MUNIVEST
FUND II, INC.
Semi-Annual Report April 30, 1994
This report, including the financial information herein,
is transmitted to the shareholders of MuniVest Fund II, 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 share-
holders 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 of 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.
MuniVest Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MUNIVEST FUND II, INC.
The Benefits and
Risks of
Leveraging
MuniVest Fund II, 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.
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. 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.
<PAGE>
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
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
ASE Symbol
MVT
<PAGE>
DEAR SHAREHOLDER
For the six-month period ended April 30, 1994, the Common Stock
of MuniVest Fund II, Inc. earned $0.505 per share income
dividends, which includes earned and unpaid dividends of $0.071.
This represents a net annualized yield of 7.55%, based on a
month-end net asset value of $13.48 per share. Over the same
period, the total investment return on the Fund's Common Stock
was -7.58%, based on a change in per share net asset value from
$15.15 to $13.48, and assuming reinvestment of $0.511 per share
income dividends paid.
For the six-month period ended April 30, 1994, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
2.39%; Series B, 2.99%; and Series C, 2.30%.
The Environment
Inflationary expectations and investor sentiment changed for the
worse during the three-month period ended April 30, 1994.
Following stronger-than-expected economic results through year-
end 1993, the Federal Reserve Board broke with tradition
on February 4, 1994 and publicly announced a modest 25 basis
point (0.25%) increase in short-term interest rates. At the March
22 meeting of the Federal Open Market Committee, the Federal
Reserve Board again raised the Federal Funds rate by 25 basis
points, followed by another 25 basis point increase on April 18.
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income
investors focused on Chairman Greenspan's implicit promise of
further tightening should the rate of inflation accelerate, and
bond prices declined sharply. The setback in the bond market was
also reflected in greater stock market volatility. While the
second and third increases in the Federal Funds rate were less of
a surprise, investors remained concerned that interest rates
would trend upward sharply as the central bank aggressively
attempted to contain the inflationary pressures of an improving
economy. At the same time, highly leveraged investors were forced
to liquidate positions in the face of declining stock and bond
prices. Investor confidence was not restored with the
announcement of the surprisingly slow 2.6% gross domestic product
growth rate for the first calendar quarter of 1994. Instead,
investors focused on the higher-than-expected (but still moderate)
broad inflation measures and became concerned that business activity
was beginning to stagnate as inflationary pressures were increasing.
<PAGE>
The volatility in the US capital markets was mirrored in
international markets during the period. Political and economic
developments, along with concerns of heightened global
inflationary pressures, led to a sell-off in most capital
markets, especially the emerging markets that had appreciated
strongly in 1993.
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond yield
exhibited considerable volatility as they rose to their highest
level in the past two years. As measured by the Bond Buyer
Revenue Bond Index, the yield on newly issued municipal bonds
maturing in 30 years rose over 90 basis points to 6.42% by the
end of April. Yields on seasoned municipal revenue bonds rose by
over 100 basis points in sympathy with the equally dramatic
increase in long-term US Treasury bond yields. By the end of
April, yields on US Treasury securities rose by over 95 basis
points to approximately 7.30%.
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid
economic growth seen late last year with continued low inflation.
Following the initial interest rate increase by the Federal
Reserve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began to
sell securities in anticipation of further interest rate
increases. This fear led investors to withdraw from the tax-
exempt market. From early February to the end of March, total
assets of all tax-exempt bond funds declined by $14 billion to
$247 billion. This decline in investor demand, coupled with fears
that the robust economic recovery seen during the fourth quarter
of 1993 would continue well into 1994, helped push municipal bond
yields higher in February and March. Attracted by tax-exempt
yields in excess of 6.25%, investor demand returned in April,
allowing yields to decline approximately 15 basis points to end
the April period at approximately 6.40%.
