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 811-07083

 

Name of Fund: BlackRock MuniYield Arizona Fund, Inc. (MZA)

 

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

 

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock MuniYield Arizona 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: 07/31/2014

 

Date of reporting period: 04/30/2014

 

Item 1 – Schedule of Investments

 
 
Schedule of Investments April 30, 2014 (Unaudited) BlackRock MuniYield Arizona Fund, Inc. (MZA)
  (Percentages shown are based on Net Assets)

 

Municipal Bonds   Par
(000)		  Value
Arizona — 144.0%
Corporate — 16.8%          
County of Maricopa Arizona Pollution Control Corp., Refunding RB, Southern California Edison Co., Series A, 5.00%, 6/01/35  $4,350   $4,599,647 
County of Pima Arizona IDA, RB, Tucson Electric Power Co. Project, Series A, 5.25%, 10/01/40   1,000    1,035,740 
County of Pima Arizona IDA, Refunding, IDRB, Tucson Electric Power Co. Project, Remarketing, Series B, 5.75%, 9/01/29   500    509,690 
County of Pima Arizona IDA, Refunding RB, Tucson Electric Power Co. Project, Series A, 4.00%, 9/01/29   1,000    965,430 
Salt Verde Financial Corp., RB, Senior:          
5.50%, 12/01/29   2,000    2,305,040 
5.00%, 12/01/37   1,500    1,642,845 
              
            11,058,392 
County/City/Special District/School District — 40.1%          
City of Phoenix Arizona Civic Improvement Corp., RB, Subordinate, Civic Plaza Expansion Project, Series A (NPFGC), 5.00%, 7/01/35   3,325    3,459,363 
City of Tucson Arizona, COP (AGC), 5.00%, 7/01/29   1,000    1,071,300 
County of Maricopa Arizona Community College District, GO, Series C, 3.00%, 7/01/22   1,000    1,039,640 
County of Maricopa Arizona School District No. 28 Kyrene Elementary, GO, School Improvement Project of 2010, Series B (a):          
1.00%, 7/01/29   480    527,414 
1.00%, 7/01/30   400    439,236 
County of Maricopa Arizona Unified School District No. 89 Dysart, GO, School Improvement Project of 2006, Series C, 6.00%, 7/01/28   1,000    1,160,330 
County of Mohave Arizona Unified School District No. 20 Kingman, GO, School Improvement Project of 2006, Series C (AGC), 5.00%, 7/01/26   1,000    1,153,980 
           
Municipal Bonds  Par
(000)		   Value 
Arizona (continued)
County/City/Special District/School District (concluded)          
County of Pinal Arizona, COP:          
5.00%, 12/01/26  $1,250   $1,283,787 
5.00%, 12/01/29   1,250    1,263,650 
County of Yuma Arizona Library District, GO (Syncora), 5.00%, 7/01/26   1,000    1,102,060 
Gilbert Public Facilities Municipal Property Corp., RB, 5.50%, 7/01/27   2,000    2,293,240 
Gladden Farms Community Facilities District, GO, 5.50%, 7/15/31   750    756,128 
Greater Arizona Development Authority, RB, Santa Cruz County Jail, Series 2, 5.25%, 8/01/31   1,155    1,213,639 
Marana Municipal Property Corp., RB, Series A, 5.00%, 7/01/28   2,500    2,776,875 
Phoenix-Mesa Gateway Airport Authority, RB, Mesa Project, AMT, 5.00%, 7/01/38   3,600    3,677,220 
Scottsdale Municipal Property Corp., RB, Water & Sewer Development Project, Series A, 5.00%, 7/01/24   1,000    1,141,780 
Vistancia Community Facilities District Arizona, GO:          
6.75%, 7/15/22   1,275    1,278,519 
5.75%, 7/15/24   750    768,278 
              
