MUNIVEST
NEW JERSEY
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1997
This report, including the financial information herein, is
transmitted to the shareholders of MuniVest New Jersey Fund, Inc.
for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
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
New Jersey Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIVEST NEW JERSEY FUND, INC.
MuniVest New Jersey Fund, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. However,
these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Stock shareholders in the form
of dividends, and the value of these portfolio holdings is reflected
in the per share net asset value of the Fund's Common Stock.
However, in order to benefit Common Stock shareholders, the yield
curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield 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 New Jersey Fund, Inc. earned $0.385 per share income
dividends, which included earned and unpaid dividends of $0.063.
This represents a net annualized yield of 5.71%, based on a month-
end per share net asset value of $13.61. Over the same period, the
total return on the Fund's Common Stock was +1.82%, based on a
change in per share net asset value from $13.78 to $13.61, and
assuming reinvestment of $0.387 per share income dividends.
For the six-month period ended April 30, 1997, the Fund's Auction
Market Preferred Stock had an average yield of 3.21%.
<PAGE>
The Municipal Market Environment
Long-term tax-exempt revenue bonds traded in a relatively narrow
range throughout much of the six months ended April 30, 1997. By mid-
January 1997, municipal bond yields had risen 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 administered 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
of 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. Over the past six months, approximately $90 billion in
long-term tax-exempt bonds was underwritten, a decline of more than
6% versus 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 as compared to the
same three-month period in April 30, 1996. Overall investor demand
has remained strong, particularly from property and casualty
insurance companies and individual retail investors. In recent
years, investor demand has increased whenever tax-exempt bond yields
have 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 generally were 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, sign 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 of 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
During the past six months, we generally maintained a cautious
approach toward the fixed-income market since powerful economic
growth was effectively neutralized by tame inflation reports.
However, this strong growth/low inflation scenario may have ended in
late March as the FRB decided to strike preemptively against a
future rise in inflation by tightening monetary policy.
Historically, once the FRB chooses to see economic growth slow down,
it is reasonable to expect several additional increases in short-
term interest rates over the following six months--twelve months.
This is referred to as a tightening cycle, and long-term interest
rates typically rise along with short-term interest rates until the
economic growth falters. Although taxable yields could rise as high
as 7.50% from the current level of 6.90% during the tightening
cycle, we expect the impact on municipal bond yields to be muted in
response to the combination of scarce New Jersey supply and
increasing retail investor demand as municipal bonds yield 6% or
higher.
The Fund is currently well-positioned for such a turn of events as a
substantial portion of its holdings are in bonds which traditionally
appeal to individual or retail investors and therefore are likely to
outperform other issues in a declining market. As tax-exempt
interest rates rise toward 6%, we are prepared to swap these retail
bonds for aggressively structured and higher-yielding securities.
This will allow us to more fully participate in the bond market
rally we expect later in the year should economic growth finally
begin to falter as a result of tighter monetary policy. If a Federal
budget agreement which is deemed to be credible by bond market
investors is enacted, the decline in yields could happen sooner than
anticipated as further FRB tightenings may not then be needed.
Should this occur, we are prepared to quickly adopt a more
aggressive stance in the bond market. We would expect the Fund to
benefit from a sharp drop in interest rates as many of the
portfolio's higher-coupon bonds can be advance refunded, providing a
boost to the Fund's total return.
