UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7478
Name of Fund: MuniVest II, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, MuniVest 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: 04/30/03
Date of reporting period: 11/01/02 - 04/30/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
April 30, 2003
MuniVest
Fund II, Inc.
www.mlim.ml.com
MUNIVEST FUND II, INC.
The Benefits and
Risks of Leveraging
MuniVest Fund II, Inc. utilizes leveraging to seek to enhance the yield and net
asset value of its Common Stock. However, these objectives cannot be achieved in
all interest rate environments. To leverage, the Fund issues Preferred Stock,
which pays dividends at prevailing short-term interest rates, and invests the
proceeds in long-term municipal bonds. The interest earned on these investments
is paid to Common Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset value of the
Fund's Common Stock. However, in order to benefit Common Stock shareholders, the
yield curve must be positively sloped; that is, short-term interest rates must
be lower than long-term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders. If either of
these conditions change, then the risks of leveraging will begin to outweigh the
benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value on the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
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 these securities.
Swap
Agreements
The Fund may also 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.
MuniVest Fund II, Inc., April 30, 2003
DEAR SHAREHOLDER
For the six months ended April 30, 2003, the Common Stock of MuniVest Fund II,
Inc. had a net annualized yield of 6.80%, based on a period-end per share net
asset value of $14.58 and $.492 per share income dividends. Over the same
period, the total investment return on the Fund's Common Stock was +6.67%, based
on a change in per share net asset value from $14.16 to $14.58, and assuming
reinvestment of $.486 per share ordinary income dividends.
For the six-month period ended April 30, 2003, the Fund's Auction Market
Preferred Stock had an average yield as follows: Series A, 1.09%; Series B,
1.21%; and Series C, 1.10%.
For a description of the Fund's total investment return based on a change in the
per share market value (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 the Financial Statements included
in 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 Fund's market value can
vary significantly from total investment return based on changes in the Fund's
net asset value.
The Municipal Market Environment
During the six-month period ended April 30, 2003, amid considerable weekly and
monthly volatility, long-term fixed income interest rates generally declined.
Geopolitical tensions and volatile equity valuations continued to overshadow
economic fundamentals as they have for most of the last 12 months. Reacting to
the strong U.S. equity rally that began last October, fixed income bond yields
remained under pressure in November 2002, as U.S. equity markets continued to
strengthen. During November, the Standard & Poor's 500 (S&P 500) Index rose an
additional 5.50%. Equity prices were supported by further signs of U.S. economic
recovery, especially improving labor market activity. In late November,
third-quarter 2002 U.S. gross domestic product growth was 4%, well above the
second-quarter 2002 rate of 1.30%. Financial conditions were also strengthened
by a larger-than-expected reduction in short-term interest rates by the Federal
Reserve Board in early November. The Federal Funds target rate was lowered 50
basis points (0.50%) to 1.25%, its lowest level since the 1960s. This action by
the Federal Reserve Board was largely viewed as being taken to bolster the
sputtering U.S. economic recovery. Rebounding U.S. equity markets and the
prospects for a more substantial U.S. economic recovery pushed long-term U.S.
Treasury yield levels to 5.10% by late November.
However, into early 2003, softer equity prices and renewed investor concerns
about U.S. military action against Iraq and North Korea again pushed bond prices
higher. Reacting to disappointing holiday sales and corporate managements'
attempts to scale back analysts' expectation of future earnings, the S&P 500
Index declined more than 10% from December 2002 to February 2003. Fearing an
eventual U.S./Iraq military confrontation in 2003, investors again sought the
safety of U.S. Treasury obligations and the prices of fixed income issues rose.
By the end of February 2003, U.S. Treasury bond yields had declined
approximately 40 basis points to 4.67%.
Bond yields continued to fall into early March. Once direct U.S. military action
against Iraq began, bond yields quickly rose. Prior uncertainty surrounding the
Iraqi situation was obviously removed and early U.S. military successes fostered
the hope that the conflict would be quickly and positively concluded.
Concurrently, the S&P 400 Index rose over 6% as investors, in part, sold fixed
income issues to purchase equities in anticipation of a strong U.S. economic
recovery once the Iraqi conflict was resolved. By mid-March, U.S. Treasury bond
yields again rose to above 5%. However, as there was growing sentiment that
hostilities may not be resolved in a matter of weeks, U.S. Treasury bond yields
again declined to end the month at 4.81%.
For the six months ended April 30, 2003, long-term U.S. Treasury bond yields
ratcheted back to near 5% by mid-April, as U.S. equity markets continued to
improve and the safe-haven premium U.S. Treasury issues had commanded prior to
the beginning of the Iraqi conflict continued to be withdrawn. However, with the
quick positive resolution of the Iraqi war, investors quickly resumed their
focus on the fragile U.S. economic recovery. Business activity in the United
States has remained sluggish, especially job creation. Investors have also been
concerned that the recent SARS outbreak would have a material, negative impact
on world economic conditions, especially in China and Japan. First quarter 2003
U.S. gross domestic product was released in late April initially estimating U.S.
economic activity to be growing at 1.60%, well below many analysts' assessments.
These factors, as well as the possibility that the Federal Reserve Board could
again lower short-term interest rates to encourage more robust U.S. economic
growth, pushed bond prices higher during the last two weeks of the period. By
April 30, 2003, long-term U.S. Treasury bond yields had declined to almost
4.75%. Over the past six months, long-term U.S. bond yields fell more than 20
basis points.
For the six months ended April 30, 2003, long-term tax-exempt bond yields also
fell modestly. Yield volatility was reduced relative to that seen in U.S.
