For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector
sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector
sub-classifications for reporting ease.
For the period ended July 31, 2022, the effect of derivative financial instruments in the Statements of
Operations was as follows:
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes
to Financial Statements.
Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the
Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.
The following table summarizes the
Fund’s financial instruments categorized in the fair value hierarchy. The breakdown of the Fund’s financial instruments into major categories is disclosed in the Schedule of Investments above.
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial
statement purposes. As of period end, such assets and/or liabilities are categorized within the fair value hierarchy as follows:
The purpose of these transactions was to combine two funds managed by the Manager with the similar investment objectives,
investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on April 11, 2022.
Assuming the reorganization had been completed on August 1, 2021, the beginning of the fiscal reporting period of the Acquiring Fund, the pro forma
results of operations for the year ended July 31, 2022, are as follows:
Because the combined investment portfolios have been managed as a single integrated portfolio since the reorganization was completed, it is not
practicable to separate the amounts of revenue and earnings of the Target Fund that have been included in the Acquiring Fund’s Statements of Operations since April 11, 2022.
Reorganization costs incurred by MUJ in connection with the reorganization were expensed by MUJ. The Manager reimbursed MUJ $161,495 which is included in
fees waived and/or reimbursed by the Manager in the Statements of Operations.
Each Common Shareholder of a Target Fund received Common Shares of the Acquiring Trust in an amount equal to the aggregate NAV of such Common
Shareholder’s Target Fund Common Shares, as determined at the close of business on April 9, 2021, less the costs of the Target Fund’s reorganizations. Cash was distributed for any fractional shares.
Each Preferred Shareholder of a Target Fund received Preferred Shares of the Acquiring Trust in an amount equal to the aggregate liquidation preference of
the Target Fund’s Preferred Shares held by such Preferred Shareholder prior to the Target Fund’s reorganization.
Each Target Fund’s net assets and composition of net assets on April 9, 2021, the valuation date of the
reorganization were as follows:
For financial reporting purposes, assets received and shares issued by the Acquiring Trust were recorded at fair value.
However, the cost basis of the investments received from the Target Funds was carried forward to align ongoing reporting of the Acquiring Trust’s realized and unrealized gains and losses with amounts distributable to shareholders for tax
purposes.
The net assets applicable to Common Shareholders of the Acquiring Trust before the reorganizations were $195,030,274. The aggregate net
assets applicable to Common Shareholders of the Acquiring Trust immediately after the reorganizations amounted to $369,654,525. Each Target Fund’s fair value and cost of financial instruments prior to the reorganization were as follows:
The purpose of these transactions was to combine three funds managed by the Manager with similar or substantially similar
(but not identical) investment objectives and similar investment strategies, policies and restrictions and portfolio compositions. Each reorganization was a tax-free event and was effective on April 12,
2021.
Assuming the reorganization had been completed on August 1, 2020, the beginning of the fiscal reporting period of the Acquiring Trust, the
pro forma results of operations for the year ended July 31, 2021, are as follows:
Because the combined investment portfolios have been managed as a single integrated portfolio since the reorganization was completed, it is not
practicable to separate the amounts of revenue and earnings of the Target Funds that have been included in the Acquiring Trust’s Statements of Operations since April 12, 2021.
Reorganization costs incurred in connection with the reorganization were expensed by BNY.
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the
accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Distributions to Preferred Shareholders are accrued and
determined as described in Note 10.
The Plan is not funded and
obligations thereunder represent general unsecured claims against the general assets of each Fund, as applicable. Deferred compensation liabilities, if any, are included in the Directors’ and Officer’s fees payable in the Statements of
Assets and Liabilities and will remain as a liability of the Funds until such amounts are distributed in accordance with the Plan. Net appreciation (depreciation) in the value of participants’ deferral accounts is allocated among the
participating funds in the BlackRock Fixed-Income Complex and reflected as Directors and Officer expense on the Statements of Operations. The Directors and Officer expense may be negative as a result of a decrease in value of the deferred accounts.
If events (e.g., market volatility, company announcement or a natural disaster) occur that are expected to
materially affect the value of such investment, or in the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not
available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair 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 Fund might reasonably expect to receive or pay from the current sale or
purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant
and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held
companies or funds that may not have a secondary market and/or may have a limited number of investors. The categorization of a value determined for financial instruments is based on the pricing transparency of the financial instruments and is
not necessarily an indication of the risks associated with investing in those securities.
TOB Trusts are supported by a liquidity facility provided by a third-party bank or other financial institution (the “Liquidity Provider”) that
allows the holders of the TOB Trust Certificates to tender their certificates in exchange for payment of par plus accrued interest on any business day. The tendered TOB Trust Certificates are remarketed by a Remarketing Agent. In the event of a
failed remarketing, the TOB Trust may draw upon a loan from the Liquidity Provider to purchase the tendered TOB Trust Certificates. Any loans made by the Liquidity Provider will be secured by the purchased TOB Trust Certificates held by the TOB
Trust and will be subject to an increased interest rate based on number of days the loan is outstanding.
The TOB Trust may be collapsed without the
consent of a fund, upon the occurrence of a termination event as defined in the TOB Trust agreement. Upon the occurrence of a termination event, a TOB Trust would be liquidated with the proceeds applied first to any accrued fees owed to the trustee
of the TOB Trust, the Remarketing Agent and the Liquidity Provider. Upon certain termination events, TOB Trust Certificates holders will be paid before the TOB Residuals holders (i.e., the Funds) whereas in other termination events, TOB Trust
Certificates holders and TOB Residuals holders will be paid pro rata.
While a fund’s investment policies and restrictions expressly permit
investments in inverse floating rate securities, such as TOB Residuals, they restrict the ability of a fund to borrow money for purposes of making investments. MIY’s, MYN’s, MPA’s and MYI’s management believes that a fund’s
restrictions on borrowings do not apply to the Funds’ TOB Trust transactions. Each Fund’s transfer of the municipal bonds to a TOB Trust is considered a secured borrowing for financial reporting purposes. The cash received by the TOB Trust
from the sale of the TOB Trust Certificates, less certain transaction expenses, is paid to a Fund. A Fund typically invests the cash received in additional municipal bonds.
Interest income, including amortization and accretion of premiums and discounts, from the underlying municipal bonds is recorded by a Fund on an accrual
basis. Interest expense incurred on the TOB Trust transaction and other expenses related to remarketing, administration, trustee, liquidity and other services to a TOB Trust are shown as interest expense, fees and amortization of offering costs in
the Statements of Operations. Fees paid upon creation of the TOB Trust are recorded as debt issuance costs and are amortized to interest expense, fees and amortization of offering costs in the Statements of Operations to the expected maturity of the
TOB Trust. In connection with the restructurings of the TOB Trusts to non-bank sponsored TOB Trusts, a Fund incurred non-recurring, legal and restructuring fees, which
are recorded as interest expense, fees and amortization of offering costs in the Statements of Operations. Amounts recorded within interest expense, fees and amortization of offering costs in the Statements of Operations are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Fund Name |
|
Interest Expense |
|
|
Liquidity Fees |
|
|
Other Expenses |
|
|
Total |
|
| |
|
|
|
|
|
|
| MUJ |
|
$ |
262,298 |
|
|
$ |
272,035 |
|
|
$ |
159,237 |
|
|
$ |
693,570 |
|
| MIY |
|
|
163,871 |
|
|
|
178,849 |
|
|
|
48,006 |
|
|
|
390,726 |
|
| MYN |
|
|
217,226 |
|
|
|
316,893 |
|
|
|
108,171 |
|
|
|
642,290 |
|
| MPA |
|
|
146,955 |
|
|
|
179,998 |
|
|
|
55,689 |
|
|
|
382,642 |
|
| MYI |
|
|
833,398 |
|
|
|
1,030,755 |
|
|
|
300,548 |
|
|
|
2,164,701 |
|
| BNY |
|
|
168,352 |
|
|
|
239,243 |
|
|
|
83,255 |
|
|
|
490,850 |
|
| |
|
For the year ended July 31, 2022, the following table is a summary of each Fund’s TOB Trusts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
| Fund Name |
|
|
Underlying
Municipal Bonds
Transferred to
TOB Trusts |
(a) |
|
|
Liability for
TOB Trust
Certificates |
(b) |
|
|
Range of
Interest Rates
on TOB Trust
Certificates at
Period End |
|
|
|
Average
TOB Trust
Certificates
Outstanding |
|
|
|
Daily Weighted
Average Rate
of Interest and
Other Expenses
on TOB Trusts |
|
|
|
|
|
|
|
| MUJ |
|
$ |
160,538,270 |
|
|
$ |
90,838,274 |
|
|
|
1.33% — 1.48% |
|
|
$ |
74,460,961 |
|
|
|
0.93 |
% |
| MIY |
|
|
72,359,007 |
|
|
|
41,267,055 |
|
|
|
1.36 — 1.61 |
|
|
|
42,431,438 |
|
|
|
0.92 |
|
| MYN |
|
|
101,274,110 |
|
|
|
58,178,643 |
|
|
|
1.35 — 1.41 |
|
|
|
77,012,598 |
|
|
|
0.83 |
|
| MPA |
|
|
71,104,324 |
|
|
|
42,183,181 |
|
|
|
1.36 — 1.48 |
|
|
|
42,488,749 |
|
|
|
0.90 |
|
| MYI |
|
|
405,060,110 |
|
|
|
241,746,905 |
|
|
|
1.36 — 1.51 |
|
|
|
242,706,039 |
|
|
|
0.89 |
|
| BNY |
|
|
77,049,899 |
|
|
|
44,906,639 |
|
|
|
1.35 — 1.41 |
|
|
|
58,052,535 |
|
|
|
0.85 |
|
| |
(a) |
The municipal bonds transferred to a TOB Trust are generally high grade municipal bonds. In certain cases, when
municipal bonds transferred are lower grade municipal bonds, the TOB Trust transaction may include a credit enhancement feature that provides for the timely payment of principal and interest on the bonds to the TOB Trust by a credit enhancement
provider in the event of default of the municipal bond. The TOB Trust would be responsible for the payment of the credit enhancement fee and the Funds, as TOB Residuals holders, would be responsible for reimbursement of any payments of principal and
interest made by the credit enhancement provider. The maximum potential amounts owed by the Funds, for such reimbursements, as applicable, are included in the maximum potential amounts disclosed for recourse TOB Trusts in the Schedules of
Investments. |
|
| |
(b) |
TOB Trusts may be structured on a non-recourse or recourse basis. When a Fund
invests in TOB Trusts on a non-recourse basis, the Liquidity Provider may be required to make a payment under the liquidity facility to allow the TOB Trust to repurchase TOB Trust Certificates. The Liquidity
Provider will be reimbursed from the liquidation of bonds held in the TOB Trust. If a Fund invests in a TOB Trust on a recourse basis, a Fund enters into a reimbursement agreement with the Liquidity Provider where a Fund is required to reimburse the
Liquidity Provider for any shortfall between the amount paid by the Liquidity Provider and proceeds received from liquidation of municipal bonds held in the TOB Trust (the “Liquidation Shortfall”). As a result, if a Fund invests in a
recourse TOB Trust, a Fund will bear the risk of loss with respect to any Liquidation Shortfall. If multiple funds participate in any such TOB Trust, these losses will be shared ratably, including the maximum potential amounts owed by a Fund at
July 31, 2022, in proportion to their participation in the TOB Trust. The recourse TOB Trusts are identified in the Schedules of Investments including the maximum potential amounts owed by a Fund at July 31, 2022. |
|
|
|
|
| 84 |
|
2 0 2 2 B L A C
K R O C K A N N U A L R E P O
R T T O S H A R E H O L D E
R S |
Notes to Financial Statements (continued)
For the year ended July 31, 2022, the following table is a summary of each Fund’s Loan for TOB Trust Certificates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Fund Name |
|
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 |
|
| |
|
|
|
|
|
|
| MYN |
|
$ |
— |
|
|
|
— |
% |
|
$ |
34,070 |
|
|
|
0.71% |
|
| BNY |
|
|
— |
|
|
|
— |
|
|
|
8,501 |
|
|
|
0.71 |
|
| |
|
| 5. |
DERIVATIVE FINANCIAL INSTRUMENTS |
The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their
exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are
included in the Schedules of Investments. These contracts may be transacted on an exchange or over-the-counter (“OTC”).
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate
risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are
exchange-traded agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical
delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or
securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are
included in cash pledged for futures contracts in the Statements of Assets and Liabilities.
Securities deposited as initial margin are designated in
the Schedules of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts
in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the
notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest rates, foreign currency exchange rates or underlying assets.
| 6. |
INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: Each Fund entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser and an indirect,
wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory and administrative services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities,
equipment and certain other services necessary to the operations of each Fund.
For such services, each Fund, except BNY, pays the Manager a monthly
fee at an annual rate equal to the following percentages of the average daily value of each Fund’s net assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
MUJ |
|
|
MIY |
|
|
MYN |
|
|
MPA |
|
|
MYI |
|
| |
|
|
|
|
|
|
|
| Investment advisory fees |
|
|
0.50 |
% |
|
|
0.49 |
% |
|
|
0.50 |
% |
|
|
0.49 |
% |
|
|
0.50% |
|
| |
|
For purposes of calculating these fees, for each Fund except for BNY, “net assets” mean the total assets of the
Fund minus the sum of its accrued liabilities (which does not include liabilities represented by TOB Trusts and the liquidation preference of any outstanding preferred shares). It is understood that the liquidation preference of any outstanding
preferred stock (other than accumulated dividends) and TOB Trusts is not considered a liability in determining a Fund’s NAV.
For such services,
BNY pays the Manager a monthly fee at an annual rate equal to 0.55% of the average weekly value of the Fund’s managed assets.
For purposes of
calculating these fees, for BNY, “managed assets” are determined as total assets of the Fund (including any assets attributable to money borrowed for investment purposes) less the sum of its accrued liabilities (other than money borrowed
for investment purposes).
Expense Waivers and Reimbursements: With respect to each Fund, the Manager contractually agreed to waive its
investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through June 30, 2024. The
contractual agreement may be terminated upon 90 days’ notice by a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of a Fund. These amounts are included in fees waived and/or reimbursed by
the Manager in the Statements of Operations. For the year ended July 31, 2022, the amounts waived were as follows:
|
|
|
|
|
| |
|
|
|
| Fund Name |
|
Fees Waived and/or Reimbursed
by the Manager |
|
| |
|
|
|
| MUJ |
|
$ |
10,989 |
|
| MIY |
|
|
1,125 |
|
| MYN |
|
|
173 |
|
| |
|
|
|
|
| N O T E S T O F
I N A N C I A L S T A T E M
E N T S |
|
85 |
Notes to Financial Statements (continued)
|
|
|
|
|
| |
|
|
|
| Fund Name |
|
Fees Waived and/or Reimbursed
by the Manager |
|
| |
|
|
|
| MPA |
|
$ |
2,170 |
|
| MYI |
|
|
3,018 |
|
| BNY |
|
|
137 |
|
| |
|
The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of each Fund’s
assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2024. The agreement can be renewed for annual periods thereafter, and may be
terminated on 90 days’ notice, each subject to approval by a majority of the Funds’ Independent Directors. For the year ended July 31, 2022, there were no fees waived by the Manager pursuant to this arrangement.
Directors and Officers: Certain directors and/or officers of the Funds are directors and/or officers of BlackRock or its affiliates. The Funds
reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer, which is included in Directors and Officer in the Statements of Operations.
For the year ended July 31, 2022, purchases and sales of investments, excluding short-term investments, were as follows:
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| Fund Name |
|
Purchases |
|
|
Sales |
|
| |
|
|
|
|
| MUJ |
|
$ |
180,943,096 |
|
|
$ |
227,637,656 |
|
| MIY |
|
|
159,407,254 |
|
|
|
152,154,652 |
|
| MYN |
|
|
256,741,300 |
|
|
|
279,808,058 |
|
| MPA |
|
|
57,479,262 |
|
|
|
64,982,774 |
|
| MYI |
|
|
251,058,570 |
|
|
|
235,363,849 |
|
| BNY |
|
|
198,755,992 |
|
|
|
210,947,409 |
|
| |
|
| 8. |
INCOME TAX INFORMATION |
It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment
companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on
each Fund’s U.S. federal tax returns generally remains open for a period of three years after they are filed. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the
jurisdiction.
