MUNIVEST
FUND II, INC.
FUND LOGO
Semi-Annual Report
April 30, 1995
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 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 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.
<PAGE>
MuniVest Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
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. 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 New York 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
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
90 Washington Street
New York, New York 10286
NYSE Symbol
MVT
<PAGE>
DEAR SHAREHOLDER
For the six months ended April 30, 1995, the Common Stock of MuniVest Fund II,
Inc. earned $0.422 per share income dividends, which included earned and
unpaid dividends of $0.069. This represents a net annualized yield of 6.37%,
based on a month-end net asset value of $13.36 per share. Over the same period,
the total investment return on the Fund's Common Stock was +10.47%, based on a
change in per share net asset value from $12.56 to $13.36, and assuming
reinvestment of $0.426 per share income dividends.
For the six-month period ended April 30, 1995, the Fund's Auction Market
Preferred Stock had an average yield as follows: Series A, 4.19%; Series B,
3.56%; and Series C, 3.97%.
The Environment
During the six months ended April 30, 1995, the perception that the US economy
was overheating and inflationary pressures were increasing gave way to a more
benign economic outlook. With more signs of slowing growth, investors now
appear to be forecasting a "soft landing" for the US economy. Although gross
domestic product was reported to have increased at a revised 5.1% rate during
the final quarter of 1994, declines in other indicators such as new home sales
and durable goods orders registered thus far in 1995 have led investors to
anticipate that the economy is losing enough momentum to keep inflation under
control and preclude further significant monetary policy tightening by the
Federal Reserve Board. A further indication of a slowing economy was the
reported decline in the Index of Leading Economic Indicators for March.
As US stock and bond markets have risen on more positive economic news, the
value of the US dollar has reached new lows relative to the yen and the
Deutschemark. Persistent trade deficits and exports of capital from the United
States have kept the US currency in a decade-long decline relative to the
Japanese and German currencies. Over the longer term, since the United States
has the highest productivity among industrialized nations and among the lowest
labor costs, demand for US dollar-denominated assets may improve. However, a
reduction of the still-widening US trade deficit may be necessary before the
US dollar appreciates substantially relative to the yen and the Deutschemark.
<PAGE>
The first months of 1995 have been very positive for the stock and bond
markets. Continued signs of a moderating expansion and well-contained
inflationary pressures would provide further assurance that the peak in
interest rates is behind us. On the other hand, indications of reaccelerating
growth and further significant monetary policy tightening by the Federal
Reserve Board would be a decided negative for the US financial markets.
The Municipal Market
During the six-month period ended April 30, 1995, the tax-exempt bond market
gradually recouped much of the losses sustained during 1994. Signs of a
weakening domestic economy and ongoing moderate inflationary pressures have
fostered an environment of declining interest rates. Since October 31, 1994,
A-rated, uninsured municipal revenue bond yields, as measured by the Bond
Buyer Revenue Bond Index, have declined over 65 basis points (0.65%) to close
the six-month period ended April 30, 1995 at 6.29%. Tax-exempt bond yields
initially continued to climb in late 1994, reaching a high of 7.37% in late
November 1994. Municipal bond yields have since declined over 100 basis points
from their recent highs and are presently lower than they were a year ago. US
Treasury bond yields have experienced similar declines over the last six
months to end the April period at 7.34%.
Much of the recent improvement in the tax-exempt bond market, however, has
occurred over the last three months. During this most recent quarter,
municipal bond yields have fallen approximately 50 basis points, while US
Treasury bond yields declined only 35 basis points. Tax-exempt bond yields
declined more than their taxable counterparts in recent months, largely in
response to the significant decline in new bond issuance in recent quarters.
Over the last six months, less than $60 billion in new long-term municipal
securities were underwritten, a decline of nearly 45% versus the comparable
period a year earlier. Issuance was particularly low this past January and
February, with monthly volume of less than $8 billion. These levels are the
lowest monthly totals since the mid-1980s.
