MUNIVEST
FUND II, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 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 shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock share-holders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value on the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, interest rates 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.
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., October 31, 1998
DEAR SHAREHOLDER
For the year ended October 31, 1998, the Common Stock of MuniVest Fund II, Inc.
earned $0.836 per share income dividends, which included earned and unpaid
dividends of $0.071. This represents a net annualized yield of 5.63%, based on a
month-end per share net asset value of $14.85. Over the same period, the total
investment return on the Fund's Common Stock was +7.96%, based on a change in
per share net asset value from $14.59 to $14.85, and assuming reinvestment of
$0.839 per share income dividends.
For the six-month period ended October 31, 1998, the total investment return on
the Fund's Common Stock was 6.10%, based on a change in per share net asset
value from $14.41 to $14.85, and assuming reinvestment of $0.413 per share
income dividends.
For the six-month period ended October 31, 1998, the Fund's Auction Market
Preferred Stock had an average yield as follows: Series A, 3.27%; Series B,
3.21%; and Series C, 3.41%.
The Municipal Market Environment
During the six months ended October 31, 1998, long-term bond yields declined
significantly. The near absence of any inflationary pressures in the United
States continued to support historic low interest rates. Additionally, foreign
economic factors have continued to outweigh US domestic fundamentals, as they
have for much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic factors in these
countries have begun to negatively impact US growth. For example, employment in
the US manufacturing sector declined in recent months as a result of reduced
demand for export goods. Concern that the modest decline in US economic growth
seen thus far would spread and intensify led the Federal Reserve Board to lower
short-term interest rates in late September, in mid-October and in mid-November.
These actions were taken to offset the drag of foreign economies on future US
growth.
US Treasury bond yields continued to benefit from a strong "flight to quality"
as foreign investors were drawn to the relative safe haven of US Government
securities. Additionally, the sharp equity market correction, which began at the
end of August, triggered a further flight into US Treasury securities. Long-term
US Treasury bond yields fell over 90 basis points (0.90%) to approximately 5% by
the end of September. This is the lowest level since the US Treasury
reintroduced 30-year maturity bond auctions in 1977.
By early October, worldwide investor confidence began to rise, reducing the
demand for the safety and liquidity of US Treasury securities. Investor
confidence was restored by the belief that major world governments, as well as
the International Monetary Fund, would take the necessary action to support weak
domestic economies in Asia and Latin America. Additionally, rapid recovery in US
and world equity markets caused some investors to reallocate funds from US debt
instruments back to various world equity markets. US Treasury security yields
rose for the remainder of the month to end October at 5.15%. During the
six-month period ended October 31, 1998, long-term Treasury security yields
declined approximately 80 basis points.
During the past 12 months, the tax-exempt bond market has contended with
significant new-issue supply pressures. Over the past year, more than $277
billion in new long-term tax-exempt bonds were underwritten, an increase of
almost 30% compared to the same period a year ago. During the most recent
six-month period, approximately $140 billion in new long-term municipal bonds
were underwritten, representing an increase of more than 15% over the same
six-month period last year. This increased supply, coupled with the high returns
the US equity market generated for much of 1998, was one of the major reasons
municipal bond yields declined less than their taxable counterparts during the
period.
The continued increase in new bond issuance has required ever-lower tax-exempt
bond yields to generate the economic savings necessary for additional municipal
bond financings. Consequently, the pace of new bond issuance has slowed in
recent months. In fact, the trend may be reversing. During the three months
ended October 31, 1998, just over $60 billion in new long-term municipal bonds
were underwritten, a decline of 4% compared to the same quarter a year ago.
During the month of October, there were less than $20 billion in new municipal
bond securities issued, a decline of over 10% compared to October 1997. We will
monitor this trend closely in the coming months to determine if the supply
pressures exerted thus far in 1998 are abating and fostering a more balanced
supply/demand environment.