            26,406,439 
Education — 19.9%          
Arizona Board of Regents, COP, Refunding University of Arizona, Series C, 5.00%, 6/01/30   2,595    2,834,518 
Arizona State University, RB, Series C:          
6.00%, 7/01/25   970    1,140,584 
6.00%, 7/01/26   745    873,386 
6.00%, 7/01/27   425    498,240 
6.00%, 7/01/28   400    465,176 
City of Phoenix Arizona IDA, RB:          
Candeo School, Inc. Project, 6.63%, 7/01/33   500    522,190 
Great Hearts Academies - Veritas Project, 6.30%, 7/01/42   500    507,015 
Series A, 6.75%, 7/01/44 (b)   440    436,858 
County of Maricopa Arizona IDA, RB, Arizona Charter School Project 1, Series A, 6.63%, 7/01/20   550    524,161 

 

     
  BlackRock MuniYield Arizona Fund, Inc. April 30, 2014 1
           

 

 
 
Schedule of Investments (continued) BlackRock MuniYield Arizona Fund, Inc. (MZA)
  (Percentages shown are based on Net Assets)

 

Municipal Bonds  Par
(000)		   Value 
Arizona (continued)
Education (concluded)          
County of Pima Arizona IDA, RB, Arizona Charter Schools Project, Series C:          
6.70%, 7/01/21  $20   $20,033 
6.75%, 7/01/31   45    45,022 
County of Pima Arizona IDA, Refunding RB, Arizona Charter Schools Project, Series O, 5.00%, 7/01/26   985    984,045 
Florence Town Inc., IDA, ERB, Legacy Traditional School Project, Queen Creek and Casa Grande Campuses, 6.00%, 7/01/43   500    481,325 
Northern Arizona University, RB, Stimulus Plan for Economic and Educational Development, 5.00%, 8/01/38   3,000    3,225,120 
Sun Devil Energy Center LLC, Refunding RB, Arizona State University Project, 5.00%, 7/01/30   500    553,820 
              
            13,111,493 
Health — 19.9%          
Arizona Health Facilities Authority, RB, Catholic Healthcare West, Series B-2 (AGM), 5.00%, 3/01/41   500    521,115 
Arizona Health Facilities Authority, Refunding RB:          
Banner Health, Series D, 5.50%, 1/01/38   4,800    5,129,376 
Phoenix Children's Hospital, Series A, 5.00%, 2/01/42   1,000    1,024,460 
City of Tempe Arizona IDA, Refunding RB, Friendship Village of Tempe, Series A, 6.25%, 12/01/42   500    514,545 
County of Maricopa Arizona IDA, RB, Catholic Healthcare West, Series A, 6.00%, 7/01/39   170    188,488 
County of Maricopa Arizona IDA, Refunding RB, Series A:          
Catholic Healthcare West, 5.50%, 7/01/26   1,850    1,864,078 
Samaritan Health Services (NPFGC), 7.00%, 12/01/16 (c)   1,000    1,081,110 
University Medical Center Corp., RB, 6.50%, 7/01/39    500    551,440 
           
Municipal Bonds  Par
(000)		   Value 
Arizona (continued)
Health (concluded)          
University Medical Center Corp., Refunding RB, 6.00%, 7/01/39  $1,000   $1,078,910 
Yavapai County IDA, Refunding RB, Northern Arizona Healthcare System, 5.25%, 10/01/26   1,000    1,132,120 
              
            13,085,642 
Housing — 0.8%          
City of Phoenix & County of Maricopa Arizona IDA, Refunding RB, S/F, AMT (Fannie Mae):          
Series A-1, 5.75%, 5/01/40   50    53,744 
Series A-2, 5.80%, 7/01/40   65    66,152 
City of Phoenix & County of Pima Arizona IDA, RB, S/F, Series 1A, AMT (Fannie Mae), 5.65%, 7/01/39   159    158,934 
City of Phoenix & County of Pima Arizona IDA, Refunding RB, S/F, Series 1, AMT (Fannie Mae), 5.25%, 8/01/38   40    40,657 
City of Phoenix Arizona IDA, Refunding RB, S/F, Series 2, AMT (Fannie Mae), 5.50%, 12/01/38   64    65,584 
County of Maricopa Arizona IDA, RB, S/F, Series 3-B, AMT (Ginnie Mae), 5.25%, 8/01/38   98    98,253 
              