Management has analyzed tax laws and regulations and their application to the Funds as of July 31, 2022, inclusive of the open tax
return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
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 NAVs per share. As of period end, permanent differences attributable to non-deductible expenses were reclassified to the following accounts:
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| Fund Name |
|
Paid-in Capital |
|
|
Accumulated
Earnings (Loss) |
|
| |
|
|
|
|
| MUJ |
|
$ |
(206,761 |
) |
|
$ |
206,761 |
|
| MIY |
|
|
(9,817 |
) |
|
|
9,817 |
|
| MYN |
|
|
(20,101 |
) |
|
|
20,101 |
|
| MPA |
|
|
(12,604 |
) |
|
|
12,604 |
|
| MYI |
|
|
(26,899 |
) |
|
|
26,899 |
|
| BNY |
|
|
(18,269 |
) |
|
|
18,269 |
|
| |
|
The tax character of distributions paid was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
| Fund Name |
|
Year Ended
07/31/22 |
|
|
|
|
|
Year Ended
07/31/21 |
|
| |
|
|
|
|
|
| MUJ |
|
|
|
|
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
$ |
30,943,538 |
|
|
|
|
|
|
$ |
24,607,163 |
|
| Ordinary income |
|
|
7,045 |
|
|
|
|
|
|
|
1,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
30,950,583 |
|
|
|
|
|
|
$ |
24,608,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| MIY |
|
|
|
|
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
$ |
22,804,745 |
|
|
|
|
|
|
$ |
21,992,740 |
|
| Ordinary income |
|
|
— |
|
|
|
|
|
|
|
682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,804,745 |
|
|
|
|
|
|
$ |
21,993,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 86 |
|
2 0 2 2 B L A C
K R O C K A N N U A L R E P O
R T T O S H A R E H O L D E
R S |
Notes to Financial Statements (continued)
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
| Fund Name |
|
Year Ended
07/31/22 |
|
|
Year Ended
07/31/21 |
|
| |
|
|
|
|
| MYN |
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
$ |
24,764,075 |
|
|
$ |
24,439,040 |
|
| Ordinary income |
|
|
1,048 |
|
|
|
2,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
24,765,123 |
|
|
$ |
24,441,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| MPA |
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
$ |
9,177,045 |
|
|
$ |
8,903,643 |
|
| Ordinary income |
|
|
63 |
|
|
|
4,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,177,108 |
|
|
$ |
8,908,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| MYI |
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
$ |
43,834,140 |
|
|
$ |
41,741,122 |
|
| Ordinary income |
|
|
437 |
|
|
|
5,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,834,577 |
|
|
$ |
41,746,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| BNY |
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
$ |
17,533,480 |
|
|
$ |
12,468,851 |
|
| Ordinary income |
|
|
80,034 |
|
|
|
1,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,613,514 |
|
|
$ |
12,470,648 |
|
|
|
|
|
|
|
|
|
|
As of July 31, 2022, the tax components of accumulated earnings (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Fund Name |
|
Undistributed
Tax-Exempt Income |
|
|
Undistributed
Ordinary Income |
|
|
Non-Expiring
Capital Loss
Carryforwards(a) |
|
|
Net Unrealized
Gains (Losses)(b) |
|
|
Total |
|
| |
|
|
|
|
|
|
|
| MUJ |
|
$ |
— |
|
|
$ |
5,988 |
|
|
$ |
(24,000,048 |
) |
|
$ |
(4,862,866 |
) |
|
$ |
(28,856,926 |
) |
| MIY |
|
|
476,984 |
|
|
|
107 |
|
|
|
(10,740,450 |
) |
|
|
(7,723,862 |
) |
|
|
(17,987,221 |
) |
| MYN |
|
|
— |
|
|
|
1,665 |
|
|
|
(33,063,837 |
) |
|
|
(10,173,904 |
) |
|
|
(43,236,076 |
) |
| MPA |
|
|
— |
|
|
|
444 |
|
|
|
(5,685,245 |
) |
|
|
(3,109,300 |
) |
|
|
(8,794,101 |
) |
| MYI |
|
|
2,472,538 |
|
|
|
10,920 |
|
|
|
(13,488,372 |
) |
|
|
14,530,053 |
|
|
|
3,525,139 |
|
| BNY |
|
|
— |
|
|
|
8,895 |
|
|
|
(18,331,793 |
) |
|
|
(10,369,135 |
) |
|
|
(28,692,033 |
) |
| |
|
| |
(a) |
Amounts available to offset future realized capital gains. |
|
| |
(b) |
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 realization for tax purposes of unrealized gains/losses on certain futures contracts,
the treatment of residual interests in tender option bond trusts, the timing of distributions and the deferral of compensation to Directors. |
|
During the year ended July 31, 2022, MYI utilized $3,530,396 of its capital loss carryforward.
As of July 31, 2022, gross unrealized appreciation and depreciation based on cost of investments (including short positions and derivatives, if any)
for U.S. federal income tax purposes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Fund Name |
|
Tax Cost |
|
|
Gross Unrealized
Appreciation |
|
|
Gross Unrealized
Depreciation |
|
|
Net Unrealized
Appreciation
(Depreciation) |
|
| |
|
|
|
|
|
|
| MUJ |
|
$ |
1,152,848,600 |
|
|
$ |
36,769,197 |
|
|
$ |
(40,089,739 |
) |
|
$ |
(3,320,542 |
) |
| MIY |
|
|
638,006,297 |
|
|
|
8,191,829 |
|
|
|
(15,894,813 |
) |
|
|
(7,702,984 |
) |
| MYN |
|
|
729,914,206 |
|
|
|
18,906,526 |
|
|
|
(27,778,407 |
) |
|
|
(8,871,881 |
) |
| MPA |
|
|
267,805,078 |
|
|
|
6,770,319 |
|
|
|
(9,724,156 |
) |
|
|
(2,953,837 |
) |
| MYI |
|
|
1,220,136,350 |
|
|
|
48,679,709 |
|
|
|
(33,645,655 |
) |
|
|
15,034,054 |
|
| BNY |
|
|
493,864,800 |
|
|
|
11,374,733 |
|
|
|
(20,731,504 |
) |
|
|
(9,356,771 |
) |
| |
|
In the normal course of business, the Funds invest in securities or other instruments and may enter into certain transactions, and such activities
subject each Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors,
including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various
countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a
significant impact on the Funds and their investments.
The Funds may hold a significant amount of bonds subject to calls by the issuers at defined
dates and prices. When bonds are called by issuers and the Funds reinvest the proceeds received, such investments may be in securities with lower yields than the bonds originally held, and correspondingly, could adversely impact the yield and total
return performance of a Fund.
|
|
|
| N O T E S T O F
I N A N C I A L S T A T E M
E N T S |
|
87 |
Notes to Financial Statements (continued)
A Fund structures and “sponsors” the TOB Trusts in which it holds TOB Residuals and has certain duties and responsibilities, which may give rise
to certain additional risks including, but not limited to, compliance, securities law and operational risks.
As short-term interest rates rise, the
Funds’ investments in the TOB Trusts may adversely affect the Funds’ net investment income and dividends to Common Shareholders. Also, fluctuations in the market value of municipal bonds deposited into the TOB Trust may adversely affect
the Funds’ NAVs per share.
The U.S. Securities and Exchange Commission (“SEC”) and various federal banking and housing agencies have
adopted credit risk retention rules for securitizations (the “Risk Retention Rules”). The Risk Retention Rules would require the sponsor of a TOB Trust to retain at least 5% of the credit risk of the underlying assets supporting the TOB
Trust’s municipal bonds. The Risk Retention Rules may adversely affect the Funds’ ability to engage in TOB Trust transactions or increase the costs of such transactions in certain circumstances.
TOB Trusts constitute an important component of the municipal bond market. Any modifications or changes to rules governing TOB Trusts may adversely impact
the municipal market and the Funds, including through reduced demand for and liquidity of municipal bonds and increased financing costs for municipal issuers. The ultimate impact of any potential modifications on the TOB Trust market and the overall
municipal market is not yet certain.
Each Fund may invest without limitation in illiquid or less liquid investments or investments in which no
secondary market is readily available or which are otherwise illiquid, including private placement securities. A Fund may not be able to readily dispose of such investments at prices that approximate those at which a Fund could sell such investments
if they were more widely traded and, as a result of such illiquidity, a Fund may have to sell other investments or engage in borrowing transactions if necessary to raise funds to meet its obligations. Limited liquidity can also affect the market
price of investments, thereby adversely affecting a Fund’s NAV and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks
as investing in below investment grade public debt securities.
Market Risk: Each Fund may be exposed to prepayment risk, which is the risk
that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Each Fund may also be exposed to reinvestment risk,
which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Fund portfolio’s current earnings
rate.
Municipal securities are subject to the risk that litigation, legislation or other political events, local business or economic conditions,
credit rating downgrades, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest or otherwise affect the value of such securities. Municipal securities can be
significantly affected by political or economic changes, including changes made in the law after issuance of the securities, as well as uncertainties in the municipal market related to, taxation, legislative changes or the rights of municipal
security holders, including in connection with an issuer insolvency. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the tax benefits
supporting the project or assets or the inability to collect revenues for the project or from the assets. Municipal securities may be less liquid than taxable bonds, and there may be less publicly available information on the financial condition of
municipal security issuers than for issuers of other securities.
An outbreak of respiratory disease caused by a novel coronavirus has developed into
a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the
future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact
the prices and liquidity of a fund’s investments. Although vaccines have been developed and approved for use by various governments, the duration of this pandemic and its effects cannot be determined with certainty.
Counterparty Credit Risk: The Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on
its commitments related to unsettled or open transactions, including making timely interest and/or principal payments or otherwise honoring its obligations. The Funds manage counterparty credit risk by entering into transactions only with
counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and
counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is
approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.
A derivative contract may
suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can
also occur if the counterparty does not perform under the contract.
With exchange-traded futures, there is less counterparty credit risk to the Funds
since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the
clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit
risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that
a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis
across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Concentration Risk: A diversified portfolio,
where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within each Fund’s
portfolio are disclosed in its Schedule of Investments.
|
|
|
| 88 |
|
2 0 2 2 B L A C
K R O C K A N N U A L R E P O
R T T O S H A R E H O L D E
R S |
Notes to Financial Statements (continued)
Certain Funds invest a substantial amount of their assets in issuers located in a single state or limited number of states. When a fund concentrates its
investments in this manner, it assumes the risk that economic, regulatory, political or social conditions affecting that state or group of states could have a significant impact on the fund and could affect the income from, or the value or liquidity
of, the fund’s portfolio. Investment percentages in specific states or U.S. territories are presented in the Schedules of Investments.
Certain
Funds invest a significant portion of their assets in securities within a single or limited number of market sectors. When a fund concentrates its investments in this manner, it assumes the risk that economic, regulatory, political and social
conditions affecting such sectors may have a significant impact on the Fund and could affect the income from, or the value or liquidity of, the Fund’s portfolio. Investment percentages in specific sectors are presented in the Schedules of
Investments.
The Funds invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income
markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will decrease as interest rates rise
and increase as interest rates fall. The Funds may be subject to a greater risk of rising interest rates due to the recent period of historically low interest rates. The Federal Reserve has recently begun to raise the federal funds rate as part of
its efforts to address inflation. There is a risk that interest rates will continue to rise, which will likely drive down the prices of bonds and other fixed-income securities, and could negatively impact the Funds’ performance.
LIBOR Transition Risk: The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate
(“LIBOR”). Although many LIBOR rates ceased to be published or no longer are representative of the underlying market they seek to measure after December 31, 2021, a selection of widely used USD LIBOR rates will continue to be
published through June 2023 in order to assist with the transition. The Funds may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process
away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the
Funds is uncertain.
| 10. |
CAPITAL SHARE TRANSACTIONS |
MPA and BNY are authorized to issue an unlimited number of shares, all of which were initially classified as Common Shares. MUJ, MIY, MYN and MYI are
authorized to issue 200 million shares, all of which were initially classified as Common Shares. The par value for each Fund’s Common Shares is $0.10, except for BNY for which it is $0.001. The par value for MUJ’s, MIY’s,
MYN’s and MYI’s Preferred Shares outstanding is $0.10. The par value for MPA’s Preferred Shares outstanding is $0.05. The par value for BNY’s Preferred Shares outstanding is $0.001. The Board is authorized, however, to
reclassify any unissued Common Shares to Preferred Shares without the approval of Common Shareholders. MPA is authorized to issue 1 million Preferred Shares.
Common Shares
For the periods shown, shares issued and
outstanding increased by the following amounts as a result of dividend reinvestment:
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Year Ended |
|
|
|
|
|
|
|
|
|
| Fund Name |
|
07/31/22 |
|
|
07/31/21 |
|
| |
|
|
|
|
| MUJ |
|
|
28,923 |
|
|
|
— |
|
| MIY |
|
|
6,385 |
|
|
|
— |
|
| MPA |
|
|
8,523 |
|
|
|
— |
|
| BNY |
|
|
23,267 |
|
|
|
13,107 |
|
| |
|
For the year ended July 31, 2022, Common Shares of MUJ issued and outstanding increased by 24,386,597 as a result of
the reorganization of MYJ with and into MUJ.
For the year ended July 31, 2022, Common Shares of MUJ issued and outstanding decreased by 41 as a
result of a redemption of fractional shares from the reorganization of MYJ with and into MUJ.
For the year ended July 31, 2021, Common Shares
issued and outstanding increased by 11,625,210 as a result of the reorganization of BNY.
For the year ended July 31, 2021, Common Shares issued
and outstanding decreased by 9 as a result of a redemption of fractional shares from the reorganization of BNY.
For the year ended July 31, 2022
and the year ended July 31, 2021, shares issued and outstanding remained constant for MYN and MYI.
For the year ended July 31, 2021, shares
issued and outstanding remained constant for MUJ and MIY.
For the year ended July 31, 2021, shares issued and outstanding decreased by 1,307 as
a result of share repurchase for MPA.
The Funds participate in an open market share repurchase program (the “Repurchase Program”). From
December 1, 2020 through November 30, 2021, each Fund may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2020, subject
to certain conditions. From December 1, 2021 through November 30, 2022, each Fund may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on
November 30, 2021, subject to certain conditions. The Repurchase Program has an accretive effect as shares are purchased at a discount to the Fund’s NAV. There is no assurance that the Funds will purchase shares in any particular amounts.
For the year ended July 31, 2022, the Funds did not repurchase any shares.
Preferred Shares
|
|
|
| N O T E S T O F
I N A N C I A L S T A T E M
E N T S |
|
89 |
Notes to Financial Statements (continued)
A Fund’s Preferred Shares rank prior to its Common Shares as to the payment of dividends by the Fund and distribution of assets upon dissolution or
liquidation of the Fund. The 1940 Act prohibits the declaration of any dividend on Common Shares or the repurchase of Common Shares if the Fund fails to maintain asset coverage of at least 200% of the liquidation preference of the Fund’s
outstanding Preferred Shares. In addition, pursuant to the Preferred Shares’ governing instruments, a Fund is restricted from declaring and paying dividends on classes of shares ranking junior to or on parity with its Preferred Shares or
repurchasing such shares if the Fund fails to declare and pay dividends on the Preferred Shares, redeem any Preferred Shares required to be redeemed under the Preferred Shares’ governing instruments or comply with the basic maintenance amount
requirement of the ratings agencies rating the Preferred Shares.
Holders of Preferred Shares have voting rights equal to the voting rights of holders
of Common Shares (one vote per share) and vote together with holders of Common Shares (one vote per share) as a single class on certain matters. Holders of Preferred Shares, voting as a separate class, are also entitled to (i) elect two members
of the Board, (ii) elect the full Board if dividends on the Preferred Shares are not paid for a period of two years and (iii) a separate class vote to amend the Preferred Share governing documents. In addition, the 1940 Act requires the
approval of the holders of a majority of any outstanding Preferred Shares, voting as a separate class, to (a) adopt any plan of reorganization that would adversely affect the Preferred Shares, (b) change a Fund’s sub-classification as a closed-end investment company or change its fundamental investment restrictions or (c) change its business so as to cease to be an investment
company.