To compound the municipal market's already strong technical posture, both
institutional and individual investors have seen significant cash inflows in
recent months. These assets were derived from regular coupon payments, bond
maturities and the proceeds from early bond calls and redemptions. It has been
estimated that investors received over $20 billion in principal redemptions
and coupon income in January 1995 alone. With monthly issuance in the $10
billion range thus far this year, the current supply/demand imbalance has
dominated the municipal market and bond prices have risen accordingly. The
tax-exempt bond market's technical position is likely to remain very strong
throughout most of 1995. Investors are expected to receive almost $40 billion
in principal and coupon payments on July 1, 1995. Investor proceeds from all
sources have been estimated to exceed $200 billion for all of 1995. Estimates
of total new bond issuance for 1995 have continued to be lowered with most
estimates now in the $125 billion range. Investors should find it increasingly
difficult to replace existing holdings as they mature and to reinvest coupon
income in such an environment.
<PAGE>
The municipal bond market's outperformance thus far this year caused the
tax-exempt market to become temporarily expensive relative to its taxable
counterpart in late April. Investor concerns regarding the international
currency situation and the future impact of proposed revisions to US taxation
policies upon the tax advantage inherent to municipal bonds have combined to
cause tax-exempt bond yields to increase marginally in recent weeks. Municipal
bond yields have risen approximately 15 basis points from their lows in
mid-April 1995. Long-term US Treasury bond yields have remained essentially
stable.
Such an underperformance by the tax-exempt bond market is likely to be limited
in duration. The recent increase in tax-exempt bond yields has already begun
to attract institutional investors since some municipal bonds yielding in
excess of 85% of US Treasury bond yields are again available. Also, concerns
regarding the implication for municipal bonds' tax advantage resulting from
various proposed tax law changes (for example, flat-tax, value-added tax or
national sales tax) are all likely to quickly recede as investors realize that
such, if any, changes are unlikely to be enacted before late 1996 at the
earliest. Long-term investors will also recall 1986 when similar tax proposals
were made and tax-exempt bond yields initially rose and then quickly fell.
Investors are likely to view the current situation as an opportunity to
purchase very attractively priced tax-advantaged products. This should cause
municipal bond yields to quickly return to their more historic relationship.
Portfolio Strategy
During the six-month period ended April 30, 1995, we maintained the
constructive outlook toward the municipal bond market that we adopted near the
end of 1994. We reduced cash reserves to below 5% both to allow the Fund to
fully participate in the recent bond market rally and to enhance the Fund's
current dividend payout. We continue to emphasize the purchase of larger
coupon, more defensive issues rather than those securities that are more
interest rate-sensitive. The Fund remains well positioned to respond to the
recent declines in interest rates, and its net asset value has increased
accordingly.
Looking ahead, since we have adopted a more neutral outlook regarding the
direction of tax-exempt bond interest rates, we are likely to follow a
somewhat more defensive portfolio strategy. The relative scarcity of
attractively priced tax-exempt securities prevents us from raising the Fund's
cash reserves to the levels held throughout much of the last half of 1994.
Therefore, we will focus on seeking to enhance current income and preserving
net asset value until the direction of interest rates becomes clearer.
<PAGE>
Short-term tax-exempt bond interest rates rose into the 3.75%--4.25% range
over the past six months. The recent rise was largely in response to investor
fears of inflationary pressures resulting from the dramatic decline in the
value of the US dollar and increases in many crude raw materials. It is
unclear whether the decline in the value of the US dollar or rising raw
material prices will be enough to rekindle inflation, since wage pressures
remain weak and the economy has significantly weakened since late 1994. It is
important to note that the municipal yield curve remained steeply positive,
despite the recent rise in short-term interest rates. Therefore, the leverage
effect of the issuance of Preferred Stock continued to have a positive impact
on the yield paid to the Common Stock shareholder. However, should the spread
between short-term and long-term interest rates narrow, the benefits of the
leverage will decline and, as a result, reduce the yield of the Fund's Common
Stock. (For a complete explanation of the benefits and risks of leveraging,
see page 1 of this report to shareholders.)