Throughout the six-month period ended October 31, 1998, municipal bond yields
followed a pattern that was similar to US Treasury securities, although the
yield declines were more muted. As measured by the unmanaged Bond Buyer Revenue
Bond Index, long-term, uninsured tax-exempt revenue bond yields declined over 40
basis points to 5.09% by the end of September, their lowest level since the
early 1970s. Municipal bond yields rose during October to end the period at
5.24%. Over the past six months, long-term tax-exempt bond yields declined
almost 30 basis points.
Although municipal bond yields declined during the six-month period, recent
supply pressures and the absence of the safe haven status enjoyed by US
securities caused municipal bond yields to rise relative to US Treasury bond
yields. At October 31, 1998, long-term tax-exempt bond yield spreads were
attractive relative to US Treasury securities of comparable maturities (over
100%), well in excess of their historic range of 85%-88%. Tax-exempt bond yield
ratios have rarely exceeded 90% in the 1980s and 1990s. Historically, yield
spreads have been wider than these levels when there have been potential changes
in Federal tax codes that would have adversely affected the tax-favored status
of municipal bonds.
Currently, municipal bond investors find themselves in a unique investment
environment. Previous opportunities to purchase tax-exempt bonds with yields
exceeding that of comparable US Treasury issues have been limited to relatively
brief episodes and then further limited to a few municipal credits undergoing
specific financial pressures. At present, almost the entire municipal bond
universe, across nearly all maturity and credit sectors, can be purchased at
yields greater than their taxable counterparts. However, the current opportunity
may quickly disappear should tax-exempt bond supply pressures diminish or the
safe-haven status of US Treasury securities become less desirable. Under these
conditions, municipal bond ratios should quickly revert to more normal historic
percentages, certainly well below their presently attractive levels.
Portfolio Strategy
During the six-month period ended October 31, 1998, we maintained our
constructive investment strategy toward the municipal bond market that we
adopted at the beginning of the period. We continued to believe that the
combination of negligible inflation and a slowing domestic economy should result
in a low interest rate environment. We expect that this environment is likely to
continue well into 1999. Consequently, we anticipate little change to the Fund's
existing structure and composition. Furthermore, we intend to maintain a fully
invested position in order to seek to enhance the Fund's dividend income.
Throughout the six months ended October 31, 1998, short-term tax-exempt bond
interest rates traded in a relatively narrow range centered around 3.50%. Recent
Federal Reserve Board actions to lower short-term taxable interest rates in
September, October, and again in November have begun to be reflected in the
tax-exempt market as well. Interest rates paid to the Fund's Preferred Stock
shareholders have declined in recent weeks, which resulted in higher dividends
to the Fund's Common Stock shareholders. We anticipate that this situation is
likely to continue in the coming months, particularly if the Federal Reserve
Board lowers taxable short-term interest rates further. However, should the
spread between short-term and long-term interest rates narrow, the benefits of
the leverage will decline and reduce the yield on the Fund's Common Stock. (For
a complete explanation of the benefits and risks of leveraging, see page 1 of
this report to shareholders.)
Looking ahead, we will closely monitor two areas of the Fund's current portfolio
composition. First, despite an already existing high-credit quality structure
(over 60% of the Fund is rated AA or higher by at least one of the major rating
agencies), we will continue to emphasize higher-rated issues. The yield spread
between higher-quality and lower-rated tax-exempt issues has remained
historically narrow, and we can continue to purchase better quality issues with
little yield sacrifice. Also, while none of our current holdings can be called
within two years, we will continue to manage the Fund's callable securities in
order to seek to limit the impact that the loss of higher nominal coupon-bearing
issues would have on the Fund's income stream. We purchased higher-coupon issues
at interest rate levels that are significantly higher than presently available.
Since interest levels have declined, the market value of these securities has
increased dramatically. As these issues approach their earliest call dates, we
will monitor opportunities to sell these bonds, capturing the existing market
appreciation. As a result, the proceeds from these sales will provide the
opportunity to purchase additional securities with greater call protection and
pose little disruption to the Fund's existing dividend income stream.
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
December 10, 1998
2 & 3
<PAGE>
MuniVest Fund II, Inc., October 31, 1998
PROXY RESULTS
During the six-month period ended October 31, 1998, MuniVest Fund II, Inc.