<PAGE>
In Conclusion
We appreciate your ongoing interest in MuniVest New Jersey Fund,
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
(William M. Petty)
William M. Petty
Vice President and Portfolio Manager
May 27, 1997
Portfolio
Abbreviations
To simplify the listings of MuniVest New Jersey Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of the securities according to the list at
right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
EDA Economic Development Authority
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <S> <C>
New Jersey--95.6% AAA Aaa $ 2,500 Atlantic City, New Jersey, Board of Education, School Revenue
Bonds, UT, 6.125% due 12/01/2011 (d) $ 2,612
AAA Aaa 2,500 Camden County, New Jersey, Improvement Authority, Lease Revenue
Bonds (County Guaranteed), 6.15% due 10/01/2014 (b) 2,598
AAA Aaa 1,815 Cape May County, New Jersey, Industrial Pollution Control
Financing Authority Revenue Bonds (Atlantic City Electric
Company Project), AMT, Series A, 7.20% due 11/01/2029 (b) 2,016
AAA Aaa 1,300 Highland Park, New Jersey, School District, GO, UT, 6.55% due
2/15/2005 (b)(f) 1,446
AA A3 3,200 Jersey City, New Jersey, School GO, UT, 6.65% due 2/15/2002 (f) 3,493
AAA Aaa 1,600 Middlesex County, New Jersey, COP, 6.125% due 2/15/2019 (b) 1,640
New Jersey EDA, Economic Development Revenue Bonds:
BB+ Baa2 1,900 (American Airlines Inc. Project), AMT, 7.10% due 11/01/2031 2,017
NR* A1 1,500 Refunding (Burlington Coat Factory), 6.125% due 9/01/2010 1,555
AAA Aaa 2,400 New Jersey EDA, Educational Testing Services Revenue Bonds,
Series B, 6.25% due 5/15/2025 (b) 2,507
New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds,
Series A (d):
A1+ VMIG1++ 1,000 (New Jersey Natural Gas Co.), VRDN, 4.15% due 8/01/2030 (a) 1,000
AAA Aaa 3,900 (NUI Corp.), 6.35% due 10/01/2022 4,103
AAA Aaa 1,365 New Jersey EDA, Revenue Bonds (Clara Maass Health Systems), 5%
due 7/01/2025 (e) 1,228
NR* Aa1 4,500 New Jersey EDA, Solid Waste Disposal Facilities Revenue Bonds
(Garden State Paper Company), AMT, 7.125% due 4/01/2022 4,811
New Jersey EDA, Water Facilities Revenue Bonds, AMT:
AAA Aaa 3,800 (American Water Company Inc. Project), 6.50% due 4/01/2022 (c) 3,950
AAA Aaa 2,000 (American Water Company Inc. Project), 6% due 5/01/2036 (c) 2,011
A1 Aaa 100 Refunding (United Water of New Jersey, Inc. Project), VRDN,
Series A, 4.10% due 11/01/2026 (a)(d) 100
New Jersey Health Care Facilities Financing Authority Revenue Bonds:
AAA Aaa 2,500 Refunding (Hackensack Medical Center), 6.625% due 7/01/2017 (c) 2,669
AAA Aaa 3,000 Refunding (Holy Name Hospital), 6% due 7/01/2025 (d) 2,957
AAA Aaa 5,000 Refunding (Jersey Shore Medical Center), 6.75% due 7/01/2019 (d) 5,421
AAA Aaa 1,000 Refunding (Monmouth Medical Center), Series C, 6.25% due
7/01/2024 (e) 1,041
BBB Baa2 2,075 Refunding (Saint Elizabeth Hospital Obligation Group), 6% due
7/01/2027 2,047
NR* Baa 4,200 (Southern Ocean County Hospital), Series A, 6.25% due 7/01/2023 4,249
<PAGE>
AAA Aaa 2,000 New Jersey Sports and Exposition Authority, Luxury Tax Revenue
Refunding Bonds (Convention Center), Series A, 6.60% due
7/01/2015 (b) 2,160
A+ Aa 2,000 New Jersey Sports and Exposition Authority, State Contract Revenue
Bonds, Series A, 6% due 3/01/2021 2,040
AA+ Aaa 2,000 New Jersey State Educational Facilities Authority Revenue Bonds
(Higher Education--Princeton), Series C, 6.375% due 7/01/2022 2,122
AA+ Aa1 1,970 New Jersey State, GO, AMT, 7.05% due 7/15/2014 2,212
AAA Aaa 3,000 New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, AMT, Series M, 7% due 10/01/2026 (b) 3,178
AAA Aaa 5,150 New Jersey State Transportation Corporation, COP (Raymond Plaza
East, Incorporated), 6.50% due 10/01/2016 (e) 5,512
AAA Aaa 4,450 New Jersey State Transportation Trust Fund Authority, Revenue
Refunding Bonds (Transportation System), Series A, 5% due
6/15/2015 (b) 4,134
BBB+ Baa1 1,000 New Jersey State Turnpike Authority, Revenue Refunding Bonds,
Series C, 6.50% due 1/01/2008 1,093
New Jersey Wastewater Treatment Trust Loan Revenue Bonds:
AA Aa2 2,250 6.875% due 6/15/2000 (f) 2,432
AA- Aa 1,865 Series A, 6.50% due 4/01/2014 2,021
AAA Aaa 2,000 North Hudson, New Jersey, Sewer Authority Revenue Bonds, 5.125%
due 8/01/2022 (c) 1,852
AAA Aaa 5,000 Passaic Valley, New Jersey, Sewer Commissioner's Refunding Bonds
