MERRILL LYNCH
MUNICIPAL BOND
FUND, INC.
FUND LOGO
Annual Report
June 30, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Municipal Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH MUNICIPAL BOND FUND, INC.
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
Peter J. Hayes, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
Important Tax
Information
(unaudited)
All of the net investment income distributions declared daily by
Merrill Lynch Municipal Bond Fund, Inc. during its taxable year
ended June 30, 1996 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, there were no capital gain distributions declared
by the Fund during the year.
Please retain this information for your records.
DEAR SHAREHOLDER
The Municipal Market Environment
During the three months ended June 30, 1996, long-term municipal
bond yields rose slightly. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated tax-exempt revenue bonds
increased 5 basis points (0.05%) to end the June quarter at 6.20%.
The municipal bond market demonstrated considerable weekly
volatility throughout the June quarter, with bond yields vacillating
by as much as 20 basis points. This recent volatility was in
response to conflicting evidence regarding the degree to which
recent economic growth will result in any significant increase in
inflationary pressures. Much of the evidence supporting stronger
economic growth was derived from the very strong employment reports
of April and June, and municipal bond yields rose dramatically as a
result. Other economic indicators suggested that recent growth will
not be excessive and that inflationary pressures will remain well
contained. A continuing benign inflationary environment has
supported lower tax-exempt bond yields. US Treasury bond yields
demonstrated similar, albeit greater, volatility during the past
three months. By the end of June, US Treasury bond yields rose
approximately 15 basis points to 6.88%.
The municipal bond market has continued to enjoy the same strong
technical position during the June quarter that it experienced for
much of 1996. The rate of increase in new bond issuance recently
slowed. Over the last six months approximately $90 billion in new
long-term municipal securities were underwritten. This represents an
increase of slightly more than 25% versus the comparable period a
year earlier. However, during the June quarter, approximately $48
billion in securities were issued, an increase of 15% versus that
issued during the June 1995 quarter. This relative decline in bond
issuance can be expected to continue as bond issuance historically
declines during the summer months. Also, bond issuance dedicated
toward refinancing existing debt fell in response to higher bond
yields.
<PAGE>
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest has been
steady. Additionally, investors are expected to receive over $50
billion this June and July in new assets derived from coupon income,
bond maturities and proceeds from early redemptions. Annual new bond
issuance has declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s have been redeemed
at their first optional call date, the total number of outstanding
tax-exempt bonds has declined. This combination of a declining net
supply and significant amounts of new assets has helped maintain
investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While still historically
very attractive, some institutional investors, particularly short-
term traders, have begun to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. The primary focus going forward may be the
extent to which the increase in interest rates seen thus far in 1996
will negatively impact future economic growth. Should growth slow in
the interest-rate sensitive sectors of the economy, like housing,
auto, and consumer spending, as many economists assert is likely,
then bond yields are likely to decline. Under such a scenario, the
municipal bond market's performance is likely to closely mirror that
of the US Treasury bond market.
Fiscal Year in Review
Insured Portfolio and National Portfolio
The past 12 months witnessed a municipal bond marketplace
characterized by tremendous price volatility as slow growth, low
inflation forecasts gave way to fears of an accelerating economy.
The Insured Portfolio and National Portfolio negotiated these
violent market swings by initiating a defensively oriented market
stance seeking to stress an above-industry average current yield
while maintaining a lower level of sensitivity to the general rising
direction of interest rates. Cash equivalent reserves fluctuated
between 5%--10% of total assets, and a large position of assets
committed to longer-term maturities currently have coupons
structured for income rather than price appreciation.
<PAGE>
This strategy served the Portfolios well during this particularly
volatile period for the fixed-income markets in general. However,
the market's recent volatility creates opportunities. Therefore, we
are monitoring the US economic backdrop and the overall valuation of
municipal rates, looking for a re-entry point at which time we would
expect to take a more aggressive approach. We are seeking higher-
yielding investment opportunities for the National Portfolio within
the credit limits detailed by the Fund's prospectus.
Limited Maturity Portfolio
Throughout most of the first nine months of the Fund's fiscal year,
the Fund remained aggressively positioned in order to seek to take
advantage of the falling interest rate environment which occurred
for most of 1995. During this time we maintained our cash reserve
position at a low of below 5% of net assets and an average portfolio
maturity of just under two years, which is the maximum allowable as
detailed in the Fund's prospectus. During the June quarter, we
repositioned the Limited Maturity Portfolio to a more neutral
investment position in response to concerns that a tightening of
monetary policy by the Federal Reserve Board would lead to higher
short-term interest rates. We accomplished this by increasing cash
reserves to just over 10% of net assets and reducing the average
portfolio maturity to 19 months. As a result, the Fund was somewhat
insulated from the volatility of interest rates over the course of
the quarter.
Our aggressive strategy earlier in the fiscal year enhanced the
benefit from falling interest rates. However, the Fund did
underperform funds with longer allowable average maturities for that
period. This trend reversed itself during the recent rise in
interest rates as the shorter nature of the Fund served to
outperform longer-term funds in such an environment.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
<PAGE>
(Kenneth A. Jacob)
Kenneth A. Jacob
Vice President and Portfolio Manager
(Peter J. Hayes)
Peter J. Hayes
Vice President and Portfolio Manager
August 9, 1996
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for Insured and National Portfolios. Limited Maturity Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears no ongoing distribution or account maintenance fees.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Insured and National
Portfolios. Limited Maturity Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Insured and National Portfolios are
subject to a distribution fee of 0.50% and an account maintenance
fee of 0.25%. Limited Maturity Portfolio is subject to a
distribution fee of 0.20% and an account maintenance fee of 0.15%.
All three classes of shares automatically convert to Class D Shares
after approximately 10 years.
