BLACKROCK MUNICIPAL INCOME TRUST II

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-21126

Name of Fund: BlackRock Municipal Income Trust II (BLE)

Fund Address:  100 Bellevue Parkway, Wilmington, DE 19809

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

            Income Trust II, 55 East 52nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 08/31/2017

Date of reporting period: 08/31/2017


Item 1 – Report to Stockholders


AUGUST 31, 2017

 

 

ANNUAL REPORT

 

    LOGO

 

BlackRock Municipal Bond Trust (BBK)

BlackRock Municipal Income Investment Quality Trust (BAF)

BlackRock Municipal Income Quality Trust (BYM)

BlackRock Municipal Income Trust II (BLE)

BlackRock MuniHoldings Investment Quality Fund (MFL)

BlackRock MuniVest Fund, Inc. (MVF)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


The Markets in Review

 

Dear Shareholder,

In the 12 months ended August 31, 2017, risk assets, such as stocks and high-yield bonds, continued to deliver strong performance. These markets showed great resilience during a period with big surprises, including the aftermath of the U.K.’s vote to leave the European Union and the outcome of the U.S. presidential election, which brought only brief spikes in equity market volatility. These expressions of isolationism and discontent were countered by the closely watched and less surprising elections in France, the Netherlands and Australia.

Interest rates rose, which worked against high-quality assets with more interest rate sensitivity. As a result, longer-term U.S. Treasuries posted negative returns, as rising energy prices, modest wage increases, and steady job growth led to expectations of higher inflation and anticipation of interest rate increases by the U.S. Federal Reserve (the “Fed”).

Market prices began to reflect reflationary expectations toward the end of 2016, as investors sensed that a global recovery was afoot. And those expectations have been largely realized in 2017, as many countries throughout the world experienced sustained and synchronized growth for the first time since the financial crisis. Growth rates and inflation are still relatively low, but they are finally rising together.

The Fed responded to these positive developments by increasing interest rates three times and setting expectations for additional interest rate increases. The Fed also appears to be approaching the implementation of its plan to reduce the vast balance sheet reserves that provided liquidity to the global economy in the aftermath of the financial crisis in 2008. Also, growing skepticism about the near-term likelihood of significant U.S. tax reform and infrastructure spending has tempered reflationary expectations in the United States.

By contrast, the European Central Bank and the Bank of Japan reiterated their commitments to economic stimulus and balance sheet expansion despite nascent signs of sustained economic growth in both countries. The Eurozone also benefited from the relatively stable political environment, which is creating momentum for economic reform and pro-growth policies.

Financial markets — and to an extent the Fed — have adopted a “wait-and-see” approach to the economic data and potential fiscal stimulus. Escalating tensions with North Korea and our nation’s divided politics are significant concerns. Nevertheless, benign credit conditions, modest inflation, and the positive outlook for growth in the world’s largest economies have kept markets relatively tranquil.

However, the capacity for rapid global growth is restrained by structural factors, including an aging population in developed countries, low productivity growth, and excess savings. Cyclical factors, such as the Fed moving toward the normalization of monetary policy and the length of the current expansion, also limit economic growth. Tempered economic growth and high valuations across most assets have laid the groundwork for muted returns going forward. At current valuation levels, potential equity gains will likely be closely tied to the pace of earnings growth, which has remained solid thus far in 2017.

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

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

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

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

    5.65     16.23

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

    2.04       14.91  

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

    12.14       17.64  

Emerging market equities
(MSCI Emerging Markets Index)

    18.02       24.53  

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

    0.40       0.62  

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

    3.10       (3.26

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

    2.74       0.49  

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

    3.51       0.92  

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

    3.03       8.62  
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.  

 

                
2    THIS PAGE NOT PART OF YOUR FUND REPORT      


Table of Contents     

 

     Page  

The Markets in Review

    2  

Annual Report:

 

Municipal Market Overview

    4  

The Benefits and Risks of Leveraging

    5  

Derivative Financial Instruments

    5  

Trust Summaries

    6  
Financial Statements:  

Schedules of Investments

    18  

Statements of Assets and Liabilities

    57  

Statements of Operations

    59  

Statements of Changes in Net Assets

    61  

Statements of Cash Flows

    64  

Financial Highlights

    66  

Notes to Financial Statements

    72  

Report of Independent Registered Public Accounting Firm

    83  

Disclosure of Investment Advisory Agreements

    84  

Automatic Dividend Reinvestment Plans

    89  

Officers and Trustees

    90  

Additional Information

    93  

 

                
   ANNUAL REPORT    AUGUST 31, 2017    3


Municipal Market Overview     

 

For the Reporting Period Ended August 31, 2017      

Municipal Market Conditions

Municipal bonds experienced modestly positive performance for the period as a result of rising interest rates spurring from generally stronger economic data, signs of inflation pressures, Fed monetary policy normalization, and market expectations for pro-growth fiscal policy. However, ongoing reassurance from the Fed that rates would be increased gradually and would likely remain low overall resulted in continued demand for fixed income investments. More specifically, investors favored the income, attractive relative yield, and stability of municipal bonds amid bouts of interest rate volatility (bond prices rise as rates fall) resulting from geopolitical tensions, the contentious U.S. election, and continued global central bank divergence — i.e., policy easing outside the United States while the Fed slowly engages in policy tightening. During the 12 months ended August 31, 2017, municipal bond funds experienced net outflows of approximately $2 billion (based on data from the Investment Company Institute). The asset class came under pressure post the November U.S. election as a result of uncertainty surrounding potential tax-reform, though expectation that tax reform was likely to be delayed or watered down quickly eased investor concerns.

For the same 12-month period, total new issuance remained robust from a historical perspective at $400 billion (though slightly below the $405 billion issued in the prior 12-month period). A noteworthy portion of new supply during this period was attributable to refinancing activity (roughly 55%) as issuers continued to take advantage of low interest rates and a flat yield curve to reduce their borrowing costs.

S&P Municipal Bond Index

Total Returns as of August 31, 2017

  6 months:     3.51%

12 months:     0.92%

A Closer Look at Yields

 

LOGO

From August 31, 2016 to August 31, 2017, yields on AAA-rated 30-year municipal bonds increased by 58 basis points (“bps”) from 2.12% to 2.70%, while 10-year rates rose by 44 bps from 1.42% to 1.86% and 5-year rates increased 26 bps from 0.86% to 1.12% (as measured by Thomson Municipal Market Data). The municipal yield curve steepened over the 12-month period with the spread between 2- and 30-year maturities steepening by 34 bps.

During the same time period, on a relative basis, tax-exempt municipal bonds broadly outperformed U.S. Treasuries with the greatest outperformance experienced in the front and intermediate portions of the yield curve. The relative positive performance of municipal bonds was driven largely by a supply/demand imbalance within the municipal market as investors sought income and incremental yield in an environment where opportunities became increasingly scarce. The asset class is known for its lower relative volatility and preservation of principal with an emphasis on income as tax rates rise.

Financial Conditions of Municipal Issuers

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

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

The Standard & Poor’s Municipal Bond Index, a broad, market value-weighted index, seeks to measure the performance of the U.S. municipal bond market. All bonds in the index are exempt from U.S. federal income taxes or subject to 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    ANNUAL REPORT    AUGUST 31, 2017   


The Benefits and Risks of Leveraging

 

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

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

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

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

direction of interest rates are very difficult to predict accurately, and there is no assurance that the Trust’s intended leveraging strategy will be successful.

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

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

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

 

 

Derivative Financial Instruments     

 

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

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

 

 

                
   ANNUAL REPORT    AUGUST 31, 2017    5


Trust Summary as of August 31, 2017    BlackRock Municipal Bond Trust

 

 

Trust Overview

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

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

 

Trust Information

Symbol on New York Stock Exchange (“NYSE”)

  BBK

Initial Offering Date

  April 30, 2002

Yield on Closing Market Price as of August 31, 2017 ($15.99)1

  4.77%

Tax Equivalent Yield2

  8.43%

Current Monthly Distribution per Common Share3

  $0.0635

Current Annualized Distribution per Common Share3

  $0.7620

Economic Leverage as of August 31, 20174

  37%

 

  1   

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

 

  2   

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

 

  3   

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

 

  4   

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

 

Performance

Returns for the 12 months ended August 31, 2017 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BBK1, 2

    (5.18)%        (1.44)%  

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (0.46)%        (0.01)%  

 

  1  

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

 

  2  

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

 

  3   

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

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

Past performance is not indicative of future results.

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

 

 

The municipal bond market generated mixed returns in the past 12 months. Municipal bonds moved lower early in the period due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to factor in the possibility of faster economic growth and tighter Fed policy. As optimism for meaningful fiscal reforms subsequently waned and the economy failed to experience a significant acceleration, municipal bonds stabilized and retraced the majority of their post-election losses.

 

 

In this environment, the Trust’s positions in longer-dated and longer-duration bonds were the largest detractors from performance. (Duration is a measure of interest rate sensitivity.) Exposure to lower-coupon and zero-coupon bonds, which experienced greater price deterioration than the market as a whole, also detracted from returns. Conversely, positions in pre-refunded issues benefited performance as their low duration and higher credit quality enabled them to hold up better than longer-duration bonds.

 

 

Positions in the transportation, education and utilities sectors, which were among the weaker sectors for the period, negatively impacted performance. The Trust’s exposure to school district bonds, which were adversely affected by their longer durations, was an additional detractor.

 

 

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

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

 

                
6    ANNUAL REPORT    AUGUST 31, 2017   


     BlackRock Municipal Bond Trust

 

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/17      8/31/16      Change      High      Low  

Market Price

     $15.99        $18.22        (12.24)%        $18.55        $14.50  

Net Asset Value

     $16.32        $17.89        (8.78)%        $17.89        $15.30  

 

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

 

LOGO

 

Overview of the Trust’s Total Investments*

 

Sector Allocation   8/31/17     8/31/16  

County/City/Special District/School District

    23     17

Health

    18       24  

Transportation

    18       15  

Education

    11       14  

State

    11       9  

Utilities

    9       13  

Corporate

    5       5  

Tobacco

    5       2  

Housing

          1  

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

 

Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    4

2018

    6  

2019

    4  

2020

    6  

2021

    11  

 

  3   

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

Credit Quality Allocation1   8/31/17     8/31/16  

AAA/Aaa

    3       4

AA/Aa

    40       47  

A

    26       27  

BBB/Baa

    15       11  

BB/Ba

    6         5  

B

    3         1  

N/R2

    7         5  

 

  1   

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

 

  2   

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2017 and August 31, 2016, the market value of unrated securities deemed by the investment adviser to be investment grade represents less than 1% and 3%, respectively, of the Trust’s total investments.

 

 

  *   Excludes short-term securities.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    7


Trust Summary as of August 31, 2017    BlackRock Municipal Income Investment Quality Trust

 

Trust Overview

BlackRock Municipal Income Investment Quality Trust’s (BAF) (the “Trust”) investment objective is to provide current income exempt from U.S. federal income tax, including the alternative minimum tax. The Trust seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its managed assets in municipal bonds exempt from U.S. federal income taxes, including the alternative minimum tax. The Trust also invests at least 80% of its managed assets in municipal bonds that are investment grade quality at the time of investment or, if unrated, determined to be of comparable quality by the investment adviser at the time of investment. The Trust may invest directly in such securities or synthetically through the use of derivatives. Due to the repeal of the Florida intangible personal property tax, in September 2008, the Board gave approval to permit the Trust the flexibility to invest in municipal obligations regardless of geographic location since municipal obligations issued by any state or municipality that provides income exempt from regular U.S. federal income tax would now satisfy the foregoing objective and policy.

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

 

Trust Information

Symbol on NYSE

  BAF

Initial Offering Date

  October 31, 2002

Yield on Closing Market Price as of August 31, 2017 ($15.11)1

  5.44%

Tax Equivalent Yield2

  9.61%

Current Monthly Distribution per Common Share3

  $0.0685

Current Annualized Distribution per Common Share3

  $0.8220

Economic Leverage as of August 31, 20174

  39%

 

  1   

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

 

  2   

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

 

  3   

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

 

  4   

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

 

Performance

Returns for the 12 months ended August 31, 2017 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BAF1, 2

    1.15%        0.14%  

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (0.46)%        (0.01)%  

 

  1  

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

 

  2  

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

 

  3   

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

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

Past performance is not indicative of future results.

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

 

 

The municipal bond market generated mixed returns in the past 12 months. Municipal bonds moved lower early in the period due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to factor in the possibility of faster economic growth and tighter Fed policy. As optimism for meaningful fiscal reforms subsequently waned and the economy failed to experience a significant acceleration, municipal bonds stabilized and retraced the majority of their post-election losses.

 

 

The Trust’s exposure to pre-refunded issues benefited performance, as their low duration enabled them to hold up better than longer-duration bonds at a time of rising yields. (Duration is a measure of interest-rate sensitivity.) In addition, the bonds’ higher coupons and income levels further aided their performance. Positions in the tax-backed (local) and transportation sectors also contributed to results.

 

 

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

 

 

The Trust’s use of leverage, while enhancing the level of income, also exacerbated the impact of declining bond prices.

 

 

Positions in intermediate and longer-dated maturities declined the most in value as they typically have longer durations relative to shorter maturities. In addition, the Trust’s exposure to 4% coupon bonds detracted as lower coupons typically underperform in a rising rate environment.

 

 

From a sector allocation perspective, the Trust’s exposure to utilities was a detractor.

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    ANNUAL REPORT    AUGUST 31, 2017   


     BlackRock Municipal Income Investment Quality Trust

 

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/17      8/31/16      Change      High      Low  

Market Price

     $15.11        $15.79        (4.31 )%     $ 16.30      $ 13.68  

Net Asset Value

     $15.69        $16.56        (5.25 )%     $ 16.56      $ 15.07  

 

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

 

LOGO

 

Overview of the Trust’s Total Investments*

 

Sector Allocation   8/31/17     8/31/16  

Transportation

    31     28

County/City/Special District/School District

    28       27  

Utilities

    15       17  

Health

    12       14  

State

    6         6  

Education

    5         5  

Tobacco

    1         1  

Corporate

    1         1  

Housing

    1         1  

For Trust compliance purposes, the Trust’s sector classifications refer to one or

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

 

Call/Maturity Schedule2       

Calendar Year Ended December 31,

 

2018

    11

2019

    17  

2020

    2  

2021

    28  

 

  2   

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

 

Credit Quality Allocation1   8/31/17     8/31/16  

AAA/Aaa

    3       3

AA/Aa

    70       74  

A

    17       19  

BBB/Baa

    8         4  

N/R

    2        

 

  1   

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

 

 

  *   Excludes short-term securities.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    9


Trust Summary as of August 31, 2017    BlackRock Municipal Income Quality Trust

 

 

Trust Overview

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

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

 

Trust Information

Symbol on NYSE

  BYM

Initial Offering Date

  October 31, 2002

Yield on Closing Market Price as of August 31, 2017 ($14.84)1

  4.85%

Tax Equivalent Yield2

  8.57%

Current Monthly Distribution per Common Share3

  $0.0600

Current Annualized Distribution per Common Share3

  $0.7200

Economic Leverage as of August 31, 20174

  37%

 

  1  

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

 

  2   

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

 

  3   

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

 

  4   

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

 

Performance

Returns for the 12 months ended August 31, 2017 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BYM1,2

    0.74%        (0.30)%  

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (0.46)%        (0.01)%  

 

  1  

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

 

  2  

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

 

  3   

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

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

Past performance is not indicative of future results.

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

 

 

The municipal bond market generated mixed returns in the past 12 months. Municipal bonds moved lower early in the period due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to factor in the possibility of faster economic growth and tighter Fed policy. As optimism for meaningful fiscal reforms subsequently waned and the economy failed to experience a significant acceleration, municipal bonds stabilized and retraced the majority of their post-election losses.

 

 

Portfolio income made the most significant positive contribution during a period in which bond prices lost ground. However, the Trust’s use of leverage, while enhancing the level of income, also exacerbated the impact of declining bond prices.

 

 

Holdings in zero-coupon bonds also detracted. Despite their higher income and lack of reinvestment risk, their longer durations accentuated negative price performance in the rising rate environment. (Duration is a measure of interest-rate sensitivity.)

 

 

The Trust’s exposure to longer-term bonds, which lagged the overall market, further detracted from performance.

 

 

In this challenging market environment, the Trust’s position in high-quality, defensive pre-refunded bonds was the largest positive contributor to performance.

 

 

Positions in the transportation and health care sectors, both of which outperformed the broader market, added value.

 

 

The Trust sought to manage interest rate risk using U.S. Treasury futures. Given that Treasury yields rose, as prices fell, this aspect of the Trust’s strategy had a positive effect on returns. The Trust’s cash position, though modest, was an additional positive at a time of falling prices.

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    ANNUAL REPORT    AUGUST 31, 2017   


     BlackRock Municipal Income Quality Trust

 

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/17      8/31/16      Change      High      Low  

Market Price

     $14.84        $15.55        (4.57 )%     $ 15.79      $ 13.50  

Net Asset Value

     $15.32        $16.22        (5.55 )%     $ 16.22      $ 14.64  

 

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

 

LOGO

 

Overview of the Trust’s Total Investments*

 

Sector Allocation   8/31/17     8/31/16  

Transportation

    32     28

County/City/Special District/School District

    22       25  

Utilities

    15       12  

Health

    14       11  

State

    7       11  

Education

    5         7  

Tobacco

    3         3  

Corporate

    2         2  

Housing

            1  

For Trust compliance purposes, the Trust’s sector classifications refer to one or

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

 

Call/Maturity Schedule2       

Calendar Year Ended December 31,

 

2017

    3

2018

    14  

2019

    8  

2020

    8  

2021

    8  

 

  2   

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

 

Credit Quality Allocation1   8/31/17     8/31/16  

AAA/Aaa

    11     14

AA/Aa

    48       54  

A

    24       24  

BBB/Baa

    11         7  

N/R

    6         1  

 

  1   

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

 

 

  *   Excludes short-term securities.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    11


Trust Summary as of August 31, 2017    BlackRock Municipal Income Trust II

 

 

Trust Overview

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

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

 

Trust Information

Symbol on NYSE American

   BLE

Initial Offering Date

   July 30, 2002

Yield on Closing Market Price as of August 31, 2017 ($15.45)1

   5.71%

Tax Equivalent Yield2

   10.09%

Current Monthly Distribution per Common Share3

   $0.0735

Current Annualized Distribution per Common Share3

   $0.8820

Economic Leverage as of August 31, 20174

   38%

 

  1   

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

 

  2   

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

 

  3   

The monthly distribution per Common Share, declared on October 2, 2017, was decreased to $0.0650 per share. The yield on closing market price, 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.

 

  4   

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

 

Performance

 

Returns for the 12 months ended August 31, 2017 were as follows:

 

    Returns Based On  
     Market Price      NAV  

BLE1,2

    0.29%        (0.18)%  

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (0.46)%        (0.01)%  

 

  1  

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

 

  2  

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

 

  3   

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

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

Past performance is not indicative of future results.

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

 

 

The municipal bond market generated mixed returns in the past 12 months. Municipal bonds moved lower early in the period due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to factor in the possibility of faster economic growth and tighter Fed policy. As optimism for meaningful fiscal reforms subsequently waned and the economy failed to experience a significant acceleration, municipal bonds stabilized and retraced the majority of their post-election losses.

 

 

Portfolio income made the most significant contribution to performance during a period in which bond prices lost ground. However, the Trust’s use of leverage, while enhancing the level of income, also exacerbated the impact of declining bond prices.

 

 

The Trust’s position in high-quality, defensive, pre-refunded bonds was a positive contributor in the rising-rate environment. Positions in the tobacco sector, which outperformed in the period, also added value.

 

 

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

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

 

                
12    ANNUAL REPORT    AUGUST 31, 2017   


     BlackRock Municipal Income Trust II

 

 

Market Price and Net Asset Value Per Share Summary

 

      8/31/17      8/31/16      Change      High      Low  

Market Price

   $ 15.45      $ 16.34        (5.45 )%     $ 16.38      $ 13.87  

Net Asset Value

   $ 15.17      $ 16.12        (5.89 )%     $ 16.12      $ 14.59  

 

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

 

LOGO

 

Overview of the Trust’s Total Investments*

 

Sector Allocation   8/31/17     8/31/16  

Transportation

    24     22

Utilities

    16       17  

County/City/Special District/School District

    14       13  

Health

    12       12  

State

    11       11  

Education

    8       10  

Corporate

    7         7  

Tobacco

    7         7  

Housing

    1         1  

For Trust compliance purposes, the Trust’s sector classifications refer to one or

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

 

Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    7

2018

    5  

2019

    16  

2020

    13  

2021

    15  

 

  3  

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

Credit Quality Allocation1   8/31/17     8/31/16  

AAA/Aaa

    4       7

AA/Aa

    40       43  

A

    19       20  

BBB/Baa

    19       17  

BB/Ba

    7         4  

B

    2         2  

N/R2

    9         7  

 

  1   

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

 

  2   

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2017 and August 31, 2016, the market value of unrated securities deemed by the investment adviser to be investment grade represents 1% and 2%, respectively, of the Trust’s total investments.

 

 

  *   Excludes short-term securities.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    13


Trust Summary as of August 31, 2017    BlackRock MuniHoldings Investment Quality Fund

 

 

Trust Overview

BlackRock MuniHoldings Investment Quality Fund’s (MFL) (the “Trust”) investment objective is to provide shareholders with current income exempt from U.S. federal income tax and to provide shareholders with the opportunity to own shares the value of which is exempt from Florida intangible personal property tax. The Trust seeks to achieve its investment objective by investing primarily in long-term, investment grade (as rated or, if unrated, determined to be of comparable quality by the investment adviser at the time of investment) 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 Trust invests at least 80% of its assets in municipal obligations with remaining maturities of one year or more at the time of investment. The Trust may invest directly in such securities or synthetically through the use of derivatives. Due to the repeal of the Florida intangible personal property tax, in September 2008, the Board gave approval to permit the Trust the flexibility to invest in municipal obligations regardless of geographic location since municipal obligations issued by any state or municipality that provides income exempt from regular U.S. federal income tax would now satisfy the foregoing objective and policy.

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

 

Trust Information

Symbol on NYSE

   MFL

Initial Offering Date

   September 26, 1997

Yield on Closing Market Price as of August 31, 2017 ($15.03)1

   5.71%

Tax Equivalent Yield2

   10.09%

Current Monthly Distribution per Common Share3

   $0.0715

Current Annualized Distribution per Common Share3

   $0.8580

Economic Leverage as of August 31, 20174

   41%

 

  1   

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

 

  2   

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

 

  3   

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

 

  4   

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

 

Performance

Returns for the 12 months ended August 31, 2017 were as follows:

 

    Returns Based On  
     Market Price      NAV  

MFL1, 2

    0.46%        (0.34)%  

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (0.46)%        (0.01)%  

 

  1  

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

 

  2  

The Trust moved from neither a premium nor a discount to NAV to a premium during the period, which accounts for the difference between performance based on market price and performance based on NAV.

 

  3   

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

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

Past performance is not indicative of future results.

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

 

 

The municipal bond market generated mixed returns in the past 12 months. Municipal bonds moved lower early in the period due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to factor in the possibility of faster economic growth and tighter Fed policy. As optimism for meaningful fiscal reforms subsequently waned and the economy failed to experience a significant acceleration, municipal bonds stabilized and retraced the majority of their post-election losses.

 

 

Portfolio income made the most significant positive contribution during a period in which bond prices lost ground. However, the Trust’s use of leverage, while enhancing the level of income, also exacerbated the impact of declining bond prices.

 

 

The Trust’s exposure to longer-term bonds, which lagged the overall market, detracted from performance.

 

 

An underweight in lower investment-grade BBB rated bonds, which outpaced the overall market due to the combination of their superior income accrual and positive price performance in the second half of the reporting period, was an additional detractor.

 

 

The Trust’s cash position, though modest, contributed to performance at a time of falling prices.

 

 

The Trust’s position in high-quality, defensive, pre-refunded bonds was also a positive contributor in the rising-rate environment. Holdings in the transportation sector, which outperformed in the period, also added value.

 

                
14    ANNUAL REPORT    AUGUST 31, 2017   


     BlackRock MuniHoldings Investment Quality Fund

 

 

 

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

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

 

Market Price and Net Asset Value Per Share Summary      

 

      8/31/17      8/31/16      Change      High      Low  

Market Price

     $15.03        $15.86        (5.23)%        $16.16        $13.52  

Net Asset Value

     $14.91        $15.86        (5.99)%        $15.86        $14.32  

 

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

 

LOGO

 

Overview of the Trust’s Total Investments*

 

Sector Allocation   8/31/17     8/31/16  

Transportation

    41     37

Utilities

    17       14  

Health

    15       12  

County/City/Special District/School District

    12       12  

State

    8       14  

Education

    5         9  

Tobacco

    1         1  

Housing

    1         1  

Corporate

          1  

 

  1   

Represents less than 1% of total investments.

For Trust compliance purposes, the Trust’s sector classifications refer to one or

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

 

Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    1

2018

    9  

2019

    20  

2020

    4  

2021

    18  
  3   

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

Credit Quality Allocation2   8/31/17     8/31/16  

AAA/Aaa

    9       6

AA/Aa

    59       65  

A

    26       25  

BBB/Baa

    4         4  

N/R

    2        

 

  2   

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

 

 

  *   Excludes short-term securities.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    15


Trust Summary as of August 31, 2017    BlackRock MuniVest Fund, Inc.

 

 

Trust Overview

BlackRock MuniVest Fund, Inc.’s (MVF) (the “Trust”) 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 Trust seeks to achieve its investment objective by investing at least 80% of an aggregate of the Trust’s net assets (including proceeds from the issuance of any preferred shares) and the proceeds of any borrowing for investment purposes, 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 Trust primarily invests in long term municipal obligations rated investment grade at the time of investment (or, if unrated, are considered by the Trust’s investment adviser to be of comparable quality at the time of investment) and in long term municipal obligations with maturities of more than ten years at the time of investment. The Trust may invest up to 20% of its total assets in securities rated below investment grade or deemed equivalent at the time of purchase. The Trust may invest directly in such securities or synthetically through the use of derivatives.

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

 

Trust Information      

Symbol on NYSE American

   MVF

Initial Offering Date

   September 29, 1988

Yield on Closing Market Price as of August 31, 2017 ($9.84)1

   5.61%

Tax Equivalent Yield2

   9.91%

Current Monthly Distribution per Common Share3

   $0.0460

Current Annualized Distribution per Common Share3

   $0.5520

Economic Leverage as of August 31, 20174

   38%

 

  1  

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

 

  2  

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

 

  3  

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

 

  4  

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

 

Performance

Returns for the 12 months ended August 31, 2017 were as follows:

 

    Returns Based On  
     Market Price      NAV  

MVF1,2

    (3.10)%        (0.38)%  

Lipper General & Insured Municipal Debt Funds (Leveraged)3

    (0.46)%        (0.01)%  

 

  1  

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

 

  2  

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

 

  3   

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

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

Past performance is not indicative of future results.

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

 

 

The municipal bond market generated mixed returns in the past 12 months. Municipal bonds moved lower early in the period due to a pick-up in new tax-exempt issuance and rising yields in the U.S. Treasury market. (Prices and yields move in opposite directions.) The weakness accelerated in November once Donald Trump’s election victory caused investors to factor in the possibility of faster economic growth and tighter Fed policy. As optimism for meaningful fiscal reforms subsequently waned and the economy failed to experience a significant acceleration, municipal bonds stabilized and retraced the majority of their post-election losses.

 

 

Portfolio income made the most significant positive contribution during a period in which bond prices lost ground. However, the Trust’s use of leverage, while enhancing the level of income, also exacerbated the impact of declining bond prices.

 

 

Reinvestment was a drag on results, as the proceeds of higher-yielding bonds that matured or were called needed to be reinvested at materially lower prevailing rates.

 

 

The Trust’s exposure to pre-refunded issues benefited performance, as their low durations enabled them to hold up better than longer-duration bonds at a time of rising yields. (Duration is a measure of interest rate sensitivity.) At the sector level, tax-backed (local) and education issues contributed to performance, while the school districts and health care sectors detracted.

 

 

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

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

 

                
16    ANNUAL REPORT    AUGUST 31, 2017   


     BlackRock MuniVest Fund, Inc.

 

Market Price and Net Asset Value Per Share Summary                              

 

      8/31/17      8/31/16      Change      High      Low  

Market Price

   $ 9.84      $ 10.77        (8.64 )%     $ 10.95      $ 9.35  

Net Asset Value

   $ 9.75      $ 10.38        (6.07 )%     $ 10.38      $ 9.48  

 

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

 

LOGO

 

Overview of the Trust’s Total Investments*

 

Sector Allocation   8/31/17     8/31/16  

Transportation

    26     24

Health

    23       26  

County/City/Special District/School District

    11       10  

Education

    9       10  

Corporate

    8         9  

State

    7         7  

Utilities

    7         6  

Housing

    6         4  

Tobacco

    3         4  

For Trust compliance purposes, the Trust’s sector classifications refer to one or

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

 

Call/Maturity Schedule3       

Calendar Year Ended December 31,

 

2017

    8

2018

    14  

2019

    19  

2020

    14  

2021

    5  

 

  3   

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

Credit Quality Allocation1   8/31/17     8/31/16  

AAA/Aaa

    7       9

AA/Aa

    39       40  

A

    16       23  

BBB/Baa

    21       14  

BB/Ba

    4         3  

B

    2         2  

N/R2

    11         9  

 

  1   

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

 

  2   

The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of August 31, 2017 and August 31, 2016, the market value of unrated securities deemed by the investment adviser to be investment grade represents 1% and 2%, respectively, of the Trust’s total investments.

 

 

  *   Excludes short-term securities.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    17


Schedule of Investments August 31, 2017

  

BlackRock Municipal Bond Trust (BBK)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par
(000)
    Value  
Alabama — 0.6%             

Opelika Utilities Board, Refunding RB, 4.00%, 6/01/41

   $ 960     $ 1,014,778  
Arizona — 7.5%             

Arizona Health Facilities Authority, Refunding RB, Phoenix Children’s Hospital, Series A, 5.00%, 2/01/42

     2,200       2,346,894  

City of Phoenix Arizona IDA, Refunding RB, Basis Schools, Inc. Projects, 5.00%, 7/01/45 (a)

     460       475,934  

County of Pinal Arizona Electric District No.3, Refunding RB:

    

4.75%, 7/01/21 (b)

     680       774,282  

4.75%, 7/01/31

     3,070       3,384,184  

Salt Verde Financial Corp., RB, Senior:

    

5.00%, 12/01/32

     1,500       1,805,565  

5.00%, 12/01/37

     2,065       2,514,943  

University Medical Center Corp., RB, 6.50%, 7/01/19 (b)

     500       550,500  

University Medical Center Corp., Refunding RB, 6.00%, 7/01/21 (b)

     900       1,065,078  
    

 

 

 
               12,917,380  
Arkansas — 2.2%             

City of Benton Arkansas, RB, 4.00%, 6/01/39

     505       534,684  

City of Fort Smith Arkansas Water & Sewer Revenue, Refunding RB, 4.00%, 10/01/40

     840       883,227  

City of Little Rock Arkansas, RB, 4.00%, 7/01/41

     1,835       1,915,226  

County of Pulaski Arkansas Public Facilities Board, RB, 5.00%, 12/01/42

     465       520,028  
    

 

 

 
               3,853,165  
California — 25.9%             

California Health Facilities Financing Authority, RB, Sutter Health, Series B, 5.88%, 8/15/31

     1,900       2,155,968  

California Infrastructure & Economic Development Bank, Refunding RB, Academy Motion Picture Arts and Sciences, Series A, 4.00%, 11/01/45

     1,550       1,608,280  

Carlsbad California Unified School District, GO, Election of 2006, Series B, 0.00%, 5/01/34 (c)

     1,000       1,114,360  

Chaffey Joint Union High School District, GO, Election of 2012, Series C, 5.25%, 8/01/47

     4,955       5,994,708  

City of San Jose California, Refunding ARB, Norman Y Mineta San Jose International Airport SJC, Series A-1, AMT, 5.75%, 3/01/34

     2,000       2,277,420  

County of Los Angeles Metropolitan Transportation Authority, Refunding RB, Series A, 5.00%, 7/01/38

     4,095       4,942,788  

Hartnell Community College District California, GO, CAB, Election of 2002, Series D, 0.00%, 8/01/34 (c)

     1,650       1,705,754  

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

     8,000       3,617,920  
Municipal Bonds    Par
(000)
    Value  
California (continued)             

Palomar Community College District, GO, CAB, Election of 2006, Series B:

    

0.00%, 8/01/30 (d)

   $ 1,500     $ 1,029,000  

0.00%, 8/01/33 (d)

     4,000       1,647,120  

0.00%, 8/01/39 (c)

     2,605       2,468,680  

San Diego Community College District, GO, CAB, Election of 2002, 0.00%, 8/01/33 (c)

     2,800       3,321,220  

State of California, GO, Refunding:

    

5.00%, 10/01/39

     1,000       1,174,820  

Various Purposes, 5.00%, 2/01/38

     3,000       3,469,800  

State of California, GO, Various Purposes:

    

5.75%, 4/01/31

     2,000       2,153,720  

6.00%, 3/01/33

     1,000       1,123,510  

6.50%, 4/01/33

     1,950       2,127,684  

5.50%, 3/01/40

     2,350       2,599,593  
    

 

 

 
               44,532,345  
Colorado — 0.7%             

Colorado Health Facilities Authority, RB, Catholic Health Initiatives, Series D, 6.25%, 10/01/33

     1,070       1,120,836  
Connecticut — 0.3%             

Connecticut State Health & Educational Facility Authority, Refunding RB, Lawrence & Memorial Hospital, Series F, 5.00%, 7/01/36

     550       593,049  
Delaware — 1.4%             

County of Sussex Delaware, RB, NRG Energy, Inc., Indian River Power LLC Project, 6.00%, 10/01/40

     1,200       1,290,756  

Delaware Transportation Authority, RB, U.S. 301 Project, 5.00%, 6/01/55

     950       1,065,121  
    

 

 

 
               2,355,877  
District of Columbia — 2.0%             

Washington Metropolitan Area Transit Authority, RB, Series B, 5.00%, 7/01/37

     2,855       3,413,238  
Florida — 3.7%             

Capital Trust Agency Inc., RB, M/F Housing, The Gardens Apartment Project, Series A, 4.75%, 7/01/40

     600       627,510  

County of Miami-Dade Florida, RB, AMT, Seaport Department, Series B, 6.00%, 10/01/31

     4,135       4,934,047  

County of Orange Florida Health Facilities Authority, Refunding RB, Mayflower Retirement Center, 5.00%, 6/01/36

     125       132,795  

Stevens Plantation Community Development District, RB, Special Assessment, Series A, 7.10%, 5/01/35 (e)(f)

     860       601,596  
    

 

 

 
               6,295,948  
Hawaii — 0.3%             

State of Hawaii Department of Budget & Finance, Refunding RB, Special Purpose, Senior Living, Kahala Nui, 5.25%, 11/15/37

     400       439,616  
 
Portfolio Abbreviations

 

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

 

See Notes to Financial Statements.      
                