<PAGE>
The magnitude of the rise in tax-exempt bond yields experienced
during the past six months has not been seen since 1987 when
municipal bond rates rose 250 basis points between March and
October of that year. It is very important to note that the
recent municipal bond price declines were largely the result of
consistent and insistent selling pressures over the last two
months. In 1987, the tax-exempt bond market was much more
volatile and, at times, chaotic as investors sought to liquidate
positions without concern for fundamental value. For the most
part, the recent price deterioration has been orderly, and the
municipal bond market's liquidity and integrity have not been
challenged or jeopardized. To a large extent, the municipal bond
market has continued to be supported by its strong technical position.
New-issue volume for the last six months has been less than $105
billion. This represents a decline of approximately 20% versus the
comparable period a year ago. This decline was expected and has been
discussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issuance
to continue since we anticipate recent yield increases to
significantly impact future municipal bond issuance. Just as
higher mortgage rates slow home mortgage refinancings, the recent
rise in bond yields will prevent bond refinancings from becoming
the driving force in bond issuance in 1994 as they were in 1993.
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yielded
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield
advantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50%
represents an after-tax equivalent of 10.65%. With prevailing
estimates of 1994 inflation at no more than 3%--4%, real after-
tax rates in excess of 6.50% easily compensate longer-term
investors for much of the price volatility recently experienced.
Portfolio Strategy
We remain constructive on the municipal bond market and continue
to believe that tax-exempt bond yields will decline by late 1994
and into 1995. However, we expect the volatility the tax-exempt
bond market has exhibited in recent months to continue into mid-
year. This volatility led the Fund to become more defensive
during March and April. This defensive posture will be maintained
until either the Federal Reserve Board concludes its current
round of interest rate increases or until there are consistent
indications that recent yield increases have had a negative
impact on economic growth. It is likely that until either of
these two conditions are met, the financial markets' current
uncertainty will continue and interest rates will remain
volatile.
<PAGE>
During the April period, we increased the Fund's cash reserve
position to approximately 10% of net assets. This defensive
position has two principal benefits. First, additional capital
depreciation as a result of rising interest rates will be limited
to some degree. Second, this increased liquidity will enable the
Fund to more quickly respond to those attractive market
opportunities recent periods of volatility have presented. These
episodes of market uncertainty have allowed the Fund to add
attractively priced higher-coupon, noncallable issues to its
holdings. These issues will enhance the Fund's level of
tax-exempt income in the coming years. Also, while we reduced the
Fund's position in more performance-oriented issues, the Fund
remains well-positioned to take advantage of interest rate
declines later this year.
Short-term tax-exempt rates continue to trade in the 2.25%--3.00%
range, despite the increases in short-term taxable rates by the
Federal Reserve Board in recent months. The demand for municipal
cash equivalents has been very strong for much of the past year
and is expected to remain strong. The leverage of the Preferred
Stock continues to have a positive impact on the yield spread to
the Common Stock shareholder. 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.
Should the interest rate differential between short-term and
long-term interest rates narrow because of a rise in short-term
interest rates, the incremental yield "pick up" on the Common
Stock will be reduced. Furthermore, if long-term interest
rates rise, the Common Stock's net asset value will reflect the
full decline in the entire portfolio holdings, since the value of
the Fund's Preferred Stock does not fluctuate. During the six-
month period ended April 30, 1994, long-term interest rates rose,
reflected in the decline in the net asset value of the Fund's
Common Stock. For a complete explanation of leveraging, see page
1 of this report to shareholders.