(Sewer System), Series D, 5.875% due 12/01/2022 (d) 5,023
Port Authority of New York and New Jersey, Consolidated Revenue
Bonds:
AA- A1 5,000 72nd Series, 7.35% due 10/01/2002 (f) 5,633
AA- A1 1,500 76th Series, AMT, 6.50% due 11/01/2026 1,584
AAA Aaa 7,000 104th Series, 3rd Installment, 4.75% due 1/15/2026 (d) 6,030
A1+ VMIG1++ 1,800 Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds (Versatile Structure Obligation), VRDN, Series 5,
4.20% due 8/01/2024 (a) 1,800
AAA Aaa 1,115 South Brunswick Township, New Jersey, Board of Education, GO, UT,
6.40% due 8/01/2020 (c) 1,172
AA- A3 1,750 University of Medicine and Dentistry, New Jersey, Series E, 6.50%
due 12/01/2001 (f) 1,902
<PAGE>
Total Investments (Cost--$103,639)--95.6% 107,371
Other Assets Less Liabilities--4.4% 4,931
--------
Net Assets--100.0% $112,302
========
<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)MBIA Insured.
(c)FGIC Insured.
(d)AMBAC Insured.
(e)FSA Insured.
(f)Prerefunded.
*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--$103,639,443) (Note 1a) $107,371,105
Cash 63,357
Receivables:
Securities sold $ 3,440,183
Interest 1,619,998 5,060,181
------------
Deferred organization expenses (Note 1e) 8,205
Prepaid expenses and other assets 7,192
------------
Total assets 112,510,040
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 123,591
Investment adviser (Note 2) 45,842 169,433
------------
Accrued expenses and other liabilities 38,494
------------
Total liabilities 207,927
------------
<PAGE>
Net Assets: Net assets $112,302,113
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (1,500 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $ 37,500,000
Common Stock, par value $.10 per share (5,497,953 shares issued
and outstanding) $ 549,795
Paid-in capital in excess of par 76,520,088
Undistributed investment income--net 402,043
Accumulated realized capital losses on investments--net (Note 5) (6,401,475)
Unrealized appreciation on investments--net 3,731,662
------------
Total--Equivalent to $13.61 net asset value per share of Common
Stock (market price--$12.50) 74,802,113
------------
Total capital $112,302,113
============
<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 $ 3,179,508
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 280,968
Commission fees (Note 4) 46,746
Professional fees 40,481
Accounting services (Note 2) 27,906
Transfer agent fees 17,258
Printing and shareholder reports 15,458
Directors' fees and expenses 11,164
Listing fees 8,187
Custodian fees 4,680
Pricing fees 2,743
Amortization of organization expenses (Note 1e) 2,697
Other 8,145
------------
Total expenses 466,433
------------
Investment income--net 2,713,075
------------
<PAGE>
Realized & Realized gain on investments--net 384,180
Unrealized Gain Change in unrealized appreciation on investments--net (1,346,097)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 1,751,158
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Year
Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 2,713,075 $ 5,528,759
Realized gain on investments--net 384,180 16,362
Change in unrealized appreciation on investments--net (1,346,097) 88,326
------------ ------------
Net increase in net assets resulting from operations 1,751,158 5,633,447
------------ ------------
Dividends to Investment income--net:
Shareholders Common Stock (2,126,108) (4,288,887)
(Note 1f): Preferred Stock (597,660) (1,227,030)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (2,723,768) (5,515,917)
------------ ------------
Net Assets: Total increase (decrease) in net assets (972,610) 117,530
Beginning of period 113,274,723 113,157,193
------------ ------------
End of period* $112,302,113 $113,274,723
============ ============
<FN>
*Undistributed investment income--net $ 402,043 $ 412,736
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
The following per share data and ratios have For the Period
been derived from information provided in the Six Months April 30,
financial statements. Ended For the Year Ended 1993++ to
April 30, 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 $ 13.78 $ 13.76 $ 12.18 $ 14.89 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .49 1.01 1.02 1.00 .49
Realized and unrealized gain (loss) on
investments--net (.16) .01 1.58 (2.66) .81
