MUNIVEST
FUND, INC.
FUND LOGO
Semi-Annual Report
February 29, 1996
This report, including the financial information herein, is
transmitted to the shareholders of MuniVest Fund, Inc. for their
information. It is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund or any
securities mentioned in the report. Past performance results shown
in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock by issuing
Preferred Stock to provide the Common Stock shareholders with a
potentially higher rate of return. Leverage creates risks for Common
Stock shareholders, including the likelihood of greater volatility
of net asset value and market price shares of the Common Stock, and
the risk that fluctuations in the short-term dividend rates of the
Preferred Stock may affect the yield to Common Stock shareholders.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
MuniVest Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MUNIVEST FUND, INC.
The Benefits and
Risks of
Leveraging
MuniVest Fund, Inc. utilizes leveraging to seek to enhance the yield
and net asset value of its Common Stock. However, these objectives
cannot be achieved in all interest rate environments. To leverage,
the Fund issues Preferred Stock, which pays dividends at prevailing
short-term interest rates, and invests the proceeds in long-term
municipal bonds. The interest earned on these investments is paid to
Common Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset
value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively
sloped; that is, short-term interest rates must be lower than long-
term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders. If
either of these conditions change, then the risks of leveraging will
begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value on the fund's Common Stock (that is, its
price as listed on the American Stock Exchange), may, as a result,
decline.Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
Officers and
Directors
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
ASE Symbol
MVF
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
<PAGE>
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
TO OUR SHAREHOLDERS
For the six months ended February 29, 1996, the Common Stock of
MuniVest Fund, Inc. earned $0.313 per share income dividends, which
included earned and unpaid dividends of $0.052 per share. This
represents a net annualized yield of 6.40%, based on a month-end per
share net asset value of $9.82. Over the same period, the Fund's
total investment return was +6.89%, based on a change in per share
net asset value from $9.51 to $9.82, and assuming reinvestment of
$0.313 per share income dividends.
For the six months ended February 29, 1996, the Fund's Preferred
Stock had an average dividend yield as follows: Series A, 3.99%;
Series B, 3.98%, Series C, 3.49%; Series D, 3.48%; and Series E,
3.69%.
The Environment
Throughout most of the six-month period ended February 29, 1996, it
appeared that the US economy was losing momentum. Consumer spending
was barely growing and the industrial sector was at a virtual
standstill. With inflationary pressures subdued, the Federal Reserve
Board responded to the slowing economy by continued modest monetary
policy easing. However, toward the end of the six-month period, a
series of economic releases began to suggest that economic activity
would not continue to be as sluggish as originally expected. A surge
in auto sales and factory orders, rising consumer confidence and
strong housing starts led some investors to believe that economic
activity was again accelerating and further easing by the Federal
Reserve Board unlikely. These concerns were highlighted in early
March with the report of a sharp increase in new jobs in February
and a drop in unemployment.
<PAGE>
The impasse between the Clinton Administration and Congress over the
Federal budget continues. However, both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002. He
now proposes balanced budgets, as do the Republicans. Furthermore,
even without policy changes, it appears that the US Federal budget
deficit could remain stable at about 2% of gross domestic product
for the rest of the decade. This is far better than is the case for
most Group of Seven industrial nations and a great improvement over
the last 15 years. Nevertheless, current indications are that a
piecemeal budget accord is the most likely outcome. Although this
may fall short of investors' best expectations, it appears that the
Federal budget debate over the past year has resulted in a trend
toward a more conservative fiscal policy.
The Municipal Market
Long-term tax-exempt revenue bond yields continued to decline during
the six months ended February 29, 1996. However, during that period
the municipal bond market reversed the trend seen throughout most of
1995 and significantly outperformed the US Treasury bond market.
Buoyed by investor expectations of continuing mild inflation and
weakening domestic economic growth, tax-exempt bond yields steadily
declined as 1995 ended. As measured by the Bond Buyer Revenue Bond
Index, A-rated municipal revenue bond yields declined over 60 basis
points (0.60%) to 5.63%. Economic indicators released in January and
February 1996 suggested earlier expectations of weaker economic
growth may have been overly optimistic. As investor confidence
waned, tax-exempt bond yields rose somewhat to 5.86% at February 29,
1996. US Treasury bond yields followed a similar, although more
volatile, pattern over the last six months. By the end of 1995, US
Treasury bond yields fell approximately 45 basis points to 6.00%.
Yields rose significantly for the remainder of the period to 6.45%.
For the six months ended February 29, 1996, long-term, tax-exempt
bond yields declined a total of 40 basis points while US Treasury
bond yields fell approximately 20 basis points.
<PAGE>
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more
importantly, much of the earlier concern regarding proposed changes
in Federal income tax codes and their effect on the tax treatment of
tax-exempt bond income has dissipated. As the negative revenue
impact of the various proposals such as the flat-tax became
apparent, the likelihood of immediate tax reform quickly diminished.
When the Kemp Commission dealing with Federal income tax reform
released its findings early in 1996, the obvious need for reform was
highlighted. However, no specific recommendations of a flat-tax,
value-added tax or any other specific reforms were made.
