BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-07080

Name of Fund:  BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

Fund Address:   100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock MuniYield Michigan Quality Fund, Inc., 55 East 52nd Street, New York, NY 10055

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

Date of fiscal year end: 07/31/2015

Date of reporting period: 04/30/2015

Item 1 – Schedule of Investments

Schedule of Investments April 30, 2015 (Unaudited)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

     Value  

Michigan — 136.1%

                 

Corporate — 4.9%

     

County of Monroe EDC Michigan, Refunding RB, Detroit Edison Co. Project, Series AA (NPFGC), 6.95%, 9/01/22

    $ 10,695      $ 14,028,418   

County/City/Special District/School District — 21.4%

  

Anchor Bay School District, GO, Refunding, (Q-SBLF):

     

4.38%, 5/01/27

      960        1,035,226   

4.50%, 5/01/29

      900        968,031   

Charter Township of Canton Michigan, GO, Capital Improvement (AGM):

     

5.00%, 4/01/25

      1,840        1,979,178   

5.00%, 4/01/26

      2,000        2,152,480   

5.00%, 4/01/27

      500        534,950   

City of Oak Park Michigan, GO, Street Improvement (NPFGC), 5.00%, 5/01/30

      500        518,800   

Columbia Michigan School District, GO, Unlimited Tax, School Building & Site (Q-SBLF), 5.00%, 5/01/38

      3,215        3,609,738   

Comstock Park Public Schools, GO, School Building & Site, Series B (Q-SBLF):

     

5.50%, 5/01/36

      750        856,748   

5.50%, 5/01/41

      1,355        1,536,624   

County of Genesee Michigan, GO, Refunding, Series A (NPFGC), 5.00%, 5/01/19

      600        612,330   

Dearborn Brownfield Redevelopment Authority, GO, Limited Tax, Redevelopment, Series A (AGC), 5.50%, 5/01/39

      3,300        3,717,351   

Dearborn School District, GO, Series A (Q-SBLF):

     

5.00%, 5/01/32

      930        1,058,210   

5.00%, 5/01/33

      990        1,124,897   

5.00%, 5/01/34

      745        843,541   

Flint EDC, RB, Michigan Department of Human Services Office Building Project, 5.25%, 10/01/41

      3,070        3,285,268   

Goodrich Area School District Michigan, GO, School Building & Site (Q-SBLF):

     

5.50%, 5/01/32

      600        702,684   

5.50%, 5/01/36

      1,200        1,370,796   

5.50%, 5/01/41

      1,575        1,786,113   
Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

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

  

Grandville Public Schools, GO, School Building & Site (Q-SBLF), Series II, 5.00%, 5/01/40 (a)

    $ 2,015      $ 2,218,172   

Harper Creek Community School District Michigan, GO, Refunding, (AGM) (Q-SBLF), 5.00%, 5/01/22

      1,125        1,129,365   

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

      4,100        4,518,077   

L’Anse Creuse Public Schools Michigan, GO, School Building & Site (AGM) (Q-SBLF), 5.00%, 5/01/15 (b)

      3,000        3,000,390   

Lincoln Consolidated School District Michigan, GO, Refunding, (NPFGC) (Q-SBLF), 4.63%, 5/01/28

      3,650        3,773,406   

Livonia Public Schools School District Michigan, GO, Series I (AGM), 5.00%, 5/01/43

      3,090        3,424,709   

Mattawan Consolidated School District, GO, Series I (Q-SBLF), 5.00%, 5/01/39

      2,095        2,343,278   

Midland Public Schools, GO, School Building & Site (Q-SBLF), Series I, 5.00%, 5/01/34 (a)

      620        694,028   

Montrose Community Schools, GO, (NPFGC) (Q-SBLF), 6.20%, 5/01/17

      415        434,725   

Romulus Community Schools, GO, Unlimited Tax, Refunding (AGM) (Q-SBLF):

     

4.25%, 5/01/27

      1,200        1,290,048   

4.50%, 5/01/29

      1,025        1,105,965   

Thornapple Kellogg School District Michigan, GO, Refunding, School Building & Site (NPFGC) (Q-SBLF), 5.00%, 5/01/17 (b)

