MUNIVEST
FUND II, INC.
FUND LOGO
Annual Report
October 31, 1996
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
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank &Trust Company
One State Street
New York, NY 10004
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
NYSE Symbol
MVT
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. Statements and other information herein are as dated
and are subject to change.
MuniVest
Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
<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. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
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 pickup 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.
<PAGE>
DEAR SHAREHOLDER
For the year ended October 31, 1996, the Common Stock of MuniVest
Fund II, Inc. earned $0.854 per share income dividends, which
included earned and unpaid dividends of $0.074. This represents a
net annualized yield of 6.05%, based on a month-end net asset value
of $14.12 per share. Over the same period, the total investment
return on the Fund's Common Stock was +8.47%, based on a change in
per share net asset value from $13.93 to $14.12, and assuming
reinvestment of $0.852 per share income dividends.
For the six-month period ended October 31, 1996, the total
investment return on the Fund's Common Stock was +6.77%, based on a
change in per share net asset value from $13.68 to $14.12, and
assuming reinvestment of $0.425 per share income dividends.
For the six-month period ended October 31, 1996, the Fund's Auction
Market Preferred Stock had an average yield of Series A, 3.23%;
Series B, 3.18%; and Series C, 3.41%.
The Municipal Market
Environment
Municipal bond yields generally moved lower during the six months
ended October 31, 1996. Long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined
approximately 35 basis points (0.35%) to close the six-month period
ended October 31, 1996 at approximately 5.94%. The municipal bond
market exhibited considerable weekly yield volatility over the six
months ended October 31, 1996 with bond yields vacillating as much
as 20 basis points. This ongoing volatility was in response to
fluctuating evidence regarding the degree to which recent economic
growth would result in any significant increase in inflationary
pressures. Much of the evidence supporting stronger growth centered
around the strong employment growth seen in April and June with bond
yields rising in response. Other more recent economic indicators
have suggested that economic growth will not be excessive and
inflationary pressures will remain well-contained. This continued
benign inflationary environment has supported lower tax-exempt bond
yields in recent months. US Treasury bond yields have exhibited
similar, albeit greater, volatility during the six-month period
ended October 31, 1996, falling more than 20 basis points to end the
period at 6.64%. Over the past six months, tax-exempt bond yields
registered significantly greater declines than those shown by the US
Treasury bond. This relative outperformance by the municipal bond
market was largely the result of the strong technical support the
tax-exempt market has enjoyed throughout most of 1996. Perhaps most
significantly, the pace of new bond issuance has recently slowed.
<PAGE>
Over the last year, approximately $180 billion in long-term
municipal securities was issued, an increase of over 25% versus the
same period a year ago. Much of this increase was the result of
issuers seeking to refinance their existing higher-couponed debt as
interest rates declined in 1995 and early 1996. As interest rates
rose, these financings became increasingly economically impractical
and issuance declined. Over the last six months, approximately $90
billion in long-term tax-exempt securities was underwritten, an
increase of 5% versus the comparable period a year earlier. Only $41
billion in tax-exempt securities was issued in the last three
months, a 3% decline in issuance versus the October 31, 1995
quarter.
At the same time, investor demand remained consistently strong. With
nominal new-issue yields generally above 6%, retail investor
interest was steady. Additionally, investors received over $50
billion this June and July in assets derived from coupon income,
bond maturities, and proceeds from early redemptions. Annual new
bond issuance has declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s were redeemed at
their first optional call date, the total number of outstanding tax-
exempt bonds has declined. This combination of a declining net
supply and significant amounts of assets helped maintain investor
demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance has led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While still historically
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
<PAGE>
Portfolio Strategy
During the six months ended October 31, 1996, we continued to
maintain the neutral strategy we had adopted earlier this year. We
preferred income-oriented issues over more interest rate-sensitive
securities whenever possible. However, attractively priced, higher-
couponed, tax-exempt bonds continued to be scarce, making such
purchases difficult despite ongoing yield volatility. Consequently,
we chose to remain essentially fully invested during the six-month
period ended October 31, 1996. Until the near-term direction of tax-
exempt interest rates becomes clearer, we expect to maintain the
Fund's current strategy. Over the last 12 months, this strategy
greatly benefited the Fund's total return.