Treasury issues, as municipal bond prices were much less sensitive to worldwide
geopolitical pressures on a daily and weekly basis. Tax-exempt bond yields
generally followed their taxable counterparts higher, responding to a more
positive U.S. fixed income environment and continued slow economic growth. After
rising approximately 10 basis points in November 2002 to 5.30%, municipal bond
yields generally declined through February 2003. At February 28, 2003, long-term
tax-exempt revenue bond yields, as measured by the Bond Buyer Revenue Bond
Index, fell to approximately 5.05%. However, similar to U.S. Treasury bond
yields, once military action began in Iraq, municipal bond yields rose sharply
to nearly 5.20% before declining to approximately 5.10% by the end of April.
Over the past six months, long-term tax-exempt bond yields fell approximately 11
basis points, slightly less than U.S. Treasury obligations.
A number of factors have combined to generate consistently strong demand for
municipal bonds throughout the six-month period ended April 30, 2003. Generally
weak U.S. equity markets have supported continued positive demand for tax-exempt
products as investors have sought the relative security of fixed income issues.
Also, with tax-exempt money market rates near 1%, the demand for longer maturity
municipal issues has increased as investors have opted to buy longer maturity
issues rather than remain in cash reserves. Additionally, investors received
approximately $30 billion in January 2003 from bond maturities, coupon income
and proceeds from early redemptions. However, these positive demand factors were
not totally able to offset the increase in tax-exempt new-issue supply,
preventing more significant declines in tax-exempt bond yields. This modest
underperformance has served to make municipal bonds a particularly attractive
purchase relative to their taxable counterparts. Throughout most of the yield
curve, municipal bonds have been able to be purchased at yields near or
exceeding those of comparable Treasury issues. Compared to their recent
historical averages of 82% - 88% of U.S. Treasury yields, municipal bond yield
ratios in their current 95% - 105% range are likely to prove attractive to
long-term investors.
Declining U.S. equity markets and escalating geopolitical pressures have
resulted in reduced economic activity and consumer confidence. It is important
to note that, despite all the recent negative factors impeding the growth of
U.S. businesses, the U.S. economy still grew at an approximate 2.50% rate for
all of 2002, twice that of 2001. Similar expansion is expected for early 2003.
Lower oil prices, reduced geopolitical uncertainties, increased Federal spending
for defense, and a likely Federal tax cut are all factors which should promote
stronger economic growth later this year. However, it is questionable to expect
that business and investor confidence can be so quickly restored as to trigger
dramatic, explosive U.S. economic growth and engender associated, large-scale
interest rate increases. The resumption of solid economic growth is likely to be
a gradual process accompanied by equally graduated increases in bond yields.
Moderate economic growth, especially within a context of negligible inflationary
pressures, should not greatly endanger the positive fixed income environments
tax-exempt products currently enjoy.
2 & 3
MuniVest Fund II, Inc., April 30, 2003
Portfolio Strategy
During the six months ended April 30, 2003, portfolio activity was limited and
largely restricted to adding higher-yielding, corporate-backed issues to the
Fund's holdings. The resultant increase in dividend income allowed the Fund's
dividend to be raised once in late 2002 and once thus far in 2003. Current
general market municipal bond yields have not proven to be historically
attractive long-term investments. This was another reason why we focused on
lower-rated issues, which continue to trade at historically attractive yield
spreads. When the U.S. economy eventually recovers, these higher-yielding issues
are expected to retain more of their market value than higher-rated, general
obligation issues. The overall credit quality of the Fund remains high. At April
30, 2003, more than 50% of the Fund's assets were AA-rated or higher by at least
one of the major bond rating agencies, and over 30% of the Fund's holdings were
AAA-rated.
We recently adopted a slightly more defensive market position than in 2002. It
is expected that a number of positive economic factors, such as those discussed
above, will result in stronger U.S. economic activity later this year and into
2004. We also expect that increased Federal borrowing, both to replenish recent
defense expenditures and to offset reduced tax receipts, will put modest upward
pressure on interest rates in the coming months. Upon signs of a material,
sustainable economic recovery, a more defensive portfolio strategy will be
adopted to preserve recent gains in the Fund's net asset value.
During the six-month period ended April 30, 2003, the Fund's borrowing costs
remained in the 1% - 1.5% range, with interest rates presently near 1%. These
very attractive funding levels, in combination with the steep tax-exempt yield
curve, have continued to generate significant income benefits to the Fund's
Common Stock shareholder. We do not expect any material reduction in its
borrowing costs in 2003 as no additional monetary easings by the Federal Reserve
Board are anticipated. We expect the Fund's short-term borrowing costs to remain
at current attractive levels for the coming months. However, should the spread
between short-term and long-term interest rates narrow, the benefits of leverage
will decline, and as a result, reduce the yield on the Fund's Common Stock. (For
a more complete explanation of the benefits and risks of leveraging, see page 1
of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniVest Fund II, Inc., and we look
forward to assisting you with your financial needs in the months and years to
come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Fred K. Stuebe
Fred K. Stuebe
Vice President and Portfolio Manager
May 19, 2003