<PAGE>
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Insured and National
Portfolios. Limited Maturity Portfolio is subject to a distribution
fee of 0.20% and an account maintenance fee of 0.15%. In addition,
Class C Shares are subject to a 1% contingent deferred sales charge
if redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee) for
Insured and National Portfolios. Limited Maturity Portfolio incurs a
maximum initial sales charge of 1% and an account maintenance fee of
0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
PERFORMANCE DATA (continued)
Insured Portfolio's
Class A and
Class B Shares--
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Portfolio's
Class A Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
6/86 6/96
Insured Portfolio++--
Class A Shares* $ 9,600 $20,302
Lehman Brothers Municipal
Bond Index++++ $10,000 $22,015
<PAGE>
A line graph depicting the growth of an investment in the Portfolio's
Class B Shares compared to growth of an investment in the Lehman
Brothers Municipal Bond Index. Beginning and ending values are:
10/21/88** 6/96
Insured Portfolio++--
Class B Shares* $10,000 $16,675
Lehman Brothers Municipal
Bond Index++++ $10,000 $18,077
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++The Insured Portfolio invests promarily in long-term, medium-
to lower-grade municipal bonds (bonds rated Baa, bonds rated below Baa
and bonds unrated of comparable quality) offering higher yields but
subject to greater risks than investment-grade municipal bonds.
++++This unmanaged Index consists of revenue bonds, prerefunded bonds,
general obligation bonds and insured bonds, all of which mature
within 30 years.
Past performance is not predictive of future performance.
Insured Portfolio's
Class A and
Class B Shares--
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 +5.51% +1.29%
Five Years Ended 6/30/96 +7.39 +6.52
Ten Years Ended 6/30/96 +7.78 +7.34
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/96 +4.71% +0.72%
Five Years Ended 6/30/96 +6.59 +6.59
Inception (10/21/88) through 6/30/96 +6.87 +6.87
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Insured Portfolio's
Class C and
Class D Shares--
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Portfolio's
Class C and Class D Shares compared to growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
10/21/94** 6/96
Insured Portfolio++--
Class C Shares* $10,000 $11,390
Insured Portfolio++--
Class D Shares* $ 9,600 $11,038
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,734
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++The Insured Portfolio invests primarily in long-term, medium-
to lower-grade municipal bonds (bonds rated Baa, bonds rated below Baa
and bonds unrated of comparable quality) offering higher yields but
subject to greater risks than investment-grade municipal bonds.
++++This unmanaged Index consists of revenue bonds, prerefunded bonds,
general obligation bonds and insured bonds, all of which mature
within 30 years.
Past performance is not predictive of future performance.
<PAGE>
Insured Portfolio's
Class C and
Class D Shares--
Average Annual
Total Returns
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/96 +4.65% +3.66%
Inception (10/21/94) through 6/30/96 +7.99 +7.99
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 +5.25% +1.04%
Inception (10/21/94) through 6/30/96 +8.59 +6.00
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
National Portfolio's
Class A and
Class B Shares--
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Portfolio's
Class A Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index. Beginning and ending values are:
<PAGE>
6/86 6/96
National Portfolio++--
Class A Shares* $ 9,600 $20,586
Lehman Brothers Municipal
Bond Index++++ $10,000 $22,015
A line graph depicting the growth in the Portfolio's Class B Shares
compared to growth of an investment in the Lehman Brothers Municipal
Bond Index. Beginning and ending values are:
10/21/88** 6/96
National Portfolio++--
Class B Shares* $10,000 $16,789
Lehman Brothers Municipal
Bond Index++++ $10,000 $18,077
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++The National Portfolio invests primarily in long-term, medium-
to lower-grade municipal bonds (bonds rated Baa, bonds rated below Baa
and bonds unrated of comparable quality) offering higher yields but
subject to greater risks than investment-grade municipal bonds.
++++This unmanaged Index consists of revenue bonds, prerefunded bonds,
general obligation bonds and insured bonds, all of which mature
within 30 years.
Past performance is not predictive of future performance.
National Portfolio's
Class A and
Class B Shares--
Average Annual
Total Return
<PAGE>
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 +6.98% +2.71%
Five Years Ended 6/30/96 +7.83 +6.95
Ten Years Ended 6/30/96 +7.93 +7.49
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/96 +6.17% +2.17%
Five Years Ended 6/30/96 +7.04 +7.04
Inception (10/21/88) through 6/30/96 +6.97 +6.97
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (continued)
National Portfolio's
Class C and
Class D Shares--
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Portfolio's
Class C and Class D Shares compared to growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
10/21/94** 6/96
National Portfolio++--
Class C Shares* $10,000 $11,446
<PAGE>
National Portfolio++--
Class D Shares* $ 9,600 $11,102
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,734
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++The National Portfolio invests primarily in long-term, medium-
to lower-grade municipal bonds (bonds rated Baa, bonds rated below Baa
and bonds unrated of comparable quality) offering higher yields but
subject to greater risks than investment-grade municipal bonds.
++++This unmanaged Index consists of revenue bonds, prerefunded bonds,
general obligation bonds and insured bonds, all of which mature
within 30 years.
National Portfolio's
Class C and
Class D Shares--
Average Annual
Total Return
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/96 +6.01% +5.01%
Inception (10/21/94) through 6/30/96 +8.31 +8.31
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 +6.71% +2.45%
Inception (10/21/94) through 6/30/96 +8.97 +6.37
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
Limited Maturity
Portfolio's
Class A and
Class B Shares--
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the Portfolio's
Class A Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index and the Lehman Brothers 3-Year General Obligation
Bond Index. Beginning and ending values are:
6/86 6/96
Limited Maturity Portfolio++--
Class A Shares* $ 9,900 $16,295
Lehman Brothers Municipal
Bond Index++++ $10,000 $22,015
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $17,963
A line graph depicting the growth of an investment in the Portfolio's
Class B Shares compared to growth of an investment in the Lehman Brothers
Municipal Bond Index and the Lehman Brothers 3-Year General Obligation
Bond Index. Beginning and ending values are:
11/02/92** 6/96
Limited Maturity Portfolio++--
Class B Shares* $10,000 $11,337
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,803
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $11,980
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++The Limited Maturity Portfolio invests primarily in investment-grade
municipal bonds (bonds rated Baa or better) with a maximum maturity not
to exceed 4 years.
