BLACKROCK MASSACHUSETTS TAX-EXEMPT TRUST

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 811-07660

Name of Fund: BlackRock Massachusetts Tax-Exempt Trust (MHE)

Fund Address:  100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Massachusetts Tax-Exempt Trust, 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: 08/31/2018

Date of reporting period: 08/31/2018


Item 1 – Report to Stockholders


AUGUST 31, 2018

 

ANNUAL REPORT

  LOGO

 

BlackRock Maryland Municipal Bond Trust (BZM)

BlackRock Massachusetts Tax-Exempt Trust (MHE)

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

BlackRock New York Municipal Bond Trust (BQH)

BlackRock New York Municipal Income Quality Trust (BSE)

BlackRock New York Municipal Income Trust II (BFY)

BlackRock Virginia Municipal Bond Trust (BHV)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


The Markets in Review

Dear Shareholder,

In the 12 months ended August 31, 2018, the strongest corporate profits in seven years drove the equity market higher, while rising interest rates constrained bond returns. Though the market’s appetite for risk remained healthy, risk-taking was tempered somewhat, as shorter-term, higher-quality securities led the bond market, and U.S. equities outperformed most international stock markets.

Volatility in emerging market stocks rose as U.S.-China trade relations and debt concerns adversely affected the Chinese stock market, while Turkey and Argentina became embroiled in currency crises, largely due to hyperinflation in both countries. An economic slowdown in Europe led to modest performance for European equities.

Short-term U.S. Treasury interest rates rose the fastest, while longer-term rates slightly increased, leading to a negative return for long-term U.S. Treasuries and a substantial flattening of the yield curve. Many investors are concerned with the flattening yield curve as a harbinger of recession, but given the extraordinary monetary measures in the last decade, we believe a more accurate barometer for the economy is the returns along the risk spectrums in stock and bond markets. Although the fundamentals in credit markets remained relatively solid, investment-grade bonds declined slightly, and high-yield bonds posted modest returns.

In response to rising growth and inflation, the U.S. Federal Reserve (the “Fed”) increased short-term interest rates three times during the reporting period. The Fed also reduced its $4.2 trillion balance sheet by approximately $230 billion during the reporting period, gradually reversing the unprecedented stimulus measures it enacted after the financial crisis. Meanwhile, the European Central Bank announced that its bond-purchasing program would conclude at the end of the year, while also expressing its commitment to low interest rates. In contrast, the Bank of Japan continued to expand its balance sheet through bond purchasing while lowering its expectations for inflation.

The U.S. economy continued to gain momentum despite the Fed’s modest reduction of economic stimulus; unemployment declined to 3.9%, wages increased, and the number of job openings reached a record high. Strong economic performance may justify a more rapid pace of rate hikes in 2018, as the headline inflation rate and investors’ expectations for inflation have already surpassed the Fed’s target of 2.0%.

While U.S. monetary policy is seeking to restrain economic growth and inflation, fiscal policy has produced new sources of growth that could nourish the economy for the next few years. Corporate tax cuts and repatriation of capital held abroad could encourage a virtuous cycle of business spending. Lower individual tax rates coupled with the robust job market may refresh consumer spending.

We continue to believe the primary risks to economic expansion are trade protectionism, rapidly rising interest rates, and geopolitical tension. Given the deflationary forces of technology and globalization, a substantial increase in inflation is unlikely to materialize as long as the unemployment rate remains above 3.0%. However, we are closely monitoring trade protectionism and the rise of populism in Western nations. In particular, the outcome of trade negotiations between the United States and China is likely to influence the global growth trajectory and set the tone for free trade in many other nations.

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 August 31, 2018
     6-month   12-month

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

  7.96%   19.66%

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

  15.84   25.45

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

  (2.55)   4.39

Emerging market equities
(MSCI Emerging Markets Index)

  (10.18)   (0.68)

3-month Treasury bills
(ICE BofAML 3-Month U.S. Treasury Bill Index)

  0.93   1.52

U.S. Treasury securities
(ICE BofAML 10-Year U.S. Treasury Index)

  1.42   (4.13)

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

  1.15   (1.05)

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

  1.78   0.61

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

  2.26   3.40
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 IS NOT PART OF YOUR FUND REPORT


Table of Contents

 

      Page  

The Markets in Review

     2  

Annual Report:

  

Municipal Market Overview

     4  

The Benefits and Risks of Leveraging

     5  

Derivative Financial Instruments

     5  

Trust Summaries

     6  

Financial Statements:

  

Schedules of Investments

     20  

Statements of Assets and Liabilities

     57  

Statements of Operations

     59  

Statements of Changes in Net Assets

     61  

Statements of Cash Flows

     68  

Financial Highlights

     70  

Notes to Financial Statements

     77  

Report of Independent Registered Public Accounting Firm

     87  

Disclosure of Investment Advisory Agreements

     88  

Automatic Dividend Reinvestment Plans

     92  

Trustee and Officer Information

     93  

Additional Information

     96  

Glossary of Terms Used in this Report

     99  

 

 

     3  


Municipal Market Overview  For the Reporting Period Ended August 31, 2018

 

Municipal Market Conditions

Municipal bonds experienced positive performance during the period despite rising interest rates resulting from continued Fed monetary policy normalization, firmer economic data, and the impacts of fiscal stimulus. Ongoing reassurance from the Fed that rates would be increased gradually and would likely remain low overall resulted in continued demand for fixed income investments. More specifically, investors favored the tax-exempt income, diversification, quality, and value of municipal bonds amid fiscal policy uncertainty, which saw tax reform ultimately lower the top individual tax rate just 2.6% while eliminating deductions and increasing demand for tax shelter. During the 12 months ended August 31, 2018, municipal bond funds experienced net inflows of approximately $22 billion (based on data from the Investment Company Institute).

 

For the same 12-month period, total new issuance was moderate from a historical perspective at $373 billion (below the $390 billion issued in the prior 12-month period), but displayed significant month to month volatility. Notably, issuance in December posted the highest monthly total on record at $56 billion, as issuers rushed deals to market ahead of the expected elimination of the tax-exemption for advanced refunding bonds and possibly private activity bonds (“PABs”). Ultimately, the final version of the Tax Cuts and Jobs Act left PABs unchanged, though the elimination of advanced refundings has suppressed supply in 2018, providing a powerful technical tailwind.

  S&P Municipal Bond Index
  Total Returns as of August 31, 2018
    6 months: 1.78%
  12 months: 0.61%
 

A Closer Look at Yields

 

LOGO

From August 31, 2017 to August 31, 2018, yields on AAA-rated 30-year municipal bonds increased by 32 basis points (“bps”) from 2.70% to 3.02%, while 10-year rates increased by 58 bps from 1.86% to 2.44% and 5-year rates increased by 90 bps from 1.12% to 2.02% (as measured by Thomson Municipal Market Data). The municipal yield curve bear flattened over the 12-month period with the spread between 2- and 30-year maturities flattening by 53 bps, however remained a significant 94 bps steeper than the corresponding U.S. Treasury curve.

During the same time period, on a relative basis, tax-exempt municipal bonds strongly outperformed U.S. Treasuries with the greatest outperformance experienced in the front and intermediate portions of the yield curve. The relative 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. 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 problems among a few issuers. Four of the five states with the largest amount of debt outstanding — California, New York, Texas and Florida — continue to exhibit improved credit fundamentals. However, several states with the largest unfunded pension liabilities are faced with elevated borrowing costs and difficult budgetary decisions. Across the country on the local level, property values support credit stability. Revenue bonds continue to drive performance as investors continue to seek higher yield bonds in the tobacco sector. 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 August 31, 2018, 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 AMT. 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    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


The Benefits and Risks of Leveraging

 

The Trusts may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, their common shares (“Common Shares”). However, there is no guarantee that these objectives can 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 Trust on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Trusts (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Trusts’ 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 Trust’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 Trust’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 Trust with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Trust’s financing cost of leverage is significantly lower than the income earned on a Trust’s longer-term investments acquired from such 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 Trusts’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Trusts had not used leverage. Furthermore, the value of the Trusts’ 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 Trusts’ 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 Trusts’ NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that the Trusts’ intended leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Trust’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 Trust’s Common Shares than if the Trust were not leveraged. In addition, each Trust 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 Trusts to incur losses. The use of leverage may limit a Trust’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Trust 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 Trusts’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Trusts’ investment adviser will be higher than if the Trusts did not use leverage.

To obtain leverage, each Trust has issued Variable Rate Demand Preferred Shares (“VRDP 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 Trust 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 Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Trust 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 Trust segregates or designates on its books and records cash or liquid assets having a value not less than the value of a Trust’s obligations under the TOB Trust (including accrued interest), then the TOB Trust is not considered a senior security and is not subject to the foregoing limitations and requirements imposed by the 1940 Act.

Derivative Financial Instruments

The Trusts may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets 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 instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Trusts’ 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 Trust can realize on an investment and/or may result in lower distributions paid to shareholders. The Trusts’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

 

 

THE BENEFITS AND RISKS OF LEVERAGING / DERIVATIVE FINANCIAL INSTRUMENTS      5  


Trust Summary  as of August 31, 2018    BlackRock Maryland Municipal Bond Trust

 

Trust Overview

BlackRock Maryland Municipal Bond Trust’s (BZM) (the “Trust”) investment objective is to provide current income exempt from regular U.S. federal income taxes and Maryland personal income taxes. The Trust seeks to achieve its investment objective by investing primarily in municipal bonds exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and Maryland personal income taxes. The Trust invests, under normal market conditions, at least 80% of its managed assets in municipal bonds that are investment grade quality at the time of investment or, if unrated, determined to be of comparable quality by the Trust’s investment adviser at the time of investment. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on New York Stock Exchange (“NYSE”)

  BZM

Initial Offering Date

  April 30, 2002

Yield on Closing Market Price as of August 31, 2018 ($14.04)(a)

  4.05%

Tax Equivalent Yield(b)

  7.58%

Current Monthly Distribution per Common Share(c)

  $0.0474

Current Annualized Distribution per Common Share(c)

  $0.5688

Economic Leverage as of August 31, 2018(d)

  38%

 

  (a) 

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.

 
  (b) 

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 46.55%, 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.

 
  (c) 

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

 
  (d) 

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BZM(a)(b)

    2.71      1.67

Lipper Other States Municipal Debt Funds(c)

    (6.29      (0.13

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 because of a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward. Lower-quality bonds generally outpaced higher-quality issues amid investors’ continued demand for yield.

 

 

Maryland’s municipal index underperformed the national market due to its lower yield and higher overall quality.

 

 

The Trust’s position in the health care sector made the largest contribution to returns. Yield spreads in the sector tightened, which offset the effect of falling bond prices and resulted in sizable outperformance.

 

 

Positions in BBB rated bonds added value, as did allocations to high yield issues (those rated BBB and below). High yield far outperformed the broader market as demand greatly outstripped the available supply, especially in smaller states such as Maryland. Within the high yield segment, the Trust held positions that were currently callable and therefore experienced no price movement even as the market sold off. (A call is when an issuer redeems a bond prior to its maturity date.) These securities provided both above-average income and strong relative performance.

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

The use of leverage, while amplifying the impact of weak price performance, was a net contributor since it provided additional income.

 

 

The Trust held a large weighting in long-maturity, shorter-call bonds because of their attractive yields. Some of these securities, especially those with call dates between two and five years, lagged due to the general underperformance of shorter-term securities.

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

 

 

6    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock Maryland Municipal Bond Trust

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18     

08/31/17

     Change      High      Low  

Market Price

  $ 14.04      $ 14.29        (1.75 )%     $ 14.75      $ 13.06  

Net Asset Value

    14.90        15.32        (2.74      15.42        14.79  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector

  08/31/18    

08/31/17

 

Health

    29     28

Education

    19       20  

County/City/Special District/School District

    16       12  

Utilities

    13       14  

Transportation

    13       16  

Housing

    8       8  

Corporate

    1       1  

Tobacco

    1       1  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (b)

 

Calendar Year Ended December 31,

       

2018

    5

2019

    7  

2020

    3  

2021

    8  

2022

    23  

 

  (b)

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating

  08/31/18    

08/31/17

 

AAA/Aaa

    7     8

AA/Aa

    29       33  

A

    30       30  

BBB/Baa

    15       17  

BB/Ba

    4       1  

B/B

    5       1  

N/R

    10       10  

 

  (a)

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.

 
 

 

 

TRUST SUMMARY      7  


Trust Summary  as of August 31, 2018    BlackRock Massachusetts Tax-Exempt Trust

 

Trust Overview

BlackRock Massachusetts Tax-Exempt Trust’s (MHE) (the “Trust”) investment objective is to provide as high a level of current income exempt from both regular U.S. federal income taxes and Massachusetts personal income taxes as is consistent with the preservation of shareholders’ capital. The Trust seeks to achieve its investment objective by investing primarily in Massachusetts tax-exempt obligations (including bonds, notes and capital lease obligations). The Trust invests, under normal market conditions, at least 80% of its assets in obligations that are rated investment grade at the time of investment or, if unrated, determined to be of comparable quality at the time of investment by the Trust’s investment adviser. Under normal market conditions, the Trust invests its assets so that at least 80% of the income generated by the Trust is exempt from U.S. federal income taxes, including U.S. federal alternative minimum tax, and Massachusetts personal income taxes. The Trust invests primarily in long term municipal obligations with maturities of more than ten years. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on NYSE

  MHE

Initial Offering Date

  July 23, 1993

Yield on Closing Market Price as of August 31, 2018 ($12.38)(a)

  4.26%

Tax Equivalent Yield(b)

  7.87%

Current Monthly Distribution per Common Share(c)

  $0.0440

Current Annualized Distribution per Common Share(c)

  $0.5280

Economic Leverage as of August 31, 2018(d)

  41%

 

  (a) 

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.

 
  (b) 

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 45.9%, 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.

 
  (c) 

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

 
  (d) 

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

MHE(a)(b)

    (7.64 )%       (0.41 )% 

Lipper Other States Municipal Debt Funds(c)

    (6.29      (0.13

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 because of a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward.

 

 

Massachusetts municipal issues underperformed the broader national market, as tight yield spreads at the beginning of the period left little room for additional upside.

 

 

The Trust held a large weighting in long-maturity, shorter-call bonds because of their attractive yields. Some of these securities, especially those with call dates between two and five years, lagged due to the general underperformance of shorter-term securities. (A call is when an issuer redeems a bond prior to its maturity date.)

 

 

The Trust’s allocation to BBB rated bonds made the largest contribution to returns. In addition to BBB issues providing above-average income, yield spreads on BBB issues were relatively stable during the market sell-off of early 2018.

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

Holdings in high-yield bonds, which were boosted by the combination of their income advantage and investors’ ongoing demand for yield, were strong outperformers.

 

 

The Trust’s use of leverage, while amplifying the impact of weak price performance, was a net contributor since it provided additional income.

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    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock Massachusetts Tax-Exempt Trust

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18      08/31/17      Change      High      Low  

Market Price

  $ 12.38      $ 14.00        (11.57 )%     $ 15.00      $ 12.35  

Net Asset Value

    13.33        13.98        (4.65      14.03        13.27  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector

 

08/31/18

   

08/31/17

 

Education

    41     42

State

    21       19  

Health

    15       14  

Transportation

    15       16  

Housing

    5       6  

County/City/Special District/School District

    2       2  

Tobacco

    1       1  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (b)

 

Calendar Year Ended December 31,

       

2018

    3

2019

    12  

2020

    13  

2021

    8  

2022

    14  

 

  (b)

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating

  08/31/18    

08/31/17

 

AAA/Aaa

    7     7

AA/Aa

    60       53  

A

    11       21  

BBB/Baa

    15       16  

BB/Ba

    1       1  

N/R

    6       2  

 

  (a)

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.

 
 

 

 

TRUST SUMMARY      9  


Trust Summary  as of August 31, 2018    BlackRock MuniHoldings New York Quality Fund, Inc.

 

Trust Overview

BlackRock MuniHoldings New York Quality Fund, Inc.’s (MHN) (the “Trust”) investment objective is to provide shareholders with current income exempt from U.S. federal income tax and New York State and New York City personal income taxes. The Trust seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in investment grade (as rated or, if unrated, considered to be of comparable quality at the time of investment by the Trust’s investment adviser) New York municipal obligations exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and New York State and New York City personal income taxes (“New York Municipal Bonds”), except at times when, in the judgment of its investment adviser, New York Municipal Bonds of sufficient quality and quantity are unavailable for investment by the Trust. At all times, except during temporary defensive periods, the Trust invests at least 65% of its assets in New York Municipal Bonds. The Trust invests, under normal market conditions, at least 80% of its assets in municipal obligations with remaining maturities of one year or more. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on NYSE

  MHN

Initial Offering Date

  September 19, 1997

Yield on Closing Market Price as of August 31, 2018 ($12.35)(a)

  4.32%

Tax Equivalent Yield(b)

  8.57%

Current Monthly Distribution per Common Share(c)

  $0.0445

Current Annualized Distribution per Common Share(c)

  $0.5340

Economic Leverage as of August 31, 2018(d)

  41%

 

  (a) 

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.

 
  (b) 

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 49.62%, 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.

 
  (c) 

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

 
  (d) 

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

MHN(a)(b)

    (9.82 )%       0.22

Lipper New York Municipal Debt Funds(c)

    (5.86      (0.09

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 because of a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward.

 

 

New York municipal bonds underperformed the national market. New issuance in the state was robust compared to the nation as a whole, which contributed to the weaker performance. Unfortunately, much of the new issuance was concentrated in several large issuers in which the Trust already had positions, thereby limiting the opportunity set. New York’s overall economic trends continued to improve, albeit at a rate slightly below the national level.

 

 

Portfolio income, enhanced by leverage, made the largest contribution to performance in a period characterized by a robust increase in municipal yields. Leverage also amplified the impact of falling prices, which offset some of the benefit from added income. (Bond prices and yields move in opposite directions.)

 

 

Short-term bonds, which are highly sensitive to U.S. Federal Reserve policy, lagged longer-term issues. As a result, the Trust’s positions in the two- to five-year segment of the yield curve detracted from performance. These positions are largely comprised of advance-refunded bonds that were purchased in a higher-yield environment.

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

Investments in bonds rated A and below, which generally outperformed higher-quality issues, contributed positively. From a sector perspective, the Trust’s allocation to transportation issues was beneficial.

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    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock MuniHoldings New York Quality Fund, Inc.

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18     

08/31/17

     Change      High      Low  

Market Price

  $ 12.35      $ 14.36        (14.00 )%     $ 14.58      $ 12.30  

Net Asset Value

    14.27        14.93        (4.42      15.01        14.18  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector

 

08/31/18

   

08/31/17

 

Transportation

    26     26

State

    19       15  

Education

    16       19  

County/City/Special District/School District

    16       16  

Utilities

    12       12  

Health

    6       7  

Housing

    2       3  

Corporate

    2       1  

Tobacco

    1       1  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (c)

 

Calendar Year Ended December 31,

       

2018

    6

2019

    6  

2020

    7  

2021

    14  

2022

    11  

 

  (c)

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating  

08/31/18

   

08/31/17

 

AAA/Aaa

    19     19

AA/Aa

    48       53  

A

    23       20  

BBB/Baa

    5       6  

N/R(b)

    5       2  

 

  (a)

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.

 
  (b)

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2018 and August 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade each represents 4% and 1%, respectively, of the Trust’s total investments.

 
 

 

 

TRUST SUMMARY      11  


Trust Summary  as of August 31, 2018    BlackRock New York Municipal Bond Trust

 

Trust Overview

BlackRock New York Municipal Bond Trust’s (BQH) (the “Trust”) investment objective is to provide current income exempt from regular U.S. federal income taxes and New York State and New York City personal income taxes. The Trust seeks to achieve its investment objective by investing primarily in municipal bonds exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and New York State and New York City personal income taxes. Under normal market conditions, the Trust invests at least 80% of its managed assets in municipal bonds that are investment grade quality at the time of investment or, if unrated, determined to be of comparable quality at the time of investment by the Trust’s investment adviser. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on NYSE

  BQH

Initial Offering Date

  April 30, 2002

Yield on Closing Market Price as of August 31, 2018 ($13.01)(a)

  4.24%

Tax Equivalent Yield(b)

  8.42%

Current Monthly Distribution per Common Share(c)

  $0.0460

Current Annualized Distribution per Common Share(c)

  $0.5520

Economic Leverage as of August 31, 2018(d)

  40%

 

  (a)

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.

 
  (b)

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 49.62%, 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.

 
  (c)

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

 
  (d)

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BQH(a)(b)

    (6.44 )%       (0.03 )% 

Lipper New York Municipal Debt Funds(c)

    (5.86      (0.09

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 because of a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward.

 

 

New York municipal bonds underperformed the national market. New issuance in the state was robust compared to the nation as a whole, which contributed to the weaker performance. Unfortunately, much of the new issuance was concentrated in several large issuers in which the Fund already had positions, thereby limiting the opportunity set. New York’s overall economic trends continued to improve, albeit at a rate slightly below the national level.

 

 

Short-term bonds, which are highly sensitive to Fed policy, lagged longer-term issues. As a result, the Trust’s positions in the two- to five-year segment of the yield curve detracted from performance. These positions are largely comprised of advance-refunded bonds that were purchased in a higher-yield environment.

 

 

Portfolio income, enhanced by leverage, made the largest contribution to performance in a period characterized by a robust increase in municipal yields. Leverage also amplified the impact of falling prices, which offset some of the benefit from added income. (Bond prices and yields move in opposite directions.)

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

Investments in bonds rated A and below, which generally outperformed higher-quality issues, contributed positively. From a sector perspective, the Trust’s allocation to transportation issues was beneficial.

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    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock New York Municipal Bond Trust

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18     

08/31/17

     Change      High      Low  

Market Price

  $ 13.01      $ 14.55        (10.58 )%     $ 15.65      $ 12.94  

Net Asset Value

    15.39        16.11        (4.47      16.20        15.25  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector

 

08/31/18

    08/31/17  

County/City/Special District/School District

    23     25

Education

    22       22  

Transportation

    17       16  

Utilities

    11       12  

Health

    10       11  

State

    7       6  

Corporate

    4       3  

Housing

    3       3  

Tobacco

    3       2  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (c)

 

Calendar Year Ended December 31,

       

2018

    6

2019

    6  

2020

    7  

2021

    16  

2022

    10  

 

  (c) 

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating

  08/31/18    

08/31/17

 

AAA/Aaa

    10     14

AA/Aa

    41       48  

A

    27       21  

BBB/Baa

    9       7  

BB/Ba

    2       3  

B/B

    1        

N/R(b)

    10       7  

 

  (a) 

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.

 
  (b)

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2018 and August 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade represents 4% and 2%, respectively, of the Trust’s total investments.

 
 

 

 

TRUST SUMMARY      13  


Trust Summary  as of August 31, 2018    BlackRock New York Municipal Income Quality Trust

 

Trust Overview

BlackRock New York Municipal Income Quality Trust’s (BSE) (the “Trust”) investment objective is to provide current income exempt from U.S. federal income tax, including the alternative minimum tax, and New York State and New York City personal income taxes. The Trust seeks to achieve its investment objective by investing at least 80% of its managed assets in municipal obligations exempt from U.S. federal income taxes (including the U.S. federal alternative minimum tax) and New York State and New York City personal income taxes. Under normal market conditions, the Trust invests primarily in municipal bonds that are investment grade quality at the time of investment or, if unrated, are determined to be of comparable quality at the time of investment by the Trust’s investment adviser. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on NYSE

  BSE

Initial Offering Date

  October 31, 2002

Yield on Closing Market Price as of August 31, 2018 ($12.65)(a)

  3.84%

Tax Equivalent Yield(b)

  7.62%

Current Monthly Distribution per Common Share(c)

  $0.0405

Current Annualized Distribution per Common Share(c)

  $0.4860

Economic Leverage as of August 31, 2018(d)

  40%

 

  (a)

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.

 
  (b)

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 49.62%, 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.

 
  (c)

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

 
  (d)

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BSE(a)(b)

    (2.47 )%       (0.33 )% 

Lipper New York Municipal Debt Funds(c)

    (5.86      (0.09

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 due to a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward.

 

 

New York municipal bonds underperformed the national market. New issuance in the state was robust compared to the nation as a whole, which contributed to the weaker performance. Unfortunately, much of the new issuance was concentrated in several large issuers in which the Fund already had positions, thereby limiting the opportunity set. New York’s overall economic trends continued to improve, albeit at a rate slightly below the national level.

 

 

Short-term bonds, which are highly sensitive to Fed policy, lagged longer-term issues. As a result, the Trust’s positions in the two- to five-year segment of the yield curve detracted from performance. These positions are largely comprised of advance-refunded bonds that were purchased in a higher-yield environment.

 

 

Portfolio income, enhanced by leverage, made the largest contribution to performance in a period characterized by a robust increase in municipal yields. Leverage also amplified the impact of falling prices, which offset some of the benefit from added income. (Bond prices and yields move in opposite directions.)

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

Investments in bonds rated A and below, which generally outperformed higher-quality issues, contributed positively. From a sector perspective, the Trust’s allocation to transportation issues was beneficial.

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

 

 

14    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock New York Municipal Income Quality Trust

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18      08/31/17      Change      High      Low  

Market Price

  $ 12.65      $ 13.55        (6.64 )%     $ 13.69      $ 12.14  

Net Asset Value

    14.35        15.04        (4.59      15.12        14.24  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector   08/31/18     08/31/17  

Education

    23     26

County/City/Special District/School District

    18       19  

Utilities

    16       16  

Transportation

    16       16  

State

    16       12  

Health

    7       7  

Housing

    3       3  

Tobacco

    1       1  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (c)

 

Calendar Year Ended December 31,

       

2018

    2

2019

    6  

2020

    2  

2021

    19  

2022

    9  

 

  (c) 

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating   08/31/18    

08/31/17

 

AAA/Aaa

    17     22

AA/Aa

    50       52  

A

    27       23  

BBB/Baa

    2       2  

N/R(b)

    4       1  

 

  (a) 

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.

 
  (b) 

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2018 and August 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade represents 2% and 1%, respectively, of the Trust’s total investments.

 
 

 

 

TRUST SUMMARY      15  


Trust Summary  as of August 31, 2018    BlackRock New York Municipal Income Trust II

 

Trust Overview

BlackRock New York Municipal Income Trust II’s (BFY) (the “Trust”) investment objective is to provide current income exempt from regular U.S. federal income tax and New York State and New York City personal income taxes. The Trust seeks to achieve its investment objective by investing primarily in municipal bonds exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and New York State and New York City personal income taxes. Under normal market conditions, the Trust invests at least 80% of its managed assets in municipal bonds that are investment grade quality at the time of investment or, if unrated, determined to be of comparable quality at the time of investment by the Trust’s investment adviser. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on NYSE

  BFY

Initial Offering Date

  July 30, 2002

Yield on Closing Market Price as of August 31, 2018 ($12.77)(a)

  4.60%

Tax Equivalent Yield(b)

  9.13%

Current Monthly Distribution per Common Share(c)

  $0.0490

Current Annualized Distribution per Common Share(c)

  $0.5880

Economic Leverage as of August 31, 2018(d)

  41%

 

  (a)

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.

 
  (b)

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 49.62%, 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.

 
  (c)

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

 
  (d)

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BFY(a)(b)

    (13.66 )%       (0.08 )% 

Lipper New York Municipal Debt Funds(c)

    (5.86      (0.09

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 due to a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward.

 

 

New York municipal bonds underperformed the national market. New issuance in the state was robust compared to the nation as a whole, which contributed to the weaker performance. Unfortunately, much of the new issuance was concentrated in several large issuers in which the Fund already had positions, thereby limiting the opportunity set. New York’s overall economic trends continued to improve, albeit at a rate slightly below the national level.

 

 

Short-term bonds, which are highly sensitive to Fed policy, lagged longer-term issues. As a result, the Trust’s positions in the two- to five-year segment of the yield curve detracted from performance. These positions are largely comprised of advance-refunded bonds that were purchased in a higher-yield environment.

 

 

Portfolio income, enhanced by leverage, made the largest contribution to performance in a period characterized by a robust increase in municipal yields. Leverage also amplified the impact of falling prices, which offset some of the benefit from added income. (Bond prices and yields move in opposite directions.)

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

Investments in bonds rated A and below, which generally outperformed higher-quality issues, contributed positively. From a sector perspective, the Trust’s allocation to education issues was beneficial.

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.

 

 

16    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock New York Municipal Income Trust II

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18     

08/31/17

     Change      High      Low  

Market Price

  $ 12.77      $ 15.51        (17.67 )%     $ 15.90      $ 12.67  

Net Asset Value

    14.97        15.71        (4.71      15.79        14.86  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector  

08/31/18

   

08/31/17

 

Transportation

    20     18

County/City/Special District/School District

    19       23  

Education

    17       17  

State

    13       9  

Utilities

    11       13  

Health

    8       9  

Housing

    5       6  

Corporate

    4       2  

Tobacco

    3       3  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (c)

 

Calendar Year Ended December 31,

       

2018

    4

2019

    8  

2020

    5  

2021

    19  

2022

    6  

 

  (c)

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating  

08/31/18

   

08/31/17

 

AAA/Aaa

    17     15

AA/Aa

    42       45  

A

    28       25  

BBB/Baa

    6       8  

BB/Ba

    3       2  

B

    1       1  

N/R

    3       4 (b)  

 

  (a)

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.

 
  (b)

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2018 and August 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade represents 2% of the Trust’s total investments.

 
 

 

 

TRUST SUMMARY      17  


Trust Summary  as of August 31, 2018    BlackRock Virginia Municipal Bond Trust

 

Trust Overview

BlackRock Virginia Municipal Bond Trust’s (BHV) (the “Trust”) investment objective is to provide current income exempt from regular U.S. federal income tax and Virginia personal income taxes. The Trust seeks to achieve its investment objectives by investing primarily in municipal bonds exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and Virginia personal income taxes. The Trust invests, under normal market conditions, at least 80% of its managed assets in municipal bonds that are investment grade quality at the time of investment or, if unrated, determined to be of comparable quality at the time of investment by the Trust’s investment adviser. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

Trust Information

 

Symbol on NYSE

  BHV

Initial Offering Date

  April 30, 2002

Yield on Closing Market Price as of August 31, 2018 ($16.56)(a)

  4.57%

Tax Equivalent Yield(b)

  8.55%

Current Monthly Distribution per Common Share(c)

  $0.0630

Current Annualized Distribution per Common Share(c)

  $0.7560

Economic Leverage as of August 31, 2018(d)

  42%

 

  (a)

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.

 
  (b)

Tax equivalent yield assumes the maximum marginal U.S. federal and state tax rate of 46.55%, 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.

 
  (c)

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

 
  (d)

Represents VRDP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Trust, 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 Trust, please see The Benefits and Risks of Leveraging on page 5.

 

Performance

Returns for the 12 months ended August 31, 2018 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BHV(a)(b)

    (6.91 )%       (0.20 )% 

Lipper Other States Municipal Debt Funds(c)

    (6.29      (0.13

 

  (a) 

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices.

 
  (b) 

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

 
  (c) 

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend as calculated by Lipper.

 

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

Past performance is not indicative of future results.

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

 

 

Municipal bonds posted a narrow gain in the 12-month period, with the contribution from yield offsetting negative price performance. Although tax-exempt issues sold off sharply in early 2018 because of a spike in U.S. Treasury yields, the market ultimately stabilized due to the combination of municipal issuers’ improving fundamentals and a sharp decline in new-issue supply from January onward. Lower-quality bonds generally outpaced higher-quality issues amid investors’ continued demand for yield.

 

 

Virginia’s municipal index underperformed the national market due to its lower yield and higher overall quality.

 

 

The Trust held a large weighting in long-maturity, shorter-call bonds because of their above-average yields. Some of these securities, especially those with call dates between two and five years, lagged due to the general underperformance of shorter-term securities. Certain positions in AA rated education issues also detracted from performance.

 

 

The Trust had multiple positions mature during the period. In addition to providing above-average income, these positions experienced very little price movement during the sell-off since they were so close to their maturity dates. These positions were the best performers in the portfolio. Holdings in investment-grade health care issues also made a positive contribution.

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Since Treasury yields rose, as prices fell, this strategy had a positive effect on returns.

 

 

The Trust’s investments in high yield bonds (those rated BBB and below) also added value, as this market segment outpaced investment-grade debt. In particular, positions in the tobacco sector outperformed the broader market due to their higher income and the price gains that resulted from investors’ robust demand for liquid, higher-yielding securities. A large number of tobacco issues outside of Virginia were refinanced during the period, boosting demand for those that continued to offer attractive 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.

 

 

18    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trust Summary  as of August 31, 2018 (continued)    BlackRock Virginia Municipal Bond Trust

 

Market Price and Net Asset Value Per Share Summary

 

     08/31/18     

08/31/17

     Change      High      Low  

Market Price

  $ 16.56      $ 18.68        (11.35 )%     $ 19.27      $ 15.50  

Net Asset Value

    14.97        15.75        (4.95      15.79        14.95  

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

 

LOGO

Overview of the Trust’s Total Investments*

 

SECTOR ALLOCATION

 

Sector   08/31/18    

08/31/17

 

Transportation

    33     19

Health

    28       26  

County/City/Special District/School District

    16       15  

Education

    12       25  

Housing

    6       2  

Tobacco

    3       3  

Corporate

    1       1  

State

    1       6  

Utilities

          3  

For Trust compliance purposes, the Trust’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.