In Conclusion
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 30, 1995
<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 below and at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PARS Periodic Auction Reset Securities
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
SAVRS Select Auction Variable Rate Securities
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
STATE
<S> <S> <C> <S> <C>
Alaska--3.3%
AA- A1 $12,500 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Sohio Pipeline),
7.125% due 12/01/2025 $13,178
Arizona--0.7%
AAA Aaa 2,315 Maricopa County, Arizona, School District No. 3, Refunding and Improvement Bonds
(Tempe Elementary School), UT, 7.50% due 7/01/2010 (c) 2,739
<PAGE>
California--0.5%
A- A 2,000 California State Public Works Board, Lease Revenue Bonds (Various Community
College Projects), 7% due 3/01/2014 2,104
Colorado--3.9%
NR* Aa 4,500 Colorado HFA, S/F Program Revenue Bonds, AMT, Senior Series F, 8.625% due 6/01/2025 (h) 5,246
BB Baa 7,500 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series C, 6.75% due
11/15/2022 7,308
Denver, Colorado, City and County School District Number 1, Revenue Refunding
Bonds, Series A:
A+ A 1,000 6.50% due 6/01/2010 1,073
A+ A 2,000 6.50% due 12/01/2010 2,149
Delaware--0.6%
AAA Aaa 2,250 Delaware Transportation Authority, Transportation System Revenue Bonds, Senior
Series, 7% due 7/01/2014 (c) 2,465
Florida--1.3%
A1 NR* 1,300 Dade County, Florida, IDA, PCR, Refunding (Florida Power & Light Co. Project),
VRDN, AMT, 5% due 4/01/2020 (a) 1,300
AAA Aaa 4,000 Reedy Creek, Florida, Recreational Facilities Improvement Revenue Bonds,
Series A, 5.75% due 6/01/2019 (d) 3,854
Georgia--10.6%
A1 VMIG1++ 700 Burke County, Georgia, Development Authority, PCR (Georgia Power Company--
Plant Vogtle Project), VRDN, Third Series, 5% due 7/01/2024 (a) 700
A+ A 4,500 Georgia Municipal Electric Authority, Power Revenue Refunding Bonds, Series V,
6.60% due 1/01/2018 4,723
Georgia Municipal Electric Authority, Special Obligation Revenue Bonds:
A+ A 6,000 (3rd Crossover Series), 6.60% due 1/01/2018 6,282
A+ A 1,250 (4th Crossover Series), Project One, 6.50% due 1/01/2020 1,295
A+ A 11,035 (5th Crossover Series), Project One, 6.50% due 1/01/2017 11,439
Georgia State, GO:
AA+ Aaa 5,000 Series F, 6.50% due 12/01/2006 5,514
AA+ Aaa 3,150 Series F, 6.50% due 12/01/2007 3,469
AA+ Aaa 7,960 UT, Series D, 6.80% due 8/01/2011 8,961
Idaho--0.6%
NR* Aaa 2,500 Idaho Housing Agency, S/F Mortgage Revenue Bonds, AMT, Series E-2, 6.90%
due 1/01/2027 2,537
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
STATE
<S> <S> <C> <S> <C>
Illinois--15.1%
AA- Aa3 $ 4,000 Chicago, Illinois, Gas Supply Revenue Bonds (People's Gas), 6.875% due 3/01/2015 $ 4,183
AA Aa 3,700 Chicago, Illinois, Metropolitan Water Reclamation District Revenue Bonds
(Greater Chicago Capital Improvement), 5.50% due 12/01/2012 3,470
AAA Aaa 3,475 Chicago, Illinois, Water Revenue Refunding Bonds, 6.50% due 11/01/2015 (c) 3,636
Illinois HDA, M/F Program Revenue Bonds:
A+ A1 9,360 Refunding, Series A, 7.375% due 7/01/2017 10,053
A+ A1 6,500 Series 5, 6.75% due 9/01/2023 6,514
A+ Aa 2,550 Illinois HDA, Residential Mortgage Revenue Bonds, Linked SAVRS and RIB, AMT,
6.874% due 2/01/2018 2,609
Illinois Health Facilities Authority Revenue Bonds:
NR* Baa1 3,235 (Holy Cross Hospital Project), 6.75% due 3/01/2024 3,014
A A 2,750 Refunding (Edward Hospital), Series A, 6% due 2/15/2019 2,468
