|
JANUARY 31, 2020 |
| 2020 Semi-Annual Report (Unaudited) | ||
BlackRock MuniHoldings California Quality Fund, Inc. (MUC)
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)
BlackRock MuniYield Investment Quality Fund (MFT)
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)
BlackRock MuniYield Pennsylvania Quality Fund (MPA)
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of each Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call Computershare at (800) 699-1236 to request that you continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC or its affiliates, or all funds held with your financial intermediary, as applicable.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.
| Not FDIC Insured • May Lose Value • No Bank Guarantee |
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Municipal Market Overview For the Reporting Period Ended January 31, 2020
Municipal Market Conditions
| Municipal bonds posted strong total returns during the period, buoyed by a combination of rallying interest rates and a favorable technical backdrop. Interest rates moved lower in 2019 as the Fed turned more dovish on the back of slowing global growth and trade uncertainties, indicated a commitment to sustain the current economic expansion, and executed a mid-cycle adjustment consisting of three 0.25% rate cuts. This dynamic was compounded in early 2020 as elevated event risks, led by increased U.S. conflict with Iran and a coronavirus pandemic, spurred a flight to quality. At the same time, |
S&P Municipal Bond Index Total Returns as of January 31, 2020 6 months: 3.08% 12 months: 8.21% | |
municipal bond technicals remained supportive with historically robust demand outpacing moderate supply. During the 12 months ended January 31, 2020, municipal bond funds experienced net inflows totaling $98 billion (based on data from the Investment Company Institute). Broadly, investors favored the tax-exempt income, diversification, quality, and value of municipal bonds given that tax reform ultimately lowered the top individual tax rate just 2.6% while eliminating deductions. For the same 12-month period, total new issuance was slightly above average from a historical perspective at $409 billion, but was boosted by robust taxable municipal supply. Taxable municipal bond issuance picked up late in 2019, as issuers advance refunded tax-exempt debt using taxable municipal bonds for cost savings. While increasing issuance totals, this dynamic ultimately shrank the size of the tax-exempt market and provided a positive technical tailwind for the natural buyer of the asset class.
A Closer Look at Yields
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From January 31, 2019 to January 31, 2020, yields on AAA-rated 30-year municipal bonds decreased by 122 basis points (“bps”) from 3.02% to 1.80%, while ten-year rates decreased by 102 bps from 2.17% to 1.15% and five-year rates decreased by 92 bps from 1.76% to 0.84% (as measured by Thomson Municipal Market Data). As a result, the municipal yield curve flattened over the 12-month period with the spread between two- and 30-year maturities flattening by 40 bps, compared to 14 bps of steepening in the comparable U.S. Treasury curve. |
During the same time period, tax-exempt municipal bonds outperformed duration-matched U.S. Treasuries, most notably in the long end of the yield curve. Consequently, relative valuations remained stretched versus history. Given that the corporate tax rate was lowered much more than the individual rate, institutions now have less incentive to own tax-exempt municipal bonds, while individuals are more incentivized. In a more retail-driven market, lower municipal-to-Treasury ratios are likely sustainable as individuals are focused more on generating tax-free income and less concerned with relative valuations. 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
Most states and localities are on solid footing as tax receipts are increasing steadily and spending levels are rebounding from post-recession lows. Rising healthcare expenditures and legacy pension costs are plaguing a handful of high-profile credits. Essential service revenue bonds continue to benefit from deleveraging. Several private-public partnerships and off-balance sheet projects have made headlines for cost-overruns that are calling into question their value add. More caution is warranted in the non-profit sectors, especially less-selective private education credits that are dealing with competitive pressures and are burdened with outsized debt. Merger and acquisition activity has been elevated in the hospital sector, providing opportunities to generate performance. Additionally, high yield remains an important driver of performance. BlackRock maintains the view that municipal bond defaults will remain minimal and the overall market is fundamentally sound. However, we continue to advocate careful credit research and believe that a thoughtful approach to structure and security selection remains imperative amid uncertainty in a modestly improving economic environment.
The opinions expressed are those of BlackRock as of January 31, 2020 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 S&P 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 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
The Benefits and Risks of Leveraging
The Funds may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, their common shares (“Common Shares”). However, 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 Fund on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Funds (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Funds’ shareholders benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage (after paying the leverage costs) is paid to shareholders in the form of dividends, and the value of these portfolio holdings (less the leverage liability) is reflected in the per share NAV.
To illustrate these concepts, assume a Fund’s Common Shares capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, a Fund’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the securities purchased by a Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Fund’s financing cost of leverage is significantly lower than the income earned on a Fund’s longer-term investments acquired from 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 Funds’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Funds had not used leverage. Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Funds’ obligations under their respective leverage arrangements generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Funds’ NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that the Funds’ intended leveraging strategy will be successful.
The use of leverage also generally causes greater changes in each Fund’s NAV, market price and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV and market price of a Fund’s Common Shares than if the Fund were not leveraged. In addition, each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause the Fund to incur losses. The use of leverage may limit a Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund incurs expenses in connection with the use of leverage, all of which are borne by Common Shareholders and may reduce income to the Common Shares. Moreover, to the extent the calculation of the Funds’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Funds’ investment adviser will be higher than if the Funds did not use leverage.
To obtain leverage, each Fund has issued Variable Rate Demand Preferred Shares (“VRDP Shares”) or Variable Rate Muni Term Preferred Shares (“VMTP Shares”) (collectively, “Preferred Shares”) and/or leveraged its assets through the use of tender option bond trusts (“TOB Trusts”) as described in the Notes to Financial Statements.
Under the Investment Company Act of 1940, as amended (the “1940 Act”), each Fund is permitted to issue debt up to 33 1/3% of its total managed assets or equity securities (e.g., Preferred Shares) up to 50% of its total managed assets. A Fund may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Fund may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by the Preferred Shares’ governing instruments or by agencies rating the Preferred Shares, which may be more stringent than those imposed by the 1940 Act.
If a Fund segregates or designates on its books and records cash or liquid assets having a value not less than the value of a Fund’s obligations under the TOB Trust (including accrued interest), 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 Funds 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 Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.
| THE BENEFITS AND RISKS OF LEVERAGING / DERIVATIVE FINANCIAL INSTRUMENTS | 5 |
| Fund Summary as of January 31, 2020 | BlackRock MuniHoldings California Quality Fund, Inc. |
Fund Overview
BlackRock MuniHoldings California Quality Fund, Inc.’s (MUC) (the “Fund”) investment objective is to provide shareholders with current income exempt from U.S. federal income taxes and California personal income taxes. The Fund seeks to achieve its investment objective by investing primarily in 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 California personal income taxes. Under normal market conditions, the Fund invests at least 80% of its assets in investment grade municipal obligations with remaining maturities of one year or more at the time of investment. The municipal obligations in which the Fund primarily invests are either rated investment grade quality, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of investment. Effective July 31, 2019, the Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of purchase. The Fund may invest directly in securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
Fund Information
| Symbol on New York Stock Exchange (“NYSE”) |
MUC | |
| Initial Offering Date |
February 27, 1998 | |
| Yield on Closing Market Price as of January 31, 2020 ($14.48)(a) |
3.60% | |
| Tax Equivalent Yield(b) |
7.84% | |
| Current Monthly Distribution per Common Share(c) |
$0.0435 | |
| Current Annualized Distribution per Common Share(c) |
$0.5220 | |
| Leverage as of January 31, 2020(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 54.1%, 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 monthly distribution per Common Share, declared on March, 2, 2020, was increased to $0.0460 per share. The current yield on closing market price, tax equivalent yield, current monthly distribution per Common Share and current annualized distribution per Common Share do not reflect the new distribution rate. The new distribution rate is not constant and is subject to change in the future. |
| (d) | Represents VMTP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOB Trusts, minus the sum of accrued liabilities. Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 5. |
Performance
Returns for the six months ended January 31, 2020 were as follows:
| Returns Based On | ||||||||
| Market Price | NAV | |||||||
| MUC(a)(b) |
5.35 | % | 4.86 | % | ||||
| Lipper California Municipal Debt Funds(c) |
5.74 | 5.32 | ||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. |
| (b) | The Fund’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 date 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 no guarantee of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
After moving sideways for much of the period, municipal bonds finished with positive returns thanks to their rally in January. In fact, January represented the highest one-month return for U.S. municipal issues in six years (as measured by the S&P Municipal Bond Index). The gains for the broader bond market reflected the backdrop of weaker economic data and worries about the spread of coronavirus. (Bond prices rise as yields fall.) The favorable combination of robust investor demand and relatively limited new-issue supply provided an additional tailwind for tax-exempt securities.
California municipal debt finished slightly ahead of the national index, as the repeal of federal, state and local tax deductions fueled continued demand in high-tax states.
The Fund sought to manage interest rate risk using U.S. Treasury futures. Since U.S. Treasury yields fell, as prices rose, this strategy detracted from Fund performance. Reinvestment risk continued to be a headwind since the proceeds from bonds that matured or were called needed to be reinvested at lower yields compared to bonds that were issued when yields were higher. The Fund’s higher-quality focus also detracted at a time in which high yield bonds (those rated BBB and below) outperformed the rest of the market. However, the investment adviser began adding to high yield debt during the period due to a change in the Fund’s quality designation.
The Fund’s use of leverage aided results by enhancing income and amplifying the effect of the rising prices. The Fund further benefited from its positions in bonds with maturities of 20 years and above given the outperformance of longer-term debt. At the sector level, school districts, health care and transportation issues were strong contributors.
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 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of January 31, 2020 (continued) | BlackRock MuniHoldings California Quality Fund, Inc. |
Market Price and Net Asset Value Per Share Summary
| 01/31/20 | 07/31/19 | Change | High | Low | ||||||||||||||||
| Market Price |
$ | 14.48 | $ | 14.00 | 3.43 | % | $ | 14.51 | $ | 13.62 | ||||||||||
| Net Asset Value |
16.02 | 15.56 | 2.96 | 16.02 | 15.55 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
Overview of the Fund’s Total Investments *
| FUND SUMMARY | 7 |
| Fund Summary as of January 31, 2020 | BlackRock MuniHoldings New Jersey Quality Fund, Inc. |
Fund Overview
BlackRock MuniHoldings New Jersey Quality Fund, Inc.’s (MUJ) (the “Fund”) investment objective is to provide shareholders with current income exempt from U.S. federal income tax and New Jersey personal income taxes. The Fund seeks to achieve its investment objective by investing primarily in long-term, investment grade municipal obligations exempt from U.S federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and New Jersey personal income taxes. The municipal obligations in which the Fund primarily invests are either rated investment grade quality, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of investment. Under normal market conditions, the Fund invests at least 80% of its assets in municipal obligations with remaining maturities of one year or more at the time of investment. Effective July 31, 2019, the Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of purchase. The Fund may invest directly in securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
Fund Information
| Symbol on NYSE |
MUJ | |
| Initial Offering Date |
March 11, 1998 | |
| Yield on Closing Market Price as of January 31, 2020 ($14.75)(a) |
4.39% | |
| Tax Equivalent Yield(b) |
9.06% | |
| Current Monthly Distribution per Common Share(c) |
$0.0540 | |
| Current Annualized Distribution per Common Share(c) |
$0.6480 | |
| Leverage as of January 31, 2020(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 51.55%, 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 Fund, including any assets attributable to VRDP Shares and TOB Trusts, minus the sum of accrued liabilities. Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 5. |
Performance
Returns for the six months ended January 31, 2020 were as follows:
| Returns Based On | ||||||||
| Market Price | NAV | |||||||
| MUJ(a)(b) |
4.49 | % | 4.53 | % | ||||
| Lipper New Jersey Municipal Debt Funds(c) |
5.57 | 4.22 | ||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. |
| (b) | The Fund’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 date 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 no guarantee of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
After moving sideways for much of the period, municipal bonds finished with positive returns thanks to their rally in January. In fact, January represented the highest one-month return for U.S. municipal issues in six years (as measured by the S&P Municipal Bond Index). The gains for the broader bond market reflected the backdrop of weaker economic data and worries about the spread of coronavirus. (Bond prices rise as yields fall.) The favorable combination of robust investor demand and relatively limited new-issue supply provided an additional tailwind for tax-exempt securities.
New Jersey state tax-backed bonds outperformed the national market, as the state’s fundamentals improved and credit spreads tightened amid the ongoing economic expansion. Although New Jersey carries one of the lowest state credit ratings at A3 and A- by Moody’s and Standard & Poor’s, respectively, investors were attracted by the above-average yields of a large and economically diversified issuer.
Positions in high yield debt, which outperformed on the strength of solid credit fundamentals and investors’ appetite for yield, contributed to Fund performance. The Fund’s holdings in Puerto Rico were particularly strong performers, as were tobacco issues. Positions in longer-term bonds, which outpaced short-term debt, also added value. The Fund’s use of leverage aided results by enhancing income and amplifying the effect of rising prices.
The Fund actively sought to manage interest rate risk using U.S. Treasury futures. Since U.S. Treasury yields fell, as prices rose, this strategy detracted from Fund performance. Reinvestment risk continued to be a headwind since as the proceeds from bonds that matured or were called needed to be reinvested at lower yields compared to bonds that were issued when yields were higher.