Short-term tax-exempt interest rates traded in a narrow range,
centered around 3.50% for most of the six-month period ended October
31, 1996. Concerns over interest rate tightening by the Federal
Reserve Board have had little, if any, impact on short-term
municipal interest rates. Consequently, the leverage of the Common
Stock has continued to have a material beneficial impact on the
yield paid to the 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 Common
Stock will be reduced. (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
Senior Vice President
<PAGE>
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
December 3, 1996
PROXY RESULTS
<TABLE>
During the six-month period ended October 31, 1996, MuniVest Fund
II, Inc. Common Stock shareholders voted on the following proposals.
The proposals were approved at a special shareholders' meeting on
September 19, 1996. The description of each proposal and number of
shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Cynthia A. Montgomery 19,098,111 505,107
Charles C. Reilly 19,097,411 505,807
Kevin A. Ryan 19,098,742 504,476
Arthur Zeikel 19,098,982 504,236
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 19,010,275 234,004 358,939
<CAPTION>
During the six-month period ended October 31, 1996, MuniVest Fund
II, Inc. Preferred Stock shareholders (Series A, B and C) voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on September 19, 1996. The description of each
proposal and number of shares voted are as follows:
<PAGE>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors as follows:Ronald W. Forbes,
Cynthia A. Montgomery,Charles C. Reilly, Kevin A. Ryan, Richard R.
West and Arthur Zeikel:
Series A 1,060 26
Series B 1,458 0
Series C 1,308 70
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year as follows:
Series A 1,086 0 0
Series B 1,458 0 0
Series C 1,303 75 0
</TABLE>
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
EDA Economic Development Authority
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
M/F Multi-Family
PCR Pollution Control Revenue 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>
Alaska--4.0% AA Aa3 $15,000 Valdez, Alaska, Marine Terminal Revenue Refunding
Bonds (Sohio Pipeline--British Petroleum Oil),
7.125% due 12/01/2025 $ 16,555
<PAGE>
Arizona--0.7% AAA Aaa 2,315 Maricopa County, Arizona, School District No. 3,
Refunding and Improvement Bonds (Tempe Elementary),
UT, 7.50% due 7/01/2010 (c) 2,797
Arkansas--0.0% NR* P1 200 Crosset, Arkansas, PCR (Georgia-Pacific Corp. Project),
VRDN, 3.55% due 10/01/2007 (a) 200
California-- AA Aa 3,825 California State Department of Water Resources Water Systems
1.6% Revenue Bonds (Central Valley Project), Series P, 6.50%
due 12/01/2018 4,147
A A 2,000 California State Public Works Board, Lease Revenue Bonds
(Various Community College Projects), Series B, 7% due
3/01/2004 (i) 2,310
Colorado--4.1% A1+ VMIG1++ 200 Colorado Health Facilities Authority Revenue Bonds
(Sisters of Charity Health Services), VRDN, Series C,
3.55% due 5/15/2022 (a) 200
NR* Aa 3,380 Colorado HFA, S/F Program, AMT, Senior Series F, 8.625%
due 6/01/2025 (h) 3,885
Denver, Colorado, City and County Airport Revenue Bonds:
BBB Baa 7,500 AMT, Series C, 6.75% due 11/15/2022 7,772
AAA Aaa 4,350 Series A, 7.25% due 11/15/2002 (d)(i) 5,025
Delaware--0.6% AAA Aaa 2,250 Delaware Transportation Authority, Transportation System,
Senior Revenue Bonds, 7% due 7/01/2014 (c) 2,572
Florida--0.9% BBB Baa1 3,655 Escambia County, Florida, PCR (Champion International Corp.
