UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07478
Name of Fund: MuniVest Fund II, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, MuniVest Fund II, Inc., 800 Scudders Mill Road, Plainsboro, NJ
08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/05
Date of reporting period: 11/01/04 - 04/30/05
Item 1 - Report to Stockholders
MuniVest Fund II, Inc.
Semi-Annual Report
April 30, 2005
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,
net of dividends to Preferred Stock, is paid to Common Stock shareholders in the
form of dividends, and the value of these portfolio holdings is reflected in the
per share net asset value of the Fund's Common Stock. However, in order to
benefit Common Stock shareholders, the yield curve must be positively sloped;
that is, short-term interest rates must be lower than long-term interest rates.
At the same time, a period of generally declining interest rates will benefit
Common Stock shareholders. If either of these conditions change, then the risks
of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield 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.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in such securities. As of April 30, 2005, the percentage of the Fund's
total net assets invested in inverse floaters was 10.08%, before the deduction
of Preferred Stock.
Swap Agreements
The Fund may invest in swap agreements, which are over-the-counter contracts in
which one party agrees to make periodic payments based on the change in market
value of a specified bond, basket of bonds, or index in return for periodic
payments based on a fixed or variable interest rate or the change in market
value of a different bond, basket of bonds or index. Swap agreements may be used
to obtain exposure to a bond or market without owning or taking physical custody
of securities. Swap agreements involve the risk that the party with whom the
Fund has entered into the swap will default on its obligation to pay the Fund
and the risk that the Fund will not be able to meet its obligations to pay the
other party to the agreement.
2 MUNIVEST FUND II, INC. APRIL 30, 2005
A Letter From the President
Dear Shareholder
Financial markets faced a number of crosscurrents over the past several months,
but most major benchmarks managed to post positive returns for the annual and
semi-annual reporting periods ended April 30, 2005:
Total Returns as of April 30, 2005 6-month 12-month
========================================================================================
U.S. equities (Standard & Poor's 500 Index) +3.28% + 6.34%
----------------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) -0.15% + 4.71%
----------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +8.71% +14.95%
----------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) +0.98% + 5.26%
----------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +1.93% + 6.81%
----------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) +0.65% + 6.92%
----------------------------------------------------------------------------------------
After expanding at an annualized rate of 4.4% in 2004, U.S. gross domestic
product growth for the first quarter of 2005 came in at an estimated 3.1%
(although that figure was later revised upward to 3.5%). Nevertheless, the
Federal Reserve Board continued increasing interest rates at a measured pace to
combat emergent inflation. The most recent hike came on May 3, and brought the
federal funds rate to 3%. Recently, signs of inflation have taken the form of
rising business costs and increasing consumer prices, particularly in the areas
of gasoline, healthcare, housing and education.
U.S. equities ended 2004 in a strong rally, but stumbled into negative territory
in 2005. The market weakness was largely fueled by the potential for slowing
economic and corporate earnings growth, renewed energy price concerns and a lack
of investor conviction. On the positive side, certain sectors of the market have
been performing well (particularly energy) and corporate transactions, such as
mergers and acquisitions, stock buy-backs and dividend payouts, have all
increased. International equities, especially in Asia, have benefited from
higher economic growth rates.
In the bond market, we witnessed a yield curve flattening trend over the past
several months as short-term yields increased and longer-term interest rates
remained more stable or fell. At the end of April 2005, the two-year Treasury
note yielded 3.66% and the 10-year Treasury note yielded 4.21%, a difference of
55 basis points (.55%). This compared to a spread of 149 basis points six months
earlier and 222 basis points 12 months ago.
Looking ahead, the environment is likely to be a challenging one for investors.
With this in mind, we encourage you to meet with your financial advisor to
review your goals and asset allocation and to rebalance your portfolio, as
necessary, to ensure it remains aligned with your objectives and risk tolerance.
As always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to serving you in the months and years
ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
MUNIVEST FUND II, INC. APRIL 30, 2005 3
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed its comparable Lipper category average for the
period, benefiting largely from our exposure to the higher-yielding portion of
the municipal market.
Describe the recent market environment relative to municipal bonds.
Amid significant volatility, long-term bond yields moved lower over the past six
months as shorter-term yields increased. For all of 2004, real gross domestic
product (GDP) grew at an annualized rate of 4.4%, well ahead of 2003's annual
rate of 3%. An advanced estimate of first quarter 2005 GDP came in at an
unexpectedly low 3.1%, although that figure was later revised upward to 3.5%.
It appeared that continued economic improvements were generally disregarded as
investors focused on inflationary trends, currency-related demand for long-term
U.S. securities, and interest rate action on the part of the Federal Reserve
Board (the Fed). During the past six months, 30-year Treasury bond yields
declined 28 basis points (.28%) to 4.51%, while 10-year Treasury note yields
rose 16 basis points to 4.21%. The Fed, in the meantime, continued to raise
short-term interest rates at each of its meetings throughout the period, and
most recently increased the federal funds rate from 2.75% to 3% on May 3. As
short-term interest rates increased while longer-term interest rates fell, the
yield curve continued to flatten.
In the tax-exempt market, yields on 30-year revenue bonds, as measured by the
Bond Buyer Revenue Bond Index, fell 14 basis points to 4.83% over the six-month
period. According to Municipal Market Data, yields on AAA-rated issues maturing
in 30 years declined 23 basis points to 4.37%, while AAA-rated bonds maturing in
10 years saw their yields rise 17 basis points to 3.57% during the six-month
period.
Over the past six months, more than $186 billion in tax-exempt bonds was
underwritten, an increase of 7.5% versus the same period a year earlier.
Issuance so far in 2005 has been boosted by a 32% increase in refunding issues
as municipalities sought to refinance existing higher-coupon debt. These
refunding issues have been heavily weighted in the 10-year - 20-year maturity
range to lower the overall interest cost of the refunding issue. This
concentration has put pressure on intermediate tax-exempt bond yields while
supporting longer-term bond prices.
Investor demand for municipal product remained generally positive during the
period. Investment Company Institute statistics indicate that, year-to-date
through March 31, 2005, net new cash flows into long-term municipal bond funds
exceeded $1.3 billion. This represented a significant improvement from the $516
million seen during the same period in 2004. However, AMG Data Services reports
that recent weekly figures for the month of April have shown a modest reversal
in the positive flows seen in the first three months of the year. Still,
throughout much of the past six months, high yield tax-exempt bond funds
experienced positive net cash flows. During the last week of April, these lower
rated/non-rated bond funds received more than $110 million in inflows. The need
to invest these ongoing cash flows has led to strong demand for lower-rated
issues and a resultant narrowing of credit spreads.