We appreciate your ongoing interest in MuniVest Fund II, Inc.,
and we look forward to assisting you with your financial needs in
the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 31, 1994
<PAGE>
Portfolio
Abbreviations
To simplify the listings of MuniVest Fund II, 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
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
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>
Alaska--2.0% A+ Aa $ 7,500 Alaska State Housing Finance Corporation, Housing Revenue Bonds,
Series A, 6.375% due 12/01/2012 $ 8,113
Arizona--1.0% AA- Aa 5,000 Maricopa County, Arizona, GO, Unified School District No. 48
(Scottsdale Improvement), UT, 4.40% due 7/01/2013 3,946
California--6.8% A1 VMIG1 8,900 Anaheim, California, COP (1993 Refunding Project), VRDN,
3.35% due 8/01/2019 (a)(b) 8,900
A- A1 7,500 California State Public Works Board, Lease Revenue Bonds
(California State University Library Projects), Series A, 6.25%
due 9/01/2016 7,254
Los Angeles, California, Department of Water and Power, Revenue
Refunding Bonds, Second Issue:
AA Aa 5,000 (Electric Plant), 4.75% due 11/15/2019 4,006
AA Aa 3,800 (Water Works), 4.50% due 5/15/2012 3,058
AAA Aaa 5,000 University of California, Revenue Refunding Bonds, Series C,
4.75% due 9/01/2015 4,102
Colorado--4.0% AA Aa 4,285 Colorado Springs, Colorado, Utilities Revenue Refunding Bonds,
Series A, 6% due 11/15/2018 4,177
BBB Baa1 10,000 Denver, Colorado, City and County Airport Revenue Bonds,
AMT, Series C, 6.75% due 11/15/2022 9,003
Denver, Colorado, City and County School District No. 1, Revenue
Refunding Bonds, Series A:
A+ A 1,000 6.50% due 6/01/2010 1,043
A+ A 2,000 6.50% due 12/01/2010 2,091
<PAGE>
Florida--2.5% BBB- NR 2,500 Largo, Florida, Sun Coast Health Systems, Revenue Refunding Bonds,
6.30% due 3/01/2020 2,381
A- NR 8,000 Palm Beach County, Florida, Health Facilities Authority Revenue Bonds
(Good Samaritan Health Systems), 6.30% due 10/01/2022 7,713
Georgia--5.3% Georgia Municipal Electric Authority, Power Revenue Refunding Bonds,
Series V:
AA- A1 1,200 6.40% due 1/01/2006 1,248
AA- A1 4,500 6.60% due 1/01/2018 4,676
Georgia Municipal Electric Authority, Split Obligation Revenue Bonds:
AA- A1 1,000 (1st Crossover), General Resolution, Series X, 6.50% due 1/01/2012 1,036
AA- A1 1,250 (4th Crossover), Series X, 6.50% due 1/01/2020 1,285
AA- A1 1,500 (5th Crossover), Series Y, 6.50% due 1/01/2017 1,549
Georgia State, GO, Series F:
AA+ Aaa 5,000 6.50% due 12/01/2006 5,464
AA+ Aaa 5,300 6.50% due 12/01/2007 5,760
Illinois--8.3% A+ A1 2,500 Chicago, Illinois, O'Hare International Airport,
Revenue Refunding Bonds, Senior Lien, Series A, 5% due 1/01/2016 2,082
AAA Aaa 3,475 Chicago, Illinois, Water Revenue Refunding Bonds, 6.50%
due 11/01/2015 (c) 3,640
Illinois Health Facilities Authorities, Revenue Refunding Bonds:
A A 2,750 (Edward Hospital), Series A, 6% due 2/15/2019 2,479
NR Baa1 1,250 (Holy Cross Hospital Project), 6.75% due 3/01/2024 1,183
A- NR 2,250 Improvement (Swedish Covenant), Series A, 6.35% due 8/01/2023 2,132
A+ A1 8,055 OSF Healthcare Systems), 6% due 11/15/2023 7,295
AAA Aa 2,500 Illinois State Sales Tax Revenue Bonds, Series P, 6.50% due 6/15/2022 2,575
AAA Aaa 6,000 Illinois State Toll Highway Authority, Toll Highway Priority Revenue
Bonds, Series A, 6.20% due 1/01/2016 5,901
AAA Aaa 6,500 Regional Transportation Authority, Illinois, Revenue Bonds, Series A,
6.125% due 6/01/2022 (b) 6,268
</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>
Indiana--0.5% A+ NR $ 2,000 Indianapolis, Indiana, Local Public Improvement Bond Bank, Series D,
