MUNIVEST
FUND II, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1998
<PAGE>
MUNIVEST FUND II, INC.
The Benefits and
Risks of
Leveraging
MuniVest Fund II, Inc. utilizes leveraging to seek to enhance the yield and net
asset value of its Common Stock. However, these objectives cannot be achieved in
all interest rate environments. To leverage, the Fund issues Preferred Stock,
which pays dividends at prevailing short-term interest rates, and invests the
proceeds in long-term municipal bonds. The interest earned on these investments
is paid to Common Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset value of the
Fund's Common Stock. However, in order to benefit Common Stock shareholders, the
yield curve must be positively sloped; that is, short-term interest rates must
be lower than long-term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders. If either of
these conditions change, then the risks of leveraging will begin to outweigh the
benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock share holders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value on the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
Managed Dividend
Policy
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more or less than
the amount of net investment income earned by the Fund during such month. The
Fund's current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets, Liabilities and Capital, which comprises
part of the financial information included in this report.
<PAGE>
MuniVest Fund II, Inc., April 30, 1998
DEAR SHAREHOLDER
For the six-month period ended April 30, 1998, the Common Stock of MuniVest Fund
II, Inc. earned $0.422 per share income dividends, which included earned and
unpaid dividends of $0.070. This represents a net annualized yield of 5.90%,
based on a month-end net asset value of $14.41 per share. Over the same period,
the total investment return on the Fund's Common Stock was +1.75%, based on a
change in per share net asset value from $14.59 to $14.41, and assuming
reinvestment of $0.426 per share income dividends.
For the six-month period ended April 30, 1998, the Fund's Auction Market
Preferred Stock had an average yield of 3.93% for Series A, 3.81% for Series B
and 3.56% for Series C.
The Municipal Market Environment
During the six months ended April 30, 1998, bond yields generally moved lower,
and by mid-January 1998 had declined to recent historic lows. Long-term US
Treasury bond yields declined 20 basis points (0.20%) during the same period and
stood at 5.95% by April 30, 1998. Similarly, long-term uninsured tax-exempt bond
yields, as measured by the Bond Buyer Revenue Bond Index, fell approximately 35
basis points to 5.25%, a level not seen since the mid-1970s. While low inflation
has supported lower interest rates, much of the decline in bond yields in late
1997 and early 1998 was driven more by the turmoil in Asian financial markets
than by domestic economic fundamentals. Weak economic conditions in Asia were
expected to negatively impact US growth through reduced export demand.
Additionally, inflation in the United States was also expected to decline in
response to lower prices on goods imported from Asian manufacturers.
However, in recent months, many investors have become increasingly concerned
that most of the downturn in Asia, especially in Japan, has already occurred and
any future deterioration will not be severe enough to constrain US economic
growth and inflationary pressures. These concerns served to push interest rates
higher in the latter part of the period, causing fixed-income yields to retrace
much of their earlier gains.
Thus far in 1998, the municipal bond market has experienced unexpectedly strong
supply pressures. These supply pressures have prevented tax-exempt bond yields
from declining as much as US Treasury bond yields. Over the last six months,
more than $135 billion in new tax-exempt bonds were underwritten, an increase of
over 40% compared to the same period a year ago. During the last three months,
municipali ties issued more than $72 billion in new securities, an increase of
over 60% compared to the same three-month period in 1997. Additionally,
corporate issuers have also viewed current interest rate levels as an
opportunity to issue significant amounts of taxable securities. Thus far in
1998, more than $100 billion in investment-grade corporate bonds have been
underwritten, an increase of over 60% relative to the compar- able period a year
ago. This sizeable corporate bond issuance has tended to support generally
higher fixed-income yields and reduce the demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely to be
maintained. Continued increases in bond issuance will require lower and lower
tax-exempt bond yields to generate the economic savings necessary for additional
municipal bond refinancings. Preliminary estimates for 1998 total municipal bond
issuance are presently in the $200 billion-$225 billion range. These estimates
suggest that recent supply pressures are likely to abate later in the year.
Municipal bond investors received approximately $30 billion earlier this year in
coupon payments, bond maturities and proceeds from early redemptions. The demand
generated by these assets has helped offset the increase in supply seen thus far
this year. Furthermore, looking ahead, June and July have also tended to be
periods of strong investor demand as seasonal factors are likely to generate
strong income flows similar to those seen earlier this year.