CALL/MATURITY SCHEDULE (c)

 

Calendar Year Ended December 31,

       

2018

    9

2019

    12  

2020

    15  

2021

    9  

2022

    9  

 

  (c)

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

 
  *

Excludes short-term securities.

 

CREDIT QUALITY ALLOCATION (a)

 

Credit Rating  

08/31/18

   

08/31/17

 

AAA/Aaa

    7     15

AA/Aa

    39       47  

A

    11       12  

BBB/Baa

    4       4  

BB/Ba

    2       2  

B

    3       2  

N/R(b)

    34       18  

 

  (a)

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.

 
  (b)

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2018 and August 31, 2017, the market value of unrated securities deemed by the investment adviser to be investment grade represents 9% and 5%, respectively, of the Trust’s total investments.

 
 

 

 

TRUST SUMMARY      19  


Schedule of Investments

August 31, 2018

  

BlackRock Maryland Municipal Bond Trust (BZM)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  

Municipal Bonds — 142.2%

 

Maryland — 140.7%  
Corporate — 1.9%  

Maryland EDC, Refunding RB:

   

CNX Marine Terminals, Inc., 5.75%, 09/01/25

  $ 320     $ 332,717  

Potomac Electric Power Co., 6.20%, 09/01/22

    250       255,317  
   

 

 

 
    588,034  
County/City/Special District/School District — 18.8%  

County of Anne Arundel Maryland, GOL, 5.00%, 10/01/43

    1,500       1,731,540  

County of Anne Arundel Maryland Consolidated, Refunding, Special Tax, Villages of Dorchester and Farmington Project, 5.00%, 07/01/32

    500       550,700  

County of Anne Arundel Maryland Consolidated, RB, Special Taxing District, Villages at Two Rivers Project, 5.25%, 07/01/44

    250       252,613  

County of Frederick Maryland, RB, Jefferson Technology Park Project, Series B, 7.13%, 07/01/43(a)

    250       268,507  

County of Howard Maryland, Tax Allocation Bonds:

   

Annapolis Junction Town Center Project, 6.10%, 02/15/44

    250       256,375  

Downtown Columbia Project, Series A, 4.50%, 02/15/47(a)

    500       505,665  

County of Prince George’s Maryland, Special Obligation, Remarketing, National Harbor Project, 5.20%, 07/01/34

    1,347       1,351,512  

Washington Suburban Sanitary Commission, GO, Consolidated Public Improvement Bonds, Second Series, 4.00%, 06/01/41

    875       910,420  
   

 

 

 
    5,827,332  
Education — 28.3%  

County of Anne Arundel Maryland, Refunding RB, Maryland Economic Development, Anne Arundel Community College Project, 3.25%, 09/01/28

    360       364,442  

Maryland EDC, Refunding RB:

   

Towson University Project, 5.00%, 07/01/37

    500       526,155  

University of Maryland College Park Project (AGM), 5.00%, 06/01/43

    1,350       1,510,434  

University of Maryland Project, 5.00%, 07/01/39

    500       536,665  

University Village at Sheppard Pratt, 5.00%, 07/01/33

    1,000       1,049,530  

Maryland Health & Higher Educational Facilities Authority, Refunding RB:

   

Anne Arundel Health System, 4.00%, 07/01/39

    100       101,817  

Goucher College, Series A, 5.00%, 07/01/34

    1,000       1,081,450  

Goucher College, Series A, 4.00%, 07/01/37

    500       509,670  

Johns Hopkins University Project, Series A, 4.00%, 07/01/37

    10       10,362  

Loyola University Maryland, Series A, 5.00%, 10/01/39

    900       977,130  

Maryland Institute College, 4.00%, 06/01/42

    500       499,215  

Maryland Institute College of Art, 5.00%, 06/01/29

    500       541,730  

Notre Dame Maryland University, 5.00%, 10/01/42

    1,000       1,052,950  
   

 

 

 
    8,761,550  
Health — 47.6%  

City of Gaithersburg Maryland, Refunding RB, Asbury Maryland Obligation, Series B, 6.00%, 01/01/23

    250       262,708  

City of Rockville Maryland, RB, Ingleside at King Farm Project, Series B, 5.00%, 11/01/42

    500       540,380  

County of Montgomery Maryland, RB, Trinity Health Credit Group, 5.00%, 12/01/45

    750       840,225  

County of Montgomery Maryland, Refunding RB, Trinity Health Credit Group, 5.00%, 12/01/40

    1,000       1,090,970  

Maryland Health & Higher Educational Facilities Authority, RB:

   

Ascension Health Alliance, Series B, 5.00%, 11/15/51

    1,000       1,073,390  

Medstar Health Issue, Series A, 5.00%, 05/15/42

    160       178,357  

Trinity Health Credit Group, Series 2017, 5.00%, 12/01/46

    250       282,228  

University of Maryland Medical System Issue, 4.00%, 07/01/48

    300       302,547  
Security   Par
(000)
    Value  
Health (continued)  

Maryland Health & Higher Educational Facilities Authority, Refunding RB:

   

Anne Arundel Health System, 5.00%, 07/01/19(b)

  $ 1,000     $ 1,026,720  

Charlestown Community Project, 6.25%, 01/01/21(b)

    1,000       1,096,890  

Charlestown Community, Series A, 5.00%, 01/01/45

    500       550,190  

Frederick Memorial Hospital, Series A, 4.00%, 07/01/38

    1,250       1,253,025  

Lifebridge Health Issue, 4.13%, 07/01/47

    500       510,265  

Medstar Health, Inc., 5.00%, 08/15/42

    1,000       1,093,700  

Meritus Medical Center Issue, 5.00%, 07/01/40

    1,000       1,075,820  

Peninsula Regional Medical Center, 5.00%, 07/01/45

    700       760,991  

University of Maryland, 5.00%, 07/01/35

    200       222,158  

University of Maryland, 4.00%, 07/01/41

    500       506,540  

University of Maryland Medical System,
5.13%, 07/01/19(b)

    1,000       1,027,740  

University of Maryland Medical System, Series A, 5.00%, 07/01/43

    1,000       1,075,050  
   

 

 

 
    14,769,894  
Housing — 13.0%  

County of Howard Maryland Housing Commission, RB, M/F Housing:

   

Woodfield Oxford Square Apartments, 5.00%, 12/01/42

    500       555,405  

Columbia Commons Apartments, Series A, 5.00%, 06/01/44

    550       586,047  

Gateway Village Apartments, 4.00%, 06/01/46

    500       507,635  

Maryland Community Development Administration, HRB, M/F Housing, Series A, 4.05%, 07/01/42

    1,220       1,235,470  

Maryland Community Development Administration, RB:

   

M/F Housing, 3.70%, 07/01/35

    500       502,865  

S/F Housing, Residential, Series A, 5.05%, 09/01/39

    500       503,080  

S/F Housing, Residential, Series B, 4.75%, 09/01/39

    150       150,172  
   

 

 

 
    4,040,674  
Transportation — 15.0%  

Maryland EDC, RB(b):

   

Term Project, Series B, 5.75%, 06/01/20

    500       534,535  

Transportation Facilities Project, Series A, 5.75%, 06/01/20

    500       534,535  

Maryland EDC, Refunding RB, Transportation Facilities Project, Series A, 5.00%, 06/01/35

    100       111,497  

Maryland State Department of Transportation, RB, Consolidated, 4.00%, 05/15/19(b)

    1,000       1,016,700  

Maryland State Transportation Authority, RB, Baltimore/Washington International Thurgood Marshall Airport Project, Series A, AMT, 4.00%, 06/01/29

    1,925       1,981,518  

Maryland State Transportation Authority, Refunding RB, Baltimore/Washington International Thurgood Marshall Airport Project, Series B, AMT, 5.00%, 03/01/23

    445       484,592  
   

 

 

 
    4,663,377  
Utilities — 16.1%  

City of Annapolis Maryland Water & Sewer Revenue, Refunding RB, Series A, 3.38%, 08/01/40

    780       751,249  

City of Baltimore Maryland, RB:

   

Sub-Water Projects, Series A, 5.00%, 07/01/41

    100       113,212  

Sub-Water Projects, Series A, 5.00%, 07/01/46

    495       558,855  

Wastewater Project, Series C, 5.00%, 07/01/38

    1,000       1,113,800  

Water Project, Series A, 5.00%, 07/01/43

    1,000       1,105,960  

City of Baltimore Maryland, Refunding RB:

   

Convention Center Hotel, 5.00%, 09/01/46

    750       819,780  

East Baltimore Research Park, Series A, 5.00%, 09/01/38

    250       266,772  

City of Baltimore Maryland, Tax Allocation Bonds, Center/West Development, Series A, 5.50%, 06/01/43

    250       254,708  
   

 

 

 
    4,984,336  
 

 

 

 

Total Municipal Bonds in Maryland

 

    43,635,197  
 

 

 

 
 

 

 

20    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Maryland Municipal Bond Trust (BZM)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Puerto Rico — 1.5%  
Tobacco — 1.5%  

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds, 5.63%, 05/15/43

  $ 450     $ 455,607  
   

 

 

 

Total Municipal Bonds — 142.2%
(Cost — $42,995,151)

 

    44,090,804  
 

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(c)

 

Maryland — 10.2%  
County/City/Special District/School District — 5.6%  

State of Maryland Stadium Authority, RB, Construction and Revitalization Program, 5.00%, 05/01/42

    1,500       1,715,815  
   

 

 

 
Utilities — 4.6%  

City of Baltimore Maryland, RB, Wastewater Project, Series A, 5.00%, 07/01/46

    1,269       1,432,665  
   

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond
Trusts in Maryland

 

    3,148,480  
 

 

 

 
Virginia — 5.5%  
Transportation — 5.5%  

Washington Metropolitan Area Transit Authority, RB, Series B, 5.00%, 07/01/42

    1,503       1,716,462  
   

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond
Trusts — 15.7%
(Cost — $4,830,850)

 

    4,864,942  
 

 

 

 

Total Long-Term Investments — 157.9%
(Cost — $47,826,001)

 

    48,955,746  
 

 

 

 
Security  

Shares

    Value  

Short-Term Securities — 0.9%

 

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(d)(e)

    273,831     $ 273,859  
   

 

 

 

Total Short-Term Securities — 0.9%
(Cost — $273,859)

 

    273,859  
 

 

 

 

Total Investments — 158.8%
(Cost — $48,099,860)

 

    49,229,605  

Other Assets Less Liabilities — 1.1%

 

    361,123  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (8.5)%

 

    (2,645,564

VRDP Shares at Liquidation Value, Net of Deferred Offering
Costs — (51.4)%

 

    (15,937,366
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 31,007,798  
 

 

 

 

 

(a) 

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.

(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 Trust. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details.

(d) 

Annualized 7-day yield as of period end.

 
(e) 

During the year ended August 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Held at
08/31/17
     Net
Activity
     Shares
Held at
08/31/18
     Value at
08/31/18
     Income      Net
Realized

Gain (Loss) (a)
     Change in
Unrealized

Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

            273,831        273,831      $ 273,859      $ 2,615      $ 16      $  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     4          12/19/18        $ 481        $ (88

Long U.S. Treasury Bond

     11          12/19/18          1,586          4,859  

5-Year U.S. Treasury Note

     4          12/31/18          454          (162
                 

 

 

 
                  $ 4,609  
                 

 

 

 

 

 

SCHEDULES OF INVESTMENTS      21  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Maryland Municipal Bond Trust (BZM)

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
    

Other

Contracts

     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 4,859      $      $ 4,859  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 250      $      $ 250  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
    

Other

Contracts

     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 163,772      $      $ 163,772  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 16,962      $      $ 16,962  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 2,689,766  

For more information about the Trust’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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $        $ 48,955,746        $        $ 48,955,746  

Short-Term Securities

     273,859                            273,859  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 273,859        $ 48,955,746        $        $ 49,229,605  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 4,859        $        $        $ 4,859  

Liabilities:

 

Interest rate contracts

     (250                          (250
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 4,609        $        $             —        $ 4,609  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

 

 

22    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Maryland Municipal Bond Trust (BZM)

 

The Trust 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

   $             —        $ (2,637,107      $             —        $ (2,637,107

VRDP Shares at Liquidation Value

              (16,000,000                 (16,000,000
  

 

 

      

 

 

      

 

 

      

 

 

 
   $        $ (18,637,107      $        $ (18,637,107
  

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

SCHEDULES OF INVESTMENTS      23  


Schedule of Investments

August 31, 2018

  

BlackRock Massachusetts Tax-Exempt Trust (MHE)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  

Municipal Bonds — 149.5%

 

Massachusetts — 148.0%  
County/City/Special District/School District — 3.5%  

Town of Holyoke Massachusetts, GO, Refunding, 5.00%, 09/01/26

  $ 1,000     $ 1,109,600  
   

 

 

 
Education — 58.5%  

Massachusetts Development Finance Agency, RB:

   

Emerson College Issue, Series A, 5.00%, 01/01/47

    1,000       1,081,857  

Emerson College Issue, Series A, 5.25%, 01/01/42

    500       552,035  

Foxborough Regional Charter School, Series A, 7.00%, 07/01/20(a)

    250       273,573  

Merrimack College, 5.00%, 07/01/47

    550       593,499  

Mount Holyoke College, Series B, 5.00%, 07/01/41

    500       537,240  

UMass Boston Student Housing Project, 5.00%, 10/01/48

    1,000       1,079,110  

Wellesley College, Series J, 5.00%, 07/01/42

    1,950       2,137,044  

Wentworth Institute Technology, 5.00%, 10/01/46

    500       543,170  

WGBH Educational Foundation, Series A (AMBAC), 5.75%, 01/01/42

    650       864,396  

Massachusetts Development Finance Agency, Refunding RB:

   

Boston University, Series P, 5.45%, 05/15/59

    1,500       1,770,330  

Emerson College, 5.00%, 01/01/41

    500       534,285  

Emerson College, Series A, 5.00%, 01/01/20(a)

    185       193,018  

Emerson College, Series A, 5.00%, 01/01/20(a)

    15       15,650  

Emmanuel College Issue, Series A, 5.00%, 10/01/35

    250       274,507  

Foxborough Regional Charter School Issue, 5.00%, 07/01/37

    150       160,935  

Harvard University, Series A, 5.50%, 11/15/18(a)

    75       75,581  

International Charter School, 5.00%, 04/15/40

    1,000       1,059,340  

Suffolk University, 4.00%, 07/01/39

    500       498,575  

Trustees of Deerfield Academy, 5.00%, 10/01/40

    1,675       1,775,433  

Massachusetts Educational Financing Authority, RB, Education Loan, Issue I, AMT, 5.00%, 01/01/27

    1,000       1,110,100  

Massachusetts Educational Financing Authority, Refunding RB, Issue J, AMT, 3.50%, 07/01/33

    215       213,271  

Massachusetts Health & Educational Facilities Authority, RB:

   

Berklee College of Music, Inc., Series A, 5.00%, 10/01/37

    70       70,179  

Northeastern University, Series R, 5.00%, 10/01/33

    225       225,574  

Massachusetts Health & Educational Facilities Authority, Refunding RB:

   

Northeastern University, Series T-2, 5.00%, 10/01/32

    500       548,915  

Springfield College, 5.63%, 10/15/19(a)

    500       521,500  

Tufts University, Series M, 5.50%, 02/15/27

    1,000       1,225,380  

University of Massachusetts Building Authority, RB, Senior-Series 2, 5.00%, 11/01/39

    500       549,860  
   

 

 

 
    18,484,357  
Health — 23.9%  

Massachusetts Development Finance Agency, Refunding RB:

   

Boston Medical Center, Series E, 4.00%, 07/01/38

    500       499,975  

Carleton-Willard Village, 5.63%, 12/01/30

    500       518,735  

New Bridge Charles, Inc., 4.13%, 10/01/42(b)

    550       547,904  

Partners Healthcare, Series L, 5.00%, 07/01/21(a)

    995       1,079,913  

Partners Healthcare, Series L, 5.00%, 07/01/36

    5       5,357  

Umass Memorial Healthcare, 5.00%, 07/01/44

    300       327,696  

Wellesley College Issue, Series L, 4.00%, 07/01/44

    250       261,363  

Western New England University, 5.00%, 09/01/43

    500       547,740  

Massachusetts Health & Educational Facilities Authority, RB:

   

Cape Cod Healthcare Obligated Group, Series D (AGC), 5.00%, 11/15/19(a)

    1,000       1,038,710  

Children’s Hospital, Series M, 5.25%, 12/01/39

    600       625,458  

Children’s Hospital, Series M, 5.50%, 12/01/39

    500       522,740  

Southcoast Health Obligation Group, Series D, 5.00%, 07/01/39

    500       511,620  
Security   Par
(000)
    Value  
Health (continued)  

Massachusetts Health & Educational Facilities Authority, Refunding RB, Winchester Hospital, Series H, 5.25%, 07/01/38

  $ 1,000     $ 1,053,790  
   

 

 

 
    7,541,001  
Housing — 8.7%  

Massachusetts Housing Finance Agency, RB, M/F Housing, Series A:

   

3.80%, 12/01/43

    500       494,370  

(FHA), 5.25%, 12/01/35

    185       193,952  

Massachusetts Housing Finance Agency, Refunding RB, AMT:

   

Series A, 4.50%, 12/01/47

    500       517,610  

Series C, 5.00%, 12/01/30

    160       161,367  

Series C, 5.35%, 12/01/42

    645       651,037  

Series F, 5.70%, 06/01/40

    735       739,219  
   

 

 

 
    2,757,555  
State — 28.3%  

Commonwealth of Massachusetts, GO, Series C, 5.00%, 07/01/45

    1,000       1,118,590  

Massachusetts Bay Transportation Authority, Refunding RB:

   

Senior Series A, 5.25%, 07/01/29

    730       906,755  

Sub-Series A-2, 5.00%, 07/01/45

    1,465       1,668,650  

Massachusetts School Building Authority, RB:

   

Dedicated Sales Tax, Senior Series A, 5.00%, 05/15/43

    500       550,830  

Series B, 5.00%, 10/15/41

    1,000       1,074,360  

Massachusetts State College Building Authority, RB, Series A, 5.50%, 05/01/19(a)

    2,500       2,563,600  

Massachusetts State College Building Authority, Refunding RB, Series B (Syncora), 5.50%, 05/01/39

    825       1,070,619  
   

 

 

 
    8,953,404  
Transportation — 25.1%  

Commonwealth of Massachusetts, RB, Series A, 5.00%, 06/15/22(a)

    1,000       1,111,300  

Commonwealth of Massachusetts, Refunding RB, Series A, 5.00%, 06/01/21(a)

    500       542,280  

Massachusetts Department of Transportation, Refunding RB, Senior Series B:

   

5.00%, 01/01/32

    1,120       1,164,341  

5.00%, 01/01/37

    1,000       1,036,790  

Massachusetts Port Authority, RB, AMT:

   

Series A, 5.00%, 07/01/42

    1,000       1,072,050  

Series B, 5.00%, 07/01/45

    1,750       1,920,240  

Metropolitan Boston Transit Parking Corp., Refunding RB, 5.25%, 07/01/36

    1,000       1,080,130  
   

 

 

 
    7,927,131  
Puerto Rico — 1.5%  
Tobacco — 1.5%            

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds, 5.63%, 05/15/43

    470       475,856  
   

 

 

 

Total Municipal Bonds — 149.5%
(Cost — $44,710,179)

 

    47,248,904  
   

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(c)

 

Massachusetts — 15.4%  
Education — 7.2%  

Massachusetts School Building Authority, RB, Senior Series B, 5.00%, 11/15/46(d)

    2,000       2,263,685  
   

 

 

 
Health — 1.4%  

Massachusetts Development Finance Agency, Refunding RB, Partners Healthcare System, 4.00%, 07/01/35

    430       443,846  
   

 

 

 
 

 

 

24    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Massachusetts Tax-Exempt Trust (MHE)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
State — 6.8%  

Commonwealth of Massachusetts, GO:

   

Series A, 5.00%, 03/01/46

  $ 1,001     $ 1,112,020  

Series G, 4.00%, 09/01/42

    1,005       1,034,795  
   

 

 

 
    2,146,815  
 

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond Trusts — 15.4%
(Cost — $4,916,327)

 

    4,854,346  
 

 

 

 

Total Long-Term Investments — 164.9%
(Cost — $49,626,506)

 

    52,103,250  
 

 

 

 
     Shares         
Short-Term Securities — 1.3%  

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(e)(f)

    427,577       427,620  
   

 

 

 

Total Short-Term Securities — 1.3%
(Cost — $427,620)

 

    427,620  
 

 

 

 

Total Investments — 166.2%
(Cost — $50,054,126)

 

    52,530,870  

Other Assets Less Liabilities — 2.1%

 

    652,694  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (10.0)%

 

    (3,146,394

VRDP Shares at Liquidation Value, Net of Deferred Offering Costs — (58.3)%

 

    (18,427,777
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 31,609,393  
 

 

 

 

 

(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) 

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.

(c) 

Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Trust. 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 Trust could ultimately be required to pay under the agreements, which expires on November 15, 2024, is $1,551,389. See Note 4 of the Notes to Financial Statements for details.

(e) 

Annualized 7-day yield as of period end.

 
(f) 

During the year ended August 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Investment
Value Held at
08/31/17
     Net
Activity
     Shares
Investment
Value Held at
08/31/18
     Value at
08/31/18
     Income      Net
Realized
Gain (Loss)
 (a)
     Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     844,109        (416,532      427,577      $ 427,620      $ 3,442      $ (98    $ 39  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     4          12/19/18        $ 481        $ (88

Long U.S. Treasury Bond

     10          12/19/18          1,442          4,237  

5-Year U.S. Treasury Note

     4          12/31/18          454          (117
                 

 

 

 
                  $ 4,032  
                 

 

 

 

 

 

SCHEDULES OF INVESTMENTS      25  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Massachusetts Tax-Exempt Trust (MHE)

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 4,237      $      $ 4,237  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 205      $      $ 205  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 169,138      $      $ 169,138  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 16,501      $      $ 16,501  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 2,586,898  

For more information about the Trust’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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $        $ 52,103,250        $             —        $ 52,103,250  

Short-Term Securities

     427,620                            427,620  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 427,620        $ 52,103,250        $        $ 52,530,870  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 4,237        $        $        $ 4,237  

Liabilities:

 

Interest rate contracts

     (205                          (205
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 4,032        $        $        $ 4,032  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

 

 

26    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Massachusetts Tax-Exempt Trust (MHE)

 

The Trust 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

   $             —        $ (3,135,858      $             —        $ (3,135,858

VRDP Shares at Liquidation Value

              (18,500,000                 (18,500,000
  

 

 

      

 

 

      

 

 

      

 

 

 
   $        $ (21,635,858      $        $ (21,635,858
  

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

SCHEDULES OF INVESTMENTS      27  


Schedule of Investments

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  

Municipal Bonds — 139.3%

 

New York — 139.0%  
Corporate — 2.8%  

City of New York Industrial Development Agency, Refunding RB, Transportation Infrastructure Properties LLC, Series A, AMT, 5.00%, 07/01/28

  $ 820     $ 872,972  

County of Onondaga New York Industrial Development Agency, RB, Bristol-Meyers Squibb Co. Project, AMT, 5.75%, 03/01/24

    1,125       1,307,677  

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

    8,445       10,430,842  
   

 

 

 
    12,611,491  
County/City/Special District/School District — 21.0%  

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

   

5.50%, 08/01/25

    2,710       3,127,746  

5.00%, 08/01/30

    2,000       2,210,820  

City of New York, GO:

   

Series A-1, 5.00%, 08/01/35

    2,350       2,527,308  

Sub-Series D-1, Fiscal 2014, 5.00%, 08/01/31

    945       1,054,800  

Sub-Series F-1, 5.00%, 04/01/40

    4,550       5,224,628  

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

   

0.00%, 11/15/46

    3,000       937,050  

(AGM), 0.00%, 11/15/55

    2,485       523,788  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/45

    12,215       13,675,792  

City of New York Industrial Development Agency, RB, PILOT, Queens Baseball Stadium (AGC), 6.38%, 01/01/39

    800       811,464  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/40

    6,150       6,923,424  

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

   

Queens Baseball Stadium (AMBAC), 5.00%, 01/01/31

    3,500       3,508,365  

Yankee Stadium Project (NPFGC), 5.00%, 03/01/46

    9,500       9,548,070  

City of New York New York, GO:

   

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

    4,175       4,520,356  

Refunding, Fiscal 2012, Series I, 5.00%, 08/01/32

    490       539,137  

Refunding, Fiscal 2014, Series E, 5.00%, 08/01/32

    2,000       2,231,400  

City of New York New York Convention Center Development Corp., RB, CAB, Sub Lien, Hotel Unit Fee, Series B (AGM), 0.00%, 11/15/56(a)

    3,765       755,410  

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

   

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 03/01/39(a)

    1,380       615,466  

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

    6,150       6,164,637  

Yankee Stadium Project (NPFGC), 5.00%, 03/01/36

    2,200       2,203,630  

County of Erie New York Fiscal Stability Authority, RB, Sales Tax and State Aid Secured Refunding Bonds, Series D:

   

5.00%, 09/01/35

    275       320,172  

5.00%, 09/01/36

    245       284,403  

5.00%, 09/01/37

    275       318,522  

5.00%, 09/01/38

    420       485,394  

5.00%, 09/01/39

    335       386,305  

County of Nassau New York, GO:

   

Series A, 5.00%, 01/15/31

    1,400       1,598,982  

Refunding Series B, 5.00%, 04/01/32

    1,980       2,256,448  

Hudson Yards Infrastructure Corp., Refunding RB, Series A:

   

2nd Indenture, 5.00%, 02/15/45

    3,200       3,613,120  

Fiscal 2017, 5.00%, 02/15/42

    3,360       3,801,739  

5.00%, 02/15/37

    515       585,972  
Security   Par
(000)
    Value  
County/City/Special District/School District (continued)  

New York Liberty Development Corp., Refunding RB, World Trade Center Project:

   

4, 5.00%, 11/15/31

  $ 1,710     $ 1,854,666  

4, 5.00%, 11/15/44

    4,000       4,306,320  

7 Class 1, 4.00%, 09/15/35

    885       923,161  

7 Class 2, 5.00%, 09/15/43

    3,430       3,690,131  

5.75%, 11/15/51

    1,755       1,945,540  
   

 

 

 
    93,474,166  
Education — 24.4%  

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

   

5.00%, 12/01/30

    250       275,405  

5.00%, 12/01/32

    100       109,510  

Amherst Development Corp., Refunding RB, University at Buffalo Foundation Faculty-Student Housing Corp., Series A (AGM), 4.63%, 10/01/20(b)

    4,975       5,270,017  

Build NYC Resource Corp., Refunding RB:

   

City University Queens College, Series A, 5.00%, 06/01/43

    450       496,107  

Manhattan College Project, 4.00%, 08/01/42

    525       532,061  

Manhattan College Project, 5.00%, 08/01/47

    505       562,514  

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

    110       111,513  

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

   

American Museum of Natural History, 5.00%, 07/01/37

    1,775       1,987,432  

American Museum of Natural History, 5.00%, 07/01/41

    750       838,050  

Carnegie Hall, 4.75%, 12/01/39

    3,150       3,241,287  

Wildlife Conservation Society, 5.00%, 08/01/42

    2,840       3,125,818  

City of New York New York Trust for Cultural Resources, Refunding RB, Carnegie Hall, Series A, 5.00%, 12/01/39

    1,850       1,915,434  

City of Troy New York Capital Resource Corp., Refunding RB, Rensselaer Polytechnic Institute Project, Series A, 5.13%, 09/01/40

    5,535       5,792,101  

Counties of Buffalo & Erie New York Industrial Development Agency, RB, City School District of Buffalo Project, Series A, 5.25%, 05/01/31

    1,000       1,086,060  

Counties of Buffalo & Erie New York Industrial Development Agency, Refunding RB, City School District of Buffalo Project, 5.00%, 05/01/28

    1,685       1,970,203  

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

    1,000       1,078,180  

County of Dutchess New York Local Development Corp., Refunding RB, Vassar College Project:

   

5.00%, 07/01/42

    985       1,120,300  

4.00%, 07/01/46

    1,865       1,918,041  

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

   

5.00%, 07/01/40

    685       762,220  

5.00%, 07/01/43

    2,480       2,748,336  

County of Monroe New York Industrial Development Corp., Refunding RB:

   

Nazareth College of Rochester Project, 4.00%, 10/01/47

    295       289,516  

University of Rochester Project, Series A, 5.00%, 07/01/23(b)

    1,240       1,413,228  

University of Rochester Project, Series A, 4.00%, 07/01/39

    350       361,816  
 

 

 

28    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Education (continued)  

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

   

5.00%, 12/01/29

  $ 1,135     $ 1,234,903  

5.00%, 12/01/36

    1,100       1,191,432  

County of Orange New York Funding Corp., Refunding RB, Mount St. Mary College Project, Series A:

   

5.00%, 07/01/37

    715       756,170  

5.00%, 07/01/42

    445       469,155  

County of St. Lawrence New York Industrial Development Agency, RB, Clarkson University Project:

   

6.00%, 09/01/34

    300       331,518  

5.38%, 09/01/41

    125       135,475  

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

   

5.25%, 01/01/21

    700       755,167  

5.50%, 01/01/21

    500       542,235  

County of Tompkins New York Industrial Development Agency, RB, Civic Facility Cornell University Project, Series A, 5.00%, 07/01/37

    500       526,790  

Dobbs Ferry Local Development Corp., RB, Mercy College Project, 5.00%, 07/01/39

    750       829,980  

State of New York Dormitory Authority, RB:

   

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

    1,770       1,928,769  

Fordham University, Series A, 5.00%, 07/01/21(b)

    175       190,641  

Fordham University, Series A, 5.50%, 07/01/21(b)

    1,375       1,516,749  

New School (AGM), 5.50%, 07/01/20(b)

    3,265       3,484,767  

New York University Mount Sinai School of Medicine, 5.13%, 07/01/19(b)

    1,000       1,027,990  

New York University, Series 1 (AMBAC), 5.50%, 07/01/40

    3,500       4,523,715  

New York University, Series B, 5.00%, 07/01/19(b)

    400       411,124  

New York University, Series B, 5.00%, 07/01/42

    3,000       3,275,100  

Siena College, 5.13%, 07/01/19(b)

    1,345       1,383,763  

State University Dormitory Facilities, Series A, 5.00%, 07/01/35

    750       790,042  

State University Dormitory Facilities, Series A, 5.00%, 07/01/40

    1,500       1,570,455  

State University Dormitory Facilities, Series A, 5.00%, 07/01/41

    1,500       1,611,285  

State of New York Dormitory Authority, Refunding RB:

   

3rd General Resolution, State University Educational Facilities Issue, Series A, 5.00%, 05/15/29

    1,000       1,101,420  

Barnard College, Series A, 5.00%, 07/01/34

    900       1,017,378  

Barnard College, Series A, 4.00%, 07/01/37

    510       525,336  

Barnard College, Series A, 5.00%, 07/01/43

    1,500       1,666,185  

Columbia University, Series B, 5.00%, 10/01/38

    1,780       2,093,707  

Cornell University, Series A, 5.00%, 07/01/40

    1,000       1,051,920  

Fordham University, 5.00%, 07/01/44

    1,900       2,098,341  

Icahn School of Medicine at Mount Sinai, Series A, 5.00%, 07/01/35

    1,030       1,144,783  

New York University, Series A, 5.00%, 07/01/31

    3,000       3,301,590  

New York University, Series A, 5.00%, 07/01/37

    4,180       4,576,139  

Pratt Institute, 5.00%, 07/01/46

    800       887,808  

Rochester Institute of Technology, 4.00%, 07/01/31

    1,300       1,359,501  

Rochester Institute of Technology, 5.00%, 07/01/42

    750       814,207  

St. John’s University, Series A, 5.00%, 07/01/37

    2,005       2,232,327  

State University Dormitory Facilities, Series A, 5.25%, 07/01/31

    4,755       5,384,657  

State University Dormitory Facilities, Series A, 5.25%, 07/01/32

    6,435       7,284,034  

State University Dormitory Facilities, Series A, 5.00%, 07/01/42

    1,490       1,615,294  

State University Dormitory Facilities, Series A, 5.00%, 07/01/42

    1,435       1,630,935  
Security   Par
(000)
    Value  
Education (continued)  

State University Dormitory Facilities, Series A, 5.00%, 07/01/46

  $ 440     $ 498,630  

State University Dormitory Facilities, Series B, 5.00%, 07/01/32

    500       569,525  

State University Dormitory Facilities, Series B, 5.00%, 07/01/33

    860       976,719  

Town of Hempstead New York Local Development Corp., Refunding RB, Hofstra University Project, 5.00%, 07/01/47

    1,030       1,154,651  
   

 

 

 
    108,477,461  
Health — 10.2%  

City of New York New York Health & Hospital Corp., Refunding RB, Health System, Series A, 5.00%, 02/15/30