VRDP Shares
Each Fund (for purposes of this
section, each, a “VRDP Fund”) have issued Series W-7 VRDP Shares, $100,000 liquidation preference per share, in one or more privately negotiated offerings to qualified institutional buyers as defined
pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The VRDP Shares include a liquidity feature and may be subject to a special rate period. As of period end, the VRDP Shares outstanding were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Fund Name |
|
Issue
Date |
|
|
Shares
Issued |
|
|
Aggregate
Principal |
|
|
Maturity
Date |
|
| |
|
|
|
|
|
|
| MUJ |
|
|
06/30/11 |
|
|
|
1,727 |
|
|
$ |
172,700,000 |
|
|
|
07/01/41 |
|
|
|
|
04/13/15 |
|
|
|
644 |
|
|
|
64,400,000 |
|
|
|
07/01/41 |
|
|
|
|
04/11/22 |
|
|
|
1,800 |
|
|
|
180,000,000 |
|
|
|
07/01/41 |
|
| MIY |
|
|
04/21/11 |
|
|
|
1,446 |
|
|
|
144,600,000 |
|
|
|
05/01/41 |
|
|
|
|
09/14/15 |
|
|
|
873 |
|
|
|
87,300,000 |
|
|
|
05/01/41 |
|
| MYN |
|
|
04/21/11 |
|
|
|
2,477 |
|
|
|
247,700,000 |
|
|
|
05/01/41 |
|
| MPA |
|
|
05/19/11 |
|
|
|
663 |
|
|
|
66,300,000 |
|
|
|
06/01/41 |
|
|
|
|
04/13/15 |
|
|
|
163 |
|
|
|
16,300,000 |
|
|
|
06/01/41 |
|
| MYI |
|
|
05/19/11 |
|
|
|
3,564 |
|
|
|
356,400,000 |
|
|
|
06/01/41 |
|
| BNY |
|
|
03/31/21 |
|
|
|
945 |
|
|
|
94,500,000 |
|
|
|
03/31/51 |
|
|
|
|
04/12/21 |
|
|
|
849 |
|
|
|
84,900,000 |
|
|
|
03/31/51 |
|
| |
|
Redemption Terms: A VRDP Fund is required to redeem its VRDP Shares on the maturity date, unless earlier redeemed
or repurchased. Six months prior to the maturity date, a VRDP Fund is required to begin to segregate liquid assets with the Fund’s custodian to fund the redemption. In addition, a VRDP Fund is required to redeem certain of its outstanding VRDP
Shares if it fails to comply with certain asset coverage, basic maintenance amount or leverage requirements.
Subject to certain conditions, the VRDP
Shares may also be redeemed, in whole or in part, at any time at the option of a VRDP Fund. The redemption price per VRDP Share is equal to the liquidation preference per share plus any outstanding unpaid dividends.
Liquidity Feature: VRDP Shares are subject to a fee agreement between the VRDP Fund and the liquidity provider that requires a per annum liquidity
fee and, in some cases, an upfront or initial commitment fee, payable to the liquidity provider. These fees, if applicable, are shown as liquidity fees in the Statements of Operations. As of period end, the fee agreement is set to expire, unless
renewed or terminated in advance, as follows:
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| |
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| |
|
MUJ |
|
|
MIY |
|
|
MYN |
|
|
MPA |
|
|
MYI |
|
|
BNY |
|
| |
|
|
|
|
|
|
|
|
| Expiration date |
|
|
04/30/23 |
|
|
|
07/09/23 |
|
|
|
07/09/23 |
|
|
|
07/09/23 |
|
|
|
07/09/23 |
|
|
|
04/30/23 |
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| |
|
The VRDP Shares are also subject to a purchase agreement in connection with the liquidity feature. In the event a purchase
agreement is not renewed or is terminated in advance, and the VRDP Shares do not become subject to a purchase agreement with an alternate liquidity provider, the VRDP Shares will be subject to mandatory purchase by the liquidity provider prior to
the termination of the purchase agreement. In the event of such mandatory purchase, a VRDP Fund is required to redeem the VRDP Shares six months after the purchase date. Immediately after such mandatory purchase, the VRDP Fund is required to begin
to segregate liquid assets with its custodian to fund the redemption. There is no assurance that a VRDP Fund will replace such redeemed VRDP Shares with any other preferred shares or other form of leverage.
Remarketing: A VRDP Fund may incur remarketing fees on the aggregate principal amount of all its VRDP Shares, which, if any, are included in
remarketing fees on Preferred Shares in the Statements of Operations. During any special rate period (as described below), a VRDP Fund may incur nominal or no remarketing fees.
Ratings: As of period end, the VRDP Shares were assigned the following
ratings:
|
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| |
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|
| Fund Name |
|
Moody’s Investors
Service, Inc.
Long-Term
Ratings |
|
|
Fitch Ratings, Inc.
Long-Term
Ratings |
|
| |
|
|
|
|
| MUJ |
|
|
Aa2 |
|
|
|
AA |
|
| MIY |
|
|
Aa2 |
|
|
|
AA |
|
| MYN |
|
|
Aa2 |
|
|
|
AA |
|
| |
|
|
|
|
| 90 |
|
2 0 2 2 B L A C
K R O C K A N N U A L R E P O
R T T O S H A R E H O L D E
R S |
Notes to Financial Statements (continued)
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| |
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|
|
| Fund Name |
|
Moody’s Investors
Service, Inc.
Long-Term
Ratings |
|
|
Fitch Ratings, Inc.
Long-Term Ratings |
|
| |
|
|
|
|
| MPA |
|
|
Aa2 |
|
|
|
AA |
|
| MYI |
|
|
Aa1 |
|
|
|
AA |
|
| BNY |
|
|
Aa2 |
|
|
|
AA |
|
| |
|
Special Rate Period: A VRDP Fund has commenced a “special rate period” with respect to its VRDP Shares,
during which the VRDP Shares will not be subject to any remarketing and the dividend rate will be based on a predetermined methodology. During a special rate period, short-term ratings on VRDP Shares are withdrawn. As of period end, the following
VRDP Funds have commenced/are set to commence a special rate period:
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| |
|
|
|
|
| Fund Name |
|
Commencement
Date |
|
|
Expiration Date as
of Period Ended
07/31/22 |
|
| |
|
|
|
|
| MUJ |
|
|
04/17/14 |
|
|
|
04/15/23 |
|
| MIY |
|
|
06/25/20 |
|
|
|
06/21/23 |
|
| MYN |
|
|
06/22/22 |
|
|
|
06/21/23 |
|
| MPA |
|
|
06/22/22 |
|
|
|
06/21/23 |
|
| MYI |
|
|
06/22/22 |
|
|
|
06/21/23 |
|
| BNY |
|
|
03/31/21 |
|
|
|
04/15/23 |
|
| |
|
Prior to the expiration date, the VRDP Fund and the VRDP Shares holder may mutually agree to extend the special rate
period. If a special rate period is not extended, the VRDP Shares will revert to remarketable securities upon the termination of the special rate period and will be remarketed and available for purchase by qualified institutional investors.
During the special rate period: (i) the liquidity and fee agreements remain in effect, (ii) VRDP Shares remain subject to mandatory redemption
by the VRDP Fund on the maturity date, (iii) VRDP Shares will not be remarketed or subject to optional or mandatory tender events, (iv) the VRDP Fund is required to comply with the same asset coverage, basic maintenance amount and leverage
requirements for the VRDP Shares as is required when the VRDP Shares are not in a special rate period, (v) the VRDP Fund will pay dividends monthly based on the sum of an agreed upon reference rate and a percentage per annum based on the
long-term ratings assigned to the VRDP Shares and (vi) the VRDP Fund will pay nominal or no fees to the liquidity provider and remarketing agent.
Dividends: Except during the Special Rate Period as described above, dividends on the VRDP Shares are payable monthly at a variable rate set weekly
by the remarketing agent. Such dividend rates are generally based upon a spread over a base rate and cannot exceed a maximum rate. A change in the short-term credit rating of the liquidity provider or the VRDP Shares may adversely affect the
dividend rate paid on such shares, although the dividend rate paid on the VRDP Shares is not directly based upon either short-term rating. In the event of a failed remarketing, the dividend rate of the VRDP Shares will be reset to a maximum rate.
The maximum rate is determined based on, among other things, the long-term preferred share rating assigned to the VRDP Shares and the length of time that the VRDP Shares fail to be remarketed.
For the year ended July 31, 2022, the annualized dividend rate for the VRDP Shares were as follows:
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| |
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|
|
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| |
|
MUJ |
|
|
MIY |
|
|
MYN |
|
|
MPA |
|
|
MYI |
|
|
BNY |
|
| |
|
|
|
|
|
|
|
|
| Dividend rates |
|
|
1.23 |
% |
|
|
1.28 |
% |
|
|
0.47 |
% |
|
|
0.47 |
% |
|
|
0.48 |
% |
|
|
1.15% |
|
| |
|
During the year ended July 31, 2022, issued and outstanding VRDP Shares for MUJ increased by 1,800 due to the
reorganization of MYJ with and into MUJ.
During the year ended July 31, 2021, issued and outstanding VRDP Shares for BNY increased by 945 from
the exchange of VMTP Shares and 849 due to the reorganizations of BSE and BFY with and into BNY.
Offering Costs: The Funds incurred costs in
connection with the issuance of VRDP Shares, which were recorded as a direct deduction from the carrying value of the related debt liability and will be amortized over the life of the VRDP Shares with the exception of any upfront fees paid by a VRDP
Fund to the liquidity provider which, if any, were amortized over the life of the liquidity agreement. Amortization of these costs is included in interest expense, fees and amortization of offering costs in the Statements of Operations.
Financial Reporting: The VRDP Shares are considered debt of the issuer; therefore, the liquidation preference, which approximates fair value of the
VRDP Shares, is recorded as a liability in the Statements of Assets and Liabilities net of deferred offering costs. Unpaid dividends are included in interest expense and fees payable in the Statements of Assets and Liabilities, and the dividends
accrued and paid on the VRDP Shares are included as a component of interest expense, fees and amortization of offering costs in the Statements of Operations. The VRDP Shares are treated as equity for tax purposes. Dividends paid to holders of the
VRDP Shares are generally classified as tax-exempt income for tax-reporting purposes. Dividends and amortization of deferred offering costs on VRDP Shares are included
in interest expense, fees and amortization of offering costs in the Statements of Operations:
|
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| |
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|
|
| Fund Name |
|
Dividends Accrued |
|
|
Deferred Offering
Costs Amortization |
|
| |
|
|
|
|
| MUJ |
|
$ |
3,590,061 |
|
|
$ |
24,910 |
|
| MIY |
|
|
2,973,980 |
|
|
|
35,456 |
|
| MYN |
|
|
1,171,519 |
|
|
|
51,494 |
|
| MPA |
|
|
390,664 |
|
|
|
20,749 |
|
| |
|
|
|
|
| N O T E S T O F
I N A N C I A L S T A T E M
E N T S |
|
91 |
Notes to Financial Statements (continued)
|
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| |
|
|
|
|
| Fund Name |
|
Dividends Accrued |
|
|
Deferred Offering
Costs Amortization |
|
| |
|
|
|
|
| MYI |
|
$ |
1,717,456 |
|
|
$ |
80,902 |
|
| BNY |
|
|
2,062,975 |
|
|
|
19,207 |
|
| |
|
Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial
statements were issued and the following items were noted:
The Funds declared and paid or will pay distributions to Common Shareholders as follows:
|
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|
|
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|
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| |
|
|
|
|
|
|
| Fund Name |
|
Declaration
Date |
|
|
Record
Date |
|
|
Payable/
Paid Date |
|
|
Dividend Per
Common Share |
|
| |
|
|
|
|
|
|
| MUJ |
|
|
08/01/22 |
|
|
|
08/15/22 |
|
|
|
09/01/22 |
|
|
$ |
0.063000 |
|
|
|
|
09/01/22 |
|
|
|
09/15/22 |
|
|
|
10/03/22 |
|
|
|
0.063000 |
|
| MIY |
|
|
08/01/22 |
|
|
|
08/15/22 |
|
|
|
09/01/22 |
|
|
|
0.056000 |
|
|
|
|
09/01/22 |
|
|
|
09/15/22 |
|
|
|
10/03/22 |
|
|
|
0.056000 |
|
| MYN |
|
|
08/01/22 |
|
|
|
08/15/22 |
|
|
|
09/01/22 |
|
|
|
0.040500 |
|
|
|
|
09/01/22 |
|
|
|
09/15/22 |
|
|
|
10/03/22 |
|
|
|
0.040500 |
|
| MPA |
|
|
08/01/22 |
|
|
|
08/15/22 |
|
|
|
09/01/22 |
|
|
|
0.055000 |
|
|
|
|
09/01/22 |
|
|
|
09/15/22 |
|
|
|
10/03/22 |
|
|
|
0.055000 |
|
| MYI |
|
|
08/01/22 |
|
|
|
08/15/22 |
|
|
|
09/01/22 |
|
|
|
0.051500 |
|
|
|
|
09/01/22 |
|
|
|
09/15/22 |
|
|
|
10/03/22 |
|
|
|
0.051500 |
|
| BNY |
|
|
08/01/22 |
|
|
|
08/15/22 |
|
|
|
09/01/22 |
|
|
|
0.046500 |
|
|
|
|
09/01/22 |
|
|
|
09/15/22 |
|
|
|
10/03/22 |
|
|
|
0.046500 |
|
| |
|
The Funds declared and paid or will pay distributions to Preferred Shareholders as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
| |
|
Preferred Shares(a) |
|
|
|
|
|
| Fund Name |
|
Shares |
|
|
Series |
|
|
Declared |
|
| |
|
|
|
|
|
| MUJ |
|
|
VRDP |
|
|
|
W-7 |
|
|
$ |
904,250 |
|
| MIY |
|
|
VRDP |
|
|
|
W-7 |
|
|
|
512,594 |
|
| MYN |
|
|
VRDP |
|
|
|
W-7 |
|
|
|
547,519 |
|
| MPA |
|
|
VRDP |
|
|
|
W-7 |
|
|
|
182,580 |
|
| MYI |
|
|
VRDP |
|
|
|
W-7 |
|
|
|
787,790 |
|
| BNY |
|
|
VRDP |
|
|
|
W-7 |
|
|
|
388,929 |
|
| |
|
| |
(a) |
Dividends declared for period August 1, 2022 to August 31, 2022. |
|
|
|
|
| 92 |
|
2 0 2 2 B L A C
K R O C K A N N U A L R E P O
R T T O S H A R E H O L D E
R S |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees/Directors of BlackRock MuniHoldings New
Jersey Quality Fund, Inc., BlackRock MuniYield Michigan Quality Fund, Inc., BlackRock MuniYield New York Quality Fund, Inc., BlackRock MuniYield Pennsylvania Quality Fund, BlackRock MuniYield Quality Fund III, Inc., and BlackRock New York Municipal
Income Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of BlackRock MuniHoldings New Jersey Quality Fund, Inc., BlackRock MuniYield
Michigan Quality Fund, Inc., BlackRock MuniYield New York Quality Fund, Inc., BlackRock MuniYield Pennsylvania Quality Fund, BlackRock MuniYield Quality Fund III, Inc., and BlackRock New York Municipal Income Trust (the “Funds”), including
the schedules of investments, as of July 31, 2022, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights
for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of July 31, 2022, and
the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on
the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement
of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial
highlights. Our procedures included confirmation of securities owned as of July 31, 2022, by correspondence with custodians or counterparties; when replies were not received, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Boston, Massachusetts
September 23, 2022
We have served as the auditor of one or more BlackRock investment companies since 1992.
|
|
|
| R E P O R T O
F I N D E P E N D E N T R E G
I S T E R E D P U B L I C A C
C O U N T I N G F I R M |
|
93 |
Important Tax Information
(unaudited)
The following amounts, or maximum amounts allowable by law, are hereby designated as tax-exempt interest dividends
for the fiscal year ended July 31, 2022:
|
|
|
|
|
| |
|
| Fund Name |
|
Exempt-Interest
Dividends |
|
|
|
| MYJ |
|
$ |
12,625,986 |
(a) |
| |
(a) |
For the fiscal period ended April 8, 2022. |
|
The Fund hereby designates the following amount, or maximum amount allowable by law, as interest income eligible
to be treated as a Section 163(j) interest dividend for the fiscal year ended July 31, 2022:
|
|
|
|
|
| |
|
| Fund Name |
|
Interest
Dividends |
|
|
|
| MYJ |
|
$ |
85 |
(a) |
| |
(a) |
For the fiscal period ended April 8, 2022. |
|
The Fund hereby designates the following amount, or maximum amount allowable by law, as interest-related dividends
eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations for the fiscal year ended July 31, 2022:
|
|
|
|
|
| |
|
| Fund Name |
|
Interest
Related
Dividends |
|
|
|
| MYJ |
|
$ |
85 |
(a) |
| |
(a) |
For the fiscal period ended April 8, 2022. |
|
|
|
|
| 94 |
|
2 0 2 2 B L A C
K R O C K A N N U A L R E P O
R T T O S H A R E H O L D E
R S |
Disclosure of Investment
Advisory Agreement
The Boards of Directors/Trustees, as applicable
(collectively, the “Board,” the members of which are referred to as “Board Members”) of BlackRock MuniHoldings New Jersey Quality Fund, Inc. (“MUJ”), BlackRock MuniYield Michigan Quality Fund, Inc. (“MIY”),
BlackRock MuniYield New York Quality Fund, Inc. (“MYN”), BlackRock MuniYield Pennsylvania Quality Fund (“MPA”), BlackRock MuniYield Quality Fund III, Inc. (“MYI”) and BlackRock New York Municipal Income Trust
(“BNY”) (collectively, the “Funds” and each, a “Fund”) met on April 14, 2022 (the “April Meeting”) and May 19-20, 2022 (the “May Meeting”) to consider the
approval to continue the investment advisory agreements (the “Advisory Agreements”) or (the “Agreements”) between each Fund and BlackRock Advisors, LLC (the “Manager” or “BlackRock”), each Fund’s
investment advisor.
