    5,500       5,930,485  

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

    1,500       1,617,405  

Fiscal 2015, Series S-1, 5.00%, 7/15/37

    2,000       2,245,080  

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

    5,000       5,013,550  

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

    4,025       4,032,487  

Metropolitan Transportation Authority, Refunding RB, Dedicated Tax Fund:

   

Series B, 5.00%, 11/15/34

    1,500       1,634,355  

Sub-Series B-1, 5.00%, 11/15/31

    3,465       3,953,877  

Sales Tax Asset Receivable Corp., Refunding RB, Series A, 4.00%, 10/15/32

    3,835       4,124,312  

State of New York Dormitory Authority, RB:

   

General Purpose, Series B, 5.00%, 3/15/37

    1,000       1,125,100  

General Purpose, Series B, 5.00%, 3/15/42

    7,500       8,344,125  

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

    1,750       1,874,285  

School Districts Financing Program, Series C (AGM), 5.00%, 10/01/17 (b)

    4,050       4,162,671  
Municipal Bonds  

Par  

(000)

    Value  

New York (continued)

 

State (continued)

 

State of New York Dormitory Authority, RB (continued):

   

Series B, 5.00%, 3/15/37

  $ 2,000     $ 2,287,140  

State Personal Income Tax, Series A,
5.00%, 2/15/43

    1,000       1,105,630  

State of New York Thruway Authority, RB, 2nd General Highway & Bridge Trust, Series B, 5.00%, 10/01/17 (b)

    1,500       1,541,730  

State of New York Urban Development Corp., RB, State Personal Income Tax, Series C, 5.00%, 3/15/32

    2,000       2,288,260  
   

 

 

 
        59,367,569  

Tobacco — 2.4%

 

Counties of New York Tobacco Trust VI, Refunding RB, Tobacco Settlement Pass-Through:

   

Series A, 5.00%, 6/01/41

    425       451,580  

Series B, 5.00%, 6/01/45

    1,820       1,922,866  

Series C, 5.00%, 6/01/51

    800       811,992  

County of Chautauqua New York Tobacco Asset Securitization Corp., Refunding RB, 4.75%, 6/01/39

    2,190       2,194,577  

County of Niagara New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed:

   

5.25%, 5/15/34

    1,650       1,815,314  

5.25%, 5/15/40

    2,250       2,458,867  

Westchester Tobacco Asset Securitization, Refunding RB, Sub Series C, 4.00%, 6/01/42

    3,445       3,374,894  
   

 

 

 
        13,030,090  

Transportation — 26.6%

 

Metropolitan Transportation Authority, RB:

   

Series A, 5.00%, 11/15/27

    1,000       1,131,320  

Series A, 5.00%, 11/15/30

    1,000       1,124,940  

Series A-1, 5.25%, 11/15/33

    2,565       2,925,434  

Series A-1, 5.25%, 11/15/34

    2,840       3,227,859  

Series D, 5.25%, 11/15/41

    3,450       3,887,425  

Series E, 5.00%, 11/15/38

    7,785       8,638,625  

Series E, 5.00%, 11/15/43

    4,000       4,428,320  

Series H, 5.00%, 11/15/31

    1,690       1,905,661  

Sub-Series B, 5.00%, 11/15/25

    3,250       3,757,098  

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

    615       672,503  

Metropolitan Transportation Authority, Refunding RB:

   

Green Bonds, Series A-1, 4.00%, 11/15/46

    315       318,893  

Green Bonds, Series A-1, 5.25%, 11/15/56

    3,110       3,503,726  

Series C-1, 5.25%, 11/15/56

    1,355       1,534,253  

Series D, 5.25%, 11/15/29

    1,000       1,123,830  

Metropolitan Transportation Authority Hudson Rail Yards Trust Obligations, Refunding RB, Series A:

   

5.00%, 11/15/56

    5,655       6,056,957  

5.00%, 11/15/51

    825       882,824  

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

    3,500       3,908,345  

New York Transportation Development Corp., RB, LaGuardia Airport Terminal B Redevelopment Project, Series A, AMT:

   

5.00%, 7/01/46

    6,615       6,899,313  

5.25%, 1/01/50

    6,335       6,683,045  

(AGM), 4.00%, 7/01/41

    1,575       1,536,539  

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

    1,200       1,259,208  

Port Authority of New York & New Jersey, ARB:

   

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

    2,500       2,753,675  

Consolidated, 169th Series, 5.00%, 10/15/41

    1,000       1,068,980  

Consolidated, 183rd Series, 4.00%, 6/15/44

    1,500       1,551,270  

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

    8,160       8,281,421  
 

 

See Notes to Financial Statements.

 

                
26    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

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

 

Municipal Bonds  

Par  

(000)

    Value  

New York (continued)

 

Transportation (continued)

 

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

   

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

  $ 1,140     $ 1,262,789  

179th Series, 5.00%, 12/01/38

    1,390       1,578,011  

Consolidated, 147th Series, AMT, 4.75%, 4/15/37

    2,250       2,257,943  

Consolidated, 177th Series, AMT, 4.00%, 1/15/43

    735       741,975  

Consolidated, 178th Series, AMT, 5.00%, 12/01/43

    750       820,200  

Consolidated, 186th Series, AMT, 5.00%, 10/15/44

    1,000       1,099,070  

Consolidated, 189th Series, 5.00%, 5/01/45

    2,875       3,218,735  

Port Authority of New York & New Jersey, Refunding RB, Series G (AGM), 5.75%, 12/01/25

    3,500       3,552,080  

State of New York Thruway Authority, RB, Junior Lien, Series A:

   

4.00%, 1/01/51

    1,400       1,406,230  

5.25%, 1/01/56

    3,880       4,354,679  

State of New York Thruway Authority, Refunding RB:

   

5.00%, 1/01/29

    2,225       2,558,439  

5.00%, 1/01/31

    1,500       1,702,050  

General, Series I, 5.00%, 1/01/37

    4,750       5,259,010  

General, Series I, 5.00%, 1/01/42

    3,250       3,545,003  

General, Series K, 5.00%, 1/01/32

    3,500       3,955,700  

Series J, 5.00%, 1/01/41

    6,275       6,913,418  

Triborough Bridge & Tunnel Authority, RB, Series B:

   

5.00%, 11/15/40

    1,010       1,146,623  

5.00%, 11/15/45

    1,500       1,699,215  

Triborough Bridge & Tunnel Authority, Refunding RB:

   

General, CAB, Series B, 0.00%, 11/15/32 (a)

    9,590       5,560,474  

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

    1,000       1,112,250  

General, Series A, 5.25%, 11/15/45

    1,460       1,683,219  

General, Series A, 5.00%, 11/15/50

    4,500       5,054,085  

Series C, 5.00%, 11/15/38

    2,000       2,118,640  

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

    2,500       2,865,850  

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

    875       997,036  
   

 

 

 
        145,524,188  

Utilities — 15.3%

 

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System:

   

2nd General Resolution, Fiscal 2010, Series FF, 5.00%, 6/15/31

    1,500       1,665,705  

2nd General Resolution, Fiscal 2011, Series BB, 5.00%, 6/15/31

    1,000       1,110,470  

2nd General Resolution, Fiscal 2011, Series GG, 5.00%, 6/15/43

    1,000       1,108,560  

2nd General Resolution, Fiscal 2015, Series HH, 5.00%, 6/15/39

    3,000       3,403,170  

2nd General Resolution, Series DD, 5.00%, 6/15/32

    3,750       3,933,413  

Fiscal 2016, Series A, 3.00%, 6/15/36

    1,750       1,603,945  

Long Island Power Authority, RB, General, Electric Systems, Series A (AGM), 5.00%, 5/01/36

    3,775       4,145,176  

Long Island Power Authority, Refunding RB:

   

Electric System, Series A, 5.00%, 9/01/34

    1,000       1,106,840  

Electric System, Series B, 5.00%, 9/01/41

    590       658,458  

Electric System, Series B, 5.00%, 9/01/46

    2,750       3,054,920  

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

    1,015       1,099,915  

General, Electric Systems, Series A (AGC), 6.00%, 5/01/19 (b)

    1,500       1,659,690  

State of New York Environmental Facilities Corp., RB:

   

5.00%, 3/15/45

    5,145       5,806,544  

Series B, Revolving Funds, Green Bonds, 5.00%, 9/15/40

    1,195       1,360,567  
Municipal Bonds   

Par  

(000)

    Value  

New York (continued)

 

Utilities (continued)

 

State of New York Environmental Facilities Corp., Refunding RB:

    

Revolving Funds, New York City Municipal Water, Series B, 5.00%, 6/15/33

   $ 1,040     $ 1,090,575  

Revolving Funds, New York City Municipal Water, Series B, 5.00%, 6/15/36

     2,100       2,348,346  

Series A, 5.00%, 6/15/40

     4,275       4,883,332  

Series A, 5.00%, 6/15/45

     18,920       21,418,008  

Subordinated SRF Bonds, 3.00%, 6/15/35

     2,985       2,749,513  

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

     4,920       5,511,827  

Utility Debt Securitization Authority, Refunding RB, Restructuring:

    

3.00%, 12/15/32

     1,600       1,575,840  

Series E, 5.00%, 12/15/41

     9,960       11,274,322  

Western Nassau County Water Authority, RB, Series A, 5.00%, 4/01/40

     1,185       1,309,366  
    

 

 

 
        83,878,502  
Total Municipal Bonds in New York       668,081,765  
    

Guam — 0.3%

 

Utilities — 0.3%

 

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

     1,380       1,505,553  
    

Puerto Rico — 0.9%

 

Housing — 0.9%

 

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

     4,580       4,831,167  
Total Municipal Bonds — 123.2%       674,418,485  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
            

New York — 42.4%

 

County/City/Special District/School District — 6.5%

 

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

    

5.00%, 8/01/27

     1,064       1,155,057  

5.00%, 8/01/29

     2,000       2,358,420  

City of New York New York, GO:

    

Sub-Series C-3 (AGC), 5.75%, 8/15/19 (b)

     916       995,591  

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

     13,484       14,658,361  

Sub-Series I-1, 5.00%, 3/01/36

     3,500       3,919,930  

City of New York New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/32

     3,500       3,987,795  

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

     4,125       4,594,755  

New York Liberty Development Corp., Refunding RB, 7 World Trade Center Project, Class 1, 5.00%, 9/15/40

     3,645       4,062,097  
    

 

 

 
        35,732,006  

Education — 7.1%

 

City of New York New York Trust for Cultural Resources, Refunding RB, Wildlife Conservation Society, Series A, 5.00%, 8/01/33

     1,981       2,267,744  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    27


Schedule of Investments (continued)

  

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

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

New York (continued)

 

Education (continued)

 

State of New York Dormitory Authority, LRB, State University Dormitory Facilities:

    

5.25%, 7/01/19 (b)

   $ 6,000     $ 6,575,520  

New York University, 5.00%, 7/01/35

     5,198       5,794,311  

State of New York Dormitory Authority, RB, Series A:

    

5.00%, 3/15/44

     5,548       6,228,090  

New York University, 5.00%, 7/01/18 (b)

     6,498       6,862,798  

New York University (AMBAC), 5.00%, 7/01/17 (b)

     5,707       5,807,889  

State of New York Dormitory Authority, Refunding RB, Series E, 5.25%, 3/15/33

     4,500       5,278,995  
    

 

 

 
        38,815,347  

State — 8.6%

 

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

     9,739       11,023,411  

Sales Tax Asset Receivable Corp., Refunding RB, Fiscal 2015, Series A:

    

5.00%, 10/15/31

     7,995       9,326,727  

4.00%, 10/15/32

     8,000       8,603,520  

State of New York Dormitory Authority, ERB, Series B, 5.75%, 3/15/36

     7,850       8,553,438  

State of New York Dormitory Authority, RB, Series C:

    

General Purpose, 5.00%, 3/15/41

     1,650       1,812,740  

Mental Health Services Facilities, AMT (AGM), 5.40%, 2/15/33

     6,297       6,638,507  

State of New York Urban Development Corp., Refunding RB, State Personal Income Tax, Series A,
5.00%, 3/15/45

     1,001       1,132,905  
    

 

 

 
        47,091,248  

Transportation — 13.2%

 

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

     17,999       20,099,496  

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

    

5.00%, 10/15/25

     7,990       8,943,274  

5.00%, 10/15/26

     6,000       6,684,060  

Port Authority of New York & New Jersey, Refunding ARB, 194th Series, 5.25%, 10/15/55

     3,900       4,423,458  

State of New York Thruway Authority, Refunding RB:

    

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

     10,000       10,313,600  

Transportation, Personal Income Tax, Series A, 5.00%, 3/15/31

     3,940       4,464,217  

Triborough Bridge & Tunnel Authority, Refunding RB, Series A, 5.00%, 11/15/46

     15,000       17,089,500  
    

 

 

 
        72,017,605  
Municipal Bonds Transferred to
Tender Option Bond Trusts (c)
  

Par  

(000)

    Value  

New York (continued)

 

Utilities — 7.0%

 

City of New York New York Municipal Water Finance Authority, RB, Water & Sewer System, Fiscal 2009, Series A:

    

5.75%, 6/15/18 (b)

   $ 942     $ 997,308  

5.75%, 6/15/40

     3,151       3,335,442  

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

    

Fiscal 2011, Series HH, 5.00%, 6/15/32

     9,900       11,075,229  

Fiscal 2012, Series BB, 5.00%, 6/15/44

     3,991       4,454,730  

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

     2,760       3,014,141  

New York State Environmental Facilities Corp., RB, Subordinated SRF Bonds, 4.00%, 6/15/46

     1,488       1,538,085  

Utility Debt Securitization Authority, Refunding RB:

    

5.00%, 12/15/41

     5,998       6,789,710  

Restructuring, 5.00%, 12/15/36

     3,498       4,028,096  

Restructuring, Series B, 4.00%, 12/15/35

     2,980       3,164,194  
    

 

 

 
        38,396,935  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 42.4%
      232,053,141  

Total Long-Term Investments

(Cost — $865,940,417) — 165.6%

 

 

    906,471,626  
    
   
Short-Term Securities    Shares         

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.50% (e)(f)

     2,502,273       2,502,523  

Total Short-Term Securities

(Cost — $2,502,273) — 0.4%

 

 

    2,502,523  
Total Investments (Cost — $868,442,690) — 166.0%       908,974,149  
Other Assets Less Liabilities — 1.3%       7,308,772  

Liability for TOB Trust Certificates, Including
Interest Expense and Fees Payable — (22.1)%

 

    (121,446,817

VRDP Shares at Liquidation Value, Net of Deferred Offering
Costs — (45.2)%

 

    (247,330,711
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 547,505,393  
    

 

 

 
 
Notes to Schedule of Investments

 

(a)   Zero-coupon bond.

 

(b)   U.S. Government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.

 

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

 

(d)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire between February 15, 2017 to February 15, 2019 is $12,778,278. See Note 4 of the Notes to Financial Statements for details.

 

See Notes to Financial Statements.