Consequently, fears of losing the favored tax treatment of municipal
bond income declined even further. As a percentage of Treasury bond
yields, tax-exempt bond yield ratios quickly declined from 95% to
approximately 90%. This allowed the municipal bond market to
preserve much of the gains it made in recent months. The second
major factor leading to the municipal bond market's recent
improvement has been the return of a more favorable technical
environment. Over the past six months approximately $86 billion in
municipal securities were underwritten, an increase of nearly 40%
versus the comparable period a year earlier. However, much of this
increase has been biased by recent underwritings over the last three
months. Municipal issuers have sought to refinance their existing
higher couponed debt as tax-exempt bond yields have approached their
recent historic lows. Over the past three months such refundings
have contributed to total bond issuance of over $40 billion. At the
same time, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities and proceeds from
early redemptions, however. During January and February 1996,
investors received approximately $35 billion in such assets, nearly
equal to the total amount of bonds issued during the previous three
months. These cash flows helped maintain individual retail investor
demand during recent months. Additionally, major institutional
investors, including certain insurance companies whose underwriting
profits have been cyclically high, have demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the period ended February 29, 1996
to absorb the relative increase in bond issuance and still allow tax-
exempt bond yields to decline further.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury bond market. Investor demand
is likely to remain adequate enough to absorb new bond issuance. In
addition, it is unlikely that the rapid pace of issuance seen thus
far in 1996 will be maintained. The recent rise in yields has made
further bond refinancings economically unfeasible. Since these
refinancings were the driving force of recent bond issuance, as the
amount of these refundings decline, overall issuance should decline.
This should allow the current demand/supply balance to be easily
maintained. Additionally, as a percentage of US Treasury bond
yields, long-term municipal bond yields remain historically
attractive. With long-term, tax-exempt revenue bonds yielding
approximately 90% of their taxable counterparts, should taxable
interest rates resume their decline, municipal bond yields are
poised to decline further.
<PAGE>
Portfolio Strategy
Throughout the six-month period ended February 29, 1996, we
maintained the essentially neutral posture we adopted last August.
Our current strategy is largely to maintain that approach and to
continue to seek to enhance coupon income. However, should interest
rates continue to rise in the coming months, we may increase the
Fund's holdings of more interest rate-sensitive issues in
anticipation of the next decline in interest rates. We believe that,
given the absence of inflationary pressures, any significant
increase in interest rates will place material pressures on the
current economic recovery. We expect such pressures to cause the
quick resumption of the economic slowdown seen in early 1995. Any
material increase in interest rates in 1996 will also be viewed as
an opportunity to add higher-quality issues to the Fund at yield
levels not seen since 1994. Short-term, tax-exempt interest rates
traded in a 3.5%--4.0% range over the last six months. Consequently,
the tax-exempt yield curve remained positive and the leverage of the
Fund's Preferred Stock had a material beneficial impact on the yield
paid to Common Stock shareholders. However, should the spread
between short-term and long-term interest rates narrow, the benefits
of the leverage will decline and the yield on the Fund's Common
Stock will be reduced. (For a complete explanation of the benefits
and risks of leveraging, see page 1 of this report to shareholders.)
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Portfolio Manager
<PAGE>
March 27, 1996
PER SHARE INFORMATION
<TABLE>
Per Share
Selected Quarterly
Financial Data*
<CAPTION>
Net Realized Unrealized Dividends / Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
March 1, 1994 to May 31, 1994 $.21 $ .13 $(.69) $.17 $.03 -- --
June 1, 1994 to August 31, 1994 .20 (.05) .03 .17 .04 -- --
September 1, 1994 to November 30, 1994 .21 (.28) (.77) .17 .04 -- --
December 1, 1994 to February 28, 1995 .20 (.09) 1.04 .16 .04 $.16 --
