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 811-5611
Name of Fund: MuniVest Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, MuniVest Fund,
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: 08/31/04
Date of reporting period: 09/01/03 - 02/29/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniVest Fund, Inc.
Semi-Annual Report
February 29, 2004
[LOGO] Merrill Lynch Investment Managers
MuniVest Fund, Inc.
The Benefits and Risks of Leveraging
MuniVest Fund, Inc. utilizes leveraging to seek to enhance the yield and net
asset value of its Common Stock. However, these objectives cannot be achieved in
all interest rate environments. To leverage, the Fund issues Preferred Stock,
which pays dividends at prevailing short-term interest rates, and invests the
proceeds in long-term municipal bonds. The interest earned on these investments,
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. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the American 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. As of February 29, 2004, the percentage of the
Fund's total net assets invested in inverse floaters was 13.92%, before the
deduction of Preferred Stock.
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 or reduce exposure to a bond or market without owning or
taking physical custody of securities.
2 MUNIVEST FUND, INC. FEBRUARY 29, 2004
A Letter From the President
Dear Shareholder
As I write to you at February month-end, fixed income markets in the United
States continued to reward those investors willing to accept greater risk. The
trend held true in the tax-exempt market, where the Lehman Brothers
Non-Investment Grade Index of municipal bonds posted respective returns of
+10.96% and +16.15% for the six-month and 12-month periods ended February 29,
2004. This compared to a six-month return of +6.52% and a 12-month return of
+6.30% for the broader-based Lehman Brothers Municipal Bond Index.
At the same time, equity markets maintained their positive momentum from
year-end 2003. For the six-month and 12-month periods ended February 29, 2004,
the Standard & Poor's (S&P) 500 Index returned +14.59% and +38.52%,
respectively. Much of the boost came from improving economic conditions in the
United States.
The major signposts indicate that we are seeing a shift from economic growth
fueled primarily by fiscal and monetary stimulus to a broader-based,
self-sustaining economic expansion. Gross domestic product growth, which peaked
at an annualized rate of 8.2% in the third quarter of 2003, was 4.1% in the
fourth quarter. A similar level of growth is expected in the first quarter of
2004. For its part, the Federal Reserve Board has reiterated its willingness to
keep short-term interest rates at current low levels to ensure the economy's
strength.
Accompanying the increase in economic activity was an improvement in corporate
earnings. By February 10, 2004, 392 of the S&P 500 companies had reported their
fourth-quarter 2003 results, and 67.6% of those exceeded expectations. In the
meantime, the American consumer, who continued to spend despite the faltering
economy, may get further incentive from another round of Federal tax refunds
this year.
At Merrill Lynch Investment Managers, we believe the events and efforts of 2003
leave us with a much stronger economy and that recent optimism suggests it is
time for investors to consider what can go right in 2004. We encourage you to
revisit your portfolio and your asset allocation strategy to ensure you are well
positioned to take advantage of the opportunities that lie ahead.
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/ Terry K. Glenn
Terry K. Glenn
President and Director
MUNIVEST FUND, INC. FEBRUARY 29, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
An emphasis on higher-yielding issues allowed us to enhance the Fund's
income stream and, ultimately, increase the dividend paid to shareholders.
Discuss the recent market environment relative to municipal bonds.
Over the past six months, long-term fixed income interest rates generally
declined while the U.S. economy gained strength. Gross domestic product expanded
at an annualized rate of 8.2% in the third quarter of 2003, with fourth-quarter
growth reported at 4.1%. Notwithstanding the impressive economic growth, the
Federal Reserve Board seemed apt to leave short-term interest rates at their
current low levels, citing subdued employment growth and the absence of material
inflationary pressures.
At the end of February 2004, long-term U.S. Treasury bond yields stood at 4.84%,
representing a decline of nearly 40 basis points (.40%) over the past six
months. Tax-exempt municipal bond yields also moved sharply lower during the
period, while their prices -- which move opposite of their yields -- rose
accordingly. Yields on long-term revenue bonds, as measured by the Bond Buyer
Revenue Bond Index, fell almost 60 basis points. The same was true of 30-year
issues rated AAA -- the highest rated -- according to Municipal Market Data.
Shorter-maturity bonds fared even better, as yields on 10-year AAA-rated bonds
declined approximately 65 basis points during the period.
Supporting the recent yield declines was a pronounced decrease in new bond
issuance. This translated into favorable supply/demand dynamics in the municipal
marketplace. Approximately $170 billion in municipal bonds was underwritten
during the past six months, a drop of approximately 10% compared to the same
period a year earlier. In February, just $22 billion in new long-term municipal
bonds was underwritten, a decline of more than 25% versus February 2003. New
supply of municipal bonds is expected to remain manageable in 2004, a trend we
believe will continue to support the tax-exempt market's performance relative to
the taxable bond market.
While investor enthusiasm for stocks has taken some attention away from fixed
income markets, overall demand for tax-exempt municipal bonds has remained
positive. Municipal yields have recently ranged from 88% to 91% of Treasury
yields, slightly higher than their recent historical average. Moreover,
municipal investors generally preferred longer-dated securities, which offered
somewhat higher yields in the low interest rate environment. This maturity
extension helped support the strong demand for and performance of tax-exempt
products in recent months.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended February 29, 2004, the Common Stock of MuniVest
Fund, Inc. had net annualized yields of 6.35% and 6.68%, based on a period-end
per share net asset value of $10.23 and a per share market price of $9.73,
respectively, and $.324 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +10.99%, based on a
change in per share net asset value from $9.54 to $10.23, and assuming
reinvestment of $.321 per share ordinary income dividends.
For the six-month period ended February 29, 2004, the Fund's Auction Market
Preferred Stock (AMPS) had average yields as follows: Series A, .86%; Series B,
..96%; Series C, .92%; Series D, .81%; and Series E, .86%.
The Fund's total return, based on net asset value, for the period was closely
aligned with the +10.93% average return of the Lipper General Municipal Debt
Funds (Leveraged) category for the six months ended February 29, 2004. As
interest rates moved lower over the past six months, we established a more
defensive portfolio position. This involved limiting the Fund's vulnerability to
future interest rate movements, and was largely accomplished by replacing some
of the Fund's more interest rate-sensitive issues with larger-coupon,
higher-yielding bonds. The incremental income generated by these higher-yielding
issues generally offsets the market appreciation produced by more interest
rate-sensitive bonds. This strategy allowed the Fund's total return to keep pace
with recent market moves while also enhancing its income stream.