PROXY RESULTS
During the six-month period ended April 30, 2003, MuniVest Fund II, Inc.'s
Common Stock shareholders voted on the following proposal. The proposal was
approved at a shareholders' meeting on January 28, 2003. 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: Terry K. Glenn 19,354,772 280,574
Cynthia A. Montgomery 19,351,111 284,235
Charles C. Reilly 19,345,765 289,581
Kevin A. Ryan 19,342,192 293,154
Roscoe S. Suddarth 19,349,743 285,603
Edward D. Zinbarg 19,350,135 285,211
----------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2003, MuniVest Fund II, Inc.'s
Preferred Stock shareholders (Series A, B and C) voted on the following
proposal. The proposal was approved at a shareholders' meeting on January 28,
2003. 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: Terry K. Glenn, Ronald W. Forbes,
Cynthia A. Montgomery, Charles C. Reilly, Kevin A. Ryan,
Roscoe S. Suddarth, Richard R. West and Edward D. Zinbarg 4,554 281
----------------------------------------------------------------------------------------------------------
4 & 5
MuniVest Fund II, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
Arizona--1.4% BB+ Ba1 $ 1,200 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (El Paso Electric Company Project), Series A, 6.25% due
5/01/2037 $ 1,212
AAA Aaa 2,315 Maricopa County, Arizona, Tempe Elementary Unified School District
Number 3, GO, Refunding, 7.50% due 7/01/2010 (c) 2,947
====================================================================================================================================
California--3.6% BBB+ A3 1,500 California State, Department of Water Resources, Power Supply
Revenue Bonds, Series A, 5.75% due 5/01/2017 1,668
A- A3 1,940 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A, 6%
due 10/01/2023 2,067
NR* NR* 1,250 Chula Vista, California, Community Facilities District, Special Tax
(Number 06-1, Eastlake Woods Area), Series A, 6.20% due 9/01/2033 1,269
A- A3 4,700 Golden State Tobacco Securitization Corporation, California, Tobacco
Settlement Revenue Bonds, Series 2003-A-1, 6.75% due 6/01/2039 4,158
NR* NR* 1,350 Poway, California, Unified School District, Special Tax (Community
Facilities District Number 6 Area), Series A, 6.125% due 9/01/2033 1,356
====================================================================================================================================
Colorado--2.9% NR* Aa2 80 Colorado HFA, Revenue Bonds (S/F Program), AMT, Senior-Series F,
8.625% due 6/01/2025 82
NR* Aa2 725 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT,
Senior-Series A-2, 7.50% due 4/01/2031 772
Elk Valley, Colorado, Public Improvement Revenue Bonds (Public
Improvement Fee):
NR* NR* 3,025 Series A, 7.35% due 9/01/2031 3,090
NR* NR* 1,000 Series B, 7% due 9/01/2031 1,015
NR* NR* 1,325 North Range, Colorado, Metropolitan District Number 1, GO, 7.25%
due 12/15/2031 1,332
BB+ Ba1 1,900 Northwest Parkway, Colorado, Public Highway Authority Revenue Bonds,
First Tier, Sub-Series D, 7.125% due 6/15/2041 1,987
====================================================================================================================================
Connecticut--0.7% BBB- NR* 2,000 Mohegan Tribe Indians, Connecticut, Gaming Authority, Public
Improvement Revenue Refunding Bonds (Priority Distribution), 6.25%
due 1/01/2031 2,106
====================================================================================================================================
Florida--5.1% NR* NR* 885 Bonnet Creek Resort, Florida, Community Development District,
Special Assessment Revenue Bonds, 7.50% due 5/01/2034 910
BBB Baa2 6,705 Escambia County, Florida, PCR (Champion International Corporation
Project), AMT, 6.90% due 8/01/2022 6,969
NR* NR* 1,000 Orlando, Florida, Urban Community Development District, Capital
Improvement Special Assessment Bonds, Series A, 6.95% due 5/01/2033 1,021
NR* NR* 2,000 Palm Beach County, Florida, HFA, M/F Housing Revenue Bonds (Lake
Delray Apartment Project), AMT, Series A, 6.40% due 1/01/2031 1,877
NR* NR* 385 Panther Trace, Florida, Community Development District, Special
Assessment Revenue Bonds, Series B, 6.50% due 5/01/2009 388
NR* NR* 1,000 Park Place Community Development District, Florida, Special
Assessment Revenue Bonds, 6.75% due 5/01/2032 1,013
NR* NR* 1,000 Preserve at Wilderness Lake, Florida, Community Development
District, Capital Improvement Bonds, Series A, 7.10% due 5/01/2033 1,018
NR* NR* 1,695 Vista Lakes Community, Florida, Development District, Capital
Improvement Revenue Bonds, Series B, 5.80% due 5/01/2008 1,709
====================================================================================================================================
Georgia--4.4% Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station
Project):
NR* NR* 1,655 7.25% due 12/01/2005 1,674
NR* NR* 2,000 7.90% due 12/01/2024 2,075
Georgia Municipal Electric Authority, Power Revenue Refunding Bonds:
A A2 5,620 Series W, 6.60% due 1/01/2018 7,026
A A2 380 Series W, 6.60% due 1/01/2018 (h) 485
A A2 1,250 Series X, 6.50% due 1/01/2020 1,541
====================================================================================================================================
Idaho--0.4% NR* Aaa 1,190 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT,
Series E-2, 6.90% due 1/01/2027 1,284
====================================================================================================================================
Illinois--18.9% AAA NR* 3,000 Chicago, Illinois, O'Hare International Airport Revenue Refunding
Bonds, DRIVERS, AMT, Series 253, 9.782% due 1/01/2020 (a)(d) 3,506
CC Caa2 4,000 Chicago, Illinois, O'Hare International Airport, Special Facility
Revenue Refunding Bonds (American Airlines Inc. Project), 8.20%
due 12/01/2024 1,400
AAA Aaa 1,390 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series C, 7%
due 3/01/2032 (f)(i) 1,462
NR* NR* 800 Chicago, Illinois, Special Assessment Bonds (Lake Shore East), 6.75%
due 12/01/2032 801
AAA Aaa 2,385 Cook County, Illinois, Community High School District Number 219,
Niles Township, GO, 6% due 12/01/2017 (c) 2,795