Revenue Refunding Bonds, 6.75% due 2/01/2020 $ 1,990
Iowa--0.8% BBB+ NR 3,355 Ottumwa, Iowa, Hospital Facilities Revenue Refunding and
Improvement Bonds (Ottumwa Regional Health Center), 6% due 10/01/2010 3,067
Maine--3.6% BBB Baa1 15,000 Bucksport, Maine, Solid Waste Disposal Revenue Bonds (Champion
International Corporation Project), 6.25% due 5/01/2010 14,386
<PAGE>
Maryland--3.8% Northeast Maryland Waste Disposal Authority, Solid Waste Revenue Bonds
(Montgomery County Resource Recovery Project), AMT, Series A:
NR A 6,735 6.20% due 7/01/2010 6,534
NR A 5,410 6.30% due 7/01/2016 5,222
NR Baa 3,750 Prince Georges County, Maryland, Hospital Revenue Bonds (Greater
Southeast Healthcare Systems), 6.375% due 1/01/2013 3,575
Massachusetts--7.3% Massachusetts Bay Transportation Authority Revenue Bonds:
A+ A 7,000 Refunding, Series B, 6% due 3/01/2012 6,842
A+ A 7,500 (Transportation System), Series A, 7% due 3/01/2021 8,374
NR A 5,180 Massachusetts State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Metro West Health, Inc.), Series C,
6.50% due 11/15/2018 5,080
A1 VMIG1 300 Massachusetts State Industrial Finance Agency, Revenue Refunding
Bonds (Showa Womens Institute Inc.), VRDN, 2.85% due 3/15/2004 (a) 300
Massachusetts State Water Resources Authority Revenue Bonds:
A A 5,000 Refunding, Series B, 5% due 3/01/2022 4,051
A A 2,000 Series A, 6.50% due 7/15/2007 2,079
A A 2,500 Series A, 6.50% due 7/15/2019 2,543
Michigan--6.5% AAA Aaa 1,670 Battle Creek, Michigan, Water Supply System, Revenue Refunding Bonds,
4.75% due 9/01/2010 (b) 1,440
AAA Aaa 2,000 Michigan Municipal Bond Authority Revenue Bonds (Local Government
Loan Program), Series A, 6.125% due 12/01/2018 1,969
Michigan State Building Authority Revenue Bonds:
AAA Aaa 4,000 Refunding, Series I, 5.10% due 10/01/2007 (b) 3,730
AA- A 4,570 Series II, 6.25% due 10/01/2020 4,488
BBB Baa1 2,000 Michigan State Hospital Finance Authority, Revenue Refunding Bonds
(Hospital Pontiac Osteopathic), Series A, 6% due 2/01/2014 1,772
Michigan State Trunk Line Revenue Bonds, Series A:
AA- A1 3,175 5.625% due 11/15/2014 2,937
AA- A1 3,500 5.70% due 11/15/2015 3,258
AAA Aaa 5,000 5.75% due 11/15/2020 (c) 4,653
AA Aa 2,500 Royal Oak, Michigan, Hospital Finance Authority, Revenue Refunding Bonds
(Williams Beaumont Hospital), Series G, 5.25% due 11/15/2019 2,116
Mississippi--0.4% AAA Aaa 2,075 De Soto County, Mississippi, School District Revenue Bonds,
4.75% due 2/01/2014 (d) 1,733
Montana--0.4% AAA Aaa 1,850 University of Montana, University Revenue Refunding Bonds,
Higher Educational, Series A, 4.50% due 11/15/2015 1,481
Nebraska--0.5% A+ A1 2,000 Nebraska Public Power District, Revenue Refunding Bonds,
6.125% due 1/01/2015 1,960
New Jersey--1.0% A A 4,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series C, 6.50% due 1/01/2016 4,117
<PAGE>
New York--9.7% A1+ VMIG1 700 New York City, New York, Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds, VRDN, Series C, 2.75% due 6/15/2022 (a)(c) 700
New York City, New York, Refunding, GO, Series D, UT:
A- Baa1 6,265 6% due 8/01/2007 6,147
A- Baa1 5,000 6% due 8/01/2008 4,869
A1+ VMIG1 8,200 New York City, New York, Series B, VRDN, UT, 3% due 10/01/2020 (a)(c) 8,200
A1+ NR 2,100 New York State Energy Research and Development Authority, PCR (Niagara
Power Corporation Project), Series B, VRDN, AMT, 3.15% due 7/01/2027 (a) 2,100
New York State Local Government Assistance Corporation Revenue Bonds:
A A 2,500 Refunding, Series B, 5.375% due 4/01/2016 2,213
A A 2,000 Series A, 5.375% due 4/01/2014 1,796
A A 5,000 Series B, 6.25% due 4/01/2021 4,904