March 1, 1995 to May 31, 1995 .20 (.04) .34 .15 .04 -- --
June 1, 1995 to August 31, 1995 .20 .02 (.12) .16 .05 -- --
September 1, 1995 to November 30, 1995 .20 .02 .29 .15 .04 -- --
December 1, 1995 to February 29, 1996 .19 .02 (.02) .16 .04 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
March 1, 1994 to May 31, 1994 $10.05 $9.18 $9.875 $8.875 3,341
June 1, 1994 to August 31, 1994 9.83 9.35 9.625 8.25 3,361
September 1, 1994 to November 30, 1994 9.57 8.32 8.375 7.125 7,824
December 1, 1994 to February 28, 1995 9.31 8.49 8.75 7.50 6,243
March 1, 1995 to May 31, 1995 9.62 9.18 8.875 8.00 3,233
June 1, 1995 to August 31, 1995 9.77 9.29 8.6875 8.1875 3,485
September 1, 1995 to November 30, 1995 9.83 9.42 9.00 8.25 4,399
December 1, 1995 to February 29, 1996 10.08 9.76 9.50 8.50 5,324
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
Portfolio
Abbreviations
To simplify the listings of MuniVest Fund, Inc.'s portfolio holdings
in the Schedule of Investments, we have abbreviated the names of
many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate
Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAW Revenue Anticipation Warrants
RIB Residual Interest Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--2.9% AAA NR* $ 9,740 Alabama, HFA, S/F Mortgage Revenue Bonds, Series A, 7.60%
due 10/01/2022 (d) $ 10,384
BBB Baa1 8,750 Courtland, Alabama, IDB, IDR, Refunding (Champion International
Corporation), Series A, 7.20% due 12/01/2013 9,734
BBB Baa1 5,000 Courtland, Alabama, IDB, Solid Waste Disposal Revenue Bonds
(Champion International Corporation Project), AMT, 7%
due 6/01/2022 5,321
<PAGE>
Alaska--3.6% North Slope Boro, Alaska, Revenue Bonds, UT, Series B (c):
AAA Aaa 6,000 5.10%** due 1/01/2002 4,603
AAA Aaa 6,000 5.20%** due 1/01/2003 4,370
AA- Aa3 20,750 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds
(Sohio Pipeline), 7.125% due 12/01/2025 23,077
Arizona--0.7% AA Aaa 5,145 Arizona State University Systems Revenue Bonds, 7.10% due
7/01/2001 (a) 5,915
California-- SP1 MIG1++ 450 California State, GO, RAW, Series C, 5.75% due 4/25/1996 451
0.6% NR* Aa 3,315 University of California, COP (UCLA Central Chiller/Cogeneration),
10.75% due 11/01/1999 4,029
Colorado--2.8% Denver, Colorado, City and County Airport Revenue Bonds:
BBB Baa 11,150 AMT, Series C, 6.75% due 11/15/2013 11,625
BBB Baa 1,905 AMT, Series C, 6.75% due 11/15/2022 1,980
BBB Baa 7,340 Series A, 7.25% due 11/15/2025 8,399
AAA NR* 980 El Paso County, Colorado, S/F Mortgage Revenue Bonds, AMT,
Series A, 8% due 9/01/2022 (d) 1,040
NR* A 1,335 Larimer County, Colorado, COP (Poudre School District No. R-1),
10% due 12/01/2000 1,658
Connecticut-- Connecticut State Development Authority, PCR, Refunding,
0.0% VRDN (g):
A1+ VMIG1++ 300 (Connecticut Light & Power Co. Project), AMT, Series B,
3.40% due 9/01/2028 300
A1+ VMIG1++ 400 (Connecticut Light & Power Co. Project), Series A, 3.15%
due 9/01/2028 400
A1+ VMIG1++ 100 (Western Massachusetts Electric Co.), Series A, 3.20%
due 9/01/2028 100
Delaware--0.5% AAA Aaa 3,630 Delaware Transportation Authority, Transportation System,
Senior Revenue Bonds, 7% due 7/01/2014 (f) 4,160
Florida--1.9% NR* Aaa 9,535 Florida, HFA, Home Ownership Revenue Bonds, AMT, Series G-1,
7.90% due 3/01/2022 (d) 10,092
NR* VMIG1++ 100 Palm Beach County, Florida, Water and Sewer Revenue Bonds,
VRDN, 3.25% due 10/01/2011 (g) 100
A1 VMIG1++ 6,300 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan Program), DATES,
3.25% due 12/01/2015 (g) 6,300
<PAGE>
Georgia--5.7% A A 5,000 Georgia Municipal Electric Authority, Power Revenue
Refunding Bonds, Series V, 6.60% due 1/01/2018 5,578
Georgia Municipal Electric Authority, Special Obligation
Revenue Bonds:
A+ A 12,940 (Fifth Crossover Series--Project One), 6.50% due 1/01/2017 14,412
A A 4,850 (Third Crossover Series), 6.60% due 1/01/2018 5,410
Georgia State, GO, Series F:
AA+ Aaa 8,900 6.50% due 12/01/2006 10,297
AA+ Aaa 7,000 6.50% due 12/01/2007 8,100
AA+ Aa 1,550 Georgia State, HFA, S/F Mortgage Revenue Bonds, AMT,
Sub-Series A-2, 6.55% due 12/01/2027 1,579
A+ A3 4,785 Monroe County, Georgia, Development Authority, PCR, Refunding
(Oglethorpe Power Scherer), Series A, 6.80% due 1/01/2011 5,447
Hawaii--0.4% AA+ NR* 3,500 Hawaii State Department of Budget and Finance, Special Purpose
Mortgage Revenue Bonds (Citizens Utility Company), Series 91A,
6.66% due 11/01/2021 3,728
Idaho--0.6% NR* Aaa 5,000 Idaho Housing Agency, S/F Mortgage Revenue Bonds, AMT,
Series E-2, 6.90% due 1/01/2027 5,202
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Illinois--8.0% AAA Aaa $ 4,700 Chicago, Illinois, Motor Fuel Tax Revenue Bonds, 7.10% due