Project), AMT, 6.90% due 8/01/2022 3,862
Georgia--7.0% Georgia Municipal Electric Authority, Special Obligation
Revenue Bonds:
A A 6,000 (3rd Crossover Series), 6.60% due 1/01/2018 6,627
A A 1,250 (4th Crossover Series), Project One, 6.50% due 1/01/2020 1,371
A+ A 11,035 (5th Crossover Series), Project One, 6.50% due 1/01/2017 12,084
Georgia State, GO, Series F:
AA+ Aaa 5,000 6.50% due 12/01/2006 5,630
AA+ Aaa 3,150 6.50% due 12/01/2007 3,557
Hawaii--0.5% A A 2,000 Hawaii State Department, Budget and Finance Special Purpose
Revenue Bonds (Kapi'Olani Health Obligation), 6.25% due
7/01/2021 2,052
</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>
Idaho--0.6% NR* Aaa $ 2,500 Idaho Housing Agency, S/F Mortgage, AMT, Series E-2,
6.90% due 1/01/2027 $ 2,624
<PAGE>
Illinois-- AA- Aa3 6,925 Chicago, Illinois, Gas Supply Revenue Bonds (People's
13.9% Gas), Series A, 6.875% due 3/01/2015 7,450
AAA Aaa 5,000 Chicago, Illinois, Water Revenue Bonds, 5% due
11/01/2025 (c) 4,487
Illinois HDA, M/F Housing Program:
A+ A1 9,090 Refunding, Series A, 7.375% due 7/01/2017 9,839
A+ A1 6,500 Series 5, 6.75% due 9/01/2023 6,726
A+ Aa 2,550 Illinois HDA, Residential Mortgage Revenue Bonds, AMT,
Series C-1, 6.874% due 2/01/2018 2,642
NR* Baa1 3,235 Illinois Health Facilities Authority Revenue Bonds (Holy
Cross Hospital Project), 6.75% due 3/01/2024 3,322
Illinois Regional Transportation Authority:
AAA Aaa 4,815 Series A, 6.50% due 6/01/2015 (b) 5,221
AAA Aaa 1,500 Series A, 7.20% due 11/01/2020 (b) 1,819
AAA Aaa 7,000 Series A, 6.70% due 11/01/2021 (c) 8,050
AAA Aaa 2,500 Series C, UT, 7.75% due 6/01/2020 (c) 3,207
AAA Aaa 1,000 Series C, UT, 7.10% due 6/01/2025 (c) 1,148
AAA A1 3,500 Illinois State Sales Tax Revenue Bonds, Series O, 6.50%
due 6/15/2013 3,741
Indiana--12.8% Indiana Bond Bank, Revenue Guarantee (State Revolving Fund
Program), Series A:
A NR* 2,750 6.875% due 2/01/2012 3,016
A NR* 5,750 6.75% due 2/01/2017 6,347
NR* Aaa 5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds,
Series A, 6.80% due 1/01/2017 5,793
AAA Aaa 1,700 Indiana State Toll Road Commission, Toll Road Revenue
Bonds (East-West Toll Road), 9% due 1/01/2015 (e) 2,320
NR* A 1,915 Indiana Transportation Finance Authority, Airport
Facilities Lease Revenue Bonds (United Air), Series A,
6.75% due 11/01/2011 2,024
Indiana Transportation Finance Authority, Highway Revenue
Bonds, Series A:
A+ A1 2,000 7.25% due 6/01/2015 2,378
A+ A1 3,775 6.80% due 12/01/2016 4,357
Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D:
A+ NR* 8,750 6.75% due 2/01/2014 9,884
A+ NR* 11,800 6.75% due 2/01/2020 12,738
AAA Aaa 3,770 South Newton, Indiana, First Mortgage Revenue Bonds
(School Building Corp.), UT, 7% due 1/15/2017 (d) 4,289
Kentucky--0.4% AA- Aa3 1,750 Boone County, Kentucky, PCR, Refunding (Dayton Power &
Light Co.), Series A, 6.50% due 11/15/2022 1,838
Louisiana--1.4% NR* Baa2 2,000 Lake Charles, Louisiana, Harbor and Terminal District,
Port Facilities Revenue Refunding Bonds (Trunkline Long Co.
