UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07478
Name of Fund: BlackRock 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, BlackRock 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 - 10/31/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock
MuniVest Fund II, Inc. BLACKROCK
ANNUAL REPORT | OCTOBER 31, 2006
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock MuniVest Fund II, Inc.
Portfolio Information as of October 31, 2006
Percent of
Quality Ratings by Total
S&P/Moody's Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 27.0%
AA/Aa ................................................... 11.4
A/A ..................................................... 22.5
BBB/Baa ................................................. 17.1
BB/Ba ................................................... 2.2
B/B ..................................................... 2.4
CCC/Caa ................................................. 0.8
NR (Not Rated) .......................................... 15.2
Other* .................................................. 1.4
--------------------------------------------------------------------------------
* 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.
Announcement of Annual Stockholders Meeting
The Fund has determined that its annual stockholders meeting originally
scheduled to be held in April 2007 will be postponed until and will be held in
June 2007. Proposals of stockholders intended to be presented at the meeting
must be received by the Fund by February 15, 2007 for inclusion in the Fund's
proxy statement and form of proxy for that meeting. The persons named as proxies
in the proxy materials for the Fund's 2007 annual meeting of stockholders may
exercise discretionary authority with respect to any stockholder proposal
presented at such meeting if written notice of such proposal has not been
received by the Fund by April 1, 2007. Written proposals and notices should be
sent to the Secretary of the Fund, 800 Scudders Mill Road, Plainsboro, New
Jersey 08536.
2 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
A Letter to Shareholders
Dear Shareholder
Ten months into 2006, we are able to say it has been an interesting year for
investors. After a volatile start and far-reaching mid-year correction, the
financial markets regained some positive momentum through late summer and fall.
For the six- and 12-month periods ended October 31, 2006, most major market
indexes managed to post positive returns:
Total Returns as of October 31, 2006 6-month 12-month
==========================================================================================
U.S. equities (Standard & Poor's 500 Index) +6.11% +16.34%
------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) +0.90 +19.98
------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +3.77 +27.52
------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) +4.60 + 5.19
------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +4.12 + 5.75
------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse High Yield Index) +4.66 +10.29
------------------------------------------------------------------------------------------
The Federal Reserve Board (the Fed), after raising the target short-term
interest rate 17 times between June 2004 and June 2006, finally opted to pause
on August 8, 2006. This left the federal funds rate at 5.25%, where it remained
through the September and October Fed meetings. In interrupting its two-year
rate-hiking campaign, the Fed acknowledged that economic growth is slowing, led
by softness in the housing market. However, the central bankers continue to take
a cautionary position on inflation, despite a decline in energy prices in recent
months. At the time of this writing, the price of oil had settled into the
$60-per-barrel range after reaching nearly $78 per barrel earlier in the year.
Notwithstanding the mid-year correction, equity markets generally found support
in solid corporate earnings reports in the first three quarters of the year.
Overall corporate health, including strong company balance sheets, helped to
sustain robust dividend-distribution, share-buyback and merger-and-acquisition
activity. Many international equity markets fared equally well or better, thanks
in part to higher economic growth rates and low inflation.
In the U.S. bond market, prices declined for much of the year as investors
focused on decent economic activity and inflation concerns. Bond prices began to
improve in late June as the economy showed signs of weakening and inflation
pressures subsided. Notably, the Treasury curve inverted periodically, a
phenomenon typically associated with periods of economic weakness. At the end of
October, the one-month Treasury bill offered the highest yield on the curve at
5.18%, while the 30-year Treasury bond had a yield of 4.72%.
Amid the uncertainty inherent in the financial markets, we encourage you to
review your goals periodically with your financial professional and to make
portfolio changes, as needed. For additional insight and timely "food for
thought" for investors, we also invite you to visit Shareholder magazine at
www.blackrock.com/shareholdermagazine. We are pleased to make our
investor-friendly magazine available to you online. We thank you for trusting
BlackRock with your investment assets, and we look forward to continuing to
serve your investment needs.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Fund's relatively neutral interest rate position and adequate exposure
to lower-rated, higher-yielding issues allowed it to continue distributing one
of the highest dividend yields among its peers.
Describe the recent market environment relative to municipal bonds.
Supported by a positive technical backdrop, municipal bonds managed to
significantly outperform their taxable counterparts for the 12-month period
ended October 31, 2006. Despite considerable volatility, taxable bond yields
were little changed over the past year. Tax-exempt bonds, in the meantime, saw
their yields decline (as prices, which move opposite of yields, rose).
For much of the first half of the fiscal period, longer-maturity U.S. Treasury
bond yields rose (and prices declined) as investors focused on strong U.S.
economic activity and inflationary concerns triggered by rising oil prices. By
mid-May 2006, the yield on 30-year U.S. Treasury bonds had risen more than 70
basis points (.70%) to 5.31%. Bond prices began to improve in late June as
economic activity weakened and inflationary pressures subsided. Bond price
improvement accelerated after the Federal Reserve Board (the Fed) refrained from
raising the target interest rate at its August 8 meeting, a move that occurred
after 17 consecutive interest rate hikes since June 2004. Recent declines in oil
prices, especially gasoline, helped to reverse earlier inflationary concerns and
support higher bond prices. Over the 12-month period, 30-year U.S. Treasury bond
yields fell four basis points to 4.72%, while 10-year Treasury yields rose four
basis points to 4.61%.
Meanwhile, the municipal bond market found support in declining new-issue volume
and increasing investor demand. As reported by Municipal Market Data, yields on
AAA-rated municipal issues maturing in 30 years declined 52 basis points to
4.07% over the past 12 months. Shorter maturities experienced smaller yield
declines, with yields on AAA-rated municipal issues maturing in 10 years falling
28 basis points to 3.64%.
Demand for municipal product by retail and institutional investors has remained
very strong despite the recent decline in bond yields. The strong demand is
reflected in continued flows into long-term, tax-exempt mutual funds. As
reported by the Investment Company Institute, long-term municipal bond funds saw
net new cash inflows of more than $1.3 billion during September 2006, a material
increase from $344 million in July and $283 million in June. During the first
nine months of 2006, long-term tax-exempt bond funds had net new cash flows of
over $9.6 billion, a 43% increase compared to the same period a year earlier.
Recent weekly fund flows, reported by AMG Data, averaged $416 million in October
2006, well above the July average of $247 million and the year-to-date weekly
average of $315 million.
Also supporting municipal bond price improvement has been a decline in new
issuance. In the first 10 months of 2006, more than $295 billion in new
long-term municipal bonds was underwritten, a decline of more than 12.5% versus
the same period a year ago. Notably, after declining for much of the year,
refunding activity increased slightly in October as the lower interest rate
environment sparked an increase in refinancing activity. On a year-to-date
basis, however, refunding activity has declined over 50% relative to last year's
refunding issuance.
Looking ahead, the positive technical framework in the municipal marketplace
suggests that the tax-exempt market should continue to perform well. New supply
is expected to remain manageable and tax-exempt bond yield ratios remain in
their recent range of 86% - 89% of comparable long-term U.S. Treasury yields,
well within their recent historic norms. These ratios argue for continued strong
demand from non-traditional, arbitrage-related accounts, which continue to be
attracted to the municipal bond market given its relatively steep yield curve.
Taken together, these factors suggest that the municipal market is poised to
continue to perform well as we approach year-end.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended October 31, 2006, the Common Stock of BlackRock
MuniVest Fund II, Inc. (formerly MuniVest Fund II, Inc.) had net annualized
yields of 6.45% and 6.08%, based on a year-end per share net asset value of
$15.35 and a per share market price of $16.29, respectively, and $.990 per share
income dividends. Over the same period, the total investment return on the
Fund's Common Stock was +8.36%, based on a change in per share net asset value
from $15.13 to $15.35, and assuming reinvestment of all distributions.
The Fund's total return, based on net asset value, was competitive with the
+8.42% average return of its comparable Lipper category of General Municipal
Debt Funds (Leveraged).
4 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
(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.)
Our strategy of maintaining a relatively neutral interest rate position was a
primary contributor to Fund performance during a period of volatile, but
generally declining, bond yields. The Fund's results also benefited from the
strong performance of its lower-rated holdings, which outpaced the broader
market for much of the fiscal period as credit spreads (versus higher-rated
issues of comparable maturity) continued to tighten. The exposure to
higher-yielding credits, along with maintaining a fully invested portfolio,
contributed to the Fund's above-average distribution yield, making it a
top-yielding fund in the Lipper category for the 12 months ended October 31,
2006.
For the six-month period ended October 31, 2006, the total investment return on
the Fund's Common Stock was +5.79%, based on a change in per share net asset
value from $14.97 to $15.35, and assuming reinvestment of all distributions.
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?
Attractive trading opportunities were limited given the aforementioned decline
in new issuance and low nominal bond yields that characterized the majority of
the annual period.
In making new purchases, we focused on AA-rated and A-rated revenue bonds,
particularly in New York where new issuance trends have been consistently
stronger than those on the national level. Additionally, AA-rated and A-rated
hospital revenue bonds were recent acquisition targets given their incremental
yield and significant market liquidity. The Fund's credit quality profile
remained essentially unchanged, with more than 60% of net assets rated A or
higher at October month-end.
For the six-month period ended October 31, 2006, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 3.54% for Series A, 3.55% for
Series B, 3.39% for Series C and 3.48% for Series D. The Fed raised short-term
interest rates six times during the 12-month period, but opted to keep the
target rate on hold at 5.25% in August, September and October. As such, the
Fund's borrowing costs began to stabilize and even move slightly lower late in
the period. Despite the Fed's interest rate increases during the period, the
municipal yield curve remained positively sloped and continued to generate an
income benefit to the Common Stock shareholder from the leveraging of Preferred
Stock. However, should the spread between short-term and long-term interest
rates narrow, the benefits of leverage will decline and, as a result, the yield
on the Fund's Common Stock will be reduced. (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?
The Fund ended the annual period in a slightly defensive position with respect
to interest rate risk, as current yield levels appear to be lower than economic
and inflation fundamentals alone would support. Ongoing positive technical
factors -- particularly the significant amount of excess liquidity-driven demand
seen in recent months -- prevent taking a more defensive duration posture.
Moving forward, we will continue to monitor economic trends, particularly the
employment and housing statistics, to ensure the Fund's current structuring is
appropriate. We intend to maintain the Fund's fully invested stance, and we will
avoid accumulating large cash reserve positions in order to enhance shareholder
income. Future portfolio activity also is expected to support our ongoing
efforts to maintain the Fund's higher-than-average distribution yield.
Fred K. Stuebe
Vice President and Portfolio Manager
November 9, 2006
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 5
The Benefits and Risks of Leveraging
BlackRock 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 of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As of October 31, 2006, the Fund's leverage amount, due to Auction Market
Preferred Stock, was 36.08%, before the deduction of Preferred Stock.
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.