The Approval Process
Consistent with
the requirements of the Investment Company Act of 1940 (the “1940 Act”), the Board considers the approval of the continuation of the Agreements for each Fund on an annual basis. The Board members who are not “interested persons”
of each Fund, as defined in the 1940 Act, are considered independent Board members (the “Independent Board Members”). The Board’s consideration entailed a year-long deliberative process during which the Board and its committees
assessed BlackRock’s various services to each Fund, including through the review of written materials and oral presentations, and the review of additional information provided in response to requests from the Independent Board Members. The
Board had four quarterly meetings per year, each typically extending for two days, as well as additional ad hoc meetings and executive sessions throughout the year, as needed. The committees of the Board similarly met throughout the year. The Board
also had an additional one-day meeting to consider specific information surrounding the renewal of the Agreements. In particular, the Board assessed, among other things, the nature, extent and quality of the
services provided to each Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management services; accounting oversight; administrative and shareholder services; oversight of each Fund’s service
providers; risk management and oversight; and legal, regulatory and compliance services. Throughout the year, including during the contract renewal process, the Independent Board Members were advised by independent legal counsel, and met with
independent legal counsel in various executive sessions outside of the presence of BlackRock’s management.
During the year, the Board, acting
directly and through its committees, considered information that was relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to each Fund and its shareholders. BlackRock also
furnished additional information to the Board in response to specific questions from the Board. Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year,
and/or since inception periods, as applicable, against peer funds, relevant benchmarks, and other performance metrics, as applicable, as well as BlackRock senior management’s and portfolio managers’ analyses of the reasons for any
outperformance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) leverage management, as applicable; (c) fees, including advisory, administration, if applicable, and other amounts paid
to BlackRock and its affiliates by each Fund for services; (d) Fund operating expenses and how BlackRock allocates expenses to each Fund; (e) the resources devoted to risk oversight of, and compliance reports relating to, implementation of
each Fund’s investment objective, policies and restrictions, and meeting regulatory requirements; (f) BlackRock’s and each Fund’s adherence to applicable compliance policies and procedures; (g) the nature, character and
scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of such services, as available; (h) BlackRock’s and other service providers’ internal
controls and risk and compliance oversight mechanisms; (i) BlackRock’s implementation of the proxy voting policies approved by the Board; (j) execution quality of portfolio transactions; (k) BlackRock’s implementation of
each Fund’s valuation and liquidity procedures; (l) an analysis of management fees paid to BlackRock 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 each Fund; (m) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment
professionals’ investments in the fund(s) they manage; (n) periodic updates on BlackRock’s business; and (o) each Fund’s market discount/premium compared to peer funds.
Prior to and in preparation for the April Meeting, the Board received and reviewed materials specifically relating to the renewal of the Agreements. The
Independent Board Members are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to the Board to better assist its deliberations. The materials provided in
connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), based on Lipper classifications, regarding each Fund’s
fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of each Fund as compared with a peer group of funds (“Performance Peers”); (b) information on
the composition of the Expense Peers and Performance Peers and a description of Broadridge’s methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Agreements and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as
institutional accounts, sub-advised mutual funds, closed-end funds, and open-end funds, under similar investment mandates, as
applicable; (e) a review of non-management fees; (f) the existence, impact and sharing of potential economies of scale, if any, with each Fund; (g) a summary of aggregate amounts paid by each
Fund to BlackRock; and (h) various additional information requested by the Board as appropriate regarding BlackRock’s and each Fund’s operations.
At the April Meeting, the Board reviewed materials relating to its consideration of the Agreements and the Independent Board Members presented BlackRock
with questions and requests for additional information. BlackRock responded to these questions and requests with additional written information in advance of the May Meeting.
At the May Meeting, the Board concluded its assessment of, among other things: (a) the nature, extent and quality of the services provided by
BlackRock; (b) the investment performance of each Fund as compared to its Performance Peers and to other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and
its affiliates from their relationship with each Fund; (d) each Fund’s fees and expenses compared to its Expense Peers; (e) the existence and sharing of potential economies of scale; (f) any
fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with each Fund; and (g) other factors deemed relevant by the Board Members.
The 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, and BlackRock’s services related to the valuation and pricing of Fund portfolio holdings. The Board noted the willingness of BlackRock’s personnel to engage in open, candid discussions with the
Board. The Board Members evaluated the information available to it on a fund-by-fund basis. The following paragraphs provide more information about some of the primary
factors that were relevant to the Board’s decision. The Board Members did not identify any particular information, or any single factor as determinative, and each Board Member may have attributed different weights to the various items and
factors considered.
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Disclosure of Investment Advisory Agreement (continued)
A. Nature, Extent and
Quality of the Services Provided by BlackRock
The 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 each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of closed-end funds, relevant benchmarks, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment
officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing each Fund’s performance, investment strategies and outlook.
The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and each
Fund’s portfolio management team; 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. The Board also considered BlackRock’s overall risk management program, including the continued efforts
of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s
portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.
In addition to
investment advisory services, the Board considered the nature and quality of the administrative and other non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund
with certain administrative, shareholder and other services (in addition to any such services provided to each Fund by third parties) and officers and other personnel as are necessary for the operations of each Fund. In particular, BlackRock and its
affiliates provide each Fund with administrative services including, among others: (i) responsibility for disclosure documents and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market
trading of each Fund; (iii) oversight of daily accounting and pricing; (iv) responsibility for periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of third-party service providers
including, among others, each Fund’s custodian, fund accountant, transfer agent, and auditor; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support;
(viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and
(ix) performing or managing administrative functions necessary for the operation of each Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, and shareholder call center and other services. The Board
reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and
regulations. The Board considered the operation of BlackRock’s business continuity plans, including in light of the ongoing COVID-19 pandemic.
B. The Investment Performance of each Fund and BlackRock
The Board, including the Independent Board Members, reviewed and considered the performance history of each Fund throughout the year and at the April
Meeting. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included an analysis of each Fund’s performance as of December 31, 2021, as compared to its Performance Peers.
The performance information is based on net asset value (NAV), and utilizes Lipper data. Lipper’s methodology calculates a fund’s total return assuming distributions are reinvested on the ex-date at
a fund’s ex-date NAV. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its
review, the Board received and reviewed information regarding the investment performance of each Fund as compared to its Performance Peers and certain performance metrics (“Performance Metrics”). The Board and its Performance Oversight
Committee regularly review and meet with Fund management to discuss the performance of each Fund throughout the year.
In evaluating performance, the
Board focused particular attention on funds with less favorable performance records. The Board also noted that while it found the data provided by Broadridge generally useful, it recognized the limitations of such data, including in particular, that
notable differences may exist between a fund and its Performance Peers (for example, the investment objectives and strategies). Further, the 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. The Board also acknowledged that long-term performance could be impacted by even one period of significant outperformance or underperformance, and that a single
investment theme could have the ability to disproportionately affect long-term performance.
The Board reviewed and considered MUJ’s performance
relative to MUJ’s Performance Metrics. Based on an overall rating relative to the Performance Metrics, MUJ generally performed in line with expectations. The Board noted that BlackRock believes that the Performance Metrics are an appropriate
performance comparison for MUJ, and that BlackRock has explained its rationale for this belief to the Board.
The Board reviewed and considered
MIY’s performance relative to MIY’s Performance Metrics. Based on an overall rating relative to the Performance Metrics, MIY generally performed in line with expectations. The Board noted that BlackRock believes that the Performance
Metrics are an appropriate performance comparison for MIY, and that BlackRock has explained its rationale for this belief to the Board.
The Board
reviewed and considered MYN’s performance relative to MYN’s Performance Metrics. Based on an overall rating relative to the Performance Metrics, MYN generally performed in line with expectations. The Board noted that BlackRock believes
that the Performance Metrics are an appropriate performance comparison for MYN, and that BlackRock has explained its rationale for this belief to the Board.
The Board reviewed and considered MPA’s performance relative to MPA’s Performance Metrics. Based on an overall rating relative to the
Performance Metrics, MPA generally performed in line with expectations. The Board noted that BlackRock believes that the Performance Metrics are an appropriate performance comparison for MPA, and that BlackRock has explained its rationale for this
belief to the Board.
The Board reviewed and considered MYI’s performance relative to MYI’s Performance Metrics. Based on an overall rating
relative to the Performance Metrics, MYI generally performed in line with expectations. The Board noted that BlackRock believes that the Performance Metrics are an appropriate performance comparison for MYI, and that BlackRock has explained its
rationale for this belief to the Board.
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Disclosure of Investment Advisory Agreement (continued)
The Board reviewed and
considered BNY’s performance relative to BNY’s Performance Metrics. Based on an overall rating relative to the Performance Metrics, BNY generally performed in line with expectations. The Board noted that BlackRock believes that the
Performance Metrics are an appropriate performance comparison for BNY, and that BlackRock has explained its rationale for this belief to the Board.
C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its
Affiliates from their Relationship with each Fund
The Board, including the Independent Board Members, reviewed each Fund’s contractual
management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also
compared each Fund’s total expense ratio, as well as its actual management fee rate as a percentage of managed assets, which is the total assets of each Fund (including any assets attributable to money borrowed for investment purposes) minus
the sum of each Fund’s accrued liabilities (other than money borrowed for investment purposes) to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related
expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers, and the actual management fee rate gives effect to any management fee reimbursements or waivers. The 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).
The Board received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed
BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed
BlackRock’s estimated profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2021 compared to available aggregate estimated profitability data provided for the prior two years.
The Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the
estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The 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. The Board thus recognized that calculating and comparing profitability at the individual fund level is difficult.
The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed
BlackRock’s overall operating margin, in general, compared to that of certain other publicly traded asset management firms. The 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.
The Board considered whether BlackRock has the financial resources
necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors
including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing each Fund, including 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 noted that MUJ’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 noted that
MIY’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 noted that MYN’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 noted that MPA’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 noted that MYI’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.
The Board noted that BNY’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense
ratio each ranked in the first quartile, relative to the Expense Peers.
D. Economies of Scale
The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund
increase. The Board also considered the extent to which each Fund benefits from such economies of scale in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable each Fund to more
fully participate in these economies of scale. The Board considered each Fund’s asset levels and whether the current fee was appropriate.
Based
on the Board’s review and consideration of the issue, the 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. Closed-end funds are typically priced at scale at a fund’s inception.
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Disclosure of Investment Advisory Agreement (continued)
E. Other Factors
Deemed Relevant by the Board Members
The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from BlackRock’s respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its
investment professionals who manage other portfolios and its 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 each
Fund, including for administrative, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also
noted that, subject to applicable law, BlackRock may use and benefit from third-party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.
In connection with its consideration of the Agreements, the Board also received information regarding BlackRock’s brokerage and soft dollar
practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.
The Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell
their Fund shares in the secondary market if they believe that each Fund’s fees and expenses are too high or if they are dissatisfied with the performance of each Fund.
The Board also considered the various notable initiatives and projects BlackRock performed in connection with its
closed-end fund product line. These initiatives included 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 communication efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the
Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication
program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: sponsoring and participating in conferences;
communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and
maintaining and enhancing its closed-end fund website.
Conclusion
At the May Meeting, as a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative
process, the Board, including the Independent Board Members, approved, by unanimous vote of those present, the continuation of the Advisory Agreements between the Manager and each Fund for a one-year term
ending June 30, 2023. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair
and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreements, the 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.
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Investment Objectives, Policies and Risks
Recent Changes
The following information is a summary of certain changes since July 31, 2021. This information may not reflect all of the changes that have
occurred since you purchased the relevant Fund.
During each Fund’s most recent fiscal year, there were no material changes in the
Fund’s investment objectives or policies that have not been approved by shareholders or in the principal risk factors associated with investment in the Fund.
Investment Objectives and Policies
BlackRock MuniHoldings New Jersey
Quality Fund, Inc. (MUJ)
The Fund’s investment objective is to provide shareholders with current income exempt from federal income tax and
New Jersey personal income taxes. The investment objective of the Fund is a fundamental policy that may not be changed without a vote of a majority of the Fund’s outstanding voting securities.
The Fund seeks to achieve its investment objective by investing primarily in a portfolio of municipal obligations, the interest on which, in the opinion
of bond counsel to the issuer, is exempt from federal income tax and New Jersey personal income taxes (“New Jersey Municipal Bonds”). The Fund invests substantially all (at least 80%) of its assets in New Jersey Municipal Bonds, except at
times when BlackRock Advisors, LLC (the “Manager”) considers that New Jersey Municipal Bonds of sufficient quantity and quality are unavailable at suitable prices. To the extent that the Manager considers that suitable New Jersey Municipal
Bonds are not available for investment, the Fund may purchase municipal obligations exempt from federal income taxes but not New Jersey personal income taxes (“Municipal Bonds”). The Fund may invest directly in such securities or
synthetically through the use of derivatives. The Fund will maintain at least 80% of its assets in New Jersey Municipal Bonds, except during interim periods pending investment of the net proceeds of public offerings of its securities and during
temporary defensive periods. Under normal circumstances, at least 80% of the Fund’s assets will be invested in municipal obligations with remaining maturities of one year or more. There can be no assurance that the Fund’s investment
objective will be realized.
Ordinarily, the Fund does not intend to realize significant investment income subject to federal income tax and New
Jersey personal income taxes. The Fund may invest all or a portion of its assets in certain tax-exempt securities classified as “private activity bonds” (in general, bonds that benefit non-governmental entities) that may subject certain investors in the Fund to a federal alternative minimum tax.
The
Fund may also invest in securities not issued by or on behalf of a state or territory or by an agency or instrumentality thereof, if the Fund nevertheless believes such securities pay interest or distributions that are exempt from federal income
taxation (“Non-Municipal Tax-Exempt Securities”). Non-Municipal Tax-Exempt
Securities may include securities issued by other investment companies that invest in New Jersey Municipal Bonds and Municipal Bonds, to the extent such investments are permitted by the Investment Company Act of 1940, as amended (the “1940
Act”). Other Non-Municipal Tax-Exempt Securities could include trust certificates or other instruments evidencing interests in one or more long-term New Jersey
Municipal Bonds or Municipal Bonds. Certain Non-Municipal Tax-Exempt Securities may be characterized as derivative instruments. For purposes of the Fund’s
investment objective and policies, Non-Municipal Tax-Exempt Securities that pay interest that is exempt from federal income taxes and New Jersey personal income taxes
will be considered “New Jersey Municipal Bonds” and Non-Municipal Tax-Exempt Securities that pay interest that is exempt from federal income taxes will be
considered “Municipal Bonds.”
The Fund invests in investment grade New Jersey Municipal Bonds and Municipal Bonds that are rated at the
date of purchase in the four highest rating categories of Moody’s Investors Service, Inc. (“Moody’s”) (currently Aaa, Aa, A and Baa), S&P Global Ratings (“S&P”) (currently AAA, AA, A and BBB) or Fitch Ratings,
Inc. (“Fitch”) (currently AAA, AA, A and BBB) or, if unrated, are considered to be of comparable quality by the Manager. In the case of long-term debt, the investment grade rating categories are AAA through BBB for S&P and Fitch and
Aaa through Baa for Moody’s. In the case of short-term notes, the investment grade rating categories are SP-1+ through SP-2 for S&P, MIG 1 through MIG 3
for Moody’s and F-1+ through F-3 for Fitch. In the case of tax-exempt commercial paper, the investment grade rating
categories are A-1+ through A-3 for S&P, P-1 through P-3 for Moody’s and F-1+ through F-3 for Fitch. Obligations ranked in the lowest investment grade rating category (BBB, SP-2 and A-3 for S&P; Baa, MIG 3 and P-3 for Moody’s; and BBB and F-3 for Fitch), while considered “investment grade,” may
have certain speculative characteristics. There may be sub-categories or gradations indicating relative standing within the rating categories set forth above. In assessing the quality of New Jersey Municipal
Bonds and Municipal Bonds with respect to the foregoing requirements, the Manager takes into account the portfolio insurance as well as the nature of any letters of credit or similar credit enhancement to which particular New Jersey Municipal Bonds
and Municipal Bonds are entitled and the creditworthiness of the insurance company or financial institution that provided such insurance or credit enhancements. Insurance is expected to protect the Fund against losses caused by a bond issuer’s
failure to make interest or principal payments. However, insurance does not protect the Fund or its shareholders against losses caused by declines in a bond’s market value. Also, the Fund cannot be certain that any insurance company does not
make these payments. If a bond’s insurer fails to fulfill its obligations or loses its credit rating, the value of the bond could drop.