18    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Bond Trust (BBK)

 

Municipal Bonds    Par
(000)
    Value  
Idaho — 0.3%             

Idaho Health Facilities Authority, RB, St. Lukes Health System Project, Series A, 5.00%, 3/01/39

   $ 500     $ 553,060  
Illinois — 7.2%             

City of Chicago Illinois, ARB, O’Hare International Airport, Senior Lien, Series D, 5.00%, 1/01/47

     505       577,382  

City of Chicago Illinois, Refunding ARB, O’Hare International Airport Passenger Facility Charge, Series B, AMT, 4.00%, 1/01/29

     1,600       1,677,120  

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

    

Series B, 5.00%, 1/01/35

     2,000       2,350,140  

Series B, 5.00%, 1/01/41

     2,000       2,285,000  

Series C, 5.00%, 1/01/38

     1,000       1,148,840  

City of Chicago Illinois Midway International Airport, Refunding GARB, 2nd Lien, Series A, 5.00%, 1/01/41

     870       960,149  

City of Chicago Illinois Transit Authority, RB, Sales Tax Receipts, 5.25%, 12/01/40

     665       718,739  

Illinois Finance Authority, Refunding RB:

    

OSF Healthcare System, 6.00%, 5/15/39

     295       324,031  

Roosevelt University Project, 6.50%, 4/01/44

     1,000       1,063,050  

Railsplitter Tobacco Settlement Authority, RB, 6.00%, 6/01/28

     1,150       1,310,919  
    

 

 

 
               12,415,370  
Kansas — 2.6%             

County of Seward Kansas Unified School District No. 480 Liberal, GO, Refunding:

    

5.00%, 9/01/39

     720       850,983  

5.00%, 9/01/39

     3,280       3,650,115  
    

 

 

 
               4,501,098  
Kentucky — 3.6%             

County of Boyle Kentucky, Refunding RB, Centre College of Kentucky, 5.00%, 6/01/37

     2,500       2,865,200  

Kentucky Economic Development Finance Authority, RB, Catholic Health Initiatives, Series A, 5.38%, 1/01/40

     1,830       1,990,875  

Kentucky Public Transportation Infrastructure Authority, RB, Downtown Crossing Project, Convertible CAB, 1st Tier, Series C (c):

    

0.00%, 7/01/34

     500       447,185  

0.00%, 7/01/39

     830       726,582  

0.00%, 7/01/43

     270       236,350  
    

 

 

 
               6,266,192  
Louisiana — 1.5%             

City of Alexandria Louisiana Utilities, RB, 5.00%, 5/01/39

     860       958,797  

Louisiana Local Government Environmental Facilities & Community Development Authority, RB, Westlake Chemical Corp. Project, Series A-1, 6.50%, 11/01/35

     1,050       1,189,576  

Louisiana Public Facilities Authority, RB, Belle Chasse Educational Foundation Project, 6.50%, 5/01/31

     400       441,804  
    

 

 

 
               2,590,177  
Maryland — 0.2%             

County of Anne Arundel Maryland Consolidated, RB, Special Taxing District, Villages at Two Rivers Project:

    

5.13%, 7/01/36

     170       172,710  

5.25%, 7/01/44

     170       172,451  
    

 

 

 
               345,161  
Municipal Bonds    Par
(000)
    Value  
Massachusetts — 2.1%             

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

    

5.00%, 1/01/47

   $ 630     $ 706,797  

5.25%, 1/01/42

     565       650,897  

Massachusetts Development Finance Agency, Refunding RB, International Charter School, 5.00%, 4/15/40

     400       430,392  

Massachusetts Port Authority, Refunding ARB, Series A, AMT, 5.00%, 7/01/42

     1,500       1,740,600  
    

 

 

 
               3,528,686  
Michigan — 5.1%             

Michigan Finance Authority, RB, Detroit Water & Sewage Disposal System, Senior Lien, Series 2014 C-2, AMT, 5.00%, 7/01/44

     240       256,860  

Michigan Finance Authority, Refunding RB, Henry Ford Health System, 5.00%, 11/15/41

     5,560       6,271,903  

Michigan State Hospital Finance Authority, Refunding RB, Trinity Health Credit Group, Series C, 4.00%, 12/01/32

     2,100       2,183,748  

State of Michigan Building Authority, Refunding RB, Facilities Program, Series I, 6.25%, 10/15/38

     40       42,288  
    

 

 

 
               8,754,799  
Minnesota — 4.5%             

City of Maple Grove Minnesota, Refunding RB, Maple Grove Hospital, Corp., 4.00%, 5/01/37

     880       915,790  

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

     3,890       4,125,695  

Minneapolis-St. Paul Metropolitan Airports Commission, Refunding ARB, Sub Series D, AMT, 5.00%, 1/01/41

     290       332,827  

Minnesota Higher Education Facilities Authority, RB:

    

Augsburg College, Series B, 4.25%, 5/01/40

     1,185       1,188,033  

College of St. Benedict, Series 8-K, 5.00%, 3/01/37

     660       742,051  

College of St. Benedict, Series 8-K, 4.00%, 3/01/43

     385       397,047  
    

 

 

 
               7,701,443  
Mississippi — 1.9%             

County of Warren Mississippi, RB, Gulf Opportunity Zone Bonds, International Paper Co. Project, Series A, 5.38%, 12/01/35

     400       441,032  

Mississippi Development Bank, RB, Special Obligation:

    

CAB, Hinds Community College District (AGM), 5.00%, 4/01/36

     845       914,848  

County of Jackson Limited Tax Note (AGC), 5.50%, 7/01/32

     1,750       1,873,287  
    

 

 

 
               3,229,167  
Missouri — 3.1%             

Missouri Development Finance Board, RB, Annual Appropriation Sewer System, Series B, 5.00%, 11/01/41

     900       964,863  

Missouri State Health & Educational Facilities Authority, RB:

    

A.T. Still University of Health Sciences, 5.25%, 10/01/31

     500       561,785  

A.T. Still University of Health Sciences, 4.25%, 10/01/32

     320       341,168  

A.T. Still University of Health Sciences, 5.00%, 10/01/39

     500       558,160  

Heartland Regional Medical Center, 4.13%, 2/15/43

     300       311,814  

University of Central Missouri, Series C-2, 5.00%, 10/01/34

     1,000       1,125,820  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    19


Schedule of Investments (continued)

  

BlackRock Municipal Bond Trust (BBK)

 

Municipal Bonds    Par
(000)
    Value  
Missouri (continued)             

Missouri State Health & Educational Facilities Authority, Refunding RB, Kansas City University of Medicine and Biosciences, Series A:

    

5.00%, 6/01/42

   $ 540     $ 620,833  

5.00%, 6/01/47

     770       881,095  
    

 

 

 
               5,365,538  
Montana — 0.7%             

County of Cascade Montana High School District A Great Falls, GO:

    

4.00%, 7/01/34

     570       627,906  

4.00%, 7/01/35

     550       604,885  
    

 

 

 
               1,232,791  
Nebraska — 1.6%             

Central Plains Energy Project Nebraska, RB, Gas Project No. 3, 5.00%, 9/01/42

     600       654,462  

County of Douglas Nebraska Hospital Authority No. 3, Refunding RB, Health Facilities Nebraska Methodist Health System, 5.00%, 11/01/45

     400       444,684  

Nebraska Public Power District, Refunding RB, Series A:

    

5.00%, 1/01/32

     250       283,758  

4.00%, 1/01/44

     400       410,556  

Public Power Generation Agency, Refunding RB, 3.13%, 1/01/35

     960       934,339  
    

 

 

 
               2,727,799  
Nevada — 1.2%             

City of Las Vegas Nevada, RB, Special Assessment, No. 809 Summerlin Area, 5.65%, 6/01/23

     1,025       1,018,706  

County of Clark Nevada, Refunding ARB, Department of Aviation, Subordinate Lien, Series A-2, 4.25%, 7/01/36

     1,000       1,069,020  
    

 

 

 
               2,087,726  
New Jersey — 13.9%             

New Jersey EDA, RB:

    

Continental Airlines, Inc. Project, AMT, Series B, 5.63%, 11/15/30

     660       744,975  

Goethals Bridge Replacement Project (AGM), AMT, 5.13%, 7/01/42

     200       220,038  

School Facilities Construction, Series UU, 5.00%, 6/15/40

     425       450,802  

New Jersey EDA, Refunding RB:

    

Series B, 5.50%, 6/15/30

     1,250       1,453,975  

Special Assessment, Kapkowski Road Landfill Project, 6.50%, 4/01/28

     7,500       8,841,750  

New Jersey Educational Facilities Authority, Refunding RB, College of New Jersey, Series G, 3.50%, 7/01/31

     900       920,556  

New Jersey Health Care Facilities Financing Authority, Refunding RB, St. Barnabas Health Care System, Series A:

    

4.63%, 7/01/21 (b)

     510       576,473  

5.63%, 7/01/21 (b)

     1,700       1,985,855  

5.00%, 7/01/25

     500       570,260  

New Jersey Housing & Mortgage Finance Agency, RB, S/F Housing, Series AA, 6.50%, 10/01/38

     15       15,072  

New Jersey State Turnpike Authority, RB, Series E, 5.00%, 1/01/45

     1,860       2,134,815  

New Jersey Transportation Trust Fund Authority, RB:

    

CAB, Transportation System, Series A, 0.00%, 12/15/35 (d)

     1,000       430,640  

Transportation Program, Series AA, 5.00%, 6/15/45

     900       962,154  

Transportation Program, Series AA, 5.00%, 6/15/46

     400       427,348  
Municipal Bonds    Par
(000)
    Value  
New Jersey (continued)             

New Jersey Turnpike Authority, Refunding RB, Series B, 5.00%, 1/01/40

   $ 1,000     $ 1,177,510  

Tobacco Settlement Financing Corp., Refunding RB, Series 1A, 5.00%, 6/01/41

     3,000       2,899,020  
    

 

 

 
               23,811,243  
New Mexico — 1.1%             

New Mexico Finance Authority, RB, Senior Lien, Series A:

    

3.25%, 6/01/33

     545       563,426  

3.25%, 6/01/34

     840       860,597  

New Mexico Hospital Equipment Loan Council, Refunding RB, Presbyterian Healthcare Services, 5.00%, 8/01/44

     450       511,295  
    

 

 

 
               1,935,318  
New York — 6.0%             

City of New York New York Industrial Development Agency, RB, PILOT, Queens Baseball Stadium (AMBAC), 5.00%, 1/01/39

     925       939,670  

Counties of New York Tobacco Trust IV, Refunding RB, Settlement Pass-Through Turbo, Series A, 6.25%, 6/01/41 (a)

     900       925,533  

Counties of New York Tobacco Trust VI, Refunding RB, Settlement Pass-Through Turbo, Series C, 4.00%, 6/01/51

     500       468,655  

Erie Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, Series A, 5.00%, 6/01/45

     1,160       1,140,930  

Hudson Yards Infrastructure Corp., Refunding RB, Series A, 5.00%, 2/15/37

     2,190       2,599,793  

New York Liberty Development Corp., Refunding RB:

    

2nd Priority, Bank of America Tower at One Bryant Park Project, Class 3, 6.38%, 7/15/49

     800       865,072  

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

     405       449,433  

New York Transportation Development Corp., ARB, LaGuardia Airport Terminal B Redevelopment Project, Series A, AMT, 5.00%, 7/01/41

     1,000       1,104,490  

New York Transportation Development Corp., Refunding RB, American Airlines, Inc., AMT, 5.00%, 8/01/31

     1,295       1,383,435  

Niagara Area Development Corp., Refunding RB, Solid Waste Disposal Facility, Covanta Energy Project, Series A, AMT, 5.25%, 11/01/42 (a)

     400       400,816  
    

 

 

 
               10,277,827  
North Dakota — 0.3%             

County of Burleigh North Dakota, Refunding RB, St. Alexius Medical Center Project, Series A, 5.00%, 7/01/21 (b)

     480       548,904  
Ohio — 2.4%             

Buckeye Tobacco Settlement Financing Authority, RB, Asset-Backed, Senior Turbo Term, Series A-2, 6.50%, 6/01/47

     2,000       1,990,080  

City of Dayton Ohio Airport Revenue, Refunding ARB, James M. Cox Dayton International Airport, Series A (AGM), AMT, 4.00%, 12/01/32

     2,000       2,076,160  
    

 

 

 
               4,066,240  
Oklahoma — 1.8%             

Norman Oklahoma Regional Hospital Authority, Refunding RB, 4.00%, 9/01/37

     1,275       1,312,918  

Oklahoma City Public Property Authority, Refunding RB, 5.00%, 10/01/39

     720       819,893  

Oklahoma Development Finance Authority, RB, Provident Oklahoma Education Resources, Inc., Cross Village Student Housing Project, Series A, 5.25%, 8/01/57

     820       903,911  
    

 

 

 
               3,036,722  
 

 

See Notes to Financial Statements.      
                
20    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Bond Trust (BBK)

 

Municipal Bonds    Par
(000)
    Value  
Oregon — 1.6%             

County of Lane Oregon School District No. 19 Springfield, GO, CAB, Series B, 0.00%, 6/15/40 (d)

   $ 1,000     $ 419,060  

Oregon Health & Science University, RB, Series A, 4.00%, 7/01/37

     675       720,812  

State of Oregon State Facilities Authority, Refunding RB, University of Portland Project, Series A, 5.00%, 4/01/45

     1,475       1,665,187  
    

 

 

 
               2,805,059  
Pennsylvania — 7.8%             

County of Allegheny Pennsylvania IDA, Refunding RB, U.S. Steel Corp. Project, 6.55%, 12/01/27

     1,695       1,772,207  

Delaware River Port Authority, RB:

    

4.50%, 1/01/32

     1,500       1,667,235  

Series D (AGM), 5.00%, 1/01/40

     2,600       2,817,204  

Pennsylvania Turnpike Commission, RB, Sub-Series B-1, 5.00%, 6/01/42

     5,000       5,667,800  

Pottsville Hospital Authority, Refunding RB, Lehigh Valley Health Network, Series B, 5.00%, 7/01/45

     1,250       1,402,375  
    

 

 

 
               13,326,821  
Puerto Rico — 1.1%             

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds:

    

5.50%, 5/15/39

     940       944,606  

5.63%, 5/15/43

     890       895,474  
    

 

 

 
               1,840,080  
Rhode Island — 4.5%             

Rhode Island Health & Educational Building Corp., Refunding RB, Series A (AGM), 3.75%, 5/15/32

     1,155       1,206,536  

Rhode Island Turnpike & Bridge Authority, Refunding RB, Series A, 5.00%, 10/01/40

     1,540       1,774,034  

State of Rhode Island, COP, School for the Deaf Project, Series C (AGC), 5.38%, 4/01/19 (b)

     900       963,684  

Tobacco Settlement Financing Corp., Refunding RB:

    

Series A, 5.00%, 6/01/40

     1,000       1,085,440  

Series B, 4.50%, 6/01/45

     2,730       2,761,914  
    

 

 

 
               7,791,608  
Tennessee — 2.9%             

Chattanooga Health Educational & Housing Facility Board, RB, Catholic Health Initiatives, Series A, 5.25%, 1/01/40

     1,950       2,074,585  

County of Chattanooga-Hamilton Tennessee Hospital Authority, Refunding RB, Series A, 5.00%, 10/01/44

     875       954,966  

County of Memphis-Shelby Tennessee Sports Authority, Inc., Refunding RB, Memphis Arena Project, Series A, 5.38%, 11/01/28

     275       300,303  

Johnson City Health & Educational Facilities Board, RB, Mountain States Health, Series A, 5.00%, 8/15/42

     800       859,040  

Metropolitan Government of Nashville & Davidson County Health & Educational Facilities Board, RB, Vanderbilt University Medical Center, Series A, 5.00%, 7/01/40

     675       765,045  
    

 

 

 
               4,953,939  
Texas — 8.7%             

County of Harris Texas Houston Sports Authority, Refunding RB, CAB, Senior Lien, Series G (NPFGC), 0.00%, 11/15/41 (d)

     11,690       3,652,190  

County of Matagorda Texas Navigation District No. 1, Refunding RB, Central Power & Light Co., Project, Series A, 6.30%, 11/01/29

     1,500       1,663,395  

County of Midland Texas Fresh Water Supply District No. 1, RB, CAB, City of Midland Project, Series A, 0.00%, 9/15/38 (d)

     10,760       4,454,640  
Municipal Bonds    Par
(000)
    Value  
Texas (continued)             

Leander Independent School District, GO, Refunding, CAB, Series D (PSF-GTD) (d):

    

0.00%, 8/15/24 (b)

   $ 370     $ 196,196  

0.00%, 8/15/35

     3,630       1,774,525  

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

     760       869,159  

Texas Private Activity Bond Surface Transportation Corp., RB, Senior Lien, LBJ Infrastructure Group LLC, 7.00%, 6/30/40

     2,000       2,267,580  
    

 

 

 
               14,877,685  
Utah — 0.2%             

Utah State Charter School Finance Authority, Refunding RB, Mountainville Academy, 4.00%, 4/15/42

     400       411,956  
Vermont — 0.8%             

University of Vermont & State Agricultural College, Refunding RB, 4.00%, 10/01/37

     500       528,735  

Vermont Student Assistance Corp., RB, Series A, 4.13%, 6/15/30

     810       852,444  
    

 

 

 
               1,381,179  
Virginia — 0.8%             

Ballston Quarter Community Development Authority, Tax Allocation Bonds, Series A, 5.38%, 3/01/36

     490       494,415  

Virginia Small Business Financing Authority, RB, Senior Lien, Elizabeth River Crossings OpCo LLC Project, AMT, 6.00%, 1/01/37

     725       824,593  
    

 

 

 
               1,319,008  
Wisconsin — 0.6%             

Public Finance Authority, Refunding RB, National Gypsum Co., AMT, 4.00%, 8/01/35

     280       272,955  

WPPI Energy Power Supply Systems, Refunding RB, Series A, 5.00%, 7/01/37

     665       752,740  
    

 

 

 
               1,025,695  
Total Municipal Bonds — 134.7%              231,244,523  
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
              
Colorado — 2.2%             

Colorado Health Facilities Authority, RB, Catholic Health, Series C-7 (AGM), 5.00%, 5/01/18 (b)

     3,750       3,855,413  
Connecticut — 1.7%             

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

     2,611       2,980,034  
Georgia — 2.7%             

City of Atlanta Georgia Water & Wastewater Revenue, Refunding RB, 5.00%, 11/01/43

     4,003       4,639,592  
New Jersey — 0.9%             

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

     1,400       1,480,883  
New York — 12.8%             

City of New York New York, GO, Fiscal 2015, Series B, 4.00%, 8/01/32

     3,990       4,370,566  

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

    

5.75%, 6/15/18 (b)

     104       107,659  

5.75%, 6/15/40

     346       360,061  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    21


Schedule of Investments (continued)

  

BlackRock Municipal Bond Trust (BBK)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
   Par
(000)
    Value  
New York (continued)             

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

    

Fiscal 2013, Series CC, 5.00%, 6/15/47

   $ 6,000     $ 6,873,707  

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

     405       437,837  

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

     2,500       2,888,705  

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

     2,505       2,852,232  

State of New York Dormitory Authority, RB, State University Dormitory Facilities, New York University, Series A, 5.00%, 7/01/18 (b)

     2,199       2,277,220  

State of New York Thruway Authority, Refunding RB, Transportation, Personal Income Tax, Series A, 5.00%, 3/15/31

     1,560       1,786,153  
    

 

 

 
               21,954,140  
Ohio — 1.9%             

County of Montgomery Ohio, RB, Catholic Health, Series C-1 (AGM), 5.00%, 4/28/18 (b)

     1,260       1,294,726  

Ohio Higher Educational Facility Commission, RB, Cleveland Clinic Health, Series A, 5.25%, 1/01/18 (b)

     2,000       2,028,800  
    

 

 

 
               3,323,526  
Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
   Par
(000)
    Value  
Texas — 1.1%             

City of San Antonio Texas Public Service Board, RB, Electric & Gas Systems, Junior Lien, 5.00%, 2/01/43

   $ 1,580     $ 1,798,656  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 23.3%
             40,032,244  
Total Long-Term Investments
(Cost — $250,194,591) — 158.0%
             271,276,767  
    
                  
Short-Term Securities    Shares         

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.62% (i)(j)

     136,442       136,483  
Total Short-Term Securities
(Cost — 136,483) — 0.1%
             136,483  

Total Investments (Cost — $250,331,074) — 158.1%

 

    271,413,250  

Other Assets Less Liabilities — 1.5%

 

    2,642,663  

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (13.1)%

 

    (22,451,244

VMTP Shares at Liquidation Value — (46.5)%

 

    (79,900,000
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 171,704,669  
    

 

 

 

 

 
Notes to Schedule of investments

 

(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)   Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

 

(d)   Zero-coupon bond.

 

(e)   Non-income producing security.

 

(f)   Issuer filed for bankruptcy and/or is in default.

 

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

 

(h)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire between February 15, 2019 to June 15, 2019, is $2,411,645. See Note 4 of the Notes to Financial Statements for details.

 

(i)   Annualized 7-day yield as of period end.

 

(j)   During the year ended August 31, 2017, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliated   Shares Held
at August 31,
2016
    Net
Activity
    Shares Held
at August 31,
2017
    Value
at August 31,
2017
    Income     Net
Realized Gain1
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

    2,139,553       (2,003,111     136,442     $ 136,483     $ 13,328     $ 2,430        

 

  1   

Includes net capital gain distributions.

 

See Notes to Financial Statements.      
                
22    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Bond Trust (BBK)

 

 

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

               

5-Year U.S. Treasury Note

    (21      December 2017      $ 2,489       $ (3,870

10-Year U.S. Treasury Note

    (53      December 2017      $ 6,730         (9,278

Long U.S. Treasury Bond

    (72      December 2017      $ 11,239         (50,614

Ultra Long U.S. Treasury Bond

    (15      December 2017      $ 2,536               (11,712
Total       $ (75,474
   

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

    Net unrealized  depreciation 1                            $ 75,474           $ 75,474  

 

  1  

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

For the year ended August 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

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

Futures contracts

                          $ 642,731           $ 642,731  
Net Change in Unrealized Appreciation (Depreciation) from:                                                 

Futures contracts

                          $ (89,339         $ (89,339

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:  

Average notional value of contracts – long

  $ 241,875 1 

Average notional value of contracts – short

  $ 21,966,457  

 

  1   

Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter end.

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments1

           $ 271,276,767              $ 271,276,767  

Short-Term Securities

  $ 136,483                         136,483  
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

  $ 136,483        $ 271,276,767              $ 271,413,250  
 

 

 

      

 

 

      

 

 

   

 

 

 
             
Derivative Financial Instruments 2                                      

Liabilities:

             

Interest rate contracts

  $ (75,474                     $ (75,474

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

 

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

    

    

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    23


Schedule of Investments (concluded)

  

BlackRock Municipal Bond Trust (BBK)

 

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:  
     Level 1        Level 2        Level 3     Total  

Liabilities:

             

TOB Trust Certificates

           $ (22,403,733            $ (22,403,733

VMTP Shares at Liquidation Value

             (79,900,000              (79,900,000
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

           $ (102,303,733            $ (102,303,733
 

 

 

      

 

 

      

 

 

   

 

 

 

During the year ended August 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.      
                
24    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments August 31, 2017

  

BlackRock Municipal Income Investment Quality Trust (BAF)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par
(000)
    Value  
Alabama — 1.9%             

City of Birmingham Alabama Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC) (a):

    

6.00%, 6/01/19

   $ 1,000     $ 1,088,090  

6.13%, 6/01/19

     1,000       1,090,260  

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

     335       372,704  
    

 

 

 
               2,551,054  
California — 15.0%             

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

     2,005       2,102,483  

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

     1,120       1,272,141  

City of Los Angeles California Department of Water & Power, RB, Power System, Sub-Series A-1, 5.25%, 7/01/38

     1,175       1,217,171  

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

     1,400       1,455,482  

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

     1,025       1,258,157  

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

     3,210       3,447,957  

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

     1,000       1,173,460  

San Diego Public Facilities Financing Authority Water, Refunding RB, Series B (AGC), 5.38%, 8/01/19 (a)

     1,125       1,222,132  

State of California, GO, Refunding Various Purposes, 4.00%, 11/01/36 (b)

     490       531,645  

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

    

5.50%, 11/01/30

     1,000       1,210,470  

5.50%, 11/01/31

     1,500       1,811,820  

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

     505       598,617  

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

     380       464,136  

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

     2,355       2,776,828  
    

 

 

 
               20,542,499  
Colorado — 3.9%             

City & County of Denver Colorado Airport System, ARB, Sub-System, Series B, 5.25%, 11/15/32

     3,250       3,802,175  

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

     1,425       1,547,977  
    

 

 

 
               5,350,152  
Florida — 9.3%             

City of Jacksonville Florida, RB, Series A, 5.25%, 10/01/31

     4,525       5,212,574  

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

     205       243,109  

County of Miami-Dade Florida, RB, Seaport Department, Series A, 6.00%, 10/01/38

     4,215       5,084,891  

County of Orange Florida Health Facilities Authority, Refunding RB, Presbyterian Retirement Communities Project, 5.00%, 8/01/41

     1,305       1,423,690  

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

     745       878,534  
    

 

 

 
               12,842,798  
Municipal Bonds    Par
(000)
    Value  
Georgia — 2.1%             

City of Atlanta Georgia Department of Aviation, Refunding GARB, Series C, 6.00%, 1/01/30

   $ 2,500     $ 2,906,075  
Illinois — 22.3%             

City of Chicago Illinois, Refunding GARB, O’Hare International Airport, 3rd Lien, Series C (AGC), 5.25%, 1/01/30

     1,000       1,080,850  

City of Chicago Illinois O’Hare International Airport, ARB, 3rd Lien, Series A:

    

5.75%, 1/01/21 (a)

     690       795,453  

5.75%, 1/01/39

     135       153,206  

City of Chicago Illinois O’Hare International Airport, GARB, 3rd Lien, Series C, 6.50%, 1/01/21 (a)

     3,740       4,403,214  

City of Chicago Illinois Transit Authority, RB:

    

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

     1,300       1,383,447  

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

     3,185       3,460,853  

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

     3,000       3,242,430  

City of Chicago Illinois Transit Authority, Refunding RB, Federal Transit Administration, Section 5309 (AGM), 5.00%, 6/01/28

     3,000       3,184,590  

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

     1,480       1,561,770  

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

    

5.50%, 12/01/38

     855       920,835  

5.25%, 12/01/43

     1,430       1,506,877  

Illinois Finance Authority, RB, Carle Foundation, Series A, 6.00%, 8/15/41

     1,885       2,154,140  

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     915       1,043,137  

6.00%, 6/01/28

     260       296,382  

State of Illinois, GO:

    

5.25%, 2/01/31

     610       658,483  

5.25%, 2/01/32

     1,000       1,076,540  

5.50%, 7/01/33

     1,000       1,083,250  

5.50%, 7/01/38

     270       291,600  

State of Illinois Toll Highway Authority, Refunding RB, Series B, 5.50%, 1/01/18 (a)

     2,250       2,285,482  
    

 

 

 
               30,582,539  
Indiana — 1.8%             

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

    

5.50%, 1/01/19 (a)

     470       499,361  

5.50%, 1/01/38

     1,945       2,051,002  
    

 

 

 
               2,550,363  
Kentucky — 0.7%             

Kentucky State Property & Building Commission, Refunding RB, Project No. 93, (AGC) (a):

    

5.25%, 2/01/19

     800       849,024  

5.25%, 2/01/19

     100       105,964  
    

 

 

 
               954,988  
Louisiana — 1.0%             

City of New Orleans Louisiana Aviation Board, Refunding GARB, Restructuring (AGC) (a):

    

Series A-1, 6.00%, 1/01/19

     375       400,492  

Series A-2, 6.00%, 1/01/19

     150       160,197  

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

     790       834,430  
    

 

 

 
               1,395,119  
Massachusetts — 1.5%             

Massachusetts Development Finance Agency, RB, Emerson College Issue, Series A, 5.00%, 1/01/47

     695       779,720  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    25


Schedule of Investments (continued)

  

BlackRock Municipal Income Investment Quality Trust (BAF)

 

Municipal Bonds    Par
(000)
    Value  
Massachusetts (continued)             

Massachusetts Development Finance Agency, Refunding RB, Series A:

    

Emerson College, 5.00%, 1/01/36 (b)

   $ 395     $ 458,066  

Emerson College, 5.00%, 1/01/37 (b)

     215       248,712  

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

     500       574,695  
    

 

 

 
               2,061,193  
Michigan — 2.3%             

City of Detroit Michigan Water Supply System Revenue, RB, 2nd Lien, Series B (AGM):

    

6.25%, 7/01/19 (a)

     1,695       1,860,144  

6.25%, 7/01/36

     5       5,408  

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

     1,205       1,294,531  
    

 

 

 
               3,160,083  
Minnesota — 2.8%             

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

    

6.50%, 11/15/18 (a)

     565       603,250  

6.50%, 11/15/38

     3,115       3,303,738  
    

 

 

 
               3,906,988  
Mississippi — 1.8%             

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

     1,000       1,284,290  

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

     1,000       1,171,950  
    

 

 

 
               2,456,240  
Montana — 0.5%             

Missoula County Elementary School District No. 1, GO, School Building, 4.00%, 7/01/37 (b)

     250       271,515  

Missoula High School District No. 1, GO, School Building (b):

    

4.00%, 7/01/35

     205       223,735  

4.00%, 7/01/36

     125       135,867  
    

 

 

 
               631,117  
Nevada — 3.4%             

County of Clark Nevada, GO, Limited Tax, 5.00%, 6/01/18 (a)

     2,410       2,487,482  

County of Clark Nevada Water Reclamation District, GO, Series A, 5.25%, 7/01/19 (a)

     2,000       2,158,960  
    

 

 

 
               4,646,442  
New Jersey — 4.9%             

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

     1,300       1,398,085  

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

     1,480       1,531,253  

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

    

Series A (AGC), 5.50%, 12/15/38

     2,000       2,089,700  

Series AA, 5.50%, 6/15/39

     1,620       1,771,486  
    

 

 

 
               6,790,524  
New York — 4.4%             

City of New York New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-4 (AGC), 5.50%, 1/15/29

     2,465       2,618,791  

Metropolitan Transportation Authority, RB:

    

Series A, 5.25%, 11/15/38

     1,565       1,797,872  

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

     1,000       1,180,430  
Municipal Bonds    Par
(000)
    Value  
New York (continued)             

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

   $ 430     $ 430,598  
    

 

 

 
               6,027,691  
Ohio — 0.4%             

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

     470       557,655  
Oklahoma — 1.2%             

Norman Regional Hospital Authority, Refunding RB, 5.00%, 9/01/37

     490       548,334  

Oklahoma Development Finance Authority, RB, Provident Oklahoma Education Resources, Inc., Cross Village Student Housing Project, Series A, 5.25%, 8/01/57

     990       1,091,307  
    

 

 

 
               1,639,641  
Oregon — 0.2%             

County of Clackamas Oregon School District No. 12 North Clackamas, GO, CAB, Series A, 0.00%, 6/15/38 (c)

     510       221,070  
Pennsylvania — 3.1%             

Pennsylvania Housing Finance Agency, RB, S/F Housing Mortgage, Series 123-B, 4.00%, 10/01/42

     535       556,068  

Pennsylvania Turnpike Commission, RB, Series C, 5.00%, 12/01/43

     1,720       1,929,221  

Township of Bristol Pennsylvania School District, GO, 5.25%, 6/01/37

     1,500       1,725,660  
    

 

 

 
               4,210,949  
South Carolina — 2.8%             

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

     1,525       1,801,025  

State of South Carolina Public Service Authority, RB, Series E, 5.00%, 12/01/48

     275       300,809  

State of South Carolina Public Service Authority, Refunding RB, Series E, 5.25%, 12/01/55

     1,490       1,702,384  
    

 

 

 
               3,804,218  
Texas — 12.8%             

Austin Community College District Public Facility Corp., RB, Educational Facilities Project, Round Rock Campus, 5.25%, 8/01/18 (a)

     1,000       1,040,400  

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

     980       1,137,898  

City of Frisco Texas ISD, GO, School Building (AGC), 5.50%, 8/15/41

     3,365       3,637,632  

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

    

5.38%, 5/15/19 (a)

     945       1,016,914  

6.00%, 5/15/19 (a)

     2,465       2,678,592  

6.00%, 5/15/19 (a)

     2,100       2,281,965  

6.00%, 11/15/35

     135       146,823  

6.00%, 11/15/36

     115       125,072  

5.38%, 11/15/38

     55       58,721  

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

    

6.50%, 1/01/19 (a)

     205       220,150  

6.50%, 7/01/37

     795       843,551  

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

     1,000       1,188,990  
 

 

See Notes to Financial Statements.      
                
26    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Income Investment Quality Trust (BAF)

 

Municipal Bonds    Par
(000)
    Value  
Texas (continued)             

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

    

(AGM), 6.00%, 1/01/43

   $ 1,000     $ 1,141,890  

Series K-1 (AGC), 5.75%, 1/01/19 (a)

     1,500       1,596,600  

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

     440       503,197  
    

 

 

 
               17,618,395  
Virginia — 1.1%             

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

     370       416,994  

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

     1,000       1,070,950  
    

 

 

 
               1,487,944  
Washington — 1.5%             

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

     1,025       1,150,440  

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

     795       897,388  
    

 

 

 
               2,047,828  
Wisconsin — 0.6%             

Wisconsin Health & Educational Facilities Authority, Refunding RB, Marshfield Clinic Health System Inc., Series C, 4.00%, 2/15/50 (b)

     860       861,987  
Total Municipal Bonds — 103.3%       141,805,552  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
              
Alabama — 0.8%             

Auburn University, Refunding RB, Series A, 4.00%, 6/01/41

     1,000       1,062,170  
California — 12.6%             

Fremont Union High School District, GO, Refunding, Series A, 4.00%, 8/01/46

     1,640       1,763,705  

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

     2,775       3,251,856  

San Marcos Unified School District, GO, Election of 2010, Series A, 5.25%, 8/01/31

     10,680       12,275,806  
    

 

 

 
               17,291,367  
Connecticut — 1.1%             

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

     1,306       1,490,017  
District of Columbia — 0.6%             

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

     759       802,078  
Illinois — 5.3%             

State of Illinois Toll Highway Authority, RB:

    

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

     825       942,020  

Senior, Series B, 5.00%, 1/01/40

     3,329       3,816,343  

Series C, 5.00%, 1/01/38

     2,252       2,559,374  
    

 

 

 
               7,317,737  
Michigan — 2.2%             

Michigan State Building Authority, Refunding RB, Facilities Program, Series I, 5.00%, 10/15/45

     2,650       3,023,306  
Nevada — 4.9%             

County of Clark Nevada Water Reclamation District, GO, Limited Tax, 6.00%, 7/01/18 (a)

     2,000       2,087,380  
Municipal Bonds Transferred to
Tender Option Bond Trusts (d)
   Par
(000)
    Value  
Nevada (continued)             

Las Vegas Valley Water District, GO, Refunding, Series C, 5.00%, 6/01/28

   $ 4,100     $ 4,663,094  
    

 

 

 
               6,750,474  
New Jersey — 6.5%             

New Jersey EDA, RB, School Facilities Construction (AGC) (a):

    

6.00%, 12/15/34

     986       1,052,831  

6.00%, 12/15/34

     14       14,899  

New Jersey State Turnpike Authority, RB, Series A, 5.00%, 1/01/38 (e)

     6,020       6,815,363  

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

     1,000       1,057,773  
    

 

 

 
               8,940,866  
New York — 14.3%             

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

    

Series BB, 5.25%, 6/15/44

     4,993       5,688,356  

Series FF, 5.00%, 6/15/45

     3,019       3,401,168  

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

     900       951,597  

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

     1,000       1,155,482  

Metropolitan Transportation Authority, Refunding RB, Series C-1, 5.25%, 11/15/56

     2,540       3,000,592  

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

     2,955       3,364,608  

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

     1,740       2,025,672  
    

 

 

 
               19,587,475  
North Carolina — 2.0%             

North Carolina Capital Facilities Finance Agency, Refunding RB, Duke University Project, Series B, 5.00%, 10/01/55

     2,400       2,753,352  
Pennsylvania — 3.4%             

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

     1,349       1,543,554  

Pennsylvania Turnpike Commission, RB, Sub-Series A, 5.50%, 12/01/42

     1,094       1,303,135  

Pennsylvania Turnpike Commission, Refunding RB, Sub-Series B-2 (AGM), 5.00%, 6/01/35

     1,640       1,912,404  
    

 

 

 
               4,759,093  
Texas — 5.6%             

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

     4,456       4,967,336  

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

     2,310       2,686,969  
    

 

 

 
               7,654,305  
Utah — 0.8%             

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

     1,005       1,066,431  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 60.1%
      82,498,671  
Total Long-Term Investments
(Cost — $207,314,278) — 163.4%
      224,304,223  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    27


Schedule of Investments (continued)

  

BlackRock Municipal Income Investment Quality Trust (BAF)

 

Short-Term Securities   

Shares

    Value  

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.62% (f)(g)

     189,247     $ 189,303  

Total Short-Term Securities

(Cost — $189,322) — 0.1%

 

 

    189,303  

Total Investments (Cost — $207,503,600) — 163.5%

 

    224,493,526  

Liabilities in Excess of Other Assets — (0.0)%

 

    (7,028

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (32.8)%

 

    (45,022,626

VMTP Shares at Liquidation Value — (30.7)%

 

    (42,200,000
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 137,263,872  
    

 

 

 
 
Notes to Schedule of Investments

 

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

 

(b)   When-issued security.

 

(c)   Zero-coupon bond.

 

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

 

(e)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire between May 7, 2018 to July 1, 2020, is $7,481,044. See Note 4 of the Notes to Financial Statements for details.

 

(f)   Annualized 7-day yield as of period end.

 

(g)   During the year ended August 31, 2017, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliated   Shares Held
at August 31,
2016
    Net
Activity
    Shares Held
at August 31,
2017
    Value at
August 31,
2017
    Income     Net
Realized Gain
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

    704,474       (515,227     189,247     $ 189,303     $ 2,876     $ 226     $ (19

 

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

               

5-Year U.S. Treasury Note

    (39      December 2017      $ 4,622       $ (8,735

10-Year U.S. Treasury Note

    (30      December 2017      $ 3,810         (7,109

Long U.S. Treasury Bond

    (28      December 2017      $ 4,371         (22,932

Ultra Long U.S. Treasury Bond

    (7      December 2017      $ 1,183               (5,843

Total

                $ (44,619
               

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

   Net unrealized depreciation1                           $ 44,619           $ 44,619  

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

     

 

See Notes to Financial Statements.      
                