Looking ahead, we would expect the long-term municipal market to perform at
least as well as the U.S. Treasury market. The tax-exempt market's technical
position remains favorable. The 30-day visible supply of new underwritings at
the end of April stood at approximately $6.3 billion, slightly below its current
30-day moving average. In addition, it is likely that the increase in issuance
seen in recent months has borrowed from supply expected to be issued later in
the year. The refunding deals that inflated this six-month period's supply are
unlikely to be repeated later in the year. Tax-exempt bonds' attractive yield
ratios versus taxable securities should continue to attract both traditional and
nontraditional investors, especially if new municipal bond issuance remains
modest.
How did the Fund perform during the period?
For the six-month period ended April 30, 2005, the Common Stock of MuniVest Fund
II, Inc. had net annualized yields of 7.26% and 7.15%, based on a period-end per
share net asset value of $15.34 and a per share market price of $15.57,
respectively, and $.552 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +4.57%, based on a change
in per share net asset value from $15.21 to $15.34, and assuming reinvestment of
all distributions.
The Fund's total return, based on net asset value, outpaced the +3.83% average
return of the Lipper General Municipal Debt Funds (Leveraged) category for the
six-month period. (Funds in this Lipper category invest primarily in municipal
4 MUNIVEST FUND II, INC. APRIL 30, 2005
debt issues rated in the top four credit-rating categories. These funds can be
leveraged via use of debt, preferred equity and/or reverse repurchase
agreements.) The Fund's outperformance can be attributed to its above-average
dividend yield, the continued strong performance of its lower-rated bond
holdings and positive security selection. The strong demand for high-yield
municipal securities (bonds rated BBB and below or non-rated) has driven the
prices on these bonds significantly higher. Fund performance benefited
accordingly, given our considerable exposure to these lower-rated,
higher-yielding credits. Also contributing to performance were our holdings in
California municipal debt. As investors perceived an improvement in the state's
creditworthiness, California bonds gained in value, benefiting the Fund's
results during the past six months.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
As mentioned earlier, the Fund's performance benefited from our positions in
California municipal debt. However, as the period progressed and yields on these
securities narrowed relative to other investments of comparable maturity, we
reduced our position to capitalize on the market appreciation. With the proceeds
from these sales, we invested primarily in New York credits, particularly New
York City and New York City Water revenue bonds. Following a significant amount
of new issuance, New York bonds had become attractively priced compared to
historical levels. In fact, at times during the period, New York City bonds were
offering more than 100% of the yield of comparable taxable U.S. Treasury bonds.
In recent months, we began to adopt a less defensive portfolio positioning. A
combination of factors -- including the Fed's continued program of short-term
interest rate increases, moderating economic growth expectations and declines in
leading economic indicators -- led us to believe that the potential for
significant interest rate increases later in 2005 and into 2006 was less than
previously anticipated. Thus, we sought to take advantage of periods of price
volatility by adding to our positions in bonds with greater sensitivity to
changes in interest rates. To generate funds for these purchases, we sold
pre-refunded bonds with eight-year - 10-year maturity dates, enabling us to lock
in the significant market appreciation these bonds have enjoyed while also
moving closer to our desired neutral portfolio positioning.
For the six-month period ended April 30, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 1.64% for Series A, 1.88% for
Series B, 1.77% for Series C and 1.98% for Series D. At this point in the Fed's
monetary tightening cycle, interest rate increases are having a material impact
on the Fund's borrowing costs. The Fed raised the short-term interest rate
target 100 basis points during the six-month period. Still, the tax-exempt yield
curve remained relatively steep and continued to generate an income benefit to
the holders of Common Stock from the leveraging of Preferred Stock. However,
should the spread between short-term and long-term interest rates narrow, the
benefits of leveraging will decline and, as a result, reduce the yield on the
Fund's Common Stock. At the end of the period, the Fund's leverage amount, due
to AMPS, was 36.32% of total net assets. (For a more complete explanation of the
benefits and risks of leveraging, see page 2 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We ended the period in transition toward a more neutral market stance. We are
monitoring economic and market conditions and would need to see additional
evidence of slowing economic activity or financial stress -- such as the recent
credit-rating downgrades of General Motors Corp. and Ford Motor Co. -- before
enacting a more aggressive market strategy. In the meantime, we intend to
maintain the portfolio's fully invested stance in order to enhance investment
income and allow the Fund to continue to seek an above-average dividend yield.
Fred K. Stuebe
Vice President and Portfolio Manager
May 26, 2005
MUNIVEST FUND II, INC. APRIL 30, 2005 5
Proxy Results
During the six-month period ended April 30, 2005, MuniVest Fund II, Inc.'s
Common Stock shareholders voted on the following proposal. The proposal was
approved at a shareholders' meeting on January 27, 2005. A description of the
proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
--------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 19,269,157 304,389
Cynthia A. Montgomery 19,321,892 251,654
Jean Margo Reid 19,327,046 246,500
Roscoe S. Suddarth 19,309,804 263,742
Edward D. Zinbarg 19,300,366 273,180
--------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2005, MuniVest Fund II, Inc.'s
Preferred Stock (Series A - C) shareholders voted on the following proposal. The
proposal was approved at a shareholders' meeting on January 27, 2005. A
description of the proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
--------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr. 4,964 11
Ronald W. Forbes 4,967 8
Cynthia A. Montgomery 4,964 11
Jean Margo Reid 4,964 11
Roscoe S. Suddarth 4,964 11
Richard R. West 4,964 11
Edward D. Zinbarg 4,964 11
--------------------------------------------------------------------------------------------------------
Portfolio Information as of April 30, 2005
Percent of
Total
Quality Ratings by S&P/Moody's Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 22.7%
AA/Aa ................................................... 13.9
A/A ..................................................... 20.9
BBB/Baa ................................................. 20.3
BB/Ba ................................................... 8.6
B/B ..................................................... 1.6
CCC/Caa ................................................. 0.8
NR (Not Rated) .......................................... 10.9
Other* .................................................. 0.3
--------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes.