A A 3,490 Series C, 6% due 4/01/2012 3,411
A A 5,000 Series C, 6.25% due 4/01/2018 4,923
North Carolina--4.3% AA Aa 9,000 Charlotte--Mecklenberg Hospital Authority, North Carolina, Health Care
Systems Revenue Refunding Bonds, 6.25% due 1/01/2020 8,808
A- A 5,000 North Carolina Eastern Municipal Power Agency, Power Systems Revenue
Refunding Bonds, Series B, 6.25% due 1/01/2012 4,844
A A 4,000 North Carolina Municipal Power Agency, Revenue Refunding Bonds
(No. 1 Catawba Electric), 5.75% due 1/01/2015 3,678
Ohio--4.0% NR Aa 7,500 Franklin County, Ohio, Hospital Revenue Refunding Bonds (Riverside
United Methodist), Series A, 5.75% due 5/15/2020 6,780
AAA Aaa 1,740 Lakota, Ohio, Local School District Revenue Bonds, 7% due 12/01/2007 (b) 1,934
A- NR 3,000 Lorain, Ohio, Hospital Improvement Revenue Refunding Bonds (Lakeland
Community Hospital, Inc.), 6.50% due 11/15/2012 2,949
BBB- Baa2 5,000 Ohio State Air Quality Development Authority, PCR, Refunding
(Ohio Edison), Series A, 5.95% due 5/15/2029 4,417
Pennsylvania--4.9% Allegheny County, Pennsylvania, Hospital Development Authority Revenue
Bonds (Presbyterian Health Center), VRDN (a):
A1+ VMIG1 1,600 Series A, 3.20% due 3/01/2020 1,600
A1+ VMIG1 1,200 Series B, 3.20% due 3/01/2020 1,200
A1+ VMIG1 1,800 Series C, 3.20% due 3/01/2020 1,800
BBB+ NR 1,770 Pennsylvania State Higher Educational Facilities Authority, Revenue
Refunding Bonds (Drexel University), 6.375% due 5/01/2017 1,707
Philadelphia, Pennsylvania, Hospitals and Higher Educational
Facilities Revenue Bonds:
BBB Baa1 2,000 (Frankford Hospital), Series A, 6% due 6/01/2014 1,772
BBB Baa1 2,500 (Frankford Hospital), Series A, 6% due 6/01/2023 2,150
BBB+ NR 6,340 Refunding (Philadelphia Mental Retardation Project), 6.20% due
8/01/2011 5,907
AAA Aaa 3,500 Pittsburgh, Pennsylvania, Water and Sewer Authority, Revenue Refunding
Bonds (Water and Sewer System), Series A, 6.50% due 9/01/2013 (c) 3,682
Rhode Island--0.8% A- Baa1 2,000 Rhode Island Depositors Economic Protection Corporation, Special
Obligation Refunding Bonds, Series A, 6.375% due 8/01/2022 1,991
AA+ Aa 1,460 Rhode Island Housing and Mortgage Finance Corporation Revenue Bonds
(Homeownership Opportunity), Series 10-A, 6.50% due 4/01/2027 1,435
</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>
Texas--6.1% AAA Aaa $12,500 Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company Project), AMT, Series A, 6.05% due 4/01/2025 (b) $ 11,881
AAA Aaa 7,280 Coastal Bend Health Facilities Development Corporation, Texas, Revenue
Bonds (Incarnate Ward Health Service), Series A, 6.30% due 1/01/2017 (b) 7,290
Harris County, Texas, Health Facilities Development Corporation, Hospital
Revenue Bonds (Memorial Hospital Systems), Series A:
A- A 1,500 6.60% due 6/01/2014 1,487
A- A 1,500 6.625% due 6/01/2024 1,485
A1+ NR 300 Houston, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital Project), VRDN, 3% due
12/01/2014 (a) 300
Humble, Texas, Independent School District Schoolhouse Revenue Bonds, UT:
AAA Aaa 1,450 4.50% due 2/15/2011 1,190
AAA Aaa 1,150 4.50% due 2/15/2013 924
Utah--1.2% A NR 5,300 Salt Lake City, Utah, Redevelopment Agency, Central Business District,
Neighborhood Redevelopment Tax Increment Revenue Bonds (Junior Lien
Project), Series A, 5.80% due 3/01/2015 4,919
Vermont--1.2% A- A 5,000 Vermont Municipal Bond Bank, Series 2, 6.25% due 12/01/2019 4,863
Washington--11.3% A+ A1 4,500 Grant County, Washington, Public Utilities District Number 002,
Electric Revenue Bonds (Wanapum Hydro), Series A, 6.375% due 1/01/2023 4,444