28    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (concluded)

  

BlackRock Municipal Income Investment Quality Trust (BAF)

 

For the year ended August 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:  
                
Net Realized Gain (Loss) from:   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

                          $ 293,935           $ 293,935  
Net Change in Unrealized Appreciation (Depreciation) from:                                                 

Futures contracts

                          $ (57,524         $ (57,524

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:  

Average notional value of contracts — short

  $ 14,604,024  

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments1

           $ 224,304,223              $ 224,304,223  

Short-Term Securities

  $ 189,303                         189,303  
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

  $ 189,303        $ 224,304,223              $ 224,493,526  
 

 

 

      

 

 

      

 

 

   

 

 

 
             
Derivative Financial Instruments2                                      

Liabilities:

             

Interest rate contracts

  $ (44,619                     $ (44,619

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

     

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

     

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

 

     Level 1        Level 2        Level 3     Total  

Liabilities:

             

TOB Trust Certificates

           $ (44,937,138            $ (44,937,138

VMTP Shares at Liquidation Value

             (42,200,000              (42,200,000
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

           $ (87,137,138            $ (87,137,138
 

 

 

      

 

 

      

 

 

   

 

 

 

During the year ended August 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    29


Schedule of Investments August 31, 2017

  

BlackRock Municipal Income Quality Trust (BYM)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par
(000)
    Value  
Alabama — 3.7%             

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

   $ 1,165     $ 1,227,700  

City of Birmingham Alabama Airport Authority, ARB, (AGM), 5.50%, 7/01/40

     5,800       6,398,560  

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

     1,495       1,626,695  

County of Tuscaloosa Board of Education, RB, Special Tax School Warrants, 5.00%, 2/01/43

     1,005       1,163,438  

State of Alabama Docks Department, Refunding RB, 6.00%, 10/01/20 (b)

     3,800       4,369,810  
    

 

 

 
               14,786,203  
Alaska — 0.3%             

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

     1,070       1,191,648  
Arizona — 0.7%             

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

    

3.25%, 1/01/37

     670       665,223  

5.00%, 1/01/38

     440       514,672  

State of Arizona, COP, Department of Administration, Series A (AGM):

    

5.00%, 10/01/27

     1,250       1,350,188  

5.25%, 10/01/28

     250       271,375  
    

 

 

 
               2,801,458  
California — 15.7%             

California Health Facilities Financing Authority, RB, St. Joseph Health System, Series A, 5.75%, 7/01/39

     625       676,400  

California Health Facilities Financing Authority, Refunding RB:

    

Kaiser Permanente, Sub-Series A-2, 5.00%, 11/01/47

     1,465       1,920,805  

Sutter Health, Series A, 5.00%, 11/15/35

     875       1,043,963  

Sutter Health, Series A, 5.00%, 11/15/36

     660       785,506  

California Infrastructure & Economic Development Bank, RB, Bay Area Toll Bridges, 1st Lien, Series A (AMBAC), 5.00%, 1/01/28 (b)

     10,100       13,112,729  

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

     1,620       1,828,024  

City of Los Angeles Department of Airports, RB, Sub-Series B:

    

5.00%, 5/15/36

     625       744,638  

5.00%, 5/15/37

     875       1,040,848  

Coast Community College District, GO, CAB, Election of 2002, Series C (AGM), 5.00%, 8/01/18 (b)

     7,450       7,741,891  

Monterey Peninsula Community College District, GO, CAB, Series C (AGM) (b)(c):

    

0.00%, 2/01/18

     13,575       6,813,971  

0.00%, 2/01/18

     14,150       6,740,777  

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

     1,580       1,301,936  

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

    

CAB, Series C, 0.00%, 7/01/38

     2,000       945,240  

CAB, Series G, 0.00%, 7/01/34

     725       343,338  

CAB, Series G, 0.00%, 7/01/35

     775       344,999  

CAB, Series G, 0.00%, 7/01/36

     1,155       483,933  

CAB, Series G, 0.00%, 7/01/37

     770       303,203  
Municipal Bonds    Par
(000)
    Value  
California (continued)             

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

   $ 1,400     $ 909,804  

San Diego County Regional Airport Authority, Refunding RB, Series A, 5.00%, 7/01/37

     1,750       2,090,497  

San Marcos Schools Financing Authority, Refunding LRB, AGM, 5.00%, 8/15/35

     1,000       1,189,020  

State of California, GO, Refunding, Various Purposes, 5.00%, 10/01/41

     1,100       1,254,737  

State of California, GO, Various Purposes, 5.00%, 4/01/42

     3,000       3,421,890  

State of California Public Works Board, LRB, Various Capital Projects, Series I, 5.50%, 11/01/33

     1,415       1,700,023  

Washington Township Health Care District, Refunding RB, Series B, 5.00%, 7/01/30

     1,500       1,731,000  

Yosemite Community College District, GO, CAB, Election of 2004, Series D, 0.00%, 8/01/37 (c)

     10,000       4,856,000  
    

 

 

 
               63,325,172  
Colorado — 0.6%             

Regional Transportation District, COP, Refunding, Series A, 5.38%, 6/01/31

     960       1,053,735  

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

     1,305       1,485,416  
    

 

 

 
               2,539,151  
District of Columbia — 3.3%             

District of Columbia Tobacco Settlement Financing Corp., Refunding RB, Asset-Backed, 6.75%, 5/15/40

     9,500       9,775,025  

Washington Metropolitan Area Transit Authority, RB, Series B, 5.00%, 7/01/42

     2,850       3,372,148  
    

 

 

 
               13,147,173  
Florida — 11.5%             

City of Tallahassee Florida Energy System Revenue, RB, (NPFGC):

    

5.00%, 10/01/32

     3,000       3,010,710  

5.00%, 10/01/37

     5,000       5,017,850  

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

     1,795       1,992,127  

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

     1,400       1,451,870  

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

     6,750       7,074,067  

County of Miami-Dade Florida, RB, Seaport Department, Series A, 6.00%, 10/01/38

     2,770       3,341,673  

County of Miami-Dade Florida Aviation, Refunding ARB:

    

Aviation, Miami International Airport, Series A-1, 5.50%, 10/01/41

     5,000       5,546,800  

Series A, 5.50%, 10/01/36

     5,000       5,434,800  

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

     3,910       4,414,155  

County of Miami-Dade Florida Health Facilities Authority, Refunding RB, Nicklaus Children’s Hospital Project, 5.00%, 8/01/42

     685       786,538  

County of Miami-Dade Florida Transit System, RB, Surtax (AGM), 5.00%, 7/01/18 (b)

     1,300       1,345,578  

County of Orange Florida Health Facilities Authority, Refunding RB, Presbyterian Retirement Communities Project:

    

5.00%, 8/01/41

     630       687,298  

5.00%, 8/01/47

     1,845       2,003,504  
 

 

See Notes to Financial Statements.      
                
30    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Income Quality Trust (BYM)

 

Municipal Bonds    Par
(000)
    Value  
Florida (continued)             

County of Sarasota Florida Public Hospital District, RB, Sarasota Memorial Hospital Project, Series A, 5.63%, 7/01/39

   $ 300     $ 318,633  

Reedy Creek Improvement District, GO, Series A, 5.25%, 6/01/33

     1,340       1,575,398  

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

     2,000       2,328,760  
    

 

 

 
               46,329,761  
Georgia — 2.5%             

City of Atlanta Georgia Department of Aviation, Refunding GARB, Series C, 6.00%, 1/01/30

     7,500       8,718,225  

County of Gainesville Georgia & Hall Hospital Authority, Refunding RB, Northeast Georgia Health System, Inc. Project, Series A, 5.50%, 8/15/54

     545       643,759  

Private Colleges & Universities Authority, RB, Savannah College of Art & Design:

    

5.00%, 4/01/33

     155       172,315  

5.00%, 4/01/44

     595       651,817  
    

 

 

 
               10,186,116  
Hawaii — 1.4%             

State of Hawaii Harbor System, RB, Series A, 5.50%, 7/01/35

     5,000       5,507,200  
Illinois — 13.0%             

City of Chicago Illinois O’Hare International Airport, ARB, Senior Lien, Series D, 5.25%, 1/01/42

     3,300       3,906,309  

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

    

5.63%, 1/01/21 (b)

     1,230       1,412,962  

5.63%, 1/01/35

     295       333,179  

City of Chicago Illinois O’Hare International Airport, Refunding GARB, Senior Lien, Series D, 5.25%, 1/01/34

     9,800       11,059,104  

City of Chicago Illinois Transit Authority, RB:

    

5.25%, 12/01/49

     3,500       3,910,585  

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

     650       706,297  

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

    

5.13%, 12/01/38

     7,700       8,106,945  

5.50%, 12/01/38

     1,000       1,077,000  

5.25%, 12/01/43

     500       526,880  

County of Cook Illinois Forest Preserve District, GO, Refunding, Limited Tax Project, Series B, 5.00%, 12/15/37

     210       224,627  

Illinois Finance Authority, Refunding RB:

    

Silver Cross Hospital & Medical Centers, Series C, 4.13%, 8/15/37

     3,130       3,208,970  

Silver Cross Hospital & Medical Centers, Series C, 5.00%, 8/15/44

     390       418,540  

University of Chicago Medical Center, Series B, 4.00%, 8/15/41

     900       927,162  

Railsplitter Tobacco Settlement Authority, RB, 6.00%, 6/01/28

     710       809,350  

State of Illinois, GO:

    

5.25%, 7/01/29

     8,345       8,994,992  

5.50%, 7/01/33

     880       953,260  

5.50%, 7/01/38

     1,475       1,593,000  

State of Illinois Toll Highway Authority, Refunding RB, Series B, 5.50%, 1/01/18 (b)

     4,500       4,570,965  
    

 

 

 
               52,740,127  
Indiana — 1.8%             

Indiana Finance Authority, RB, CWA Authority Project, 1st Lien, Series A, 5.25%, 10/01/38

     1,100       1,257,256  
Municipal Bonds    Par
(000)
    Value  
Indiana (continued)             

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

    

5.50%, 1/01/19 (b)

   $ 1,125     $ 1,195,279  

5.50%, 1/01/38

     4,625       4,877,062  
    

 

 

 
               7,329,597  
Iowa — 2.2%             

Iowa Finance Authority, RB, Iowa Health Care Facilities:

    

Genesis Health System, 5.50%, 7/01/33

     3,000       3,539,100  

Series A (AGC), 5.63%, 8/15/19 (b)

     5,000       5,455,650  
    

 

 

 
               8,994,750  
Kentucky — 0.4%             

State of Kentucky Property & Building Commission, Refunding RB, Project No. 93 (AGC):

    

5.25%, 2/01/19 (b)

     1,330       1,411,502  

5.25%, 2/01/29

     170       180,039  
    

 

 

 
               1,591,541  
Massachusetts — 1.3%             

Massachusetts Development Finance Agency, RB, Emerson College Issue, Series A, 5.00%, 1/01/47

     2,370       2,658,903  

Massachusetts Development Finance Agency, Refunding RB, Series A:

    

Emerson College, 5.00%, 1/01/40 (d)

     610       699,877  

Emmanuel College Issue, 5.00%, 10/01/43

     420       469,342  

Massachusetts School Building Authority, RB, Dedicated Sales Tax, Senior Series A, 5.00%, 5/15/43

     1,395       1,597,680  
    

 

 

 
               5,425,802  
Michigan — 6.2%             

City of Detroit Michigan Sewage Disposal System, Refunding RB, 2nd Lien, Series E (BHAC), 5.75%, 7/01/18 (b)

     3,000       3,122,040  

City of Lansing Michigan, RB, Board of Water & Light Utilities System, Series A, 5.50%, 7/01/41

     1,100       1,256,453  

Michigan Finance Authority, Refunding RB:

    

Henry Ford Health System, 5.00%, 11/15/41

     2,235       2,521,170  

Henry Ford Health System, 3.25%, 11/15/42

     995       918,902  

Trinity Health Credit Group, 5.00%, 12/01/21 (b)

     30       34,840  

Trinity Health Credit Group, 5.00%, 12/01/39

     9,020       10,175,913  

Royal Oak Hospital Finance Authority, Refunding RB, Beaumont Health Credit Group, Series D, 5.00%, 9/01/39

     1,560       1,738,136  

State of Michigan Building Authority, Refunding RB, Facilities Program:

    

Series I-A, 5.38%, 10/15/36

     2,000       2,273,340  

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

     800       909,336  

Series II-A, 5.38%, 10/15/36

     1,500       1,699,905  

Western Michigan University, Refunding RB, General, University and College Improvements (AGM), 5.00%, 11/15/39

     430       480,671  
    

 

 

 
               25,130,706  
Nebraska — 1.8%             

Central Plains Energy Project Nebraska, RB, Gas Project No. 3, 5.25%, 9/01/37

     6,345       7,059,384  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    31


Schedule of Investments (continued)

  

BlackRock Municipal Income Quality Trust (BYM)

 

Municipal Bonds    Par
(000)
    Value  
Nevada — 1.9%             

County of Clark Nevada, ARB, Las Vegas-McCarran International Airport, Series A:

    

5.25%, 7/01/42

   $ 3,000     $ 3,259,110  

(AGM), 5.25%, 7/01/39

     4,100       4,463,998  
    

 

 

 
               7,723,108  
New Jersey — 6.7%             

New Jersey EDA, RB, Series WW:

    

5.25%, 6/15/33

     170       186,595  

5.00%, 6/15/34

     225       242,100  

5.00%, 6/15/36

     1,395       1,498,105  

5.25%, 6/15/40

     400       439,896  

New Jersey Transportation Trust Fund Authority, RB:

    

5.00%, 6/15/36

     5,070       5,394,024  

CAB, Transportation System, Series A, 0.00%, 12/15/38 (c)

     5,845       2,147,102  

Transportation Program, Series AA, 5.25%, 6/15/33

     1,660       1,804,603  

Transportation Program, Series AA, 5.00%, 6/15/38

     945       1,010,498  

Transportation System, Series A, 5.50%, 6/15/41

     3,000       3,193,470  

Transportation System, Series AA, 5.50%, 6/15/39

     3,785       4,138,935  

Transportation System, Series B, 5.25%, 6/15/36

     5,000       5,287,650  

Transportation System, Series D, 5.00%, 6/15/32

     900       974,700  

New Jersey Turnpike Authority, Refunding RB, Series B, 4.00%, 1/01/37

     595       638,750  
    

 

 

 
               26,956,428  
New Mexico — 0.1%             

New Mexico Hospital Equipment Loan Council, Refunding RB, Presbyterian Healthcare Services, 5.00%, 8/01/44

     405       460,165  
New York — 3.8%             

City of New York New York Transitional Finance Authority, BARB, Fiscal 2009, Series S-4, 5.50%, 1/15/33

     1,950       2,069,691  

City of New York New York Transitional Finance Authority, RB, Future Tax Secured Fiscal, Sub-Series E-1, 5.00%, 2/01/37

     1,465       1,736,801  

City of New York New York Transitional Finance Authority, Refunding RB, Future Tax Secured, Series B, 5.00%, 11/01/32

     1,650       1,929,774  

Hudson Yards Infrastructure Corp., RB, Senior, Fiscal 2012:

    

5.75%, 2/15/21 (b)

     465       538,889  

5.75%, 2/15/47

     305       350,927  

Hudson Yards Infrastructure Corp., Refunding RB, 2nd Indenture, Series A, 5.00%, 2/15/39

     710       838,318  

Metropolitan Transportation Authority, Refunding RB, Series B, 5.00%, 11/15/37

     1,570       1,844,342  

New York City Water & Sewer System, Refunding RB, Second Generation Resolution, 5.00%, 6/15/37

     2,000       2,393,300  

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 205th Series, 5.00%, 11/15/37

     2,000       2,403,900  

State of New York Dormitory Authority, RB, Series B, 5.75%, 3/15/19 (b)

     1,300       1,397,383  
    

 

 

 
               15,503,325  
Municipal Bonds    Par
(000)
    Value  
Ohio — 0.7%             

County of Lucas Ohio, Refunding RB, Promedica Healthcare, Series A, 6.50%, 11/15/37

   $ 610     $ 720,983  

State of Ohio Turnpike Commission, RB, Junior Lien, Infrastructure Projects, Series A-1:

    

5.25%, 2/15/32

     780       923,232  

5.25%, 2/15/33

     1,095       1,292,330  
    

 

 

 
               2,936,545  
Oregon — 0.4%             

Counties of Washington & Multnomah Oregon School District No. 48J Beaverton, GO, Convertible CAB, Series D, 0.00%, 6/15/36 (a)

     945       1,081,723  

County of Clackamas Oregon School District No. 12 North Clackamas, GO, CAB, Series A, 0.00%, 6/15/38 (c)

     1,115       483,319  
    

 

 

 
               1,565,042  
Pennsylvania — 3.5%             

Pennsylvania HFA, RB, S/F Housing Mortgage, Series 118-B, 4.05%, 10/01/40

     1,770       1,835,508  

Pennsylvania Higher Educational Facilities Authority, Refunding RB, Thomas Jefferson University, Series A, 5.25%, 9/01/50

     4,245       4,772,993  

Pennsylvania Turnpike Commission, RB:

    

Series A, 5.00%, 12/01/38

     695       795,650  

Series A-1, 5.00%, 12/01/41

     2,730       3,124,731  

Series B, 5.00%, 12/01/40

     1,060       1,213,043  

Series C, 5.50%, 12/01/33

     630       742,297  

Subordinate, Special Motor License Fund, 6.00%, 12/01/20 (b)

     625       725,362  

Pennsylvania Turnpike Commission, Refunding RB, Series A-1, 5.00%, 12/01/40

     850       966,110  
    

 

 

 
               14,175,694  
Rhode Island — 1.5%             

Rhode Island Commerce Corp., RB, Airport Corp., Series D, 5.00%, 7/01/46

     250       281,305  

Tobacco Settlement Financing Corp., Refunding RB, Series B, 4.50%, 6/01/45

     5,855       5,923,445  
    

 

 

 
               6,204,750  
South Carolina — 5.0%             

South Carolina Jobs EDA, Refunding RB, Palmetto Health, Series A (AGM), 6.50%, 8/01/39

     260       302,900  

State of South Carolina Ports Authority, RB, 5.25%, 7/01/40

     5,000       5,461,250  

State of South Carolina Public Service Authority, RB, Santee Cooper:

    

Series A, 5.50%, 12/01/54

     6,960       7,950,547  

Series E, 5.50%, 12/01/53

     610       691,014  

State of South Carolina Public Service Authority, Refunding RB, Series B:

    

Santee Cooper, 5.00%, 12/01/38

     2,360       2,603,009  

(AGM), 5.00%, 12/01/56

     2,845       3,217,695  
    

 

 

 
               20,226,415  
Tennessee — 0.0%             

Metropolitan Government of Nashville & Davidson County Health & Educational Facilities Board, RB, Vanderbilt University Medical Center, Series A, 5.00%, 7/01/40

     35       39,669  
Texas — 19.1%             

City of Houston Texas Combined Utility System Revenue, Refunding RB, 1st Lien, Series B, 5.00%, 11/15/36

     2,890       3,428,465  

City of San Antonio Texas Electric & Gas Revenue, RB, Junior Lien, 5.00%, 2/01/38

     615       704,157  
 

 

See Notes to Financial Statements.      
                
32    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Income Quality Trust (BYM)

 

Municipal Bonds    Par
(000)
    Value  
Texas (continued)             

Coppell Texas ISD, GO, CAB, Refunding (PSF-GTD), 0.00%, 8/15/30 (c)

   $ 10,030     $ 7,094,119  

County of Harris Texas, GO, Refunding, (NPFGC) (c):

    

0.00%, 8/15/25

     7,485       6,424,525  

0.00%, 8/15/28

     10,915       8,587,595  

County of Harris Texas Houston Sports Authority, Refunding RB, CAB, Junior Lien, Series H (NPFGC) (c):

    

0.00%, 11/15/38

     5,785       2,142,301  

0.00%, 11/15/39

     6,160       2,136,966  

County of Midland Texas Fresh Water Supply District No. 1, RB, CAB, City of Midland Project, Series A, 0.00%, 9/15/36 (c)

     2,340       1,083,724  

Dallas-Fort Worth International Airport, Refunding ARB, Series F, 5.25%, 11/01/33

     1,090       1,291,748  

Grand Parkway Transportation Corp., RB, Convertible CAB, Series B, 0.00%, 10/01/46 (a)

     2,365       2,238,378  

Harris County-Houston Texas Sports Authority, Refunding RB, 3rd Lien, Series A (NPFGC) (c):

    

0.00%, 11/15/24 (b)

     5,965       2,287,339  

0.00%, 11/15/38

     10,925       3,647,967  

Leander ISD, GO, Refunding, CAB, Series D, 0.00%, 8/15/38 (c)

     3,775       1,563,529  

North Texas Tollway Authority, RB:

    

CAB, Special Project System, Series B, 0.00%, 9/01/37 (c)

     1,975       796,360  

Convertible CAB, Series C, 0.00%, 9/01/45 (a)

     2,500       2,961,650  

Special Projects System, Series A, 6.00%, 9/01/41

     1,000       1,175,350  

North Texas Tollway Authority, Refunding RB:

    

1st Tier System (NPFGC), 5.75%, 1/01/18 (b)

     8,650       8,793,330  

1st Tier System (NPFGC), 5.75%, 1/01/40

     2,785       2,826,385  

1st Tier System, Series A, 6.00%, 1/01/19 (b)

     510       544,532  

1st Tier System, Series A, 6.00%, 1/01/28

     115       122,754  

1st Tier System, Series S (NPFGC), 5.75%, 1/01/18 (b)

     11,615       11,807,461  

Series B, 5.00%, 1/01/40

     385       430,726  

Texas Municipal Gas Acquisition & Supply Corp. III, RB, Natural Gas Utility Improvements:

    

5.00%, 12/15/31

     2,105       2,330,003  

5.00%, 12/15/32

     2,540       2,799,690  
    

 

 

 
               77,219,054  
Utah — 2.0%             

Salt Lake City Corp. Airport Revenue, RB, Series B, 5.00%, 7/01/42

     2,575       3,029,848  

Utah Transit Authority, RB, Series A (AGM), 5.00%, 6/15/18 (b)

     5,000       5,165,250  
    

 

 

 
               8,195,098  
Virginia — 0.1%             

County of Fairfax Virginia IDA, Refunding RB, Health Care-Inova Health:

    

5.50%, 5/15/19 (b)

     140       150,968  

5.50%, 5/15/35

     260       278,218  
    

 

 

 
               429,186  
Washington — 2.6%             

Central Puget Sound Regional Transit Authority, RB, Series A (AGM), 5.00%, 11/01/17 (b)

     3,500       3,524,955  
Municipal Bonds    Par
(000)
    Value  
Washington (continued)             

Washington Health Care Facilities Authority, RB:

    

MultiCare Health System, Remarketing, Series B, 5.00%, 8/15/44

   $ 2,000     $ 2,246,540  

MultiCare Health System, Series C (AGC), 5.50%, 8/15/18 (b)

     4,000       4,176,720  

Providence Health & Services, Series A, 5.25%, 10/01/39

     675       725,180  
    

 

 

 
               10,673,395  
Wisconsin — 2.6%             

Public Finance Authority, RB, KU Campus Development Corp., Central District Development Project, 5.00%, 3/01/46

     3,215       3,650,375  

State of Wisconsin Health & Educational Facilities Authority, RB:

    

Ascension Health Senior Credit Group, Series E, 5.00%, 11/15/33

     1,500       1,617,570  

Marshfield Clinic Health System, Inc. Series C, 4.00%, 2/15/42 (d)

     5,000       5,054,750  
    

 

 

 
               10,322,695  
Total Municipal Bonds — 116.4%              470,716,358  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
              
Arizona — 0.3%             

City of Phoenix Arizona Civic Improvement Corp., Refunding RB, Water System, Junior Lien, Series A, 5.00%, 7/01/19 (b)

     1,300       1,397,422  
California — 2.2%             

California State University, RB, Systemwide, Series A (AGM) (f):

    

5.00%, 5/01/18 (b)

     3,292       3,384,902  

5.00%, 11/01/33

     86       88,574  

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

    

5.00%, 5/01/18

     808       830,991  

5.00%, 5/01/18

     4,062       4,177,998  

San Diego Community College District California, GO, Election of 2002, 5.25%, 8/01/19 (b)

     449       486,448  
    

 

 

 
               8,968,913  
Connecticut — 0.4%             

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

     1,561       1,781,170  
District of Columbia — 0.3%             

District of Columbia, RB, Series A, 5.50%, 12/01/30 (f)

     1,080       1,184,989  
Florida — 5.9%             

City of Miami Beach Florida, RB, 5.00%, 9/01/45

     3,500       4,005,295  

County of Miami-Dade Florida, Refunding RB, Transit System Sales Surtax, 5.00%, 7/01/42

     1,950       2,221,109  

County of Miami-Dade Florida Water & Sewer System, (AGC), 5.00%, 10/01/39

     10,101       11,141,676  

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

     6,096       6,629,454  
    

 

 

 
               23,997,534  
Illinois — 5.1%             

Illinois Finance Authority, RB, The Carle Foundation, Series A (AGM), 6.00%, 8/15/41

     2,400       2,742,672  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    33


Schedule of Investments (continued)

  

BlackRock Municipal Income Quality Trust (BYM)

 

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

State of Illinois, RB, Build Illinois, Series B, 5.25%, 6/15/19 (b)(f)

   $ 1,400     $ 1,507,442  

State of Illinois Toll Highway Authority, RB:

    

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

     3,045       3,476,912  

Senior, Series B, 5.00%, 1/01/40

     1,170       1,340,877  

Series A, 5.00%, 1/01/38

     7,714       8,675,531  

Series C, 5.00%, 1/01/38

     2,658       3,020,061  
    

 

 

 
               20,763,495  
Kansas — 1.6%             

County of Wyandotte Kansas Unified School District, GO, Series A, 5.50%, 9/01/47

     5,363       6,588,741  
Maryland — 0.9%             

City of Baltimore Maryland Water Utility Fund, RB, Sub-Water Projects, Series A, 5.00%, 7/01/41

     3,139       3,671,525  
Massachusetts — 0.5%             

Commonwealth of Massachusetts, GO, Series A, 5.00%, 3/01/46

     1,661       1,922,131  
Michigan — 0.9%             

Michigan Finance Authority, RB, Beaumont Health Credit Group, Series A, 5.00%, 11/01/44

     2,220       2,502,209  

Michigan State Building Authority, Refunding RB, Facilities Program, Series I, 5.00%, 10/15/45

     960       1,095,235  
    

 

 

 
               3,597,444  
Nevada — 2.8%             

City of Las Vegas Nevada, GO, Limited Tax, Performing Arts Center, 6.00%, 4/01/19 (b)(f)

     4,197       4,535,269  

County of Clark Nevada Water Reclamation District, GO, Limited Tax, Series B, 5.75%, 7/01/19 (b)

     2,024       2,203,535  

Las Vegas Valley Water District Nevada, GO, Refunding, Water Improvement, Series A, 5.00%, 6/01/46

     3,900       4,535,310  
    

 

 

 
               11,274,114  
New Jersey — 0.8%             

County of Hudson New Jersey Improvement Authority, RB, Hudson County Vocational-Technical Schools Project, 5.25%, 5/01/51

     920       1,072,315  

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

     2,000       2,115,547  
    

 

 

 
               3,187,862  
New York — 13.5%             

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Fiscal 2013, Series CC, 5.00%, 6/15/47

     6,240       7,148,655  

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

    

Fiscal 2014, Series DD, 5.00%, 6/15/35

     1,845       2,171,620  

Series FF, 5.00%, 6/15/39

     8,355       9,766,744  

Metropolitan Transportation Authority, RB, Sub-Series D-1, 5.25%, 11/15/44

     3,850       4,574,724  

Metropolitan Transportation Authority, Refunding RB, Series C-1, 5.25%, 11/15/56

     1,700       2,008,270  

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

     12,500       14,664,625  

New York State Urban Development Corp., RB, Personal Income Tax, General Purpose, Series A-1, 5.00%, 3/15/43

     5,720       6,480,645  
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)
   Par
(000)
    Value  
New York (continued)             

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 198th Series, 5.25%, 11/15/56

   $ 2,561     $ 3,027,610  

Triborough Bridge & Tunnel Authority, RB, General, Series A-2, 5.25%, 11/15/34 (f)

     4,500       4,737,420  
    

 

 

 
               54,580,313  
Ohio — 0.2%             

State of Ohio, RB, Cleveland Clinic Health Obligated Group, Series B, 5.50%, 1/01/34

     620       655,830  
Pennsylvania — 1.8%             

County of Westmoreland Pennsylvania Municipal Authority, Refunding RB, (BAM), 5.00%, 8/15/42

     1,020       1,161,862  

Pennsylvania Turnpike Commission, RB, Sub-Series A, 5.50%, 12/01/42

     4,997       5,950,856  
    

 

 

 
               7,112,718  
South Carolina — 0.2%             

South Carolina Public Service Authority, Refunding RB, Series A (b)(f):

    

5.50%, 1/01/19

     48       50,755  

5.50%, 1/01/19

     553       586,866  
    

 

 

 
               637,621  
Texas — 2.4%             

City of Houston Texas, Refunding RB, Airport System, Senior Lien, Series A, 5.50%, 7/01/34

     4,167       4,324,305  

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

     719       801,902  

County of Tarrant Texas Cultural Education Facilities Finance Corp., Refunding RB, Texas Health Resources System, Series A, 5.00%, 2/15/41

     3,920       4,551,708  
    

 

 

 
               9,677,915  
Washington — 1.0%             

Washington Health Care Facilities Authority, Refunding RB, Seattle Children’s Hospital, Series B, 5.00%, 10/01/38

     3,210       3,943,036  
Wisconsin — 1.6%             

Wisconsin Health & Educational Facilities Authority, Refunding RB, Froedtert & Community Health, Inc., Obligated Group:

    

Series A, 5.00%, 4/01/42

     3,520       3,835,673  

Series C, 5.25%, 4/01/19 (b)

     2,500       2,671,400  
    

 

 

 
               6,507,073  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 42.4%
             171,449,846  
Total Long-Term Investments
(Cost — $591,528,601) — 158.8%
             642,166,204  
 

 

See Notes to Financial Statements.      
                
34    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Income Quality Trust (BYM)

 

Short-Term Securities    Shares     Value  

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.62% (g)(h)

     1,889,865     $ 1,890,432  
Total Short-Term Securities
(Cost — $1,890,432) — 0.4%
             1,890,432  

Total Investments (Cost — $593,419,033) — 159.2%

 

    644,056,636  

Liabilities in Excess of Other Assets — (0.2)%

       (839,696

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (25.1)%

 

    (101,542,715

VMTP Shares at Liquidation Value — (33.9)%

 

    (137,200,000
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 404,474,225  
    

 

 

 
 
Notes to Schedule of Investments

 

(a)   Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

 

(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 Trust. 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 security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire between November 1, 2017 and June 15, 2019 is $10,516,858. See Note 4 of the Notes to Financial Statements for details.

 

(g)   Annualized 7-day yield as of period end.

 

(h)   During the year ended August 31, 2017, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliated   Shares Held
at August 31,
2016
    Net
Activity
    Shares Held
at August 31,
2017
    Value at
August 31,
2017
    Income     Net
Realized Gain1
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

    3,605,050       (1,715,185     1,889,865     $ 1,890,432     $ 26,387     $ 5,994        

1    Includes net capital gain distributions.

     

 

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

               

5-Year U.S. Treasury Note

    (58      December 2017      $ 6,873     $ (13,440  

10-Year U.S. Treasury Note

    (141      December 2017      $ 17,905       (25,725  

Long U.S. Treasury Bond

    (128      December 2017      $ 19,980       (89,796  

Ultra Long U.S. Treasury Bond

    (27      December 2017      $ 4,565       (19,610        

Total

              $ (148,571  
             

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

   Net unrealized depreciation1                           $ 148,571           $ 148,571  

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

    

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    35


Schedule of Investments (concluded)

  

BlackRock Municipal Income Quality Trust (BYM)

 

For the year ended August 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

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

Futures contracts

                  $1,027,180         $ 1,027,180  
Net Change in Unrealized Appreciation (Depreciation) from:                                           

Futures contracts

                  $(179,501)         $ (179,501

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:  

Average notional value of contracts — long

  $ 1,088,117 1 

Average notional value of contracts — short

  $ 47,562,867  

1    Actual amounts for the period are shown due to limited outstanding derivative financial instruments as of each quarter end.

     

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments1

           $ 642,166,204              $ 642,166,204  

Short-Term Securities

  $ 1,890,432                         1,890,432  
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

  $ 1,890,432        $ 642,166,204              $ 644,056,636  
 

 

 

      

 

 

      

 

 

   

 

 

 
             
Derivative Financial Instruments 2                                      

Liabilities:

             

Interest rate contracts

  $ (148,571                     $ (148,571

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

 

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

    

    

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

 

     Level 1        Level 2        Level 3     Total  

Liabilities:

             

TOB Trust Certificates

           $ (101,288,260            $ (101,288,260

VMTP Shares at Liquidation Value

             (137,200,000              (137,200,000
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

           $ (238,488,260            $ (238,488,260
 

 

 

      

 

 

      

 

 

   

 

 

 

During the year ended August 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.      
                