Common Stock shareholders voted on the following proposals. The proposals were
approved at a shareholders' meeting on September 24, 1998. The description of
each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
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Shares Voted Shares Withheld
For From Voting
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Cynthia A. Montgomery 19,366,669 326,580
Charles C. Reilly 19,342,990 350,259
Kevin A. Ryan 19,364,590 328,659
Arthur Zeikel 19,334,884 358,405
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year. 19,311,408 137,298 244,543
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the six-month period ended October 31, 1998, MuniVest Fund II, Inc.
Preferred Stock shareholders (Series A, B and C) voted on the following
proposals. The proposals were approved at a shareholders' meeting on September
24, 1998. The description of each proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect the Fund's Board of Directors as follows:
Series A:
Ronald W. Forbes, Cynthia A. Montgomery, Charles C. Reilly, Kevin A. Ryan
and Arthur Zeikel 1,771 5
Richard R. West 1,772 4
Ronald W. Forbes, Cynthia A. Montgomery, Charles C. Reilly, Kevin A. Ryan,
Richard R. West and Arthur Zeikel as follows:
Series B 1,740 0
Series C 1,590 0
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year as follows:
Series A 1,777 0 0
Series B 1,740 0 0
Series C 1,553 0 36
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</TABLE>
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--1.8% AAA Aaa $ 7,250 Jefferson County, Alabama, Sewer Revenue Bonds, RITR,
Series 7, 7.02% due 2/01/2027 (c)(e) $ 7,642
====================================================================================================================================
Arizona--1.2% A1+ P1 1,100 Coconino County, Arizona, PCR (Arizona Public Service
Corporation--Navajo Project), VRDN, AMT, Series A, 3.75%
due 10/01/2029 (a) 1,100
A1+ P1 1,000 Maricopa County, Arizona, PCR, Refunding (Arizona Public
Service Company), VRDN, Series E, 3.70% due 5/01/2029 (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) 2,982
====================================================================================================================================
Arkansas--0.7% AAA NR* 2,815 Arkansas State Development Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), Series C,
5.20% due 7/01/2017 2,867
NR* P1 200 Crosset, Arkansas, PCR (Georgia-Pacific Corp. Project),
VRDN, 3% due 10/01/2007 (a) 200
====================================================================================================================================
California--1.0% AA Aaa 3,825 California State Department of Water Resources,
Water Systems Revenue Bonds
(Central Valley Project), Series P, 6.50% due 6/01/2006 (i) 4,507
====================================================================================================================================
Colorado--2.1% NR* Aa2 1,665 Colorado HFA, S/F Program, AMT, Senior Series F, 8.625%
due 6/01/2025 (h) 1,820
BBB Baa1 5,940 Denver, Colorado, City and County Airport Revenue Bonds, AMT,
Series C, 6.75% due 11/15/2022 6,500
A1+ VMIG1+ 1,000 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 3.75% due 5/01/2013 (a)(b) 1,000
====================================================================================================================================
Delaware--0.6% AAA Aaa 2,250 Delaware Transportation Authority, Transportation System
Revenue Bonds, Senior Series, 7% due 7/01/2004 (c)(i) 2,638
====================================================================================================================================
Florida--0.9% BBB Baa1 3,655 Escambia County, Florida, PCR (Champion International
Corp. Project), AMT, 6.90% due 8/01/2022 4,015
====================================================================================================================================
Georgia--5.0% Georgia Municipal Electric Authority, Power Revenue Bonds:
A A 1,250 Series X, 6.50% due 1/01/2020 1,466
A+ A3 11,035 Series Y, 6.50% due 1/01/2017 12,967
A A3 6,000 UT, Series W, 6.60% due 1/01/2018 7,125
====================================================================================================================================
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 2,181
====================================================================================================================================
Idaho--0.6% NR* Aaa 2,360 Idaho Housing Agency, S/F Mortgage, AMT,
Series E-2, 6.90% due 1/01/2027 2,538
====================================================================================================================================
</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
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., October 31, 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>
Illinois--13.3% AA- Aa3 $ 6,925 Chicago, Illinois, Gas Supply Revenue Bonds (People's
Gas and Light), Series A, 6.875% due 3/01/2015 $ 7,591
AAA Aaa 3,000 Chicago, Illinois, Sales Tax Revenue Bonds, RITR,
Series 24, 7.02% due 1/01/2027 (c)(e) 3,159
AAA Aaa 10,000 Cook County, Illinois, Refunding, UT,
Series B, 5.375% due 11/15/2018 (d) 10,196
Illinois, HDA, M/F Housing Program:
A+ A1 6,900 Refunding, Series A, 7.375% due 7/01/2017 7,553
A+ A1 6,500 Series 5, 6.75% due 9/01/2023 7,049
A+ Aa1 2,550 Illinois HDA, Residential Mortgage Revenue Bonds, AMT,
Series C-1, 6.874% due 2/01/2018 2,716
NR* Baa1 3,235 Illinois Health Facilities Authority Revenue Bonds
(Holy Cross Hospital Project), 6.75% due 3/01/2024 3,539
Illinois Regional Transportation Authority:
AAA Aaa 1,500 Series A, 7.20% due 11/01/2020 (b) 1,954
AAA Aaa 7,000 Series A, 6.70% due 11/01/2021 (c) 8,660
AAA Aaa 2,500 UT, Series C, 7.75% due 6/01/2020 (c) 3,430
AAA Aaa 1,000 UT, Series C, 7.10% due 6/01/2025 (c) 1,153
====================================================================================================================================
Indiana--11.4% Indiana Bond Bank Revenue Bonds (Guarantee--State Revolving
Fund Program), Series A:
AAA NR* 2,750 6.875% due 2/01/2012 3,172
AAA NR* 5,750 6.75% due 2/01/2017 6,542
AA Aa3 2,500 Indiana Health Facilities Financing Authority, Hospital
Revenue Refunding Bonds (Clarian Health Partners Inc.),
Series A, 6% due 2/15/2021 2,712
NR* Aaa 5,545 Indiana State, HFA, S/F Mortgage Revenue Refunding Bonds,
Series A, 6.80% due 1/01/2017 5,880
Indiana Transportation Finance Authority, Highway Revenue Bonds,
Series A:
AA- Aa2 2,000 7.25% due 6/01/2015 2,542
AA- Aa2 3,775 6.80% due 12/01/2016 4,630
Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D:
AA NR* 8,750 6.75% due 2/01/2014 10,565
AA NR* 11,800 6.75% due 2/01/2020 13,060
====================================================================================================================================
Louisiana--2.9% 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 2,302
B+ NR* 10,000 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 6.50% due 1/01/2017 10,265
====================================================================================================================================
Maine--1.5% AA Aa2 6,085 Maine State Housing Authority, Mortgage Purchase, AMT,
Series C-2, 6.875% due 11/15/2023 6,543
====================================================================================================================================
Maryland--0.8% 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 2,204
AAA Aaa 1,000 Maryland State Health and Higher Educational Facilities
Authority Revenue Bonds (University of Maryland Medical Systems),
Series B, 7% due 7/01/2022 (c) 1,284
====================================================================================================================================
Massachusetts-- AAA Aaa 5,000 Boston, Massachusetts, Water and Sewer Commission General
3.2% Revenue Bonds, Senior Series C, 5.20% due 11/01/2021 (c) 5,063
AA- Aa3 1,000 Massachusetts State Revenue Refunding Bonds (College Building
Authority Project), Series A, 7.50% due 5/01/2011 1,293
A A1 6,000 Massachusetts State Water Resource Authority,
Series A, 6.50% due 7/15/2019 7,215
====================================================================================================================================