BBB A3 2,800 Hodgkins, Illinois, Environmental Improvement Revenue Bonds (Metro
Biosolids Management LLC Project), AMT, 6% due 11/01/2023 2,894
BBB NR* 1,000 Illinois Development Finance Authority Revenue Bonds (Community
Rehabilitation Providers Facility), Series A, 6.50% due 7/01/2022 1,022
BBB NR* 2,500 Illinois Development Finance Authority, Revenue Refunding Bonds
(Community Rehabilitation Providers), Series A, 6% due 7/01/2015 2,460
A+ A1 6,500 Illinois HDA, Revenue Refunding Bonds (M/F Program), Series 5, 6.75%
due 9/01/2023 6,773
NR* Aaa 2,600 Kane and De Kalb Counties, Illinois, Community Unit School District
Number 302, GO, DRIVERS, Series 283, 9.80% due 2/01/2018 (a)(c) 3,351
NR* Aaa 3,850 Kane, Cook and Du Page Counties, Illinois, Elgin School District
Number 46, GO, 6.375% due 1/01/2018 (g) 4,482
McLean and Woodford Counties, Illinois, Community Unit, School
District Number 005, GO, Refunding (g):
NR* Aaa 2,345 6.25% due 12/01/2014 2,795
NR* Aaa 2,000 6.375% due 12/01/2016 2,391
AAA NR* 3,200 Metropolitan Pier and Exposition Authority, Illinois, Dedicated
State Tax Revenue Refunding Bonds, DRIVERS, Series 269, 9.80%
due 6/15/2023 (a)(d) 3,973
Portfolio
Abbreviations
To simplify the listings of MuniVest Fund II, Inc.'s portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
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
6 & 7
MuniVest Fund II, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
Illinois Regional Transportation Authority, Illinois, Revenue Bonds:
(concluded) AAA Aaa $ 1,500 Series A, 7.20% due 11/01/2020 (b) $ 2,025
AAA Aaa 7,000 Series A, 6.70% due 11/01/2021 (c) 9,076
AAA Aaa 2,500 Series C, 7.75% due 6/01/2020 (c) 3,532
====================================================================================================================================
Indiana--11.4% Indiana Bond Bank Revenue Bonds (State Revolving Fund Program),
Series A:
AAA NR* 2,750 6.875% due 2/01/2012 3,046
AAA NR* 5,750 6.75% due 2/01/2017 6,351
NR* Aaa 5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds, Series A,
6.80% due 1/01/2017 (e) 5,665
Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A:
AA AA2 1,530 7.25% due 6/01/2015 1,969
AA AA2 470 7.25% due 6/01/2015 (h) 589
AA AA2 3,775 6.80% due 12/01/2016 4,751
AA NR* 8,750 Indianapolis, Indiana, Local Public Improvement Bond Bank, Revenue
Refunding Bonds, Series D, 6.75% due 2/01/2014 10,738
====================================================================================================================================
Kentucky--0.5% BB- B3 2,000 Kenton County, Kentucky, Airport Board, Special Facilities Airport
Revenue Bonds (Delta Airlines Project), AMT, Series A, 7.50%
due 2/01/2020 1,451
====================================================================================================================================
Louisiana--7.5% NR* Baa2 2,000 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Company Project),
7.75% due 8/15/2022 2,087
AAA Aaa 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 (b) 6,145
BB- NR* 10,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 6.50% due 1/01/2017 9,760
BBB Baa2 3,600 Sabine River Authority, Louisiana, Water Facilities Revenue
Refunding Bonds (International Paper Company), 6.20% due 2/01/2025 3,745
====================================================================================================================================
Maryland--1.6% A- NR* 2,000 Maryland State Energy Financing Administration, Solid Waste
Disposal Revenue Bonds, Limited Obligation (Wheelabrator Water
Projects), AMT, 6.45% due 12/01/2016 2,145
AAA Aaa 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) 1,305
NR* NR* 1,250 Montgomery County, Maryland, Special Obligation, Special Tax Bond
(West Germantown Development District), Series B, 6.70% due 7/01/2027 1,283
====================================================================================================================================
Massachusetts--4.6% AA- Aa2 1,000 Massachusetts State College Building Authority Project, Revenue
Refunding Bonds, Senior-Series A, 7.50% due 5/01/2011 1,278
BB+ NR* 1,250 Massachusetts State Development Finance Agency, Revenue Refunding
Bonds (Eastern Nazarine College), 5.625% due 4/01/2029 936
AA Aa3 6,000 Massachusetts State Water Resource Authority Revenue Bonds, Series A,
6.50% due 7/15/2019 7,594
AAA Aaa 3,000 Massachusetts State Water Resource Authority, Revenue Refunding
Bonds, Series A, 6% due 8/01/2016 (c) 3,524
====================================================================================================================================
Michigan--5.9% BBB Baa2 1,500 Delta County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (Mead
Westvaco-Escanaba), Series A, 6.25% due 4/15/2027 1,515
NR* Ba1 285 Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Sinai Hospital), 6.625% due 1/01/2016 268
Michigan State Hospital Finance Authority, Revenue Refunding Bonds,
Series A:
AAA Aa2 8,425 (Ascension Health Credit), 6.125% due 11/15/2009 (j) 10,165
BBB- Ba1 2,340 (Detroit Medical Center Obligation Group), 6.50% due 8/15/2018 2,082
BB+ NR* 3,000 Pontiac, Michigan, Tax Increment Finance Authority, Revenue
Refunding Bonds (Development Area Number 3), 6.375% due 6/01/2031 2,959
====================================================================================================================================
Minnesota--0.9% Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa1 1,040 Series L, 6.70% due 7/01/2020 1,072
AA+ Aa1 1,630 Series M, 6.70% due 7/01/2026 1,679
====================================================================================================================================
Mississippi--3.5% Mississippi Business Finance Corporation, Mississippi, PCR,
Refunding (System Energy Resources Inc. Project):
BBB- Ba1 7,200 5.875% due 4/01/2022 7,087
BBB- Ba1 3,090 5.90% due 5/01/2022 3,050
====================================================================================================================================
Missouri--0.4% AAA NR* 1,080 Missouri State Housing Development Commission, S/F Mortgage Revenue
Bonds (Homeowner Loan), AMT, Series A, 7.50% due 3/01/2031 (i) 1,155