36    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments August 31, 2017

  

BlackRock Municipal Income Trust II (BLE)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par
(000)
    Value  
Alabama — 2.1%             

County of Jefferson Alabama Sewer, Refunding RB:

    

Senior Lien, Series A (AGM), 5.00%, 10/01/44

   $ 540     $ 608,996  

Senior Lien, Series A (AGM), 5.25%, 10/01/48

     1,320       1,507,691  

Sub-Lien, Series D, 7.00%, 10/01/51

     3,220       3,962,950  

Lower Alabama Gas District, RB, Series A, 5.00%, 9/01/46

     1,170       1,448,729  
    

 

 

 
               7,528,366  
Arizona — 2.8%             

City of Phoenix Arizona IDA, RB, Legacy Traditional Schools Projects, Series A, 5.00%, 7/01/46 (a)

     1,825       1,869,731  

Salt Verde Financial Corp., RB, Senior:

    

5.00%, 12/01/32

     5,635       6,782,906  

5.00%, 12/01/37

     1,000       1,217,890  
    

 

 

 
               9,870,527  
California — 10.9%             

Bay Area Toll Authority, Refunding RB, San Francisco Bay Area Toll Bridge, Series F-1, 5.63%, 4/01/19 (b)

     2,480       2,668,703  

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

     3,500       3,975,440  

California Health Facilities Financing Authority, Refunding RB, St. Joseph Health System, Series A, 5.00%, 7/01/33

     1,365       1,566,679  

California Municipal Finance Authority, RB, Senior, Caritas Affordable Housing, Inc. Projects, S/F Housing, Series A:

    

5.25%, 8/15/39

     160       177,254  

5.25%, 8/15/49

     395       434,780  

California Municipal Finance Authority, Refunding RB, Community Medical Centers, Series A:

    

5.00%, 2/01/36

     345       395,743  

5.00%, 2/01/37

     260       297,557  

California Pollution Control Financing Authority, RB, Poseidon Resources (Channel Side) LP Desalination Project, AMT, 5.00%, 11/21/45 (a)

     1,655       1,776,146  

California Statewide Communities Development Authority, RB, Loma Linda University Medical Center, Series A, 5.00%, 12/01/46 (a)

     490       531,875  

City of Los Angeles California Department of Airports, Refunding ARB, Los Angeles International Airport, Series A:

    

Senior, 5.00%, 5/15/40

     6,500       7,150,520  

5.25%, 5/15/39

     860       921,069  

City of Stockton California Public Financing Authority, RB, Delta Water Supply Project, Series A, 6.25%, 10/01/38

     380       471,755  

San Marcos Unified School District, GO, CAB, Election of 2010, Series B (c):

    

0.00%, 8/01/33

     3,000       1,756,920  

0.00%, 8/01/43

     2,500       930,525  

State of California, GO, Various Purposes:

    

6.00%, 3/01/33

     1,760       1,977,378  

6.50%, 4/01/33

     10,645       11,614,972  

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

    

Series I, 5.00%, 11/01/38

     825       941,655  

Sub-Series I-1, 6.38%, 11/01/19 (b)

     1,280       1,432,666  
    

 

 

 
               39,021,637  
Colorado — 0.7%             

Colorado Health Facilities Authority, Refunding RB, Catholic Health Initiative, Series A, 5.50%, 7/01/34

     2,330       2,421,616  

Colorado High Performance Transportation Enterprise, RB, C-470 Express Lanes, 5.00%, 12/31/47

     235       261,146  
    

 

 

 
               2,682,762  
Municipal Bonds    Par
(000)
    Value  
Connecticut — 0.3%             

Connecticut State Health & Educational Facility Authority, RB, Ascension Health Senior Credit, Series A, 5.00%, 11/15/40

   $ 1,005     $ 1,074,435  
Delaware — 2.0%             

County of Sussex Delaware, RB, NRG Energy, Inc., Indian River Power LLC Project, 6.00%, 10/01/40

     1,240       1,333,781  

Delaware Transportation Authority, RB, U.S. 301 Project, 5.00%, 6/01/55

     1,260       1,412,687  

State of Delaware EDA, RB, Exempt Facilities, Indian River Power LLC Project, 5.38%, 10/01/45

     4,275       4,448,822  
    

 

 

 
               7,195,290  
District of Columbia — 4.7%             

District of Columbia, Refunding RB:

    

Georgetown University, 5.00%, 4/01/35

     465       553,038  

Georgetown University Issue, 5.00%, 4/01/42

     540       633,782  

Kipp Charter School, Series A, 6.00%, 7/01/43

     820       950,232  

District of Columbia Tobacco Settlement Financing Corp., Refunding RB, Asset-Backed, 6.75%, 5/15/40

     11,500       11,832,925  

Metropolitan Washington Airports Authority, Refunding RB, Dulles Toll Road, 1st Senior Lien, Series A:

    

5.00%, 10/01/39

     550       587,956  

5.25%, 10/01/44

     2,000       2,144,900  
    

 

 

 
               16,702,833  
Florida — 5.3%             

City of Atlantic Beach Florida, RB, Health Care Facilities, Fleet Landing Project, Series B, 5.63%, 11/15/43

     1,445       1,615,712  

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

     1,665       1,809,922  

County of Collier Florida Health Facilities Authority, Refunding RB, Series A, 5.00%, 5/01/45

     1,450       1,616,750  

County of Miami-Dade Florida Aviation, Refunding ARB, Miami International Airport:

    

Series A (AGC), AMT, 5.25%, 10/01/18 (b)

     1,385       1,449,874  

Series A (AGC), AMT, 5.25%, 10/01/38

     240       249,494  

Series A-1, 5.38%, 10/01/41

     1,255       1,386,775  

County of Miami-Dade Florida Water & Sewer System, RB, (AGM), 5.00%, 10/01/39

     5,000       5,514,950  

Mid-Bay Florida Bridge Authority, RB, Springing Lien, Series A, 7.25%, 10/01/21 (b)

     3,300       4,093,188  

Stevens Plantation Community Development District, RB, Special Assessment, Series A, 7.10%, 5/01/35 (d)(e)

     1,795       1,255,656  
    

 

 

 
               18,992,321  
Georgia — 0.5%             

County of Gainesville Georgia & Hall Hospital Authority, Refunding RB, Northeast Georgia Health System, Inc. Project, Series A, 5.50%, 8/15/54

     555       655,571  

DeKalb Georgia Private Hospital Authority, Refunding RB, Children’s Healthcare, 5.25%, 11/15/39

     915       991,229  
    

 

 

 
               1,646,800  
Hawaii — 0.5%             

State of Hawaii Harbor System, RB, Series A, 5.25%, 7/01/30

     1,480       1,618,247  
Idaho — 0.3%             

Idaho Health Facilities Authority, RB, Trinity Health Credit Group, Series A, 5.00%, 12/01/46

     805       923,319  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    37


Schedule of Investments (continued)

  

BlackRock Municipal Income Trust II (BLE)

 

Municipal Bonds   

Par

(000)

    Value  
Illinois — 19.7%             

City of Chicago Illinois, GO, Project, Series A, 5.00%, 1/01/34

   $ 2,705     $ 2,801,704  

City of Chicago Illinois, GO, Refunding, Project, Series A, 5.25%, 1/01/32

     4,940       5,299,336  

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

    

Series A, 5.75%, 1/01/21 (b)

     4,200       4,841,886  

Series A, 5.75%, 1/01/39

     800       907,888  

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

     6,430       7,570,232  

City of Chicago Illinois Transit Authority, RB, Sales Tax Receipts, 5.25%, 12/01/40

     1,150       1,242,931  

City of Chicago Illinois Waterworks, Refunding RB, 2nd Lien Project, 5.00%, 11/01/42

     3,130       3,322,620  

County of Cook Illinois Community College District No. 508, GO, City College of Chicago, 5.50%, 12/01/38

     845       910,065  

Illinois Finance Authority, Refunding RB:

    

Ascension Health, Series A, 5.00%, 11/15/37

     1,060       1,177,215  

Central Dupage Health, Series B, 5.50%, 11/01/39

     1,750       1,908,060  

Presence Health Network, Series C, 4.00%, 2/15/41

     1,545       1,575,483  

Illinois Sports Facilities Authority, RB, State Tax Supported (AMBAC), 5.50%, 6/15/30

     7,445       7,557,345  

Illinois State Toll Highway Authority, RB, Senior:

    

Series A, 5.00%, 1/01/38

     2,160       2,429,136  

Series C, 5.00%, 1/01/36

     2,815       3,206,876  

Series C, 5.00%, 1/01/37

     3,005       3,421,192  

Metropolitan Pier & Exposition Authority, Refunding RB, McCormick Place Expansion Project:

    

Series B (AGM), 5.00%, 6/15/50

     6,725       7,143,160  

Series B-2, 5.00%, 6/15/50

     2,725       2,745,247  

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     520       592,821  

6.00%, 6/01/28

     1,255       1,430,612  

State of Illinois, GO:

    

5.00%, 2/01/39

     1,640       1,698,138  

Series A, 5.00%, 4/01/35

     2,500       2,592,225  

Series A, 5.00%, 4/01/38

     3,885       4,012,739  

State of Illinois, RB, Build Illinois,
Series B, 5.25%, 6/15/19 (b)

     685       737,793  

University of Illinois, RB, Auxiliary Facilities System,
Series A, 5.00%, 4/01/44

     1,050       1,160,712  
    

 

 

 
               70,285,416  
Indiana — 4.8%             

City of Valparaiso Indiana, RB, Exempt Facilities, Pratt Paper LLC Project, AMT:

    

6.75%, 1/01/34

     845       1,003,699  

7.00%, 1/01/44

     3,535       4,237,687  

Indiana Finance Authority, RB, Series A:

    

CWA Authority Project, 1st Lien, 5.25%, 10/01/38

     3,510       4,011,789  

Private Activity Bond, Ohio River Bridges East End Crossing Project, AMT, 5.00%, 7/01/44

     485       523,063  

Private Activity Bond, Ohio River Bridges East End Crossing Project, AMT, 5.00%, 7/01/48

     1,610       1,733,712  

Private Activity Bond, Ohio River Bridges East End Crossing Project, AMT, 5.25%, 1/01/51

     435       471,014  

Sisters of St. Francis Health Services, 5.25%, 11/01/39

     915       987,450  

Indiana Finance Authority, Refunding RB, Marquette Project, 4.75%, 3/01/32

     1,180       1,207,329  

Indiana Municipal Power Agency, RB,
Series B, 6.00%, 1/01/19 (b)

     1,200       1,282,908  

Indianapolis Local Public Improvement Bond Bank, RB, Series A, 5.00%, 1/15/40

     1,380       1,565,762  
    

 

 

 
               17,024,413  
Municipal Bonds   

Par

(000)

    Value  
Iowa — 1.9%             

Iowa Finance Authority, Refunding RB, Midwestern Disaster Area, Iowa Fertilizer Co. Project:

    

5.00%, 12/01/19

   $ 520     $ 530,925  

5.50%, 12/01/22

     2,550       2,603,091  

5.25%, 12/01/25

     500       533,515  

5.88%, 12/01/26 (a)

     445       464,745  

Iowa Student Loan Liquidity Corp., Refunding RB, Student Loan, Senior Series A-1, AMT, 5.15%, 12/01/22

     1,085       1,151,901  

Iowa Tobacco Settlement Authority, Refunding RB, Asset-Backed, Series C, 5.63%, 6/01/46

     1,610       1,614,830  
    

 

 

 
               6,899,007  
Kentucky — 0.6%             

Kentucky Economic Development Finance Authority, RB, Catholic Health Initiatives, Series A, 5.25%, 1/01/45

     1,060       1,140,931  

Kentucky Public Transportation Infrastructure Authority, RB, Downtown Crossing Project, Convertible CAB, 1st Tier, Series C, 0.00%, 7/01/43 (f)

     1,280       1,120,474  
    

 

 

 
               2,261,405  
Louisiana — 2.8%             

Louisiana Local Government Environmental Facilities & Community Development Authority, RB, Westlake Chemical Corp. Project, Series A-1, 6.50%, 11/01/35

     3,650       4,135,194  

Tobacco Settlement Financing Corp., Refunding RB, Asset-Backed, Series A:

    

5.50%, 5/15/30

     1,100       1,173,381  

5.25%, 5/15/31

     935       992,418  

5.25%, 5/15/32

     1,195       1,284,243  

5.25%, 5/15/33

     1,300       1,391,208  

5.25%, 5/15/35

     795       869,317  
    

 

 

 
               9,845,761  
Maryland — 1.8%             

City of Baltimore Maryland, Refunding RB, Convention Center Hotel:

    

5.00%, 9/01/34

     470       542,347  

5.00%, 9/01/42

     920       1,050,612  

Maryland EDC, RB, Transportation Facilities Project, Series A, 5.75%, 6/01/35

     475       509,015  

Maryland EDC, Refunding RB, CNX Marine Terminals, Inc., 5.75%, 9/01/25

     800       823,792  

Maryland Health & Higher Educational Facilities Authority, RB, Trinity Health Credit Group, Series 2017, 5.00%, 12/01/46

     455       525,998  

Maryland Health & Higher Educational Facilities Authority, Refunding RB, Charlestown Community Project, 6.25%, 1/01/21 (b)

     2,400       2,805,984  
    

 

 

 
               6,257,748  
Massachusetts — 1.4%             

Commonwealth of Massachusetts, GO, Series E, 3.00%, 4/01/44

     2,740       2,588,697  

Massachusetts Development Finance Agency, Refunding RB, Covanta Energy Project, Series C, AMT, 5.25%, 11/01/42 (a)

     1,530       1,532,219  

Massachusetts Health & Educational Facilities Authority, Refunding RB, Partners Healthcare System, Series J1, 5.00%, 7/01/39

     955       1,011,813  
    

 

 

 
               5,132,729  
 

 

See Notes to Financial Statements.      
                
38    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Income Trust II (BLE)

 

Municipal Bonds   

Par

(000)

    Value  
Michigan — 2.7%             

City of Detroit Michigan Sewage Disposal System, Refunding RB, Senior Lien, Series A, 5.25%, 7/01/39

   $ 4,825     $ 5,367,282  

Kalamazoo Hospital Finance Authority, Refunding RB, Bronson Methodist Hospital:

    

5.50%, 5/15/20 (b)

     830       928,139  

5.50%, 5/15/36

     670       732,551  

Michigan Finance Authority, Refunding RB:

    

Detroit Water & Sewage Department Project, Senior Lien, Series C-1, 5.00%, 7/01/44

     940       1,023,077  

Henry Ford Health System, 4.00%, 11/15/46

     1,540       1,584,183  
    

 

 

 
               9,635,232  
Missouri — 1.8%             

370/Missouri Bottom Road/Taussig Road Transportation Development District, RB, 7.20%, 5/01/33

     6,000       4,679,940  

Bi-State Development Agency of the Missouri-Illinois Metropolitan District, Refunding RB, Combined Lien, Series A, 5.00%, 10/01/44

     275       315,472  

State of Missouri Health & Educational Facilities Authority, RB, Senior Living Facilities, Lutheran Senior Services, 5.50%, 2/01/42

     1,135       1,196,835  

State of Missouri Health & Educational Facilities Authority, Refunding RB, St. Louis College of Pharmacy Project, 5.50%, 5/01/43

     265       291,444  
    

 

 

 
               6,483,691  
Multi-State — 1.9%             

Centerline Equity Issuer Trust (a):

    

Series A-4-2, 6.00%, 5/15/19

     3,500       3,739,820  

Series B-3-2, 6.30%, 5/15/19

     3,000       3,220,320  
    

 

 

 
               6,960,140  
Nebraska — 1.6%             

Central Plains Energy Project Nebraska, RB, Gas Project No. 3:

    

5.25%, 9/01/37

     895       995,768  

5.00%, 9/01/42

     1,570       1,712,509  

County of Lancaster Nebraska Hospital Authority No. 1, Refunding RB, Immanuel Obligation Group, Health Facilities, 5.63%, 1/01/40

     1,245       1,344,388  

County of Sarpy Nebraska Hospital Authority No. 1, Refunding RB, Immanuel Obligation Group, 5.63%, 1/01/40

     1,635       1,737,793  
    

 

 

 
               5,790,458  
New Jersey — 8.4%             

Casino Reinvestment Development Authority, Refunding RB:

 

 

5.25%, 11/01/39

     1,805       1,897,181  

5.25%, 11/01/44

     1,640       1,712,488  

County of Essex New Jersey Improvement Authority, RB, AMT, 5.25%, 7/01/45 (a)

     1,165       1,172,211  

New Jersey EDA, RB, Continental Airlines, Inc. Project, AMT:

    

4.88%, 9/15/19

     460       475,727  

5.13%, 9/15/23

     2,130       2,303,510  

5.25%, 9/15/29

     2,130       2,317,887  

New Jersey EDA, Refunding RB, Special Assessment, Kapkowski Road Landfill Project, 6.50%, 4/01/28

     7,475       8,812,278  

New Jersey State Turnpike Authority, RB:

    

Series A, 5.00%, 1/01/43

     2,160       2,432,678  

Series E, 5.00%, 1/01/45

     2,810       3,225,178  

New Jersey Transportation Trust Fund Authority, RB:

    

Transportation Program, Series AA, 5.00%, 6/15/44

     730       776,107  
Municipal Bonds   

Par

(000)

    Value  
New Jersey (continued)             

New Jersey Transportation Trust Fund Authority, RB (continued):

 

Transportation Program, Series AA, 5.00%, 6/15/44

   $ 1,355     $ 1,430,772  

Transportation System, Series B, 5.25%, 6/15/36

     2,690       2,844,756  

Rutgers — The State University of New Jersey, Refunding RB, Series L, 5.00%, 5/01/43

     570       647,742  
    

 

 

 
               30,048,515  
New York — 8.1%             

City of New York New York Transitional Finance Authority Future Tax Secured, RB, Fiscal 2012, Sub-Series E-1, 5.00%, 2/01/42

     2,680       3,014,571  

Counties of New York Tobacco Trust IV, Refunding RB, Settlement Pass-Through Turbo, Series A,
6.25%, 6/01/41 (a)

     2,000       2,056,740  

County of Westchester New York Healthcare Corp., RB, Senior Lien, Series A, 5.00%, 11/01/44

     819       879,723  

Hudson Yards Infrastructure Corp., Refunding RB, 2nd Indenture, Series A, 5.00%, 2/15/39

     1,005       1,186,634  

Metropolitan Transportation Authority, RB, Series B:

    

5.25%, 11/15/38

     2,555       3,020,802  

5.25%, 11/15/39

     910       1,073,427  

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

     1,135       1,284,389  

New York Liberty Development Corp., Refunding RB:

    

2nd Priority, Bank of America Tower at One Bryant Park Project, Class 3, 6.38%, 7/15/49

     1,335       1,443,589  

3 World Trade Center Project, Class 1,
5.00%, 11/15/44 (a)

     4,320       4,695,192  

3 World Trade Center Project, Class 2,
5.15%, 11/15/34 (a)

     365       401,091  

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

     910       1,009,836  

New York Transportation Development Corp., Refunding RB, American Airlines, Inc., AMT:

    

5.00%, 8/01/26

     675       725,038  

5.00%, 8/01/31

     1,620       1,730,630  

Niagara Area Development Corp., Refunding RB, Solid Waste Disposal Facility, Covanta Energy Project, Series A, AMT, 5.25%, 11/01/42 (a)

     1,145       1,147,336  

Port Authority of New York & New Jersey, ARB, JFK International Air Terminal LLC Project, Series 8:

    

6.00%, 12/01/42

     1,635       1,829,320  

Special Project, 6.00%, 12/01/36

     1,410       1,581,033  

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 205th Series, 5.00%, 11/15/47

     1,570       1,856,336  
    

 

 

 
               28,935,687  
North Carolina — 1.4%             

North Carolina Capital Facilities Finance Agency, Refunding RB, Solid Waste Disposal Facility, Duke Energy Carolinas Project, Series B, 4.63%, 11/01/40

     1,000       1,080,340  

North Carolina Medical Care Commission, RB, Health Care Facilities, Duke University Health System, Series A, 5.00%, 6/01/19 (b)

     1,525       1,634,541  

North Carolina Medical Care Commission, Refunding RB, 1st Mortgage:

    

Aldersgate, 6.25%, 7/01/35

     1,530       1,699,034  

Retirement Facilities Whitestone Project, Series A, 7.75%, 3/01/41

     625       688,088  
    

 

 

 
               5,102,003  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    39


Schedule of Investments (continued)

  

BlackRock Municipal Income Trust II (BLE)

 

Municipal Bonds   

Par

(000)

    Value  
Ohio — 3.5%             

Buckeye Tobacco Settlement Financing Authority, RB, Asset-Backed, Senior Turbo Term, Series A-2, 6.50%, 6/01/47

   $ 3,550     $ 3,532,392  

County of Allen Ohio Hospital Facilities, Refunding RB, Catholic Healthcare Partners, Series A, 5.25%, 6/01/38

     3,405       3,679,579  

County of Franklin Ohio, RB:

    

Health Care Facilities Improvement, OPRS Communities Obligation Group, Series A, 6.13%, 7/01/40

     710       788,171  

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

     435       498,937  

County of Montgomery Ohio, Refunding RB, Catholic Health:

    

5.00%, 5/01/19 (b)

     1,055       1,126,265  

Series A, 5.00%, 5/01/39

     1,970       2,035,463  

State of Ohio, RB, Portsmouth Bypass Project, AMT, 5.00%, 6/30/53

     870       949,901  
    

 

 

 
               12,610,708  
Pennsylvania — 2.9%             

Allentown Neighborhood Improvement Zone Development Authority, Refunding RB, Series A, 5.00%, 5/01/42

     2,500       2,624,875  

City of Philadelphia Pennsylvania Hospitals & Higher Education Facilities Authority, RB, Temple University Health System, Series A, 5.63%, 7/01/42

     685       754,295  

Pennsylvania Economic Development Financing Authority, RB:

    

Aqua Pennsylvania, Inc. Project, Series B, 5.00%, 11/15/40

     2,065       2,221,486  

Pennsylvania Bridge Finco LP, AMT, 5.00%, 6/30/42

     3,030       3,379,965  

Pennsylvania Turnpike Commission, RB, Series A, 5.00%, 12/01/44

     1,190       1,352,292  
    

 

 

 
               10,332,913  
Puerto Rico — 1.1%             

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds:

    

5.50%, 5/15/39

     2,000       2,009,800  

5.63%, 5/15/43

     1,910       1,921,747  
    

 

 

 
               3,931,547  
Rhode Island — 2.2%             

Tobacco Settlement Financing Corp., Refunding RB:

    

Series A, 5.00%, 6/01/35

     1,690       1,849,874  

Series B, 4.50%, 6/01/45

     2,850       2,883,317  

Series B, 5.00%, 6/01/50

     3,175       3,277,679  
    

 

 

 
               8,010,870  
South Carolina — 3.8%             

State of South Carolina Ports Authority, RB:

    

5.25%, 7/01/40

     3,595       3,926,638  

AMT, 5.25%, 7/01/55

     1,390       1,590,744  

State of South Carolina Public Service Authority, RB, Santee Cooper, Series A, 5.50%, 12/01/54

     3,575       4,083,794  

State of South Carolina Public Service Authority, Refunding RB, Series E, 5.25%, 12/01/55

     3,385       3,867,498  
    

 

 

 
               13,468,674  
Tennessee — 0.7%             

City of Chattanooga Health Educational & Housing Facility Board, RB, Catholic Health Initiatives, Series A, 5.25%, 1/01/45

     1,470       1,555,936  
Municipal Bonds   

Par

(000)

    Value  
Tennessee (continued)             

Metropolitan Government of Nashville & Davidson County Health & Educational Facilities Board, RB, Vanderbilt University Medical Center, Series A, 5.00%, 7/01/40

   $ 740     $ 838,716  
    

 

 

 
               2,394,652  
Texas — 11.4%             

Central Texas Regional Mobility Authority, Refunding RB:

    

Senior Lien, 6.25%, 1/01/21 (b)

     2,350       2,745,011  

Sub-Lien, 5.00%, 1/01/33

     390       426,754  

City of Austin Texas Airport System, ARB, AMT, 5.00%, 11/15/39

     665       748,285  

City of Dallas Texas Waterworks & Sewer System Revenue, Refunding RB, 5.00%, 10/01/20 (b)

     765       857,305  

City of Houston Texas Airport System, Refunding ARB:

    

Senior Lien, Series A, 5.50%, 7/01/39

     1,675       1,736,724  

United Airlines, Inc. Terminal E Project, AMT, 5.00%, 7/01/29

     460       494,500  

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

    

6.00%, 5/15/19 (b)

     8,665       9,415,822  

6.00%, 11/15/35

     480       522,038  

County of Harris Texas Cultural Education Facilities Finance Corp., RB, 1st Mortgage, Brazos Presbyterian Homes, Inc. Project, Series B, 7.00%, 1/01/23 (b)

     485       626,698  

County of Harris Texas Houston Sports Authority, Refunding RB, 3rd Lien, Series A (NPFGC) (c):

    

0.00%, 11/15/24 (b)

     2,300       994,589  

0.00%, 11/15/36

     23,075       8,719,581  

County of Midland Texas Fresh Water Supply District No. 1, RB, CAB, City of Midland Projects, Series A, 0.00%, 9/15/37 (c)

     6,055       2,644,642  

County of Tarrant Texas Cultural Education Facilities Finance Corp., RB, Scott & White Healthcare, 6.00%, 8/15/20 (b)

     4,085       4,680,634  

Texas Private Activity Bond Surface Transportation Corp., RB, Senior Lien:

    

LBJ Infrastructure Group LLC, 7.00%, 6/30/40

     3,000       3,401,370  

NTE Mobility Partners LLC, North Tarrant Express Managed Lanes Project, 6.88%, 12/31/39

     2,250       2,509,762  
    

 

 

 
               40,523,715  
Utah — 0.4%             

Salt Lake City Corp. Airport Revenue, ARB, Series A, AMT, 5.00%, 7/01/47

     995       1,145,941  

Utah State Charter School Finance Authority, RB, Ogden Preparatory Academy, Series A, 3.25%, 10/15/42

     390       355,372  
    

 

 

 
               1,501,313  
Virginia — 1.2%             

Virginia Small Business Financing Authority, RB, Senior Lien, Elizabeth River Crossings OpCo LLC Project, AMT:

    

5.25%, 1/01/32

     1,755       1,939,679  

6.00%, 1/01/37

     2,120       2,411,224  
    

 

 

 
               4,350,903  
Washington — 5.7%             

Central Puget Sound Regional Transit Authority, RB, Series A (AGM), 5.00%, 11/01/17 (b)

     3,040       3,061,675  

City of Bellingham Washington Water & Sewer, RB, 5.00%, 8/01/36

     5,050       5,670,140  
 

 

See Notes to Financial Statements.      
                
40    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock Municipal Income Trust II (BLE)

 

Municipal Bonds   

Par

(000)

    Value  
Washington (continued)             

Grant County Public Utility District No. 2, Refunding RB, Series A, 5.00%, 1/01/43

   $ 2,335     $ 2,667,737  

Port of Seattle Washington, ARB, Intermediate Lien, Series C, AMT, 5.00%, 5/01/42

     1,615       1,864,679  

Port of Seattle Washington, RB, Series C, AMT, 5.00%, 4/01/40

     815       913,330  

State of Washington, GO, Series D, 5.00%, 2/01/42

     2,810       3,313,440  

Washington Health Care Facilities Authority, RB, Catholic Health Initiatives, Series A, 5.75%, 1/01/45

     2,445       2,695,392  
    

 

 

 
               20,186,393  
Wisconsin — 0.8%             

State of Wisconsin Health & Educational Facilities Authority, RB, Ascension Health Senior Credit Group, Series E, 5.00%, 11/15/33

     910       981,326  

Wisconsin Health & Educational Facilities Authority, Refunding RB, Medical College of Wisconsin, Inc., 4.00%, 12/01/46

     1,955       2,032,574  
    

 

 

 
               3,013,900  
Wyoming — 1.5%             

County of Sweetwater Wyoming, Refunding RB, Idaho Power Co. Project, Remarketing, 5.25%, 7/15/26

     3,355       3,620,582  

Wyoming Municipal Power Agency, Inc., RB, Series A (b):

    

5.50%, 1/01/18

     800       812,728  

5.50%, 1/01/18

     750       761,932  
    

 

 

 
               5,195,242  
Total Municipal Bonds — 124.2%              443,439,572  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
 
Alabama — 0.5%             

Auburn University, Refunding RB, Series A, 4.00%, 6/01/41

     1,820       1,933,149  
California — 6.6%             

Bay Area Toll Authority, Refunding RB, San Francisco Bay Area Toll Bridge, 4.00%, 4/01/42 (h)

     3,358       3,555,282  

California Educational Facilities Authority, RB, University of Southern California, Series B, 5.25%, 10/01/18 (b)(h)

     2,850       2,988,567  

City & County of San Francisco California Public Utilities Commission, RB, Water Revenue, Series B, 5.00%, 11/01/19 (b)

     10,335       11,258,329  

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

     3,345       3,907,066  

San Diego Community College District California, GO, Election of 2002, 5.25%, 8/01/19 (b)

     1,839       1,994,435  
    

 

 

 
               23,703,679  
Colorado — 2.0%             

Colorado Health Facilities Authority, RB, Catholic Health (AGM) (b):

    

Series C-3, 5.10%, 4/29/18

     4,230       4,350,724  

Series C-7, 5.00%, 5/01/18

     2,710       2,786,178  
    

 

 

 
               7,136,902  
Georgia — 1.4%             

Private Colleges & Universities Authority, Refunding RB, Emory University, Series C, 5.00%, 9/01/18 (b)

     4,638       4,835,161  
Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
  

Par

(000)

    Value  
Massachusetts — 0.8%             

Massachusetts School Building Authority, RB, Senior, Series B, 5.00%, 10/15/41

   $ 2,461     $ 2,791,078  
New Hampshire — 0.7%             

New Hampshire Health & Education Facilities Authority, RB, Dartmouth College, 5.25%, 6/01/19 (b)(h)

     2,219       2,388,471  
New York — 12.6%             

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

    

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

     1,710       1,848,647  

Series HH, 5.00%, 6/15/31 (h)

     9,150       10,397,236  

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

     1,750       2,022,094  

Metropolitan Transportation Authority, Refunding RB, Series C-1, 5.25%, 11/15/56

     5,120       6,048,436  

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

     11,670       13,287,641  

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

     7,040       8,195,824  

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

     2,790       3,256,711  
    

 

 

 
               45,056,589  
North Carolina — 0.9%             

North Carolina Capital Facilities Finance Agency, Refunding RB, Duke University Project, Series B, 5.00%, 10/01/55

     2,740       3,143,410  
Pennsylvania — 0.8%             

Pennsylvania Turnpike Commission, RB, Sub-Series A, 5.50%, 12/01/42

     2,521       3,002,234  
Texas — 3.1%             

City of San Antonio Texas Public Service Board, RB, Electric & Gas Systems, Junior Lien, 5.00%, 2/01/43

     2,660       3,028,117  

County of Harris Texas Metropolitan Transit Authority, Refunding RB, Series A, 5.00%, 11/01/41

     3,720       4,191,696  

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

     3,347       3,848,578  
    

 

 

 
               11,068,391  
Utah — 1.2%             

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

     3,959       4,202,058  
Virginia — 1.7%             

University of Virginia, Refunding RB, GO, 5.00%, 6/01/18 (b)

     5,909       6,095,661  
Washington — 2.4%             

State of Washington, GO, Various Purposes, Series E, 5.00%, 2/01/19 (b)

     8,113       8,590,593  
Total Municipal Bonds Transferred to Tender Option Bond Trusts — 34.7%              123,947,376  
Total Long-Term Investments
(Cost — $527,207,903) — 158.9%
      567,386,948  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    41


Schedule of Investments (continued)

  

BlackRock Municipal Income Trust II (BLE)

 

Short-Term Securities — 2.0%    Shares     Value  

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.62% (i)(j)

     6,985,327     $ 6,987,423  
Total Short-Term Securities
(Cost — $6,987,142) — 2.0%
      6,987,423  

Total Investments (Cost — $534,195,045) — 160.9%

 

    574,374,371  

Other Assets Less Liabilities — 1.5%

 

    5,255,938  

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (20.0)%

 

    (71,429,313

VMTP Shares at Liquidation Value — (42.4)%

 

    (151,300,000
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 356,900,996  
    

 

 

 
 
Notes to Schedule of Investments

 

(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)   Issuer filed for bankruptcy and/or is in default.

 

(e)   Non-income producing security.

 

(f)   Step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate as of period end.

 

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

 

(h)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire between May 7, 2018 to April 1, 2025, is $17,085,636. See Note 4 of the Notes to Financial Statements for details.

 

(i)   Annualized 7-day yield as of period end.

 

(j)   During the year ended August 31, 2017, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate   Shares Held
at August 31,
2016
    Net
Activity
    Shares Held
at August 31,
2017
    Value at
August 31,
2017
    Income     Net
Realized Gain1
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

    3,509,584       3,475,743       6,985,327     $ 6,987,423     $ 24,156     $ 1,833     $ 281  

1   Includes net capital gain distributions.

    

 

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

               

5-Year U.S. Treasury Note

    (76      December 2017      $ 9,006     $ (13,661  

10-Year U.S. Treasury Note

    (70      December 2017      $ 8,889       (10,968  

Long U.S. Treasury Bond

    (81      December 2017      $ 12,644       (58,403  

Ultra Long U.S. Treasury Bond

    (30      December 2017      $ 5,072       (25,235        

Total

              $ (108,267  
             

 

 

 

 

See Notes to Financial Statements.      
                
42    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (concluded)

  

BlackRock Municipal Income Trust II (BLE)

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

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

Futures contracts

   Net unrealized depreciation1                           $ 108,267           $ 108,267  

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

    

                
For the year ended August 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:  
                
Net Realized Gain (Loss) from:   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Currency
Exchange
Contracts
    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

                          $ 822,956           $ 822,956  
Net Change in Unrealized Appreciation (Depreciation) on:                                                 

Futures contracts

                          $ (135,038         $ (135,038

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:  

Average notional value of contracts — short

  $ 35,115,430  

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments1

           $ 567,386,948              $ 567,386,948  

Short-Term Securities

  $ 6,987,423                         6,987,423  
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

  $ 6,987,423        $ 567,386,948              $ 574,374,371  
 

 

 

      

 

 

      

 

 

   

 

 

 
             
Derivative Financial Instruments2                                      

Liabilities:

             

Interest rate contracts

  $ (108,267                     $ (108,267

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

    

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

    

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

 

     Level 1        Level 2        Level 3     Total  

Liabilities:

             

TOB Trust Certificates

           $ (71,274,043            $ (71,274,043

VMTP Shares at Liquidation Value

             (151,300,000              (151,300,000
 

 

 

 

Total

           $ (222,574,043            $ (222,574,043
 

 

 

 

During the year ended August 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    43


Schedule of Investments August 31, 2017

  

BlackRock MuniHoldings Investment Quality Fund (MFL)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par
(000)
    Value  
Alabama — 3.4%             

City of Birmingham Alabama Special Care Facilities Financing Authority, RB, Children’s Hospital (AGC) (a):

    

6.00%, 6/01/19

   $ 10,995     $ 11,963,550  

6.13%, 6/01/19

     4,980       5,429,495  

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

     1,745       1,941,400  
    

 

 

 
               19,334,445  
Arizona — 0.5%             

University of Arizona Board of Regents, Refunding RB, Series A, 5.00%, 6/01/40

     2,300       2,651,969  
California — 24.5%             

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

     4,000       4,194,480  

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

     5,370       6,099,461  

Chabot-Las Positas Community College District, GO, Refunding, 4.00%, 8/01/37

     10,000       10,640,100  

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

    

2nd, 5.50%, 5/01/28

     3,330       3,966,463  

2nd, 5.25%, 5/01/33

     2,600       3,008,226  

5.00%, 5/01/44

     3,430       3,863,655  

City of Los Angeles California Department of Airports, ARB:

    

Sub-Series A, AMT, 5.00%, 5/15/42

     4,500       5,242,995  

Sub-Series B, 5.00%, 5/15/42

     3,250       3,832,660  

City of Los Angeles California Department of Water & Power, RB, Power System, Sub-Series A-1, 5.25%, 7/01/38

     5,000       5,179,450  

City of Manteca California Financing Authority, RB, Manteca Sewer (AGC):

    

5.63%, 12/01/33

     2,450       2,693,408  

5.75%, 12/01/36

     3,285       3,595,005  

City of San Jose California, Refunding ARB, Norman Y Mineta San Jose International Airport SJC, AMT:

    

Series A, 5.00%, 3/01/47

     1,000       1,150,870  

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

     4,450       5,067,259  

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

     5,600       5,821,928  

Irvine Ranch Water District, Special Assessment Bonds, 5.25%, 2/01/46

     7,000       8,486,310  

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

     4,365       5,357,907  

Metropolitan Water District of Southern California, Refunding RB, Series A, 5.00%, 7/01/32

     5,625       6,765,862  

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

     3,110       3,649,461  

San Diego Public Facilities Financing Authority Water, Refunding RB, Series B (AGC), 5.38%, 8/01/19 (a)

     2,000       2,172,680  

State of California, GO, Various Purposes (AGC), 5.50%, 11/01/39

     15,000       16,399,350  

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

    

5.50%, 11/01/30

     4,500       5,447,115  

5.50%, 11/01/31

     2,615       3,158,606  

5.50%, 11/01/33

     2,000       2,402,860  

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

     3,240       3,840,631  
Municipal Bonds    Par
(000)
    Value  
California (continued)             

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

   $ 1,685     $ 2,058,076  

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

     12,250       14,444,220  
    

 

 

 
               138,539,038  
Colorado — 2.2%             

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

    

5.50%, 11/15/28

     2,700       3,135,456  

5.50%, 11/15/30

     1,040       1,199,931  

5.50%, 11/15/31

     1,250       1,440,200  

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

     5,925       6,436,328  
    

 

 

 
               12,211,915  
District of Columbia — 0.6%             

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

     3,000       3,168,570  
Florida — 7.3%             

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

     1,250       1,482,375  

County of Hillsborough Florida Aviation Authority, Refunding ARB, Tampa International Airport, Series A, AMT:

    

5.50%, 10/01/29

     5,360       6,307,594  

5.25%, 10/01/30

     3,255       3,770,104  

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

     7,100       7,953,491  

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

     420       427,829  

County of Manatee Florida HFA, RB, S/F Housing, Series A, AMT (Ginnie Mae, Fannie Mae & Freddie Mac), 5.90%, 9/01/40

     220       222,906  

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

    

Series A, 5.38%, 10/01/33

     3,145       3,613,039  

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

     1,405       1,686,534  

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

     1,885       2,207,542  

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

     2,870       3,432,147  

County of Miami-Dade Florida Aviation, Refunding ARB, Series A, AMT, 5.00%, 10/01/31

     5,465       6,138,288  

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

     3,225       3,803,049  
    

 

 

 
               41,044,898  
Hawaii — 2.0%             

State of Hawaii, Department of Transportation, COP, AMT:

    

5.25%, 8/01/25

     1,350       1,556,064  

5.25%, 8/01/26

     2,500       2,858,150  

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

     5,985       6,796,985  
    

 

 

 
               11,211,199  
Illinois — 18.2%             

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

    

5.50%, 1/01/30

     6,500       7,446,790  

5.50%, 1/01/32

     6,275       7,138,691  
 

 

See Notes to Financial Statements.      
                