Project), 7.75% due 8/15/2022 2,256
A- A1 3,315 Louisiana Public Facilities Authority Revenue Bonds (Tulane
University), 6.625% due 11/15/2021 3,570
<PAGE>
Maine--1.7% AA- Aa 6,790 Maine State Housing Authority, Mortgage Purchase, AMT,
Series C-2, 6.875% due 11/15/2023 7,054
Maryland--1.0% A- NR* 2,000 Maryland State Energy Financing Administration, Solid Waste
Disposal, Limited Obligation, Revenue Bonds (Wheelabrator
Water Projects), AMT, 6.45% due 12/01/2016 2,075
Maryland State Health and Higher Educational Facilities
Authority Revenue Bonds:
NR* VMIG1++ 600 (Pooled Loan Program), VRDN, Series A, 3.55% due
4/01/2035 (a) 600
AAA Aaa 1,000 (University of Maryland Medical Systems), Series B, 7%
due 7/01/2022 (c) 1,203
A1+ VMIG1++ 400 University of Maryland, University Revenue Bonds (Revolving
Equipment Loan Program), VRDN, Series B, 3.40% due
7/01/2015 (a) 400
Massachusetts-- A+ A1 3,250 Massachusetts Bay Transportation Authority (Massachusetts
3.5% Transportation System), Series C, 6.10% due 3/01/2023 3,325
A+ A1 2,450 Massachusetts State Consolidated Loan, Series A, 4.50% due
1/01/2003 2,406
AAA Aaa 1,000 Massachusetts State, HFA, Residential Development, Series C,
6.90% due 11/15/2021 (f) 1,053
A+ A1 1,000 Massachusetts State Revenue Refunding Bonds (College Building
Authority Project), Series A, 7.50% due 5/01/2011 1,207
A A 6,000 Massachusetts State Water Resource Authority, Series A, 6.50%
due 7/15/2019 6,655
Michigan--10.2% AAA Aaa 2,500 Detroit, Michigan, Sewage Disposal Revenue Bonds, 6.625%
due 7/01/2001 (c)(i) 2,766
BBB Baa1 3,500 Dickinson County, Michigan, Economic Development Corp., Solid
Waste Disposal, Revenue Refunding Bonds (Champion
International), 6.55% due 3/01/2007 3,648
AA Aa 1,250 Michigan Municipal Bond Authority Revenue Refunding Bonds
(Local Government--Qualified School), Series A, 6.50% due
5/01/2016 1,323
A+ NR* 3,000 Michigan State, HDA, Rental Housing Revenue Refunding Bonds,
Series A, 6.65% due 4/01/2023 3,100
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 5,670 Refunding, AMT, Series D, 6.85% due 6/01/2026 5,917
AA+ NR* 4,885 Series A, 6.875% due 6/01/2023 5,095
Michigan State Hospital Finance Authority, Revenue Refunding
Bonds:
A A 3,500 (Detroit Medical Center Obligated Group), Series A, 6.50%
due 8/15/2018 3,657
AA Aa 10,000 (Henry Ford Health Systems), Series A, 5.25% due 11/15/2025 9,405
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 2,620
AAA Aaa 2,100 Nice Community School District, Michigan, Marquette and
Baraga Counties, UT, Series 95, 5.25% due 5/01/2020 (d) 1,981
Royal Oak, Michigan, Hospital Finance Authority, Revenue
Refunding Bonds (Beaumont Properties, Inc.), Series E:
AA- Aa 265 6.625% due 1/01/2002 (i) 294
AA- Aa 2,320 6.625% due 1/01/2019 2,472
A1+ VMIG1++ 200 University of Michigan, University Hospital Revenue Bonds,
VRDN, Series A, 3.60% due 12/01/2027 (a) 200
<PAGE>
Minnesota-- Minnesota State, HFA, S/F Mortgage, AMT:
1.6% AA+ Aa 2,700 Series L, 6.70% due 7/01/2020 2,793
AA+ Aa 3,920 Series M, 6.70% due 7/01/2026 4,055
Nebraska--0.6% AAA Aaa 2,200 Lancaster County, Nebraska, Hospital Authority No. 1,
Hospital Revenue Bonds (Bryan Memorial Hospital Project),
6.70% due 6/01/2022 (d) 2,390
</TABLE>
<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>
Nevada--3.1% AAA Aaa $ 2,500 Clark County, Nevada, School District, 6.75% due
12/15/2004 (c)(i) $ 2,847
AAA Aaa 1,450 Nevada Housing Division, S/F Program, AMT, Series E,
7% due 10/01/2019 1,528
AA Aa 5,430 Nevada State, Refunding (Colorado River Commission--Hoover),
6.60% due 10/01/2016 5,844
AAA Aaa 2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds
(Sierra Pacific Power Co.), AMT, 6.65% due 12/01/2017 (b) 2,681
New Jersey-- AAA Aaa 4,435 New Jersey State Housing and Mortgage Finance Agency