The Fund
may invest up to 20% of its managed assets in securities that are rated below investment grade, which are securities rated Ba or below by Moody’s, BB or below by S&P or Fitch or are considered by the Manager to be of comparable quality, at
the time of purchase, subject to the Fund’s other investment policies. Below investment grade quality is regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Such securities
commonly are referred to as “high yield” or “junk” bonds.
The Fund may invest in variable rate demand obligations
(“VRDOs”) and VRDOs in the form of participation interests (“Participating VRDOs”) in variable rate tax-exempt obligations held by a financial institution, typically a commercial bank. The
VRDOs in which the Fund may invest are tax-exempt obligations, in the opinion of counsel to the issuer, that contain a floating or variable interest rate adjustment formula and a right of demand on the part of
the holder thereof to receive payment of the unpaid principal balance plus accrued interest on a short notice period not to exceed seven days. There is, however, the possibility that because of default or insolvency the demand feature of VRDOs may
not be honored. The interest rates are adjustable at intervals (ranging from daily to up to one year) to some prevailing market rate for similar investments, such adjustment formula being calculated to maintain the market value of the VRDOs, at
approximately the par value of the VRDOs on the adjustment date. The adjustments typically are based upon SIFMA or some other appropriate interest rate adjustment index. VRDOs that contain an unconditional right of demand to receive payment of the
unpaid principal balance plus accrued interest on a notice period exceeding seven days may be deemed to be illiquid securities. Participating VRDOs provide the Fund with a
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specified undivided interest
(up to 100%) in the underlying obligation and the right to demand payment of the unpaid principal balance plus accrued interest on the Participating VRDOs from the financial institution on a specified number of days’ notice, not to exceed seven
days.
The average maturity of the Fund’s portfolio securities varies based upon the Manager’s assessment of economic and market conditions.
The net asset value of the shares of common stock of a closed-end investment company such as the Fund, which invests primarily in fixed-income securities, changes as the general levels of interest rates
fluctuate. When interest rates decline, the value of a fixed income portfolio can be expected to rise. Conversely, when interest rates rise, the value of a fixed income portfolio can be expected to decline. Prices of longer-term securities generally
fluctuate more in response to interest rate changes than do short-term or medium-term securities. These changes in net asset value are likely to be greater in the case of a fund having a leveraged capital structure, such as that used by the Fund.
The Fund invests primarily in long-term New Jersey Municipal Bonds and Municipal Bonds with a maturity of more than ten years. However, the Fund may
also invest in intermediate-term New Jersey Municipal Bonds and Municipal Bonds with a maturity of between three years and ten years. The Fund may also invest in short-term tax-exempt securities, short-term
U.S. Government securities, repurchase agreements or cash. Investments in such short-term securities or cash will not exceed 20% of the Fund’s total assets, except during interim periods pending investment of the net proceeds from public
offerings of the Fund’s securities or in anticipation of the repurchase or redemption of the Fund’s securities and temporary periods when, in the opinion of the Manager, prevailing market or economic conditions warrant. The Fund does not
ordinarily intend to realize significant interest income that is subject to federal income tax and New Jersey personal income taxes.
Leverage:
The Fund may utilize leverage to seek to enhance the yield and net asset value of its common shares. However, this objective cannot be achieved in all interest rate environments. The Fund currently leverages its assets through the use of
variable rate demand preferred shares (“VRDP Shares”) and residual interest municipal tender option bonds (“TOB Residuals”), which are derivative interests in municipal bonds. The TOB Residuals in which the Fund will invest pay
interest or income that, in the opinion of counsel to the issuer of such TOB Residuals, is exempt from regular U.S. federal income tax.
The Fund may
enter into reverse repurchase agreements with respect to its portfolio investments subject to the Fund’s investment restrictions.
The Fund is
authorized to borrow money in amounts of up to 5% of the value of its total assets at the time of such borrowings; provided, however, that the Fund is authorized to borrow moneys in amounts of up to 33 1/3% of the value of its total assets at the
time of such borrowings to finance the repurchase of its own common shares pursuant to tender offers or otherwise to redeem or repurchase preferred shares.
BlackRock MuniYield Michigan Quality Fund (MIY)
The Fund’s
investment objective is to provide shareholders with as high a level of current income exempt from federal and Michigan income taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its
investment objective by investing at least 80% of an aggregate of the Fund’s net assets (including proceeds from the issuance of any preferred stock) and the proceeds of any borrowings for investment purposes, in a portfolio of municipal
obligations issued by or on behalf of the State of Michigan, its political subdivisions, agencies and instrumentalities and by other qualifying issuers, each of which pays interest that, in the opinion of bond counsel to the issuer, is excludable
from gross income for federal income tax purposes (except that the interest may be includable in taxable income for purposes of the federal alternative minimum tax) and exempt from Michigan income taxes (“Michigan Municipal Bonds”). The
Fund also may invest directly in such securities or synthetically through the use of derivatives in municipal obligations issued by or on behalf of states, territories and possessions of the United States and their political subdivisions, agencies
or instrumentalities, each of which pays interest that is excludable from gross income for federal income tax purposes, in the opinion of bond counsel to the issuer, but is not excludable from gross income for Michigan income tax purposes
(“Municipal Bonds”). Unless otherwise noted, the term “Municipal Bonds” also includes Michigan Municipal Bonds. In general, the Fund does not intend for its investments to earn a large amount of interest income that is
(i) includable in gross income for federal income tax purposes or (ii) not exempt from Michigan income taxes. From time to time, the Fund may realize taxable capital gains. The Fund’s investment objective and its policy of investing
at least 80% of an aggregate of the Fund’s net assets (including proceeds from the issuance of any preferred stock) and the proceeds of any borrowings for investment purposes, in Municipal Bonds are fundamental policies that may not be changed
without the approval of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)). There can be no assurance that the Fund’s investment objective will
be realized.
The Fund may invest in certain tax-exempt securities classified as “private activity
bonds” (or industrial development bonds, under pre-1986 law) (“PABs”) (in general, bonds that benefit non-governmental entities) that may subject certain
investors in the Fund to an alternative minimum tax. The percentage of the Fund’s total assets invested in PABs will vary from time to time.
Under normal market conditions, the Fund expects to invest primarily in a portfolio of long-term Municipal Bonds that are commonly referred to as
“investment grade” securities, which are obligations rated at the time of purchase within the four highest-quality ratings as determined by either Moody’s Investors Service, Inc. (“Moody’s”) (currently Aaa, Aa, A and
Baa), S&P Global Ratings (“S&P”) (currently AAA, AA, A and BBB) or Fitch Ratings, Inc. (“Fitch”) (currently AAA, AA, A and BBB) or are considered by BlackRock Advisors, LLC (the “Manager”) to be of comparable
quality. In the case of short-term notes, the investment grade rating categories are SP-1+ through SP-2 for S&P, MIG 1 through MIG 3 for Moody’s and
F1+ through F3 for Fitch. In the case of tax-exempt commercial paper, the investment grade rating categories are A-1+ through
A-3 for S&P, Prime-1 through Prime-3 for Moody’s and F1+ through F3 for Fitch. Obligations ranked in the lowest
investment grade rating category (BBB, SP-2 and A-3 for S&P; Baa, MIG 3 and Prime-3 for Moody’s; and BBB and F3 for
Fitch), while considered “investment grade,” may have certain speculative characteristics. There may be sub-categories or gradations indicating relative standing within the rating categories set
forth above. In assessing the quality of Municipal Bonds with respect to the foregoing requirements, the Manager takes into account the nature of any letters of credit or similar credit enhancement to which particular Municipal Bonds are entitled
and the creditworthiness of the financial institution that provided such credit enhancement. Insurance is expected to protect the Fund against losses caused by a bond issuer’s failure to make interest or principal payments. However, insurance
does not protect the Fund or its shareholders against losses caused by declines in a bond’s market value. If a bond’s insurer fails to fulfill its obligations or loses its credit rating, the value of the bond could drop. If unrated, such
securities will possess creditworthiness comparable, in the opinion of the Manager, to other obligations in which the Fund may invest.
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The Fund may invest up to
20% of its managed assets in securities that are rated below investment grade, which are securities rated Ba or below by Moody’s, BB or below by S&P or Fitch or are considered by the Manager to be of comparable quality, at the time of
purchase, subject to the Fund’s other investment policies. Below investment grade quality is regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Such securities commonly are
referred to as “high yield” or “junk” bonds.
All percentage and ratings limitations on securities in which the Fund may invest
apply at the time of making an investment and shall not be considered violated as a result of subsequent market movements or if an investment rating is subsequently downgraded to a rating that would have precluded the Fund’s initial investment
in such security. In the event that the Fund disposes of a portfolio security subsequent to its being downgraded, the Fund may experience a greater risk of loss than if such security had been sold prior to such downgrade.
The average maturity of the Fund’s portfolio securities varies from time to time based upon an assessment of economic and market conditions by the
Manager. The Fund’s portfolio at any given time may include both long-term and intermediate-term municipal bonds.
The net asset value of the
shares of common stock of a closed-end investment company, such as the Fund, which invests primarily in fixed income securities, changes as the general levels of interest rates fluctuate. When interest rates
decline, the value of a fixed income portfolio can be expected to rise. Conversely, when interest rates rise, the value of a fixed income portfolio can be expected to decline. Prices of longer term securities generally fluctuate more in response to
interest rate changes than do shorter term securities. These changes in net asset value are likely to be greater in the case of a fund having a leveraged capital structure, such as the Fund.
For temporary periods or to provide liquidity, the Fund has the authority to invest as much as 20% of its total assets in
tax-exempt and taxable money market obligations with a maturity of one year or less (such short-term obligations being referred to herein as “Temporary Investments”). In addition, the Fund reserves
the right as a defensive measure to invest temporarily a greater portion of its assets in Temporary Investments, when, in the opinion of the Manager, prevailing market or financial conditions warrant. Taxable money market obligations will yield
taxable income. The Fund also may invest in variable rate demand obligations (“VRDOs”) and VRDOs in the form of participation interests (“Participating VRDOs”) in variable rate tax-exempt
obligations held by a financial institution. The Fund’s hedging strategies are not fundamental policies and may be modified by the Board of Directors of the Fund without the approval of the Fund’s stockholders. The Fund is also authorized
to invest in indexed and inverse floating rate obligations for hedging purposes and to seek to enhance return.
The Fund may invest in securities not
issued by or on behalf of a state or territory or by an agency or instrumentality thereof, if the Fund receives an opinion of counsel to the issuer that such securities pay interest that is excludable from gross income for federal income tax
purposes and, if applicable, exempt from Michigan income taxes (“Non-Municipal Tax-Exempt Securities”). Non-Municipal Tax-Exempt Securities could include trust certificates, partnership interests or other instruments evidencing interest in one or more long-term Municipal Bonds. Non-Municipal Tax-Exempt Securities also may include securities issued by other investment companies that invest in Municipal Bonds, to the extent such investments are permitted by the Fund’s investment restrictions and
applicable law. Non-Municipal Tax-Exempt Securities are subject to the same risks associated with an investment in Municipal Bonds as well as many of the risks
associated with investments in derivatives. If the Internal Revenue Service were to issue any adverse ruling or take an adverse position with respect to the taxation on these types of securities, there is a risk that the interest paid on such
securities would be deemed taxable at the federal level.
The Fund ordinarily does not intend to realize significant investment income not exempt from
federal income tax. From time to time, the Fund may realize taxable capital gains.
Federal tax legislation may limit the types and volume of bonds
the interest on which qualifies for a federal income tax-exemption. As a result, current legislation and legislation that may be enacted in the future may affect the availability of Municipal Bonds for
investment by the Fund.
Leverage: The Fund may utilize leverage to seek to enhance the yield and net asset value of its common shares.
However, this objective cannot be achieved in all interest rate environments. The Fund currently leverages its assets through the use of variable rate demand preferred shares (“VRDP Shares”) and residual interest municipal tender option
bonds (“TOB Residuals”), which are derivative interests in municipal bonds. The TOB Residuals in which the Fund will invest pay interest or income that, in the opinion of counsel to the issuer of such TOB Residuals, is exempt from regular
U.S. federal income tax.
The Fund may enter into reverse repurchase agreements with respect to its portfolio investments subject to the Fund’s
investment restrictions. The Fund may enter into “dollar roll” transactions.
The Fund may leverage its portfolio by entering into one or
more credit facilities.
The Fund may enter into derivative transactions that have economic leverage embedded in them.
The Fund may also borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of
securities transactions which otherwise might require untimely dispositions of Fund securities. Certain short-term borrowings (such as for cash management purposes) are not subject to the 1940 Act’s limitations on leverage if (i) repaid
within 60 days, and (ii) not in excess of 5% of the Fund’s total assets.
BlackRock MuniYield New York Quality Fund, Inc. (MYN)
The
Fund’s investment objective is to provide stockholders with as high a level of current income exempt from federal income taxes and New York State and New York City personal income taxes as is consistent with its investment policies and prudent
investment management. The Fund seeks to achieve its investment objective by investing, as a fundamental policy, at least 80% of an aggregate of the Fund’s net assets (including proceeds from the issuance of any preferred stock) and the
proceeds of any borrowings for investment purposes, in a portfolio of municipal obligations issued by or on behalf of the State of New York, its political subdivisions, agencies and instrumentalities and by other qualifying instrumentalities, each
of which pays interest that, in the opinion of bond counsel to the issuer, is excludable from gross income for federal income tax purposes (except that the interest may be includable in taxable income for purposes of the federal alternative minimum
tax) and exempt from New York State and New York City personal income taxes (“New York Municipal Bonds”). The Fund also may invest in municipal obligations issued by or on behalf of states, territories and possessions of the United States
and their political subdivisions, agencies or instrumentalities, which pay interest that is excludable from gross income for federal income tax purposes, in the opinion of bond
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counsel to the issuer, but
is not exempt from New York State and New York City personal income taxes (“Municipal Bonds”). Unless otherwise noted, the term “Municipal Bonds” also includes New York Municipal Bonds. The Fund may invest directly in such
securities or synthetically through the use of derivatives. In general, the Fund does not intend for its investments to earn a large amount of interest income that is (i) includable in gross income for federal income tax purposes or
(ii) not exempt from New York State and New York City personal income taxes. The Fund’s investment objective and its policy of investing at least 80% of an aggregate of the Fund’s net assets (including proceeds from the issuance of
any preferred stock) and the proceeds of any borrowings for investment purposes, in New York Municipal Bonds are fundamental policies that may not be changed without the approval of a majority of the outstanding voting securities of the Fund (as
defined in the Investment Company Act of 1940, as amended (the “1940 Act”)). There can be no assurance that the Fund’s investment objective will be realized.
The Fund may invest in certain tax-exempt securities classified as “private activity bonds” (or
industrial development bonds, under pre-1986 law) (“PABs”) (in general, bonds that benefit non-governmental entities) that may subject certain investors in the
Fund to an alternative minimum tax. The percentage of the Fund’s total assets invested in PABs will vary from time to time.
Under normal market
conditions, the Fund expects to invest primarily in a portfolio of long-term Municipal Bonds that are commonly referred to as “investment grade” securities, which are obligations rated at the time of purchase within the four
highest-quality ratings as determined by either Moody’s Investors Service, Inc. (“Moody’s”) (currently Aaa, Aa, A and Baa), S&P Global Ratings (“S&P”) (currently AAA, AA, A and BBB) or Fitch Ratings, Inc.
(“Fitch”) (currently AAA, AA, A and BBB) or are considered by BlackRock Advisors, LLC (the “Manager”) to be of comparable quality. In the case of short-term notes, the investment grade rating categories are SP-1+ through SP-2 for S&P, MIG 1 through MIG 3 for Moody’s and F1+ through F3 for Fitch. In the case of tax-exempt
commercial paper, the investment grade rating categories are A-1+ through A-3 for S&P, Prime-1 through Prime-3 for Moody’s and F1+ through F3 for Fitch. Obligations ranked in the lowest investment grade rating category (BBB, SP-2 and
A-3 for S&P; Baa, MIG 3 and Prime-3 for Moody’s; and BBB and F3 for Fitch), while considered “investment grade,” may have certain speculative
characteristics. There may be sub-categories or gradations indicating relative standing within the rating categories set forth above. In assessing the quality of Municipal Bonds with respect to the foregoing
requirements, the Manager takes into account the nature of any letters of credit or similar credit enhancement to which particular Municipal Bonds are entitled and the creditworthiness of the financial institution that provided such credit
enhancement. Insurance is expected to protect the Fund against losses caused by a bond issuer’s failure to make interest or principal payments. However, insurance does not protect the Fund or its stockholders against losses caused by declines
in a bond’s market value. If a bond’s insurer fails to fulfill its obligations or loses its credit rating, the value of the bond could drop. If unrated, such securities will possess creditworthiness comparable, in the opinion of the
Manager, to other obligations in which the Fund may invest.