44    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniHoldings Investment Quality Fund (MFL)

 

Municipal Bonds    Par
(000)
    Value  
Illinois (continued)             

City of Chicago Illinois Midway International Airport, Refunding GARB:

    

2nd Lien, Series A, 5.00%, 1/01/41

   $ 8,020     $ 8,851,032  

3rd Lien, Series A, 5.75%, 1/01/21 (a)

     6,210       7,159,074  

3rd Lien, Series A, 5.75%, 1/01/39

     1,185       1,344,809  

City of Chicago Illinois O’Hare International Airport, ARB, Senior Lien, Series D, 5.25%, 1/01/42

     2,630       3,113,210  

City of Chicago Illinois O’Hare International Airport, GARB, 3rd Lien, Series C, 6.50%, 1/01/21 (a)

     16,800       19,779,144  

City of Chicago Illinois O’Hare International Airport, Refunding ARB, Series C, 5.00%, 1/01/37

     2,000       2,307,260  

City of Chicago Illinois Transit Authority, RB:

    

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

     6,000       6,385,140  

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

     10,960       11,845,678  

City of Chicago Illinois Transit Authority, Refunding RB, Federal Transit Administration, Section 5309 (AGM), 5.00%, 6/01/28

     7,735       8,210,934  

Illinois Finance Authority, RB, Carle Foundation, Series A, 6.00%, 8/15/41

     4,000       4,571,120  

Railsplitter Tobacco Settlement Authority, RB:

    

5.50%, 6/01/23

     4,365       4,976,275  

6.00%, 6/01/28

     1,245       1,419,213  

State of Illinois Finance Authority, RB, University of Chicago, Series B, 5.50%, 7/01/18 (a)

     8,000       8,312,240  
    

 

 

 
               102,860,610  
Indiana — 4.1%             

Indiana Finance Authority, Refunding RB, Stadium Project, Series A, 5.25%, 2/01/37

     3,130       3,695,403  

Indiana Municipal Power Agency, Refunding RB, Series A:

    

5.25%, 1/01/32

     1,500       1,725,195  

5.25%, 1/01/33

     1,500       1,719,930  

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

    

5.50%, 1/01/19 (a)

     2,760       2,932,417  

5.50%, 1/01/38

     11,345       11,963,303  

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

     1,240       1,326,850  
    

 

 

 
               23,363,098  
Kansas — 0.9%             

County of Wyandotte Unified School District No. 500 Kansas City, GO, Improvement, Series A, 5.50%, 9/01/47

     4,000       4,914,000  
Kentucky — 0.1%             

Kentucky State Property & Building Commission, Refunding RB, Project No. 93, (AGC) (a):

    

5.25%, 2/01/19

     355       376,754  

5.25%, 2/01/19

     45       47,684  
    

 

 

 
               424,438  
Louisiana — 0.9%             

City of New Orleans Louisiana Aviation Board, Refunding GARB, Restructuring (AGC) (a):

    

Series A-1, 6.00%, 1/01/19

     500       533,990  

Series A-2, 6.00%, 1/01/19

     720       768,946  

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

     3,735       3,945,056  
    

 

 

 
               5,247,992  
Municipal Bonds    Par
(000)
    Value  
Massachusetts — 1.2%             

Massachusetts Development Finance Agency, Refunding RB, Partners Healthcare System, 5.00%, 7/01/41

   $ 4,710     $ 5,408,446  

Massachusetts Educational Financing Authority, RB, Education Loan, Issue I, AMT, 5.00%, 1/01/27

     1,000       1,149,190  
    

 

 

 
               6,557,636  
Michigan — 3.5%             

City of Detroit Michigan Water Supply System Revenue, RB, 2nd Lien, Series B (AGM):

    

6.25%, 7/01/19 (a)

     6,310       6,924,783  

6.25%, 7/01/36

     10       10,816  

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

     6,015       6,754,905  

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

     5,780       6,209,454  
    

 

 

 
               19,899,958  
Minnesota — 1.6%             

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

     8,375       8,882,441  
Mississippi — 2.8%             

Mississippi Development Bank, RB, Jackson Water & Sewer System Project (AGM):

    

6.88%, 12/01/40

     6,405       8,225,877  

Special Obligation, 6.75%, 12/01/31

     3,775       4,820,637  

Special Obligation, 6.75%, 12/01/33

     2,350       3,000,927  
    

 

 

 
               16,047,441  
Nevada — 2.1%             

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

     11,175       12,167,117  
New Jersey — 6.7%             

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

    

5.38%, 1/01/43

     7,000       7,815,640  

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

     2,425       2,671,889  

New Jersey EDA, Refunding RB, Series B, 5.50%, 6/15/30

     2,000       2,326,360  

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

     6,500       6,990,425  

New Jersey Higher Education Student Assistance Authority, Refunding RB, Series 1, AMT, 5.75%, 12/01/28

     2,795       3,081,488  

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

    

Series A, 5.50%, 6/15/41

     5,410       5,758,891  

Series AA, 5.50%, 6/15/39

     8,175       8,939,444  
    

 

 

 
               37,584,137  
New York — 10.2%             

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

    

2nd General Resolution, Fiscal 2009, Series EE, 5.25%, 6/15/40

     7,500       8,058,225  

Water & Sewer System, 2nd General Resolution, Series EE, 5.38%, 6/15/43

     3,475       3,926,333  

Water & Sewer System, Series FF-2, 5.50%, 6/15/40

     4,000       4,324,320  

Metropolitan Transportation Authority, RB:

    

Series A, 5.25%, 11/15/38

     4,000       4,595,200  

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

     4,490       5,300,131  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    45


Schedule of Investments (continued)

  

BlackRock MuniHoldings Investment Quality Fund (MFL)

 

Municipal Bonds    Par
(000)
    Value  
New York (continued)             

Metropolitan Transportation Authority, Refunding RB:

    

Series B, 5.00%, 11/15/37

   $ 6,140     $ 7,212,903  

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

     5,410       6,391,482  

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

     10,000       11,280,100  

Port Authority of New York & New Jersey, Refunding RB, Consolidated, 205th Series, 5.25%, 5/15/42

     900       1,096,308  

Triborough Bridge & Tunnel Authority, Refunding RB, General, Series B, 5.00%, 11/15/38

     4,500       5,369,850  
    

 

 

 
               57,554,852  
Ohio — 1.5%             

State of Ohio Turnpike Commission, RB, Junior Lien, Infrastructure Projects, Series A-1:

    

5.25%, 2/15/31

     5,145       6,104,542  

5.25%, 2/15/32

     2,250       2,663,168  
    

 

 

 
               8,767,710  
Pennsylvania — 4.5%             

Pennsylvania Turnpike Commission, RB, Sub-Series A, 5.50%, 12/01/46

     18,570       22,145,839  

Township of Bristol Pennsylvania School District, GO, 5.25%, 6/01/37

     3,000       3,451,320  
    

 

 

 
               25,597,159  
South Carolina — 6.7%             

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

     6,735       7,954,035  

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

    

5.25%, 7/01/25

     4,490       5,277,501  

5.50%, 7/01/38

     3,000       3,431,280  

6.00%, 7/01/38

     5,270       6,190,142  

5.50%, 7/01/41

     4,170       4,759,846  

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

     3,445       3,943,595  

State of South Carolina Public Service Authority, Refunding RB, Series E, 5.25%, 12/01/55

     5,500       6,283,970  
    

 

 

 
               37,840,369  
Texas — 14.8%             

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

     4,190       4,865,093  

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

    

6.00%, 5/15/19 (a)

     12,030       13,072,399  

6.00%, 5/15/19 (a)

     8,940       9,714,651  

6.00%, 11/15/35

     670       728,679  

6.00%, 11/15/36

     495       538,352  

5.38%, 11/15/38

     265       282,927  

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

     1,450       1,538,551  

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

    

Series A, 5.00%, 11/01/38

     5,580       6,097,601  

Series H, 5.00%, 11/01/37

     4,575       5,125,784  

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

     3,735       4,440,878  

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

    

(AGM), 6.00%, 1/01/43

     5,555       6,343,199  

Series K-1 (AGC), 5.75%, 1/01/19 (a)

     12,150       12,932,460  

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

     7,170       8,199,827  
Municipal Bonds    Par
(000)
    Value  
Texas (continued)             

Texas Water Development Board, RB:

    

Series A, 5.00%, 10/15/40

   $ 3,170     $ 3,723,736  

State Water Implementation Revenue, 5.25%, 10/15/46

     4,780       5,789,727  
    

 

 

 
               83,393,864  
Utah — 1.5%             

County of Utah Utah, RB, IHC Health Services, Inc., Series B, 5.00%, 5/15/46

     7,500       8,672,550  
Virginia — 1.2%             

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

     1,750       1,972,268  

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

     4,300       4,605,085  
    

 

 

 
               6,577,353  
Washington — 2.7%             

City of Richland Washington, GO, Refunding, 5.00%, 12/01/45

     1,175       1,382,117  

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

     4,200       4,713,996  

Port of Seattle Washington, GO, 5.00%, 1/01/42

     4,505       5,350,544  

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

     3,290       3,713,719  
    

 

 

 
               15,160,376  
Total Municipal Bonds – 125.7%       709,675,135  
    
   
Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
              
Alabama — 8.1%             

City of Birmingham Alabama Special Care Facilities Financing Authority, Refunding RB, Senior Credit:

    

Ascension Health, Series C, 5.00%, 11/15/46

     11,920       13,763,786  

Ascension Group, Series B, 5.00%, 11/15/46

     27,798       31,959,959  
    

 

 

 
               45,723,745  
California — 2.6%             

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

     2,400       2,576,448  

University of California, Refunding RB, Series AR, 5.00%, 5/15/38

     10,000       11,858,600  
    

 

 

 
               14,435,048  
Florida — 2.0%             

County of Hillsborough Florida Aviation Authority, ARB, Tampa International Airport, Series A, AMT (AGC), 5.50%, 10/01/38

     10,657       11,108,050  
Indiana — 1.8%             

Indiana Health & Educational Facilities Financing Authority, Refunding RB, St. Francis, Series E (AGM), 5.25%, 5/01/18 (a)

     9,850       10,141,659  
Massachusetts — 2.8%             

Commonwealth of Massachusetts, GO, Series G, 4.00%, 9/01/42

     15,000       15,931,650  
Nevada — 2.4%             

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

    

Limited Tax, 6.00%, 7/01/18

     8,000       8,349,520  

Series B, 5.50%, 7/01/19

     5,008       5,429,225  
    

 

 

 
               13,778,745  
 

 

See Notes to Financial Statements.      
                
46    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniHoldings Investment Quality Fund (MFL)

 

Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
   Par
(000)
    Value  
New Jersey — 3.3%             

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

   $ 7,118     $ 7,364,330  

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

    

Series A (AMBAC), 5.00%, 12/15/32

     8,000       8,083,520  

Series B, 5.25%, 6/15/36 (c)

     2,961       3,131,009  
    

 

 

 
               18,578,859  
New York — 12.0%             

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, 2nd General Resolution, Series FF-2, 5.50%, 6/15/40

     4,995       5,399,995  

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

     5,619       5,942,193  

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

     9,249       10,688,208  

New York City Transitional Finance Authority Future Tax Secured Revenue, RB, Fiscal 2017, Sub-Series B-1, 5.00%, 8/01/40

     5,000       5,871,150  

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

     13,950       15,883,684  

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

     8,200       9,546,272  

New York State Dormitory Authority, ERB, Personal Income Tax, Series B, 5.25%, 3/15/19 (a)

     13,500       14,408,280  
    

 

 

 
               67,739,782  
Municipal Bonds Transferred to
Tender Option Bond Trusts (b)
   Par
(000)
    Value  
Texas — 7.5%             

City of San Antonio Texas Public Service Board, Refunding RB, Series A, 5.25%, 2/01/19 (a)(c)

   $ 12,027     $ 12,774,809  

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

     9,640       11,213,152  

State of Texas, GO, Texas Transportation Commission, Highway Improvement, 5.00%, 4/01/43

     15,550       18,221,490  
    

 

 

 
               42,209,451  
Utah — 1.2%             

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

     6,373       6,764,676  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 43.7%
             246,411,665  

Total Investments (Cost — $890,026,506) — 169.4%

 

    956,086,800  

Other Assets Less Liabilities — 1.1%

       5,912,799  

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (21.9)%

 

    (123,420,000

VRDP Shares at Liquidation Value, Net of Deferred Offering Costs — (48.6)%

 

    (274,196,212
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 564,383,387  
    

 

 

 
 
Notes to Schedule of Investments

 

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

 

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

 

(c)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire between September 6, 2018 to November 15, 2019, is $19,874,974. See Note 4 of the Notes to Financial Statements for details.

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

 

Affiliate   Shares Held
at August 31,
2016
    Net
Activity
    Shares Held
at August 31,
2017
    Value at
August 31,
2017
    Income     Net
Realized Gain1
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

    3,476,692       (3,476,692               $ 14,022     $ 1,632        

1   Includes net capital gain distributions.

    

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    47


Schedule of Investments (continued)

  

BlackRock MuniHoldings Investment Quality Fund (MFL)

 

 

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

               

5-Year U.S. Treasury Note

    (138      December 2017      $ 16,353       $ (26,462

10-Year U.S. Treasury Note

    (184      December 2017      $ 23,365         (32,858

Long U.S. Treasury Bond

    (128      December 2017      $ 19,980         (89,796

Ultra U.S. Treasury Bond

    (38      December 2017      $ 6,424               (32,350

Total

                $ (181,466
               

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

Liabilities — Derivative Financial Instruments   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
   

Foreign
Currency
Exchange

Contracts

    Interest
Rate
Contracts
    Other
Contracts
    Total  

Futures contracts

   Net unrealized depreciation1                           $ 181,466           $ 181,466  

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

    

For the year ended August 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

Net Realized Gain (Loss) from:   Commodity
Contracts
   

Credit

Contracts

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

Futures contracts

                          $ 858,486           $ 858,486  
Net Change in Unrealized Appreciation (Depreciation) on:  

Futures contracts

                          $ (231,876         $ (231,876

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:  

Average notional value of contracts — short

  $ 65,324,102  

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments1

           $ 956,086,800              $ 956,086,800  
Derivative Financial Instruments2              

Liabilities:

             

Interest rate contracts

  $ (181,466                     $ (181,466

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

    

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

    

 

See Notes to Financial Statements.      
                
48    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (concluded)

  

BlackRock MuniHoldings Investment Quality Fund (MFL)

 

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

 

     Level 1        Level 2        Level 3     Total  

Liabilities:

             

TOB Trust Certificates

           $ (123,110,561            $ (123,110,561

VRDP Shares at Liquidation Value

             (274,600,000              (274,600,000
 

 

 

 

Total

           $ (397,710,561            $ (397,710,561
 

 

 

 

During the year ended August 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    49


Schedule of Investments August 31, 2017

  

BlackRock MuniVest Fund, Inc. (MVF)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par
(000)
    Value  
Alabama — 2.8%             

City of Selma Alabama IDB, RB, Gulf Opportunity Zone, International Paper Co. Project, Series A:

    

5.80%, 5/01/34

   $ 1,850     $ 2,039,476  

5.38%, 12/01/35

     1,000       1,112,550  

Lower Alabama Gas District, RB, Series A, 5.00%, 9/01/46

     4,555       5,640,138  

State of Alabama Docks Department, Refunding RB, 6.00%, 10/01/20 (a)

     7,610       8,751,119  
    

 

 

 
               17,543,283  
Alaska — 0.5%             

City of Anchorage Alaska Electric Revenue, Refunding RB, Series A, 5.00%, 12/01/41

     3,000       3,402,840  
Arizona — 4.0%             

Arizona IDA, Refunding RB, Basis Schools, Inc. Projects, Series A, 5.38%, 7/01/50 (b)

     2,500       2,641,025  

City of Phoenix Arizona Civic Improvement Corp., Refunding RB, Junior Lien, Series A, 5.00%, 7/01/40

     2,000       2,194,600  

City of Phoenix Arizona IDA, RB, Candeo School, Inc. Project:

    

6.63%, 7/01/33

     2,245       2,590,708  

6.88%, 7/01/44

     3,440       3,966,699  

City of Phoenix Arizona IDA, Refunding RB (b):

    

Basis Schools, Inc. Projects, 5.00%, 7/01/35

     600       627,648  

Basis Schools, Inc. Projects, 5.00%, 7/01/45

     760       786,326  

Basis Schools, Inc. Projects, Series A, 5.00%, 7/01/35

     1,125       1,176,840  

Legacy Traditional School Projects, 5.00%, 7/01/45

     700       715,890  

County of Maricopa Arizona Pollution Control Corp., Refunding RB, Southern California Edison Co., Series A, 5.00%, 6/01/35

     3,300       3,590,202  

Salt Verde Financial Corp., RB, Senior, 5.00%, 12/01/37

     5,725       6,972,420  
    

 

 

 
               25,262,358  
California — 6.3%             

California Health Facilities Financing Authority, RB:

    

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

     5,000       5,411,200  

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

     5,600       6,360,704  

California Health Facilities Financing Authority, Refunding RB, Dignity Health, Series A, 6.00%, 7/01/19 (a)

     1,055       1,153,611  

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

     1,200       1,285,212  

Los Angeles Community College District, GO, Refunding, Election of 2008, Series A, 6.00%, 8/01/19 (a)

     9,585       10,528,164  

Oakland Unified School District/Alameda County, GO, Series A, 5.00%, 8/01/40

     1,000       1,169,920  

Poway Unified School District, GO, Refunding, CAB, School Facilities Improvement District No. 2007-1, Election of 2008, Series B, 0.00%, 8/01/46 (c)

     10,000       3,300,900  

State of California, GO, Various Purposes, 6.50%, 4/01/33

     9,675       10,556,586  
    

 

 

 
               39,766,297  
Colorado — 0.8%             

Centerra Metropolitan District No. 1, Tax Allocation Bonds, 5.00%, 12/01/47

     1,025       1,041,544  

Colorado Health Facilities Authority, RB, Catholic Health Initiatives, Series D, 6.25%, 10/01/33

     2,500       2,618,775  
Municipal Bonds    Par
(000)
    Value  
Colorado (continued)             

Copperleaf Metropolitan District No. 2, GO, Refunding, 5.75%, 12/01/45

   $ 1,000     $ 1,060,770  

Regional Transportation District, COP, Refunding, Series A, 5.38%, 6/01/31

     385       422,591  
    

 

 

 
               5,143,680  
Delaware — 0.4%             

County of Sussex Delaware, RB, NRG Energy, Inc., Indian River Power LLC Project, 6.00%, 10/01/40

     2,500       2,689,075  
District of Columbia — 0.2%             

Metropolitan Washington Airports Authority, Refunding RB, Dulles Toll Road, 1st Senior Lien, Series A:

    

5.00%, 10/01/39

     415       443,639  

5.25%, 10/01/44

     650       697,093  
    

 

 

 
               1,140,732  
Florida — 8.8%             

Celebration Pointe Community Development District, Special Assessment Bonds, County of Alachua Florida (b):

    

5.00%, 5/01/32

     905       924,430  

5.00%, 5/01/48

     2,270       2,287,161  

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

    

Series B, 6.38%, 7/01/18

     4,630       4,843,906  

Series B-1, 5.63%, 7/01/18

     5,000       5,199,900  

County of Miami-Dade Florida, Refunding RB, Transit System Sales Surtax, 5.00%, 7/01/42

     3,750       4,271,363  

County of Miami-Dade Florida Aviation, Refunding ARB, Miami International Airport:

    

Series A, AMT (AGC), 5.00%, 10/01/40

     10,000       10,034,900  

Series A-1, 5.38%, 10/01/41

     10,290       11,370,450  

County of Miami-Dade Florida Educational Facilities Authority, Refunding RB, University of Miami, Series A, 5.00%, 4/01/45

     4,625       5,198,037  

County of Miami-Dade Florida Expressway Authority, RB, Toll System, Series A (AGM), 5.00%, 7/01/35

     8,900       9,779,053  

Lakewood Ranch Stewardship District, Special Assessment Bonds, Lakewood National & Polo Run Projects:

    

4.63%, 5/01/27

     255       262,094  

5.25%, 5/01/37

     470       483,607  

5.38%, 5/01/47

     770       793,654  
    

 

 

 
               55,448,555  
Georgia — 0.8%             

City of Atlanta Georgia Department of Aviation, Refunding GARB, Series B, AMT, 5.00%, 1/01/29

     1,070       1,186,138  

DeKalb Georgia Private Hospital Authority, Refunding RB, Children’s Healthcare, 5.25%, 11/15/39

     3,335       3,612,839  
    

 

 

 
               4,798,977  
Hawaii — 0.9%             

State of Hawaii Harbor System, RB, Series A, 5.50%, 7/01/35

     5,000       5,507,200  
Illinois — 11.1%             

City of Chicago Illinois O’Hare International Airport, GARB, Senior Lien, Series D, AMT, 5.00%, 1/01/42

     1,450       1,650,303  

City of Chicago Illinois Transit Authority, RB, Sales Tax Receipts, 5.25%, 12/01/36

     2,110       2,292,747  

City of Chicago Illinois Wastewater Transmission, Refunding RB, 2nd Lien, Series C, 5.00%, 1/01/39

     1,000       1,092,180  
 

 

See Notes to Financial Statements.      
                
50    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniVest Fund, Inc. (MVF)

 

Municipal Bonds    Par
(000)
    Value  
Illinois (continued)             

City of Chicago Illinois Waterworks, Refunding RB, 2nd Lien (AGM):

    

5.25%, 11/01/18 (a)

   $ 195     $ 204,937  

5.25%, 11/01/33

     1,135       1,174,759  

County of Cook Illinois Community College District No. 508, GO, University & College Improvements, 5.25%, 12/01/31

     5,000       5,402,550  

Illinois Finance Authority, RB:

    

Advocate Health Care Network, Series D, 6.50%, 11/01/18 (a)

     9,700       10,339,036  

Memorial Health System, Series A, 5.25%, 7/01/44

     1,785       1,947,453  

Illinois Finance Authority, Refunding RB:

    

Northwestern Memorial Hospital, Series A, 6.00%, 8/15/39

     9,000       9,819,630  

OSF Healthcare System, 6.00%, 5/15/20 (a)

     3,205       3,622,900  

OSF Healthcare System, 6.00%, 5/15/39

     1,455       1,598,186  

Presence Health Network, Series C, 4.00%, 2/15/41

     2,205       2,248,505  

Presence Health Network, Series C, 5.00%, 2/15/41

     3,600       4,019,184  

Railsplitter Tobacco Settlement Authority, RB, 6.00%, 6/01/28

     2,645       3,015,115  

Regional Transportation Authority, RB:

    

Series A (AMBAC), 7.20%, 11/01/20

     1,595       1,754,181  

Series C (NPFGC), 7.75%, 6/01/20

     2,230       2,480,407  

State of Illinois Toll Highway Authority, RB, Series B, 5.50%, 1/01/18 (a)

     7,000       7,110,390  

Village of Hodgkins Illinois, RB, Metropolitan Biosolids Management LLC Project, AMT, 6.00%, 11/01/23

     10,000       10,016,700  
    

 

 

 
               69,789,163  
Indiana — 1.4%             

City of Valparaiso Indiana, RB, Exempt Facilities, Pratt Paper LLC Project, AMT, 6.75%, 1/01/34

     2,250       2,672,572  

Indiana Finance Authority, Refunding RB, Deaconess Health System, Series A, 5.00%, 3/01/39

     3,000       3,385,260  

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

     2,640       2,824,906  
    

 

 

 
               8,882,738  
Iowa — 0.9%             

Iowa Finance Authority, Refunding RB, Midwestern Disaster Area, Iowa Fertilizer Co. Project, 5.25%, 12/01/25

     4,500       4,801,635  

Iowa Tobacco Settlement Authority, Refunding RB, Asset-Backed, CAB, Series B, 5.60%, 6/01/34

     1,000       1,006,150  
    

 

 

 
               5,807,785  
Kansas — 1.0%             

City of Lenexa Kansas, Refunding RB, Lakeview Village, Inc., Series A, 5.00%, 5/15/43

     1,965       2,021,199  

Wyandotte County-Kansas City Unified Government Utility System, RB, Series A, 5.00%, 9/01/40

     3,700       4,214,374  
    

 

 

 
               6,235,573  
Kentucky — 2.7%             

County of Owen Kentucky, RB, Kentucky American Water Co. Project, Series B, 5.63%, 9/01/39

     1,000       1,068,960  

Kentucky Economic Development Finance Authority, Refunding RB, Hospital Facilities, St. Elizabeth Medical Center, Inc., Series A, 5.50%, 5/01/19 (a)

     8,000       8,596,720  

Lexington-Fayette Urban County Airport Board, Refunding GARB, Series A, 5.00%, 7/01/19 (a)

     7,000       7,521,920  
    

 

 

 
               17,187,600  
Municipal Bonds    Par
(000)
    Value  
Louisiana — 5.4%             

City of New Orleans Aviation Board, ARB, General Airport North Terminal Project, Series B, AMT, 5.00%, 1/01/48

   $ 12,000     $ 13,626,720  

Louisiana Local Government Environmental Facilities & Community Development Authority, RB, Westlake Chemical Corp. Project, Series A-1, 6.50%, 11/01/35

     2,615       2,962,612  

Parish of St. Charles Louisiana, RB, Valero Energy Corp., 4.00%, 12/01/40 (d)

     2,210       2,354,910  

Tobacco Settlement Financing Corp., Refunding RB, Asset-Backed, Series A:

    

5.25%, 5/15/31

     3,420       3,630,022  

5.25%, 5/15/32

     4,375       4,701,725  

5.25%, 5/15/33

     4,750       5,083,260  

5.25%, 5/15/35

     1,500       1,640,220  
    

 

 

 
               33,999,469  
Maine — 1.0%             

Maine Health & Higher Educational Facilities Authority, RB, Series A, 5.00%, 7/01/39

     5,000       5,307,250  

Portland Housing Development Corp., Refunding RB, Senior Living, Retirement Facilities, Series A, 6.00%, 2/01/34

     1,190       1,191,761  
    

 

 

 
               6,499,011  
Maryland — 3.2%             

City of Baltimore Maryland, Refunding RB, East Baltimore Research Park, Series A, 4.50%, 9/01/33

     545       560,930  

County of Howard Maryland Housing Commission, RB, M/F Housing, Woodfield Oxford Square Apartments, 5.00%, 12/01/42

     4,935       5,608,726  

Maryland Health & Higher Educational Facilities Authority, Refunding RB:

    

Charlestown Community Project, 6.25%, 1/01/21 (a)

     2,000       2,338,320  

Meritus Medical Center Issue, 5.00%, 7/01/40

     6,350       7,011,099  

University of Maryland Medical System, 5.00%, 7/01/19 (a)

     1,990       2,140,265  

University of Maryland Medical System, 5.13%, 7/01/19 (a)

     2,100       2,263,338  

University of Maryland Medical System, 5.00%, 7/01/34

     110       115,096  
    

 

 

 
               20,037,774  
Massachusetts — 2.4%             

Massachusetts Bay Transportation Authority, Refunding RB, General Transportation System, Series A, 7.00%, 3/01/19

     740       765,448  

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

    

5.00%, 1/01/47

     845       948,005  

5.25%, 1/01/42

     1,895       2,183,097  

Massachusetts Development Finance Agency, Refunding RB, Emerson College, Series A, 5.00%, 1/01/40 (e)

     2,020       2,317,627  

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

     4,410       4,704,544  

Massachusetts Water Resources Authority, RB, Series A, 6.50%, 7/15/19 (f)

     3,965       4,198,182  
    

 

 

 
               15,116,903  
Michigan — 2.3%             

City of Detroit Michigan Water Supply System Revenue, RB, 2nd Lien, Series B (AGM):

    

6.25%, 7/01/19 (a)

     2,495       2,738,088  

6.25%, 7/01/36

     5       5,408  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    51


Schedule of Investments (continued)

  

BlackRock MuniVest Fund, Inc. (MVF)

 

Municipal Bonds    Par
(000)
    Value  
Michigan (continued)             

Michigan State Hospital Finance Authority, Refunding RB, McLaren Health Care, Series A, 5.75%, 5/15/18 (a)

   $ 7,285     $ 7,538,372  

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

     4,100       4,404,630  
    

 

 

 
               14,686,498  
Minnesota — 0.7%             

City of Cologne Minnesota Charter School, LRB, Cologne Academy Project, Series A, 5.00%, 7/01/45

     1,500       1,536,510  

Housing & Redevelopment Authority of The City of Saint Paul Minnesota, RB, Great River School Project, Series A, 5.50%, 7/01/52 (b)

     695       697,036  

Housing & Redevelopment Authority of The City of State Paul Minnesota, Refunding RB, Fairview Health Services, Series A, 4.00%, 11/15/43

     1,940       2,036,166  
    

 

 

 
               4,269,712  
Mississippi — 4.5%             

County of Lowndes Mississippi, Refunding RB, Solid Waste Disposal & Pollution Control, Weyerhaeuser Co. Project:

    

Series A, 6.80%, 4/01/22

     9,160       10,644,195  

Series B, 6.70%, 4/01/22

     4,500       5,213,115  

Mississippi Business Finance Corp., Refunding RB, System Energy Resource, Inc. Project, 5.88%, 4/01/22

     9,305       9,392,653  

Mississippi Development Bank, Refunding RB, Municipal Energy Agency Of Mississippi, Series A (AGM), 4.00%, 3/01/41

     3,000       3,125,160  
    

 

 

 
               28,375,123  
Nebraska — 1.1%             

Central Plains Energy Project Nebraska, RB, Gas Project No. 3, 5.00%, 9/01/42

     6,200       6,762,774  
New Jersey — 9.7%             

Casino Reinvestment Development Authority, Refunding RB, 5.25%, 11/01/44

     1,400       1,461,880  

New Jersey EDA, RB:

    

Continental Airlines, Inc. Project, Series A, AMT, 5.63%, 11/15/30

     1,530       1,726,988  

Goethals Bridge Replacement Project, AMT, Private Activity Bond, 5.38%, 1/01/43

     10,000       11,165,200  

Goethals Bridge Replacement Project, AMT, Private Activity Bond, 5.13%, 1/01/34

     1,050       1,142,390  

School Facilities Construction, Series UU, 5.00%, 6/15/40

     3,390       3,595,807  

New Jersey EDA, Refunding RB, School Facilities Construction:

    

5.25%, 6/15/19 (a)

     2,650       2,860,039  

Series AA, 5.25%, 6/15/19 (a)

     700       755,482  

Series AA, 5.25%, 12/15/33

     6,650       6,917,862  

New Jersey Housing & Mortgage Finance Agency, RB, S/F Housing, Series AA, 6.38%, 10/01/28

     50       50,236  

New Jersey Transportation Trust Fund Authority, RB:

    

CAB, Transportation System, Series A, 0.00%, 12/15/38 (c)

     7,260       2,666,888  

Transportation Program, Series AA, 5.25%, 6/15/33

     8,750       9,512,212  

Transportation Program, Series AA, 5.25%, 6/15/41

     780       850,099  

Transportation Program, Series AA, 5.00%, 6/15/44

     4,450       4,731,062  
Municipal Bonds    Par
(000)
    Value  
New Jersey (continued)             

Transportation System, Series B, 5.50%, 6/15/31

   $ 8,000     $ 8,692,960  

Tobacco Settlement Financing Corp., Refunding RB, Series 1A, 5.00%, 6/01/41

     4,980       4,812,373  
    

 

 

 
               60,941,478  
New York — 7.7%             

Build NYC Resource Corp., Refunding RB, Pratt Paper, Inc. Project, AMT, 5.00%, 1/01/35 (b)

     2,145       2,309,715  

City of New York New York Municipal Water Finance Authority, Refunding RB, Water & Sewer System, Series FF-2, 5.50%, 6/15/40

     4,150       4,486,482  

Counties of New York Tobacco Trust IV, Refunding RB, Settlement Pass-Through Turbo, Series A, 6.25%, 6/01/41 (b)

     3,500       3,599,295  

Erie Tobacco Asset Securitization Corp., Refunding RB, Asset-Backed, Series A, 5.00%, 6/01/45

     4,435       4,362,089  

Metropolitan Transportation Authority, RB, Series C:

    

6.25%, 11/15/18 (a)

     2,595       2,766,426  

6.25%, 11/15/18 (a)

     25       26,651  

6.50%, 11/15/18 (a)

     11,135       11,903,872  

6.50%, 11/15/18 (a)

     925       988,871  

6.25%, 11/15/23

     625       666,475  

6.50%, 11/15/28

     2,865       3,063,344  

New York Liberty Development Corp., Refunding RB, 3 World Trade Center Project, Class 2 (b):

    

5.15%, 11/15/34

     460       505,485  

5.38%, 11/15/40

     1,145       1,270,618  

New York Transportation Development Corp., Refunding RB, American Airlines, Inc., AMT:

    

5.00%, 8/01/26

     1,285       1,380,257  

5.00%, 8/01/31

     3,070       3,279,650  

Port Authority of New York & New Jersey, ARB, Special Project, JFK International Air Terminal LLC Project, Series 8, 6.00%, 12/01/36

     3,165       3,548,914  

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

     1,785       1,981,885  

Westchester Tobacco Asset Securitization, Refunding RB, Tobacco Settlement Bonds, Sub-Series C, 5.13%, 6/01/51

     2,740       2,729,725  
    

 

 

 
               48,869,754  
Ohio — 3.5%             

County of Allen Ohio Hospital Facilities, Refunding RB, Catholic Healthcare Partners, Series A, 5.25%, 6/01/38

     2,875       3,106,840  

County of Butler Port Authority, RB, StoryPoint Fairfield Project, Series A-1 (b):

    

6.38%, 1/15/43

     675       695,810  

6.50%, 1/15/52

     390       400,920  

County of Franklin Ohio, RB, Health Care Facilities Improvement, OPRS Communities Obligation Group, Series A, 6.13%, 7/01/40

     1,690       1,876,069  

County of Lucas Ohio, Refunding RB, Promedica Healthcare, Series A, 6.50%, 11/15/37

     1,915       2,263,415  

County of Montgomery Ohio, RB, Catholic Health Initiatives, Series D-2, 5.45%, 10/01/38

     7,430       8,121,436  

County of Montgomery Ohio, Refunding RB, Catholic Health:

    

5.50%, 5/01/19 (a)

     1,910       2,054,778  

Series A, 5.50%, 5/01/34

     3,560       3,727,783  
    

 

 

 
               22,247,051  
Oklahoma — 0.6%             

Oklahoma Development Finance Authority, RB, Provident Oklahoma Education Resources, Inc., Cross Village Student Housing Project, Series A, 5.25%, 8/01/57

     3,275       3,610,131  
 

 

See Notes to Financial Statements.      
                
52    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniVest Fund, Inc. (MVF)

 

Municipal Bonds    Par
(000)
    Value  
Pennsylvania — 3.4%             

Allentown Neighborhood Improvement Zone Development Authority, RB, City Center Project, 5.00%, 5/01/42 (b)

   $ 1,725     $ 1,854,910  

County of Delaware Pennsylvania IDA, Refunding RB, Covanta Project, 5.00%, 7/01/43

     5,000       5,037,600  

County of Montgomery Pennsylvania IDA, Refunding RB, Whitemarsh Continuing Care Retirement Community, 5.25%, 1/01/40

     4,170       4,230,507  

Delaware River Port Authority, RB, Series D, 5.00%, 1/01/40

     195       210,729  

Pennsylvania Economic Development Financing Authority, RB, Pennsylvania Bridge Finco LP, 5.00%, 12/31/38

     2,565       2,877,853  

Pennsylvania HFA, RB, S/F Housing Mortgage, Series 118-B, 4.05%, 10/01/40

     3,850       3,992,488  

Pennsylvania Turnpike Commission, RB:

    

Series A-1, 5.00%, 12/01/41

     440       503,620  

Sub-Series B-1, 5.25%, 6/01/47

     2,130       2,469,905  
    

 

 

 
               21,177,612  
Puerto Rico — 1.1%             

Children’s Trust Fund, Refunding RB, Tobacco Settlement Asset-Backed Bonds:

    

5.50%, 5/15/39

     3,555       3,572,419  

5.63%, 5/15/43

     3,400       3,420,910  
    

 

 

 
               6,993,329  
Rhode Island — 1.7%             

Rhode Island Health & Educational Building Corp., Refunding RB, Hospital Financing, LifeSpan Obligation Group, 5.00%, 5/15/39

     1,425       1,578,501  

Tobacco Settlement Financing Corp., Refunding RB, Series B:

    

4.50%, 6/01/45

     6,820       6,899,726  

5.00%, 6/01/50

     2,000       2,064,680  
    

 

 

 
               10,542,907  
South Carolina — 1.2%             

State of South Carolina Public Service Authority, Refunding RB, Series E, 5.25%, 12/01/55

     6,450       7,369,383  
Texas — 10.9%             

Central Texas Regional Mobility Authority, RB, Senior Lien, Series A:

    

5.00%, 1/01/40

     1,215       1,376,218  

5.00%, 1/01/45

     3,500       3,928,155  

Central Texas Regional Mobility Authority, Refunding RB, Senior Lien:

    

5.75%, 1/01/21 (a)

     1,000       1,151,770  

6.00%, 1/01/21 (a)

     4,300       4,987,699  

Series A, 5.00%, 1/01/43

     6,925       7,556,283  

City of Houston Texas Airport System, Refunding ARB, United Airlines, Inc. Terminal E Project, AMT, 5.00%, 7/01/29

     2,665       2,864,875  

County of Harris Texas Cultural Education Facilities Finance Corp., RB, 1st Mortgage, Brazos Presbyterian Homes, Inc. Project, Series B, 7.00%, 1/01/23 (a)

     850       1,098,336  

County of Harris Texas Health Facilities Development Corp., Refunding RB, Memorial Hermann Healthcare System, Series B (a):

    

7.13%, 12/01/18

     3,500       3,774,505  

7.25%, 12/01/18

     5,400       5,831,892  

County of Tarrant Texas Cultural Education Facilities Finance Corp., RB, Scott & White Healthcare (a):

    

6.00%, 8/15/20

     370       423,950  

6.00%, 8/15/20

     4,630       5,305,100  
Municipal Bonds    Par
(000)
    Value  
Texas (continued)             

County of Tarrant Texas Cultural Education Facilities Finance Corp., Refunding RB, Trinity Terrace Project, 5.00%, 10/01/44

   $ 875     $ 930,703  

La Vernia Higher Education Finance Corp., RB, KIPP, Inc., Series A, 6.25%, 8/15/19 (a)

     925       1,018,758  

Love Field Airport Modernization Corp., RB, Southwest Airlines Co. Project, 5.25%, 11/01/40

     1,100       1,208,603  

New Hope Cultural Education Facilities Corp., RB, Collegiate Housing Tarleton State University Project, 5.00%, 4/01/35

     500       545,730  

New Hope Cultural Education Facilities Corp., Refunding RB, 1st Mortgage, Morningside Ministries Project, 6.25%, 1/01/33

     1,600       1,800,688  

North Texas Education Finance Corp., ERB, Uplift Education, Series A, 5.13%, 12/01/42

     1,000       1,055,250  

North Texas Tollway Authority, Refunding RB, Series A:

    

1st Tier System, 6.25%, 1/01/19 (a)

     2,845       3,047,023  

1st Tier System, 6.25%, 1/01/39

     655       696,534  

5.00%, 1/01/38

     5,000       5,713,800  

Texas Private Activity Bond Surface Transportation Corp., RB, Senior Lien:

    

LBJ Infrastructure Group LLC, 7.00%, 6/30/40

     8,000       9,070,320  

NTE Mobility Partners LLC, North Tarrant Express Managed Lanes Project, 6.88%, 12/31/39

     4,710       5,253,769  
    

 

 

 
               68,639,961  
Vermont — 0.9%             

University of Vermont & State Agricultural College, Refunding RB, 5.00%, 10/01/43

     4,995       5,839,605  
Virginia — 3.9%             

Ballston Quarter Community Development Authority, Tax Allocation Bonds, Series A:

    

5.38%, 3/01/36

     430       433,874  

5.50%, 3/01/46

     1,475       1,488,024  

City of Portsmouth Virginia, GO, Refunding Series D:

    

5.00%, 7/15/20 (a)

     3,030       3,376,783  

5.00%, 7/15/34

     75       82,566  

County of Fairfax Virginia EDA, Refunding RB, Goodwin House, Inc. (a):

    

5.13%, 10/01/17

     2,000       2,007,380  

5.13%, 10/01/17

     6,015       6,037,195  

County of Fairfax Virginia IDA, Refunding RB, Health Care-Inova Health, 5.50%, 5/15/19 (a)

     735       792,580  

Tobacco Settlement Financing Corp., Refunding RB, Senior Series B-1, 5.00%, 6/01/47

     2,665       2,546,141  

Virginia Small Business Financing Authority, RB, Senior Lien, Elizabeth River Crossings OpCo LLC Project, AMT:

    

6.00%, 1/01/37

     2,150       2,445,346  

5.50%, 1/01/42

     5,140       5,726,166  
    

 

 

 
               24,936,055  
Washington — 6.2%             

Central Puget Sound Regional Transit Authority, RB, Series A (a):

    

(AGM), 5.00%, 11/01/17

     14,000       14,099,820  

5.00%, 11/01/17

     6,000       6,042,780  

Port of Seattle Washington, ARB, Intermediate Lien, Series C, AMT:

    

5.00%, 5/01/37

     4,905       5,718,200  

5.00%, 5/01/42

     1,295       1,495,207  

Washington Health Care Facilities Authority, RB, Catholic Health Initiatives, Series A, 5.75%, 1/01/45

     4,010       4,420,664  

Washington Health Care Facilities Authority, Refunding RB, Catholic Health Initiatives, Series D, 6.38%, 10/01/36

     7,000       7,361,340  
    

 

 

 
               39,138,011  
 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    53


Schedule of Investments (continued)

  

BlackRock MuniVest Fund, Inc. (MVF)

 

Municipal Bonds    Par
(000)
    Value  
West Virginia — 0.4%             

West Virginia Hospital Finance Authority, Refunding RB, Improvement, Charleston Area Medical Center, Inc., Series A, 5.63%, 9/01/32

   $ 2,500     $ 2,654,500  
Wisconsin — 1.0%             

Wisconsin Health & Educational Facilities Authority, Refunding RB, Froedtert & Community Health, Inc., Series C, 5.25%, 4/01/19 (a)

     6,100       6,518,216  
Wyoming — 1.4%             

County of Sweetwater Wyoming, Refunding RB, Idaho Power Co. Project, Remarketing, 5.25%, 7/15/26

     4,500       4,856,220  

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

     1,120       1,282,478  

Wyoming Community Development Authority, Refunding RB, Series 2 & 3, 4.05%, 12/01/38

     2,340       2,409,054  
    

 

 

 
               8,547,752  
Total Municipal Bonds — 116.8%              736,378,865  
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
              
Arizona — 0.6%             

City of Phoenix Arizona Civic Improvement Corp., Refunding RB, Water System, Junior Lien, Series A, 5.00%, 7/01/19 (a)

     3,500       3,762,290  
California — 6.2%             

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

     14,998       17,520,475  

University of California, RB, General, Series O (a):

    

5.25%, 5/15/19

     3,235       3,478,660  

5.25%, 5/15/19

     5,675       6,102,441  

5.25%, 5/15/19

     11,090       11,925,299  
    

 

 

 
               39,026,875  
District of Columbia — 1.3%             

District of Columbia Water & Sewer Authority, Refunding RB, Senior Lien, Series A, 5.50%, 10/01/18 (a)

     7,495       7,875,420  
Florida — 2.6%             

County of Miami-Dade Florida Water & Sewer System, (AGC), 5.00%, 10/01/39

     14,747       16,265,592  
Illinois — 3.7%             

State of Illinois Finance Authority, RB, University of Chicago, Series B, 6.25%, 7/01/18 (a)

     10,000       10,452,500  

State of Illinois Toll Highway Authority, RB, Senior, Series B, 5.00%, 1/01/40

     10,976       12,583,618  
    

 

 

 
               23,036,118  
Kentucky — 1.6%             

County of Louisville & Jefferson Kentucky Metropolitan Government Parking Authority, RB, River City, Inc., 1st Mortgage, Series A, 5.38%, 12/01/19 (a)

     9,195       10,102,455  
Maryland — 1.7%             

City of Baltimore Maryland, RB, Wastewater Project, Sub-Series A, 5.00%, 7/01/46

     4,898       5,698,274  

State of Maryland Transportation Authority, RB, Transportation Facilities Project (AGM), 5.00%, 7/01/41

     4,710       4,868,915  
    

 

 

 
               10,567,189  
Nevada — 2.7%             

County of Clark Nevada Water Reclamation District, GO, Limited Tax, Series B, 5.75%, 7/01/19 (a)

     15,789       17,187,572  
Municipal Bonds Transferred to
Tender Option Bond Trusts (g)
   Par
(000)
    Value  
New York — 5.8%             

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

    

5.00%, 6/15/18 (a)

   $ 3,556     $ 3,670,778  

5.00%, 6/15/37

     20,643       21,310,615  

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

     10,000       11,641,795  
    

 

 

 
               36,623,188  
North Carolina — 0.8%             

North Carolina Capital Facilities Finance Agency, Refunding RB, Wake Forest University, 5.00%, 1/01/19 (a)

     5,000       5,274,450  
Ohio — 2.1%             

Ohio Higher Educational Facility Commission, RB, Cleveland Clinic Health, Series A, 5.25%, 1/01/18 (a)

     4,400       4,463,360  

State of Ohio, RB, Cleveland Clinic Health Obligated Group, Series B, 5.50%, 1/01/34

     8,500       8,991,215  
    

 

 

 
               13,454,575  
Oregon — 1.1%             

State of Oregon Housing & Community Services Department, HRB, M/F Housing, Series A, AMT, 4.95%, 7/01/30

     6,477       6,729,480  
Pennsylvania — 0.7%             

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

     3,925       4,491,797  
Texas — 7.3%             

City of Houston Texas, Refunding RB, Airport System, Senior Lien, Series A, 5.50%, 7/01/34

     8,333       8,648,611  

City of Houston Texas Higher Education Finance Corp., RB, Rice University Project, Series A, 5.00%, 5/15/40

     10,000       10,936,365  

County of Harris Texas Health Facilities Development Corp., Refunding RB, School Health Care System, Series B, 5.75%, 7/01/27 (f)

     20,970       26,416,538  
    

 

 

 
               46,001,514  
Virginia — 3.6%             

County of Fairfax Virginia EDA, RB, Metrorail Parking System, 5.00%, 4/01/47 (h)

     6,960       8,167,143  

Virginia Commonwealth Transportation Board, RB, Capital Projects, 5.00%, 5/15/32

     7,999       9,031,445  

Virginia Small Business Financing Authority, Refunding RB, Sentara Healthcare, 5.00%, 11/01/40

     5,002       5,399,119  
    

 

 

 
               22,597,707  
Washington — 1.9%             

Washington Health Care Facilities Authority, Refunding RB, Seattle Children’s Hospital, Series B, 5.00%, 10/01/38

     10,000       12,283,600  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 43.7%
      275,279,822  

Total Investments (Cost — $943,301,755) — 160.5%

 

    1,011,658,687  

Other Assets Less Liabilities — 0.5%

 

    2,927,886  

Liability for TOB Trust Certificates, Including Interest
Expense and Fees Payable — (22.3)%

 

    (140,298,048

VMTP Shares at Liquidation Value — (38.7)%

 

    (243,800,000
    

 

 

 

Net Assets Applicable to Common Shares — 100.0%

 

  $ 630,488,525  
    

 

 

 
 

 

See Notes to Financial Statements.      
                
54    ANNUAL REPORT    AUGUST 31, 2017   


Schedule of Investments (continued)

  

BlackRock MuniVest Fund, Inc. (MVF)

 

 

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

 

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

 

(c)   Zero-coupon bond.

 

(d)   Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.

 

(e)   When-issued security.

 

(f)   Security is collateralized by municipal bonds or U.S. Treasury obligations.

 

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

 

(h)   All or a portion of security is subject to a recourse agreement. The aggregate maximum potential amount the Trust could ultimately be required to pay under the agreements, which expire between November 15, 2019 to October 1, 2024, is $8,954,336. See Note 4 of the Notes to Financial Statements for details.

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

 

Affiliate   Shares Held
at August 31,
2016
    Net
Activity
    Shares Held
at August 31,
2017
    Value at
August 31,
2017
    Income     Net
Realized Gain1
    Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, MuniCash, Institutional Class

    6,852,839       (6,852,839               $ 36,700     $ 9,031        

1   Includes net capital gain distributions.

    

 

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

             

5-Year U.S. Treasury Note

    (98      December 2017      $ 11,613     $ (21,499

10-Year U.S. Treasury Note

    (121      December 2017      $ 15,365       (32,900

Long U.S. Treasury Bond

    (121      December 2017      $ 18,887       (107,868

Ultra Long U.S. Treasury Bond

    (40      December 2017      $ 6,763       (37,949

Total

              $ (200,216
             

 

 

 

 

Derivative Financial Instruments Categorized by Risk Exposure

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

 

Liabilities — Derivative Financial Instruments   Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
   

Foreign

Currency
Exchange

Contracts

   

Interest

Rate

Contracts

   

Other

Contracts

    Total  

Futures contracts

   Net unrealized depreciation1                           $ 200,216           $ 200,216  

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

    

For the year ended August 31, 2017, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

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

Other

Contracts

    Total  

Futures contracts

                      $ 605,346           $ 605,346  
Net Change in Unrealized Appreciation (Depreciation) on:                                               

Futures contracts

                      $ (241,760         $ (241,760

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    55


Schedule of Investments (concluded)

  

BlackRock MuniVest Fund, Inc. (MVF)

 

 

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:  

Average notional value of contracts — short

  $ 53,909,945  

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

 

Fair Value Hierarchy as of Period End

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

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

 

     Level 1        Level 2        Level 3     Total  

Assets:

             
Investments:              

Long-Term Investments 1

           $ 1,011,658,687              $ 1,011,658,687  
Derivative Financial Instruments 2              

Liabilities:

             

Interest rate contracts

  $ (200,216                     $ (200,216

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

    

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

     

 

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

 

     Level 1        Level 2        Level 3     Total  

Liabilities:

             

TOB Trust Certificates

           $ (139,989,200            $ (139,989,200

VMTP Shares at Liquidation Value

             (243,800,000              (243,800,000
 

 

 

      

 

 

      

 

 

   

 

 

 

Total

           $ (383,789,200            $ (383,789,200
 

 

 

      

 

 

      

 

 

   

 

 

 

During the year ended August 31, 2017, there were no transfers between levels.

 

See Notes to Financial Statements.      
                
56    ANNUAL REPORT    AUGUST 31, 2017   


Statements of Assets and Liabilities     

 

August 31, 2017   BlackRock
Municipal
Bond Trust
(BBK)
    BlackRock
Municipal Income
Investment
Quality Trust
(BAF)
    BlackRock
Municipal Income
Quality Trust
(BYM)
    BlackRock
Municipal
Income Trust II
(BLE)
 
       
Assets  

Investments at value — unaffiliated1

  $ 271,276,767     $ 224,304,223     $ 642,166,204     $ 567,386,948  

Investments at value — affiliated2

    136,483       189,303       1,890,432       6,987,423  

Cash pledged for futures contracts

    349,050       170,800       690,050       487,800  
Receivables:  

Interest — unaffiliated

    2,909,866       2,426,939       6,578,357       6,808,888  

Investments sold

    5,833,301       1,785,172             424,009  

Dividends — affiliated

    582       122       2,231       4,769  

Prepaid expenses

    11,608       11,249       14,087       13,980  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    280,517,657       228,887,808       651,341,361       582,113,817  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Accrued Liabilities  

Bank overdraft

    110,777       56,143       181,989       212,230  
Payables:  

Income dividends — Common Shares

    668,208       599,335       1,584,376       1,728,827  

Investment advisory fees

    150,771       104,645       299,310       269,153  

Investments purchased

    5,343,993       3,504,461       5,745,479        

Officer’s and Trustees’ fees

    30,049       22,275       69,984       63,432  

Interest expense and fees

    47,511       85,488       254,455       155,270  

Variation margin on futures contracts

    53,336       25,398       104,563       75,313  

Other accrued expenses

    104,610       89,053       138,720       134,553  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total accrued liabilities

    6,509,255       4,486,798       8,378,876       2,638,778  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Other Liabilities  

TOB Trust Certificates

    22,403,733       44,937,138       101,288,260       71,274,043  

VMTP Shares, at liquidation value of $100,000 per share3,4

    79,900,000       42,200,000       137,200,000       151,300,000  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other liabilities

    102,303,733       87,137,138       238,488,260       222,574,043  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    108,812,988       91,623,936       246,867,136       225,212,821  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets Applicable to Common Shareholders

  $ 171,704,669     $ 137,263,872     $ 404,474,225     $ 356,900,996  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Net Assets Applicable to Common Shareholders Consist of  

Paid-in capital5,6,7

  $ 149,545,188     $ 124,019,631     $ 365,004,467     $ 331,634,424  

Undistributed net investment income

    1,947,633       1,377,396       2,295,741       2,322,957  

Accumulated net realized loss

    (794,854     (5,078,462     (13,315,015     (17,127,444

Net unrealized appreciation (depreciation)

    21,006,702       16,945,307       50,489,032       40,071,059  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net Assets Applicable to Common Shareholders

  $ 171,704,669     $ 137,263,872     $ 404,474,225     $ 356,900,996  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value per common share

  $ 16.32     $ 15.69     $ 15.32     $ 15.17  
 

 

 

   

 

 

   

 

 

   

 

 

 

1    Investments at cost — unaffiliated

  $ 250,194,591     $ 207,314,278     $ 591,528,601     $ 527,207,903  

2    Investments at cost — affiliated

  $ 136,483     $ 189,322     $ 1,890,432     $ 6,987,142  

3    Preferred Shares outstanding, par value $0.001 per share

    799       422       1,372       1,513  

4    Preferred Shares authorized, including Auction Market Rate Preferred Shares (“AMPS”)

    unlimited       unlimited       unlimited       unlimited  

5    Par value per Common Share

  $ 0.001     $ 0.001     $ 0.001     $ 0.001  

6    Common Shares outstanding

    10,522,957       8,749,418       26,406,273       23,521,456  

7    Common Shares authorized

    unlimited       unlimited       unlimited       unlimited  

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    57


Statements of Assets and Liabilities     

 

August 31, 2017   BlackRock
MuniHoldings
Investment
Quality Fund
(MFL)
     BlackRock
MuniVest
Fund, Inc.
(MVF)
 
    
Assets                 

Investments at value – unaffiliated1

  $ 956,086,800      $ 1,011,658,687  

Cash pledged for futures contracts

    831,150        719,500  

Receivables:

    

Interest — unaffiliated

    11,534,110        12,691,653  

Investments sold

    205,000        241,367  

Dividends — affiliated

    1,039        1,589  

Prepaid expenses

    31,466        37,180  
 

 

 

 

Total assets

    968,689,565        1,025,349,976  
 

 

 

 
    
Accrued Liabilities                 

Bank overdraft

    608,185        4,579,376  
Payables:     

Income dividends — Common Shares

    2,706,764        2,975,447  

Investment advisory fees

    404,260        429,732  

Investments purchased

    2,351,150        2,300,578  

Officer’s and Trustees’ fees

    301,761        165,869  

Interest expense and fees

    309,439        308,848  

Variation margin on futures contracts

    125,829        110,625  

Other accrued expenses

    192,017        201,776  
 

 

 

 

Total accrued liabilities

    6,999,405        11,072,251  
 

 

 

 
    
Other Liabilities                 

TOB Trust Certificates

    123,110,561        139,989,200  

VMTP Shares, at liquidation value of $100,000 per share2,3

           243,800,000  

VRDP Shares, at liquidation value of $100,000 per share, net of deferred offering costs2,3

    274,196,212         
 

 

 

 

Total other liabilities

    397,306,773        383,789,200  
 

 

 

 

Total liabilities

    404,306,178        394,861,451  
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 564,383,387      $ 630,488,525  
 

 

 

 
    
Net Assets Applicable to Common Shareholders Consist of                 

Paid-in capital4,5,6

  $ 524,762,403      $ 580,998,332  

Undistributed net investment income

    5,561,495        4,778,923  

Accumulated net realized loss

    (31,819,339      (23,445,446

Net unrealized appreciation (depreciation)

    65,878,828        68,156,716  
 

 

 

 

Net Assets Applicable to Common Shareholders

  $ 564,383,387      $ 630,488,525  
 

 

 

 

Net asset value per Common Share

  $ 14.91      $ 9.75  
 

 

 

 

1    Investments at cost — unaffiliated

  $ 890,026,506      $ 943,301,755  

2    Preferred Shares outstanding, par value $0.10 per share

    2,746        2,438  

3    Preferred Shares authorized, including Auction Market Rate Preferred Shares (“AMPS”)

    1,000,000        10,000,000  

4    Par value per Common Share

  $ 0.10      $ 0.10  

5    Common Shares outstanding

    37,856,845        64,683,637  

6    Common Shares authorized

    unlimited        150,000,000  

 

 

See Notes to Financial Statements.      
                
58    ANNUAL REPORT    AUGUST 31, 2017   


Statements of Operations     

 

Year Ended August 31, 2017   BlackRock
Municipal
Bond Trust
(BBK)
    BlackRock
Municipal Income
Investment
Quality Trust
(BAF)
    BlackRock
Municipal Income
Quality Trust
(BYM)
    BlackRock
Municipal
Income Trust II
(BLE)
 
       
Investment Income  

Interest — unaffiliated

  $ 11,652,804     $ 9,721,244     $ 27,548,737     $ 26,581,890  

Dividends — affiliated

    13,328       2,876       26,387       24,156  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total investment income

    11,666,132       9,724,120       27,575,124       26,606,046  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Expenses  

Investment advisory

    1,779,287       1,223,767       3,532,400       3,187,040  

Professional

    64,299       61,362       98,837       89,373  

Accounting services

    48,562       42,180       59,984       59,984  

Officer and Trustees

    20,316       16,293       48,053       42,828  

Transfer agent

    24,978       20,862       36,397       36,115  

Custodian

    16,077       11,775       27,699       25,676  

Registration

    9,756       9,737       10,541       11,797  

Printing

    8,779       8,138       11,901       11,325  

Rating agency

    39,315       39,214       39,469       39,507  

Miscellaneous

    21,853       13,760       23,791       22,536  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    2,033,222       1,447,088       3,889,072       3,526,181  

Interest expense, fees and amortization of offering costs1

    1,895,519       1,371,682       3,837,952       3,654,302  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    3,928,741       2,818,770       7,727,024       7,180,483  

Less fees waived by the Manager

    (2,080     (446     (4,337     (3,817
 

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses after fees waived

    3,926,661       2,818,324       7,722,687       7,176,666  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

    7,739,471       6,905,796       19,852,437       19,429,380  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Realized and Unrealized Gain (Loss)  
Net realized gain (loss) from:  

Investments — unaffiliated

    689,402       188,878       (1,180,324     (2,044,893

Investments — affiliated

    2,034       226       2,519       1,684  

Futures contracts

    642,731       293,935       1,027,180       822,956  

Capital gain distributions from investment companies — affiliated

    396             3,475       149  
 

 

 

   

 

 

   

 

 

   

 

 

 
    1,334,563       483,039       (147,150     (1,220,104
 

 

 

   

 

 

   

 

 

   

 

 

 
Net change in unrealized appreciation (depreciation) on:  

Investments — unaffiliated

    (12,657,674     (7,802,298     (22,843,766     (19,409,890

Investments — affiliated

          (19           281  

Futures contracts

    (89,339     (57,524     (179,501     (135,038
 

 

 

   

 

 

   

 

 

   

 

 

 
    (12,747,013     (7,859,841     (23,023,267     (19,544,647
 

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized loss

    (11,412,450     (7,376,802     (23,170,417     (20,764,751
 

 

 

   

 

 

   

 

 

   

 

 

 

Net Decrease in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ (3,672,979   $ (471,006   $ (3,317,980   $ (1,335,371
 

 

 

   

 

 

   

 

 

   

 

 

 

1    Related to TOB Trusts, VMTP Shares and/or VRDP Shares.

     

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    59


Statements of Operations     

 

Year Ended August 31, 2017   BlackRock
MuniHoldings
Investment
Quality Fund
(MFL)
    BlackRock
MuniVest
Fund, Inc.
(MVF)
 
   
Investment Income  

Interest — unaffiliated

  $ 41,008,381     $ 47,990,835  

Dividends — affiliated

    14,022       36,700  
 

 

 

   

 

 

 

Total investment income

    41,022,403       48,027,535  
 

 

 

   

 

 

 
   
Expenses  

Investment advisory

    5,314,155       5,126,216  

Professional

    134,434       139,885  

Accounting services

    130,467       141,230  

Officer and Trustees

    86,006       81,016  

Transfer agent

    46,767       57,598  

Custodian

    38,888       41,712  

Registration

    15,100       32,284  

Printing

    13,756       14,897  

Liquidity fees

    27,966        

Remarketing fees on Preferred Shares

    27,459        

Rating agency

    39,837       39,754  

Miscellaneous

    31,235       34,985  
 

 

 

   

 

 

 

Total expenses excluding interest expense, fees and amortization of offering costs

    5,906,070       5,709,577  

Interest expense, fees and amortization of offering costs1

    6,322,642       6,398,971  
 

 

 

   

 

 

 

Total expenses

    12,228,712       12,108,548  

Less fees waived and reimbursed by the Manager

    (558,704     (6,243
 

 

 

   

 

 

 

Total expenses after fees waived and/or reimbursed

    11,670,008       12,102,305  
 

 

 

   

 

 

 

Net investment income

    29,352,395       35,925,230  
 

 

 

   

 

 

 
   
Realized and Unrealized Gain (Loss)  
Net realized gain (loss) from:  

Investments — unaffiliated

    1,352,983       (2,086,531

Investments — affiliated

    1,191       3,691  

Futures contracts

    858,486       605,346  

Capital gain distributions from investment companies — affiliated

    441       5,340  
 

 

 

   

 

 

 
    2,213,101       (1,472,154
 

 

 

   

 

 

 
Net change in unrealized appreciation (depreciation) on:  

Investments — unaffiliated

    (34,951,695     (37,640,964

Futures contracts

    (231,876     (241,760
 

 

 

   

 

 

 
    (35,183,571     (37,882,724
 

 

 

   

 

 

 

Net realized and unrealized loss

    (32,970,470     (39,354,878
 

 

 

   

 

 

 

Net Decrease in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ (3,618,075   $ (3,429,648
 

 

 

   

 

 

 

1    Related to TOB Trusts, VMTP Shares and/or VRDP Shares.

     

 

 

See Notes to Financial Statements.      
                
60    ANNUAL REPORT    AUGUST 31, 2017   


Statements of Changes in Net Assets     

 

    BlackRock Municipal Bond
Trust (BBK)
          BlackRock Municipal Income
Investment Quality Trust (BAF)
 
    Year Ended August 31,           Year Ended August 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2017     2016           2017     2016  
         
Operations                                        

Net investment income

  $ 7,739,471     $ 9,337,529       $ 6,905,796     $ 7,223,541  

Net realized gain

    1,334,563       2,455,647         483,039       265,592  

Net change in unrealized appreciation (depreciation)

    (12,747,013     12,451,415         (7,859,841     6,427,068  
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    (3,672,979     24,244,591         (471,006     13,916,201  
 

 

 

   

 

 

     

 

 

   

 

 

 
         
Distributions to Common Shareholders1                                        

From net investment income

    (8,742,737     (9,449,507       (7,192,022     (7,192,022

From net realized gain

    (4,092,513     (153,110              
 

 

 

     

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (12,835,250     (9,602,617       (7,192,022     (7,192,022
 

 

 

   

 

 

     

 

 

   

 

 

 
         
Capital Share Transactions                                        

Reinvestment of common distributions

    106,139       101,508                
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                        

Total increase (decrease) in net assets applicable to Common Shareholders

    (16,402,090     14,743,482         (7,663,028     6,724,179  

Beginning of year

    188,106,759       173,363,277         144,926,900       138,202,721  
 

 

 

     

 

 

 

End of year

  $ 171,704,669     $ 188,106,759       $ 137,263,872     $ 144,926,900  
 

 

 

     

 

 

 

Undistributed net investment income, end of year

  $ 1,947,633     $ 2,495,048       $ 1,377,396     $ 1,681,136  
 

 

 

     

 

 

 

 

  1   

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    61


Statements of Changes in Net Assets     

 

    BlackRock Municipal Income
Quality Trust (BYM)
          BlackRock Municipal Income
Trust II (BLE)
 
    Year Ended August 31,           Year Ended August 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2017     2016           2017     2016  
         
Operations                                        

Net investment income

  $ 19,852,437     $ 21,546,402       $ 19,429,380     $ 21,726,079  

Net realized gain (loss)

    (147,150     (331,103       (1,220,104     115,722  

Net change in unrealized appreciation (depreciation)

    (23,023,267     27,620,933         (19,544,647     20,413,932  
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    (3,317,980     48,836,232         (1,335,371     42,255,733  
 

 

 

     

 

 

 
         
Distributions to Common Shareholders1                                        

From net investment income

    (20,596,893     (21,983,222       (20,808,732     (21,868,068
 

 

 

     

 

 

 
         
Capital Share Transactions                                        

Reinvestment of common distributions

                  472,775       316,581  
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                        

Total increase (decrease) in net assets applicable to Common Shareholders

    (23,914,873     26,853,010         (21,671,328     20,704,246  

Beginning of year

    428,389,098       401,536,088         378,572,324       357,868,078  
 

 

 

     

 

 

 

End of year

  $ 404,474,225     $ 428,389,098       $ 356,900,996     $ 378,572,324  
 

 

 

     

 

 

 

Undistributed net investment income, end of year

  $ 2,295,741     $ 3,346,244       $ 2,322,957     $ 3,728,046  
 

 

 

     

 

 

 

 

  1   

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

 

See Notes to Financial Statements.      
                
62    ANNUAL REPORT    AUGUST 31, 2017   


Statements of Changes in Net Assets     

 

    BlackRock MuniHoldings
Investment Quality Fund (MFL)
          BlackRock MuniVest Fund,
Inc. (MVF)
 
    Year Ended August 31,           Year Ended August 31,  
Increase (Decrease) in Net Assets Applicable to Common Shareholders:   2017     2016           2017     2016  
         
Operations                                        

Net investment income

  $ 29,352,395     $ 32,591,123       $ 35,925,230     $ 38,991,048  

Net realized gain (loss)

    2,213,101       6,297,723         (1,472,154     1,172,461  

Net change in unrealized appreciation (depreciation)

    (35,183,571     19,383,609         (37,882,724     21,955,766  
 

 

 

     

 

 

 

Net increase (decrease) in net assets applicable to Common Shareholders resulting from operations

    (3,618,075     58,272,455         (3,429,648     62,119,275  
 

 

 

     

 

 

 
         
Distributions to Common Shareholders1                                        

From net investment income:

    (32,468,810     (32,440,515       (36,990,508     (40,498,987
 

 

 

     

 

 

 
         
Capital Share Transactions                                        

Reinvestment of common distributions

    540,004       212,833         3,319,416       3,079,538  
 

 

 

     

 

 

 
         
Net Assets Applicable to Common Shareholders                                        

Total increase (decrease) in net assets applicable to Common Shareholders

    (35,546,881     26,044,773         (37,100,740     24,699,826  

Beginning of year

    599,930,268       573,885,495         667,589,265       642,889,439  
 

 

 

     

 

 

 

End of year

  $ 564,383,387     $ 599,930,268       $ 630,488,525     $ 667,589,265  
 

 

 

     

 

 

 

Undistributed net investment income, end of year

  $ 5,561,495     $ 8,655,522       $ 4,778,923     $ 5,598,133  
 

 

 

     

 

 

 

 

  1   

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    63


Statements of Cash Flows     

 

Year Ended August 31, 2017   BlackRock
Municipal
Bond Trust
(BBK)
    BlackRock
Municipal Income
Investment
Quality Trust
(BAF)
    BlackRock
Municipal Income
Quality Trust
(BYM)
    BlackRock
Municipal
Income Trust II
(BLE)
 
       
Cash Provided by (Used for) Operating Activities  

Net decrease in net assets resulting from operations

  $ (3,672,979   $ (471,006   $ (3,317,980   $ (1,335,371

Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:

       

Proceeds from sales of long-term investments

    130,518,647       69,455,923       116,995,469       57,302,302  

Purchases of long-term investments

    (124,966,304     (73,685,921     (119,021,860     (48,833,845

Net proceeds from sales (purchases) of short-term securities

    2,005,104       515,378       1,717,137       (3,475,874

Amortization of premium and accretion of discount on investments and other fees

    (453,610     963,228       (497,472     873,088  

Net realized (gain) loss on investments

    (691,436     (189,104     1,177,805       2,043,209  

Net unrealized loss on investments

    12,657,674       7,802,317       22,843,766       19,409,609  

(Increase) Decrease in Assets:

 

Cash pledged for futures contracts

    (52,000     (25,000     (260,000     (73,000
Receivables:  

Interest — unaffiliated

    115,081       (60,229     (29,717     196,016  

Dividends — affiliated

    34       (61     (1,286     (3,622

Prepaid expenses

    12,826       12,817       12,699       13,089  

Increase (Decrease) in Liabilities:

 

Payables:  

Investment advisory fees

    (167,740     (106,421     (318,377     (293,136

Interest expense and fees

    26,906       43,293       126,384       66,653  

Officer’s and Trustees’ fees

    1,202       993       3,095       2,900  

Variation margin on futures contracts

    45,977       22,461       95,704       65,594  

Other accrued expenses

    9,874       9,508       10,007       15,316  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

    15,389,256       4,288,176       19,535,374       25,972,928  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Cash Provided by (Used for) Financing Activities  

Proceeds from TOB Trust Certificates

          13,896,108       25,345,174       6,463,386  

Repayments of TOB Trust Certificates

    (2,650,383     (11,048,405     (24,307,206     (12,286,690

Proceeds from Loan for TOB Trust Certificates

          7,275,762       3,692,285        

Repayments of Loan for TOB Trust Certificates

          (7,275,762     (3,692,285     (33,182

Cash dividends paid to Common Shareholders

    (12,849,650     (7,192,022     (20,755,331     (20,333,672

Increase in bank overdraft

    110,777       56,143       181,989       212,230  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

    (15,389,256     (4,288,176     (19,535,374     (25,977,928
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Cash  

Net increase (decrease) in cash

                      (5,000

Cash at beginning of year

                      5,000  
 

 

 

   

 

 

   

 

 

   

 

 

 

Cash at end of year

                       
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Supplemental Disclosure of Cash Flow Information  

Cash paid during the year for interest expense

  $ 1,868,613     $ 1,328,389     $ 3,711,568     $ 3,587,649  
 

 

 

   

 

 

   

 

 

   

 

 

 
       
Non-Cash Financing Activities  

Capital shares issued in reinvestment of distributions paid to Common Shareholders

  $ 106,139                 $ 472,775  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

See Notes to Financial Statements.      
                
64    ANNUAL REPORT    AUGUST 31, 2017   


Statements of Cash Flows     

 

Year Ended August 31, 2017   BlackRock
MuniHoldings
Investment
Quality Fund
(MFL)
    BlackRock
MuniVest
Fund, Inc.
(MVF)
 
   
Cash Provided by (Used for) Operating Activities  

Net decrease in net assets resulting from operations

  $ (3,618,075   $ (3,429,648

Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities:

   

Proceeds from sales of long-term investments

    160,794,677       265,430,962  

Purchases of long-term investments

    (169,039,071     (259,221,501

Net proceeds from sales of short-term securities

    3,477,883       6,856,530  

Amortization of premium and accretion of discount on investments and other fees

    4,938,756       2,257,526  

Net realized (gain) loss on investments

    (1,354,174     2,082,840  

Net unrealized loss on investments

    34,951,695       37,640,964  

(Increase) Decrease in Assets:

 

Cash pledged for futures contracts

    (293,000     (231,000
Receivables:  

Interest — unaffiliated

    (270,103     121,519  

Dividends — affiliated

    (321     1,369  

Prepaid expenses

    (1,236     95  

Increase (Decrease) in Liabilities:

 

Payables:  

Investment advisory fees

    (457,181     (475,883

Interest expense and fees

    158,335       121,617  

Officer’s and Trustees’ fees

    32,048       2,564  

Variation margin on futures contracts

    115,876       100,641  

Other accrued expenses

    40,788       10,917  
 

 

 

   

 

 

 

Net cash provided by operating activities

    29,476,897       51,269,512  
 

 

 

   

 

 

 
   
Cash Provided by (Used for) Financing Activities  

Proceeds from TOB Trust Certificates

    17,802,507       22,039,739  

Repayments of TOB Trust Certificates

    (15,978,273     (44,007,954

Proceeds from Loan for TOB Trust Certificates

    4,920,075       3,498,775  

Repayments of Loan for TOB Trust Certificates

    (4,920,075     (3,498,775

Cash dividends paid to Common Shareholders

    (31,926,252     (33,880,673

Increase in bank overdraft

    608,185       4,579,376  

Amortization of deferred offering costs

    16,936        
 

 

 

   

 

 

 

Net cash used for financing activities

    (29,476,897     (51,269,512
 

 

 

   

 

 

 
   
Cash  

Net increase (decrease) in cash

           

Cash at beginning of year

           
 

 

 

   

 

 

 

Cash at end of year

           
 

 

 

   

 

 

 
   
Supplemental Disclosure of Cash Flow Information  

Cash paid during the year for interest expense

  $ 6,147,371     $ 6,277,354  
 

 

 

   

 

 

 
   
Non-Cash Financing Activities  

Capital shares issued in reinvestment of distributions paid to Common Shareholders

  $ 540,004     $ 3,319,416  
 

 

 

   

 

 

 

 

See Notes to Financial Statements.      
                
   ANNUAL REPORT    AUGUST 31, 2017    65


Financial Highlights    BlackRock Municipal Bond Trust (BBK)

 

    Year Ended August 31,  
    2017     2016     2015     2014     2013  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 17.89     $ 16.49     $ 16.54     $ 14.18     $ 16.79  
 

 

 

 

Net investment income1

    0.74       0.89       0.90       0.97       0.96  

Net realized and unrealized gain (loss)

    (1.09     1.42       0.03       2.43       (2.46
 

 

 

 

Net increase (decrease) from investment operations

    (0.35     2.31       0.93       3.40       (1.50
 

 

 

 
Distributions to Common Shareholders:2          

From net investment income

    (0.83     (0.90     (0.98     (0.96     (0.97

From net realized gain

    (0.39     (0.01           (0.08     (0.14
 

 

 

 

Total distributions to Common Shareholders

    (1.22     (0.91     (0.98     (1.04     (1.11
 

 

 

 

Net asset value, end of year

  $ 16.32     $ 17.89     $ 16.49     $ 16.54     $ 14.18  
 

 

 

 

Market price, end of year

  $ 15.99     $ 18.22     $ 15.23     $ 15.59     $ 13.49  
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    (1.44)%       14.53%       5.96%       25.27%       (9.52)%  
 

 

 

 

Based on market price

    (5.18)%       26.29%       3.83%       24.11%       (15.78)%  
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    2.31%       1.78%       1.73%       1.84% 4      1.82%  
 

 

 

 

Total expenses after fees waived and paid indirectly

    2.31%       1.77%       1.73%       1.84% 4      1.82%  
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs4

    1.19%       1.16%       1.16%       1.19%       1.17%  
 

 

 

 

Net investment income to Common Shareholders

    4.55%       5.18%       5.41%       6.29%       5.85%  
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 171,705     $ 188,107     $ 173,363     $ 173,798     $ 149,003  
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 79,900     $ 79,900     $ 79,900     $ 79,900     $ 79,900  
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $ 314,899     $ 335,428     $ 316,975     $ 317,520     $ 286,487  
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 22,404     $ 25,054     $ 19,495     $ 19,495     $ 17,039  
 

 

 

 

Portfolio turnover rate

    46%       29%       34%       32%       32%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

 

  4  

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.      
                
66    ANNUAL REPORT    AUGUST 31, 2017   


Financial Highlights    BlackRock Municipal Income Investment Quality Trust  (BAF)

 

    Year Ended August 31,  
    2017     2016     2015     2014     2013  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 16.56     $ 15.80     $ 15.97     $ 13.83     $ 16.53  
 

 

 

 

Net investment income1

    0.79       0.83       0.83       0.83       0.81  

Net realized and unrealized gain (loss)

    (0.84     0.75       (0.18     2.13       (2.68
 

 

 

 

Net increase (decrease) from investment operations

    (0.05     1.58       0.65       2.96       (1.87
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.82     (0.82     (0.82     (0.82     (0.83
 

 

 

 

Net asset value, end of year

  $ 15.69     $ 16.56     $ 15.80     $ 15.97     $ 13.83  
 

 

 

 

Market price, end of year

  $ 15.11     $ 15.79     $ 13.89     $ 14.18     $ 12.82  
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    0.14%       10.57%       4.71%       22.67%       (11.69)%  
 

 

 

 

Based on market price

    1.15%       19.92%       3.68%       17.50%       (16.68)%  
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    2.06%       1.61%       1.50%       1.58%       1.63%  
 

 

 

 

Total expenses after fees waived and paid indirectly

    2.06%       1.61%       1.50%       1.58%       1.63%  
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs4

    1.06%       1.01%       1.00%       1.03%       1.03%  
 

 

 

 

Net investment income to Common Shareholders

    5.06%       5.09%       5.16%       5.56%       5.02%  
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 137,264     $ 144,927     $ 138,203     $ 139,723     $ 120,962  
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 42,200     $ 42,200     $ 42,200     $ 42,200     $ 42,200  
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $ 425,270     $ 443,429     $ 427,495     $ 431,097     $ 386,639  
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 44,937     $ 42,089     $ 33,470     $ 32,345     $ 33,845  
 

 

 

 

Portfolio turnover rate

    31%       29%       13%       26%       43%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

 

  4  

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.      
                