 

                
28    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

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

 

 

(e)   During the six months ended January 31, 2017, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares Held
at July 31,
2016
     Net
Activity
     Shares Held
at January 31,
2017
     Value at
January 31,
2017
     Income      Net
Realized
Gain1
    

Change in
Unrealized
Appreciation

(Depreciation)

 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     1,544,681        957,592        2,502,273      $ 2,502,523      $ 5,876      $ 340      $ 250  

1    Includes net capital gain distributions.

     

        

 

(f)   Current yield as of period end.

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

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts                      
Contracts
Short
       Issue   Expiration   Notional
Value
    Unrealized
Depreciation
        
  (62      5-Year U.S. Treasury Note   March 2017   $ 7,307,766     $ (19,243  
  (331      10-Year U.S. Treasury Note   March 2017   $ 41,199,156       (94,576  
  (188      Long U.S. Treasury Bond   March 2017   $ 28,358,625       (45,415  
  (44      Ultra U.S. Treasury Bond   March 2017   $ 7,070,250       (34,484        
 

Total

    $ (193,718  
          

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

   Net unrealized depreciation1           $ 193,718       $ 193,718  

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

     

 

For the six months ended January 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

 

Net Realized Gain (Loss) from:   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

                          $ 2,910,352           $ 2,910,352  

Net Change in Unrealized Appreciation (Depreciation) on:

                                                       

Futures contracts

                          $ 315,487           $ 315,487  

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments      

 

Futures contracts:       

Average notional value of contracts — short

  $ 57,679,547  

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

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    29


Schedule of Investments (concluded)

  

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

 

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:  

Long-Term Investments1

           $ 906,471,626                 $ 906,471,626  

Short-Term Securities

  $ 2,502,523                            2,502,523  
 

 

 

 

Total

  $ 2,502,523        $ 906,471,626                 $ 908,974,149  
 

 

 

 
                
Derivative Financial Instruments 2  

Liabilities:

 

Interest rate contracts

  $ (193,718                        $ (193,718
 

 

 

 

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

    

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

    

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

 

TOB Trust Certificates

           $ (121,226,531               $ (121,226,531

VRDP Shares at Liquidation Value

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

 

 

 

Total

       $ (368,926,531               $ (368,926,531
 

 

 

 

During the six months ended January 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
30    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments January 31, 2017 (Unaudited)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

    Value  

Alabama — 0.7%

 

City of Birmingham Alabama Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC), 6.00%, 6/01/19 (a)

   $ 3,605     $ 3,997,044  

City of Birmingham Alabama, GO, Convertible CAB, Series A1, 0.00%, 3/01/45 (b)

     2,920       2,892,172  
    

 

 

 
        6,889,216  

Alaska — 1.5%

 

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

     2,690       2,979,471  

Borough of Matanuska-Susitna Alaska, RB, Goose Creek Correctional Center (AGC) (a):

    

6.00%, 9/01/19

     6,450       7,218,711  

6.00%, 9/01/19

     3,700       4,140,966  
    

 

 

 
        14,339,148  

Arizona — 0.7%

 

City of Phoenix & County of Maricopa Arizona IDA, Refunding RB, S/F Housing, Series A-2, AMT (Fannie Mae), 5.80%, 7/01/40

     120       122,429  

County of Maricopa Arizona IDA, Refunding RB, Banner Health Obligation Group, Series A:

    

3.25%, 1/01/37

     2,020       1,836,665  

5.00%, 1/01/38

     1,095       1,233,550  

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

     3,075       3,330,440  
    

 

 

 
        6,523,084  

California — 12.9%

 

Alameda Corridor Transportation Authority, Refunding RB, CAB, Subordinate Lien, Series A (AMBAC), 5.40%, 10/01/17 (a)(b)

     10,000       10,303,400  

Alameda County Joint Powers Authority, Refunding RB, 5.00%, 12/01/17 (a)

     6,990       7,232,553  

California Health Facilities Financing Authority, RB:

    

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

     1,550       1,684,137  

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

     3,200       3,649,856  

California Health Facilities Financing Authority, Refunding RB, St. Joseph Health System, Series A, 5.00%, 7/01/37

     2,965       3,277,719  

California State University, RB, Systemwide, Series A, 5.50%, 5/01/19 (a)

     1,525       1,671,797  

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

     1,065       1,074,745  

California Statewide Communities Development Authority, RB:

    

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

     4,030       4,380,771  

St. Joseph Health System, Series E (AGM), 5.25%, 7/01/18 (a)

     4,000       4,240,840  

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

     1,900       1,981,415  

City of San Jose California, Refunding ARB, AMT:

    

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

     11,965       12,006,758  

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

     2,300       2,596,539  

County of Sacramento California, ARB, Senior Series A, 5.00%, 7/01/18 (a)

     10,000       10,564,100  

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

     1,830       2,117,584  

Dublin Unified School District California, GO, CAB, Election of 2004, Series D, 0.00%, 8/01/34 (c)

     5,000       1,849,250  

Grossmont Union High School District, GO, CAB, Election of 2004, 0.00%, 8/01/31 (c)

     5,110       2,889,807  

Long Beach Unified School District, GO, CAB, Election of 2008, Series B, 0.00%, 8/01/34 (c)

     5,000       2,447,200  
Municipal Bonds   

Par  

(000)

    Value  

California (continued)

 

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

   $ 1,200     $ 1,225,536  

Mount San Antonio Community College District, GO, Refunding, CAB, Election of 2008, Series A, 0.00%, 8/01/43 (b)

     3,975       2,808,059  

Norwalk-La Mirada Unified School District, GO, Refunding, CAB, Election of 2002, Series E (AGC), 0.00%, 8/01/38 (c)

     7,620       2,878,226  

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

     2,500       2,630,625  

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

    

0.00%, 8/01/35

     7,820       3,585,392  

0.00%, 8/01/36

     10,000       4,370,500  

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

    

0.00%, 8/01/37

     8,000       3,453,600  

0.00%, 8/01/38

     12,940       5,361,818  

San Diego California Unified School District, GO, CAB, Election of 2008, Series G (c):

    

0.00%, 7/01/34

     1,860       817,656  

0.00%, 7/01/35

     1,970       813,925  

0.00%, 7/01/36

     2,960       1,148,658  

0.00%, 7/01/37

     1,975       721,586  

San Diego California Unified School District, GO, Refunding, CAB, Series R-1, 0.00%, 7/01/31 (c)

     3,485       1,977,284  

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

    

5.00%, 8/01/34

     1,800       2,003,994  

5.00%, 8/01/38

     1,600       1,779,152  

State of California, GO, Refunding, Various Purposes:

    

5.00%, 9/01/41

     2,700       3,012,849  

5.00%, 10/01/41

     2,555       2,862,137  

State of California, GO, Series 2007-2 (NPFGC), 5.50%, 4/01/30

     10       10,032  

State of California Public Works Board, LRB, Various Capital Projects, Series I, 5.00%, 11/01/38

     5,040       5,638,500  

Walnut Valley Unified School District, GO, CAB, Election of 2007, Series B, 0.00%, 8/01/36 (c)

     6,545       2,861,605  

West Valley-Mission Community College District, GO, 5.00%, 8/01/30

     575       576,627  
    

 

 

 
        124,506,232  

Colorado — 0.8%

 

Denver Convention Center Hotel Authority, Refunding RB, 5.00%, 12/01/36

     1,500       1,623,420  

Regional Transportation District, COP, Series A, 5.00%, 6/01/39

     5,655       6,183,234  
    

 

 

 
        7,806,654  

Connecticut — 0.5%

 

Connecticut State Health & Educational Facility Authority, RB, Yale University Issue, Series T-1, 4.70%, 7/01/29

     5,000       5,076,250  

Florida — 13.6%

 

City of Tallahassee Florida Energy System Revenue, RB (NPFGC), 5.00%, 10/01/32

     3,300       3,377,880  

County of Brevard Florida Health Facilities Authority, Refunding RB, Health First, Inc. Project, 5.00%, 4/01/39

     4,535       4,811,998  

County of Broward Florida Airport System Revenue, RB, Series A, AMT, 5.00%, 10/01/40

     3,000       3,249,720  

County of Broward Florida School Board, COP, Series A (AGM), 5.25%, 7/01/18 (a)

     13,100       13,873,424  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    31


Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Municipal Bonds   

Par  

(000)

    Value  

Florida (continued)

 

County of Broward Florida Water & Sewer Utility, Refunding RB, Series A, 5.25%, 10/01/18 (a)

   $ 2,250     $ 2,403,945  

County of Highlands Florida Health Facilities Authority, RB, Adventist Health System/Sunbelt, Series B, 6.00%, 11/15/37

     1,750       1,936,515  

County of Lee Florida, Refunding ARB, Series A, AMT:

    

5.63%, 10/01/26

     2,600       2,921,984  

5.38%, 10/01/32

     3,440       3,807,942  

County of Miami-Dade Florida, GO, Building Better Communities Program (a):

    

Series B, 6.38%, 7/01/18

     6,000       6,448,920  

Series B-1, 5.75%, 7/01/18

     3,700       3,944,422  

County of Miami-Dade Florida, RB, Seaport:

    

Department, Series A, 6.00%, 10/01/38

     5,695       6,645,211  

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

     1,165       1,379,814  

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

     1,865       2,148,368  

Series B, AMT, 6.00%, 10/01/30

     1,820       2,134,096  

County of Miami-Dade Florida, Refunding RB, Water & Sewer System, Series C (BHAC),
6.00%, 10/01/18 (a)

     20,095       21,718,073  

County of Miami-Dade Florida Aviation, Refunding ARB, AMT:

    

5.00%, 10/01/34

     530       573,396  

Miami International Airport, Series A (AGM), 5.50%, 10/01/18 (a)

     19,020       20,379,930  

County of Miami-Dade Florida Educational Facilities Authority, RB, University Miami, Series A, 5.00%, 4/01/40

     14,360       15,664,750  

County of Miami-Dade Florida Transit System, RB, Surtax (AGM), 5.00%, 7/01/35

     2,800       2,924,544  

County of Orange Health Facilities Authority, Refunding RB, Presbyterian Retirement Communities Project, 5.00%, 8/01/47

     2,250       2,357,460  

County of Palm Beach Florida Solid Waste Authority, Refunding RB, Series B:

    

5.00%, 10/01/21 (a)

     50       57,468  

5.00%, 10/01/31

     3,050       3,408,375  

County of Sarasota Florida Public Hospital District, RB, Sarasota Memorial Hospital Project, Series A, 5.63%, 7/01/39

     5,135       5,492,704  
    

 

 

 
        131,660,939  

Georgia — 2.1%

 

County of Burke Georgia Development Authority, Refunding RB, Oglethorpe Power-Vogtle Project, Series C, 5.70%, 1/01/43

     6,450       6,651,820  

County of Gainesville Georgia & Hall Hospital Authority, Refunding RB, Northeast Georgia Health System, Inc. Project, Series A, 5.50%, 8/15/54

     1,405       1,613,038  

Metropolitan Atlanta Rapid Transit Authority, Refunding RB, 3rd Indenture, Series B,
5.00%, 7/01/17 (a)

     10,000       10,176,000  

Private Colleges & Universities Authority, RB, Savannah College of Art & Design:

    

5.00%, 4/01/33

     395       419,885  

5.00%, 4/01/44

     1,775       1,860,875  
    

 

 

 
        20,721,618  

Hawaii — 0.4%

 

State of Hawaii Department of Transportation, COP, AMT:

    

5.00%, 8/01/27

     2,000       2,202,780  

5.00%, 8/01/28

     1,775       1,945,347  
    

 

 

 
        4,148,127  
Municipal Bonds   

Par  

(000)

    Value  

Illinois — 14.9%

 

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

    

5.00%, 1/01/35

   $ 7,280     $ 6,797,409  

Project, 5.25%, 1/01/33

     2,340       2,244,832  

City of Chicago Illinois, Refunding GARB, O’Hare International Airport, AMT, Series B, 5.00%, 1/01/31

     2,425       2,623,220  

City of Chicago Illinois, Refunding RB, Series A:

    

Sales Tax Receipts, 5.00%, 1/01/41

     2,715       2,755,046  

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

     3,500       3,508,575  

City of Chicago Illinois Midway International Airport, Refunding RB, 2nd Lien, Series A, AMT, 5.00%, 1/01/34

     3,035       3,241,289  

City of Chicago Illinois O’Hare International Airport, GARB, 3rd Lien, Series A, 5.75%, 1/01/39

     9,000       10,098,990  

City of Chicago Illinois O’Hare International Airport, RB, Senior Lien, Series D, 5.25%, 1/01/42

     8,285       9,364,701  

City of Chicago Illinois Transit Authority, RB, Sales Tax Receipts, 5.25%, 12/01/36

     1,620       1,730,857  

County of Cook Illinois Community College District No. 508, GO, City College of Chicago, 5.13%, 12/01/38

     3,250       3,406,130  

County of Cook Illinois Forest Preserve District, GO, Refunding, Limited Tax Project, Series B, 5.00%, 12/15/37

     615       652,681  

Illinois Finance Authority, RB, Carle Foundation, Series A, 5.75%, 8/15/34

     8,700       9,766,968  

Illinois Finance Authority, Refunding RB:

    

Northwestern Memorial Hospital, Series A, 6.00%, 8/15/39

     5,250       5,793,427  

Silver Cross Hospital and Medical Centers, 4.13%, 8/15/37

     1,965       1,919,687  

Silver Cross Hospital and Medical Centers, 5.00%, 8/15/44

     985       1,032,388  

Metropolitan Pier & Exposition Authority, RB, McCormick Place Expansion Project, Series A:

    

CAB (NPFGC), 0.00%, 12/15/26 (c)

     8,500       5,553,050  

CAB (NPFGC), 0.00%, 6/15/32 (c)

     14,000       6,752,480  

CAB (NPFGC), 0.00%, 12/15/33 (c)

     20,000       8,910,200  

CAB (NPFGC), 0.00%, 12/15/34 (c)

     41,880       17,599,651  

5.00%, 6/15/42

     475       482,572  

Metropolitan Pier & Exposition Authority, Refunding RB, CAB, McCormick Place Expansion Project, Series B (AGM), 0.00%, 6/15/44 (c)

     9,430       2,282,814  

Railsplitter Tobacco Settlement Authority, RB, 6.00%, 6/01/28

     1,700       1,932,747  

Regional Transportation Authority, RB, Series C (NPFGC), 7.75%, 6/01/20

     720       801,900  

State of Illinois, GO:

    

5.25%, 7/01/29

     3,160       3,246,394  

5.25%, 2/01/33

     5,860       5,969,875  

5.50%, 7/01/33

     2,235       2,329,183  

5.25%, 2/01/34

     5,360       5,447,797  

5.50%, 7/01/38

     1,200       1,240,512  

5.00%, 2/01/39

     7,500       7,450,500  

State of Illinois Toll Highway Authority, RB, Series B:

    

5.50%, 1/01/18 (a)

     4,000       4,165,680  

(BHAC), 5.50%, 1/01/18 (a)

     2,000       2,082,840  

University of Illinois, RB, Auxiliary Facilities System, Series A, 5.00%, 4/01/39

     2,580       2,780,905  
    

 

 

 
        143,965,300  

Indiana — 2.8%

 

City of Indianapolis Indiana, Refunding RB, Series B (AGC), 5.25%, 8/15/27

     5,000       5,264,550  
 

 

See Notes to Financial Statements.

