MUNIVEST
FUND II, INC.
FUND LOGO
Semi-Annual Report
April 30, 1997
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.
<PAGE>
MuniVest
Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
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.
<PAGE>
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 of 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.
DEAR SHAREHOLDER
For the six-month period ended April 30, 1997, the Common Stock of
MuniVest Fund II, Inc. earned $0.437 per share income dividends,
which included earned and unpaid dividends of $0.071. This
represents a net annualized yield of 6.29%, based on a month-end per
share net asset value of $14.01. Over the same period, the total
investment return on the Fund's Common Stock was +2.63%, based on a
change in per share net asset value from $14.12 to $14.01, and
assuming reinvestment of $0.440 per share income dividends.
For the six-month period ended April 30, 1997, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
3.71%; Series B, 3.12%; and Series C, 3.96%.
<PAGE>
The Municipal Market
Environment
Long-term tax-exempt revenue bonds traded in a relatively narrow
range throughout much of the six-month period ended April 30, 1997.
By mid-January 1997, municipal bond yields rose to over 6% as
investors reacted negatively to reports of progressively stronger
domestic economic growth. However, a continued lack of any material
inflationary pressures allowed bond yields to decline to their prior
levels by late February. Bond yields rose again as investors became
increasingly concerned that the US domestic economic strength seen
thus far in 1997 would continue, and that the increase in short-term
interest rates by the Federal Reserve Board (FRB) in late March
would be the first in a series of such moves designed to slow the US
economy before any dormant inflationary pressures were awakened.
Long-term tax-exempt bond yields rose approximately 15 basis points
(0.15%) to almost 6.15% by mid-April. Similarly, long-term US
Treasury bond yields rose over 35 basis points over the same period
to 7.16%. However, in late April economic indicators were released
showing that despite considerable economic growth any inflationary
pressures, particularly those associated with wage increases, were
well-contained and of no immediate concern. Fixed-income bond prices
staged a significant rally during the last week in April with long-
term US Treasury bond yields falling nearly 20 basis points to end
the month at 6.95%. Municipal bond yields, as measured by the Bond
Buyer Revenue Bond Index, declined nearly 15 basis points to stand
at 6.01% by April 30, 1997.
As in recent quarters, the relative stability of long-term tax-
exempt bond yields was supported by low levels of new municipal bond
issuance. During the six months ended April 30, 1997, approximately
$90 billion in long-term tax-exempt bonds was underwritten, a
decline of over 6% compared to the corresponding period a year
earlier. During the three months ended April 30, 1997, $41 billion
in new long-term municipal bonds was issued, also a 6% decline in
issuance compared to the same three-month period ended April 30,
1996. Overall investor demand remained strong, particularly from
property and casualty insurance companies and individual retail
investors. In recent years, investor demand increased whenever tax-
exempt bond yields approached or exceeded the 6% level as they have
in the past few months.
Additionally, in recent months much of the new bond issuance was
dominated by a number of larger issues. These included $710 million
in New York City water bonds, $600 million in state of California
bonds, $1 billion in New York City general obligation bonds, $435
million in Dade County, Florida water and sewer revenue bonds, $450
million in Puerto Rico Electric Authority issues and $930 million in
Port Authority of New York and New Jersey issues. These bonds have
typically been issued in states with relatively high state income
taxes and consequently were generally underwritten at yields that
were relatively unattractive to residents in other states. This has
exacerbated the general decline in overall issuance in recent years,
making the decrease in supply even more dramatic for general market
investors.
<PAGE>
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, signs of a
resurgence in inflation. Recent economic growth generated
considerable unexpected tax revenues for the Federal government.
Forecasts for the 1997 Federal fiscal deficit were reduced to under
$100 billion, a level not seen since the early 1980s. Such a reduced
Federal deficit enhances the prospect for a balanced Federal budget.
All these factors support a scenario of steady, or even falling,
interest rates in the coming years. Present annual estimates of
future municipal bond issuance remain centered around $175 billion,
indicating that the current relative scarcity of tax-exempt bonds
should continue for at least the remainder of the year. Should
interest rates begin to decline later this year, either as the
result of a balanced Federal budget or continued benign inflation,
investors are unlikely to be able to purchase long-term municipal
bonds at their currently attractive levels.