Illinois State Sales Tax Revenue Bonds:
AAA A1 1,500 Series O, 6.50% due 6/15/2013 1,548
AAA A1 4,500 Series P, 6.50% due 6/15/2022 4,706
Regional Transportation Authority, Illinois, Revenue Bonds:
AAA Aaa 4,815 Series A, 6.50% due 6/01/2015 (b) 4,904
AAA Aaa 1,500 Series A, 7.20% due 11/01/2020 (b) 1,701
AAA Aaa 7,000 Series A, 6.70% due 11/01/2021 (c) 7,500
AAA Aaa 2,500 UT, Series C, 7.75% due 6/01/2020 (c) 3,008
AAA Aaa 1,000 UT, Series C, 7.10% due 6/01/2025 (c) 1,084
Indiana--12.7%
Indiana Bond Bank Revenue Bonds (State Revolving Fund Program), Series A:
A NR* 2,750 6.875% due 2/01/2012 2,910
A NR* 5,750 6.75% due 2/01/2017 5,952
NR* Aaa 7,350 Indiana State HFA, S/F Mortgage Revenue Refunding Bonds, Series A, 6.80%
due 1/01/2017 7,479
AAA Aaa 2,050 Indiana State Toll Road Commission, Toll Road Revenue Bonds (East-West Toll
Road), 9% due 1/01/2015 (e) 2,705
A A 1,915 Indiana Transportation Finance Authority, Airport Facilities Lease Revenue
Bonds (United Air), Series A, 6.75% due 11/01/2011 1,964
Indiana Transportation Finance Authority, Highway Revenue Bonds, Series A:
A+ A1 2,000 7.25% due 6/01/2015 2,277
A+ A1 3,775 6.80% due 12/01/2016 4,109
Indianapolis, Indiana, Local Public Improvement Bond Bank, Revenue
Refunding Bonds, Series D:
A+ NR* 8,750 6.75% due 2/01/2014 9,399
A+ NR* 10,000 6.75% due 2/01/2020 10,250
AAA Aaa 3,770 South Newton, Indiana, First Mortgage Revenue Bonds (School Building Corp.), UT,
7% due 1/15/2017 (d) 4,047
Iowa--0.8%
A1+ NR* 100 Iowa Finance Authority, Solid Waste Disposal Revenue Bonds (Cedar River Paper Co.
Project), VRDN, Series A, 5.25% due 6/01/2024 (a) 100
BBB+ NR* 3,355 Ottumwa, Iowa, Hospital Facility Revenue Refunding and Improvement Bonds
(Ottumwa Regional Health Center), 6% due 10/01/2010 3,062
<PAGE>
Kentucky--0.0%
A1+ VMIG1++ 200 Daviess County, Kentucky, Solid Waste Disposal Facility Revenue Bonds (Scott
Paper Co. Project), VRDN, AMT, Series A, 5.05% due 12/01/2023 (a) 200
Louisiana--0.5%
NR* Baa3 2,000 Lake Charles, Louisiana, Harbor and Terminal District, Port Facilities Revenue
Refunding Bonds (Trunkline Long Co. Project), 7.75% due 8/15/2022 2,153
Maine--1.7%
AA- A1 6,790 Maine State Housing Authority, Mortgage Purchase Revenue Bonds, AMT,
Series C-2, 6.875% due 11/15/2023 6,873
Maryland--0.3%
AAA Aaa 1,000 Maryland State Health and Higher Educational Facilities Authority Revenue
Bonds (University of Maryland Medical Systems), Series B, 7% due 7/01/2022 (c) 1,127
Massachusetts--
6.6%
Massachusetts Bay Transportation Authority Revenue Bonds (Massachusetts
General Transportation System), Series A:
A+ A1 7,500 7% due 3/01/2021 8,298
A+ A1 4,270 Refunding, 7% due 3/01/2011 4,711
AAA Aaa 1,000 Massachusetts State HFA, Residential Development Revenue Bonds, Series C,
6.90% due 11/15/2021 (f) 1,035
A+ A1 1,000 Massachusetts State Revenue Refunding Bonds (College Building Authority Project),
Series A, 7.50% due 5/01/2011 1,162
Massachusetts State Water Resource Authority Revenue Bonds:
A A 2,500 Refunding, Series B, 5.50% due 11/01/2015 2,290
A A 8,500 Series A, 6.50% due 7/15/2019 8,893
Michigan--7.6%
AAA Aaa 1,670 Battle Creek, Michigan, Water Supply System, Revenue Refunding Bonds,
4.75% due 9/01/2010 (b) 1,447
BBB Baa1 3,500 Dickinson County, Michigan, Economic Development Corp., Solid Waste Disposal
Revenue Refunding Bonds (Champion International), 6.55% due 3/01/2007 3,580