      2,500        2,716,250   

Troy School District, GO, (Q-SBLF), 5.00%, 5/01/28

      1,240        1,435,660   

Van Dyke Public Schools Michigan, GO, School Building & Site (AGM) (Q-SBLF), 5.00%, 5/01/28

      1,250        1,370,275   

Walled Lake Consolidated School District, GO, (Q-SBLF):

     

5.00%, 5/01/37

      1,770        1,994,312   

5.00%, 5/01/40

      1,630        1,827,572   
    

 

 

  
    60,969,197   

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015    1

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)		     Value  

Michigan (continued)

                 

Education — 23.6%

     

Central Michigan University, Refunding RB, 5.00%, 10/01/39

    $ 620      $ 702,038   

Grand Valley State University, RB, (NPFGC), 5.50%, 2/01/18

      1,115        1,178,566   

Michigan Finance Authority, Refunding RB:

   

5.00%, 11/15/45

      2,325        2,535,785   

AMT, 4.00%, 11/01/28

      5,425        5,429,394   

AMT, 4.00%, 11/01/29

      3,660        3,643,091   

AMT, 4.00%, 11/01/30

      1,770        1,747,521   

AMT, 4.00%, 11/01/31

      1,955        1,925,636   

Michigan State University, Refunding RB, General:

     

Series A, 5.00%, 8/15/41

      4,980        5,601,056   

Series C, 5.00%, 2/15/40

      4,700        5,252,156   

Michigan Technological University, Refunding RB, Series A, 5.00%, 10/01/34

      1,340        1,473,799   

Oakland University, RB, General, Series A:

     

5.00%, 3/01/38

      6,785        7,511,266   

5.00%, 3/01/43

      13,865        15,308,901   

University of Michigan, RB, Series A, 5.00%, 4/01/39

      2,125        2,428,578   

Wayne State University, RB, Series A, 5.00%, 11/15/40

      2,000        2,230,760   

Western Michigan University, Refunding RB:

     

General, University and College Improvements, 5.25%, 11/15/40

      2,100        2,333,919   

General, University and College Improvements, 5.25%, 11/15/43

      5,255        5,987,074   

General, University and College Improvements (AGM), 5.25%, 11/15/33

      620        703,911   

General (AGM), 5.00%, 11/15/39

      1,085        1,201,713   
    

 

 

  
               67,195,164   

Health — 31.9%

     

Grand Traverse County Hospital Finance Authority, RB, Series A:

     

5.00%, 7/01/44

      1,075        1,187,176   

5.00%, 7/01/47

      1,365        1,504,367   

Kalamazoo Hospital Finance Authority, RB, Bronson Methodist Hospital (AGM), 5.25%, 5/15/36

      4,750        5,140,212   
Municipal Bonds    Par  
(000)		     Value  

Michigan (continued)

                 

Health (continued)

     

Kent Hospital Finance Authority Michigan, Refunding RB, Spectrum Health, Series A, 5.00%, 11/15/29

    $ 4,500      $ 5,108,130   

Michigan Finance Authority, RB, Sparrow Obligated Group, 5.00%, 11/15/36

      1,550        1,666,746   

Michigan Finance Authority, Refunding RB:

     

5.00%, 6/01/39

      930        1,015,793   

Hospital McLaren Health Care, 5.00%, 5/15/33 (a)

      1,240        1,377,454   

Hospital McLaren Health Care, 5.00%, 5/15/34 (a)

      3,100        3,435,389   

Hospital McLaren Health Care, 5.00%, 5/15/35 (a)

      3,070        3,402,143   

Hospital, Oakwood Obligated Group, 5.00%, 8/15/31

      930        1,023,270   

Trinity Health Credit Group, 5.00%, 12/01/31

      3,100        3,495,591   

Trinity Health Credit Group, 5.00%, 12/01/35

      4,100        4,571,090   

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

      3,350        3,715,920   

Michigan State Hospital Finance Authority, RB:

     