Portfolio Strategy
Over the six months ended April 30, 1997, we generally maintained
the neutral investment strategy adopted in late 1996. However, in
recent months, we became slightly more defensive given the FRB's
apparent intention to raise short-term interest rates further to
ensure that domestic growth slows and any potential inflationary
pressures are contained. We expect that domestic US growth will
eventually slow and interest rates will fall in response.
In ordinary circumstances, FRB actions impact the economy only after
a considerable period of time, usually measured in quarters, not
months. The first action by the FRB was taken in late March, and we
expect the economy to begin to slow by the beginning of the fourth
quarter of 1997, at the earliest. However, prospects for material
progress on reducing the Federal budget deficit may significantly
alter historic patterns of FRB actions and their consequences.
Should meaningful Federal budget reduction legislation be enacted
quickly, interest rates could fall sooner. Under such a scenario, we
are prepared to quickly adopt a more aggressive approach to the tax-
exempt bond market in order to more fully participate in the bond
market rally.
However, until such legislation is enacted, we expect that tax-
exempt bond yields will trade in a relatively narrow range, with
perhaps a slight upward bias in yields. We will continue to purchase
higher-couponed, defensively oriented securities whenever they
become available. Cash reserves may be raised to seek to further
protect the Fund's principal, but probably not exceed 5% for any
significant period of time. The scarcity of attractively priced
municipal issues is expected to continue making reinvestment
difficult.
<PAGE>
Short-term, tax-exempt rates also continued to trade in a relatively
narrow range, typically between 3.50%--3.75%. However, in recent
weeks short-term interest rates rose to above 4%, largely in
response to seasonal corporate and individual tax pressures.
Historically, such pressures are short-lived and interest rates
usually begin to decline by mid-May. However, throughout the six-
month period ended April 30, 1997, the leverage of the Preferred
Stock was very favorable and significantly augmented the yield paid
to the Common Stock shareholders. However, should the spread between
short-term and long-term tax-exempt rates narrow, the benefits of
the leverage will decline and the yield on the Common Stock be
reduced. (For a complete explanation of the benefits and risk 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
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
May 30, 1997
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.
<PAGE>
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
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
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>
Alabama--0.7% AAA Aaa $ 2,500 Alabama Agricultural and Mechanical University Revenue
Bonds, 6.50% due 11/01/2025 (d) $ 2,681
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 16,611
Arizona--1.2% A1+ P1 200 Coconino County, Arizona, PCR, Public Service (Navajo Project),
VRDN, AMT, Series A, 4.55% due 10/01/2029 (a) 200
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) 2,743
AA+ Aa1 2,370 Phoenix, Arizona, GO, UT, Series B, 5% due 7/01/2020 2,184
California--1.6% AA Aaa 3,825 California State Department of Water Resources, Water Systems
Revenue Bonds (Central Valley Project), Series P, 6.50%
due 6/01/2006 (i) 4,270
A Aaa 2,000 California State Public Works Board, Lease Revenue Bonds
(Various Community College Projects), Series B, 7% due
3/01/2004 (i) 2,276
Colorado--4.4% NR* Aa2 3,125 Colorado HFA, S/F Program, AMT, Senior Series F, 8.625%
due 6/01/2025 (h) 3,497
BBB Baa 7,500 Denver, Colorado, City and County Airport Revenue Bonds,
AMT, Series C, 6.75% due 11/15/2022 7,782
AAA Aaa 2,070 Douglas County, Colorado, School District No. RE1 (Douglas
and Elbert Counties Improvement Project), Series A, 6.50% due
12/15/2004 (d)(i) 2,283
A1 VMIG1++ 2,300 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 4.50% due 5/01/2013 (a)(b) 2,300
A1+ NR* 2,300 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Co.
Project), VRDN, AMT, Series B, 4.60% due 4/01/2014 (a) 2,300
<PAGE>
Delaware--0.6% AAA Aaa 2,250 Delaware Transportation Authority, Transportation System
Revenue Bonds, Senior Series, 7% due 7/01/2014 (c) 2,492
Florida--0.9% BBB Baa1 3,655 Escambia County, Florida, PCR (Champion International Corp.