    1,800       1,873,602  

County of Dutchess New York Industrial Development Agency, RB, Vassar Brothers Medical Center (AGC), 5.50%, 04/01/34

    500       533,760  

County of Dutchess New York Local Development Corp., RB, Health Quest Systems, Inc., Series B, 4.00%, 07/01/41

    4,310       4,327,068  

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

   

4.00%, 12/01/41

    500       501,020  

5.00%, 12/01/46

    800       875,608  

Series A, 5.00%, 12/01/37

    1,180       1,270,789  

County of Monroe New York Industrial Development Corp., Refunding RB, Unity Hospital of Rochester Project (FHA), 5.50%, 08/15/40

    5,925       6,406,880  

County of Suffolk New York EDC, RB, Catholic Health Services, Series C, 5.00%, 07/01/32

    460       501,350  

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

    1,340       1,421,311  

State of New York Dormitory Authority, RB:

   

Health System, Series B (AGM), 5.00%, 02/15/33

    1,020       1,022,458  

Healthcare, Series A, 5.00%, 03/15/19(b)

    2,250       2,291,715  

New York University Hospitals Center, Series A, 5.75%, 07/01/20(b)

    2,680       2,869,851  

New York University Hospitals Center, Series A, 6.00%, 07/01/20(b)

    1,800       1,935,540  

North Shore-Long Island Jewish Obligated Group, Series A, 5.50%, 05/01/19(b)

    1,825       1,872,523  

North Shore-Long Island Jewish Obligated Group, Series C, 4.25%, 05/01/39

    1,000       1,041,880  

North Shore-Long Island Jewish Obligated Group, Series D, 4.25%, 05/01/39

    685       713,688  

State of New York Dormitory Authority, Refunding RB:

   

Memorial Sloan-Kettering Cancer Center, Series 1, 5.00%, 07/01/42

    2,200       2,498,562  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/21(b)

    2,000       2,167,360  

North Shore-Long Island Jewish Obligated Group, Series A, 5.25%, 05/01/21(b)

    7,375       8,039,709  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/32

    2,645       2,967,002  
   

 

 

 
    45,131,676  
Housing — 3.1%  

City of New York Housing Development Corp., RB, M/F Housing, Fund Grant Program, New York City Housing Authority Program, Series B1:

   

5.25%, 07/01/32

    6,505       7,129,740  

5.00%, 07/01/33

    1,375       1,486,637  
 

 

 

SCHEDULES OF INVESTMENTS      29  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Housing (continued)  

City of New York Housing Development Corp., Refunding RB, M/F Housing, 8 Spruce Street, Class F, 4.50%, 02/15/48

  $ 1,075     $ 1,114,033  

City of Yonkers New York Industrial Development Agency, RB, Monastery Manor Associates LP Project, Series A, AMT (SONYMA), 5.25%, 04/01/37

    2,000       2,005,060  

State of New York HFA, RB, M/F Housing:

   

Affordable Series B (Ginnie Mae, Fannie Mae & Freddie Mac), 4.00%, 11/01/42

    845       861,165  

St. Philip’s Housing, Series A, AMT, 4.65%, 11/15/38

    1,000       1,000,520  
   

 

 

 
    13,597,155  
State — 20.9%  

City of New York New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-4 (AGC), 5.50%, 01/15/39

    1,250       1,266,813  

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

   

Fiscal 2014, Sub-Series A-1, 5.00%, 11/01/38

    950       1,058,338  

Fiscal 2016, Sub-Series B-1, 5.00%, 11/01/38

    1,455       1,639,087  

Sub Series A-3, 5.00%, 08/01/41

    4,505       5,132,682  

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

    2,100       2,364,600  

City of New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-4 (AGC), 5.50%, 01/15/33

    3,000       3,042,750  

City of New York Transitional Finance Authority, Refunding RB, Fiscal 2018:

   

Series S-1, 5.00%, 07/15/35

    1,220       1,398,364  

Series S-2, 5.00%, 07/15/35

    1,220       1,398,364  

City of New York Transitional Finance Authority Building Aid Revenue, RB:

   

Series S-1, 5.00%, 07/15/37

    1,815       2,037,809  

Series S-3, 5.25%, 07/15/36

    1,600       1,897,776  

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

   

Fiscal 2014, Sub-Series B-1, 5.00%, 11/01/36

    1,690       1,899,154  

Series A-2, 5.00%, 08/01/39

    2,090       2,386,425  

Sub-Series E-1, 5.00%, 02/01/38

    4,470       5,079,931  

Sub-Series F-1, 5.00%, 05/01/38

    3,455       3,938,596  

Sub-Series F-1, 5.00%, 05/01/39

    4,300       4,894,905  

Subordinate, Sub-Series C-3, 4.00%, 05/01/42

    2,790       2,882,544  

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

    1,145       1,308,151  

Metropolitan Transportation Authority, Refunding RB:

   

Dedicated Tax Fund, Series B, 5.00%, 11/15/19(b)

    2,500       2,601,025  

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

    4,000       4,490,360  

Green Bond, Series A1, 5.00%, 11/15/37

    1,500       1,688,895  

New York State Dormitory Authority, Refunding RB, Series C, 5.00%, 03/15/38

    1,000       1,154,800  

Sales Tax Asset Receivable Corp., Refunding RB, Fiscal 2015, Series A, 4.00%, 10/15/32

    2,070       2,229,080  

State of New York Dormitory Authority, RB:

   

Bid Group 2, Series A, 5.00%, 03/15/38

    2,725       3,110,342  

General Purpose, Series A, 5.00%, 02/15/36

    4,500       4,956,435  

General Purpose, Series B, 5.00%, 03/15/37

    3,000       3,257,010  

General Purpose, Series B, 5.00%, 03/15/42

    4,600       4,982,720  

Group 4, Series A, 5.00%, 03/15/45

    2,800       3,208,604  

Master BOCES Program Lease (AGC),
5.00%, 08/15/19(b)

    250       258,053  

Series A, 5.00%, 03/15/36

    1,180       1,347,253  

Series A, 5.00%, 02/15/42

    7,500       8,451,525  

Series B, 5.00%, 03/15/37

    1,500       1,698,960  

State Personal Income Tax, Series A, 5.00%, 02/15/43

    495       542,589  

State of New York Dormitory Authority, Refunding RB, School Districts Financing Program, Series A (AGM), 5.00%, 10/01/18(b)

    3,000       3,007,830  
Security   Par
(000)
    Value  
State (continued)  

State of New York Urban Development Corp., RB, State Personal Income Tax, Series C, 5.00%, 03/15/32

  $ 2,000     $ 2,222,740  
   

 

 

 
    92,834,510  
Tobacco — 2.3%  

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

   

Series A, 5.00%, 06/01/41

    400       433,852  

Series A-2B, 5.00%, 06/01/51

    765       799,371  

Series B, 5.00%, 06/01/45

    1,500       1,598,895  

County of Chautauqua New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, 4.75%, 06/01/39

    1,875       1,891,744  

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

   

5.25%, 05/15/34

    1,495       1,608,949  

5.25%, 05/15/40

    1,500       1,601,640  

Westchester New York Tobacco Asset Securitization, Refunding RB, Tobacco Settlement Bonds, Sub-Series C, 4.00%, 06/01/42

    2,440       2,384,954  
   

 

 

 
    10,319,405  
Transportation — 38.6%  

Buffalo & Fort Erie Public Bridge Authority, RB, Toll Bridge System:

   

5.00%, 01/01/42

    970       1,093,617  

5.00%, 01/01/47

    325       365,157  

Metropolitan Transportation Authority, RB:

   

Green Bonds, Series A, 5.00%, 11/15/42

    3,500       3,980,410  

Series A, 5.00%, 11/15/21(b)

    1,000       1,099,860  

Series A, 5.00%, 05/15/23(b)

    3,000       3,412,830  

Series A-1, 5.25%, 11/15/23(b)

    1,620       1,881,954  

Series A-1, 5.25%, 11/15/23(b)

    1,620       1,881,954  

Series B, 5.25%, 11/15/44

    1,000       1,125,850  

Series C, 6.50%, 11/15/28

    1,155       1,166,250  

Series D, 5.25%, 11/15/21(b)

    440       487,340  

Series E, 5.00%, 11/15/38

    8,750       9,620,887  

Series E, 5.00%, 11/15/43

    1,000       1,088,960  

Sub-Series B, 5.00%, 11/15/23(b)

    1,000       1,149,420  

Metropolitan Transportation Authority, Refunding RB:

   

Green Bond, SubSeries B-1, 5.00%, 11/15/51

    2,360       2,651,295  

Green Bonds, Climate Bond Certified, Sub-Series B-2, 4.00%, 11/15/34

    2,500       2,658,125  

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

    1,830       2,052,162  

Green Bonds, Series A-1, 5.25%, 11/15/57

    1,505       1,703,299  

Series B, 5.00%, 11/15/37

    2,010       2,259,642  

Series D, 5.25%, 11/15/21(b)

    1,560       1,727,840  

Series D, 5.00%, 11/15/30

    885       974,403  

Metropolitan Transportation Authority Hudson Rail Yards Trust Obligations, Refunding RB, Series A, 5.00%, 11/15/56

    5,410       5,850,861  

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

    11,500       12,599,170  

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

   

5.00%, 07/01/46

    7,625       8,127,183  

5.25%, 01/01/50

    7,670       8,266,342  

(AGM), 4.00%, 07/01/41

    1,250       1,264,200  

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

    355       359,260  

Port Authority of New York & New Jersey, ARB:

   

Consolidated, 163rd Series, 5.00%, 07/15/35

    2,500       2,644,300  

Consolidated, 183rd Series, 4.00%, 06/15/44

    1,500       1,548,375  

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

    19,725       20,495,458  
 

 

 

30    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Transportation (continued)  

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

   

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

  $ 1,000     $ 1,106,470  

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

    1,390       1,559,594  

Consolidated, 177th Series, AMT, 4.00%, 01/15/43

    285       289,554  

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

    750       822,188  

Consolidated, 195th Series, AMT, 5.00%, 04/01/36

    1,400       1,567,426  

Consolidated, 206th Series, AMT, 5.00%, 11/15/42

    2,375       2,662,826  

Consolidated, 211th Series, 5.00%, 09/01/48

    4,760       5,478,808  

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

   

5.00%, 01/01/41

    1,770       1,969,107  

5.25%, 01/01/56

    1,080       1,216,696  

State of New York Thruway Authority, Refunding RB:

   

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

    3,770       4,072,316  

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

    4,270       4,602,462  

General, Series J, 5.00%, 01/01/41

    5,000       5,493,500  

General, Series K, 5.00%, 01/01/29

    1,750       1,991,150  

General, Series K, 5.00%, 01/01/31

    1,000       1,130,340  

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

    1,000       1,128,480  

Series L, 5.00%, 01/01/33

    410       474,792  

Series L, 5.00%, 01/01/34

    710       819,702  

Series L, 5.00%, 01/01/35

    810       932,326  

Triborough Bridge & Tunnel Authority, RB, Series B:

   

5.00%, 11/15/40

    940       1,064,700  

5.00%, 11/15/45

    820       927,650  

Triborough Bridge & Tunnel Authority, Refunding RB:

   

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

    7,670       4,680,541  

General, MTA Bridges & Tunnels, Series C-2, 5.00%, 11/15/42

    6,720       7,705,421  

General, Remarketing, Series A, 5.00%, 11/15/36

    1,000       1,105,230  

General, Series A, 5.00%, 11/15/41

    5,000       5,653,000  

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

    1,280       1,466,803  

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

    3,000       3,332,490  

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

    2,000       2,287,580  

General, Series C, 5.00%, 11/15/18(b)

    855       860,934  

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

    530       533,625  

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

    875       978,294  
   

 

 

 
    171,450,409  
Utilities — 15.7%  

City of New York Municipal Water Finance Authority, RB, Water & Sewer System, 2nd General Resolution, Fiscal 2017, Series DD, 5.25%, 06/15/47

    2,455       2,831,842  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2015, Series HH, 5.00%, 06/15/39

    2,250       2,525,512  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2011, Series BB, 5.00%, 06/15/31

    1,000       1,054,270  

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

   

Fiscal 2010, Series FF, 5.00%, 06/15/31

    1,500       1,581,405  

Fiscal 2011, Series GG, 5.00%, 06/15/21(b)

    2,070       2,252,760  

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

   

2nd Generation Resolution, Fiscal 2018, Series FF, 5.00%, 06/15/40

    2,000       2,309,200  

Series EE, 5.00%, 06/15/40

    5,460       6,266,879  

County of Western Nassau New York Water Authority, RB, Series A, 5.00%, 04/01/40

    1,065       1,175,792  

Long Island Power Authority, RB, General, Electric Systems:

   

5.00%, 09/01/42

    1,185       1,340,590  

Series A (AGM), 5.00%, 05/01/21(b)

    2,375       2,573,740  
Security   Par
(000)
    Value  
Utilities (continued)  

Long Island Power Authority, Refunding RB:

   

Electric System, Series B, 5.00%, 09/01/41

  $ 475     $ 532,361  

Electric System, Series B, 5.00%, 09/01/46

    625       698,150  

Electric Systems, Series A (AGC), 5.75%, 04/01/19(b)

    1,000       1,024,290  

General, Electric Systems, Series A (AGC), 6.00%, 05/01/19(b)

    1,500       1,543,440  

State of New York Environmental Facilities Corp., RB:

   

Green Bond, Series CRB, Green Bond, Series CRB, Green Bond, Series C, 5.00%, 08/15/38

    1,000       1,154,170  

Green Bond, Series C, 5.00%, 08/15/36

    475       550,649  

Series B, Revolving Funds, Green Bonds, 5.00%, 09/15/40

    3,170       3,583,400  

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

   

Revolving Funds, New York City Municipal Water, Series B, 5.00%, 06/15/36

    3,200       3,454,432  

Series A, 5.00%, 06/15/40

    1,545       1,753,451  

Series A, 5.00%, 06/15/45

    7,935       8,979,405  

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

    2,580       2,808,253  

Utility Debt Securitization Authority, Refunding RB, Restructuring:

   

5.00%, 12/15/35

    2,280       2,612,948  

Series E, 5.00%, 12/15/41

    15,490       17,287,460  
   

 

 

 
    69,894,399  
 

 

 

 

Total Municipal Bonds in New York

 

    617,790,672  
   

 

 

 
Guam — 0.3%  
Utilities — 0.3%  

Guam Power Authority, RB, Series A (AGM), 5.00%, 10/01/20(b)

    1,175       1,252,115  
   

 

 

 

Total Municipal Bonds — 139.3%
(Cost — $595,407,617)

 

    619,042,787  
 

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(c)

 

New York — 27.8%  
County/City/Special District/School District — 5.7%  

City of New York, GO, Sub-Series I-1, 5.00%, 03/01/36

    2,500       2,786,950  

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

    2,500       2,866,563  

City of New York New York, GO, Sub-Series C-3 (AGC), 5.75%, 02/15/19(b)(d)

    10,000       10,187,750  

Hudson Yards Infrastructure Corp., RB, Fiscal 2012, Series A, 5.75%, 02/15/47(d)

    5,999       6,537,252  

New York Liberty Development Corp., Refunding RB, 7 World Trade Center Project, Class 1, 5.00%, 09/15/40

    2,610       2,844,082  
   

 

 

 
    25,222,597  
Education — 2.7%  

City of New York Trust for Cultural Resources, Refunding RB, Wildlife Conservation Society, Series A, 5.00%, 08/01/33

    1,981       2,199,388  

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

   

5.25%, 07/01/19(b)

    5,000       5,149,775  

5.00%, 07/01/35

    4,448       4,787,690  
   

 

 

 
    12,136,853  
State — 10.0%  

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

    1,650       1,785,762  
 

 

 

SCHEDULES OF INVESTMENTS      31  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
State (continued)  

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

   

5.00%, 10/15/31

  $ 7,380     $ 8,456,890  

4.00%, 10/15/32

    6,000       6,461,130  

State of New York Dormitory Authority, ERB, Series B, 5.75%, 03/15/19(b)

    5,000       5,110,150  

State of New York Dormitory Authority, RB:

   

Bid Group 2, Series A, 5.00%, 03/15/32

    2,000       2,358,380  

General Purpose, Series C, 5.00%, 03/15/41

    2,500       2,665,537  

Mental Health Services Facilities, Series C, AMT (AGM), 5.40%, 02/15/33

    5,458       5,472,092  

Series A, 5.00%, 03/15/44

    4,858       5,415,198  

State of New York Dormitory Authority, Refunding RB, Series E, 5.25%, 03/15/33

    4,500       5,195,790  

State of New York Urban Development Corp., Refunding RB, State Personal Income Tax, Series A, 5.00%, 03/15/45

    1,471       1,646,121  
   

 

 

 
    44,567,050  
Transportation — 5.4%  

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

   

194th Series, 5.25%, 10/15/55

    3,405       3,870,906  

Consolidated, Series 169th, 5.00%, 10/15/25

    8,005       8,636,262  

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

    10,000       11,269,500  
   

 

 

 
    23,776,668  
Utilities — 4.0%  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2011, Series HH, 5.00%, 06/15/32

    7,151       7,699,865  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Series FF-2, 5.50%, 06/15/40

    2,400       2,467,808  

City of New York Water & Sewer System, Refunding RB, 2nd General Resolution, Fiscal 2018, 5.00%, 06/15/38(d)

    1,151       1,315,437  

Utility Debt Securitization Authority, Refunding RB, Restructuring:

   

Series A, 5.00%, 12/15/35

    3,000       3,451,500  

Series B, 4.00%, 12/15/35

    2,600       2,753,946  
   

 

 

 
    17,688,556  
 

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond
Trusts — 27.8%
(Cost — $120,993,365)

 

    123,391,724  
 

 

 

 

Total Long-Term Investments — 167.1%
(Cost — $716,400,982)

 

    742,434,511  
 

 

 

 
Security   Shares    

Value

 

Short-Term Securities — 0.6%

 

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(e)(f)

    2,683,498     $ 2,683,766  
   

 

 

 

Total Short-Term Securities — 0.6%
(Cost — $2,683,717)

 

    2,683,766  
 

 

 

 

Total Investments — 167.7%
(Cost — $719,084,699)

 

    745,118,277  

Other Assets Less Liabilities — 1.5%

 

    7,010,421  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (14.5)%

 

    (64,512,614

VRDP Shares at Liquidation Value, Net of Deferred Offering
Costs — (54.7)%

 

    (243,247,283
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 444,368,801  
 

 

 

 

 

(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 Trust. 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 Trust could ultimately be required to pay under the agreements, which expire between February 15, 2019 to June 15, 2025, is $9,082,326. See Note 4 of the Notes to Financial Statements for details.

(e) 

Annualized 7-day yield as of period end.

 
(f) 

During the year ended August 31, 2018, investments in issuers considered to be affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Held at
08/31/17
     Net
Activity
     Shares
Held at
08/31/18
     Value at
08/31/18
     Income      Net
Realized

Gain (Loss) (a)
     Change in
Unrealized

Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     3,259,019        (575,521      2,683,498      $ 2,683,766      $ 50,751      $ (124    $ 99  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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.

 

 

32    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     41          12/19/18        $ 4,931        $ (858

Long U.S. Treasury Bond

     117          12/19/18          16,874          53,339  

5-Year U.S. Treasury Note

     61          12/31/18          6,917          (2,330
                 

 

 

 
                  $ 50,151  
                 

 

 

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 53,339      $      $ 53,339  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 3,188      $      $ 3,188  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations were as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 2,378,940      $      $ 2,378,940  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 284,458      $      $ 284,458  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 36,607,141  

 

 

SCHEDULES OF INVESTMENTS      33  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)

 

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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $        $ 742,434,511        $        $ 742,434,511  

Short-Term Securities

     2,683,766                            2,683,766  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 2,683,766        $ 742,434,511        $        $ 745,118,277  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 53,339        $        $        $ 53,339  

Liabilities:

 

Interest rate contracts

     (3,188                          (3,188
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 50,151        $        $        $ 50,151  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

The Trust 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

   $        $ (64,262,332      $        $ (64,262,332

VRDP Shares at Liquidation Value

              (243,600,000                 (243,600,000
  

 

 

      

 

 

      

 

 

      

 

 

 
   $             —        $ (307,862,332      $             —        $ (307,862,332
  

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

34    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

August 31, 2018

  

BlackRock New York Municipal Bond Trust (BQH)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  

Municipal Bonds — 137.2%

 

New York — 136.0%  
Corporate — 6.6%  

Build NYC Resource Corp., Refunding RB, Pratt Paper, Inc. Project, AMT, 5.00%, 01/01/35(a)

  $ 100     $ 107,147  

City of New York Industrial Development Agency, Refunding RB, Transportation Infrastructure Properties LLC, Series A, AMT, 5.00%, 07/01/28

    690       734,574  

County of Essex New York Industrial Development Agency, RB, International Paper Co. Project, Series A, AMT, 6.63%, 09/01/32

    100       100,000  

County of Onondaga New York Industrial Development Agency, RB, Bristol-Meyers Squibb Co. Project, AMT, 5.75%, 03/01/24

    250       290,595  

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

    475       586,696  

Niagara Area Development Corp., Refunding RB, Series A, AMT(a):

   

Solid Waste Disposal Facility, Covanta Energy Project, 5.25%, 11/01/42

    375       377,685  

Refunding RB, Covanta Energy Project, 4.75%, 11/01/42

    640       642,394  
   

 

 

 
    2,839,091  
County/City/Special District/School District — 29.7%  

City of New York, GO, Refunding, Series E, 5.50%, 08/01/25

    150       173,122  

City of New York, GO:

   

Series D, 5.38%, 06/01/32

    15       15,046  

Series G-1, 6.25%, 12/15/31

    5       5,066  

Sub-Series D-1, Fiscal 2014, 5.00%, 08/01/31

    245       273,467  

Sub-Series G-1, 6.25%, 12/15/18(b)

    245       248,254  

Sub-Series I-1, 5.38%, 04/01/19(b)

    115       117,548  

Sub-Series I-1, 5.38%, 04/01/36

    20       20,407  

City of New York Convention Center Development Corp., RB, CAB, Sub Lien, Hotel Unit Fee, Series B (AGM), 0.00%, 11/15/55(c)

    500       105,390  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/45

    670       750,125  

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

   

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 03/01/42(c)

    500       191,845  

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 03/01/45(c)

    950       315,086  

(AMBAC), 5.00%, 01/01/39

    325       328,929  

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

    100       101,433  

Queens Baseball Stadium (AMBAC), 5.00%, 01/01/46

    175       177,273  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/40

    1,110       1,249,594  

City of New York Industrial Development Agency, RB, PILOT, Yankee Stadium Project (NPFGC), 5.00%, 03/01/46

    175       175,885  

City of New York New York, GO, Refunding, Series J, 5.00%, 08/01/32

    500       564,705  

City of New York New York, GO, Sub-Series G-1, 5.00%, 04/01/29

    250       274,280  

City of New York New York Industrial Development Agency, RB, CAB, PILOT, Yankee Stadium Project, Series A (AGC)(c):

   

0.00%, 03/01/41

    4,155       1,675,296  

0.00%, 03/01/43

    2,000       731,440  

County of Erie New York Fiscal Stability Authority, RB, Sales Tax and State Aid Secured Refunding Bonds, Series D:

   

5.00%, 09/01/35

    25       29,107  

5.00%, 09/01/36

    25       29,021  
Security   Par
(000)
    Value  
County/City/Special District/School District (continued)  

5.00%, 09/01/37

  $ 25     $ 28,957  

5.00%, 09/01/38

    40       46,228  

5.00%, 09/01/39

    35       40,360  

Hudson Yards Infrastructure Corp., Refunding RB, Series A:

   

2nd Indenture, 5.00%, 02/15/45

    125       141,138  

Fiscal 2017, 5.00%, 02/15/42

    405       458,245  

5.00%, 02/15/37

    50       56,891  

New York Liberty Development Corp., Refunding RB:

   

2nd Priority, Bank of America Tower at One Bryant Park Project, Class 2, 5.63%, 07/15/47

    1,350       1,418,526  

2nd Priority, Bank of America Tower at One Bryant Park Project, Class 3, 6.38%, 07/15/49

    285       299,011  

3 World Trade Center Project, Class 2, 5.38%, 11/15/40(a)

    120       132,080  

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

    750       813,450  

7 World Trade Center Project, Class 1, 4.00%, 09/15/35

    320       333,798  

7 World Trade Center Project, Class 2, 5.00%, 09/15/43

    500       537,920  

7 World Trade Center Project, Class 3, 5.00%, 03/15/44

    520       558,714  

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

    340       376,914  
   

 

 

 
    12,794,551  
Education — 35.5%  

Amherst Development Corp., Refunding RB:

   

Daemen College Project, 5.00%, 10/01/43

    85       91,768  

Daemen College Project, 5.00%, 10/01/48

    65       69,896  

University at Buffalo Foundation Faculty-Student Housing Corp., Series A (AGM), 4.63%, 10/01/20(b)

    140       148,302  

Build NYC Resource Corp., RB, Inwood Academy for Leadership Charter School Project, Series A, 5.50%, 05/01/48(a)

    150       156,261  

Build NYC Resource Corp., Refunding RB:

   

City University New York-Queens College Student Residences, LLC Project, Series A, 5.00%, 06/01/38

    250       276,865  

Ethical Culture Fieldston School Project, 5.00%, 06/01/32

    450       504,814  

Manhattan College Project, 5.00%, 08/01/35

    120       135,528  

Packer Collegiate Institute Project, 5.00%, 06/01/40

    310       340,612  

City of New York Trust for Cultural Resources, RB, Juilliard School, Series A, 5.00%, 01/01/39

    250       252,622  

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

   

American Museum of Natural History, 5.00%, 07/01/37

    110       123,165  

Carnegie Hall, 4.75%, 12/01/39

    400       411,592  

City of Troy New York Capital Resource Corp., Refunding RB, Rensselaer Polytechnic Institute Project:

   

Series A, 5.13%, 09/01/40

    610       638,334  

Series B, 4.00%, 08/01/35

    110       113,268  

City of Yonkers New York Industrial Development Agency, RB, Sarah Lawrence College Project, Series A, 6.00%, 06/01/19(b)

    250       258,040  

Counties of Buffalo & Erie New York Industrial Land Development Corp., Refunding RB, The Charter School for Applied Technologies Project, Series A, 5.00%, 06/01/35

    55       59,701  

County of Cattaraugus New York, RB, St. Bonaventure University Project, 5.00%, 05/01/39

    60       64,643  

County of Dutchess New York Local Development Corp., Refunding RB, Vassar College Project:

   

5.00%, 07/01/42

    100       113,736  

4.00%, 07/01/46

    185       190,261  

County of Monroe New York Industrial Development Corp., RB, University of Rochester Project(b):

   

5.00%, 07/01/21

    110       119,514  

5.00%, 07/01/21

    390       424,858  

Series A, 5.00%, 07/01/21

    500       544,690  

County of Monroe New York Industrial Development Corp., Refunding RB:

   

Nazareth College of Rochester Project, 4.00%, 10/01/47

    25       24,535  

University of Rochester Project, Series A, 5.00%, 07/01/23(b)

    120       136,764  
 

 

 

SCHEDULES OF INVESTMENTS      35  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Bond Trust (BQH)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Education (continued)  

County of Nassau New York Industrial Development Agency, Refunding RB, New York Institute of Technology Project, Series A, 4.75%, 03/01/20(b)

  $ 200     $ 208,990  

County of Tompkins New York Development Corp., RB, Ithaca College Project (AGM), 5.50%, 01/01/21(b)

    100       108,447  

Geneva Development Corp., Refunding RB, Hobart & William Smith Colleges, 5.25%, 09/01/44

    160       178,133  

State of New York Dormitory Authority, RB:

   

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

    300       326,910  

Education, Series B, 5.75%, 03/15/19(b)

    300       306,660  

New York University, Series 1 (AMBAC) (BHAC), 5.50%, 07/01/31

    245       296,541  

New York University, Series B, 5.00%, 07/01/42

    500       545,850  

State University Dormitory Facilities, Series A, 5.00%, 07/01/19(b)

    150       154,172  

Teachers College, Series B, 5.00%, 07/01/42

    750       811,087  

Touro College & University System, Series A, 5.25%, 01/01/34

    250       272,852  

Touro College & University System, Series A, 5.50%, 01/01/39

    500       548,645  

University of Rochester, Series A, 5.13%, 07/01/19(b)

    185       190,332  

University of Rochester, Series A, 5.75%, 07/01/19(b)

    150       155,087  

University of Rochester, Series A, 5.13%, 07/01/39

    30       30,795  

University of Rochester, Series A, 5.75%, 07/01/39

    25       25,821  

State of New York Dormitory Authority, Refunding RB:

   

Barnard College, Series A, 5.00%, 07/01/34

    100       113,042  

Bid Group 4, Series C, 4.00%, 03/15/44

    305       315,510  

Brooklyn Law School, 5.75%, 07/01/33

    125       128,146  

Columbia University, Series B, 5.00%, 10/01/38

    170       199,961  

Cornell University, Series A, 5.00%, 07/01/40

    150       157,788  

Fordham University, 5.00%, 07/01/44

    340       375,493  

Icahn School of Medicine at Mount Sinai, Series A, 5.00%, 07/01/35

    345       383,447  

New York University, Series A, 5.00%, 07/01/37

    445       487,173  

New York University, Series A, 5.00%, 07/01/42

    1,750       1,910,475  

Skidmore College, Series A, 5.00%, 07/01/28

    250       269,260  

State University Dormitory Facilities, Series A, 5.25%, 07/01/30

    350       396,690  

State University Dormitory Facilities, Series A, 5.25%, 07/01/32

    350       396,179  

State University Dormitory Facilities, Series A, 5.00%, 07/01/46

    190       215,318  

Teachers College, 5.50%, 03/01/19(b)

    350       356,688  

Town of Hempstead New York Local Development Corp., Refunding RB:

   

Adelphi University Project, 5.00%, 10/01/34

    105       116,699  

Hofstra University Project, 5.00%, 07/01/47

    100       112,102  
   

 

 

 
    15,294,062  
Health — 16.5%  

Counties of Buffalo & Erie New York Industrial Land Development Corp., RB, Catholic Health System Obligation, 5.25%, 07/01/35

    500       548,850  

County of Dutchess New York Local Development Corp., Refunding RB, Health Quest System, Inc., Series A (AGM), 5.75%, 07/01/30

    350       377,751  

County of Genesee New York Industrial Development Agency, Refunding RB, United Memorial Medical Center Project, 5.00%, 12/01/27

    130       130,081  

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

   

4.00%, 12/01/41

    100       100,204  

5.00%, 12/01/46

    160       175,122  

Series A, 5.00%, 12/01/37

    370       398,468  
Security   Par
(000)
    Value  
Health (continued)  

County of Monroe New York Industrial Development Corp., Refunding RB, Unity Hospital of Rochester Project (FHA), 5.50%, 08/15/40

  $ 275     $ 297,366  

County of Suffolk New York EDC, RB, Catholic Health Services, Series C, 5.00%, 07/01/32

    80       87,191  

County of Westchester New York Healthcare Corp., Refunding RB, Senior Lien:

   

Remarketing, Series A, 5.00%, 11/01/30

    1,030       1,092,500  

Series B, 6.00%, 11/01/20(b)

    175       190,661  

Series B, 6.00%, 11/01/30

    25       26,802  

County of Westchester New York Local Development Corp., Refunding RB, Kendal On Hudson Project, 5.00%, 01/01/34

    500       533,955  

State of New York Dormitory Authority, RB:

   

Mental Health Services (AGM), 5.00%, 02/15/22

    25       25,063  

New York State Association for Retarded Children, Inc., Series B (AMBAC), 6.00%, 07/01/19(b)

    185       191,571  

New York University Hospitals Center, Series A, 5.75%, 07/01/20(b)

    220       235,585  

North Shore-Long Island Jewish Obligated Group, Series A, 5.75%, 05/01/19(b)

    500       513,835  

State of New York Dormitory Authority, Refunding RB:

   

Memorial Sloan-Kettering Cancer Center, Series 1, 5.00%, 07/01/42

    205       232,820  

Miriam Osborn Memorial Home Association, 5.00%, 07/01/29

    290       296,070  

Mount Sinai Hospital, Series A, 5.00%, 07/01/26

    315       331,878  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/21(b)

    1,000       1,083,680  

North Shore-Long Island Jewish Obligated Group, Series E, 5.50%, 05/01/33

    250       255,680  
   

 

 

 
    7,125,133  
Housing — 5.6%  

City of New York Housing Development Corp., RB, M/F Housing, Fund Grant Program, New York City Housing Authority Program, Series B1:

   

5.25%, 07/01/32

    735       805,589  

5.00%, 07/01/33

    250       270,298  

City of New York Housing Development Corp., Refunding RB, M/F Housing, 8 Spruce Street, Class F, 4.50%, 02/15/48

    500       518,155  

County of Onondaga New York Trust for Cultural Resources, Refunding RB, Abby Lane Housing Corporation Project, 5.00%, 05/01/40

    135       147,891  

State of New York HFA, RB:

   