   ANNUAL REPORT    AUGUST 31, 2017    67


Financial Highlights    BlackRock Municipal Income Quality Trust (BYM)

 

    Year Ended August 31,  
    2017     2016     2015     2014     2013  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 16.22     $ 15.21     $ 15.56     $ 13.46     $ 16.11  
 

 

 

 

Net investment income1

    0.75       0.82       0.84       0.86       0.91  

Net realized and unrealized gain (loss)

    (0.87     1.02       (0.33     2.16       (2.62
 

 

 

 

Net increase (decrease) from investment operations

    (0.12     1.84       0.51       3.02       (1.71
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.78     (0.83     (0.86 )       (0.92     (0.94
 

 

 

 

Net asset value, end of year

  $ 15.32     $ 16.22     $ 15.21     $ 15.56     $ 13.46  
 

 

 

 

Market price, end of year

  $ 14.84     $ 15.55     $ 13.67     $ 13.96     $ 12.59  
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    (0.30)%       12.71%       3.85%       23.69%       (11.13)%  
 

 

 

 

Based on market price

    0.74%       20.23%       4.03%       18.65%       (19.96)%  
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    1.93%       1.56%       1.47%       1.55%       1.55%  
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.93%       1.56%       1.47%       1.55%       1.55%  
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs4

    0.97%       0.95%       0.96%       0.98%       0.96%  
 

 

 

 

Net investment income to Common Shareholders

    4.95%       5.19%       5.42%       5.89%       5.77%  
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 404,474     $ 428,389     $ 401,536     $ 410,776     $ 355,372  
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 137,200     $ 137,200     $ 137,200     $ 137,200     $ 137,200  
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $ 394,806     $ 412,237     $ 392,665     $ 399,399     $ 359,018  
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 101,288     $ 100,250     $ 101,818     $ 93,816     $ 114,948  
 

 

 

 

Portfolio turnover rate

    18%       10%       12%       20%       24%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

 

  4  

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.      
                
68    ANNUAL REPORT    AUGUST 31, 2017   


Financial Highlights    BlackRock Municipal Income Trust II (BLE)

 

 

    Year Ended August 31,    

 

 
    2017       2016       2015       2014       2013    
           
Per Share Operating Performance                                                

Net asset value, beginning of year

  $ 16.12     $ 15.25     $ 15.48     $ 13.32     $ 16.10    
 

 

 

 

Net investment income1

    0.83       0.93       0.92       0.93       0.97    

Net realized and unrealized gain (loss)

    (0.89     0.87       (0.19     2.22       (2.72  
 

 

 

 

Net increase (decrease) from investment operations

    (0.06     1.80       0.73       3.15       (1.75  
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.89     (0.93     (0.96 )       (0.99     (1.03  
 

 

 

 

Net asset value, end of year

  $ 15.17     $ 16.12     $ 15.25     $ 15.48     $ 13.32    
 

 

 

 

Market price, end of year

  $ 15.45     $ 16.34     $ 14.18     $ 14.70     $ 13.20    
 

 

 

 
           
Total Return Applicable to Common Shareholders3                                                

Based on net asset value

    (0.18)%       12.21%       5.01%       24.73%       (11.60)%    
 

 

 

 

Based on market price

    0.29%       22.33%       2.83%       19.52%       (15.75)%    
 

 

 

 
           
Ratios to Average Net Assets Applicable to Common Shareholders                                                

Total expenses

    2.02%       1.62%       1.55%       1.64%       1.67%    
 

 

 

 

Total expenses after fees waived and paid indirectly

    2.02%       1.62%       1.55%       1.64%       1.67%    
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs4

    0.99%       0.98%       0.98%       1.01%       1.00%    
 

 

 

 

Net investment income to Common Shareholders

    5.47%       5.90%       5.94%       6.49%       6.17%    
 

 

 

 
           
Supplemental Data                                                

Net assets applicable to Common Shareholders, end of year (000)

  $  356,901     $  378,572     $  357,868     $  363,038     $  312,329    
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 151,300     $ 151,300     $ 151,300     $ 151,300     $ 151,300    
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $ 335,890     $ 350,213     $ 336,529     $ 339,946     $ 306,430    
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 71,274     $ 77,130     $ 68,692     $ 68,692     $ 73,531    
 

 

 

 

Portfolio turnover rate

    9%       7%       10%       16%       17%    
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

 

  4  

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.      
                
   ANNUAL REPORT    AUGUST 31, 2017    69


Financial Highlights    BlackRock MuniHoldings Investment Quality Fund (MFL)

 

    Year Ended August 31,  
    2017     2016     2015     2014     2013  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 15.86     $ 15.18     $ 15.46     $ 13.27     $ 15.96  
 

 

 

 

Net investment income1

    0.78       0.86       0.89       0.89       0.87  

Net realized and unrealized gain (loss)

    (0.87     0.68       (0.31     2.16       (2.66
 

 

 

 

Net increase (decrease) from investment operations

    (0.09     1.54       0.58       3.05       (1.79
 

 

 

 

Distributions to Common Shareholders from net investment income2

    (0.86     (0.86     (0.86     (0.86     (0.90
 

 

 

 

Net asset value, end of year

  $ 14.91     $ 15.86     $ 15.18     $ 15.46     $ 13.27  
 

 

 

 

Market price, end of year

  $ 15.03     $ 15.86     $ 14.06     $ 13.92     $ 12.59  
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    (0.34)%       10.56%       4.29%       24.24%       (11.70)%  
 

 

 

 

Based on market price

    0.46%       19.37%       7.28%       17.91%       (17.11)%  
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    2.17%       1.65%       1.54%       1.64%       1.71%  
 

 

 

 

Total expenses after fees waived and paid indirectly

    2.08%       1.60%       1.49%       1.57%       1.62%  
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs4

    0.95% 5      0.94% 5      0.95% 5      1.19% 5      1.29% 5 
 

 

 

 

Net investment income to Common Shareholders

    5.22%       5.54%       5.73%       6.18%       5.55%  
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 564,383     $ 599,930     $ 573,885     $ 584,690     $ 501,810  
 

 

 

 

VRDP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 274,600     $ 274,600     $ 274,600     $ 274,600     $ 274,600  
 

 

 

 

Asset coverage per VRDP Shares at $100,000 liquidation value, end of year

  $ 305,529     $ 318,474     $ 308,990     $ 312,924     $ 282,742  
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 123,111     $ 131,279     $ 85,502     $ 89,157     $ 95,959  
 

 

 

 

Portfolio turnover rate

    16%       27%       13%       25%       59%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

 

  4  

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.

 

  5  

For the years ended August 31, 2017, August 31, 2016, August 31, 2015, August 31, 2014 and August 31, 2013, the total expense ratio after fees waived and paid indirectly and excluding interest expense, fees, amortization of offering costs, liquidity and remarketing fees was 0.94%, 0.93%, 0.94%, 0.95% and 0.92%, respectively.

 

 

See Notes to Financial Statements.      
                
70    ANNUAL REPORT    AUGUST 31, 2017   


Financial Highlights    BlackRock MuniVest Fund, Inc. (MVF)

 

    Year Ended August 31,  
    2017     2016     2015     2014     2013  
         
Per Share Operating Performance                                        

Net asset value, beginning of year

  $ 10.38     $ 10.04     $ 10.27     $ 9.14     $ 10.68  
 

 

 

 

Net investment income1

    0.56       0.61       0.62       0.63       0.67  

Net realized and unrealized gain (loss)

    (0.62     0.36       (0.21     1.18       (1.50
 

 

 

 

Net increase (decrease) from investment operations

    (0.06     0.97       0.41       1.81       (0.83
 

 

 

 
Distributions to Common Shareholders from net investment income2     (0.57     (0.63     (0.64     (0.68     (0.71
 

 

 

 

Net asset value, end of year

  $ 9.75     $ 10.38     $ 10.04     $ 10.27     $ 9.14  
 

 

 

 

Market price, end of year

  $ 9.84     $ 10.77     $ 9.65     $ 9.83     $ 8.91  
 

 

 

 
         
Total Return Applicable to Common Shareholders3                                        

Based on net asset value

    (0.38)%       9.96%       4.27%       20.70%       (8.39)%  
 

 

 

 

Based on market price

    (3.10)%       18.70%       4.71%       18.50%       (15.45)%  
 

 

 

 
         
Ratios to Average Net Assets Applicable to Common Shareholders                                        

Total expenses

    1.92%       1.55%       1.43%       1.49%       1.54%  
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.92%       1.55%       1.43%       1.49%       1.54%  
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense, fees and amortization of offering costs4

    0.91%       0.89%       0.89%       0.91%       0.91%  
 

 

 

 

Net investment income to Common Shareholders

    5.71%       5.95%       6.03%       6.53%       6.43%  
 

 

 

 
         
Supplemental Data                                        

Net assets applicable to Common Shareholders, end of year (000)

  $ 630,489     $ 667,589     $ 642,889     $ 656,922     $ 584,718  
 

 

 

 

VMTP Shares outstanding at $100,000 liquidation value, end of year (000)

  $ 243,800     $ 243,800     $ 243,800     $ 243,800     $ 243,800  
 

 

 

 

Asset coverage per VMTP Shares at $100,000 liquidation value, end of year

  $ 358,609     $ 373,827     $ 363,695     $ 369,451     $ 339,835  
 

 

 

 

Borrowings outstanding, end of year (000)

  $ 139,989     $ 161,957     $ 148,867     $ 145,111     $ 149,085  
 

 

 

 

Portfolio turnover rate

    26%       13%       18%       14%       11%  
 

 

 

 

 

  1  

Based on average Common Shares outstanding.

 

  2  

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

 

  3  

Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

 

  4  

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.      
                
   ANNUAL REPORT    AUGUST 31, 2017    71


Notes to Financial Statements     

 

1. Organization:

The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end management investment companies and are referred to herein collectively as the “Trusts”, or individually as a “Trust”:

 

Trust Name   Herein Referred To As    Organized    Diversification Classification

BlackRock Municipal Bond Trust

  BBK    Delaware    Diversified

BlackRock Municipal Income Investment Quality Trust

  BAF    Delaware    Diversified*

BlackRock Municipal Income Quality Trust

  BYM    Delaware    Diversified

BlackRock Municipal Income Trust II

  BLE    Delaware    Diversified

BlackRock MuniHoldings Investment Quality Fund

  MFL    Massachusetts    Diversified*

BlackRock MuniVest Fund, Inc.

  MVF    Maryland    Diversified*

 

  *   The Trust’s classification changed from non-diversified to diversified during the reporting period.

The Board of Directors and Boards of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the “Board,” and the directors/trustees thereof are collectively referred to throughout this report as “Trustees.” The Trusts determine and make available for publication the net asset value (“NAV”) of their Common Shares on a daily basis.

The Trusts, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of closed-end funds referred to as the Closed-End Complex.

2. Significant Accounting Policies:

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Trust is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income (in the form of cash) and non-cash dividend income (in the form of additional securities) are recorded on the ex-dividend date. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis.

Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g., futures contracts) or certain borrowings (e.g., TOB Trust transactions) that would be treated as “senior securities” for 1940 Act purposes, a Trust may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Trusts may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Distributions to Preferred Shareholders are accrued and determined as described in Note 10.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Trust’s Board, the independent Trustees (“Independent Trustees”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust, if applicable. Deferred compensation liabilities are included in the officer’s and trustees’ fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Trusts until such amounts are distributed in accordance with the Plan.

Recent Accounting Standards: In November 2016, the Financial Accounting Standards Board issued Accounting Standards Update “Restricted Cash” which will require entities to include the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the beginning and ending cash balances in the Statements of Cash Flows. The guidance will be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Management is evaluating the impact, if any, of this guidance on the Trusts’ presentation in the Statements of Cash Flows.

In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of

 

                
72    ANNUAL REPORT    AUGUST 31, 2017   


Notes to Financial Statements (continued)     

 

purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Trusts.

Indemnifications: In the normal course of business, a Trust enters into contracts that contain a variety of representations that provide general indemnification. A Trust’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Trust, which cannot be predicted with any certainty.

Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

Through May 31, 2016, the Trusts had an arrangement with their custodian whereby credits were earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. Credits previously earned have been utilized until December 31, 2016. Under current arrangements effective June 1, 2016, the Trusts no longer earn credits on uninvested cash, and may incur charges on uninvested cash balances and overdrafts, subject to certain conditions.

3. Investment Valuation and Fair Value Measurements:

Investment Valuation Policies: The Trusts’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Trusts would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trusts determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of each Trust (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Trust’s assets and liabilities:

 

 

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

 

 

Investments in open-end U.S. mutual funds are valued at 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 include Market approach, Income approach and Cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Trust might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

 

 

Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Trust has the ability to access

 

 

Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

 

 

Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for

 

                
   ANNUAL REPORT    AUGUST 31, 2017    73


Notes to Financial Statements (continued)     

 

instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Trust’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

4. Securities and Other Investments:

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Forward Commitments and When-Issued Delayed Delivery Securities: Certain Trusts may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Trust may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a Trust may be required to pay more at settlement than the security is worth. In addition, a Trust is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Trust assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Trust’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

Municipal Bonds Transferred to TOB Trusts: Certain Trusts leverage their assets through the use of “TOB Trust” transactions. The Trusts transfer municipal bonds into a special purpose trust (a “TOB Trust”). A TOB Trust issues two classes of beneficial interests: short-term floating rate interests (“TOB Trust Certificates”), which are sold to third party investors, and residual inverse floating rate interests (“TOB Residuals”), which are issued to the participating 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 Trust provide the Trust with the right to cause the holders of a proportional share of the TOB Trust Certificates to tender their certificates to the TOB Trust at par plus accrued interest. The Trusts may withdraw a corresponding share of the municipal bonds from the TOB Trust. Other funds managed by the investment adviser may also contribute municipal bonds to a TOB Trust into which a Trust has contributed bonds. If multiple BlackRock advised funds participate in the same TOB Trust, the economic rights and obligations under the TOB Residuals will be shared among the funds ratably in proportion to their participation in the TOB Trust.

TOB Trusts are supported by a liquidity facility provided by a third party bank or other financial institution (the “Liquidity Provider”) that allows the holders of the TOB Trust Certificates to tender their certificates in exchange for payment of par plus accrued interest on any business day. The tendered TOB Trust Certificates are remarketed by a Remarketing Agent. In the event of a failed remarketing, the TOB Trust may draw upon a loan from the Liquidity Provider to purchase the tendered TOB Trust Certificates. Any loans made by the Liquidity Provider will be secured by the purchased TOB Trust Certificates held by the TOB Trust and will be subject to an increased interest rate based on number of days the loan is outstanding.

The TOB Trust may be collapsed without the consent of a Trust, upon the occurrence of a termination event as defined in the TOB Trust agreement. Upon the occurrence of a termination event, a TOB Trust would be liquidated with the proceeds applied first to any accrued fees owed to the trustee of the TOB Trust, the Remarketing Agent and the Liquidity Provider. Upon certain termination events, TOB Trust Certificates holders will be paid before the TOB Residuals holders (i.e., the Trusts) whereas in other termination events, TOB Trust Certificates holders and TOB Residuals holders will be paid pro rata.

While a Trust’s investment policies and restrictions expressly permit investments in inverse floating rate securities, such as TOB Residuals, they restrict the ability of a Trust to borrow money for purposes of making investments. The management of MVF believes that the Trust’s restrictions on borrowings do not apply to the Trust’s TOB Trust transactions. Each Trust’s transfer of the municipal bonds to a TOB Trust is considered a secured borrowing for financial reporting purposes. The cash received by the TOB Trust from the sale of the TOB Trust Certificates, less certain transaction expenses, is paid to a Trust. A Trust typically invests the cash received in additional municipal bonds.

Accounting for TOB Trusts: The municipal bonds deposited into a TOB Trust are presented in a Trust’s Schedule of Investments and the TOB Trust Certificates are shown in Other Liabilities in the Statements of Assets and Liabilities. Any loans drawn by the TOB Trust pursuant to the liquidity facility to purchase tendered TOB Trust Certificates are shown as Loan for TOB Trust Certificates. The carrying amount of a Trust’s payable to the holder of the TOB Trust Certificates, as reported in the Statements of Assets and Liabilities as TOB Trust Certificates, approximates its fair value.

 

                
74    ANNUAL REPORT    AUGUST 31, 2017   


Notes to Financial Statements (continued)     

 

Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by a Trust on an accrual basis. Interest expense incurred on the TOB Trust transaction and other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust are shown as interest expense, fees and amortization of offering costs in the Statements of Operations. Fees paid upon creation of the TOB Trust are recorded as debt issuance costs and are amortized to interest expense, fees and amortization of offering costs in the Statements of Operations to the expected maturity of the TOB Trust. In connection with the restructurings of the TOB Trusts to non-bank sponsored TOB Trusts, a Trust incurred non-recurring, legal and restructuring fees, which are recorded as interest expense, fees and amortization of deferred offering costs in the Statements of Operations.

For the year ended August 31, 2017, the following table is a summary of each Trust’s TOB Trusts:

 

     Underlying
Municipal
Bonds
Transferred to
TOB Trusts1
     Liability for
TOB Trust
Certificates2
     Range of
Interest Rates
on TOB Trust
Certificates at
Period End
     Average TOB
Trust
Certificates
Outstanding
    

Daily Weighted
Average Rate of
Interest and
Other Expenses

on TOB Trusts

 

BBK

  $ 40,032,244      $ 22,403,733        0.80% - 0.96%      $ 23,531,401        1.43%  

BAF

  $ 82,498,671      $ 44,937,138        0.79% - 1.03%      $ 43,526,219        1.45%  

BYM

  $ 171,449,846      $ 101,288,260        0.79% - 1.14%      $ 103,930,591        1.39%  

BLE

  $ 123,947,376      $ 71,274,043        0.79% - 1.03%      $ 72,591,045        1.41%  

MFL

  $ 246,411,665      $ 123,110,561        0.79% - 1.13%      $ 128,436,999        1.43%  

MVF

  $ 275,279,822      $ 139,989,200        0.79% - 0.93%      $ 151,856,218        1.41%  

 

  1   

The municipal bonds transferred to a TOB Trust are generally high grade municipal bonds. In certain cases, when municipal bonds transferred are lower grade municipal bonds, the TOB Trust transaction may include a credit enhancement feature that provides for the timely payment of principal and interest on the bonds to the TOB Trust by a credit enhancement provider in the event of default of the municipal bond. The TOB Trust would be responsible for the payment of the credit enhancement fee and the Trusts, 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 Trusts, for such reimbursements, as applicable, are included in the maximum potential amounts disclosed for recourse TOB Trusts.

 

  2   

TOB Trusts may be structured on a non-recourse or recourse basis. When a Trust invests in TOB Trusts on a non-recourse basis, the Liquidity Provider may be required to make a payment under the liquidity facility to allow the TOB Trust to repurchase TOB Trust Certificates. The Liquidity Provider will be reimbursed from the liquidation of bonds held in the TOB Trust. If a Trust invests in a TOB Trust on a recourse basis, the Trust enters into a reimbursement agreement with the Liquidity Provider where a Trust is required to reimburse the Liquidity Provider for any shortfall between the amount paid by the Liquidity Provider and proceeds received from liquidation of municipal bonds held in the TOB Trust (the “Liquidation Shortfall”). As a result, if a Trust invests in a recourse TOB Trust, a Trust will bear the risk of loss with respect to any Liquidation Shortfall. If multiple funds participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed by a Trust at August 31, 2017, in proportion to their participation in the TOB Trust. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by a Trust at August 31, 2017.

For the year ended August 31, 2017, the following table is a summary of each Trust’s Loan for TOB Trust Certificates:

 

     Loans
Outstanding
at Period
End
     Range of
Interest Rates
on Loans at
Period End
     Average Loans
Outstanding
     Daily Weighted
Average Rate of
Interest  and
Other Expenses
on Loans
 

BAF

                $ 234,603        0.78%  

BYM

                $ 172,876        0.80%  

BLE

                $ 818        0.78%  

MFL

                $ 849,218        0.79%  

MVF

                $ 67,100        0.78%  

5. Derivative Financial Instruments:

The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Trusts and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    75


Notes to Financial Statements (continued)     

 

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

6. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment adviser, an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory services. The Manager is responsible for the management of each Trust’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Trust.

For such services, each Trust, except for MFL and MVF, pays the Manager a monthly fee at an annual rate equal to the following percentages of the average weekly value of each Trust’s managed assets:

 

     BBK      BAF      BYM      BLE  

Investment advisory fees

    0.65%        0.55%        0.55%        0.55%  

For purposes of calculating these fees, “managed assets” mean the total assets of a Trust minus the sum of its accrued liabilities (other than the aggregate indebtedness constituting financial leverage).

For such services, MFL and MVF each pays the Manager a monthly fee at an annual rate of 0.55% and 0.50%, respectively, of the average daily value of each Trust’s net assets.

For purposes of calculating these fees, “net assets” mean the total assets of each Trust minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of any outstanding preferred shares). It is understood that the liquidation preference of any outstanding preferred shares (other than accumulated dividends) and TOB Trusts is not considered a liability in determining a Trust’s NAV.

Waivers: The Manager, for MFL, voluntarily agreed to waive its investment advisory fee on the proceeds of the Preferred Shares and TOB Trusts that exceed 35% of total assets minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of preferred shares). This amount is included in fees waived by the Manager in the Statements of Operations. For the year ended August 31, 2017 the waiver was $556,553.

With respect to each Trust, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). These amounts are included in fees waived by the Manager in the Statements of Operations. For the year ended August 31, 2017, the amounts waived were as follows:

 

     BBK      BAF      BYM      BLE      MFL      MVF  

Amounts waived

  $ 2,080      $ 446      $ 4,337      $ 3,817      $ 2,151      $ 6,243  

Effective September 1, 2016, the Manager voluntarily agreed to waive its investment advisory fee with respect to any portion of each Trust’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee. Effective December 2, 2016, the waiver became contractual through June 30, 2018. 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 Trusts’ Independent Trustees.

Officers and Trustees: Certain officers and/or trustees of the Trusts are officers and/or directors of BlackRock or its affiliates. The Trusts reimburse the Manager for a portion of the compensation paid to the Trusts’ Chief Compliance Officer, which is included in Officer and Trustees in the Statements of Operations.

7. Purchases and Sales:

For the year ended August 31, 2017, purchases and sales of investments, excluding short-term securities, were as follows:

 

     BBK      BAF      BYM      BLE      MFL      MVF  

Purchases

  $ 126,731,871      $ 71,479,586      $ 124,767,339      $ 48,833,845      $ 153,733,981      $ 261,522,079  

Sales

  $ 135,143,333      $ 69,700,155      $ 116,995,469      $ 57,526,311      $ 150,721,188      $ 265,133,750  

 

                
76    ANNUAL REPORT    AUGUST 31, 2017   


Notes to Financial Statements (continued)     

 

8. Income Tax Information:

It is each Trust’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

Each Trust files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Trust’s U.S. federal tax returns generally remains open for each of the four years ended August 31, 2017. The statutes of limitations on each Trust’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Trusts as of August 31, 2017, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Trusts’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to amortization methods on fixed-income securities, non-deductible expenses, the reclassification of distributions, the expiration of capital loss carryforwards, distributions received from a regulated investment company and the sale of bonds received from TOB Trust transactions were reclassified to the following accounts:

 

     BBK      BAF      BYM      BLE      MFL      MVF  

Paid-in capital

  $ (6,122           $ (6,430,212    $ (2,066,643    $ (1,880,583    $ (7,618,622

Undistributed net investment income

  $ 455,851      $ (17,514    $ (306,047    $ (25,737    $ 22,388      $ 246,068  

Accumulated net realized gain (loss)

  $ (449,729    $ 17,514      $ 6,736,259      $ 2,092,380      $ 1,858,195      $ 7,372,554  

The tax character of distributions paid was as follows:

 

             BBK      BAF      BYM      BLE      MFL      MVF  

Tax-exempt income1

    8/31/17          $ 9,847,053      $ 7,924,663      $ 22,978,805      $ 23,353,117      $ 36,906,582      $ 41,194,059  
    8/31/16          $ 10,408,415      $ 7,695,564      $ 23,620,356      $ 23,673,452      $ 35,387,331      $ 43,339,969  

Ordinary income2

    8/31/17            1,305,584               41        85,468        388        30,252  
    8/31/16            153,130        9        3        1        24        69,567  

Long-term capital gains3

    8/31/17            3,238,848                                     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

    8/31/17          $ 14,391,485      $ 7,924,663      $ 22,978,846      $ 23,438,585      $ 36,906,970      $ 41,224,311  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
    8/31/16          $ 10,561,545      $ 7,695,573      $ 23,620,359      $ 23,673,453      $ 35,387,355      $ 43,409,536  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  1  

The Trusts designate these amounts paid during the fiscal year ended August 31, 2017, as exempt-interest dividends.

 

  2   

Ordinary income consists primarily of taxable income recognized from market discount and net short-term capital gains. Additionally, all ordinary income distributions are comprised of interest related dividends for non-U.S. residents and are eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

 

  3   

The Trusts designate these amounts paid during the fiscal year ended August 31, 2017 as a capital gain dividends.

As of period end, the tax components of accumulated net earnings (losses) were as follows:

 

     BBK      BAF      BYM      BLE      MFL      MVF  

Undistributed tax-exempt income

  $ 1,677,857      $ 1,230,186      $ 24,652      $ 1,239,232      $ 4,731,700      $ 2,065,384  

Undistributed ordinary income

    51,804               2,995        20,550               41,053  

Capital loss carryforwards

           (4,753,252      (9,429,809      (15,933,989      (30,346,832      (18,390,594

Net unrealized gains (losses)1

    21,052,936        16,767,307        48,871,920        39,940,779        65,236,116        65,774,350  

Qualified late-year losses2

    (623,116                                   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  $ 22,159,481      $ 13,244,241      $ 39,469,758      $ 25,266,572      $ 39,620,984      $ 49,490,193  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  1   

The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and straddles, amortization methods of premiums and discounts on fixed income securities, the timing and recognition of partnership income, the deferral of compensation to the Trustees, the realization for tax purposes of unrealized gain/loss on certain futures contracts and the treatment of residual interests in TOB Trusts.

 

  2   

The Trust has elected to defer certain qualified late-year losses and recognize such losses in the next taxable year.

As of August 31, 2017, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires August 31,    BAF      BYM      BLE      MFL      MVF  

No expiration date1

   $ 4,753,252      $ 7,220,379      $ 9,119,070      $ 18,612,125      $ 13,114,070  

2018

            2,209,430        4,366,226        11,734,707         

2019

                   2,448,693               5,276,524  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,753,252      $ 9,429,809      $ 15,933,989      $ 30,346,832      $ 18,390,594  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  1  

Must be utilized prior to losses subject to expiration.

During the year ended August 31, 2017, the Trusts listed below utilized the following amounts of their respective capital loss carryforward:

 

      BAF      MFL  

Amount utilized

   $ 393,420        1,982,049  

 

                
   ANNUAL REPORT    AUGUST 31, 2017    77


Notes to Financial Statements (continued)     

 

As of August 31, 2017, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

     BBK      BAF      BYM      BLE      MFL      MVF  

Tax cost

  $ 227,953,402      $ 162,769,445      $ 493,834,098      $ 463,102,978      $ 767,445,881      $ 804,932,258  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross unrealized appreciation

  $ 21,488,740      $ 17,095,958      $ 51,823,231      $ 42,830,821      $ 68,346,808      $ 68,605,487  

Gross unrealized depreciation

    (432,625      (309,015      (2,888,953      (2,833,471      (2,816,450      (1,868,258
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net unrealized appreciation

  $ 21,056,115      $ 16,786,943      $ 48,934,278      $ 39,997,350      $ 65,530,358      $ 66,737,229  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

9. Principal Risks:

Many municipalities insure repayment of their bonds, which may reduce the potential for loss due to credit risk. The market value of these bonds may fluctuate for other reasons, including market perception of the value of such insurance, and there is no guarantee that the insurer will meet its obligation.

Inventories of municipal bonds held by brokers and dealers may decrease, which would lessen their ability to make a market in these securities. Such a reduction in market making capacity could potentially decrease a Trust’s ability to buy or sell bonds. As a result, a Trust may sell a security at a lower price, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative impact on performance. If a Trust needed to sell large blocks of bonds, those sales could further reduce the bonds’ prices and impact performance.

In the normal course of business, certain Trusts invest in securities or other instruments and may enter into certain transactions, and such activities subject each Trust to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) general economy; (ii) overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Each Trust’s prospectus provides details of the risks to which each Trust is subject.

Each Trust may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Trust to reinvest in lower yielding securities. Each Trust may also be exposed to reinvestment risk, which is the risk that income from each Trust’s portfolio will decline if each Trust invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Trust portfolio’s current earnings rate.

The Trusts may hold a significant amount of bonds subject to calls by the issuers at defined dates and prices. When bonds are called by issuers and the Trusts reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total return performance of a Trust.

A Trust structures and “sponsors” the TOB Trusts in which it holds TOB Residuals and has certain duties and responsibilities, which may give rise to certain additional risks including, but not limited to, compliance, securities law and operational risks.

Should short-term interest rates rise, the Trusts’ investments in TOB Trusts may adversely affect the Trusts’ net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect the Trusts’ NAVs per share.

The SEC and various federal banking and housing agencies have adopted credit risk retention rules for securitizations (the “Risk Retention Rules”). The Risk Retention Rules would require the sponsor of a TOB Trust to retain at least 5% of the credit risk of the underlying assets supporting the TOB Trust’s municipal bonds. The Risk Retention Rules may adversely affect the Trusts’ ability to engage in TOB Trust transactions or increase the costs of such transactions in certain circumstances.

TOB Trusts constitute an important component of the municipal bond market. Any modifications or changes to rules governing TOB Trusts may adversely impact the municipal market and the Trusts, including through reduced demand for and liquidity of municipal bonds and increased financing costs for municipal issuers. The ultimate impact of any potential modifications on the TOB Trust market and the overall municipal market is not yet certain.

Counterparty Credit Risk: Similar to issuer credit risk, the Trusts may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Trusts manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Trusts to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Trusts’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Trusts.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

 

                
78    ANNUAL REPORT    AUGUST 31, 2017   


Notes to Financial Statements (continued)     

 

With exchange-traded futures, there is less counterparty credit risk to the Trusts since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Trust does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Trusts.

Concentration Risk: BBK and MFL invest a substantial amount of their assets in issuers located in a single state or limited number of states. This may subject the Trusts to the risk that economic, political or social issues impacting a particular state or group of states could have an adverse and disproportionate impact on the income from, or the value or liquidity of, the Trusts’ portfolios. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.

As of period end, BAF invested a significant portion of their assets in securities in the transportation and county, city, special district and school district sectors. BYM, MFL and MVF invested a significant portion of their assets in securities in the transportation sector. Changes in economic conditions affecting such sectors would have a greater impact on the Trusts and could affect the value, income and/or liquidity of positions in such securities.

Certain Trusts invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trusts may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

10. Capital Share Transactions:

Each of BBK, BAF, BYM, and BLE is authorized to issue an unlimited number of shares, including Preferred Shares, par value $0.001 per share, all of which were initially classified as Common Shares. The Board is authorized, however, to reclassify any unissued Common Shares to Preferred Shares, including AMPS, without approval of Common Shareholders.

MFL is authorized to issue an unlimited number of shares, including 1 million Preferred Shares, including AMPS, par value $0.10 per share.

MVF is authorized to issue 160 million shares, 150 million of which were initially classified as Common Shares, par value $0.10 per share and 10 million of which were classified as Preferred Shares, including AMPS, par value $0.10 per share.

Common Shares

For the years shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

Year Ended August 31,   BBK      BLE      MFL      MVF  

2017

    6,337        31,083        35,731        340,661  

2016

    5,768        19,952        13,338        300,473  

For the years ended August 31, 2017 and August 31, 2016, shares issued and outstanding remained constant for BAF and BYM.

Preferred Shares

Each Trust’s Preferred Shares rank prior to the Trust’s Common Shares as to the payment of dividends by the Trust and distribution of assets upon dissolution or liquidation of a Trust. The 1940 Act prohibits the declaration of any dividend on a Trust’s Common Shares or the repurchase of a Trust’s Common Shares if a Trust fails to maintain asset coverage of at least 200% of the liquidation preference of the Trust’s outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, a Trust is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with the Trust’s Preferred Shares or repurchasing such shares if a Trust fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares’ governing instruments or comply with the basic maintenance amount requirement of the ratings agencies rating the Preferred Shares.

The holders of Preferred Shares have voting rights equal to the voting rights of the holders of Common Shares (one vote per share) and will vote together with holders of Common Shares (one vote per share) as a single class on certain matters. However, the holders of Preferred Shares, voting as a separate class, are also entitled to elect two Trustees to the Board of each Trust. The holders of Preferred Shares are also entitled to elect the full Board of Directors if dividends on the Preferred Shares are not paid for a period of two years. The holders of Preferred Shares are also generally entitled to a separate class vote to amend the Preferred Share governing documents. In addition, the 1940 Act requires the approval of the holders of a majority of any outstanding Preferred Shares, voting as a separate class, to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Trust’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment company.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    79


Notes to Financial Statements (continued)     

 

VRDP Shares

MFL has issued Series W-7 VRDP Shares, $100,000 liquidation preference per share, in a privately negotiated offerings. The VRDP Shares were offered to qualified institutional buyers as defined pursuant to Rule 144A under the Securities Act of 1933, as amended, (the “Securities Act”). The VRDP Shares include a liquidity feature and are currently in a special rate period, each as described below.

As of period end, the VRDP Shares outstanding of MFL were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Maturity Date  

MFL

    6/30/11        2,746      $ 274,600,000        7/01/41  

Redemption Terms: MFL is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed or repurchased. Six months prior to the maturity date, MFL is required to begin to segregate liquid assets with the Trust’s custodian to fund the redemption. In addition, MFL 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 MFL. The redemption price per VRDP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.

Liquidity Feature: MFL entered into a fee agreement with the liquidity provider that requires an upfront commitment and a per annum liquidity fee payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations.

The fee agreement between MFL and the liquidity provider is for a three-year term and is scheduled to expire on April 15, 2020, unless renewed or terminated in advance.

In the event the fee agreement is not renewed or is terminated in advance, and MFL does not enter into a fee agreement with an alternate liquidity provider, the VRDP Shares will be subject to mandatory purchase by the liquidity provider prior to the termination of the fee agreement. In the event of such mandatory purchase, MFL is required to redeem the VRDP Shares six months after the purchase date. Immediately after such mandatory purchase, MFL is required to begin to segregate liquid assets with its custodian to fund the redemption. There is no assurance MFL will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.

Remarketing: MFL may incur remarketing fees of 0.10% on the aggregate principal amount of all the Trust’s VRDP Shares, which, if any, are included in remarketing fees on Preferred Shares in the Statements of Operations. During any special rate period (as described below), MFL may incur no remarketing fees.

Dividends: Dividends on the VRDP Shares are payable monthly at a variable rate set weekly by the remarketing agent. Such dividend rates are generally based upon a spread over a base rate and cannot exceed a maximum rate. In the event of a failed remarketing, the dividend rate of the VRDP Shares will be reset to a maximum rate. The maximum rate is determined based on, among other things, the long-term preferred share rating assigned to the VRDP Shares and the length of time that the VRDP Shares fail to be remarketed. At the date of issuance, the VRDP Shares were assigned long-term ratings of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VRDP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of period end, the VRDP Shares were assigned a long-term rating of Aa1 from Moody’s under its new ratings methodology. The VRDP Shares continue to be assigned a long-term rating of AAA from Fitch.

For the year ended August 31, 2017, the annualized dividend rate for MFL’s VRDP Shares was 1.62%.

Ratings: The short-term ratings on the VRDP Shares are directly related to the short-term ratings of the liquidity provider for such VRDP Shares. Changes in the credit quality of the liquidity provider could cause a change in the short-term credit ratings of the VRDP Shares as rated by Moody’s, Fitch and/or S&P. A change in the short-term credit rating of the liquidity provider or the VRDP Shares may adversely affect the dividend rate paid on such shares, although the dividend rate paid on the VRDP Shares is not directly based upon either short-term rating. As of period end, the short-term ratings of the liquidity provider and the VRDP Shares were A1/P1 as rated by Moody’s and Fitch, respectively, which is within the two highest rating categories. The liquidity provider may be terminated prior to the scheduled termination date if the liquidity provider fails to maintain short-term debt ratings in one of the two highest rating categories.

Special Rate Period: On April 17, 2014, MFL commenced a three-year term ending April 19, 2017 (the “special rate period”) with respect to its VRDP Shares, during which the VRDP Shares were not be subject to any remarketing and the dividend rate will be based on a predetermined methodology. The special rate period was extended for an additional three-year term and is currently set to expire on April 15, 2020. Prior to April 15, 2020, the holder of the VRDP Shares and MFL may mutually agree to extend the special rate period. If the special rate period is not extended, the VRDP Shares will revert to remarketable securities upon the termination of the special rate period and will be remarketed and available for purchase by qualified institutional investors. Short-term ratings may be re-assigned upon the termination of the special rate period when the VRDP Shares revert back to remarkable securities.

 

                
80    ANNUAL REPORT    AUGUST 31, 2017   


Notes to Financial Statements (continued)     

 

During the special rate period, the liquidity and fee agreements remain in effect and the VRDP Shares remain subject to mandatory redemption by MFL on the maturity date. The VRDP Shares will not be remarketed or subject to optional or mandatory tender events during the special rate period. During the special rate period, MFL 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. MFL will pay a nominal fee at the annual rate of 0.01% to the liquidity provider and remarketing agent during the special rate period. MFL will also pay dividends monthly based on the sum of the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Index rate and a percentage per annum based on the long-term ratings assigned to the VRDP Shares.