1/01/2001 (a)(h) $ 5,352
AAA Aaa 8,680 Chicago, Illinois, Water Revenue Bonds, 5% due 11/01/2025 (f) 7,918
AAA Aaa 2,500 Cook County, Illinois, COP, UT (Community College--District
No. 508), 8.75% due 1/01/2004 (f) 3,170
AAA Aaa 4,215 Du Page County, Illinois, Revenue Bonds (Stormwater Project),
UT, 6.55% due 1/01/2002 (a) 4,749
BBB Baa2 7,000 Illinois Development Finance Authority, PCR, Refunding
(Commonwealth Edison Company Project), 7.25% due 6/01/2011 7,627
Illinois Educational Facilities Authority Revenue Bonds:
NR* NR* 2,500 (Chicago Osteopathic Health System), 7.25% due 11/15/2019 (a) 2,993
A+ A1 2,000 Refunding (Loyola University), Series A, 7.125% due 7/01/2021 2,179
Illinois, HDA, Revenue Bonds (M/F Housing Program):
A+ A1 2,000 Refunding, Series A, 7.375% due 7/01/2017 2,170
A+ A1 7,000 Series 5, 6.75% due 9/01/2023 7,212
Illinois Health Facilities Authority Revenue Bonds:
NR* Baa1 2,650 (Holy Cross Hospital Project), 6.70% due 3/01/2014 2,680
NR* Baa1 2,205 (Ravenswood Hospital Medical Center), 6.85% due 6/01/2012 2,268
NR* Baa1 7,375 (Ravenswood Hospital Medical Center), 6.90% due 6/01/2022 7,497
BBB NR* 2,500 Lansing, Illinois, Tax Increment Revenue Refunding Bonds
(Sales Tax--Landings Redevelopment), 7% due 12/01/2008 2,746
Regional Transportation Authority, Illinois, GO:
AAA Aaa 3,500 Series A, 7.20% due 11/01/2020 (h) 4,287
AAA Aaa 4,000 UT, Series C, 7.75% due 6/01/2020 (f) 5,197
AAA Aaa 2,500 UT, Series C, 7.10% due 6/01/2025 (f) 2,868
<PAGE>
Indiana--8.4% A NR* 5,250 Indiana Bond Bank Revenue Bonds (State Revolving
Fund Program), Series A, 6.75% due 2/01/2017 5,729
NR* Aaa 6,855 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds,
Series A, 6.80% due 1/01/2017 7,132
NR* A 6,000 Indiana Transportation Finance Authority, Airport Facilities,
Lease Revenue Bonds (United Air), Series A, 6.75% due 11/01/2011 6,413
A+ A1 7,195 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A, 6.80% due 12/01/2016 8,373
Indianapolis, Indiana, Local Public Improvement Bond Bank
Revenue Bonds:
A+ NR* 15,335 Refunding, Series D, 6.75% due 2/01/2014 17,264
A+ NR* 18,350 Refunding, Series D, 6.75% due 2/01/2020 19,907
NR* A1 7,000 Series C, 6.70% due 1/01/2002 (a) 7,933
Iowa--0.5% NR* Aaa 3,915 Iowa Finance Authority, S/F Mortgage Revenue Bonds, AMT,
Series A, 7.90% due 11/01/2022 (d) 4,132
Kentucky--0.0% AAA VMIG1++ 300 Daviess County, Kentucky, Solid Waste Disposal Facility
Revenue Bonds (Scott Paper Company Project), VRDN, AMT,
Series A, 3.40% due 5/01/2024 (g) 300
Louisiana--1.0% A- A3 5,000 De Soto Parish, Louisiana, Environmental Improvement Revenue
Refunding Bonds (International Paper Co. Project), AMT, Series B,
6.55% due 4/01/2019 5,177
NR* Baa2 3,000 Lake Charles, Louisiana, Harbor and Terminal District,
Port Facilities Revenue Refunding Bonds (Trunkline Long Company
Project), 7.75% due 8/15/2022 3,395
Maryland--0.3% AAA Aaa 2,500 Maryland State and Local Facilities Loans, Second Series,
4.50% due 10/15/2002 2,539
Massachusetts-- AAA Aaa 2,035 Boston, Massachusetts, Water and Sewer Commission Revenue
7.1% Bonds, Series A, 9.25% due 1/01/2011 (k) 2,799
A+ A1 3,010 Massachusetts Bay Transportation Authority, Revenue Refunding
Bonds (Massachusetts General Transportation Systems), Series A,
UT, 7% due 3/01/2019 3,586
AAA Aaa 7,300 Massachusetts State Health and Educational Facilities Authority
Revenue Bonds, 6.70% due 8/15/2021 (i) 7,982
Massachusetts State, HFA (Residential Development) (l):
AAA Aaa 3,375 Series A, 6.90% due 11/15/2024 3,547
AAA Aaa 2,360 Series D, Section 8, 6.875% due 11/15/2021 2,473
A A 37,130 Massachusetts State Water Resource Authority, Series A,
6.50% due 7/15/2019 41,715
<PAGE>
Michigan--6.5% AAA Aaa 4,050 Detroit, Michigan, Water Supply System Revenue Bonds,
Second Lien, Series A, 5.50% due 7/01/2025 (c) 3,974
BBB Baa1 15,265 Dickinson County, Michigan, Economic Development Corporation,
PCR, Refunding (Champion International Corporation Project),
5.85% due 10/01/2018 14,983
AAA Aaa 2,140 Ingham County, Michigan, Building Authority, Revenue Refunding
Bonds, 5% due 11/01/2016 (h) 2,014
BBB NR* 4,385 LaPeer, Michigan, Economic Development Corporation, Limited
Obligation Revenue Bonds (LaPeer Health Services Project),
8.50% due 2/01/2000 (a) 5,126
AA+ NR* 6,000 Michigan State, HDA, S/F Mortgage Revenue Refunding Bonds,
AMT, Series D, 6.85% due 6/01/2026 6,235
Michigan State Hospital Finance Authority Revenue Bonds:
NR* Aaa 2,000 (McLaren Obligation Group), Series A, 7.50% due 9/15/2001 (a) 2,348
AAA Aaa 1,000 (Saint John Hospital & Medical Center), Series A, 5% due