6 MUNIVEST FUND II, INC. APRIL 30, 2005
Schedule of Investments (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Alabama--1.7% $ 5,000 Huntsville, Alabama, Health Care Authority Revenue Bonds, Series B, 5.75%
due 6/01/2032 $ 5,349
===================================================================================================================================
Arizona--2.7% 1,000 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools
Project 1), Series A, 6.75% due 7/01/2029 998
1,200 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (El Paso
Electric Company Project), Series A, 6.25% due 5/01/2037 1,210
2,315 Maricopa County, Arizona, Tempe Elementary Unified School District Number 3, GO,
Refunding, 7.50% due 7/01/2010 (c) 2,781
2,000 Pima County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools
Project), Series C, 6.75% due 7/01/2031 2,087
1,000 Pima County, Arizona, IDA, Education Revenue Refunding Bonds (Arizona Charter
Schools Project II), Series A, 6.75% due 7/01/2021 1,057
===================================================================================================================================
California--9.5% California State, Various Purpose, GO:
3,300 5.50% due 4/01/2028 3,609
4,145 5.50% due 4/01/2030 4,526
5,000 5.50% due 11/01/2033 5,427
Golden State Tobacco Securitization Corporation of California, Tobacco Settlement
Revenue Bonds:
4,310 Series A-3, 7.875% due 6/01/2042 4,995
3,750 Series B, 5.375% due 6/01/2028 3,934
6,200 Series B, 5.50% due 6/01/2033 6,677
===================================================================================================================================
Colorado--3.5% 300 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT, Senior Series A-2,
7.50% due 4/01/2031 316
Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee):
3,025 Series A, 7.35% due 9/01/2031 3,235
1,000 Series B, 7% due 9/01/2031 1,030
1,325 North Range, Colorado, Metropolitan District Number 1, GO, 7.25% due 12/15/2031 1,339
3,300 Plaza Metropolitan District No. 1, Colorado, Tax Allocation Revenue Bonds (Public
Improvement Fees), 8% due 12/01/2025 3,663
1,000 Southlands, Colorado, Medical District, GO (Metropolitan District No. 1), 7%
due 12/01/2024 1,100
===================================================================================================================================
Connecticut--1.2% 1,165 Connecticut State Development Authority, Airport Facility Revenue Bonds
(LearJet Inc. Project), AMT, 7.95% due 4/01/2026 1,382
2,000 Mohegan Tribe Indians Gaming Authority, Connecticut, Public Improvement Revenue
Refunding Bonds (Priority Distribution), 6.25% due 1/01/2031 2,165
===================================================================================================================================
Florida--4.7% Fiddlers Creek, Florida, Community Development District Number 2, Special Assessment
Revenue Bonds:
2,350 Series A, 6.375% due 5/01/2035 2,465
1,250 Series B, 5.75% due 5/01/2013 1,298
4,000 Midtown Miami, Florida, Community Development District, Special Assessment Revenue
Bonds, Series A, 6.25% due 5/01/2037 4,161
1,280 Orange County, Florida, Health Facilities Authority, Hospital Revenue Bonds
(Adventist Health System), 5.625% due 11/15/2032 1,364
Orlando, Florida, Urban Community Development District, Capital Improvement Special
Assessment Bonds:
1,135 6.25% due 5/01/2034 1,174
1,000 Series A, 6.95% due 5/01/2033 1,068
40 Panther Trace, Florida, Community Development District, Special Assessment Revenue
Bonds, Series B, 6.50% due 5/01/2009 40
Portfolio Abbreviations
To simplify the listings of MuniVest Fund II, Inc.'s portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list at right.
AMT Alternative Minimum Tax (subject to)
DRIVERS Derivative Inverse Tax-Exempt Receipts
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
MUNIVEST FUND II, INC. APRIL 30, 2005 7
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Florida $ 935 Park Place Community Development District, Florida, Special Assessment Revenue Bonds,
(concluded) 6.75% due 5/01/2032 $ 988
950 Preserve at Wilderness Lake, Florida, Community Development District, Capital
Improvement Bonds, Series A, 7.10% due 5/01/2033 1,030
695 Vista Lakes Community, Florida, Development District, Capital Improvement Revenue Bonds,
Series B, 5.80% due 5/01/2008 701
===================================================================================================================================
Georgia--5.7% Atlanta, Georgia, Tax Allocation Bonds (Atlantic Station Project):
1,655 7.25% due 12/01/2005 1,671
2,000 7.90% due 12/01/2024 2,180
1,225 Brunswick & Glynn County, Georgia, Development Authority, First Mortgage Revenue Bonds
(Coastal Community Retirement Corporation Project), Series A, 7.125% due 1/01/2025 1,286
2,000 Fulton County, Georgia, Residential Care Facilities, Revenue Refunding Bonds (Canterbury
Court Project), Series A, 6.125% due 2/15/2026 2,016
Georgia Municipal Electric Authority, Power Revenue Refunding Bonds:
5,620 Series W, 6.60% due 1/01/2018 6,785
380 Series W, 6.60% due 1/01/2018 (b) 457
1,250 Series X, 6.50% due 1/01/2020 1,522
1,350 Milledgeville-Baldwin County, Georgia, Development Authority Revenue Bonds (Georgia
College and State University Foundation), 5.50% due 9/01/2024 1,428
===================================================================================================================================
Idaho--0.1% 405 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT, Series E-2,
6.90% due 1/01/2027 407
===================================================================================================================================
Illinois--16.5% 3,000 Chicago, Illinois, O'Hare International Airport, Revenue Refunding Bonds, DRIVERS, AMT,
Series 253, 8.16% due 1/01/2020 (h)(l) 3,561
4,000 Chicago, Illinois, O'Hare International Airport, Special Facility Revenue Refunding
Bonds (American Airlines Inc. Project), 8.20% due 12/01/2024 3,620
320 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series C, 7% due 3/01/2032 (e)(f) 323
800 Chicago, Illinois, Special Assessment Bonds (Lake Shore East), 6.75% due 12/01/2032 831
1,000 Chicago, Illinois, Tax Allocation Bonds (Kingsbury Redevelopment Project), Series A,
6.57% due 2/15/2013 1,046
2,800 Hodgkins, Illinois, Environmental Improvement Revenue Bonds (Metro Biosolids
Management LLC Project), AMT, 6% due 11/01/2023 2,983