Ascension Health Senior Credit Group, 5.00%, 11/15/25

      3,700        4,194,357   

McLaren Health Care, Series C, 5.00%, 8/01/15

      1,000        1,010,730   

MidMichigan Obligated Group, Series A, 5.00%, 4/15/16 (b)

      620        647,658   

Michigan State Hospital Finance Authority, RB:

     

MidMichigan Obligated Group, Series A, 5.00%, 4/15/16 (b)

      3,550        3,708,365   

Michigan State Hospital Finance Authority, Refunding RB:

     

Henry Ford Health System, Series A, 5.25%, 11/15/46

      2,500        2,615,925   

Hospital, Oakwood Obligated Group, 5.00%, 11/01/32

      4,000        4,409,560   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/17 (b)

      600        654,630   

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/17 (b)

      3,260        3,556,823   

 

                
2    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015   

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds    Par  
(000)		     Value  

Michigan (continued)

                 

Health (continued)

     

Michigan State Hospital Finance Authority, Refunding RB (concluded):

     

Hospital, Oakwood Obligated Group, Series A, 5.00%, 7/15/17 (b)

    $ 630      $ 687,362   

Hospital, Sparrow Obligated Group, 5.00%, 11/15/17 (b)

      2,200        2,430,406   

Hospital, Sparrow Obligated Group, 5.00%, 11/15/31

      900        960,804   

McLaren Health Care, Series A, 5.75%, 5/15/18 (b)

      4,500        5,126,175   

McLaren Health Care, Series A, 5.00%, 6/01/35

      1,390        1,528,041   

Trinity Health Credit Group, Series A, 6.25%, 12/01/18 (b)

      930        1,097,874   

Trinity Health Credit Group, Series C, 4.00%, 12/01/32

      3,850        3,969,773   

Trinity Healthcare, 6.50%, 12/01/18 (b)

      790        938,307   

Trinity Healthcare, 6.50%, 12/01/33

      210        243,575   

Royal Oak Hospital Finance Authority Michigan, Refunding RB, William Beaumont Hospital:

     

Series D, 5.00%, 9/01/39

      11,000        11,990,990   

Series V, 8.25%, 9/01/18 (b)

      1,000        1,235,880   

Series W, 6.00%, 8/01/19 (b)

      925        1,106,457   

State of Michigan Hospital Finance Authority, Refunding RB, Henry Ford Health, 5.75%, 11/15/39

      1,965        2,210,586   
    

 

 

  
               90,967,559   

Housing — 9.1%

     

Michigan State HDA, RB:

     

Deaconess Tower, AMT (Ginnie Mae), 5.25%, 2/20/48

      1,000        1,012,710   

Series A, 4.75%, 12/01/25

      4,235        4,529,798   

Series A, 4.45%, 10/01/34

      620        638,333   

Series A, 4.63%, 10/01/39

      2,165        2,236,705   

Series A, 4.75%, 10/01/44

      3,100        3,213,770   

Williams Pavilion, AMT (Ginnie Mae), 4.75%, 4/20/37

      3,530        3,566,324   

Michigan State HDA, Refunding RB:

     

Rental Housing, Series D, 4.50%, 10/01/48

      6,230        6,407,244   

Series A, 6.05%, 10/01/41

      4,085        4,447,748   
    

 

 

  
               26,052,632   
Municipal Bonds    Par  
(000)		     Value  

Michigan (continued)

                 

State — 16.2%

     

Michigan Finance Authority, Refunding RB, Detroit Regional Convention Facility Authority Local Project Bonds, 5.00%, 10/01/39

    $ 3,350      $ 3,710,460   

Michigan State Building Authority, Refunding RB, 5.00%, 10/15/31

      1,000        1,051,390   

Michigan State Finance Authority, RB, Local Government Loan Program, Series F, 5.00%, 4/01/31

      1,000        1,077,200   

Michigan Strategic Fund, RB, Michigan Senate Offices Project, Series A, 5.25%, 10/15/40

      1,860        2,080,708   

Michigan Strategic Fund, Refunding RB, Cadillac Place Office Building Project, 5.25%, 10/15/31