Michigan--7.0% AA- NR* 2,450 Michigan State, HDA, Rental Housing Revenue Refunding Bonds,
Series A, 6.65% due 4/01/2023 2,633
Michigan State, HDA, S/F Mortgage Revenue Bonds:
AA+ NR* 4,715 Refunding, AMT, Series D, 6.85% due 6/01/2026 5,017
AA+ NR* 3,635 Series A, 6.875% due 6/01/2023 3,838
A- A3 3,500 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Detroit Medical Center Obligated Group),
Series A, 6.50% due 8/15/2018 3,828
Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds:
AA- Aa3 2,320 Refunding (Beaumont Properties, Inc.),
Series E, 6.625% due 1/01/2019 2,520
A1+ VMIG1+ 1,000 (William Beaumont Hospital), VRDN,
Series J, 3.70% due 1/01/2003 (a) 1,000
AAA Aaa 10,630 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit
Metropolitan--Wayne County), Series A, 5.375% due 12/01/2017 (d) 10,968
====================================================================================================================================
Minnesota--1.5% Minnesota State, HFA, S/F Mortgage, AMT:
AA Aa2 2,495 Series L, 6.70% due 7/01/2020 2,667
AA Aa2 3,675 Series M, 6.70% due 7/01/2026 3,928
====================================================================================================================================
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) 2,501
====================================================================================================================================
Nevada--1.8% AAA Aaa 2,500 Clark County, Nevada, School District, 6.75% due 12/15/2004 (c)(i) 2,901
AAA Aaa 1,415 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) 2,753
A1+ P1 600 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
Pacific Power Co. Project), VRDN, AMT, 3.85% due 12/01/2020 (a) 600
====================================================================================================================================
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) 4,846
====================================================================================================================================
New York--12.2% AAA Aaa 2,500 Long Island Power Authority, New York, Electric System, General
Revenue Bonds, Series A, 5.50% due 12/01/2029 (d) 2,619
AAA Aaa 2,000 Metropolitan Transportation Authority, New York, Dedicated Tax Fund,
Series A, 5.25% due 4/01/2026 (d) 2,043
AAA Aaa 5,000 Metropolitan Transportation Authority, New York, Transportation
Facilities Revenue Bonds, Series B, 4.75% due 7/01/2026 (c) 4,792
New York City, New York, GO, UT:
A- A3 2,500 Refunding, Series C, 5.875% due 2/01/2016 2,686
A- Aaa 4,000 Series B, Sub-Series B-1, 7.25% due 8/15/2004 (i) 4,718
New York City, New York, Municipal Water Finance Authority, Water and
Sewer System Revenue Bonds:
AAA Aaa 6,250 RITR, Series 10, 7.02% due 6/15/2026 (e) 6,627
AAA Aaa 2,500 Series A, 5.125% due 6/15/2021 (k) 2,505
AAA Aaa 5,000 Series A, 4.75% due 6/15/2031 (c) 4,761
AAA Aaa 2,250 Series B, 5.50% due 6/15/2027 (d) 2,375
A A1 5,000 Series B, 5.25% due 6/15/2029 5,068
AAA Aaa 1,550 New York State Dormitory Authority Revenue Bonds (Mental Health
Services Facilities Improvement), Series G, 4.50% due 8/15/2018 (b) 1,464
A- A3 9,200 New York State Dormitory Authority Revenue Bonds (State University
Educational Facilities), Series B, 4.75% due 5/15/2028 8,698
AAA Aaa 4,000 New York State Energy Research and Development Authority, Gas
Facilities Revenue Bonds, RITR, Series 9, 7.27% due 1/01/2021 (d)(e) 4,429
====================================================================================================================================
</TABLE>
6 & 7
<PAGE>
MuniVest Fund II, Inc., October 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
North Carolina-- AA Aa3 $ 1,750 North Carolina Medical Care Commission, Health Care Facilities
4.0% Revenue Bonds (Duke University
Health System), Series B, 4.75% due 6/01/2021 $ 1,662
North Carolina Medical Care Commission, Hospital Revenue Bonds
(Pitt County Memorial Hospital):
AA- Aa3 14,300 Series A, 4.75% due 12/01/2028 13,367
AA- Aa3 2,500 Series B, 4.75% due 12/01/2028 2,337
====================================================================================================================================