Project), AMT, 6.90% due 8/01/2022 3,874
Georgia--7.0% A A 1,250 Georgia Municipal Electric Authority, Power Revenue Bonds,
Series X, 6.50% due 1/01/2020 1,346
Georgia Municipal Electric Authority, Special Obligation
Revenue Bonds:
A A3 6,000 (3rd Crossover Series), 6.60% due 1/01/2018 6,550
A+ A3 11,035 (5th Crossover Series), Project One, 6.50% due 1/01/2017 12,029
Georgia State, GO, Series F:
AA+ Aaa 5,000 6.50% due 12/01/2006 5,553
AA+ Aaa 3,150 6.50% due 12/01/2007 3,513
Hawaii--0.5% A A2 2,000 Hawaii State Department of Budget and Finance, Special
Purpose Revenue Bonds (Kapi'Olani Health Obligations),
6.25% due 7/01/2021 2,040
Idaho--0.6% NR* Aaa 2,500 Idaho Housing Agency, S/F Mortgage, AMT, Series E-2,
6.90% due 1/01/2027 2,608
Illinois--13.6% AAA Aaa 3,850 Chicago, Illinois, GO, UT, 5.25% due 1/01/2027 (c) 3,531
AA- Aa3 6,925 Chicago, Illinois, Gas Supply Revenue Bonds (People's Gas
and Light), Series A, 6.875% due 3/01/2015 7,423
Illinois HDA, M/F Housing Program:
A+ A1 9,090 Refunding, Series A, 7.375% due 7/01/2017 9,775
A+ A1 6,500 Series 5, 6.75% due 9/01/2023 6,722
A+ Aa2 2,550 Illinois HDA, Residential Mortgage Revenue Bonds, AMT,
Series C-1, 6.874% due 2/01/2018 2,628
NR* Baa1 3,235 Illinois Health Facilities Authority Revenue Bonds (Holy
Cross Hospital Project), 6.75% due 3/01/2024 3,334
Illinois Regional Transportation Authority:
AAA Aaa 4,815 Series A, 6.50% due 6/01/2015 (b) 5,141
AAA Aaa 1,500 Series A, 7.20% due 11/01/2020 (b) 1,783
AAA Aaa 7,000 Series A, 6.70% due 11/01/2021 (c) 7,888
AAA Aaa 2,500 UT, Series C, 7.75% due 6/01/2020 (c) 3,142
AAA Aaa 1,000 UT, Series C, 7.10% due 6/01/2025 (c) 1,113
AAA Aa3 3,500 Illinois State Sales Tax Revenue Bonds, Series O, 6.50%
due 6/15/2013 3,760
Indiana--12.8% Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A:
A NR* 2,750 6.875% due 2/01/2012 3,009
A NR* 5,750 6.75% due 2/01/2017 6,327
AA Aa3 2,500 Indiana Health Facilities Financing Authority, Hospital
Revenue Refunding Bonds (Clarian Health Partners Inc.),
Series A, 6% due 2/15/2021 2,497
NR* Aaa 5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds,
Series A, 6.80% due 1/01/2017 5,761
NR* Aaa 1,915 Indiana Transportation Finance Authority, Airport Facilities
Lease Revenue Bonds (United Air), Series A, 6.75% due
11/01/2002 (i) 2,111
Indiana Transportation Finance Authority, Highway Revenue
Bonds, Series A:
A+ A1 2,000 7.25% due 6/01/2015 2,352
A+ A1 3,775 6.80% due 12/01/2016 4,247
Indianapolis, Indiana, Local Public Improvement Bond Bank
<PAGE> Refunding Bonds, Series D:
A+ NR* 8,750 6.75% due 2/01/2014 9,803
A+ NR* 11,800 6.75% due 2/01/2020 12,672
AAA Aaa 3,770 South Newton, Indiana (School Building Corp.--First Mortgage),
UT, 7% due 1/15/2005 (d)(i) 4,296
</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>
Kentucky--1.0% AA- Aa3 $ 1,750 Boone County, Kentucky, PCR, Refunding (Dayton Power &