 

                
32    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Municipal Bonds   

Par  

(000)

    Value  

Indiana (continued)

 

Indiana Finance Authority, RB, Series A:

    

CWA Authority Project, 1st Lien, 5.25%, 10/01/38

   $ 2,900     $ 3,260,354  

Private Activity Bond, Ohio River Bridges East End Crossing Project, AMT, 5.00%, 7/01/44

     1,400       1,448,846  

Private Activity Bond, Ohio River Bridges, AMT, 5.00%, 7/01/40

     2,425       2,460,502  

Indiana Municipal Power Agency, RB, Series B, 6.00%, 1/01/19 (a)

     5,000       5,457,350  

Indianapolis Local Public Improvement Bond Bank, Refunding RB, Waterworks Project, Series A:

    

5.75%, 1/01/19 (a)

     565       614,008  

5.75%, 1/01/38

     2,335       2,527,777  

(AGC), 5.25%, 1/01/19 (a)

     265       285,482  

(AGC), 5.50%, 1/01/19 (a)

     830       898,077  

(AGC), 5.25%, 1/01/29

     1,085       1,164,997  

(AGC), 5.50%, 1/01/38

     3,420       3,685,563  
    

 

 

 
        27,067,506  

Iowa — 2.6%

 

Iowa Finance Authority, RB, Iowa Health Care Facilities, Series A (AGC), 5.63%, 8/15/19 (a)

     12,650       14,022,904  

Iowa Student Loan Liquidity Corp., RB, Senior
Series A-2, AMT:

    

5.60%, 12/01/26

     2,580       2,768,263  

5.70%, 12/01/27

     2,570       2,742,550  

5.75%, 12/01/28

     1,360       1,450,590  

5.80%, 12/01/29

     1,735       1,847,046  

5.85%, 12/01/30

     1,805       1,923,011  
    

 

 

 
        24,754,364  

Kansas — 1.6%

 

County Of Wyandotte Unified School District No. 500 Kansas City, GO, Improvement, Series A, 5.50%, 9/01/47

     13,470       15,872,779  

Kentucky — 1.9%

 

Kentucky Economic Development Finance Authority, RB, Catholic Health Initiatives, Series A, 5.38%, 1/01/40

     1,000       1,070,140  

Kentucky Public Transportation Infrastructure Authority, RB, Downtown Crossing Project, Convertible CAB, 1st Tier, Series C, 0.00%, 7/01/39 (b)

     8,225       6,625,484  

Kentucky State Property & Building Commission, Refunding RB, Project No. 93, (AGC):

    

5.25%, 2/01/19 (a)

     5,315       5,739,616  

5.25%, 2/01/19 (a)

     3,545       3,828,210  

5.25%, 2/01/27

     685       732,642  

5.25%, 2/01/28

     455       486,272  
    

 

 

 
        18,482,364  

Louisiana — 1.5%

 

City of New Orleans Louisiana Aviation Board, RB, AMT:

    

Series A (AGM), 5.25%, 1/01/32

     6,405       6,578,831  

Series B, 5.00%, 1/01/40

     4,825       5,146,104  

Louisiana Public Facilities Authority, RB, Provident Group-Flagship Properties LLC, Series A,
5.00%, 7/01/56

     2,215       2,340,768  
    

 

 

 
        14,065,703  

Massachusetts — 1.8%

 

Massachusetts Development Finance Agency, RB, Emerson College Issue, Series A,
5.00%, 1/01/47

     5,950       6,322,708  
Municipal Bonds   

Par  

(000)

    Value  

Massachusetts (continued)

 

Massachusetts Development Finance Agency, Refunding RB, Emmanuel College Issue, Series A,
5.00%, 10/01/43

   $ 1,045     $ 1,103,144  

Massachusetts HFA, RB, M/F Housing, Series B,
7.00%, 12/01/38

     3,150       3,302,681  

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

     2,395       2,539,179  

Massachusetts School Building Authority, RB, Dedicated Sales Tax, Senior Series A, 5.00%, 5/15/43

     3,495       3,916,147  
    

 

 

 
        17,183,859  

Michigan — 7.6%

 

City of Detroit Michigan Water Supply System Revenue, RB, 2nd Lien, Series B (AGM), 6.25%, 7/01/19 (a)

     1,075       1,202,001  

City of Lansing Michigan, RB, Board of Water & Light Utilities System, Series A, 5.50%, 7/01/41

     3,185       3,602,808  

Michigan Finance Authority, Refunding RB:

    

Henry Ford Health System, 3.25%, 11/15/42

     2,505       2,046,510  

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

     60       69,309  

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

     16,040       17,963,036  

Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital, Series D, 5.00%, 9/01/39

     1,330       1,421,437  

State of Michigan, RB, GAB (AGM) (a):

    

5.25%, 9/15/17

     10,000       10,274,000  

5.25%, 9/15/17

     6,650       6,832,210  

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

    

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

     1,890       2,051,878  

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

     1,130       1,226,785  

Series I, 6.25%, 10/15/38

     105       113,146  

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

     1,750       1,910,195  

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

     3,250       3,543,897  

Series I-A, 5.38%, 10/15/36

     2,075       2,307,877  

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

     1,900       2,110,577  

Series II-A (AGM), 5.25%, 10/15/36

     8,040       8,909,526  

State of Michigan HDA, RB, S/F Housing, Series C, AMT, 5.50%, 12/01/28

     1,515       1,579,645  

Wayne County Airport Authority, Refunding RB, AMT (AGC), 5.38%, 12/01/32

     5,000       5,267,150  

Western Michigan University, Refunding RB, General, University and College Improvements (AGM), 5.00%, 11/15/39

     1,080       1,184,609  
    

 

 

 
        73,616,596  

Minnesota — 0.6%

 

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

    

6.50%, 11/15/18 (a)

     845       925,114  

6.50%, 11/15/38

     4,655       5,027,028  
    

 

 

 
        5,952,142  

Nebraska — 0.8%

 

Central Plains Energy Project Nebraska, RB, Gas Project No. 3, 5.25%, 9/01/37

     6,825       7,397,003  

Nevada — 1.1%

 

City of Las Vegas Nevada, GO, Limited Tax, Performing Arts Center, 6.00%, 4/01/19 (a)

     2,250       2,480,535  

County of Clark Nevada, ARB, Las Vegas-McCarran International Airport, Series A:

    

5.25%, 7/01/42

     2,000       2,163,120  

(AGM), 5.25%, 7/01/39

     5,170       5,594,715  
    

 

 

 
        10,238,370  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    33


Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Municipal Bonds   

Par  

(000)

    Value  

New Jersey — 8.5%

 

New Jersey EDA, RB:

    

Private Activity Bond, Goethals Bridge Replacement Project, AMT, 5.13%, 1/01/34

   $ 1,930     $ 2,032,927  

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

     4,920       5,200,194  

Series WW, 5.25%, 6/15/33

     445       454,034  

Series WW, 5.00%, 6/15/34

     570       569,310  

Series WW, 5.00%, 6/15/36

     2,635       2,631,601  

Series WW, 5.25%, 6/15/40

     1,025       1,038,100  

New Jersey EDA, Refunding RB, School Facilities Construction:

    

Series N-1 (AMBAC), 5.50%, 9/01/24

     6,325       6,889,696  

Series N-1 (NPFGC), 5.50%, 9/01/28

     1,685       1,950,741  

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

    

5.50%, 12/01/25

     900       979,704  

5.50%, 12/01/26

     1,295       1,406,331  

5.75%, 12/01/28

     145       157,814  

5.88%, 12/01/33

     6,895       7,498,657  

New Jersey Housing & Mortgage Finance Agency, Refunding RB, M/F Housing, Series 2, AMT, 4.35%, 11/01/33

     2,645       2,692,002  

New Jersey Transportation Trust Fund Authority, RB:

    

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

     18,525       6,629,171  

CAB, Transportation System, Series C (AGC) (AMBAC), 0.00%, 12/15/25 (c)

     8,550       5,822,379  

Federal Highway Reimbursement Revenue Notes, Series A, 5.00%, 6/15/28

     4,205       4,477,862  

Federal Highway Reimbursement Revenue Notes, Series A, 5.00%, 6/15/29

     2,145       2,271,147  

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

     4,150       4,233,000  

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

     4,990       4,963,753  

Transportation System, Series A,
5.50%, 6/15/41

     2,980       3,043,534  

Transportation System, Series A (NPFGC), 5.75%, 6/15/25

     4,000       4,627,560  

Transportation System, Series AA,
5.50%, 6/15/39

     5,625       5,844,881  

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

     1,000       1,046,540  

Transportation System, Series B,
5.00%, 6/15/42

     3,520       3,494,762  

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

     1,825       1,845,020  
    

 

 

 
        81,800,720  

New Mexico — 0.1%

 

New Mexico Hospital Equipment Loan Council, Refunding RB, Presbyterian Healthcare Services, 5.00%, 8/01/44

     1,040       1,148,212  

New York — 2.8%

 

City of New York New York Transitional Finance Authority, RB, Fiscal 2009, Series S-4,
5.50%, 1/15/34

     7,250       7,817,457  

City of New York New York Transitional Finance Authority, Refunding RB, Future Tax Secured, Series B, 5.00%, 11/01/32

     4,150       4,752,539  

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

     1,920       2,173,190  

New York Transportation Development Corp., RB, LaGuardia Airport Terminal B Redevelopment Project, Series A, AMT, 5.25%, 1/01/50

     8,300       8,756,002  
Municipal Bonds   

Par  

(000)

    Value  

New York (continued)

 

State of New York Dormitory Authority, ERB, Series B, 5.25%, 3/15/38

   $ 3,250     $ 3,497,488  
    

 

 

 
        26,996,676  

North Carolina — 0.5%

 

North Carolina Housing Finance Agency, RB, Series 31-A, AMT, 5.25%, 7/01/38

     4,345       4,371,461  

Ohio — 2.2%

 

County of Lucas Ohio, Refunding RB, Promedica Healthcare, Series A, 6.50%, 11/15/37

     3,000       3,538,290  

County of Montgomery Ohio, RB, Catholic Health Initiatives, Series D-2, 5.45%, 10/01/38

     11,135       12,090,383  

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

    

5.25%, 2/15/32

     1,950       2,217,208  

5.25%, 2/15/33

     2,730       3,094,346  
    

 

 

 
        20,940,227  

Pennsylvania — 5.5%

 

Commonwealth Financing Authority, RB, Series B, 5.00%, 6/01/42

     3,305       3,585,991  

Pennsylvania Economic Development Financing Authority, RB, Pennsylvania Bridge Finco LP, AMT:

    

5.00%, 12/31/34

     7,115       7,593,626  

5.00%, 12/31/38

     5,850       6,168,767  

5.00%, 6/30/42

     6,805       7,181,249  

Pennsylvania Higher Educational Facilities Authority, Refunding RB, Thomas Jefferson University, Series A, 5.25%, 9/01/50

     9,075       9,983,135  

Pennsylvania Turnpike Commission, RB:

    

Series A, 5.00%, 12/01/38

     1,775       1,949,571  

Series A-1, 5.00%, 12/01/41

     2,320       2,558,009  

Series B, 5.00%, 12/01/40

     920       1,011,558  

Series C, 5.50%, 12/01/33

     1,565       1,813,428  

Sub-Series C (AGC), 6.25%, 6/01/18 (a)

     5,695       6,087,841  

Subordinate, Special Motor License Fund, 6.00%, 12/01/20 (a)

     2,575       3,008,321  

Pennsylvania Turnpike Commission, Refunding RB, Series A-1, 5.00%, 12/01/40

     2,165       2,368,402  
    

 

 

 
        53,309,898  

Rhode Island — 1.1%

 

Rhode Island Commerce Corp., RB, Airport Corp.:

    

5.00%, 7/01/41

     295       323,285  

5.00%, 7/01/46

     325       354,812  

Tobacco Settlement Financing Corp., Refunding RB, Series B:

    

4.50%, 6/01/45

     3,000       2,834,610  

5.00%, 6/01/50

     7,465       7,479,631  
    

 

 

 
        10,992,338  

South Carolina — 3.8%

 

South Carolina Jobs EDA, Refunding RB, Palmetto Health, Series A (AGM), 6.50%, 8/01/39

     3,600       4,195,944  

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

     6,530       7,069,443  

State of South Carolina Public Service Authority, RB, Santee Cooper:

    

Series A, 5.50%, 12/01/54

     11,450       12,895,563  

Series E, 5.50%, 12/01/53

     2,025       2,277,194  

State of South Carolina Public Service Authority, Refunding RB:

    

Santee Cooper, Series B, 5.00%, 12/01/38

     5,870       6,506,073  

Series E, 5.25%, 12/01/55

     2,985       3,269,500  
    

 

 

 
        36,213,717  
 

 

See Notes to Financial Statements.