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 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of January 31, 2020 (continued) | BlackRock MuniHoldings New Jersey Quality Fund, Inc. |
Market Price and Net Asset Value Per Share Summary
| 01/31/20 | 07/31/19 | Change | High | Low | ||||||||||||||||
| Market Price |
$ | 14.75 | $ | 14.43 | 2.22 | % | $ | 14.80 | $ | 13.69 | ||||||||||
| Net Asset Value |
16.31 | 15.95 | 2.26 | 16.31 | 15.79 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
Overview of the Fund’s Total Investments *
| FUND SUMMARY | 9 |
| Fund Summary as of January 31, 2020 | BlackRock MuniYield Investment Quality Fund |
Fund Overview
BlackRock MuniYield Investment Quality Fund’s (MFT) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from U.S. federal income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax). Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of investment. Effective July 31, 2019, the Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of purchase. The Fund may invest directly in securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
Fund Information
| Symbol on NYSE |
MFT | |
| Initial Offering Date |
October 30, 1992 | |
| Yield on Closing Market Price as of January 31, 2020 ($13.96)(a) |
4.30% | |
| Tax Equivalent Yield(b) |
7.26% | |
| Current Monthly Distribution per Common Share(c) |
$0.0500 | |
| Current Annualized Distribution per Common Share(c) |
$0.6000 | |
| Leverage as of January 31, 2020(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 tax rate of 40.8%, 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 VMTP Shares and TOB Trusts as a percentage of total managed assets, which is the total assets of the Fund, including any assets attributable to VMTP Shares and TOB Trusts, minus the sum of accrued liabilities. Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 5. |
Performance
Returns for the six months ended January 31, 2020 were as follows:
| Returns Based On | ||||||||
| Market Price | NAV | |||||||
| MFT(a)(b) |
5.00 | % | 4.87 | % | ||||
| Lipper General & Insured Municipal Debt Funds (Leveraged)(c) |
4.81 | 5.01 | ||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. |
| (b) | The Fund’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 date 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 no guarantee of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
After moving sideways for much of the period, municipal bonds finished with positive returns thanks to their rally in January. In fact, January represented the highest one-month return for U.S. municipal issues in six years (as measured by the S&P Municipal Bond Index). The gains for the broader bond market reflected the backdrop of weaker economic data and worries about the spread of coronavirus. (Bond prices rise as yields fall.) The favorable combination of robust investor demand and relatively limited new-issue supply provided an additional tailwind for tax-exempt securities.
The Fund sought to manage interest rate risk using U.S. Treasury futures. Since U.S. Treasury yields fell, as prices rose, this strategy detracted from Fund performance. Reinvestment risk continued to be a headwind since the proceeds from bonds that matured or were called needed to be reinvested at lower yields compared to bonds that were issued when yields were higher. In addition, positions in shorter-term bonds lagged relative to those with longer-dated maturities.
On the positive side, an allocation to bonds with maturities of 20 years and longer helped Fund performance. The Fund’s use of leverage aided results by enhancing income and amplifying the effect of rising prices. At the sector level, transportation and state tax-backed issues were strong contributors. Performance in the tax-backed space was highlighted by strength in Puerto Rico bonds backed by sales taxes. Positions in AA and A rated debt further contributed to Fund results.
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 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of January 31, 2020 (continued) | BlackRock MuniYield Investment Quality Fund |
Market Price and Net Asset Value Per Share Summary
| 01/31/20 | 07/31/19 | Change | High | Low | ||||||||||||||||
| Market Price |
$ | 13.96 | $ | 13.59 | 2.72 | % | $ | 14.03 | $ | 12.99 | ||||||||||
| Net Asset Value |
14.63 | 14.26 | 2.59 | 14.63 | 14.19 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
Overview of the Fund’s Total Investments *
| FUND SUMMARY | 11 |
| Fund Summary as of January 31, 2020 | BlackRock MuniYield Michigan Quality Fund, Inc. |
Fund Overview
BlackRock MuniYield Michigan Quality Fund, Inc.’s (MIY) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from U.S. federal and Michigan income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and Michigan income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of investment. Effective July 31, 2019, the Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of purchase. The Fund may invest directly in securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
Fund Information
| Symbol on NYSE |
MIY | |
| Initial Offering Date |
October 30, 1992 | |
| Yield on Closing Market Price as of January 31, 2020 ($14.68)(a) |
4.01% | |
| Tax Equivalent Yield(b) |
7.30% | |
| Current Monthly Distribution per Common Share(c) |
$0.0490 | |
| Current Annualized Distribution per Common Share(c) |
$0.5880 | |
| Leverage as of January 31, 2020(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 45.05%, 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 Fund, including any assets attributable to VRDP Shares and TOB Trusts, minus the sum of accrued liabilities. Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 5. |
Performance
Returns for the six months ended January 31, 2020 were as follows:
| Returns Based On | ||||||||
| Market Price | NAV | |||||||
| MIY(a)(b) |
5.23 | % | 4.48 | % | ||||
| Lipper Other States Municipal Debt Funds(c) |
6.00 | 4.16 | ||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. |
| (b) | The Fund’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 date 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 no guarantee of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
After moving sideways for much of the period, municipal bonds finished with positive returns thanks to their rally in January. In fact, January represented the highest one-month return for U.S. municipal issues in six years (as measured by the S&P Municipal Bond Index). The gains for the broader bond market reflected the backdrop of weaker economic data and worries about the spread of coronavirus. (Bond prices rise as yields fall.) The favorable combination of robust investor demand and relatively limited new-issue supply provided an additional tailwind for tax-exempt securities.
Michigan municipal bonds slightly outperformed the national market, due in part to its longer duration (higher interest rate sensitivity). A number of fundamental trends were supportive for the market, as well. Michigan’s economy continued to improve and diversify, although it is still dependent upon the auto industry. The state’s most recent unemployment rate was only slightly above the national average, and Michigan’s budget for the 2019 fiscal year contained over $1 billion in reserves. Additionally, positive net migration trends have helped Michigan recover the population losses it experienced in the prior decade.
The Fund’s use of leverage aided results by enhancing income and amplifying the effect of rising prices. An allocation to longer-term debt, which outpaced shorter-dated issues, was an additional positive. A weighting in bonds rated A and below was also additive at a time in which lower-quality issues outpaced the broader market. Similarly, the Fund’s positions in 4% coupon issues helped performance, as yield spreads for these securities generally tightened compared to 5% coupons. The Fund further benefited from its positions in the state tax-backed, health care and education sectors. Performance in the tax-backed space was highlighted by strength in Puerto Rico bonds backed by sales taxes.
The Fund sought to manage interest rate risk using U.S. Treasury futures. Given that U.S. Treasury yields fell, as prices rose, this strategy detracted from Fund performance. In addition, the ongoing loss of higher-yielding securities from bond calls and maturities negatively impacted the Fund’s yield.
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 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of January 31, 2020 (continued) | BlackRock MuniYield Michigan Quality Fund, Inc. |
Market Price and Net Asset Value Per Share Summary
| 01/31/20 | 07/31/19 | Change | High | Low | ||||||||||||||||
| Market Price |
$ | 14.68 | $ | 14.24 | 3.09 | % | $ | 14.70 | $ | 13.72 | ||||||||||
| Net Asset Value |
16.07 | 15.70 | 2.36 | 16.07 | 15.61 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
Overview of the Fund’s Total Investments *
| FUND SUMMARY | 13 |
| Fund Summary as of January 31, 2020 | BlackRock MuniYield Pennsylvania Quality Fund |
Fund Overview
BlackRock MuniYield Pennsylvania Quality Fund’s (MPA) (the “Fund”) investment objective is to provide shareholders with as high a level of current income exempt from U.S. federal and Pennsylvania income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of its assets in municipal obligations exempt from U.S. federal income taxes (except that the interest may be subject to the U.S. federal alternative minimum tax) and Pennsylvania income taxes. Under normal market conditions, the Fund invests primarily in long-term municipal obligations that are investment grade quality, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of investment. Effective July 31, 2019, the Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of purchase. The Fund may invest directly in securities or synthetically through the use of derivatives.
No assurance can be given that the Fund’s investment objective will be achieved.
Fund Information
| Symbol on NYSE |
MPA | |
| Initial Offering Date |
October 30, 1992 | |
| Yield on Closing Market Price as of January 31, 2020 ($14.74)(a) |
3.74% | |
| Tax Equivalent Yield(b) |
6.66% | |
| Current Monthly Distribution per Common Share(c) |
$0.0460 | |
| Current Annualized Distribution per Common Share(c) |
$0.5520 | |
| Leverage as of January 31, 2020(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 43.87%, 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 Fund, including any assets attributable to VRDP Shares and TOB Trusts, minus the sum of accrued liabilities. Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments on page 5. |
Performance
Returns for the six months ended January 31, 2020 were as follows:
| Returns Based On | ||||||||
| Market Price | NAV | |||||||
| MPA(a)(b) |
5.96 | % | 4.35 | % | ||||
| Lipper Pennsylvania Municipal Debt Funds(c) |
4.78 | 3.99 | ||||||
| (a) | All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. |
| (b) | The Fund’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 date 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 no guarantee of future results.
The following discussion relates to the Fund’s absolute performance based on NAV:
After moving sideways for much of the period, municipal bonds finished with positive returns thanks to their rally in January. In fact, January represented the highest one-month return for U.S. municipal issues in six years (as measured by the S&P Municipal Bond Index). The gains for the broader bond market reflected the backdrop of weaker economic data and worries about the spread of coronavirus. (Bond prices rise as yields fall.) The favorable combination of robust investor demand and relatively limited new-issue supply provided an additional tailwind for tax-exempt securities.
Pennsylvania state tax-backed bonds outperformed the national market, as the state’s fundamentals strengthened and credit spreads tightened amid the ongoing economic expansion. The strength in bond prices also reflected recent strong revenue growth, improvement in the state’s budget reserves, and overall progress toward budgetary stability.
Allocations to higher education, health care and tobacco issues made the largest contribution to Fund performance. Positions in longer-term bonds, which outpaced short-term debt, also added value. In addition, the Fund’s use of leverage aided results by enhancing income and amplifying the effect of rising prices.
The Fund’s allocation to the multi-family housing sector was a large detractor, as the rating agency S&P Global Ratings lowered its ratings on two specific issuers held by the Fund. However, the investment adviser chose to maintain the positions, as it believed the bonds offered compelling values at their lower prices. The Fund actively sought to manage interest rate risk using U.S. Treasury futures. Since U.S. Treasury yields fell, as prices rose, this strategy detracted from Fund performance. Reinvestment risk remained a headwind since the proceeds from bonds that matured or were called needed to be reinvested at lower yields compared to bonds that were issued when yields were higher.