1.1% Revenue Bonds (Home Buyer), AMT, Series M, 6.95% due
10/01/2022 (d) 4,692
New Mexico-- A1+ P1 1,400 Farmington, New Mexico, PCR (Arizona Public Service Co.),
0.3% VRDN, AMT, Series C, 3.65% due 9/01/2024 (a) 1,400
New York--4.7% New York City, New York, GO, UT:
BBB+ Baa1 2,500 Refunding, Series C, 5.875% due 2/01/2016 2,417
BBB+ Baa1 95 Series B, 7% due 6/01/2001 (i) 105
BBB+ Baa1 2,330 Series B, 7% due 6/01/2016 2,476
BBB+ Baa1 7,500 Series B, Sub-Series B-1, 7% due 8/15/2016 8,071
BBB+ Baa1 4,000 Series B, Sub-Series B-1, 7.25% due 8/15/2019 4,392
AAA Aaa 1,900 New York State Local Government Assistance Corporation,
Series C, 7% due 4/01/2001 (i) 2,125
Ohio--0.4% Cleveland, Ohio, Water Works Revenue Bonds (First
Mortgage), Series F-92B (b):
AAA Aaa 20 6.50% due 1/01/2002 (i) 22
AAA Aaa 1,480 6.50% due 1/01/2011 1,606
Oregon--0.9% A-1 VMIG1++ 300 Medford, Oregon, Hospital Facilities Authority Revenue
Bonds (Gross-Rogue Valley Health Services), VRDN, 3.70%
due 10/01/2016 (a) 300
A1+ A3 3,500 Port Saint Helens, Oregon, PCR (Portland General
Electric Company Project), VRDN, AMT, Series A, 3.65%
due 8/01/2014 (a) 3,500
<PAGE>
Pennsylvania-- AA+ Aa 1,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 43, 7.40% due
0.3% 10/01/2014 1,312
South Carolina-- A- A1 3,000 Richland County, South Carolina, Solid Waste Disposal
1.0% Facilities Revenue Bonds (Union Camp Corp. Project), AMT,
Series B, 7.125% due 9/01/2021 3,223
NR* Aa 1,000 South Carolina State Housing Finance and Development
Authority, Mortgage Revenue Bonds, AMT, Series A, 6.70%
due 7/01/2027 (h) 1,032
Texas--5.5% AA- Aa3 2,500 Guadalupe-Blanco River Authority, Texas, Sewage and
Solid Waste Disposal Facility Revenue Bonds (du Pont (E.I.)
de Nemours & Co. Project), AMT, 6.40% due 4/01/2026 2,602
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds, Series A:
A- A 1,500 (Memorial Hospital Systems Project), 6.60% due 6/01/2014 1,580
A- A 1,500 (Memorial Hospital Systems Project), 6.625% due 6/01/2024 1,572
AA Aa 2,500 (Saint Luke's Episcopal Hospital Project), 6.625%
due 2/15/2012 2,642
A+ A2 2,500 Matagorda County, Texas, Port of Bay City Authority Revenue
Bonds (Hoechst Celanese Corp. Project), AMT, 6.50% due
5/01/2026 2,577
AA Aa 8,000 North Central, Texas, Health Facility Development
Corporation Revenue Bonds (Baylor University Medical Center),
Series A, 6.85% due 5/15/2001 (i) 8,857
AA Aa 2,500 Texas State, Refunding (Veterans' Land), UT, 6.50% due
12/01/2021 2,640
Utah--0.2% NR* P1 700 Salt Lake County, Utah, PCR, Refunding (Service Station
Holdings Project), VRDN, 3.60% due 2/01/2008 (a) 700
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 3,281
Virginia State, HDA, Commonwealth Mortgage:
AA+ Aa1 2,000 AMT, Series B, Sub-Series B-2, 6.85% due 1/01/2027 2,067
AA+ NR* 2,500 AMT, Series G, Sub-Series G-2, 6.65% due 1/01/2019 2,570
AA+ Aa1 2,000 Series B, Sub-Series B-5, 6.90% due 7/01/2013 2,077
AA+ Aa1 5,100 Series H, 6.85% due 7/01/2014 5,398
Washington-- AAA NR* 2,395 Washington State Housing Finance Commission, S/F Mortgage
4.5% Revenue Refunding Bonds, Series D, 6.95% due 7/01/2017 (f)(g) 2,509
Washington State Public Power Supply System, Revenue
Refunding Bonds, Series B:
AA- Aa1 4,950 (Nuclear Project No. 1), 7.25% due 7/01/2009 5,654
AA- Aa1 5,000 (Nuclear Project No. 1), 7.125% due 7/01/2016 5,700
AA- Aa1 2,500 (Nuclear Project No. 2), 7% due 7/01/2000 (i) 2,762
AAA Aaa 1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (d) 2,255
<PAGE>
Wisconsin-- AA Aa 2,250 Wisconsin Housing and EDA, Home Ownership Revenue Bonds, AMT,
1.1% Series D, 6.65% due 7/01/2025 2,313
NR* A 2,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Saint Claire Hospital Project), 7%
due 2/15/2011 2,127
Wyoming--3.7% A1 VMIG1++ 2,400 Sweetwater County, Wyoming, PCR, Refunding (Idaho Power Co.