5/15/2005 (h) 1,015
A Aaa 2,000 (Sisters of Mercy Health Corp.), Series J, 7.375% due
2/15/2001 (a) 2,307
Michigan State Hospital Finance Authority, Revenue
Refunding Bonds, Series A:
A A 3,250 (Detroit Medical Center), 6.25% due 8/15/2013 3,341
A A 7,930 (Detroit Medical Center), 6.50% due 8/15/2018 8,294
NR* A1 1,380 (McLaren Obligation Group), 5.375% due 10/15/2013 1,319
AA- Aa 2,500 Royal Oak, Michigan, Hospital Finance Authority, Revenue
Refunding Bonds (Beaumont Properties, Inc.), Series E, 6.625%
due 1/01/2019 2,667
AAA Aaa 3,600 Western Michigan University, Revenue Refunding Bonds,
Series A, 5% due 7/15/2021 (f) 3,318
Minnesota--3.4% A1+ NR* 300 Beltrami County, Minnesota, Environmental Control Revenue
Bonds (Northwood Panelboard Co. Project), VRDN, AMT, 3.35%
due 7/01/2025 (g) 300
A1+ NR* 200 Hubbard County, Minnesota, Solid Waste Disposal Revenue
Bonds (Potlatch Corporation Project), VRDN, AMT, 3.40%
due 8/01/2014 (g) 200
Minnesota State, HFA, S/F Mortgage Revenue Bonds:
AA+ Aa 3,750 AMT, Series L, 6.70% due 7/01/2020 3,861
AA+ Aa 5,925 AMT, Series M, 6.70% due 7/01/2026 6,101
AA+ Aa 7,500 Series E, 6.80% due 7/01/2025 7,510
AA+ Aa 4,250 Series H, 6.70% due 1/01/2018 4,471
AA+ Aa 2,000 Series Q, 6.70% due 1/01/2017 2,107
BBB Baa1 5,700 Sartell, Minnesota, PCR, Refunding (Champion International
Corporation), 6.95% due 10/01/2012 6,119
Missouri--0.3% AAA Aaa 2,600 Missouri State Regional Convention and Sports Complex
Authority, Series A, 6.90% due 8/15/2003 (a) 2,997
<PAGE>
Nebraska--0.3% AAA Aaa 2,255 Nebraska Investment Finance Authority, S/F Mortgage Revenue
Bonds, AMT, Series 1, 8.125% due 8/15/2038 (c) (d) 2,366
Nevada--1.8% AAA Aaa 5,000 Clark County, Nevada, School District Revenue Bonds,
6.75% due 12/15/2004 (a) (f) 5,815
AA Aa 2,500 Nevada State Colorado River Community Revenue Bonds,
6.50% due 7/01/2004 (a) 2,845
AAA NR* 1,235 Nevada State Housing Division, Housing Revenue Bonds
(Multi-Unit), Issue B, AMT, 7.45% due 10/01/2017 (l) 1,334
Nevada State Housing Division, Housing Revenue Bonds
(S/F Program), AMT:
NR* Aa 2,580 Series A, 6.55% due 10/01/2012 2,633
AAA Aaa 3,245 Series E, 7% due 10/01/2019 3,405
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New Jersey-- AAA Aaa $ 3,000 New Jersey State Housing and Mortgage Finance Agency
0.8% Revenue Bonds (Home Buyer), AMT, Series M, 6.95% due
10/01/2022 (c) $ 3,132
AAA Aaa 3,100 Washington Township, New Jersey, School Board of
Education (Gloucester County School District), 5% due
2/01/2006 (c) 3,166
New York--9.9% New York City, New York, GO, UT:
BBB+ Baa1 1,880 Series A, 7.75% due 3/15/2000 (a) 2,152
BBB+ Baa1 120 Series A, 7.75% due 3/15/2004 130
BBB+ Baa1 4,500 Series B, 7% due 6/01/2016 4,853
BBB+ Baa1 1,500 Series B, Sub-Series B-1, 7% due 8/15/2016 1,641
BBB+ Baa1 4,000 Series B, Sub-Series B-1, 7.25% due 8/15/2019 4,485
BBB+ Baa1 5,000 Series D, 9.50% due 8/01/2002 5,993
BBB+ Baa1 6,290 Series F, 8.10% due 11/15/1999 6,970
BBB+ Baa1 1,610 Series I, 7.50% due 8/15/2002 1,731
BBB+ Baa1 5,450 Series I, 7.50% due 8/15/2005 5,927
A- Aaa 6,635 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series C, 7.75%
due 6/15/2001 (a) 7,819
New York State Local Government Assistance Corporation
Revenue Bonds:
A Aaa 8,000 Series A, 7.125% due 4/01/2002 (a) 9,318
AAA Aaa 7,000 Series B, 7% due 4/01/2001 (a) 7,886
AAA Aaa 10,570 Series B, 7.50% due 4/01/2001 (a) 12,318
A A 13,000 Series C, 7% due 4/01/2010 14,513
<PAGE>
North A+ Aa 850 North Dakota State, HFA, S/F Mortgage Revenue Bonds,
Dakota--0.1% Series C, 8.75% due 1/01/2019 900
Ohio--3.4% Ohio, HFA, S/F Mortgage Revenue Bonds, AMT (d):
AAA NR* 10,525 Series A, 7.65% due 3/01/2029 11,138
AAA Aaa 8,135 Series B, 6.903% due 3/31/2031 8,493
AAA NR* 4,745 Series C, 8.125% due 3/01/2020 5,029
AAA NR* 4,335 Series C, 7.85% due 9/01/2021 4,591
Pennsyl- AA- Aa3 5,000 Delaware County, Pennsylvania, IDA, Revenue
vania--4.1% Refunding Bonds (Resource Recovery Project), Series A,
8.10% due 12/01/2013 5,220
Pennsylvania, HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa 9,260 Series R, 8.125% due 10/01/2019 9,611
AA+ Aa 4,890 Series U, 7.80% due 10/01/2020 5,193
NR* Aaa 3,965 Pennsylvania Intergovernmental Cooperative Authority,
Special Tax Revenue Bonds (City of Philadelphia Funding Program),
6.80% due 6/15/2002 (a) 4,490
AAA Aaa 10,000 Pennsylvania State Higher Education Assistance Agency, Student
Loan Revenue Bonds, AMT, RIB, 9.886% due 9/03/2026 (h)(j) 11,275
A1+ VMIG1++ 100 Philadelphia, Pennsylvania, Hospitals and Higher Education
Facilities Authority, Hospital Revenue Bonds (Children's Hospital