The Fund may invest up to 20% of its managed assets in securities that are rated below
investment grade, which are securities rated at the time of purchase Ba or below by Moody’s, BB or below by S&P or Fitch, or securities determined by the Manager to be of comparable quality. Below investment grade quality is regarded as
predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Such securities commonly are referred to as “high yield” or “junk” bonds.
All percentage and ratings limitations on securities in which the Fund may invest apply at the time of making an investment and shall not be considered
violated as a result of subsequent market movements or if an investment rating is subsequently downgraded to a rating that would have precluded the Fund’s initial investment in such security. In the event that the Fund disposes of a portfolio
security subsequent to its being downgraded, the Fund may experience a greater risk of loss than if such security had been sold prior to such downgrade.
The average maturity of the Fund’s portfolio securities varies from time to time based upon an assessment of economic and market conditions by the
Manager. The Fund’s portfolio at any given time may include both long-term and intermediate-term municipal bonds.
The net asset value of the
shares of common stock of a closed-end investment company, such as the Fund, which invests primarily in fixed income securities, changes as the general levels of interest rates fluctuate. When interest rates
decline, the value of a fixed income portfolio can be expected to rise. Conversely, when interest rates rise, the value of a fixed income portfolio can be expected to decline. Prices of longer term securities generally fluctuate more in response to
interest rate changes than do shorter term securities. These changes in net asset value are likely to be greater in the case of a fund having a leveraged capital structure, such as the Fund.
For temporary periods or to provide liquidity, the Fund has the authority to invest as much as 20% of its total assets in
tax-exempt and taxable money market obligations with a maturity of one year or less (such short-term obligations being referred to herein as “Temporary Investments”). In addition, the Fund reserves
the right as a defensive measure to invest temporarily a greater portion of its assets in Temporary Investments, when, in the opinion of the Manager, prevailing market or financial conditions warrant. Taxable money market obligations will yield
taxable income. The Fund also may invest in variable rate demand obligations (“VRDOs”) and VRDOs in the form of participation interests (“Participating VRDOs”) in variable rate tax-exempt
obligations held by a financial institution. The Fund’s hedging strategies are not fundamental policies and may be modified by the Board of Directors of the Fund without the approval of the Fund’s stockholders. The Fund is also authorized
to invest in indexed and inverse floating rate obligations for hedging purposes and to seek to enhance return.
The Fund may invest in securities not
issued by or on behalf of a state or territory or by an agency or instrumentality thereof, if the Fund receives an opinion of counsel to the issuer that such securities pay interest that is excludable from gross income for federal income tax
purposes and, if applicable, exempt from New York State and New York City personal income taxes (“Non-Municipal Tax-Exempt Securities”). Non-Municipal Tax-Exempt Securities could include trust certificates, partnership interests or other instruments evidencing interest in one or more long-term Municipal Bonds. Non-Municipal Tax-Exempt Securities also may include securities issued by other investment companies that invest in Municipal Bonds, to the extent such investments are
permitted by the Fund’s investment restrictions and applicable law. Non-Municipal Tax-Exempt Securities are subject to the same risks associated with an investment
in Municipal Bonds as well as many of the risks associated with investments in derivatives. If the Internal Revenue Service were to issue any adverse ruling or take an adverse position with respect to the taxation on these types of securities, there
is a risk that the interest paid on such securities would be deemed taxable at the federal level.
The Fund ordinarily does not intend to realize
significant investment income not exempt from federal income tax. From time to time, the Fund may realize taxable capital gains.
Federal tax
legislation may limit the types and volume of bonds the interest on which qualifies for a federal income tax-exemption. As a result, current legislation and legislation that may be enacted in the future may
affect the availability of Municipal Bonds for investment by the Fund.
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Investment Objectives, Policies and Risks (continued)
Leverage: The Fund
may utilize leverage to seek to enhance the yield and net asset value of its common shares. However, this objective cannot be achieved in all interest rate environments. The Fund currently leverages its assets through the use of variable rate demand
preferred shares (“VRDP Shares”) and residual interest municipal tender option bonds (“TOB Residuals”), which are derivative interests in municipal bonds. The TOB Residuals in which the Fund will invest pay interest or income
that, in the opinion of counsel to the issuer of such TOB Residuals, is exempt from regular U.S. federal income tax.
The Fund may enter into reverse
repurchase agreements with respect to its portfolio investments subject to the Fund’s investment restrictions. The Fund may enter into “dollar roll” transactions.
The Fund may enter into derivative transactions that have economic leverage embedded in them.
The Fund may leverage its portfolio by entering into one or more credit facilities.
The Fund may also borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of
securities transactions which otherwise might require untimely dispositions of Fund securities. Certain short-term borrowings (such as for cash management purposes) are not subject to the 1940 Act’s limitations on leverage if (i) repaid
within 60 days, and (ii) not in excess of 5% of the Fund’s total assets.
BlackRock MuniYield Pennsylvania Quality Fund (MPA)
The Fund’s investment objective is to provide shareholders with as high a level of current income exempt from U.S. federal and Pennsylvania income
taxes as is consistent with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing, as a fundamental policy, at least 80% of an aggregate of the Fund’s net assets (including
proceeds from the issuance of any preferred shares) and the proceeds of any borrowings for investment purposes, in a portfolio of municipal obligations issued by or on behalf of the State of Pennsylvania, its political subdivisions, agencies and
instrumentalities and by other qualifying issuers, each of which pays interest that, in the opinion of bond counsel to the issuer, is excludable from gross income for federal income tax purposes (except that the interest may be includable in taxable
income for purposes of the federal alternative minimum tax) and exempt from Pennsylvania income taxes (“Pennsylvania Municipal Bonds”). The Fund also may invest in municipal obligations issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions, agencies or instrumentalities, each of which pays interest that is excludable from gross income for federal income tax purposes, in the opinion of bond counsel to the issuer, but is
not excludable from gross income for Pennsylvania income tax purposes (“Municipal Bonds”). Unless otherwise noted, the term “Municipal Bonds” also includes Pennsylvania Municipal Bonds. The Fund may invest directly in such
securities or synthetically through the use of derivatives. In general, the Fund does not intend for its investments to earn a large amount of interest income that is (i) includable in gross income for federal income tax purposes or
(ii) not exempt from Pennsylvania income taxes. From time to time, the Fund may realize taxable capital gains.
The Fund’s investment
objective and its policy of investing at least 80% of an aggregate of the Fund’s net assets (including proceeds from the issuance of any preferred shares) and the proceeds of any borrowings for investment purposes, in Pennsylvania Municipal
Bonds are fundamental policies that may not be changed without the approval of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)). There can be no
assurance that the Fund’s investment objective will be realized.
The Fund may invest in certain
tax-exempt securities classified as “private activity bonds” (or industrial development bonds, under pre-1986 law) (“PABs”) (in general, bonds that
benefit non-governmental entities) that may subject certain investors in the Fund to an alternative minimum tax. The percentage of the Fund’s total assets invested in PABs will vary from time to time.
Under normal market conditions, the Fund expects to invest primarily in a portfolio of long-term Municipal Bonds that are commonly referred to as
“investment grade” securities, which are obligations rated at the time of purchase within the four highest-quality ratings as determined by either Moody’s Investors Service, Inc. (“Moody’s”) (currently Aaa, Aa, A and
Baa), S&P (currently AAA, AA, A and BBB) or Fitch Ratings (“Fitch”) (currently AAA, AA, A and BBB). In the case of short-term notes, the investment grade rating categories are SP-1+ through SP-2 for S&P, MIG 1 through MIG 3 for Moody’s and F1+ through F3 for Fitch. In the case of tax-exempt commercial paper, the investment grade rating categories
are A-1+ through A-3 for S&P, Prime-1 through Prime-3 for Moody’s and
F1+ through F3 for Fitch. Obligations ranked in the lowest investment grade rating category (BBB, SP-2 and A-3 for S&P; Baa, MIG 3 and Prime-3 for Moody’s; and BBB and F3 for Fitch), while considered “investment grade,” may have certain speculative characteristics. There may be sub-categories
or gradations indicating relative standing within the rating categories set forth above. In assessing the quality of Municipal Bonds with respect to the foregoing requirements, BlackRock Advisors, LLC (the “Manager”) takes into account the
nature of any letters of credit or similar credit enhancement to which particular Municipal Bonds are entitled and the creditworthiness of the financial institution that provided such credit enhancement. If unrated, such securities will possess
creditworthiness comparable, in the opinion of the Manager, to other obligations in which the Fund may invest. Insurance is expected to protect the Fund against losses caused by a bond issuer’s failure to make interest or principal payments.
However, insurance does not protect the Fund or its shareholders against losses caused by declines in a bond’s market value. If a bond’s insurer fails to fulfill its obligations or loses its credit rating, the value of the bond could drop.
If unrated, such securities will possess creditworthiness comparable, in the opinion of the Manager, to other obligations in which the Fund may invest.
The Fund may invest up to 20% of its managed assets in securities that are rated below investment grade, which are securities rated Ba or below by
Moody’s, BB or below by S&P or Fitch or are considered by the Manager to be of comparable quality, at the time of purchase, subject to the Fund’s other investment policies. Below investment grade quality is regarded as predominantly
speculative with respect to the issuer’s capacity to pay interest and repay principal. Such securities commonly are referred to as “high yield” or “junk” bonds.
All percentage and ratings limitations on securities in which the Fund may invest apply at the time of making an investment and shall not be considered
violated as a result of subsequent market movements or if an investment rating is subsequently downgraded to a rating that would have precluded the Fund’s initial investment in such security. In the event that the Fund disposes of a portfolio
security subsequent to its being downgraded, the Fund may experience a greater risk of loss than if such security had been sold prior to such downgrade.
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Investment Objectives, Policies and Risks (continued)
The average maturity of the
Fund’s portfolio securities varies from time to time based upon an assessment of economic and market conditions by the Manager. The Fund’s portfolio at any given time may include long-term, intermediate-term and short-term Municipal Bonds.
The net asset value of the shares of common stock of a closed-end investment company, such as the Fund, which
invests primarily in fixed income securities, changes as the general levels of interest rates fluctuate. When interest rates decline, the value of a fixed income portfolio can be expected to rise. Conversely, when interest rates rise, the value of a
fixed income portfolio can be expected to decline. Prices of longer term securities generally fluctuate more in. response to interest rate changes than do shorter term securities. These changes in net asset value are likely to be greater in the case
of a fund having a leveraged capital structure, such as the Fund.
For temporary periods or to provide liquidity, the Fund has the authority to invest
as much as 20% of its total assets in tax-exempt and taxable money market obligations with a maturity of one year or less (such short-term obligations being referred to herein as “Temporary
Investments”). In addition, the Fund reserves the right as a defensive measure to invest temporarily a greater portion of its assets in Temporary Investments, when, in the opinion of the Manager, prevailing market or financial conditions
warrant. Taxable money market obligations will yield taxable income. The Fund also may invest in variable rate demand obligations (“VRDOs”) and VRDOs in the form of participation interests (“Participating VRDOs”) in variable rate
tax-exempt obligations held by a financial institution. The Fund’s hedging strategies are not fundamental policies and may be modified by the Board of Trustees of the Fund without the approval of the
Fund’s shareholders. The Fund is also authorized to invest in indexed and inverse floating rate obligations for hedging purposes and to seek to enhance return.
The Fund may invest in securities not issued by or on behalf of a state or territory or by an agency or instrumentality thereof, if the Fund receives an
opinion of counsel to the issuer that such securities pay interest that is excludable from gross income for federal income tax purposes and, if applicable, exempt from Pennsylvania income taxes
(“Non-Municipal Tax-Exempt Securities”). Non-Municipal Tax-Exempt Securities
could include trust certificates, partnership interests or other instruments evidencing interest in one or more long-term Municipal Bonds. Non-Municipal Tax-Exempt
Securities also may include securities issued by other investment companies that invest in Municipal Bonds, to the extent such investments are permitted by the Fund’s investment restrictions and applicable law.
Non-Municipal Tax-Exempt Securities are subject to the same risks associated with an investment in Municipal Bonds as well as many of the risks associated with
investments in derivatives. If the Internal Revenue Service were to issue any adverse ruling or take an adverse position with respect to the taxation on these types of securities, there is a risk that the interest paid on such securities would be
deemed taxable at the federal level.
The Fund ordinarily does not intend to realize significant investment income not exempt from federal and
Pennsylvania income taxes. From time to time, the Fund may realize taxable capital gains.
Federal tax legislation may limit the types and volume of
bonds the interest on which qualifies for a federal income tax-exemption. As a result, current legislation and legislation that may be enacted in the future may affect the availability of Municipal Bonds for
investment by the Fund.
Leverage: The Fund may utilize leverage to seek to enhance the yield and net asset value of its common shares.
However, this objective cannot be achieved in all interest rate environments. The Fund currently leverages its assets through the use of variable rate demand preferred shares (“VRDP Shares”) and residual interest municipal tender option
bonds (“TOB Residuals”), which are derivative interests in municipal bonds. The TOB Residuals in which the Fund will invest pay interest or income that, in the opinion of counsel to the issuer of such TOB Residuals, is exempt from regular
U.S. federal income tax.
The Fund may enter into reverse repurchase agreements with respect to its portfolio investments subject to the Fund’s
investment restrictions.
The Fund may enter into derivative transactions that have economic leverage embedded in them.
The Fund may also borrow money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of
securities transactions which otherwise might require untimely dispositions of Fund securities. Certain short-term borrowings (such as for cash management purposes) are not subject to the 1940 Act’s limitations on leverage if (i) repaid
within 60 days, and (ii) not in excess of 5% of the Fund’s total assets.
BlackRock MuniYield Quality Fund III, Inc. (MYI)
The Fund’s investment objective is to provide stockholders with as high a level of current income exempt from federal income taxes as is consistent
with its investment policies and prudent investment management. The Fund seeks to achieve its investment objective by investing at least 80% of an aggregate of the Fund’s net assets (including proceeds from the issuance of any preferred stock)
and the proceeds of any borrowings for investment purposes, in a portfolio of municipal obligations issued by or on behalf of states, territories and possessions of the United States and their political subdivisions, agencies or instrumentalities,
each of which pays interest that, in the opinion of bond counsel to the issuer, is excludable from gross income for federal income tax purposes (except that the interest may be includable in taxable income for purposes of the federal alternative
minimum tax) (“Municipal Bonds”). The Fund may invest directly in such securities or synthetically through the use of derivatives. The Fund’s investment objective and its policy of investing at least 80% of an aggregate of the
Fund’s net assets (including proceeds from the issuance of any preferred stock) and the proceeds of any borrowings for investment purposes, in Municipal Bonds are fundamental policies that may not be changed without the approval of a majority
of the outstanding voting securities of the Fund (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)). There can be no assurance that the Fund’s investment objective will be realized.
The Fund may invest in certain tax-exempt securities classified as “private activity bonds” (or
industrial development bonds, under pre-1986 law) (“PABs”) (in general, bonds that benefit non-governmental entities) that may subject certain investors in the
Fund to an alternative minimum tax. The percentage of the Fund’s total assets invested in PABs will vary from time to time. The Fund also will not invest more than 25% of its total assets (taken at market value at the time of each investment)
in Municipal Bonds whose issuers are located in the same state.