1,000 Illinois Development Finance Authority Revenue Bonds (Community Rehabilitation
Providers Facilities), Series A, 6.50% due 7/01/2022 1,065
2,500 Illinois Development Finance Authority, Revenue Refunding Bonds (Community
Rehabilitation Providers Facilities), Series A, 6% due 7/01/2015 2,591
1,415 Illinois HDA, Revenue Refunding Bonds (M/F Program), Series 5, 6.75% due 9/01/2023 1,447
300 Illinois Health Facilities Authority, Revenue Refunding Bonds (Resurrection Health
Care), VRDN, Series A, 2.98% due 5/15/2029 (g)(j) 300
2,600 Kane and De Kalb Counties, Illinois, Community Unit School District Number 302, GO,
DRIVERS, Series 283, 8.19% due 2/01/2018 (c)(l) 3,273
2,000 McLean and Woodford Counties, Illinois, Community Unit, School District Number 005, GO,
Refunding, 6.375% due 12/01/2016 (g) 2,328
Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax and Capital
Appreciation Revenue Bonds (McCormick Place Expansion Project), Series A (h):
9,950 5.02%** due 12/15/2038 1,884
16,600 5.15%** due 6/15/2039 3,047
21,450 4.97%** due 12/15/2039 3,840
3,200 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax, Revenue
Refunding Bonds, DRIVERS, Series 269, 8.064% due 6/15/2023 (h)(l) 4,017
Regional Transportation Authority, Illinois, Revenue Bonds:
1,500 Series A, 7.20% due 11/01/2020 (a) 1,922
7,000 Series A, 6.70% due 11/01/2021 (c) 8,882
2,500 Series C, 7.75% due 6/01/2020 (c) 3,512
8 MUNIVEST FUND II, INC. APRIL 30, 2005
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Indiana--7.5% $ 5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds, Series A,
6.80% due 1/01/2017 (d) $ 5,554
Indiana Transportation Finance Authority, Highway Revenue Bonds, Series A:
1,530 7.25% due 6/01/2015 1,909
470 7.25% due 6/01/2015 556
3,775 6.80% due 12/01/2016 4,649
8,750 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue Refunding Bonds,
Series D, 6.75% due 2/01/2014 10,448
===================================================================================================================================
Louisiana--6.4% 5,000 Louisiana Local Government, Environmental Facilities, Community Development Authority
Revenue Bonds (Capital Projects and Equipment Acquisition), Series A,
6.30% due 7/01/2030 (a) 5,489
10,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project),
6.50% due 1/01/2017 10,274
3,600 Sabine River Authority, Louisiana, Water Facilities Revenue Refunding Bonds
(International Paper Company), 6.20% due 2/01/2025 3,938
===================================================================================================================================
Maryland--1.6% 2,000 Maryland State Energy Financing Administration, Solid Waste Disposal Revenue Bonds,
Limited Obligation (Wheelabrator Water Projects), AMT, 6.45% due 12/01/2016 2,100
1,000 Maryland State Health and Higher Educational Facilities Authority Revenue Bonds
(University of Maryland Medical System), Series B, 7% due 7/01/2022 (c) 1,324
1,245 Montgomery County, Maryland, Special Obligation, GO (West Germantown Development
District), Series A, 6.70% due 7/01/2027 (k) 1,422
===================================================================================================================================
Massachusetts--3.2% 1,000 Massachusetts State College Building Authority, Project Revenue Refunding Bonds,
Senior-Series A, 7.50% due 5/01/2011 1,221
1,250 Massachusetts State Development Finance Agency, Revenue Refunding Bonds (Eastern
Nazarene College), 5.625% due 4/01/2029 1,209
6,000 Massachusetts State Water Resource Authority Revenue Bonds, Series A, 6.50%
due 7/15/2019 7,323
===================================================================================================================================
Michigan--5.9% 2,300 Delta County, Michigan, Economic Development Corporation, Environmental Improvement
Revenue Refunding Bonds (Mead Westvaco-Escanaba), Series A, 6.25% due 4/15/2012 (g)(i) 2,581
3,100 Flint, Michigan, Hospital Building Authority, Revenue Refunding Bonds (Hurley Medical
Center), Series A, 6% due 7/01/2020 (m) 3,384
5,320 Macomb County, Michigan, Hospital Finance Authority, Hospital Revenue Bonds (Mount
Clemens General Hospital), Series B, 5.875% due 11/15/2034 5,312
3,425 Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Ascension Health
Credit), Series A, 6.125% due 11/15/2009 (i) 3,880
3,000 Pontiac, Michigan, Tax Increment Finance Authority, Revenue Refunding Bonds (Development
Area Number 3), 6.375% due 6/01/2031 3,027
===================================================================================================================================
Mississippi--3.5% Mississippi Business Finance Corporation, Mississippi, PCR, Refunding (System Energy
Resources Inc. Project):
7,200 5.875% due 4/01/2022 7,290
3,465 5.90% due 5/01/2022 3,513
===================================================================================================================================
Missouri--0.1% 260 Missouri State Housing Development Commission, S/F Mortgage Revenue Bonds (Homeowner
Loan), AMT, Series A, 7.50% due 3/01/2031 (f) 273
===================================================================================================================================
Nebraska--0.6% Nebraska Investment Finance Authority, S/F Housing Revenue Bonds, AMT (f):
760 Series C, 6.30% due 9/01/2028 (e) 774
925 Series D, 6.45% due 3/01/2028 954
===================================================================================================================================
Nevada--2.1% 3,300 Clark County, Nevada, IDR (Power Company Project), AMT, Series A, 6.70%
due 6/01/2022 (c) 3,333
620 Clark County, Nevada, Improvement District No. 142 Special Assessment,
6.375% due 8/01/2023 639
100 Nevada Housing Division Revenue Bonds (S/F Program), AMT, Senior Series E,
7% due 10/01/2019 (d) 101
2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra Pacific Power Company), AMT,
6.65% due 12/01/2017 (a) 2,520
MUNIVEST FUND II, INC. APRIL 30, 2005 9
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
New Jersey--5.7% $ 4,250 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50% due 6/15/2024 $ 4,496
New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village Inc. Facility),
Series A:
1,335 7.25% due 11/15/2021 1,432
1,100 7.25% due 11/15/2031 1,169
3,000 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project),
AMT, 6.25% due 9/15/2029 2,427
1,680 New Jersey Health Care Facilities Financing Authority Revenue Bonds (Pascack Valley
Hospital Association), 6.625% due 7/01/2036 1,663
5,785 Tobacco Settlement Financing Corporation of New Jersey Revenue Bonds, 7% due 6/01/2041 6,251
===================================================================================================================================
New Mexico--1.1% 3,160 Farmington, New Mexico, PCR, Refunding (Tucson Electric Power Co.--San Juan Project),
Series A, 6.95% due 10/01/2020 3,313
===================================================================================================================================
New York--24.1% 4,000 Metropolitan Transportation Authority, New York, Revenue Refunding Bonds, Series A,
5.125% due 11/15/2031 4,188
New York City, New York, City IDA, Civic Facility Revenue Bonds:
690 Series C, 6.80% due 6/01/2028 714
890 (Special Needs Facility Pooled Program), Series C-1, 6.50% due 7/01/2017 928
1,920 New York City, New York, City IDA, Special Facility Revenue Bonds (British Airways Plc
Project), AMT, 7.625% due 12/01/2032 2,014
New York City, New York, City Municipal Water Finance Authority, Water and Sewer System,
Revenue Refunding Bonds:
3,550 Series B, 5% due 6/15/2036 3,707
5,000 Series B, 5% due 6/15/2036 (g) 5,245
3,875 Series D, 5% due 6/15/2037 4,045
3,125 Series E, 5% due 6/15/2034 3,247
3,375 New York City, New York, City Transitional Finance Authority Revenue Bonds, RIB, Series
283, 5% due 11/15/2018 (l) 4,450
New York City, New York, GO:
2,500 Series D, 5% due 11/01/2027 2,596
3,500 Series F, 5.25% due 1/15/2033 3,700
2,500 Series M, 5% due 4/01/2030 2,595
10,500 Series M, 5% due 4/01/2035 10,873
New York City, New York, GO, Refunding:
530 Series A, 6.375% due 5/15/2015 (c) 608
3,400 Series G, 5% due 12/01/2033 3,518
7,000 New York State Dormitory Authority, Revenue Refunding Bonds, RIB, Series 305,
8.71% due 5/15/2015 (h)(l) 8,872
8,500 Port Authority of New York and New Jersey, Consolidated Revenue Refunding Bonds, AMT,
132nd Series, 5% due 9/01/2038 8,848
1,000 Westchester County, New York, IDA, Civic Facility Revenue Bonds (Special Needs
Facilities Pooled Program), Series E-1, 6.50% due 7/01/2017 1,027
2,690 Westchester County, New York, IDA, Continuing Care Retirement, Mortgage Revenue Bonds
(Kendal on Hudson Project), Series A, 6.50% due 1/01/2034 2,732
===================================================================================================================================
North Carolina--1.6% 1,400 Haywood County, North Carolina, Industrial Facilities and Pollution Control Financing
Authority Revenue Bonds (Champion International Corporation Project), AMT,
6.25% due 9/01/2025 1,435
2,000 North Carolina Medical Care Commission, Health Care Housing Revenue Bonds (The ARC of
North Carolina Projects), Series A, 5.80% due 10/01/2034 2,025
1,500 North Carolina Medical Care Commission, Retirement Facilities, First Mortgage Revenue
Bonds (Givens Estates Project), Series A, 6.375% due 7/01/2023 1,583
===================================================================================================================================
Pennsylvania--5.0% 2,000 Delaware River Port Authority of Pennsylvania and New Jersey Revenue Bonds, RIB,
Series 396, 8.713% due 1/01/2019 (g)(l) 2,458
Montgomery County, Pennsylvania, IDA, Revenue Bonds (Whitemarsh Continuing Care
Project):
470 6.125% due 2/01/2028 479
1,090 6.25% due 2/01/2035 1,118
2,000 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds
(National Gypsum Company), AMT, Series B, 6.125% due 11/01/2027 2,134
1,250 Pennsylvania State Higher Educational Facilities Authority Revenue Bonds (University
of Pennsylvania Medical Center Health System), Series A, 6% due 1/15/2031 1,374
1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial Development,
7.75% due 12/01/2017 1,293
10 MUNIVEST FUND II, INC. APRIL 30, 2005
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Pennsylvania Sayre, Pennsylvania, Health Care Facilities Authority, Revenue Bonds (Guthrie Healthcare
(concluded) System), Series B:
$ 2,425 5.85% due 12/01/2020 $ 2,619
3,350 7.125% due 12/01/2031 3,958
===================================================================================================================================
Rhode Island--0.4% 1,140 Rhode Island State Health and Educational Building Corporation, Hospital Financing
Revenue Bonds (Lifespan Obligation Group), 6.50% due 8/15/2032 1,261
===================================================================================================================================
South Carolina--1.5% 1,200 Lexington County, South Carolina, Health Services District Inc., Hospital Revenue Bonds
(Lexington Medical Center), 5.50% due 5/01/2032 1,255
1,500 Lexington County, South Carolina, Health Services District Inc., Hospital Revenue
Refunding and Improvement Bonds, 5.50% due 11/01/2032 1,566
1,230 Medical University Hospital Authority, South Carolina, Hospital Facilities Revenue
Refunding Bonds, 6.50% due 8/15/2012 (i) 1,476
365 South Carolina Housing Finance and Development Authority, Mortgage Revenue Bonds,
AMT, Series A, 6.70% due 7/01/2027 373
===================================================================================================================================
Tennessee--4.0% 1,000 Johnson City, Tennessee, Health and Educational Facilities Board, Retirement Facility
Revenue Bonds (Appalachian Christian Village Project), Series A, 6% due 2/15/2024 980
4,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling Facility--Calhoun
Newsprint), AMT, 7.40% due 12/01/2022 4,020
1,280 Sevier County, Tennessee, Public Building Authority Revenue Bonds, Local Government
Public Improvement IV, VRDN, Series E-4, 3.01% due 6/01/2020 (a)(j) 1,280
Shelby County, Tennessee, Health, Educational and Housing Facility Board, Hospital
Revenue Refunding Bonds (Methodist Healthcare):
3,175 6.50% due 9/01/2012 (i) 3,801
1,825 6.50% due 9/01/2026 (b) 2,170
===================================================================================================================================
Texas--16.1% Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First
Tier, Series A:
1,600 6.70% due 1/01/2028 1,712
4,510 6.70% due 1/01/2032 4,793
Brazos River Authority, Texas, PCR, Refunding, AMT:
1,500 (Texas Utility Company), Series A, 7.70% due 4/01/2033 1,776
6,805 (Utilities Electric Company), Series B, 5.05% due 6/01/2030 6,909
1,810 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant Energy Inc. Project),
Series B, 7.75% due 12/01/2018 2,013
5,800 Brazos River, Texas, Harbor Navigation District, Brazoria County Environmental Revenue
Refunding Bonds (Dow Chemical Company Project), AMT, Series A-7, 6.625% due 5/15/2033 6,457
2,500 Guadalupe-Blanco River Authority, Texas, Sewage and Solid Waste Disposal Facility
Revenue Bonds (E. I. du Pont de Nemours and Company Project), AMT, 6.40% due 4/01/2026 2,612
5,000 Harris County, Texas, Health Facilities Development Corporation, Revenue Refunding
Bonds, RITR, Series 6, 7.815% due 7/01/2027 (b)(l) 6,814
1,150 Lufkin, Texas, Health Facilities Development Corporation, Health System Revenue Bonds
(Memorial Health System of East Texas), 5.70% due 2/15/2028 1,177
3,440 Matagorda County, Texas, Navigation District No. 1, Revenue Refunding Bonds (Reliant
Energy Inc.), Series C, 8% due 5/01/2029 3,795
3,060 Port Corpus Christi, Texas, Individual Development Corporation, Environmental Facilities
Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 8.25% due 11/01/2031 3,285
Port Corpus Christi, Texas, Revenue Refunding Bonds (Celanese Project):
2,500 AMT, Series B, 6.70% due 11/01/2030 2,630
800 Series A, 6.45% due 11/01/2030 844
3,750 San Antonio, Texas, Electric and Gas Revenue Bonds, RIB, Series 469X, 8.24%
due 2/01/2014 (l) 4,606
===================================================================================================================================
Virginia--3.9% 1,000 Chesterfield County, Virginia, IDA, PCR, Refunding (Virginia Electric and Power
Company), Series B, 5.875% due 6/01/2017 1,091
3,115 Isle of Wight County, Virginia, IDA, Solid Waste Disposal Facilities Revenue Bonds
(Union Camp Corporation Project), AMT, 6.55% due 4/01/2024 3,157
8,015 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds, Senior-Series A,
5.50% due 8/15/2028 7,840
===================================================================================================================================
Washington--7.9% 2,425 Chelan County, Washington, Public Utility District Number 001, Consolidated Revenue
Refunding Bonds (Chelan Hydro System), AMT, Series D, 6.35% due 7/01/2028 (h) 2,630
Energy Northwest, Washington, Electric Revenue Refunding Bonds, DRIVERS (l):
2,250 Series 248, 8.19% due 7/01/2018 (h) 2,808
1,125 Series 255, 8.687% due 7/01/2018 (a) 1,447
MUNIVEST FUND II, INC. APRIL 30, 2005 11
Schedule of Investments (concluded) (in Thousands)
Face
State Amount Municipal Bonds Value
===================================================================================================================================
Washington $ 5,000 Washington State, GO, Trust Receipts, Class R, Series 6, 8.623% due 1/01/2014 (g)(l) $ 6,261
(concluded) 2,200 Washington State Health Care Facilities Authority Revenue Bonds (Kadlec Medical
Center), 6% due 12/01/2030 (k) 2,437
Washington State Public Power Supply System, Revenue Refunding Bonds, Series B:
5,000 (Nuclear Project No. 1), 7.125% due 7/01/2016 6,368
1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (h) 2,434
===================================================================================================================================
Wisconsin--1.5% 2,045 Badger Tobacco Asset Securitization Corporation, Wisconsin, Asset-Backed Revenue
Bonds, 6.125% due 6/01/2027 2,089
2,215 Wisconsin State Health and Educational Facilities Authority Revenue Bonds
(Synergyhealth Inc.), 6% due 11/15/2032 2,354
===================================================================================================================================
Wyoming--2.0% Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corporation
Project), AMT:
1,000 Series A, 7% due 6/01/2024 1,015
5,000 Series B, 6.90% due 9/01/2024 5,065
===================================================================================================================================
U.S. Virgin 6,000 Virgin Islands Government Refinery Facilities, Revenue Refunding Bonds (Hovensa Coker
Islands--2.2% Project), AMT, 6.50% due 7/01/2021 6,804
===================================================================================================================================
Total Investments (Cost--$432,488*)--153.5% 470,929
Other Assets Less Liabilities--3.5% 10,897
Preferred Stock, at Redemption Value--(57.0%) (175,019)
---------
Net Assets Applicable to Common Stock--100.0% $ 306,807
=========
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2005, as computed for federal income tax purposes, were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ............................................. $432,314
========
Gross unrealized appreciation .............................. $ 39,286
Gross unrealized depreciation .............................. (671)
--------
Net unrealized appreciation ................................ $ 38,615
========
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
(a) AMBAC Insured.
(b) Escrowed to maturity.
(c) FGIC Insured.
(d) FHA Insured.
(e) FHLMC Collateralized.
(f) FNMA/GNMA Collateralized.
(g) FSA Insured.
(h) MBIA Insured.
(i) Prerefunded.
(j) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(k) Radian Insured.
(l) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(m) ACA Insured.
Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund (3,092) $ 15
--------------------------------------------------------------------------
Forward interest rate swaps outstanding as of April 30, 2005 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
--------------------------------------------------------------------------
Receive a variable rate equal to a 7-day
Bond Market Association Municipal Swap
Index Rate and pay a fixed rate equal
to 3.684%
Broker, JPMorgan Chase Bank
Expires May 2015 $14,500 $ (112)
Receive a variable rate equal to a 7-day
Bond Market Association Municipal Swap
Index Rate and pay a fixed rate equal
to 3.811%
Broker, JPMorgan Chase Bank
Expires June 2015 $11,000 (183)
--------------------------------------------------------------------------
Total $ (295)
========
Financial futures contracts sold as of April 30, 2005 were as follows:
(in Thousands)
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
120 10-Year U.S.
Treasury Bond June 2005 $13,103 $ (268)
--------------------------------------------------------------------------
See Notes to Financial Statements.
12 MUNIVEST FUND II, INC. APRIL 30, 2005
Statement of Net Assets
As of April 30, 2005
======================================================================================================================
Assets
----------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$432,487,702) ........................... $ 470,929,495
Cash ....................................................... 86,111
Receivables:
Interest ................................................ $ 9,227,550
Securities sold ......................................... 6,470,231 15,697,781
-------------
Prepaid expenses ........................................... 6,318
-------------
Total assets ............................................... 486,719,705
-------------
======================================================================================================================
Liabilities
----------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps ..... 294,925
Payables:
Securities purchased .................................... 4,044,230
Variation margin ........................................ 255,661
Investment adviser ...................................... 183,391
Offering costs .......................................... 79,972
Other affiliates ........................................ 4,738 4,567,992
-------------
Accrued expenses ........................................... 30,506
-------------
Total liabilities .......................................... 4,893,423
-------------
======================================================================================================================
Preferred Stock
----------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.05 per
share (1,800 Series A Shares, 1,800 Series B Shares,
1,800 Series C Shares and 1,600 Series D Shares of AMPS*
authorized, issued and outstanding at $25,000 per share
liquidation preference) ................................... 175,019,376
-------------
======================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ...................... $ 306,806,906
=============
======================================================================================================================
Analysis of Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share (20,000,030 shares
issued and outstanding) ................................... $ 2,000,003
Paid-in capital in excess of par ........................... 278,431,291
Undistributed investment income--net ....................... $ 6,588,754
Accumulated realized capital losses--net ................... (18,091,547)
Unrealized appreciation--net ............................... 37,878,405
-------------
Total accumulated earnings--net ............................ 26,375,612
-------------
Total--Equivalent to $15.34 net asset value per share of
Common Stock (market price--$15.57) ....................... $ 306,806,906
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIVEST FUND II, INC. APRIL 30, 2005 13
Statement of Operations
For the Six Months Ended April 30, 2005
======================================================================================================================
Investment Income
----------------------------------------------------------------------------------------------------------------------
Interest ................................................... $ 13,462,215
Dividends from affiliates .................................. 14,752
-------------
Total income ............................................... 13,476,967
-------------
======================================================================================================================
Expenses
----------------------------------------------------------------------------------------------------------------------
Investment advisory fees ................................... $ 1,149,854
Commission fees ............................................ 202,680
Accounting services ........................................ 77,303
Transfer agent fees ........................................ 34,072
Professional fees .......................................... 22,730
Printing and shareholder reports ........................... 21,129
Directors' fees and expenses ............................... 15,745
Custodian fees ............................................. 12,970
Pricing fees ............................................... 10,632
Listing fees ............................................... 10,006
Other ...................................................... 21,379
-------------
Total expenses before reimbursement ........................ 1,578,500
Reimbursement of expenses .................................. (2,049)
-------------
Total expenses after reimbursement ......................... 1,576,451
-------------
Investment income--net ..................................... 11,900,516
-------------
======================================================================================================================
Realized & Unrealized Gain (Loss)--Net
----------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ........................................ 1,316,142
Futures contracts and forward interest rate swaps--net .. (139,051) 1,177,091
-------------
Change in unrealized appreciation/depreciation on:
Investments--net ........................................ 2,728,628
Futures contracts and forward interest rate swaps--net .. (332,975) 2,395,653
-------------------------------
Total realized and unrealized gain--net .................... 3,572,744
-------------
======================================================================================================================
Dividends to Preferred Stock Shareholders
----------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... (1,419,594)
-------------
Net Increase in Net Assets Resulting from Operations ....... $ 14,053,666
=============
See Notes to Financial Statements.
14 MUNIVEST FUND II, INC. APRIL 30, 2005
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2005 2004
======================================================================================================================
Operations
----------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... $ 11,900,516 $ 23,321,149
Realized gain--net ......................................... 1,177,091 2,475,190
Change in unrealized appreciation/depreciation--net ........ 2,395,653 6,348,033
Dividends to Preferred Stock shareholders .................. (1,419,594) (1,374,858)
-------------------------------
Net increase in net assets resulting from operations ....... 14,053,666 30,769,514
-------------------------------
======================================================================================================================
Dividends to Common Stock Shareholders
----------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................... (11,019,169) (21,646,818)
-------------------------------
Net decrease in net assets resulting from dividends to
Common Stock shareholders ................................. (11,019,169) (21,646,818)
-------------------------------
======================================================================================================================
Stock Transactions
----------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in
reinvestment of dividends ................................. 846,344 573,097
Offering and underwriting costs resulting from the
issuance of Preferred Stock ............................... (522,318) --
-------------------------------
Net increase in net assets resulting from stock transactions 324,026 --
-------------------------------
======================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to Common Stock .... 3,358,523 9,695,793
Beginning of period ........................................ 303,448,383 293,752,590
-------------------------------
End of period* ............................................. $ 306,806,906 $ 303,448,383
===============================
* Undistributed investment income--net .................. $ 6,588,754 $ 7,127,001
===============================
See Notes to Financial Statements.
MUNIVEST FUND II, INC. APRIL 30, 2005 15
Financial Highlights
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
=========================================================================================================================
Per Share Operating Performance
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........ $ 15.21 $ 14.76 $ 14.16 $ 14.29 $ 13.32
------------------------------------------------------------
Investment income--net ...................... .60+ 1.17+ 1.17+ 1.11 1.02
Realized and unrealized gain (loss)--net .... .18 .44 .49 (.25) .97
Dividends to Preferred Stock shareholders from
investment income--net ..................... (.07) (.07) (.07) (.09) (.22)
------------------------------------------------------------
Total from investment operations ............ .71 1.54 1.59 .77 1.77
------------------------------------------------------------
Less dividends to Common Stock shareholders from
investment income--net ..................... (.55) (1.09) (.99) (.90) (.80)
------------------------------------------------------------
Offering and underwriting costs resulting from
the issuance of Preferred Stock ............ (.03) -- -- -- --
------------------------------------------------------------
Net asset value, end of period .............. $ 15.34 $ 15.21 $ 14.76 $ 14.16 $ 14.29
============================================================
Market price per share, end of period ....... $ 15.57 $ 15.15 $ 14.26 $ 13.36 $ 13.69
============================================================
=========================================================================================================================
Total Investment Return**
-------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .......... 4.57%@ 10.94% 11.88% 5.86% 14.06%
============================================================
Based on market price per share ............. 6.56%@ 14.38% 14.56% 4.25% 25.20%
============================================================
=========================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-------------------------------------------------------------------------------------------------------------------------
Total expenses, net reimbursement*** ........ 1.05%* .99% 1.01% 1.05% 1.02%
============================================================
Total expenses*** ........................... 1.05%* .99% 1.01% 1.05% 1.02%
============================================================
Total investment income--net*** ............. 7.89%* 7.86% 8.01% 7.79% 7.42%
============================================================
Amount of dividends to Preferred Stock
shareholders ............................... .94%* .46% .46% .66% 1.57%
============================================================
Investment income--net, to Common Stock
shareholders ............................... 6.95%* 7.40% 7.55% 7.13% 5.85%
============================================================
=========================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ... 1.79%* 1.02% .98% 1.38% 3.22%
============================================================
16 MUNIVEST FUND II, INC. APRIL 30, 2005
Financial Highlights (concluded)
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
=========================================================================================================================
Supplemental Data
-------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of
period (in thousands) ...................... $306,807 $303,448 $293,753 $281,830 $284,547
============================================================
Preferred Stock outstanding, end of period
(in thousands) ............................. $175,000 $135,000 $135,000 $135,000 $135,000
============================================================
Portfolio turnover .......................... 38.53% 22.39% 31.50% 66.07% 87.80%
============================================================
=========================================================================================================================
Leverage
-------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ................... $ 2,753 $ 3,248 $ 3,176 $ 3,088 $ 3,108
============================================================
=========================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ............ $ 204 $ 262 $ 251 $ 338 $ 793
============================================================
Series B--Investment income--net ............ $ 234 $ 234 $ 248 $ 319 $ 834
============================================================
Series C--Investment income--net ............ $ 220 $ 268 $ 240 $ 375 $ 784
============================================================
Series D@@--Investment income--net .......... $ 146 -- -- -- --
============================================================
* 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 effect of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Series D was issued on January 14, 2005.