It is also possible that at least some of the recent economic strength seen in
the United States will be reversed in the coming months. A particularly mild
winter has been partially responsible for a strong housing sector, as well as
other construction industries. This recent strong trend may not be sustained and
may lead to weaker construction growth later this year. Additionally, strong
economic growth in 1997 and the increased use of electronic tax filing have
resulted in larger and earlier Federal and state income tax refunds to many
individuals. These refunds appear to have supported strong consumer spending
in recent months, but may be borrowing against weaker spending later this year.
In addition, the continued impact of the Asian financial crisis on the US
domestic economy's future growth remains unclear. Barring a dramatic and
unexpected resurgence of domestic inflation, we do not believe that the Federal
Reserve Board will be willing to raise interest rates until the full impact of
the Asian situation can be established.
All these factors suggest that over the near term, tax-exempt as well as taxable
bond yields are unlikely to rise by any appreciable amount. Recent supply
pressures have caused municipal bond yield ratios to rise relative to US
Treasury bond yields. At April 30, 1998, long-term tax-exempt bond yields were
at attractive yield ratios relative to comparable US Treasury securities (over
90%), and well in excess of their expected range of 85%-88%. Any further
pressure upon the municipal market may well represent a very attractive
investment opportunity.
Portfolio Strategy
During the six months ended April 30, 1998, we gradually adopted a more
constructive investment outlook. We believe that the current absence of
inflationary pressures will continue, and further slowing of US economic growth
is likely as a result of the ongoing Asian financial crisis. In our opinion,
slower economic growth, coupled with minimal inflation, should result in
interest rate declines. Therefore, we have used recent periods of interest rate
volatility to add higher-yielding issues to the Fund's holdings. The Fund has
remained fully invested in order to seek to enhance shareholder income and
participate in improving fixed-income markets that we expect in the coming
months.
During the period, short-term tax-exempt interest rates traded in a relative
narrow range centered around 3.50%. Recently, these interest rates rose slightly
in response to temporary seasonal tax factors that should abate quickly in the
coming weeks. Despite the recent moderate increase in short-term interest rates,
throughout the period the leveraging of the Fund's Preferred Stock continued to
generate a significant yield enhancement to Common Stock shareholders. However,
should the spread between short-term and long-term interest rates narrow, the
benefits of the leverage will decline and the yield on the Common Stock will be
reduced. (For a complete explanation of the benefits and risks of leveraging,
see page 1 of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniVest Fund II, Inc., and we look
forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Fred K. Stuebe
Fred K. Stuebe
Vice President and Portfolio Manager
June 4, 1998
2 & 3
<PAGE>
MuniVest Fund II, Inc., April 30, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alabama--1.7% AAA Aaa $ 7,250 Jefferson County, Alabama, Sewer Revenue Bonds, RITR, Series 7,
6.27% due 2/01/2027 (c)(e) $ 7,259
=================================================================================================================================
Alaska--1.3% AA Aa3 5,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Sohio
Pipeline--British Petroleum Oil), 7.125% due 12/01/2025 5,544
=================================================================================================================================
Arizona--1.1% A1+ P1 1,000 Coconino County, Arizona, PCR (Arizona Public Service Corporation
--Navajo Project), VRDN, AMT, Series A, 4.25% due 10/01/2029 (a) 1,000
AAA Aaa 2,315 Maricopa County, Arizona, School District No. 3, Refunding and
Improvement Bonds (Tempe Elementary School), UT, 7.50%
due 7/01/2010 (c) 2,886
A1+ VMIG1+ 700 Phoenix, Arizona, VRDN, UT, Series 95-2, 4.10% due 6/01/2020 (a) 700
=================================================================================================================================
California--3.3% AA Aaa 3,825 California State Department of Water Resources, Water Systems
Revenue Bonds (Central Valley Project), Series P, 6.50% due
12/01/2006 (i) 4,371
A Aaa 2,000 California State Public Works Board, Lease Revenue Bonds
(Various Community College Projects), Series B, 7% due
3/01/2004 (i) 2,296
AAA Aaa 6,495 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2002 (d)(i) 7,141
=================================================================================================================================
Colorado--2.2% NR* Aa2 2,365 Colorado HFA, S/F Program, AMT, Senior Series F, 8.625% due
6/01/2025 (h) 2,624
A1+ VMIG1+ 100 Colorado Health Facilities Authority Revenue Bonds (Boulder
Community Hospital Project), VRDN, Series C, 4.40% due
10/01/2014 (a)(d) 100
BBB Baa1 5,940 Denver, Colorado, City and County Airport Revenue Bonds, AMT,
Series C, 6.75% due 11/15/2022 6,417
=================================================================================================================================
Delaware--0.6% AAA Aaa 2,250 Delaware Transportation Authority, Transportation System Revenue
Bonds, Senior Series, 7% due 7/01/2004 (c)(i) 2,592
=================================================================================================================================
Florida--1.0% BBB Baa1 3,655 Escambia County, Florida, PCR (Champion International Corp.