      4,350        4,916,457   

State of Michigan, COP, (AMBAC), 0.00%, 6/01/22 (c)(d)

      3,000        2,628,390   

State of Michigan Building Authority, RB, Local Government Loan Program, Series F, 5.25%, 10/01/41

      6,085        6,547,338   

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

     

Series I, 6.25%, 10/15/38

      3,900        4,500,249   

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

     

Series I (AGC), 5.25%, 10/15/24

      4,000        4,619,640   

Series I (AGC), 5.25%, 10/15/25

      2,000        2,302,360   

Series I (AGC), 5.25%, 10/15/26

      600        689,202   

Series I-A, 5.50%, 10/15/45

      1,250        1,409,538   

Series II (AGM), 5.00%, 10/15/26

      4,500        5,121,000   

State of Michigan Trunk Line Fund, RB:

     

5.00%, 11/15/33

      1,850        2,090,555   

5.00%, 11/15/36

      3,125        3,481,781   
    

 

 

  
               46,226,268   

Transportation — 13.9%

     

State of Michigan, RB, GAB (AGM), 5.25%, 9/15/27

      5,250        5,772,900   

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015    3

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

Transportation (concluded)

     

Wayne County Airport Authority, RB, Detroit Metropolitan Wayne County Airport, AMT (NPFGC):

     

5.25%, 12/01/25

    $ 6,270      $ 6,432,895   

5.25%, 12/01/26

      6,300        6,463,674   

5.00%, 12/01/34

      4,435        4,530,131   

5.00%, 12/01/39

      915        997,121   

Wayne County Airport Authority, Refunding RB, AMT (AGC):

     

5.75%, 12/01/25

      4,000        4,504,680   

5.75%, 12/01/26

      1,000        1,126,170   

5.38%, 12/01/32

      8,700        9,692,148   
    

 

 

  
               39,519,719   

Utilities — 15.1%

     

City of Detroit Michigan Sewage Disposal System, Refunding RB, Senior Lien, Series A, 5.25%, 7/01/39

      1,645        1,766,681   

City of Detroit Michigan Water Supply System, RB, Senior Lien, Series A (NPFGC), 5.00%, 7/01/34

      1,425        1,429,760   

City of Detroit Michigan Water Supply System, Refunding RB, 2nd Lien, Series C (AGM), 5.00%, 7/01/29

      10,470        10,754,784   

City of Holland Michigan Electric Utility System, RB, Series A, 5.00%, 7/01/39

      6,425        7,127,445   

City of Lansing Michigan, RB, Board of Water & Light Utilities System, Series A:

     

5.00%, 7/01/27

      1,970        2,263,904   

5.00%, 7/01/31

      4,230        4,767,633   

5.00%, 7/01/37

      2,065        2,276,415   

5.50%, 7/01/41

      3,000        3,504,510   

City of Port Huron Michigan, RB, Water Supply System:

     

5.25%, 10/01/31

      310        337,593   

5.63%, 10/01/40

      1,000        1,126,090   

Michigan Finance Authority, Refunding RB, Senior Lien, Detroit Water and Sewer, Series C-3:

     

5.00%, 7/01/31

      620        690,835   

5.00%, 7/01/32

      3,255        3,608,037   

5.00%, 7/01/33

      1,860        2,055,616   
Municipal Bonds   

Par  

(000)

     Value  

Michigan (concluded)

                 

Utilities (concluded)

     

Michigan Municipal Bond Authority, RB, State Clean Water Revolving Fund, Pooled Project, 5.00%, 10/01/27

    $ 1,240      $ 1,446,249   
    

 

 

  
               43,155,552   
Total Municipal Bonds in Michigan              388,114,509   
    

Guam — 3.0%

                 

State — 3.0%

  

Territory of Guam, RB:

     