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 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Schedule of Investments as of October 31, 2006 (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 $ 5,402
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 2,960
===============================================================================================
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 1,005
2,315 Maricopa County, Arizona, Tempe Elementary Unified
School District Number 3, GO, Refunding, 7.50%
due 7/01/2010 (d) 2,621
2,000 Pima County, Arizona, IDA, Education Revenue Bonds
(Arizona Charter Schools Project), Series C, 6.75%
due 7/01/2031 2,122
960 Pima County, Arizona, IDA, Education Revenue
Refunding Bonds (Arizona Charter Schools Project II),
Series A, 6.75% due 7/01/2021 1,025
===============================================================================================
California -- 10.8%
7,950 California Health Facilities Financing Authority Revenue
Bonds (Kaiser Permanente), Series A, 5.25%
due 4/01/2039 8,469
California State, GO:
785 5.50% due 4/01/2014 (j) 883
2,985 5.50% due 4/01/2028 3,298
3,675 5.50% due 4/01/2030 4,050
10,000 Refunding, 5% due 9/01/2028 10,647
5,010 Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds,
Series A-3, 7.875% due 6/01/2042 6,156
===============================================================================================
Colorado -- 3.7%
215 Colorado HFA, Revenue Refunding Bonds (S/F Program),
AMT, Senior Series A-2, 7.50% due 4/01/2031 220
Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee):
3,025 Series A, 7.35% due 9/01/2031 3,229
830 Series B, 7.45% due 9/01/2031 890
1,310 North Range, Colorado, Metropolitan District Number 1,
GO, 7.25% due 12/15/2031 1,412
Plaza Metropolitan District Number 1, Colorado, Tax
Allocation Revenue Bonds (Public Improvement Fees):
3,300 8% due 12/01/2025 3,659
820 8.125% due 12/01/2025 826
1,000 Southlands, Colorado, Medical District, GO
(Metropolitan District Number 1), 7% due 12/01/2024 1,106
===============================================================================================
Connecticut -- 1.1%
1,165 Connecticut State Development Authority, Airport
Facility Revenue Bonds (Learjet Inc. Project), AMT,
7.95% due 4/01/2026 1,403
2,000 Mohegan Tribe Indians Gaming Authority, Connecticut,
Public Improvement Revenue Refunding Bonds
(Priority Distribution), 6.25% due 1/01/2031 2,135
===============================================================================================
Delaware -- 0.3%
1,000 New Castle County, Delaware, PCR (General Motors
Corporation Project), VRDN, 7.10%
due 10/01/2008 (l) 1,000
===============================================================================================
Florida -- 8.3%
Fiddlers Creek, Florida, Community Development
District Number 2, Special Assessment Revenue Bonds:
2,350 Series A, 6.375% due 5/01/2035 2,501
850 Series B, 5.75% due 5/01/2013 887
8,000 Highlands County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Adventist Health System),
Series C, 5.25% due 11/15/2036 8,534
4,000 Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds, Series A,
6.25% due 5/01/2037 4,380
1,280 Orange County, Florida, Health Facilities Authority,
Hospital Revenue Bonds (Adventist Health System),
5.625% due 11/15/2032 1,384
Orlando, Florida, Urban Community Development
District, Capital Improvement Special
Assessment Bonds:
1,135 6.25% due 5/01/2034 1,224
1,000 Series A, 6.95% due 5/01/2033 1,080
1,250 Palm Coast Park Community Development District,
Florida, Special Assessment Revenue Bonds, 5.70%
due 5/01/2037 1,276
900 Park Place Community Development District, Florida,
Special Assessment Revenue Bonds, 6.75%
due 5/01/2032 960
500 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan
Program), DATES, VRDN, 3.65% due 12/01/2015 (b)(l) 500
935 Preserve at Wilderness Lake, Florida, Community
Development District, Capital Improvement Bonds,
Series A, 7.10% due 5/01/2033 1,022
2,000 West Villages Improvement District, Florida, Special
Assessment Revenue Bonds (Unit of Development
Number 3), 5.50% due 5/01/2037 2,042
===============================================================================================
Georgia -- 6.7%
2,000 Atlanta, Georgia, Tax Allocation Bonds (Atlantic Station
Project), 7.90% due 12/01/2024 2,225
Portfolio Abbreviations
To simplify the listings of BlackRock 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)
DATES Daily Adjustable Tax-Exempt Securities
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
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 7
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================================
Georgia (concluded)
$ 1,225 Brunswick and Glynn County, Georgia, Development
Authority, First Mortgage Revenue Bonds (Coastal
Community Retirement Corporation Project), Series A,
7.125% due 1/01/2025 $ 1,208
3,100 Burke County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Corporation), VRDN,
3.61% due 1/01/2021 (b)(l) 3,100
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 2,107
Georgia Municipal Electric Authority, Power Revenue
Refunding Bonds:
380 Series W, 6.60% due 1/01/2018 (c) 443
5,620 Series W, 6.60% due 1/01/2018 6,635
1,250 Series X, 6.50% due 1/01/2020 1,501
Milledgeville-Baldwin County, Georgia, Development
Authority Revenue Bonds (Georgia College and State
University Foundation):
1,350 5.50% due 9/01/2024 1,449
1,000 5.625% due 9/01/2030 1,080
===============================================================================================
Idaho -- 0.1%
185 Idaho Housing Agency, S/F Mortgage Revenue
Refunding Bonds, AMT, Series E-2, 6.90%
due 1/01/2027 190
===============================================================================================
Illinois -- 10.6%
4,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American Airlines
Inc. Project), 8.20% due 12/01/2024 4,125
235 Chicago, Illinois, S/F Mortgage Revenue Bonds, AMT,
Series C, 7% due 3/01/2032 (f)(g) 241
800 Chicago, Illinois, Special Assessment Bonds (Lake Shore
East), 6.75% due 12/01/2032 867
1,000 Chicago, Illinois, Tax Allocation Bonds (Kingsbury
Redevelopment Project), Series A, 6.57%
due 2/15/2013 1,040
2,800 Hodgkins, Illinois, Environmental Improvement
Revenue Bonds (Metro Biosolids Management LLC
Project), AMT, 6% due 11/01/2023 2,924
1,000 Illinois Development Finance Authority Revenue Bonds
(Community Rehabilitation Providers Facilities),
Series A, 6.50% due 7/01/2022 1,093
2,500 Illinois Development Finance Authority, Revenue
Refunding Bonds (Community Rehabilitation
Providers Facilities), Series A, 6% due 7/01/2015 2,551
415 Illinois HDA, Revenue Refunding Bonds (M/F Program),
Series 5, 6.75% due 9/01/2023 420
Illinois State Finance Authority Revenue Bonds,
Series A:
500 (Friendship Village of Schaumburg),
5.625% due 2/15/2037 511
1,035 (Landing At Plymouth Place Project),
6% due 5/15/2037 1,086
2,000 McLean and Woodford Counties, Illinois, Community
Unit, School District Number 005, GO, Refunding,
6.375% due 12/01/2016 (h) 2,249
Regional Transportation Authority, Illinois,
Revenue Bonds:
1,500 Series A, 7.20% due 11/01/2020 (b) 1,884
7,000 Series A, 6.70% due 11/01/2021 (d) 8,779
2,500 Series C, 7.75% due 6/01/2020 (d) 3,453
1,580 Village of Wheeling, Illinois, Revenue Bonds (North
Milwaukee/Lake-Cook Tax Increment Financing
Redevelopment Project), 6% due 1/01/2025 1,616
===============================================================================================
Indiana -- 11.6%
Indiana Health and Educational Facilities Financing
Authority, Hospital Revenue Bonds:
8,245 (Clarian Health Obligation), Series A, 5.25%
due 2/15/2040 8,735
2,000 (Schneck Memorial Hospital Project), Series A,
5.25% due 2/15/2030 2,130
2,500 Indiana Health and Educational Facilities Financing
Authority, Hospital Revenue Refunding Bonds
(Clarian Health Obligation), Series B, 5%
due 2/15/2030 2,602
5,545 Indiana State HFA, S/F Mortgage Revenue Refunding
Bonds, Series A, 6.80% due 1/01/2017 (e) 5,687
Indiana Transportation Finance Authority, Highway
Revenue Bonds, Series A:
2,000 7.25% due 6/01/2015
3,775 6.80% due 12/01/2016 4,516
8,750 Indianapolis, Indiana, Local Public Improvement Bond
Bank Revenue Refunding Bonds, Series D, 6.75%
due 2/01/2014 10,046
===============================================================================================
Kentucky -- 1.7%
4,850 Louisville and Jefferson County, Kentucky, Metropolitan
Government Health System Revenue Refunding
Bonds (Norton Healthcare, Inc.), 5.25%
due 10/01/2036 5,118
===============================================================================================
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) 5,975
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 8,736
10,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project), 6.50%
due 1/01/2017 10,200
3,600 Sabine River Authority, Louisiana, Water Facilities
Revenue Refunding Bonds (International Paper
Company), 6.20% due 2/01/2025 3,853
===============================================================================================
Maryland -- 1.5%
2,000 Maryland State Energy Financing Administration, Solid
Waste Disposal Revenue Bonds, Limited Obligation
(Wheelabrator Water Projects), AMT, 6.45%
due 12/01/2016 2,043
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) 1,315
1,230 Montgomery County, Maryland, Special Obligation,
GO (West Germantown Development District),
Series A, 6.70% due 7/01/2027 (k) 1,402
===============================================================================================
8 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================================
Massachusetts -- 2.7%
$ 1,000 Massachusetts State College Building Authority,
Project Revenue Refunding Bonds, Senior Series A,
7.50% due 5/01/2011 $ 1,157
6,000 Massachusetts State Water Resource Authority
Revenue Bonds, Series A, 6.50% due 7/15/2019 7,224
===============================================================================================
Michigan -- 7.6%
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) 2,599
2,500 Detroit, Michigan, Sewer Disposal Revenue Bonds,
Senior Lien, VRDN, Series B, 3.57%
due 7/01/2033 (h)(l) 2,500
3,100 Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A,
6% due 7/01/2020 (a) 3,380
4,320 Macomb County, Michigan, Hospital Finance Authority,
Hospital Revenue Bonds (Mount Clemens General
Hospital), Series B, 5.875% due 11/15/2034 4,576
Michigan State Hospital Finance Authority Revenue
Bonds, Series A:
3,600 (Mid-Michigan Obligor Group), 5%
due 4/15/2036 3,729
3,500 (Trinity Health Credit Group), 5%
due 12/01/2031 3,690
3,000 Pontiac, Michigan, Tax Increment Finance Authority,
Revenue Refunding Bonds (Development Area
Number 3), 6.375% due 6/01/2031 3,225
===============================================================================================
Minnesota -- 0.3%
1,000 Minnesota State Municipal Power Agency, Electric
Revenue Bonds, 5% due 10/01/2035 1,044
===============================================================================================
Mississippi -- 5.7%
5,850 Lowndes County, Mississippi, Solid Waste Disposal and
PCR, Refunding (Weyerhaeuser Company Project),
Series A, 6.80% due 4/01/2022 7,080
Mississippi Business Finance Corporation, Mississippi,
PCR, Refunding (System Energy Resources Inc. Project):
7,200 5.875% due 4/01/2022 7,222
3,465 5.90% due 5/01/2022 3,476
===============================================================================================
Missouri -- 0.1%
130 Missouri State Housing Development Commission, S/F
Mortgage Revenue Bonds (Homeowner Loan), AMT,
Series A, 7.50% due 3/01/2031 (g) 135
===============================================================================================
Nebraska -- 0.3%
Nebraska Investment Finance Authority, S/F Housing
Revenue Bonds, AMT (g):
405 Series C, 6.30% due 9/01/2028 (f) 409
405 Series D, 6.45% due 3/01/2028 412
===============================================================================================
Nevada -- 1.0%
620 Clark County, Nevada, Improvement District Number
142, Special Assessment Bonds, 6.375%
due 8/01/2023 641
2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds
(Sierra Pacific Power Company), AMT, 6.65%
due 12/01/2017 (b) 2,506
===============================================================================================
New Hampshire -- 0.2%
625 New Hampshire Health and Education Facilities
Authority, Hospital Revenue Bonds (Catholic Medical
Center), 5% due 7/01/2032 647
===============================================================================================
New Jersey -- 6.0%
4,250 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50%
due 6/15/2024 4,504
New Jersey EDA, Retirement Community Revenue
Bonds (Cedar Crest Village Inc. Facility), Series A:
1,335 7.25% due 11/15/2021 1,458
1,100 7.25% due 11/15/2031 1,196
3,000 New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT, 6.25%
due 9/15/2029 3,101
1,680 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (Pascack Valley Hospital Association),
6.625% due 7/01/2036 1,731
5,785 Tobacco Settlement Financing Corporation of New
Jersey, Asset-Backed Revenue Bonds, 7%
due 6/01/2041 6,694
===============================================================================================
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 3,278
===============================================================================================
New York -- 7.9%
5,000 Metropolitan Transportation Authority, New York,
Transportation Revenue Bonds, Series A, 5%
due 11/15/2031 5,300
New York City, New York, City IDA, Civic Facility
Revenue Bonds:
690 Series C, 6.80% due 6/01/2028 761
890 (Special Needs Facility Pooled Program),
Series C-1, 6.50% due 7/01/2017 937
1,920 New York City, New York, City IDA, Special Facility
Revenue Bonds (British Airways Plc Project), AMT,
7.625% due 12/01/2032 2,153
New York City, New York, GO:
340 Series F, 5.25% due 1/15/2013 (j) 372
3,160 Series F, 5.25% due 1/15/2033 3,350
4,995 Sub-Series I-1, 5% due 4/01/2025 5,295
New York City, New York, Go, Refunding, Series A (d):
490 6.375% due 5/15/2010 (j) 540
40 6.375% due 5/15/2015 44
1,500 New York State Dormitory Authority, Revenue
Refunding Bonds, RIB, Series 305, 8.14% due
5/15/2015 (i)(m) 1,761
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 1,052
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 2,878
===============================================================================================
North Carolina -- 1.1%
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 1,776
1,500 North Carolina Medical Care Commission, Retirement
Facilities, First Mortgage Revenue Bonds (Givens
Estates Project), Series A, 6.375% due 7/01/2023 1,618
===============================================================================================
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 9
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================================
Pennsylvania -- 4.9%
$ 1,235 Allegheny County, Pennsylvania, IDA, Environmental
Improvement Revenue Refunding Bonds, 5.50%
due 11/01/2016 $ 1,301
880 Bucks County, Pennsylvania, IDA, Retirement Community
Revenue Bonds (Ann's Choice Inc.), Series A, 6.125%
due 1/01/2025 934
Montgomery County, Pennsylvania, IDA, Revenue Bonds
(Whitemarsh Continuing Care Project):
470 6.125% due 2/01/2028 498
1,090 6.25% due 2/01/2035 1,153
2,000 Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds (National
Gypsum Company), AMT, Series B, 6.125%
due 11/01/2027 2,093
1,250 Pennsylvania State Higher Educational Facilities
Authority Revenue Bonds (University of Pennsylvania
Medical Center Health System), Series A, 6%
due 1/15/2031 1,365
1,265 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development, 7.75% due 12/01/2017 1,268
Sayre, Pennsylvania, Health Care Facilities Authority,
Revenue Bonds (Guthrie Healthcare System), Series B:
2,425 5.85% due 12/01/2020 2,630
3,350 7.125% due 12/01/2031 4,015
===============================================================================================
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) 1,306
===============================================================================================
South Carolina -- 1.4%
1,200 Lexington County, South Carolina, Health Services
District Inc., Hospital Revenue Bonds (Lexington
Medical Center), 5.50% due 5/01/2032 1,280
1,500 Lexington County, South Carolina, Health Services
District Inc., Hospital Revenue Refunding and
Improvement Bonds, 5.50% due 11/01/2032 1,596
1,230 Medical University Hospital Authority, South Carolina,
Hospital Facilities Revenue Refunding Bonds, 6.50%
due 8/15/2012 (j) 1,414
180 South Carolina Housing Finance and Development
Authority, Mortgage Revenue Bonds, AMT, Series A,
6.70% due 7/01/2027 182
===============================================================================================
Tennessee -- 3.5%
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 1,013
4,000 McMinn County, Tennessee, IDB, Solid Waste Revenue
Bonds (Recycling Facility -- Calhoun Newsprint),
AMT, 7.40% due 12/01/2022 4,060
5,000 Shelby County, Tennessee, Health, Educational and
Housing Facility Board, Hospital Revenue Refunding
Bonds (Methodist Healthcare), 6.50%
due 9/01/2012 (j) 5,754
===============================================================================================
Texas -- 10.8%
Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), First Tier, Series A:
1,600 6.70% due 1/01/2028 1,706
4,510 6.70% due 1/01/2032 4,776
1,500 Brazos River Authority, Texas, PCR, Refunding (Texas
Utility Company), AMT, Series A, 7.70%
due 4/01/2033 1,752
1,810 Brazos River Authority, Texas, Revenue Refunding
Bonds (Reliant Energy Inc. Project), Series B, 7.75%
due 12/01/2018 1,926
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 6,506
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
100 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Texas
Children's Hospital), VRDN, Series B-1, 3.64%
due 10/01/2029 (i)(l) 100
3,440 Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (Reliant Energy Inc.),
Series C, 8% due 5/01/2029 3,658
3,060 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 8.25%
due 11/01/2031 3,166
Port Corpus Christi, Texas, Revenue Refunding Bonds
(Celanese Project):
2,500 AMT, Series B, 6.70% due 11/01/2030 2,739
800 Series A, 6.45% due 11/01/2030 864
3,670 Sabine River Authority, Texas, PCR, Refunding (TXU
Electric Company Project/TXU Energy Company LLC),
Series C, 5.20% due 5/01/2028 3,799
===============================================================================================
Virginia -- 2.8%
1,000 Chesterfield County, Virginia, IDA, PCR, Refunding
(Virginia Electric and Power Company), Series B,
5.875% due 6/01/2017 1,088
7,215 Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds, Senior Series A, 5.50%
due 8/15/2008 (j) 7,596
===============================================================================================
Washington -- 4.6%
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) 2,514
500 Energy Northwest, Washington, Electric Revenue