Oregon--1.0% AAA Aaa 4,020 Washington County, Oregon, Unified Sewer Agency, Sewer Revenue
Refunding Bonds, Sub-Lien, Series One, 5.50% due 10/01/2005 (c) 4,396
====================================================================================================================================
Pennsylvania--0.3% AA+ Aa 1,250 Pennsylvania HFA, S/F Mortgage, AMT, Series 43, 7.40% due 10/01/2014 1,363
====================================================================================================================================
South Carolina-- A- A2 3,000 Richland County, South Carolina, Solid Waste Disposal Facilities
1.0% Revenue Bonds (Union Camp
Corp. Project), AMT, Series B, 7.125% due 9/01/2021 3,271
NR* Aa2 945 South Carolina State Housing Finance and Development Authority,
Mortgage Revenue Bonds, AMT, Series A, 6.70% due 7/01/2027 (h) 1,018
====================================================================================================================================
Texas--6.8% Austin, Texas, Revenue Refunding Bonds, Sub-Lien, Series A (d):
AAA Aaa 2,290 4.62%** due 5/15/2013 1,142
AAA Aaa 5,000 4.25% due 5/15/2028 4,417
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 2,762
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
NR* A3 1,500 (Memorial Hospital System Project), Series A, 6.60% due 6/01/2004 (i) 1,716
NR* A3 1,500 (Memorial Hospital Systems Project), Series A, 6.625% due
6/01/2004 (i) 1,718
AA Aa3 5,000 RITR, Series 6, 7.695% due 12/01/2027 (e) 5,741
AAA Aa3 2,500 (Saint Luke's Episcopal Hospital Project),
Series A, 6.625% due 2/15/2012 (j) 2,702
AAA Aaa 6,000 Houston, Texas, Water and Sewer System Revenue Bonds, RITR,
Series 5, 7.02% due 12/01/2027 (c)(e) 6,293
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 2,793
====================================================================================================================================
Virginia--2.6% 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 3,407
BBB- Baa3 5,000 Pocahontas Parkway Association, Virginia, Connector Toll Road
Revenue Bonds (Route 895), Senior Series A, 5.50% due 8/15/2028 5,004
AA+ NR* 2,500 Virginia State, HDA (Commonwealth Mortgage), AMT,
Series G, Sub-Series G-2, 6.65% due 1/01/2019 2,666
====================================================================================================================================
Washington--5.2% AAA Aaa 5,000 Washington State, GO, Series C, 5% due 1/01/2022 (c) 4,932
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), Series B, 7.25% due 7/01/2009 5,957
AA- Aa1 5,000 (Nuclear Project No. 1), Series B, 7.125% due 7/01/2016 6,270
AAA Aaa 1,900 (Nuclear Project No. 3), 7.125% due 7/01/2016 (d) 2,388
====================================================================================================================================
Wisconsin--1.0% AA Aa3 2,170 Wisconsin Housing and EDA, Home Ownership Revenue Bonds, AMT,
Series D, 6.65% due 7/01/2025 2,316
NR* A3 2,000 Wisconsin State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Saint Claire Hospital Project),
7% due 2/15/2011 2,168
====================================================================================================================================
Wyoming--2.7% BBB- Baa2 5,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds
(FMC Corp. Project), AMT, Series B, 6.90% due 9/01/2024 5,484
Wyoming Community Development Authority, S/F Mortgage:
AA Aa2 1,500 AMT, Series H, 7.10% due 6/01/2012 1,616
AA Aa2 4,050 Series B, 6.70% due 6/01/2017 4,328
====================================================================================================================================
Total Investments (Cost--$386,044)--96.3% 414,880
Other Assets Less Liabilities--3.7% 15,741
--------
Net Assets--100.0% $430,621
========
====================================================================================================================================
</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 October 31,
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 October 31, 1998.
(f) FNMA Collateralized.
(g) GNMA Collateralized.
(h) FHA Insured.
(i) Prerefunded.
(j) Escrowed to maturity.
(k) FSA Insured.