If MFL redeems the VRDP Shares prior to end of the special rate period and the VRDP Shares have long-term ratings above A1/A+ and its equivalent by all ratings agencies then rating the VRDP Shares, then such redemption may be subject to a redemption premium payable to the holder of the VRDP Shares based on the time remaining in the special rate period, subject to certain exceptions for redemptions that are required to comply with minimum asset coverage requirements.

For the year ended August 31, 2017, VRDP Shares issued and outstanding of MFL remained constant.

VMTP Shares

BBK, BAF, BYM, BLE, and MVF (collectively, the “VMTP Trusts”), have issued Series W-7 VMTP Shares, $100,000 liquidation value per share, in privately negotiated offerings and sale of VMTP Shares exempt from registration under the Securities Act. The VMTP Shares are subject to certain restrictions on transfer, and VMTP Trusts may also be required to register the VMTP Shares for sale under the Securities Act under certain circumstances. In addition, amendments to the VMTP governing documents generally require the consent of the holders of VMTP Shares.

As of period end, the VMTP Shares outstanding of each Trust were as follows:

 

     Issue Date      Shares Issued      Aggregate Principal      Term Date  

BBK

    12/16/11        799      $ 79,900,000        1/02/19  

BAF

    12/16/11        422      $ 42,200,000        1/02/19  

BYM

    12/16/11        1,372      $ 137,200,000        1/02/19  

BLE

    12/16/11        1,513      $ 151,300,000        1/02/19  

MVF

    12/16/11        2,438      $ 243,800,000        1/02/19  

Redemption Terms: Each VMTP Trust is required to redeem its VMTP Shares on the term redemption date, unless earlier redeemed or repurchased or unless extended. There is no assurance that the term of a Trust’s VMTP Shares will be extended further or that a Trust’s VMTP Shares will be replaced with any other preferred shares or other form of leverage upon the redemption or repurchase of the VMTP Shares. Six months prior to the term redemption date, each VMTP Trust is required to begin to segregate liquid assets with the Trust’s custodian to fund the redemption. In addition, each VMTP Trust 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, a Trust’s VMTP Shares may be redeemed, in whole or in part, at any time at the option of each VMTP Trust. The redemption price per VMTP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends and applicable redemption premium. If the VMTP Trust redeems the VMTP Shares prior to the term redemption date and the VMTP Shares have long-term ratings above A1/A+ or its equivalent by the ratings agencies then rating the VMTP Shares, then such redemption may be subject to a prescribed redemption premium (up to 3% of the liquidation preference) payable to the holder of the VMTP Shares based on the time remaining until the term redemption date, subject to certain exceptions for redemptions that are required to comply with minimum asset coverage requirements.

Dividends: Dividends on the VMTP Shares are declared daily and payable monthly at a variable rate set weekly at a fixed rate spread to the SIFMA Municipal Swap Index. The fixed spread is determined based on the long-term preferred share rating assigned to the VMTP Shares by the ratings agencies then rating the VMTP Shares. At the date of issuance, the VMTP Shares were assigned long-term ratings of Aaa from Moody’s and AAA from Fitch. Subsequent to the issuance of the VMTP Shares, Moody’s completed a review of its methodology for rating securities issued by registered closed-end funds. As of period end, the VMTP Shares were assigned a long-term rating of Aa1 from Moody’s under its new rating methodology. The VMTP Shares continue to be assigned a long-term rating of AAA from Fitch. The dividend rate on the VMTP Shares is subject to a step-up spread if the Trusts fail 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 year ended August 31, 2017, the average annualized dividend rates for the VMTP Shares were as follows:

 

     BBK      BAF      BYM      BLE      MVF  

Rate

    1.95%        1.74%        1.74%        1.74%        1.74%  

For the year ended August 31, 2017, VMTP Shares issued and outstanding of each Trust remained constant.

Offering Costs: The Trusts incurred costs in connection with the issuance of VRDP and VMTP Shares, which were recorded as a direct deduction from the carrying value of the related debt liability and will be amortized over the life of the VRDP and VMTP Shares with the exception of upfront fees paid to the liquidity provider which were amortized over the life of the liquidity agreement. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    81


Notes to Financial Statements (concluded)     

 

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.

11. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Trusts’ financial statements was completed through the date the financial statements were issued and the following items were noted:

 

     Common Dividend Per Share            Preferred Shares3  
     Paid1        Declared2            Shares        Series        Declared  

BBK

  $ 0.0635        $ 0.0635         VMTP          W-7        $ 120,222  

BAF

  $ 0.0685        $ 0.0685         VMTP          W-7        $ 63,497  

BYM

  $ 0.0600        $ 0.0600         VMTP          W-7        $ 206,439  

BLE

  $ 0.0735        $ 0.0650         VMTP          W-7        $ 227,655  

MFL

  $ 0.0715        $ 0.0715         VRDP          W-7        $ 386,095  

MVF

  $ 0.0460        $ 0.0460               VMTP          W-7        $ 366,835  

 

  1   

Net investment income dividend paid on October 2, 2017 to Common Shareholders of record on September 15, 2017.

 

  2   

Net investment income dividend declared on October 2, 2017, payable to Common Shareholders of record on October 16, 2017.

 

  3   

Dividends declared for period September 1, 2017 to September 30, 2017.

 

                
82    ANNUAL REPORT    AUGUST 31, 2017   


Report of Independent Registered Public Accounting Firm     

 

To the Shareholders and Board of Trustees of BlackRock Municipal Bond Trust, BlackRock Municipal Income Investment Quality Trust, BlackRock Municipal Income Quality Trust, BlackRock Municipal Income Trust II, and BlackRock MuniHoldings Investment Quality Fund, and to the Shareholders and Board of Directors of BlackRock MuniVest Fund, Inc.:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock Municipal Bond Trust, BlackRock Municipal Income Investment Quality Trust, BlackRock Municipal Income Quality Trust, BlackRock Municipal Income Trust II, BlackRock MuniHoldings Investment Quality Fund, and BlackRock MuniVest Fund, Inc. (collectively, the “Trusts”), as of August 31, 2017, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trusts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trusts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2017, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Municipal Bond Trust, BlackRock Municipal Income Investment Quality Trust, BlackRock Municipal Income Quality Trust, BlackRock Municipal Income Trust II, BlackRock MuniHoldings Investment Quality Fund, and BlackRock MuniVest Fund, Inc. as of August 31, 2017, the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts

October 24, 2017

 

                
   ANNUAL REPORT    AUGUST 31, 2017    83


Disclosure of Investment Advisory Agreements     

 

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) BlackRock Municipal Income Investment Quality Trust (“BAF”), BlackRock Municipal Income Quality Trust (“BYM”), BlackRock Municipal Bond Trust (“BBK”), BlackRock Municipal Income Trust II (“BLE”), BlackRock MuniHoldings Investment Quality Fund (“MFL”) and BlackRock MuniVest Fund, Inc. (“MVF” and together with BAF, BYM, BBK, BLE and MFL, each a “Trust,” and, collectively, the “Trusts”) met in person on April 27, 2017 (the “April Meeting”) and June 7-8, 2017 (the “June Meeting”) to consider the approval of each Trust’s investment advisory agreement (each an “Agreement,” and collectively, the “Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Trust’s investment advisor. The Manager is also referred to herein as “BlackRock”.

Activities and Composition of the Board

On the date of the June Meeting, the Board of each Trust consisted of eleven individuals, nine of whom were not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of its Trust and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of each Board is an Independent Board Member. Each Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, each Board is required to consider the continuation of the Agreement for its Trust on an annual basis. Each Board has four quarterly meetings per year, each extending over two days, a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement for its Trust and additional in-person and telephonic meetings as needed. In connection with this year-long deliberative process, each Board assessed, among other things, the nature, extent and quality of the services provided to its Trust by BlackRock, BlackRock’s personnel and affiliates, including, as applicable; investment management, administrative, and shareholder services; the oversight of fund service providers; marketing; risk oversight; compliance; and ability to meet applicable legal and regulatory requirements.

Each Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement for its Trust, including the services and support provided by BlackRock to the Trust and its shareholders. BlackRock also furnished additional information to each Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters each Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmarks, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, paid to BlackRock and its affiliates by the Trust for services; (c) Trust operating expenses and how BlackRock allocates expenses to the Trust; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Trust’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (e) the Trust’s adherence to its compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Trust’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Trust; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

The Board of each Trust considered BlackRock’s efforts during the past several years with regard to the redemption of outstanding auction rate preferred securities (“AMPS”). As of the date of this report each Trust has redeemed all of its outstanding AMPS.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April Meeting, each Board requested and received materials specifically relating to the Agreement for its Trust. Each Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided to the Board of each Trust in connection with the April Meeting included (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) on Trust fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of the Trust as compared with a peer group of funds as determined by Broadridge1 and a customized peer group selected by BlackRock (“Customized Peer Group”); (b) information on the profits realized by BlackRock and its affiliates pursuant to the Trust’s Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees charged to other clients, such as institutional clients, sub-advised mutual funds, and open-end funds,

 

1   

Trusts are ranked by Broadridge in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable.

 

                
84    ANNUAL REPORT    AUGUST 31, 2017   


Disclosure of Investment Advisory Agreements (continued)     

 

under similar investment mandates, as applicable; (d) review of non-management fees; (e) the existence, impact and sharing of potential economies of scale; and (f) a summary of aggregate amounts paid by the Trust to BlackRock.

At the April Meeting, each Board reviewed materials relating to its consideration of the Agreement for its Trust. As a result of the discussions that occurred during the April Meeting, and as a culmination of each Board’s year-long deliberative process, each Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting. Topics covered included:(a) fund repositionings and portfolio management changes, including additional information about the portfolio managers, research teams, organization and methods and historical track records of the teams, and the potential impact of such changes on fund performance and the costs of such changes; (b) scientific active equity management; (c) BlackRock’s option overwrite policy; (d) differences in services between closed-end funds and mutual funds; (d) market discount; and (e) adviser profitability.

At the June Meeting, each Board, including the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and its Trust for a one-year term ending June 30, 2018. In approving the continuation of the Agreement for its Trust, each Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Trust; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Trust; (d) the Trust’s costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance metrics as previously discussed; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of its relationship with the Trust; and (g) other factors deemed relevant by the Board Members.

Each Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, services related to the valuation and pricing of Trust portfolio holdings, and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. Each Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. Each Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: Each Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of its Trust. Throughout the year, each Board compared its Trust’s performance to the performance of a comparable group of closed-end funds, relevant benchmark, and performance metrics, as applicable. Each Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Trust’s portfolio management team discussing the Trust’s performance and the Trust’s investment objective(s), strategies and outlook.

Each Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and its Trust’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. Each Board engaged in a review of BlackRock’s compensation structure with respect to its Trust’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, each Board considered the quality of the administrative and other non-investment advisory services provided to its Trust. BlackRock and its affiliates provide each Trust with certain administrative, shareholder, and other services (in addition to any such services provided to the Trust by third parties) and officers and other personnel as are necessary for the operations of the Trust. In particular, BlackRock and its affiliates provide each Trust with administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Trust; (iii) oversight of daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing other administrative functions necessary for the operation of the Trust, such as tax reporting, fulfilling regulatory filing requirements and call center services. Each Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Trusts and BlackRock: Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Trust. In preparation for the April Meeting, the Board of each Trust was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of the Trust’s performance. Each Board also reviewed a narrative and statistical analysis of the Broadridge data that was prepared by BlackRock. In connection with its review, the Board of each Trust received and reviewed information regarding the investment performance, based on net asset value (NAV), of the Trust as compared to other funds in its applicable Broadridge category and a Customized Peer Group. Each Board was provided with a description of the methodology used by Broadridge to select peer funds and periodically meets with Broadridge

 

                
   ANNUAL REPORT    AUGUST 31, 2017    85


Disclosure of Investment Advisory Agreements (continued)

 

representatives to review its methodology. Each Board was provided with information on the composition of the Broadridge performance universes and expense universes. Each Board and its Performance Oversight Committee regularly review, and meet with Trust management to discuss, the performance of its Trust throughout the year.

In evaluating performance, each Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, each Board recognized that it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect long-term performance disproportionately.

The Board of BAF noted that for the one-, three- and five-year periods reported, BAF ranked first out of two funds, first out of two funds and second out of two funds, respectively, against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for BAF. The Composite measures a blend of total return and yield.

The Board of BYM noted that for each of the one-, three- and five-year periods reported, BYM ranked first out of two funds against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for BYM. The Composite measures a blend of total return and yield.

The Board of BBK noted that for the one-, three- and five-year periods reported, BBK ranked in the third, first and first quartiles, respectively, against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for BBK. The Composite measures a blend of total return and yield. The Board and BlackRock reviewed BBK’s underperformance during the one-year period.

The Board of BLE noted that for each of the one-, three- and five-year periods reported, BLE ranked in the first quartile against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for BLE. The Composite measures a blend of total return and yield.

The Board of MFL noted that for each of the one-, three- and five-year periods reported, MFL ranked first out of two funds against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for MFL. The Composite measures a blend of total return and yield.

The Board of MVF noted that for the one-, three- and five-year periods reported, MVF ranked in the first, second and first quartiles, respectively, against its Customized Peer Group Composite. BlackRock believes that the Customized Peer Group Composite is an appropriate performance metric for MVF. The Composite measures a blend of total return and yield.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Trusts: Each Board, including the Independent Board Members, reviewed its Trust’s contractual management fee rate compared with the other funds in its Broadridge category. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. Each Board also compared its Trust’s total expense ratio, as well as its actual management fee rate as a percentage of total assets, to those of other funds in its Broadridge category. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. Each Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).

Each Board received and reviewed statements relating to BlackRock’s financial condition. Each Board reviewed BlackRock’s profitability methodology and was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to its Trust. Each Board reviewed BlackRock’s profitability with respect to its Trust and other funds the Board currently oversees for the year ended December 31, 2016 compared to available aggregate profitability data provided for the prior two years. Each Board reviewed BlackRock’s profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. Each Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. Each Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

Each Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Each Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. Each Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, each Board considered the cost of the services provided to its Trust by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of its Trust and the other funds advised by BlackRock and its affiliates. As part of its analysis, each Board reviewed BlackRock’s methodology

 

                
86    ANNUAL REPORT    AUGUST 31, 2017   


Disclosure of Investment Advisory Agreements (continued)

 

in allocating its costs of managing its Trust, to the Trust. Each Board may receive and review information from independent third parties as part of its annual evaluation. Each Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Trust’s Agreement and to continue to provide the high quality of services that is expected by the Board. Each Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing its Trust in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable.

The Board of BAF noted that BAF’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Expense Peers.

The Board of BYM noted that BYM’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the first and third quartiles, respectively, relative to the Expense Peers.

The Board of BBK noted that BBK’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the third and fourth quartiles, respectively, relative to the Expense Peers.

BBK was identified by the Board as having a high total expense ratio relative to its Expense Peers. BlackRock noted that BlackRock continues to evaluate its product line-up.

The Board of each of MFL and BLE noted that its Trust’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the first and third quartiles, respectively, relative to the Expense Peers.

The Board of MVF noted that MVF’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio ranked in the first and second quartiles, respectively, relative to the Expense Peers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Trust increase. Each Board also considered the extent to which its Trust benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Trust to more fully participate in these economies of scale. Each Board considered its Trust’s asset levels and whether the current fee was appropriate.

Based on each Board’s review and consideration of the issue, each Board concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.

E. Other Factors Deemed Relevant by the Board Members: Each Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with its Trust, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Trust, including for administrative, securities lending and cash management services. Each Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. Each Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.

In connection with its consideration of the Agreement for its Trust, each Board also received information regarding BlackRock’s brokerage and soft dollar practices. Each Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

Each Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Trust shares in the secondary market if they believe that the Trust’s fees and expenses are too high or if they are dissatisfied with the performance of the Trust.

Each Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included the redemption of AMPS for the BlackRock closed-end funds with AMPS outstanding; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: continuing communications concerning the redemption efforts related to AMPS; sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    87


Disclosure of Investment Advisory Agreements (concluded)

 

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and its Trust for a one-year term ending June 30, 2018. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, each Board, including the Independent Board Members, was satisfied that the terms of the Agreement for its Trust were fair and reasonable and in the best interest of the Trust and its shareholders. In arriving at its decision to approve the Agreement for its Trust, each Board did not identify any single factor or group of factors as, all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Trust reflect the results of several years of review by the Trust’s Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 

                
88    ANNUAL REPORT    AUGUST 31, 2017   


Automatic Dividend Reinvestment Plans     

 

Pursuant to each Trust’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains and other distributions reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s Common Shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Trusts declare a dividend or determine to make a capital gain or other distribution, the Reinvestment Plan Agents will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Trusts (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Trust’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.

You may elect not to participate in the Reinvestment Plan and to receive all dividends in cash by contacting the Reinvestment Plan Agent, at the address set forth below.

Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open-market purchases in connection with the reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any U.S. federal, state or local income tax that may be payable on such dividends or distributions.

Each Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, each Trust reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants in BBK, BAF, BYM and BLE that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. Participants in MFL and MVF that request a sale of shares are subject to a $0.02 per share sold brokerage commission. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A., through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 505000, Louisville, KY 40233, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    89


Officers and Trustees     

 

Name, Address1

and Year of Birth

  Position(s)
Held with
the Trusts
  Length of
Time Served³
  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen4
  Public Company
and Other
Investment Company
Directorships Held
During Past Five Years
Independent Trustees2               

Richard E. Cavanagh

1946

  Chair of the Board and Trustee   Since 2007   Director, The Guardian Life Insurance Company of America since 1998; Board Chair, Volunteers of America (a not-for-profit organization) since 2015 (board member since 2009); Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.   74 RICs consisting of
74 Portfolios
  None

Karen P. Robards

1950

  Vice Chair of the Board and Trustee   Since 2007   Principal of Robards & Company, LLC (consulting and private investing) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Investment Banker at Morgan Stanley from 1976 to 1987.   74 RICs consisting of
74 Portfolios
  Greenhill & Co., Inc.; AtriCure, Inc. (medical devices) from 2000 until 2017

Michael J. Castellano

1946

  Trustee   Since 2011   Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) from 2009 to June 2015 and since 2017; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director, CircleBlack Inc. (financial technology company) since 2015.   74 RICs consisting of
74 Portfolios
  None

Cynthia L. Egan

1955

  Trustee   Since 2016   Advisor, U.S. Department of the Treasury from 2014 to 2015; President, Retirement Plan Services for T. Rowe Price Group, Inc. from 2007 to 2012; executive positions within Fidelity Investments from 1989 to 2007.   74 RICs consisting of
74 Portfolios
  Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016

Frank J. Fabozzi

1948

  Trustee   Since 2007   Editor of and Consultant for The Journal of Portfolio Management since 2006; Professor of Finance, EDHEC Business School since 2011; Visiting Professor, Princeton University from 2013 to 2014 and since 2016; Professor in the Practice of Finance and Becton Fellow, Yale University School of Management from 2006 to 2011.   74 RICs consisting of
74 Portfolios
  None

Jerrold B. Harris

1942

  Trustee   Since 2007   Trustee, Ursinus College from 2000 to 2012; Director, Ducks Unlimited — Canada (conservation) since 2015; Director, Waterfowl Chesapeake (conservation) since 2014; Director, Ducks Unlimited, Inc. since 2013; Director, Troemner LLC (scientific equipment) from 2000 to 2016; Director of Delta Waterfowl Foundation from 2010 to 2012; President and Chief Executive Officer, VWR Scientific Products Corporation from 1990 to 1999.   74 RICs consisting of
74 Portfolios
  BlackRock Capital Investment Corp. (business development company)

R. Glenn Hubbard

1958

  Trustee   Since 2007   Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.   74 RICs consisting of
74 Portfolios
  ADP (data and information services); Metropolitan Life Insurance Company (insurance)

W. Carl Kester

1951

  Trustee   Since 2007   George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008, Deputy Dean for Academic Affairs from 2006 to 2010, Chairman of the Finance Unit, from 2005 to 2006, Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981.   74 RICs consisting of
74 Portfolios
  None

Catherine A. Lynch

1961

  Trustee   Since 2016   Chief Executive Officer, Chief Investment Officer and various other positions, National Railroad Retirement Investment Trust from 2003 to 2016; Associate Vice President for Treasury Management, The George Washington University from 1999 to 2003; Assistant Treasurer, Episcopal Church of America from 1995 to 1999.   74 RICs consisting of
74 Portfolios
  None

 

                
90    ANNUAL REPORT    AUGUST 31, 2017   


Officers and Trustees (continued)     

 

Name, Address1

and Year of Birth

  Position(s)
Held with
the Trusts
  Length of
Time Served³
  Principal Occupation(s) During Past Five Years   Number of BlackRock-
Advised Registered
Investment Companies
(“RICs”) Consisting of
Investment Portfolios
(“Portfolios”) Overseen4
  Public Company
and Other
Investment Company
Directorships Held
During Past Five Years
Interested Trustees5               

Barbara G. Novick

1960

  Trustee   Since 2014   Vice Chairman of BlackRock, Inc. since 2006; Chair of BlackRock's Government Relations Steering Committee since 2009; Head of the Global Client Group of BlackRock, Inc. from 1988 to 2008.   100 RICs consisting of
218 Portfolios
  None

John M. Perlowski

1964

  Trustee, President and Chief Executive Officer   Since 2015 (Trustee); Since 2011 (President and Chief Executive Officer)   Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Fund & Accounting Services since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009.   127 RICs consisting of
316 Portfolios
  None
 

1    The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

 

2    Each Independent Trustee will serve until his or her successor is elected and qualifies, or until his or her earlier death, resignation, retirement or removal, or until December 31 of the year in which he or she turns 75. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding of good cause therefor.

 

3    Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, each Trustee first became a member of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; Jerrold B. Harris, 1999; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.

 

4    For purposes of this chart, “RICs” refers to investment companies registered under the 1940 Act and “Portfolios” refers to the investment programs of the BlackRock-advised funds. The Closed-End Complex is comprised of 74 RICs. Ms. Novick and Mr. Perlowski are also board members of certain complexes of BlackRock registered open-end funds. Ms. Novick is also a board member of the BlackRock Equity-Liquidity Complex and Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex.

 

5    Ms. Novick and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trusts based on their positions with BlackRock and its affiliates. Ms. Novick and Mr. Perlowski are also board members of certain complexes of BlackRock registered open-end funds. Ms. Novick is also a board member of the BlackRock Equity-Liquidity Complex and Mr. Perlowski is also a board member of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon a finding of good cause therefor.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    91


Officers and Trustees (concluded)     

 

Name, Address1

and Year of Birth

  Position(s)
Held with
the Trusts
  Length of
Time Served
as an Officer
  Principal Occupation(s) During Past Five Years
Officers Who Are Not Trustees2     

Jonathan Diorio

1980

  Vice President   Since 2015   Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015; Director of Deutsche Asset & Wealth Management from 2009 to 2011.

Neal J. Andrews

1966

  Chief Financial Officer   Since 2007   Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay M. Fife

1970

  Treasurer   Since 2007   Managing Director of BlackRock, Inc. since 2007; Director of BlackRock, Inc. in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Charles Park

1967

  Chief Compliance Officer   Since 2014   Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.

Janey Ahn

1975

  Secretary   Since 2012   Director of BlackRock, Inc. since 2009; Assistant Secretary of the funds in the Closed-End Complex from 2008 to 2012.
 

1    The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.

 

2    Officers of the Trusts serve at the pleasure of the Board.

 

As of the date of this report, the portfolio managers of:

 

   

BBK are Walter O’Connor and Ted Jaeckel

 

 

   

BYM are Kevin Maloney and Michael Kalinoski

 

 

       

Investment Adviser

BlackRock Advisors, LLC

Wilmington, DE 19809

  

Transfer Agent

Computershare Trust Company, N.A.

Canton, MA 02021

  

VRDP Remarketing Agent

Citigroup Global Markets Inc.

New York, NY 10179

  

Independent Registered

Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Accounting Agent and Custodian

State Street Bank and

Trust Company

Boston, MA 02111

  

VRDP Tender and Paying Agent

and VMTP Redemption and

Paying Agent

The Bank of New York Mellon

New York, NY 10286

  

VRDP Liquidity Provider

Bank of America, N.A.1

New York, NY 10036

  

Legal Counsel

Skadden, Arps, Slate,

Meagher & Flom LLP

Boston, MA 02116

        

Address of the Trusts

100 Bellevue Parkway

Wilmington, DE 19809

 

  1   

For MFL.

 

                
92    ANNUAL REPORT    AUGUST 31, 2017   


Additional Information     

 

 

Proxy Results

The Annual Meeting of Shareholders was held on July 25, 2017 for shareholders of record on May 30, 2017 to elect trustee nominees for each Trust. There were no broker non-votes with regard to any of the Trusts.

Shareholders elected the Class I Trustees as follows:

 

     Michael J. Castellano             R. Glenn Hubbard             W. Carl Kester¹             John M. Perlowski  
     Votes For      Votes
Withheld
            Votes For      Votes
Withheld
            Votes For      Votes
Withheld
            Votes For      Votes
Withheld
 

BYM

    24,503,936        496,239          24,329,775        670,400          1,372        0          24,382,917        617,258  

BAF

    7,915,971        270,657          7,916,573        270,055          422        0          7,921,171        265,457  

BBK

    9,488,703        212,296          9,390,286        310,713          799        0          9,512,693        188,306  

BLE

    20,534,697        722,938                20,397,020        860,615                1,513        0                20,407,850        849,785  

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Richard E. Cavanagh, Cynthia L. Egan, Frank J. Fabozzi, Jerrold B. Harris, Catherine A. Lynch, Barbara G. Novick and Karen P. Robards.

 

  ¹   Voted on by holders of Preferred Shares only.

Shareholders elected the Trustees as follows:

 

     Michael J. Castellano             Richard E. Cavanagh             Cynthia L. Egan  
     Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
         

MVF

    59,671,976        1,830,055                         59,614,609        1,887,422                         59,795,544        1,706,487           
             Votes
Against
     Abstain                     Votes
Against
     Abstain                     Votes
Against
     Abstain  

MFL

    35,681,929        378,691        353,566                35,366,426        705,399        342,361                35,675,668        404,519        333,999  
    Frank J. Fabozzi¹            Jerrold B. Harris            R. Glenn Hubbard  
     Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
         

MVF

    2,438        0                         59,528,152        1,973,879                         59,531,788        1,970,243           
             Votes
Against
     Abstain                     Votes
Against
     Abstain                     Votes
Against
     Abstain  

MFL

    2,746        0        0                35,342,623        728,818        342,745                35,340,462        717,379        356,345  
    W. Carl Kester¹            Catherine A. Lynch            Barbara G. Novick  
     Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
         

MVF

    2,438        0                         59,809,798        1,692,233                         59,762,508        1,739,523           
             Votes
Against
     Abstain                     Votes
Against
     Abstain                     Votes
Against
     Abstain  

MFL

    2,746        0        0                35,691,316        383,216        339,654                35,694,237        393,310        326,639  
    John M. Perlowski            Karen P. Robards                             
     Votes For      Votes
Withheld
                    Votes For      Votes
Withheld
                                    

MVF

    59,750,776        1,751,255                         59,765,844        1,736,187                      
             Votes
Against
     Abstain                     Votes
Against
     Abstain                             

MFL

    35,657,931        402,688        353,567                35,676,184        411,363        326,639                                     

 

  ¹   Voted on by holders of Preferred Shares only.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    93


Additional Information (continued)     

 

 

Trust Certification

Certain Trusts are listed for trading on the NYSE and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Trusts filed with the SEC the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

 

Dividend Policy

Each Trust’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of distributions, the Trusts may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any particular month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result, the distributions paid by the Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The Trusts’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

 

General Information

The Trusts do not make available copies of their Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trust’s offerings and the information contained in each Trust’s Statement of Additional Information may have become outdated.

During the period, there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charters or by-laws that would delay or prevent a change of control of the Trusts that were not approved by the shareholders or in the principal risk factors associated with investment in the Trusts. Except as disclosed on page 92, there have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.

Effective September 26, 2016, BlackRock implemented a new methodology for calculating “effective duration” for BlackRock’s municipal bond portfolios. The new methodology replaces the model previously used by BlackRock to evaluate municipal bond duration, and is a common indicator of an investment’s sensitivity to interest rate movements. The new methodology is applied to each Trust’s duration reported for periods after September 26, 2016.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trusts may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website 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 Trusts will mail only one copy of shareholder documents, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Trusts at (800) 882-0052.

 

                
94    ANNUAL REPORT    AUGUST 31, 2017   


Additional Information (concluded)     

 

 

General Information (concluded)

Availability of Quarterly Schedule of Investments

The Trusts file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trusts’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room or how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Trusts’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Trusts voted proxies relating to securities held in the Trusts’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com; or by calling (800) 882-0052; and (2) on the SEC’s website at http://www.sec.gov.

Availability of Trust Updates

BlackRock will update performance and certain other data for the Trusts on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Trusts. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

                
   ANNUAL REPORT    AUGUST 31, 2017    95


This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Trusts have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

LOGO

 

CEF-NTL-6-8/17-AR    LOGO


Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to clarify an inconsistency in to whom persons covered by the code should report suspected violations of the code. The amendment clarifies that such reporting should be made to BlackRock’s General Counsel, and retains the alternative option of anonymous reporting following “whistleblower” policies. Other non-material changes were also made in connection with this amendment. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, by calling 1-800-882-0052, option 4.

 

Item 3 – Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

Michael Castellano

Frank J. Fabozzi

W. Carl Kester

Catherine A. Lynch

Karen P. Robards

The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.

Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements.    

Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an

 

2


audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

Item 4 – Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

     (a) Audit Fees   (b) Audit-Related Fees1   (c) Tax Fees2   (d) All Other Fees

Entity Name

 

Current

    Fiscal Year    
End

 

Previous

    Fiscal Year    
End

 

Current

    Fiscal Year    
End

 

Previous

    Fiscal Year    
End

 

Current

    Fiscal Year    
End

 

Previous

    Fiscal Year    
End

 

Current

    Fiscal Year    
End

 

Previous

    Fiscal Year    
End

BlackRock

Municipal Income

Trust II

  $33,418   $33,418   $0   $0   $13,872   $13,872   $0   $0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):

 

      Current Fiscal Year End    Previous Fiscal Year End

(b) Audit-Related Fees1

   $0    $0

(c) Tax Fees2

   $0    $0

(d) All Other Fees3

   $2,129,000    $2,154,000

1 The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.

2 The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.

3 Non-audit fees of $2,129,000 and $2,154,000 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved

 

3


provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:

 

   

Entity Name

      Current Fiscal Year    
End
 

  Previous Fiscal Year    

End

 

BlackRock Municipal Income        

Trust II

  $13,872   $13,872

Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored or advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:

 

Current Fiscal

Year End

  

Previous Fiscal

Year End

$2,129,000

   $2,154,000

These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 – Audit Committee of Listed Registrants

 

  (a) The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

 

4


Michael Castellano

Frank J. Fabozzi

W. Carl Kester

Catherine A. Lynch

Karen P. Robards

(b)  Not Applicable

 

Item 6 –  Investments

(a)  The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b)  Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

Item 7 –  Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.

 

Item 8 –  Portfolio Managers of Closed-End Management Investment Companies

(a)(1)  As of the date of filing this Report:

The registrant is managed by a team of investment professionals comprised of Theodore R. Jaeckel, Jr., CFA, Managing Director at BlackRock, and Walter O’Connor, Managing Director at BlackRock. Each of the foregoing investment professional is a member of BlackRock’s municipal tax-exempt management group and is jointly responsible for the day-

 

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to-day management of the registrant’s portfolio, which includes setting the registrant’s overall investment strategy, overseeing the management of the registrant and/or selection of its investments. Messrs. Jaeckel and O’Connor have been members of the registrant’s portfolio management team since 2006.

 

  Portfolio Manager    Biography

  Theodore R. Jaeckel, Jr.        

   Managing Director of BlackRock since 2006; Managing Director of Merrill Lynch Investment Managers, L.P. (“MLIM”) from 2005 to 2006; Director of MLIM from 1997 to 2005.

  Walter O’Connor

   Managing Director of BlackRock since 2006; Managing Director of MLIM from 2003 to 2006; Director of MLIM from 1998 to 2003.

(a)(2) As of August 31, 2017:

 

    

(ii) Number of Other Accounts Managed

and Assets by Account Type

 

(iii) Number of Other Accounts and

Assets for Which Advisory Fee is

Performance-Based

(i) Name of

Portfolio Manager

 

Other

Registered

    Investment    

Companies

 

    Other Pooled    

Investment

Vehicles

 

Other

    Accounts    

 

Other

Registered

     Investment     

Companies

 

Other Pooled

    Investment    

Vehicles

 

Other

    Accounts    

Theodore R. Jaeckel, Jr.

 

  34

 

  0

 

  0

 

  0

 

  0

 

  0

 

        $27.72 Billion    

 

  $0

 

  $0

 

  $0

 

  $0

 

  $0

 

Walter O’Connor

  29

 

  0

 

  0

 

  0

 

  0

 

  0

 

             
    $19.01 Billion

 

  $0

 

  $0

 

  $0

 

  $0

 

  $0

 

(iv) Portfolio Manager Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’)

 

6


officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund.    It should also be noted that a portfolio manager may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Such portfolio managers may therefore be entitled to receive a portion of any incentive fees earned on such accounts. Currently, the portfolio managers of this fund are not entitled to receive a portion of incentive fees of other accounts.

As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.

(a)(3) As of August 31, 2017:

Portfolio Manager Compensation Overview

The discussion below describes the portfolio managers’ compensation as of August 31, 2017.

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.

Base compensation.  Generally, portfolio managers receive base compensation based on their position with the firm.

Discretionary Incentive Compensation.  Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the Funds and other accounts managed by each portfolio

 

7


manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are: a combination of market-based indices (e.g., Standard & Poor’s Municipal Bond Index), certain customized indices and certain fund industry peer groups.

Distribution of Discretionary Incentive Compensation.  Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc. stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.

Typically, the cash portion of the discretionary incentive compensation, when combined with base salary, represents more than 60% of total compensation for the portfolio managers.

Portfolio managers generally receive deferred BlackRock, Inc. stock awards as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. Deferred BlackRock, Inc. stock awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest ratably over a number of years and, once vested, settle in BlackRock, Inc. common stock. In some cases, additional deferred BlackRock, Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align their interests with long-term shareholder interests and motivate performance. Such equity awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have deferred BlackRock, Inc. stock awards.

For some portfolio managers, discretionary incentive compensation is also distributed in the form of deferred cash awards that notionally track the returns of select BlackRock investment products they manage. Providing a portion of discretionary incentive compensation in deferred cash awards that notionally track the BlackRock investment products they manage provides direct alignment with investment product results. Deferred cash awards vest ratably over a number of years and, once vested, settle in the form of cash. Any portfolio manager who is either a managing director or director at BlackRock with compensation above a specified threshold is eligible to participate in the deferred compensation program.

Other Compensation Benefits.  In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:

Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service

 

8


limit ($270,000 for 2017). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.

(a)(4) Beneficial Ownership of Securities – As of August 31, 2017.

 

Portfolio Manager   

Dollar Range of Equity Securities

of the Fund Beneficially Owned

Theodore R. Jaeckel, Jr.

   None

Walter O’Connor

   None

(b) Not Applicable

 

Item 9 –  Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.

 

Item 10 –  Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

 

Item 11 –  Controls and Procedures

(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12 –  Disclosure of Securities Lending Activities for Closed-End Management Investment Companies

(a) The following table shows the dollar amounts of income, and dollar amounts of fees and/or compensation paid, relating to the Fund’s securities lending activities during the fiscal year ended August 31, 2017. The Fund did not engage in any securities lending activity during the fiscal year ended August 31, 2017.

 

9


BlackRock Municipal Income Trust II

 

  (1)  

  

Gross income from securities lending activities

     $0  

  (2)  

  

Fees and/or compensation for securities lending activities and related services

  
  

(a)       Securities lending income paid to BIM for services as securities lending agent

   $ 0              
  

(b)      Collateral management expenses (including fees deducted from a polled cash collateral vehicle) not included in (a)

   $ 0              
  

(c)       Administrative fees not included in (a)

   $ 0              
  

(d)      Indemnification fees not included in (a)

   $ 0              
  

(e)       Rebate (paid to borrowers)

   $ 0              
  

(f)       Other fees not included in (a)

   $ 0              

  (3)  

  

Aggregate fees/compensation for securities lending activities

     $0  

  (4)  

  

Net income from securities lending activities

     $0  

(b) BlackRock Investment Management, LLC (“BIM”) serves as securities lending agent for the Fund and in that role administers the Fund’s securities lending program pursuant to the terms of a securities lending agency agreement entered into between the Fund and BIM.

 

Item 13 –  Exhibits attached hereto

(a)(1) – Code of Ethics – See Item 2

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) – Certifications – Attached hereto

 

10


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  BlackRock Municipal Income Trust II
  By:      /s/ John M. Perlowski                               
     John M. Perlowski   
    

Chief Executive Officer (principal executive officer) of

BlackRock Municipal Income Trust II

  
  Date: November 3, 2017   
  Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
  By:      /s/ John M. Perlowski                               
     John M. Perlowski   
     Chief Executive Officer (principal executive officer) of   
    

BlackRock Municipal Income Trust II

  
  Date: November 3, 2017   
  By:      /s/ Neal J. Andrews                                  
     Neal J. Andrews   
     Chief Financial Officer (principal financial officer) of   
    

BlackRock Municipal Income Trust II

  
  Date: November 3, 2017   

 

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