++++This unmanaged Index consists of revenue bonds, prerefunded bonds,
general obligation bonds and insured bonds, all of which mature within
30 years.
++++++This unmanaged Index consists of state and local government
obligation bonds that mature in 3 years--4 years, rated Baa or better.
Past performance is not predictive of future performance.
Limited Maturity Portfolio's
Class A and
Class B Shares--
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 +3.75% +2.71%
Five Years Ended 6/30/96 +4.54 +4.34
Ten Years Ended 6/30/96 +5.11 +5.00
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/96 +3.37% +2.38%
Inception (11/02/92) through 6/30/96 +3.49 +3.49
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Limited Maturity Portfolio's
Class C and
Class D Shares--
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the Portfolio's
Class C and Class D Shares compared to growth of an investment in the
Lehman Brothers Municipal Bond Index and the Lehman Brothers 3-Year
General Obligation Bond Index. Beginning and ending values are:
10/21/94** 6/96
Limited Maturity Portfolio++--
Class C Shares* $10,000 $10,659
Limited Maturity Portfolio++--
Class D Shares* $ 9,600 $10,634
Lehman Brothers Municipal
Bond Index++++ $10,000 $11,734
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $11,068
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++The Limited Maturity Portfolio invests primarily in investment-grade
municipal bonds (bonds rated Baa or better) with a maximum maturity not
to exceed 4 years.
++++This unmanaged Index consists of revenue bonds, prerefunded bonds,
general obligation bonds and insured bonds, all of which mature within
30 years.
++++++This unmanaged Index consists of state and local government
obligation bonds that mature in 3 years--4 years, rated Baa or better.
Past performance is not predictive of future performance.
Limited Maturity
Portfolio's
Class C and
Class D Shares--
Average Annual
Total Return
<PAGE>
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/96 +2.97% +1.97%
Inception (10/21/94) through 6/30/96 +3.84 +3.84
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 6/30/96 +3.55% +2.51%
Inception (10/21/94) through 6/30/96 +4.31 +3.69
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity Insured National Maturity Insured National Maturity
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/77-12/31/77 $9.80/9.80 -- -- $ 0.09 -- -- + 0.94% -- --
1978 9.80/8.97 -- -- 0.48 -- -- - 3.69 -- --
1979++ 8.97/8.39 $ 9.60/9.60 $ 9.90/9.88 0.53 $ 0.11 $0.10 - 0.77 + 1.17% +0.86%
1980 8.39/6.86 9.60/8.54 9.88/9.74 0.60 0.79 0.64 -11.46 - 3.00 +5.14
1981 6.86/5.66 8.54/7.34 9.74/9.78 0.65 0.90 0.77 - 8.49 - 3.82 +8.64
1982 5.66/6.81 7.34/8.71 9.78/9.89 0.67 0.93 0.80 +33.96 +33.16 +9.67
1983 6.81/6.97 8.71/9.01 9.89/9.76 0.65 0.89 0.67 +12.20 +14.04 +5.57
1984 6.97/6.88 9.01/8.96 9.76/9.74 0.65 0.90 0.67 + 8.49 +10.00 +6.91
1985 6.88/7.53 8.96/9.86 9.74/9.75 0.64 0.88 0.63 +19.56 +20.76 +6.71
1986 7.53/8.18 9.86/10.67 9.75/9.90 0.61(1) 1.01(1) 0.56 +17.24 +19.08 +7.47
1987 8.18/7.56 10.67/9.76 9.90/9.68 0.68(2) 0.86(2) 0.53(2) + 0.86 - 0.40 +3.18
1988 7.56/7.79 9.76/10.11 9.68/9.68 0.57 0.76 0.56 +10.92 +11.71 +5.90
1989 7.79/7.94 10.11/10.25 9.68/9.74 0.57 0.75 0.59 + 9.49 + 9.11 +6.93
1990 7.94/7.86 10.25/10.09 9.74/9.72 0.61(3) 0.73 0.60 + 7.07 + 5.85 +6.11
1991 7.86/8.18 10.09/10.49 9.72/9.88 0.60(4) 0.82(4) 0.54 +12.07 +12.58 +7.39
1992 8.18/8.27 10.49/10.55 9.88/9.97 0.63(5) 0.89(5) 0.45 + 9.04 + 9.35 +5.62
1993 8.27/8.60 10.55/10.91 9.97/10.01 0.71(6) 0.94(6) 0.38 +12.85 +12.59 +4.30
1994 8.60/7.43 10.91/9.40 10.01/9.77 0.60(7) 0.81(7) 0.37 - 6.76 - 6.55 +1.35
1995 7.43/8.25 9.40/10.44 9.77/9.98 0.45 0.60 0.38 +17.43 +17.83 +6.13
1/1/96-6/30/96 8.25/7.91 10.44/10.11 9.98/9.91 0.21 0.29 0.18 - 1.43 - 0.30 +1.22
<PAGE> ------ ------ -----
Total $11.20 $13.86 $9.42
Cumulative total return as of 6/30/96: +248.72%** +343.28%** +161.16%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charges; results would be lower if sales charge was
included.
++For National and Limited Maturity Portfolios, period covered is
from 11/02/79 to 12/31/79.
(1)Includes capital gains of $0.011 and $0.178 for the Insured and
National Portfolios, respectively.
(2)Includes capital gains of $0.098, $0.073 and $0.012 for the
Insured, National and Limited Maturity Portfolios, respectively.
(3)Includes capital gains of $0.064 for the Insured Portfolio.