of Philadelphia Project), VRDN, 3.25% due 3/01/2027 (g) 100
Rhode AA+ A1 6,000 Rhode Island Housing and Mortgage Finance Corporation,
Island--1.4% INFLOS, AMT, Series B, 10.253% due 4/01/2024 (j) 6,577
AAA Aaa 6,000 Rhode Island State Health and Education Building Corporation
Revenue Bonds (Rhode Island NHospital), 6.85% due 8/15/2021 (f) 6,528
South AAA Aaa 2,045 Richland County, South Carolina, Hospital Facilities Revenue
Carolina-- Refunding Bonds (South Carolina Baptist Hospital), Series B,
1.1% 10% due 8/01/2001 (h) 2,602
South Carolina State, GO:
AA+ Aaa 2,500 Refunding, UT, 4.40% due 4/01/2004 2,493
AA+ Aaa 2,050 Series A, 5% due 2/01/2005 2,120
AA+ Aaa 2,150 Series A, 5% due 2/01/2006 2,211
Tennessee--0.7% AA+ Aaa 5,660 Tennessee State, GO, Series A, 5% due 5/01/2006 5,837
<PAGE>
Texas--8.1% Austin, Texas, Utility System Revenue Bonds (Prior Lien) (a):
AAA Aaa 20,000 10% due 5/15/2000 (e) 24,415
AAA Aaa 6,000 Series A, 9.50% due 5/15/2000 7,216
A1+ VMIG1++ 100 Brazos River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Co.), VRDN, AMT, Series C, 3.40% due 6/01/2030 (g) 100
AAA Aaa 3,040 Copperas Cove, Texas, Independent School District Revenue
Bonds, UT, 6.90% due 8/15/2004 (a) (b) 3,533
BBB Baa1 4,000 Gulf Coast, Texas, IDA, Revenue Refunding Bonds (Champion
International Corporation), 7.125% due 4/01/2010 4,374
AA- Aa 2,400 Harris County, Texas, Certificates of Obligation, Tax and
Revenue Bonds, 10% due 10/01/2002 3,160
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
AAA Aaa 2,985 (Hermann Hospital Project), 6.375% due 10/01/2024 (c) 3,180
A- A 3,500 (Memorial Hospital Systems Project), Series A, 6.60% due
6/01/2014 3,650
A- A 2,500 (Memorial Hospital Systems Project), Series A, 6.625% due
6/01/2024 2,624
AA Aa 5,290 (Saint Luke's Episcopal Hospital Project), Series A, 6.625%
due 2/15/2012 5,593
AA Aa 11,400 North Central, Texas, Health Facility Development Corporation
Revenue Bonds (Baylor University Medical Center), Series A,
6.85% due 5/15/2016 12,906
Utah--2.2% A1+ VMIG1++ 4,000 Emery County, Utah, PCR, Refunding (Pacificorp Projects),
VRDN, 3.25% due 11/01/2024 (g) (h) 4,000
AA- Aa 16,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 5% due 7/01/2021 14,561
Virginia--2.3% AAA Aaa 2,390 Portsmouth, Virginia, GO, UT, 5% due 8/01/2005 (f) 2,460
Virginia State HDA, Commonwealth Mortgage Revenue Bonds:
AA+ Aa1 2,950 AMT, Series G, Sub-Series G-2, 6.65% due 1/01/2019 3,021
AA+ Aa1 10,000 Series H, 6.85% due 7/01/2014 10,571
AA+ Aa1 4,400 Series J, Sub-Series J-2, 6.75% due 7/01/2017 4,599
Washington--5.9% Washington State Housing Finance Commission, S/F Mortgage
Revenue Refunding Bonds (d):
AAA NR* 8,330 Series A, 7.70% due 7/01/2016 8,888
AAA NR* 2,395 Series D, 6.95% due 7/01/2017 (l) 2,515
Washington State Public Power Supply System, Revenue
Refunding Bonds:
AA Aa 3,000 (Nuclear Project No. 1), Series A, 7% due 7/01/2008 3,446
AA Aa 5,000 (Nuclear Project No. 1), Series A, 6.875% due 7/01/2017 5,418
AA Aa 5,000 (Nuclear Project No. 1), Series B, 7.25% due 7/01/2009 5,845
AA Aa 14,320 (Nuclear Project No. 1), Series B, 7.125% due 7/01/2016 16,624
AA Aa 2,500 (Nuclear Project No. 2), Series B, 7% due 7/01/2012 2,720
AAA Aaa 5,000 (Nuclear Project No. 2), Series C, 7.625% due 1/01/2001 (a) 5,807
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Wisconsin--0.9% AA Aa $ 3,370 Wisconsin State, GO, Series C, 5% due 5/01/2003 $ 3,487
NR* A 4,000 Wisconsin State Health and Educational Facilities
Authority, Revenue Refunding Bonds (Saint Claire Hospital
Project), 7% due 2/15/2011 4,268
Wyoming--1.2% BBB Baa2 7,475 Sweetwater County, Wyoming, Solid Waste Disposal Revenue
Bonds (FMC Corporation Project), AMT, Series B, 6.90%
due 9/01/2024 7,863
AA Aa 2,500 Wyoming Community Development Authority, S/F Mortgage
Revenue Bonds, AMT, Series H, 7.10% due 6/01/2012 2,655
Total Investments (Cost--$822,641)--99.4% 870,046
Other Assets Less Liabilities--0.6% 5,392
--------
Net Assets--100.0% $875,438
========
<FN>
(a)Prerefunded.
(b)PSF Guaranteed.
(c)MBIA Insured.
(d)GNMA Collateralized.
(e)BIGI Insured.
(f)FGIC Insured.
(g)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at February 29, 1996.
(h)AMBAC Insured.
(i)FSA Insured.
(j)The interest rate is subject to change periodically andinversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at February 29, 1996.
(k)Escrowed to maturity.
(l)FNMA Collateralized.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of February 29, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$822,641,377)(Note 1a) $870,046,109
Cash 59,475
Receivables:
Interest $ 12,772,143
Securities sold 1,385,624 14,157,767
------------
Prepaid expenses and other assets 19,682
------------
Total assets 884,283,033
------------
Liabilities: Payables:
Securities purchased 7,463,624
Dividends to Common Stock shareholders (Note 1e) 847,485
Investment adviser (Note 2) 349,869 8,660,978
------------
Accrued expenses and other liabilities 183,917
------------
Total liabilities 8,844,895
------------
Net Assets: Net assets $875,438,138
============
Capital: Preferred Stock, par value $.10 per share; 10,000,000 shares
authorized (11,000 shares of AMPS* issued and outstanding,
at $25,000 per share liquidation preference) (Note 4) $275,000,000
Common Stock, par value $.10 per share; 150,000,000 shares
authorized; 61,123,140 shares issued and outstanding (Note 4) $ 6,112,314
Paid-in capital in excess of par 563,529,671
Undistributed investment income--net 6,582,161
Accumulated realized capital losses on investments--net (Note 5) (20,890,021)
Accumulated distributions in excess of realized capital gains--net (2,300,719)
Unrealized appreciation on investments--net 47,404,732
------------
Total--Equivalent to $9.82 net asset value per share of
Common Stock (market price--$9.1875) 600,438,138
------------
Total capital $875,438,138
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended February 29, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 27,024,196
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 2,168,058
Commission fees (Note 4) 344,980
Transfer agent fees 81,058
Accounting services (Note 2) 59,730
Professional fees 44,460
Printing and shareholder reports 32,603
Custodian fees 29,060
Directors' fees and expenses 16,044
Pricing fees 11,662
Listing fees 9,794
Other 14,949
------------
Total expenses 2,812,398
------------
Investment income--net 24,211,798
------------
Realized & Unreal- Realized gain on investments--net 2,483,919
ized Gain on Change in unrealized appreciation on investments--net 16,784,836
Investments--Net ------------
Net Increase in Net Assets Resulting from Operations $ 43,480,553
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
February 29, August 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 24,211,798 $ 49,422,296
Realized gain (loss) on investments--net 2,483,919 (23,373,939)
Change in unrealized appreciation on investments--net 16,784,836 29,954,817
------------ ------------
Net increase in net assets resulting from operations 43,480,553 56,003,174
------------ ------------
Dividends & Investment income--net:
Distributions to Preferred Stock (5,104,690) (10,565,338)
Shareholders Common Stock (19,148,474) (38,887,886)
(Note 1e): Realized gain on investments--net, to Common Stock shareholders -- (7,718,708)
In excess of realized gain on investments--net, to Common Stock
shareholders -- (2,300,719)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (24,253,164) (59,472,651)
------------ ------------
Net Assets: Total increase (decrease) in net assets 19,227,389 (3,469,477)
Beginning of period 856,210,749 859,680,226
------------ ------------
End of period* $875,438,138 $856,210,749
============ ============
<FN>
*Undistributed investment income--net $ 6,582,161 $ 6,623,527
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios
have been derived from information provided For the Six
in the financial statements. Months Ended
February 29, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.51 $ 9.57 $ 10.65 $ 10.19 $ 9.76
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .39 .81 .84 .92 .97
Realized and unrealized gain (loss) on
investments--net .31 .10 (.78) .69 .58
-------- -------- -------- -------- --------
Total from investment operations .70 .91 .06 1.61 1.55
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.31) (.64) (.70) (.78) (.79)
Realized gain on investments--net -- (.12) (.32) (.25) (.16)
In excess of realized gain on investments--net -- (.04) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.31) (.80) (1.02) (1.03) (.95)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends to Preferred Stock shareholders
from investment income--net (.08) (.17) (.12) (.12) (.17)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.82 $ 9.51 $ 9.57 $ 10.65 $ 10.19
======== ======== ======== ======== ========
Market price per share, end of period $ 9.1875 $ 8.5625 $ 8.50 $ 11.25 $ 11.25
======== ======== ======== ======== ========
Total Investment Based on market price per share 11.07%+++ 10.88% (16.29%) 10.39% 20.39%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 6.89%+++ 9.38% (0.44%) 15.38% 14.52%