Affordable Housing, Series E (SONYMA), 4.15%, 11/01/47

    165       168,909  

M/F Housing, Highland Avenue Senior Apartments, Series A, AMT (SONYMA), 5.00%, 02/15/39

    485       486,576  
   

 

 

 
    2,397,418  
State — 7.9%  

City of New York New York Transitional Finance Authority Future Tax Secured, RB, Sub-Series B-1, 5.00%, 11/01/35

    200       225,200  

City of New York Transitional Finance Authority, BARB:

   

Fiscal 2018, Series S-1, 5.00%, 07/15/35

    115       131,813  

Fiscal 2018, Series S-2, 5.00%, 07/15/35

    115       131,813  

Series S-3, 5.25%, 07/15/36

    150       177,917  

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

   

Sub-Series F-1, 5.00%, 05/01/38

    325       370,490  

Sub-Series F-1, 5.00%, 05/01/39

    135       153,677  

Subordinate, Sub-Series C-3, 4.00%, 05/01/42

    265       273,790  

State of New York, GO, Series A, 5.00%, 02/15/39

    250       253,600  
 

 

 

36    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Bond Trust (BQH)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
State (continued)  

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

   

General Purpose, 5.00%, 02/15/42

  $ 500     $ 563,435  

Group 4, 5.00%, 03/15/45

    265       303,672  

5.00%, 03/15/36

    110       125,591  

State of New York Dormitory Authority, Refunding RB, General Purpose, Series A, 5.00%, 02/15/38

    370       420,694  

State of New York Urban Development Corp., RB, State Personal Income Tax, Series C, 5.00%, 03/15/30

    250       278,525  
   

 

 

 
    3,410,217  
Tobacco — 3.8%  

Counties of New York Tobacco Trust IV, Refunding RB, Settlement Pass-Through Turbo, Series A,
6.25%, 06/01/41(a)

    200       207,198  

Counties of New York Tobacco Trust VI, Refunding RB:

   

Settlement Pass-Through Turbo, Series C, 4.00%, 06/01/51

    400       375,660  

Tobacco Settlement Pass-Through, Series A-2B, 5.00%, 06/01/51

    340       355,276  

County of Chautauqua New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, 4.75%, 06/01/39

    75       75,670  

County of Niagara New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, 5.25%, 05/15/40

    170       181,519  

Westchester New York Tobacco Asset Securitization, Refunding RB, Tobacco Settlement Bonds, Sub-Series C:

   

4.00%, 06/01/42

    245       239,473  

5.13%, 06/01/51

    200       207,910  
   

 

 

 
    1,642,706  
Transportation — 22.2%  

Buffalo & Fort Erie Public Bridge Authority, RB, Toll Bridge System, 5.00%, 01/01/42

    120       135,293  

County of Albany Airport Authority, Refunding RB, AMT, Series B:

   

4.00%, 12/15/34

    235       237,418  

4.00%, 12/15/35

    120       120,880  

Metropolitan Transportation Authority, RB:

   

Series A, 5.63%, 11/15/18(b)

    45       45,367  

Series C, 6.50%, 11/15/28

    130       131,266  

Series D, 5.25%, 11/15/21(b)

    220       243,670  

Metropolitan Transportation Authority, Refunding RB:

   

Green Bonds, Climate Bond Certified, Sub-Series B-2, 4.00%, 11/15/34

    200       212,650  

Green Bonds, Series A-1, 5.00%, 11/15/41

    195       216,516  

Series D, 5.25%, 11/15/21(b)

    780       863,920  

Series D, 5.25%, 11/15/23(b)

    170       197,489  

Series D, 5.25%, 11/15/23(b)

    250       290,425  

Series D, 5.25%, 11/15/23(b)

    250       290,425  

Series F, 5.00%, 11/15/30

    500       550,510  

Metropolitan Transportation Authority Hudson Rail Yards Trust Obligations, Refunding RB, Series A, 5.00%, 11/15/56

    450       486,670  

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

   

5.25%, 01/01/50

    165       177,829  

(AGM), 4.00%, 07/01/41

    150       151,704  

New York Transportation Development Corp., Refunding ARB, American Airlines, Inc., AMT, 5.00%, 08/01/31

    690       719,891  

Port Authority of New York & New Jersey, ARB, Special Project, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/01/42

    500       544,250  

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

   

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

    150       168,302  

Consolidated, 195th Series, AMT, 5.00%, 04/01/36

    250       279,897  

Consolidated, 206th Series, AMT, 5.00%, 11/15/42

    225       252,268  
Security   Par
(000)
    Value  
Transportation (continued)  

Port Authority of New York & New Jersey, Refunding RB, 178th Series, AMT, 5.00%, 12/01/32

  $ 270     $ 299,163  

State of New York Thruway Authority, RB, Junior Lien, Series A, 5.25%, 01/01/56

    370       416,831  

State of New York Thruway Authority, Refunding RB, General:

   

2nd Highway & Bridge Trust, Series A, 5.00%, 04/01/32

    1,000       1,096,390  

Series I, 5.00%, 01/01/37

    440       475,284  

Series I, 5.00%, 01/01/42

    140       150,900  

Series J, 5.00%, 01/01/41

    250       274,675  

Triborough Bridge & Tunnel Authority, RB, Series B, 5.00%, 11/15/40

    140       158,572  

Triborough Bridge & Tunnel Authority, Refunding RB, General:

   

MTA Bridges & Tunnels, Series C-2, 5.00%, 11/15/42

    50       57,332  

Series A, 5.25%, 11/15/45

    275       315,133  
   

 

 

 
    9,560,920  
Utilities — 8.2%  

City of New York Municipal Water Finance Authority, RB, Water & Sewer System, 2nd General Resolution, Fiscal 2017, Series DD, 5.25%, 06/15/47

    120       138,420  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2015, Series HH, 5.00%, 06/15/39

    250       280,612  

Long Island Power Authority, RB, General, Electric Systems:

   

5.00%, 09/01/42

    110       124,443  

Series A (AGM), 5.00%, 05/01/21(b)

    225       243,828  

Series C (CIFG), 5.25%, 09/01/29

    500       598,150  

Long Island Power Authority, Refunding RB, Electric System:

   

Series A, 5.50%, 04/01/19(b)

    100       102,287  

Series B, 5.00%, 09/01/41

    50       56,038  

Series B, 5.00%, 09/01/46

    75       83,778  

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

    600       653,082  

Utility Debt Securitization Authority, Refunding RB, Restructuring, Series E, 5.00%, 12/15/41

    1,115       1,244,385  
   

 

 

 
    3,525,023  
Puerto Rico — 1.2%  
Tobacco — 1.2%  

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds, 5.63%, 05/15/43

    500       506,230  
   

 

 

 

Total Municipal Bonds — 137.2%
(Cost — $55,314,749)

 

    59,095,351  
 

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(d)

 

New York — 27.3%  
County/City/Special District/School District — 7.5%  

City of New York, GO, Sub-Series I-1, 5.00%, 03/01/36

    250       278,695  

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

    300       343,988  

Hudson Yards Infrastructure Corp., RB, Fiscal 2012, Series A, 5.75%, 02/15/47(e)

    700       762,679  

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

    630       689,177  

New York Liberty Development Corp., Refunding RB, 7 World Trade Center Project, Class 1, 5.00%, 09/15/40

    1,050       1,144,171  
   

 

 

 
    3,218,710  
State — 3.9%  

City of New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-3, 5.25%, 01/15/39

    500       506,115  
 

 

 

SCHEDULES OF INVESTMENTS      37  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Bond Trust (BQH)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
State (continued)  

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

  $ 825     $ 892,881  

Sales Tax Asset Receivable Corp., Refunding RB, Fiscal 2015, Series A, 5.00%, 10/15/31

    255       292,210  
   

 

 

 
    1,691,206  
Transportation — 6.3%  

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

   

194th Series, 5.25%, 10/15/55

    360       409,259  

Consolidated, 210th Series, 5.00%, 09/01/48

    960       1,104,969  

State of New York Thruway Authority, Refunding RB, Transportation, Personal Income Tax, Series A, 5.00%, 03/15/31

    600       650,352  

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

    500       563,475  
   

 

 

 
    2,728,055  
Utilities — 9.6%  

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

   

Fiscal 2011, Series HH, 5.00%, 06/15/32

    990       1,066,263  

Fiscal 2012, Series BB, 5.00%, 06/15/44

    1,500       1,620,490  

Utility Debt Securitization Authority, Refunding RB, Restructuring:

   

Series A, 5.00%, 12/15/35

    1,000       1,150,500  

Series B, 4.00%, 12/15/35

    280       296,579  
   

 

 

 
    4,133,832  
 

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond Trusts — 27.3%
(Cost — $11,417,465)

 

    11,771,803  
 

 

 

 

Total Long-Term Investments — 164.5%
(Cost — $66,732,214)

 

    70,867,154  
 

 

 

 
Security  

Shares

    Value  

Short-Term Securities — 0.8%

 

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(f)(g)

    343,324     $ 343,358  
   

 

 

 

Total Short-Term Securities — 0.8%
(Cost — $343,358)

 

    343,358  
 

 

 

 

Total Investments — 165.3%
(Cost — $67,075,572)

 

    71,210,512  

Other Assets Less Liabilities — 1.1%

 

    456,628  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (15.3)%

 

    (6,583,955

VRDP Shares at Liquidation Value, Net of Deferred Offering Costs — (51.1)%

 

    (21,998,402
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 43,084,783  
 

 

 

 

 

(a) 

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.

(b) 

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

(c) 

Zero-coupon bond.

(d) 

Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Trust. 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 Trust could ultimately be required to pay under the agreement, which expires on February 15, 2019, is $370,682. See Note 4 of the Notes to Financial Statements for details.

(f) 

Annualized 7-day yield as of period end.

 
(g) 

During the year ended August 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Held at
08/31/17
     Net
Activity
     Shares
Held at
08/31/18
     Value at
08/31/18
     Income      Net Realized
Gain (Loss)
 (a)
     Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     225,260        118,064        343,324      $ 343,358      $ 4,537      $ (29    $  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     2          12/19/18        $ 241        $ (44

Long U.S. Treasury Bond

     12          12/19/18          1,731          5,481  

5-Year U.S. Treasury Note

     7          12/31/18          794          (283
                 

 

 

 
                  $ 5,154  
                 

 

 

 

 

 

38    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Bond Trust (BQH)

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 5,481      $      $ 5,481  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 327      $      $ 327  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 232,970      $      $ 232,970  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 28,772      $      $ 28,772  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 3,571,938  

For more information about the Trust’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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $        $ 70,867,154        $             —        $ 70,867,154  

Short-Term Securities

     343,358                            343,358  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 343,358        $ 70,867,154        $        $ 71,210,512  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 5,481        $        $        $ 5,481  

Liabilities:

 

Interest rate contracts

     (327                          (327
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 5,154        $        $        $ 5,154  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

 

 

SCHEDULES OF INVESTMENTS      39  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Bond Trust (BQH)

 

The Trust 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

   $             —        $ (6,560,292      $             —        $ (6,560,292

VRDP Shares at Liquidation Value

              (22,100,000                 (22,100,000
  

 

 

      

 

 

      

 

 

      

 

 

 
   $        $ (28,660,292      $        $ (28,660,292
  

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

40    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

August 31, 2018

  

BlackRock New York Municipal Income Quality Trust (BSE)

(Percentages shown are based on Net Assets)

 

Security  

Par
(000)

    Value  

Municipal Bonds — 121.4%

 

New York — 121.4%  
Corporate — 0.5%  

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

  $ 355     $ 438,478  
   

 

 

 
County/City/Special District/School District — 16.4%  

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

   

5.50%, 08/01/25

    725       836,759  

5.00%, 08/01/30

    1,000       1,105,410  

City of New York, GO:

   

Series A-1, 5.00%, 08/01/35

    200       215,090  

Sub-Series D-1, Fiscal 2014, 5.00%, 08/01/31

    440       491,124  

Sub-Series F-1, 5.00%, 04/01/40

    930       1,067,891  

City of New York Convention Center Development Corp., RB, CAB, Sub Lien, Hotel Unit Fee, Series B (AGM), 0.00%, 11/15/55(a)

    1,000       210,780  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/45

    1,250       1,399,487  

City of New York Industrial Development Agency, RB, PILOT, Queens Baseball Stadium (AGC), 6.38%, 01/01/39

    150       152,149  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/40

    1,335       1,502,890  

City of New York New York Industrial Development Agency, RB, CAB, PILOT, Yankee Stadium Project, Series A (AGC), 0.00%, 03/01/39(a)

    1,000       445,990  

County of Erie New York Fiscal Stability Authority, RB, Sales Tax and State Aid Secured Refunding Bonds, Series D:

   

5.00%, 09/01/35

    60       69,856  

5.00%, 09/01/36

    50       58,042  

5.00%, 09/01/37

    60       69,496  

5.00%, 09/01/38

    90       104,013  

5.00%, 09/01/39

    70       80,720  

County of Nassau New York, GO, Refunding Series B, 5.00%, 04/01/32

    420       478,640  

Haverstraw-Stony Point Central School District, GO, Refunding, (AGM), 5.00%, 10/15/36

    240       266,544  

Hudson Yards Infrastructure Corp., RB, Senior, Fiscal 2012:

   

5.75%, 02/15/21(b)

    615       674,071  

5.75%, 02/15/47

    385       417,348  

Hudson Yards Infrastructure Corp., Refunding RB, Series A:

   

2nd Indenture, 5.00%, 02/15/45

    465       525,031  

Fiscal 2017, 5.00%, 02/15/42

    875       990,036  

New York Liberty Development Corp., Refunding RB, World Trade Center Project:

   

4, 5.00%, 11/15/31

    1,000       1,084,600  

4, 5.00%, 11/15/44

    1,250       1,345,725  

7 Class 1, 4.00%, 09/15/35

    1,100       1,147,432  

5.75%, 11/15/51

    545       604,171  
   

 

 

 
    15,343,295  
Education — 35.1%  

Build NYC Resource Corp., Refunding RB:

   

City University New York-Queens College Student Residences, LLC Project, Series A, 5.00%, 06/01/38

    250       276,865  

Ethical Culture Fieldston School Project, 5.00%, 06/01/33

    300       335,184  

Ethical Culture Fieldston School Project, 5.00%, 06/01/35

    350       389,470  

Manhattan College Project, 5.00%, 08/01/35

    260       293,644  

Manhattan College Project, 5.00%, 08/01/47

    135       150,375  

Packer Collegiate Institute Project, 5.00%, 06/01/40

    690       758,137  

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

   

5.00%, 12/01/33

    175       191,126  

4.00%, 12/01/34

    130       131,788  
Security  

Par
(000)

    Value  
Education (continued)  

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

   

American Museum of Natural History, Series A 5.00%, 07/01/37

  $ 440     $ 492,659  

American Museum of Natural History, Series A 5.00%, 07/01/41

    500       558,700  

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

    700       701,827  

Wildlife Conservation Society, 5.00%, 08/01/42

    410       451,262  

City of Troy New York Capital Resource Corp., Refunding RB, Rensselaer Polytechnic Institute Project:

   

Series A, 5.13%, 09/01/40

    1,645       1,721,410  

Series B, 4.00%, 08/01/35

    230       236,833  

Counties of Buffalo & Erie New York Industrial Development Agency, RB, City School District of Buffalo Project, Series A, 5.25%, 05/01/31

    200       217,212  

Counties of Buffalo & Erie New York Industrial Development Agency, Refunding RB, City School District of Buffalo Project, 5.00%, 05/01/28

    565       660,632  

County of Dutchess New York Local Development Corp., Refunding RB, Vassar College Project:

   

5.00%, 07/01/42

    195       221,785  

4.00%, 07/01/46

    375       385,665  

County of Madison New York Capital Resource Corp., Refunding RB, Colgate University Project, Series A, 4.50%, 07/01/39

    1,500       1,594,710  

County of Monroe New York Industrial Development Corp., RB, University of Rochester Project, Series A, 5.00%, 07/01/21(b)

    500       544,690  

County of Monroe New York Industrial Development Corp., Refunding RB:

   

Nazareth College of Rochester Project, 4.00%, 10/01/47

    60       58,885  

University of Rochester Project, Series A, 5.00%, 07/01/23(b)

    400       455,880  

County of Orange New York Funding Corp., Refunding RB, Mount St. Mary College Project, Series A:

   

5.00%, 07/01/37

    180       190,364  

5.00%, 07/01/42

    115       121,242  

County of Schenectady New York Capital Resource Corp., Refunding RB, Union College, 5.00%, 07/01/32

    500       545,090  

County of Tompkins New York Development Corp., RB, Ithaca College Project (AGM), 5.50%,
01/01/21(b)

    250       271,118  

County of Tompkins New York Industrial Development Agency, RB, Civic Facility Cornell University Project, Series A, 5.00%, 07/01/37

    1,000       1,053,580  

Dobbs Ferry Local Development Corp., RB, Mercy College Project:

   

5.00%, 07/01/39

    1,000       1,106,640  

5.00%, 07/01/44

    500       551,910  

State of New York Dormitory Authority, RB:

   

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

    300       326,910  

Education, Series B, 5.75%, 03/15/19(b)

    600       613,320  

Fordham University, Series A, 5.00%, 07/01/21(b)

    500       544,690  

New School (AGM), 5.50%, 07/01/20(b)

    350       373,559  

New York University, Series B, 5.00%, 07/01/37

    500       547,385  

Rochester Institute of Technology, 5.00%, 07/01/40

    550       577,241  

State University Dormitory Facilities, Series A, 5.00%, 07/01/40

    600       628,182  

State University Dormitory Facilities, Series A, 5.00%, 07/01/41

    1,000       1,074,190  

State of New York Dormitory Authority, Refunding RB:

   

Barnard College, Series A, 5.00%, 07/01/34

    200       226,084  

Barnard College, Series A, 5.00%, 07/01/43

    2,960       3,287,938  

Bid Group 4, Series C, 4.00%, 03/15/44

    655       677,571  

Columbia University, Series B, 5.00%, 10/01/38

    365       429,328  

Cornell University, Series A, 5.00%, 07/01/40

    250       262,980  
 

 

 

SCHEDULES OF INVESTMENTS      41  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Quality Trust (BSE)

(Percentages shown are based on Net Assets)

 

Security  

Par
(000)

    Value  
Education (continued)  

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

 

Fordham University, 5.00%, 07/01/44

  $ 640     $ 706,810  

Icahn School of Medicine at Mount Sinai, Series A, 5.00%, 07/01/35

    1,380       1,533,787  

New York University, Series A, 5.00%, 07/01/37

    745       815,604  

Pratt Institute, Series A, 5.00%, 07/01/44

    500       544,670  

State University Dormitory Facilities, Series A, 5.25%, 07/01/30

    1,500       1,700,100  

State University Dormitory Facilities, Series A, 5.25%, 07/01/32

    600       679,164  

State University Dormitory Facilities, Series A, 5.00%, 07/01/42

    450       487,841  

State University Dormitory Facilities, Series A, 5.00%, 07/01/46

    375       424,969  

State University Dormitory Facilities, Series B, 5.00%, 07/01/32

    545       620,782  

State University of New York Dormitory Facilities, Series A, 5.00%, 07/01/38

    255       290,868  

Town of Hempstead New York Local Development Corp., Refunding RB:

   

Adelphi University Project, 5.00%, 10/01/34

    310       344,540  

Adelphi University Project, 5.00%, 10/01/35

    310       346,366  

Hofstra University Project, 5.00%, 07/01/47

    100       112,102  
   

 

 

 
    32,845,664  
Health — 11.4%  

Counties of Buffalo & Erie New York Industrial Land Development Corp., RB, Catholic Health System Obligation, 5.25%, 07/01/35

    500       548,850  

County of Dutchess New York Industrial Development Agency, RB, Vassar Brothers Medical Center (AGC), 5.50%, 04/01/30

    500       533,760  

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

   

4.00%, 12/01/41

    200       200,408  

5.00%, 12/01/46

    320       350,243  

Series A, 5.00%, 12/01/37

    850       915,399  

County of Monroe New York Industrial Development Corp., Refunding RB, Unity Hospital of Rochester Project (FHA), 5.50%, 08/15/40

    725       783,964  

County of Suffolk New York EDC, RB, Catholic Health Services, Series C, 5.00%, 07/01/32

    150       163,484  

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

    895       949,309  

State of New York Dormitory Authority, RB:

   

Mental Health Services (AGM), 5.00%, 02/15/22

    80       80,203  

New York University Hospitals Center, Series A, 6.00%, 07/01/20(b)

    250       268,825  

North Shore-Long Island Jewish Obligated Group, Series D, 4.25%, 05/01/39

    500       520,940  

State of New York Dormitory Authority, Refunding RB:

   

Memorial Sloan-Kettering Cancer Center, Series 1, 5.00%, 07/01/42

    450       511,070  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/21(b)

    750       812,760  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/21(b)

    750       812,760  

North Shore-Long Island Jewish Obligated Group, Series A, 5.25%, 05/01/21(b)

    1,840       2,005,839  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/43

    1,140       1,243,523  
   

 

 

 
    10,701,337  
Security  

Par
(000)

    Value  
Housing — 4.0%  

City of New York Housing Development Corp., RB, M/F Housing, Fund Grant Program, New York City Housing Authority Program, Series B1:

   

5.25%, 07/01/32

  $ 915     $ 1,002,877  

5.00%, 07/01/33

    400       432,476  

City of New York Housing Development Corp., Refunding RB, M/F Housing, 8 Spruce Street, Class F, 4.50%, 02/15/48

    500       518,155  

City of New York Housing Development Corp., RB, M/F Housing, Series B1, 5.25%, 07/01/30

    750       829,110  

County of Onondaga New York Trust for Cultural Resources, Refunding RB, Abby Lane Housing Corporation Project, 5.00%, 05/01/40

    445       487,493  

State of New York HFA, RB:

   

Affordable Housing, Series E (SONYMA), 4.15%, 11/01/47

    330       337,818  

Affordable M/F Housing, Series B (Ginnie Mae, Fannie Mae & Freddie Mac), 4.00%, 11/01/42

    110       112,104  
   

 

 

 
    3,720,033  
State — 17.6%  

City of New York New York Transitional Finance Authority Future Tax Secured, RB, Sub-Series B-1, 5.00%, 11/01/35

    425       478,550  

City of New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-4 (AGC), 5.50%, 01/15/33

    1,000       1,014,250  

City of New York Transitional Finance Authority, Refunding RB, Fiscal 2018:

   

Series S-1, 5.00%, 07/15/35

    250       286,550  

Series S-2, 5.00%, 07/15/35

    250       286,550  

City of New York Transitional Finance Authority Building Aid Revenue, RB:

   

Series S-1, 5.00%, 07/15/37

    370       415,421  

Series S-3, 5.25%, 07/15/36

    325       385,486  

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

   

Sub-Series E-1, 5.00%, 02/01/38

    910       1,034,169  

Sub-Series F-1, 5.00%, 05/01/38

    705       803,679  

Sub-Series F-1, 5.00%, 05/01/39

    300       341,505  

Subordinate, Sub-Series C-3, 4.00%, 05/01/42

    570       588,907  

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

    590       674,069  

Metropolitan Transportation Authority, Refunding RB, Dedicated Tax Fund:

   

Series B, 5.00%, 11/15/19(b)

    540       561,821  

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

    750       841,943  

Sales Tax Asset Receivable Corp., Refunding RB, Fiscal 2015, Series A, 5.00%, 10/15/31

    750       859,747  

State of New York Dormitory Authority, RB:

   

Bid Group 2, Series A, 5.00%, 03/15/38

    560       639,190  

Bid Group 3, Series A, 5.00%, 03/15/43

    265       304,138  

Bid Group 4, Series C, 5.00%, 03/15/37

    760       880,369  

General Purpose, Series B, 5.00%, 03/15/37

    1,000       1,085,670  

General Purpose, Series B, 5.00%, 03/15/42

    1,400       1,516,480  

Group 4, Series A, 5.00%, 03/15/45

    570       653,180  

Group B, State Sales Tax, Series A, 5.00%, 03/15/39

    90       102,583  

Series A, 5.00%, 03/15/36

    440       502,366  

Series A, 5.00%, 02/15/42

    500       563,435  

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

   

5.00%, 03/15/30

    500       557,050  

5.00%, 03/15/32

    1,000       1,111,370  
   

 

 

 
    16,488,478  
Tobacco — 1.3%  

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

   

Series A-2B, 5.00%, 06/01/51

    270       282,131  

Series B, 5.00%, 06/01/45

    300       319,779  
 

 

 

42    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Quality Trust (BSE)

(Percentages shown are based on Net Assets)

 

Security  

Par
(000)

    Value  
Tobacco (continued)  

County of Niagara New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, 5.25%, 05/15/40

  $ 290     $ 309,651  

Westchester New York Tobacco Asset Securitization, Refunding RB, Tobacco Settlement Bonds, Sub-Series C, 4.00%, 06/01/42

    285       278,570  
   

 

 

 
    1,190,131  
Transportation — 19.5%  

Buffalo & Fort Erie Public Bridge Authority, RB, Toll Bridge System, 5.00%, 01/01/42

    265       298,772  

Metropolitan Transportation Authority, RB:

   

Series A, 5.00%, 11/15/21(b)

    575       632,420  

Series A-1, 5.25%, 11/15/23(b)

    270       313,659  

Series C, 6.50%, 11/15/28

    145       146,412  

Series D, 5.25%, 11/15/21(b)

    440       487,340  

Series E, 5.00%, 11/15/38

    650       714,694  

Metropolitan Transportation Authority, Refunding RB:

   

Green Bonds, SubSeries B-1, 5.00%, 11/15/51

    480       539,246  

Green Bonds, Climate Bond Certified, Sub-Series B-2, 4.00%, 11/15/34

    500       531,625  

Series B, 5.00%, 11/15/37

    1,110       1,247,862  

Series D, 5.25%, 11/15/21(b)

    1,560       1,727,840  

Series D, 5.25%, 11/15/23(b)

    750       871,275  

Metropolitan Transportation Authority Hudson Rail Yards Trust Obligations, Refunding RB, Series A, 5.00%, 11/15/56

    1,345       1,454,604  

Port Authority of New York & New Jersey, Refunding ARB, 179th Series, 5.00%, 12/01/38

    245       274,892  

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

   

5.00%, 01/01/41

    365       406,059  

5.25%, 01/01/56

    210       236,580  

State of New York Thruway Authority, Refunding RB:

   

2nd General Highway & Bridge Trust, Series A, 5.00%, 04/01/32

    250       274,098  

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

    1,325       1,431,252  

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

    425       458,091  

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

    750       846,360  

Series L, 5.00%, 01/01/33

    90       104,223  

Series L, 5.00%, 01/01/34

    140       161,631  

Series L, 5.00%, 01/01/35

    170       195,673  

Triborough Bridge & Tunnel Authority, RB, Series B, 5.00%, 11/15/40

    280       317,145  

Triborough Bridge & Tunnel Authority, Refunding RB:

   

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

    635       387,502  

General, Remarketing, Series A, 5.00%, 11/15/34

    1,000       1,106,490  

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

    370       423,998  

General, Series C, 5.00%, 11/15/18(b)

    615       619,268  

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

    385       387,633  

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

    1,485       1,660,304  
   

 

 

 
    18,256,948  
Utilities — 15.6%  

Albany Municipal Water Finance Authority, Refunding RB, Series A, 5.00%, 12/01/33

    1,000       1,089,660  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2015, Series HH, 5.00%, 06/15/39

    1,000       1,122,450  

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

   

Series EE, 5.00%, 06/15/40

    700       803,446  

Water & Sewer System, 2nd General Resolution, Fiscal 2018, Series FF, 5.00%, 06/15/38

    1,000       1,157,330  

County of Western Nassau New York Water Authority, RB, Series A, 5.00%, 04/01/40

    250       276,007  

Long Island Power Authority, RB, General, Electric Systems:

   

5.00%, 09/01/42

    1,240       1,402,812  
Security  

Par
(000)

    Value  
Utilities (continued)  

Long Island Power Authority, RB, General, Electric Systems: (continued)

 

Series A (AGM), 5.00%, 05/01/21(b)

  $ 500     $ 541,840  

Series C (CIFG), 5.25%, 09/01/29

    1,000       1,196,300  

Long Island Power Authority, Refunding RB:

   

Electric System, Series B, 5.00%, 09/01/41

    110       123,284  

Electric System, Series B, 5.00%, 09/01/46

    140       156,386  

Electric Systems, Series A (AGC), 5.75%, 04/01/19(b)

    1,690       1,731,050  

General, Electric Systems, Series A (AGC), 6.00%, 05/01/19(b)

    2,000       2,057,920  

State of New York Environmental Facilities Corp., RB, Series B, Revolving Funds, Green Bonds, 5.00%, 09/15/40

    635       717,810  

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

    1,000       1,088,470  

Utility Debt Securitization Authority, Refunding RB, Restructuring, Series E, 5.00%, 12/15/41

    1,000       1,116,040  
   

 

 

 
    14,580,805  
 

 

 

 

Total Municipal Bonds — 121.4%
(Cost — $109,041,022)

 

    113,565,169  
 

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(c)

 

New York — 42.8%  
County/City/Special District/School District — 13.8%  

City of New York, GO:

   

Sub-Series G-1, 5.00%, 04/01/29

    1,000       1,096,445  

Sub-Series I-1, 5.00%, 03/01/36

    250       278,695  

Refunding Fiscal 2015, Series B, 4.00%, 08/01/32

    1,790       1,880,619  

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

    500       573,312  

City of New York New York, GO, Sub-Series C-3 (AGC)(d):

   

5.75%, 02/15/19(b)

    64       64,794  

5.75%, 08/15/28

    936       953,981  

Hudson Yards Infrastructure Corp., RB, Fiscal 2012, Series A, 5.75%, 02/15/47(d)

    1,800       1,961,176  

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

    3,495       3,823,292  

New York Liberty Development Corp., Refunding RB, 7 World Trade Center Project, Class 1, 5.00%, 09/15/40

    2,085       2,271,997  
   

 

 

 
    12,904,311  
Education — 2.3%  

State of New York Dormitory Authority, RB, State University Dormitory Facilities, New York University, Series A, 5.00%, 07/01/35

    1,999       2,151,771  
   

 

 

 
State — 7.9%  

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

    2,475       2,678,643  

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

   

5.00%, 10/15/31

    990       1,134,461  

4.00%, 10/15/32

    1,500       1,615,282  

State of New York Dormitory Authority, RB:

   

Bid Group 2, Series A, 5.00%, 03/15/32

    1,000       1,179,190  

General Purpose, Series C, 5.00%, 03/15/41

    750       799,661  
   

 

 

 
    7,407,237  
Transportation — 7.4%  

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

   

194th Series, 5.25%, 10/15/55

    735       835,570  

Consolidated, 210th Series, 5.00%, 09/01/48

    1,900       2,186,919  

State of New York Thruway Authority, Refunding RB, Transportation, Personal Income Tax, Series A, 5.00%, 03/15/31

    800       867,136  
 

 

 

SCHEDULES OF INVESTMENTS      43  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Quality Trust (BSE)

(Percentages shown are based on Net Assets)

 

Security  

Par
(000)

    Value  
Transportation (continued)  

Triborough Bridge & Tunnel Authority, Refunding RB:

   

General, Series A, 5.00%, 11/15/46

  $ 1,000     $ 1,126,950  

MTA Bridges & Tunnels, Series C-2, 5.00%, 11/15/42

    1,665       1,909,156  
   

 

 

 
    6,925,731  
Utilities — 11.4%  

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

   

Fiscal 2011, Series HH, 5.00%, 06/15/32

    2,249       2,421,341  

Fiscal 2012, Series BB, 5.00%, 06/15/44

    2,011       2,171,457  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Series FF-2, 5.50%, 06/15/40

    405       416,443  

Utility Debt Securitization Authority, Refunding RB:

   

5.00%, 12/15/41

    3,719       4,146,157  

Restructuring, Series A, 5.00%, 12/15/35

    1,000       1,150,500  

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

    280       296,579  
   

 

 

 
    10,602,477  
 

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond
Trusts — 42.8%
(Cost — $38,539,216)

 

    39,991,527  
 

 

 

 

Total Long-Term Investments — 164.2%
(Cost — $147,580,238)

 

    153,556,696  
 

 

 

 

Security

  Shares     Value  

Short-Term Securities — 0.7%

 

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(e)(f)

    673,097     $ 673,165  
   

 

 

 

Total Short-Term Securities — 0.7%
(Cost — $673,165)

 

    673,165  
 

 

 

 

Total Investments — 164.9%
(Cost — $148,253,403)

 

    154,229,861  

Other Assets Less Liabilities — 1.6%

 

    1,467,493  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (23.3)%

 

    (21,775,277

VRDP Shares, at Liquidation Value, Net of Deferred Offering
Costs — (43.2)%

 

    (40,390,139
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 93,531,938  
 

 

 

 

 

(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 Trust. 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 Trust could ultimately be required to pay under the agreements, which expire February 15, 2019, is $1,482,731. See Note 4 of the Notes to Financial Statements for details.

(e) 

Annualized 7-day yield as of period end.