-------- -------- -------- -------- --------
Total from investment operations .33 1.02 2.60 (1.66) 1.30
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.39) (.78) (.76) (.81) (.35)
Realized gain on investments--net -- -- -- (.04) --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.39) (.78) (.76) (.85) (.35)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- -- -- -- (.04)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.11) (.22) (.26) (.19) (.07)
Realized gain on investments--net -- -- -- (.01) --
Capital charge resulting from issuance of
Preferred Stock -- -- -- -- (.13)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.11) (.22) (.26) (.20) (.20)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.61 $ 13.78 $ 13.76 $ 12.18 $ 14.89
======== ======== ======== ======== ========
Market price per share, end of period $ 12.50 $ 12.25 $ 12.00 $ 10.125 $ 15.00
======== ======== ======== ======== ========
Total Investment Based on market price per share 5.20%+++ 8.67% 26.66% (27.74%) 2.38%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 1.82%+++ 6.61% 20.74% (12.43%) 7.50%+++
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .83%* .81% .84% .79% .48%*
Net Assets:*** ======== ======== ======== ======== ========
Expenses .83%* .81% .84% .82% .84%*
======== ======== ======== ======== ========
Investment income--net 4.83%* 4.87% 5.20% 4.89% 4.85%*
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $ 74,802 $ 75,775 $ 75,657 $ 66,978 $ 81,637
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 37,500 $ 37,500 $ 37,500 $ 37,500 $ 37,500
======== ======== ======== ======== ========
Portfolio turnover 22.59% 99.56% 62.45% 68.75% 20.15%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 2,995 $ 3,021 $ 3,018 $ 2,786 $ 3,177
======== ======== ======== ======== ========
Dividends Investment income--net $ 398 $ 818 $ 955 $ 696 $ 240
Per Share on ======== ======== ======== ======== ========
Preferred Stock
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 June 1, 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
1. Significant Accounting Policies:
MuniVest New Jersey Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund's Common Stock is listed on the New York Stock Exchange
under the symbol MVJ. The following is a summary of significant
accounting policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts 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 and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. 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).
<PAGE>
Written and purchased options are non-income producing investments.
NOTES TO FINANCIAL STATEMENTS (concluded)
(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.
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 $24,337,320 and
$27,645,974, respectively.
<PAGE>
Net realized and unrealized gains as of April 30, 1997 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 384,180 $ 3,731,662
------------ ------------
Total $ 384,180 $ 3,731,662
============ ============
As of April 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $3,731,662, of which $3,782,177 related to
appreciated securities and $50,515 related to depreciated
securities. The aggregate cost of investments at April 30, 1997 for
Federal income tax purposes was $103,639,443.
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 5,497,953. At April 30, 1997, total
paid-in capital amounted to $77,069,883.
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 yield in effect at April 30, 1997 was 4.00%.
As of April 30, 1997, there were 1,500 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 $37,547 as commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a net capital loss carryforward of
approximately $5,797,000, of which $3,467,000 expires in 2002 and
$2,330,000 expires in 2003. This amount willl be available to offset
like amounts of any future taxable gains.
<PAGE>
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
$.063491 per share, payable on May 29, 1997 to shareholders of
record as of May 19, 1997.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
William M. Petty, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
NYSE Symbol
MVJ
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
<PAGE>