 

                
34    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Municipal Bonds   

Par  

(000)

    Value  

Texas — 16.1%

 

Central Texas Turnpike System, Refunding RB, CAB, Series B, 0.00%, 8/15/37 (c)

   $ 5,065     $ 2,156,829  

City of Houston Texas Combined Utility System Revenue, Refunding RB, Combined 1st Lien:

    

Series A (AGC), 5.38%, 5/15/19 (a)

     3,460       3,784,583  

Series A (AGC), 6.00%, 5/15/19 (a)

     5,400       5,982,498  

Series A (AGC), 6.00%, 11/15/35

     300       331,428  

Series A (AGC), 5.38%, 11/15/38

     190       204,774  

Series A (AGM), 5.00%, 11/15/17 (a)

     10,000       10,317,600  

City of San Antonio Texas Public Service Board, RB, Junior Lien, 5.00%, 2/01/38

     1,450       1,621,665  

County of Midland Texas Fresh Water Supply District No. 1, RB, CAB, City of Midland Project, Series A, 0.00%, 9/15/36 (c)

     5,810       2,552,856  

County of Tarrant Texas Cultural Education Facilities Finance Corp., Refunding RB, Cook Children’s Medical Center, 5.25%, 12/01/39

     2,095       2,337,580  

Dallas ISD, GO, School Building (PSF-GTD), 6.38%, 2/15/18 (a)

     10,000       10,559,500  

Dallas-Fort Worth International Airport, ARB, Joint Improvement, Series D, AMT, 5.00%, 11/01/38

     10,980       11,803,939  

Dallas-Fort Worth International Airport, Refunding ARB, Series F:

    

5.25%, 11/01/33

     2,745       3,145,001  

5.00%, 11/01/35

     5,000       5,360,100  

Grand Prairie ISD, GO, Refunding, CAB, 0.00%, 8/15/18 (a)(c)

     10,000       5,033,800  

Judson ISD Texas, GO, School Building (AGC), 5.00%, 2/01/17 (a)

     10,000       10,000,000  

Leander ISD, GO, Refunding, CAB, Series D, 0.00%, 8/15/38 (c)

     9,685       3,922,231  

North Texas Tollway Authority, RB, CAB, Special Project System, Series B, 0.00%, 9/01/43 (c)

     24,100       5,786,892  

North Texas Tollway Authority, Refunding RB:

    

1st Tier System, Series A, 6.00%, 1/01/19 (a)

     5,100       5,564,457  

1st Tier System, Series A, 5.13%, 1/01/28

     2,460       2,541,082  

1st Tier System, Series A (NPFGC), 5.13%, 1/01/18 (a)

     17,540       18,201,784  

1st Tier System, Series A (NPFGC), 6.00%, 1/01/28

     1,175       1,274,746  

1st Tier System, Series S, 5.75%, 1/01/18 (a)

     8,540       8,910,721  

1st Tier System, Series SE, 5.75%, 1/01/40

     1,460       1,514,210  

Series B, 5.00%, 1/01/40

     1,710       1,889,225  

San Antonio Public Facilities Corp., Refunding RB, Convention Center Refinancing and Expansion Project, CAB (c):

    

0.00%, 9/15/35

     680       292,346  

0.00%, 9/15/36

     12,195       4,944,585  

0.00%, 9/15/37

     8,730       3,330,146  

Texas Municipal Gas Acquisition & Supply Corp. III, RB:

    

5.00%, 12/15/32

     3,930       4,175,939  

Natural Gas Utility Improvements, 5.00%, 12/15/31

     1,665       1,774,624  

Texas Private Activity Bond Surface Transportation Corp., RB, Senior Lien, AMT, Blueridge Transportation Group, 5.00%, 12/31/45

     3,630       3,808,451  

Texas Transportation Commission, Refunding RB, Central Texas Turnpike System, 1st Tier, Series A, 5.00%, 8/15/41

     11,345       12,361,852  
    

 

 

 
        155,485,444  

Utah — 1.9%

 

Utah Transit Authority, Refunding RB, CAB (c):

    

Sub-Series A (AGC), 0.00%, 6/15/20

     10,000       8,661,800  

Sub-Series A (NPFGC), 0.00%, 6/15/24

     13,930       9,883,614  
    

 

 

 
        18,545,414  
Municipal Bonds   

Par  

(000)

    Value  

Washington — 1.3%

 

Port of Seattle Washington, RB, Series C, AMT, 5.00%, 4/01/40

   $ 2,830     $ 3,093,247  

Washington Health Care Facilities Authority, RB:

    

MultiCare Health System, Remarketing, Series B, 5.00%, 8/15/44

     1,000       1,080,140  

Providence Health & Services, Series A, 5.25%, 10/01/39

     2,725       2,930,138  

Washington Health Care Facilities Authority, Refunding RB, Catholic Health Initiatives, Series D, 6.38%, 10/01/36

     5,400       5,750,244  
    

 

 

 
        12,853,769  

Wisconsin — 0.5%

 

Public Finance Authority, RB, KU Campus Development Corp., Central District Development Project, 5.00%, 3/01/46

     875       957,101  

State of Wisconsin Health & Educational Facilities Authority, RB, Ascension Health Senior Credit Group, Series E, 5.00%, 11/15/33

     3,745       4,059,992  
    

 

 

 
        5,017,093  
Total Municipal Bonds — 114.7%       1,107,942,223  
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
              

Arizona — 1.1%

 

Arizona School Facilities Board, COP (AGC), 5.13%, 9/01/18 (a)(e)

     10,000       10,630,400  

California — 7.0%

 

California State University, RB, Systemwide, Series A (AGM) (e):

    

5.00%, 5/01/18 (a)

     7,793       8,152,788  

5.00%, 11/01/33

     204       213,336  

California State University, Refunding RB, Systemwide, Series A (AGM):

    

5.00%, 5/01/17 (a)

     7,840       7,920,144  

5.00%, 5/01/17 (a)

     5,040       5,091,521  

5.00%, 11/01/37

     5,555       5,611,786  

City of Riverside California, RB, Issue D (AGM), 5.00%, 10/01/38

     20,000       21,048,200  

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

    

5.00%, 5/01/18

     1,554       1,633,171  

5.00%, 5/01/18

     7,816       8,211,138  

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

     5,248       5,868,088  

San Diego Community College District California, GO, Election of 2002, 5.25%, 8/01/19 (a)

     1,047       1,151,151  

University of California, RB, Series O, 5.75%, 5/15/19 (a)

     2,206       2,433,406  
    

 

 

 
        67,334,729  

Colorado — 0.3%

 

Colorado Health Facilities Authority, Refunding RB, Catholic Health Initiatives, Series A, 5.50%, 7/01/34 (e)

     2,469       2,564,663  

Connecticut — 0.4%

 

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

     3,932       4,299,246  
 

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    35


Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
  

Par  

(000)

    Value  

District of Columbia — 2.6%

 

District of Columbia, RB, Series A,
5.50%, 12/01/30 (e)

   $ 2,594     $ 2,878,112  

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

     4,277       4,625,807  

Metropolitan Washington Airports Authority, RB, Series B, AMT, 5.00%, 10/01/32

     10,000       10,231,500  

Metropolitan Washington Airports Authority, Refunding ARB, Series A, AMT, 5.00%, 10/01/30

     6,880       7,639,208  
    

 

 

 
        25,374,627  

Florida — 4.6%

 

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

     8,760       9,774,846  

County of Miami-Dade Florida, Refunding RB, Transit System Sales Surtax, 5.00%, 7/01/42

     4,840       5,320,806  

County of Miami-Dade Florida Water & Sewer System (AGC), 5.00%, 10/01/39

     11,702       12,843,865  

County of Orange Florida School Board, COP, Series A (AGC), 5.50%, 8/01/19 (a)

     12,013       13,271,044  

State of Florida Board of Education, GO, Refunding, Series C, 5.00%, 6/01/18 (e)

     3,299       3,377,847  
    

 

 

 
        44,588,408  

Illinois — 4.5%

 

State of Illinois, RB, Build Illinois, Series B, 5.25%, 6/15/19 (a)(e)

     3,499       3,823,117  

State of Illinois Finance Authority, RB, University of Chicago, Series B, 6.25%, 7/01/18 (a)

     10,000       10,713,000  

State of Illinois Toll Highway Authority, RB:

    

Senior Priority, Series A, 5.00%, 1/01/40

     7,621       8,378,238  

Senior, Series B, 5.00%, 1/01/40

     2,939       3,238,515  

Senior, Series C, 5.00%, 1/01/36

     10,000       10,985,597  

Series A, 5.00%, 1/01/38

     5,836       6,414,195  
    

 

 

 
        43,552,662  

Massachusetts — 0.5%

 

Commonwealth of Massachusetts, GO, Series A, 5.00%, 3/01/46

     4,204       4,688,103  

Michigan — 0.9%

 

Michigan Finance Authority, RB, Beaumont Health Credit Group, 5.00%, 11/01/44

     5,591       6,043,075  

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

     2,410       2,650,663  
    

 

 

 
        8,693,738  

Nevada — 1.8%

 

County of Clark Nevada Water Reclamation District, GO, Series B (a):

    

5.50%, 7/01/19

     510       561,898  

Limited Tax, 5.75%, 7/01/19

     4,813       5,333,376  

Las Vegas Valley Water District Nevada, GO, Refunding, Water Improvement, Series A, 5.00%, 6/01/46

     9,840       11,106,408  
    

 

 

 
        17,001,682  

New Jersey — 2.1%

 

County of Hudson New Jersey Improvement Authority, RB, Hudson County Vocational-Technical Schools Project, 5.25%, 5/01/51

     2,320       2,638,327  

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

     10,000       12,136,500  

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

     4,961       5,040,120  
    

 

 

 
        19,814,947  
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
  

Par  

(000)

    Value  

New York — 8.8%

 

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

    

5.00%, 6/15/18 (a)

   $ 2,586     $ 2,708,780  

5.00%, 6/15/37

     14,981       15,693,256  

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2013, Series CC, 5.00%, 6/15/47

     15,521       17,223,401  

City of New York New York Water & Sewer System, Refunding RB, 2nd General Resolution, Fiscal 2014, Series DD, 5.00%, 6/15/35

     4,740       5,376,061  

Metropolitan Transportation Authority, RB, Sub-Series D-1, 5.25%, 11/15/44

     9,850       11,239,146  

Metropolitan Transportation Authority, Refunding RB, Series C-1, 5.25%, 11/15/56

     4,280       4,845,860  

New York State Urban Development Corp., RB, Personal Income Tax, General Purpose, Series A-1, 5.00%, 3/15/43

     14,280       15,807,103  

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 198th Series, 5.25%, 11/15/56

     6,402       7,322,608  

Triborough Bridge & Tunnel Authority, RB, General, Series A-2, 5.25%, 11/15/34 (e)

     4,500       4,806,495  
    

 

 

 
        85,022,710  

Ohio — 0.7%

 

County of Montgomery Ohio, RB, Catholic Health, Series C-1 (AGM), 5.00%, 4/28/18 (a)

     4,990       5,234,859  

State of Ohio, RB, Cleveland Clinic Health Obligated Group, Series B, 5.50%, 1/01/34

     1,520       1,623,087  
    

 

 

 
        6,857,946  

Pennsylvania — 0.3%

 

County of Westmoreland Pennsylvania Municipal Authority, RB, Westmoreland County, Pennsyllvania (BAM), 5.00%, 8/15/42

     2,560       2,817,459  

South Carolina — 1.2%

 

State of South Carolina Public Service Authority, Refunding RB, Series B, 5.00%, 12/01/56

     10,740       11,578,364  

Texas — 5.8%

 

County of Tarrant Texas Cultural Education Facilities Finance Corp., RB, Baylor Health Care System Project, Series A, 5.00%, 11/15/38

     1,799       1,967,580  

County of Tarrant Texas Cultural Education Facilities Finance Corp., Refunding RB, Texas Health Resources System, Series A, 5.00%, 2/15/41

     9,840       10,935,389  

Dallas Fort Worth International Airport, ARB, Series H, AMT, 5.00%, 11/01/37 (e)

     8,868       9,537,309  

Friendswood ISD Texas, GO, Schoolhouse (PSF-GTD), 5.00%, 2/15/18 (a)

     12,955       13,494,695  

Houston ISD, GO, Schoolhouse (PSF-GTD), 5.00%, 2/15/17 (a)

     10,000       10,016,500  

Texas State University Systems, Refunding RB, 5.25%, 3/15/18 (a)

     10,000       10,477,300  
    

 

 

 
        56,428,773  

Virginia — 0.4%

 

University of Virginia, Refunding RB, GO, 5.00%, 6/01/40

     3,944       4,130,223  

Washington — 2.8%

 

Central Puget Sound Regional Transit Authority, RB, Series A (AGM), 5.00%, 11/01/17 (a)

     16,770       17,526,411  

Washington Health Care Facilities Authority, Refunding RB, Seattle Children’s Hospital,
Series B, 5.00%, 10/01/38

     8,205       9,484,734  
    

 

 

 
        27,011,145  
 

 

See Notes to Financial Statements.

 

                
36    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
  

Par  

(000)

    Value  

Wisconsin — 2.8%

 

State of Wisconsin, Refunding RB, Series A,
6.00%, 5/01/19 (a)

   $ 14,780     $ 16,346,532  

Wisconsin Health & Educational Facilities Authority, Refunding RB, Froedtert & Community Health, Inc., Obligated Group:

    

Series A, 5.00%, 4/01/42

     2,490       2,672,417  

Series C, 5.25%, 4/01/39 (e)

     7,459       7,844,870  
    

 

 

 
        26,863,819  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 48.6%
      469,253,644  
Total Long-Term Investments
(Cost — $1,493,395,734) — 163.3%
      1,577,195,867  
Short-Term Securities        
Shares
    Value  

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.50% (f)(g)

     5,585,572     $ 5,586,130  
Total Short-Term Securities
(Cost — $5,585,738) — 0.6%
      5,586,130  
Total Investments
(Cost — $1,498,981,472) — 163.9%
      1,582,781,997  

Other Assets Less Liabilities — 0.9%

 

    8,257,446  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (27.9)%

 

    (269,576,367

VRDP Shares at Liquidation Value, Net of Deferred Offering Costs — (36.9)%

 

    (355,912,992
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 965,550,084  
    

 

 

 
 
Notes to Schedule of Investments

 

(a)   U.S. Government securities, held in escrow, are used to pay interest on this security, as well as to retire the bond in full at the date indicated, typically at a premium to par.

 

(b)   Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

 

(c)   Zero-coupon bond.

 

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

 

(e)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Fund could ultimately be required to pay under the agreements, which expire between April 1, 2017 and December 1, 2029 is $33,967,868. See Note 4 of the Notes to Financial Statements for details.

 

(f)   During the six months ended January 31, 2017, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares Held
at July 31,
2016
     Net
Activity
     Shares Held
at January 31,
2017
     Value at
January 31,
2017
     Income      Net
Realized
Gain1
    

Change in
Unrealized
Appreciation

(Depreciation)

 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     5,108,362        477,210        5,585,572      $ 5,586,130      $ 21,145      $ 4,119      $ 392  

1    Includes net capital gain distributions.

     

 

(g)   Current yield as of period end.

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts                      
Contracts
Short
       Issue   Expiration   Notional
Value
    Unrealized
Appreciation
(Depreciation)
        
  (66      5-Year U.S. Treasury Note   March 2017   $ 7,779,234     $ (9,148  
  (389      10-Year U.S. Treasury Note   March 2017   $ 48,418,344       (57,985  
  (357      Long U.S. Treasury Bond   March 2017   $ 53,851,219       115,143    
  (46      Ultra U.S. Treasury Bond   March 2017   $ 7,391,625       (11,532        
 

Total

    $ 36,478    
          

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

  Net unrealized appreciation1                $ 115,143         $ 115,143  
Liabilities — Derivative Financial Instruments                                        

Futures contracts

  Net unrealized depreciation1                $ 78,665         $ 78,665  

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

     

 

See Notes to Financial Statements.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    37


Schedule of Investments (concluded)

  

BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

For the six months ended January 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

Net Realized Gain (Loss) from:   Commodity
Contracts
  Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

                      $ 5,028,425           $ 5,028,425  

Net Change in Unrealized Appreciation (Depreciation) on:

 

                                       

Futures contracts

                      $ 592,441           $ 592,441  

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments      

 

Futures contracts:       

Average notional value of contracts — long

  $ 1,934,540 1 

Average notional value of contracts — short

  $ 87,858,258  

1    Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter end.