 
(f) 

During the year ended August 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Held at
08/31/17
     Net
Activity
     Shares
Held at
08/31/18
     Value at
08/31/18
     Income      Net
Realized

Gain (Loss) (a)
     Change in
Unrealized

Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     1,143,510        (470,413      673,097      $ 673,165      $ 10,621      $ 40      $ 50  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     10          12/19/18        $ 1,203        $ (210

Long U.S. Treasury Bond

     22          12/19/18          3,173          10,114  

5-Year U.S. Treasury Note

     17          12/31/18          1,928          (642
                 

 

 

 
                  $ 9,262  
                 

 

 

 

 

 

44    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Quality Trust (BSE)

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 10,114      $      $ 10,114  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 852      $      $ 852  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 497,605      $      $ 497,605  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 59,293      $      $ 59,293  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 7,898,523  

For more information about the Trust’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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $        $ 153,556,696        $        $ 153,556,696  

Short-Term Securities

     673,165                            673,165  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 673,165        $ 153,556,696        $        $ 154,229,861  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 10,114        $        $        $ 10,114  

Liabilities:

 

Interest rate contracts

     (852                          (852
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 9,262        $        $             —        $ 9,262  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

 

 

SCHEDULES OF INVESTMENTS      45  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Quality Trust (BSE)

 

The Trust 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

   $        $ (21,702,203      $        $ (21,702,203

VRDP Shares at Liquidation Value

              (40,500,000                 (40,500,000
  

 

 

      

 

 

      

 

 

      

 

 

 
   $             —        $ (62,202,203      $             —        $ (62,202,203
  

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

46    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

August 31, 2018

  

BlackRock New York Municipal Income Trust II (BFY)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  

Municipal Bonds — 150.4%

 

New York — 146.5%  
Corporate — 6.2%  

Build NYC Resource Corp., Refunding RB, Pratt Paper, Inc. Project, AMT, 5.00%, 01/01/35(a)

  $ 140     $ 150,006  

City of New York Industrial Development Agency, Refunding RB, Transportation Infrastructure Properties LLC, Series A, AMT:

   

5.00%, 07/01/22

    350       382,631  

5.00%, 07/01/28

    330       351,318  

County of Essex New York Industrial Development Agency, RB, International Paper Co. Project, Series A, AMT, 6.63%, 09/01/32

    200       200,000  

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

    1,475       1,821,846  

Niagara Area Development Corp., Refunding RB, Series A, AMT(a):

   

Solid Waste Disposal Facility, Covanta Energy Project, 5.25%, 11/01/42

    625       629,475  

Refunding RB, Covanta Energy Project,
4.75%, 11/01/42(b)

    1,130       1,134,226  
   

 

 

 
    4,669,502  
County/City/Special District/School District — 31.4%  

City of New York, GO, Refunding:

   

Series A, 5.00%, 08/01/30

    1,700       1,952,875  

Series E, 5.50%, 08/01/25

    965       1,113,755  

Series E, 5.00%, 08/01/30

    500       552,705  

City of New York, GO:

   

Series G-1, 6.25%, 12/15/31

    5       5,066  

Sub-Series D-1, Fiscal 2014, 5.00%, 08/01/31

    690       770,171  

Sub-Series G-1, 6.25%, 12/15/18(c)

    245       248,254  

Sub-Series I-1, 5.38%, 04/01/19(c)

    120       122,659  

Sub-Series I-1, 5.38%, 04/01/36

    15       15,305  

City of New York Convention Center Development Corp., RB, CAB, Sub Lien, Hotel Unit Fee, Series B (AGM), 0.00%, 11/15/55(d)

    1,000       210,780  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/45

    2,340       2,619,841  

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

   

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 03/01/42(d)

    1,750       671,457  

CAB, Yankee Stadium Project, Series A (AGC), 0.00%, 03/01/45(d)

    500       165,835  

(AMBAC), 5.00%, 01/01/39

    500       506,045  

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

    100       101,433  

Queens Baseball Stadium (AMBAC), 5.00%, 01/01/46

    400       405,196  

City of New York Convention Center Development Corp., Refunding RB, Hotel Unit Fee Secured, 5.00%, 11/15/40

    1,445       1,626,723  

City of New York Industrial Development Agency, RB, PILOT, Yankee Stadium Project:

   

CAB, Series A (AGC), 0.00%, 03/01/35(d)

    500       270,970  

(NPFGC), 4.75%, 03/01/46

    400       400,240  

(NPFGC), 5.00%, 03/01/46

    500       502,530  

City of Syracuse New York, GO, Airport Terminal Security & Access, Series A, AMT (AGM), 4.75%, 11/01/31

    500       524,600  

County of Erie New York Fiscal Stability Authority, RB, Sales Tax and State Aid Secured Refunding Bonds, Series D:

   

5.00%, 09/01/35

    45       52,392  

5.00%, 09/01/36

    40       46,433  

5.00%, 09/01/37

    45       52,122  

5.00%, 09/01/38

    70       80,899  

5.00%, 09/01/39

    55       63,423  

Haverstraw-Stony Point Central School District, GO, Refunding, (AGM), 5.00%, 10/15/36

    120       133,272  
Security   Par
(000)
    Value  
County/City/Special District/School District (continued)  

Hudson Yards Infrastructure Corp., RB, Senior, Fiscal 2012:

   

5.75%, 02/15/21(c)

  $ 960     $ 1,052,208  

5.75%, 02/15/47

    590       639,572  

Hudson Yards Infrastructure Corp., Refunding RB, Series A:

   

2nd Indenture, 5.00%, 02/15/45

    565       637,941  

Fiscal 2017, 5.00%, 02/15/42

    700       792,029  

New York Liberty Development Corp., Refunding RB:

   

2nd Priority, Bank of America Tower at One Bryant Park Project, Class 2, 5.63%, 07/15/47

    1,400       1,471,064  

2nd Priority, Bank of America Tower at One Bryant Park Project, Class 3, 6.38%, 07/15/49

    500       524,580  

3 World Trade Center Project, Class 2, 5.38%, 11/15/40(a)

    200       220,134  

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

    1,000       1,084,600  

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

    1,250       1,345,725  

7 World Trade Center Project, Class 2, 5.00%, 09/15/43

    1,000       1,075,840  

7 World Trade Center Project, Class 3, 5.00%, 03/15/44

    690       741,370  

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

    670       742,742  
   

 

 

 
    23,542,786  
Education — 27.8%  

Amherst Development Corp., Refunding RB:

   

Daemen College Project, 5.00%, 10/01/43

    155       167,341  

Daemen College Project, 5.00%, 10/01/48

    120       129,040  

University at Buffalo Foundation Faculty-Student Housing Corp., Series A (AGM), 4.63%, 10/01/20(c)

    275       291,308  

Build NYC Resource Corp., RB, Inwood Academy for Leadership Charter School Project, Series A, 5.50%, 05/01/48(a)

    270       281,270  

Build NYC Resource Corp., Refunding RB:

   

City University New York-Queens College Student Residences, LLC Project, Series A, 5.00%, 06/01/38

    250       276,865  

Manhattan College Project, 5.00%, 08/01/35

    215       242,821  

City of New York Trust for Cultural Resources, RB, Juilliard School, Series A, 5.00%, 01/01/39

    500       505,245  

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

   

American Museum of Natural History, 5.00%, 07/01/37

    440       492,659  

Carnegie Hall, 4.75%, 12/01/39

    700       720,286  

City of Troy New York Capital Resource Corp., Refunding RB, Rensselaer Polytechnic Institute Project:

   

Series A, 5.13%, 09/01/40

    1,000       1,046,450  

Series B, 4.00%, 08/01/35

    190       195,645  

City of Yonkers New York Industrial Development Agency, RB, Sarah Lawrence College Project, Series A,
6.00%, 06/01/19(c)

    500       516,080  

Counties of Buffalo & Erie New York Industrial Land Development Corp., Refunding RB, Series A:

   

Buffalo State College Foundation Housing Corp. Project, 5.38%, 10/01/41

    280       301,890  

The Charter School for Applied Technologies Project, 5.00%, 06/01/35

    100       108,547  

County of Cattaraugus New York, RB, St. Bonaventure University Project, 5.00%, 05/01/39

    125       134,673  

County of Dutchess New York Local Development Corp., Refunding RB, Vassar College Project:

   

5.00%, 07/01/42

    165       187,664  

4.00%, 07/01/46

    310       318,816  

County of Monroe New York Industrial Development Corp., RB, University of Rochester Project, Series A,
5.00%, 07/01/21(c)

    1,000       1,089,380  

County of Monroe New York Industrial Development Corp., Refunding RB:

   

Nazareth College of Rochester Project, 4.00%, 10/01/47

    50       49,071  

University of Rochester Project, Series A,
5.00%, 07/01/23(c)

    240       273,528  
 

 

 

SCHEDULES OF INVESTMENTS      47  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Trust II (BFY)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Education (continued)  

County of Nassau New York Industrial Development Agency, Refunding RB, New York Institute of Technology Project, Series A, 4.75%, 03/01/20(c)

  $ 350     $ 365,732  

County of St. Lawrence New York Industrial Development Agency, RB, Clarkson University Project:

   

6.00%, 09/01/34

    150       165,759  

5.38%, 09/01/41

    650       704,470  

County of Tompkins New York Development Corp., RB, Ithaca College Project (AGM), 5.50%, 01/01/21(c)

    450       488,011  

Geneva Development Corp., Refunding RB, Hobart & William Smith Colleges, 5.25%, 09/01/44

    400       445,332  

State of New York Dormitory Authority, RB:

   

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

    500       544,850  

Education, Series B, 5.75%, 03/15/19(c)

    300       306,660  

Fordham University, Series A, 5.50%, 07/01/21(c)

    150       165,464  

State University Dormitory Facilities, Series A, 5.00%, 07/01/19(c)

    250       256,953  

State University Dormitory Facilities, Series A, 5.00%, 07/01/41

    670       719,707  

Touro College & University System, Series A, 5.25%, 01/01/34

    1,200       1,309,692  

University of Rochester, Series A, 5.13%, 07/01/19(c)

    215       221,196  

University of Rochester, Series A, 5.13%, 07/01/39

    35       35,927  

State of New York Dormitory Authority, Refunding RB:

   

Barnard College, Series A, 5.00%, 07/01/34

    150       169,563  

Bid Group 4, Series C, 4.00%, 03/15/44

    540       558,608  

Brooklyn Law School, 5.75%, 07/01/33

    250       256,293  

Columbia University, Series B, 5.00%, 10/01/38

    300       352,872  

Fordham University, 5.00%, 07/01/44

    640       706,810  

Icahn School of Medicine at Mount Sinai, Series A, 5.00%, 07/01/35

    685       761,336  

New York University, Series A, 5.00%, 07/01/37

    600       656,862  

Skidmore College, Series A, 5.25%, 07/01/29

    200       217,228  

Skidmore College, Series A, 5.25%, 07/01/31

    300       325,584  

State University Dormitory Facilities, Series A, 5.25%, 07/01/30

    1,220       1,382,748  

State University Dormitory Facilities, Series A, 5.25%, 07/01/32

    700       792,358  

State University Dormitory Facilities, Series A, 5.00%, 07/01/46

    310       351,308  

Teachers College, 5.50%, 03/01/19(c)

    650       662,421  

Town of Hempstead New York Local Development Corp., Refunding RB:

   

Adelphi University Project, 5.00%, 10/01/35

    210       234,635  

Hofstra University Project, 4.00%, 07/01/37

    220       226,424  

Hofstra University Project, 5.00%, 07/01/47

    100       112,102  
   

 

 

 
    20,825,484  
Health — 14.1%  

County of Dutchess New York Local Development Corp., Refunding RB, Health Quest System, Inc., Series A, 5.75%, 07/01/40

    300       322,545  

County of Genesee New York Industrial Development Agency, Refunding RB, United Memorial Medical Center Project, 5.00%, 12/01/27

    210       210,130  

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

   

4.00%, 12/01/41

    200       200,408  

5.00%, 12/01/46

    320       350,243  

Series A, 5.00%, 12/01/32

    180       195,268  

Series A, 5.00%, 12/01/37

    250       269,235  

County of Monroe New York Industrial Development Corp., Refunding RB, Unity Hospital of Rochester Project (FHA), 5.50%, 08/15/40

    1,425       1,540,895  
Security   Par
(000)
    Value  
Health (continued)  

County of Suffolk New York EDC, RB, Catholic Health Services, Series C, 5.00%, 07/01/32

  $ 150     $ 163,483  

County of Westchester New York Healthcare Corp., Refunding RB, Senior Lien:

   

Remarketing, Series A, 5.00%, 11/01/30

    895       949,308  

Series B, 6.00%, 11/01/20(c)

    130       141,634  

Series B, 6.00%, 11/01/30

    20       21,442  

County of Westchester New York Local Development Corp., Refunding RB, Kendal On Hudson Project, 5.00%, 01/01/34

    500       533,955  

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

   

Healthcare, 5.00%, 03/15/19

    500       509,270  

New York State Association for Retarded Children, Inc., 6.00%, 07/01/19

    250       258,880  

New York University Hospitals Center, 5.75%, 07/01/20

    425       455,107  

State of New York Dormitory Authority, Refunding RB:

   

Memorial Sloan-Kettering Cancer Center, Series 1, 5.00%, 07/01/42

    370       420,213  

Miriam Osborn Memorial Home Association, 5.00%, 07/01/29

    130       132,721  

Mount Sinai Hospital, Series A, 5.00%, 07/01/26

    500       526,790  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/21(c)

    1,000       1,083,680  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/21(c)

    750       812,760  

North Shore-Long Island Jewish Obligated Group, Series A, 5.00%, 05/01/43

    860       938,097  

North Shore-Long Island Jewish Obligated Group, Series E, 5.50%, 05/01/33

    500       511,360  
   

 

 

 
    10,547,424  
Housing — 5.2%  

City of New York Housing Development Corp., RB, M/F Housing, Fund Grant Program, New York City Housing Authority Program, Series B1:

   

5.25%, 07/01/32

    915       1,002,877  

5.00%, 07/01/33

    400       432,476  

City of New York Housing Development Corp., Refunding RB, M/F Housing, 8 Spruce Street, Class F, 4.50%, 02/15/48

    500       518,155  

County of Onondaga New York Trust for Cultural Resources, Refunding RB, Abby Lane Housing Corporation Project, 5.00%, 05/01/40

    265       290,305  

State of New York HFA, RB:

   

Affordable Housing, Series E (SONYMA), 4.15%, 11/01/47

    660       675,635  

M/F Housing, Highland Avenue Senior Apartments, Series A, AMT (SONYMA), 5.00%, 02/15/39

    955       958,104  
   

 

 

 
    3,877,552  
State — 17.9%  

City of New York Transitional Finance Authority, BARB:

   

Fiscal 2018, Series S-1, 5.00%, 07/15/35

    205       234,971  

Fiscal 2018, Series S-2, 5.00%, 07/15/35

    205       234,971  

Series S-3, 5.25%, 07/15/36

    270       320,250  

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

   

Fiscal 2012, Sub-Series D-1, 5.00%, 11/01/38

    825       893,714  

Fiscal 2014, Sub-Series B-1, 5.00%, 11/01/36

    340       382,078  

Future Tax Secured Subordinate Bonds, SubSeries A-2, 5.00%, 08/01/40

    1,765       2,037,692  

Series A-2, 5.00%, 08/01/39

    355       405,350  

Sub-Series E-1, 5.00%, 02/01/38

    750       852,337  

Sub-Series F-1, 5.00%, 05/01/38

    580       661,183  

Sub-Series F-1, 5.00%, 05/01/39

    245       278,896  

Subordinate, Sub-Series C-3, 4.00%, 05/01/42

    465       480,424  
 

 

 

48    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Trust II (BFY)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
State (continued)  

Metropolitan Transportation Authority, Refunding RB, Dedicated Tax Fund, Sub-Series B-1, 5.00%, 11/15/31

  $ 750     $ 841,943  

State of New York, GO, Series A, 5.00%, 02/15/39

    500       507,200  

State of New York Dormitory Authority, RB:

   

General Purpose, Series B, 5.00%, 03/15/37

    1,070       1,161,667  

General Purpose, Series B, 5.00%, 03/15/42

    1,000       1,083,200  

General Purpose, Series C, 5.00%, 03/15/34

    1,000       1,068,470  

Group 4, Series A, 5.00%, 03/15/45

    470       538,587  

Series A, 5.00%, 03/15/36

    545       622,248  

Series A, 5.00%, 02/15/42

    250       281,718  

State of New York Urban Development Corp., RB, State Personal Income Tax, Series C, 5.00%, 03/15/30

    500       557,050  
   

 

 

 
    13,443,949  
Tobacco — 3.9%  

Counties of New York Tobacco Trust IV, Refunding RB, Settlement Pass-Through Turbo, Series A,
6.25%, 06/01/41(a)

    400       414,396  

Counties of New York Tobacco Trust VI, Refunding RB:

   

Settlement Pass-Through Turbo, Series C, 4.00%, 06/01/51

    750       704,362  

Tobacco Settlement Pass-Through, Series A-2B, 5.00%, 06/01/51

    600       626,958  

County of Chautauqua New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, 4.75%, 06/01/39

    250       252,233  

County of Niagara New York Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, 5.25%, 05/15/40

    230       245,585  

Westchester New York Tobacco Asset Securitization, Refunding RB, Tobacco Settlement Bonds, Sub-Series C:

   

4.00%, 06/01/42

    285       278,570  

5.13%, 06/01/51

    355       369,040  
   

 

 

 
    2,891,144  
Transportation — 26.0%  

Buffalo & Fort Erie Public Bridge Authority, RB, Toll Bridge System, 5.00%, 01/01/42

    215       242,400  

Metropolitan Transportation Authority, RB:

   

Series A-1, 5.25%, 11/15/23(c)

    270       313,659  

Series C, 6.50%, 11/15/28

    145       146,412  

Series E, 5.00%, 11/15/38

    1,000       1,099,530  

Metropolitan Transportation Authority, Refunding RB:

   

Green Bonds, Climate Bond Certified, Sub-Series B-2, 4.00%, 11/15/34

    500       531,625  

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

    250       280,350  

Series B, 5.00%, 11/15/37

    915       1,028,643  

Series F, 5.00%, 11/15/30

    1,500       1,651,530  

Series F, 5.00%, 11/15/35

    500       558,770  

Metropolitan Transportation Authority Hudson Rail Yards Trust Obligations, Refunding RB, Series A, 5.00%, 11/15/56

    1,120       1,211,269  

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

    500       547,790  

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

   

5.00%, 07/01/46

    1,320       1,406,935  

5.25%, 01/01/50

    1,325       1,428,019  

(AGM), 4.00%, 07/01/41

    300       303,408  

New York Transportation Development Corp., Refunding ARB, American Airlines, Inc., AMT, 5.00%, 08/01/31

    920       959,854  

Port Authority of New York & New Jersey, ARB, Special Project, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/01/42

    1,000       1,088,500  

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

   

177th Series, 4.00%, 01/15/43

    480       487,670  

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

    430       471,387  
Security   Par
(000)
    Value  
Transportation (continued)  

State of New York Thruway Authority, RB, Junior Lien, Series A, 5.25%, 01/01/56

  $ 305     $ 343,604  

State of New York Thruway Authority, Refunding RB, General:

   

Series I, 5.00%, 01/01/37

    1,530       1,652,691  

Series I, 5.00%, 01/01/42

    1,030       1,110,196  

Series J, 5.00%, 01/01/41

    1,000       1,098,700  

Triborough Bridge & Tunnel Authority, RB, Series B, 5.00%, 11/15/40

    240       271,838  

Triborough Bridge & Tunnel Authority, Refunding RB, General:

   

MTA Bridges & Tunnels, Series C-2, 5.00%, 11/15/42

    225       257,994  

Series A, 5.25%, 11/15/45

    370       423,998  

Series A, 5.00%, 11/15/50

    500       555,415  
   

 

 

 
    19,472,187  
Utilities — 14.0%  

City of New York Municipal Water Finance Authority, RB, Water & Sewer System, 2nd General Resolution, Fiscal 2017, Series DD, 5.25%, 06/15/47

    245       282,608  

City of New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2015, Series HH, 5.00%, 06/15/39

    1,500       1,683,675  

City of New York Water & Sewer System, Refunding RB, Series EE, 5.00%, 06/15/40

    350       401,723  

Long Island Power Authority, RB, Electric Systems:

   

CAB, Series A (AGM), 0.00%, 06/01/28(d)

    3,515       2,572,769  

General, 5.00%, 09/01/42

    200       226,260  

General, Series C (CIFG), 5.25%, 09/01/29

    1,000       1,196,300  

Long Island Power Authority, Refunding RB, Electric System:

   

Series A, 5.50%, 04/01/19(c)

    500       511,435  

Series B, 5.00%, 09/01/41

    75       84,057  

Series B, 5.00%, 09/01/46

    125       139,630  

State of New York Environmental Facilities Corp., Refunding RB, Revolving Funds, New York City Municipal Water, Series B, 5.00%, 06/15/36

    350       377,828  

Utility Debt Securitization Authority, Refunding RB, Restructuring, Series E, 5.00%, 12/15/41

    2,690       3,002,148  
   

 

 

 
    10,478,433  
Multi-State — 2.7%  
Housing — 2.7%  

Centerline Equity Issuer Trust(a)(e):

   

Series A-4-2, 6.00%, 10/31/52

    1,000       1,026,660  

Series B-3-2, 6.30%, 10/31/52

    1,000       1,028,600  
   

 

 

 
    2,055,260  
Puerto Rico — 1.2%  
Tobacco — 1.2%  

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds, 5.63%, 05/15/43

    900       911,214  
   

 

 

 

Total Municipal Bonds — 150.4%
(Cost — $106,999,266)

 

    112,714,935  
 

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(f)

 

New York — 17.9%  
County/City/Special District/School District — 4.4%  

City of New York, GO, Sub-Series I-1, 5.00%, 03/01/36

    500       557,390  

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

    500       573,313  

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

    1,995       2,182,394  
   

 

 

 
    3,313,097  
 

 

 

SCHEDULES OF INVESTMENTS      49  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Trust II (BFY)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Education — 0.7%  

City of New York Trust for Cultural Resources, Refunding RB, Wildlife Conservation Society, Series A, 5.00%, 08/01/33

  $ 510     $ 566,509  
   

 

 

 
State — 4.1%  

City of New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-3, 5.25%, 01/15/39

    1,300       1,315,899  

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

   

5.00%, 10/15/31

    255       292,209  

4.00%, 10/15/32

    350       376,899  

State of New York Dormitory Authority, RB, General Purpose, Series C, 5.00%, 03/15/41

    1,000       1,066,215  
   

 

 

 
    3,051,222  
Transportation — 4.8%  

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

   

194th Series, 5.25%, 10/15/55

    735       835,570  

Consolidated, 210th Series, 5.00%, 09/01/48

    960       1,104,970  

Consolidated, Series 169th, 5.00%, 10/15/26

    1,000       1,079,315  

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

    500       563,475  
   

 

 

 
    3,583,330  
Utilities — 3.9%  

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

   

Fiscal 2011, Series HH, 5.00%, 06/15/32

    1,500       1,615,550  

Fiscal 2012, Series BB, 5.00%, 06/15/44

    1,005       1,085,729  

Utility Debt Securitization Authority, Refunding RB, Restructuring, Series B, 4.00%, 12/15/35

    190       201,250  
   

 

 

 
    2,902,529  
 

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond
Trusts — 17.9%
(Cost — $12,905,271)

 

    13,416,687  
 

 

 

 

Total Long-Term Investments — 168.3%
(Cost — $119,904,537)

 

    126,131,622  
 

 

 

 
Security  

Shares

    Value  

Short-Term Securities — 0.2%

 

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(g)(h)

    129,237     $ 129,250  
   

 

 

 

Total Short-Term Securities — 0.2%
(Cost — $129,237)

 

    129,250  
 

 

 

 

Total Investments — 168.5%
(Cost — $120,033,774)

 

    126,260,872  

Other Assets Less Liabilities — 0.6%

 

    466,582  

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (10.0)%

 

    (7,500,616

VRDP Shares at Liquidation Value, Net of Deferred Offering
Costs — (59.1)%

 

    (44,295,740
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 74,931,098  
 

 

 

 

 

(a) 

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.

(b) 

When-issued security.

(c) 

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.

(d) 

Zero-coupon bond.

(e) 

Represents a beneficial interest in a trust. The collateral deposited into the trust is federally tax-exempt revenue bonds issued by various state or local governments, or their respective agencies or authorities. The security is subject to remarketing prior to its stated maturity.

(f) 

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

(g) 

Annualized 7-day yield as of period end.

 
(h) 

During the year ended August 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Held at
08/31/17
     Net
Activity
     Shares
Held at
08/31/18
     Value at
08/31/18
     Income      Net
Realized
Gain (Loss)
 (a)
     Change in
Unrealized

Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

     604,604        (475,367      129,237      $ 129,250      $ 8,737      $ 3      $ 13  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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.

 

 

50    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Trust II (BFY)

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     8          12/19/18        $ 962        $ (176

Long U.S. Treasury Bond

     18          12/19/18          2,596          8,420  

5-Year U.S. Treasury Note

     11          12/31/18          1,247          (355
                 

 

 

 
                  $ 7,889  
                 

 

 

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 8,420      $      $ 8,420  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 531      $      $ 531  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes cumulative appreciation (depreciation) on futures contract 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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 415,696      $      $ 415,696  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 47,886      $      $ 47,886  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 6,362,508  

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

 

 

SCHEDULES OF INVESTMENTS      51  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock New York Municipal Income Trust II (BFY)

 

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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1        Level 2        Level 3        Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $        $ 126,131,622        $        $ 126,131,622  

Short-Term Securities

     129,250                            129,250  
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 129,250        $ 126,131,622        $        $ 126,260,872  
  

 

 

      

 

 

      

 

 

      

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 8,420        $        $        $ 8,420  

Liabilities:

 

Interest rate contracts

     (531                          (531
  

 

 

      

 

 

      

 

 

      

 

 

 
   $ 7,889        $        $             —        $ 7,889  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

The Trust 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

   $             —        $ (7,475,312      $             —        $ (7,475,312

VRDP Shares at Liquidation Value

              (44,400,000                 (44,400,000
  

 

 

      

 

 

      

 

 

      

 

 

 
   $        $ (51,875,312      $        $ (51,875,312
  

 

 

      

 

 

      

 

 

      

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

52    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments

August 31, 2018

  

BlackRock Virginia Municipal Bond Trust (BHV)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  

Municipal Bonds — 133.5%

 

Virginia — 124.6%  
Corporate — 2.1%  

County of Chesterfield Virginia EDA, RB, Virginia Electric Power Co. Project, Series A, AMT, 5.60%, 11/01/31

  $ 500     $ 501,365  
   

 

 

 
County/City/Special District/School District — 27.8%  

Ballston Quarter Community Development Authority, Tax Allocation Bonds, Series A, 5.38%, 03/01/36

    250       260,810  

Cherry Hill Virginia Community Development Authority, Special Assessment Bonds, Potomac Shores Project, 5.40%, 03/01/45(a)

    250       256,178  

City of Norfolk Virginia, GO, Refunding(b):

   

5.00%, 08/01/23

    465       527,073  

5.00%, 08/01/23

    35       39,760  

City of Portsmouth Virginia, GO, Refunding Series D(b):

   

5.00%, 07/15/20

    485       513,547  

5.00%, 07/15/20

    15       15,897  

City of Suffolk Virginia, GO, Refunding, 5.00%, 06/01/21(b)

    1,000       1,084,560  

County of Fairfax Virginia EDA, RB, Silverline Phase I Project, 5.00%, 04/01/20(b)

    1,000       1,050,490  

County of Fairfax Virginia Redevelopment & Housing Authority, Refunding RB, Fairfax Redevelopment & Housing, 5.00%, 10/01/39

    1,500       1,547,310  

Dulles Town Center Community Development Authority, Refunding, Special Assessment, Dulles Town Center Project, 4.25%, 03/01/26

    500       500,160  

Lower Magnolia Green Community Development Authority, Special Assessment Bonds, 5.00%, 03/01/35(a)

    245       249,341  

Mosaic District Community Development Authority, Special Assessment, Series A, 6.88%, 03/01/36

    250       269,943  

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

    360       364,262  
   

 

 

 
    6,679,331  
Education — 21.4%  

County of Montgomery Virginia EDA, Refunding RB, Virginia Tech Foundation, Series A, 5.00%, 06/01/20(b)

    355       374,979  

Virginia College Building Authority, RB, Marymount University Project, Series B, 5.00%, 07/01/45(a)

    100       103,915  

Virginia College Building Authority, Refunding RB:

   

Liberty University Projects, 5.00%, 03/01/41

    1,000       1,043,790  

Marymount University Project, Series A, 5.00%, 07/01/45(a)

    400       415,660  

Washington & Lee University Project (NPFGC), 5.25%, 01/01/26

    500       565,850  

Washington & Lee University Project (NPFGC), 5.25%, 01/01/31

    1,000       1,191,240  

Virginia Small Business Financing Authority, RB:

   

Covanta Project, AMT, 5.00%, 01/01/48(a)(c)

    400       412,052  

Roanoke College, 5.75%, 04/01/41

    500       525,760  

Virginia Small Business Financing Authority, Refunding RB, 4.00%, 10/01/38

    500       500,790  
   

 

 

 
    5,134,036  
Health — 35.1%  

City of Danville Virginia IDA, Refunding RB, Danville Regional Medical Center (AMBAC), 5.25%, 10/01/28(d)

    1,000       1,119,030  

County of Fairfax Virginia EDA, Refunding RB, Vinson Hall LLC, Series A, 5.00%, 12/01/42

    500       529,450  

County of Fairfax Virginia IDA, RB, Series A, 5.00%, 05/15/44

    450       494,298  

County of Hanover Virginia EDA, Refunding RB, Covenant Woods:

   

5.00%, 07/01/51

    250       264,603  

Series A, 5.00%, 07/01/42

    500       516,815  

County of Henrico Virginia EDA, Refunding RB, United Methodist Homes, 4.25%, 06/01/26

    145       149,235  
Security   Par
(000)
    Value  
Health (continued)  

County of Prince William Virginia IDA, Refunding RB, Novant Health Obligation Group, Series B, 4.00%, 11/01/46

  $ 500     $ 508,410  

Lexington Industrial Development Authority, RB, Series A, 5.00%, 01/01/42

    690       742,288  

Roanoke Virginia EDA, Refunding RB:

   

Carilion Clinic Obligation Group, 5.00%, 07/01/30

    795       860,953  

Carilion Health System (AGM), 5.00%, 07/01/20(b)

    5       5,288  

Carilion Health System, Series B (AGM), 5.00%, 07/01/38

    495       516,260  

Virginia Beach Development Authority, Refunding RB, Westminster-Canterbury on Chesapeake Bay:

   

5.00%, 09/01/44

    250       277,135  

4.00%, 09/01/48

    250       249,565  

Winchester Virginia EDA, Refunding RB, Valley Health System Obligation:

   

5.00%, 01/01/44

    1,000       1,092,730  

Series A, 5.00%, 01/01/44

    400       431,504  

Winchester Virginia IDA, RB, Valley Health System Obligation, Series E, 5.63%, 01/01/19(b)

    650       658,288  
   

 

 

 
    8,415,852  
Housing — 10.8%  

Virginia HDA, RB, M/F Housing, Rental Housing:

   

Series A, 5.25%, 05/01/41

    750       789,922  

Series B, 5.63%, 06/01/39

    1,000       1,026,270  

Series B, 4.00%, 06/01/53

    500       503,650  

Series F, 5.25%, 10/01/38

    250       276,223  
   

 

 

 
    2,596,065  
State — 1.8%  

Virginia Public School Authority, RB, School Financing, 1997 Resolution, Series B, 4.00%, 08/01/21(b)

    405       428,928  
   

 

 

 
Tobacco — 3.8%  

Tobacco Settlement Financing Corp., Refunding RB, Senior:

   

Convertible, Series B2, 5.20%, 06/01/46

    500       504,695  

Series B-1, 5.00%, 06/01/47

    410       410,004  
   

 

 

 
    914,699  
Transportation — 21.4%  

Richmond Metropolitan Authority, Refunding RB, (NPFGC), 5.25%, 07/15/22

    410       435,494  

Virginia Commonwealth Transportation Board, RB, Capital Projects, 5.00%, 05/15/21(b)(e)

    1,260       1,365,550  

Virginia Port Authority, RB, 5.00%, 07/01/20(b)

    500       529,285  

Virginia Resources Authority, RB, Series B:

   

5.00%, 11/01/18(b)

    1,155       1,161,375  

5.00%, 11/01/33

    740       744,085  

Virginia Small Business Financing Authority, RB, Senior Lien, Elizabeth River Crossings OpCo LLC Project, AMT, 6.00%, 01/01/37

    820       904,739  
   

 

 

 
    5,140,528  
Utilities — 0.4%  

Virginia Resources Authority, RB, 5.00%, 11/01/18(b)

    105       105,580  
   

 

 

 

Total Municipal Bonds in Virginia — 124.6%

      29,916,384  
   

 

 

 
District of Columbia — 7.5%  
Transportation — 7.5%            

Metropolitan Washington Airports Authority, Refunding RB:

   

Dulles Toll Road, 1st Senior Lien, Series A, 5.00%, 10/01/39

    290       298,303  

Dulles Toll Road, 1st Senior Lien, Series A, 5.25%, 10/01/44

    460       474,232  

Series B, 5.00%, 10/01/29

    1,000       1,031,330  
   

 

 

 
    1,803,865  
 

 

 

SCHEDULES OF INVESTMENTS      53  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Virginia Municipal Bond Trust (BHV)

(Percentages shown are based on Net Assets)

 

Security   Par
(000)
    Value  
Puerto Rico — 1.4%  
Tobacco — 1.4%            

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds, 5.63%, 05/15/43

  $ 335     $ 339,174  
   

 

 

 

Total Municipal Bonds — 133.5%
(Cost — $30,530,675)

 

    32,059,423  
 

 

 

 

Municipal Bonds Transferred to Tender Option Bond Trusts(f)

 

Virginia — 41.6%  
Health — 13.8%  

County of Fairfax Virginia EDA, RB, Metrorail Parking System Project, 5.00%, 04/01/47(g)

    2,000       2,269,160  

Virginia Small Business Financing Authority, Refunding RB, Sentara Healthcare, 5.00%, 11/01/40

    1,000       1,048,965  
   

 

 

 
    3,318,125  
Transportation — 27.8%  

Hampton Roads Transportation Accountability Commission, RB, Transportation Fund, Senior Lien, Series A, 5.00%, 07/01/48

    4,308       4,961,868  

Washington Metropolitan Area Transit Authority, RB, Series B, 5.00%, 07/01/42

    1,503       1,716,462  
   

 

 

 
    6,678,330  
 

 

 

 

Total Municipal Bonds Transferred to Tender Option Bond
Trusts — 41.6%
(Cost — $9,928,332)

 

    9,996,455  
 

 

 

 

Total Long-Term Investments — 175.1%
(Cost — $40,459,007)

 

    42,055,878  
 

 

 

 
Security  

Shares

    Value  

Short-Term Securities — 0.1%

 

BlackRock Liquidity Funds, MuniCash, Institutional Class, 1.35%(h)(i)

    13,073     $ 13,074  
   

 

 

 

Total Short-Term Securities — 0.1%
(Cost — $13,074)

 

    13,074  
 

 

 

 

Total Investments — 175.2%
(Cost — $40,472,081)

 

    42,068,952  

Liabilities in Excess of Other Assets — (4.6)%

 

    (1,113,836

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (22.5)%

 

    (5,410,703

VRDP Shares at Liquidation Value, Net of Deferred Offering
Costs — (48.1)%

 

    (11,538,521
 

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 24,005,892  
 

 

 

 

 

(a) 

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.

(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) 

Variable rate security. Rate shown is the rate in effect as of period end.

(d) 

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

(e) 

When-issued security.

(f) 

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

(g) 

All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreement, which expires on October 1, 2024, is $1,051,389. See Note 4 of the Notes to Financial Statements for details.

(h) 

Annualized 7-day yield as of period end.

 
(i) 

During the year ended August 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate    Shares
Held at
08/31/17
     Net
Activity
     Shares
Held at
08/31/18
     Value at
08/31/18
     Income      Net
Realized

Gain (Loss) (a)
     Change in
Unrealized

Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

            13,073        13,073      $ 13,074      $ 1,413      $ 30      $  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Includes net capital gain distributions, if applicable.

 

For Trust compliance purposes, the Trust’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

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Short Contracts:

                 

10-Year U.S. Treasury Note

     2          12/19/18        $ 241        $ (44

Long U.S. Treasury Bond

     4          12/19/18          577          1,695  

5-Year U.S. Treasury Note

     1          12/31/18          113          (41
                 

 

 

 
                  $ 1,610  
                 

 

 

 

 

 

54    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Virginia Municipal Bond Trust (BHV)

 

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:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Assets — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized appreciation(a)

   $      $      $      $      $ 1,695      $      $ 1,695  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities — Derivative Financial Instruments

                    

Futures contracts

                    

Net unrealized depreciation(a)

   $      $      $      $      $ 85      $      $ 85  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

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 year ended August 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

      Commodity
Contracts
     Credit
Contracts
     Equity
Contracts
     Foreign
Currency
Exchange
Contracts
     Interest
Rate
Contracts
     Other
Contracts
     Total  

Net Realized Gain (Loss) from:

                    

Futures contracts

   $      $      $      $      $ 61,167      $      $ 61,167  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on:

                    

Futures contracts

   $      $      $      $      $ 7,802      $      $ 7,802  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:

 

Average notional value of contracts — short

   $ 1,205,119  

For more information about the Trust’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 Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

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

 

      Level 1      Level 2      Level 3      Total  

Assets:

 

Investments:

 

Long-Term Investments(a)

   $      $ 42,055,878      $             —      $ 42,055,878  

Short-Term Securities

     13,074                      13,074  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 13,074      $ 42,055,878      $      $ 42,068,952  
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivative Financial Instruments(b)

 

Assets:

 

Interest rate contracts

   $ 1,695      $      $      $ 1,695  

Liabilities:

 

Interest rate contracts

     (85                    (85
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,610      $      $      $ 1,610  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

See above Schedule of Investments for values in each sector.

 
  (b) 

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

 

 

 

SCHEDULES OF INVESTMENTS      55  


Schedule of Investments  (continued)

August 31, 2018

  

BlackRock Virginia Municipal Bond Trust (BHV)

 

The Trust 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

   $             —      $ (5,395,720    $             —      $ (5,395,720

VRDP Shares at Liquidation Value

            (11,600,000             (11,600,000
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ (16,995,720    $      $ (16,995,720
  

 

 

    

 

 

    

 

 

    

 

 

 

During the year ended August 31, 2018, there were no transfers between levels.

See notes to financial statements.

 

 

56    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Assets and Liabilities

August 31, 2018

 

     BZM      MHE     MHN     BQH  

ASSETS

 

Investments at value — unaffiliated(a)

  $ 48,955,746      $ 52,103,250     $ 742,434,511     $ 70,867,154  

Investments at value — affiliated(b)

    273,859        427,620       2,683,766       343,358  

Cash

    738                     

Cash pledged for futures contracts

    33,350        31,050       357,850       35,350  

Receivables:

 

Interest — unaffiliated

    518,733        618,845       8,471,004       767,391  

Dividends — affiliated

    379        777       3,506       450  

Investments sold

           187,878       340,000       502,375  

Prepaid expenses

    12,892        10,430       29,813       43,813  
 

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

    49,795,697        53,379,850       754,320,450       72,559,891  
 

 

 

    

 

 

   

 

 

   

 

 

 

ACCRUED LIABILITIES

 

Payables:

 

Income dividend distributions-Common Shares

    98,648        104,313       1,385,375       128,805  

Investment advisory fees

    25,282        22,000       319,406       33,300  

Trustees’ and Officer’s fees

    12,237        482       256,532       12,190  

Interest expense and fees

    8,457        10,536       250,282       23,663  

Variation margin on futures contracts

    844        846       10,680       929  

Investments purchased

                       640,000  

Other accrued expenses

    67,958        68,645       219,759       77,527  
 

 

 

    

 

 

   

 

 

   

 

 

 

Total accrued liabilities

    213,426        206,822       2,442,034       916,414  
 

 

 

    

 

 

   

 

 

   

 

 

 

OTHER LIABILITIES

 

TOB Trust Certificates

    2,637,107        3,135,858       64,262,332       6,560,292  

VRDP Shares, at liquidation value of $100,000 per share, net of deferred offering costs(c)(d)

    15,937,366        18,427,777       243,247,283       21,998,402  
 

 

 

    

 

 

   

 

 

   

 

 

 

Total other liabilities

    18,574,473        21,563,635       307,509,615       28,558,694  
 

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

    18,787,899        21,770,457       309,951,649       29,475,108  
 

 

 

    

 

 

   

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

  $ 31,007,798      $ 31,609,393     $ 444,368,801     $ 43,084,783  
 

 

 

    

 

 

   

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS CONSIST OF

 

Paid-in capital(e)(f)(g)

  $ 29,490,692      $ 29,301,354     $ 433,321,244     $ 39,693,455  

Undistributed net investment income

    221,233        130,411       1,076,098       335,187  

Accumulated net realized gain (loss)

    161,519        (303,148     (16,112,270     (1,083,953

Net unrealized appreciation (depreciation)

    1,134,354        2,480,776       26,083,729       4,140,094  
 

 

 

    

 

 

   

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

  $ 31,007,798      $ 31,609,393     $ 444,368,801     $ 43,084,783  
 

 

 

    

 

 

   

 

 

   

 

 

 

Net asset value per Common Share

  $ 14.90      $ 13.33     $ 14.27     $ 15.39  
 

 

 

    

 

 

   

 

 

   

 

 

 

(a)Investmentsat cost — unaffiliated

  $ 47,826,001      $ 49,626,506     $ 716,400,982     $ 66,732,214  

(b)Investmentsat cost — affiliated

  $ 273,859      $ 427,620     $ 2,683,717     $ 343,358  

(c)PreferredShares Outstanding:

        

Par value $ 0.001 per share

    160                    221  

Par value $0.01 per share

           185              

Par value $0.10 per share

                 2,436        

(d)PreferredShares authorized

    unlimited        unlimited       14,956       unlimited  

(e)Parvalue per Common Shares

  $ 0.001      $ 0.010     $ 0.100     $ 0.001  

(f)CommonShares outstanding

    2,081,183        2,371,023       31,132,023       2,800,105  

(g)CommonShares authorized

    unlimited        unlimited       199,985,044       unlimited  

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      57  


 

Statements of Assets and Liabilities   (continued)

August 31, 2018

 

     BSE     BFY     BHV  

ASSETS

 

Investments at value — unaffiliated(a)

  $ 153,556,696     $ 126,131,622     $ 42,055,878  

Investments at value — affiliated(b)

    673,165       129,250       13,074  

Cash pledged for futures contracts

    74,300       58,400       12,950  

Receivables:

 

Interest — unaffiliated

    1,780,166       1,374,704       539,609  

Dividends — affiliated

    698       944       74  

Investments sold

          502,375        

TOB Trust

                867,030  

Prepaid expenses

    60,507       65,470       3,104  
 

 

 

   

 

 

   

 

 

 

Total assets

    156,145,532       128,262,765       43,491,719  
 

 

 

   

 

 

   

 

 

 

ACCRUED LIABILITIES

 

Bank overdraft

    109              

Payables:

 

Income dividend distributions — Common Shares

    264,046       245,241       101,036  

Investment advisory fees

    72,352       59,002       18,105  

Trustees’ and Officer’s fees

    11,253       13,725       9,126  

Interest expense and fees

    73,074       25,304       14,983  

Variation margin on futures contracts

    2,820       1,992       321  

Investments purchased

          1,130,000       1,509,267  

TOB Trust

                845,917  

Other accrued expenses

    97,598       85,351       52,831  
 

 

 

   

 

 

   

 

 

 

Total accrued liabilities

    521,252       1,560,615       2,551,586  
 

 

 

   

 

 

   

 

 

 

OTHER LIABILITIES

 

TOB Trust Certificates

    21,702,203       7,475,312       5,395,720  

VRDP Shares, at liquidation value of $100,000 per share, net of deferred offering costs(c)(d)

    40,390,139       44,295,740       11,538,521  
 

 

 

   

 

 

   

 

 

 

Total other liabilities

    62,092,342       51,771,052       16,934,241  
 

 

 

   

 

 

   

 

 

 

Total liabilities

    62,613,594       53,331,667       19,485,827  
 

 

 

   

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

  $ 93,531,938     $ 74,931,098     $ 24,005,892  
 

 

 

   

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS CONSIST OF

 

Paid-in capital(e)(f)(g)

  $ 89,254,965     $ 69,885,673     $ 22,890,415  

Undistributed net investment income

    141,169       614,961       157,423  

Accumulated net realized gain (loss)

    (1,849,916     (1,804,523     (640,427

Net unrealized appreciation (depreciation)

    5,985,720       6,234,987       1,598,481  
 

 

 

   

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

  $ 93,531,938     $ 74,931,098     $ 24,005,892  
 

 

 

   

 

 

   

 

 

 

Net asset value per Common Share

  $ 14.35     $ 14.97     $ 14.97  
 

 

 

   

 

 

   

 

 

 

(a)Investmentsat cost — unaffiliated

  $ 147,580,238     $ 119,904,537     $ 40,459,007  

(b)Investmentsat cost — affiliated

  $ 673,165     $ 129,237     $ 13,074  

(c)PreferredShares outstanding:

 

Par value $ 0.001 per share

    405       444       116  

(d)PreferredShares authorized

    unlimited       unlimited       unlimited  

(e)Parvalue per Common Shares

  $ 0.001     $ 0.001     $ 0.001  

(f)CommonShares outstanding

    6,519,660       5,004,922       1,603,764  

(g)CommonShares authorized

    unlimited       unlimited       unlimited  

See notes to financial statements.

 

 

58    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Operations

Year Ended August 31, 2018

 

     BZM     MHE     MHN     BQH  

INVESTMENT INCOME

 

Interest — unaffiliated

  $ 1,973,790     $ 2,116,090     $ 29,466,482     $ 2,825,587  

Dividends — affiliated

    2,615       3,442       50,751       4,537  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

    1,976,405       2,119,532       29,517,233       2,830,124  
 

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES

 

Investment advisory

    325,766       261,438       4,209,525       470,786  

Liquidity fees

    117,017             24,941        

Professional

    42,487       38,723       87,455       43,810  

Transfer agent

    15,418       16,759       32,483       15,805  

Remarketing fees on Preferred Shares

    11,355             24,360        

Accounting services

    10,679       10,917       99,770       13,838  

Printing

    6,845       6,988       13,396       7,374  

Trustees and Officer

    3,358       2,948       55,273       4,540  

Custodian

    3,034       2,816       29,149       3,894  

Registration

    976       1,111       12,022       9,419  

Rating agency

    29,658       29,663       41,787       41,408  

Miscellaneous

    18,548       14,886       33,657       13,006  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    585,141       386,249       4,663,818       623,880  

Interest expense, fees and amortization of offering costs(a)

    277,904       419,645       6,424,354       596,149  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    863,045       805,894       11,088,172       1,220,029  

Less fees waived and/or reimbursed by the Manager

    (25,267     (301     (381,779     (72,842
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses after fees waived and/or reimbursed

    837,778       805,593       10,706,393       1,147,187  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

    1,138,627       1,313,939       18,810,840       1,682,937  
 

 

 

   

 

 

   

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS)

 

Net realized gain (loss) from:

 

Investments — unaffiliated

    104,220       (56,434     194,993       (18,331

Investments — affiliated

    (18     (193     (1,994     (258

Futures contracts

    163,772       169,138       2,378,940       232,970  

Capital gain distributions from investment companies — affiliated

    34       95       1,870       229  
 

 

 

   

 

 

   

 

 

   

 

 

 
    268,008       112,606       2,573,809       214,610  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on:

       

Investments — unaffiliated

    (1,041,685     (1,594,149     (22,886,429     (2,190,659

Investments — affiliated

          39       99        

Futures contracts

    16,962       16,501       284,458       28,772  
 

 

 

   

 

 

   

 

 

   

 

 

 
    (1,024,723     (1,577,609     (22,601,872     (2,161,887
 

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized loss

    (756,715     (1,465,003     (20,028,063     (1,947,277
 

 

 

   

 

 

   

 

 

   

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS

  $ 381,912     $ (151,064   $ (1,217,223   $ (264,340
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Related to TOB Trusts and/or VRDP Shares.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      59  


Statements of Operations  (continued)

Year Ended August 31, 2018

 

     BSE     BFY     BHV  

INVESTMENT INCOME

 

Interest — unaffiliated

  $ 5,888,811     $ 5,151,934     $ 1,770,251  

Dividends — affiliated

    10,621       8,737       1,413  
 

 

 

   

 

 

   

 

 

 

Total investment income

    5,899,432       5,160,671       1,771,664  
 

 

 

   

 

 

   

 

 

 

EXPENSES

 

Investment advisory

    860,331       706,416       265,611  

Liquidity fees

                85,237  

Professional

    49,289       46,837       32,067  

Transfer agent

    22,606       17,066       15,291  

Remarketing fees on Preferred Shares

                8,234  

Accounting services

    28,120       18,110       4,493  

Printing

    8,065       7,804       6,718  

Trustees and Officer

    9,197       7,545       2,623  

Custodian

    7,152       6,407       2,941  

Registration

    9,419       2,347       751  

Rating agency

    41,439       41,446       29,651  

Miscellaneous

    14,924       13,244       16,508  
 

 

 

   

 

 

   

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    1,050,542       867,222       470,125  

Interest expense, fees and amortization of offering costs(a)

    1,251,416       1,091,255       250,133  
 

 

 

   

 

 

   

 

 

 

Total expenses

    2,301,958       1,958,477       720,258  

Less fees waived and/or reimbursed by the Manager

    (955     (789     (53,257
 

 

 

   

 

 

   

 

 

 

Total expenses after fees waived and/or reimbursed

    2,301,003       1,957,688       667,001  
 

 

 

   

 

 

   

 

 

 

Net investment income

    3,598,429       3,202,983       1,104,663  
 

 

 

   

 

 

   

 

 

 

REALIZED AND UNREALIZED GAIN (LOSS)

 

Net realized gain (loss) from:

 

Investments — unaffiliated

    (165,383     (5,147     199,130  

Investments — affiliated

    (272     (295     25  

Futures contracts

    497,605       415,696       61,167  

Capital gain distributions from investment companies — affiliated

    312       298       5  
 

 

 

   

 

 

   

 

 

 
    332,262       410,552       260,327  
 

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on:

     

Investments — unaffiliated

    (4,866,578     (4,072,344     (1,384,182

Investments — affiliated

    50       13        

Futures contracts

    59,293       47,886       7,802  
 

 

 

   

 

 

   

 

 

 
    (4,807,235     (4,024,445     (1,376,380
 

 

 

   

 

 

   

 

 

 

Net realized and unrealized loss

    (4,474,973     (3,613,893     (1,116,053
 

 

 

   

 

 

   

 

 

 

NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS

  $ (876,544   $ (410,910   $ (11,390
 

 

 

   

 

 

   

 

 

 

 

(a) 

Related to TOB Trusts and/or VRDP Shares.

See notes to financial statements.

 

 

60    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets

 

    BZM  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 1,138,627     $ 1,220,727  

Net realized gain

    268,008       94,503  

Net change in unrealized appreciation (depreciation)

    (1,024,723     (1,470,250
 

 

 

   

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    381,912       (155,020
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (1,184,330     (1,183,544

From net realized gain

    (83,044      
 

 

 

   

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (1,267,374     (1,183,544
 

 

 

   

 

 

 

CAPITAL SHARE TRANSACTIONS

 

Reinvestment of common distributions

          30,246  
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (885,462     (1,308,318

Beginning of year

    31,893,260       33,201,578  
 

 

 

   

 

 

 

End of year

  $ 31,007,798     $ 31,893,260  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 221,233     $ 259,700  
 

 

 

   

 

 

 

 

(a)

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      61  


Statements of Changes in Net Assets  (continued)

 

    MHE  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 1,313,939     $ 1,458,297  

Net realized gain (loss)

    112,606       (15,349

Net change in unrealized appreciation (depreciation)

    (1,577,609     (1,620,354
 

 

 

   

 

 

 

Net decrease in net assets applicable to Common Shareholders resulting from operations

    (151,064     (177,406
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (1,379,587     (1,506,359
 

 

 

   

 

 

 

CAPITAL SHARE TRANSACTIONS

 

Reinvestment of common distributions

    24,680       26,673  
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (1,505,971     (1,657,092

Beginning of year

    33,115,364       34,772,456  
 

 

 

   

 

 

 

End of year

  $ 31,609,393     $ 33,115,364  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 130,411     $ 192,642  
 

 

 

   

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

62    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets  (continued)

 

    MHN  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 18,810,840     $ 21,343,909  

Net realized gain

    2,573,809       2,216,818  

Net change in unrealized appreciation (depreciation)

    (22,601,872     (25,369,660
 

 

 

   

 

 

 

Net decrease in net assets applicable to Common Shareholders resulting from operations

    (1,217,223     (1,808,933
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (19,231,620     (21,691,673
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (20,448,843     (23,500,606

Beginning of year

    464,817,644       488,318,250  
 

 

 

   

 

 

 

End of year

  $ 444,368,801     $ 464,817,644  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 1,076,098     $ 1,905,446  
 

 

 

   

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      63  


Statements of Changes in Net Assets  (continued)

 

    BQH  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 1,682,937     $ 1,876,649  

Net realized gain

    214,610       285,329  

Net change in unrealized appreciation (depreciation)

    (2,161,887     (2,647,715
 

 

 

   

 

 

 

Net decrease in net assets applicable to Common Shareholders resulting from operations

    (264,340     (485,737
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (1,764,066     (1,982,474
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (2,028,406     (2,468,211

Beginning of year

    45,113,189       47,581,400  
 

 

 

   

 

 

 

End of year

  $ 43,084,783     $ 45,113,189  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 335,187     $ 420,001  
 

 

 

   

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

64    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets  (continued)

 

    BSE  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 3,598,429     $ 4,108,641  

Net realized gain

    332,262       534,682  

Net change in unrealized appreciation (depreciation)

    (4,807,235     (5,787,817
 

 

 

   

 

 

 

Net decrease in net assets applicable to Common Shareholders resulting from operations

    (876,544     (1,144,494
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (3,667,309     (4,075,779
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (4,543,853     (5,220,273

Beginning of year

    98,075,791       103,296,064  
 

 

 

   

 

 

 

End of year

  $ 93,531,938     $ 98,075,791  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 141,169     $ 212,962  
 

 

 

   

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      65  


Statements of Changes in Net Assets  (continued)

 

    BFY  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 3,202,983     $ 3,573,037  

Net realized gain

    410,552       204,867  

Net change in unrealized appreciation (depreciation)

    (4,024,445     (4,281,706
 

 

 

   

 

 

 

Net decrease in net assets applicable to Common Shareholders resulting from operations

    (410,910     (503,802
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (3,303,232     (3,813,493
 

 

 

   

 

 

 

CAPITAL SHARE TRANSACTIONS

 

Reinvestment of common distributions

    4,281       31,711  
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (3,709,861     (4,285,584

Beginning of year

    78,640,959       82,926,543  
 

 

 

   

 

 

 

End of year

  $ 74,931,098     $ 78,640,959  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 614,961     $ 722,849  
 

 

 

   

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

66    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets  (continued)

 

    BHV  
    Year Ended August 31,  
     2018     2017  

INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

OPERATIONS

 

Net investment income

  $ 1,104,663     $ 1,246,653  

Net realized gain

    260,327       88,117  

Net change in unrealized appreciation (depreciation)

    (1,376,380     (1,426,601
 

 

 

   

 

 

 

Net decrease in net assets applicable to Common Shareholders resulting from operations

    (11,390     (91,831
 

 

 

   

 

 

 

DISTRIBUTIONS TO COMMON SHAREHOLDERS(a)

 

From net investment income

    (1,245,984     (1,209,228
 

 

 

   

 

 

 

CAPITAL SHARE TRANSACTIONS

 

Reinvestment of common distributions

    47,740       54,508  
 

 

 

   

 

 

 

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS

 

Total decrease in net assets applicable to Common Shareholders

    (1,209,634     (1,246,551

Beginning of year

    25,215,526       26,462,077  
 

 

 

   

 

 

 

End of year

  $ 24,005,892     $ 25,215,526  
 

 

 

   

 

 

 

Undistributed net investment income, end of year

  $ 157,423     $ 246,316  
 

 

 

   

 

 

 

 

(a) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      67  


Statements of Cash Flows

Year Ended August 31, 2018

 

     BZM     MHE     MHN     BQH  

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

 

Net increase (decrease) in net assets resulting from operations

  $ 381,912     $ (151,064   $ (1,217,223   $ (264,340

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities:

       

Proceeds from sales of long-term investments and principal paydowns

    8,151,492       8,501,055       116,542,600       7,498,077  

Purchases of long-term investments

    (8,524,723     (11,061,340     (117,819,770     (7,913,997

Net proceeds from sales (purchases) of short-term securities

    (273,876     416,587       574,335       (118,288

Amortization of premium and accretion of discount on investments and other fees

    241,571       266,223       4,706,136       324,155  

Net realized (gain) loss on investments

    (104,202     56,627       (192,999     18,589  

Net unrealized depreciation on investments

    1,041,685       1,594,110       22,886,330       2,190,659  
(Increase) Decrease in Assets:  

Receivables:

 

Interest — unaffiliated

    (27,683     17,458       (213,972     (8,008

Dividends — affiliated

    (378     (330     (1,476     (277

Prepaid expenses

    (305     13,710       (349     13,484  
Increase (Decrease) in Liabilities:  

Payables:

 

Investment advisory fees

    (166     (415     (13,046     (1,044

Interest expense and fees

    5,447       4,199       87,181       7,953  

Trustees’ and Officer’s

    331       (162     9,669       302  

Variation margin on futures contracts

    (7,656     (7,287     (107,188     (10,782

Other accrued expenses

    12,413       10,373       43,747       9,339  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) operating activities

    895,862       (340,256     25,283,975       1,745,822  
 

 

 

   

 

 

   

 

 

   

 

 

 

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

 

Proceeds from TOB Trust Certificates

    2,002,732       1,715,000       5,743,525       1,249,793  

Repayments of TOB Trust Certificates

    (1,500,000           (11,488,379     (1,210,964

Proceeds from Loan for TOB Trust Certificates

                2,667,952       269,793  

Repayments of Loan for TOB Trust Certificates

                (2,667,952     (269,793

Cash dividends paid to Common Shareholders

    (1,267,374     (1,376,163     (19,651,902     (1,800,467

Decrease in bank overdraft

    (155,520     (23,917     (313,660     (29,018

Amortization of deferred offering costs

    3,038       3,336       15,441       5,834  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

    (917,124     318,256       (25,694,975     (1,784,822
 

 

 

   

 

 

   

 

 

   

 

 

 

CASH

 

Net decrease in restricted and unrestricted cash and foreign currency

  $ (21,262   $ (22,000   $ (411,000   $ (39,000

Restricted and unrestricted cash and foreign currency at beginning of year

    55,350       53,050       768,850       74,350  
 

 

 

   

 

 

   

 

 

   

 

 

 

Restricted and unrestricted cash and foreign currency at end of year

  $ 34,088     $ 31,050     $ 357,850     $ 35,350  
 

 

 

   

 

 

   

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

Cash paid during the year for interest expense

  $ 269,419     $ 412,110     $ 6,321,732     $ 582,362  
 

 

 

   

 

 

   

 

 

   

 

 

 

NON-CASH FINANCING ACTIVITIES

 

Capital shares issued in reinvestment of distributions paid to Common Shareholders

  $     $ 24,680     $     $  
 

 

 

   

 

 

   

 

 

   

 

 

 

RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE END OF YEAR TO THE STATEMENTS OF ASSETS AND LIABILITIES

 

Cash

  $ 738     $     $     $  

Cash pledged:

 

Futures contracts

    33,350       31,050       357,850       35,350  
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 34,088     $ 31,050     $ 357,850     $ 35,350  
 

 

 

   

 

 

   

 

 

   

 

 

 

RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE BEGINNING OF YEAR TO THE STATEMENTS OF ASSETS AND LIABILITIES

 

Cash pledged:

 

Futures contracts

  $ 55,350     $ 53,050     $ 768,850     $ 74,350  
 

 

 

   

 

 

   

 

 

   

 

 

 

See notes to financial statements.

 

 

68    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Statements of Cash Flows  (continued)

Year Ended August 31, 2018

 

     BSE     BFY     BHV  

CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

 

Net increase (decrease) in net assets resulting from operations

  $ (876,544   $ (410,910   $ (11,390

Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by (used for) operating activities:

 

Proceeds from sales of long-term investments and principal paydowns

    24,143,576       15,143,254       10,403,068  

Purchases of long-term investments

    (27,160,405     (16,095,811     (11,302,726

Net proceeds from sales (purchases) of short-term securities

    470,466       475,253       (13,049

Amortization of premium and accretion of discount on investments and other fees

    1,044,019       498,575       123,835  

Net realized (gain) loss on investments

    165,655       5,442       (199,155

Net unrealized depreciation on investments

    4,866,528       4,072,331       1,384,182  
(Increase) Decrease in Assets:  

Receivables:

 

Interest — unaffiliated

    (67,987     (6,068     37,385  

Dividends — affiliated

    (118     (568     (67

Prepaid expenses

    (1,379     (1,424     13,695  
Increase (Decrease) in Liabilities:  

Payables:

 

Investment advisory fees

    (1,772     (1,937     (59

Interest expense and fees

    27,620       8,036       3,655  

Trustees’ and Officer’s

    (5     176       259  

Variation margin on futures contracts

    (21,305     (18,297     (3,320

Other accrued expenses

    14,458       11,313       10,458  
 

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

    2,602,807       3,679,365       446,771  
 

 

 

   

 

 

   

 

 

 

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

 

Proceeds from TOB Trust Certificates

    3,389,747       639,877       3,008,296  

Repayments of TOB Trust Certificates

    (2,291,694     (981,469     (1,994,057

Proceeds from Loan for TOB Trust Certificates

    329,747       159,877        

Repayments of Loan for TOB Trust Certificates

    (329,747     (159,877      

Cash dividends paid to Common Shareholders

    (3,742,285     (3,358,994     (1,198,058

Decrease in bank overdraft

    (50,825     (58,110     (277,536

Amortization of deferred offering costs

    6,250       6,331       2,584  
 

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

    (2,688,807     (3,752,365     (458,771
 

 

 

   

 

 

   

 

 

 

CASH

 

Net decrease in restricted and unrestricted cash and foreign currency

  $ (86,000   $ (73,000   $ (12,000

Restricted and unrestricted cash and foreign currency at beginning of year

    160,300       131,400       24,950  
 

 

 

   

 

 

   

 

 

 

Restricted and unrestricted cash and foreign currency at end of year

  $ 74,300     $ 58,400     $ 12,950  
 

 

 

   

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

Cash paid during the year for interest expense

  $ 1,217,546     $ 1,076,888     $ 243,894  
 

 

 

   

 

 

   

 

 

 

NON-CASH FINANCING ACTIVITIES

 

Capital shares issued in reinvestment of distributions paid to Common Shareholders

  $     $ 4,281     $ 47,740  
 

 

 

   

 

 

   

 

 

 

RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE END OF YEAR TO THE STATEMENTS OF ASSETS AND LIABILITIES

 

Cash pledged:

 

Futures contracts

  $ 74,300     $ 58,400     $ 12,950  
 

 

 

   

 

 

   

 

 

 

RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE BEGINNING OF YEAR TO THE STATEMENTS OF ASSETS AND LIABILITIES

 

Cash pledged:

 

Futures contracts

  $ 160,300     $ 131,400     $ 24,950  
 

 

 

   

 

 

   

 

 

 

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      69  


Financial Highlights

(For a share outstanding throughout each period)

 

    BZM  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 15.32      $ 15.97      $ 14.96      $ 15.20      $ 13.33  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.55        0.59        0.61        0.63        0.70  

Net realized and unrealized gain (loss)

    (0.36      (0.67      1.02        (0.19      1.90  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    0.19        (0.08      1.63        0.44        2.60  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Distributions to Common Shareholders(b)                                  

From net investment income

    (0.57      (0.57      (0.62      (0.68      (0.73

From net realized gain

    (0.04                            
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions to Common Shareholders

    (0.61      (0.57      (0.62      (0.68      (0.73
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 14.90      $ 15.32      $ 15.97      $ 14.96      $ 15.20  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 14.04      $ 14.29      $ 16.06      $ 14.44      $ 14.59  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    1.67      (0.31 )%       11.15      3.07      20.39
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    2.71      (7.53 )%       15.80      3.64      21.68
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.75      2.35      2.10      1.96      2.00
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.67      2.27      2.02      1.88      1.92
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    1.78      1.75      1.83      1.41      1.34
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    3.63      3.87      3.98      4.19      4.88
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 31,008      $ 31,893      $ 33,202      $ 31,073      $ 31,535  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 16,000      $ 16,000      $ 16,000      $ 16,000      $ 16,000  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 293,799      $ 299,333      $ 307,510      $ 294,207      $ 297,091  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 2,637      $ 2,134      $ 1,500      $ 1,500      $ 1,500  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    16      12      11      18      15
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    1.38       1.31       1.39       1.33       1.34  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

70    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    MHE  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 13.98      $ 14.69      $ 13.89      $ 14.02      $ 12.34  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.55        0.62        0.65        0.68        0.69  

Net realized and unrealized gain (loss)

    (0.62      (0.69      0.83        (0.10      1.74  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.07      (0.07      1.48        0.58        2.43  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to Common Shareholders from net investment income(b)