====================================================================================================================================
Nebraska--1.8% Nebraska Investment Finance Authority, S/F Housing Revenue Bonds,
AMT (i):
AAA NR* 1,935 Series C, 6.30% due 9/01/2028 (f) 2,034
AAA NR* 2,950 Series D, 6.45% due 3/01/2028 3,105
====================================================================================================================================
Nevada--2.3% AAA Aaa 3,300 Clark County, Nevada, IDR (Power Company Project), AMT, Series A,
6.70% due 6/01/2022 (c) 3,419
AAA Aaa 585 Nevada Housing Division Revenue Bonds (S/F Program), AMT,
Senior-Series E, 7% due 10/01/2019 (e) 604
AAA Aaa 2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra Pacific
Power Company), AMT, 6.65% due 12/01/2017 (b) 2,547
====================================================================================================================================
New Jersey--4.6% NR* NR* 1,335 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest
Village Inc. Facility), Series A, 7.25% due 11/15/2021 1,340
B Caa2 2,000 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines
Inc. Project), AMT, 6.25% due 9/15/2029 1,401
BB+ NR* 1,930 New Jersey Health Care Facilities Financing Authority Revenue Bonds
(Pascack Valley Hospital Association), 6.625% due 7/01/2036 1,907
AAA Aaa 2,700 New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, AMT, Series M, 6.95% due 10/01/2022 (d) 2,821
A- A3 6,250 Tobacco Settlement Financing Corporation of New Jersey Revenue
Bonds, 7% due 6/01/2041 5,749
====================================================================================================================================
New York--10.6% New York City, New York, City IDA, Civic Facility Revenue Bonds:
NR* NR* 690 Series C, 6.80% due 6/01/2028 704
NR* NR* 890 (Special Needs Facility Pooled Program), Series C-1, 6.50% due
7/01/2017 909
BBB- Ba2 1,920 New York City, New York, City IDA, Special Facility Revenue Bonds
(British Airways PLC Project), AMT, 7.625% due 12/01/2032 1,461
NR* Aa2 3,375 New York City, New York, City Transitional Finance Authority Revenue
Bonds, RIB, Series 283, 10.83% due 11/15/2015 (a) 4,668
New York City, New York, GO, Refunding, Series A:
AAA Aaa 3,530 6.50% due 5/15/2012 (k) 4,149
AAA Aaa 5,000 6.375% due 5/15/2015 (c) 5,926
AAAr NR* 7,000 New York State Dormitory Authority, Revenue Refunding Bonds, RIB,
Series 305, 10.07% due 5/15/2015 (a)(d) 9,404
NR* NR* 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 1,005
NR* NR* 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 2,650
====================================================================================================================================
8 & 9
MuniVest Fund II, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
North Carolina-- NR* NR* $ 1,625 North Carolina Medical Care Commission, Retirement Facilities, First
0.6% Mortgage Revenue Bonds (Forest at Duke Project), 6.375% due 9/01/2032 $ 1,646
====================================================================================================================================
Pennsylvania--4.3% NR* Aaa 2,000 Delaware River Port Authority of Pennsylvania and New Jersey
Revenue Bonds, RIB, Series 396, 10.383% due 1/01/2019 (a)(g) 2,632
NR* NR* 2,000 Pennsylvania Economic Development Financing Authority, Exempt
Facilities Revenue Bonds (National Gypsum Company), AMT, Series B,
6.125% due 11/01/2027 1,789
NR* NR* 1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial
Development, 7.75% due 12/01/2017 1,296
Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds
(Guthrie Health Issue):
A- NR* 4,050 Series A, 5.875% due 12/01/2031 4,225
A- NR* 2,425 Series B, 5.85% due 12/01/2020 2,542
====================================================================================================================================
Rhode Island--0.7% BBB Baa2 1,865 Rhode Island State Health and Educational Building Corporation,
Hospital Financing Revenue Bonds (Lifespan Obligation Group), 6.50%
due 8/15/2032 1,916
====================================================================================================================================
South Carolina-- BBB+ Baa2 1,230 Medical University, South Carolina, Hospital Authority, Hospital
1.3% Facility Revenue Refunding Bonds, 6.50% due 8/15/2032 1,296
NR* Aa2 560 South Carolina Housing Finance and Development Authority, Mortgage
Revenue Bonds, AMT, Series A, 6.70% due 7/01/2027 579
BBB- NR* 2,000 South Carolina Jobs, EDA, Revenue Bonds (Myrtle Beach Convention
Center), Series A, 6.625% due 4/01/2036 2,004
====================================================================================================================================
Tennessee--3.2% BB+ Ba1 4,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling
Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 3,952
BBB+ Baa1 5,000 Shelby County, Tennessee, Health, Educational and Housing Facility
Board, Hospital Revenue Refunding Bonds (Methodist Healthcare),
6.50% due 9/01/2026 5,384
====================================================================================================================================
Texas--17.7% Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.):
BBB- Baa3 1,600 First Tier, Series A, 6.70% due 1/01/2028 1,665
BBB- Baa3 4,510 First Tier, Series A, 6.70% due 1/01/2032 4,675
A+ Aa3 3,500 Trust Certificates, Second Tier, Series B, 6% due 1/01/2023 3,792
Brazos River Authority, Texas, PCR, Refunding, AMT:
BBB Baa2 1,500 (Texas Utility Company), Series A, 7.70% due 4/01/2033 1,574
BBB Baa2 7,080 (Utilities Electric Company), Series B, 5.05% due 6/01/2030 7,064
BBB- Ba1 1,810 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant
Energy Inc. Project), Series B, 7.75% due 12/01/2018 1,886
A- A3 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 6,004
CC Caa2 1,000 Dallas-Fort Worth, Texas, International Airport Facility,
Improvement Corporation Revenue Refunding Bonds (American Airlines),
AMT, Series A, 5.95% due 5/01/2029 650
NR* Baa3 1,000 Grapevine, Texas, Industrial Development Corporation Revenue Bonds