Light Co.), Series A, 6.50% due 11/15/2022 $ 1,833
AAA Aaa 2,500 Louisville and Jefferson County, Kentucky, Metropolitan
Sewer District, Sewer and Drain System Revenue Refunding Bonds,
Series A, 5.25% due 5/15/2027 (d) 2,322
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 2,260
A- A1 3,315 Louisiana Public Facilities Authority Revenue Bonds (Tulane
University), 6.625% due 11/15/2021 3,555
Maine--1.7% AA Aa2 6,790 Maine State Housing Authority, Mortgage Purchase, AMT, Series
C-2, 6.875% due 11/15/2023 7,054
Maryland--0.9% 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++ 100 (Pooled Loan Program), VRDN, Series A, 4.60% due 4/01/2035 (a) 100
AAA Aaa 1,000 (University of Maryland Medical Systems), Series B, 7% due
7/01/2022 (c) 1,176
A1+ VMIG1++ 400 University of Maryland, University Revenue Bonds (Revolving
Equipment Loan Program), VRDN, Series B, 4.35% due 7/01/2015 (a) 400
Massachusetts AAA Aaa 1,000 Massachusetts State, HFA, Residential Development, Series C,
- --2.2% 6.90% due 11/15/2021 (f) 1,048
A+ A1 1,000 Massachusetts State Revenue Refunding Bonds (College Building
Authority Project), Series A, 7.50% due 5/01/2011 1,201
A A 6,000 Massachusetts State Water Resource Authority, Series A, 6.50%
due 7/15/2019 6,616
Michigan--10.3% BBB Baa1 3,500 Dickinson County, Michigan, Economic Development Corporation,
Solid Waste Disposal Revenue Refunding Bonds (Champion
International), 6.55% due 3/01/2007 3,636
<PAGE> AAA Aaa 2,500 East Grand Rapids, Michigan, Public School District, Building
and Site, UT, 5% due 5/01/2016 (d) 2,298
A1+ VMIG1++ 200 Grand Rapids, Michigan, Water Supply System, Revenue Refunding
Bonds, VRDN, 4.50% due 1/01/2020 (a)(c) 200
AA Aa2 1,250 Michigan Municipal Bond Authority, Revenue Refunding Bonds
(Local Government--Qualified School), Series A, 6.50% due
5/01/2016 1,324
A+ NR* 3,000 Michigan State, HDA, Rental Housing Revenue Refunding Bonds,
Series A, 6.65% due 4/01/2023 3,090
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 5,670 Refunding, AMT, Series D, 6.85% due 6/01/2026 5,884
AA+ NR* 4,885 Series A, 6.875% due 6/01/2023 5,050
Michigan State Hospital Finance Authority, Revenue Refunding
Bonds:
A A2 3,500 (Detroit Medical Center Obligation Group), Series A, 6.50%
due 8/15/2018 3,662
AA Aa2 7,500 (Henry Ford Health Systems), Series A, 5.25% due 11/15/2025 6,908
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 2,599
AAA Aaa 3,500 Novi, Michigan, Building Authority Revenue Bonds, 5.25% due
6/01/2024 (b) 3,246
Royal Oak, Michigan, Hospital Finance Authority, Revenue
Refunding Bonds:
AA- Aa3 2,320 (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 2,465
AA Aa3 2,500 (William Beaumont Hospital), 5.25% due 1/01/2020 2,319
Minnesota--1.7% Minnesota State, HFA, S/F Mortgage, AMT:
AA+ Aa2 2,700 Series L, 6.70% due 7/01/2020 2,791
AA+ Aa2 3,920 Series M, 6.70% due 7/01/2026 4,052
Nebraska--0.6% AAA Aaa 2,200 Lancaster Couny, Nebraska, Hospital Authority No. 1, Hospital
Revenue Bonds (Bryan Memorial Hospital Project), 6.70%
due 6/01/2022 (d) 2,362
Nevada--3.1% AAA Aaa 2,500 Clark County, Nevada, School District, 6.75% due
12/15/2004 (c)(i) 2,798
AAA Aaa 1,450 Nevada Housing Division, S/F Program, AMT, Series E, 7%
due 10/01/2019 1,518
AA Aa 5,430 Nevada State Refunding (Colorado River Commission--Hoover),
6.60% due 10/01/2016 5,852
AAA Aaa 2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra
Pacific Power Co.), AMT, 6.65% due 12/01/2017 (b) 2,645
A1+ P1 100 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
Pacific Power Co. Project), VRDN, AMT, 4.50% due 12/01/2020 (a) 100
New Jersey--1.1% 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) 4,663
New Mexico--0.5% A1+ P1 2,100 Farmington, New Mexico, PCR (Arizona Public Service Co.),
VRDN, AMT, Series C, 4.50% due 9/01/2024 (a) 2,100
<PAGE>
New York--4.8% New York City, New York, GO, UT:
BBB+ Baa1 2,500 Refunding, Series C, 5.875% due 2/01/2016 2,421
BBB+ Aaa 2,105 Series B, 7% due 6/01/2001 (i) 2,309
BBB+ Baa1 225 Series B, 7% due 6/01/2016 237
BBB+ Baa1 165 Series B, Sub-Series B-1, 7% due 8/15/2004 (i) 186
BBB+ Baa1 2,405 Series B, Sub-Series B-1, 7.25% due 8/15/2004 (i) 2,752
BBB+ Baa1 7,335 Series B, Sub-Series B-1, 7% due 8/15/2016 7,814
BBB+ Baa1 1,595 Series B, Sub-Series B-1, 7.25% due 8/15/2019 1,754
AA- A1 2,500 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 109th Series, 5.375% due 7/15/2022 2,373
North Carolina-- Raleigh-Durham, North Carolina, Airport Authority, Special
0.5% Facility Revenue Refunding Bonds (American Airlines), VRDN,
Series A (a):
A1+ NR* 100 4.35% due 11/01/2005 100
A1+ NR* 1,800 4.35% due 11/01/2015 1,800
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 1,587
</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>
Oregon--0.4% A1 VMIG1++ $ 300 Medford, Oregon, Hospital Facilities Authority Revenue
Bonds (Gross-Rogue Valley Health Services), VRDN, 4.60%
due 10/01/2016 (a) $ 300
NR* VMIG1++ 200 Oregon State Health, Housing, Educational, and Cultural
Facilities Authority (Guide Dogs for the Blind), VRDN,
Series A, 4.65% due 7/01/2025 (a) 200
A1+ A3 1,000 Port Saint Helens, Oregon, PCR (Portland General Electric Co.
Project), VRDN, AMT, Series A, 4.40% due 8/01/2014 (a) 1,000
Pennsylvania AA+ Aa 1,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 43, 7.40% due
- --0.3% 10/01/2014 1,340
South Carolina-- A- A1 3,000 Richland County, South Carolina, Solid Waste Disposal Facilities
1.0% Revenue Bonds (Union Camp Corp. Project), AMT, Series B, 7.125%
due 9/01/2021 3,210
NR* Aa2 1,000 South Carolina State Housing Finance and Development Authority,
Mortgage Revenue Bonds, AMT, Series A, 6.70% due 7/01/2027 (h) 1,028
<PAGE>
Texas--4.8% AA- Aa3 2,500 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste
Disposal Facility Revenue Bonds (du Pont (E.I.) de Nemours and Co.
Project), AMT, 6.40% due 4/01/2026 2,596
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Memorial Hospital Systems Project),
Series A (i):
A- A2 1,500 6.60% due 6/01/2004 1,656
A- A2 1,500 6.625% due 6/01/2004 1,658
AA Aa3 2,500 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Saint Luke's Episcopal Hospital Project),
Series A, 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 2,602
AA Aa 4,000 North Central, Texas, Health Facility Development Corporation
Revenue Bonds (Baylor University Medical Center), INFLOS,
Series A, 9.766% due 5/15/2001 (i)(j) 4,715
AAA Aaa 1,500 Nueces River Authority, Texas, Water Supply Facilities Revenue
Bonds (Corpus Christi Lake Project), 5.25% due 7/15/2017 (e) 1,409
AA Aa 2,500 Texas State, Refunding (Veterans' Land), UT, 6.50% due 12/01/2021 2,620
Utah--1.2% AAA Aaa 5,000 Intermountain Power Agency, Utah, Power Supply Revenue Refunding
Bonds, Series A, 6% due 7/01/2021 (b) 5,051
Virginia--4.8% 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 3,277
Virginia State, HDA (Commonwealth Mortgage):
AA+ Aa1 2,000 AMT, Series B, Sub-Series B-2, 6.85% due 1/01/2027 2,060
AA+ NR* 2,500 AMT, Series G, Sub-Series G-2, 6.65% due 1/01/2019 2,568
AA+ Aa1 2,000 Series B, Sub-Series B-5, 6.90% due 7/01/2013 2,067
AA+ Aa1 5,100 Series H, 6.85% due 7/01/2014 5,368
AA Aa 5,000 Virginia State Transportation Board, Transportation Contract
Revenue Bonds (US Route 58 Corridor), Series B, 5.125%
due 5/15/2021 4,602
Washington--3.9% 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) 2,495
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 5,668
AA- Aa1 5,000 (Nuclear Project No. 1), 7.125% due 7/01/2016 5,722
AAA Aaa 1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (d) 2,211
Wisconsin--1.1% AA Aa 2,250 Wisconsin Housing and EDA, Home Ownership Revenue Bonds, AMT,
Series D, 6.65% due 7/01/2025 2,311
NR* A3 2,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Saint Claire Hospital Project), 7%
due 2/15/2011 2,108
Wyoming--3.1% BBB Baa2 5,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
(FMC Corp. Project), AMT, Series B, 6.90% due 9/01/2024 5,251
Wyoming Community Development Authority, S/F Mortgage:
AA Aa2 1,500 AMT, Series H, 7.10% due 6/01/2012 1,578
AA Aa2 5,690 Series B, 6.70% due 6/01/2017 5,921
<PAGE>
Puerto Rico--0.1% A1+ VMIG1++ 500 Puerto Rico Commonwealth, Government Development Bank,
Refunding, VRDN, 4.30% due 12/01/2015 (a) 500
Total Investments (Cost--$387,157)--98.8% 408,738
Other Assets Less Liabilities--1.2% 5,122
--------
Net Assets--100.0% $413,860
========
<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 April 30, 1997.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FNMA Collateralized.
(g)GNMA Collateralized.
(h)FHA Insured.
(i)Prerefunded.
(j)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1997.
*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
As of April 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$387,156,897) (Note 1a) $408,737,973
Cash 56,404
Receivables:
Interest $ 7,811,577
Securities sold 3,599,881 11,411,458
------------
Deferred organization expenses (Note 1e) 11,626
Prepaid expenses and other assets 45,495
------------
Total assets 420,262,956
------------
<PAGE>
Liabilities: Payables:
Securities purchased 5,649,954
Dividends to shareholders (Note 1f) 493,817
Investment adviser (Note 2) 168,891 6,312,662
------------
Accrued expenses and other liabilities 90,779
------------
Total liabilities 6,403,441
------------
Net Assets: Net assets $413,859,515
============
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 $135,000,000
preference) 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 2,462,490
Accumulated realized capital losses on investments--net (Note 5) (24,718,240)
Unrealized appreciation on investments--net 21,581,076
------------
Total--Equivalent to $14.01 net asset value per share of
Common Stock (market price--$13.125) 278,859,515
------------
Total capital $413,859,515
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 12,467,224
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,031,220
Commission fees (Note 4) 167,449
Professional fees 38,964
Transfer agent fees 35,967
Accounting services (Note 2) 34,102
Printing and shareholder reports 21,706
Custodian fees 15,004
Directors' fees and expenses 11,914
Listing fees 11,815
Pricing fees 7,552
Amortization of organization expenses (Note 1e) 4,037
Other 17,246
------------
<PAGE> Total expenses 1,396,976
------------
Investment income--net 11,070,248
------------
Realized & Realized gain on investments--net 582,778
Unrealized Change in unrealized appreciation on investments--net (2,657,178)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 8,995,848
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 11,070,248 $ 21,973,143
Realized gain (loss) on investments--net 582,778 (1,655,497)
Change in unrealized appreciation/depreciation on
investments--net (2,657,178) 5,246,338