    (0.58      (0.64      (0.68      (0.71      (0.75
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 13.33      $ 13.98      $ 14.69      $ 13.89      $ 14.02  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 12.38      $ 14.00      $ 15.32      $ 13.26      $ 13.75  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    (0.41 )%       (0.34 )%       11.01      4.25      20.47
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    (7.64 )%       (4.30 )%       21.27      1.47      22.42
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.50      2.17      1.77      1.71      1.78
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.50      2.17      1.77      1.71      1.78
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    1.20      1.18      1.15      1.15      1.16
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    4.08      4.44      4.53      4.82      5.22
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 31,609      $ 33,115      $ 34,772      $ 32,864      $ 33,139  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 18,500      $ 18,500      $ 18,500      $ 18,500      $ 18,500  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 270,862      $ 279,002      $ 287,959      $ 277,646      $ 279,130  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 3,136      $ 1,421      $ 751      $      $  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    17      18      30      8      14
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

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.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    1.20       1.18       1.15       1.15       1.16  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS      71  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    MHN  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 14.93      $ 15.69      $ 14.81      $ 14.98      $ 13.14  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.60        0.69        0.75        0.80        0.83  

Net realized and unrealized gain (loss)

    (0.64      (0.75      0.91        (0.15      1.88  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.04      (0.06      1.66        0.65        2.71  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to Common Shareholders from net investment income(b)

    (0.62      (0.70      (0.78      (0.82      (0.87
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 14.27      $ 14.93      $ 15.69      $ 14.81      $ 14.98  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 12.35      $ 14.36      $ 15.04      $ 13.65      $ 13.64  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    0.22      0.04      11.63      4.88      21.74
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    (9.82 )%       0.37      16.10      6.16      15.15
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.45      2.13      1.68      1.58      1.66
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.36      2.05      1.62      1.52      1.59
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    0.94      0.96      0.95      0.95      1.22
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    4.15      4.65      4.91      5.35      5.86
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 444,369      $ 464,818      $ 488,318      $ 461,159      $ 466,412  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 243,600      $ 243,600      $ 243,600      $ 243,600      $ 243,600  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 282,417      $ 290,812      $ 300,459      $ 289,310      $ 291,466  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 64,262      $ 70,007      $ 76,443      $ 53,308      $ 51,890  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    15      17      13      19      16
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

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.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    0.94       0.95       0.94       0.94       0.95  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

72    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BQH  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 16.11      $ 16.99      $ 15.75      $ 15.77      $ 13.32  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.60        0.67        0.71        0.74        0.79  

Net realized and unrealized gain (loss)

    (0.69      (0.84      1.27        0.03        2.46  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.09      (0.17      1.98        0.77        3.25  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to Common Shareholders from net investment income(b)

    (0.63      (0.71      (0.74      (0.79      (0.80
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 15.39      $ 16.11      $ 16.99      $ 15.75      $ 15.77  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 13.01      $ 14.55      $ 15.70      $ 13.66      $ 13.86  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    (0.03 )%       (0.47 )%       13.22      5.57      25.66
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    (6.44 )%       (2.73 )%       20.63      4.18      18.16
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.78      2.44      2.10      2.08      2.23
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.61      2.28      2.07      2.07      2.23
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    1.26      1.24      1.48      1.91      2.02
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    3.84      4.21      4.31      4.68      5.45
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 43,085      $ 45,113      $ 47,581      $ 44,111      $ 44,158  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 22,100      $ 22,100      $ 22,100      $ 22,100      $ 22,100  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 294,954      $ 304,132      $ 315,300      $ 299,597      $ 299,812  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 6,560      $ 6,521      $ 6,381      $ 5,070      $ 4,900  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    11      17      13      22      18
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    1.26       1.24       1.41       1.41       1.46  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS      73  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BSE  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 15.04      $ 15.84      $ 14.81      $ 14.92      $ 12.92  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.55        0.63        0.68        0.70        0.72  

Net realized and unrealized gain (loss)

    (0.68      (0.80      1.03        (0.08      2.05  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.13      (0.17      1.71        0.62        2.77  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to Common Shareholders from net investment income(b)

    (0.56      (0.63      (0.68      (0.73      (0.77
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 14.35      $ 15.04      $ 15.84      $ 14.81      $ 14.92  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 12.65      $ 13.55      $ 14.84      $ 12.99      $ 13.16  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    (0.33 )%       (0.55 )%       12.22      4.88      22.65
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    (2.47 )%       (4.36 )%       19.87      4.29      15.99
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.41      2.10      1.76      1.70      1.75
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.41      2.09      1.75      1.70      1.75
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    1.10      1.10      1.17      1.51      1.55
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    3.77      4.23      4.40      4.72      5.18
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 93,532      $ 98,076      $ 103,296      $ 96,587      $ 97,276  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 40,500      $ 40,500      $ 40,500      $ 40,500      $ 40,500  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 330,943      $ 342,162      $ 355,052      $ 338,486      $ 340,188  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 21,702      $ 20,604      $ 21,873      $ 18,091      $ 17,431  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    16      13      8      20      24
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    1.10       1.10       1.12       1.09       1.09  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

74    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BFY  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 15.71      $ 16.58      $ 15.57      $ 15.66      $ 13.36  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.64        0.71        0.78        0.82        0.84  

Net realized and unrealized gain (loss)

    (0.72      (0.82      1.06        (0.07      2.30  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

    (0.08      (0.11      1.84        0.75        3.14  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to Common Shareholders from net investment income(b)

    (0.66      (0.76      (0.83      (0.84      (0.84
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 14.97      $ 15.71      $ 16.58      $ 15.57      $ 15.66  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 12.77      $ 15.51      $ 17.01      $ 14.16      $ 14.02  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    (0.08 )%       (0.37 )%       12.24      5.33      24.75
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    (13.66 )%       (4.13 )%       26.61      7.00      18.80
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.57      2.21      1.86      1.83      1.96
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.56      2.21      1.85      1.83      1.95
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    1.13      1.12      1.23      1.69      1.78
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    4.20      4.60      4.83      5.25      5.76
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 74,931      $ 78,641      $ 82,927      $ 77,854      $ 78,304  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 44,400      $ 44,400      $ 44,400      $ 44,400      $ 44,400  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 268,764      $ 277,119      $ 286,771      $ 275,347      $ 276,360  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 7,475      $ 7,817      $ 8,061      $ 5,895      $ 5,725  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    12      14      17      20      21
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

Interest expense, fees and amortization of offering costs related to TOBs and/or VRDP Shares. See Note 4 and Note 10 of the Notes to Financial Statements for details.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    1.13       1.12       1.16       1.13       1.15  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS      75  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BHV  
    Year Ended August 31,  
     2018      2017      2016      2015      2014  

Net asset value, beginning of year

  $ 15.75      $ 16.56      $ 15.90      $ 15.95      $ 14.03  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income(a)

    0.69        0.78        0.81        0.81        0.83  

Net realized and unrealized gain (loss)

    (0.69      (0.83      0.66        (0.01      1.95  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) from investment operations

           (0.05      1.47        0.80        2.78  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Distributions to Common Shareholders from net investment income(b)

    (0.78      (0.76      (0.81      (0.85      (0.86
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net asset value, end of year

  $ 14.97      $ 15.75      $ 16.56      $ 15.90      $ 15.95  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Market price, end of year

  $ 16.56      $ 18.68      $ 19.14      $ 16.70      $ 16.35  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Return Applicable to Common Shareholders(c)

 

Based on net asset value

    (0.20 )%       (0.44 )%       9.05      5.02      20.31
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Based on market price

    (6.91 )%       2.17      20.00      7.61      16.06
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ratios to Average Net Assets Applicable to Common Shareholders

 

Total expenses

    2.94      2.46      2.16      1.98      2.01
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly

    2.72      2.25      1.95      1.77      1.96
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(d)(e)

    1.70      1.61      1.70      1.30      1.38
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment income to Common Shareholders

    4.51      4.95      5.00      5.08      5.52
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Data

 

Net assets applicable to Common Shareholders, end of year (000)

  $ 24,006      $ 25,216      $ 26,462      $ 25,336      $ 25,373  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 11,600      $ 11,600      $ 11,600      $ 11,600      $ 11,600  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 306,947      $ 317,375      $ 328,121      $ 318,414      $ 318,733  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Borrowings outstanding, end of year (000)

  $ 5,396      $ 4,360      $ 3,860      $ 3,019      $ 3,019  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio turnover rate

    26      10      6      9      11
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) 

Based on average Common Shares outstanding.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c) 

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 at actual reinvestment prices.

(d) 

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.

(e) 

The total expense ratio after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees were as follows:

 

    Year Ended August 31,  
     2018            2017            2016            2015            2014         

Expense ratios

    1.32       1.22       1.30       1.23       1.38  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

See notes to financial statements.

 

 

76    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements

 

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 “Trusts”, or individually as a “Trust”:

 

Trust Name   Herein Referred To As    Organized    Diversification
Classification

BlackRock Maryland Municipal Bond Trust

  BZM    Delaware    Non-diversified

BlackRock Massachusetts Tax-Exempt Trust

  MHE    Massachusetts    Non-diversified

BlackRock MuniHoldings New York Quality Fund, Inc.

  MHN    Maryland    Non-diversified

BlackRock New York Municipal Bond Trust

  BQH    Delaware    Diversified

BlackRock New York Municipal Income Quality Trust

  BSE    Delaware    Non-diversified

BlackRock New York Municipal Income Trust II

  BFY    Delaware    Non-diversified

BlackRock Virginia Municipal Bond Trust

  BHV    Delaware    Non-diversified

The Board of Directors and Boards of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the “Board,” and the directors/trustees thereof are collectively referred to throughout this report as “Trustees”. The Trusts determine and make available for publication the net asset values (“NAVs”) of their Common Shares on a daily basis.

The Trusts, 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 Trusts 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 Trust 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:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis.

Segregation and Collateralization: In cases where a Trust 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 Trust 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 Trusts 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.

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 U.S. 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 Trust’s Board, the independent Trustees (“Independent Trustees”) 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 Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees 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 Trust, if applicable. Deferred compensation liabilities are included in the Trustees’ and Officer’s fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Trusts until such amounts are distributed in accordance with the Plan.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Trusts.

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-13 “Changes to the Disclosure Requirements for Fair Value Measurement” which modifies disclosure requirements for fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. Management is currently evaluating the impact of this guidance to the Trusts.

 

 

NOTES TO FINANCIAL STATEMENTS      77  


Notes to Financial Statements  (continued)

 

Indemnifications: In the normal course of business, a Trust enters into contracts that contain a variety of representations that provide general indemnification. A Trust’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Trust, which cannot be predicted with any certainty.

Other: Expenses directly related to a Trust are charged to that Trust. 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.

 

3.

INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Trusts’ 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 Trusts would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trusts 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 Trust’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 net asset value (“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 are 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 Trust 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 Trust 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 Trust’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 privately held companies or funds. 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.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Trust’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.

 

 

78    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Trusts 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 Trust 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 Trust may be required to pay more at settlement than the security is worth. In addition, a Trust is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Trust 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 Trust’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

Municipal Bonds Transferred to TOB Trusts: Certain Trusts leverage their assets through the use of “TOB Trust” transactions. The Trusts transfer municipal bonds into a special purpose trust (a “TOB Trust”). A TOB Trust 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 issued to the participating trusts that contributed the municipal bonds to the TOB Trust. The TOB Trust Certificates have interest rates that 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 Trust provide the Trust 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 Trusts 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 a Trust 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 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 are remarketed by a Remarketing Agent. In the event of a failed remarketing, 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 number of days the loan is outstanding.

The TOB Trust may be collapsed without the consent of a Trust, upon the occurrence of a termination event, as defined in the TOB Trust agreement. Upon the occurrence of a termination event, a 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. Upon certain termination events, TOB Trust Certificates holders will be paid before the TOB Residuals holders (i.e., the Trusts) whereas in other termination events, TOB Trust Certificates holders and TOB Residuals holders will be paid pro rata.

While a Trust’s investment policies and restrictions expressly permit investments in inverse floating rate securities, such as TOB Residuals, they restrict the ability of a Trust to borrow money for purposes of making investments. MHE’s management believes that the Trust’s restrictions on borrowings do not apply to the Trust’s TOB Trust transactions. Each Trust’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 Trust. A Trust typically invests the cash received in additional municipal bonds.

Accounting for TOB Trusts: The municipal bonds deposited into a TOB Trust are presented in a Trust’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 Trust’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 trust 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 Trust 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. Amounts recorded within interest expense, fees and amortization of offering costs in the Statements of Operations are:

 

     Interest Expense      Liquidity Fees      Other Expenses      Total  

BZM

  $ 35,082      $ 10,335      $ 3,426      $ 48,843  

MHE

    19,571        6,914        2,127        28,612  

MHN

    855,919        309,928        111,506        1,277,353  

BQH

    80,358        29,156        10,893        120,407  

BSE

    254,980        98,504        30,649        384,133  

BFY

    95,471        36,427        9,422        141,320  

BHV

    58,990        22,439        5,883        87,312  

 

 

NOTES TO FINANCIAL STATEMENTS      79  


Notes to Financial Statements  (continued)

 

For the year ended August 31, 2018, the following table is a summary of each Trust’s TOB Trusts:

 

     Underlying
Municipal Bonds
Transferred to
TOB Trusts
 (a)
     Liability for
TOB Trust
Certificates
  (b)
     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
 

BZM

  $ 4,864,942      $ 2,637,107        1.59% — 1.59    $ 2,720,534        1.80

MHE

    4,854,346        3,135,858        1.58 — 1.59        1,604,515        1.78  

MHN

    123,391,724        64,262,332        1.58 — 1.71        68,773,283        1.85  

BQH

    11,771,803        6,560,292        1.58 — 1.71        6,454,819        1.86  

BSE

    39,991,527        21,702,203        1.58 — 1.71        20,589,599        1.86  

BFY

    13,416,687        7,475,312        1.58 — 1.71        7,691,422        1.84  

BHV

    9,996,455        5,395,720        1.58 — 1.59        4,758,261        1.83  

 

  (a) 

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 trust, 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 trust, for such reimbursements, as applicable, are included in the maximum potential amounts disclosed for recourse TOB Trusts.

 
  (b) 

TOB Trusts may be structured on a non-recourse or recourse basis. When a Trust invests in TOB Trusts on a non-recourse basis, the Liquidity Provider may be required to make a payment under the liquidity facility to allow the TOB Trust to repurchase TOB Trust Certificates. The Liquidity Provider will be reimbursed from the liquidation of bonds held in the TOB Trust. If a trust invests in a TOB Trust on a recourse basis, the trust enters into a reimbursement agreement with the Liquidity Provider where a trust is required to reimburse the Liquidity Provider for any shortfall between the amount paid by the Liquidity Provider and proceeds received from liquidation of municipal bonds held in the TOB Trust (the “Liquidation Shortfall”). As a result, if a trust invests in a recourse TOB Trust, a trust will bear the risk of loss with respect to any Liquidation Shortfall. If multiple trusts participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed by a trust at August, 31, 2018, 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 trust at August 31, 2018.

 

For the year ended August 31, 2018, the following table is a summary of each Trust’s Loan for TOB Trust Certificates:

 

     Loan
Outstanding
at Period End
    

Interest Rate

on Loan at

Period End

     Average
Loan
Outstanding
     Daily Weighted
Average Rate
of Interest and
Other Expenses
on Loan
 

MHN

  $           $ 29,238        0.78

BQH

                  2,957        0.78  

BSE

                  3,614        0.78  

BFY

                  1,752        0.78  

 

5.

DERIVATIVE FINANCIAL INSTRUMENTS

The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts 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: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Trusts 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 Trusts 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. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts on the Statements of Assets and Liabilities.

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 Trusts 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 notional amount of the contract at the time it was opened and the notional amount 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.

 

 

80    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

 

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 Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of each Trust’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Trust.

For such services, each Trust, except for MHE and MHN, pays the Manager a monthly fee, at an annual rate equal to a percentage of each Trust’s average weekly managed assets. For such services, MHE and MHN each pays the Manager a monthly fee, at an annual rate equal to a percentage of each Trust’s average daily net assets. The Trusts pay their respective fees based on the following annual rates:

 

     BZM      MHE      MHN      BQH      BSE      BFY      BHV  

Investment advisory fee

    0.65      0.50      0.55      0.65      0.55      0.55      0.65

For purposes of calculating these fees, “net assets” mean the total assets of each Trust minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of any outstanding 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 Trust’s NAV. For purposes of calculating these fees, “managed assets” mean the total assets of each Trust minus the sum of its accrued liabilities (other than the aggregate indebtedness constituting financial leverage).

Expense Limitations and Waivers: With respect to BZM, BQH and BHV, the Manager voluntarily agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other trust expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Trust’s business (“expense limitation”). The expense limitations as a percentage of average weekly managed assets are as follows:

 

     BZM      BQH      BHV  

Fee waived

    0.05      0.10      0.13

The Manager, for MHN, 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 any outstanding preferred shares). This amount is included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended August 31, 2018 the waivers were as follows:

 

     BZM      MHN      BQH      BHV  

Amounts waived

  $ 25,059      $ 377,242      $ 72,428      $ 53,123  

With respect to each Trust, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation described below will be reduced by the amount of the affiliated money market fund waiver. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended August 31, 2018 the waivers were as follows:

 

     BZM      MHE      MHN      BQH      BSE      BFY      BHV  

Amounts waived

  $ 208      $ 301      $ 4,537      $ 414      $ 955      $ 789      $ 134  

The Manager contractually agreed to waive its investment advisory fee with respect to any portion of each Trust’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2019. 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 each Trust’s Independent Trustees. For the year ended August 31, 2018, there were no fees waived by the Manager.

Trustees and Officers: Certain Trustees and/or officers of the Trusts are directors and/or officers of BlackRock or its affiliates. The Trusts reimburse the Manager for a portion of the compensation paid to the Trusts’ Chief Compliance Officer, which is included in Trustees and Officer in the Statements of Operations.

 

7.

PURCHASES AND SALES

For the year ended August 31, 2018, purchases and sales of investments, excluding short-term securities, were as follows:

 

     BZM      MHE      MHN      BQH      BSE      BFY      BHV  

Purchases

  $ 8,524,723      $ 9,979,252      $ 115,968,487      $ 8,374,859      $ 26,766,253      $ 16,921,249      $ 12,811,993  

Sales

    8,151,492        8,688,933        116,442,012        7,858,083        24,143,576        15,603,685        10,403,068  

 

 

NOTES TO FINANCIAL STATEMENTS      81  


Notes to Financial Statements  (continued)

 

 

8.

INCOME TAX INFORMATION

It is each Trust’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

Each Trust 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 Trust’s U.S. federal tax returns generally remains open for each of the four years ended August 31, 2018. The statutes of limitations on each Trust’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 Trusts as of August 31, 2018, 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 Trusts’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to amortization methods on fixed income securities, non-deductible expenses, the expiration of capital loss carryforwards, distributions received from a regulated investment company, and the sale of bonds received from tender option bond trusts were reclassified to the following accounts:

 

     BZM     MHE     MHN     BQH     BSE     BFY     BHV  

Paid-in capital

  $ (3,037   $ (36,014   $ (3,877,397   $ (5,835   $ (1,550,612   $ (363,880   $ (2,593

Undistributed net investment income

    7,236       3,417       (408,568     (3,685     (2,913     (7,639     52,428  

Accumulated net realized gain (loss)

    (4,199     32,597       4,285,965       9,520       1,553,525       371,519       (49,835

The tax character of distributions paid was as follows:

 

             BZM      MHE      MHN      BQH      BSE      BFY      BHV  

Tax-exempt income(a)

    08/31/2018      $ 1,399,571      $ 1,765,789      $ 24,317,312      $ 2,233,502      $ 4,526,182      $ 4,243,606      $ 1,368,757  
    08/31/2017      $ 1,322,128      $ 1,808,770      $ 25,603,587      $ 2,343,180      $ 4,730,566      $ 3,810,748      $ 1,309,575  

Ordinary income(b)

    08/31/2018        6,221        1,494        45,867        240        1,846        3,229        37,465  
    08/31/2017               197        26,682        896        8,255        2,745         

Long term capital gains(c)

    08/31/2018        87,606                                            
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

    08/31/2018      $ 1,493,398      $ 1,767,283      $ 24,363,179      $ 2,233,742      $ 4,528,028      $ 4,246,835      $ 1,406,222  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
    08/31/2017      $ 1,322,128      $ 1,808,967      $ 25,630,269      $ 2,344,076      $ 4,738,821      $ 3,813,493      $ 1,309,575  
    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

The Trusts designate these amounts paid during the fiscal year ended August 31, 2018, as exempt-interest dividends.

 
  (b) 

Ordinary income consists primarily of taxable income recognized from market discount and net short-term capital gains. Additionally, all ordinary income distributions are comprised of interest related dividends for non-US residents and are eligible for exemption from US withholding tax for nonresident aliens and foreign corporations.

 
  (c)

The Trusts designate this amount paid during the fiscal year ended August 31, 2018 as a capital gain dividend.

 

As of period end, the tax components of accumulated net earnings (losses) were as follows:

 

     BZM      MHE     MHN     BQH     BSE     BFY     BHV  

Undistributed tax-exempt income

  $ 230,033      $ 114,161     $ 147,950     $ 243,526     $     $ 342,312     $ 140,949  

Undistributed ordinary income

    42,595        487       2,726       7,278       652       6,611       1,375  

Capital loss carryforwards

           (292,259     (14,846,298     (945,719     (1,469,732     (1,533,853     (572,785

Undistributed long-term capital gains

    123,967                                       

Net unrealized gains(a)

    1,120,511        2,485,650       25,743,179       4,086,243       5,746,053       6,230,355       1,545,938  
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 1,517,106      $ 2,308,039     $ 11,047,557     $ 3,391,328     $ 4,276,973     $ 5,045,425     $ 1,115,477  
 

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a) 

The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, amortization and accretion methods of premiums and discounts on fixed income securities, the timing and recognition of partnership income, the treatment of residual interests in tender option bond trusts, the realization for tax purposes of unrealized gains/losses on certain futures contracts, and the deferral of compensation to trustees.

 

As of August 31, 2018, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:

 

Expires August 31,    MHE      MHN      BQH      BSE      BFY      BHV  

No expiration date(a)

   $ 292,185      $ 14,172,767      $ 945,719      $ 1,469,732      $ 1,278,852      $ 520,919  

2019

     74        673,531                      255,001        51,866  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 292,259      $ 14,846,298      $ 945,719      $ 1,469,732      $ 1,533,853      $ 572,785  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

Must be utilized prior to losses subject to expiration.

 

During the year ended August 31, 2018, the Trusts listed below utilized the following amounts of their respective capital loss carryforward:

 

BZM         MHE           MHN           BQH           BSE           BFY           BHV  
$8,953        $ 129,068          $ 3,026,276          $ 244,490          $ 393,010          $ 266,685          $ 249,946  

 

 

82    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

As of August 31, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

     BZM     MHE     MHN     BQH     BSE     BFY     BHV  

Tax cost

  $ 45,460,207     $ 46,909,362     $ 654,860,856     $ 60,552,456     $ 126,681,770     $ 112,542,632     $ 35,118,552  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross unrealized appreciation

  $ 1,250,788     $ 2,598,938     $ 28,138,475     $ 4,278,052     $ 6,263,684     $ 6,500,066     $ 1,611,539  

Gross unrealized depreciation

    (118,497     (113,288     (2,143,386     (180,288     (417,796     (257,138     (56,859
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net unrealized appreciation

  $ 1,132,291     $ 2,485,650     $ 25,995,089     $ 4,097,764     $ 5,845,888     $ 6,242,928     $ 1,554,680  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Certain provisions of the Act were effective upon enactment with the remainder becoming effective for tax years beginning after December 31, 2017. Although the Act does not amend any provisions directly related to the qualification or taxation of regulated investment companies (“RICs”), the Act does change the taxation of entities in which some RICs invest, the tax treatment of income derived from those entities and the taxation of RIC shareholders. While management does not anticipate significant impact to the Trusts or to their shareholders, there is uncertainty in the application of certain provisions in the Act. Specifically, provisions in the Act may increase the amount of or accelerate the recognition of taxable income and may limit the deductibility of certain expenses by RICs. Until full clarity around these provisions is obtained, the impact on the Trusts’ financial statements, if any, cannot be fully determined.

 

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 Trust’s ability to buy or sell bonds. As a result, a Trust 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 Trust needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

In the normal course of business, certain Trusts invest in securities or other instruments and may enter into certain transactions, and such activities subject each Trust to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations.

Each Trust 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 Trust to reinvest in lower yielding securities. Each Trust may also be exposed to reinvestment risk, which is the risk that income from each Trust’s portfolio will decline if each Trust invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Trust portfolio’s current earnings rate.

The Trusts 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 Trusts 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 Trust.

A Trust structures and “sponsors” the TOB Trusts in which it holds TOB Residuals and has certain duties and responsibilities, which may give rise to certain additional risks including, but not limited to, compliance, securities law and operational risks.

Should short-term interest rates rise, the Trusts’ investments in the TOB Trusts may adversely affect the Trusts’ 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 Trusts’ NAVs per share.

The SEC and various federal banking and housing agencies have adopted credit risk retention rules for securitizations (the “Risk Retention Rules”). 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 Trusts’ ability to engage in TOB Trust transactions or increase the costs of such transactions in certain circumstances.

TOB Trusts constitute an important component of the municipal bond market. Any modifications or changes to rules governing TOB Trusts may adversely impact the municipal market and the Trusts, including through reduced demand for and liquidity of municipal bonds and increased financing costs for municipal issuers. The ultimate impact of any potential modifications on the TOB Trust market and the overall municipal market is not yet certain.

Counterparty Credit Risk: The Trusts 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 Trusts 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 Trusts to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Trusts’ 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 Trusts.

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.

 

 

NOTES TO FINANCIAL STATEMENTS      83  


Notes to Financial Statements  (continued)

 

With exchange-traded futures, there is less counterparty credit risk to the Trusts 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 Trust 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 Trusts.

Concentration Risk: Each Trust invests a substantial amount of its assets in issuers located in a single state or limited number of states. This may subject each Trust 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 Trusts’ respective portfolios. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.

As of period end, BZM and BHV invested a significant portion of their assets in securities in the health sector, MHE invested a significant portion of its assets in securities in the education sector, and MHN and BHV invested a significant portion of their assets in securities in the transportation sector. Changes in economic conditions affecting such sectors would have a greater impact on the Trusts and could affect the value, income and/or liquidity of positions in such securities.

Certain Trusts 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.

 

10.

CAPITAL SHARE TRANSACTIONS

Each Trust, except for MHN, is authorized to issue an unlimited numbers of shares, all of which were initially classified as Common Shares. MHN is authorized to issue 200 million shares, all of which were initially classified as Common Shares. The par value for each Trust’s Common Shares is $0.001, except for MHE and MHN, which is $0.01 and $0.10, respectively. The par value for each Trust’s Preferred Shares outstanding is $0.001, except for MHE and MHN, which is $0.01 and $0.10 respectively. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without the approval of Common Shareholders.

Common Shares

For the years shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

Year Ended August 31,   BZM      MHE      BFY      BHV  

2018

           1,800        273        2,965  

2017

    1,922        1,915        1,924        3,295  

For the years ended August 31, 2018 and August 31, 2017, shares issued and outstanding remained constant for MHN, BQH and BSE.

Preferred Shares

Each Trust’s Preferred Shares rank prior to the Trust’s Common Shares as to the payment of dividends by the Trust and distribution of assets upon dissolution or liquidation of a Trust. The 1940 Act prohibits the declaration of any dividend on a Trust’s Common Shares or the repurchase of a Trust’s Common Shares if a Trust fails to maintain asset coverage of at least 200% of the liquidation preference of the Trust’s outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, a Trust is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with the Trust’s Preferred Shares or repurchasing such shares if a Trust 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 Trustees to the Board of each Trust. The holders of Preferred Shares are also entitled to elect the full Board of Trustees 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 Trust’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

BZM, MHE, MHN, BQH, BSE, BFY and BHV (collectively, the “VRDP Trusts”) 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 VRDP Shares of certain VRDP Trusts are currently in a special rate period, each as described below.

 

 

84    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (continued)

 

As of period end, the VRDP Shares outstanding of each VRDP Trust were as follows:

 

     Issue
Date
     Shares
Issued
     Aggregate
Principal
     Maturity
Date
 

BZM

    06/14/12        160      $ 16,000,000        07/01/42  

MHE

    06/14/12        185        18,500,000        07/01/42  

MHN

    06/30/11        2,436        243,600,000        07/01/41  

BQH

    09/15/11        221        22,100,000        10/01/41  

BSE

    09/15/11        405        40,500,000        10/01/41  

BFY

    09/15/11        444        44,400,000        10/01/41  

BHV

    06/14/12        116      11,600,000        07/01/42

Redemption Terms: Each VRDP Trust 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 Trust is required to begin to segregate liquid assets with its custodian to fund the redemption. In addition, each VRDP Trust is required to redeem certain of its outstanding VRDP Shares if it fails 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 each VRDP Trust. The redemption price per VRDP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.

Liquidity Feature: Each VRDP Trust entered into a fee agreement with the liquidity provider that requires an upfront 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 each VRDP Trust and the liquidity provider is set to expire, unless renewed or terminated in advance, as follows:

 

     BZM      MHE      MHN      BQH      BSE      BFY      BHV  

Expiration Date

    07/04/19        07/04/19        04/15/20        10/21/19        10/21/19        10/21/19        07/04/19  

In the event a fee agreement is not renewed or is terminated in advance, and that a VRDP Trust does 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, each VRDP Trust is required to redeem the VRDP Shares six months after the purchase date. Immediately after such mandatory purchase, each VRDP Trust is required to begin to segregate liquid assets with its custodian to fund the redemption. There is no assurance a VRDP Trust will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.

Remarketing: MHE, MHN, BQH, BSE and BFY may incur remarketing fees of 0.10% on the aggregate principal amount of the VRDP Trust’s VRDP Shares and BZM and BHV may incur remarketing fees of 0.07% on the aggregate principal amount of the VRDP Trust’s 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), a VRDP Trust may incur no 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 Aa2 for BZM, BQH, MHN, BSE, BFY and BHV and Aa3 for MHE 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 year ended August 31, 2018, the annualized dividend rates for the VRDP Shares were as follows:

 

     BZM     MHE     MHN     BQH     BSE     BFY     BHV  

Rate

    1.41     2.10     2.11     2.13     2.13     2.13     1.38

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. As of period end, the short-term ratings of the liquidity provider and the VRDP Shares for BZM and BHV were P1/F1 as rated by Moody’s, Fitch and/or S&P, respectively, which is within the two highest rating categories. 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: Upon issuance of the VRDP Shares on June 14, 2012, MHE commenced a three-year term ending June 24, 2015 (“special rate period”) with respect to its VRDP Shares. The special rate period for MHE has been extended each year for an additional one-year term and is currently scheduled to expire on June 19, 2019.

On April 17, 2014, MHN commenced a three-year special rate period ending April 19, 2017 with respect to its VRDP Shares. The special rate period for MHN was extended for an additional three-year term and is currently scheduled to expire on April 15, 2020.

 

 

NOTES TO FINANCIAL STATEMENTS      85  


Notes to Financial Statements  (continued)

 

On October 22, 2015, BQH, BSE and BFY commenced a three-year special rate period ending April 18, 2018 with respect to their VRDP Shares. The special rate period for BQH, BSE and BFY has been extended each year for an additional one-year term and is currently scheduled to expire on April 17, 2019.

Prior to their respective expiration date, a VRDP Trust and the holders of its VRDP Shares 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 VRDP Shares will not be subject to any remarketing and the dividend rate will be based on a predetermined methodology. The short-term ratings on the VRDP Shares were withdrawn upon commencement of the special rate period.

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 Trusts 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 Trusts will be 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 Trusts will not pay any fees to the liquidity provider and remarketing agent during the special rate period, except MHN which pays 0.01% to each of the Liquidity Provider and remarketing agent. The VRDP Trusts will also 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 Trusts redeem the VRDP Shares prior to 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 year ended August 31, 2018, VRDP Shares issued and outstanding of each Trust remained constant.

Offering Costs: The VRDP Trusts incurred costs in connection with the issuance of VRDP 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 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 Shares are considered debt of the issuer; therefore, the liquidation preference, which approximates fair value of the VRDP 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 Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP Shares are treated as equity for tax purposes. Dividends paid to holders of the VRDP Shares are generally classified as tax-exempt income for tax-reporting purposes. Dividends and amortization of deferred offering costs on VRDP Shares are included in interest expense, fees and amortization of offering costs in the Statements of Operations:

 

     Dividends
Accrued
     Deferred
Offering
Costs
Amortization
 

BZM

  $ 226,023      $ 3,038  

MHE

    387,697        3,336  

MHN

    5,131,560        15,441  

BQH

    469,908        5,834  

BSE

    861,033        6,250  

BFY

    943,604        6,331  

BHV

    160,237        2,584  

 

11.

SUBSEQUENT EVENTS

Management’s evaluation of the impact of all subsequent events on the Trusts’ financial statements was completed through the date the financial statements were issued and the following items were noted:

 

     Common Dividend
Per Share
           Preferred Shares (c)  
     Paid (a)      Declared (b)            Shares      Series      Declared  

BZM

  $ 0.0474      $ 0.0474         VRDP        W-7      $ 19,564  

MHE

    0.0440        0.0440         VRDP        W-7        32,542  

MHN

    0.0445        0.0445         VRDP        W-7        429,403  

BQH

    0.0460        0.0460         VRDP        W-7        39,283  

BSE

    0.0405        0.0405         VRDP        W-7        71,990  

BFY

    0.0490        0.0490         VRDP        W-7        78,923  

BHV

    0.0630        0.0630               VRDP        W-7        14,184  

 

  (a) 

Net investment income dividend paid on October 1, 2018 to Common Shareholders of record on September 14, 2018.

 
  (b) 

Net investment income dividend declared on October 1, 2018, payable to Common Shareholders of record on October 15, 2018.

 
  (c) 

Dividends declared for period September 1, 2018 to September 30, 2018.

 

 

 

86    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Report of Independent Registered Public Accounting Firm   

 

To the Shareholders and Board of Trustees of BlackRock Maryland Municipal Bond Trust, BlackRock Massachusetts Tax-Exempt Trust, BlackRock New York Municipal Bond Trust, BlackRock New York Municipal Income Quality Trust, BlackRock New York Municipal Income Trust II, and BlackRock Virginia Municipal Bond Trust and to the Shareholders and Board of Directors of BlackRock MuniHoldings New York Quality Fund, Inc.:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statements of assets and liabilities of BlackRock Maryland Municipal Bond Trust, BlackRock Massachusetts Tax-Exempt Trust, BlackRock MuniHoldings New York Quality Fund, Inc., BlackRock New York Municipal Bond Trust, BlackRock New York Municipal Income Quality Trust, BlackRock New York Municipal Income Trust II, and BlackRock Virginia Municipal Bond Trust (the “Funds”), including the schedules of investments, as of August 31, 2018, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of August 31, 2018, and the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

October 23, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING  FIRM      87  


Disclosure of Investment Advisory Agreements

 

The Board of Directors or the Board of Trustees, as applicable (the “Board,” the members of which are referred to as “Board Members”), of BlackRock Maryland Municipal Bond Trust (“BZM”), BlackRock MuniHoldings New York Quality Fund, Inc. (“MHN”), BlackRock New York Municipal Income Quality Trust (“BSE”), BlackRock New York Municipal Bond Trust (“BQH”), BlackRock New York Municipal Income Trust II (“BFY”), BlackRock Virginia Municipal Bond Trust (“BHV”) and BlackRock Massachusetts Tax-Exempt Trust (“MHE” and together with BZM, MHN, BSE, BQH, BFY and BHV, each a “Fund,” and, collectively, the “Funds”) met in person on April 24, 2018 (the “April Meeting”) and June 6-7, 2018 (the “June Meeting”) to consider the approval of each Fund’s investment advisory agreement (each, an “Agreement,” and collectively, the “Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Manager is referred to herein as “BlackRock”.

Activities and Composition of the Board

On the date of the June Meeting, the Board of each Fund consisted of ten individuals, eight of whom were not “interested persons” of the Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of its Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of each Board is an Independent Board Member. Each Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, each Board is required to consider the continuation of the Agreement for its Fund on an annual basis. Each Board has four quarterly meetings per year, each typically extending for two days, and additional in-person and telephonic meetings throughout the year, as needed. Each Board also has a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement for its Fund. Each Board’s consideration of the Agreement for its Fund is a year-long deliberative process, during which the Board assessed, among other things, the nature, extent and quality of the services provided to its Fund by BlackRock, BlackRock’s personnel and affiliates, including, as applicable; investment management, accounting, administrative, and shareholder services; oversight of the Fund’s service providers; marketing; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements.

Each Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement for its Fund, including the services and support provided by BlackRock to the Fund and its shareholders. BlackRock also furnished additional information to each Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters each Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmarks, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) leverage management, as applicable; (c) fees, including advisory, administration, if applicable, paid to BlackRock and its affiliates by the Fund for services; (d) Fund operating expenses and how BlackRock allocates expenses to the Fund; (e) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Fund’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (f) the Fund’s adherence to its compliance policies and procedures; (g) the nature, character and scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of such services; (h) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (i) BlackRock’s implementation of the proxy voting policies approved by the Board; (j) execution quality of portfolio transactions; (k) BlackRock’s implementation of the Fund’s valuation and liquidity procedures; (l) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Fund; (m) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (n) periodic updates on BlackRock’s business.

Each Board considered BlackRock’s efforts during the past several years with regard to the redemption of outstanding auction rate preferred securities. Each Fund has redeemed all of its outstanding auction rate preferred securities.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April Meeting, each Board requested and received materials specifically relating to the Agreement for its Fund. Each Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), based on Lipper classifications, regarding the Funds’ fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of the Funds’ as compared with a peer group of funds (“Performance Peers”) and other metrics, as applicable; (b) information on the composition of the Expense Peers and Performance Peers, and a description of the Broadridge’s methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to each Fund’s Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts, sub-advised mutual funds, closed-end funds, and open-end funds, under similar investment mandates, as applicable; (e) review of non-management fees; (f) the existence and impact and sharing of potential economies of scale, if any, and the sharing of potential economies of scale with each Fund; (g) a summary of aggregate amounts paid by each Fund to BlackRock; and (h) various additional information requested by each Board as appropriate regarding BlackRock’s and the operations of its Fund.

 

 

88    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Disclosure of Investment Advisory Agreements  (continued)

 

At the April Meeting, each Board reviewed materials relating to its consideration of the Agreement for its Fund. As a result of the discussions that occurred during the April Meeting, and as a culmination of each Board’s year-long deliberative process, each Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.

At the June Meeting, each Board considered, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Fund as compared with Performance Peers and other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with the Fund; (d) the Fund’s fees and expenses compared to Expense Peers; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with the Fund; and (g) other factors deemed relevant by the Board Members.

Each Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, services related to the valuation and pricing of Fund portfolio holdings, and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. Each Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. Each Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: Each Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of its Fund. Throughout the year, each Board compared its Fund’s performance to the performance of a comparable group of closed-end funds, relevant benchmark, and performance metrics, as applicable. Each Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team discussing the Fund’s performance and the Fund’s investment objective(s), strategies and outlook.

Each Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and its Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. Each Board also considered BlackRock’s overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. Each Board engaged in a review of BlackRock’s compensation structure with respect to its Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, each Board considered the quality of the administrative and other non-investment advisory services provided to its Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder, and other services (in addition to any such services provided to its Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide each Fund with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Fund; (iii) oversight of daily accounting and pricing; (iv) responsibility for periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers including, among others, the Fund’s custodian, fund accountant, transfer agent, and auditor; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing administrative functions necessary for the operation of the Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Funds and BlackRock: Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Fund. In preparation for the April Meeting, each Board was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of its Fund’s performance as of December 31, 2017. The performance information is based on net asset value (NAV), and utilizes Lipper data. Lipper’s methodology calculates a fund’s total return assuming distributions are reinvested on the ex-date at a fund’s ex-date NAV. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, each Board received and reviewed information regarding the investment performance of its Fund as compared to its Performance Peers and a custom peer group of funds as defined by BlackRock (“Customized Peer Group”). Each Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of the Fund throughout the year.

In evaluating performance, each Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, each Board recognized that it is possible that long-term performance can be impacted by even one period of significant outperformance or underperformance, so that a single investment theme has the ability to affect long-term performance disproportionately.

The Board of BZM noted that for the one-, three- and five-year periods reported, the Fund ranked second out of two funds, first out of two funds, and first out of two funds, respectively, against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for the BZM. The Composite measures a blend of total return and yield. The Board and BlackRock reviewed the BZM’s underperformance during the applicable period. The Board was informed that, among other things, BZM’s shorter call structure, coupled with the portfolio management team’s overweight allocation to higher credit quality bonds, detracted from performance over the one-year period.

The Board and BlackRock discussed BlackRock’s strategy for improving BZM’s investment performance. Discussions covered topics such as performance attribution, BZM’s investment personnel, and the resources appropriate to support the Fund’s investment processes.

 

 

DISCLOSURE OF INVESTMENT ADVISORY AGREEMENTS      89  


Disclosure of Investment Advisory Agreements  (continued)

 

The Board of each of MHN, BHV and MHE noted that for each of the one-, three- and five-year periods reported, its Fund ranked first out of two funds against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for MHN, BHV and MHE. The Composite measures a blend of total return and yield.

The Board of BSE noted that for the one-, three- and five-year periods reported, the Fund ranked second out of two funds, second out of two funds, and first out of two funds, respectively, against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for BSE. The Composite measures a blend of total return and yield. The Board and BlackRock reviewed BSE’s underperformance during the applicable periods. The Board was informed that, among other things, BSE’s yield curve positioning detracted from performance over the one-year period. Over the three-year period, portfolio management’s trading decisions negatively impacted BSE’s performance.

The Board and BlackRock discussed BlackRock’s strategy for improving BSE’s investment performance. Discussions covered topics such as performance attribution, BSE’s investment personnel, and the resources appropriate to support the Fund’s investment processes.

The Board of each of BQH and BFY noted that for the one-, three- and five-year periods reported, its Fund ranked in the second quartile against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for each Fund. The Composite measures a blend of total return and yield.

C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Funds: Each Board, including the Independent Board Members, reviewed its Fund’s contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. Each Board also compared its Fund’s total expense ratio, as well as its actual management fee rate as a percentage of total assets, to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. Each Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).

Each Board received and reviewed statements relating to BlackRock’s financial condition. Each Board reviewed BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to its Fund. Each Board reviewed BlackRock’s estimated profitability with respect to its Fund and other funds the Board currently oversees for the year ended December 31, 2017 compared to available aggregate estimated profitability data provided for the prior two years. Each Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. Each Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. Each Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

Each Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Each Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. Each Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, each Board considered the estimated cost of the services provided to its Fund by BlackRock, and BlackRock’s and its affiliates’ estimated profits relating to the management of the Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, each Board reviewed BlackRock’s methodology in allocating its costs of managing its Fund, to the Fund. Each Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement for its Fund and to continue to provide the high quality of services that is expected by the Board. Each Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing its Fund in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable.

The Board of BZM noted that the Fund’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the second and third quartiles, respectively, relative to the Expense Peers. In addition, the Board noted that BlackRock had agreed to voluntarily waive a portion of the advisory fee payable by BZM, which has been in effect since 2013. After discussions between the Board, including Independent Board Members, and BlackRock, the Board and BlackRock agreed to a continuation of a 5 basis points voluntary advisory fee waiver.

The Board of MHN noted that the Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile relative to the Expense Peers.

The Board of each of BSE and BFY noted that its Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile, relative to the Expense Peers.

The Board of BQH noted that the Fund’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the first and second quartiles, respectively, relative to the Expense Peers. In addition, the Board noted that BlackRock had agreed to voluntarily waive a portion of the advisory fee payable by BQH, which has been in effect since 2016. After discussions between the Board, including Independent Board Members, and BlackRock, the Board and BlackRock agreed to a continuation of a 10 basis point voluntary advisory fee waiver.

 

 

90    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Disclosure of Investment Advisory Agreements  (continued)

 

The Board of BHV noted that the Fund’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the first and second quartiles, respectively, relative to the Expense Peers. The Board also noted that BlackRock had agreed to voluntarily waive a portion of the advisory fee payable by BHV, which has been in effect since 2014. After discussions between the Board, including the Independent Board Members, and BlackRock, the Board and BlackRock agreed to a continuation of a 13 basis point voluntary advisory fee waiver.

The Board of MHE noted that the Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the second and third quartiles, respectively, relative to the Expense Peers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to more fully participate in these economies of scale. Each Board considered the Fund’s asset levels and whether the current fee was appropriate.

Based on each Board’s review and consideration of the issue, each Board concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.

E. Other Factors Deemed Relevant by the Board Members: Each Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from BlackRock’s respective relationships with its Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, securities lending and cash management services. Each Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. Each Board also noted that, subject to applicable law, BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.

In connection with its consideration of the Agreement for its Fund, each Board also received information regarding BlackRock’s brokerage and soft dollar practices. Each Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

Each Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that the Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Each Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included the completion of the redemption of auction rate preferred securities for all of the BlackRock closed-end funds; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and its Fund for a one-year term ending June 30, 2019. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, each Board, including the Independent Board Members, was satisfied that the terms of the Agreement for its Fund were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreement for its Fund, each Board did not identify any single factor or group of factors as, all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.

 

 

DISCLOSURE OF INVESTMENT ADVISORY AGREEMENTS      91  


Automatic Dividend Reinvestment Plans

 

Pursuant to each Trust’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains and other distributions reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s Common Shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Trusts declare a dividend or determine to make a capital gain or other distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Trusts (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Trust’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.

You may elect not to participate in the Reinvestment Plan and to receive all dividends in cash by contacting the Reinvestment Plan Agent, at the address set forth below.

Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of dividends and distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open-market purchases in connection with the reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any federal, state or local income tax that may be payable on such dividends or distributions.

Each Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan. However, each Trust reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants in BZM, BQH, BSE, BFY and BHV that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. Participants in MHE and MHN that request a sale of shares are subject to a $0.02 per share sold brokerage commission. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 505000, Louisville, KY 40233, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202.

 

 

92    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trustee and Officer Information

 

Independent Trustees (a)
         

Name

Year of Birth (b)

   Position(s) Held
(Length of Service)
 (c)
   Principal Occupation(s) During Past Five Years    Number of BlackRock-Advised
Registered Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen
 (d)
   Public Company and
Investment Company
Directorships During
Past Five Years

Richard E. Cavanagh

1946

  

Chair of the Board and Trustee

(Since 2007)

   Director, The Guardian Life Insurance Company of America since 1998; Board Chair, Volunteers of America (a not-for-profit organization) since 2015 (board member since 2009); Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.    73 RICs consisting of 73 Portfolios    None

Karen P. Robards

1950

  

Vice Chair of the Board and Trustee

(Since 2007)

   Principal of Robards & Company, LLC (consulting and private investing) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Investment Banker at Morgan Stanley from 1976 to 1987.    73 RICs consisting of 73 Portfolios    Greenhill & Co., Inc.; AtriCure, Inc. (medical devices) from 2000 until 2017

Michael J. Castellano

1946

  

Trustee

(Since 2011)

   Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) from 2009 to June 2015 and since 2017; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director, CircleBlack Inc. (financial technology company) since 2015.    73 RICs consisting of 73 Portfolios    None

Cynthia L. Egan

1955

  

Trustee

(Since 2016)

   Advisor, U.S. Department of the Treasury from 2014 to 2015; President, Retirement Plan Services for T. Rowe Price Group, Inc. from 2007 to 2012; executive positions within Fidelity Investments from 1989 to 2007.    73 RICs consisting of 73 Portfolios    Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016

Frank J. Fabozzi

1948

  

Trustee

(Since 2007)

   Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Visiting Professor, Princeton University from 2013 to 2014 and since 2016; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011.    73 RICs consisting of 73 Portfolios    None

R. Glenn Hubbard

1958

  

Trustee

(Since 2007)

   Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.    73 RICs consisting of 73 Portfolios    ADP (data and information services); Metropolitan Life Insurance Company (insurance)

W. Carl Kester

1951

  

Trustee

(Since 2007)

   George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008, Deputy Dean for Academic Affairs from 2006 to 2010, Chairman of the Finance Unit, from 2005 to 2006, Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981.    73 RICs consisting of 73 Portfolios    None

Catherine A. Lynch

1961

  

Trustee

(Since 2016)

   Chief Executive Officer, Chief Investment Officer and various other positions, National Railroad Retirement Investment Trust from 2003 to 2016; Associate Vice President for Treasury Management, The George Washington University from 1999 to 2003; Assistant Treasurer, Episcopal Church of America from 1995 to 1999.    73 RICs consisting of 73 Portfolios    None

 

 

TRUSTEE AND OFFICER INFORMATION      93  


Trustee and Officer Information  (continued)

 

Interested Trustees (a)(e)
         

Name

Year of Birth (b)

  

Position(s) Held

(Length of Service) (c)

   Principal Occupation(s) During Past Five Years    Number of BlackRock-Advised
Registered Investment Companies
(“RICs”)  Consisting of
Investment Portfolios
(“Portfolios”) Overseen
 (d)
   Public Company and
Investment Company
Directorships During
Past Five Years

Robert Fairbairn

1965

  

Trustee

(Since 2018)

   Senior Managing Director of BlackRock, Inc. since 2010; oversees BlackRock's Strategic Partner Program and Strategic Product Management Group; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock's Human Capital Committee; Global Head of BlackRock's Retail and iShares® businesses from 2012 to 2016.    133 RICs consisting of 333 Portfolios    None

John M. Perlowski

1964

  

Trustee

(Since 2015);

President and Chief Executive Officer

(Since 2010)

   Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009.    133 RICs consisting of 333 Portfolios    None

(a) The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

(b) Each Independent Trustee will serve until his or her successor is elected and qualifies, or until his or her earlier death, resignation, retirement or removal, or until December 31 of the year in which he or she turns 75. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding of good cause therefor.

(c) Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, each Trustee first became a member of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.

(d) For purposes of this chart, "RICs" refers to investment companies registered under the 1940 Act and "Portfolios" refers to the investment programs of the BlackRock-advised funds. The Closed-End Complex is comprised of 73 RICs consisting of 73 Portfolios. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex.

(e) Mr. Fairbairn and Mr. Perlowski are both "interested persons," as defined in the 1940 Act, of the Trust based on their positions with BlackRock and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon a finding of good cause therefor.

 

Officers Who Are Not Trustees (a)
     

Name

Year of Birth (b)

   Position(s) Held
(Length of Service)
   Principal Occupation(s) During Past Five Years

Jonathan Diorio

1980

  

Vice President

(Since 2015)

   Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015.

Neal J. Andrews

1966

  

Chief Financial Officer

(Since 2007)

   Managing Director of BlackRock, Inc. since 2006.

Jay M. Fife

1970

  

Treasurer

(Since 2007)

   Managing Director of BlackRock, Inc. since 2007.

Charles Park

1967

  

Chief Compliance Officer

(Since 2014)

   Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.

Janey Ahn

1975

  

Secretary

(Since 2012)

   Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017.

(a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

(b) Officers of the Trust serve at the pleasure of the Board.

 

Effective October 1, 2018, the portfolio managers of MHN are Walter O’Connor and Christian Romaglino. Mr. Romaglino joined MHN’s portfolio management team effective October 1, 2018. Mr. Romaglino has been a Director of BlackRock, Inc. since 2017; a Portfolio Manager for the Municipal Mutual Fund Desk within BlackRock’s Global Fixed Income Group since 2017; and a Portfolio Manager at Brown Brothers Harriman from 2007 to 2017.

Effective October 1, 2018, the portfolio managers of BQH, BSE and BFY are Walter O’Connor and Michael Perilli. Mr. Perilli joined each Trust’s portfolio management team effective October 1, 2018. Mr. Perilli has been a Vice President of BlackRock, Inc. since 2014, and an Associate thereof from 2008 to 2014.

 

 

94    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Trustee and Officer Information  (continued)

 

Investment Adviser

BlackRock Advisors, LLC

Wilmington, DE 19809

Accounting Agent and Custodian

State Street Bank and Trust Company

Boston, MA 02111

Transfer Agent

Computershare Trust Company, N.A.

Canton, MA 02021

VRDP Tender and Paying Agent

The Bank of New York Mellon

New York, NY 10289

VRDP Remarketing Agent

BofAML Securities, Inc.(a)

New York, NY 10036

Citigroup Global Markets, Inc.(b)

New York, NY 10179

Barclays Capital, Inc.(c)

New York, NY 10019

VRDP Liquidity Providers

Bank of America, N.A.(a)

New York, NY 10036

Citibank, N.A.(b)

New York, NY 10179

Barclays Bank PLC.(c)

New York, NY 10019

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom LLP

Boston, MA 02116

Address of the Trusts

100 Bellevue Parkway

Wilmington, DE 19809

 

 

(a) 

For MHN.

(b) 

For BZM, MHE and BHV.

(c) 

For BQH, BSE and BFY.

 

 

TRUSTEE AND OFFICER INFORMATION      95  


Additional Information

 

Proxy Results

The adjourned Annual Meeting of Shareholders was held on July 30, 2018 for shareholders of record on May 31, 2018, to elect trustee or director nominees for each Trust. There were no broker non-votes with regard to any of the Trusts.

Shareholders elected the Class II Trustees & Class III Trustee as follows:

 

  

 

  Robert Fairbairn (a)     Catherine A. Lynch (b)     Karen P. Robards (b)     Frank J. Fabozzi (b)(c)  
     Votes For     Votes Withheld     Votes For     Votes Withheld     Votes For     Votes Withheld     Votes For     Votes Withheld  

BZM

    1,898,830       35,594       1,889,904       44,520       1,898,620       35,804       160       0  

BSE

    5,275,762       861,229       5,047,680       1,089,311       5,069,259       1,067,732       405       0  

BQH

    2,532,843       86,277       2,534,043       85,077       2,534,043       85,077       221       0  

BFY

    4,029,218       531,983       4,378,145       183,056       4,378,145       183,056       444       0  

BHV

    1,456,808       56,605       1,467,765       45,648       1,437,285       76,128       116       0  

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Michael J. Castellano, Richard E. Cavanagh, Cynthia L. Egan, R. Glenn Hubbard, W. Carl Kester and John M. Perlowski.

 

  (a) 

Class III.                                                             (c) Voted on by holders of Preferred Shares only.

 
  (b) 

Class II.

 

Shareholders elected the Directors/Trustees as follows:

 

  

 

  Michael J. Castellano     Richard E. Cavanagh     Cynthia L. Egan  
 

 

  Votes For     Votes Withheld           Votes For     Votes Withheld           Votes For     Votes Withheld        

MHN

    26,350,248       1,543,354         26,290,641       1,602,961         26,913,724       979,878    
          Votes Against     Abstain           Votes Against     Abstain           Votes Against     Abstain  

MHE

    2,163,072       32,944       41,557       2,185,860       10,156       41,557       2,192,424       3,592       41,557  
  

 

  Robert Fairbairn     R. Glenn Hubbard     Catherine A. Lynch  
 

 

  Votes For     Votes Withheld           Votes For     Votes Withheld           Votes For     Votes Withheld        

MHN

    26,929,736       963,866         26,857,452       1,036,150         26,925,634       967,968    
          Votes Against     Abstain           Votes Against     Abstain           Votes Against     Abstain  

MHE

    2,195,246       770       41,557       2,182,748       13,268       41,557       2,195,246       770       41,557  
  

 

  John M. Perlowski     Karen P. Robards     Frank J. Fabozzi(a)  
 

 

  Votes For     Votes Withheld           Votes For     Votes Withheld           Votes For     Votes Withheld        

MHN

    26,943,569       950,033         26,925,899       967,703         2,436       0    
          Votes Against     Abstain           Votes Against     Abstain           Votes Against     Abstain  

MHE

    2,198,812       591       38,170       2,192,424       3,592       41,557       185       0       0  
  

 

  W. Carl Kester (a)                              
    Votes For     Votes Withheld                                            

MHN

    2,436       0                
          Votes Against     Abstain                                      

MHE

    185       0       0                                                  

 

  (a) 

Voted on by holders of Preferred Shares only.

 

Trust Certification

The Trusts 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 Trusts 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 Trust’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 Trusts 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 Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The Trusts’ 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.

 

 

96    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Additional Information  (continued)

 

General Information

The Trusts do not make available copies of their Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trust’s offerings and the information contained in each Trust’s Statement of Additional Information may have become outdated.

During the period, there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charters or by-laws that would delay or prevent a change of control of the Trusts that were not approved by the shareholders or in the principal risk factors associated with investment in the Trusts. Except as described on page 94, there have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trusts, 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 Trusts and does not, and is not intended to, incorporate BlackRock’s website into this report.

Effective May 31, 2018, BZM, MHE, BFY and BHV transferred the listing of their common shares from the NYSE American to the NYSE.

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 Trusts 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 Trusts at (800) 882-0052.

Availability of Quarterly Schedule of Investments

The Trusts 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 Trusts’ 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 Trusts’ 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 Trusts 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 Trusts voted proxies relating to securities held in the Trusts’ 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 Trust Updates

BlackRock will update performance and certain other data for the Trusts 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 Trusts. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

 

ADDITIONAL INFORMATION      97  


Additional Information  (continued)

 

Section 19(a) Notices

The amounts and sources of distributions reported in this notice are for financial reporting purposes and are not being provided for tax reporting purposes. The actual amounts and character of the distributions for tax reporting purposes will be reported to shareholders on Form 1099-DIV which is sent to shareholders shortly after calendar year end.

August 31, 2018

 

     Total Fiscal Year to Date
Cumulative Distributions by Character
    Percentage of Fiscal Year to Date
Cumulative Distributions by Character
 
     Net
Investment
Income
    Net Realized
Capital Gains
Short Term
    Net Realized
Capital Gains
Long Term
   

Return of

Capital*

    Total Per
Common
Share
    Net
Investment
Income
    Net Realized
Capital Gains
Short Term
    Net Realized
Capital Gains
Long Term
    Return of
Capital
    Total Per
Common
Share
 

BSE

  $ 0.5607480     $     $     $ 0.0017520     $ 0.5625000       100     0     0     0     100

 

  *

The Trust estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Trust is returned to the shareholder. A return of capital does not necessarily reflect the Trust’s investment performance and should not be confused with “yield” or “income”. When distributions exceed total return performance, the difference will incrementally reduce the Trust’s net asset value per share.

 

Section 19(a) notices for BSE, as applicable, are available on the BlackRock website at http://www.blackrock.com.

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.

 

 

98    2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS


Glossary of Terms Used in this Report

 

Portfolio Abbreviations
AGC    Assured Guarantee Corp.
AGM    Assured Guaranty Municipal Corp.
AMBAC    American Municipal Bond Assurance Corp.
AMT    Alternative Minimum Tax (subject to)
ARB    Airport Revenue Bonds
BARB    Building Aid Revenue Bonds
BHAC    Berkshire Hathaway Assurance Corp.
BOCES    Board of Cooperative Educational Services
CAB    Capital Appreciation Bonds
CIFG    CIFG Assurance North America, Inc.
EDA    Economic Development Authority
EDC    Economic Development Corp.
ERB    Education Revenue Bonds
FHA    Federal Housing Administration
GO    General Obligation Bonds
HDA    Housing Development Authority
HFA    Housing Finance Agency
HRB    Housing Revenue Bonds
IDA    Industrial Development Authority
M/F    Multi-Family
NPFGC    National Public Finance Guarantee Corp.
PILOT    Payment in Lieu of Taxes
RB    Revenue Bonds
S/F    Single-Family
SONYMA    State of New York Mortgage Agency
Syncora    Syncora Guarantee
 

 

 

GLOSSARY OF TERMS USED IN THIS REPORT      99  


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 Trusts 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

 

 

CEF-STMUNI-8-8/18-AR    LOGO


Item 2 –

Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls 1-800-882-0052, option 4.

 

Item 3 –

Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

 

    

Michael Castellano

    

Frank J. Fabozzi

    

W. Carl Kester

    

Catherine A. Lynch

    

Karen P. Robards

 

    

The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.

 

    

Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements.

 

    

Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.

 

    

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

2


Item 4 –

Principal Accountant Fees and Services

 

    

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

      (a) Audit Fees    (b) Audit-Related Fees1    (c) Tax Fees2    (d) All Other Fees
Entity Name    Current  
Fiscal Year  
End  
   Previous  
Fiscal Year  
End  
   Current  
Fiscal Year  
End  
   Previous  
Fiscal Year  
End  
   Current  
Fiscal Year  
End  
   Previous  
Fiscal Year  
End  
   Current  
Fiscal Year  
End  
   Previous  
Fiscal Year  
End  

 BlackRock

 Massachusetts

 Tax-Exempt Trust

   $26,112    $26,074    $0    $0    $8,000    $7,956    $0    $0

 

    

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):

 

      Current Fiscal Year End    Previous Fiscal Year End

(b) Audit-Related Fees1

   $0    $0

(c) Tax Fees2

   $0    $0

(d) All Other Fees3

   $2,274,000    $2,129,000

1 The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.

2 The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.

3 Non-audit fees of $2,274,000 and $2,129,000 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or

 

3


$50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:

 

Entity Name    Current Fiscal Year    
End    
     Previous Fiscal Year    
End     
    
BlackRock Massachusetts Tax-Exempt Trust    $8,000    $7,956   

Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored or advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:

 

Current Fiscal  
Year End  
  Previous Fiscal  
Year End  
$2,274,000   $2,129,000

These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 – Audit

Committee of Listed Registrants

 

  (a)

The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

 

4


  Michael Castellano

  Frank J. Fabozzi

  W. Carl Kester

  Catherine A. Lynch

  Karen P. Robards

(b) Not Applicable

 

Item 6 –

Investments

 

    

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

 

    

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

Item 7 –

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.

 

Item 8 –

Portfolio Managers of Closed-End Management Investment Companies

(a)(1)   As of the date of filing this Report:

The registrant is managed by a team of investment professionals comprised of Michael Perilli, Vice President at BlackRock and Kevin Maloney, Vice President at BlackRock. Each of the foregoing professionals is a member of BlackRock’s municipal tax-exempt management group and is jointly responsible for the day-to-day management of the registrant’s portfolio, which includes setting the registrant’s overall investment strategy, overseeing the management of the registrant and/or selection

 

5


of its investments. Messrs. Perilli and Maloney have been members of the registrant’s portfolio management team since 2016 and 2017, respectively.

 

 Portfolio Manager    Biography
 Michael Perilli   

Vice President of BlackRock since 2014; Associate of BlackRock from 2008 to 2014.

 

 Kevin Maloney    Vice President of BlackRock since 2018; Associate of BlackRock from 2017 to 2014; Analyst of BlackRock from 2011 to 2013.

(a)(2) As of August 31, 2018:

 

    

(ii) Number of Other Accounts Managed

and Assets by Account Type

 

(iii) Number of Other Accounts and

Assets for Which Advisory Fee is

Performance-Based

(i) Name of

  Portfolio Manager  

 

Other

Registered

Investment

Companies

 

Other Pooled

Investment

Vehicles

 

Other

Accounts

 

Other

Registered

Investment

Companies

 

Other Pooled

Investment

Vehicles

 

Other

Accounts

Michael Perilli

 

 

16

 

 

0

 

  0   0   0   0
   

$4.73 Billion

 

  $0   $0   $0   $0   $0

Kevin Maloney

 

  8   0   0   0   0   0
   

$2.21 Billion

 

  $0   $0   $0   $0   $0

 

(iv)

Portfolio Manager Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that a

 

6


portfolio manager may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Such portfolio managers may therefore be entitled to receive a portion of any incentive fees earned on such accounts. Currently, the portfolio managers of this Fund are not entitled to receive a portion of incentive fees of other accounts.

As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.

(a)(3) As of August 31, 2018:

Portfolio Manager Compensation Overview

The discussion below describes the portfolio managers’ compensation as of August 31, 2018.

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.

Base Compensation.  Generally, portfolio managers receive base compensation based on their position with the firm.

Discretionary Incentive Compensation.  Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Funds and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, the benchmark for the Fund and other

 

7


accounts is: a combination of market-based indices (e.g., Standard & Poor’s Municipal Bond Index), certain customized indices and certain fund industry peer groups

Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc. stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.

Portfolio managers receive their annual discretionary incentive compensation in the form of cash. Portfolio managers whose total compensation is above a specified threshold also receive deferred BlackRock, Inc. stock awards annually as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. In some cases, additional deferred BlackRock, Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align interests with long-term shareholders and motivate performance. Deferred BlackRock, Inc. stock awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. With the exception of Mr. Maloney, the portfolio manager of this Fund has deferred BlackRock, Inc. stock awards.

For certain portfolio managers, a portion of the discretionary incentive compensation is also distributed in the form of deferred cash awards that notionally track the returns of select BlackRock investment products they manage, which provides direct alignment of portfolio manager discretionary incentive compensation with investment product results. Deferred cash awards vest ratably over a number of years and, once vested, settle in the form of cash. Only portfolio managers who manage specified products and whose total compensation is above a specified threshold are eligible to participate in the deferred cash award program.

Other Compensation Benefits. In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:

Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($275,000 for 2018). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of

 

8


common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.

(a)(4) Beneficial Ownership of Securities – As of August 31, 2018.

 

Portfolio Manager   

Dollar Range of Equity Securities

of the Fund Beneficially Owned

Michael Perilli

   None

Kevin Maloney

   None

(b) Not Applicable

 

Item 9 –   Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.
Item 10 –   Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 –   Controls and Procedures
  (a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
  (b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12 –   Disclosure of Securities Lending Activities for Closed-End Management Investment Companies - - Not Applicable
Item 13 –   Exhibits attached hereto
  (a)(1) – Code of Ethics – See Item 2
  (a)(2) – Certifications – Attached hereto
  (a)(3) – Not Applicable
  (a)(4) – Not Applicable
  (b) – Certifications – Attached hereto

 

9


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  BlackRock Massachusetts Tax-Exempt Trust   
  By:   /s/ John M. Perlowski                               
    John M. Perlowski   
    Chief Executive Officer (principal executive officer) of   
    BlackRock Massachusetts Tax-Exempt Trust   
  Date:   November 2, 2018   
 

 

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 Massachusetts Tax-Exempt Trust   
  Date:   November 2, 2018   
  By:   /s/ Neal J. Andrews                                   
    Neal J. Andrews   
    Chief Financial Officer (principal financial officer) of   
    BlackRock Massachusetts Tax-Exempt Trust   
  Date:   November 2, 2018   

 

10