AAA Aaa 2,250 Greenville, Michigan, Public Schools Building Revenue Bonds, UT,
5.75% due 5/01/2019 (d) 2,143
AAA Aaa 1,500 Inkster, Michigan, School District, Refunding Bonds, UT, 5.50% due 5/01/2013 (b) 1,413
AAA Aaa 3,200 Marysville, Michigan, Public Schools District Revenue Bonds, UT, 5.75%
due 5/01/2019 (d) 3,048
A+ NR* 3,000 Michigan State HDA, Rental Housing Revenue Refunding Bonds, Series A,
6.65% due 4/01/2023 3,023
Michigan State HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 3,715 Refunding, AMT, Series D, 6.85% due 6/01/2026 3,789
AA+ NR* 4,885 Series A, 6.875% due 6/01/2023 5,002
BBB Baa1 2,000 Michigan State Hospital Finance Authority, Revenue Refunding Bonds
(Pontiac Hospital Osteopathic), Series A, 6% due 2/01/2014 1,711
A+ A1 2,500 Michigan State Strategic Fund, Limited Obligation Revenue Bonds
(Ford Motor Co. Project), AMT, Series A, 6.55% due 10/01/2022 2,512
NR* P1 400 Monroe County, Michigan, Economic Development Corporation, Limited
Obligation Revenue Refunding Bonds (Detroit Edison Co.), VRDN,
Series CC, 5% due 10/01/2024 (a) 400
AAA Aaa 2,430 Monroe County, Michigan, PCR (Detroit Edison Co.), AMT, Series I-B, 6.55% due
9/01/2024 (d) 2,472
<PAGE>
Minnesota--2.4%
Minnesota State HFA, S/F Mortgage Revenue Bonds:
A+ Aa 2,750 AMT, Series L, 6.70% due 7/01/2020 2,783
A+ Aa 4,000 AMT, Series M, 6.70% due 7/01/2026 4,054
AA+ Aa 2,500 Series E, 6.80% due 7/01/2025 2,586
Mississippi--0.3%
AAA Aaa 1,500 De Soto County, Mississippi, School District Revenue Bonds, UT, 4.75%
due 2/01/2014 (d) 1,274
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
STATE
<S> <S> <C> <S> <C>
Nevada--3.1%
AAA Aaa $ 2,500 Clark County, Nevada, School District Revenue Bonds, 6.75% due 6/15/2015 (c) $ 2,648
AAA Aaa 1,500 Nevada State Housing Division Revenue Bonds (S/F Program), AMT, Series E, 7% due
10/01/2019 1,541
AA Aa 5,430 Nevada State Revenue Refunding Bonds (Colorado River Commission--Hoover),
6.60% due 10/01/2016 5,630
AAA Aaa 2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra Pacific Power Co.),
AMT, 6.65% due 12/01/2017 (b) 2,568
New Jersey--1.2%
AAA Aaa 4,435 New Jersey State Housing and Mortgage Finance Agency Revenue Bonds (Home Buyer),
AMT, Series M, 6.95% due 10/01/2022 (d) 4,649
New York--2.8%
A- Baa1 2,000 New York City, New York, GO, Series B, Sub-Series B-1, UT, 7.25% due 8/15/2019 2,083
A1+ NR* 5,100 New York City, New York, IDA, IDR (Japan Airlines Company Ltd. Project), VRDN,
AMT, 5.25% due 11/01/2015 (a) 5,100
AAA VMIG1++ 1,000 New York City, New York, Municipal Water Finance Authority, Water and Sewer
System Revenue Bonds, VRDN, Series C, 5.10% due 6/15/2023 (a)(c) 1,000
A1+ NR* 600 New York State Energy Research and Development Authority, PCR (Niagara Power
Corp. Project), VRDN, AMT, Series B, 5.40% due 7/01/2027 (a) 600
A+ Aa 2,500 Triborough Bridge and Tunnel Authority, New York, General Purpose Revenue
Refunding Bonds, Series Y, 5.50% due 1/01/2017 2,338
<PAGE>
Ohio--0.9%
AAA Aaa 1,500 Cleveland, Ohio, Water Works Revenue Refunding Bonds (First Mortgage), Series F-92B,
6.50% due 1/01/2011 (b) 1,572
AAA Aaa 1,740 Lakota, Ohio, Local School District Revenue Bonds, UT, 7% due 12/01/2007 (b) 1,992
Pennsylvania--1.8%
AA Aa 1,250 Pennsylvania HFA, S/F Mortgage Revenue Bonds, AMT, Series 43, 7.40%
due 10/01/2014 1,343
BBB+ NR* 6,340 Philadelphia, Pennsylvania, Hospitals and Higher Education Facilities Authority,
Revenue Refunding Bonds (Philadelphia Mental Retardation Project), 6.20% due 8/01/2011 5,880