Refunding Bonds, DRIVERS Series 248, 7.615%
due 7/01/2018 (i)(m) 602
2,200 Washington State Health Care Facilities Authority
Revenue Bonds (Kadlec Medical Center), 6%
due 12/01/2010 (j)(k) 2,397
Washington State Public Power Supply System,
Revenue Refunding Bonds Series B:
5,000 (Nuclear Project Number 1), 7.125%
due 7/01/2016 (h) 6,251
1,900 (Nuclear Project Number 3), 7.125%
due 7/01/2016 (i) 2,402
===============================================================================================
Wisconsin -- 1.5%
1,945 Badger Tobacco Asset Securitization Corporation,
Wisconsin, Asset-Backed Revenue Bonds, 6.125%
due 6/01/2027 2,101
2,215 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (SynergyHealth Inc.), 6%
due 11/15/2032 2,420
===============================================================================================
10 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Schedule of Investments (concluded) (in Thousands)
Face
Amount Municipal Bonds Value
===============================================================================================
Puerto Rico -- 0.5%
$ 1,400 Puerto Rico Commonwealth, Public Improvement, GO,
Series A, 5.25% due 7/01/2026 $ 1,512
===============================================================================================
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 6,768
-----------------------------------------------------------------------------------------------
Total Municipal Bonds
(Cost -- $391,402) -- 137.2% 425,394
===============================================================================================
Municipal Bonds Held in Trust (n)
===============================================================================================
Illinois -- 6.2%
6,000 Chicago, Illinois, O'Hare International Airport, General
Airport Revenue Refunding Bonds, Third Lien, AMT,
Series A, 5.75% due 1/01/2020 (i) 6,485
Kane and De Kalb Counties, Illinois, Community United
School District Number 302, GO: (d)
1,000 5.75% due 2/01/2019 1,119
4,200 5.75% due 2/01/2020 4,698
6,400 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Refunding Bonds (McCormick
Place Expansion Project), Series B, 5.75% due 6/15/2023 (i) 7,068
===============================================================================================
Massachusetts -- 3.4%
10,000 Massachusetts State School Building Authority,
Dedicated Sales Tax Revenue Bonds, Series A, 5%
due 8/15/2030 (h) 10,620
===============================================================================================
New York -- 6.3%
6,750 New York City, New York, City Transitional Finance Authority
Revenue Bonds, Future Tax Secured, Series B, 6.25%
due 11/15/2018 7,416
New York State Dormitory Authority, State University
Educational Facilities Revenue Refunding Bonds,
Series 1989 (i):
5,000 6% due 5/15/2015 5,435
6,000 6% due 5/15/2016 6,522
===============================================================================================
Pennsylvania -- 1.4%
4,000 Delaware River Port Authority of Pennsylvania and New
Jersey Revenue Bonds, 6% due 1/01/2018 (h) 4,281
===============================================================================================
Texas -- 6.5%
10,000 Harris County, Texas, Health Facilities Development
Corporation, Revenue Refunding Bonds (School Health
Care System), Series B, 5.75% due 7/01/2027 (c) 12,136
7,500 San Antonio, Texas, Electric and Gas Revenue Bonds,
Series A, 5.75% due 2/01/2010 (j) 7,997
===============================================================================================
Washington -- 5.5%
Energy Northwest, Washington, Electric Revenue
Refunding Bonds (Columbia Generating Station):
3,500 Series A, 5.75% due 7/01/2018 (i) 3,858
2,250 Series B, 6% due 7/01/2018 (b) 2,509
10,000 Washington State, Various Purpose, GO, Series B, 6%
due 1/01/2010 (h)(j) 10,721
-----------------------------------------------------------------------------------------------
Total Municipal Bonds Held in Trust
(Cost -- $85,988) -- 29.3% 90,865
===============================================================================================
Total Investments (Cost -- $477,390*) -- 166.5% 516,259
Other Assets Less Liabilities -- 3.5% 10,669
Liability for Trust Certificates, Including Interest Expense Payable -- (13.5%) (41,777)
Preferred Stock, at Redemption Value -- (56.5%) (175,176)
---------
Net Assets -- 100.0% $ 309,975
=========
* The cost and unrealized appreciation (depreciation) of investments as of
October 31, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................. $ 438,897
=========
Gross unrealized appreciation .................. $ 36,099
Gross unrealized depreciation .................. (37)
---------
Net unrealized appreciation .................... $ 36,062
=========
(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.
(n) Securities represent underlying bonds transferred to a separate
securitization trust established in a tender option bond transaction in
which the Fund acquired the residual interest certificates. These
securities serve as collateral in a financing transaction. See Note 1 (c)
to Financial Statements for details of Municipal Bonds Held in Trust.
o Forward interest rate swaps outstanding as of October 31, 2006 were as
follows:
---------------------------------------------------------------------------------------------------
Notional Unrealized
Amount Depreciation
---------------------------------------------------------------------------------------------------
Pay a fixed rate of 3.881% and receive a floating rate
based on 1-week Bond Market Association rate
Broker, JPMorgan Chase
Expires November 2016 $ 11,500 $ (222)
Pay a fixed rate of 3.901% and receive a floating
rate based on 1-week Bond Market Association rate
Broker, JPMorgan Chase
Expires December 2016 $ 6,000 (123)
Pay a fixed rate of 3.722% and receive a floating rate
based on 1-week Bond Market Association rate
Broker, JPMorgan Chase
Expires January 2017 $ 11,500 (71)
---------------------------------------------------------------------------------------------------
Total $ (416)
============
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.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 11
Statement of Net Assets
As of October 31, 2006
===================================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost -- $477,390,043) .............................................. $ 516,259,401
Cash ............................................................................ 4,029
Receivables:
Securities sold .............................................................. $ 9,431,437
Interest ..................................................................... 9,292,556 18,723,993
-------------
Prepaid expenses ................................................................ 12,930
-------------
Total assets .................................................................... 535,000,353
-------------
===================================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------------
Trust certificates .............................................................. 41,300,000
Unrealized depreciation on forward interest rate swaps .......................... 416,245
Payables:
Securities purchased ......................................................... 7,376,418
Interest expense payable ..................................................... 477,447
Investment adviser ........................................................... 198,192
Other affiliates ............................................................. 3,116 8,055,173
-------------
Accrued expenses ................................................................ 78,634
-------------
Total liabilities ............................................................... 49,850,052
-------------
===================================================================================================================================
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 ....................................... 175,175,695
-------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ........................................... $ 309,974,606
=============
===================================================================================================================================
Analysis of Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share (20,193,086 shares issued and
outstanding) ................................................................... $ 2,019,309
Paid-in capital in excess of par ................................................ 281,339,783
Undistributed investment income -- net .......................................... $ 2,727,299
Accumulated realized capital losses -- net ...................................... (14,564,898)
Unrealized appreciation -- net .................................................. 38,453,113
-------------
Total accumulated earnings -- net ............................................... 26,615,514
-------------
Total -- Equivalent to $15.35 net asset value per share of Common Stock
(market price -- $16.29) ....................................................... $ 309,974,606
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Statement of Operations
For the Year Ended October 31, 2006
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Interest ........................................................................ $ 28,293,049
Dividends from affiliates ....................................................... 3,497
-------------
Total income .................................................................... 28,296,546
-------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ........................................................ $ 2,395,064
Interest expense and fees ....................................................... 1,536,575
Commission fees ................................................................. 445,062
Accounting services ............................................................. 160,585
Transfer agent fees ............................................................. 107,016
Professional fees ............................................................... 52,532
Printing and shareholder reports ................................................ 38,421
Directors' fees and expenses .................................................... 32,813
Custodian fees .................................................................. 27,322
Pricing fees .................................................................... 24,274
Listing fees .................................................................... 17,057
Other ........................................................................... 61,402
-------------
Total expenses before reimbursement ............................................. 4,898,123
Reimbursement of expenses ....................................................... (250)
-------------
Total expenses after reimbursement .............................................. 4,897,873
-------------
Investment income -- net ........................................................ 23,398,673
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
-----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net ........................................................... 3,786,515
Forward interest rate swaps -- net ........................................... (306,982) 3,479,533
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ........................................................... 3,947,751
Forward interest rate swaps -- net ........................................... (416,245) 3,531,506
-------------------------------
Total realized and unrealized gain -- net ....................................... 7,011,039
-------------
===================================================================================================================================
Dividends to Preferred Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................ (5,777,483)
-------------
Net Increase in Net Assets Resulting from Operations ............................ $ 24,632,229
=============
See Notes to Financial Statements.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 13
Statements of Changes in Net Assets
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................ $ 23,398,673 $ 23,757,955
Realized gain -- net ............................................................ 3,479,533 3,234,915
Change in unrealized appreciation/depreciation -- net ........................... 3,531,506 (2,571,853)
Dividends to Preferred Stock shareholders ....................................... (5,777,483) (3,494,922)
-------------------------------
Net increase in net assets resulting from operations ............................ 24,632,229 20,926,095
-------------------------------
===================================================================================================================================
Dividends to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................ (20,208,309) (22,075,616)
-------------------------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (20,208,309) (22,075,616)
-------------------------------
===================================================================================================================================
Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends 1,849,222 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 .................... 1,849,222 1,402,602
-------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to Common Stock ......................... 6,273,142 253,081
Beginning of year ............................................................... 303,701,464 303,448,383
-------------------------------
End of year* .................................................................... $ 309,974,606 $ 303,701,464
===============================
* Undistributed investment income -- net ..................................... $ 2,727,299 $ 5,314,418
===============================
See Notes to Financial Statements.
14 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Financial Highlights (As Restated for 2005, 2004, 2003 and 2002. See Note 6)
For the Year Ended October 31,
The following per share data and ratios have been derived ----------------------------------------------------------------
from information provided in the financial statements. 2006 2005 2004 2003 2002
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ........................ $ 15.13 $ 15.21 $ 14.76 $ 14.16 $ 14.29
----------------------------------------------------------------
Investment income -- net .................................. 1.16+ 1.19+ 1.17+ 1.17+ 1.11
Realized and unrealized gain (loss) -- net ................ .35 .04 .44 .49 (.25)
Dividends to Preferred Stock shareholders from investment
income -- net ............................................ (.29) (.18) (.07) (.07) (.09)
----------------------------------------------------------------
Total from investment operations .......................... 1.22 1.05 1.54 1.59 .77
----------------------------------------------------------------
Less dividends to Common Stock shareholders from investment
income -- net ............................................ (1.00) (1.10) (1.09) (.99) (.90)
----------------------------------------------------------------
Offering and underwriting costs resulting from the issuance
of Preferred Stock ....................................... -- (.03) -- -- --
----------------------------------------------------------------
Net asset value, end of year .............................. $ 15.35 $ 15.13 $ 15.21 $ 14.76 $ 14.16
================================================================
Market price per share, end of year ....................... $ 16.29 $ 15.40 $ 15.15 $ 14.26 $ 13.36
================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........................ 8.36% 6.88% 10.94% 11.88% 5.86%
================================================================
Based on market price per share ........................... 12.98% 9.21% 14.38% 14.56% 4.25%
================================================================
===================================================================================================================================
Ratios Based on Average Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement and excluding
interest expense* ........................................ 1.11% 1.07% .99% 1.01% 1.05%
================================================================
Total expenses, net of reimbursement* ..................... 1.61% 1.35% 1.16% 1.19% 1.29%
================================================================
Total expenses* ........................................... 1.61% 1.35% 1.16% 1.19% 1.29%
================================================================
Total investment income -- net* ........................... 7.70% 7.76% 7.86% 8.01% 7.79%
================================================================
Amount of dividends to Preferred Stock shareholders ....... 1.90% 1.14% .46% .46% .66%
================================================================
Investment income to Common Stock shareholders -- net ..... 5.80% 6.62% 7.40% 7.55% 7.13%
================================================================
===================================================================================================================================
Ratios Based on Average Net Assets Applicable to Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ................. 3.30% 2.09% 1.02% .98% 1.38%
================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of year
(in thousands) ........................................... $309,975 $303,701 $303,448 $293,753 $281,830
================================================================
Preferred Stock outstanding at liquidation preference,
end of year (in thousands) ............................... $175,000 $175,000 $135,000 $135,000 $135,000
================================================================
Portfolio turnover ........................................ 60% 64% 20% 29% 56%
================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ................................. $ 2,771 $ 2,735 $ 3,248 $ 3,176 $ 3,088
================================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
-----------------------------------------------------------------------------------------------------------------------------------
Series A -- Investment income -- net ...................... $ 820 $ 527 $ 262 $ 251 $ 338
================================================================
Series B -- Investment income -- net ...................... $ 869 $ 503 $ 234 $ 248 $ 319
================================================================
Series C -- Investment income -- net ...................... $ 800 $ 512 $ 268 $ 240 $ 375
================================================================
Series D++ -- Investment income -- net .................... $ 812 $ 450 -- -- --
================================================================
* 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.