* 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.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of October 31, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa............................................................... 38.2%
AA/Aa................................................................. 29.1
A/A................................................................... 19.8
BBB/Baa............................................................... 5.7
BB/Ba................................................................. 2.4
Other+................................................................ 1.1
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
8 & 9
<PAGE>
MuniVest Fund II, Inc., October 31, 1998
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of October 31, 1998
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$386,044,350)
(Note 1a)............................................................... $414,879,860
Cash.................................................................... 59
Receivables:
Securities sold....................................................... $ 16,040,959
Interest.............................................................. 7,401,935 23,442,894
------------
Prepaid expenses and other assets....................................... 20,308
------------
Total assets............................................................ 438,343,121
------------
====================================================================================================================================
Liabilities: Payables:
Securities purchased.................................................. 7,149,261
Dividends to shareholders (Note 1f)................................... 283,910
Investment adviser (Note 2)........................................... 190,114 7,623,285
------------
Accrued expenses and other liabilities.................................. 99,086
------------
Total liabilities....................................................... 7,722,371
------------
====================================================================================================================================
Net Assets: Net assets.............................................................. $430,620,750
============
====================================================================================================================================
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.................................... 2,883,079
Accumulated realized capital losses on investments--net (Note 5)........ (15,632,028)
Unrealized appreciation on investments--net............................. 28,835,510
------------
Total--Equivalent to $14.85 net asset value per share of Common Stock
(market price--$14.4375) ............................................... 295,620,750
------------
Total capital........................................................... $430,620,750
============
====================================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 1998
====================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned................ $ 24,456,021
Income (Note 1d):
====================================================================================================================================
Expenses: Investment advisory fees (Note 2)....................................... $ 2,138,149
Commission fees (Note 4)................................................ 341,604
Professional fees....................................................... 79,238
Accounting services (Note 2)............................................ 74,207
Transfer agent fees..................................................... 44,886
Custodian fees.......................................................... 32,786
Printing and shareholder reports........................................ 28,982
Directors' fees and expenses............................................ 28,114
Listing fees............................................................ 20,217
Pricing fees............................................................ 13,874
Amortization of organization expenses (Note 1e)......................... 3,338
Other................................................................... 33,598
------------
Total expenses.......................................................... 2,838,993
------------
Investment income--net.................................................. 21,617,028
------------
====================================================================================================================================
Realized & Realized gain on investments--net....................................... 9,035,426
Unrealized Gain
(Loss) on Change in unrealized appreciation on investments--net................... (3,923,226)
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations.................... $ 26,729,228
============
====================================================================================================================================
See Notes to Financial Statements.
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
-----------------------------------
Increase (Decrease) in Net Assets: 1998 1997
====================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net.................................................. $ 21,617,028 $ 22,313,979
Realized gain on investments--net....................................... 9,035,426 633,564
Change in unrealized appreciation on investments--net................... (3,923,226) 8,520,482
------------ ------------
Net increase in net assets resulting from operations.................... 26,729,228 31,468,025
------------ ------------
====================================================================================================================================
Dividends to Investment income--net:
Shareholders Common Stock ......................................................... (16,701,482) (17,439,516)
(Note 1f): Preferred Stock ...................................................... (4,752,270) (4,718,754)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders............................................................ (21,453,752) (22,158,270)
------------ ------------
====================================================================================================================================
Net Assets: Total increase in net assets............................................ 5,275,476 9,309,755
Beginning of year....................................................... 425,345,274 416,035,519
------------ ------------
End of year*............................................................ $430,620,750 $425,345,274
============ ============
====================================================================================================================================
*Undistributed investment income--net.................................... $ 2,883,079 $ 2,719,803
============ ============
====================================================================================================================================
See Notes to Financial Statements.