Project), AMT, 6.90% due 8/01/2022 3,991
=================================================================================================================================
Georgia--4.9% Georgia Municipal Electric Authority, Power Revenue Bonds:
A A 1,250 Series X, 6.50% due 1/01/2020 1,431
A+ A3 11,035 Series Y, 6.50% due 1/01/2017 12,521
NR* NR* 6,000 UT, Series W, 6.60% due 1/01/201 6,897
=================================================================================================================================
Hawaii--0.5% A A2 2,000 Hawaii State Department of Budget and Finance, Special Purpose
Revenue Bonds (Kapi'Olani Health Obligation), 6.25% due 7/01/2021 2,135
=================================================================================================================================
Idaho--0.6% NR* Aaa 2,390 Idaho Housing Agency, S/F Mortgage, AMT, Series E-2, 6.90% due
1/01/2027 2,548
=================================================================================================================================
Illinois--14.2% AA- Aa3 6,925 Chicago, Illinois, Gas Supply Revenue Bonds (People's Gas and
Light), Series A, 6.875% due 3/01/2015 7,543
AAA Aaa 3,000 Chicago, Illinois, Sales Tax Revenue Bonds, RITR, Series 24, 6.27%
due 1/01/2027 (c)(e) 2,959
AAA Aaa 10,000 Chicago, Illinois, Wastewater Transmission Revenue Refunding Bonds,
Series A, 5.35%** due 1/01/2028 (d) 1,953
Illinois HDA, M/F Housing Program:
A+ A1 6,900 Refunding, Series A, 7.375% due 7/01/2017 7,492
A+ A1 6,500 Series 5, 6.75% due 9/01/2023 6,921
A+ Aa2 2,550 Illinois HDA, Residential Mortgage Revenue Bonds, AMT, Series C-1,
6.874% due 2/01/2018 2,711
NR* Baa1 3,235 Illinois Health Facilities Authority Revenue Bonds (Holy Cross
Hospital Project), 6.75% due 3/01/2024 3,530
Illinois Regional Transportation Authority:
AAA Aaa 1,500 Series A, 7.20% due 11/01/2020 (b) 1,888
AAA Aaa 7,000 Series A, 6.70% due 11/01/2021 (c) 8,365
AAA Aaa 2,500 UT, Series C, 7.75% due 6/01/2020 (c) 3,328
AAA Aaa 1,000 UT, Series C, 7.10% due 6/01/2025 (c) 1,132
Metropolitan Pier and Exposition Authority, Illinois, Dedicated State
Tax Revenue Refunding Bonds (McCormick Plant Expansion Project) (d):
AAA Aaa 24,575 Series A, 5.30%** due 12/15/2024 5,697
AAA Aaa 32,995 Series B, 5.096%** due 6/15/2028 6,285
=================================================================================================================================
Indiana--11.5% Indiana Bond Bank Revenue Bonds (Guarantee--State Revolving Fund
Program), Series A:
AAA NR* 2,750 6.875% due 2/01/2012 3,115
AAA NR* 5,750 6.75% due 2/01/2017 6,473
AA Aa3 2,500 Indiana Health Facilities Financing Authority, Hospital Revenue
Refunding Bonds (Clarian Health Partners Inc.), Series A, 6%
due 2/15/2021 2,625
NR* Aaa 5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds, Series A,
6.80% due 1/01/2017 5,856
Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A:
AA- Aa3 2,000 7.25% due 6/01/2015 2,466
AA- Aa3 3,775 6.80% due 12/01/2016 4,499
Indianapolis, Indiana, Local Public Improvement Bond Bank, Refunding,
Series D:
AA NR* 8,750 6.75% due 2/01/2014 10,501
AA NR* 11,800 6.75% due 2/01/2020 13,002
=================================================================================================================================
</TABLE>
================================================================================
Portfolio
Abbreviations
To simplify the listings of MuniVest Fund II, Inc.'s portfolio holdings in the
Schedule of Investments, we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniVest Fund II, Inc., April 30, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Louisiana--3.1% NR* A3 $ 2,000 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Co.