     

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:  

Long-Term Investments1

           $ 1,577,195,867                 $ 1,577,195,867  

Short-Term Securities

  $ 5,586,130                            5,586,130  
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 5,586,130        $ 1,577,195,867                 $ 1,582,781,997  
 

 

 

      

 

 

      

 

 

      

 

 

 
                
Derivative Financial Instruments 2  

Assets:

 

Interest rate contracts

  $ 115,143                          $ 115,143  

Liabilities:

 

Interest rate contracts

    (78,665                          (78,665
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

  $ 36,478                          $ 36,478  
 

 

 

      

 

 

      

 

 

      

 

 

 

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

   

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

   

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3        Total  

Liabilities:

 

TOB Trust Certificates

           $ (269,064,024               $ (269,064,024

VRDP Shares at Liquidation Value

             (356,400,000                 (356,400,000
 

 

 

      

 

 

      

 

 

      

 

 

 

Total

           $ (625,464,024               $ (625,464,024
 

 

 

      

 

 

      

 

 

      

 

 

 

During the six months ended January 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.

 

                
38    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Statements of Assets and Liabilities     

 

January 31, 2017 (Unaudited)   BlackRock
MuniHoldings
Quality
Fund II, Inc.
(MUE)
    BlackRock
MuniYield
California
Quality
Fund, Inc.
(MCA)
    BlackRock
MuniYield
New York
Quality
Fund, Inc.
(MYN)
    BlackRock
MuniYield
Quality
Fund III, Inc.
(MYI)
 
       
Assets  

Investments at value — unaffiliated1

  $ 497,351,619     $ 875,943,090     $ 906,471,626     $ 1,577,195,867  

Investments at value — affiliated2

    6,400,031       194,805       2,502,523       5,586,130  

Cash pledged for futures contracts

    558,800       1,091,750       1,606,350       2,449,600  
Receivables:  

Interest — unaffiliated

    5,243,813       12,474,263       9,190,621       16,869,738  

TOB Trust

    1,307,694       6,665,000             6,665,000  

Investments sold

    55,000       4,874,253       45,000       2,401,600  

Dividends — affiliated

    1,521       579       1,878       4,737  

Prepaid expenses

    12,690       20,056       20,459       32,897  
 

 

 

 

Total assets

    510,931,168       901,263,796       919,838,457       1,611,205,569  
 

 

 

 
       
Accrued Liabilities  

Bank overdraft

    180,520       188,506       280,719       397,117  
Payables:  

Income dividends — Common Shares

    1,440,974       2,236,372       2,137,676       4,627,299  

Investment advisory fees

    226,943       376,772       389,791       675,690  

Variation margin on futures contracts

    82,789       161,570       238,766       355,766  

Interest expense and fees

    71,893       404,957       220,286       512,343  

Officer’s and Directors’ fees

    1,781       255,387       269,213       462,703  

Investments purchased

          15,179,679             13,305,701  

Other accrued expenses

    167,609       201,982       239,371       341,850  
 

 

 

 

Total accrued liabilities

    2,172,509       19,005,225       3,775,822       20,678,469  
 

 

 

 
       
Other Liabilities  

TOB Trust Certificates

    62,324,733       185,697,579       121,226,531       269,064,024  

VMTP Shares, at liquidation value of $100,000 per share3,4

    131,000,000                    

VRDP Shares, at liquidation value of $100,000 per share, net of deferred offering costs3,4

          166,222,490       247,330,711       355,912,992  
 

 

 

 

Total other liabilities

    193,324,733       351,920,069       368,557,242       624,977,016  
 

 

 

 

Total liabilities

    195,497,242       370,925,294       372,333,064       645,655,485  
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 315,433,926     $ 530,338,502     $ 547,505,393     $ 965,550,084  
 

 

 

 
       
Net Assets Applicable to Common Shareholders Consist of  

Paid-in capital5,6

  $ 300,037,517     $ 493,049,859     $ 530,160,582     $ 924,445,586  

Undistributed net investment income

    1,921,517       2,002,640       3,431,938       11,187,393  

Accumulated net realized loss

    (19,679,694     (1,883,433     (26,424,868     (53,919,898

Net unrealized appreciation (depreciation)

    33,154,586       37,169,436       40,337,741       83,837,003  
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 315,433,926     $ 530,338,502     $ 547,505,393     $ 965,550,084  
 

 

 

 

Net asset value per Common Share

  $ 14.01     $ 15.41     $ 13.83     $ 14.19  
 

 

 

 

1    Investments at cost — unaffiliated

  $ 464,105,677     $ 838,564,794     $ 865,940,417     $ 1,493,395,734  

2    Investments at cost — affiliated

  $ 6,399,798     $ 194,805     $ 2,502,273     $ 5,585,738  

3    Preferred Shares outstanding, par value $0.10 per share

    1,310       1,665       2,477       3,564  

4    Preferred Shares authorized, including Auction Market Preferred Shares (“AMPS”)

    9,490       12,665       14,637       26,364  

5    Common Shares outstanding, par value $0.10 per share

    22,515,224       34,405,717       39,586,584       68,048,509  

6    Common Shares authorized

    199,990,510       199,987,335       199,985,363       199,973,636  

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    39


Statements of Operations     

 

Six Months Ended January 31, 2017 (Unaudited)   BlackRock
MuniHoldings
Quality
Fund II, Inc.
(MUE)
   

BlackRock
MuniYield
California
Quality

Fund, Inc.
(MCA)

    BlackRock
MuniYield
New York
Quality
Fund, Inc.
(MYN)
    BlackRock
MuniYield
Quality
Fund III, Inc.
(MYI)
 
       
Investment Income  

Interest — unaffiliated

  $ 11,463,187     $ 17,794,116     $ 18,176,599     $ 35,661,494  

Dividends — affiliated

    3,939       16,310       5,876       21,145  
 

 

 

 

Total investment income

    11,467,126       17,810,426       18,182,475       35,682,639  
 

 

 

 
       
Expenses  

Investment advisory

    1,434,356       2,287,040       2,365,153       4,106,060  

Professional

    44,508       60,188       63,146       95,215  

Accounting services

    33,477       49,467       53,911       76,890  

Rating agency

    19,259       19,289       19,359       19,454  

Transfer agent

    16,146       17,704       21,387       38,999  

Officer and Directors

    14,694       39,656       41,415       72,370  

Custodian

    11,439       18,256       20,396       32,344  

Registration

    5,188       7,291       8,390       14,432  

Printing

    5,176       6,433       6,604       8,875  

Miscellaneous

    27,417       24,366       31,548       42,700  
 

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    1,611,660       2,529,690       2,631,309       4,507,339  

Interest expense, fees and amortization of offering costs1

    1,491,314       2,606,503       2,742,921       4,552,009  
 

 

 

 

Total expenses

    3,102,974       5,136,193       5,374,230       9,059,348  

Less fees waived by the Manager

    (43,043     (3,224     (1,131     (3,816
 

 

 

 

Total expenses after fees waived

    3,059,931       5,132,969       5,373,099       9,055,532  
 

 

 

 

Net investment income

    8,407,195       12,677,457       12,809,376       26,627,107  
 

 

 

 
       
Realized and Unrealized Gain (Loss)  
Net realized gain (loss) from:  

Investments — unaffiliated

    200,931       (2,373,176     249,097       (230,400

Investments — affiliated

    329       (159     339       25  

Futures contracts

    1,128,892       2,679,501       2,910,352       5,028,425  

Capital gain distributions from investment companies — affiliated

          3       1       4,094  
 

 

 

 
    1,330,152       306,169       3,159,789       4,802,144  
 

 

 

 
Net change in unrealized appreciation (depreciation) on:  

Investments — unaffiliated

    (25,120,242     (44,469,740     (52,404,617     (92,827,584

Investments — affiliated

    233             250       392  

Futures contracts

    (30,573     (13,270     315,487       592,441  
 

 

 

 
    (25,150,582     (44,483,010     (52,088,880     (92,234,751
 

 

 

 

Net realized and unrealized loss

    (23,820,430     (44,176,841     (48,929,091     (87,432,607
 

 

 

 

Net Decrease in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ (15,413,235   $ (31,499,384   $ (36,119,715   $ (60,805,500
 

 

 

 

1    Related to TOB Trusts, VMTP Shares and/or VRDP Shares.

     

 

 

See Notes to Financial Statements.      
                
40    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


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,
2017
(Unaudited)
    Year Ended
July 31,
2016
         

Six Months Ended

January 31,
2017
(Unaudited)

    Year Ended
July 31,
2016
 
         
Operations  

Net investment income

  $ 8,407,195     $ 17,649,198       $ 12,677,457     $ 27,797,843  

Net realized gain (loss)

    1,330,152       (180,558       306,169       1,382,536  

Net change in unrealized appreciation (depreciation)

    (25,150,582     14,305,532         (44,483,010     22,794,435  
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    (15,413,235     31,774,172         (31,499,384     51,974,814  
 

 

 

     

 

 

 
         
Distributions to Common Shareholders1  

From net investment income

    (8,645,846     (18,192,301       (13,418,238     (29,271,550

From net realized gain

                  (1,659,457      
 

 

 

     

 

 

 

Decrease in net assets resulting from distributions to Common Shareholders

    (8,645,846     (18,192,301       (15,077,695     (29,271,550
 

 

 

     

 

 

 
         
Capital Share Transactions  

Reinvestment of common distributions

                  151,954        
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders  

Total increase (decrease) in net assets applicable to Common Shareholders

    (24,059,081     13,581,871         (46,425,125     22,703,264  

Beginning of period

    339,493,007       325,911,136         576,763,627       554,060,363  
 

 

 

     

 

 

 

End of period

  $ 315,433,926     $ 339,493,007       $ 530,338,502     $ 576,763,627  
 

 

 

     

 

 

 

Undistributed net investment income, end of period

  $ 1,921,517     $ 2,160,168       $ 2,002,640     $ 2,743,421  
 

 

 

     

 

 

 

 

    BlackRock MuniYield New York
Quality Fund, Inc. (MYN)
          BlackRock MuniYield
Quality Fund III, Inc. (MYI)
 
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   Six Months Ended
January 31,
2017
(Unaudited)
   

Year Ended
July 31,

2016

          Six Months Ended
January 31,
2017
(Unaudited)
    Year Ended
July 31,
2016
 
         
Operations  

Net investment income

  $ 12,809,376     $ 27,609,415       $ 26,627,107     $ 57,199,642  

Net realized gain (loss)

    3,159,789       872,615         4,802,144       (710,916

Net change in unrealized appreciation (depreciation)

    (52,088,880     36,534,748         (92,234,751     50,664,478  
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    (36,119,715     65,016,778         (60,805,500     107,153,204  
 

 

 

     

 

 

 
         
Distributions to Common Shareholders1  

From net investment income

    (12,902,891     (28,860,756       (27,792,124     (59,486,296
 

 

 

     

 

 

 
         
Capital Share Transactions  

Reinvestment of common distributions

                  916,023       1,943,879  
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders  

Total increase (decrease) in net assets applicable to Common Shareholders

    (49,022,606     36,156,022         (87,681,601     49,610,787  

Beginning of period

    596,527,999       560,371,977         1,053,231,685       1,003,620,898  
 

 

 

     

 

 

 

End of period

  $ 547,505,393     $ 596,527,999       $ 965,550,084     $ 1,053,231,685  
 

 

 

     

 

 

 

Undistributed net investment income, end of period

  $ 3,431,938     $ 3,525,453       $ 11,187,393     $ 12,352,410  
 

 

 

     

 

 

 

1    Distributions for annual periods determined in accordance with federal income tax regulations.

       

 

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    41


Statements of Cash Flows     

 

Six Months Ended January 31, 2017 (Unaudited)  

BlackRock
MuniHoldings
Quality

Fund II, Inc.
(MUE)

   

BlackRock
MuniYield
California

Quality

Fund, Inc.
(MCA)

   

BlackRock
MuniYield

New York

Quality

Fund, Inc.
(MYN)

   

BlackRock
MuniYield

Quality

Fund III, Inc.
(MYI)

 
       
Cash Provided by Operating Activities  

Net decrease in net assets resulting from operations

  $ (15,413,235   $ (31,499,384   $ (36,119,715   $ (60,805,500

Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:

       

Proceeds from sales of long-term investments

    39,703,891       199,815,464       50,052,579       109,949,594  

Purchases of long-term investments

    (39,094,004     (205,850,909     (62,572,257     (114,379,971

Net purchases of short-term securities

    (5,772,090     (51,913     (957,253     (477,351

Amortization of premium and accretion of discount on investments and other fees

    873,603       2,706,825       2,423,467       (866,273

Net realized gain (loss) on investments

    (201,260     2,373,335       (249,436     230,375  

Net unrealized loss on investments

    25,120,009       44,469,740       52,404,367       92,827,192  

(Increase) Decrease in Assets:

       

Cash pledged for futures contracts

    (378,000     (696,000     (1,002,000     (1,762,000

Receivables:

 

Interest — unaffiliated

    78,904       795,578       (126,967     704,895  

Dividends — affiliated

    (776     (449     (1,406     (2,893

Prepaid expenses

    18,297       15,790       16,421       14,631  

Increase (Decrease) in Liabilities:

       

Payables:

 

Investment advisory fees

    (16,788     (15,015     (16,389     (30,861

Interest expense and fees

    17,737       167,809       108,756       198,845  

Officer’s and Directors’ fees

    (3,288     8,083       8,510       14,967  

Variation margin on futures contracts

    23,742       34,554       43,390       138,515  

Other accrued expenses

    34,907       30,210       86,672       94,662  
 

 

 

 

Net cash provided by operating activities

    4,991,649       12,303,718       4,098,739       25,848,827  
 

 

 

 
       
Cash Used for Financing Activities                                

Proceeds from TOB Trust Certificates

    6,471,912       51,451,905       18,967,284       32,955,349  

Repayments of TOB Trust Certificates

    (3,004,239     (39,111,743     (9,845,740     (32,358,964

Proceeds from Loan for TOB Trust Certificates

          2,994,900       7,858,738       18,851,064  

Repayments of Loan for TOB Trust Certificates

          (12,735,075     (8,466,238     (18,851,064

Cash dividends paid to Common Shareholders

    (8,645,846     (14,925,151     (12,902,891     (26,872,075

Increase in bank overdraft

    180,520       15,680       280,719       397,117  

Amortization of deferred offering costs

          5,766       7,669       10,081  
 

 

 

 

Net cash used for financing activities

    (4,997,653     (12,303,718     (4,100,459     (25,868,492
 

 

 

 
       
Cash                                

Net decrease in cash

    (6,004           (1,720     (19,665

Cash at beginning of period

    6,004             1,720       19,665  
 

 

 

 

Cash at end of period

                       
 

 

 

 
       
Supplemental Disclosure of Cash Flow Information                                

Cash paid during the period for interest expense

  $ 1,473,577     $ 2,356,115     $ 2,626,496     $ 4,343,083  
 

 

 

 
       
Non-Cash Financing Activities                                

Capital shares issued in reinvestment of distributions paid to Common Shareholders

          151,954             916,023  
 

 

 

 

 

 

See Notes to Financial Statements.      
                