++ Series D was issued on January 14, 2005.
See Notes to Financial Statements.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 15
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, MuniVest Fund II, Inc. was renamed BlackRock MuniVest
Fund II, Inc. (the "Fund"). 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. 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. Options
traded in the OTC market are valued at 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 financial futures contracts.
Financial 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.
o Swaps -- The Fund may enter into swap agreements, which are OTC contracts
in which the Fund and a counterparty agree to make periodic net payments
on a specified notional amount. The net payments can be made for a set
period of time or may be triggered by a predetermined credit event. The
net periodic payments
16 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Notes to Financial Statements (continued)
may be based on a fixed or variable interest rate; the change in market
value of a specified security, basket of securities, or index; or the
return generated by a security. These periodic payments received or made
by the Fund are recorded in the accompanying Statement of Operations as
realized gains or losses, respectively. Gains or losses are also realized
upon termination of the swap agreements. Swaps are marked-to-market daily
and changes in value are recorded as unrealized appreciation
(depreciation). Risks include changes in the returns of the underlying
instruments, failure of the counterparties to perform under the contracts'
terms and the possible lack of liquidity with respect to the swap
agreements.
(c) Municipal bonds held in trust -- The Fund invests in leveraged residual
certificates ("TOB Residuals") issued by tender option bond trusts ("TOBs"). A
TOB is established by a third party sponsor forming a special purpose entity,
into which the Fund, or an agent on behalf of the Fund, transfers municipal
securities. A TOB typically issues two classes of beneficial interests:
short-term floating rate certificates, which are sold to third party investors,
and residual certificates, which are generally issued to the Fund which made the
transfer or to affiliates of the Fund. The transfer of the municipal securities
to a TOB does not qualify for sale treatment under Statement of Financial
Accounting Standards No. 140 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", therefore the municipal
securities deposited into a TOB are presented in the Fund's schedule of
investments and the proceeds from the transaction are reported as a liability
for trust certificates of the Fund. Similarly, proceeds from residual
certificates issued to affiliates, if any, from the transaction are included in
the liability for trust certificates. Interest income from the underlying
security is recorded by the Fund on an accrual basis. Interest expense incurred
on the secured borrowing and other expenses related to remarketing,
administration and trustee services to a TOB are reported as expenses of the
Fund. The floating rate certificates have interest rates that generally reset
weekly and their holders have the option to tender certificates to the TOB for
redemption at par at each reset date. The residual interests held by the Fund
include the right of the Fund (1) to cause the holders of a proportional share
of the floating rate certificates to tender their certificates at par, and (2)
to transfer a corresponding share of the municipal securities from the TOB to
the Fund. At October 31, 2006, the aggregate value of the underlying municipal
securities transferred to TOBs was $90,864,728, the related liability for trust
certificates was $41,300,000 and the range of interest rates was 3.58% to 3.63%.
Financial transactions executed through TOBs generally will under perform the
market for fixed rate municipal bonds in a rising interest rate environment, but
tend to outperform the market for fixed rate bonds when interest rates decline
or remain relatively stable. Should short-term interest rates rise, the Fund's
investment in TOB Residuals likely will adversely affect the Fund's investment
income-net and distributions to shareholders. Fluctuations in the market value
of municipal securities deposited into the TOB may adversely affect the Fund's
net asset value per share.
While the Fund's investment policies and restrictions expressly permit
investments in inverse floating rate securities such as TOB Residuals, they
generally do not allow the Fund to borrow money for purposes of making
investments. The Fund's management believes that the Fund's restrictions on
borrowings do not apply to the secured borrowings deemed to have occurred for
accounting purposes.
(d) 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.
(e) 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.
(f) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(g) 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.
(h) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity including mutual funds before being measured
and recognized in the financial statements. Adoption of FIN 48 is required for
fiscal years beginning after December
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 17
Notes to Financial Statements (continued)
15, 2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the implications of
FAS 157. At this time its impact on the Fund's financial statements has not been
determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM") and its affiliates, including Fund Asset
Management, L.P. ("FAM"), with BlackRock, Inc. to create a new independent
company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest
in the combined company and The PNC Financial Services Group, Inc. has
approximately a 34% economic and voting interest. The new company operates under
the BlackRock name and is governed by a board of directors with a majority of
independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment Advisory
Agreement with BlackRock Advisors, Inc. (the "Manager"), an indirect, wholly
owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was recently
reorganized into a limited liability company and renamed BlackRock Advisors,
LLC. The new Investment Advisory Agreement between the Fund and the Manager
became effective on September 29, 2006. Prior to September 29, 2006, FAM was the
Investment Adviser. The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch, which is the
limited partner.
The Manager 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 daily net
assets, including proceeds from the issuance of Preferred Stock. The Manager
(and formerly FAM) has agreed to reimburse its management fee by the amount of
management fees the Fund pays to FAM and/or the Manager indirectly through its
investment in the Merrill Lynch Institutional Tax-Exempt Fund. The
reimbursements were as follows:
--------------------------------------------------------------------------------
For the Period For the Period
November 1, 2005 to September 30, 2006
September 29, 2006 to October 31, 2006
Reimbursement Reimbursement
to FAM to the Manager
--------------------------------------------------------------------------------
$250 --
================================================================================
In addition, the Manager has entered into a sub-advisory agreement with
BlackRock Investment Management, LLC, an affiliate of the Manager, under which
the Manager pays the Sub-Adviser for services it provides a fee equal to 59% of
the management fee paid by the Fund to the Manager.
The Fund reimbursed FAM and/or the Manager for certain accounting services. The
reimbursements were as follows:
--------------------------------------------------------------------------------
For the Period For the Period
November 1, 2005 to September 30, 2006
September 29, 2006 to October 31, 2006
Reimbursement Reimbursement
to FAM to the Manager
--------------------------------------------------------------------------------
$9,771 $779
================================================================================
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a
wholly owned subsidiary of Merrill Lynch, received $1,000 in commissions on the
execution of portfolio security transactions for the Fund for the year ended
October 31, 2006.
Prior to September 29, 2006, certain officers and/or directors of the Funds were
officers and/or directors of Merrill Lynch, FAM, MLIM, and/or PSI.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2006 were $308,645,192 and $315,403,495, 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 years ended October 31, 2006 and October
31, 2005 increased by 121,589 and 126,778, respectively, as a result of dividend
reinvestment.
18 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Notes to Financial Statements (continued)
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 entitles their holders to receive cash dividends at an annual rate that may
vary for the successive dividend periods. The yields in effect at October 31,
2006 were as follows: Series A, 3.50%; Series B, 3.62%; Series C, 3.45%; and
Series D, 3.45%.
Shares issued and outstanding during the year ended October 31, 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 year ended October 31, 2006, MLPF&S earned $243,132 as
commissions.
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.078000 per share on November 29, 2006 to shareholders of record on
November 14, 2006.
The tax character of distributions paid during the fiscal years ended October
31, 2006 and October 31, 2005 was as follows:
--------------------------------------------------------------------------------
10/31/2006 10/31/2005
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................... $25,985,792 $25,570,538
--------------------------------
Total distributions .................... $25,985,792 $25,570,538
================================
As of October 31, 2006, the components of accumulated earnings on a tax basis
were as follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt income -- net .................. $ 2,508,605
Undistributed long-term capital gains -- net ............ --
------------
Total undistributed earnings -- net ..................... 2,508,605
Capital loss carryforward ............................... (10,072,402)*
Unrealized gains -- net ................................. 34,179,311**
------------
Total accumulated earnings -- net ....................... $ 26,615,514
============
* On October 31, 2006, the Fund had a net capital loss carryforward of
$10,072,402, of which $1,158,684 expires in 2007 and $8,913,718 expires in
2008. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
tax deferral of losses on straddles, the difference between book and tax
amortization methods for premiums and discounts on fixed income securities
and the difference between the book and tax treatment of residual
interests in tender option bond trusts.
6. Restatement Information:
During the year ended October 31, 2006, the Fund determined that the criteria
for sale accounting in Statement of Financial Accounting Standards No. 140 had
not been met for certain transfers of municipal bonds and that these transfers
should have been accounted for as secured borrowings rather than as sales.
Accordingly, the Fund has restated the financial highlights for the years ended
October 31, 2005, 2004, 2003 and 2002 to give effect to recording the transfers
of the municipal bonds as secured borrowings, including recording interest on
the bonds as interest income and interest on the secured borrowings as interest
expense.
------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For the Years Ended October 31, 2005, 2004, 2003 and 2002
------------------------------------------------------------------------------------------------------------------------------------
2005 2004 2003 2002
--------------------- -------------------- --------------------- ---------------------
Previously Previously Previously Previously
Reported Restated Reported Restated Reported Restated Reported Restated
------------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement* 1.07% 1.35% .99% 1.16% 1.01% 1.19% 1.05% 1.29%
Total expenses* ..................... 1.07% 1.35% .99% 1.16% 1.01% 1.19% 1.05% 1.29%
Portfolio turnover .................. 74.96% 64% 22.39% 20% 31.50% 29% 66.07% 56%
------------------------------------------------------------------------------------------------------------------------------------
* Do not reflect the effect of dividends to Preferred Stock shareholders.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 19
Notes to Financial Statements (concluded)
While the Statements of Net Assets as of October 31, 2005, 2004, 2003 and 2002,
not presented herein, have not been reissued to give effect to the restatement,
the principal effects of the restatement would be to increase investments and
liability for trust certificates by corresponding amounts at each year, with no
effect on previously reported net assets. The Statements of Operations for the
years ended October 31, 2005, 2004, 2003 and 2002, not presented herein, have
not been reissued to give effect to the restatement. However, the principal
effects of the restatement would be to increase interest income and interest
expense and fees by corresponding amounts each year, and, where applicable, to
revise realized gain (loss) on investments -- net, and the change in unrealized
appreciation/depreciation on investments -- net, by corresponding and offsetting
amounts. The Statements of Changes in Net Assets for the years ended October 31,
2004, 2003 and 2002, not presented herein, have not been reissued to give effect
to the restatement, but the principal effects of a restatement, where
applicable, would be to revise previously reported realized gain (loss) -- net,
and change in unrealized appreciation/depreciation-net, by corresponding and
offsetting amounts.
20 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BlackRock MuniVest Fund II, Inc.:
We have audited the accompanying statement of net assets, including the schedule
of investments, of BlackRock MuniVest Fund II, Inc. (formerly MuniVest Fund II,
Inc.) as of October 31, 2006, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock MuniVest Fund II, Inc. as of October 31, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and its financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 6, the financial highlights for the years ended October 31,
2005, 2004, 2003 and 2002 have been restated.
Deloitte & Touche LLP
Princeton, New Jersey
January 16, 2007
Fund Certification (unaudited)
In February 2006, the Fund filed its Chief Executive Officer Certification for
the prior year with the New York Stock Exchange pursuant to Section 303A.12(a)
of the New York Stock Exchange Corporate Governance Listing Standards.
The Fund's Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Fund's Form N-CSR and are available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
Important Tax Information (unaudited)
All of the net investment income distributions paid by BlackRock MuniVest Fund
II, Inc. during the taxable year ended October 31, 2006 qualify as tax-exempt
interest dividends for federal income tax purposes.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 21
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by The Bank of New York (the
"Plan Agent"). Under the Plan, whenever the Fund declares a dividend,
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund. The Plan Agent will acquire the shares for the participant's
account either (i) through receipt of additional unissued but authorized shares
of the Fund ("newly issued shares") or (ii) by purchase of outstanding shares of
Common Stock on the open market on the New York Stock Exchange or elsewhere. If,
on the dividend payment date, the Fund's net asset value per share is equal to
or less than the market price per share plus estimated brokerage commissions (a
condition often referred to as a "market premium"), the Plan Agent will invest
the dividend amount in newly issued shares. If the Fund's net asset value per
share is greater than the market price per share (a condition often referred to
as a "market discount"), the Plan Agent will invest the dividend amount by
purchasing on the open market additional shares. If the Plan Agent is unable to
invest the full dividend amount in open market purchases, or if the market
discount shifts to a market premium during the purchase period, the Plan Agent
will invest any uninvested portion in newly issued shares. The shares acquired
are credited to each shareholder's account. The amount credited is determined by
dividing the dollar amount of the dividend by either (i) when the shares are
newly issued, the net asset value per share on the date the shares are issued or
(ii) when shares are purchased in the open market, the average purchase price
per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan, must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value, participants
in the Plan will receive shares of the Fund for less than they could otherwise
purchase them and with a cash value greater than the value of any cash
distribution they would have received. However, there may not be enough shares
available in the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price on resale
may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. The value of shares acquired pursuant to the Plan will generally be
excluded from gross income to the extent that the cash amount reinvested would
be excluded from gross income. If, when the Fund's shares are trading at a
market premium, the Fund issues shares pursuant to the Plan that have a greater
fair market value than the amount of cash reinvested, it is possible that all or
a portion of the discount from the market value (which may not exceed 5% of the
fair market value of the Fund's shares) could be viewed as a taxable
distribution. If the discount is viewed as a taxable distribution, it is also
possible that the taxable character of this discount would be allocable to all
the shareholders, including shareholders who do not participate in the Plan.
Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their
allocable share of the discount.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at The Bank of
New York, Church Street Station, P.O. Box 11258, New York, NY 10286-1258,
Telephone: 800-432-8224.
22 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Disclosure of Investment Advisory Agreement
Disclosure of FAM Investment Advisory Agreement
The Board of Directors of the Fund met in May 2006 to consider approval of the
Fund's investment advisory agreement with Fund Asset Management, L.P. ("FAM"),
the Fund's investment adviser at that time.
Activities and Composition of the Board
All but one member of the Board is an independent director, whose only
affiliation with FAM or other Merrill Lynch affiliates was as a director of the
Fund and as a director or trustee of certain other funds advised by FAM or its
affiliates. The Chairman of the Board is also an independent director. New
director nominees are chosen by a Nominating Committee comprised of independent
directors. All independent directors also are members of the Board's Audit
Committee, and the independent directors meet in executive session at each
in-person Board meeting. The Board and the Audit Committee meet in person for at
least two days each quarter and conduct other in-person and telephone meetings
throughout the year, some of which are formal Board meetings and some of which
are informational meetings. The independent counsel to the independent directors
attends all in-person Board and Audit Committee meetings and other meetings at
the independent directors' request.
FAM Investment Advisory Agreement -- Matters Considered by the Board
Every year, the Board considers approval of the Fund's investment advisory
agreement. The Board assesses the nature, scope and quality of the services
provided to the Fund by the personnel of the investment adviser and its
affiliates, including administrative services, shareholder services, oversight
of fund accounting, marketing services and assistance in meeting legal and
regulatory requirements. The Board also receives and assesses information
regarding the services provided to the Fund by certain unaffiliated service
providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided by the
investment adviser and its affiliates. Among the matters considered are: (a)
fees (in addition to management fees) paid to the investment adviser and its
affiliates by the Fund; (b) Fund operating expenses paid to third parties; (c)
the resources devoted to and compliance reports relating to the Fund's
investment objective, policies and restrictions, and its compliance with its
Code of Ethics and compliance policies and procedures; and (d) the nature, cost
and character of non-investment management services provided by the investment
adviser and its affiliates.
The Board noted its view of FAM as one of the most experienced global asset
management firms and considered the overall services provided by FAM to be of
high quality. The Board also noted its view of FAM as financially sound and well
managed and noted FAM's affiliation with one of America's largest financial
firms. The Board works closely with the investment adviser in overseeing the
investment adviser's efforts to achieve good performance. As part of this
effort, the Board discusses portfolio manager effectiveness and, when
performance is not satisfactory, discusses with the investment adviser taking
steps such as changing investment personnel.
Annual Consideration of Approval by the Board
In the period prior to the Board meeting to consider renewal of the investment
advisory agreement, the Board requests and receives materials specifically
relating to the investment advisory agreement. These materials include (a)
information compiled by Lipper Inc. ("Lipper") on the fees and expenses,
investment performance and leverage of the Fund as compared to a comparable
group of funds as classified by Lipper; (b) information comparing the Fund's
market price with its net asset value per share; (c) a discussion by the Fund's
portfolio management team regarding investment strategies used by the Fund
during its most recent fiscal year; (d) information on the profitability to the
investment adviser and its affiliates of the investment advisory agreement and
other relationships with the Fund; and (e) information provided by the
investment adviser concerning investment advisory fees charged to other retail
closed-end funds under similar investment mandates. The Board also considers
other matters it deems important to the approval process, such as payments made
for services related to the valuation and pricing of Fund portfolio holdings,
the Fund's portfolio turnover statistics, and direct and indirect benefits to
the investment adviser and its affiliates from their relationship with the Fund.
The Board did not identify any particular information as controlling, and each
member of the Board may have attributed different weights to the various items
considered.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's investment advisory
agreement with FAM (the "FAM Investment Advisory Agreement") in May 2006, the
independent directors' and the Board's review included the following:
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 23
Disclosure of Investment Advisory Agreement (concluded)
Services Provided by the Investment Adviser -- The Board reviewed the nature,
extent and quality of services provided by FAM, including the investment
advisory services and the resulting performance of the Fund. The Board focused
primarily on FAM's investment advisory services and the Fund's investment
performance. The Board compared Fund performance -- both including and excluding
the effects of the Fund's fees and expenses -- to the performance of a
comparable group of funds as classified by Lipper and the performance of a
relevant index or combination of indexes. While the Board reviews performance
data at least quarterly, consistent with the investment adviser's investment
goals, the Board attaches more importance to performance over relatively long
periods of time, typically three to five years. The Board concluded that the
comparative data indicated that the Fund's performance was competitive.
Considering all these factors, the Board concluded that the Fund's performance
and the nature and quality of the services provided supported the continuation
of the FAM Investment Advisory Agreement.
FAM's Personnel and Investment Process -- The Board reviewed the Fund's
investment objectives and strategies. The Board discussed with FAM's senior
management responsible for investment operations and the senior management of
FAM's municipal investing group the strategies being used to achieve the stated
objectives. Among other things, the Board considered the size, education and
experience of FAM's investment staff, its use of technology, and FAM's approach
to training and retaining portfolio managers and other research, advisory and
management personnel. The Board also reviewed FAM's compensation policies and
practices with respect to the Fund's portfolio managers. The Board also
considered the experience of the Fund's portfolio manager and noted that Mr.
Stuebe has more than 15 years of experience in portfolio management. The Board
considered the extensive experience of FAM and its investment staff in analyzing
and managing the types of investments used by the Fund. The Board concluded that
the Fund benefits from that experience.
Management Fees and Other Expenses -- The Board reviewed the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels -- the actual rate includes advisory and
administrative service fees and the effects of any fee waivers -- compared to
the other funds in its Lipper category. The Board also compared the Fund's total
expenses to those of other comparable funds. The Board considered the services
provided to and the fees charged by FAM to other types of clients with similar
investment mandates. The Board determined that the Fund's contractual and actual
management fee rates, as well as total expenses, were competitive with those of
comparable funds. The Board concluded that the Fund's management fee rate and
overall expense ratio were reasonable compared to those of other comparable
funds.
Profitability -- The Board considers the cost of the services provided to the
Fund by the investment adviser and the investment adviser's and its affiliates'
profits relating to the management and distribution of the Fund and the funds
advised by the investment manager and its affiliates. As part of its analysis,
the Board reviewed FAM's methodology in allocating its costs to the management
of the Fund and concluded that there was a reasonable basis for the allocation.
The Board also considered federal court decisions discussing an investment
adviser's profitability and profitability levels considered to be reasonable in
those decisions. The Board concluded that the profits of FAM and its affiliates
were acceptable in relation to the nature and quality of services provided and
given the level of fees and expenses overall.
Economies of Scale -- The Board considered the extent to which economies of
scale might be realized as the assets of the Fund increase and whether there
should be changes in the management fee rate or structure in order to enable the
Fund to participate in these economies of scale. The Board considered economies
of scale to the extent applicable to the Fund's closed-end structure and
determined that no changes were currently necessary.
Conclusion
After the independent directors deliberated in executive session, the entire
Board, including all of the independent directors, approved the renewal of the
existing FAM Investment Advisory Agreement, concluding that the management fee
rate was reasonable in relation to the services provided and that a contract
renewal was in the best interests of the shareholders.
24 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreement -- Matters Considered by the Board
In connection with the combination of Merrill Lynch's investment advisory
business, including Fund Asset Management, L.P. (the "Previous Investment
Adviser"), with that of BlackRock, Inc. ("BlackRock") to create a new
independent company ("New BlackRock") (the "Transaction"), the Board of
Directors considered and approved a new investment advisory agreement (the
"BlackRock Investment Advisory Agreement") between the Fund and BlackRock
Advisors, LLC ("BlackRock Advisors"). The Fund's shareholders subsequently
approved the BlackRock Investment Advisory Agreement and it became effective on
September 29, 2006, replacing the Fund's investment advisory agreement with the
Previous Investment Adviser (the "Previous Investment Advisory Agreement").
The Board discussed the BlackRock Investment Advisory Agreement at telephonic
and in-person meetings held during April and May 2006. The Board, including the
independent directors, approved the BlackRock Investment Advisory Agreement at
an in-person meeting held on May 12, 2006.
To assist the Board in its consideration of the BlackRock Investment Advisory
Agreement, BlackRock provided materials and information about BlackRock,
including its financial condition and asset management capabilities and
organization, and Merrill Lynch provided materials and information about the
Transaction. The independent directors, through their independent legal counsel,
also requested and received additional information from Merrill Lynch and
BlackRock in connection with their consideration of the BlackRock Investment
Advisory Agreement. The additional information was provided in advance of the
May 12, 2006 meetings. In addition, the independent directors consulted with
their counsel and Fund counsel on numerous occasions, discussing, among other
things, the legal standards and certain other considerations relevant to the
directors' deliberations.
At the Board meetings, the directors discussed with Merrill Lynch management and
certain BlackRock representatives the Transaction, its strategic rationale and
BlackRock's general plans and intentions regarding the Fund. At these Board
meetings, representatives of Merrill Lynch and BlackRock made presentations to
and responded to questions from the Board. The directors also inquired about the
plans for and anticipated roles and responsibilities of certain employees and
officers of the Previous Investment Adviser, and of its affiliates, to be
transferred to BlackRock in connection with the Transaction. The independent
directors also conferred separately and with their counsel about the Transaction
and other matters related to the Transaction on a number of occasions, including
in connection with the April and May 2006 meetings. After the presentations and
after reviewing the written materials provided, the independent directors met in
executive sessions with their counsel to consider the BlackRock Investment
Advisory Agreement.
In connection with the Board's review of the BlackRock Investment Advisory
Agreement, Merrill Lynch and/or BlackRock advised the directors about a variety
of matters. The advice included the following, among other matters:
o that there was not expected to be any diminution in the nature, quality
and extent of services provided to the Fund or its shareholders by
BlackRock Advisors, including compliance services;
o that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented
professionals;
o that the Fund was expected to benefit from having access to BlackRock's
state of the art technology and risk management analytic tools, including
investment tools, provided under the BlackRock Solutions(R) brand name;
o that BlackRock had no present intention to alter any applicable expense
waivers or reimbursements that were currently in effect and, while it
reserved the right to do so in the future, it would seek Board approval
before making any changes;
o that in connection with the Transaction, Merrill Lynch and BlackRock had
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in
compliance with the conditions of Section 15(f) of the Investment Company
Act of 1940 (the "1940 Act") in relation to any public funds advised by
BlackRock or the Previous Investment Adviser (or affiliates),
respectively; and
o that Merrill Lynch and BlackRock would derive benefits from the
Transaction and that, as a result, they had a financial interest in the
matters being considered that was different from that of Fund
shareholders.
The directors considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 25
Disclosure of New Investment Advisory Agreement (continued)
o the potential benefits to the Fund's shareholders from being part of a
combined fund family with BlackRock-sponsored funds, including possible
economies of scale and access to investment opportunities;
o the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength
and resources of New BlackRock;
o the compliance policies and procedures of BlackRock Advisors;
o the terms and conditions of the BlackRock Investment Advisory Agreement,
including the fact that the Fund's schedule of total advisory fees would
not increase under the BlackRock Investment Advisory Agreement, but would
remain the same;
o that in May 2005, the Board had performed a full annual review of the
Previous Investment Advisory Agreement, as required by the 1940 Act, and
had determined that the Previous Investment Adviser had the capabilities,
resources and personnel necessary to provide the advisory and
administrative services that were then being provided to the Fund; and
that the advisory and/or management fees paid by the Fund, taking into
account any applicable agreed-upon fee waivers and breakpoints, had
represented reasonable compensation to the Previous Investment Adviser in
light of the services provided, the costs to the Previous Investment
Adviser of providing those services, economies of scale, the fees and
other expenses paid by similar funds (including information provided by
Lipper Inc. ["Lipper"]), and such other matters as the directors had
considered relevant in the exercise of their reasonable judgment; and
o that Merrill Lynch had agreed to pay all expenses of the Fund in
connection with the consideration by the Board of the BlackRock Investment
Advisory Agreement and related agreements and all costs of shareholder
approval of the BlackRock Investment Advisory Agreement and as a result
the Fund would bear no costs in obtaining shareholder approval of the
BlackRock Investment Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the BlackRock Investment Advisory Agreement, the Board assessed
the nature, quality and scope of the services to be provided to the Fund by the
personnel of BlackRock Advisors and its affiliates, including administrative
services, shareholder services, oversight of fund accounting and assistance in
meeting legal and regulatory requirements. In its review of the BlackRock
Investment Advisory Agreement, the Board also considered a range of information
in connection with its oversight of the services to be provided by BlackRock
Advisors and its affiliates. Among the matters considered were: (a) fees (in
addition to management fees) to be paid to BlackRock Advisors and its affiliates
by the Fund; (b) Fund operating expenses paid to third parties; (c) the
resources devoted to and compliance reports relating to the Fund's investment
objective, policies and restrictions, and its compliance with its Code of Ethics
and BlackRock Advisors' compliance policies and procedures; and (d) the nature,
cost and character of non-investment management services to be provided by
BlackRock Advisors and its affiliates.
In the period prior to the Board meeting to consider renewal of the Previous
Investment Advisory Agreement, the Board had requested and received materials
specifically relating to the Previous Investment Advisory Agreement. These
materials included (a) information compiled by Lipper on the fees and expenses
and the investment performance of the Fund as compared to a comparable group of
funds as classified by Lipper; (b) information comparing the Fund's market price
with its net asset value per share; (c) a discussion by the Fund's portfolio
management team on investment strategies used by the Fund during its most recent
fiscal year; (d) information on the profitability to the Previous Investment
Adviser of the Previous Investment Advisory Agreement and other payments
received by the Previous Investment Adviser and its affiliates from the Fund;
and (e) information provided by the Previous Investment Adviser concerning
services related to the valuation and pricing of Fund portfolio holdings, the
Fund's portfolio turnover statistics, and direct and indirect benefits to the
Previous Investment Adviser and its affiliates from their relationship with the
Fund.
In their deliberations, the directors considered information received in
connection with their most recent approval of the continuance of the Previous
Investment Advisory Agreement, in addition to information provided by BlackRock
and BlackRock Advisors in connection with their evaluation of the terms and
conditions of the BlackRock Investment Advisory Agreement. The directors did not
identify any particular information that was all-important or controlling, and
each director attributed different weights to the various factors. The
directors, including a majority of the independent directors, concluded that the
terms of the BlackRock Investment Advisory Agreement are appropriate, that the
fees to be paid are
26 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
reasonable in light of the services to be provided to the Fund, and that the
BlackRock Investment Advisory Agreement should be approved and recommended to
Fund shareholders.
Nature, Quality and Extent of Services Provided -- The Board reviewed the
nature, quality and scope of services provided by the Previous Investment
Adviser, including the investment advisory services and the resulting
performance of the Fund, as well as the nature, quality and extent of services
expected to be provided by BlackRock Advisors. The Board focused primarily on
the Previous Investment Adviser's investment advisory services and the Fund's
investment performance, but also considered certain areas in which both the
Previous Investment Adviser and the Fund received services as part of the
Merrill Lynch complex. The Board compared the Fund's performance -- both
including and excluding the effects of fees and expenses -- to the performance
of a comparable group of funds, and the performance of a relevant index or
combination of indexes. While the Board reviews performance data at least
quarterly, consistent with the Previous Investment Adviser's investment goals,
the Board attaches more importance to performance over relatively long periods
of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, the
directors considered, among other things, the expected impact of the Transaction
on the operations, facilities, organization and personnel of BlackRock Advisors
and how it would affect the Fund; the ability of BlackRock Advisors to perform
its duties after the Transaction; and any anticipated changes to the investment
and other practices of the Fund.
The Board was given information with respect to the potential benefits to the
Fund and its shareholders from having access to BlackRock's state of the art
technology and risk management analytic tools, including the investment tools
provided under the BlackRock Solutions brand name.
The Board was advised that, as a result of Merrill Lynch's equity interest in
BlackRock after the Transaction, the Fund would continue to be subject to
restrictions concerning certain transactions involving Merrill Lynch affiliates
(for example, transactions with a Merrill Lynch broker-dealer acting as
principal) absent revised or new regulatory relief. The directors were advised
that a revision of existing regulatory relief with respect to these restrictions
was being sought from the Securities and Exchange Commission and were advised of
the possibility of the receipt of such revised regulatory relief.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the directors
determined that the nature and quality of services to be provided to the Fund
under the BlackRock Investment Advisory Agreement were expected to be as good as
or better than that provided under the Previous Investment Advisory Agreement.
The directors were advised that BlackRock Advisors did not plan to change the
Fund's portfolio management team upon the closing of the transaction. It was
noted, however, that other changes in personnel were expected to follow the
Transaction and the combination of the operations of the Previous Investment
Adviser and its affiliates with those of BlackRock. The directors noted that if
current portfolio managers or other personnel were to cease to be available
prior to the closing of the Transaction, the Board would consider all available
options, including seeking the investment advisory or other services of
BlackRock affiliates. Accordingly, the Board concluded that, overall, the Board
was satisfied at the present time with assurances from BlackRock and BlackRock
Advisors as to the expected nature, quality and extent of the services to be
provided to the Fund under the BlackRock Investment Advisory Agreement.
Costs of Services Provided and Profitability -- It was noted that, in
conjunction with their recent review of the Previous Investment Advisory
Agreement, the directors had received, among other things, a report from Lipper
comparing the Fund's fees and expenses to those of a peer group selected by
Lipper, and information as to the fees charged by the Previous Investment
Adviser or its affiliates to other registered investment company clients for
investment management services. The Board reviewed the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels -- the actual rate includes advisory fees and the
effects of any fee waivers -- compared to the other funds in its Lipper
category. The Board also compared the Fund's total expenses to those of other
comparable funds. The information showed that the Fund had fees and expenses
within the range of fees and expenses of comparable funds. The Board considered
the services to be provided by and the fees to be charged by BlackRock Advisors
to other funds with similar investment mandates and noted that the fees charged
by BlackRock Advisors in those cases, including fee waivers and expense
reimbursements, were generally comparable to those being charged to the Fund.
The Board concluded that the Fund's management fee rate and overall expense
ratio were reasonable compared to those of other comparable funds.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 27
Disclosure of New Investment Advisory Agreement (concluded)
In evaluating the costs of the services to be provided by BlackRock Advisors
under the BlackRock Investment Advisory Agreement, the Board considered, among
other things, whether advisory fees or other expenses would change as a result
of the Transaction. Based on their review of the materials provided and the fact
that the BlackRock Investment Advisory Agreement is substantially similar to the
Previous Investment Advisory Agreement in all material respects, including the
rate of compensation, the Board determined that the Transaction should not
increase the total fees payable, including any fee waivers and expense
reimbursements, for advisory and administrative services. The Board noted that
it was not possible to predict how the Transaction would affect BlackRock
Advisors' profitability from its relationship with the Fund.
The Board discussed with BlackRock Advisors its general methodology to be used
in determining New BlackRock's profitability with respect to its relationship
with the Fund. The directors noted that they expect to receive profitability
information from BlackRock Advisors on at least an annual basis and thus be in a
position to evaluate whether any adjustments in Fund fees and/or fee breakpoints
would be appropriate.
Fees and Economies of Scale -- The Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in order
to enable the Fund to participate in these economies of scale. The Board
determined that changes were not currently necessary.
In reviewing the Transaction, the directors considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that the BlackRock Investment Advisory Agreement
is substantially similar to the Previous Investment Advisory Agreement in all
material respects, including the rate of compensation, the Board determined that
as a result of the Transaction, the Fund's total advisory fees would be no
higher than the fees under the Previous Investment Advisory Agreement. The
directors noted that in conjunction with their most recent deliberations
concerning the Previous Investment Advisory Agreement, they had determined that
the total fees for advisory and administrative services for the Fund were
reasonable in light of the services provided. It was noted that in conjunction
with the most recent review of the Previous Investment Advisory Agreement, the
Board had received, among other things, a report from Lipper comparing the
Fund's fees, expenses and performance to those of a peer group selected by
Lipper, and information as to the fees charged by the Previous Investment
Adviser to other registered investment company clients for investment management
services. The Board concluded that because the rates for advisory fees for the
Fund would be no higher than the fee rates in effect at the time, the proposed
management fee structure, including any fee waivers, was reasonable in relation
to the services provided and that no changes were currently necessary.
Fall-Out Benefits -- In evaluating the fall-out benefits to be received by
BlackRock Advisors under the BlackRock Investment Advisory Agreement, the Board
considered whether BlackRock Advisors would experience such benefits to the same
extent that the Previous Investment Adviser was experiencing such benefits under
the Previous Investment Advisory Agreement. Based on their review of the
materials provided, including materials received in connection with their most
recent approval of the continuance of the Previous Investment Advisory
Agreement, and their discussions with management of the Previous Investment
Adviser and BlackRock, the directors determined that BlackRock Advisors'
fall-out benefits could include increased ability for BlackRock to distribute
shares of its funds and other investment products. The directors noted that any
fall-out benefits were difficult to quantify with certainty at this time, and
indicated that they would continue to evaluate them going forward.
Investment Performance -- The Board considered investment performance for the
Fund. The Board compared the Fund's performance -- both including and excluding
the effects of fees and expenses -- to the performance of a comparable group of
funds, and the performance of a relevant index or combination of indexes. The
comparative information received from Lipper showed Fund performance at various
levels within the range of performance of comparable funds over different time
periods. While the Board reviews performance data at least quarterly, consistent
with the Previous Investment Adviser's investment goals, the Board attaches more
importance over relatively long periods of time, typically three to five years.
The directors believed the Fund's performance was satisfactory. Also, the Board
took into account the investment performance of funds advised by BlackRock
Advisors. The Board considered comparative information from Lipper which showed
that the performance of the funds advised by BlackRock Advisors was within the
range of performance of comparable funds over different time periods. The Board
noted BlackRock's considerable investment management experience and
capabilities, but was unable to predict what effect, if any, consummation of the
Transaction would have on the future performance of the Fund.
28 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Conclusion -- After the independent directors of the Fund deliberated in
executive session, the entire Board, including the independent directors,
approved the BlackRock Investment Advisory Agreement, concluding that the
management fee rate was reasonable in relation to the services provided and that
the BlackRock Investment Advisory Agreement was in the best interests of the
shareholders. In approving the BlackRock Investment Advisory Agreement, the
Board noted that it anticipated reviewing the continuance of the agreement in
advance of the expiration of the initial two-year period.
New BlackRock Sub-Advisory Agreement -- Matters Considered by the Board
At an in-person meeting held on August 14-16, 2006, the Board of Directors,
including the independent directors, discussed and approved the sub-advisory
agreement (the "BlackRock Sub-Advisory Agreement") between BlackRock Advisors
and its affiliate, BlackRock Investment Management, LLC (the "Sub-Adviser"). The
BlackRock Sub-Advisory Agreement became effective on September 29, 2006, at the
same time the BlackRock Investment Advisory Agreement became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors equal to 59% of the advisory fee received by
BlackRock Advisors from the Fund. BlackRock Advisors pays the Sub-Adviser out of
its own resources, and there is no increase in the Fund expenses as a result of
the BlackRock Sub-Advisory Agreement.
In approving the BlackRock Sub-Advisory Agreement at the August in-person
meeting, the Board reviewed its considerations in connection with its approval
of the BlackRock Investment Advisory Agreement in May 2006. The Board relied on
the same information and considered the same factors as those discussed above in
connection with the approval of the BlackRock Investment Advisory Agreement. In
reviewing the sub-advisory fee rate provided in the BlackRock Sub-Advisory
Agreement, the Board noted the fact that both BlackRock Advisors and the
Sub-Adviser have significant responsibilities under their respective advisory
agreements. BlackRock Advisors remains responsible for oversight of the Fund's
operations and administration, and the Sub-Adviser provides advisory services to
the Fund and is responsible for the day-to-day management of the Fund's
portfolio under the BlackRock Sub-Advisory Agreement. The Board also took into
account the fact that there is no increase in total advisory fees paid by the
Fund as a result of the BlackRock Sub-Advisory Agreement. Under all of the
circumstances, the Board concluded that it was a reasonable allocation of fees
for the Sub-Adviser to receive 59% of the advisory fee paid by the Fund to
BlackRock Advisors.
After the Fund's independent directors deliberated in executive session, the
entire Board, including the independent directors, approved the BlackRock
Sub-Advisory Agreement, concluding that the sub-advisory fee was reasonable in
relation to the services provided and that the BlackRock Sub-Advisory Agreement
was in the best interests of shareholders.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 29
Officers and Directors
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 President 2005 to Vice Chairman and Director of BlackRock, Inc., 122 Funds None
Doll, Jr.* Princeton, NJ and present Global Chief Investment Officer for Equities, 168 Portfolios
08543-9011 Director Chairman of the BlackRock Retail Operating
Age: 52 Committee, and member of the BlackRock Executive
Committee since 2006; President of the Funds advised
by Merrill Lynch Investment Managers, L.P. ("MLIM")
and its affiliates ("MLIM/FAM-advised funds") from
2005 to 2006 and Chief Investment Officer thereof
from 2001 to 2006; President of MLIM and Fund Asset
Management, L.P. ("FAM") from 2001 to 2006; Co-Head
(Americas Region) thereof from 2000 to 2001 and
Senior Vice President from 1999 to 2001; President
and Director of Princeton Services, Inc. ("Princeton
Services") since 2001; President of Princeton
Administrators, L.P. ("Princeton Administrators")
from 2001 to 2006; Chief Investment Officer of
OppenheimerFunds, Inc. in 1999 and Executive Vice
President thereof from 1991 to 1999.
------------------------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which
BlackRock acts as investment adviser. Mr. Doll is an "interested person," as described in the Investment Company
Act, of the Fund based on his current and former positions with BlackRock, Inc. and its affiliates. Directors
serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. As Fund
President, Mr. Doll serves at the pleasure of the Board of Directors.
30 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Officers and Directors (continued)
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors*
------------------------------------------------------------------------------------------------------------------------------------
Ronald W. P.O. Box 9095 Director 1993 to Professor Emeritus of Finance, School of Business, 47 Funds None
Forbes** Princeton, NJ present State University of New York at Albany since 2000 49 Portfolios
08543-9095 and Professor thereof from 1989 to 2000;
Age: 66 International Consultant, Urban Institute,
Washington, D.C. from 1995 to 1999.
------------------------------------------------------------------------------------------------------------------------------------
Cynthia A. P.O. Box 9095 Director 1993 to Professor, Harvard Business School since 1989; 47 Funds Newell
Montgomery Princeton, NJ present Associate Professor, J.L. Kellogg Graduate School of 49 Portfolios Rubbermaid,
08543-9095 Management, Northwestern University from 1985 Inc. (manu-
Age: 54 to 1989; Associate Professor, Graduate School of facturing)
Business Administration, University of Michigan from
1979 to 1985; Director, Harvard Business School
Publishing since 2005; Director, McLean Hospital
since 2005.
------------------------------------------------------------------------------------------------------------------------------------
Jean Margo P.O. Box 9095 Director 2004 to Self-employed consultant since 2001; Counsel of 47 Funds None
Reid Princeton, NJ present Alliance Capital Management (investment adviser) 49 Portfolios
08543-9095 in 2000; General Counsel, Director and Secretary
Age: 61 of Sanford C. Bernstein & Co., Inc. (investment
adviser/broker-dealer) from 1997 to 2000; Secretary,
Sanford C. Bernstein Fund, Inc. from 1994 to 2000;
Director and Secretary of SCB, Inc. since 1998;
Director and Secretary of SCB Partners, Inc. since
2000; and Director of Covenant House from 2001 to
2004.
------------------------------------------------------------------------------------------------------------------------------------
Roscoe S. P.O. Box 9095 Director 2000 to President, Middle East Institute, from 1995 to 2001; 47 Funds None
Suddarth Princeton, NJ present Foreign Service Officer, United States Foreign 49 Portfolios
08543-9095 Service, from 1961 to 1995 and Career Minister from
Age: 71 1989 to 1995; Deputy Inspector General, U.S.
Department of State, from 1991 to 1994; U.S.
Ambassador to the Hashemite Kingdom of Jordan from
1987 to 1990.
------------------------------------------------------------------------------------------------------------------------------------
Richard R. P.O. Box 9095 Director 1993 to Professor of Finance from 1984 to 1995, Dean from 47 Funds Bowne &
West Princeton, NJ present 1984 to 1993 and since 1995 Dean Emeritus of 49 Portfolios Co., Inc.
08543-9095 New York University's Leonard N. Stern School of (financial
Age: 68 Business Administration. printers);
Vornado
Realty Trust
(real estate
company);
Alexander's,
Inc. (real
estate
company)
------------------------------------------------------------------------------------------------------------------------------------
Edward D. P.O. Box 9095 Director 2000 to Self-employed financial consultant since 1994; 47 Funds None
Zinbarg*** Princeton, NJ present Executive Vice President of the Prudential Insurance 49 Portfolios
08543-9095 Company of America from 1988 to 1994; Former Director
Age: 72 of Prudential Reinsurance Company and former Trustee
of the Prudential Foundation.
------------------------------------------------------------------------------------------------------------------------
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
** Chairman of the Board of Directors and the Audit Committee.
*** Mr. Zinbarg is expected to retire from the Board of Directors effective January 1, 2007.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 31
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to Managing Director of BlackRock since 2006; Managing Director of MLIM and FAM in
Burke Princeton, NJ President present 2006; First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof
08543-9011 and and from 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
Age: 46 Treasurer 1999 to
present
------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior Vice 2002 to Managing Director of BlackRock since 2006; Managing Director (Tax-Exempt Fund
Loffredo Princeton, NJ President present Management) of MLIM from 2000 to 2006; Director of MLIM from 1997 to 2000.
08543-9011
Age: 42
------------------------------------------------------------------------------------------------------------------------------------
Fred K. P.O. Box 9011 Vice 1998 to Director of BlackRock since 2006; Director (Tax-Exempt Fund Management) of MLIM
Stuebe Princeton, NJ President present from 2000 to 2006; Vice President of MLIM from 1994 to 2000.
08543-9011
Age: 56
------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Fund Chief 2004 to Managing Director of BlackRock and Fund Chief Compliance Officer since 2006; Chief
Hiller Princeton, NJ Compliance present Compliance Officer of the MLIM/FAM-advised funds and First Vice President and Chief
08543-9011 Officer Compliance Officer of MLIM (Americas Region) from 2004 to 2006; Chief Compliance
Age: 55 Officer of the IQ Funds since 2004; Global Director of Compliance at Morgan Stanley
Investment Management from 2002 to 2004; Managing Director and Global Director of
Compliance at Citigroup Asset Management from 2000 to 2002; Chief Compliance
Officer at Soros Fund Management in 2000; Chief Compliance Officer at Prudential
Financial from 1995 to 2000; Senior Counsel in the Securities and Exchange
Commission's Division of Enforcement in Washington, D.C. from 1990 to 1995.
------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director of BlackRock since 2006; Director (Legal Advisory) of MLIM from 2002 to
Pellegrino Princeton, NJ present 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM from
08543-9011 1997 to 2006; Secretary of MLIM, FAM, FAM Distributors, Inc. and Princeton Services
Age: 46 from 2004 to 2006.
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
------------------------------------------------------------------------------------------------------------------------------------
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
32 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Proxy Results
During the six-month period ended October 31, 2006, BlackRock MuniVest Fund II,
Inc.'s shareholders voted on the following proposals, which were approved at a
special shareholders' meeting on August 15, 2006. A description of the proposals
and number of shares voted were as follows:
----------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------------------------------------------------------------
To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 10,681,626 240,938 564,831
----------------------------------------------------------------------------------------------
To approve a contingent subadvisory agreement
with BlackRock Advisors, Inc. 10,666,135 258,284 562,976
----------------------------------------------------------------------------------------------
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 33
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their nonpublic personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic
personal information about its Clients, except as permitted by law or as is
necessary to service Client accounts. These nonaffiliated third parties are
required to protect the confidentiality and security of this information and to
use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to nonpublic
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the nonpublic
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
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.
34 BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial adviser. Please note that not all investment
advisers, banks or brokerages may offer this service.
BLACKROCK MUNIVEST FUND II, INC. OCTOBER 31, 2006 35
BlackRock 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 BlackRock 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 1-800-441-7762; (2) at
www.blackrock.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.blackrock.com and (2) on the Securities
and Exchange Commission's Web site at http://www.sec.gov.
BlackRock MuniVest Fund II, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#16807-10/06
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge at
www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Ronald W.
Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg (retired as of
December 31, 2006).
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending October 31, 2006 - $28,000
Fiscal Year Ending October 31, 2005 - $27,500
(b) Audit-Related Fees - Fiscal Year Ending October 31, 2006 - $3,500
Fiscal Year Ending October 31, 2005 - $13,700
The nature of the services include professional services rendered in
connection with the registration and issuance of new AMP series of the
Fund, and compliance procedures associated with the Fund's AMPS.
(c) Tax Fees - Fiscal Year Ending October 31, 2006 - $6,000
Fiscal Year Ending October 31, 2005 - $5,700
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending October 31, 2006 - $0
Fiscal Year Ending October 31, 2005 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending October 31, 2006 - $3,204,783
Fiscal Year Ending October 31, 2005 - $6,277,749
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,739,500 , 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Ronald W. Forbes
Cynthia A. Montgomery
Jean Margo Reid
Roscoe S. Suddarth
Richard R. West
Edward D. Zinbarg (retired as of December 31, 2006)
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
Proxy Voting Policies and Procedures
Each Fund's Board of Directors has delegated to the Manager authority
to vote all proxies relating to the Fund's portfolio securities. The
Manager has adopted policies and procedures (the "Proxy Voting
Procedures") with respect to the voting of proxies related to the
portfolio securities held in the account of one or more of its clients,
including a Fund. Pursuant to these Proxy Voting Procedures, the
Manager's primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of each Fund and its
shareholders, and to act in a manner that the Manager believes is most
likely to enhance the economic value of the securities held by the
Fund. The Proxy Voting Procedures are designed to ensure that the
Manager considers the interests of its clients, including each Fund,
and not the interests of the Manager, when voting proxies and that real
(or perceived) material conflicts that may arise between the Manager's
interest and those of the Manager's clients are properly addressed and
resolved.
In order to implement the Proxy Voting Procedures, the Manager has
formed a Proxy Voting Committee (the "Committee"). The Committee, which
is a subcommittee of the Manager's Equity Investment Policy Oversight
Committee ("EIPOC"), is comprised of a senior member of the Manager's
equity management group who is also a member of EIPOC, one or more
other senior investment professionals appointed by EIPOC, portfolio
managers and investment analysts appointed by EIPOC and any other
personnel EIPOC deems appropriate. The Committee will also include two
non-voting representatives from the Manager's Legal Department
appointed by the Manager's General Counsel. The Committee's membership
shall be limited to full-time employees of the Manager. No person with
any investment banking, trading, retail brokerage or research
responsibilities for the Manager's affiliates may serve as a member of
the Committee or participate in its decision making (except to the
extent such person is asked by the Committee to present information to
the Committee on the same basis as other interested knowledgeable
parties not affiliated with the Manager might be asked to do so). The
Committee determines how to vote the proxies of all clients, including
a Fund, that have delegated proxy voting authority to the Manager and
seeks to ensure that all votes are consistent with the best interests
of those clients and are free from unwarranted and inappropriate
influences. The Committee establishes general proxy voting policies for
the Manager and is responsible for determining how those policies are
applied to specific proxy votes, in light of each issuer's unique
structure, management, strategic options and, in certain circumstances,
probable economic and other anticipated consequences of alternate
actions. In so doing, the Committee may determine to vote a particular
proxy in a manner contrary to its generally stated policies. In
addition, the Committee will be responsible for ensuring that all
reporting and recordkeeping requirements related to proxy voting are
fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not
to adopt a specific voting policy applicable to that issue. The Manager
believes that certain proxy voting issues require investment analysis -
such as approval of mergers and other significant corporate
transactions - akin to investment decisions, and are, therefore, not
suitable for general guidelines. The Committee may elect to adopt a
common position for the Manager on certain proxy votes that are akin to
investment decisions, or determine to permit the portfolio manager to
make individual decisions on how best to maximize economic value for a
Fund (similar to normal buy/sell investment decisions made by such
portfolio managers). While it is expected that the Manager will
generally seek to vote proxies over which the Manager exercises voting
authority in a uniform manner for all the Manager's clients, the
Committee, in conjunction with a Fund's portfolio manager, may
determine that the Fund's specific circumstances require that its
proxies be voted differently.
To assist the Manager in voting proxies, the Committee has retained
Institutional Shareholder Services ("ISS"). ISS is an independent
adviser that specializes in providing a variety of fiduciary-level
proxy-related services to institutional investment managers, plan
sponsors, custodians, consultants, and other institutional investors.
The services provided to the Manager by ISS include in-depth research,
voting recommendations (although the Manager is not obligated to follow
such recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Manager's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For
instance, under the Proxy Voting Procedures, the Manager generally will
not seek to vote proxies related to portfolio securities that are on
loan, although it may do so under certain circumstances. In addition,
the Manager will vote proxies related to securities of foreign issuers
only on a best efforts basis and may elect not to vote at all in
certain countries where the Committee determines that the costs
associated with voting generally outweigh the benefits. The Committee
may at any time override these general policies if it determines that
such action is in the best interests of a Fund.
From time to time, the Manager may be required to vote proxies in
respect of an issuer where an affiliate of the Manager (each, an
"Affiliate"), or a money management or other client of the Manager,
including investment companies for which the Manager provides
investment advisory, administrative and/or other services (each, a
"Client"), is involved. The Proxy Voting Procedures and the Manager's
adherence to those procedures are designed to address such conflicts of
interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates
and Clients. If, however, an issue representing a non-routine matter
that is material to an Affiliate or a widely known Client is involved
such that the Committee does not reasonably believe it is able to
follow its guidelines (or if the particular proxy matter is not
addressed by the guidelines) and vote impartially, the Committee may,
in its discretion for the purposes of ensuring that an independent
determination is reached, retain an independent fiduciary to advise the
Committee on how to vote or to cast votes on behalf of the Manager's
clients.
In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent
fiduciary, the Committee may pass the voting power to a subcommittee,
appointed by EIPOC (with advice from the Secretary of the Committee),
consisting solely of Committee members selected by EIPOC. EIPOC shall
appoint to the subcommittee, where appropriate, only persons whose job
responsibilities do not include contact with the Client and whose job
evaluations would not be affected by the Manager's relationship with
the Client (or failure to retain such relationship). The subcommittee
shall determine whether and how to vote all proxies on behalf of the
Manager's clients or, if the proxy matter is, in their judgment, akin
to an investment decision, to defer to the applicable portfolio
managers, provided that, if the subcommittee determines to alter the
Manager's normal voting guidelines or, on matters where the Manager's
policy is case-by-case, does not follow the voting recommendation of
any proxy voting service or other independent fiduciary that may be
retained to provide research or advice to the Manager on that matter,
no proxies relating to the Client may be voted unless the Secretary, or
in the Secretary's absence, the Assistant Secretary of the Committee
concurs that the subcommittee's determination is consistent with the
Manager's fiduciary duties.
In addition to the general principles outlined above, the Manager has
adopted voting guidelines with respect to certain recurring proxy
issues that are not expected to involve unusual circumstances. These
policies are guidelines only, and the Manager may elect to vote
differently from the recommendation set forth in a voting guideline if
the Committee determines that it is in a Fund's best interest to do so.
In addition, the guidelines may be reviewed at any time upon the
request of a Committee member and may be amended or deleted upon the
vote of a majority of Committee members present at a Committee meeting
at which there is a quorum.
The Manager has adopted specific voting guidelines with respect to the
following proxy issues:
o Proposals related to the composition of the board of directors of
issuers other than investment companies. As a general matter, the
Committee believes that a company's board of directors (rather than
shareholders) is most likely to have access to important, nonpublic
information regarding a company's business and prospects, and is,
therefore, best-positioned to set corporate policy and oversee
management. The Committee, therefore, believes that the foundation of
good corporate governance is the election of qualified, independent
corporate directors who are likely to diligently represent the
interests of shareholders and oversee management of the corporation in
a manner that will seek to maximize shareholder value over time. In
individual cases, the Committee may look at a nominee's number of other
directorships, history of representing shareholder interests as a
director of other companies or other factors, to the extent the
Committee deems relevant.
o Proposals related to the selection of an issuer's independent
auditors. As a general matter, the Committee believes that corporate
auditors have a responsibility to represent the interests of
shareholders and provide an independent view on the propriety of
financial reporting decisions of corporate management. While the
Committee will generally defer to a corporation's choice of auditor, in
individual cases, the Committee may look at an auditors' history of
representing shareholder interests as auditor of other companies, to
the extent the Committee deems relevant.
o Proposals related to management compensation and employee benefits.
As a general matter, the Committee favors disclosure of an issuer's
compensation and benefit policies and opposes excessive compensation,
but believes that compensation matters are normally best determined by
an issuer's board of directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set arbitrary
restrictions on compensation or benefits will, therefore, generally not
be supported.
o Proposals related to requests, principally from management, for
approval of amendments that would alter an issuer's capital structure.
As a general matter, the Committee will support requests that enhance
the rights of common shareholders and oppose requests that appear to be
unreasonably dilutive.
o Proposals related to requests for approval of amendments to an
issuer's charter or by-laws. As a general matter, the Committee opposes
poison pill provisions.
o Routine proposals related to requests regarding the formalities of
corporate meetings.
o Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the
Committee believes that a fund's board of directors (rather than its
shareholders) is best positioned to set fund policy and oversee
management. However, the Committee opposes granting boards of directors
authority over certain matters, such as changes to a fund's investment
objective, which the Investment Company Act envisions will be approved
directly by shareholders.
o Proposals related to limiting corporate conduct in some manner that
relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are
inappropriate forums for discussion of larger social issues, and
opposes shareholder resolutions "micromanaging" corporate conduct or
requesting release of information that would not help a shareholder
evaluate an investment in the corporation as an economic matter. While
the Committee is generally supportive of proposals to require corporate
disclosure of matters that seem relevant and material to the economic
interests of shareholders, the Committee is generally not supportive of
proposals to require disclosure of corporate matters for other
purposes.
Information about how a Fund voted proxies relating to securities held
in the Fund's portfolio during the most recent 12 month period ended
October 31 is available without charge (1) at www.blackrock.com and (2)
on the Commission's web site at http://www.sec.gov.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - as
of October 31, 2006.
(a)(1) BlackRock MuniVest Fund II, Inc. is managed by a team of
investment professionals comprised of Fred K. Stuebe, Director at
BlackRock, Theodore R. Jaeckel, Jr., CFA, Managing Director at
BlackRock, and Walter O'Connor, Managing Director at BlackRock. Each is
a member of BlackRock's municipal tax-exempt management group. Mr.
Jaeckel and Mr. O'Connor are responsible for setting the Fund's overall
investment strategy and overseeing the management of the Fund. Mr.
Stuebe is the Fund's lead portfolio manager and is responsible for the
day-to-day management of the Fund's portfolio and the selection of its
investments. Messrs. Jaeckel and O'Connor have been members of the
Fund's management team since 2006 and Mr. Stuebe has been the Fund's
portfolio manager since 1993.
Mr. Jaeckel joined BlackRock in 2006. Prior to joining BlackRock, he
was a Managing Director (Municipal Tax-Exempt Fund Management) of
Merrill Lynch Investment Managers, L.P. ("MLIM") from 2005 to 2006 and
a Director of MLIM from 1997 to 2005. He has been a portfolio manager
with BlackRock or MLIM since 1991.
Mr. O'Connor joined BlackRock in 2006. Prior to joining BlackRock, he
was a Managing Director (Municipal Tax-Exempt Fund Management) of MLIM
from 2003 to 2006 and was a Director of MLIM from 1997 to 2002. He has
been a portfolio manager with BlackRock or MLIM since 1991.
Mr. Stuebe joined BlackRock in 2006. Prior to joining BlackRock, he was
a Director (Municipal Tax-Exempt Fund Management) of MLIM since 2000.
From 1994 to 2000, he was a Vice President of MLIM. He has been a
portfolio manager with BlackRock or MLIM since 1989.
(a)(2) As of October 31, 2006:
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
Other Other
Registered Other Pooled Registered Other Pooled
(i) Name of Investment Investment Other Investment Investment Other
Portfolio Manager Companies Vehicles Accounts Companies Vehicles Accounts
--------------- --------------- --------------- --------------- --------------- ---------------
Fred K. Stuebe 8 0 0 0 0 0
$ 3,203,297,536 $ 0 $ 0 $ 0 $ 0 $ 0
Theodore R.
Jaeckel, Jr. 82 0 0 0 0 0
$30,030,610,443 $ 0 $ 0 $ 0 $ 0 $ 0
Walter O'Connor 82 0 0 0 0 0
$30,030,610,443 $ 0 $ 0 $ 0 $ 0 $ 0
(iv) Potential Material Conflicts of Interest
BlackRock has built a professional working environment, firm-wide
compliance culture and compliance procedures and systems designed to
protect against potential incentives that may favor one account over
another. BlackRock has adopted policies and procedures that address the
allocation of investment opportunities, execution of portfolio
transactions, personal trading by employees and other potential
conflicts of interest that are designed to ensure that all client
accounts are treated equitably over time. Nevertheless, BlackRock
furnishes investment management and advisory services to numerous
clients in addition to the Fund, and BlackRock may, consistent with
applicable law, make investment recommendations to other clients or
accounts (including accounts which are hedge funds or have performance
or higher fees paid to BlackRock, or in which portfolio managers have a
personal interest in the receipt of such fees), which may be the same
as or different from those made to the Fund. In addition, BlackRock,
its affiliates and any officer, director, stockholder or employee may
or may not have an interest in the securities whose purchase and sale
BlackRock recommends to the Fund. BlackRock, or any of its affiliates,
or any officer, director, stockholder, employee or any member of their
families may take different actions than those recommended to the Fund
by BlackRock with respect to the same securities. Moreover, BlackRock
may refrain from rendering any advice or services concerning securities
of companies of which any of BlackRock's (or its affiliates') officers,
directors or employees are directors or officers, or companies as to
which BlackRock or any of its affiliates or the officers, directors and
employees of any of them has any substantial economic interest or
possesses material non-public information. Each portfolio manager also
may manage accounts whose investment strategies may at times be opposed
to the strategy utilized for the Fund. In this connection, it should be
noted that certain portfolio managers currently manage certain accounts
that are subject to performance fees. In addition, certain portfolio
managers assist in managing certain hedge funds and may be entitled to
receive a portion of any incentive fees earned on such funds and a
portion of such incentive fees may be voluntarily or involuntarily
deferred. Additional portfolio managers may in the future manage other
such accounts or funds and may be entitled to receive incentive fees.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and
must treat each client fairly. When BlackRock purchases or sells
securities for more than one account, the trades must be allocated in a
manner consistent with its fiduciary duties. BlackRock attempts to
allocate investments in a fair and equitable manner among client
accounts, with no account receiving preferential treatment. To this
end, BlackRock has adopted a policy that is intended to ensure that
investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve reasonable
efficiency in client transactions and provide BlackRock with sufficient
flexibility to allocate investments in a manner that is consistent with
the particular investment discipline and client base.
(a)(3) As of October 31, 2006:
Portfolio Manager Compensation
The portfolio manager compensation program of BlackRock and its
affiliates, including the Investment Adviser, is critical to BlackRock's ability
to attract and retain the most talented asset management professionals. This
program ensures that compensation is aligned with maximizing investment returns
and it provides a competitive pay opportunity for competitive performance.
Compensation Program
The elements of total compensation for certain BlackRock and its
affiliates portfolio managers are a fixed base salary, annual performance-based
cash and stock compensation (cash and stock bonus) and other benefits. BlackRock
has balanced these components of pay to provide portfolio managers with a
powerful incentive to achieve consistently superior investment performance. By
design, portfolio manager compensation levels fluctuate -- both up and down --
with the relative investment performance of the portfolios that they manage.
Base Salary
Under the BlackRock approach, like that of many asset management firms,
base salaries represent a relatively small portion of a portfolio manager's
total compensation. This approach serves to enhance the motivational value of
the performance-based (and therefore variable) compensation elements of the
compensation program.
Performance-Based Compensation
BlackRock believes that the best interests of investors are served by
recruiting and retaining exceptional asset management talent and managing their
compensation within a consistent and disciplined framework that emphasizes pay
for performance in the context of an intensely competitive market for talent. To
that end, certain BlackRock and its affiliates portfolio manager incentive
compensation is based on a formulaic compensation program.
BlackRock's formulaic portfolio manager compensation program includes:
investment performance relative to a subset of general closed-end, leveraged,
municipal debt funds over 1-, 3- and 5-year performance periods and a measure of
operational efficiency. Portfolio managers are compensated based on the pre-tax
performance of the products they manage. If a portfolio manager's tenure is less
than 5-years, performance periods will reflect time in position. Portfolio
managers are compensated based on the products they manage. A discretionary
element of portfolio manager compensation may include consideration of:
financial results, expense control, profit margins, strategic planning and
implementation, quality of client service, market share, corporate reputation,
capital allocation, compliance and risk control, leadership, workforce
diversity, supervision, technology and innovation. All factors are considered
collectively by BlackRock management.
Cash Bonus
Performance-based compensation is distributed to portfolio managers in a
combination of cash and stock. Typically, the cash bonus, when combined with
base salary, represents more than 60% of total compensation for portfolio
managers.
Stock Bonus
A portion of the dollar value of the total annual performance-based bonus
is paid in restricted shares of BlackRock stock. Paying a portion of annual
bonuses in stock puts compensation earned by a portfolio manager for a given
year "at risk" based on the Company's ability to sustain and improve its
performance over future periods.
The ultimate value of stock bonuses is dependent on future BlackRock stock
price performance. As such, the stock bonus aligns each portfolio manager's
financial interests with those of BlackRock shareholders and encourages a
balance between short-term goals and long-term strategic objectives. Management
strongly believes that providing a significant portion of competitive
performance-based compensation in stock is in the best interests of investors
and shareholders. This approach ensures that portfolio managers participate as
shareholders in both the "downside risk" and "upside opportunity" of the
Company's performance. Portfolio managers therefore have a direct incentive to
protect BlackRock's reputation for integrity.
Other Compensation Programs
Portfolio managers who meet relative investment performance and financial
management objectives during a performance year are eligible to participate in a
deferred cash program. Awards under this program are in the form of deferred
cash that may be benchmarked to a menu of certain BlackRock mutual funds
(including their own funds) during a five-year vesting period. The deferred cash
program aligns the interests of participating portfolio managers with the
investment results of BlackRock products and promotes continuity of successful
portfolio management teams.
Other Benefits
Portfolio managers are also eligible to participate in broad-based plans
offered generally to BlackRock employees, including broad-based retirement,
401(k), health, and other employee benefit plans.
(a)(4) Beneficial Ownership of Securities. As of October 31, 2006, neither
of Messrs. Jaeckel and O'Connor beneficially owns stock issued by
the Fund. Mr. Stuebe beneficially owns stock issued by the Fund in
the range of over $100,000.
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 principal executive and principal financial officers
have evaluated the Registrant's disclosure controls and procedures,
including internal control over financial reporting, within 90 days of
this filing. Such principal officers have concluded that the
Registrant's disclosure controls and procedures were effective in design
and operation to reasonably ensure that information required to be
disclosed by the Registrant in this Form N-CSR was recorded, processed,
summarized, and reported within the required time periods, and were
sufficient to form the basis of the certifications required by Rule
30a-(2) of the Investment Company Act of 1940, as amended. Prior to
reaching that conclusion, such principal officers had become aware of
matters relating to the Registrant's participation in certain inverse
floater structures that necessitated adjustments to financial
information included in Item 1 of this filing. As a result, management
of the Registrant has reevaluated certain disclosure controls and
procedures determined not to be effective, as discussed more fully
below.
Management of the Registrant is responsible for establishing and
maintaining effective internal control over financial reporting. In
fulfilling this responsibility, estimates and judgments by management
are required to assess the expected benefits and related costs of
controls. The Registrant's internal control over financial reporting is
a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. generally
accepted accounting principles. Such internal control includes policies
and procedures that provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of a
registrant's assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
A control deficiency exists when the design or operation of a control
does not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect misstatements
on a timely basis. A significant deficiency is a control deficiency, or
combination of control deficiencies, that adversely affects the
Registrant's ability to initiate, authorize, record, process or report
financial data reliably in accordance with generally accepted accounting
principles such that there is more than a remote likelihood that a
misstatement of the Registrant's annual or interim financial statements
that is more than inconsequential will not be prevented or detected. A
material weakness is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote likelihood
that a material misstatement of the annual or interim financial
statements will not be prevented or detected.
Prior to the filing of this Form N-CSR, the Registrant identified the
following control deficiency, that was determined to be a material
weakness, as defined above, in the Registrant's internal control over
financial reporting. The Registrant's controls related to the review and
analysis of relevant terms and conditions of transfers of certain assets
pertaining to inverse floater structures were not operating effectively
to appropriately determine whether the transfers of assets qualified for
sale accounting under the provisions of Statement of Financial
Accounting Standards No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS 140").
Accordingly, the Registrant's financial statements as of and for the
period ended October 31, 2006, including prior periods where applicable,
were adjusted prior to being issued to appropriately reflect transfers
of such securities as secured borrowings and to report the related
income and expense. These adjustments had no impact on net assets, net
asset value per share or total return.
Management of the Registrant believes that subsequent to the
adjustments, the Registrant's accounting treatment of such transfers is
appropriate under SFAS 140. Additionally, management of the Registrant
is taking such further actions as are necessary to enhance its internal
control over financial reporting, and in doing so, increase the
effectiveness of such controls, so that such transfers of assets are
reviewed and evaluated appropriately under the provisions of SFAS 140.
11(b) - There have been no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940, as amended) that occurred during the second half of
the Registrant's fiscal year that have materially affected, or are
reasonably likely to materially affect, the Registrant's internal
control over financial reporting. However, as discussed above,
subsequent to October 31, 2006, the Registrant is further enhancing
controls related to the application of SFAS 140.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
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.
BlackRock MuniVest Fund II, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock MuniVest Fund II, Inc.
Date: January 18, 2007
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
BlackRock MuniVest Fund II, Inc.
Date: January 18, 2007
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock MuniVest Fund II, Inc.
Date: January 18, 2007