Project), 7.75% due 8/15/2022 $ 2,294
BB NR* 10,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project),
6.50% due 1/01/2017 10,749
=================================================================================================================================
Maine--1.5% AA Aa2 6,085 Maine State Housing Authority, Mortgage Purchase,
AMT, Series C-2, 6.875% due 11/15/2023 6,478
=================================================================================================================================
Maryland--0.9% A- NR* 2,000 Maryland State Energy Financing Administration, Solid Waste
Disposal, Limited Obligation Revenue Bonds (Wheelabrator Water
Project), AMT, 6.45% due 12/01/2016 2,181
Maryland State Health and Higher Educational Facilities
Authority Revenue Bonds:
NR* VMIG1+ 100 (Pooled Loan Program), VRDN, Series A, 4.15% due
4/01/2035 (a) 100
AAA Aaa 1,000 (University of Maryland Medical Systems), Series B, 7% due
7/01/2022 (c) 1,241
University of Maryland, University Revenue Bonds (Revolving
Equipment Loan Program), VRDN (a):
A1+ VMIG1+ 100 Series A, 4.10% due 7/01/2015 100
A1+ VMIG1+ 100 Series B, 4.10% due 7/01/2015 100
=================================================================================================================================
Massachusetts--2.5% AAA Aaa 1,000 Massachusetts State, HFA, Residential Development, Series C, 6.90%
due 11/15/2021 (f) 1,086
AA- A1 1,000 Massachusetts State Revenue Refunding Bonds (College Building
Authority Project), Series A, 7.50% due 5/01/2011 1,249
AAA Aaa 5,000 Massachusetts State Turnpike Authority, Metropolitan Highway
System Revenue Bonds, Series A, 5.16%** due 1/01/2028 (d) 1,005
A A2 6,000 Massachusetts State Water Resource Authority, Series A, 6.50% due
7/15/2019 6,994
=================================================================================================================================
Michigan--5.5% A1+ VMIG1+ 300 Grand Rapids, Michigan, Water Supply System, Revenue Refunding
Bonds, VRDN, 4% due 1/01/2020 (a)(c) 300
AA- NR* 2,755 Michigan State, HDA, Rental Housing Revenue Refunding Bonds,
Series A, 6.65% due 4/01/2023 2,950
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 5,490 Refunding, AMT, Series D, 6.85% due 6/01/2026 5,852
AA+ NR* 4,885 Series A, 6.875% due 6/01/2023 5,129
A A2 3,500 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Detroit Medical Center Obligated Group), Series A, 6.50%
due 8/15/2018 3,788
A A1 2,500 Michigan State Strategic Fund, Limited Obligation Revenue Bonds
(Ford Motor Co. Project), AMT, Series A, 6.55% due 10/01/2022 2,683
AA- Aa3 2,320 Royal Oak, Michigan, Hospital Finance Authority, Revenue Refunding
Bonds (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 2,504
=================================================================================================================================
Minnesota--2.5% Minnesota State, HFA, S/F Mortgage, AMT:
AA Aa2 2,630 Series L, 6.70% due 7/01/2020 2,786
AA Aa2 3,830 Series M, 6.70% due 7/01/2026 4,058
AA+ NR* 3,500 Rochester, Minnesota, Health Care Facilities Revenue Bonds
(Mayo Foundation), Series A, 5.50% due 11/15/2027 3,515
=================================================================================================================================
Nebraska--0.6% AAA Aaa 2,200 Lancaster County, Nebraska, Hospital Authority No. 1, Hospital
Revenue Bonds (Bryan Memorial Hospital Project), 6.70%
due 6/01/2022 (d)(j) 2,486
=================================================================================================================================
Nevada--1.7% AAA Aaa 2,500 Clark County, Nevada, School District, 6.75% due
12/15/2004 (c)(i) 2,845
AAA Aaa 1,425 Nevada Housing Division, S/F Program, AMT, Series E,
7% due 10/01/2019 1,531
AAA Aaa 2,500 Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra
Pacific Power Co.), AMT, 6.65% due 12/01/2017 (b) 2,711
=================================================================================================================================
New Jersey--1.1% AAA Aaa 4,435 New Jersey State Housing and Mortgage Finance Agency Revenue
Bonds (Home Buyer), AMT, Series M, 6.95% due 10/01/2022 (d) 4,799
=================================================================================================================================
New York--14.5% AAA Aaa 9,785 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, RITR, Series 4, 6.27% due
7/01/2027 (d)(e) 9,822
New York City, New York, GO:
BBB+ A3 5,000 Refunding, Series G, 5.25% due 8/01/2016 4,902
BBB+ A3 5,075 Refunding, Series G, 5% due 8/01/2018 4,808
BBB+ A3 2,500 Refunding, UT, Series C, 5.875% due 2/01/2016 2,612
BBB+ A3 110 UT, Series B, 7% due 6/01/2016 118
BBB+ Aaa 7,500 UT, Series B, Sub-Series B-1, 7% due 8/15/2004 (i) 8,605
BBB+ Aaa 4,000 UT, Series B, Sub-Series B-1, 7.25% due 8/15/2004 (i) 4,643
New York City, New York, Municipal Water Finance Authority, Water
and Sewe System Revenue Bonds:
AAA Aaa 6,250 RITR, Series 10, 6.27% due 6/15/2026 (e) 6,266
AAA Aaa 5,000 Refunding, Series C, 5% due 6/15/2021 (c) 4,769
A- Aaa 5,000 Series 93-B, 6.50% due 6/15/2002 (i) 5,454
AAA Aaa 2,250 Series B, 5.50% due 6/15/2027 (d) 2,276
AAA Aaa 3,000 New York State Dormitory Authority, Revenue Refunding Bonds
(University of Rochester), Series A, 5% due 7/01/2023 (d) 2,859
AAA Aaa 4,000 New York State Energy Research and Development Authority,
Gas Facilities Revenue Bonds, RITR, Series 9, 6.52%
due 1/01/2021 (d)(e) 4,110
=================================================================================================================================
Oregon--0.8% A1 VMIG1+ 900 Medford, Oregon, Hospital Facilities Authority Revenue Bonds
(Gross-Rogue Valley Health Services), VRDN, 4.10% due
10/01/2016 (a) 900
NR* VMIG1+ 500 Oregon State Health, Housing, Educational, and Cultural Facilities
Authority Revenue Bonds (Guide Dogs for the Blind), VRDN, Series A,
4.45% due 7/01/2025 (a) 500
A1+ A3 2,000 Port Saint Helens, Oregon, PCR (Portland General Electric Company Project),
VRDN, AMT, Series A, 4.15% due 8/01/2014 (a) 2,000
=================================================================================================================================
Pennsylvania--0.3% AA+ Aa 1,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 43, 7.40% due
10/01/2014 1,352
=================================================================================================================================
South Carolina--1.0% A- A1 3,000 Richland County, South Carolina, Solid Waste Disposal Facilities
Revenue Bonds (Union Camp Corp. Project), AMT, Series B, 7.125% due
9/01/2021 3,254
NR* Aa2 1,000 South Carolina State Housing Finance and Development Authority,
Mortgage Revenue Bonds, AMT, Series A, 6.70% due 7/01/2027 (h) 1,065
=================================================================================================================================
</TABLE>
6 & 7
<PAGE>
MuniVest Fund II, Inc., April 30, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Texas--6.5% AA- Aa3 $ 2,500 Guadalupe--Blanco River Authority, Texas, Sewage and Solid
Waste Disposal Facility Revenue Bonds (du Pont (E.I.) de Nemours
and Co. Project), AMT, 6.40% due 4/01/2026 $ 2,725
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
NR* A3 1,500 (Memorial Hospital Systems Project), Series A, 6.60% due
6/01/2004 (i) 1,684
NR* A3 1,500 (Memorial Hospital Systems Project), Series A, 6.625% due
6/01/2004 (i) 1,686
AA Aa3 5,000 RITR, Series 6, 6.945% due 12/01/2027 (e) 5,369
AAA Aa3 2,500 (Saint Luke's Episcopal Hospital Project), Series A, 6.625%
due 2/15/2012 (j) 2,705
AAA Aaa 6,000 Houston, Texas, Water and Sewer System Revenue Bonds, RITR,
Series 5, 6.27% due 12/01/2027 (c)(e) 6,022
A+ A2 2,500 Matagorda County, Texas, Port of Bay City Authority Revenue Bonds
(Hoechst Celanese Corp. Project), AMT, 6.50% due 5/01/2026 2,702
AA Aa 4,000 North Central, Texas, Health Facility Development Corporation
Revenue Bonds (Baylor University Medical Center), INFLOS,
Series A, 9.664% due 5/15/2001 (e)(i) 4,715
=================================================================================================================================
Virginia--3.7% A- A1 3,115 Isle Wright County, Virginia, IDA, Solid Waste Disposal Facilities
Revenue Bonds (Union Camp Corp. Project), AMT, 6.55%
due 4/01/2024 3,386
Virginia State, HDA (Commonwealth Mortgage):
AA+ Aa1 2,000 AMT, Series B, Sub-Series B-2, 6.85% due 1/01/2027 2,101
AA+ NR* 2,500 AMT, Series G, Sub-Series G-2, 6.65% due 1/01/2019 2,659
AA+ Aa1 2,000 Series B, Sub-Series B-5, 6.90% due 7/01/2013 2,074
AA+ Aa1 5,100 Series H, 6.85% due 7/01/2014 5,476
=================================================================================================================================
Washington--4.0% AAA NR* 2,395 Washington State Housing Finance Commission, S/F Mortgage Revenue
Refunding Bonds, Series D, 6.95% due 7/01/2017 (f)(g) 2,510
Washington State Public Power Supply System, Revenue Refunding Bonds,
Series B:
AA- Aa1 4,950 (Nuclear Project No. 1), 7.25% due 7/01/2009 5,838
AA- Aa1 5,000 (Nuclear Project No. 1), 7.125% due 7/01/2016 6,069
AAA Aaa 1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (d) 2,308
=================================================================================================================================
Wisconsin--1.1% AA Aa3 2,250 Wisconsin Housing and EDA, Home Ownership Revenue Bonds, AMT,
Series D, 6.65% due 7/01/2025 2,374
NR* A3 2,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Saint Claire Hospital Project),
7% due 2/15/2011 2,161
=================================================================================================================================
Wyoming--2.8% BBB- Baa2 5,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
(FMC Corp. Project), AMT, Series B, 6.90% due 9/01/2024 5,541
Wyoming Community Development Authority, S/F Mortgage:
AA Aa2 1,500 AMT, Series H, 7.10% due 6/01/2012 1,611
AA Aa2 4,540 Series B, 6.70% due 6/01/2017 4,800
=================================================================================================================================
Puerto Rico--0.1% A1+ VMIG1+ 500 Puerto Rico Commonwealth, Governmental Development Bank, Refunding,
VRDN, 3.90% due 12/01/2015 (a)(d) 500
=================================================================================================================================
Total Investments (Cost--$385,183)--97.1% 409,639
Other Assets Less Liabilities--2.9% 12,260
--------
Net Assets--100.0% $421,899
========
=================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
1998.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in effect
at April 30, 1998.
(f) FNMA Collateralized.
(g) GNMA Collateralized.
(h) FHA Insured.
(i) Prerefunded.
(j) Escrowed to maturity.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of April 30, 1998 were as
follows:
- ----------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- ----------------------------------------------------------
AAA/Aaa.......................................... 37.0%
AA/Aa............................................ 31.2
A/A.............................................. 18.0
BBB/Baa.......................................... 4.6
BB/Ba............................................ 2.5
NR (Not Rated)................................... 1.6
Other+........................................... 2.2
- ----------------------------------------------------------
+ Temporary investments in short-term municipal securities.
8 & 9
<PAGE>
MuniVest Fund II, Inc., April 30, 1998
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of April 30, 1998
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$385,183,107) (Note 1a).............. $409,639,386
Cash......................................................................... 51,599
Receivables:
Securities sold............................................................ $ 17,069,987
Interest................................................................... 6,879,801 23,949,788
------------
Deferred organization expenses (Note 1e)..................................... 3,338
Prepaid expenses and other assets............................................ 16,366
------------
Total assets................................................................. 433,660,477
------------
=================================================================================================================================
Liabilities: Payables:
Securities purchased....................................................... 11,220,606
Dividends to shareholders (Note 1f)........................................ 314,335
Investment adviser (Note 2)................................................ 175,786 11,710,727
------------
Accrued expenses and other liabilities....................................... 50,328
------------
Total liabilities............................................................ 11,761,055
------------
=================================================================================================================================
Net Assets: Net assets................................................................... $421,899,422
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (5,400 shares of AMPS* issued
and outstanding at $25,000 per share liquidation preference)............... $135,000,000
Common Stock, par value $.10 per share (19,907,055 shares issued
and outstanding)........................................................... $ 1,990,705
Paid-in capital in excess of par............................................. 277,543,484
Undistributed investment income--net......................................... 2,482,177
Accumulated realized capital losses on investments--net (Note 5)............. (19,573,223)
Unrealized appreciation on investments--net.................................. 24,456,279
------------
Total--Equivalent to $14.41 net asset value per share of Common Stock
(market price--$13.625)...................................................... 286,899,422
------------
Total capital................................................................ $421,899,422
============
=================================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended April 30, 1998
=================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned..................... $ 12,127,663
Income (Note 1d):
=================================================================================================================================
Expenses: Investment advisory fees (Note 2)............................................ $ 1,051,050
Commission fees (Note 4)..................................................... 171,178
Professional fees............................................................ 34,442
Accounting services (Note 2)................................................. 30,523
Transfer agent fees.......................................................... 29,555
Custodian fees............................................................... 16,028
Directors' fees and expenses................................................. 14,631
Listing fees................................................................. 12,157
Printing and shareholder reports............................................. 10,284
Pricing fees................................................................. 7,162
Amortization of organization expenses (Note 1e).............................. 547
Other........................................................................ 16,849
-----------
Total expenses............................................................... 1,394,406
-----------
Investment income--net....................................................... 10,733,257
-----------
=================================================================================================================================
Realized & Realized gain on investments--net............................................ 5,094,231
Unrealized Gain Change in unrealized appreciation on investments--net........................ (8,302,457)
(Loss) on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations......................... $ 7,525,031
(Notes 1b, 1d ===========
& 3):
=================================================================================================================================
See Notes to Financial Statements.
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1998 1997
=================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net....................................................... $ 10,733,257 $ 22,313,979
Realized gain on investments--net............................................ 5,094,231 633,564
Change in unrealized appreciation on investments--net........................ (8,302,457) 8,520,482
------------ ------------
Net increase in net assets resulting from operations......................... 7,525,031 31,468,025
------------ ------------
=================================================================================================================================
Dividends to Investment income--net:
Shareholders Common Stock............................................................... (8,475,687) (17,439,516)
(Note 1f): Preferred Stock............................................................ (2,495,196) (4,718,754)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders.......... (10,970,883) (22,158,270)
------------ ------------
=================================================================================================================================
Net Assets: Total increase (decrease) in net assets...................................... (3,445,852) 9,309,755
Beginning of period.......................................................... 425,345,274 416,035,519
------------ ------------
End of period*............................................................... $421,899,422 $425,345,274
============ ============
=================================================================================================================================
* Undistributed investment income--net....................................... $ 2,482,177 $ 2,719,803
============ ============
=================================================================================================================================
See Notes to Financial Statements.
</TABLE>
10 & 11
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended For the Year Ended October 31,
April 30, -----------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period .................... $ 14.59 $ 14.12 $ 13.93 $ 12.56 $ 15.15
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .................................. .54 1.13 1.10 1.11 1.08
Realized and unrealized gain (loss) on investments--net . (.16) .46 .18 1.37 (2.53)
-------- -------- -------- -------- --------
Total from investment operations ........................ .38 1.59 1.28 2.48 (1.45)
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ................................ (.43) (.88) (.85) (.85) (.87)
Realized gain on investments--net ..................... -- -- -- -- (.08)
-------- -------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders ............................................ (.43) (.88) (.85) (.85) (.95)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net .............................. (.13) (.24) (.24) (.26) (.18)
Realized gain on investments--net ................... -- -- -- -- (.01)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity ................ (.13) (.24) (.24) (.26) (.19)
-------- -------- -------- -------- --------
Net asset value, end of period .......................... $ 14.41 $ 14.59 $ 14.12 $ 13.93 $ 12.56
======== ======== ======== ======== ========
Market price per share, end of period ................... $ 13.625 $ 13.875 $ 12.625 $ 12.125 $ 10.375
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on market price per share ......................... 1.17%++ 17.32% 11.43% 25.68% (23.56%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ...................... 1.75%++ 10.31% 8.47% 19.27% (10.67%)
======== ======== ======== ======== ========
==================================================================================================================================
Ratios to Average Expenses ................................................ .66%* .68% .68% .69% .68%
Net Assets:*** ======== ======== ======== ======== ========
Investment income--net .................................. 5.11%* 5.30% 5.30% 5.55% 5.17%
======== ======== ======== ======== ========
==================================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) .......................................... $286,899 $290,345 $281,036 $277,230 $250,079
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) .......................................... $135,000 $135,000 $135,000 $135,000 $135,000
======== ======== ======== ======== ========
Portfolio turnover ...................................... 69.51% 57.80% 46.58% 95.62% 114.56%
======== ======== ======== ======== ========
==================================================================================================================================
Leverage: Asset coverage per $1,000 ............................... $ 3,125 $ 3,151 $ 3,082 $ 3,054 $ 2,852
======== ======== ======== ======== ========
==================================================================================================================================
Dividends Series A--Investment income--net ........................ $ 482 $ 880 $ 898 $ 967 $ 644
Per Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net ........................ $ 468 $ 872 $ 879 $ 891 $ 693
Outstanding:+ ======== ======== ======== ======== ========
Series C--Investment income--net ........................ $ 437 $ 869 $ 886 $ 1,070 $ 634
======== ======== ======== ======== ========
==================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
loads.