AA- A1 13,250 Seattle, Washington, Municipality of Metropolitan Seattle, Sewer Systems
Revenue Refunding Bonds, Series V, 6.20% due 1/01/2032 12,800
AAA Aaa 5,000 Snohomish County, Washington, Public Utilities District Number 001,
Electric Revenue Refunding Bonds (Generation Systems), 6%
due 1/01/2018 (c) 4,763
AA Aa 6,500 Washington State, GO, Revenue Bonds, 5% due 5/01/2017 5,474
Washington State Public Power Supply Systems, Revenue Refunding
Bonds (Nuclear Project Number 2):
AA Aa 12,650 Series A, 6.25% due 7/01/2012 12,314
AA Aa 2,000 Series B, 7% due 7/01/2012 2,066
AA Aa 3,500 Series B, 7.125% due 7/01/2016 3,763
Wisconsin--0.8% AA- A1 4,000 Wisconsin State Transportation Revenue Refunding Bonds, Series A,
4.75% due 7/01/2012 3,338
Wyoming--0.2% NR P1 800 Uinta County, Wyoming, PCR, Refunding (Chevron U.S.A. Inc. Project),
VRDN, 2.80% due 12/01/2022 (a) 800
Total Investments (Cost--$417,005)--99.2% 400,075
Other Assets Less Liabilities--0.8% 3,357
--------
Net Assets--100.0% $403,432
========
<FN>
(a)The interest rate is subject to change periodically based
upon the prevailing market rate. The interest rates shown
are the rates in effect at April 30, 1994.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of April 30, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$417,004,581) (Note 1a) $400,074,522
Receivables:
Securities sold $ 20,039,935
Interest 7,212,157 27,252,092
------------
Deferred organization expenses (Note 1e) 40,185
Prepaid expenses and other assets 175,480
------------
Total assets 427,542,279
------------
Liabilities: Payables:
Securities purchased 11,888,933
Dividends to shareholders (Note 1g) 709,167
Investment adviser (Note 2) 153,609 12,751,709
------------
Accrued expenses and other liabilities 11,358,546
------------
Total liabilities 24,110,255
------------
Net Assets: Net assets $403,432,024
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,700 shares of
AMPS* issued and outstanding at $50,000 per share liquidation
preference) $135,000,000
Common Stock, par value $.10 per share (19,907,055 shares issued
and outstanding) $ 1,990,706
Paid-in capital in excess of par 277,543,484
Undistributed investment income--net 2,221,357
Undistributed realized capital gains--net 3,606,536
Unrealized depreciation on investments--net (16,930,059)
------------
Total--Equivalent to $13.48 net asset value per share of
Common Stock (market price--$12.25) 268,432,024
------------
Total capital $403,432,024
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended April 30, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 12,221,759
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,059,300
Commission fees (Note 4) 182,622
Accounting services (Note 2) 33,814
Professional fees 32,780
Printing and shareholder reports 23,734
Transfer agent fees 22,520
Custodian fees 14,546
Directors' fees and expenses 12,662
Listing fees 5,308
Pricing fees 4,664
Amortization of organization expenses (Note 1e) 4,259
Other 8,024
------------
Total expenses 1,404,233
------------
Investment income--net 10,817,526
------------
Realized & Realized gain on investments--net 3,606,555
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net (35,472,264)
(Loss) on ------------
Investments--Net Net Decrease in Net Assets Resulting from Operations $(21,048,183)
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Period
Months Ended March 29, 1993++
Increase (Decrease) in Net Assets: April 30, 1994 to Oct. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 10,817,526 $ 12,353,265
Realized gain on investments--net 3,606,555 1,732,327
Change in unrealized appreciation/depreciation on investments--net (35,472,264) 18,542,205
------------ ------------
Net increase (decrease) in net assets resulting from operations (21,048,183) 32,627,797
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (8,683,358) (8,942,826)
Shareholders Preferred Stock (1,619,802) (1,703,448)
(Note 1g): Realized gain on investments--net:
Common Stock (1,493,467) --
Preferred Stock (238,878) --
------------ ------------
Net decrease in net assets resulting from
dividends and distributions to shareholders (12,035,505) (10,646,274)
------------ ------------
Common & Net proceeds from issuance of Common Stock -- 281,695,367
Preferred Stock Proceeds from issuance of Preferred Stock -- 135,000,000
Transactions Offering and underwriting costs resulting from the issuance of
(Notes 1e & 4) Preferred Stock -- (2,270,000)
Value of shares issued to Common Stock shareholders in
reinvestment of dividends 8,817 --
------------ ------------
Net increase in net assets derived from capital stock transactions 8,817 414,425,367
------------ ------------
Net Assets: Total increase (decrease) in net assets (33,074,871) 436,406,890
Beginning of period 436,506,895 100,005
------------ ------------
End of period* $403,432,024 $436,506,895
============ ============
<FN>
*Undistributed investment income--net $ 2,221,357 $ 1,706,991
============ ============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Six For the Period
Months Ended March 29, 1993++
Increase (Decrease) in Net Asset Value: April 30, 1994 to Oct. 31, 1993
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 15.15 $ 14.18
Operating ----------- -----------
Performance: Investment income--net .55 .62
Realized and unrealized gain (loss) on investments--net (1.60) 1.02
----------- -----------
Total from investment operations (1.05) 1.64
----------- -----------
Less dividends and distributions to Common Stock shareholders:
Investment income--net (.44) (.45)
Realized gain on investments--net (.08) --
----------- -----------
Total dividends and distributions to Common Stock shareholders (.52) (.45)
----------- -----------
Capital charge resulting from issuance of Common Stock -- (.02)
----------- -----------
Effect of Preferred Stock activity++++:
Dividends and distributions to Preferred Stock shareholders:
Investment income--net (.09) (.09)
Realized gain on investments--net (.01) --
Capital charge resulting from issuance of Preferred Stock -- (.11)
----------- -----------
Total effect of Preferred Stock activity (.10) (.20)
----------- -----------
Net asset value, end of period $ 13.48 $ 15.15
=========== ===========
Market price per share, end of period $ 12.25 $ 14.625
=========== ===========
Total Investment Based on market price per share (13.00%)+++ 0.53%+++
Return:** =========== ===========
Based on net asset value per share (7.58%)+++ 10.16%+++
=========== ===========
Ratios to Average Expenses, net of reimbursement .66%* .35%*
Net Assets:*** =========== ===========
Expenses .66%* .49%*
=========== ===========
Investment income--net 5.09%* 5.17%*
=========== ===========
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 268,432 $ 301,507
Data: =========== ===========
Preferred Stock outstanding, end of period (in thousands) $ 135,000 $ 135,000
=========== ===========
Portfolio turnover 42.78% 25.00%
=========== ===========
Dividends Per Series A--Investment income--net $ 591 $ 584
Share on Preferred Series B--Investment income--net 686 703
Stock Outstanding: Series C--Investment income--net 523 605
<FN>
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 26, 1993.
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value,
result in substantially different returns. Total investment
returns exclude the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock shareholders.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniVest Fund II, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. 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 MVT. The following is
a summary of significant accounting policies followed by the
Fund.
(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. Securities 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.
(b) 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.
(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.
<PAGE>
(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) Deferred organization and offering expenses--Deferred
organization expenses are amortized on a straight-line basis over
a five-year period beginning with the commencement of operations
of the Fund. Direct expenses relating to the public offering of
the Fund's Common and Preferred Stocks were charged to capital at
the time of issuance of the shares.
(f) Non-income producing investments--Written and purchased
options are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with
Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of
FAM is Princeton Services, Inc., an indirect wholly-owned subsid-
iary of ML & Co. The limited partners are ML & Co. and Merrill
Lynch Investment Management, Inc. ("MLIM"), which is also an
indirect wholly-owned subsidiary of ML & Co.
NOTES TO FINANCIAL STATEMENTS (concluded)
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, MLIM, 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 April 30, 1994 were
$172,729,657 and $188,349,076, respectively.
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $ (793,287) $(16,930,059)
Short-term investments (155) --
Financial futures contracts 4,399,997 --
----------- ------------
Total $ 3,606,555 $(16,930,059)
=========== ============
As of April 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $16,930,059, of which $1,092,037
related to appreciated securities and $18,022,096 related to
depreciated securities. The aggregate cost of investments at
April 30, 1994 for Federal income tax purposes was $417,004,581.
4. Capital Stock Transactions:
Common Stock
At April 30, 1994, the Fund had one class of Common Stock, par
value $.10 per share, of which 200,000,000 shares were
authorized. For the six months ended April 30, 1994, shares
issued and outstanding remained constant at 19,907,055. At April
30, 1994, total paid-in capital amounted to $279,534,190.
Preferred Stock
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. The yields in effect at April 30, 1994 were as
follows: Series A, 2.50%; Series B, 2.99%; and Series C, 2.96%.
In connection with the offering of AMPS, the Fund reclassified
2,700 shares of unissued capital stock as AMPS. For the six
months ended April 30, 1994, there were 2,700 AMPS authorized,
issued and outstanding with a liquidation preference of $50,000
per share, plus accumulated and unpaid dividends of $173,471.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated
on the proceeds of each auction. For the six months ended April
30, 1994, MLPF&S, an affiliate of MLIM, earned $109,034 as
commissions.
<PAGE>
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the
amount of $0.070623 per share, payable on May 27, 1994 to
shareholders of record as of May 17, 1994.
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 Period Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
March 29, 1993++ to April 30, 1993 $.06 $(.01) $ .10 -- -- -- --
May 1, 1993 to July 31, 1993 .29 .02 .24 $.22 $.05 -- --
August 1, 1993 to October 31, 1993 .27 .07 .58 .23 .04 -- --
November 1, 1993 to January 31, 1994 .28 .10 .10 .22 .05 $.08 $.01
February 1, 1994 to April 30, 1994 .27 (.08) (1.88) .22 .04 -- --
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
March 29, 1993++ to April 30, 1993 $14.41 $14.10 $15.125 $15.00 348
May 1, 1993 to July 31, 1993 14.71 14.20 15.125 13.875 967
August 1, 1993 to October 31, 1993 15.36 14.50 14.75 14.25 1,568
November 1, 1993 to January 31, 1994 15.27 14.67 14.75 13.375 2,643
February 1, 1994 to April 30, 1994 15.23 12.80 14.50 11.875 2,175
<FN>
++Commencement of Operations.
*Calculations are based upon Common Shares outstanding at the end of each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