See Notes to Financial Statements.
MUNIVEST FUND II, INC. APRIL 30, 2005 17
Notes to Financial Statements
1. Significant Accounting Policies:
MuniVest Fund II, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management investment
company. The Fund's financial statements are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to present a fair statement of the
results for the interim period. 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 daily 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 ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the general direction
of the Board of Directors. Such valuations and procedures are reviewed
periodically by the Board of Directors of the Fund. 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 written or purchased are
valued at the last sale price in the case of exchange-traded options. In the
case of options traded in the OTC market, valuation is the last asked price
(options written) or the last bid price (options purchased). Swap agreements are
valued by quoted fair values received daily by the Fund's pricing service.
Short-term investments with a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market value, under which method the
investment is valued at cost and any premium or discount is amortized on a
straight line basis to maturity. Investments in open-end investment companies
are valued at their net asset value each business day. Securities and other
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.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. 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.
o Options -- The Fund may 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.
18 MUNIVEST FUND II, INC. APRIL 30, 2005
Notes to Financial Statements (continued)
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. When the agreement is closed, the Fund records a realized gain or
loss in an amount equal to the value of the agreement.
(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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(f) Offering costs -- Direct expenses relating to the public offering of the
Fund's Preferred Stock were charged to capital at the time of issuance of the
shares.
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 .50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. The Investment Adviser has agreed
to reimburse its management fee by the amount of management fees the Fund pays
to FAM indirectly through its investment in Merrill Lynch Institutional
Tax-Exempt Fund. For the six months ended April 30, 2005, FAM reimbursed the
Fund in the amount of $2,049.
For the six months ended April 30, 2005, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), an affiliate of FAM, received underwriting fees of
$400,000 in connection with the issuance of the Fund's Preferred Stock.
In addition, MLPF&S received $3,105 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended April 30, 2005.
For the six months ended April 30, 2005, the Fund reimbursed FAM $4,765 for
certain accounting services.
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, 2005 were $210,535,648 and $172,785,778, respectively.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of 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 stock without approval of holders of Common Stock.
MUNIVEST FUND II, INC. APRIL 30, 2005 19
Notes to Financial Statements (concluded)
Common Stock
Shares issued and outstanding during the six months ended April 30, 2005 and the
year ended October 31, 2004 increased by 55,311 and 37,664 as a result of
dividend reinvestment, respectively.
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Fund, with a
par value of $.05 per share and a liquidation preference of $25,000 per share
plus accrued and unpaid dividends, 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, 2005 were as follows: Series A, 2.20%; Series
B, 2.20%; Series C, 2.50%; and Series D, 2.53%.
Shares issued and outstanding during the six months ended April 30, 2005
increased by 1,600 shares from the issuance of an additional series of Preferred
Stock. Shares issued and outstanding during the year ended October 31, 2004
remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended April 30, 2005, MLPF&S earned $101,478 as
commissions.
5. Capital Loss Carryforward:
On October 31, 2004, the Fund had a net capital loss carryforward of
$15,395,225, of which $6,636,791 expires in 2007 and $8,758,434 expires in 2008.
This amount will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.092000 per share on May 27, 2005 to shareholders of record on May
13, 2005.
20 MUNIVEST FUND II, INC. APRIL 30, 2005
Officers and Directors
Robert C. Doll, Jr., President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Jean Margo Reid, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Fred K. Stuebe, Vice President
Donald C. Burke, Vice President and Treasurer
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MVT
--------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn, President and Director and Kevin A.
Ryan, Director of MuniVest Fund II, Inc. retired. The Fund's Board of Directors
wishes Messrs. Glenn and Ryan well in their retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became President and Director of
the Fund.
--------------------------------------------------------------------------------
MUNIVEST FUND II, INC. APRIL 30, 2005 21
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more stable level of dividend distributions, the Fund may at
times pay out less than the entire amount of net investment income earned in any
particular month and may at times in any particular month pay out such
accumulated but undistributed income in addition to net investment income earned
in that month. As a result, the dividends paid by the Fund for any particular
month may be more or less than the amount of net investment income earned by the
Fund during such month. The Fund's current accumulated but undistributed net
investment income, if any, is disclosed in the Statement of Net Assets, which
comprises part of the financial information included in this report.
22 MUNIVEST FUND II, INC. APRIL 30, 2005
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
MUNIVEST FUND II, INC. APRIL 30, 2005 23
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
--------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
MuniVest Fund II, Inc. seeks to provide shareholders with as high a level of
current income exempt from federal income taxes as is consistent with its
investment policies and prudent investment management by investing primarily in
a portfolio of long-term, investment grade municipal obligations the interest on
which, in the opinion of bond counsel to the issuer, is exempt from federal
income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniVest Fund II, Inc. for their information. It is not a
prospectus. Past performance results shown in this report should not be
considered a representation of future performance. The Fund has leveraged its
Common Stock and intends to remain leveraged 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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniVest Fund II, Inc.
Box 9011
Princeton, NJ 08543-9011
#16807 -- 4/05
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MuniVest Fund II, Inc.
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniVest Fund II, Inc.
Date: June 20, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniVest Fund II, Inc.
Date: June 20, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniVest Fund II, Inc.
Date: June 20, 2005