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 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of January 31, 2020 (continued) | BlackRock MuniYield Pennsylvania Quality Fund |
Market Price and Net Asset Value Per Share Summary
| 01/31/20 | 07/31/19 | Change | High | Low | ||||||||||||||||
| Market Price |
$ | 14.74 | $ | 14.18 | 3.95 | % | $ | 14.80 | $ | 13.81 | ||||||||||
| Net Asset Value |
16.44 | 16.06 | 2.37 | 16.44 | 15.83 | |||||||||||||||
Market Price and Net Asset Value History For the Past Five Years
Overview of the Fund’s Total Investments *
| FUND SUMMARY | 15 |
| Schedule of Investments (unaudited) January 31, 2020 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| 16 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 17 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| 18 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) (Percentages shown are based on Net Assets) |
| (i) | During the six months ended January 31, 2020, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliate | Shares Held at 07/31/19 |
Net Activity |
Shares Held at 01/31/20 |
Value at 01/31/20 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, California Money Fund, Institutional Class |
— | 40,971 | 40,971 | $ | 40,979 | $ | 9,404 | $ | — | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Short Contracts |
||||||||||||||||
| 10-Year U.S. Treasury Note |
128 | 03/20/20 | $ | 16,852 | $ | (230,025 | ) | |||||||||
| Long U.S. Treasury Bond |
293 | 03/20/20 | 47,915 | (1,145,364 | ) | |||||||||||
| 5-Year U.S. Treasury Note |
123 | 03/31/20 | 14,799 | (128,454 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | (1,503,843 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| SCHEDULES OF INVESTMENTS | 19 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) |
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 | ||||||||||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(a) |
$ | — | $ | — | $ | — | $ | — | $ | 1,503,843 | $ | — | $ | 1,503,843 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
For the six months ended January 31, 2020, 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 |
$ | — | $ | — | $ | — | $ | — | $ | (2,750,365 | ) | $ | — | $ | (2,750,365 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: | ||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | — | $ | — | $ | (564,053 | ) | $ | — | $ | (564,053 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
| |||
| Average notional value of contracts — long |
$ | — | (a) | |
| Average notional value of contracts — short |
69,336,941 | |||
| (a) | Derivative not held at any quarter-end. The risk exposure table serves as an indicator of activity during the period. |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
| |||||||||||||||
| Investments: |
| |||||||||||||||
| Long-Term Investments(a) |
$ | — | $ | 1,061,035,635 | $ | — | $ | 1,061,035,635 | ||||||||
| Short-Term Securities |
40,979 | — | — | 40,979 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 40,979 | $ | 1,061,035,635 | $ | — | $ | 1,061,076,614 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(b) |
| |||||||||||||||
| Liabilities: |
| |||||||||||||||
| Interest rate contracts |
$ | (1,503,843 | ) | $ | — | $ | — | $ | (1,503,843 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each sector or state. |
| (b) | Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
| 20 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings California Quality Fund, Inc. (MUC) |
Fair Value Hierarchy as of Period End (continued)
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: |
||||||||||||||||
| TOB Trust Certificates |
$ | — | $ | (158,508,608 | ) | $ | — | $ | (158,508,608 | ) | ||||||
| VMTP Shares at Liquidation Value |
— | (254,000,000 | ) | — | (254,000,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | (412,508,608 | ) | $ | — | $ | (412,508,608 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| SCHEDULES OF INVESTMENTS | 21 |
| Schedule of Investments (unaudited) January 31, 2020 |
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| 22 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 23 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| 24 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) (Percentages shown are based on Net Assets) |
| (i) | During the six months ended January 31, 2020, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliate | Shares Held at 07/31/19 |
Net Activity |
Shares Held at 01/31/20 |
Value at 01/31/20 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, MuniCash, Institutional Class |
2,382,612 | 4,713,675 | 7,096,287 | $ | 7,097,706 | $ | 7,765 | $ | (303 | ) | $ | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Short Contracts |
||||||||||||||||
| 10-Year U.S. Treasury Note |
97 | 03/20/20 | $ | 12,771 | $ | (165,317 | ) | |||||||||
| U.S. Long Treasury Bond |
114 | 03/20/20 | 18,643 | (455,894 | ) | |||||||||||
| 5-Year U.S. Treasury Note |
76 | 03/31/20 | 9,144 | (88,399 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | (709,610 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| SCHEDULES OF INVESTMENTS | 25 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ) |
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 | ||||||||||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(a) |
$ | — | $ | — | $ | — | $ | — | $ | 709,610 | $ | — | $ | 709,610 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contract, if any, are reported in the Schedule of Investments. In the Statement of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized depreciation is included in accumulated earnings (loss). |
For the six months ended January 31, 2020, 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 |
$ | — | $ | — | $ | — | $ | — | $ | (1,486,712 | ) | $ | — | $ | (1,486,712 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: | ||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | — | $ | — | $ | (455,749 | ) | $ | — | $ | (455,749 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
| |||
| Average notional value of contracts — long |
$ | — | (a) | |
| Average notional value of contracts — short |
36,549,914 | |||
| (a) | Derivative not held at quarter-end. The risk exposure table serves as an indicator of activity during the period. |
For more information about the Funds investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
| |||||||||||||||
| Investments: |
| |||||||||||||||
| Long-Term Investments(a) |
$ | — | $ | 789,304,412 | $ | — | $ | 789,304,412 | ||||||||
| Short-Term Securities |
7,097,706 | — | — | 7,097,706 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 7,097,706 | $ | 789,304,412 | $ | — | $ | 796,402,118 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(b) |
| |||||||||||||||
| Liabilities: |
| |||||||||||||||
| Interest Rate Contracts |
$ | (709,610 | ) | $ | — | $ | — | $ | (709,610 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each sector. |
| (b) | Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: |
| |||||||||||||||
| TOB Trust Certificates |
$ | — | $ | (71,299,741 | ) | $ | — | $ | (71,299,741 | ) | ||||||
| VRDP Shares at Liquidation Value |
— | (237,100,000 | ) | — | (237,100,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | (308,399,741 | ) | $ | — | $ | (308,399,741 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 26 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) January 31, 2020 |
BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 27 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| 28 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 29 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Investment Quality Fund (MFT) (Percentages shown are based on Net Assets) |
| 30 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Investment Quality Fund (MFT) |
| (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) | When-issued security. |
| (e) | Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing. See Note 4 of the Notes to Financial Statements for details. |
| (f) | All or a portion of the security is subject to a recourse agreement. The aggregate maximum potential amount the Fund could ultimately be required to pay under the agreement(s), which expire(s) between August 15, 2020 to August 1, 2027 is $5,288,748. (See Note 4 of the Notes to Financial Statements for details.) |
| During the six months ended January 31, 2020, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliate | Shares Held at 07/31/19 |
Net Activity |
Shares Held at 01/31/20 |
Value at 01/31/20 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, MuniCash, Institutional Class(b) |
2,088,769 | (2,088,769 | ) | — | $ | — | $ | 4,845 | $ | (210 | ) | $ | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
| (b) | As of period end, the entity is no longer held by the Fund |
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 | 03/20/20 | $ | 1,053 | $ | (18,754 | ) | |||||||||
| U.S. Long Treasury Bond |
65 | 03/20/20 | 10,630 | (292,276 | ) | |||||||||||
| 5-Year U.S. Treasury Note |
19 | 03/31/20 | 2,286 | (24,071 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | (335,101 | ) | ||||||||||||||
|
|
|
|||||||||||||||
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 | ||||||||||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(a) |
$ | — | $ | — | $ | — | $ | — | $ | 335,101 | $ | — | $ | 335,101 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
For the six-month ended January 31, 2020, 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 |
$ | — | $ | — | $ | — | $ | — | $ | (469,842 | ) | $ | — | $ | (469,842 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: |
||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | — | $ | — | $ | (226,936 | ) | $ | — | $ | (226,936 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| SCHEDULES OF INVESTMENTS | 31 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Investment Quality Fund (MFT) |
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
| |||
| Average notional value of contracts — short |
$ | 10,750,676 | ||
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
| |||||||||||||||
| Investments: |
| |||||||||||||||
| Long-Term Investments(a) |
$ | — | $ | 210,789,511 | $ | — | $ | 210,789,511 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(b) |
| |||||||||||||||
| Liabilities: |
| |||||||||||||||
| Interest rate contracts |
$ | (335,101 | ) | $ | — | $ | — | $ | (335,101 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each state. |
| (b) | Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: |
||||||||||||||||
| TOB Trust Certificates |
$ | — | $ | (27,936,886 | ) | $ | — | $ | (27,936,886 | ) | ||||||
| VMTP Shares at Liquidation Value |
— | (56,500,000 | ) | — | (56,500,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | (84,436,886 | ) | $ | — | $ | (84,436,886 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 32 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) January 31, 2020 |
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 33 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) (Percentages shown are based on Net Assets) |
| 34 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 35 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) |
| (h) | During the six months ended January 31, 2020, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliate | Shares Held at 07/31/19 |
Net Activity |
Shares Held at 01/31/20 |
Value at 01/31/20 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, MuniCash, Institutional Class |
2,325,529 | (1,035,986 | ) | 1,289,543 | $ | 1,289,801 | $ | 19,143 | $ | (509 | ) | $ | (97 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Short Contracts |
||||||||||||||||
| 10-Year U.S. Treasury Note |
114 | 03/20/20 | $ | 15,009 | $ | (216,584 | ) | |||||||||
| Long U.S. Treasury Bond |
133 | 03/20/20 | 21,750 | (520,987 | ) | |||||||||||
| 5-Year U.S. Treasury Note |
74 | 03/31/20 | 8,904 | (89,733 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | (827,304 | ) | ||||||||||||||
|
|
|
|||||||||||||||
Derivative Financial Instruments Categorized by Risk Exposure
As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(a) |
$ | — | $ | — | $ | — | $ | — | $ | 827,304 | $ | — | $ | 827,304 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts, if any, are reported in the Schedule of Investments. In the Statement of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
For the six months ended January 31, 2020, the effect of derivative financial instruments in the Statement 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 |
$ | — | $ | — | $ | — | $ | — | $ | (1,261,933 | ) | $ | — | $ | (1,261,933 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: | ||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | — | $ | — | $ | (411,530 | ) | $ | — | $ | (411,530 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
||||
| Average notional value of contracts — short |
$ | 36,242,773 |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
| 36 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY) |
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
| |||||||||||||||
| Investments: |
| |||||||||||||||
| Long-Term Investments(a) |
$ | — | $ | 770,368,249 | $ | — | $ | 770,368,249 | ||||||||
| Short-Term Securities |
1,289,801 | — | — | 1,289,801 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 1,289,801 | $ | 770,368,249 | $ | — | $ | 771,658,050 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(b) |
| |||||||||||||||
| Liabilities: |
| |||||||||||||||
| Interest rate contracts |
$ | (827,304 | ) | $ | — | $ | — | $ | (827,304 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each sector. |
| (b) | Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: |
||||||||||||||||
| TOB Trust Certificates |
$ | — | $ | (64,527,053 | ) | $ | — | $ | (64,527,053 | ) | ||||||
| VRDP Shares at Liquidation Value |
— | (231,900,000 | ) | — | (231,900,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | (296,427,053 | ) | $ | — | $ | (296,427,053 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| SCHEDULES OF INVESTMENTS | 37 |
| Schedule of Investments (unaudited) January 31, 2020 |
BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
| 38 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
| SCHEDULES OF INVESTMENTS | 39 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