42    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Financial Highlights    BlackRock MuniHoldings Quality Fund II, Inc. (MUE)

 

   

Six Months Ended
January 31,
2017

(Unaudited)

    Year Ended July 31,  
    2016     2015     2014     2013     2012  
           
Per Share Operating Performance  

Net asset value, beginning of period

  $ 15.08     $ 14.48     $ 14.42     $ 13.27     $ 15.18     $ 13.07  
 

 

 

 

Net investment income1

    0.37       0.78       0.80       0.82       0.81       0.86  

Net realized and unrealized gain (loss)

    (1.06     0.63       0.09       1.18       (1.87     2.14  

Distributions to AMPS Shareholders from net investment income

                                  (0.01
 

 

 

 

Net increase (decrease) from investment operations

    (0.69     1.41       0.89       2.00       (1.06     2.99  
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.38     (0.81     (0.83     (0.85     (0.85     (0.88
 

 

 

 

Net asset value, end of period

  $ 14.01     $ 15.08     $ 14.48     $ 14.42     $ 13.27     $ 15.18  
 

 

 

 

Market price, end of period

  $ 13.47     $ 14.94     $ 13.13     $ 12.94     $ 12.32     $ 15.55  
 

 

 

 
           
Total Return Applicable to Common Shareholders3  

Based on net asset value

    (4.48)% 4      10.33%       6.84%       16.19%       (7.41)%       23.64%  
 

 

 

 

Based on market price

    (7.31)% 4      20.55%       7.96%       12.30%       (16.08)%       32.85%  
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders  

Total expenses

    1.89% 5      1.56%       1.50%       1.61%       1.66%       1.52% 6 
 

 

 

 

Total expenses after fees waived and/or paid indirectly

    1.86% 5      1.55%       1.49%       1.56%       1.60%       1.46% 6 
 

 

 

 

Total expenses after fees waived and/or paid indirectly and excluding interest expense, fees and amortization of offering costs7

    0.95% 5      0.95%       0.96%       0.95%       0.97%       1.00% 6,8 
 

 

 

 

Net investment income

    5.11% 5      5.32%       5.41%       6.01%       5.36%       6.05% 6 
 

 

 

 

Distributions to AMPS Shareholders

                                  0.04%  
 

 

 

 

Net investment income to Common Shareholders

    5.11% 5      5.32%       5.41%       6.01%       5.36%       6.01%  
 

 

 

 
           
Supplemental Data  

Net assets applicable to Common Shareholders, end of period (000)

  $  315,434     $  339,493     $  325,911     $  324,563     $  298,707     $  341,144  
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 131,000     $ 131,000     $ 131,000     $ 131,000     $ 131,000     $ 131,000  
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of period

  $ 340,789     $ 359,155     $ 348,787     $ 347,758     $ 328,021     $ 360,416  
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 62,325     $ 57,549     $ 51,795     $ 52,497     $ 81,123     $ 88,921  
 

 

 

 

Portfolio turnover rate

    6%       15%       13%       28%       40%       36%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

 

  4  

Aggregate total return.

 

  5  

Annualized.

 

  6  

Does not reflect the effect of distributions to AMPS Shareholders.

 

  7  

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VMTP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  8  

For the year ended July 31, 2012, the total expense ratio after fees waived and/or paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.97%.

 

See Notes to Financial Statements.      
                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    43


Financial Highlights    BlackRock MuniYield California Quality Fund, Inc.  (MCA)

 

   

Six Months Ended
January 31,
2017

(Unaudited)

    Year Ended July 31,  
    2016     2015     2014     2013     2012  
           
Per Share Operating Performance                                          

Net asset value, beginning of period

  $ 16.77     $ 16.11     $ 16.14     $ 14.83     $ 16.60     $ 14.31  
 

 

 

 

Net investment income1

    0.37       0.81       0.83       0.87       0.88       0.90  

Net realized and unrealized gain (loss)

    (1.29     0.70       0.02       1.35       (1.74     2.28  
 

 

 

 

Net increase (decrease) from investment operations

    (0.92     1.51       0.85       2.22       (0.86     3.18  
 

 

 

 
Distributions to Common Shareholders:2  

From net investment income

    (0.39     (0.85     (0.88     (0.91     (0.91     (0.89

From net realized gain

    (0.05                              
 

 

 

 

Total distributions to Common Shareholders

    (0.44     (0.85     (0.88     (0.91     (0.91     (0.89
 

 

 

 

Net asset value, end of period

  $ 15.41     $ 16.77     $ 16.11     $ 16.14     $ 14.83     $ 16.60  
 

 

 

 

Market price, end of period

  $ 14.81     $ 16.75     $ 14.71     $ 14.37     $ 13.66     $ 16.59  
 

 

 

 
           
Total Return Applicable to Common Shareholders3  

Based on net asset value

    (5.43)% 4      9.84%       5.76%       16.04%       (5.41)%       23.15%  
 

 

 

 

Based on market price

    (9.00)% 4      20.15%       8.47%       12.16%       (12.83)%       35.48%  
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders  

Total expenses

    1.85% 5      1.46%       1.32%       1.40%       1.48%       1.62%  
 

 

 

 

Total expenses after fees waived and/or paid indirectly

    1.85% 5      1.46%       1.32%       1.40%       1.48%       1.61%  
 

 

 

 

Total expenses after fees waived and/or paid indirectly and excluding interest expense, fees and amortization of offering costs6

    0.91% 5      0.89%       0.86%       0.90%       0.92%       1.20% 7 
 

 

 

 

Net investment income to Common Shareholders

    4.56% 5      4.94%       5.09%       5.63%       5.37%       5.79%  
 

 

 

 
           
Supplemental Data  

Net assets applicable to Common Shareholders, end of period (000)

  $  530,339     $  576,764     $  554,060     $  555,127     $  510,018     $  570,559  
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 166,500     $ 166,500     $ 166,500     $ 166,500     $ 166,500     $ 166,500  
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 418,522     $ 446,404     $ 432,769     $ 433,410     $ 406,317     $ 442,678  
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 185,698     $ 176,433     $ 172,574     $ 127,397     $ 188,185     $ 199,874  
 

 

 

 

Portfolio turnover rate

    23%       23%       36%       15%       25%       34%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

 

  4  

Aggregate total return.

 

  5  

Annualized.

 

  6  

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  7  

For the year ended July 31, 2012, the total expense ratio after fees waived and/or paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.95%.

 

 

See Notes to Financial Statements.      
                
44    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


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

 

    Six Months Ended
January 31,
2017
(Unaudited)
    Year Ended July 31,  
    2016     2015     2014     2013     2012  
           
Per Share Operating Performance  

Net asset value, beginning of period

  $ 15.07     $ 14.16     $ 14.09     $ 13.17     $ 15.07     $ 13.44  
 

 

 

 

Net investment income1

    0.32       0.70       0.75       0.78       0.83       0.83  

Net realized and unrealized gain (loss)

    (1.23     0.94       0.09       0.97       (1.88     1.65  
 

 

 

 

Net increase (decrease) from investment operations

    (0.91     1.64       0.84       1.75       (1.05     2.48  
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.33     (0.73     (0.77     (0.83     (0.85     (0.85
 

 

 

 

Net asset value, end of period

  $ 13.83     $ 15.07     $ 14.16     $ 14.09     $ 13.17     $ 15.07  
 

 

 

 

Market price, end of period

  $ 12.95     $ 14.40     $ 13.13     $ 12.71     $ 12.34     $ 15.11  
 

 

 

 
           
Total Return Applicable to Common Shareholders3  

Based on net asset value

    (5.97)% 4      12.19%       6.54%       14.21%       (7.33)%       19.10%  
 

 

 

 

Based on market price

    (7.86)% 4      15.60%       9.52%       9.95%       (13.40)%       27.38%  
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders  

Total expenses

    1.87% 5      1.51%       1.44%       1.50%       1.53%       1.65%  
 

 

 

 

Total expenses after fees waived and/or paid indirectly

    1.87% 5      1.50%       1.44%       1.50%       1.53%       1.65%  
 

 

 

 

Total expenses after fees waived and/or paid indirectly and excluding interest expense, fees and amortization of offering costs6

    0.92% 5      0.89%       0.89%       0.91%       0.91%       1.27% 7 
 

 

 

 

Net investment income to Common Shareholders

    4.46% 5      4.79%       5.22%       5.82%       5.59%       5.78%  
 

 

 

 
           
Supplemental Data  

Net assets applicable to Common Shareholders, end of period (000)

  $  547,505     $  596,528     $  560,372     $  557,606     $  521,263     $  594,807  
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 247,700     $ 247,700     $ 247,700     $ 247,700     $ 247,700     $ 247,700  
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 321,036     $ 340,827     $ 326,230     $ 325,114     $ 310,441     $ 340,132  
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 121,227     $ 112,712     $ 93,113     $ 89,734     $ 108,615     $ 117,960  
 

 

 

 

Portfolio turnover rate

    5%       15%       20%       18%       10%       17%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

 

  4  

Aggregate total return.

 

  5  

Annualized.

 

  6  

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  7  

For the year ended July 31, 2012, the total expense ratio after fees waived and/or 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, 2017    45


Financial Highlights    BlackRock MuniYield Quality Fund III, Inc. (MYI)

 

    Six Months Ended
January 31,
2017
(Unaudited)
    Year Ended July 31,  
      2016     2015     2014     2013     2012  
           
Per Share Operating Performance  

Net asset value, beginning of period

  $ 15.49     $ 14.79     $ 14.84     $ 13.64     $ 15.32     $ 13.19  
 

 

 

 

Net investment income1

    0.39       0.84       0.87       0.89       0.89       0.87  

Net realized and unrealized gain (loss)

    (1.28     0.74       (0.03     1.18       (1.70     2.13  
 

 

 

 

Net increase (decrease) from investment operations

    (0.89     1.58       0.84       2.07       (0.81     3.00  
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.41     (0.88     (0.89     (0.87     (0.87     (0.87
 

 

 

 

Net asset value, end of period

  $ 14.19     $ 15.49     $ 14.79     $ 14.84     $ 13.64     $ 15.32  
 

 

 

 

Market price, end of period

  $ 13.95     $ 15.63     $ 14.04     $ 13.46     $ 12.80     $ 15.81  
 

 

 

 
           
Total Return Applicable to Common Shareholders3  

Based on net asset value

    (5.75)% 4      11.08%       6.12%       16.23%       (5.66)%       23.45%  
 

 

 

 

Based on market price

    (8.17)% 4      18.07%       11.06%       12.35%       (14.21)%       38.08%  
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders  

Total expenses

    1.79% 5      1.45%       1.39%       1.47%       1.43%       1.57%  
 

 

 

 

Total expenses after fees waived and/or paid indirectly

    1.78% 5      1.45%       1.39%       1.47%       1.43%       1.56%  
 

 

 

 

Total expenses after fees waived and/or paid indirectly and excluding interest expense, fees and amortization of offering costs6

    0.89% 5      0.88%       0.88%       0.91%       0.89%       1.19% 7 
 

 

 

 

Net investment income to Common Shareholders

    5.25% 5      5.60%       5.78%       6.35%       5.83%       6.04%  
 

 

 

 
           
Supplemental Data  

Net assets applicable to Common Shareholders, end of period (000)

  $     965,550     $  1,053,232     $  1,003,621     $  1,007,291     $     925,812     $  1,036,022  
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of period (000)

  $ 356,400     $ 356,400     $ 356,400     $ 356,400     $ 356,400     $ 356,400  
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of period

  $ 370,918     $ 395,520     $ 381,600     $ 382,629     $ 359,768     $ 390,691  
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 269,064     $ 261,803     $ 244,245     $ 262,507     $ 287,426     $ 249,148  
 

 

 

 

Portfolio turnover rate

    7%       10%       11%       15%       9%       18%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

 

  4  

Aggregate total return.

 

  5  

Annualized.

 

  6  

Interest expense, fees and amortization of offering costs related to TOB Trusts and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

 

  7  

For the year ended July 31, 2012, the total expense ratio after fees waived and/or paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.90%.

 

 

See Notes to Financial Statements.      
                
46    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Notes to Financial Statements (Unaudited)     

 

1. Organization:

The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end management investment companies and are referred to herein collectively as the “Funds”, or individually, a “Fund”:

 

Fund Name   Herein Referred to As      Organized      Diversification
Classification
 

BlackRock MuniHoldings Quality Fund ll, Inc.

    MUE        Maryland        Non-diversified  

BlackRock MuniYield California Quality Fund, Inc.

    MCA        Maryland        Non-diversified  

BlackRock MuniYield New York Quality Fund, Inc.

    MYN        Maryland        Non-diversified  

BlackRock MuniYield Quality Fund III, Inc.

    MYI        Maryland        Non-diversified  

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 Funds, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of closed-end funds referred to as the Closed-End Complex.

2. Significant Accounting Policies:

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., futures contracts) or certain borrowings (e.g., TOB Trust transactions) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Dividend income is recorded on the ex-dividend date. Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Distributions: Distributions from net investment income are declared monthly and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Distributions to Preferred Shareholders are accrued and determined as described in Note 10.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Fund’s Board, the independent Directors (“Independent Directors”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund, if applicable. Deferred compensation liabilities are included in officer’s and directors’ fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Funds until such amounts are distributed in accordance with the Plan.

Recent Accounting Standard: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statements of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Funds’ presentation in the Statements of Cash Flows.

Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    47


Notes to Financial Statements (continued)     

 

Other: Expenses directly related to a Fund are charged to that Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

Through May 31, 2016, the Funds had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned may have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Funds no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various 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 oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:

 

 

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

 

 

Investments in open-end U.S. mutual funds are valued at NAV each business day.

 

 

Futures contracts traded on exchanges are valued at their last sale price.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include Market approach, Income approach and Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

 

 

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

 

 

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

 

 

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

 

                
48    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Notes to Financial Statements (continued)     

 

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

4. Securities and Other Investments:

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a Fund may be required to pay more at settlement than the security is worth. In addition, a Fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

Municipal Bonds Transferred to TOB Trusts: The Funds leverage their assets through the use of “TOB Trust” transactions. The Funds transfer municipal bonds into a special purpose trust (a “TOB Trust”). A TOB Trust generally issues two classes of beneficial interests: short-term floating rate interests (“TOB Trust Certificates”), which are sold to third party investors, and residual inverse floating rate interests (“TOB Residuals”), which are generally issued to the participating funds that contributed the municipal bonds to the TOB Trust. The TOB Trust Certificates have interest rates that generally reset weekly and their holders have the option to tender such certificates to the TOB Trust for redemption at par and any accrued interest at each reset date. The TOB Residuals held by a Fund generally provide the Fund with the right to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates to the TOB Trust at par plus accrued interest. The Funds may withdraw a corresponding share of the municipal bonds from the TOB Trust. Other funds managed by the investment adviser may also contribute municipal bonds to a TOB Trust into which each Fund has contributed bonds. If multiple BlackRock advised funds participate in the same TOB Trust, the economic rights and obligations under the TOB Residuals will be shared among the funds ratably in proportion to their participation in the TOB Trust.