4 MUNIVEST FUND, INC. FEBRUARY 29, 2004
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
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
of the Fund's Common Stock can vary significantly from total investment return
based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
The decline in new municipal bond issuance in recent months has resulted in
restricted portfolio activity. In addition to a dwindling supply of new issues,
we also have seen limited trading opportunities in the secondary market. This is
because institutional investors have been increasingly reluctant to sell
existing higher-coupon holdings and reinvest the proceeds at current low market
rates.
Our strategy has been to add lower-rated investment grade issues to the
portfolio whenever they have been attractively priced. These issues generate
incremental coupon income, which has served to enhance the Fund's total return.
By adding these lower-rated securities, we also have enjoyed a cumulative
positive effect on the Fund's income stream, which allowed the Fund's dividend
to be increased in February 2004. This increase placed the Fund's dividend well
above that of many of its peers.
In terms of leverage, the Fund's borrowing costs remained in a .85% - 1.0% range
during the period. These attractive funding levels, in combination with a steep
tax-exempt yield curve, generated a significant income benefit to the Fund's
Common Stock shareholders. Further declines in the Fund's borrowing costs would
require significant easing of monetary policy by the Federal Reserve Board.
While such action is not expected, neither is an imminent increase in short-term
interest rates. We expect short-term borrowing costs to remain near 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. At the
end of the period, the Fund's leverage amount, based on AMPS, was 30.47% of
total 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 portfolio's position at the close of the period?
We ended the period with a slightly defensive position with respect to future
interest rate movements. We continue to favor more defensive, higher-coupon
issues over the more interest rate-sensitive securities. At the close of the
period, the Fund had modest cash reserves of approximately 2%. Overall, the Fund
is structured to perform better in stable-to-rising interest rate environments.
If yields decline to the recent lows seen in June 2003, we would expect to adopt
a much stronger defensive strategy.
Looking ahead, we believe moderate economic growth, especially within a context
of negligible inflationary pressures, should not greatly endanger the positive
fixed income environment that tax-exempt products have enjoyed.
Fred K. Stuebe
Vice President and Portfolio Manager
March 8, 2004
MUNIVEST FUND, INC. FEBRUARY 29, 2004 5
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Schedule of Investments (in Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
================================================================================================================================
Alabama--4.0% BBB NR* $ 2,550 Camden, Alabama, IDB, Exempt Facilities Revenue Bonds (Weyerhaeuser
Company), Series A, 6.125% due 12/01/2024 $ 2,765
BBB Baa2 7,500 Courtland, Alabama, IDB, Solid Waste Disposal Revenue Bonds
(Champion International Corporation Project), AMT, Series A,
6.50% due 9/01/2025 7,862
Huntsville, Alabama, Health Care Authority Revenue Bonds:
NR* A2 3,500 Series A, 5.75% due 6/01/2031 3,699
NR* A2 5,000 Series B, 5.75% due 6/01/2032 5,324
BBB Baa2 5,000 Selma, Alabama, IDB, Environmental Improvement Revenue Refunding
Bonds (International Paper Company Project), Series B, 5.50%
due 5/01/2020 5,300
================================================================================================================================
Alaska--1.4% Anchorage, Alaska, Lease Revenue Bonds (Correctional Facility) (i):
AAA Aaa 3,575 6% due 2/01/2014 4,229
AAA Aaa 3,830 6% due 2/01/2016 4,485
================================================================================================================================
Arizona--0.6% NR* Baa3 2,500 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona
Charter Schools Project 1), Series A, 6.75% due 7/01/2029 2,516
Pima County, Arizona, IDA, Education Revenue Bonds (Arizona Charter
Schools Project), Series I:
NR* Baa3 500 6.10% due 7/01/2024 490
NR* Baa3 1,000 6.30% due 7/01/2031 978
================================================================================================================================
California--11.7% California State Public Works Board, Lease Revenue Bonds (Department
of Corrections), Series C:
BBB- Baa2 5,000 5.50% due 6/01/2022 5,302
BBB- Baa2 6,000 5.50% due 6/01/2023 6,338
BBB Baa1 17,600 California State, Various Purpose, GO, 5.50% due 11/01/2033 18,391
A- A3 5,240 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A, 6%
due 10/01/2023 5,695
Golden State Tobacco Securitization Corporation of California,
Tobacco Settlement Revenue Bonds:
BBB Baa2 1,885 Series A-2, 7.90% due 6/01/2042 2,046
BBB Baa2 7,280 Series A-3, 7.875% due 6/01/2042 7,888
BBB Baa2 3,250 Series A-4, 7.80% due 6/01/2042 3,505
BBB Baa2 1,125 Series A-5, 7.875% due 6/01/2042 1,219
BBB- Baa2 13,900 Series B, 5.375% due 6/01/2028 14,123
BBB- Baa2 8,850 Series B, 5.50% due 6/01/2033 9,055
================================================================================================================================
Colorado--2.3% Arapahoe County, Colorado, School District Number 005, GO (Cherry
Creek):
AA Aa2 5,750 6% due 12/15/2013 6,822
AA Aa2 4,165 6% due 12/15/2014 4,941
Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT, Senior
Series A-2:
NR* Aa2 1,790 6.60% due 5/01/2028 1,839
NR* Aa2 755 7.50% due 4/01/2031 776
================================================================================================================================