Under normal market conditions, the Fund expects to invest primarily in a portfolio
of long-term Municipal Bonds that are commonly referred to as “investment grade” securities, which are obligations rated at the time of purchase within the four highest-quality ratings as determined by either Moody’s Investors
Service, Inc. (“Moody’s”) (currently Aaa, Aa, A and Baa), S&P Global Ratings (“S&P”) (currently AAA, AA, A and BBB) or Fitch Ratings, Inc. (“Fitch”) (currently AAA, AA, A and BBB) or are considered by
BlackRock
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Investment Objectives, Policies and Risks (continued)
Advisors, LLC (the
“Manager”) to be of comparable quality. In the case of short-term notes, the investment grade rating categories are SP-1+ through SP-2 for S&P, MIG 1
through MIG 3 for Moody’s and F1+ through F3 for Fitch. In the case of tax-exempt commercial paper, the investment grade rating categories are A-1+
through A-3 for S&P, Prime-1 through Prime-3 for Moody’s and F1+ through F3 for Fitch. Obligations ranked in the
lowest investment grade rating category (BBB, SP-2 and A-3 for S&P; Baa, MIG 3 and Prime-3 for Moody’s; and BBB and F3
for Fitch), while considered “investment grade,” may have certain speculative characteristics. There may be sub-categories or gradations indicating relative standing within the rating categories set
forth above. In assessing the quality of Municipal Bonds with respect to the foregoing requirements, the Manager takes into account the nature of any letters of credit or similar credit enhancement to which particular Municipal Bonds are entitled
and the creditworthiness of the financial institution that provided such credit enhancement. Insurance is expected to protect the Fund against losses caused by a bond issuer’s failure to make interest or principal payments. However, insurance
does not protect the Fund or its stockholders against losses caused by declines in a bond’s market value. If a bond’s insurer fails to fulfill its obligations or loses its credit rating, the value of the bond could drop. If unrated, such
securities will possess creditworthiness comparable, in the opinion of the Manager, to other obligations in which the Fund may invest.
The Fund may
invest up to 20% of its managed assets in securities that are rated below investment grade, which are securities rated at the time of purchase Ba or below by Moody’s, BB or below by S&P or Fitch, or securities determined by the Manager to
be of comparable quality. Below investment grade quality is regarded as predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Such securities commonly are referred to as “high yield” or
“junk” bonds.
All percentage and ratings limitations on securities in which the Fund may invest apply at the time of making an investment
and shall not be considered violated as a result of subsequent market movements or if an investment rating is subsequently downgraded to a rating that would have precluded the Fund’s initial investment in such security. In the event that the
Fund disposes of a portfolio security subsequent to its being downgraded, the Fund may experience a greater risk of loss than if such security had been sold prior to such downgrade.
The average maturity of the Fund’s portfolio securities varies from time to time based upon an assessment of economic and market conditions by the
Manager. The Fund’s portfolio at any given time may include both long-term and intermediate-term municipal bonds.
The net asset value of the
shares of common stock of a closed-end investment company, such as the Fund, which invests primarily in fixed income securities, changes as the general levels of interest rates fluctuate. When interest rates
decline, the value of a fixed income portfolio can be expected to rise. Conversely, when interest rates rise, the value of a fixed income portfolio can be expected to decline. Prices of longer term securities generally fluctuate more in response to
interest rate changes than do shorter term securities. These changes in net asset value are likely to be greater in the case of a fund having a leveraged capital structure, such as the Fund.
For temporary periods or to provide liquidity, the Fund has the authority to invest as much as 20% of its total assets in
tax-exempt and taxable money market obligations with a maturity of one year or less (such short-term obligations being referred to herein as “Temporary Investments”). In addition, the Fund reserves
the right as a defensive measure to invest temporarily a greater portion of its assets in Temporary Investments, when, in the opinion of the Manager, prevailing market or financial conditions warrant. Taxable money market obligations will yield
taxable income. The Fund also may invest in variable rate demand obligations (“VRDOs”) and VRDOs in the form of participation interests (“Participating VRDOs”) in variable rate tax-exempt
obligations held by a financial institution. The Fund’s hedging strategies are not fundamental policies and may be modified by the Board of Directors of the Fund without the approval of the Fund’s stockholders. The Fund is also authorized
to invest in indexed and inverse floating rate obligations for hedging purposes and to seek to enhance return.
The Fund may invest in securities not
issued by or on behalf of a state or territory or by an agency or instrumentality thereof, if the Fund receives an opinion of counsel to the issuer that such securities pay interest that is excludable from gross income for federal income tax
purposes (“Non-Municipal Tax-Exempt Securities”). Non-Municipal Tax-Exempt
Securities could include trust certificates, partnership interests or other instruments evidencing interest in one or more long-term Municipal Bonds. Non-Municipal
Tax-Exempt Securities also may include securities issued by other investment companies that invest in Municipal Bonds, to the extent such investments are permitted by the Fund’s investment restrictions
and applicable law. Non-Municipal Tax-Exempt Securities are subject to the same risks associated with an investment in Municipal Bonds as well as many of the risks
associated with investments in derivatives. If the Internal Revenue Service were to issue any adverse ruling or take an adverse position with respect to the taxation on these types of securities, there is a risk that the interest paid on such
securities would be deemed taxable at the federal level.
The Fund ordinarily does not intend to realize significant investment income not exempt from
federal income tax. From time to time, the Fund may realize taxable capital gains.
Federal tax legislation may limit the types and volume of bonds
the interest on which qualifies for a federal income tax-exemption. As a result, current legislation and legislation that may be enacted in the future may affect the availability of Municipal Bonds for
investment by the Fund.
The Fund may purchase and sell futures contracts, enter into various interest rate transactions and swap contracts
(including, but not limited to, credit default swaps) and may purchase and sell exchange-listed and OTC put and call options on securities and swap contracts, financial indices and futures contracts and use other derivative instruments or management
techniques. These derivative transactions may be used for duration management and other risk management purposes, subject to the Fund’s investment restrictions.
Leverage: The Fund may utilize leverage to seek to enhance the yield and net asset value of its common shares. However, this objective cannot be
achieved in all interest rate environments. The Fund currently leverages its assets through the use of variable rate demand preferred shares (“VRDP Shares”) and residual interest municipal tender option bonds (“TOB Residuals”),
which are derivative interests in municipal bonds. The TOB Residuals in which the Fund will invest pay interest or income that, in the opinion of counsel to the issuer of such TOB Residuals, is exempt from regular U.S. federal income tax.
The Fund may enter into reverse repurchase agreements with respect to its portfolio investments subject to the Fund’s investment restrictions. The
Fund may enter into “dollar roll” transactions.
The Fund may enter into derivative transactions that have economic leverage embedded in
them.
The Fund may leverage its portfolio by entering into one or more credit facilities.
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The Fund may also borrow
money as a temporary measure for extraordinary or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require untimely dispositions of Fund securities. Certain short-term
borrowings (such as for cash management purposes) are not subject to the 1940 Act’s limitations on leverage if (i) repaid within 60 days, and (ii) not in excess of 5% of the Fund’s total assets.
BlackRock New York Municipal Income Trust (BNY)
The Fund’s
investment objective is to provide current income exempt from federal income taxes. The Fund’s investment policies provide that, as a matter of fundamental policy, under normal market conditions, the Fund will invest at least 80% of its managed
assets in investments the income from which is exempt from federal income tax and New York State and New York City personal income taxes (except that interest may be subject to the alternative minimum tax). For the purposes of the foregoing policy
“managed assets” are the Fund’s net assets plus borrowings for investment purposes. The Fund may not change its investment objective or the foregoing fundamental policy without the approval of the holders of a majority of the
Fund’s outstanding common shares and outstanding preferred shares voting together as a single class, and of the holders of a majority of the outstanding preferred shares voting as a separate class. A majority of the outstanding means (1) 67% or
more of the shares present at a meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or (2) more than 50% of the outstanding shares, whichever is less.
The Fund’s investment policies provide that, under normal market conditions, the Fund will invest at least 80% of its total assets in investment
grade quality municipal bonds. Investment grade quality means that such bonds are rated, at the time of investment, within the four highest rating categories of Moody’s Investors Service, Inc. (“Moody’s”) (currently Aaa, Aa, A
and Baa), S&P Global Ratings (“S&P”) (currently AAA, AA, A and BBB) or Fitch Ratings, Inc. (“Fitch”) (currently AAA, AA, A and BBB) or are unrated but judged to be of comparable quality by BlackRock Advisors, LLC (the
“Manager”). Municipal bonds rated Baa by Moody’s are investment grade, but Moody’s considers municipal bonds rated Baa to have speculative characteristics. Changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity for issuers of municipal bonds that are rated BBB or Baa (or that have equivalent ratings) to make principal and interest payments than is the case for issuers of higher grade municipal bonds. In the case of short term
notes, the investment grade rating categories are SP-1+ through SP-2 for S&P, MIG-1 through MIG-3 for Moody’s and F-1+ through F-3 for Fitch. In the case of tax exempt commercial paper, the investment grade rating
categories are A-1+ through A-3 for S&P, Prime-1 through Prime-3 for
Moody’s and F-1+ through F-3 for Fitch. Obligations ranked in the lowest investment grade rating category (BBB, SP-2
and A-3 for S&P; Baa, MIG-3 and Prime-3 for Moody’s and BBB and F-3 for Fitch),
while considered “investment grade,” may have certain speculative characteristics. There may be sub-categories or gradations indicating relative standing within the rating categories set forth above.
In assessing the quality of municipal bonds with respect to the foregoing requirements, the Manager takes into account the nature of any letters of credit or similar credit enhancement to which particular municipal bonds are entitled and the
creditworthiness of the financial institution that provided such credit enhancement.
The Fund may invest up to 20% of its total assets in municipal
bonds that are rated, at the time of investment, Ba/BB or B by Moody’s, S&P or Fitch or that are unrated but judged to be of comparable quality by the Manager. Such securities, sometimes referred to as “high yield” or
“junk” bonds, are predominantly speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of the security and generally involve a greater volatility of price than securities in higher rating
categories.
The foregoing credit quality policies apply only at the time a security is purchased, and the Fund is not required to dispose of a
security if a rating agency downgrades its assessment of the credit characteristics of a particular issue. In determining whether to retain or sell a security that a rating agency has downgraded, the Manager may consider such factors as the
Manager’s assessment of the credit quality of the issuer of the security, the price at which the security could be sold and the rating, if any, assigned to the security by other rating agencies. In the event that the Fund disposes of a
portfolio security subsequent to its being downgraded, the Fund may experience a greater risk of loss than if such security had been sold prior to such downgrade.
Subject to the Fund’s policy of investing, under normal market conditions, at least 80% of its managed assets (as defined for this policy) in
investments the income from which is exempt from federal income tax and New York City and New York State personal income taxes, the Fund may invest in securities that pay interest that is not exempt from New York City and New York State personal
income taxes when, in the judgment of the Manager, the return to the shareholders after payment of applicable New York City and New York State personal income taxes would be higher than the return available from comparable securities that pay
interest that is, or make other distributions that are, exempt from New York City and New York State personal income taxes.
The Fund may also invest
in securities of other open- or closed-end investment companies that invest primarily in municipal bonds of the types in which the Fund may invest directly and in
tax-exempt preferred shares that pay dividends that are exempt from regular federal income tax. In addition, the Fund may purchase municipal bonds that are additionally secured by insurance, bank credit
agreements or escrow accounts. The credit quality of companies which provide these credit enhancements will affect the value of those securities. Although the insurance feature reduces certain financial risks, the premiums for insurance and the
higher market price paid for insured obligations may reduce the Fund’s income. The insurance feature does not guarantee the market value of the insured obligations or the net asset value of the common shares.
The Fund may invest in certain tax exempt securities classified as “private activity bonds” (or industrial development bonds, under pre-1986 law) (in general, bonds that benefit non-governmental entities) that may subject certain investors in the Fund to an alternative minimum tax. The percentage of the
Fund’s total assets invested in private activity bonds will vary from time to time. The Fund has not established any limit on the percentage of its portfolio that may be invested in municipal bonds subject to the alternative minimum tax
provisions of federal tax law, and the Fund expects that a portion of the income it produces will be includable in alternative minimum taxable income.
The average maturity of the Fund’s portfolio securities varies from time to time based upon an assessment of economic and market conditions by the
Manager. The Fund’s portfolio at any given time may include both long-term and intermediate-term municipal bonds.
The Fund’s stated
expectation is that it will invest in municipal bonds that, in the Manager’s opinion, are underrated or undervalued. Underrated municipal bonds are those whose ratings do not, in the opinion of the Manager, reflect their true higher
creditworthiness. Undervalued municipal bonds are bonds that, in the opinion of the Manager, are worth more than the value assigned to them in the marketplace. The Manager may at times believe that bonds associated with a particular municipal market
sector (for example, but not limited to electric utilities), or issued by a particular municipal issuer, are undervalued. The Manager may purchase those bonds for the Fund’s portfolio because they represent a market sector or issuer that the
Manager considers undervalued, even if the value of those particular bonds appears to be consistent with the value
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of similar bonds. Municipal
bonds of particular types (for example, but not limited to hospital bonds, industrial revenue bonds or bonds issued by a particular municipal issuer) may be undervalued because there is a temporary excess of supply in that market sector, or because
of a general decline in the market price of municipal bonds of the market sector for reasons that do not apply to the particular municipal bonds that are considered undervalued. The Fund’s investment in underrated or undervalued municipal bonds
will be based on the Manager’s belief that their yield is higher than that available on bonds bearing equivalent levels of interest rate risk, credit risk and other forms of risk, and that their prices will ultimately rise, relative to the
market, to reflect their true value. Any capital appreciation realized by the Fund will generally result in capital gain distributions subject to federal capital gains taxation. The Fund ordinarily does not intend to realize significant investment
income not exempt from federal income tax. From time to time, the Fund may realize taxable capital gains.
Leverage: The Fund may utilize
leverage to seek to enhance the yield and net asset value of its common shares. However, this objective cannot be achieved in all interest rate environments. The Fund currently leverages its assets through the use of variable rate demand preferred
shares (“VRDP Shares”) and residual interest municipal tender option bonds (“TOB Residuals”), which are derivative interests in municipal bonds. The TOB Residuals in which the Fund will invest pay interest or income that, in the
opinion of counsel to the issuer of such TOB Residuals, is exempt from regular U.S. federal income tax.
The Fund may enter into reverse repurchase
agreements with respect to its portfolio investments subject to the Fund’s investment restrictions.
The Fund reserves the right to borrow funds,
subject to the Fund’s investment restrictions. The proceeds of borrowings may be used for any valid purpose including, without limitation, liquidity, investments and repurchases of shares of the Fund.
Risk Factors
This section contains a discussion of the general
risks of investing in each Fund. The net asset value and market price of, and dividends paid on, the common shares will fluctuate with and be affected by, among other things, the risks more fully described below. As with any fund, there can be no
guarantee that the Fund will meet its investment objective or that the Fund’s performance will be positive for any period of time. Each risk noted below is applicable to each Fund unless the specific Fund or Funds are noted in a parenthetical.
Non-Diversification Risk (MUJ, MIY, MYN and MPA): The Fund is a
non-diversified fund. Because the Fund may invest in securities of a smaller number of issuers, it may be more exposed to the risks associated with and developments affecting an individual issuer than a fund
that invests more widely.
Investment and Market Discount Risk: An investment in the Fund’s common shares is subject to investment risk,
including the possible loss of the entire amount that you invest. As with any stock, the price of the Fund’s common shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than
the original investment. Common shares are designed for long-term investors and the Fund should not be treated as a trading vehicle. Shares of closed-end management investment companies frequently trade at a
discount from their net asset value. This risk is separate and distinct from the risk that the Fund’s net asset value could decrease as a result of its investment activities. At any point in time an investment in the Fund’s common shares
may be worth less than the original amount invested, even after taking into account distributions paid by the Fund. During periods in which the Fund may use leverage, the Fund’s investment, market discount and certain other risks will be
magnified.
Debt Securities Risk: Debt securities, such as bonds, involve interest rate risk, credit risk, extension risk, and prepayment risk,
among other things.
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Interest Rate Risk — The market value of bonds and other fixed-income securities changes in response to interest
rate changes and other factors. 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 Fund may be subject to a greater risk of rising interest rates due to the recent period of historically low interest rates. For
example, if interest rates increase by 1%, assuming a current portfolio duration of ten years, and all other factors being equal, the value of the Fund’s investments would be expected to decrease by 10%. (Duration is a measure of the price
sensitivity of a debt security or portfolio of debt securities to relative changes in interest rates.) The magnitude of these fluctuations in the market price of bonds and other fixed-income securities is generally greater for those securities with
longer maturities. Fluctuations in the market price of the Fund’s investments will not affect interest income derived from instruments already owned by the Fund, but will be reflected in the Fund’s net asset value. The Fund may lose money
if short-term or long-term interest rates rise sharply in a manner not anticipated by Fund management.
To the extent the Fund invests
in debt securities that may be prepaid at the option of the obligor (such as mortgage-backed securities), the sensitivity of such securities to changes in interest rates may increase (to the detriment of the Fund) when interest rates rise. Moreover,
because rates on certain floating rate debt securities typically reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the net asset value of the
Fund to the extent that it invests in floating rate debt securities.
These basic principles of bond prices also apply to U.S.
Government securities. A security backed by the “full faith and credit” of the U.S. Government is guaranteed only as to its stated interest rate and face value at maturity, not its current market price. Just like other fixed-income
securities, government-guaranteed securities will fluctuate in value when interest rates change.