------------ ------------
Net increase in net assets resulting from operations 8,995,848 25,563,984
------------ ------------
Dividends to Investment income--net:
Shareholders Common Stock (8,762,966) (16,965,648)
(Note 1f): Preferred Stock (2,408,886) (4,793,238)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (11,171,852) (21,758,886)
------------ ------------
Net Assets: Total increase (decrease) in net assets (2,176,004) 3,805,098
Beginning of period 416,035,519 412,230,421
------------ ------------
End of period* $413,859,515 $416,035,519
============ ============
<FN>
*Undistributed investment income--net $ 2,462,490 $ 2,564,094
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the For the
The following per share data and ratios Six Period
have been derived from information Months March 29,
provided in the financial statements. Ended 1993++ to
April 30, For the Year Ended October 31 Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.12 $ 13.93 $ 12.56 $ 15.15 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .56 1.10 1.11 1.08 .62
Realized and unrealized gain (loss) on
investments--net (.11) .18 1.37 (2.53) 1.02
-------- -------- -------- -------- --------
Total from investment operations .45 1.28 2.48 (1.45) 1.64
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.44) (.85) (.85) (.87) (.45)
Realized gain on investments--net -- -- -- (.08) --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.44) (.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 (.12) (.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 (.12) (.24) (.26) (.19) (.20)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.01 $ 14.12 $ 13.93 $ 12.56 $ 15.15
======== ======== ======== ======== ========
Market price per share, end of period $ 13.125 $ 12.625 $ 12.125 $ 10.375 $ 14.625
======== ======== ======== ======== ========
Total Investment Based on market price per share 7.53%+++ 11.43% 25.68% (23.56%) .53%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 2.63%+++ 8.47% 19.27% (10.67%) 10.16%+++
======== ======== ======== ======== ========
<PAGE>
Ratios to Average Expenses, net of reimbursement .68%* .68% .69% .68% .35%*
Net Assets:*** ======== ======== ======== ======== ========
Expenses .68%* .68% .69% .68% .49%*
======== ======== ======== ======== ========
Investment income--net 5.37%* 5.30% 5.55% 5.17% 5.17%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of period (in thousands) $278,860 $281,036 $277,230 $250,079 $301,507
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $135,000 $135,000 $135,000 $135,000 $135,000
======== ======== ======== ======== ========
Portfolio turnover 24.15% 46.58% 95.62% 114.56% 25.00%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,066 $ 3,082 $ 3,054 $ 2,852 $ 3,233
======== ======== ======== ======== ========
Dividends Series A--Investment income--net $ 460 $ 898 $ 967 $ 644 $ 292
Per Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 387 $ 879 $ 891 $ 693 $ 352
Outstanding:++++++ ======== ======== ======== ======== ========
Series C--Investment income--net $ 491 $ 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>
NOTES TO FINANCIAL STATEMENTS
<PAGE>
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, 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 contrats
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).
NOTES TO FINANCIAL STATEMENTS (concluded)
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 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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1997 were $97,181,234 and
$98,029,986, respectively.
Net realized and unrealized gains as of April 30, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 582,778 $21,581,076
----------- -----------
Total $ 582,778 $21,581,076
=========== ===========
As of April 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $21,581,076, of which $21,727,900 related to
appreciated securities and $146,824 related to depreciated
securities. The aggregate cost of investments at April 30, 1997 for
Federal income tax purposes was $387,156,897.
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, 1997, shares issued and
outstanding remained constant at 19,907,055. At April 30, 1997,
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, 1997 were as
follows: Series A, 3.638%; Series B, 3.54%; and Series C, 3.79%.
<PAGE>
As of April 30, 1997, 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 six months ended
April 30, 1997, Merrill Lynch, Pierce, Fenner & Smith Inc., an
affiliate of FAM, earned $73,130 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 May 9, 1997, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.070806 per share, payable on May 29, 1997 to shareholders of
record as of May 19, 1997.
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
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
<PAGE>
Preferred Stock:
IBJ Schroder Bank &Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MVT