(4)Includes capital gains of $0.058 and $0.060 for the Insured and
National Portfolios, respectively.
(5)Includes capital gains of $0.084 and $0.130 for the Insured and
National Portfolios, respectively.
(6)Includes capital gains of $0.181 and $0.157 for the Insured and
National Portfolios, respectively.
(7)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity*** Insured National Maturity Insured National Maturity***
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88-12/31/88 $7.81/7.78 $10.14/10.11 -- $0.11 $0.14 -- + 0.97% + 1.08% --
1989 7.78/7.94 10.11/10.25 -- 0.51 0.67 -- + 8.81 + 8.29 --
1990 7.94/7.86 10.25/10.09 -- 0.55(1) 0.66 -- + 6.28 + 5.05 --
1991 7.86/8.17 10.09/10.49 -- 0.54(2) 0.75(2) -- +11.10 +11.74 --
1992 8.17/8.27 10.49/10.55 $ 9.93/9.97 0.56(3) 0.81(3) $0.06 + 8.35 + 8.53 +1.05%
1993 8.27/8.59 10.55/10.90 9.97/10.01 0.64(4) 0.85(4) 0.35 +11.88 +11.65 +3.93
1994 8.59/7.43 10.90/9.39 10.01/9.77 0.53(5) 0.73(5) 0.34 - 7.36 - 7.27 +1.03
1995 7.43/8.24 9.39/10.44 9.77/9.98 0.39 0.52 0.34 +16.41 +17.07 +5.75
1/1/96-6/30/96 8.24/7.91 10.44/10.11 9.98/9.91 0.19 0.25 0.17 - 1.68 - 0.67 +1.04
----- ----- -----
Total $4.02 $5.38 $1.26
Cumulative total return as of 6/30/96: +66.75%** +67.89%** +13.37%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of anysales charges; results would be lower if
sales charge was deducted.
***Limited Maturity Portfolio commenced operations on 11/02/92.
(1)Includes capital gains of $0.064 for the Insured Portfolio.
(2)Includes capital gains of $0.058 and $0.060 for the Insured and
National Portfolios, respectively.
(3)Includes capital gains of $0.084 and $0.130 for the Insured and
National Portfolios, respectively.
(4)Includes capital gains of $0.181 and $0.157 for the Insured and
National Portfolios, respectively.
(5)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity Insured National Maturity Insured National Maturity
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $7.68/7.43 $ 9.85/9.40 $ 9.83/9.77 $0.22(1) $0.31(1) $0.07 - 0.41% - 1.39% +0.11%
1995 7.43/8.25 9.40/10.44 9.77/10.00 0.38 0.52 0.34 +16.50 +16.89 +5.92
1/1/96-6/30/96 8.25/7.91 10.44/10.11 10.00/9.88 0.18 0.25 0.16 - 1.83 - 0.70 +0.51
----- ----- -----
Total $0.78 $1.08 $0.57
Cumulative total return as of 6/30/96: +13.90%** +14.46%** +6.59%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of anysales charges; results would be lower if
sales charge was deducted.
(1)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity Insured National Maturity Insured National Maturity
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $7.68/7.43 $ 9.85/9.40 $9.83/9.77 $0.23(1) $0.32(1) $0.07 - 0.30% - 1.29% +0.13%
1995 7.43/8.25 9.40/10.45 9.77/9.98 0.43 0.57 0.37 +17.14 +17.65 +6.03
1/1/96-6/30/96 8.25/7.91 10.45/10.12 9.98/9.91 0.21 0.28 0.18 - 1.56 - 0.42 +1.17
----- ----- -----
Total $0.87 $1.17 $0.62
Cumulative total return as of 6/30/96: +14.97%** +15.65%** +7.41%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charges;results would be lower if sales charge was
included.
(1)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Standardized
6/30/96 3/31/96 6/30/95 % Change % Change 30-Day Yield
<S> <C> <C> <C> <C> <C>
Insured Portfolio Class A Shares $ 7.91 $ 7.97 $ 7.92 -0.13% -0.75% 4.94%
Insured Portfolio Class B Shares 7.91 7.96 7.92 -0.13 -0.63 4.39
Insured Portfolio Class C Shares 7.91 7.97 7.92 -0.13 -0.75 4.34
Insured Portfolio Class D Shares 7.91 7.97 7.92 -0.13 -0.75 4.70
National Portfolio Class A Shares 10.11 10.14 10.02 +0.90 -0.30 5.44
National Portfolio Class B Shares 10.11 10.13 10.02 +0.90 -0.20 4.91
National Portfolio Class C Shares 10.11 10.14 10.03 +0.80 -0.30 4.87
National Portfolio Class D Shares 10.12 10.14 10.03 +0.90 -0.20 5.20
Limited Maturity Portfolio Class A Shares 9.91 9.94 9.92 -0.10 -0.30 3.86
Limited Maturity Portfolio Class B Shares 9.91 9.94 9.92 -0.10 -0.30 3.54
Limited Maturity Portfolio Class C Shares 9.88 9.92 9.92 -0.40 -0.40 3.53
Limited Maturity Portfolio Class D Shares 9.91 9.94 9.93 -0.20 -0.30 3.80
Insured Portfolio Class A Shares--Total Return +5.51(1) +0.64(2)
Insured Portfolio Class B Shares--Total Return +4.71(3) +0.58(4)
Insured Portfolio Class C Shares--Total Return +4.65(5) +0.44(6)
Insured Portfolio Class D Shares--Total Return +5.25(7) +0.58(8)
National Portfolio Class A Shares--Total Return +6.98(9) +1.19(10)
National Portfolio Class B Shares--Total Return +6.17(11) +1.10(12)
National Portfolio Class C Shares--Total Return +6.01(13) +0.99(14)
National Portfolio Class D Shares--Total Return +6.71(15) +1.23(16)
Limited Maturity Portfolio Class A Shares--Total Return +3.75(17) +0.67(4)
Limited Maturity Portfolio Class B Shares--Total Return +3.37(18) +0.58(19)
Limited Maturity Portfolio Class C Shares--Total Return +2.97(20) +0.47(21)
Limited Maturity Portfolio Class D Shares--Total Return +3.55(22) +0.65(23)
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.445 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.111 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.384 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.096 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.380 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.095 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.425 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.106 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.598 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.150 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.521 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.131 per share
ordinary income dividends.