A general rise in interest rates has
the potential to cause investors to move out of fixed-income securities on a large scale, which may increase redemptions from funds that hold large amounts of fixed-income securities. Heavy redemptions could cause the Fund to sell assets at
inopportune times or at a loss or depressed value and could hurt the Fund’s performance.
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Credit Risk — Credit risk refers to the possibility that the issuer of a debt security (i.e., the borrower) will not
be able to make payments of interest and principal when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer. The
degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. |
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Extension Risk — When interest rates rise, certain obligations will be paid off by the obligor more slowly than
anticipated, causing the value of these obligations to fall. |
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Prepayment Risk — When interest rates fall, certain obligations will be paid off by the obligor more quickly than
originally anticipated, and the Fund may have to invest the proceeds in securities with lower yields. |
Municipal Securities
Risks: Municipal securities risks include the ability of the issuer to repay the obligation, the relative lack of information about certain issuers of municipal securities, and the possibility of future legislative changes which could affect the
market for and value of municipal securities. These risks include:
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General Obligation Bonds Risks — Timely payments depend on the issuer’s credit quality, ability to raise tax
revenues and ability to maintain an adequate tax base. |
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Revenue Bonds Risks — These payments depend on the money earned by the particular facility or class of facilities,
or the amount of revenues derived from another source. |
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Private Activity Bonds Risks — Municipalities and other public authorities issue private activity bonds to finance
development of industrial facilities for use by a private enterprise. The private enterprise pays the principal and interest on the bond, and the issuer does not pledge its full faith, credit and taxing power for repayment. The Fund’s
investments may consist of private activity bonds that may subject certain shareholders to an alternative minimum tax. |
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Moral Obligation Bonds Risks — Moral obligation bonds are generally issued by special purpose public authorities of
a state or municipality. If the issuer is unable to meet its obligations, repayment of these bonds becomes a moral commitment, but not a legal obligation, of the state or municipality. |
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Municipal Notes Risks — Municipal notes are shorter term municipal debt obligations. If there is a shortfall in the
anticipated proceeds, the notes may not be fully repaid and the Fund may lose money. |
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Municipal Lease Obligations Risks — In a municipal lease obligation, the issuer agrees to make payments when due on
the lease obligation. Although the issuer does not pledge its unlimited taxing power for payment of the lease obligation, the lease obligation is secured by the leased property. |
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Tax-Exempt Status Risk — The Fund and its investment manager will rely on
the opinion of issuers’ bond counsel and, in the case of derivative securities, sponsors’ counsel, on the tax-exempt status of interest on municipal bonds and payments under derivative securities.
Neither the Fund nor its investment manager will independently review the bases for those tax opinions, which may ultimately be determined to be incorrect and subject the Fund and its shareholders to substantial tax liabilities.
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State Specific Risk (MUJ, MIY, MYN, MPA and BNY): The Fund invests primarily in municipal bonds issued by or on behalf of
its designated state. As a result, the Fund is more exposed to risks affecting issuers of its designated state’s municipal securities than is a fund that invests more widely. Fund management does not believe that the current economic conditions
will adversely affect the Fund’s ability to invest in high quality state municipal securities in its designated state.
Taxability Risk:
The Fund intends to minimize the payment of taxable income to shareholders by investing in tax-exempt or municipal securities in reliance at the time of purchase on an opinion of bond counsel to the issuer
that the interest paid on those securities will be excludable from gross income for U.S. federal income tax purposes. Such securities, however, may be determined to pay, or have paid, taxable income subsequent to the Fund’s acquisition of the
securities. In that event, the treatment of dividends previously paid or to be paid by the Fund as “exempt interest dividends” could be adversely affected, subjecting the Fund’s shareholders to increased U.S. federal income tax
liabilities. Alternatively, the Fund might enter into an agreement with the IRS to pay an agreed upon amount in lieu of the IRS adjusting individual shareholders’ income tax liabilities. If the Fund agrees to enter into such an agreement, the
Fund’s yield could be adversely affected. Further, shareholders at the time the Fund enters into such an agreement that were not shareholders when the dividends in question were paid would bear some cost for a benefit they did not receive.
Federal tax legislation may limit the types and volume of bonds the interest on which qualifies for a federal income tax-exemption. As a result, current legislation and legislation that may be enacted in the
future may affect the availability of municipal securities for investment by the Fund. In addition, future laws, regulations, rulings or court decisions may cause interest on municipal securities to be subject, directly or indirectly, to U.S.
federal income taxation or interest on state municipal securities to be subject to state or local income taxation, or the value of state municipal securities to be subject to state or local intangible personal property tax, or may otherwise prevent
the Fund from realizing the full current benefit of the tax-exempt status of such securities. Any such change could also affect the market price of such securities, and thus the value of an investment in the
Fund.
Insurance Risk: Insurance guarantees that interest payments on a municipal security will be made on time and that the principal will be
repaid when the security matures. However, insurance does not protect against losses caused by declines in a municipal security’s value. The Fund cannot be certain that any insurance company will make the payments it guarantees. If a municipal
security’s insurer fails to fulfill its obligations or loses its credit rating, the value of the security could drop.
Junk Bonds Risk:
Although junk bonds generally pay higher rates of interest than investment grade bonds, junk bonds are high risk investments that are considered speculative and may cause income and principal losses for the Fund.
Indexed and Inverse Securities Risk (MIY, MYN, MPA and MYI): Indexed and inverse securities provide a potential return based on a particular index
of value or interest rates. The Fund’s return on these securities will be subject to risk with respect to the value of the particular index. These securities are subject to leverage risk and correlation risk. Certain indexed and inverse
securities have greater sensitivity to changes in interest rates or index levels than other securities, and the Fund’s investment in such instruments may decline significantly in value if interest rates or index levels move in a way Fund
management does not anticipate.
U.S. Government Obligations Risk: Certain securities in which the Fund may invest, including securities issued
by certain U.S. Government agencies and U.S. Government sponsored enterprises, are not guaranteed by the U.S. Government or supported by the full faith and credit of the United States.
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Variable Rate Demand
Obligations Risks (MUJ, MIY, MYN, MPA and MYI): Variable rate demand obligations are floating rate securities that combine an interest in a long term municipal bond with a right to demand payment before maturity from a bank or other financial
institution. If the bank or financial institution is unable to pay, the Fund may lose money.
Repurchase Agreements and Purchase and Sale Contracts
Risk (MUJ): If the other party to a repurchase agreement or purchase and sale contract defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the
seller fails to repurchase the security in either situation and the market value of the security declines, the Fund may lose money.
Leverage Risk:
The Fund uses leverage for investment purposes through the issuance of VRDP Shares and investments in TOB Residuals. The Fund may also utilize leverage for investment purposes by entering into reverse repurchase agreements, derivative
instruments with leverage embedded in them and dollar rolls, as applicable. The Fund’s use of leverage may increase or decrease from time to time in its discretion and the Fund may, in the future, determine not to use leverage.
The use of leverage creates an opportunity for increased common share net investment income dividends, but also creates risks for the holders of common
shares. The Fund cannot assure you that the use of leverage will result in a higher yield on the common shares. Any leveraging strategy the Fund employs may not be successful.
Leverage involves risks and special considerations for common shareholders, including:
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the likelihood of greater volatility of net asset value, market price and dividend rate of the common shares than a
comparable portfolio without leverage; |
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the risk that fluctuations in interest rates or dividend rates on any leverage that the Fund must pay will reduce the
return to the common shareholders; |
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the effect of leverage in a declining market, which is likely to cause a greater decline in the net asset value of the
common shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the common shares; |
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leverage may increase operating costs, which may reduce total return. |
Any decline in the net asset value of the Fund’s investments will be borne entirely by the holders of common shares. Therefore, if the market value
of the Fund’s portfolio declines, leverage will result in a greater decrease in net asset value to the holders of common shares than if the Fund were not leveraged. This greater net asset value decrease will also tend to cause a greater decline
in the market price for the common shares.
Tender Option Bonds Risk: The Fund’s participation in tender option bond transactions may
reduce the Fund’s returns and/or increase volatility. Investments in tender option bond transactions expose the Fund to counterparty risk and leverage risk. An investment in a tender option bond transaction typically will involve greater risk
than an investment in a municipal fixed rate security, including the risk of loss of principal. Distributions on TOB Residuals will bear an inverse relationship to short-term municipal security interest rates. Distributions on TOB Residuals paid to
the Fund will be reduced or, in the extreme, eliminated as short-term municipal interest rates rise and will increase when short-term municipal interest rates fall. TOB Residuals generally will underperform the market for fixed rate municipal
securities in a rising interest rate environment. The Fund may invest special purpose trusts formed for the purpose of holding municipal bonds contributed by one or more funds (“TOB Trusts”) on either a
non-recourse or recourse basis. If the Fund invests in a TOB Trust on a recourse basis, it could suffer losses in excess of the value of its TOB Residuals.
Reverse Repurchase Agreements Risk: Reverse repurchase agreements involve the sale of securities held by the Fund with an agreement to repurchase
the securities at an agreed-upon price, date and interest payment. Reverse repurchase agreements involve the risk that the other party may fail to return the securities in a timely manner or at all. The Fund could lose money if it is unable to
recover the securities and the value of the collateral held by the Fund, including the value of the investments made with cash collateral, is less than the value of the securities. These events could also trigger adverse tax consequences for the
Fund. In addition, reverse repurchase agreements involve the risk that the interest income earned in the investment of the proceeds will be less than the interest expense.
Dollar Rolls Risk (MIY, MYN and MYI): Dollar rolls involve the risk that the market value of the securities that the Fund is committed to buy may
decline below the price of the securities the Fund has sold. These transactions may involve leverage.
Illiquid Investments Risk: The Fund may
invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise illiquid, including private placement securities. The Fund may not be able to readily dispose of
such investments at prices that approximate those at which the Fund could sell such investments if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if
necessary to raise cash to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting the Fund’s net asset value and ability to make dividend distributions. The financial markets in
general, and certain segments of the mortgage-related securities markets in particular, have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting in a loss of liquidity during which market prices
were suddenly and substantially below traditional measures of intrinsic value. During such periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market dislocation may occur again at any time.
Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade public debt securities.
Investment Companies and ETFs Risk (MUJ, MIY and BNY): Subject to the limitations set forth in the Investment Company Act of 1940, as amended, and
the rules thereunder, the Fund may acquire shares in other investment companies and in exchange-traded funds (“ETFs”), some of which may be affiliated investment companies. The market value of the shares of other investment companies and
ETFs may differ from their net asset value. As an investor in investment companies and ETFs, the Fund would bear its ratable share of that entity’s expenses, including its investment advisory and administration fees, while continuing to pay its
own advisory and administration fees and other expenses (to the extent not offset by the Manager through waivers). As a result, shareholders will be absorbing duplicate levels of fees with respect to investments in other investment companies and
ETFs (to the extent not offset by the Manager through waivers).
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The securities of other
investment companies and ETFs in which the Fund may invest may be leveraged. As a result, the Fund may be indirectly exposed to leverage through an investment in such securities. An investment in securities of other investment companies and ETFs
that use leverage may expose the Fund to higher volatility in the market value of such securities and the possibility that the Fund’s long-term returns on such securities (and, indirectly, the long-term returns of shares of the Fund) will be
diminished.
As with other investments, investments in other investment companies, including ETFs, are subject to market and selection risk. To the
extent the Fund is held by an affiliated fund, the ability of the Fund itself to hold other investment companies may be limited.
Derivatives Risk:
The Fund’s use of derivatives may increase its costs, reduce the Fund’s returns and/or increase volatility. Derivatives involve significant risks, including:
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Leverage Risk — The Fund’s use of derivatives can magnify the Fund’s gains and losses. Relatively small
market movements may result in large changes in the value of a derivatives position and can result in losses that greatly exceed the amount originally invested. |
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Market Risk — Some derivatives are more sensitive to interest rate changes and market price fluctuations than other
securities. The Fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, the Manager may not be able to predict correctly the direction of
securities prices, interest rates and other economic factors, which could cause the Fund’s derivatives positions to lose value. |
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Counterparty Risk — Derivatives are also subject to counterparty risk, which is the risk that the other party in the
transaction will be unable or unwilling to fulfill its contractual obligation, and the related risks of having concentrated exposure to such a counterparty. |
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Illiquidity Risk — The possible lack of a liquid secondary market for derivatives and the resulting inability of the
Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. |
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Operational Risk — The use of derivatives includes the risk of potential operational issues, including documentation
issues, settlement issues, systems failures, inadequate controls and human error. |
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Legal Risk — The risk of insufficient documentation, insufficient capacity or authority of counterparty, or legality
or enforceability of a contract. |
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Volatility and Correlation Risk — Volatility is defined as the characteristic of a security, an index or a market to
fluctuate significantly in price within a short time period. A risk of the Fund’s use of derivatives is that the fluctuations in their values may not correlate with the overall securities markets. |
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Valuation Risk — Valuation for derivatives may not be readily available in the market. Valuation may be more
difficult in times of market turmoil since many investors and market makers may be reluctant to purchase complex instruments or quote prices for them. |
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Hedging Risk — Hedges are sometimes subject to imperfect matching between the derivative and the underlying
security, and there can be no assurance that the Fund’s hedging transactions will be effective. The use of hedging may result in certain adverse tax consequences. |
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Tax Risk — Certain aspects of the tax treatment of derivative instruments, including swap agreements and
commodity-linked derivative instruments, are currently unclear and may be affected by changes in legislation, regulations or other legally binding authority. Such treatment may be less favorable than that given to a direct investment in an
underlying asset and may adversely affect the timing, character and amount of income the Fund realizes from its investments. |
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Regulatory Risk — Derivative contracts are subject to regulation under the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”) in the United States and under comparable regimes in Europe, Asia and other non-U.S. jurisdictions. Under the Dodd-Frank Act, with respect to uncleared
swaps, swap dealers are required to collect variation margin from the Fund and may be required by applicable regulations to collect initial margin from the Fund. Both initial and variation margin may be comprised of cash and/or securities, subject
to applicable regulatory haircuts. Shares of investment companies (other than certain money market funds) may not be posted as collateral under applicable regulations. In addition, regulations adopted by global prudential regulators that are now in
effect require certain bank-regulated counterparties and certain of their affiliates to include in certain financial contracts, including many derivatives contracts, terms that delay or restrict the rights of counterparties, such as the Fund, to
terminate such contracts, foreclose upon collateral, exercise other default rights or restrict transfers of credit support in the event that the counterparty and/or its affiliates are subject to certain types of resolution or insolvency proceedings.
The implementation of these requirements with respect to derivatives, as well as regulations under the Dodd-Frank Act regarding clearing, mandatory trading and margining of other derivatives, may increase the costs and risks to the Fund of trading
in these instruments and, as a result, may affect returns to investors in the Fund. |
Market Risk and Selection Risk: Market
risk is the risk that one or more markets in which the Fund invests will go down in value, including the possibility that the markets will go down sharply and unpredictably. The value of a security or other asset may decline due to changes in
general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or factors that affect a particular issuer or issuers, exchange, country, group of countries, region, market,
industry, group of industries, sector or asset class. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues like pandemics or epidemics, recessions, or other events could have
a significant impact on the Fund and its investments. Selection risk is the risk that the securities selected by Fund management will underperform the markets, the relevant indices or the securities selected by other funds with similar investment
objectives and investment strategies. This means you may lose money.
An outbreak of an infectious coronavirus
(COVID-19) that was first detected in December 2019 developed into a global pandemic that has resulted in numerous disruptions in the market and has had significant economic impact leaving general concern and
uncertainty. Although vaccines have been developed and approved for use by various governments, the duration of the pandemic and its effects cannot be predicted with certainty. The impact of this coronavirus, and other epidemics and pandemics that
may arise in the future, could affect the economies of many nations, individual companies and the market in general ways that cannot necessarily be foreseen at the present time.
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Automatic Dividend Reinvestment Plan
Pursuant to MUJ, MIY, MYN, MPA, MYI and BNY’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 Fund’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 MUJ, MIY, MYN, MPA, MYI and BNY declare a dividend or determine to make a capital gain or other distribution, the Reinvestment Plan Agent will
acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Funds (“newly issued shares”) or (ii) by purchase of
outstanding shares on the open market or on the Fund’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value (“NAV”) per share 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 Fund. 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 Fund reserves the
right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, each Fund reserves the right to amend the Reinvestment Plan to include a service charge payable by the
participants. Participants in MPA, MYI and BNY that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share sold fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay.
Participants in MUJ, MIY and MYN 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 computershare.com/blackrock, or in writing to Computershare, P.O. Box 43006, Providence, RI 02940-3078, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment
Plan Agent at Computershare, 150 Royall Street, Suite 101, Canton, MA 02021.
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