Business Privilege Tax Bonds, Series A, 5.25%, 1/01/36

      500        553,500   

Business Privilege Tax Bonds, Series A, 5.13%, 1/01/42

      4,850        5,293,823   

Business Privilege Tax Bonds, Series B-1, 5.00%, 1/01/32

      925        1,016,085   

Business Privilege Tax Bonds, Series B-1, 5.00%, 1/01/37

      40        43,614   

Limited Obligation Bonds, Section 30, Series A, 5.63%, 12/01/29

      1,400        1,539,944   
Total Municipal Bonds in Guam              8,446,966   
    

U.S. Virgin Islands — 2.1%

                 

State — 2.1%

  

Virgin Islands Public Finance Authority, Refunding RB, Series C, 5.00%, 10/01/39

      5,540        5,993,671   
Total Municipal Bonds — 141.2%              402,555,146   
    
                  
Municipal Bonds Transferred to
Tender Option Bond Trusts (e)		  

Michigan — 16.9%

                 

County/City/Special District/School District — 4.3%

  

Lakewood Public Schools Michigan, GO, School Building & Site (AGM) (Q-SBLF), 5.00%, 5/01/17 (b)

      6,771        7,356,196   

 

                
4    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015   

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

(Percentages shown are based on Net Assets)

 

Municipal Bonds Transferred to

Tender Option Bond Trusts (e)

   

Par  

(000)

     Value  

Michigan (concluded)

                 

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

  

Portage Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/31

    $ 4,650      $ 5,055,619   
    

 

 

  
               12,411,815   

Education — 12.5%

     

Michigan State University, Refunding RB, General, Series A, 5.00%, 8/15/38

      6,220        7,019,768   

Saginaw Valley State University, Refunding RB, General (AGM), 5.00%, 7/01/31

      7,500        8,205,675   

Wayne State University, RB, General, Series A, 5.00%, 11/15/40

      6,190        6,904,202   

Wayne State University, Refunding RB, General (AGM), 5.00%, 11/15/35

      12,207        13,482,259   
    

 

 

  
        35,611,904   

Health — 0.1%

     

Michigan Finance Authority, RB, Hospital, Trinity Health Credit Group, 5.00%, 12/01/39

      190        210,754   
             Value  
Total Municipal Bonds Transferred to
Tender Option Bond Trusts — 16.9%		       $ 48,234,473   

Total Long-Term Investments

(Cost — $419,068,259) — 158.1%

  

  

     450,789,619   
    
                  
Short-Term Securities    Shares         

FFI Institutional Tax-Exempt Fund, 0.02% (f)(g)

      7,042,980        7,042,980   

Total Short-Term Securities

(Cost — $7,042,980) — 2.5%

  

  

     7,042,980   
Total Investments (Cost — $426,111,239*) — 160.6%        457,832,599   
Liabilities in Excess of Other Assets — (1.7)%        (4,690,192 ) 

Liability for TOB Trust Certificates, Including
Interest Expense and Fees Payable — (8.2%)

   

     (23,494,757 ) 
VRDP Shares, at Liquidation Value — (50.7%)        (144,600,000 ) 
    

 

 

  

Net Assets Applicable to Common Shares — 100.0%

  

   $ 285,047,650   
    

 

 

  

 

*  As of April 30, 2015, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

      

Tax cost

      $ 402,674,561   
    

 

 

  

Gross unrealized appreciation

      $ 32,066,494   

Gross unrealized depreciation

        (395,456 ) 
    

 

 

  

Net unrealized appreciation

      $ 31,671,038   
    

 

 

  

 

Notes to Schedule of Investments

 

(a)   When-issued security. Unsettled when-issued transactions were as follows:

 

Counterparty      Value        Unrealized
(Depreciation)		  

J.P. Morgan Securities LLC

      $ 8,214,986         $ (48,738 ) 

National Financial Services Group

      $ 2,218,172         $ (37,076 ) 

Stifel Nicolaus & Co., Inc.

      $ 694,028         $ (4,049 ) 

 

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

 

(c)   Security is collateralized by municipal or U.S. Treasury obligations.

 

(d)   Zero-coupon bond.

 

(e)   Represent bonds transferred to a TOB Trust in exchange of cash and residual certificates received by the Fund. These bonds serve as collateral in a secured borrowing.

 

(f)   During the period ended April 30, 2015, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015    5

Schedule of Investments (continued)

    BlackRock MuniYield Michigan Quality Fund, Inc.  (MIY)

 

Affiliate      Shares Held
at July 31,
2014		        Net
Activity		        Shares Held
at April 30,
2015		        Income  

BIF Michigan Municipal Money Fund

        3,889,640           (3,889,640 )         —           —   

FFI Institutional Tax-Exempt Fund

        —           7,042,980           7,042,980         $ 2,641   

 

(g)   Represents the current yield as of report date.

 

Portfolio Abbreviations

 

AGC    Assured Guarantee Corp.
AGM    Assured Guaranty Municipal Corp.
AMBAC    American Municipal Bond Assurance Corp.
AMT    Alternative Minimum Tax (subject to)
COP    Certificates of Participation
EDC    Economic Development Corp.
GAB    Grant Anticipation Bonds
GO    General Obligation Bonds
HDA    Housing Development Authority
NPFGC    National Public Finance Guarantee Corp.
Q-SBLF    Qualified School Bond Loan Fund Program
RB    Revenue Bonds

 

•  

As of April 30, 2015, financial futures contracts outstanding were as follows:

 

Contracts
Short		     Issue   Exchange   Expiration  

Notional

Value

     Unrealized
Depreciation		  
  (55 )    5-Year U.S. Treasury Note   Chicago Board of Trade   June 2015   $ 6,607,305      $ (59,807 ) 
  (142 )    10-Year U.S. Treasury Note   Chicago Board of Trade   June 2015     18,229,250        (160,486 ) 
  Total              $ (220,293 ) 
         

 

 

  

For Fund compliance purposes, the Fund’s sector classifications refer to any 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 advisor. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

 

                
6    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015   

Schedule of Investments (continued)

    BlackRock MuniYield Michigan Quality Fund, Inc.  (MIY)

 

•  

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. 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. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows:

 

  •  

Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

  •  

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  •  

Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Fund’s most recent financial statements as contained in its semi-annual report.

As of April 30, 2015, the following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                 
Investments:                 

Long-Term Investments1

     —         $ 450,789,619         —      $ 450,789,619   

Short-Term Securities

   $ 7,042,980           —         —        7,042,980   
 

 

 

  

Total

   $ 7,042,980         $ 450,789,619         —      $ 457,832,599   
 

 

 

  

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

       

     Level 1        Level 2        Level 3      Total  
Derivative Financial Instruments2             

Liabilities:

                 

Interest rate contracts

   $ (220,293 )         —         —      $ (220,293 ) 

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

       

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015    7

Schedule of Investments (concluded)

    BlackRock MuniYield Michigan Quality Fund, Inc.  (MIY)

 

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial reporting purposes. As of April 30, 2015, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

 

     Level 1        Level 2        Level 3      Total  

Assets:

                 

Cash pledged for financial futures contracts

   $ 254,000           —         —      $ 254,000   

Liabilities:

                 

TOB Trust Certificates

     —         $ (23,487,000 )       —        (23,487,000 ) 

VRDP Shares

     —           (144,600,000 )       —        (144,600,000 ) 
 

 

 

  

Total

   $ 254,000         $ (168,087,000 )       —      $ (167,833,000 ) 
 

 

 

  

During the period ended April 30, 2015, there were no transfers between levels.

 

                
8    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    APRIL 30, 2015   

Item 2 – Controls and Procedures
2(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
2(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 3 – Exhibits
Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BlackRock MuniYield Michigan Quality Fund, Inc.
By:

/s/ John M. Perlowski
John M. Perlowski
Chief Executive Officer (principal executive officer) of
BlackRock MuniYield Michigan Quality Fund, Inc.
Date: June 22, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:

/s/ John M. Perlowski
John M. Perlowski
Chief Executive Officer (principal executive officer) of
BlackRock MuniYield Michigan Quality Fund, Inc.
Date: June 22, 2015
By:

/s/ Neal J. Andrews
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock MuniYield Michigan Quality Fund, Inc.
Date: June 22, 2015