+ Dividends per share have been adjusted to reflect a two-for-one stock split
that occurred on December 1, 1994.
++ Aggregate total investment return.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniVest Fund II, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 as a non-diversified, closed-end management investment company.
These unaudited financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal recurring nature.
The Fund determines and makes available for publication the net asset value of
its Common Stock on a weekly basis. The Fund's Common Stock is listed on the New
York Stock Exchange under the symbol MVT. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options, which are traded on exchanges, are valued at
their last sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. Securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by a pricing service
retained by the Fund, which may utilize a matrix system for valuations. The
procedures of the pricing service and its valuations are reviewed by the
officers of the Fund under the general supervision of the Board of Directors.
(b) Derivative financial instrument--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
12 & 13
<PAGE>
MuniVest Fund II, Inc., April 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses are amortized
on a straight-line basis over a five-year period.
(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.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of 0.50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1998 were $285,606,997 and $336,749,830, respectively.
Net realized gains for the six months ended April 30, 1998 and net unrealized
gains as of April 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .............................. $5,094,231 $24,456,279
---------- -----------
Total .............................................. $5,094,231 $24,456,279
========== ===========
- --------------------------------------------------------------------------------
As of April 30, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $24,456,279, of which $28,131,531 related to appreciated
securities and $3,675,252 related to depreciated securities. The aggregate cost
of investments at April 30, 1998 for Federal income tax purposes was
$385,183,107.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital 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 capital stock without approval of holders of
Common Stock.
Common Stock
Shares issued and outstanding during the six months ended April 30, 1998 and for
the year ended October 31, 1997 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund that entitle their holders to receive cash dividends at an annual rate that
may vary for the successive dividend periods. The yields in effect at April 30,
1998 were as follows: Series A, 3.78%; Series B, 3.57%; and Series C, 3.70%.
As of April 30, 1998, there were 5,400 AMPS authorized, issued and outstanding
with a liquidation preference of $25,000 per share.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from 0.25% to 0.375%, calculated on the proceeds of
each auction. For the six months ended April 30, 1998, Merrill Lynch, Pierce,
Fenner & Smith Inc., an affiliate of FAM, earned $88,208 as commissions.
5. Capital Loss Carryforward:
At October 31, 1997, the Fund had a net capital loss carryforward of
approximately $17,782,000, of which $3,734,000 expires in 2002 and $14,048,000
expires in 2003. This amount will be available to offset like amounts of any
future taxable gains.
6. Subsequent Event:
On May 7, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.069776 per share,
payable on May 28, 1998 to shareholders of record as of May 21, 1998.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank &Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MVT
<PAGE>
This report, including the financial information herein, is transmitted to the
shareholders of MuniVest Fund II, Inc. for their information. It is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock by issuing Preferred Stock
to provide the Common Stock shareholders with a potentially higher rate of
return. Leverage creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price of shares
of the Common Stock, and the risk that fluctuations in the short-term dividend
rates of the Preferred Stock may affect the yield to Common Stock shareholders.
Statements and other information herein are as dated and are subject to change.
MuniVest
Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011 16807--4/98
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