South Carolina--
1.0%
A- A1 3,000 Richland County, South Carolina, Solid Waste Disposal Facilities Revenue
Bonds (Union Camp Corp. Project), AMT, Series B, 7.125% due 9/01/2021 3,113
NR* Aa 1,000 South Carolina State Housing Finance and Development Authority, Mortgage
Revenue Bonds, AMT, Series A, 6.70% due 7/01/2027 999
Texas--7.8%
NR* NR* 10,300 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds (Citgo Petroleum
Corp. Project), VRDN, 5.10% due 4/01/2025 (a) 10,300
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
A- A 1,500 (Memorial Hospital Systems Project), Series A, 6.60% due 6/01/2014 1,503
A- A 1,500 (Memorial Hospital Systems Project), Series A, 6.625% due 6/01/2024 1,493
AA Aa 2,500 (Saint Luke's Episcopal Hospital Project), Series A, 6.625% due 2/15/2012 2,555
SP1+ MIG1++ 600 Houston, Texas, TRAN, 4.50% due 6/29/1995 600
AA Aa 8,000 North Central, Texas, Health Facilities Development Corporation Revenue
Bonds (Baylor University Medical Center), Linked PARS and INFLOS,
Series A, 6.85% due 5/15/2016 8,253
NR* VMIG1++ 5,200 Southwest Texas, Higher Education Authority Incorporated, Revenue Refunding Bonds
(Southern Methodist University), VRDN, 4.90% due 7/01/2015 (a) 5,200
BBB Baa2 1,250 West Side Calhoun County, Texas, Navigation District, Solid Waste Disposal
Revenue Bonds (Union Carbide Chemicals Project), AMT, 6.40% due 5/01/2023 1,179
Virginia--3.7%
A- A1 3,115 Isle Wight County, Virginia, IDA, Solid Waste Disposal Facilities Revenue Bonds
(Union Camp Corp. Project), AMT, 6.55% due 4/01/2024 3,127
Virginia State HDA, Commonwealth Mortgage Revenue Bonds:
AA+ Aa1 2,000 AMT, Series B, Sub-Series B-2, 6.85% due 1/01/2027 2,023
AA+ Aa 2,500 AMT, Series G, Sub-Series G-2, 6.65% due 1/01/2019 2,505
AA+ Aa1 2,000 Series B, Sub-Series B-5, 6.90% due 7/01/2013 2,060
AA+ Aa1 5,100 Series H, 6.85% due 7/01/2014 5,278
Washington--4.6%
AAA NR* 2,395 Washington State Housing Finance Commission, S/F Mortgage Revenue Refunding
Bonds, Series D, 6.95% due 7/01/2017 (f)(g) 2,472
Washington State Public Power Supply System, Revenue Refunding Bonds, Series B:
AA Aa 4,950 (Nuclear Project No. 1), 7.25% due 7/01/2009 5,420
AA Aa 5,000 (Nuclear Project No. 1), 7.125% due 7/01/2016 5,368
AAA Aaa 3,500 (Nuclear Project No. 1--Bonneville Power Administration), 5.60% due 7/01/2015 (d) 3,218
AAA Aaa 1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (d) 2,120
<PAGE>
Wisconsin--1.1%
NR* A 2,000 Wisconsin State Health and Educational Facilities Authority, Revenue
Refunding Bonds (Saint Claire Hospital Project), 7% due 2/15/2011 2,044
AA Aa 2,250 Wisconsin State Housing and Economic Development Authority, Home Ownership
Revenue Bonds, AMT, Series D, 6.65% due 7/01/2025 2,235
Wyoming--1.5%
BBB Baa3 2,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corp.
Project), AMT, Series B, 6.90% due 9/01/2024 1,992
Wyoming Community Development Authority, S/F Mortgage Revenue Bonds:
AA Aa 1,500 AMT, Series H, 7.10% due 6/01/2012 1,559
AA Aa 2,500 Series B, 6.70% due 6/01/2017 2,571
Total Investments (Cost--$390,656)--99.0% 397,098
Other Assets Less Liabilities--1.0% 3,809
--------
Net Assets--100.0% $400,907
========
<FN>
(a)The interest rate is subject to change periodically
based upon the prevailing market rates. The interest
rate shown is the rate in effect at April 30, 1995.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)Escrowed to Maturity.
(f)FNMA Collateralized.
(g)GNMA Collateralized.
(h)FHA Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of April 30, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$390,656,460) (Note 1a) $397,097,942
Receivables:
Interest $ 7,563,368
Securities sold 6,419,210 13,982,578
------------
Deferred organization expenses (Note 1e) 28,225
Prepaid expenses and other assets 25,839
------------
Total assets 411,134,584
------------
<PAGE>
Liabilities: Payables:
Securities purchased 7,445,661
Dividends to shareholders (Note 1f) 617,978
Investment adviser (Note 2) 155,605 8,219,244
------------
Accrued expenses and other liabilities 2,008,411
------------
Total liabilities 10,227,655
------------
Net Assets: Net assets $400,906,929
============
Capital: Capital Stock (200,000,000 shares authorized)(Note 4):
Preferred Stock, par value $.10 per share (5,400 shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference) $135,000,000
Common Stock, par value $.10 per share (19,907,055 shares
issued and outstanding) $ 1,990,705
Paid-in capital in excess of par 277,543,484
Undistributed investment income--net 2,279,632
Accumulated realized capital losses on investments--net (Note 5) (22,348,374)
Unrealized appreciation on investments--net 6,441,482
------------
Total--Equivalent to $13.36 net asset value per share of Common Stock
(market price--$11.625) 265,906,929
------------
Total capital $400,906,929
============
<FN>
*Auction Market Preferred Stock.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended April 30, 1995
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $12,371,656
Income (Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 965,118
Commission fees (Note 4) 174,554
Professional fees 37,209
Transfer agent fees 33,766
Accounting services (Note 2) 32,006
Printing and shareholder reports 25,904
Custodian fees 15,385
Listing fees 12,241
Directors' fees and expenses 12,091
Pricing fees 7,150
Amortization of organization expenses (Note 1e) 4,155
Other 19,878
---------
Total expenses 1,339,457
------------
Investment income--net 11,032,199
------------
Realized & Realized loss on investments--net (16,344,136)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 32,235,699
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 26,923,762
(Notes 1b, 1d & 3): ============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1995 Oct. 31, 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 11,032,199 $ 21,439,599
Realized loss on investments--net (16,344,136) (6,004,219)
Change in unrealized appreciation/depreciation on investments--net 32,235,699 (44,336,422)
------------ ------------
Net increase (decrease) in net assets from operations 26,923,762 (28,901,042)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (8,480,107) (17,256,192)
Shareholders Preferred Stock (2,616,201) (3,546,657)
(Note 1f): Realized gain on investments--net:
Common Stock -- (1,493,468)
Preferred Stock -- (238,878)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (11,096,308) (22,535,195)
------------ ------------
Capital Stock Offering and underwriting costs resulting from the issuance of
Transactions Preferred Stock -- 8,817
(Notes 1e & 4): ------------ ------------
Net increase in net assets derived from capital stock transactions -- 8,817
------------ ------------
<PAGE>
Net Assets: Total increase (decrease) in net assets 15,827,454 (51,427,420)
Beginning of period 385,079,475 436,506,895
------------ ------------
End of period* $400,906,929 $385,079,475
============ ============
<FN>
*Undistributed investment income--net $ 2,279,632 $ 2,343,741
============ ============
See Notes to Financial Statements.