Connecticut--0.5% BBB- NR* 2,810 Mohegan Tribe Indians, Connecticut, Gaming Authority, Public
Improvement Revenue Refunding Bonds (Priority Distribution), 6.25%
due 1/01/2031 3,011
================================================================================================================================
Georgia--2.9% Georgia Municipal Electric Authority, Power Revenue Refunding Bonds:
A A2 250 Series W, 6.60% due 1/01/2018 (e) 315
A A2 4,600 Series W, 6.60% due 1/01/2018 5,748
A A2 250 Series Y, 10% due 1/01/2010 (e) 350
AAA Aaa 5,000 Georgia State, GO, Series F, 6.50% due 12/01/2007 5,862
A A3 4,785 Monroe County, Georgia, Development Authority, PCR, Refunding
(Oglethorpe Power Corporation--Scherer), Series A, 6.80%
due 1/01/2011 5,803
Portfolio Abbreviations
To simplify the listings of MuniVest Fund, 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)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
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 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
================================================================================================================================
Idaho--0.6% NR* Aaa $ 1,315 Idaho Housing Agency, S/F Mortgage Revenue Refunding Bonds, AMT,
Series E-2, 6.90% due 1/01/2027 $ 1,360
BB+ Ba3 2,250 Power County, Idaho, Industrial Development Corporation, Solid Waste
Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45%
due 8/01/2032 2,226
================================================================================================================================
Illinois--19.9% AAA Aaa 3,005 Chicago, Illinois, GO (Neighborhoods Alive 21 Program), Series A,
6% due 1/01/2016 (f) 3,567
AAA Aaa 5,000 Chicago, Illinois, O'Hare International Airport, General Airport
Revenue Refunding Bonds, Third Lien, AMT, Series A, 5.75%
due 1/01/2019 (c) 5,556
Chicago, Illinois, O'Hare International Airport Revenue Bonds, AMT:
AAA Aaa 11,200 3rd Lien, Series B-2, 6% due 1/01/2029 (n) 12,695
AAA NR* 8,540 Series 368, DRIVERS, 9.701% due 7/01/2011 (c)(j) 10,982
AAA NR* 7,000 Chicago, Illinois, O'Hare International Airport Revenue Refunding
Bonds, DRIVERS, AMT, Series 253, 10.217% due 1/01/2020 (c)(j) 8,456
AAA Aaa 205 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT, Series C, 7%
due 3/01/2032 (b)(d)(l) 209
AAA Aaa 5,000 Cook County, Illinois, Community High School District Number 219,
Niles Township, GO, 6% due 12/01/2017 (f) 5,943
BBB Baa1 10,000 Hodgkins, Illinois, Environmental Improvement Revenue Bonds (Metro
Biosolids Management LLC Project), AMT, 6% due 11/01/2023 10,228
BBB NR* 2,140 Illinois Development Finance Authority Revenue Bonds (Community
Rehabilitation Providers Facility), Series A, 6.50% due 7/01/2022 2,250
NR* NR* 2,500 Illinois Educational Facilities Authority, Revenue Refunding Bonds
(Chicago Osteopathic Health System), 7.25% due 11/15/2019 (a) 2,530
A+ A1 7,000 Illinois HDA, Revenue Refunding Bonds (M/F Program), Series 5, 6.75%
due 9/01/2023 7,251
AAA Aa3 5,650 Illinois State Sales Tax Revenue Bonds, 5% due 6/15/2028 5,946
NR* Aaa 5,245 Kane and De Kalb Counties, Illinois, Community Unit School District
Number 302, GO, DRIVERS, Series 283, 10.258% due 2/01/2018 (f)(j) 7,008
NR* Aaa 2,500 Kane, Cook and Du Page Counties, Illinois, School District 46, Elgin,
GO, 6.375% due 1/01/2019 (i) 3,003
Mc Lean and Woodford Counties, Illinois, Community Unit, School
District Number 005, GO, Refunding (i):
NR* Aaa 5,000 6.25% due 12/01/2014 6,132
NR* Aaa 4,000 6.375% due 12/01/2016 4,900
AAA NR* 9,275 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State
Tax Revenue Refunding Bonds, DRIVERS, Series 269, 10.258%
due 6/15/2023 (c)(j) 11,836
Regional Transportation Authority, Illinois, Revenue Bonds:
AAA Aaa 3,500 Series A, 7.20% due 11/01/2020 (h) 4,732
AAA Aaa 4,000 Series C, 7.75% due 6/01/2020 (f) 5,696
AAA Aaa 3,000 Will County, Illinois, Environmental Revenue Bonds (Mobil Oil
Refining Corporation Project), AMT, 6.40% due 4/01/2026 3,307
Will County, Illinois, School District Number 122, GO, Series A (i):
NR* Aaa 1,000 6.50% due 11/01/2013 1,232
NR* Aaa 1,375 6.50% due 11/01/2015 1,694
================================================================================================================================
Indiana--7.7% BBB Baa1 1,700 Fort Wayne, Indiana, PCR, Refunding (General Motors Corporation
Project), 6.20% due 10/15/2025 1,811
AAA NR* 5,250 Indiana Bond Bank Revenue Bonds (State Revolving Fund Program),
Series A, 6.75% due 2/01/2017 5,624
AA- A1 6,500 Indiana Health Facility Financing Authority, Hospital Revenue
Refunding Bonds (Clarian Health Partners Inc.), Series A, 6%
due 2/15/2021 6,976
NR* Aaa 4,290 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds, Series A,
6.80% due 1/01/2017 (k) 4,323
AA- NR* 8,195 Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A, 6.80% due 12/01/2016 10,509
AA NR* 15,335 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue
Refunding Bonds, Series D, 6.75% due 2/01/2014 19,215
================================================================================================================================
Kansas--0.6% NR* Aaa 3,805 Sedgwick and Shawnee Counties, Kansas, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT, Series A-4, 5.95%
due 12/01/2033 (b)(d) 4,198
================================================================================================================================
Louisiana--2.6% BBB Baa2 4,000 De Soto Parish, Louisiana, Environmental Improvement Revenue
Refunding Bonds (International Paper Co. Project), AMT, Series B,
6.55% due 4/01/2019 4,202
AAA Aaa 10,000 Louisiana Local Government, Environmental Facilities, Community
Development Authority Revenue Bonds (Capital Projects and Equipment
Acquisition), Series A, 6.30% due 7/01/2030 (h) 12,448
MUNIVEST FUND, INC. FEBRUARY 29, 2004 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
================================================================================================================================
Maine--0.3% Portland, Maine, Housing Development Corporation, Senior Living
Revenue Bonds (Avesta Housing Development Corporation Project),
Series A:
NR* Baa2 $ 775 5.70% due 8/01/2021 $ 778
NR* Baa2 1,190 6% due 2/01/2034 1,197
================================================================================================================================
Massachusetts--7.8% AAA Aaa 2,035 Boston, Massachusetts, Water and Sewer Commission Revenue Bonds,
9.25% due 1/01/2011 (e) 2,806
AA Aa2 3,010 Massachusetts Bay Transportation Authority, Revenue Refunding Bonds
(General Transportation System), Series A, 7% due 3/01/2019 3,962
AA Aa3 30,000 Massachusetts State Water Resource Authority Revenue Bonds, Series A,
6.50% due 7/15/2019 38,062
Massachusetts State Water Resource Authority, Revenue Refunding
Bonds, Series A (f):
AAA Aaa 1,000 6% due 8/01/2014 1,204
AAA Aaa 2,480 6% due 8/01/2017 2,950
================================================================================================================================
Michigan--5.5% BBB Baa2 7,695 Delta County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (Mead
Westvaco-Escanaba), Series A, 6.25% due 4/15/2027 8,178
Macomb County, Michigan, Hospital Finance Authority, Hospital Revenue
Bonds (Mount Clemens General Hospital), Series B:
BBB- NR* 3,715 5.75% due 11/15/2025 3,512
BBB- NR* 5,250 5.875% due 11/15/2034 4,920
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 3,000 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (a)(c) 3,631
AAA Aa2 10,390 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (a) 12,576
B Ba1 1,300 (Detroit Medical Center Obligation Group), Series A, 6.25%
due 8/15/2013 1,058
NR* Ba3 1,000 (Sinai Hospital), 6.70% due 1/01/2026 733
================================================================================================================================
Minnesota--2.0% NR* A3 7,235 Minneapolis, Minnesota, Health Care System Revenue Bonds (Allina
Health System), Series A, 5.75% due 11/15/2032 7,709
Minnesota State, HFA, S/F Mortgage Revenue Bonds:
AA+ Aa1 960 AMT, Series L, 6.70% due 7/01/2020 981
AA+ Aa1 1,195 AMT, Series M, 6.70% due 7/01/2026 1,220
AA+ Aa1 800 Series H, 6.70% due 1/01/2018 817
NR* Aaa 1,405 Saint Cloud, Minnesota, Health Care Revenue Refunding Bonds (Saint
Cloud Hospital Obligation Group), Series A, 6.25% due 5/01/2017 (i) 1,681
================================================================================================================================
Mississippi--4.8% Lowndes County, Mississippi, Solid Waste Disposal and PCR, Refunding
(Weyerhaeuser Company Project):
BBB Baa2 3,650 Series A, 6.80% due 4/01/2022 4,398
BBB Baa2 4,000 Series B, 6.70% due 4/01/2022 4,777
BBB- Ba1 20,705 Mississippi Business Finance Corporation, Mississippi, PCR, Refunding
(System Energy Resources Inc. Project), 5.875% due 4/01/2022 20,813
================================================================================================================================
Missouri--0.5% BBB+ Baa1 2,600 Missouri State Development Finance Board, Infrastructure Facilities
Revenue Refunding Bonds (Branson), Series A, 5.50% due 12/01/2032 2,687
AAA NR* 610 Missouri State Housing Development Commission, S/F Mortgage Revenue
Bonds (Homeowner Loan), AMT, Series A, 7.50% due 3/01/2031 (b)(d) 632
================================================================================================================================
Montana--1.0% BBB+ Baa2 6,000 Forsyth, Montana, PCR, Refunding (Portland General Electric Company),
Series A, 5.20% due 5/01/2033 6,294
================================================================================================================================
Nebraska--0.2% AAA NR* 1,195 Nebraska Investment Finance Authority, S/F Housing Revenue Bonds,
AMT, Series C, 6.30% due 9/01/2028 (b)(d)(l) 1,253
================================================================================================================================
Nevada--2.3% AAA Aaa 6,700 Clark County, Nevada, IDR (Power Company Project), AMT, Series A,
6.70% due 6/01/2022 (f) 6,907
AA Aa2 1,600 Clark County, Nevada, Public Safety, GO, 6% due 3/01/2014 1,910
Nevada Housing Division Revenue Bonds (Multi-Unit Housing), AMT (b):
AAA NR* 3,475 (Arville Electric Project), 6.60% due 10/01/2023 3,637
AAA Aa2 1,235 Issue B, 7.45% due 10/01/2017 1,276
Nevada Housing Division Revenue Bonds (S/F Program), AMT (k):
AAA Aaa 635 Senior Series E, 7% due 10/01/2019 649
NR* Aa2 425 Series A, 6.55% due 10/01/2012 427
8 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
================================================================================================================================
New Hampshire--0.4% BBB+ Baa1 $ 2,425 New Hampshire Health and Education Facilities Authority, Revenue
Refunding Bonds (Elliot Hospital), Series B, 5.60% due 10/01/2022 $ 2,496
================================================================================================================================
New Jersey--2.6% AAA Aaa 1,620 New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, AMT, Series M, 6.95% due 10/01/2022 (c) 1,671
AAA Aaa 6,500 New Jersey State Transit Corporation, COP (Federal Transit
Administration Grants), Series A, 6% due 9/15/2009 (a)(h) 7,746
BBB Baa2 7,150 Tobacco Settlement Financing Corporation of New Jersey Revenue Bonds,
7% due 6/01/2041 7,197
================================================================================================================================
New Mexico--0.5% BBB- Baa3 3,300 Farmington, New Mexico, PCR, Refunding (Public Service Company--San
Juan Project), Series A, 5.80% due 4/01/2022 3,334
================================================================================================================================
New York--6.7% NR* Aa2 7,875 New York City, New York, City Transitional Finance Authority Revenue
Bonds, RIB, Series 283, 11.23% due 11/15/2015 (j) 11,158
AAA Aaa 8,000 New York City, New York, GO, Refunding, Series A, 6.375%
due 5/15/2014 (f) 9,760
New York City, New York, GO, Series I:
AAA Aaa 280 6.25% due 4/15/2007 (a) 323
AAA Aaa 2,060 6.25% due 4/15/2017 2,344
AAA Aaa 870 6.25% due 4/15/2027 979
New York State Dormitory Authority, Revenue Refunding Bonds:
BB Ba1 1,000 (Mount Sinai Health), Series A, 6.50% due 7/01/2025 1,023
AAAr NR* 11,875 RIB, Series 305, 10.75% due 5/15/2015 (c)(j) 16,281
================================================================================================================================
Oregon--1.1% NR* Aaa 2,000 Portland, Oregon, Airport Way, Urban Renewal and Redevelopment Tax
Allocation Refunding Bonds, Series A, 6% due 6/15/2015 (h) 2,366
NR* Aaa 3,305 Portland, Oregon, Sewer System Revenue Bonds, RIB, Series 386, 10.23%
due 8/01/2020 (f)(j) 4,352
================================================================================================================================
Pennsylvania--4.2% AAA Aaa 2,440 Pennsylvania State Higher Education Assistance Agency Revenue Bonds,
Capital Acquisition, 6.125% due 12/15/2010 (a)(c) 2,979
A NR* 6,250 Pennsylvania State Higher Educational Facilities Authority Revenue
Bonds (University of Pennsylvania Medical Center Health System),
Series A, 6% due 1/15/2031 6,692
Philadelphia, Pennsylvania, Authority for Industrial Development,
Senior Living Revenue Bonds:
NR* Baa2 1,000 (Arbor House Inc. Project), Series E, 6.10% due 7/01/2033 981
NR* Baa2 1,355 (Rieder House Project), Series A, 6.10% due 7/01/2033 1,329
A- NR* 2,650 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds
(Guthrie Health Issue), Series B, 1% due 12/01/2031 3,116
Sayre, Pennsylvania, Health Care Facilities Authority, Revenue
Refunding Bonds (Guthrie Healthcare System), Series A:
A- NR* 1,750 6.25% due 12/01/2018 1,950
A- NR* 1,000 5.75% due 12/01/2021 1,066
A- NR* 7,700 5.875% due 12/01/2031 8,145
================================================================================================================================
Puerto Rico--0.9% BBB+ Baa3 5,000 Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds, Series E, 5.75% due 8/01/2030 5,415
================================================================================================================================
South Carolina--1.6% BBB+ Baa2 2,450 Medical University, South Carolina, Hospital Authority, Hospital
Facility Revenue Refunding Bonds, 6.50% due 8/15/2032 2,619
BBB Baa2 5,000 Richland County, South Carolina, Environmental Improvement Revenue
Refunding Bonds (International Paper), AMT, 6.10% due 4/01/2023 5,433
BBB Baa2 2,000 York County, South Carolina, Industrial Revenue Bonds (Hoechst
Celanese Corporation), AMT, 5.70% due 1/01/2024 1,941
================================================================================================================================
Tennessee--1.5% BB+ Ba2 2,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling
Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 2,021
A- Baa1 6,500 Shelby County, Tennessee, Health, Educational and Housing Facility
Board, Hospital Revenue Refunding Bonds (Methodist Healthcare), 6.50%
due 9/01/2026 7,198
MUNIVEST FUND, INC. FEBRUARY 29, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
================================================================================================================================
Texas--22.4% Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.):
BBB- Baa3 $ 6,000 First Tier, Series A, 6.70% due 1/01/2028 $ 6,434
BBB- Baa3 1,175 First Tier, Series A, 6.70% due 1/01/2032 1,256
A- Aa3 6,500 Trust Certificates, Second Tier, Series B, 6% due 1/01/2023 7,238
Brazos River Authority, Texas, PCR, Refunding, AMT:
BBB Baa2 3,000 (Texas Utilities Electric Company Project), Series B, 5.40%
due 5/01/2029 3,168
BBB Baa2 3,055 (Texas Utility Company), Series A, 7.70% due 4/01/2033 3,494
BBB Baa2 12,300 (Utilities Electric Company), Series B, 5.05% due 6/01/2030 12,933
A- A3 11,460 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 12,542
AA+ Aa1 5,000 Fort Worth, Texas, Certificates of Obligation, GO, 6.25%
due 3/01/2005 (a) 5,262
AA NR* 3,000 Gregg County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Good Shepherd Medical Center Project), 6.875%
due 10/01/2020 (g) 3,602
AA- Aa3 10,250 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 11,199
BBB Baa2 4,000 Gulf Coast, Texas, IDA (Champion International Corp.), Refunding,
7.125% due 4/01/2010 4,079
BBB Baa2 3,000 Gulf Coast, Texas, Waste Disposal Authority, Revenue Refunding Bonds
(International Paper Company), AMT, Series A, 6.10% due 8/01/2024 3,187
AAA Aaa 5,500 Harris County, Houston, Texas, Sports Authority, Revenue Refunding
Bonds, Senior Lien, Series G, 5.75% due 11/15/2020 (c) 6,218
NR* Aa3 10,385 Harris County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds, RITR, Series 6, 9.885% due 12/01/2027 (e)(j) 14,071
NR* Baa3 1,800 Houston, Texas, Industrial Development Corporation Revenue Bonds (Air
Cargo), AMT, 6.375% due 1/01/2023 1,848
AAA Aaa 2,030 Mansfield, Texas, Independent School District, GO, Refunding, 6.625%
due 2/15/2015 2,451
BBB Baa2 9,855 Matagorda County, Texas, Navigation District Number 1, Revenue
Refunding Bonds (Centerpoint Energy Project), 5.60% due 3/01/2027 10,093
NR* Aaa 5,225 Midway, Texas, Independent School District, GO, Refunding, 6.125%
due 8/15/2014 6,275
BBB Baa2 5,400 Port Corpus Christi, Texas, Revenue Refunding Bonds (Celanese
Project), Series A, 6.45% due 11/01/2030 5,672
BBB Baa2 5,000 Red River Authority, Texas, PCR, Refunding (Celanese Project), AMT,
Series B, 6.70% due 11/01/2030 5,299
NR* Aa1 6,250 San Antonio, Texas, Electric and Gas Revenue Bonds, RIB, Series 469x,
10.28% due 2/01/2014 (j) 8,523
AAA Aaa 4,605 Travis County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds (Ascension Health Credit), Series A, 6.25%
due 11/15/2009 (a)(c) 5,594
================================================================================================================================
Vermont--0.2% BBB+ NR* 1,000 Vermont Educational and Health Buildings Financing Agency,
Developmental and Mental Health Revenue Bonds (Howard Center for
Human Services), Series A, 6.375% due 6/15/2022 1,055
================================================================================================================================
Virgin Islands--1.4% BBB- Baa3 8,000 Virgin Islands Government Refinery Facilities, Revenue Refunding
Bonds (Hovensa Coker Project), AMT, 6.50% due 7/01/2021 8,714
================================================================================================================================
Virginia--2.0% BBB+ A3 1,425 Chesterfield County, Virginia, IDA, PCR (Virginia Electric and Power
Company), Series A, 5.875% due 6/01/2017 1,564
AAA Aaa 5,000 Fairfax County, Virginia, GO, Series B, 4% due 6/01/2014 5,249
BBB Baa2 1,500 Isle of Wight County, Virginia, IDA, Solid Waste Disposal Facilities
Revenue Bonds (Union Camp Corporation Project), AMT, 6.55%
due 4/01/2024 1,536
AAA Aaa 4,185 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds, Series J,
Sub-Series J-1, 5.20% due 7/01/2019 (c) 4,356
================================================================================================================================
Washington--9.9% Energy Northwest, Washington, Electric Revenue Refunding Bonds,
DRIVERS (j):
AAA NR* 5,330 Series 248, 10.258% due 7/01/2018 (c) 7,071
AAA NR* 3,510 Series 255, 10.752% due 7/01/2018 (h) 4,836
AAA NR* 7,350 Series 256, 10.757% due 7/01/2017 (c) 10,148
NR* NR* 2,460 Seattle, Washington, Housing Authority Revenue Bonds (Replacement
Housing Project), 6.125% due 12/01/2032 2,462
AAA Aaa 2,230 Vancouver, Washington, Water and Sewer Revenue Bonds, 6%
due 6/01/2009 (a) 2,642
AAAr Aaa 8,100 Washington State, GO, Trust Receipts, Class R, Series 6, 10.653%
due 1/01/2014 (i)(j) 10,891
Washington State Public Power Supply System, Revenue Refunding Bonds
(Nuclear Project Number 1):
AA- Aa1 1,185 Series A, 7% due 7/01/2008 (e) 1,433
AA- Aa1 1,815 Series A, 7% due 7/01/2008 2,178
AA- Aa1 1,380 Series B, 7.25% due 7/01/2009 (e) 1,622
AA- Aa1 14,320 Series B, 7.125% due 7/01/2016 18,801
10 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Schedule of Investments (concluded) (in Thousands)
S&P Moody's Face
State Ratings Ratings Amount Municipal Bonds Value
================================================================================================================================
Wisconsin--1.9% NR* Baa3 $ 1,650 Milwaukee, Wisconsin, Revenue Bonds (Air Cargo), AMT, 6.50%
due 1/01/2025 $ 1,707
NR* Aa2 5,000 Wisconsin State Health and Educational Facilities Authority, Mortgage
Revenue Bonds (Hudson Memorial Hospital), 5.70% due 1/15/2029 (k) 5,255
BBB+ NR* 4,540 Wisconsin State Health and Educational Facilities Authority Revenue
Bonds (Synergyhealth Inc.), 6% due 11/15/2032 4,705
================================================================================================================================
Wyoming--2.1% Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC
Corporation Project), AMT:
BB+ Ba3 5,425 Series A, 7% due 6/01/2024 5,488
BB+ Ba3 7,475 Series B, 6.90% due 9/01/2024 7,565
----------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$781,221)--138.6% 869,988
================================================================================================================================
Shares
Held Short-Term Investments
================================================================================================================================
26,758 Merrill Lynch Institutional Tax-Exempt Fund (m) 26,758
----------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost--$26,758)--4.3% 26,758
================================================================================================================================
Total Investments (Cost--$807,979)--142.9% 896,746
Unrealized Depreciation on Forward Interest Rate Swaps**--(0.4%) (2,721)
Other Assets Less Liabilities--1.3% 8,642
Preferred Stock, at Redemption Value--(43.8%) (275,045)
--------
Net Assets Applicable to Common Stock--100.0% $627,622
========
(a) Prerefunded.
(b) FNMA Collateralized.
(c) MBIA Insured.
(d) GNMA Collateralized.
(e) Escrowed to maturity.
(f) FGIC Insured.
(g) Radian Insured.
(h) AMBAC Insured.
(i) FSA Insured.
(j) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at February 29, 2004.
(k) FHA Insured.
(l) FHLMC Collateralized.
(m) 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 3,400 $108
--------------------------------------------------------------------------
(n) XL Capital Insured.
* Not Rated.
** Forward interest rate swaps entered into as of February 29, 2004 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
--------------------------------------------------------------------------
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and pay
a fixed rate of 3.673%
Broker, J.P. Morgan Chase Bank
Expires May 2014 $22,000 $ (396)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and pay
a fixed rate of 3.719%
Broker, J.P. Morgan Chase Bank
Expires March 2014 $21,750 (623)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and pay
a fixed rate of 3.85%
Broker, Morgan Stanley
Capital Services, Inc.
Expires March 2014 $44,000 (1,702)
--------------------------------------------------------------------------
Total $(2,721)
=======
See Notes to Financial Statements.
MUNIVEST FUND, INC. FEBRUARY 29, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Net Assets
As of February 29, 2004
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost--$807,979,496) ................ $ 896,745,835
Cash ................................................................. 843,125
Receivables:
Securities sold ................................................... $ 15,591,199
Interest .......................................................... 13,020,440
Dividends from affiliates ......................................... 592 28,612,231
-------------
Prepaid expenses ..................................................... 11,473
-------------
Total assets ......................................................... 926,212,664
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps ............... 2,721,056
Payables:
Securities purchased .............................................. 19,979,371
Dividends to Common Stock shareholders ............................ 440,817
Investment adviser ................................................ 339,236
Other affiliates .................................................. 7,356 20,766,780
-------------
Accrued expenses ..................................................... 57,838
-------------
Total liabilities .................................................... 23,545,674
-------------
============================================================================================================================
Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.025 per share;
10,000,000 shares authorized (2,000 Series A Shares, 2,000 Series B
Shares, 2,000 Series C Shares, 2,000 Series D Shares, and 3,000
Series E Shares of AMPS* issued and outstanding at $25,000 per share
liquidation preference) ............................................ 275,044,840
-------------
============================================================================================================================
Net Assets Applicable to Common Stock
- ----------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ................................ $ 627,622,150
=============
============================================================================================================================
Analysis of Net Assets Applicable to Common Stock
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share; 150,000,000 shares authorized
(61,346,288 shares issued and outstanding) ......................... $ 6,134,629
Paid-in capital in excess of par ..................................... 565,202,625
Undistributed investment income--net ................................. $ 10,112,493
Accumulated realized capital losses on investments--net .............. (39,872,880)
Unrealized appreciation on investments--net .......................... 86,045,283
-------------
Total accumulated earnings--net ...................................... 56,284,896
-------------
Total--Equivalent to $10.23 net asset value per share of Common Stock
(market price--$9.73) .............................................. $ 627,622,150
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Statement of Operations
For the Six Months Ended February 29, 2004
============================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Interest ............................................................. $ 24,675,270
Dividends from affiliates ............................................ 107,785
-------------
Total income ......................................................... 24,783,055
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................. $ 2,187,658
Commission fees ...................................................... 342,646
Accounting services .................................................. 126,010
Transfer agent fees .................................................. 60,979
Professional fees .................................................... 31,274
Printing and shareholder reports ..................................... 23,574
Custodian fees ....................................................... 21,720
Directors' fees and expenses ......................................... 16,319
Pricing fees ......................................................... 12,460
Listing fees ......................................................... 12,269
Other ................................................................ 21,416
-------------
Total expenses before reimbursement .................................. 2,856,325
Reimbursement of expenses ............................................ (25,727)
-------------
Total expenses after reimbursement ................................... 2,830,598
-------------
Investment income--net ............................................... 21,952,457
-------------
============================================================================================================================
Realized & Unrealized Gain on Investments--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net .................................... 1,292,824
Change in unrealized appreciation on investments--net ................ 40,244,264
-------------
Total realized and unrealized gain on investments--net ............... 41,537,088
-------------
============================================================================================================================
Dividends to Preferred Stock Shareholders
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................... (1,197,620)
-------------
Net Increase in Net Assets Resulting from Operations ................. $ 62,291,925
=============
See Notes to Financial Statements.
MUNIVEST FUND, INC. FEBRUARY 29, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
February 29, August 31,
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................... $ 21,952,457 $ 44,032,855
Realized gain on investments--net .................................... 1,292,824 8,263,901
Change in unrealized appreciation on investments--net ................ 40,244,264 (24,459,149)
Dividends to Preferred Stock Shareholders ............................ (1,197,620) (3,044,590)
-------------------------------
Net increase in net assets resulting from operations ................. 62,291,925 24,793,017
-------------------------------
============================================================================================================================
Dividends to Common Stock Shareholders
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................... (19,692,158) (38,586,815)
-------------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders ................................................. (19,692,158) (38,586,815)
-------------------------------
============================================================================================================================
Net Assets Applicable to Common Stock
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock ... 42,599,767 (13,793,798)
Beginning of period .................................................. 585,022,383 598,816,181
-------------------------------
End of period* ....................................................... $ 627,622,150 $ 585,022,383
===============================
* Undistributed investment income--net ............................ $ 10,112,493 $ 9,049,814
===============================
See Notes to Financial Statements.
14 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Financial Highlights
The following per share data and ratios have been derived For the Six For the Year Ended
from information provided in the financial statements. Months Ended August 31,
February 29, --------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001++ 2000++
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............... $ 9.54 $ 9.76 $ 9.71 $ 9.07 $ 9.15
---------------------------------------------------------
Investment income--net ............................. .36+ .72+ .69 .69 .70
Realized and unrealized gain (loss) on
investments--net ................................. .67 (.26) .02 .65 (.05)
Dividends to Preferred Stock shareholders from
investment income--net ........................... (.02) (.05) (.07) (.16) (.18)
---------------------------------------------------------
Total from investment operations ................... 1.01 .41 .64 1.18 .47
---------------------------------------------------------
Less dividends to Common Stock shareholders from
investment income--net ........................... (.32) (.63) (.59) (.54) (.55)
---------------------------------------------------------
Net asset value, end of period ..................... $ 10.23 $ 9.54 $ 9.76 $ 9.71 $ 9.07
=========================================================
Market price per share, end of period .............. $ 9.73 $ 8.80 $ 9.11 $ 9.30 $ 8.25
=========================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on market price per share .................... 14.44%@ 3.56% 4.55% 19.92% 1.75%
=========================================================
Based on net asset value per share ................. 10.99%@ 4.79% 7.28% 13.89% 6.21%
=========================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement*** ............ .94%* .95% .95% .98% 1.01%
=========================================================
Total expenses*** .................................. .95%* .96% .95% .98% 1.01%
=========================================================
Total investment income--net*** .................... 7.28%* 7.33% 7.33% 7.37% 7.95%
=========================================================
Amount of dividends to Preferred Stock shareholders .40%* .50% .75% 1.70% 2.01%
=========================================================
Investment income--net, to Common Stock shareholders 6.88%* 6.83% 6.58% 5.67% 5.94%
=========================================================
MUNIVEST FUND, INC. FEBRUARY 29, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
For the Six For the Year Ended
Months Ended August 31,
The following per share data and ratios have been derived February 29, ----------------------------------------------
from information provided in the financial statements. 2004 2003 2002 2001++ 2000++
===============================================================================================================================
Ratios Based on Average Net Assets of Common & Preferred Stock***
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement ......... .65%* .65% .65% .66% .67%
==========================================================
Total expenses ............................... .65%* .66% .65% .66% .67%
==========================================================
Total investment income--net ................. 5.01%* 5.03% 4.98% 4.98% 5.26%
==========================================================
===============================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
- -------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders .... .88%* 1.11% 1.59% 3.53% 3.93%
==========================================================
===============================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock,
end of period (in thousands) ............... $627,622 $585,022 $598,816 $595,908 $556,105
==========================================================
Preferred Stock outstanding, end of period
(in thousands) ............................. $275,000 $275,000 $275,000 $275,000 $275,000
==========================================================
Portfolio turnover ........................... 25.00% 44.30% 74.00% 74.80% 121.76%
==========================================================
===============================================================================================================================
Leverage
- -------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 .................... $ 3,282 $ 3,127 $ 3,178 $ 3,167 $ 3,022
==========================================================
===============================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
- -------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ............. $ 106 $ 266 $ 388 $ 909 $ 1,030
==========================================================
Series B--Investment income--net ............. $ 119 $ 278 $ 394 $ 923 $ 991
==========================================================
Series C--Investment income--net ............. $ 114 $ 269 $ 391 $ 906 $ 952
==========================================================
Series D--Investment income--net ............. $ 100 $ 306 $ 445 $ 877 $ 978
==========================================================
Series E--Investment income--net ............. $ 107 $ 269 $ 372 $ 851 $ 977
==========================================================
* 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.
+ Based on average shares outstanding.
++ Certain prior year amounts have been reclassified to conform with current
year presentation.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
MuniVest Fund, 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
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 American Stock
Exchange under the symbol MVF. 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 last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more dealers that make markets in the
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). Swap agreements are valued by quoted fair values
received daily by the Fund from the counterparty. Short-term investments with a
remaining maturity 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 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 purchase and write call and 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.
MUNIVEST FUND, INC. FEBRUARY 29, 2004 17
[LOGO] Merrill Lynch Investment Managers
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.
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. ("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 assets
acquired from the sale of Preferred Stock. For the six months ended February 29,
2004, FAM reimbursed the Fund in the amount of $25,727.
For six months ended February 29, 2004, the Fund reimbursed FAM $8,884 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 six
months ended February 29, 2004, were $214,434,646 and $212,751,982 respectively.
Net realized gains (losses) for the six months ended February 29, 2004 and net
unrealized gains (losses) as of February 29, 2004 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments ................ $ 1,788,375 $ 88,766,339
Forward interest rate swaps .......... (495,551) (2,721,056)
---------------------------------
Total ................................ $ 1,292,824 $ 86,045,283
=================================
As of February 29, 2004, net unrealized appreciation for Federal income tax
purposes aggregated $88,786,039, of which $89,898,120 related to appreciated
securities and $1,112,081 related to depreciated securities. The aggregate cost
of investments at February 29, 2004 for Federal income tax purposes was
$807,959,796.
4. Capital Stock Transactions:
Common Stock
At February 29, 2004, the Fund had one class of shares of Common Stock, par
value $.10 per share, of which 150,000,000 shares were authorized.
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred Stock of the
Fund with a par value of $.025 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 for each series. The Fund is authorized to issue 10,000,000
shares of Preferred Stock. The yields in effect at February 29, 2004 were as
follows: Series A, .82%; Series B, .82%; Series C, .85%; Series D, .80%; and
Series E, .85%.
18 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Notes to Financial Statements (concluded)
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 February 29, 2004, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, an affiliate of FAM, received $115,634 as
commissions.
5. Capital Loss Carryforward:
On August 31, 2003 the Fund had a net capital loss carryforward of $26,099,945,
of which $8,420,062 expires in 2008 and $17,679,883 expires in 2009. 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 $.056000 per share payable on March 30, 2004 to shareholders of record
as of March 15, 2004.
MUNIVEST FUND, INC. FEBRUARY 29, 2004 19
[LOGO] Merrill Lynch Investment Managers
Quality Profile
The quality ratings of securities in the Fund as of February 29, 2004 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Total Investments
- --------------------------------------------------------------------------------
AAA/Aaa ................................................. 33.4%
AA/Aa ................................................... 20.9
A/A ..................................................... 9.4
BBB/Baa ................................................. 30.4
BB/Ba ................................................... 2.2
NR (Not Rated) .......................................... 3.7
- --------------------------------------------------------------------------------
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.
20 MUNIVEST FUND, INC. FEBRUARY 29, 2004
Proxy Results
During the six-month period ended February 29, 2004, MuniVest Fund, Inc.'s
Common Stock shareholders voted on the following proposal. The proposal was
approved at a shareholders' meeting on January 30, 2004. 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 56,789,689 1,425,209
Cynthia A. Montgomery 56,768,569 1,446,329
Kevin A. Ryan 56,735,638 1,479,260
Roscoe S. Suddarth 56,744,263 1,470,635
Edward D. Zinbarg 56,742,144 1,472,754
- ----------------------------------------------------------------------------------------------------------------
During the six-month period ended February 29, 2004, MuniVest Fund, Inc.'s
Preferred Stock shareholders (Series A - E) voted on the following proposal. The
proposal was approved at a shareholders' meeting on January 30, 2004. 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: Ronald W. Forbes and Richard R. West 10,205 --
- ----------------------------------------------------------------------------------------------------------------
MUNIVEST FUND, INC. FEBRUARY 29, 2004 21
[LOGO] Merrill Lynch Investment Managers
Officers and Directors
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, 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
Phillip S. Gillespie, Secretary
- --------------------------------------------------------------------------------
Charles C. Reilly, Director of MuniVest Fund, Inc., has recently retired. The
Fund's Board of Directors wishes Mr. Reilly well in his retirement.
- --------------------------------------------------------------------------------
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
101 Barclay Street -- 7 West
New York, NY 10286
Amex Symbol
MVF
22 MUNIVEST FUND, INC. FEBRUARY 29, 2004
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 website
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, INC. FEBRUARY 29, 2004 23
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniVest Fund, 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 is exempt from Federal income taxes in the opinion of bond counsel to
the issuer.
This report, including the financial information herein, is transmitted to the
shareholders of MuniVest Fund, Inc. for their information. It is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock 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)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
MuniVest Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#10787 -- 2/04
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 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(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.
10(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 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(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, Inc.
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
MuniVest Fund, Inc.
Date: April 16, 2004
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 Fund, Inc.
Date: April 16, 2004
By: /s/ Donald C. Burke
-----------------------------
Donald C. Burke,
Chief Financial Officer of
MuniVest Fund, Inc.
Date: April 16, 2004