<PAGE>
(13)Percent change includes reinvestment of $0.516 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.130 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.573 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.144 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.381 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.345 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.088 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.335 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.087 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.371 per share
ordinary income dividends.
(23)Percent change includes reinvestment of $0.094 per share
ordinary income dividends.
</TABLE>
Portfolio
Abbreviations
To simplify the listings of Merrill Lynch Municipal
Bond Fund, Inc.'s portfolio holdings in the Schedule of
Investments, we have abbreviated the names of many of
the securities according to the list at right.
ACES SM Adjustable Convertible Extendible Securities
AMT Alternative Minimum Tax (Subject to)
BAN Bond Anticipation Notes
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
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
LEVRRS Leveraged Reverse Rate Securities
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
UPDATES Unit Priced Demand Adjustable
Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.4% AAA Aaa $ 1,625 Alabama Water Pollution Control Authority, Revolving Fund
Loan, Series A, 6.75% due 8/15/2017 (b) $ 1,740
AAA Aaa 1,250 Mobile, Alabama, GO, Refunding and Capital Improvement
Bonds, 10.875% due 11/01/2007 (c) 1,696
AAA Aaa 6,000 Montgomery, Alabama, Special Care Facilities Financing
Authority Revenue Bonds (Baptist Medical Center), Series A,
5.75% due 1/01/2022 (h) 5,843
Alaska--0.7% Kenai Peninsula Borough, Alaska, GO (b):
AAA Aaa 6,450 8.40% due 1/01/2000 7,209
AAA Aaa 8,460 8.40% due 1/01/2001 9,677
Arizona--2.1% AAA Aaa 6,750 Arizona State Municipal Financing Program, COP, Series 34,
7.25% due 8/01/2009 (g) 7,891
AAA Aaa 3,800 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds
(Saint Joseph's Care Center Project), Series A, 7.75% due
7/01/2020 (e) 4,216
AAA Aaa 4,000 Maricopa County, Arizona, IDA, Hospital Facility Revenue
Refunding Bonds (Samaritan Health Services), Series A,
7% due 12/01/2013 (e) 4,382
AAA Aaa 7,000 Maricopa County, Arizona, Unified School District No.097
(Deer Valley Project), UT, 1986 Series E, 10% due 7/01/2000 (h) 8,352
Mesa, Arizona, IDA, Health Care Facilities Revenue Bonds
(Western Health Network)(g):
AAA Aaa 10,000 Refunding, Series A-2, 7.625% due 1/01/2013 10,806
AAA Aaa 7,340 Series A-1, 7.625% due 1/01/2019 7,937
AAA Aaa 5,000 Pima County, Arizona, Unified School District No. 1
(Tucson), UT, Series C, 6.875% due 7/01/2001 (a)(e) 5,513
<PAGE>
California--3.0% California Health Facilities Financing Authority Revenue
Refunding Bonds (Catholic West), VRDN (e)(f):
A1+ VMIG1++ 5,600 Series B, 3% due 7/01/2005 5,600
A1+ VMIG1++ 7,200 Series D, 3% due 7/01/2018 7,200
AAA Aaa 10,000 East Bay, California, Municipal Utility District, Water
System Revenue Bonds, Sub-Series, 6.375% due 12/01/2001 (a)(b) 10,984
AAA Aaa 12,200 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds (Property A--Second
Tier), 6% due 7/01/2026 (e) 12,231
AAA Aaa 4,700 Los Angeles County, California, Transport Commission,
Sales Tax Revenue Bonds, Series A, 6.75% due 7/01/2001 (a)(h) 5,216
AAA Aaa 8,800 Northern California Power Agency, Multiple Capital Facilities
Revenue Bonds, RIB, 9.129% due 9/02/2025 (d)(e) 9,526
AAA Aaa 6,000 Oakland, California, Redevelopment Agency, Refunding,
INFLOS, 8.118% due 9/01/2019 (d)(e) 5,873
AAA VMIG1++ 11,000 Southern California Public Power Authority, Transmission
Project Revenue Refunding Bonds, Series A, 5% due 7/01/2022 (e) 9,613
AAA Aaa 5,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2024 (e) 5,155
Colorado--1.2% A1+ VMIG1++ 13,980 Colorado Health Facilities Authority Revenue Bonds (North
Colorado Medical Center), VRDN, 3.25% due 5/15/2020 (e)(f) 13,980
AAA Aaa 10,000 Denver, Colorado, City and County Apartments, Revenue Bonds,
Series A, 5.70% due 11/15/2025 9,776
AAA Aaa 4,000 La Plata County, Colorado, Revenue Bonds (School District
Number 9 & R. Durango), UT, 6.60% due 11/01/2017 (h) 4,250
Connecticut-- AAA Aaa 6,870 Connecticut State Health and Educational Facilities Authority