======== ======== ======== ======== ========
Ratios to Average Expenses .65%* .66% .64% .65% .65%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net 5.58%* 5.91% 5.76% 6.17% 6.58%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $600,438 $581,211 $584,680 $642,530 $601,049
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $275,000 $275,000 $275,000 $275,000 $275,000
======== ======== ======== ======== ========
Portfolio turnover 30.92% 71.95% 100.92% 73.38% 112.10%
======== ======== ======== ======== ========
<PAGE>
Leverage: Asset coverage per $1,000 $ 3,183 $ 3,113 $ 3,126 $ 3,336 $ 3,186
======== ======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 497 $ 922 $ 633 $ 633 $ 878
Share on Series B--Investment income--net 497 946 637 642 882
Preferred Stock Series C--Investment income--net 435 947 644 624 861
Outstanding:++ Series D--Investment income--net 434 1,014 633 644 915
Series E--Investment income--net 460 968 626 636 884
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effect of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Dividends per share have been adjusted to reflect a four-for-one
stock split on December 1, 1994.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniVest Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management
investment company. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the American Stock Exchange under the symbol MVF. The
following is a summary of significant accounting policies followed
by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts, which are traded on exchanges, are valued at
their closing prices as of the close of such exchanges. Options,
which are traded on exchanges, are valued at their last sale price
as of the close of such exchanges or, lacking any sales, at the last
available bid price. Securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market
value. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Directors of the
Fund, including valuations furnished by a pricing service retained
by the Fund, which may utilize a matrix system for valuations. The
procedures of the pricing service and its valuations are reviewed by
the officers of the Fund under the general supervision of the Board
of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
<PAGE>
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions and post-October losses.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."), which is the limited
partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 29, 1996 were $269,963,871 and
$262,591,551 respectively.
Net realized and unrealized gains (losses) as of February 29, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 4,139,952 $47,404,323
Short-term investments 16,405 409
Financial futures contracts (1,672,438)
------------ -----------
Total $ 2,483,919 $47,404,732
============ ===========
As of February 29, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $47,404,732, of which $48,578,038
related to appreciated securities and $1,173,306 related to
depreciated securities. The aggregate cost of investments at
February 29, 1996 for Federal income tax purposes was $822,641,377.
4. Capital Stock Transactions:
Common Stock
At February 29, 1996, the Fund had one class of shares of Common
Stock, par value $.10 per share, of which 150,000,000 shares were
authorized. For the six months ended February 29, 1996 shares issued
and outstanding remained constant at 61,123,140. At February 29,
1996, total paid-in capital amounted to $569,641,985.
Preferred Stock
The Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods for each series. The Fund is authorized to issue
10,000,000 shares or Preferred Stock having a par value of $.10 per
share. The yields in effect at February 29, 1996 were as follows:
Series A, 3.385%; Series B, 3.385%; Series C, 3.35%; Series D,
3.45%; and Series E, 3.24%.
At February 29, 1996, there were 11,000 AMPS shares issued and
outstanding with a liquidation preference of $25,000 per share, plus
accumulated and unpaid dividends of $114,536.
<PAGE>
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate of approximately one-quarter of 1%
calculated on the proceeds of each auction. For the six months ended
February 29, 1996, MLPF&S, an affiliate of FAM, received $179,072 as
commissions.
5. Capital Loss Carryforward:
At August 31, 1995, the Fund had a net capital loss carryforward of
approximately $5,673,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On March 3, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.051664 per share, payable on March 28, 1996 to shareholders of
record as of March 19, 1996.