</TABLE>
<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 For the Period
Months Ended Year Ended Mar. 29, 1993++ to
Increase (Decrease) in Net Asset Value: April 30, 1995 Oct. 31, 1994 Oct. 31, 1993
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.56 $ 15.15 $ 14.18
Operating ----------- ----------- -----------
Performance: Investment income--net .55 1.08 .62
Realized and unrealized gain (loss) on investments--net .81 (2.53) 1.02
----------- ----------- -----------
Total from investment operations 1.36 (1.45) 1.64
----------- ----------- -----------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.43) (.87) (.45)
Realized gain on investments--net -- (.08) --
----------- ----------- -----------
Total dividends and distributions to Common Stock
shareholders (.43) (.95) (.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 (.13) (.18) (.09)
Realized gain on investments--net -- (.01) --
Capital charge resulting from issuance of Preferred Stock -- -- (.11)
----------- ----------- -----------
Total effect of Preferred Stock activity (.13) (.19) (.20)
----------- ----------- -----------
Net asset value, end of period $ 13.36 $ 12.56 $ 15.15
=========== =========== ===========
Market price per share, end of period $ 11.625 $ 10.375 $ 14.625
=========== =========== ===========
<PAGE>
Total Investment Based on market price per share 16.36%+++ (23.56%) .53%+++
Return:** =========== =========== ===========
Based on net asset value per share 10.47%+++ (10.72%) 10.16%+++
=========== =========== ===========
Ratios to Average Expenses, net of reimbursement .70%* .68% .35%*
Net Assets:*** =========== =========== ===========
Expenses .70%* .68% .49%*
=========== =========== ===========
Investment income--net 5.73%* 5.17% 5.17%*
=========== =========== ===========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 265,907 250,079 $ 301,507
=========== =========== ===========
Preferred Stock outstanding, end of period (in thousands) $ 135,000 $ 135,000 $ 135,000
=========== =========== ===========
Portfolio turnover 53.19% 114.56% 25.00%
=========== =========== ===========
Dividends Per Series A--Investment income--net $ 519 $ 644 $ 292
Share on Series B--Investment income--net 442 693 352
Preferred Stock Series C--Investment income--net 493 634 302
Outstanding:++++++
<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 effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 26, 1993.
++++++Dividends per share have been adjusted to reflect a two-for-one stock split.
+++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. 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 New York 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 and options thereon,
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 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) 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) 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 Stock were
charged to capital at the time of issuance of the shares.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
NOTES TO FINANCIAL STATEMENTS (concluded)
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.,
Inc. ("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 0.50% 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 April 30, 1995 were $195,096,654 and $204,430,445,
respectively.
Net realized and unrealized gains (losses) as of April 30, 1995 were as
follows:
Realized Unrealized
Losses Gains (Losses)
Long-term investments $(11,556,002) $6,442,287
Short-term investments (40,836) (805)
Financial futures contracts (4,747,298) --
------------ ----------
Total $(16,344,136) $6,441,482
============ ==========
As of April 30, 1995, net unrealized appreciation for Federal income tax
purposes aggregated $6,441,482, of which $9,305,262 related to appreciated
securities and $2,863,780 related to depreciated securities. The aggregate
cost of investments at April 30, 1995 for Federal income tax purposes was
$390,656,460.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. The Board of Directors is authorized, however, to
reclassify any unissued shares of capital stock without approval of holders of
Common Stock.
Common Stock
For the six months ended April 30, 1995, shares issued and outstanding
remained constant at 19,907,055. At April 30, 1995, total paid-in capital
amounted to $279,534,189.
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, 1995 were as follows: Series A, 4.20%; Series B, 3.965%; and Series
C, 4.50%.
A two-for-one stock split occurred on December 1, 1994. As a result, at April
30, 1995, there were 5,400 AMPS authorized, issued and outstanding with a
liquidation preference of $25,000 per share, plus accumulated and unpaid
dividends of $165,205.
<PAGE>
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended April 30, 1995, MLPF&S, an affiliate of
FAM, earned $96,436 as commissions.
5. Capital Loss Carryforward:
At October 31, 1994, the Fund had a capital loss carryforward of approximately
$6,004,000, all of which expires in 2002. This amount will be available to
offset like amounts of any future taxable gains.
6. Subsequent Event:
On May 9, 1995, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $0.069208 per share,
payable on May 30, 1995 to shareholders of record as of May 19, 1995.
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>
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 -- --
May 1, 1994 to July 31, 1994 .26 (.12) .41 .22 .04 -- --
August 1, 1994 to October 31, 1994 .27 (.37) (.85) .21 .05 -- --
November 1, 1994 to January 31, 1995 .28 (.64) .95 .22 .07 -- --
February 1, 1995 to April 30, 1995 .27 (.18) .68 .21 .06 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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
May 1, 1994 to July 31, 1994 14.15 13.15 12.625 11.875 1,966
August 1, 1994 to October 31, 1994 13.79 12.56 12.375 10.50 4,443
November 1, 1994 to January 31, 1995 12.87 11.51 11.25 9.625 5,533
February 1, 1995 to April 30, 1995 13.66 12.89 11.875 11.125 2,714
<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>
