UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07478
Name of Fund: MuniVest Fund II, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, MuniVest Fund II, Inc., 800 Scudders Mill Road, Plainsboro, NJ
08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/06
Date of reporting period: 11/01/05 - 04/30/06
Item 1 - Report to Stockholders
Semi-Annual Report
April 30, 2006
MuniVest Fund II, Inc.
MuniVest Fund II, Inc.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined assets
under management as of March 31, 2006). The transaction is expected to close in
the third quarter of 2006, at which time the new company will operate under the
BlackRock name. The Fund's Board of Directors has approved a new investment
advisory agreement with BlackRock Advisors, Inc. or its successor ("BlackRock
Advisors") on substantially the same terms and for the same advisory fee as the
current investment advisory agreement with the Investment Adviser. If the new
agreement is approved by the Fund's shareholders, BlackRock Advisors is expected
to become the Fund's investment adviser upon the closing of the transaction
between Merrill Lynch and BlackRock.
Portfolio Information as of April 30, 2006
Percent of
Quality Ratings by Total
S&P/Moody's Investments
- --------------------------------------------------------------------------------
AAA/Aaa .............................................................. 18.4%
AA/Aa ................................................................ 16.0
A/A .................................................................. 20.9
BBB/Baa .............................................................. 19.8
BB/Ba ................................................................ 4.9
B/B .................................................................. 2.6
CCC/Caa .............................................................. 0.9
NR (Not Rated) ....................................................... 15.2
Other* ............................................................... 1.3
- --------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes.
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.
2 MUNIVEST FUND II, INC. APRIL 30, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager -- BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our investors.
MLIM is a leading investment management organization with over $576 billion in
assets under management globally and 2,757 employees in 17 countries. It offers
over 100 investment strategies in vehicles ranging from mutual funds to
institutional portfolios. BlackRock is one of the largest publicly traded
investment management firms in the United States with $463.1 billion in assets
under management and 1,839 employees. It manages assets on behalf of
institutional and individual investors worldwide through a variety of equity,
fixed income, liquidity and alternative investment products.
At the completion of the transaction, which is expected in the third quarter of
this year, the resultant firm will be a top-10 investment manager worldwide with
over $1 trillion in assets under management.* The combined company will provide
a wider selection of high-quality investment solutions across a range of asset
classes and investment styles. MLIM and BlackRock possess complementary
capabilities that together create a well-rounded organization uniting some of
the finest money managers in the industry. At the same time, the firms share
similar values and beliefs -- they are focused on delivering excellence on
behalf of clients, and both make investment performance their single most
important mission. In short, the merger only reinforces our commitment to
shareholders.
Most of MLIM's investment products -- including mutual funds, separately managed
accounts, annuities and variable insurance funds -- eventually will carry the
"BlackRock" name. As a shareholder in one or more MLIM-advised mutual funds, you
will receive a proxy package in the coming weeks in connection with this
transaction. After you receive this information, should you have any questions
or concerns, do not hesitate to contact your financial advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
MUNIVEST FUND II, INC. APRIL 30, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Fund maintained an above-average distribution rate throughout the
period, and our commitment to providing shareholders with attractive income
continues to drive portfolio activity.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields rose sharply during the six-month period ended April 30,
2006, with much of the increase occurring in March and April 2006. Bond prices,
which move opposite of yields, declined. Bond prices were pressured as investors
focused on solid economic growth, both globally and in the United States, and
renewed inflationary pressures deriving from rising commodity prices. First
quarter 2006 gross domestic product growth was recently estimated at 4.8%, well
above the 1.7% rate recorded in the fourth quarter of 2005.
The Federal Reserve Board (the Fed) continued to raise short-term interest rates
at each of its meetings during the period, bringing the federal funds target
rate to 4.75% at period-end, and to 5% on May 10. In response, the Treasury
curve continued to flatten, with short-term interest rates rising more than
longer-term interest rates. Over the past six months, 30-year U.S. Treasury bond
yields rose 41 basis points (.41%) to 5.17% and 10-year U.S. Treasury note
yields rose 50 basis points to 5.07%, the highest level since May 2002.
While the municipal yield curve also flattened during the period, the market's
strong technical position provided significant price support. This allowed
municipal bond prices to improve slightly or decline much less than those of
their taxable counterparts. As measured by Municipal Market Data, yields on
AAA-rated issues maturing in 30 years fell six basis points to 4.53%, while
yields on AAA-rated issues maturing in 10 years rose 16 basis points to 4.08%.
For the most part, the tax-exempt market's recent outperformance has been
fostered by a dramatic decline in new bond issuance so far in 2006. In 2005,
more than $408 billion in new long-term tax-exempt bonds was underwritten, a new
annual record and an increase of more than 13% compared to 2004. Over the past
six months, $170 billion in long-term municipal bonds was issued, a decline of
8.6% versus the same period a year earlier. The record new issuance in 2005 was
largely triggered by a 47% increase in refunding activity as issuers took
advantage of historically low bond yields and a flattening yield curve to
refinance outstanding higher-couponed debt. Year-to-date through April 2006,
refunding issuance declined more than 55% relative to the first four months of
2005. This decline already has led some analysts to reduce their forecasts for
2006 new issuance from the $350 billion - $370 billion range to the $300 billion
- - $325 billion range. Lower annual issuance would further solidify the
tax-exempt market's already positive technical position.
The tax-exempt market has continued to enjoy strong investor demand. As reported
by the Investment Company Institute, long-term municipal bond funds received net
new monies of $5.0 billion in 2005 -- a sharp reversal from the $3.7 billion
outflow in 2004. During the first quarter of 2006, tax-exempt mutual funds
received over $9.3 billion, slightly higher than the $8.9 billion inflow during
the same period in 2005. Recent statistics from AMG Data Services indicate that,
thus far in 2006, weekly cash flows into long-term municipal bond funds averaged
over $300 million, a significant improvement from the weekly average of $65
million in December 2005.
Looking ahead, the fundamentals for the tax-exempt bond market appear favorable,
and continued positive cash flows are anticipated. Given their attractive yields
relative to comparable U.S. Treasury bonds, and the prospects for reduced
issuance in 2006, we believe municipal bonds could enjoy solid results in the
coming months.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended April 30, 2006, the Common Stock of MuniVest Fund
II, Inc. had net annualized yields of 7.03% and 6.54%, based on a period-end per
share net asset value of $14.97 and a per share market price of $16.09,
respectively, and $.522 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +2.43%, based on a change
in per share net asset value from $15.13 to $14.97, and assuming reinvestment of
all distributions.
The Fund's total return, based on net asset value, lagged the +2.60% average
return of its comparable Lipper category of General Municipal Debt Funds
(Leveraged). (Funds in this Lipper category invest primarily in municipal debt
issues rated in the top four credit-rating categories. These funds can be
leveraged via use of debt, preferred equity and/or reverse repurchase
agreements.)
4 MUNIVEST FUND II, INC. APRIL 30, 2006
Fund performance benefited from our neutral interest rate exposure and the
strong performance of its lower-rated holdings, which continued to outpace the
broader market during the six-month period. These lower-rated securities also
greatly contributed to the Fund's attractive distribution yield. The modest
underperformance on a total return basis is largely attributable to the
portfolio's considerable exposure to the intermediate sector of the municipal
yield curve, an area that underperformed as the curve flattened. The Fund's
exposure to the intermediate sector primarily results from both its derivative
position and the natural maturation of the portfolio. That is, as time
progresses, many of the Fund's holdings are prerefunded to shorter call dates
while other issues become priced to shorter and shorter call dates, resulting in
the increased exposure to intermediate maturities. Nevertheless, we retained
many of these bonds in the portfolio, as they provide a meaningful income
benefit and their sale could result in material taxable gains as well as
declines in the Fund's dividend stream.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Given the aforementioned decline in new issuance during the past six months,
attractive trading opportunities have been limited. Portfolio activity has been
largely focused on the reinvestment of coupon income and the proceeds from bond
calls.
In terms of new purchases, we have recently targeted AA-rated and A-rated
revenue bonds, particularly in New York where new issuance trends have been
consistently stronger than national levels. The Fund's overall credit quality
profile remained essentially unchanged during the period, with more than 56% of
the portfolio's net assets rated A or higher at April month-end.
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 3.02% for Series A, 3.40% for
Series B, 3.01% for Series C and 3.01% for Series D. The Fed raised the
short-term interest rate target 100 basis points during the period, and this
continued to affect the Fund's borrowing costs. We would expect additional
increases in the cost of funds to be more limited as the Fed nears a pause in
its monetary tightening campaign. Despite interest rate increases during the
period, the tax-exempt yield curve maintained a positive slope, allowing us to
borrow at a lower rate than where we invest. This continued to generate an
income benefit to the holders of Common Stock from the leveraging of Preferred
Stock. However, should the spread between short-term and long-term interest
rates narrow, the benefits of leveraging will decline and, as a result, reduce
the yield on the Fund's Common Stock. At the end of the period, the Fund's
leverage amount, due to AMPS, was 36.72% of total net assets, before the
deduction of Preferred Stock. (For a more complete explanation of the benefits
and risks of leveraging, see page 6 of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We recently adopted a more positive stance on the municipal market. After 16
consecutive interest rate hikes, the Fed may be nearing a pause in its monetary
tightening campaign. We would expect the end of Fed tightening, combined with
modest economic growth and muted inflationary pressures, to promote a gradual
improvement in tax-exempt bond prices later this year, underpinning our more
constructive outlook. Conversely, we would view accelerated economic activity
and/or rising wage pressures as signals to return to a more defensive
positioning.
Overall, we intend to maintain the Fund's fully invested stance as we seek to
enhance shareholder income. Portfolio activity in the months ahead is likely to
be driven by our efforts to maintain the Fund's already attractive distribution
yield.
Fred K. Stuebe
Vice President and Portfolio Manager
May 12, 2006
MUNIVEST FUND II, INC. APRIL 30, 2006 5
The Benefits and Risks of Leveraging
MuniVest Fund II, Inc. utilizes leveraging to seek to enhance the yield and net
asset value of its Common Stock. However, these objectives cannot be achieved in
all interest rate environments. To leverage, the Fund issues Preferred Stock,
which pays dividends at prevailing short-term interest rates, and invests the
proceeds in long-term municipal bonds. The interest earned on these investments,
net of dividends to Preferred Stock, is paid to Common Stock shareholders in the
form of dividends, and the value of these portfolio holdings is reflected in the
per share net asset value of the Fund's Common Stock. However, in order to
benefit Common Stock shareholders, the yield curve must be positively sloped;
that is, short-term interest rates must be lower than long-term interest rates.
At the same time, a period of generally declining interest rates will benefit
Common Stock shareholders. If either of these conditions change, then the risks
of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value on the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in such securities. As of April 30, 2006, the percentage of the Fund's
total net assets invested in inverse floaters was 10.70%, before the deduction
of Preferred Stock.
Swap Agreements
The Fund may invest in swap agreements, which are over-the-counter contracts in
which one party agrees to make periodic payments based on the change in market
value of a specified bond, basket of bonds, or index in return for periodic
payments based on a fixed or variable interest rate or the change in market
value of a different bond, basket of bonds or index. Swap agreements may be used
to obtain exposure to a bond or market without owning or taking physical custody
of securities. Swap agreements involve the risk that the party with whom the
Fund has entered into the swap will default on its obligation to pay the Fund
and the risk that the Fund will not be able to meet its obligations to pay the
other party to the agreement.
6 MUNIVEST FUND II, INC. APRIL 30, 2006
Schedule of Investments (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================
Alabama--2.7%
$ 5,000 Huntsville, Alabama, Health Care Authority Revenue
Bonds, Series B, 5.75% due 6/01/2032 $ 5,243
2,900 Tuscaloosa, Alabama, Special Care Facilities Financing
Authority, Residential Care Facility Revenue Bonds
(Capstone Village, Inc. Project) Series A, 5.875%
due 8/01/2036 2,893
===============================================================================
Arizona--2.2%
1,000 Maricopa County, Arizona, IDA, Education Revenue
Bonds (Arizona Charter Schools Project 1), Series A,
6.75% due 7/01/2029 995
2,315 Maricopa County, Arizona, Tempe Elementary Unified
School District Number 3, GO, Refunding, 7.50%
due 7/01/2010 (d) 2,641
2,000 Pima County, Arizona, IDA, Education Revenue Bonds
(Arizona Charter Schools Project), Series C, 6.75%
due 7/01/2031 2,085
1,000 Pima County, Arizona, IDA, Education Revenue
Refunding Bonds (Arizona Charter Schools Project II),
Series A, 6.75% due 7/01/2021 1,054
===============================================================================
California--9.0%
2,500 Bay Area Toll Authority, California, Toll Bridge
Revenue Refunding Bonds (San Francisco Bay Area),
Series F, 5% due 4/01/2031 2,585
9,300 California State, GO, 5% due 2/01/2033 9,425
California State, Various Purpose, GO:
3,300 5.50% due 4/01/2028 3,570
4,145 5.50% due 4/01/2030 4,485
6,010 Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds,
Series A-3, 7.875% due 6/01/2042 7,153
===============================================================================
Colorado--3.8%
225 Colorado HFA, Revenue Refunding Bonds (S/F Program),
AMT, Senior Series A-2, 7.50% due 4/01/2031 233
Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee):
3,025 Series A, 7.35% due 9/01/2031 3,201
930 Series B, 7% due 9/01/2031 952
1,325 North Range, Colorado, Metropolitan District
Number 1, GO, 7.25% due 12/15/2031 1,420
Plaza Metropolitan District Number 1, Colorado, Tax
Allocation Revenue Bonds (Public Improvement Fees):
3,300 8% due 12/01/2025 3,623
820 8.125% due 12/01/2025 818
1,000 Southlands, Colorado, Medical District, GO
(Metropolitan District Number 1), 7% due 12/01/2024 1,094
===============================================================================
Connecticut--1.2%
1,165 Connecticut State Development Authority, Airport
Facility Revenue Bonds (LearJet Inc. Project), AMT,
7.95% due 4/01/2026 1,386
2,000 Mohegan Tribe Indians Gaming Authority, Connecticut,
Public Improvement Revenue Refunding Bonds
(Priority Distribution), 6.25% due 1/01/2031 2,132
===============================================================================
Delaware--0.3%
1,000 New Castle County, Delaware, PCR (General Motors
Corporation Project), VRDN, 7.875%
due 10/01/2008 (l) 1,000
===============================================================================
Florida--5.5%
Fiddlers Creek, Florida, Community Development
District Number 2, Special Assessment
Revenue Bonds:
2,350 Series A, 6.375% due 5/01/2035 2,485
1,250 Series B, 5.75% due 5/01/2013 1,298
4,000 Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds, Series A,
6.25% due 5/01/2037 4,360
1,280 Orange County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Adventist Health System),
5.625% due 11/15/2032 1,350
Orlando, Florida, Urban Community Development
District, Capital Improvement Special
Assessment Bonds:
1,135 6.25% due 5/01/2034 1,209
1,000 Series A, 6.95% due 5/01/2033 1,078
935 Park Place Community Development District, Florida,
Special Assessment Revenue Bonds, 6.75%
due 5/01/2032 993
935 Preserve at Wilderness Lake, Florida, Community
Development District, Capital Improvement Bonds,
Series A, 7.10% due 5/01/2033 1,016
925 Sarasota County, Florida, Public Hospital Board,
Hospital Revenue Bonds (Sarasota Memorial
Hospital), VRDN, Series A, 3.70%
due 7/01/2037 (b)(l) 925
2,000 West Villages Improvement District, Florida, Special
Assessment Revenue Bonds (Unit of Development
Number 3), 5.50% due 5/01/2037 2,008
===============================================================================
Georgia--5.8%
2,000 Atlanta, Georgia, Tax Allocation Bonds (Atlantic
Station Project), 7.90% due 12/01/2024 2,218
1,225 Brunswick & Glynn County, Georgia, Development
Authority, First Mortgage Revenue Bonds (Coastal
Community Retirement Corporation Project), Series A,
7.125% due 1/01/2025 1,240
Portfolio Abbreviations
To simplify the listings of MuniVest Fund II, Inc.'s portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list at right.
AMT Alternative Minimum Tax (subject to)
DRIVERS Derivative Inverse Tax-Exempt Receipts
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
MUNIVEST FUND II, INC. APRIL 30, 2006 7
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================
Georgia (concluded)
$ 1,075 Fulton County, Georgia, Development Authority, PCR
(General Motors Corporation), Refunding, VRDN, 8%
due 4/01/2010 (l) $ 1,075
2,000 Fulton County, Georgia, Residential Care Facilities,
Revenue Refunding Bonds (Canterbury Court Project),
Series A, 6.125% due 2/15/2026 2,078
Georgia Municipal Electric Authority, Power Revenue
Refunding Bonds:
5,620 Series W, 6.60% due 1/01/2018 6,471
380 Series W, 6.60% due 1/01/2018 (c) 439
1,250 Series X, 6.50% due 1/01/2020 1,453
Milledgeville-Baldwin County, Georgia, Development
Authority Revenue Bonds (Georgia College and State
University Foundation):
1,350 5.50% due 9/01/2024 1,403
1,000 5.625% due 9/01/2030 1,044
===============================================================================
Idaho--0.1%
285 Idaho Housing Agency, S/F Mortgage Revenue
Refunding Bonds, AMT, Series E-2, 6.90%
due 1/01/2027 286
===============================================================================
Illinois--14.1%
3,000 Chicago, Illinois, O'Hare International Airport,
Revenue Refunding Bonds, DRIVERS, AMT, Series 253,
7.343% due 1/01/2020 (i)(m) 3,393
4,000 Chicago, Illinois, O'Hare International Airport,
Special Facility Revenue Refunding Bonds (American
Airlines Inc. Project), 8.20% due 12/01/2024 4,016
235 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT,
Series C, 7% due 3/01/2032 (f)(g) 236
800 Chicago, Illinois, Special Assessment Bonds (Lake Shore
East), 6.75% due 12/01/2032 858
1,000 Chicago, Illinois, Tax Allocation Bonds (Kingsbury
Redevelopment Project), Series A, 6.57%
due 2/15/2013 1,042
2,800 Hodgkins, Illinois, Environmental Improvement Revenue
Bonds (Metro Biosolids Management LLC Project),
AMT, 6% due 11/01/2023 2,938
1,000 Illinois Development Finance Authority Revenue Bonds
(Community Rehabilitation Providers Facilities),
Series A, 6.50% due 7/01/2022 1,075
2,500 Illinois Development Finance Authority, Revenue
Refunding Bonds (Community Rehabilitation
Providers Facilities), Series A, 6% due 7/01/2015 2,555
415 Illinois HDA, Revenue Refunding Bonds (M/F Program),
Series 5, 6.75% due 9/01/2023 418
Illinois State Finance Authority Revenue Bonds,
Series A:
500 (Friendship Village of Schaumburg), 5.625%
due 2/15/2037 504
1,035 (Landing At Plymouth Place Project), 6%
due 5/15/2037 1,062
2,600 Kane and De Kalb Counties, Illinois, Community Unit
School District Number 302, GO, DRIVERS, Series 283,
7.373% due 2/01/2018 (d)(m) 3,107
2,000 McLean and Woodford Counties, Illinois, Community
Unit, School District Number 005, GO, Refunding,
6.375% due 12/01/2016 (h) 2,250
3,200 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax, Revenue Refunding Bonds,
DRIVERS, Series 269, 7.363% due 6/15/2023 (i)(m) 3,792
Regional Transportation Authority, Illinois,
Revenue Bonds:
1,500 Series A, 7.20% due 11/01/2020 (b) 1,831
7,000 Series A, 6.70% due 11/01/2021 (d) 8,481
2,500 Series C, 7.75% due 6/01/2020 (d) 3,341
1,580 Village of Wheeling, Illinois, Revenue Bonds (North
Milwaukee/Lake-Cook Tax Increment Financing (TIF)
Redevelopment Project), 6% due 1/01/2025 1,522
===============================================================================
Indiana--8.0%
1,650 Indiana Health and Educational Facilities Financing
Authority, Hospital Revenue Bonds (Clarian Health
Obligation), Series A, 5.25% due 2/15/2040 1,684
5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding
Bonds, Series A, 6.80% due 1/01/2017 (e) 5,568
Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A:
470 7.25% due 6/01/2009 (j) 530
1,530 7.25% due 6/01/2015 1,817
3,775 6.80% due 12/01/2016 4,427
8,750 Indianapolis, Indiana, Local Public Improvement Bond
Bank Revenue Refunding Bonds, Series D, 6.75%
due 2/01/2014 9,995
===============================================================================
Louisiana--9.3%
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) 5,537
8,260 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Franciscan Missionaries of Our Lady Health
System, Inc.), Series A, 5.25% due 8/15/2036 8,393
10,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project), 6.50%
due 1/01/2017 10,199
3,600 Sabine River Authority, Louisiana, Water Facilities
Revenue Refunding Bonds (International Paper
Company), 6.20% due 2/01/2025 3,833
===============================================================================
Maryland--1.6%
2,000 Maryland State Energy Financing Administration, Solid
Waste Disposal Revenue Bonds, Limited Obligation
(Wheelabrator Water Projects), AMT, 6.45%
due 12/01/2016 2,060
1,000 Maryland State Health and Higher Educational
Facilities Authority Revenue Bonds (University of
Maryland Medical System), Series B, 7%
due 7/01/2022 (d) 1,274
1,240 Montgomery County, Maryland, Special Obligation,
GO (West Germantown Development District),
Series A, 6.70% due 7/01/2027 (k) 1,396
===============================================================================
Massachusetts--4.9%
1,000 Massachusetts State College Building Authority,
Project Revenue Refunding Bonds, Senior Series A,
7.50% due 5/01/2011 1,161
1,250 Massachusetts State Development Finance Agency,
Revenue Refunding Bonds (Eastern Nazarene College),
5.625% due 4/01/2029 1,264
5,000 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, DRIVERS,
Series 1052, 6.323% due 8/15/2013 (h)(m) 5,360
6,000 Massachusetts State Water Resource Authority
Revenue Bonds, Series A, 6.50% due 7/15/2019 7,004
8 MUNIVEST FUND II, INC. APRIL 30, 2006
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================
Michigan--4.5%
$ 2,300 Delta County, Michigan, Economic Development
Corporation, Environmental Improvement Revenue
Refunding Bonds (Mead Westvaco-Escanaba),
Series A, 6.25% due 4/15/2012 (j) $ 2,587
3,100 Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A,
6% due 7/01/2020 (a) 3,323
4,320 Macomb County, Michigan, Hospital Finance Authority,
Hospital Revenue Bonds (Mount Clemens General
Hospital), Series B, 5.875% due 11/15/2034 4,548
3,000 Pontiac, Michigan, Tax Increment Finance Authority,
Revenue Refunding Bonds (Development Area
Number 3), 6.375% due 6/01/2031 3,200
===============================================================================
Mississippi--5.9%
5,850 Lowndes County, Mississippi, Solid Waste Disposal and
PCR, Refunding (Weyerhaeuser Company Project),
Series A, 6.80% due 4/01/2022 7,000
Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources
Inc. Project):
7,200 5.875% due 4/01/2022 7,259
3,465 5.90% due 5/01/2022 3,495
===============================================================================
Missouri--0.0%
145 Missouri State Housing Development Commission, S/F
Mortgage Revenue Bonds (Homeowner Loan), AMT,
Series A, 7.50% due 3/01/2031 (g) 153
===============================================================================
Nebraska--0.3%
Nebraska Investment Finance Authority, S/F Housing
Revenue Bonds, AMT (g):
470 Series C, 6.30% due 9/01/2028 (f) 473
540 Series D, 6.45% due 3/01/2028 550
===============================================================================
Nevada--1.1%
620 Clark County, Nevada, Improvement District Number
142, Special Assessment Bonds, 6.375%
due 8/01/2023 641
50 Nevada Housing Division Revenue Bonds (S/F Program),
AMT, Senior Series E, 7% due 10/01/2019 (e) 50
2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds
(Sierra Pacific Power Company), AMT, 6.65%
due 12/01/2017 (b) 2,506
===============================================================================
New Jersey--9.0%
4,250 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50%
due 6/15/2024 4,402
New Jersey EDA, Retirement Community Revenue
Bonds (Cedar Crest Village Inc. Facility), Series A:
1,335 7.25% due 11/15/2021 1,452
1,100 7.25% due 11/15/2031 1,186
New Jersey EDA, School Facilities Construction
Revenue Bonds:
7,155 Series O, 5.125% due 3/01/2028 7,425
1,325 Series P, 5.25% due 9/01/2026 1,402
3,000 New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT, 6.25%
due 9/15/2029 2,924
1,680 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (Pascack Valley Hospital Association),
6.625% due 7/01/2036 1,728
5,785 Tobacco Settlement Financing Corporation of New
Jersey, Asset-Backed Revenue Bonds, 7%
due 6/01/2041 6,546
===============================================================================
New Mexico--1.1%
3,160 Farmington, New Mexico, PCR, Refunding (Tucson
Electric Power Company--San Juan Project),
Series A, 6.95% due 10/01/2020 3,300
===============================================================================
New York--20.1%
3,750 Long Island Power Authority, New York, Electric
System Revenue Refunding Bonds, Series B, 5%
due 12/01/2035 3,836
4,000 Metropolitan Transportation Authority, New York,
Revenue Refunding Bonds, Series A, 5.125%
due 11/15/2031 4,142
3,650 Metropolitan Transportation Authority, New York,
Transportation Revenue Refunding Bonds, Series F,
5% due 11/15/2030 3,736
New York City, New York, City IDA, Civic Facility
Revenue Bonds:
690 Series C, 6.80% due 6/01/2028 739
890 (Special Needs Facility Pooled Program),
Series C-1, 6.50% due 7/01/2017 926
1,920 New York City, New York, City IDA, Special Facility
Revenue Bonds (British Airways Plc Project), AMT,
7.625% due 12/01/2032 2,083
6,500 New York City, New York, City Municipal Financing
Authority, Water and Sewer Systems Revenue Bonds,
Series B, 5% due 6/15/2036 6,682
3,375 New York City, New York, City Transitional Finance
Authority Revenue Bonds, RIB, Series 283, 8.40%
due 11/15/2018 (m) 4,075
New York City, New York, GO:
3,500 Series F, 5.25% due 1/15/2033 3,642
6,245 Sub-Series I-1, 5% due 4/01/2025 6,427
New York City, New York, GO, Refunding, Series A (d):
490 6.375% due 5/15/2010 (j) 543
40 6.375% due 5/15/2015 44
10,680 New York Liberty Development Corporation, Revenue
Bonds (Goldman Sachs Headquarters), 5.25%
due 10/01/2035 11,521
7,000 New York State Dormitory Authority, Revenue
Refunding Bonds, RIB, Series 305, 7.90%
due 5/15/2015 (i)(m) 8,301
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 1,031
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 2,857
===============================================================================
North Carolina--1.6%
1,675 Gaston County, North Carolina, Industrial Facilities
and Pollution Control Financing Authority, Revenue
Bonds (National Gypsum Company Project), AMT, 5.75%
due 8/01/2035 1,751
1,400 Haywood County, North Carolina, Industrial Facilities
and Pollution Control Financing Authority Revenue
Bonds (Champion International Corporation Project),
AMT, 6.25% due 9/01/2025 1,428
1,500 North Carolina Medical Care Commission, Retirement
Facilities, First Mortgage Revenue Bonds (Givens
Estates Project), Series A, 6.375% due 7/01/2023 1,601
===============================================================================
Oklahoma--0.5%
1,600 Norman, Oklahoma, Regional Hospital Authority,
Hospital Revenue Bonds, 5.375% due 9/01/2029 1,602
MUNIVEST FUND II, INC. APRIL 30, 2006 9
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================
Pennsylvania--5.8%
$ 1,235 Allegheny County, Pennsylvania, IDA, Environmental
Improvement Revenue Refunding Bonds, 5.50%
due 11/01/2016 $ 1,278
880 Bucks County, Pennsylvania, IDA, Retirement
Community Revenue Bonds (Ann's Choice Inc.),
Series A, 6.125% due 1/01/2025 908
2,000 Delaware River Port Authority of Pennsylvania and
New Jersey Revenue Bonds, RIB, Series 396, 7.903%
due 1/01/2019 (h)(m) 2,285
Montgomery County, Pennsylvania, IDA, Revenue
Bonds (Whitemarsh Continuing Care Project):
470 6.125% due 2/01/2028 495
1,090 6.25% due 2/01/2035 1,152
2,000 Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds (National
Gypsum Company), AMT, Series B, 6.125%
due 11/01/2027 2,106
1,250 Pennsylvania State Higher Educational Facilities
Authority Revenue Bonds (University of Pennsylvania
Medical Center Health System), Series A, 6%
due 1/15/2031 1,349
1,265 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development, 7.75% due 12/01/2017 1,280
Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Bonds (Guthrie Healthcare System), Series B:
2,425 5.85% due 12/01/2020 2,589
3,350 7.125% due 12/01/2031 3,923
===============================================================================
Rhode Island--0.4%
1,140 Rhode Island State Health and Educational Building
Corporation, Hospital Financing Revenue Bonds
(Lifespan Obligation Group), 6.50%
due 8/15/2012 (j) 1,300
===============================================================================
South Carolina--1.5%
1,200 Lexington County, South Carolina, Health Services
District Inc., Hospital Revenue Bonds (Lexington
Medical Center), 5.50% due 5/01/2032 1,241
1,500 Lexington County, South Carolina, Health Services
District Inc., Hospital Revenue Refunding and
Improvement Bonds, 5.50% due 11/01/2032 1,550
1,230 Medical University Hospital Authority, South Carolina,
Hospital Facilities Revenue Refunding Bonds, 6.50%
due 8/15/2012 (j) 1,407
195 South Carolina Housing Finance and Development
Authority, Mortgage Revenue Bonds, AMT, Series A,
6.70% due 7/01/2027 198
===============================================================================
Tennessee--3.6%
1,000 Johnson City, Tennessee, Health and Educational
Facilities Board, Retirement Facility Revenue Bonds
(Appalachian Christian Village Project), Series A,
6% due 2/15/2024 1,009
4,000 McMinn County, Tennessee, IDB, Solid Waste Revenue
Bonds (Recycling Facility--Calhoun Newsprint),
AMT, 7.40% due 12/01/2022 4,011
5,000 Shelby County, Tennessee, Health, Educational and
Housing Facility Board, Hospital Revenue Refunding
Bonds (Methodist Healthcare) 6.50%
due 9/01/2012 (j) 5,725
===============================================================================
Texas--18.0%
Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), First Tier, Series A:
1,600 6.70% due 1/01/2028 1,701
4,510 6.70% due 1/01/2032 4,758
Brazos River Authority, Texas, PCR, Refunding, AMT:
1,500 (Texas Utility Company), Series A, 7.70%
due 4/01/2033 1,753
6,805 (Utilities Electric Company), Series B, 5.05%
due 6/01/2030 6,811
1,810 Brazos River Authority, Texas, Revenue Refunding
Bonds (Reliant Energy Inc. Project), Series B, 7.75%
due 12/01/2018 1,962
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 6,464
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 2,554
3,300 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Texas
Children's Hospital), VRDN, Series B-1, 3.82%
due 10/01/2029 (i)(l) 3,300
5,000 Harris County, Texas, Health Facilities Development
Corporation, Revenue Refunding Bonds, DRIVERS,
Series 1018, 7.368% due 7/01/2010 (m) 6,643
3,440 Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (Reliant Energy Inc.),
Series C, 8% due 5/01/2029 3,698
3,060 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 8.25%
due 11/01/2031 3,204
Port Corpus Christi, Texas, Revenue Refunding Bonds
(Celanese Project):
2,500 AMT, Series B, 6.70% due 11/01/2030 2,682
800 Series A, 6.45% due 11/01/2030 848
3,670 Sabine River Authority, Texas, PCR, Refunding
(TXU Electric Company Project/TXU Energy Company
LLC), Series C, 5.20% due 5/01/2028 3,736
3,750 San Antonio, Texas, Electric and Gas Revenue Bonds,
RIB, Series 469X, 7.43% due 2/01/2014 (m) 4,273
===============================================================================
Virginia--2.8%
1,000 Chesterfield County, Virginia, IDA, PCR, Refunding
(Virginia Electric and Power Company), Series B,
5.875% due 6/01/2017 1,081
7,215 Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds, Senior Series A, 5.50%
due 8/15/2028 7,350
===============================================================================
Washington--7.6%
2,425 Chelan County, Washington, Public Utility District
Number 001, Consolidated Revenue Refunding
Bonds (Chelan Hydro System), AMT, Series D, 6.35%
due 7/01/2028 (i) 2,539
===============================================================================
10 MUNIVEST FUND II, INC. APRIL 30, 2006
Schedule of Investments (concluded) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================
Washington (concluded)
Energy Northwest, Washington, Electric Revenue
Refunding Bonds, DRIVERS (m):
$ 2,250 Series 248, 7.373% due 7/01/2018 (i) $ 2,652
1,125 Series 255, 7.871% due 7/01/2018 (b) 1,359
5,000 Washington State, GO, Trust Receipts, Class R,
Series 6, 7.869% due 1/01/2014 (h)(m) 5,762
2,200 Washington State Health Care Facilities Authority
Revenue Bonds (Kadlec Medical Center), 6%
due 12/01/2030 (k) 2,356
Washington State Public Power Supply System
Revenue Refunding Bonds, Series B:
5,000 (Nuclear Project Number 1), 7.125%
due 7/01/2016 6,087
1,900 (Nuclear Project Number 3), 7.125%
due 7/01/2016 (i) 2,322
===============================================================================
Wisconsin--1.5%
1,995 Badger Tobacco Asset Securitization Corporation,
Wisconsin, Asset-Backed Revenue Bonds, 6.125%
due 6/01/2027 2,105
2,215 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Synergyhealth Inc.), 6%
due 11/15/2032 2,369
===============================================================================
U.S. Virgin Islands--2.2%
6,000 Virgin Islands Government Refinery Facilities, Revenue
Refunding Bonds (Hovensa Coker Project), AMT,
6.50% due 7/01/2021 6,740
===============================================================================
Total Investments (Cost--$441,267*)--156.0% 470,372
Other Assets Less Liabilities--2.1% 6,318
Preferred Stock, at Redemption Value--(58.1%) (175,158)
---------
Net Assets Applicable to Common Stock--100.0% $ 301,532
=========
- -------------------------------------------------------------------------------
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ............................................. $ 441,060
=========
Gross unrealized appreciation .............................. $ 30,436
Gross unrealized depreciation .............................. (1,124)
---------
Net unrealized appreciation ................................ $ 29,312
=========
(a) ACA Insured.
(b) AMBAC Insured.
(c) Escrowed to maturity.
(d) FGIC Insured.
(e) FHA Insured.
(f) FHLMC Collateralized.
(g) FNMA/GNMA Collateralized.
(h) FSA Insured.
(i) MBIA Insured.
(j) Prerefunded.
(k) Radian Insured.
(l) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(m) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
o Forward interest rate swaps outstanding as of April 30, 2006 were as
follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
--------------------------------------------------------------------------
Pay a fixed rate of 4.416% and receive a floating
rate based on 1-week Bond Market Association rate
Broker, JPMorgan Chase Bank
Expires July 2026 $11,900 $(73)
--------------------------------------------------------------------------
o Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax Exempt Fund -- $3
--------------------------------------------------------------------------
See Notes to Financial Statements.
MUNIVEST FUND II, INC. APRIL 30, 2006 11
Statement of Net Assets
As of April 30, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost--$441,267,119) ............ $470,372,398
Cash ........................................................................................ 79,955
Receivables:
Interest ................................................................................. $ 8,769,267
Securities sold .......................................................................... 335,000 9,104,267
------------
Prepaid expenses ............................................................................ 9,293
------------
Total assets ................................................................................ 479,565,913
------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward interest rate swaps ...................................... 72,971
Payables:
Securities purchased ..................................................................... 2,597,033
Investment adviser ....................................................................... 182,801
Other affiliates ......................................................................... 5,845 2,785,679
------------
Accrued expenses and other liabilities ...................................................... 17,604
------------
Total liabilities ........................................................................... 2,876,254
------------
===================================================================================================================================
Preferred Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.05 per share (1,800 Series A Shares,
1,800 Series B Shares, 1,800 Series C Shares) and $.10 per share (1,600 Series D Shares)
of AMPS* authorized, issued and outstanding at $25,000 per share liquidation preference ... 175,157,826
------------
===================================================================================================================================
Net Assets Applicable to Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ....................................................... $301,531,833
============
===================================================================================================================================
Analysis of Net Assets Applicable to Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share (20,136,292 shares issued and outstanding) ........... $ 2,013,629
Paid-in capital in excess of par ............................................................ 280,481,690
Undistributed investment income--net ........................................................ $ 3,703,400
Accumulated realized capital losses--net .................................................... (13,699,194)
Unrealized appreciation--net ................................................................ 29,032,308
------------
Total accumulated earnings--net ............................................................. 19,036,514
------------
Total--Equivalent to $14.97 net asset value per share of Common Stock (market price--$16.09) $301,531,833
============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 MUNIVEST FUND II, INC. APRIL 30, 2006
Statement of Operations
For the Six Months Ended April 30, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Interest .................................................................................... $ 13,356,076
Dividends from affiliates ................................................................... 3,497
------------
Total income ................................................................................ 13,359,573
------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .................................................................... $ 1,189,173
Commission fees ............................................................................. 220,226
Accounting services ......................................................................... 80,514
Transfer agent fees ......................................................................... 39,875
Professional fees ........................................................................... 26,705
Printing and shareholder reports ............................................................ 22,129
Directors' fees and expenses ................................................................ 16,260
Custodian fees .............................................................................. 13,634
Pricing fees ................................................................................ 12,365
Listing fees ................................................................................ 8,483
Other ....................................................................................... 30,235
------------
Total expenses before reimbursement ......................................................... 1,659,599
Reimbursement of expenses ................................................................... (250)
------------
Total expenses after reimbursement .......................................................... 1,659,349
------------
Investment income--net ...................................................................... 11,700,224
------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ......................................................................... 2,522,205
Forward interest rate swaps--net ......................................................... (187,676) 2,334,529
------------
Change in unrealized appreciation/depreciation on:
Investments--net ......................................................................... (3,805,620)
Forward interest rate swaps--net ......................................................... (72,971) (3,878,591)
-----------------------------
Total realized and unrealized loss--net ..................................................... (1,544,062)
------------
===================================================================================================================================
Dividends to Preferred Stock Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................................... (2,699,108)
------------
Net Increase in Net Assets Resulting from Operations ........................................ $ 7,457,054
============
See Notes to Financial Statements
MUNIVEST FUND II, INC. APRIL 30, 2006 13
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................................... $ 11,700,224 $ 23,757,955
Realized gain--net .......................................................................... 2,334,529 3,234,915
Change in unrealized appreciation/depreciation--net ......................................... (3,878,591) (2,571,853)
Dividends to Preferred Stock shareholders ................................................... (2,699,108) (3,494,922)
-----------------------------
Net increase in net assets resulting from operations ........................................ 7,457,054 20,926,095
-----------------------------
===================================================================================================================================
Dividends to Common Stock Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................................... (10,612,134) (22,075,616)
-----------------------------
Net decrease in net assets resulting from dividends to Common Stock shareholders ............ (10,612,134) (22,075,616)
-----------------------------
===================================================================================================================================
Stock Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends ............ 985,449 1,950,702
Offering and underwriting costs resulting from the issuance of Preferred Stock .............. -- (548,100)
-----------------------------
Net increase in net assets resulting from stock transactions ................................ 985,449 1,402,602
-----------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock .......................... (2,169,631) 253,081
Beginning of period ......................................................................... 303,701,464 303,448,383
-----------------------------
End of period* .............................................................................. $301,531,833 $303,701,464
=============================
* Undistributed investment income--net .................................................... $ 3,703,400 $ 5,314,418
=============================
See Notes to Financial Statements.
14 MUNIVEST FUND II, INC. APRIL 30, 2006
Financial Highlights
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................ $15.13 $15.21 $14.76 $14.16 $14.29
-------------------------------------------------------
Investment income--net .......................................... .58+ 1.19+ 1.17+ 1.17+ 1.11
Realized and unrealized gain (loss)--net ........................ (.08) .04 .44 .49 (.25)
Dividends to Preferred Stock shareholders from investment
income--net ................................................... (.13) (.18) (.07) (.07) (.09)
-------------------------------------------------------
Total from investment operations ................................ .37 1.05 1.54 1.59 .77
-------------------------------------------------------
Less dividends to Common Stock shareholders from investment
income--net ................................................... (.53) (1.10) (1.09) (.99) (.90)
-------------------------------------------------------
Offering and underwriting costs resulting from the issuance
of Preferred Stock ............................................ -- (.03) -- -- --
-------------------------------------------------------
Net asset value, end of period .................................. $14.97 $15.13 $15.21 $14.76 $14.16
=======================================================
Market price per share, end of period ........................... $16.09 $15.40 $15.15 $14.26 $13.36
=======================================================
==================================================================================================================================
Total Investment Return***
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............................. 2.43%@ 6.88% 10.94% 11.88% 5.86%
=======================================================
Based on market price per share ................................. 8.16%@ 9.21% 14.38% 14.56% 4.25%
=======================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net reimbursement** ............................. 1.10%* 1.07% .99% 1.01% 1.05%
=======================================================
Total expenses** ................................................ 1.10%* 1.07% .99% 1.01% 1.05%
=======================================================
Total investment income--net** .................................. 7.75%* 7.76% 7.86% 8.01% 7.79%
=======================================================
Amount of dividends to Preferred Stock shareholders ............. 1.79%* 1.14% .46% .46% .66%
=======================================================
Investment income--net, to Common Stock shareholders ............ 5.96%* 6.62% 7.40% 7.55% 7.13%
=======================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ....................... 3.11%* 2.09% 1.02% .98% 1.38%
=======================================================
MUNIVEST FUND II, INC. APRIL 30, 2006 15
Financial Highlights (concluded)
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, ------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period (in thousands) $301,532 $303,701 $303,448 $293,753 $281,830
=====================================================
Preferred Stock outstanding, end of period (in thousands) ......... $175,000 $175,000 $135,000 $135,000 $135,000
=====================================================
Portfolio turnover ................................................ 34.31% 74.96% 22.39% 31.50% 66.07%
=====================================================
==================================================================================================================================
Leverage
- ----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ......................................... $ 2,723 $ 2,735 $ 3,248 $ 3,176 $ 3,088
=====================================================
==================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
- ----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net .................................. $ 374 $ 527 $ 262 $ 251 $ 338
=====================================================
Series B--Investment income--net .................................. $ 421 $ 503 $ 234 $ 248 $ 319
=====================================================
Series C--Investment income--net .................................. $ 373 $ 512 $ 268 $ 240 $ 375
=====================================================
Series D--Investment income--net .................................. $ 373 $ 450@@ -- -- --
=====================================================
* Annualized.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
*** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the
effect of sales charges.
+ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Series D was issued on January 14, 2005.
See Notes to Financial Statements.
16 MUNIVEST FUND II, INC. APRIL 30, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
MuniVest Fund II, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management investment
company. The Fund's financial statements are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to present a fair statement of the
results for the interim period. All such adjustments are of a normal, recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Stock on a daily basis. The Fund's Common Stock shares are
listed on the New York Stock Exchange under the symbol MVT. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the general direction
of the Board of Directors. Such valuations and procedures are reviewed
periodically by the Board of Directors of the Fund. Financial futures contracts
and options thereon, which are traded on exchanges, are valued at their closing
prices as of the close of such exchanges. Options written or purchased are
valued at the last sale price in the case of exchange-traded options. In the
case of options traded in the OTC market, valuation is the last asked price
(options written) or the last bid price (options purchased). Swap agreements are
valued by quoted fair values received daily by the Fund's pricing service.
Short-term investments with a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market value, under which method the
investment is valued at cost and any premium or discount is amortized on a
straight line basis to maturity. Investments in open-end investment companies
are valued at their net asset value each business day. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Directors of the Fund.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by
the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are recorded by the
Fund as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed.
o Options -- The Fund may write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked-to-market to reflect
the current market value of the option written. When a security is
purchased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the
security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent
of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
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.
MUNIVEST FUND II, INC. APRIL 30, 2006 17
Notes to Financial Statements (continued)
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(f) Offering costs -- Direct expenses relating to the public offering of the
Fund's Preferred Stock were charged to capital at the time of issuance of the
shares.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. The Investment Adviser has agreed
to reimburse its management fee by the amount of the management fees the Fund
pays to FAM indirectly through its investment in Merrill Lynch Institutional
Tax-Exempt Fund. For the six months ended April 30, 2006, FAM reimbursed the
Fund in the amount of $250.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an
affiliate of FAM, received $1,000 in commissions on the execution of portfolio
security transactions for the Fund for the six months ended April 30, 2006.
For the six months ended April 30, 2006, the Fund reimbursed FAM $5,098 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 2006 were $160,657,088 and $161,610,110, respectively.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of stock, including Preferred
Stock, par value $.10 per share, all of which were initially classified as
Common Stock. The Board of Directors is authorized, however, to reclassify any
unissued shares of stock without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended April 30, 2006 and the
year ended October 31, 2005 increased by 64,795 and 126,778 as a result of
dividend reinvestment, respectively.
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Fund, with a
par value of $.05 per share on Series A Shares, Series B Shares and Series C
Shares, and $.10 per share on Series D Shares. In addition, there is a
liquidation preference of $25,000 per share, plus accrued and unpaid dividends,
that entitle their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yields in effect at April 30, 2006
were as follows: Series A, 3.20%; Series B, 3.37%; Series C, 3.33%; and Series
D, 3.75%.
18 MUNIVEST FUND II, INC. APRIL 30, 2006
Notes to Financial Statements (concluded)
Shares issued and outstanding during the six months ended April 30, 2006
remained constant. Shares issued and outstanding during the year ended October
31, 2005 increased by 1,600 shares from the issuance of an additional series of
Preferred Stock.
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, 2006, MLPF&S earned $119,678 as
commissions.
5. Capital Loss Carryforward:
On October 31, 2005, the Fund had a net capital loss carryforward of
$12,488,454, of which $3,730,020 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 $.086000 per share on May 30, 2006 to shareholders of record on May
15, 2006.
MUNIVEST FUND II, INC. APRIL 30, 2006 19
Proxy Results
During the six-month period ended April 30, 2006, MuniVest Fund II, Inc.'s
Common Stock shareholders voted on the following proposals. Proposal 1 was
approved at a shareholders' meeting on January 26, 2006. With respect to
Proposal 2, the proposal was adjourned until February 16, 2006, at which time it
was approved. A description of each proposal and number of shares voted are as
follows:
- -----------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -----------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 19,227,676 283,828
Cynthia A. Montgomery 19,219,901 291,603
Jean Margo Reid 19,234,278 277,226
Roscoe S. Suddarth 19,201,127 310,377
Edward D. Zinbarg 19,207,565 303,939
- -----------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -----------------------------------------------------------------------------------------------------------
2. To approve an amendment to Fundamental
Investment Restriction. 10,164,818 247,193 285,209
- -----------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2006, MuniVest Fund II, Inc.'s
Preferred Stock (Series A - F) shareholders voted on the following proposals.
Proposal 1 was approved at a shareholders' meeting on January 26, 2006. With
respect to Proposal 2, the proposal was adjourned until February 16, 2006, at
which time it was approved. A description of each proposal and number of shares
voted are as follows:
- -----------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -----------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr. 6,630 43
Ronald W. Forbes 6,630 43
Cynthia A. Montgomery 6,630 43
Jean Margo Reid 6,630 43
Roscoe S. Suddarth 6,628 45
Richard R. West 6,630 43
Edward D. Zinbarg 6,630 43
- -----------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -----------------------------------------------------------------------------------------------------------
2. To approve an amendment to Fundamental
Investment Restriction. 5,994 199 158
- -----------------------------------------------------------------------------------------------------------
20 MUNIVEST FUND II, INC. APRIL 30, 2006
Officers and Directors
Robert C. Doll, Jr., President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Jean Margo Reid, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Donald C. Burke, Vice President and Treasurer
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Fred K. Stuebe, Vice President
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MVT
MUNIVEST FUND II, INC. APRIL 30, 2006 21
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
22 MUNIVEST FUND II, INC. APRIL 30, 2006
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
- --------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
MuniVest Fund II, Inc. seeks to provide shareholders with as high a level of
current income exempt from federal income taxes as is consistent with its
investment policies and prudent investment management by investing primarily in
a portfolio of long-term, investment grade municipal obligations the interest on
which, in the opinion of bond counsel to the issuer, is exempt from federal
income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniVest Fund II, Inc. for their information. It is not a
prospectus. Past performance results shown in this report should not be
considered a representation of future performance. The Fund has leveraged its
Common Stock and intends to remain leveraged by issuing Preferred Stock to
provide the Common Stock shareholders with a potentially higher rate of return.
Leverage creates risks for Common Stock shareholders, including the likelihood
of greater volatility of net asset value and market price of shares of the
Common Stock, and the risk that fluctuations in the short-term dividend rates of
the Preferred Stock may affect the yield to Common Stock shareholders.
Statements and other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniVest Fund II, Inc.
Box 9011
Princeton, NJ 08543-9011
#16807 -- 4/06
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MuniVest Fund II, Inc.
By: /s/ Robert C. Doll, Jr.
------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniVest Fund II, Inc.
Date: June 22, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniVest Fund II, Inc.
Date: June 22, 2006
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniVest Fund II, Inc.
Date: June 22, 2006