Project), VRDN, Series B, 3.50% due 7/15/2026 (a) 2,400
BBB Baa2 5,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue
Bonds (FMC Corp. Project), AMT, Series B, 6.90% due 9/01/2024 5,252
Wyoming Community Development Authority, S/F Mortgage:
AA Aa 1,500 AMT, Series H, 7.10% due 6/01/2012 1,587
AA Aa 5,690 Series B, 6.70% due 6/01/2017 5,951
Total Investments (Cost--$381,834)--97.6% 406,072
Other Assets Less Liabilities--2.4% 9,964
--------
Net Assets--100.0% $416,036
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1996.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)Escrowed to Maturity.
(f)FNMA Collateralized.
(g)GNMA Collateralized.
(h)FHA Insured.
(i)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$381,833,574) (Note 1a) $406,071,828
Cash 112,502
Receivables:
Interest $ 7,985,602
Securities sold 4,519,088 12,504,690
------------
Deferred organization expenses (Note 1e) 11,626
Prepaid expenses and other assets 45,495
------------
Total assets 418,746,141
------------
<PAGE>
Liabilities: Payables:
Securities purchased 2,114,217
Dividends to shareholders (Note 1f) 334,774
Investment adviser (Note 2) 175,610 2,624,601
------------
Accrued expenses and other liabilities 86,021
------------
Total liabilities 2,710,622
------------
Net Assets: Net assets $416,035,519
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 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 2,564,094
Accumulated realized capital losses on investments--net (Note 5) (25,301,018)
Unrealized appreciation on investments--net 24,238,254
------------
Total--Equivalent to $14.12 net asset value per share of
Common Stock (market price--$12.625) 281,035,519
------------
Total capital $416,035,519
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 24,774,496
Income (Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 2,067,312
Commission fees (Note 4) 346,604
Professional fees 83,067
Transfer agent fees 64,715
Accounting services (Note 2) 52,596
Printing and shareholder reports 52,254
Custodian fees 31,128
Listing fees 24,885
Directors' fees and expenses 24,869
Pricing fees 13,975
Amortization of organization expenses (Note 1e) 8,311
Other 31,637
------------
Total expenses 2,801,353
------------
Investment income--net 21,973,143
------------
Realized & Realized loss on investments--net (1,655,497)
Unrealized Gain Change in unrealized appreciation on investments--net 5,246,338
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 25,563,984
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 21,973,143 $ 22,112,540
Realized loss on investments--net (1,655,497) (17,641,284)
Change in unrealized appreciation/depreciation on
investments--net 5,246,338 44,786,134
------------ ------------
Net increase in net assets resulting from operations 25,563,984 49,257,390
------------ ------------
Dividends to Investment income--net:
Shareholders Common Stock (16,965,648) (16,834,919)
(Note 1f): Preferred Stock (4,793,238) (5,271,525)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders (21,758,886) (22,106,444)
------------ ------------
<PAGE>
Net Assets: Total increase in net assets 3,805,098 27,150,946
Beginning of year 412,230,421 385,079,475
------------ ------------
End of year* $416,035,519 $412,230,421
============ ============
<FN>
*Undistributed investment income--net $ 2,564,094 $ 2,349,837
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
Period
The following per share data and ratios have been derived March 29,
from information provided in the financial statements. 1993++ to
For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.93 $ 12.56 $ 15.15 $ 14.18
Operating -------- -------- -------- --------
Performance: Investment income--net 1.10 1.11 1.08 .62
Realized and unrealized gain (loss) on
investments--net .18 1.37 (2.53) 1.02
-------- -------- -------- --------
Total from investment operations 1.28 2.48 (1.45) 1.64
-------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.85) (.85) (.87) (.45)
Realized gain on investments--net -- -- (.08) --
-------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders (.85) (.85) (.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 (.24) (.26) (.18) (.09)
Realized gain on investments--net -- -- (.01) --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.11)
-------- -------- -------- --------
Total effect of Preferred Stock activity (.24) (.26) (.19) (.20)
-------- -------- -------- --------
Net asset value, end of period $ 14.12 $ 13.93 $ 12.56 $ 15.15
======== ======== ======== ========
Market price per share, end of period $ 12.625 $ 12.125 $ 10.375 $ 14.625
======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 11.43% 25.68% (23.56%) .53%+++
Return:** ======== ======== ======== ========
Based on net asset value per share 8.47% 19.27% (10.67%) 10.16%+++
======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .68% .69% .68% .35%*
Net Assets:*** ======== ======== ======== ========
Expenses .68% .69% .68% .49%*
======== ======== ======== ========
Investment income--net 5.30% 5.55% 5.17% 5.17%*
======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $281,036 $277,230 $250,079 $301,507
======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $135,000 $135,000 $135,000 $135,000
======== ======== ======== ========
Portfolio turnover 46.58% 95.62% 114.56% 25.00%
======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,082 $ 3,054 $ 2,852 $ 3,233
======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 898 $ 967 $ 644 $ 292
Share On ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 879 $ 891 $ 693 $ 352
Outstanding:++++++ ======== ======== ======== ========
Series C--Investment income--net $ 886 $ 1,070 $ 634 $ 302
======== ======== ======== ========
<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 that occurred on December 1, 1994.
+++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 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, 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.
<PAGE>
* 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.
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.
NOTES TO FINANCIAL STATEMENTS (concluded)
(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 expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(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.
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.
<PAGE>
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.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1996 were $185,474,010 and
$196,562,607, respectively.
Net realized and unrealized gains (losses) as of October 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 279,357 $24,238,254
Financial futures contracts (1,934,854) --
----------- -----------
Total $(1,655,497) $24,238,254
=========== ===========
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $24,096,305, of which $24,145,086
related to appreciated securities and $48,781 related to depreciated
securities. The aggregate cost of investments at October 31, 1996
for Federal income tax purposes was $381,975,523.
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 year ended October 31, 1996, shares issued and outstanding
remained constant at 19,907,055. At October 31, 1996, total paid-in
capital amounted to $279,534,189.
<PAGE>
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 October 31, 1996 were as
follows: Series A, 3.345%; Series B, 3.44%; and Series C, 3.30%.
As of October 31, 1996, there were 5,400 AMPS authorized, issued and
outstanding with a liquidation preference of $25,000 per share.
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 year ended
October 31, 1996, MLPF&S, an affiliate of FAM, earned $164,336 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a net capital loss carryforward of
approximately $19,649,000, of which $5,601,000 expires in 2002 and
$14,048,000 expires in 2003. This amount willl be available to
offset like amounts of any future taxable gains.
6. Subsequent Event:
On November 8, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.074231 per share, payable on November 27, 1996 to shareholders
of record as of November 18, 1996.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders,
MuniVest Fund II, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniVest Fund
II, Inc. as of October 31, 1996, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the three-year period
then ended, and for the period March 29, 1993 (commencement of
operations) to October 31, 1993. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1996 by correspondence with the custodian and broker. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniVest Fund II, Inc. as of October 31, 1996, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 3, 1996
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniVest Fund
II, Inc. during its taxable year ended October 31, 1996 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