            483,324 
State — 20.8%          
Arizona Department of Transportation State Highway Fund, RB, Series B, 5.00%, 7/01/30   4,000    4,517,960 
Arizona School Facilities Board, COP:          
5.13%, 9/01/21   1,000    1,104,600 
5.75%, 9/01/22   2,000    2,247,940 
Arizona Sports & Tourism Authority, Refunding RB, Multipurpose Stadium Facility Project, Series A:          
5.00%, 7/01/31   1,000    1,074,100 
5.00%, 7/01/36   2,500    2,633,425 
State of Arizona, RB, Lottery Revenue, Series A (AGM), 5.00%, 7/01/29   1,930    2,093,104 
              
            13,671,129 
           

 

     
  BlackRock MuniYield Arizona Fund, Inc. April 30, 2014 2
           

 

 
 
Schedule of Investments (continued) BlackRock MuniYield Arizona Fund, Inc. (MZA)
  (Percentages shown are based on Net Assets)

 

Municipal Bonds  Par
(000)		   Value 
Arizona (concluded)
Transportation — 4.4%          
City of Phoenix Arizona Civic Improvement Corp., RB, Senior Lien, Series A, AMT, 5.00%, 7/01/33  $1,000   $1,098,990 
City of Phoenix Arizona Civic Improvement Corp., Refunding RB:          
Junior Lien, Series A, 5.00%, 7/01/40   1,000    1,040,270 
Senior Lien, AMT, 5.00%, 7/01/32   700    758,849 
              
            2,898,109 
Utilities — 21.3%          
City of Phoenix Arizona Civic Improvement Corp., Refunding RB, Senior Lien, 5.50%, 7/01/22   2,000    2,338,860 
County of Pinal Arizona Electric District No. 3, Refunding RB, 5.25%, 7/01/36   2,500    2,689,750 
County of Pinal Arizona Electric District No. 4, RB, 6.00%, 12/01/38   2,000    2,106,060 
County of Pinal Arizona IDA, RB, San Manuel Facility Project, AMT, 6.25%, 6/01/26   500    483,770 
Gilbert Water Resource Municipal Property Corp., RB, Subordinate Lien (NPFGC), 5.00%, 10/01/29   900    988,614 
Greater Arizona Development Authority, RB, Series B (NPFGC):          
5.00%, 8/01/30   1,600    1,664,976 
5.00%, 8/01/35   1,000    1,041,750 
Salt River Project Agricultural Improvement & Power District, RB, Series A, 5.00%, 1/01/24   1,000    1,127,920 
Salt River Project Agricultural Improvement & Power District, Refunding RB, Series A, 5.00%, 1/01/35   1,500    1,585,950 
              
            14,027,650 
Total Municipal Bonds in Arizona           94,742,178 
Guam — 3.0%
State — 3.0%          
Territory of Guam, RB, Business Privilege Tax Bonds:          
Series A, 5.25%, 1/01/36   65    67,446 
           
Municipal Bonds  Par
(000)		   Value 
Guam (concluded)
State (concluded)          
Territory of Guam, RB (concluded):          
Series A, 5.13%, 1/01/42  $800   $822,152 
Series B-1, 5.00%, 1/01/37   80    81,836 
Series B-1, 5.00%, 1/01/42   1,000    1,019,710 
Total Municipal Bonds in Guam           1,991,144 
Total Municipal Bonds — 147.0%           96,733,322 
           
Municipal Bonds Transferred to
Tender Option Bond (TOB) Trusts (d)		          
Arizona — 11.2%
Utilities — 11.2%          
City of Mesa Arizona, RB, Utility System, 5.00%, 7/01/35   3,000    3,261,210 
City of Phoenix Arizona Civic Improvement Corp., Refunding RB, Water System, Junior Lien, Series A, 5.00%, 7/01/34   3,000    3,354,720 
Salt River Project Agricultural Improvement & Power District, RB, Electric System, Series A, 5.00%, 1/01/38   660    720,911 
Total Municipal Bonds Transferred to
Tender Option Bond (TOB) Trusts — 11.2%		           7,336,841 
Total Long-Term Investments
(Cost — $97,881,583) — 158.2%		           104,070,163 
           
Short-Term Securities 
Shares		      
FFI Institutional Tax-Exempt Fund, 0.03% (e)(f)   1,384,209    1,384,209 
Total Short-Term Securities
(Cost — $1,384,209) — 2.1%		           1,384,209 