(Air Cargo), AMT, 6.50% due 1/01/2024 961
AA- Aa3 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 2,669
AAA Aaa 1,665 Harris County, Houston, Texas, Sports Authority, Revenue Refunding
Bonds, Senior Lien, Series G, 5.75% due 11/15/2019 (d) 1,864
NR* Aa3 5,000 Harris County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds, RITR, Series 6, 9.375% due 12/01/2027 (a)(h) 6,556
BBB- Ba1 3,440 Matagorda County, Texas, Navigation District Number 1, Revenue
Refunding Bonds (Reliant Energy Inc.), Series C, 8% due 5/01/2029 3,576
BBB Baa2 1,600 Port Corpus Christi, Texas, Revenue Refunding Bonds (Celanese
Project), Series A, 6.45% due 11/01/2030 1,635
BBB Baa2 1,810 Sabine River Authority, Texas, PCR, Refunding (TXU Electric Company
Project), Series C, 4% due 5/01/2028 1,811
NR* Aa1 3,750 San Antonio, Texas, Electric and Gas Revenue Bonds, RIB, Series
469x, 9.62% due 2/01/2014 (a) 4,979
====================================================================================================================================
Virginia--1.9% BBB+ A3 1,000 Chesterfield County, Virginia, IDA, PCR (Virginia Electric and
Power Company), Series B, 5.875% due 6/01/2017 1,060
BBB Baa2 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 3,179
BBB- Baa3 800 Mecklenburg County, Virginia, IDA, Exempt Facility Revenue Refunding
Bonds (UAE LP Project), 6.50% due 10/15/2017 785
BB NR* 750 Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds,
Senior-Series A, 5.50% due 8/15/2028 497
====================================================================================================================================
Washington--13.8% AAA Aaa 2,425 Chelan County, Washington, Public Utility District Number 001,
Consolidated Revenue Refunding Bonds (Chelan Hydro), AMT, Series D,
6.35% due 7/01/2028 (d) 2,785
AAA Aaa 3,245 Douglas County, Washington, Public Utility District Number 001,
Wells Hydroelectric Revenue Bonds, Series B, 6% due 9/01/2029 (d) 3,738
Energy Northwest, Washington, Electric Revenue Refunding Bonds,
DRIVERS (a):
AAA NR* 2,250 Series 248, 9.81% due 7/01/2018 (d) 2,820
AAA NR* 1,125 Series 255, 10.31% due 7/01/2018 (b) 1,460
AAA NR* 3,650 Series 256, 10.31% due 7/01/2017 (d) 4,822
NR* NR* 1,000 Port Seattle, Washington, Special Facilities Revenue Bonds
(Northwest Airlines Project), AMT, 7.25% due 4/01/2030 661
AAAr Aaa 5,000 Washington State, GO, Trust Receipts, Class R, Series 6, 10.24% due
1/01/2014 (a)(g) 6,566
AA Baa1 2,200 Washington State Health Care Facilities Authority Revenue Bonds
(Kadlec Medical Center), 6% due 12/01/2030 2,381
Washington State Public Power Supply System, Revenue Refunding
Bonds, Series B:
AA- Aa1 915 (Nuclear Project No. 1), 7.25% due 7/01/2009 (h) 1,145
AA- Aa1 4,035 (Nuclear Project No. 1), 7.25% due 7/01/2009 4,752
AA- Aa1 5,000 (Nuclear Project No. 1), 7.125% due 7/01/2016 6,499
AAA Aaa 1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (d) 2,497
====================================================================================================================================
Wisconsin--0.9% BBB+ NR* 2,715 Wisconsin State Health and Educational Facilities Authority Revenue
Bonds (Synergyhealth Inc.), 6% due 11/15/2032 2,742
====================================================================================================================================
Wyoming--1.9% Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC
Corporation Project), AMT:
BB+ Ba3 1,000 Series A, 7% due 6/01/2024 923
BB+ Ba3 5,000 Series B, 6.90% due 9/01/2024 4,559
====================================================================================================================================
Virgin Islands--2.1% BBB- Baa3 6,000 Virgin Islands Government Refinery Facilities Revenue Bonds (Hovensa
Coker Project), AMT, 6.50% due 7/01/2021 6,070
====================================================================================================================================
Total Municipal Bonds (Cost--$380,475)--141.4% 410,549
====================================================================================================================================
10 & 11
MuniVest Fund II, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Shares
Held Short-Term Securities Value
====================================================================================================================================
5,392 Merrill Lynch Institutional Tax-Exempt Fund** $ 5,392
====================================================================================================================================
Total Short-Term Securities (Cost--$5,392)--1.9% 5,392
====================================================================================================================================
Total Investments (Cost--$385,867)--143.3% 415,941
Unrealized Appreciation on Forward Interest Rate Swaps***--0.0% 82
Other Assets Less Liabilities--3.2% 9,295
Preferred Stock, at Redemption Value--(46.5%) (135,006)
---------
Net Assets Applicable to Common Stock--100.0% $ 290,312
=========
====================================================================================================================================
(a) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rates shown are the rates in
effect at April 30, 2003.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) FHA Insured.
(f) FHLMC Collateralized.
(g) FSA Insured.
(h) Escrowed to maturity.
(i) FNMA/GNMA Collateralized.
(j) Prerefunded.
(k) XL Capital Insured.
* Not Rated.
** 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) are as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional
Tax-Exempt Fund 2,005 $36
--------------------------------------------------------------------------
*** Forward interest rate swaps entered into as of April 30, 2003 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Receive a variable rate equal to
7-day Bond Market Association rate
at quarterly reset date and pay a
fixed rate equal to 3.365%
Broker, JP Morgan Chase
Expires, June 7, 2013 $21,000 $ 82
----
$ 82
====
--------------------------------------------------------------------------
See Notes to Financial Statements.