TOB Trusts are generally supported by a liquidity facility provided by a third party bank or other financial institution (the “Liquidity Provider”) that allows the holders of the TOB Trust Certificates to tender their certificates in exchange for payment of par plus accrued interest on any business day. The tendered TOB Trust Certificates may be purchased by the Liquidity Provider and are usually remarketed by a Remarketing Agent, which is typically an affiliated entity of the Liquidity Provider. The Remarketing Agent may also purchase the tendered TOB Trust Certificates for its own account in the event of a failed remarketing.

The TOB Trust may be collapsed without the consent of a Fund, upon the occurrence of tender option termination events (“TOTEs”) or mandatory termination events (“MTEs”), as defined in the TOB Trust agreements. TOTEs include the bankruptcy or default of the issuer of the municipal bonds held in the TOB Trust, a substantial downgrade in the credit quality of the issuer of the municipal bonds held in the TOB Trust, failure of any scheduled payment of principal or interest on the municipal bonds, and/or a judgment or ruling that interest on the municipal bond is subject to federal income taxation. MTEs may include, among other things, a failed remarketing of the TOB Trust Certificates, the inability of the TOB Trust to obtain renewal of the liquidity support agreement and a substantial decline in the market value of the municipal bonds held in the TOB Trust. Upon the occurrence of a TOTE or an MTE, the TOB Trust would be liquidated with the proceeds applied first to any accrued fees owed to the trustee of the TOB Trust, the Remarketing Agent and the Liquidity Provider. In the case of an MTE, after the payment of fees, the TOB Trust Certificates holders would be paid before the TOB Residuals holders (i.e., the Funds). In contrast, in the case of a TOTE, after payment of fees, the TOB Trust Certificates holders and the TOB Residuals holders would be paid pro rata in proportion to the respective face values of their certificates. During the six months ended January 31, 2017, no TOB Trusts in which a Fund participated were terminated without the consent of a Fund.

While a Fund’s investment policies and restrictions expressly permit investments in inverse floating rate securities, such as TOB Residuals, they generally restrict the ability of a Fund to borrow money for purposes of making investments. The Funds’ management believes that a Fund’s restrictions on borrowings do not apply to the Funds’ TOB Trust transactions. Each Fund’s transfer of the municipal bonds to a TOB Trust is considered a secured borrowing for financial reporting purposes. The cash received by the TOB Trust from the sale of the TOB Trust Certificates, less certain transaction expenses, is paid to a Fund. A Fund typically invests the cash received in additional municipal bonds. The municipal bonds deposited into a TOB Trust are presented in a Fund’s Schedule of Investments and the TOB Trust Certificates are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust pursuant to the liquidity facility to purchase tendered TOB Trust Certificates would be shown as Loan for TOB Trust Certificates.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    49


Notes to Financial Statements (continued)     

 

Volcker Rule Impact: On December 10, 2013, regulators published final rules implementing section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”), which precludes banking entities and their affiliates from sponsoring and investing in TOB Trusts. Banking entities subject to the Volcker Rule were required to fully comply by July 21, 2015, with respect to investments in and relationships with TOB Trusts established after December 31, 2013 (“Non-Legacy TOB Trusts”), and by July 21, 2017, with respect to investments in and relationships with TOB Trusts established prior to December 31, 2013 (“Legacy TOB Trusts”).

As a result, a new structure for TOB Trusts has been designed in which no banking entity would sponsor the TOB Trust. Specifically, a Fund establishes, structures and “sponsors” the TOB Trusts in which it holds TOB Residuals. In such a structure, certain responsibilities that previously belonged to a third party bank are performed by, or on behalf of, the Funds. The Funds have restructured any Non-Legacy TOB Trusts and are in the process of restructuring Legacy TOB Trusts in conformity with regulatory guidelines. Until all restructurings are completed, a Fund may, for a period of time, hold TOB Residuals in both Legacy TOB Trusts and new or restructured non-bank sponsored TOB Trusts.

Under the new TOB Trust structure, the Liquidity Provider or Remarketing Agent will no longer purchase the tendered TOB Trust Certificates even in the event of failed remarketing. This may increase the likelihood that a TOB Trust will need to be collapsed and liquidated in order to purchase the tendered TOB Trust Certificates. The TOB Trust may draw upon a loan from the Liquidity Provider to purchase the tendered TOB Trust Certificates. Any loans made by the Liquidity Provider will be secured by the purchased TOB Trust Certificates held by the TOB Trust and will be subject to an increased interest rate based on the number of days the loan is outstanding.

Accounting for TOB Trusts: The municipal bonds deposited into a TOB Trust are presented in a Fund’s Schedule of Investments and the TOB Trust Certificates are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust pursuant to the liquidity facility to purchase tendered TOB Trust Certificates are shown as Loan for TOB Trust Certificates. The carrying amount of a Fund’s payable to the holder of the TOB Trust Certificates, as reported in the Statements of Assets and Liabilities as TOB Trust Certificates, approximates its fair value.

Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by a Fund on an accrual basis. Interest expense incurred on the TOB Trust transaction and other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust are shown as interest expense, fees and amortization of offering costs in the Statements of Operations. Fees paid upon creation of the TOB Trust are recorded as debt issuance costs and are amortized to interest expense, fees and amortization of offering costs in the Statements of Operations to the expected maturity of the TOB Trust. In connection with the restructurings of the TOB Trusts to non-bank sponsored TOB Trusts, a Fund incurred non-recurring, legal and restructuring fees, which are recorded as interest expense, fees and amortization of deferred offering costs in the Statements of Operations.

For the six months ended January 31, 2017, the following table is a summary of each Fund’s TOB Trusts:

 

    

Underlying
Municipal

Bonds

Transferred to

TOB Trusts1

    

Liability for

TOB Trust

Certificates2

     Range of Interest
Rates on TOB
Trust Certificates
at Period End
    

Average TOB

Trust

Certificates

Outstanding

     Daily Weighted
Average Rate of
Interest and  Other
Expenses
on TOB Trusts
 

MUE

  $ 112,463,413      $ 62,324,733        0.67% - 0.86%      $ 60,117,828        1.33%  

MCA

  $ 386,241,426      $ 185,697,579        0.67% - 0.86%      $ 189,858,569        1.30%  

MYN

  $ 232,053,141      $ 121,226,531        0.69% - 0.81%      $ 120,084,697        1.30%  

MYI

  $ 469,253,644      $ 269,064,024        0.69% - 1.26%      $ 263,957,323        1.31%  

 

  1  

The municipal bonds transferred to a TOB Trust are generally high grade municipal bonds. In certain cases, when municipal bonds transferred are lower grade municipal bonds, the TOB Trust transaction may include a credit enhancement feature that provides for the timely payment of principal and interest on the bonds to the TOB Trust by a credit enhancement provider in the event of default of the municipal bond. The TOB Trust would be responsible for the payment of the credit enhancement fee and the Funds, as TOB Residuals holders, would be responsible for reimbursement of any payments of principal and interest made by the credit enhancement provider. The maximum potential amounts owed by the Funds, for such reimbursements, as applicable, are included in the maximum potential amounts disclosed for recourse TOB Trusts.

 

  2  

The Funds may invest in TOB Trusts that are structured on a non-recourse or recourse basis. When a Fund invests in TOB Trusts on a non-recourse basis, the Liquidity Provider may be required to make a payment under the liquidity facility. In such an event, the Liquidity Provider will typically either (i) fund the full amount owed under the liquidity facility and be subsequently reimbursed from only the proceeds of the liquidation of all or a portion of the municipal bonds held in the TOB Trust or the remarketing of the TOB Trust Certificates, or (ii) liquidate all or a portion of the municipal bonds held in the TOB Trust and then fund the balance, if any, of the amount owed under the liquidity facility over the liquidation proceeds (the “Liquidation Shortfall”). If a Fund invests in a TOB Trust on a recourse basis, a Fund will usually enter into a reimbursement agreement with the Liquidity Provider where a Fund is required to reimburse the Liquidity Provider the amount of any Liquidation Shortfall. As a result, if a Fund invests in a recourse TOB Trust, a Fund will bear the risk of loss with respect to any Liquidation Shortfall. If multiple funds participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed by a Fund at January 31, 2017, in proportion to their participation in the TOB Trust. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by a Fund at January 31, 2017.

 

                
50    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Notes to Financial Statements (continued)     

 

For the six months ended January 31, 2017, the following table is a summary of each Fund’s Loan for TOB Trust Certificates:

 

    

Loan

Outstanding at
Period End

    

Range of

Interest Rates

on Loan at

Period End

    

Average Loans

Outstanding

     Daily Weighted
Average Rate of
Interest and Other
Expenses
on Loan
 

MCA

                $ 752,831        0.78%  

MYN

                $ 895,441        0.83%  

MYI

                $ 1,982,808        0.78%  

5. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: The Funds invest in long and/or short positions in futures and options on futures contracts to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. 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 market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations 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 futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: Each Fund entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund.

For such services, each Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of each Fund’s net assets:

 

     MUE      MCA      MYN      MYI  

Investment advisory fees

    0.55%        0.50%        0.50%        0.50%  

For purposes of calculating these fees, “net assets” mean the total assets of the Funds minus the sum of their accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of preferred shares). It is understood that the liquidation preference of any outstanding preferred stock (other than accumulated dividends) and TOB Trusts is not considered a liability in determining a Fund’s NAV.

Waivers: 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 (the “affiliated money market fund waiver”). These amounts are included in fees waived by the Manager in the Statements of Operations. The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation caps, as applicable, will be reduced by the amount of the affiliated money market fund waiver. For the six months ended January 31, 2017, the amounts waived were as follows:

 

     MUE      MCA      MYN      MYI  

Amounts waived

  $ 707      $ 3,224      $ 1,131      $ 3,816  

Effective September 1, 2016, the Manager voluntarily agreed to waive its investment advisory fee with respect to any portion of Funds’ assets invested in affiliated equity or fixed-income mutual funds or affiliated exchange-traded funds that have a contractual management fee. Prior to September 1, 2016,

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    51


Notes to Financial Statements (continued)     

 

the Manager did not waive such fees. On December 2, 2016, the Manager entered into a Master Advisory Fee Agreement (“Agreement”), contractually committing to this arrangement through June 30, 2017. The Agreement can be renewed for annual periods thereafter, and may be terminated on 90 days’ notice, each subject to approval by a majority of the Funds’ independent directors.

The Manager, for MUE, voluntarily agreed to waive its investment advisory fee on the proceeds of the Preferred Shares and TOB Trusts that exceed 35% of total assets minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of preferred shares). This amount is included in fees waived by the Manager in the Statements of Operations. For the six months ended January 31, 2017 the waiver was $42,336.

Officers and Directors: Certain officers and/or Directors of the Funds are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in Officer and Directors in the Statements of Operations.

7. Purchases and Sales:

For the six months ended January 31, 2017, purchases and sales of investments excluding short-term securities, were as follows:

 

     MUE      MCA      MYN      MYI  

Purchases

  $ 30,127,563      $ 212,596,933      $ 62,572,257      $ 123,005,992  

Sales

  $ 39,758,891      $ 204,689,717      $ 49,601,082      $ 110,054,554  

8. Income Tax Information

It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended July 31, 2016. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds as of January 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.

As of July 31, 2016, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires July 31,   MUE      MYN      MYI  

No expiration date1

  $ 10,627,007      $ 20,723,468      $ 4,160,266  

2017

    3,385,582        2,295,738        21,251,301  

2018

    6,013,130        3,370,191        26,460,028  

2019

           1,287,746         
 

 

 

    

 

 

    

 

 

 

Total

  $ 20,025,719      $ 27,677,143      $ 51,871,595  
 

 

 

    

 

 

    

 

 

 

 

  1   

Must be utilized prior to losses subject to expiration.

As of January 31, 2017, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

     MUE      MCA      MYN      MYI  

Tax cost

  $ 408,722,370      $ 652,687,595      $ 748,154,432      $ 1,233,857,321  
 

 

 

 

Gross unrealized appreciation

  $ 34,517,973      $ 37,752,721      $ 46,085,996      $ 91,130,504  

Gross unrealized depreciation

    (1,813,426             (6,492,810      (11,269,852
 

 

 

 

Net unrealized appreciation

  $ 32,704,547      $ 37,752,721      $ 39,593,186      $ 79,860,652  
 

 

 

 

9. Principal Risks:

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Fund’s ability to buy or sell bonds. As a result, a Fund may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Fund needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

 

                
52    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Notes to Financial Statements (continued)     

 

In the normal course of business, certain Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer to meet all its obligations, including the ability to pay principal and interest when due (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers of securities owned by the Funds. Changes arising from the general economy, the overall market and local, regional or global political and/or social instability, as well as currency, interest rate and price fluctuations, may also affect the securities’ value.

Each Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed income securities at market interest rates that are below each Fund portfolio’s current earnings rate.

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.

It is possible that regulators could take positions that could limit the market for non-bank sponsored TOB Trust transactions or the Funds’ ability to hold TOB Residuals. Under the new TOB Trust structure, the Funds will have certain additional duties and responsibilities, which may give rise to certain additional risks including, but not limited to, compliance, securities law and operational risks.

There can be no assurance that the Funds can successfully enter into restructured TOB Trust transactions in order to refinance their existing TOB Residuals holdings prior to the compliance date for the Volcker Rule, which may require that the Funds unwind existing TOB Trusts. There can be no assurance that alternative forms of leverage will be available to the Funds and any alternative forms of leverage may be more or less advantageous to the Funds than existing TOB leverage.

Should short-term interest rates rise, the Funds’ investments in TOB Trust transactions may adversely affect the Funds’ net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect the Funds’ NAVs per share.

The SEC and various federal banking and housing agencies have adopted credit risk retention rules for securitizations (the “Risk Retention Rules”), which took effect in December 2016. The Risk Retention Rules would require the sponsor of a TOB Trust to retain at least 5% of the credit risk of the underlying assets supporting the TOB Trust’s municipal bonds. The Risk Retention Rules may adversely affect the Funds’ ability to engage in TOB Trust transactions or increase the costs of such transactions in certain circumstances.

TOB Trust transactions constitute an important component of the municipal bond market. Accordingly, implementation of the Volcker Rule and Risk Retention Rules may adversely impact the municipal market, including through reduced demand for and liquidity of municipal bonds and increased financing costs for municipal issuers. Any such developments could adversely affect the Funds. The ultimate impact of these rules on the TOB Trust market and the overall municipal market is not yet certain.

Counterparty Credit Risk: Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

With exchange-traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    53


Notes to Financial Statements (continued)     

 

Concentration Risk: MCA and MYN invest a substantial amount of their assets in issuers located in a single state or limited number of states. This may subject each Fund to the risk that economic, political or social issues impacting a particular state or group of states could have an adverse and disproportionate impact on the income from, or the value or liquidity of, the Funds’ respective portfolios. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.

As of period end, MUE invested a significant portion of its assets in securities in the transportation and county, city, special district and school district sectors. MCA invested a significant portion of its assets in securities in the county, city, special district and school district sector. MYI invested a significant portion of its assets in securities in the transportation sector. Changes in economic conditions affecting such sectors would have a greater impact on the Funds and could affect the value, income and/or liquidity of positions in such securities.