 

     
  BlackRock MuniYield Arizona Fund, Inc. April 30, 2014 3
           

 

 
 
Schedule of Investments (continued) BlackRock MuniYield Arizona Fund, Inc. (MZA)
  (Percentages shown are based on Net Assets)

 

           
        Value 
Total Investments
(Cost — $99,265,792*) — 160.3%		          $105,454,372 
Other Assets Less Liabilities — 1.5%           975,100 
Liability for TOB Trust Certificates, Including Interest Expense and Fees Payable — (5.1%)           (3,330,887)
VRDP Shares, at Liquidation Value — (56.7%)           (37,300,000)
              
Net Assets Applicable to Common Shares — 100.0%          $65,798,585 
           

 

* As of April 30, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:  

 

Tax cost

 $ 95,922,911  
Gross unrealized appreciation $ 6,372,759  
Gross unrealized depreciation   (171,298 )
Net unrealized appreciation $ 6,201,461  
         
 

 

Notes to Schedule of Investments

(a) Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(c) Security is collateralized by municipal or U.S. Treasury obligations.
(d) Represent bonds transferred to a TOB. In exchange for which the Fund acquired residual interest certificates. These bonds serve as collateral in a financing transaction.
(e) Investments in issuers considered to be an affiliate of the Fund during the period ended April 30, 2014, 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, 2013		   Net
Activity		   Shares
Held at
April 30, 2014		   Income  
 
  FFI Institutional Tax-Exempt Fund   210,260   1,173,949   1,384,209 $ 124  
 
                                           

 

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

 

Portfolio Abbreviations

   
AGC Assured Guarantee Corp.
AGM Assured Guaranty Municipal Corp.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
ERB Education Revenue Bonds
GO General Obligation Bonds
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bonds
NPFGC National Public Finance Guarantee Corp.
RB Revenue Bonds
Syncora Syncora Guarantee
S/F Single-Family
     

 

  •   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.

 

     
  BlackRock MuniYield Arizona Fund, Inc. April 30, 2014 4
           

 

 
 
Schedule of Investments (concluded) BlackRock MuniYield Arizona Fund, Inc. (MZA)

 

 
• Fair Value Measurements - Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a disclosure 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)
       

 

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.

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. The categorization of a value determined for investments is based on the pricing transparency of the investment 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, please refer to the Fund's most recent financial statements as contained in its semi-annual report.

The following table summarizes the Fund's investments categorized in the disclosure hierarchy as of April 30, 2014:

 

 
  Level 1   Level 2   Level 3   Total  
 
Assets:    
Investments:  
  Long-Term Investments1   — $ 104,070,163   — $ 104,070,163  
  Short-Term Securities $ 1,384,209   —   —   1,384,209  
Total $ 1,384,209 $ 104,070,163   — $ 105,454,372  
                                 

 

1 See above Schedule of Investments for values in each sector or political sub division.

 

The carrying amount for certain of the Fund's assets and/or liabilities approximates fair value for financial reporting purposes. As of April 30, 2014, such liabilities are categorized within the disclosure hierarchy as follows:
  

 

 
  Level 1   Level 2   Level 3   Total  
 
Liabilities:    
  TOB trust certificates   — $ (3,330,000)   — $ (3,330,000)  
  VRDP Shares   —   (37,300,000)   —   (37,300,000)  
Total   — $ (40,630,000)   — $ (40,630,000)  
                                   

 


There were no transfers between levels during the period ended April 30, 2014.

 

     
  BlackRock MuniYield Arizona Fund, Inc. April 30, 2014 5
           

 

 
 
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 Arizona Fund, Inc.
     
  By: /s/ John M. Perlowski
    John M. Perlowski
    Chief Executive Officer (principal executive officer) of
    BlackRock MuniYield Arizona Fund, Inc.
     
  Date: June 23, 2014
     
  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 Arizona Fund, Inc.
     
  Date: June 23, 2014
     
  By: /s/ Neal J. Andrews
    Neal J. Andrews
    Chief Financial Officer (principal financial officer) of
    BlackRock MuniYield Arizona Fund, Inc.
     
  Date: June 23, 2014