STATEMENT OF NET ASSETS
As of April 30, 2003
===============================================================================================================================
Assets: Investments, at value (identified cost--$385,867,384) ............. $ 415,940,975
Cash .............................................................. 1,950,100
Unrealized appreciation on forward interest rate swaps ............ 82,383
Receivables:
Interest ........................................................ $ 8,353,084
Securities sold ................................................. 3,920,778
Dividends ....................................................... 173 12,274,035
-------------
Prepaid expenses .................................................. 33,935
-------------
Total assets ...................................................... 430,281,428
-------------
===============================================================================================================================
Liabilities: Payables:
Securities purchased ............................................ 4,552,528
Dividends to Common Stock shareholders .......................... 188,282
Investment adviser .............................................. 177,938
Other affiliates ................................................ 3,272 4,922,020
-------------
Accrued expenses .................................................. 40,752
-------------
Total liabilities ................................................. 4,962,772
-------------
===============================================================================================================================
Preferred Stock: Preferred Stock, par value $.05 per share (1,800 Series A shares,
1,800 Series B shares and 1,800 Series C shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference) ...... 135,006,300
-------------
===============================================================================================================================
Net Assets Applicable Net assets applicable to Common Stock ............................. $ 290,312,356
To Common Stock: =============
===============================================================================================================================
Analysis of Net Common Stock, par value $.10 per share (19,907,055 shares issued
Assets Applicable and outstanding) .................................................. $ 1,990,705
To Common Stock: Paid-in capital in excess of par .................................. 277,543,466
Undistributed investment income--net .............................. $ 5,633,553
Accumulated realized capital losses on investments--net ........... (25,011,342)
Unrealized appreciation on investments--net ....................... 30,155,974
-------------
Total accumulated earnings--net ................................... 10,778,185
-------------
Total--Equivalent to $14.58 net asset value per share of Common
Stock (market price--$14.16) ...................................... $ 290,312,356
=============
===============================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 & 13
MuniVest Fund II, Inc., April 30, 2003
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2003
===============================================================================================================================
Investment Interest .......................................................... $ 12,755,518
Income: Dividends ......................................................... 36,366
-------------
Total income ...................................................... 12,791,884
-------------
===============================================================================================================================
Expenses: Investment advisory fees .......................................... $ 1,041,160
Commission fees ................................................... 172,012
Accounting services ............................................... 72,873
Transfer agent fees ............................................... 39,894
Professional fees ................................................. 32,231
Directors' fees and expenses ...................................... 18,776
Listing fees ...................................................... 14,584
Custodian fees .................................................... 12,105
Pricing fees ...................................................... 10,700
Printing and shareholder reports .................................. 10,382
Other ............................................................. 23,617
-------------
Total expenses before reimbursement ............................... 1,448,334
Reimbursement of expenses ......................................... (6,876)
-------------
Total expenses after reimbursement ................................ 1,441,458
-------------
Investment income--net ............................................ 11,350,426
-------------
===============================================================================================================================
Realized & Realized gain on investments--net ................................. 867,188
Unrealized Gain on Change in unrealized appreciation on investments--net ............. 6,697,375
Investments--Net: -------------
Total realized and unrealized gain on investments--net ............ 7,564,563
-------------
===============================================================================================================================
Dividends to Investment income--net ............................................ (757,926)
Preferred Stock -------------
Shareholders: Net Increase in Net Assets Resulting from Operations .............. $ 18,157,063
=============
===============================================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2003 2002
==============================================================================================================================
Operations: Investment income--net ........................................... $ 11,350,426 $ 21,828,084
Realized gain on investments--net ................................ 867,188 3,250,885
Change in unrealized appreciation on investments--net ............ 6,697,375 (8,111,087)
Dividends to Preferred Stock shareholders ........................ (757,926) (1,857,924)
------------- -------------
Net increase in net assets resulting from operations ............. 18,157,063 15,109,958
------------- -------------
==============================================================================================================================
Dividends to Investment income--net ........................................... (9,674,829) (17,826,768)
Common Stock ------------- -------------
Shareholders: Net decrease in net assets resulting from dividends to Common
Stock shareholders ............................................... (9,674,829) (17,826,768)
------------- -------------
==============================================================================================================================
Net Assets Total increase (decrease) in net assets applicable to Common Stock 8,482,234 (2,716,810)
Applicable to Beginning of period .............................................. 281,830,122 284,546,932
Common Stock: ------------- -------------
End of period* ................................................... $ 290,312,356 $ 281,830,122
============= =============
==============================================================================================================================
*Undistributed investment income--net ............................. $ 5,633,553 $ 4,715,882
============= =============
==============================================================================================================================
See Notes to Financial Statements.