</TABLE>
10 & 11
<PAGE>
MuniVest Fund II, Inc., October 31, 1998
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
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 year..................... $ 14.59 $ 14.12 $ 13.93 $ 12.56 $ 15.15
Operating -------- -------- -------- -------- --------
Performance: Investment income--net................................. 1.08 1.13 1.10 1.11 1.08
Realized and unrealized gain (loss) on investments--net .26 .46 .18 1.37 (2.53)
-------- -------- -------- -------- --------
Total from investment operations....................... 1.34 1.59 1.28 2.48 (1.45)
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net............................... (.84) (.88) (.85) (.85) (.87)
Realized gain on investments--net.................... -- -- -- -- (.08)
-------- -------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders .......................................... (.84) (.88) (.85) (.85) (.95)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net............................. (.24) (.24) (.24) (.26) (.18)
Realized gain on investments--net.................. -- -- -- -- (.01)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity............... (.24) (.24) (.24) (.26) (.19)
-------- -------- -------- -------- --------
Net asset value, end of year........................... $ 14.85 $ 14.59 $ 14.12 $ 13.93 $ 12.56
======== ======== ======== ======== ========
Market price per share, end of year.................... $14.4375 $ 13.875 $ 12.625 $ 12.125 $ 10.375
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on market price per share........................ 10.37% 17.32% 11.43% 25.68% (23.56%)
Return:* ======== ======== ======== ======== ========
Based on net asset value per share..................... 7.96% 10.31% 8.47% 19.27% (10.67%)
======== ======== ======== ======== ========
====================================================================================================================================
Ratios to Average Expenses............................................... .66% .68% .68% .69% .68%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net................................. 5.06% 5.30% 5.30% 5.55% 5.17%
======== ======== ======== ======== ========
====================================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of
Data: year (in thousands).................................... $295,621 $290,345 $281,036 $277,230 $250,079
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year (in thousands) $135,000 $135,000 $135,000 $135,000 $135,000
======== ======== ======== ======== ========
Portfolio turnover..................................... 140.55% 57.80% 46.58% 95.62% 114.56%
======== ======== ======== ======== ========
====================================================================================================================================
Leverage: Asset coverage per $1,000.............................. $ 3,190 $ 3,151 $ 3,082 $ 3,054 $ 2,852
======== ======== ======== ======== ========
====================================================================================================================================
Dividends Series A--Investment income--net....................... $ 897 $ 880 $ 898 $ 967 $ 644
Per Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net....................... $ 875 $ 872 $ 879 $ 891 $ 693
Outstanding:+ ======== ======== ======== ======== ========
Series C--Investment income--net....................... $ 869 $ 869 $ 886 $ 1,070 $ 634
======== ======== ======== ======== ========
====================================================================================================================================
</TABLE>
* 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.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Dividends per share have been adjusted to reflect a two-for-one stock
split that occurred on December 1, 1994.
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. The
Fund determines and makes available for publication the net asset value of its
Common Stock on a weekly basis. The Fund's Common Stock is listed on the New
York Stock Exchange under the symbol MVT. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial 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.
(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
12 & 13
<PAGE>
MuniVest Fund II, Inc., October 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
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 period not exceeding five years.
(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
year ended October 31, 1998 were $578,625,957 and $587,618,146, respectively.
Net realized gains for the year ended October 31, 1998 and net unrealized gains
as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ............... $9,035,426 $28,835,510
---------- -----------
Total ............................... $9,035,426 $28,835,510
========== ===========
- --------------------------------------------------------------------------------
As of October 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $28,835,349, of which $30,127,566 related to appreciated
securities and $1,292,217 related to depreciated securities. The aggregate cost
of investments at October 31, 1998 for Federal income tax purposes was
$386,044,511.
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 years ended October 31, 1998 and
October 31, 1997 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.05 per share and a liquidation preference of $25,000
per share, 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
October 31, 1998 were as follows: Series A, 3.36%; Series B, 3.39%; and Series
C, 3.30%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 remained constant.
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 year ended October 31, 1998, Merrill Lynch, Pierce, Fenner
& Smith Inc., an affiliate of FAM, earned $167,583 as commissions.
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a net capital loss carryforward of
approximately $9,489,000, all of which expires in 2003. This amount will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
On November 5, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.070545 per share,
payable on November 27, 1998 to shareholders of record as of November 20, 1998.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders,
MuniVest Fund II, Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniVest Fund II, Inc. as of October
31, 1998, the related statements of operations for the year then ended and
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniVest Fund II,
Inc. as of October 31, 1998, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 10, 1998
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniVest Fund II, Inc.
during its taxable year ended October 31, 1998 qualify as tax-exempt interest
dividends for Federal income tax purposes. Additionally, there were no capital
gains distributed by the Fund during the year.
Please retain this information for your records.
14 & 15
<PAGE>
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
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--10/98
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