| 40 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Pennsylvania Quality Fund (MPA) (Percentages shown are based on Net Assets) |
| (h) | During the six months ended January 31, 2020, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliate | Shares Held at 07/31/19 |
Net Activity |
Shares Held at 01/31/20 |
Value at 01/31/20 |
Income | Net Realized Gain (Loss) (a) |
Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||
| BlackRock Liquidity Funds, MuniCash, Institutional Class |
2,353,360 | (340,300 | ) | 2,013,060 | $ | 2,013,463 | $ | 6,325 | $ | 162 | $ | 4 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (a) | Includes net capital gain distributions, if applicable. |
For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Short Contracts |
||||||||||||||||
| 10-Year U.S. Treasury Note |
40 | 03/20/20 | $ | 5,266 | $ | (68,639 | ) | |||||||||
| U.S. Long Treasury Bond |
84 | 03/20/20 | 13,737 | (333,312 | ) | |||||||||||
| 5-Year U.S. Treasury Note |
21 | 03/31/20 | 2,527 | (24,895 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | (426,846 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| SCHEDULES OF INVESTMENTS | 41 |
| Schedule of Investments (unaudited) (continued) January 31, 2020 |
BlackRock MuniYield Pennsylvania Quality Fund (MPA) |
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 | ||||||||||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(a) |
$ | — | $ | — | $ | — | $ | — | $ | 426,846 | $ | — | $ | 426,846 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
For the six month ended January 31, 2020, 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 |
$ | — | $ | — | $ | — | $ | — | $ | (1,104,766 | ) | $ | — | $ | (1,104,766 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on: | ||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | — | $ | — | $ | (228,922 | ) | $ | — | $ | (228,922 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
||||
| Average notional value of contracts — Long |
$ | — | (a) | |
| Average notional value of contracts — Short |
19,747,066 |
| (a) | Derivative not held at quarter-end. The risk exposure table serves as an indicator of activity during the period. |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
| |||||||||||||||
| Investments: |
| |||||||||||||||
| Long-Term Investments(a) |
$ | — | $ | 353,715,832 | $ | — | $ | 353,715,832 | ||||||||
| Short-Term Securities |
2,013,463 | — | — | 2,013,463 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 2,013,463 | $ | 353,715,832 | $ | $ | 355,729,295 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(b) |
| |||||||||||||||
| Liabilities: |
| |||||||||||||||
| Interest Rate Contracts |
$ | (426,846 | ) | $ | — | $ | — | $ | (426,846 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | See above Schedule of Investments for values in each sector. |
| (b) | Derivative financial instruments are futures contracts. Future contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: |
| |||||||||||||||
| TOB Trust Certificates |
$ | — | $ | (54,480,225 | ) | $ | — | $ | (54,480,225 | ) | ||||||
| VRDP Shares at Liquidation Value |
— | (82,600,000 | ) | — | (82,600,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | (137,080,225 | ) | $ | — | $ | (137,080,225 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 42 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Statements of Assets and Liabilities (unaudited)
January 31, 2020
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| ASSETS |
| |||||||||||||||||||
| Investments at value — unaffiliated(a) |
$ | 1,061,035,635 | $ | 789,304,412 | $ | 210,789,511 | $ | 770,368,249 | $ | 353,715,832 | ||||||||||
| Investments at value — affiliated(b) |
40,979 | 7,097,706 | — | 1,289,801 | 2,013,463 | |||||||||||||||
| Cash |
— | 23,580 | — | 13,686 | 4,739 | |||||||||||||||
| Cash pledged for futures contracts |
1,065,000 | 489,000 | 206,550 | 560,950 | 299,800 | |||||||||||||||
| Receivables: |
| |||||||||||||||||||
| Investments sold |
— | — | 10,076 | — | — | |||||||||||||||
| Dividends — affiliated |
211 | 5,235 | 964 | 1,996 | 588 | |||||||||||||||
| Interest — unaffiliated |
13,562,055 | 5,568,080 | 2,058,658 | 7,830,106 | 3,369,776 | |||||||||||||||
| Prepaid expenses |
12,549 | 7,649 | 5,910 | 72,900 | 84,332 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total assets |
1,075,716,429 | 802,495,662 | 213,071,669 | 780,137,688 | 359,488,530 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| LIABILITIES |
| |||||||||||||||||||
| Bank overdraft |
— | — | 11,646 | — | — | |||||||||||||||
| Payables: |
| |||||||||||||||||||
| Investments purchased |
1,895,945 | — | 3,747,089 | 6,031,043 | 2,034,461 | |||||||||||||||
| Income dividend distributions — Common Shares |
1,783,608 | 1,628,309 | 423,894 | 1,449,335 | 613,807 | |||||||||||||||
| Interest expense and fees |
704,943 | 200,474 | 80,755 | 209,772 | 177,080 | |||||||||||||||
| Investment advisory fees |
927,542 | 669,595 | 173,818 | 634,158 | 291,910 | |||||||||||||||
| Directors’ and Officer’s fees |
365,515 | 3,237 | 924 | 3,142 | 11,057 | |||||||||||||||
| Other accrued expenses |
244,156 | 216,162 | 99,151 | 354,693 | 143,694 | |||||||||||||||
| Variation margin on futures contracts |
258,819 | 124,175 | 48,269 | 141,391 | 71,655 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total liabilities |
6,180,528 | 2,841,952 | 4,585,546 | 8,823,534 | 3,343,664 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| OTHER LIABILITIES |
| |||||||||||||||||||
| TOB Trust Certificates |
158,508,608 | 71,299,741 | 27,936,886 | 64,527,053 | 54,480,225 | |||||||||||||||
| VRDP Shares, at liquidation value of $100,000 per share, net of deferred offering costs(c)(d) |
— | 236,656,498 | — | 231,490,345 | 82,309,359 | |||||||||||||||
| VMTP Shares, at liquidation value of $100,000 per share(c)(d) |
254,000,000 | — | 56,500,000 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total other liabilities |
412,508,608 | 307,956,239 | 84,436,886 | 296,017,398 | 136,789,584 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total liabilities |
418,689,136 | 310,798,191 | 89,022,432 | 304,840,932 | 140,133,248 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
$ | 657,027,293 | $ | 491,697,471 | $ | 124,049,237 | $ | 475,296,756 | $ | 219,355,282 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS CONSIST OF |
| |||||||||||||||||||
| Paid-in capital(e)(f) |
$ | 581,297,061 | $ | 424,070,431 | $ | 113,445,548 | $ | 419,026,698 | $ | 194,522,514 | ||||||||||
| Accumulated earnings |
75,730,232 | 67,627,040 | 10,603,689 | 56,270,058 | 24,832,768 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
$ | 657,027,293 | $ | 491,697,471 | $ | 124,049,237 | $ | 475,296,756 | $ | 219,355,282 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value per Common Share |
$ | 16.02 | $ | 16.31 | $ | 14.63 | $ | 16.07 | $ | 16.44 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) Investments at cost — unaffiliated |
$ | 976,193,923 | $ | 718,505,112 | $ | 193,871,593 | $ | 709,307,752 | $ | 325,234,163 | ||||||||||
| (b) Investments at cost — affiliated |
$ | 40,979 | $ | 7,097,706 | $ | — | $ | 1,289,729 | $ | 2,013,459 | ||||||||||
| (c) Preferred Shares outstanding: |
||||||||||||||||||||
| Par value $0.05 per share |
— | — | 565 | — | 826 | |||||||||||||||
| Par value $0.10 per share |
2,540 | 2,371 | — | 2,319 | — | |||||||||||||||
| (d) Preferred Shares authorized |
15,600 | 8,120 | 1,000,000 | 6,600 | 1,000,000 | |||||||||||||||
| (e) Common Shares outstanding, par value $0.10 per share |
41,002,483 | 30,153,865 | 8,477,872 | 29,578,269 | 13,343,626 | |||||||||||||||
| (f) Common Shares authorized |
199,981,860 | 199,990,153 | unlimited | 199,991,954 | unlimited | |||||||||||||||
See notes to financial statements.
| FINANCIAL STATEMENTS | 43 |
Statements of Operations (unaudited)
Six Months Ended January 31, 2020
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| INVESTMENT INCOME |
| |||||||||||||||||||
| Interest — unaffiliated |
$ | 18,561,056 | $ | 15,623,274 | $ | 4,092,755 | $ | 14,503,552 | $ | 6,614,881 | ||||||||||
| Dividends — affiliated |
9,404 | 7,765 | 4,845 | 19,143 | 6,325 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total investment income |
18,570,460 | 15,631,039 | 4,097,600 | 14,522,695 | 6,621,206 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| EXPENSES |
| |||||||||||||||||||
| Investment advisory |
2,923,101 | 1,985,377 | 514,883 | 1,882,522 | 865,359 | |||||||||||||||
| Accounting services |
70,288 | 57,655 | 22,699 | 56,552 | 32,144 | |||||||||||||||
| Professional |
63,133 | 53,930 | 29,896 | 54,090 | 38,447 | |||||||||||||||
| Directors and Officer |
54,842 | 17,171 | 4,905 | 16,677 | 8,923 | |||||||||||||||
| Rating agency |
22,492 | 22,492 | 22,492 | 22,492 | 22,492 | |||||||||||||||
| Transfer agent |
17,965 | 16,585 | 9,775 | 17,256 | 15,452 | |||||||||||||||
| Custodian |
11,903 | 7,548 | 8,976 | 4,308 | 9,249 | |||||||||||||||
| Registration |
7,655 | 5,634 | 4,552 | 5,525 | 4,554 | |||||||||||||||
| Printing |
4,744 | 4,219 | 2,958 | 4,167 | 3,288 | |||||||||||||||
| Liquidity fees |
— | 12,174 | — | 767,551 | 296,736 | |||||||||||||||
| Remarketing fees on Preferred Shares |
— | 11,952 | — | 71,116 | 16,964 | |||||||||||||||
| Miscellaneous |
16,310 | 16,256 | 10,349 | 20,050 | 12,580 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses excluding interest expense, fees and amortization of offering costs |
3,192,433 | 2,210,993 | 631,485 | 2,922,306 | 1,326,188 | |||||||||||||||
| Interest expense, fees and amortization of offering costs(a) |
4,009,824 | 3,206,146 | 876,367 | 2,215,894 | 1,068,979 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses |
7,202,257 | 5,417,139 | 1,507,852 | 5,138,200 | 2,395,167 | |||||||||||||||
| Less fees waived and/or reimbursed by the Manager |
(176,575 | ) | (814 | ) | (389 | ) | (1,709 | ) | (478 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
7,025,682 | 5,416,325 | 1,507,463 | 5,136,491 | 2,394,689 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
11,544,778 | 10,214,714 | 2,590,137 | 9,386,204 | 4,226,517 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) |
| |||||||||||||||||||
| Net realized gain (loss) from: |
| |||||||||||||||||||
| Investments — affiliated |
— | (303 | ) | (210 | ) | (509 | ) | 162 | ||||||||||||
| Investments — unaffiliated |
1,175,525 | 1,879,687 | 513,347 | 808,756 | 673,792 | |||||||||||||||
| Futures contracts |
(2,750,365 | ) | (1,486,712 | ) | (469,842 | ) | (1,261,933 | ) | (1,104,766 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1,574,840 | ) | 392,672 | 43,295 | (453,686 | ) | (430,812 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||||||
| Investments — affiliated |
— | — | — | (97 | ) | 4 | ||||||||||||||
| Investments — unaffiliated |
20,501,073 | 10,121,630 | 3,291,548 | 11,106,241 | 5,112,399 | |||||||||||||||
| Futures contracts |
(564,053 | ) | (455,749 | ) | (226,936 | ) | (411,530 | ) | (228,922 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 19,937,020 | 9,665,881 | 3,064,612 | 10,694,614 | 4,883,481 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net realized and unrealized gain |
18,362,180 | 10,058,553 | 3,107,907 | 10,240,928 | 4,452,669 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS |
$ | 29,906,958 | $ | 20,273,267 | $ | 5,698,044 | $ | 19,627,132 | $ | 8,679,186 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | Related to TOB Trusts, VMTP Shares and/or VRDP Shares. |
See notes to financial statements.
| 44 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets
| MUC | MUJ | |||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended 07/31/19 |
Six Months Ended 01/31/20 (unaudited) |
Year Ended 07/31/19 |
|||||||||||||||||
| INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
|
|||||||||||||||||||
| OPERATIONS |
|
|||||||||||||||||||
| Net investment income |
$ | 11,544,778 | $ | 23,450,577 | $ | 10,214,714 | $ | 19,771,208 | ||||||||||||
| Net realized loss |
(1,574,840 | ) | (7,240,768 | ) | 392,672 | (3,422,603 | ) | |||||||||||||
| Net change in unrealized appreciation (depreciation) |
19,937,020 | 28,806,519 | 9,665,881 | 22,945,821 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in net assets applicable to Common Shareholders resulting from operations |
29,906,958 | 45,016,328 | 20,273,267 | 39,294,426 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS(a) |
|
|||||||||||||||||||
| Decrease in net assets resulting from distributions to Common Shareholders |
(10,701,648 | ) | (23,581,636 | ) | (9,600,237 | ) | (18,996,935 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
|
|||||||||||||||||||
| Total increase in net assets applicable to Common Shareholders |
19,205,310 | 21,434,692 | 10,673,030 | 20,297,491 | ||||||||||||||||
| Beginning of period |
637,821,983 | 616,387,291 | 481,024,441 | 460,726,950 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| End of period |
$ | 657,027,293 | $ | 637,821,983 | $ | 491,697,471 | $ | 481,024,441 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| FINANCIAL STATEMENTS | 45 |
Statements of Changes in Net Assets (continued)
| MFT | MIY | |||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended 07/31/19 |
Six Months Ended 01/31/20 (unaudited) |
Year Ended 07/31/19 |
|||||||||||||||||
| INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
|
|||||||||||||||||||
| OPERATIONS |
|
|||||||||||||||||||
| Net investment income |
$ | 2,590,137 | $ | 5,476,513 | $ | 9,386,204 | $ | 18,330,527 | ||||||||||||
| Net realized gain (loss) |
43,295 | (334,112 | ) | (453,686 | ) | (2,019,681 | ) | |||||||||||||
| Net change in unrealized appreciation (depreciation) |
3,064,612 | 3,870,410 | 10,694,614 | 21,476,253 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase in net assets applicable to Common Shareholders resulting from operations |
5,698,044 | 9,012,811 | 19,627,132 | 37,787,099 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS(a) |
|
|||||||||||||||||||
| Decrease in net assets resulting from distributions to Common Shareholders |
(2,543,362 | ) | (5,925,542 | ) | (8,696,011 | ) | (18,368,105 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||
| Reinvestment of common distributions |
— | 11,910 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
|
|||||||||||||||||||
| Total increase in net assets applicable to Common Shareholders |
3,154,682 | 3,099,179 | 10,931,121 | 19,418,994 | ||||||||||||||||
| Beginning of period |
120,894,555 | 117,795,376 | 464,365,635 | 444,946,641 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| End of period |
$ | 124,049,237 | $ | 120,894,555 | $ | 475,296,756 | $ | 464,365,635 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| 46 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets (continued)
| MPA | ||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended 07/31/19 |
|||||||
| INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
| |||||||
| OPERATIONS |
| |||||||
| Net investment income |
$ | 4,226,517 | $ | 8,422,880 | ||||
| Net realized loss |
(430,812 | ) | (1,427,493 | ) | ||||
| Net change in unrealized appreciation (depreciation) |
4,883,481 | 12,057,146 | ||||||
|
|
|
|
|
|||||
| Net increase in net assets applicable to Common Shareholders resulting from operations |
8,679,186 | 19,052,533 | ||||||
|
|
|
|
|
|||||
| DISTRIBUTIONS TO COMMON SHAREHOLDERS(a) |
| |||||||
| Decrease in net assets resulting from distributions to Common Shareholders |
(3,682,841 | ) | (8,530,833 | ) | ||||
|
|
|
|
|
|||||
| CAPITAL SHARE TRANSACTIONS |
||||||||
| Redemption of shares resulting from share repurchase program (including transaction costs) |
— | (119,150 | ) | |||||
|
|
|
|
|
|||||
| NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS |
| |||||||
| Total increase in net assets applicable to Common Shareholders |
4,996,345 | 10,402,550 | ||||||
| Beginning of period |
214,358,937 | 203,956,387 | ||||||
|
|
|
|
|
|||||
| End of period |
$ | 219,355,282 | $ | 214,358,937 | ||||
|
|
|
|
|
|||||
| (a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| FINANCIAL STATEMENTS | 47 |
Statements of Cash Flows (unaudited)
Six Months Ended January 31, 2020
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES |
| |||||||||||||||||||
| Net increase in net assets resulting from operations |
$ | 29,906,958 | $ | 20,273,267 | $ | 5,698,044 | $ | 19,627,132 | $ | 8,679,186 | ||||||||||
| Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: |
||||||||||||||||||||
| Proceeds from sales of long-term investments |
78,493,650 | 62,677,958 | 33,908,782 | 43,654,766 | 22,909,882 | |||||||||||||||
| Purchases of long-term investments |
(68,379,231 | ) | (68,916,233 | ) | (38,894,550 | ) | (46,091,026 | ) | (24,602,895 | ) | ||||||||||
| Net proceeds from sales (purchases) of short-term securities |
(40,979 | ) | (4,714,920 | ) | 2,088,976 | 1,035,587 | 340,534 | |||||||||||||
| Amortization of premium and accretion of discount on investments and other fees |
3,647,142 | 316,488 | 435,960 | 2,080,572 | 530,815 | |||||||||||||||
| Net realized gain on investments |
(1,175,525 | ) | (1,879,384 | ) | (513,137 | ) | (808,247 | ) | (673,954 | ) | ||||||||||
| Net unrealized appreciation on investments |
(20,501,073 | ) | (10,121,630 | ) | (3,291,548 | ) | (11,106,144 | ) | (5,112,403 | ) | ||||||||||
| (Increase) Decrease in Assets: |
| |||||||||||||||||||
| Receivables: |
| |||||||||||||||||||
| Dividends — affiliated |
4,393 | (2,429 | ) | 1,217 | 969 | 902 | ||||||||||||||
| Interest — unaffiliated |
705,414 | (245,720 | ) | 20,751 | 288,993 | (16,520 | ) | |||||||||||||
| Variation margin on futures contracts |
6,438 | 4,813 | 1,496 | 5,250 | 1,250 | |||||||||||||||
| Prepaid expenses |
7,890 | 26,540 | 26,094 | 16,143 | (19,779 | ) | ||||||||||||||
| Increase (Decrease) in Liabilities: |
| |||||||||||||||||||
| Payables: |
| |||||||||||||||||||
| Investment advisory fees |
471,045 | 340,518 | 88,240 | 318,527 | 146,853 | |||||||||||||||
| Interest expense and fees |
(246,066 | ) | 19,278 | (10,226 | ) | (65,479 | ) | (42,371 | ) | |||||||||||
| Directors’ and Officer’s fees |
14,289 | 262 | 79 | 278 | 977 | |||||||||||||||
| Variation margin on futures contracts |
(36,947 | ) | 13,784 | 3,640 | 6,719 | (20,501 | ) | |||||||||||||
| Other accrued expenses |
(23,987 | ) | (19,964 | ) | (12,529 | ) | (143,721 | ) | (82,825 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net cash provided by (used for) operating activities |
22,853,411 | (2,227,372 | ) | (448,711 | ) | 8,820,319 | 2,039,151 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES |
| |||||||||||||||||||
| Cash dividends paid to Common Shareholders |
(10,701,648 | ) | (9,555,006 | ) | (2,543,362 | ) | (8,696,011 | ) | (3,682,841 | ) | ||||||||||
| Repayments of TOB Trust Certificates |
(4,796,385 | ) | — | (695,148 | ) | — | — | |||||||||||||
| Proceeds from TOB Trust Certificates |
3,750,000 | 11,885,000 | 3,750,184 | — | 1,666,426 | |||||||||||||||
| Increase (decrease) in bank overdraft |
(10,886,880 | ) | — | 11,646 | — | — | ||||||||||||||
| Amortization of deferred offering costs |
— | 9,598 | — | 4,987 | 7,534 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net cash (provided by) used for financing activities |
(22,634,913 | ) | 2,339,592 | 523,320 | (8,691,024 | ) | (2,008,881 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH |
| |||||||||||||||||||
| Net increase in restricted and unrestricted cash |
218,498 | 112,220 | 74,609 | 129,295 | 30,270 | |||||||||||||||
| Restricted and unrestricted cash at beginning of period |
846,502 | 400,360 | 131,941 | 445,341 | 274,269 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Restricted and unrestricted cash at end of period |
$ | 1,065,000 | $ | 512,580 | $ | 206,550 | $ | 574,636 | $ | 304,539 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
| |||||||||||||||||||
| Cash paid during the period for interest expense |
$ | 4,255,890 | $ | 3,177,270 | $ | 886,593 | $ | 2,276,386 | $ | 1,103,816 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE END OF PERIOD TO THE STATEMENTS OF ASSETS AND LIABILITIES |
||||||||||||||||||||
| Cash |
$ | — | $ | 23,580 | $ | — | $ | 13,686 | $ | 4,739 | ||||||||||
| Cash pledged for futures contracts |
1,065,000 | 489,000 | 206,550 | 560,950 | 299,800 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 1,065,000 | $ | 512,580 | $ | 206,550 | $ | 574,636 | $ | 304,539 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE BEGINNING OF PERIOD TO THE STATEMENTS OF ASSETS AND LIABILITIES |
||||||||||||||||||||
| Cash |
$ | — | $ | 27,360 | $ | 8,391 | $ | 29,391 | $ | 17,469 | ||||||||||
| Cash pledged for futures contracts |
846,502 | 373,000 | 123,550 | 415,950 | 256,800 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 846,502 | $ | 400,360 | $ | 131,941 | $ | 445,341 | $ | 274,269 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
See notes to financial statements.
| 48 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
(For a share outstanding throughout each period)
| MUC | ||||||||||||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended July 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 15.56 | $ | 15.03 | $ | 15.53 | $ | 16.51 | $ | 15.78 | $ | 15.82 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income(a) |
0.28 | 0.57 | 0.64 | 0.69 | 0.77 | 0.78 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.44 | 0.54 | (0.47 | ) | (0.93 | ) | 0.76 | (0.00 | )(b) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase (decrease) from investment operations |
0.72 | 1.11 | 0.17 | (0.24 | ) | 1.53 | 0.78 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Distributions to Common Shareholders(c) |
| |||||||||||||||||||||||||||
| From net investment income |
(0.26 | ) | (0.57 | ) | (0.67 | ) | (0.74 | ) | (0.80 | ) | (0.82 | ) | ||||||||||||||||
| From net realized gain |
— | (0.01 | ) | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total distributions |
(0.26 | ) | (0.58 | ) | (0.67 | ) | (0.74 | ) | (0.80 | ) | (0.82 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net asset value, end of period |
$ | 16.02 | $ | 15.56 | $ | 15.03 | $ | 15.53 | $ | 16.51 | $ | 15.78 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Market price, end of period |
$ | 14.48 | $ | 14.00 | $ | 13.07 | $ | 14.75 | $ | 16.28 | $ | 14.28 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Return Applicable to Common Shareholders(d) |
| |||||||||||||||||||||||||||
| Based on net asset value |
4.86 | %(e) | 8.17 | % | 1.54 | % | (1.08 | )% | 10.20 | % | 5.52 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Based on market price |
5.35 | %(e) | 11.92 | % | (7.03 | )% | (4.73 | )% | 20.08 | % | 7.60 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders |
| |||||||||||||||||||||||||||
| Total expenses |
2.22 | %(f) | 2.58 | % | 2.38 | % | 2.04 | % | 1.60 | % | 1.47 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
2.16 | %(f) | 2.50 | % | 2.29 | % | 1.96 | % | 1.55 | % | 1.45 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(g) |
0.93 | %(f) | 0.92 | % | 0.93 | % | 0.93 | % | 0.93 | % | 0.93 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income to Common Shareholders |
3.56 | %(f) | 3.82 | % | 4.20 | % | 4.44 | % | 4.79 | % | 4.88 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Supplemental Data |
| |||||||||||||||||||||||||||
| Net assets applicable to Common Shareholders, end of period (000) |
$ | 657,027 | $ | 637,822 | $ | 616,387 | $ | 636,865 | $ | 677,128 | $ | 646,897 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| VMTP Shares outstanding at $100,000 liquidation value, end of period (000) |
$ | 254,000 | $ | 254,000 | $ | 254,000 | $ | 254,000 | $ | 254,000 | $ | 254,000 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Asset coverage per VMTP Shares at $100,000 liquidation value, end of period |
$ | 358,672 | $ | 351,111 | $ | 342,672 | $ | 350,734 | $ | 366,586 | $ | 354,684 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings outstanding, end of period (000) |
$ | 158,509 | $ | 159,555 | $ | 185,905 | $ | 181,685 | $ | 169,699 | $ | 161,571 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Portfolio turnover rate |
7 | % | 24 | % | 24 | % | 19 | % | 21 | % | 25 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (a) | Based on average Common Shares outstanding. |
| (b) | Amount is greater than $(0.005) per share. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | 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. |
| (e) | Aggregate total return. |
| (f) | Annualized. |
| (g) | 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. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS | 49 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| MUJ | ||||||||||||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended July 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 15.95 | $ | 15.28 | $ | 15.57 | $ | 16.55 | $ | 15.62 | $ | 15.74 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income(a) |
0.34 | 0.66 | 0.71 | 0.77 | 0.84 | 0.84 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.34 | 0.64 | (0.26 | ) | (0.94 | ) | 0.96 | (0.07 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase (decrease) from investment operations |
0.68 | 1.30 | 0.45 | (0.17 | ) | 1.80 | 0.77 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Distributions to Common Shareholders from net investment income(b) |
(0.32 | ) | (0.63 | ) | (0.74 | ) | (0.81 | ) | (0.87 | ) | (0.89 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net asset value, end of period |
$ | 16.31 | $ | 15.95 | $ | 15.28 | $ | 15.57 | $ | 16.55 | $ | 15.62 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Market price, end of period |
$ | 14.75 | $ | 14.43 | $ | 12.90 | $ | 14.88 | $ | 16.12 | $ | 13.55 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Return Applicable to Common Shareholders(c) |
| |||||||||||||||||||||||||||
| Based on net asset value |
4.53 | %(d) | 9.44 | % | 3.52 | % | (0.57 | )% | 12.39 | % | 5.59 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Based on market price |
4.49 | %(d) | 17.28 | % | (8.55 | )% | (2.44 | )% | 26.20 | % | 2.18 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders |
| |||||||||||||||||||||||||||
| Total expenses |
2.23 | %(e) | 2.49 | % | 2.23 | % | 1.89 | % | 1.52 | % | 1.62 | %(f) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
2.23 | %(e) | 2.49 | % | 2.23 | % | 1.89 | % | 1.52 | % | 1.57 | %(f) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense and fees, and amortization of offering costs(g)(h) |
0.91 | %(e) | 0.92 | % | 0.93 | % | 0.91 | % | 0.90 | % | 1.02 | %(f) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income to Common Shareholders |
4.21 | %(e) | 4.28 | % | 4.60 | % | 4.95 | % | 5.27 | % | 5.27 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Supplemental Data |
| |||||||||||||||||||||||||||
| Net assets applicable to Common Shareholders, end of period (000) |
$ | 491,697 | $ | 481,024 | $ | 460,727 | $ | 469,417 | $ | 499,058 | $ | 470,946 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| VRDP Shares outstanding at $100,000 liquidation value, end of period (000) |
$ | 237,100 | $ | 237,100 | $ | 237,100 | $ | 237,100 | $ | 237,100 | $ | 237,100 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Asset coverage per VRDP Shares at $100,000 liquidation value, end of period |
$ | 307,380 | $ | 302,878 | $ | 294,318 | $ | 297,983 | $ | 310,484 | $ | 298,628 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings outstanding, end of period (000) |
$ | 71,300 | $ | 59,415 | $ | 62,747 | $ | 63,877 | $ | 55,089 | $ | 52,744 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Portfolio turnover rate |
8 | % | 8 | % | 14 | % | 8 | % | 9 | % | 10 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (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) | Aggregate total return. |
| (e) | Annualized. |
| (f) | Includes reorganization costs associated with the Fund’s reorganization. Without these costs, total expenses, total expenses after fees waived and/or reimbursed and/or paid indirectly and total expenses after fees waived and/or reimbursed and/or paid indirectly and excluding interest expense, fees and amortization of offering costs would have been 1.52%, 1.50% and 0.95%, respectively. |
| (g) | 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. |
| (h) | 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: |
| Six Months Ended 01/31/20 (unaudited) |
Year Ended July 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Expense ratios |
0.90 | % | 0.91 | % | 0.93 | % | 0.91 | % | 0.89 | % | 1.01 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
See notes to financial statements.
| 50 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| MFT | ||||||||||||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended July 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 14.26 | $ | 13.90 | $ | 14.60 | $ | 15.55 | $ | 14.95 | $ | 14.83 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income(a) |
0.31 | 0.65 | 0.74 | 0.79 | 0.83 | 0.84 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.36 | 0.41 | (0.64 | ) | (0.91 | ) | 0.62 | 0.13 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net increase (decrease) from investment operations |
0.67 | 1.06 | 0.10 | (0.12 | ) | 1.45 | 0.97 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Distributions to Common Shareholders from net investment income(b) |
(0.30 | ) | (0.70 | ) | (0.80 | ) | (0.83 | ) | (0.85 | ) | (0.85 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net asset value, end of period |
$ | 14.63 | $ | 14.26 | $ | 13.90 | $ | 14.60 | $ | 15.55 | $ | 14.95 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Market price, end of period |
$ | 13.96 | $ | 13.59 | $ | 13.03 | $ | 14.67 | $ | 16.09 | $ | 13.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Return Applicable to Common Shareholders(c) |
| |||||||||||||||||||||||||||
| Based on net asset value |
4.87 | %(d) | 8.21 | % | 0.92 | % | (0.51 | )% | 10.31 | % | 7.25 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Based on market price |
5.00 | %(d) | 10.01 | % | (5.85 | )% | (3.39 | )% | 27.63 | % | 7.27 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Ratios to Average Net Assets Applicable to Common Shareholders |
| |||||||||||||||||||||||||||
| Total expenses |
2.46 | %(e) | 2.82 | % | 2.47 | % | 2.07 | % | 1.61 | % | 1.56 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
2.46 | %(e) | 2.82 | % | 2.47 | % | 2.07 | % | 1.61 | % | 1.56 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(f) |
1.03 | %(e) | 1.05 | % | 1.03 | % | 1.00 | % | 0.96 | % | 0.98 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net investment income to Common Shareholders |
4.23 | %(e) | 4.68 | % | 5.23 | % | 5.35 | % | 5.45 | % | 5.52 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Supplemental Data |
| |||||||||||||||||||||||||||
| Net assets applicable to Common Shareholders, end of period (000) |
$ | 124,049 | $ | 120,895 | $ | 117,795 | $ | 123,705 | $ | 131,739 | $ | 126,696 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| VMTP Shares outstanding at $100,000 liquidation value, end of period (000) |
$ | 56,500 | $ | 56,500 | $ | 56,500 | $ | 56,500 | $ | 56,500 | $ | 56,500 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Asset coverage per VMTP Shares at $100,000 liquidation value, end of period |
$ | 319,556 | $ | 313,973 | $ | 308,487 | $ | 318,947 | $ | 333,167 | $ | 324,240 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Borrowings outstanding, end of period (000) |
$ | 27,937 | $ | 26,002 | $ | 28,786 | $ | 27,229 | $ | 21,953 | $ | 19,488 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Portfolio turnover rate |
16 | % | 39 | % | 30 | % | 34 | % | 21 | % | 13 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (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) | Aggregate total return. |
| (e) | Annualized. |
| (f) | 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. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS | 51 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| MIY | ||||||||||||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended July 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 15.70 | $ | 15.04 | $ | 15.48 | $ | 16.36 | $ | 15.48 | $ | 15.24 | ||||||||||||||||
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| Net investment income(a) |
0.32 | 0.62 | 0.69 | 0.75 | 0.79 | 0.83 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.34 | 0.66 | (0.42 | ) | (0.86 | ) | 0.92 | 0.27 | ||||||||||||||||||||
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| Net increase (decrease) from investment operations |
0.66 | 1.28 | 0.27 | (0.11 | ) | 1.71 | 1.10 | |||||||||||||||||||||
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| Distributions to Common Shareholders from net investment income(b) |
(0.29 | ) | (0.62 | ) | (0.71 | ) | (0.77 | ) | (0.83 | ) | (0.86 | ) | ||||||||||||||||
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| Net asset value, end of period |
$ | 16.07 | $ | 15.70 | $ | 15.04 | $ | 15.48 | $ | 16.36 | $ | 15.48 | ||||||||||||||||
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| Market price, end of period |
$ | 14.68 | $ | 14.24 | $ | 12.89 | $ | 14.19 | $ | 15.38 | $ | 13.22 | ||||||||||||||||
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| Total Return Applicable to Common Shareholders(c) |
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| Based on net asset value |
4.48 | %(d) | 9.42 | % | 2.37 | % | (0.07 | )% | 11.99 | % | 8.08 | % | ||||||||||||||||
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| Based on market price |
5.23 | %(d) | 15.80 | % | (4.29 | )% | (2.56 | )% | 23.28 | % | 4.43 | % | ||||||||||||||||
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| Ratios to Average Net Assets Applicable to Common Shareholders |
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| Total expenses |
2.18 | %(e) | 2.46 | % | 2.16 | % | 1.88 | % | 1.54 | %(f) | 1.52 | %(g) | ||||||||||||||||
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| Total expenses after fees waived and/or reimbursed and paid indirectly |
2.18 | %(e) | 2.46 | % | 2.16 | % | 1.88 | % | 1.54 | %(f) | 1.48 | %(g) | ||||||||||||||||
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| Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees, and amortization of offering costs(h) |
1.24 | %(e) | 1.09 | %(i) | 0.89 | % | 0.89 | % | 0.93 | %(f) | 0.93 | %(g) | ||||||||||||||||
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| Net investment income to Common Shareholders |
3.99 | %(e) | 4.11 | % | 4.49 | % | 4.81 | % | 5.02 | % | 5.30 | % | ||||||||||||||||
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| Supplemental Data |
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| Net assets applicable to Common Shareholders, end of period (000) |
$ | 475,297 | $ | 464,366 | $ | 444,947 | $ | 457,888 | $ | 483,968 | $ | 282,534 | ||||||||||||||||
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| VRDP Shares outstanding at $100,000 liquidation value, end of period (000) |
$ | 231,900 | $ | 231,900 | $ | 231,900 | $ | 231,900 | $ | 231,900 | $ | 144,600 | ||||||||||||||||
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| Asset coverage per VRDP Shares at $100,000 liquidation value, end of period |
$ | 304,958 | $ | 300,244 | $ | 291,870 | $ | 297,450 | $ | 308,697 | $ | 295,390 | ||||||||||||||||
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| Borrowings outstanding, end of period (000) |
$ | 64,527 | $ | 64,527 | $ | 60,002 | $ | 52,002 | $ | 51,227 | $ | 23,487 | ||||||||||||||||
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| Portfolio turnover rate |
6 | % | 15 | % | 8 | % | 13 | % | 19 | % | 19 | % | ||||||||||||||||
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| (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) | Aggregate total return. |
| (e) | Annualized. |
| (f) | Includes reorganization costs associated with the Fund’s reorganization. Without these costs total expenses, total expenses after fees waived and/or reimbursed and/or paid indirectly and total expenses after fees waived and/or reimbursed and/or paid indirectly and excluding interest expense, fees and amortization of offering costs would have been 1.49%, 1.49% and 0.88%, respectively. |
| (g) | Includes reorganization costs associated with the Fund’s reorganization. Without these costs total expenses, total expenses after fees waived and/or reimbursed and/or paid indirectly and total expenses after fees waived and/or reimbursed and/or paid indirectly and excluding interest expense, fees and amortization of offering costs would have been 1.48%, 1.48% and 0.92%, respectively |
| (h) | 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. |
| (i) | The total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.90%. |
See notes to financial statements.
| 52 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| MPA | ||||||||||||||||||||||||||||
| Six Months Ended 01/31/20 (unaudited) |
Year Ended July 31, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 16.06 | $ | 15.27 | $ | 15.74 | $ | 16.76 | $ | 15.77 | $ | 15.77 | ||||||||||||||||
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| Net investment income(a) |
0.32 | 0.63 | 0.71 | 0.76 | 0.80 | 0.81 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.34 | 0.80 | (0.47 | ) | (1.03 | ) | 1.02 | 0.07 | ||||||||||||||||||||
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| Net increase (decrease) from investment operations |
0.66 | 1.43 | 0.24 | (0.27 | ) | 1.82 | 0.88 | |||||||||||||||||||||
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| Distributions to Common Shareholders from net investment income(b) |
(0.28 | ) | (0.64 | ) | (0.71 | ) | (0.75 | ) | (0.83 | ) | (0.88 | ) | ||||||||||||||||
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| Net asset value, end of period |
$ | 16.44 | $ | 16.06 | $ | 15.27 | $ | 15.74 | $ | 16.76 | $ | 15.77 | ||||||||||||||||
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| Market price, end of period |
$ | 14.74 | $ | 14.18 | $ | 13.26 | $ | 14.69 | $ | 16.07 | $ | 13.50 | ||||||||||||||||
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| Total Return Applicable to Common Shareholders(c) |
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| Based on net asset value |
4.35 | %(d) | 10.32 | % | 2.09 | % | (1.20 | )% | 12.38 | % | 6.33 | % | ||||||||||||||||
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| Based on market price |
5.96 | %(d) | 12.18 | % | (5.01 | )% | (3.83 | )% | 25.87 | % | 3.34 | % | ||||||||||||||||
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| Ratios to Average Net Assets Applicable to Common Shareholders |
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| Total expenses |
2.21 | %(e) | 2.55 | % | 2.26 | % | 1.91 | % | 1.46 | % | 1.54 | %(f) | ||||||||||||||||
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| Total expenses after fees waived and/or reimbursed and paid indirectly |
2.21 | %(e) | 2.55 | % | 2.26 | % | 1.91 | % | 1.46 | % | 1.45 | %(f) | ||||||||||||||||
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| Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense, fees and amortization of offering costs(g) |
1.23 | %(e) | 0.99 | %(h) | 0.95 | % | 0.94 | % | 0.89 | % | 0.96 | %(f) | ||||||||||||||||
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| Net investment income to Common Shareholders |
3.91 | %(e) | 4.11 | % | 4.56 | % | 4.83 | % | 4.98 | % | 5.05 | % | ||||||||||||||||
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| Supplemental Data |
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| Net assets applicable to Common Shareholders, end of period (000) |
$ | 219,355 | $ | 214,359 | $ | 203,956 | $ | 210,170 | $ | 223,738 | $ | 210,549 | ||||||||||||||||
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| VRDP Shares outstanding at $100,000 liquidation value, end of period (000) |
$ | 82,600 | $ | 82,600 | $ | 82,600 | $ | 82,600 | $ | 82,600 | $ | 82,600 | ||||||||||||||||
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| Asset coverage per VRDP Shares at $100,000 liquidation value, end of period |
$ | 365,563 | $ | 359,514 | $ | 346,921 | $ | 354,444 | $ | 370,869 | $ | 354,901 | ||||||||||||||||
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| Borrowings outstanding, end of period (000) |
$ | 54,480 | $ | 52,814 | $ | 58,176 | $ | 55,826 | $ | 48,710 | $ | 28,468 | ||||||||||||||||
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| Portfolio turnover rate |
7 | % | 21 | % | 21 | % | 15 | % | 17 | % | 21 | % | ||||||||||||||||
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| (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) | Aggregate total return. |
| (e) | Annualized. |
| (f) | Includes reorganization costs associated with the Fund’s reorganization. Without these costs, total expenses, total expenses after fees waived and/or reimbursed and/or paid indirectly and total expenses after fees waived and/or reimbursed and/or paid indirectly and excluding interest expense, fees and amortization of offering costs would have been 1.40%, 1.40% and 0.91%, respectively. |
| (g) | 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. |
| (h) | The total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.96%. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS | 53 |
Notes to Financial Statements (unaudited)
| 1. | ORGANIZATION |
The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end management investment companies and are referred to herein collectively as the “Funds”, or individually as a “Fund”:
| Fund Name | Herein Referred To As | Organized | Diversification Classification | |||
| BlackRock MuniHoldings California Quality Fund, Inc. |
MUC | Maryland | Diversified | |||
| BlackRock MuniHoldings New Jersey Quality Fund, Inc. |
MUJ | Maryland | Non-diversified | |||
| BlackRock MuniYield Investment Quality Fund |
MFT | Massachusetts | Diversified | |||
| BlackRock MuniYield Michigan Quality Fund, Inc. |
MIY | Maryland | Non-diversified | |||
| BlackRock MuniYield Pennsylvania Quality Fund |
MPA | Massachusetts | Non-diversified |
The Boards of Directors and Boards of Trustees of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board,” and the directors thereof are collectively referred to throughout this report as “Directors.” The Funds determine and make available for publication the net asset values (“NAVs”) of their Common Shares on a daily basis.
The Funds, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of non-index fixed-income mutual funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. 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, are recognized on an accrual basis.
Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., futures contracts) or certain borrowings (e.g.,TOB Trust transactions) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowings to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Distributions: Distributions from net investment income are declared and paid monthly. Distributions of capital gains are distributed at least annually and are recorded on the ex-dividend dates. 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 Fund’s Board, the directors who are not “interested persons” of the Funds, as defined in the 1940 Act (“Independent Directors”), may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain funds in the BlackRock Fixed-Income Complex selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain funds in the BlackRock Fixed-Income Complex.
The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Fund, as applicable. Deferred compensation liabilities are included in the Directors’ and Officer’s fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Funds until such amounts are distributed in accordance with the Plan.
Recent Accounting Standards: The Funds have adopted Financial Accounting Standards Board Accounting Standards Update 2017-08 to amend the amortization period for certain purchased callable debt securities held at a premium. Under the new standard, the Funds have changed the amortization period for the premium on certain purchased callable debt securities with non-contingent call features to the earliest call date. In accordance with the transition provisions of the standard, the Funds applied the amendments on a modified retrospective basis beginning with the fiscal period ended January 31, 2020. The adjusted cost basis of securities at July 31, 2019, are as follows:
| MUC |
$ | 986,839,014 | ||
| MUJ |
713,086,727 | |||
| MFT |
196,811,264 | |||
| MPA |
325,468,223 |
This change in accounting policy has been made to comply with the newly issued accounting standard and had no impact on accumulated earnings (loss) or the net asset value of the Funds.
| 54 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.
Other: Expenses directly related to a Fund are charged to that Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
| 3. | INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS |
Investment Valuation Policies: The Funds’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:
| • | Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments. |
| • | Investments in open-end U.S. mutual funds are valued at NAV each business day. |
| • | Futures contracts traded on exchanges are valued at their last sale price. |
If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and 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 Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:
| • | Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access |
| • | Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs) |
| • | Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committee’s 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. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.
| 4. | SECURITIES AND OTHER INVESTMENTS |
Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.
Forward Commitments, When-Issued and Delayed Delivery Securities: Certain funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a fund may be required to pay more at settlement than the security is worth. In
| NOTES TO FINANCIAL STATEMENTS | 55 |
Notes to Financial Statements (unaudited) (continued)
addition, a fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.
Municipal Bonds Transferred to TOB Trusts: Certain Funds leverage their assets through the use of “TOB Trust” transactions. The Funds transfer municipal bonds into a special purpose trust (a “TOB Trust”). A TOB Trust 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 funds 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 Fund provides the Fund with the right to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates to the TOB Trust at par plus accrued interest. The Funds may withdraw a corresponding share of the municipal bonds from the TOB Trust. Other funds managed by the investment adviser may also contribute municipal bonds to a TOB Trust into which a Fund has contributed bonds. If multiple BlackRock-advised funds participate in the same TOB Trust, the economic rights and obligations under the TOB Residuals will be shared among the funds ratably in proportion to their participation in the TOB Trust.
TOB Trusts are 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 fund, 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 Funds) whereas in other termination events, TOB Trust Certificates holders and TOB Residuals holders will be paid pro rata.
While a fund’s investment policies and restrictions expressly permit investments in inverse floating rate securities, such as TOB Residuals, they restrict the ability of a fund to borrow money for purposes of making investments. The funds’ believes that each fund’s restriction on borrowings do not apply to the fund’s TOB Trust transactions. Each fund’s transfer of the municipal bonds to a TOB Trust is considered a secured borrowing for financial reporting purposes. The cash received by the TOB Trust from the sale of the TOB Trust Certificates, less certain transaction expenses, is paid to a fund. A fund typically invests the cash received in additional municipal bonds.
Accounting for TOB Trusts: The municipal bonds deposited into a TOB Trust are presented in a fund’s Schedule of Investments and the TOB Trust Certificates are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust pursuant to the liquidity facility to purchase tendered TOB Trust Certificates are shown as Loan for TOB Trust Certificates. The carrying amount of a fund’s payable to the holder of the TOB Trust Certificates, as reported in the Statements of Assets and Liabilities as TOB Trust Certificates, approximates its fair value.
Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by a fund on an accrual basis. Interest expense incurred on the TOB Trust transaction and other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust are shown as interest expense, fees and amortization of offering costs in the Statements of Operations. Fees paid upon creation of the TOB Trust are recorded as debt issuance costs and are amortized to interest expense, fees and amortization of offering costs in the Statements of Operations to the expected maturity of the TOB Trust. In connection with the restructurings of the TOB Trusts to non-bank sponsored TOB Trusts, a fund incurred non-recurring, legal and restructuring fees, which are recorded as interest expense, fees and amortization of deferred offering costs in the Statements of Operations. Amounts recorded within interest expense, fees and amortization of offering costs in the Statements of Operations are:
| Interest Expense | Liquidity Fees | Other Expenses | Total | |||||||||||||
| MUC |
$ | 1,000,177 | $ | 358,116 | $ | 108,428 | $ | 1,466,721 | ||||||||
| MUJ |
460,086 | 132,460 | 74,533 | 667,079 | ||||||||||||
| MFT |
170,026 | 54,537 | 23,257 | 247,820 | ||||||||||||
| MIY |
424,733 | 130,632 | 41,363 | 596,728 | ||||||||||||
| MPA |
347,658 | 117,174 | 33,989 | 498,821 | ||||||||||||
For the six months ended January 31, 2020, the following table is a summary of each fund’s Loan TOB Trusts Certificates:
| 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 |
||||||||||||||||
| MUC |
$ | 336,563,344 | $ | 158,508,608 | 0.92% — 1.04 | % | $ | 157,367,303 | 1.85 | % | ||||||||||
| MUJ |
134,864,612 | 71,299,741 | 0.84% — 1.14 | % | 70,007,893 | 1.90 | ||||||||||||||
| MFT |
52,934,764 | 27,936,886 | 0.94% — 1.12 | % | 26,500,784 | 1.86 | ||||||||||||||
| MIY |
126,625,613 | 64,527,053 | 0.97% — 1.14 | % | 64,527,053 | 1.84 | ||||||||||||||
| MPA |
98,744,625 | 54,480,225 | 0.96% — 1.12 | % | 53,601,729 | 1.85 | ||||||||||||||
| (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 |
| 56 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
| enhancement provider in the event of default of the municipal bond. The TOB Trust would be responsible for the payment of the credit enhancement fee and the funds, as TOB Residuals holders would be responsible for reimbursement of any payments of principal and interest made by the credit enhancement provider. The maximum potential amounts owed by the funds, for such reimbursements, as applicable, are included in the maximum potential amounts disclosed for recourse TOB Trusts. |
| (b) | TOB Trusts may be structured on a non-recourse or recourse basis. When a Fund invests in TOB Trusts on a non-recourse basis, the Liquidity Provider may be required to make a payment under the liquidity facility 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 fund invests in a TOB Trust on a recourse basis, a fund enters into a reimbursement agreement with the Liquidity Provider where a fund 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 fund invests in a recourse TOB Trust, the fund will bear the risk of loss with respect to any Liquidation Shortfall. If multiple funds participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed by a fund at January 31, 2020, in proportion to their participation in the TOB Trust. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by a fund at January 31, 2020. |
| 5. | DERIVATIVE FINANCIAL INSTRUMENTS |
The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or over-the-counter.
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 Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statements of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the 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.
| 6. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: Each Fund, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory and administrative services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund.
For such services, each Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of each Fund’s net assets.
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| Investment advisory fees |
0.55 | % | 0.50 | % | 0.50 | % | 0.49 | % | 0.49 | % | ||||||||||
For purposes of calculating these fees, “net assets” mean the total assets of each Fund 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 Fund’s NAV.
Expense Waivers: With respect to each Fund, the Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through June 30, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of the Independent Directors who are not “interested persons” of the Funds’, as defined in the 1940 Act (“Independent Directors”), or by a vote of a majority of the outstanding voting securities of a Fund. Prior to December 1, 2019, this waiver was voluntary. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the six months ended January 31, 2020, the amounts waived were as follows:
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| Amounts waived |
$ | 632 | $ | 814 | $ | 389 | $ | 1,709 | $ | 478 | ||||||||||
The Manager contractually agreed to waive its investment advisory fee with respect to any portion of each Fund’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, 2021. The agreement can be renewed for annual periods thereafter, and may be terminated on 90 days’ notice, each subject to approval by a majority of the Funds’ Independent Directors. For the six months ended January 31, 2020, there were no fees waived by the Manager.
The Manager, for MUC, voluntarily agreed to waive its investment advisory fee on the proceeds of the Preferred Shares and TOB Trusts that exceed 35% of total assets minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of any outstanding preferred shares). The voluntary waiver may be reduced or discontinued at any time without notice. This amount is included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the six months ended January 31, 2020, the waiver was $175,943.
| NOTES TO FINANCIAL STATEMENTS | 57 |
Notes to Financial Statements (unaudited) (continued)
Directors and Officers: Certain directors and/or officers of the Funds are directors and/or officers of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in Directors and Officer in the Statements of Operations.
7. PURCHASES AND SALES
For the six months ended January 31, 2020, purchases and sales of investments, excluding short-term securities, were as follows:
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| Purchases |
$ | 70,275,176 | $ | 68,916,233 | $ | 32,177,896 | $ | 52,122,069 | $ | 24,834,911 | ||||||||||
| Sales |
78,448,650 | 110,217,958 | 33,105,768 | 43,654,766 | 22,858,117 | |||||||||||||||
8. INCOME TAX INFORMATION
It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for each of the four years ended July 31, 2020. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Funds as of January 31, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
As of January 31, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| MUC | MUJ | MFT | MIY | MPA | ||||||||||||||||
| Tax cost |
$ | 817,926,388 | $ | 654,980,582 | $ | 166,019,728 | $ | 646,299,843 | $ | 272,892,912 | ||||||||||
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| Gross unrealized appreciation |
$ | 84,850,895 | $ | 70,834,755 | $ | 16,917,859 | $ | 61,060,569 | $ | 29,805,603 | ||||||||||
| Gross unrealized depreciation |
(1,713,120 | ) | (1,422,570 | ) | (420,063 | ) | (1,056,719 | ) | (1,876,291 | ) | ||||||||||
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| Net unrealized appreciation (depreciation) |
$ | 83,137,775 | $ | 69,412,185 | $ | 16,497,796 | $ | 60,003,850 | $ | 27,929,312 | ||||||||||
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| 9. | PRINCIPAL RISKS |
Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.
Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Fund’s ability to buy or sell bonds. As a result, a Fund may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Fund needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.
In the normal course of business, certain Funds invest in securities or other instruments and may enter into certain transactions, and such activities subject each Fund 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. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Funds and their investments.
Each Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Fund portfolio’s current earnings rate.
The Funds may hold a significant amount of bonds subject to calls by the issuers at defined dates and prices. When bonds are called by issuers and the Funds reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total return performance of a Fund.
A Fund 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 Funds’ investments in the TOB Trusts may adversely affect the Funds’ net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect the Funds’ NAVs per share.
| 58 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
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 Funds’ 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 Funds, 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.
Each Fund may invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise illiquid, including private placement securities. A Fund may not be able to readily dispose of such investments at prices that approximate those at which the Fund could sell such investments if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary, to raise funds to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting a Fund’s net asset value and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade public debt securities.
A recent outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and has now been detected internationally. This coronavirus has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of epidemics and pandemics such as the coronavirus, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. The impact of the outbreak may be short term or may last for an extended period of time.
Counterparty Credit Risk: The Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange-traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Concentration Risk: Each of MUC, MUJ, MIY and MPA invests a substantial amount of its assets in issuers located in a single state or limited number of states. This may subject each Fund to the risk that economic, political or social issues impacting a particular state or group of states could have an adverse and disproportionate impact on the income from, or the value or liquidity of, the Funds’ respective portfolios. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.
As of period end, MUC, MIY and MPA invested a significant portion of their assets in securities in the county, city, special district and school district sector. MUJ invested a significant portion of its assets in securities in the transportation sector. MUC, MIY and MPA invested a significant portion of their assets in securities in the health sector. MUJ, MIY and MPA invested a significant portion of their assets in securities in the education sector. MUJ and MIY invested a significant portion of their assets in securities in the state sector. Changes in economic conditions affecting such sectors would have a greater impact on the Funds and could affect the value, income and/or liquidity of positions in such securities.
Certain Funds invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.
| 10. | CAPITAL SHARE TRANSACTIONS |
Common Shares
MFT and MPA are authorized to issue an unlimited number of Common Shares and 1 million Preferred Shares, all of which were initially classified as Common Shares. MUC, MUJ and MIY each is authorized to issue 200 million shares, all of which were initially classified as Common Shares. The par value for each Fund’s Common Shares is $0.10. The par value for each Fund’s Preferred Shares outstanding is $0.10, except for MFT and MPA, which is $0.025. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares without the approval of Common Shareholders.
For the six months ended January 31, 2020, shares issued and outstanding remained constant for MFT. For the year ended July 31, 2019, shares issued and outstanding increased by 839, for MFT as a result of dividend reinvestment.
| NOTES TO FINANCIAL STATEMENTS | 59 |
Notes to Financial Statements (unaudited) (continued)
For the six months ended January 31, 2020 and the year ended July 31, 2019, shares issued and outstanding remained constant for MUC, MUJ, MIY and MPA.
The Funds participate in an open market share repurchase program (the “Repurchase Program”). From December 1, 2018 through November 30, 2019, each Fund may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2018, subject to certain conditions. From December 1, 2019 through November 30, 2020, each Fund may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2019, subject to certain conditions. There is no assurance that the Funds will purchase shares in any particular amounts. For the six months ended January 31, 2020, the Funds did not repurchase any shares.
Preferred Shares
A Fund’s Preferred Shares rank prior to its Common Shares as to the payment of dividends by the Fund and distribution of assets upon dissolution or liquidation of the Fund. The 1940 Act prohibits the declaration of any dividend on Common Shares or the repurchase of Common Shares if the Fund fails to maintain asset coverage of at least 200% of the liquidation preference of the Fund’s outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, a Fund is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with its Preferred Shares or repurchasing such shares if the Fund fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares’ governing instruments or comply with the basic maintenance amount requirement of the ratings agencies rating the Preferred Shares.
Holders of Preferred Shares have voting rights equal to the voting rights of holders of Common Shares (one vote per share) and vote together with holders of Common Shares (one vote per share) as a single class on certain matters. Holders of Preferred Shares, voting as a separate class, are also entitled to (i) elect two members of the Board, (ii) elect the full Board if dividends on the Preferred Shares are not paid for a period of two years and (iii) a separate class vote to amend the Preferred Share governing documents. In addition, the 1940 Act requires the approval of the holders of a majority of any outstanding Preferred Shares, voting as a separate class, to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.
VRDP Shares
MUJ, MIY and MPA (for purposes of this section, a “VRDP Fund”), have issued Series W-7 VRDP Shares, $100,000 liquidation preference per share, in one or more privately negotiated offerings 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 may be subject to a special rate period. As of period end, the VRDP Shares outstanding were as follows:
| Issue Date |
Shares Issued |
Aggregate Principal |
Maturity Date |
|||||||||||||
| MUJ |
06/30/11 | 1,727 | $ | 172,700,000 | 07/01/41 | |||||||||||
| 04/13/15 | 644 | 64,400,000 | 07/01/41 | |||||||||||||
| MIY |
04/21/11 | 1,446 | 144,600,000 | 05/01/41 | ||||||||||||
| 09/14/15 | 873 | 87,300,000 | 05/01/41 | |||||||||||||
| MPA |
05/19/11 | 663 | 66,300,000 | 06/01/41 | ||||||||||||
| 04/13/15 | 163 | 16,300,000 | 06/01/41 | |||||||||||||
Redemption Terms: A VRDP Fund is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six months prior to the maturity date, a VRDP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, a VRDP Fund 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 a VRDP Fund. The redemption price per VRDP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.
Liquidity Feature: VRDP Shares are subject to a fee agreement between the VRDP Fund and the liquidity provider that requires a per annum liquidity fee and, in some cases, an upfront or initial commitment fee, payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations. As of period end, the fee agreement is set to expire, unless renewed or terminated in advance, as follows:
| MUJ | MIY | MPA | ||||||||||
| Expiration Date |
04/15/20 | 07/03/20 | 07/02/20 | |||||||||
The VRDP Shares are also subject to a purchase agreement in connection with the liquidity feature. In the event a purchase agreement is not renewed or is terminated in advance, and the VRDP Shares do not become subject to a purchase 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 purchase agreement. In the event of such mandatory purchase, a VRDP Fund is required to redeem the VRDP Shares six months after the purchase date. Immediately after such mandatory purchase, the VRDP Fund is required to begin to segregate liquid assets with its custodian to fund the redemption. There is no assurance that a VRDP Fund will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.
Remarketing: A VRDP Fund may incur remarketing fees on the aggregate principal amount of all its 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 Fund may incur nominal or no remarketing fees.
| 60 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (unaudited) (continued)
Ratings: As of period end, the VRDP Shares were assigned the following assigned ratings:
| Long-term Moody’s Rating |
Long-term Fitch Rating |
Short-term Moody’s Rating |
Short-term Fitch Rating |
Short-term Rating |
||||||||||||||||
| MUJ |
Aa2 | AAA | N/A | N/A | N/A | |||||||||||||||
| MIY |
Aa2 | AAA | P-1 | F1 | N/A | |||||||||||||||
| MPA |
Aa2 | AAA | N/A | F1+ | A-1+ | |||||||||||||||
Any short-term ratings on 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 S&P Global. 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: A VRDP Fund may commence a “special rate period” with respect to its VRDP Shares, during which the VRDP Shares will not be subject to any remarketing and the dividend rate will be based on a predetermined methodology. During a special rate period, short-term ratings on VRDP Shares are withdrawn. As of period end, the following VRDP Funds have commenced or are set to commence a special rate period:
| Commencement Date |
Expiration Date as of period ended January 31, 2020 |
|||||||
| MUJ |
04/17/2014 | 04/15/2020 | ||||||
Prior to the expiration date, the VRDP Fund and the VRDP Shares holder may mutually agree to extend the special rate period. If a 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: (i) the liquidity and fee agreements remain in effect, (ii) VRDP Shares remain subject to mandatory redemption by the VRDP Fund on the maturity date, (iii) VRDP Shares will not be remarketed or subject to optional or mandatory tender events, (iv) the VRDP Fund is 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, (v) the VRDP Fund will pay dividends monthly based on the sum of an agreed upon reference rate and a percentage per annum based on the long-term ratings assigned to the VRDP Shares and (vi) the VRDP Fund will pay nominal or no fees to the liquidity provider and remarketing agent.
If a VRDP Fund redeems its 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.
Dividends: Except during the Special Rate Period as described above, 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. 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. 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.
For the six months ended January 31, 2020, the annualized dividend rates for the VRDP Shares were as follows:
| MUJ | MIY | MPA | ||||||||||
| Rate |
2.13 | % | 1.39 | % | 1.36 | % | ||||||
VMTP Shares
MUC and MFT (for purposes of this section, a “VMTP Funds”) have issued Series W-7 VMTP Shares, $100,000 liquidation preference per share, in one or more privately negotiated offerings to qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act. The VMTP Shares are subject to certain restrictions on transfer, and a VMTP Fund may also be required to register its VMTP Shares for sale under the Securities Act under certain circumstances. As of period end, the VMTP Shares outstanding and assigned long-term ratings were as follows:
| Issue Date |
Shares Issued |
Aggregate Principal |
Term Redemption Date |
Moody’s Rating |
Fitch Rating |
|||||||||||||||||||
| MUC |
03/22/2012 | 2,540 | $ | 254,000,000 | 03/30/2021 | Aa2 | AAA | |||||||||||||||||
| MFT |
12/16/2011 | 565 | 56,500,000 | 07/02/2021 | Aa1 | AAA | ||||||||||||||||||
Redemption Terms: A VMTP Fund is required to redeem its VMTP Shares on the term redemption date, unless earlier redeemed or repurchased or unless extended. There is no assurance that a term will be extended further or that any VMTP Shares will be replaced with any other preferred shares or other form of leverage upon the redemption or repurchase of the VMTP Shares. Six months prior to the term redemption date, a VMTP Fund is required to begin to segregate liquid assets with its
| NOTES TO FINANCIAL STATEMENTS | 61 |
Notes to Financial Statements (unaudited) (continued)
custodian to fund the redemption. In addition, a VMTP Fund is required to redeem certain of its outstanding VMTP Shares if it fails to comply with certain asset coverage, basic maintenance amount or leverage requirements.
Subject to certain conditions, VMTP Shares may be redeemed, in whole or in part, at any time at the option of the VMTP Fund. The redemption price per VMTP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.
Dividends: Dividends on the VMTP Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Index or to a percentage of the one-month LIBOR rate, as set forth in the VMTP Shares governing instrument. The fixed spread is determined based on the long-term preferred share rating assigned to the VMTP Shares by the ratings agencies then rating the VMTP Shares.
The dividend rate on VMTP Shares is subject to a step-up spread if the VMTP Fund fails to comply with certain provisions, including, among other things, the timely payment of dividends, redemptions or gross-up payments, and complying with certain asset coverage and leverage requirements.
For the six months ended January 31, 2020, the average annualized dividend rates for the VMTP Shares were as follows:
| MUC | MFT | |||||||
| Rate |
2.00 | % | 2.22 | % | ||||
For the six months ended January 31, 2020, VMTP Shares issued and outstanding of each Fund remained constant.
Offering Costs: The Funds incurred costs in connection with the issuance of VRDP and VMTP Shares, which were recorded as a direct deduction from the carrying value of the related debt liability and will be amortized over the life of the VRDP and VMTP Shares with the exception of any upfront fees paid by a VRDP Fund to the liquidity provider which, if any, were amortized over the life of the liquidity agreement. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.
Financial Reporting: The VRDP and VMTP Shares are considered debt of the issuer; therefore, the liquidation preference, which approximates fair value of the VRDP and VMTP Shares, is recorded as a liability in the Statements of Assets and Liabilities net of deferred offering costs. Unpaid dividends are included in interest expense and fees payable in the Statements of Assets and Liabilities, and the dividends accrued and paid on the VRDP and VMTP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP and VMTP Shares are treated as equity for tax purposes. Dividends paid to holders of the VRDP and VMTP Shares are generally classified as tax-exempt income for tax-reporting purposes. Dividends and amortization of deferred offering costs on VRDP and VMTP Shares are included in interest expense, fees and amortization of offering costs in the Statements of Operations:
| Dividends Accrued | Deferred Offering Costs Amortization |
|||||||
| MUC |
$ | 2,541,898 | $ | 1,205 | ||||
| MUJ |
2,529,469 | 9,598 | ||||||
| MFT |
628,547 | — | ||||||
| MIY |
1,614,179 | 4,987 | ||||||
| MPA |
562,624 | 7,534 | ||||||
11. SUBSEQUENT EVENTS
Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted.
The Funds declared and paid distributions to Common Shareholders as follows:
| Common Dividend Per Share |
Preferred Shares (c) | |||||||||||||||||||||||
| Paid (a) | Declared (b) | Shares | Series | Declared | ||||||||||||||||||||
| MUC |
$ | 0.0435 | $ | 0.0460 | VMTP | W-7 | $ | 368,786 | ||||||||||||||||
| MUJ |
0.0540 | 0.0540 | VRDP | W-7 | 358,241 | |||||||||||||||||||
| MFT |
0.0500 | 0.0500 | VMTP | W-7 | 89,871 | |||||||||||||||||||
| MIY |
0.0490 | 0.0490 | VRDP | W-7 | 219,101 | |||||||||||||||||||
| MPA |
0.0460 | 0.0460 | VRDP | W-7 | 76,145 | |||||||||||||||||||
| (a) | Net investment income dividend paid on March 2, 2020 to Common Shareholders of record on February 14, 2020. |
| (b) | Net investment income dividend declared on March 2, 2020 payable to Common Shareholders of record on March 16, 2020. |
| (c) | Dividends declared for period February 1, 2020 to February 29, 2020. |
| 62 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Director and Officer Information
Richard E. Cavanagh, Co-Chair of the Board and Director
Karen P. Robards, Co-Chair of the Board and Director
Michael J. Castellano, Director
Cynthia L. Egan, Director
Frank J. Fabozzi, Director
Henry Gabbay, Director
R. Glenn Hubbard, Director
W. Carl Kester, Director
Catherine A. Lynch, Director
Robert Fairbairn, Director
John M. Perlowski, Director, President and Chief Executive Officer
Jonathan Diorio, Vice President
Neal J. Andrews, Chief Financial Officer
Jay M. Fife, Treasurer
Charles Park, Chief Compliance Officer
Janey Ahn, Secretary
Effective February 19, 2020, Henry Gabbay resigned as a Director of the Funds.
| (a) | For MIY. |
| (b) | For MUJ. |
| (c) | For MPA. |
| DIRECTOR AND OFFICER INFORMATION | 63 |
Fund Certification
The Funds are listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Funds filed with the SEC the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.
Dividend Policy
Each Fund’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of distributions, the Funds may at times pay out less than the entire amount of net investment income earned in any particular month/quarter and may at times in any particular month/quarter pay out such accumulated but undistributed income in addition to net investment income earned in that month/quarter. As a result, the distributions paid by the Funds for any particular month/quarter may be more or less than the amount of net investment income earned by the Funds during such month/quarter. The Funds’ current accumulated but undistributed net investment income, if any, is disclosed as accumulated earnings (loss) in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.
General Information
The Funds do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.
Except as described below, during the period there were no material changes in the Funds’ investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by the shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.
Effective July 31, 2019, each Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, or are considered by the Fund’s investment adviser to be of comparable quality, at the time of purchase, subject to the Fund’s other investment policies. The adoption of the new policy will have no effect on a Fund’s existing investment policy to invest primarily in investment grade municipal obligations.
On July 29, 2019, the Board approved the elimination of MUC’s non-fundamental policy limiting investments in illiquid investments to 15% of MUC’s net assets. As a result, MUC may invest without limit in illiquid investments.
In accordance with Section 23(c) of the Investment Company Act of 1940, each Fund may from time to time purchase shares of its common stock in the open market or in private transactions.
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Funds, may be found on BlackRock’s website, which can be accessed at blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
Electronic Delivery
Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.
To enroll in electronic delivery:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service.
Householding
The Funds will mail only one copy of shareholder documents, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 882-0052.
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at sec.gov. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.
| 64 | 2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS |
Additional Information (continued)
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at blackrock.com; and (3) on the SEC’s website at sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at blackrock.com; or by calling (800) 882-0052; and (2) on the SEC’s website at sec.gov.
Availability of Fund Updates
BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
Glossary of Terms Used in this Report
| ADDITIONAL INFORMATION / GLOSSARY OF TERMS USED IN THIS REPORT | 65 |
Want to know more?
blackrock.com | 877-275-1255 (1-877-ASK-1BLK)
This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.
MQUAL5-1/20-SAR
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