14 & 15
MuniVest Fund II, Inc., April 30, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended October 31,
April 30, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ........ $ 14.16 $ 14.29 $ 13.32 $ 12.81 $ 14.85
Operating -------- -------- -------- -------- --------
Performance:+ Investment income--net ...................... .57++ 1.11 1.02 1.04 1.05
Realized and unrealized gain (loss) on
investments--net ............................ .38 (.25) .97 .54 (2.05)
Dividends to Preferred Stock shareholders from
investment income--net ...................... (.04) (.09) (.22) (.28) (.22)
-------- -------- -------- -------- --------
Total from investment operations ............ .91 .77 1.77 1.30 (1.22)
-------- -------- -------- -------- --------
Less dividends to Common Stock shareholders
from investment income--net ................. (.49) (.90) (.80) (.79) (.82)
-------- -------- -------- -------- --------
Net asset value, end of period .............. $ 14.58 $ 14.16 $ 14.29 $ 13.32 $ 12.81
======== ======== ======== ======== ========
Market price per share, end of period ....... $ 14.16 $ 13.36 $ 13.69 $ 11.625 $ 11.75
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on market price per share ............. 9.80%@ 4.25% 25.20% 5.93% (13.49%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .......... 6.67%@ 5.86% 14.06% 11.33% (8.31%)
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement*** ..... 1.02%* 1.05% 1.02% 1.08% 1.01%
Average Net Assets ======== ======== ======== ======== ========
Of Common Stock: Total expenses*** ........................... 1.03%* 1.05% 1.02% 1.08% 1.01%
======== ======== ======== ======== ========
Total investment income--net*** ............. 8.05%* 7.79% 7.42% 8.00% 7.36%
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock
shareholders ................................ .54%* .66% 1.57% 2.15% 1.53%
======== ======== ======== ======== ========
Investment income--net, to Common Stock
shareholders ................................ 7.51%* 7.13% 5.85% 5.85% 5.83%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement ........ .69%* .71% .69% .71% .68%
Average Net Assets of ======== ======== ======== ======== ========
Common and Total expenses .............................. .70%* .71% .69% .71% .68%
Preferred Stock:*** ======== ======== ======== ======== ========
Total investment income--net ................ 5.46%* 5.26% 4.98% 5.24% 4.99%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ... 1.13%* 1.38% 3.22% 4.08% 3.22%
Average Net Assets ======== ======== ======== ======== ========
Of Preferred Stock:
==================================================================================================================================
Supplemental Net assets applicable to Common Stock, end of
Data: period (in thousands) ....................... $290,312 $281,830 $284,547 $265,169 $254,975
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) .............................. $135,000 $135,000 $135,000 $135,000 $135,000
======== ======== ======== ======== ========
Portfolio turnover .......................... 18.81% 66.07% 87.80% 110.66% 114.06%
======== ======== ======== ======== ========
==================================================================================================================================
Leverage: Asset coverage per $1,000 ................... $ 3,150 $ 3,088 $ 3,108 $ 2,964 $ 2,889
======== ======== ======== ======== ========
==================================================================================================================================
Dividends Per Share Series A--Investment income--net ............ $ 135 $ 338 $ 793 $ 1,067 $ 816
On Preferred Stock ======== ======== ======== ======== ========
Outstanding: Series B--Investment income--net ............ $ 150 $ 319 $ 834 $ 990 $ 810
======== ======== ======== ======== ========
Series C--Investment income--net ............ $ 136 $ 375 $ 784 $ 1,012 $ 786
======== ======== ======== ======== ========
==================================================================================================================================
* 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
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Certain prior year amounts have been reclassified to conform to current
year presentation.
++ Based on average shares outstanding.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 & 17
MuniVest Fund II, Inc., April 30, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniVest Fund II, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company. The
Fund's financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which may require
the use of management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to a fair statement of the results for the interim period presented.
All such adjustments are of a normal, recurring nature. The Fund determines and
makes available for publication the net asset value of its Common Stock on a
weekly basis. The Fund's Common Stock is listed on the New York Stock Exchange
under the symbol MVT. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options 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 over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). 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
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movement and movements in the securities
market. 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 is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward interest rate swaps -- The Fund is authorized to enter into forward
interest rate swaps. In a forward interest rate swap, the Fund and the
counterparty agree to pay or receive interest on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. The value of the agreement is determined by quoted fair values received
daily by the Fund from the counterparty. 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.
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. For the six months ended April
30, 2003, FAM reimbursed the Fund in the amount of $6,876.
For the six months ended April 30, 2003, the Fund reimbursed FAM $4,860 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, 2003 were $79,875,031 and $76,313,623, respectively.
Net realized gains for the six months ended April 30, 2003 and net unrealized
gains as of April 30, 2003 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
--------------------------------------------------------------------------------
Long-term investments .................... $ 867,188 $30,073,591
Forward interest rate swaps .............. -- 82,383
----------- -----------
Total .................................... $ 867,188 $30,155,974
=========== ===========
--------------------------------------------------------------------------------
As of April 30, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $30,161,530, of which $36,699,954 related to appreciated
securities and $6,538,424 related to depreciated securities. The aggregate cost
of investments at April 30, 2003 for Federal income tax purposes was
$385,779,445.
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.
Common Stock
Shares issued and outstanding during the six months ended April 30, 2003 and for
the year ended October 31, 2002 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") 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
18 & 19
MuniVest Fund II, Inc., April 30, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
April 30, 2003 were as follows: Series A, .99%; Series B, .97%; and Series C,
..73%.
Shares issued and outstanding during the six months ended April 30, 2003 and the
year ended October 31, 2002 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, 2003, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, an affiliate of FAM, earned $70,596 as commissions.
5. Capital Loss Carryforward:
On October 31, 2002, the Fund had a net capital loss carryforward of
$21,827,939, of which $2,105,327 expires in 2003, $10,964,178 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 $.084000 per share on May 29, 2003 to shareholders of record on May
16, 2003.
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 2003 were as
follows:
--------------------------------------------------------------------------------
Percent
of Total
S&P Rating/Moody's Rating Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 34.7%
AA/Aa ................................................... 16.5
A/A ..................................................... 11.4
BBB/Baa ................................................. 19.9
BB/Ba ................................................... 7.3
B/B ..................................................... 0.3
CCC/Caa ................................................. 0.5
NR (Not Rated) .......................................... 9.4
--------------------------------------------------------------------------------
20 & 21
MuniVest Fund II, Inc., April 30, 2003
MANAGED 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 consistent yield to the current trading price of shares
of Common Stock of the Fund, 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.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, 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
Brian D. Stewart, 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
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MVT
22 & 23
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
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.
MuniVest Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #16807--4/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by
the principal accountant for the audit of the
registrant's annual financial statements or services
that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and
related services by the principal accountant
that are reasonably related to the performance
of the audit of the registrant's financial
statements and are not reported under
paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising
the fees disclosed under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of
the services comprising the fees disclosed under this
category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services
provided by the principal accountant, other than
the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the
nature of the services comprising the fees
disclosed under this category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each
of the last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees.
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A (not answered
until July 1, 2003)
Item 8 -- Reserved
Item 9(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.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
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 II, Inc.
By: /s/ Terry K. Glenn
-------------------------
Terry K. Glenn,
President of
MuniVest II, Inc.
Date: June 23, 2003
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/ Terry K. Glenn
-------------------------
Terry K. Glenn,
President of
MuniVest II, Inc.
Date: June 23, 2003
By: /s/ Donald C. Burke
-------------------------
Donald C. Burke,
Chief Financial Officer of
MuniVest II, Inc.
Date: June 23, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.