The Funds invest a significant portion of their assets in fixed income securities and/or use derivatives tied to the fixed income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

10. Capital Share Transactions:

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:

 

     MCA      MYI  

Six Months Ended January 31, 2017

    9,066        59,193  

Year Ended July 31, 2016

           126,962  

For the six months ended January 31, 2017 and the year ended July 31, 2016, shares issued and outstanding remained constant for MUE and MYN.

Preferred Shares

Each Fund’s Preferred Shares rank prior to the Funds’ Common Shares as to the payment of dividends by the Funds and distribution of assets upon dissolution or liquidation of a Fund. The 1940 Act prohibits the declaration of any dividend on a Fund’s Common Shares or the repurchase of a Fund’s Common Shares if a Fund fails to maintain asset coverage of at least 200% of the liquidation preference of the Funds’ outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, a Fund is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with the Funds’ Preferred Shares or repurchasing such shares if a Fund fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares’ governing instruments or comply with the basic maintenance amount requirement of the ratings agencies rating the Preferred Shares.

The holders of Preferred Shares have voting rights equal to the voting rights of 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 on certain matters. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Directors to the Board of each Fund. The holders of Preferred Shares are also entitled to elect the full Board of Directors if dividends on the Preferred Shares are not paid for a period of two years. The holders of Preferred Shares are also generally entitled to a separate class vote to amend the Preferred Share governing documents. In addition, the 1940 Act requires the approval of the holders of a majority of any outstanding Preferred Shares, voting as a separate class, 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, MYN and MYI (collectively, the “VRDP Funds”), have issued Series W-7 VRDP Shares, $100,000 liquidation preference per share, in privately negotiated offerings. The VRDP Shares were offered to qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act of 1933, as amended, (the “Securities Act”). The VRDP Shares include a liquidity feature and the VRDP Shares of certain Funds are currently in a special rate period, each as described below.

As of period end, the VRDP Shares outstanding of each Fund were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Maturity Date  

MCA

    4/21/11        1,665      $ 166,500,000        5/01/41  

MYN

    4/21/11        2,477      $ 247,700,000        5/01/41  

MYI

    5/19/11        3,564      $ 356,400,000        6/01/41  

 

                
54    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Notes to Financial Statements (continued)     

 

Redemption Terms: Each VRDP Fund is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six months prior to the maturity date, each VRDP Fund is required to begin to segregate liquid assets with the Funds’ custodian to fund the redemption. In addition, VRDP Funds are required to redeem certain of their outstanding VRDP Shares if they fail to comply with certain asset coverage, basic maintenance amount or leverage requirements.

Subject to certain conditions, the VRDP Shares may also be redeemed, in whole or in part, at any time at the option of the VRDP Funds. The redemption price per VRDP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends. In the event of an optional redemption of the VRDP Shares during the period commencing on the date of issuance and ending on the initial termination date of the fee agreement, the VRDP Funds must pay the liquidity provider fees on such redeemed VRDP Shares for the remaining term of the fee agreement up to such initial termination date.

Liquidity Feature: Each VRDP Fund entered into a fee agreement with the liquidity provider that requires an initial commitment and a per annum liquidity fee payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations.

The fee agreement between the VRDP Funds and the liquidity provider is for a 364 day term and was scheduled to expire on July 7, 2016 unless renewed or terminated in advance. The VRDP Funds renewed the fee agreement for an additional 364 days term which is scheduled to expire on July 6, 2017, 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. In the event of such mandatory purchase, VRDP Funds are required to redeem the VRDP Shares six months after the purchase date. Immediately after such mandatory purchase, the VRDP Funds are required to begin to segregate liquid assets with their custodian to fund the redemption. There is no assurance the VRDP Funds will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.

Remarketing: The VRDP Funds may incur remarketing fees of 0.10% on the aggregate principal amount of all the Funds’ VRDP Shares, which, if any, are included in remarketing fees on Preferred Shares in the Statements of Operations. During any special rate period (as described below), the VRDP Funds may incur no/nominal remarketing fees.

Dividends: Dividends on the VRDP Shares are payable monthly at a variable rate set weekly by the remarketing agent. Such dividend rates are generally based upon a spread over a base rate and cannot exceed a maximum rate. In the event of a failed remarketing, the dividend rate of the VRDP Shares will be reset to a maximum rate. The maximum rate is determined based on, among other things, the long-term preferred share rating assigned to the VRDP Shares and the length of time that the VRDP Shares fail to be remarketed. At the date of issuance, the VRDP Shares were assigned long-term ratings of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VRDP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of period end, the VRDP Shares were assigned a long-term rating of Aa1 from Moody’s under its new ratings methodology. The VRDP Shares continue to be assigned a long-term rating of AAA from Fitch.

For the six months ended January 31, 2017, the average annualized dividend rates for the VRDP Shares were as follows:

 

     MCA      MYN      MYI  

Rate

    1.61%        1.55%        1.54%  

Ratings: The short-term ratings on the VRDP Shares are directly related to the short-term ratings of the liquidity provider for such VRDP Shares. Changes in the credit quality of the liquidity provider could cause a change in the short-term credit ratings of the VRDP Shares as rated by Moody’s, Fitch and/or S&P. A change in the short-term credit rating of the liquidity provider or the VRDP Shares may adversely affect the dividend rate paid on such shares, although the dividend rate paid on the VRDP Shares is not directly based upon either short-term rating. The liquidity provider may be terminated prior to the scheduled termination date if the liquidity provider fails to maintain short-term debt ratings in one of the two highest rating categories.

Special Rate Period: On June 21, 2012, the VRDP Funds commenced a three-year term ending June 24, 2015 (the “special rate period”), with respect to their VRDP Shares. In May 2015, the special rate period was extended to June 22, 2016. In May 2016, the special rate period was extended to June 21, 2017 will not be subject to any remarketing and the dividend rate will be based on a predetermined methodology. The implementation of the special rate period resulted in a mandatory tender of the VRDP Shares prior to the commencement of the special rate period. The mandatory tender event was not the result of a failed remarketing. The short-term ratings on the VRDP Shares for the VRDP Funds were withdrawn by Moody’s, Fitch and/or S&P at the commencement of the special rate period. Prior to June 21, 2017, 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 to remarketable securities upon the termination of the special rate period and will be remarketed and available for purchase by qualified institutional investors.

During the special rate period, the liquidity and fee agreements remain in effect and the VRDP Shares remain subject to mandatory redemption by the VRDP Funds on the maturity date. The VRDP Shares will not be remarketed or subject to optional or mandatory tender events during the special rate period. During the special rate period, the VRDP Funds are required to comply with the same asset coverage, basic maintenance amount and leverage requirements for the VRDP Shares as is required when the VRDP Shares are not in a special rate period. The VRDP Funds will not pay any fees to the

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    55


Notes to Financial Statements (continued)     

 

liquidity provider and remarketing agent during the special rate period. The VRDP Funds will pay dividends monthly based on the sum of the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Index rate and a percentage per annum based on the long-term ratings assigned to the VRDP Shares.

If the VRDP Funds redeems the VRDP Shares prior to the end of the special rate period and the VRDP Shares have long-term ratings above A1/A+ and its equivalent by all ratings agencies then rating the VRDP Shares, then such redemption may be 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 comply with minimum asset coverage requirements.

For the six months ended January 31, 2017, VRDP Shares issued and outstanding of the VRDP Funds remained constant.

VMTP Shares

MUE has issued Series W-7 VMTP Shares, $100,000 liquidation preference per share, in a privately negotiated offering and sale of VMTP Shares exempt from registration under the Securities Act. The VMTP Shares are subject to certain restrictions on transfer, and MUE 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 documents generally require the consent of the holders of VMTP Shares.

As of period end, the VMTP Shares outstanding of MUE were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Term
Redemption Date
 

MUE

    12/16/11        1,310      $ 131,000,000        1/02/19  

Redemption Terms: MUE is required to redeem its VMTP Shares on the term redemption date, unless earlier redeemed or repurchased or unless extended. There is no assurance that the term of MUE’s VMTP Shares will be extended further or that MUE’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 the term redemption date, MUE is required to begin to segregate liquid assets with MUE’s custodian to fund the redemption. In addition, MUE is required to redeem certain of its outstanding VMTP Shares if it fails to comply with certain asset coverage, basic maintenance amount or leverage requirements.

Subject to certain conditions, MUE’s VMTP Shares may be redeemed, in whole or in part, at any time at the option of MUE. The redemption price per VMTP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends and applicable redemption premium. If MUE redeems the VMTP Shares prior to the term redemption date and the VMTP Shares have long-term ratings above A1/A+ or its equivalent by the ratings agencies then rating the VMTP Shares, then such redemption may be subject to a prescribed redemption premium (up to 3% of the liquidation preference) payable to the holder of the VMTP Shares based on the time remaining until the term redemption date, subject to certain exceptions for redemptions that are required to comply with minimum asset coverage requirements.

Dividends: Dividends on the VMTP Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the SIFMA Municipal Swap Index. The fixed spread is determined based on the long-term preferred share rating assigned to the VMTP Shares by the ratings agencies then rating the VMTP Shares. At the date of issuance, the VMTP Shares were assigned long-term ratings of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VMTP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of period end, the VMTP Shares were assigned a long-term rating of Aa1 from Moody’s under its new rating methodology. The VMTP Shares continue to be assigned a long-term rating of AAA from Fitch. The dividend rate on the VMTP Shares is subject to a step-up spread if MUE fails to comply with certain provisions, including, among other things, the timely payment of dividends, redemptions or gross-up payments, and complying with certain asset coverage and leverage requirements.

For the six months ended January 31, 2017, the average annualized dividend rates for MUE’s VMTP Shares was 1.64%.

For the six months ended January 31, 2017, MUE’s VMTP Shares issued and outstanding remained constant.

Offering Costs: The Funds incurred costs in connection with the issuance of VRDP and VMTP Shares, which were recorded as a direct deduction from the carrying value of the related debt liability and will be amortized over the life of the VRDP and VMTP Shares with the exception of upfront fees paid to the liquidity provider which were amortized over the life of the liquidity agreement. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.

Financial Reporting: The VRDP and VMTP Shares are considered debt of the issuer; therefore, the liquidation preference, which approximates fair value of the VRDP and VMTP Shares, is recorded as a liability in the Statements of Assets and Liabilities net of deferred offering costs. 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 and VMTP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP and VMTP Shares are treated as equity for tax purposes. Dividends paid to holders of the VRDP and VMTP Shares are generally classified as tax-exempt income for tax-reporting purposes.

 

                
56    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Notes to Financial Statements (concluded)     

 

11. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:

 

     Common Dividend Per Share              Preferred Shares3  
     Paid1      Declared2              Shares      Series      Declared  

MUE

  $ 0.0640      $ 0.0640           VMTP        W-7      $ 166,143  

MCA

  $ 0.0650      $ 0.0650           VRDP        W-7      $ 198,356  

MYN

  $ 0.0540      $ 0.0540           VRDP        W-7      $ 295,091  

MYI

  $ 0.0680      $ 0.0680                 VRDP        W-7      $ 424,588  

 

  1  

Net investment income dividend paid on March 1, 2017 to Common Shareholders of record on February 15, 2017.

 

  2  

Net investment income dividend declared on March 1, 2017, payable to Common Shareholders of record on March 15, 2017.

 

  3  

Dividends declared for period February 1, 2017 to February 28, 2017.

 

Officers and Directors     

Richard E. Cavanagh, Chair of the Board and Director

Karen P. Robards, Vice Chair of the Board and Director

Michael J. Castellano, Director

Cynthia L. Egan, Director

Frank J. Fabozzi, Director

Jerrold B. Harris, Director

R. Glenn Hubbard, Director

W. Carl Kester, Director

Catherine A. Lynch, Director

Barbara G. Novick, Director

John M. Perlowski, Director, President and Chief Executive Officer

Jonathan Diorio, Vice President

Neal J. Andrews, Chief Financial Officer

Jay M. Fife, Treasurer

Charles Park, Chief Compliance Officer

Janey Ahn, Secretary

 

         

Investment Adviser

BlackRock Advisors, LLC Wilmington, DE 19809

 

Accounting Agent and Custodian

State Street Bank and
Trust Company

Boston, MA 02110

 

VRDP Tender and Paying Agent

and VMTP Redemption and Paying Agent

The Bank of New York Mellon New York, NY 10289

  

Independent Registered Public Accounting Firm Deloitte & Touche LLP Boston, MA 02116

 

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom LLP Boston, MA 02116

  Transfer Agent Computershare Trust
Company, N.A.
Canton, MA 02021
 

VRDP Remarketing Agent Citigroup Global Markets Inc. New York, NY 10179

  

VRDP Liquidity Provider Citibank, N.A.
New York, NY 10179

  Address of the Funds 100 Bellevue Parkway Wilmington, DE 19809

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    57


Additional Information     

 

Fund Certification

Certain Funds are listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Funds filed with the SEC the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

 

Dividend Policy

Each Fund’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of 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 distributions paid by the Funds for any particular month may be more or less than the amount of net investment income earned by the Funds during such month. The Funds’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

 

General Information

The Funds do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.

During the period, there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.

Effective September 26, 2016, BlackRock implemented a new methodology for calculating “effective duration” for BlackRock’s municipal bond portfolios. The new methodology replaces the model previously used by BlackRock to evaluate municipal bond duration and is a common indicator of an investment’s sensitivity to interest rate movements. The new methodology is applied to each Fund’s duration reported for periods after September 26, 2016.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Funds, may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

Electronic Delivery

Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.

To enroll in electronic delivery:

Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service.

Householding

The Funds will mail only one copy of shareholder documents, 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.

 

                
58    SEMI-ANNUAL REPORT    JANUARY 31, 2017   


Additional Information (concluded)     

 

 

General Information (concluded)

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 882-0052; and; (2) on the SEC’s website at http://www.sec.gov.

Availability of Fund Updates

BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

                
   SEMI-ANNUAL REPORT    JANUARY 31, 2017    59


This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

LOGO

 

MHMYINS4-1/17-SAR    LOGO


Item 2 – Code of Ethics – Not Applicable to this semi-annual report

 

Item 3 – Audit Committee Financial Expert – Not Applicable to this semi-annual report

 

Item 4 – Principal Accountant Fees and Services – Not Applicable to this semi-annual report

 

Item 5 – Audit Committee of Listed Registrants – Not Applicable to this semi-annual report

 

Item 6 – Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable to this semi-annual report

 

Item 8 – Portfolio Managers of Closed-End Management Investment Companies

 

  (a) Not Applicable to this semi-annual report.

 

  (b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.

 

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable

 

Item 10 –  Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

 

Item 11 –  Controls and Procedures

(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12 –  Exhibits attached hereto

(a)(1) – Code of Ethics – Not Applicable to this semi-annual report

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) –   Certifications – Attached hereto

 

2


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock 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 5, 2017

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 5, 2017

 

By:       /s/ Neal J. Andrews                                  
  Neal J. Andrews  
  Chief Financial Officer (principal financial officer) of
  BlackRock MuniYield Quality Fund III, Inc.

Date: April 5, 2017

 

3