0.3% Revenue Bonds (Lawrence and Memorial Hospitals), Series C, 6.25%
due 7/01/2002 (a)(e) 7,473
Delaware--0.5% AAA Aaa 6,000 Delaware State EDA, PCR, Refunding (Delmarva Power and Light
Company), Series B, 7.30% due 3/01/2014 (e) 6,564
AAA Aaa 3,750 Delaware State Health Facilities Authority, Crossover
Refunding (Medical Center of Delaware), 7% due 10/01/2015 (e) 4,040
<PAGE>
Florida--7.5% AAA Aaa 4,000 Dade County, Florida, School District, UT, 6.125% due
8/01/2001 (a)(h) 4,255
A1+ VMIG1++ 28,800 Dade County, Florida, Water and Sewer System Revenue
Bonds, VRDN, 3.30% due 10/05/2022 (f)(h) 28,800
AAA Aaa 5,000 Florida State Division, Bond Finance Department, General
Services Revenue Bonds (Department of Natural Resource
Preservation), Series 2000-A, 6.75% due 7/01/2013 (b) 5,365
Florida State Municipal Power Agency Revenue Bonds (All
Requirements Power Supply Project)(a)(b):
AAA Aaa 9,250 6.25% due 10/01/2002 10,120
AAA Aaa 2,340 Refunding, 6.25% due 10/01/2001 2,544
AAA Aaa 3,030 Florida State Turnpike Authority, Turnpike Revenue Bonds,
Series A, 6.35% due 7/01/2002 (a)(h) 3,300
AAA Aaa 5,950 Hollywood, Florida, Water and Sewer Revenue Bonds, 6.875%
due 10/01/2001 (a)(h) 6,639
Jacksonville, Florida, Health Facilities Authority, Hospital
Revenue Refunding and Improvement Bonds (Baptist Medical
Center Project):
AAA Aaa 500 11.50% due 10/01/2012 (c) 805
AAA Aaa 26,500 Series A, 7.30% due 6/01/2019 (e) 28,695
AAA Aaa 8,750 Jacksonville, Florida, Port Authority Revenue Bonds, AMT,
7.875% due 11/01/2018 (g) 9,030
AAA Aaa 10,000 Lee County, Florida, Hospital Board of Directors, Hospital
Revenue Bonds, INFLOS, 9.241% due 4/01/2020 (d)(e) 10,750
AAA Aaa 16,700 Martin County, Florida, PCR, Refunding (Florida Power and
Light Company Project), 7.30% due 7/01/2020 (e) 18,296
AAA Aaa 11,525 Orange County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan), Series B,
7.875% due 12/01/2025 (g) 12,073
AAA Aaa 3,950 Orange County, Florida, HFA, Mortgage Revenue Refunding
Bonds, Series A, 7.60% due 1/01/2024 (h)(j) 4,180
Orlando and Orange County, Florida, Expressway Authority,
Revenue Refunding Bonds, Junior-Lien, Series A (h):
AAA Aaa 3,960 5% due 7/01/2017 3,547
AAA Aaa 10,455 5.125% due 7/01/2020 9,409
AAA Aaa 12,500 Reedy Creek, Florida, Improvement District, Florida Utilities
Revenue Refunding Bonds, Series 1, 5% due 10/01/2019 (e) 11,071
AAA Aaa 2,850 South Broward, Florida, Hospital District Revenue Bonds, RIB,
Series C, 9.29% due 5/01/2001 (a)(b)(d) 3,367
AAA Aaa 2,000 Tampa, Florida, Water and Sewer Revenue Refunding Bonds,
Sub-Lien, Series A, 7.25% due 10/01/2016 (b) 2,131
AAA Aaa 2,240 West Coast Regional Water Supply Authority, Florida, Capital
Improvement Revenue Bonds (Hillsborough County Project),
10.40% due 10/01/2010 (a)(b) 3,154
<PAGE>
Georgia--4.3% A1+ VMIG1++ 6,200 Burke County, Georgia, Development Authority, PCR (Oglethorpe
Power Corporation), VRDN, Series A, 3.30% due 1/01/2016 (f)(h) 6,200
AAA Aaa 10,500 Chatam County, Georgia, School District, UT, 6.75%
due 8/01/2003 (a)(e) 11,773
Georgia Municipal Electric Authority, Power Revenue Bonds:
AAA Aaa 12,100 Refunding, Series Z, 5.50% due 1/01/2012 (h) 12,013
AAA Aaa 7,400 Refunding, Series Z, 5.50% due 1/01/2012 (i) 7,347
AAA Aaa 11,545 Refunding, Series Z, 5.50% due 1/01/2020 (h) 11,089
AAA Aaa 20,000 Series EE, 7% due 1/01/2025 (b) 23,296
A1+ VMIG1++ 17,400 Glynn-Brunswick Memorial Hospital Authority, Georgia,
Anticipation Certificates, Revenue Refunding Bonds (Southeast
Georgia Project), VRDN, 3.30% due 8/01/2016 (e)(f) 17,400
AAA Aaa 3,990 Metropolitan Atlanta, Rapid Transit Authority, Georgia, Sales
Tax Revenue Refunding Bonds, Second Indenture Series,
Series A, 5.125% due 7/01/2019 (b) 3,641
AAA Aaa 9,000 Municipal Electric Authority, Georgia, Special Obligation
Bonds (Fifth Crossover Series, Project One), 6.40% due 1/01/2013 (b) 9,729
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Hawaii--3.2% Hawaii State Airports System Revenue Bonds:
AAA Aaa $21,795 AMT, 7.30% due 7/01/2020 (b) $ 23,679
AAA Aaa 23,200 AMT, Second Series, 7.50% due 7/01/2020 (h) 25,371
AAA Aaa 10,000 Refunding, Series 1993, 6.45% due 7/01/2013 (e) 10,566
Hawaii State Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Hawaiian Electric Company,
Inc. Project), AMT (e):
AAA Aaa 4,340 7.625% due 12/01/2018 4,730
AAA Aaa 5,000 Series C, 7.375% due 12/01/2020 5,471
AAA Aaa 4,500 Hawaii State Harbor, Capital Improvement Revenue Bonds,
AMT, 7% due 7/01/2017 (e) 4,814
<PAGE>
Illinois--7.0% AAA Aaa 11,000 Chicago, Illinois, GO, Series A-1, 5.125% due 1/01/2025 (b) 9,734
Chicago, Illinois, Public Building Commission Revenue Bonds (c):
AAA Aaa 25,000 (Community College District No. 508), Series B, 8.75%
due 1/01/2007 (g) 26,548
AAA Aaa 25,000 Series A, 7.125% due 1/01/2015 (e) 26,794
AAA Aaa 6,000 Chicago, Illinois, Refunding, Series B, 5.125% due 1/01/2025 (h) 5,309
AAA Aaa 19,000 Chicago, Illinois, Wastewater Transmission Revenue
Refunding Bonds, 5.125% due 1/01/2025 (h) 16,790
Chicago, Illinois, Water Revenue Bonds (h):
AAA Aaa 3,000 5% due 11/01/2015 2,684
AAA Aaa 3,000 5% due 11/01/2020 2,625
AAA Aaa 10,000 5% due 11/01/2025 8,651
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,250 (Elmhurst Memorial Hospital), 6.625% due 1/01/2022 (h) 3,399
AAA Aaa 2,000 (Methodist Health Project), RIB, 9.821% due 5/01/2021 (b)(d) 2,223
AAA Aaa 10,000 (Rush Presbyterian-Saint Luke's Medical Center),
INFLOS, 9.585% due 10/01/2024 (d)(e) 11,050
AAA Aaa 6,600 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds (McCormick Place Expansion
Project), Series A, 6.50% due 6/15/2027 (b) 6,905
Regional Transportation Authority, Illinois:
AAA Aaa 38,025 Refunding, 5.60% due 6/01/2025 (e) 35,847
AAA Aaa 6,000 Series A, 6.25% due 6/01/2024 (b) 6,066
Indiana--2.0% AAA Aaa 2,470 Indiana State Employment Development Commission,
Environmental Revenue Bonds (Public Service Company of
Indiana, Inc.), AMT, 7.50% due 3/15/2015 (e) 2,681
AAA Aaa 4,000 Indiana State Municipal Power Agency, Power Supply
System Revenue Bonds, Series A, 6.125% due 1/01/2019 (e) 4,044
AAA Aaa 4,040 Indianapolis, Indiana, Local Public Improvement Bond
Bank, Series A, 7.90% due 2/01/2002 (a)(g) 4,639
AAA Aaa 4,340 Jasper County, Indiana, PCR, Refunding (Northern Indiana
Public Service), 7.10% due 7/01/2017 (e) 4,718
Rockport, Indiana, PCR, Refunding:
A1 Aaa 4,600 (AEP Generating Company Project), VRDN, Series A,
3.60% due 7/01/2025 (b)(f) 4,600
A1 Aaa 3,000 (AEP Generating Company Project), VRDN, Series B,
3.65% due 7/01/2025 (b)(f) 3,000
AAA Aaa 3,550 (Indiana--Michigan Power Company Project), Series B,
7.60% due 3/01/2016 (h) 3,976
A1 Aaa 19,100 (Indiana--Michigan Power Company Project), VRDN, Series B,
3.25% due 6/01/2025 (b)(f) 19,100
Iowa--0.2% AAA Aaa 5,000 Des Moines, Iowa, Parking Facilities Revenue Bonds,
Series A, 7.25% due 7/01/2015 (h) 5,420
<PAGE>
Kentucky--0.7% AAA Aaa 11,470 Kentucky Development Finance Authority, Hospital Revenue
Refunding and Improvement Bonds (Saint Elizabeth Medical
Center), Series A, 9% due 11/01/2000 (h) 13,376
AAA Aaa 3,050 Kentucky State Property and Buildings Commission Revenue
Bonds, Project No. 50, 6% due 2/01/2001 (a)(e) 3,208
Maryland--0.5% AAA Aaa 3,000 Baltimore, Maryland, Revenue Refunding Bonds (Kidder Maryland
Water Projects), Series A, 5.65% due 7/01/2020 (e) 2,904
Maryland State Health and Higher Educational Facilities Authority
Revenue Bonds (University of Maryland Medical Systems)(h):
AAA Aaa 2,250 Series A, 7% due 7/01/2001 (a) 2,507
AAA Aaa 4,400 Series B, 7% due 7/01/2022 5,144
Massachusetts-- AAA Aaa 13,000 Massachusetts Bay Transportation Authority, COP,
5.2% Series A, 7.65% due 8/01/2000 (a)(i) 14,648
AAA Aaa 10,000 Massachusetts Bay Transportation Authority (Massachusetts
General Transportation), Series B, 5.375% due 3/01/2025 (b) 9,303
AAA Aaa 4,780 Massachusetts Educational Loan Authority, Education Loan
Revenue Bonds, AMT, Issue D, Series A, 7.25% due 1/01/2009 (e) 5,106
AAA Aaa 3,250 Massachusetts Port Authority Revenue Bonds, 13% due 7/01/2013 (c) 5,323
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 10,000 (Beth Israel), INFLOS, 8.319% due 7/01/2025 (b)(d) 9,700
A1 VMIG1++ 1,695 (Capital Asset Program), VRDN, Series B, 3.35%
due 7/01/2005 (e)(f) 1,695
SP1+ VMIG1++ 43,000 (Capital Asset Program), VRDN, Series D, 3.60%
due 1/01/2035 (e)(f) 43,000
AAA Aaa 3,100 (Saint Elizabeth's Hospital), LEVRRS, Series E, 9.88%
due 8/12/2021 (d)(i) 3,410
AAA Aaa 19,755 Massachusetts State HFA, Housing Revenue Refunding Bonds
(Insured Rental), AMT, Series A, 6.75% due 7/01/2028 (b) 20,334
AAA Aaa 5,500 Massachusetts State Industrial Finance Agency Revenue Bonds
(Brandeis University), Series C, 6.80% due 10/01/2019 (e) 5,824
AAA Aaa 5,850 Massachusetts State Turnpike Authority, Turnpike Revenue
Refunding Bonds, Series A, 5.125% due 1/01/2023 (h) 5,217
<PAGE>
Michigan--3.3% AAA Aaa 5,500 Chippewa Valley, Michigan Schools (School Building and
Sites), UT, 6.375% due 5/01/2001 (a)(h) 5,943
AAA Aaa 3,350 Detroit, Michigan, City School District UT, 7.10% due
5/01/2001 (a)(e) 3,737
AAA Aaa 10,900 Detroit, Michigan, Water Supply System Revenue Bonds,
INFLOS, 8.821% due 7/01/2002 (a)(d)(h) 12,753
AAA Aaa 5,000 Kent Hospital Finance Authority, Michigan, Healthcare
Revenue Bonds (Butterworth Health Systems), Series A, 5.625%
due 1/15/2026 (e) 4,742
AAA Aaa 10,000 Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Co.), Series AA, 6.40%
due 9/01/2025 (e) 10,404
Monroe County, Michigan, PCR (Detroit Edison Company
Project), AMT:
AAA Aaa 16,500 (Monroe and Fermi Plants), Series 1, 7.65% due 9/01/2020 (h) 18,160
AAA Aaa 9,745 Series I-B, 7.50% due 9/01/2019 (b) 10,671
Oxford, Michigan, Area Community School District
(Building and Site), UT (h):
AAA Aaa 6,300 5.50% due 5/01/2021 6,005
AAA Aaa 5,000 5.40% due 5/01/2025 4,662
AAA Aaa 1,000 Riverview, Michigan, Community School District Building,
UT, 6.55% due 5/01/2002 (a)(h) 1,097
Mississippi-- AAA Aaa 1,320 Harrison County, Mississippi, Wastewater Management District,
0.1% Revenue Refunding Bonds (Wastewater Treatment Facilities),
Series A, 8.50% due 2/01/2013 (h) 1,728
Missouri--0.3% AAA Aaa 4,000 Kansas City, Missouri, Municipal Assistance Corporation
Revenue Bonds (Leasehold Improvement--H-Roe Bartle),
Series B, 6% due 4/15/2001 (a)(b) 4,215
AAA Aaa 3,500 Sikeston, Missouri, Electric Revenue Refunding Bonds,
6.25% due 6/01/2002 (a)(e) 3,804
Nebraska--0.4% AAA Aaa 9,000 Nebraska Public Power District Revenue Refunding Bonds,
6.125% due 1/01/2015 (e) 9,188
Nevada--2.2% AAA Aaa 5,000 Washoe County, Nevada, Airport Authority, Airport System
Improvement Revenue Bonds, Series A, 5.70% due 7/01/2026 (e) 4,867
AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power), AMT, 6.65% due 6/01/2017 (e) 47,277
<PAGE>
New Jersey--5.5% AAA Aaa 3,350 Cape May County, New Jersey, Industrial Pollution Control
Financing Authority, Revenue Refunding Bonds (Atlantic City
Electric Company), Series A, 6.80% due 3/01/2021 (e) 3,820
AAA Aaa 14,000 Delaware River Port Authority of Pennsylvania and New Jersey,
Revenue Bonds, Series 1995, 5.50% due 1/01/2026 (h) 13,353
AAA Aaa 2,000 Hoboken, Union City, and Weehawken, New Jersey, Sewage Authority,
Sewer Revenue Bonds, 7.25% due 8/01/1999 (a)(e) 2,191
AAA Aaa 28,750 New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds
(NUI Corp.), Series A, 6.35% due 10/01/2022 (b) 29,889
A1+ VMIG1++ 10,000 New Jersey Sports and Exposition Authority (State Contract),
VRDN, Series C, 3.10% due 9/01/2024 (e)(f) 10,000
AAA Aaa 5,165 New Jersey State Educational Facilities Authority Revenue
Bonds (New Jersey Institute of Technology), Series D, 6.25%
due 7/01/2001 (a)(b) 5,543
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New Jersey New Jersey State Housing and Mortgage Finance Agency, Home
(concluded) Buyer Revenue Bonds, AMT (e):
AAA Aaa $ 5,640 Series B, 7.90% due 10/01/2022 $ 5,909
AAA Aaa 10,390 Series D, 7.70% due 10/01/2029 10,798
AAA Aaa 23,890 Series M, 7% due 10/01/2026 24,887
AAA VMIG1++ 23,400 New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds, VRDN, Series D, 3% due 1/01/2018 (f)(h) 23,400
<PAGE>
New York--5.3% AAA Aaa 9,650 Metropolitan Transportation Authority, New York, Service
Contract, Refunding (Transportation Facilities), Series L,
7.50% due 7/01/2017 (b) 10,361
AAA Aaa 1,550 New York City, New York, GO, UT, Series C, Sub-Series C-1,
6.625% due 8/01/2002 (a)(e) 1,716
New York City, New York, GO, UT, Series I (b):
AAA Aaa 7,150 7.25% due 8/15/2013 7,682
AAA Aaa 10,130 7.25% due 8/15/2016 10,958
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 1,090 Series A, 6.75% due 6/15/1999 (a)(h) 1,173
AAA Aaa 2,000 Series B, 5.75% due 6/15/2026 (e) 1,961
AAA Aaa 4,510 Series C, 6.20% due 6/15/2021 (b) 4,603
AAA VMIG1++ 11,500 VRDN, Series C, 3.60% due 6/15/2023 (f)(h) 11,500
AAA VMIG1++ 12,600 VRDN, Series G, 3.60% due 6/15/2024 (f)(h) 12,600
AAA Aaa 10,705 New York State Dormitory Authority Revenue Bonds (City
University System), Third Generation, Series 1, 5.375% due
7/01/2025 (b) 9,999
AAA Aaa 31,765 New York State Energy Research and Development Authority,
Gas Facilities Revenue Refunding Bonds (Brooklyn Union Gas
Company), