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: 07/31/2017

Date of reporting period: 10/31/2016

Item 1 – Schedule of Investments

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds    Par  
(000)		     Value  

Michigan — 136.4%

                 

Corporate — 4.0%

  

  

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

    $ 14,500      $ 18,694,415   

County/City/Special District/School District — 24.0%

  

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

     

4.38%, 5/01/27

      1,600        1,773,936   

4.50%, 5/01/29

      1,505        1,665,719   

Battle Creek School District Michigan, GO, Refunding (Q-SBLF):

     

5.00%, 5/01/35

      1,100        1,273,789   

5.00%, 5/01/36

      1,500        1,732,980   

5.00%, 5/01/37

      1,170        1,350,683   

Berkley School District, GO, School Building & Site (Q-SBLF), 5.00%, 5/01/35

      2,965        3,426,265   

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

     

5.00%, 4/01/17

      3,090        3,145,156   

5.00%, 4/01/17

      3,250        3,308,012   

5.00%, 4/01/17

      1,000        1,017,850   

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

      5,185        5,930,344   

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

     

5.50%, 5/01/36

      1,200        1,385,304   

5.50%, 5/01/41

      2,185        2,522,408   

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

      1,000        1,019,800   

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

      5,300        5,790,038   

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

     

5.00%, 5/01/32

      1,500        1,741,545   

5.00%, 5/01/33

      1,600        1,848,736   

5.00%, 5/01/34

      1,200        1,381,572   

Dowagiac Union School District, GO (Q-SBLF), 5.00%, 5/01/41

      1,140        1,320,109   
Municipal Bonds    Par  
(000)		     Value  

Michigan (continued)

                 

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

  

Farmington Public School District, GO, Refunding, School Building & Site (AGM):

     

5.00%, 5/01/33

    $ 1,500      $ 1,754,265   

5.00%, 5/01/34

      1,500        1,750,560   

5.00%, 5/01/35

      1,000        1,162,920   

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

      4,950        5,427,031   

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

     

5.50%, 5/01/32

      1,000        1,154,420   

5.50%, 5/01/36

      2,000        2,308,840   

5.50%, 5/01/41

      2,575        2,972,632   

Grandville Public Schools, GO, School Building & Site, Series II (AGM), 5.00%, 5/01/40

      3,250        3,718,780   

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

      6,750        7,745,017   

Kentwood Public Schools, GO, School Building & Site:

     

5.00%, 5/01/41

      1,120        1,301,966   

5.00%, 5/01/44

      1,815        2,105,001   

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

      5,000        5,624,250   

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

      3,375        3,869,944   

Portage Public Schools, GO, Refunding School Building & Site:

     

5.00%, 11/01/34

      1,000        1,176,010   

5.00%, 11/01/36

      1,000        1,169,670   

5.00%, 11/01/37

      1,250        1,457,575   

5.00%, 11/01/35

      1,340        1,569,783   

Rockford Public Schools, GO, Refunding School Building & Site (Q-SBLF):

     

5.00%, 5/01/38

      1,025        1,192,444   

5.00%, 5/01/39

      1,025        1,190,609   

5.00%, 5/01/40

      1,025        1,188,775   

5.00%, 5/01/41

      1,025        1,186,940   

Romeo Community School District, GO, Refunding School Building & Site, Series 1 (Q-SBLF), 5.00%, 5/01/41

      2,250        2,599,470   
 

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016    1

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds    Par  
(000)		     Value  

Michigan (continued)

                 

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

  

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

    $ 3,000      $ 3,064,440   

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

      210        214,484   

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

      2,000        2,366,720   

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

     

5.00%, 5/01/37

      2,850        3,263,592   

5.00%, 5/01/40

      2,630        2,999,068   

5.00%, 5/01/43

      1,530        1,739,503   

Zeeland Public Schools, GO, School Building & Site, Series A (AGM):

     

5.00%, 5/01/33

      1,000        1,154,760   

5.00%, 5/01/34

      1,000        1,149,890   

5.00%, 5/01/35

      1,000        1,145,040   
    

 

 

  
               112,358,645   

Education — 25.1%

     

City of Grand Rapids Michigan, EDC, RB, Ferris State University Project, Series A, 5.50%, 10/01/35

      760        854,749   

Ferris State University, Refunding RB:

     

5.00%, 10/01/41 (b)

      2,250        2,612,430   

General (AGM), 4.50%, 10/01/24

      1,595        1,696,298   

General (AGM), 4.50%, 10/01/25

      1,405        1,494,232   

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

      765        783,383   

Michigan Finance Authority, Refunding RB:

     

College for Creative Studies, 4.00%, 12/01/33

      1,720        1,751,854   

College for Creative Studies, 5.00%, 12/01/36

      1,550        1,675,504   

College for Creative Studies, 5.00%, 12/01/40

      2,900        3,114,252   

College for Creative Studies, 5.00%, 12/01/45

      4,400        4,705,316   
Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

Education (continued)

  

Michigan Finance Authority, Refunding RB (continued):

     

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/28

    $ 8,750      $ 9,132,550   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/29

      5,900        6,138,891   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/30

      2,850        2,950,206   

Series 25 A, AMT, Student Loan Revenue, 4.00%, 11/01/31

      3,150        3,248,343   

Michigan State University, Refunding RB, General, Series C:

     

5.00%, 2/15/40

      8,470        9,347,661   

5.00%, 2/15/44

      1,000        1,103,620   

Michigan Technological University, RB, General, Series A, 5.00%, 10/01/45

      1,800        2,058,570   

Oakland University, RB, General:

     

5.00%, 3/01/32

      400        452,616   

5.00%, 3/01/47

      2,500        2,873,325   

Series A, 5.00%, 3/01/38

      5,490        6,264,968   

Series A, 5.00%, 3/01/43

      16,845        19,138,447   

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

      3,425        3,993,756   

University of Michigan, Refunding RB, 5.00%, 4/01/46

      10,000        11,919,300   

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

      3,000        3,408,720   

Western Michigan University, Refunding RB, General, University and College Improvements:

     

5.25%, 11/15/40

      3,500        4,058,110   

5.25%, 11/15/43

      8,475        9,781,421   

(AGM), 5.25%, 11/15/33

      1,000        1,169,440   

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

      1,750        1,989,610   
    

 

 

  
               117,717,572   

Health — 35.4%

     

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

     

5.00%, 7/01/44

      4,230        4,762,219   

5.00%, 7/01/47

      2,200        2,473,350   
 

 

                
2    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016   

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

Health (continued)

  

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

    $ 7,500      $ 8,274,675   

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

      7,500        8,483,475   

Michigan Finance Authority, RB:

     

Beaumont Health Credit Group, 4.00%, 11/01/46

      2,070        2,099,725   

Sparrow Obligated Group, 5.00%, 11/15/36

      2,500        2,813,950   

Sparrow Obligated Group, 5.00%, 11/15/45

      3,750        4,286,925   

Michigan Finance Authority, Refunding RB:

     

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

      3,000        3,388,950   

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

      1,145        1,034,404   

Henry Ford Health System, 4.00%, 11/15/46

      6,500        6,548,100   

Hospital, McLaren Health Care, 5.00%, 5/15/32

      1,000        1,160,280   

Hospital, McLaren Health Care, 5.00%, 5/15/33

      2,000        2,310,740   

Hospital, McLaren Health Care, 5.00%, 5/15/34

      5,000        5,756,450   

Hospital, McLaren Health Care, 5.00%, 5/15/34

      1,500        1,726,935   

Hospital, McLaren Health Care, 5.00%, 5/15/35

      4,945        5,673,052   

MidMichigan Health, 5.00%, 6/01/39

      1,500        1,708,635   

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

      20        23,731   

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

      5,000        5,816,100   

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

      6,500        7,526,545   

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

      4,980        5,750,755   

Michigan State Hospital Finance Authority, RB:

     

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

      6,000        6,645,180   

Trinity Health Credit, Series A, 5.00%, 12/01/16 (a)

      855        858,010   
Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

Health (continued)

     

Michigan State Hospital Finance Authority, Refunding RB:

     

Henry Ford Health System, 5.75%, 11/15/19 (a)

    $ 3,165      $ 3,607,214   

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

      4,000        4,508,840   

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

      1,000        1,029,910   

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

      5,730        5,901,384   

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

      3,970        4,088,743   

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

      3,330        3,476,254   

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

      1,365        1,409,608   

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

      6,000        6,446,160   

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

      2,250        2,505,397   

Trinity Health, 6.50%, 12/01/18 (a)

      425        473,943   

Trinity Health, 6.50%, 12/01/33

      80        88,292   

Trinity Health Credit Group, 6.50%, 12/01/18 (a)

      1,895        2,113,228   

Trinity Health Credit Group, Series A, 6.13%, 12/01/18 (a)

      940        1,040,994   

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

      1,500        1,665,030   

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

      5,300        5,581,642   

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

     

Series D, 5.00%, 9/01/39

      25,505        28,785,708   

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

      2,000        2,267,960   

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

      1,500        1,703,640   
    

 

 

  
               165,816,133   

Housing — 6.4%

     

Michigan State HDA, RB:

     

M/F Housing, Rental Housing Revenue, Series A, 4.45%, 10/01/34

      1,000        1,069,570   
 

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016    3

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

Housing (continued)

     

Michigan State HDA, RB (continued):

     

M/F Housing, Rental Housing Revenue, Series A, 4.63%, 10/01/39

    $ 3,490      $ 3,685,056   

M/F Housing, Rental Housing Revenue, Series A, 4.75%, 10/01/44

      5,000        5,279,750   

M/F Housing, Series A, 4.30%, 10/01/40

      3,320        3,462,494   

S/F Housing, Series A, 4.75%, 12/01/25

      6,840        7,217,226   

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

      3,390        3,405,696   

Michigan State HDA, Refunding RB, M/F Housing, Series A, 6.05%, 10/01/41

      5,460        5,915,364   
    

 

 

  
               30,035,156   

State — 14.9%

     

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

      5,400        6,078,888   

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

      1,000        1,106,670   

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

      3,000        3,470,490   

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

      7,000        8,074,780   

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

      3,000        2,752,350   

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

      8,595        9,522,401   

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

     

Series I, 6.25%, 10/15/18 (a)

      2,260        2,493,775   

Series I, 6.25%, 10/15/18 (a)

      3,780        4,171,003   

Series I, 6.25%, 10/15/38

      210        230,311   

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

      6,000        6,673,200   
Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

State (continued)

     

State of Michigan Building Authority, Refunding RB, Facilities Program (continued):

     

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

    $ 3,500      $ 3,888,395   

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

      1,000        1,109,740   

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

      2,000        2,306,060   

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

      7,500        8,268,975   

State of Michigan Trunk Line Fund, RB:

     

5.00%, 11/15/33

      3,000        3,484,800   

5.00%, 11/15/36

      5,345        6,169,573   
    

 

 

  
               69,801,411   

Transportation — 11.3%

     

State of Michigan, RB, Garvee, GAB (AGM), 5.25%, 9/15/17 (a)

      8,500        8,829,715   

Wayne County Airport Authority, RB:

     

Detroit Metropolitan Wayne County Airport, AMT (NPFGC), 5.00%, 12/01/39

      1,475        1,647,162   

Series D, 5.00%, 12/01/35

      3,850        4,484,788   

Series D, 5.00%, 12/01/45

      5,000        5,755,500   

Wayne County Airport Authority, Refunding RB, AMT:

     

(AGC), 5.75%, 12/01/25

      4,000        4,349,360   

(AGC), 5.75%, 12/01/26

      4,060        4,414,600   

(AGC), 5.38%, 12/01/32

      13,000        14,014,910   

Series F, 5.00%, 12/01/34

      8,000        9,113,520   
    

 

 

  
               52,609,555   

Utilities — 15.3%

     

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

      2,655        2,965,529   

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

      5,000        5,007,700   

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

      10        10,031   

City of Grand Rapids Michigan Sanitary Sewer System, Refunding RB, Series A (NPFGC), 5.50%, 1/01/22

      1,500        1,681,830   
 

 

                
4    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016   

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Municipal Bonds   

Par  

(000)

     Value  

Michigan (continued)

                 

Utilities (continued)

     

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

    $ 10,000      $ 11,459,800   

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

     

5.00%, 7/01/27

      3,180        3,675,921   

5.00%, 7/01/31

      6,830        7,784,219   

5.00%, 7/01/37

      3,335        3,800,933   

5.50%, 7/01/41

      5,000        5,851,300   

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

     

5.25%, 10/01/31

      500        549,620   

5.63%, 10/01/40

      1,500        1,691,130   

Great Lakes Water Authority Water Supply System Revenue, RB, Second Lien, Series B, 5.00%, 7/01/46

      10,000        11,212,000   

Michigan Finance Authority, Refunding RB:

     

Government Loan Program, 5.00%, 7/01/34

      2,000        2,286,780   

Government Loan Program, 5.00%, 7/01/35

      750        855,098   

Senior Lien, Detroit Water and Sewer, Series C-3 (AGM), 5.00%, 7/01/31

      1,000        1,157,530   

Senior Lien, Detroit Water and Sewer, Series C-3 (AGM), 5.00%, 7/01/32

      5,250        6,049,575   

Senior Lien, Detroit Water and Sewer, Series C-3 (AGM), 5.00%, 7/01/33

      3,000        3,443,520   

Michigan Municipal Bond Authority, RB, State Clean Water Revolving Fund, Pooled Project, 5.00%, 10/01/20 (a)

      2,000        2,278,580   
    

 

 

  
               71,761,096   
Total Municipal Bonds - 136.4%              638,793,983   

Municipal Bonds Transferred to

Tender Option Bond Trusts (e)

    Par  
(000)		     Value  

Michigan — 22.0%

                 

County/City/Special District/School District — 4.1%

  

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

    $ 10,440      $ 11,159,629   

Portage Public Schools Michigan, GO, School Building & Site (AGM), 5.00%, 5/01/18 (a)

      7,500        7,955,250   
    

 

 

  
               19,114,879   

Education — 11.7%

     

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

      10,000        11,660,400   

Saginaw Valley State University, Refunding RB, General (AGM), 5.00%, 7/01/18 (a)

      10,000        10,680,000   

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

      10,000        11,362,400   

Wayne State University, Refunding RB, General (AGM):

     

5.00%, 11/15/18 (a)

      8,880        9,518,912   

5.00%, 11/15/35

      11,120        11,920,078   
    

 

 

  
               55,141,790   

Health — 6.2%

     

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

      10,002        11,217,410   

Michigan Finance Authority, Refunding RB:

     

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

      190        219,406   

Trinity Health Corp., Series 2016, 5.00%, 12/01/45

      10,000        11,645,786   

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

      5,150        5,940,474   
    

 

 

  
               29,023,076   
Total Municipal Bonds Transferred to
Tender Option Bond Trusts in Michigan – 22.0%		         103,279,745   

Total Long-Term Investments

(Cost — $688,774,767) — 158.4%

  

  

     742,073,728   

 

 

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016    5

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

Short-Term Securities    Shares     Value  

BlackRock Liquidity Funds, MuniCash, Institutional Class, 0.44% (f)(g)

      3,015,224      $ 3,015,526   

Total Short-Term Securities

(Cost — $3,015,291) — 0.6%

  

  

     3,015,526   
Total Investments
(Cost — $691,790,058*) — 159.0%		         745,089,254   
Other Assets Less Liabilities — 1.3%        6,205,982   

Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (10.9)%

   

     (51,356,096 ) 

VRDP Shares, at Liquidation Value — (49.4)%

  

     (231,458,961 ) 
    

 

 

  

Net Assets Applicable to Common Shares — 100.0%

  

   $ 468,480,179   
    

 

 

  
*   As of October 31, 2016, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:

 

Tax cost

   $ 640,633,568   
 

 

 

  

Gross unrealized appreciation

   $ 53,820,389   

Gross unrealized depreciation

     (591,760 ) 
 

 

 

  

Net unrealized appreciation

   $ 53,228,629   
 

 

 

  

 

 

 

Notes to Schedule of Investments

 

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

 

(b)   When-issued security.

 

(c)   Security is collateralized by municipal bonds 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 October 31, 2016, investments in issuers considered to be affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate  

Shares Held
at July 31,

2016

     Net
Activity		    

Shares Held

at October 31,

2016

    

Value at
October 31,

2016

     Income  

BlackRock Liquidity Funds, MuniCash, Institutional Class

     4,096,066        (1,080,842 )      3,015,224      $ 3,015,526      $ 3,968   

 

(g)   Current yield as of period end.

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

  
Contracts
Short		     Issue   Expiration     Notional
Value		     Unrealized
Appreciation		  
  (116 )    10-Year U.S. Treasury Note     December 2016      $ 15,036,500      $ 191,473   
  (84 )    Long U.S. Treasury Bond     December 2016      $ 13,668,375        536,709   
  (15 )    Ultra U.S. Treasury Bond     December 2016      $ 2,639,063        144,333   
  Total            $ 872,515   
       

 

 

  

 

                
6    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016   

Schedule of Investments (continued)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

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.

 

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
M/F    Multi-Family
NPFGC    National Public Finance Guarantee Corp.
RB    Revenue Bonds
S/F    Single-Family

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation methodologies are categorized into a fair value hierarchy consisting of three broad levels for financial reporting purposes as follows:

 

  •  

Level 1 – unadjusted price quotations 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)

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. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation methodologies may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments, refer to the Fund’s most recent financial statements as contained in its annual report.

 

                
   BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016    7

Schedule of Investments (concluded)

   

BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)

 

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

     —         $ 742,073,728           —         $ 742,073,728   

Short-Term Securities

   $ 3,015,526           —           —           3,015,526   
 

 

 

  

Total

   $ 3,015,526         $ 742,073,728           —         $ 745,089,254   
 

 

 

  
Derivative Financial Instruments 2                 

Assets:

                 

Interest rate contracts

   $ 872,515           —           —         $ 872,515   

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

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

       

       

 

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

 

   

     Level 1        Level 2        Level 3        Total  

Assets:

                 

Cash pledged for financial futures contracts

   $ 540,950           —           —         $ 540,950   

Liabilities:

                 

TOB Trust Certificates

     —         $ (51,227,057 )         —           (51,227,057 ) 

VRDP Shares at Liquidation Value

     —           (231,900,000 )         —           (231,900,000 ) 
 

 

 

       

 

 

       

 

 

  

Total

   $ 540,950         $ (283,127,057 )         —         $ (282,586,107 ) 
 

 

 

       

 

 

       

 

 

  

During the period ended October 31, 2016, there were no transfers between levels.

 

                
8    BLACKROCK MUNIYIELD MICHIGAN QUALITY FUND, INC.    OCTOBER 31, 2016   

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: December 20, 2016

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: December 20, 2016

 

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

Date: December 20, 2016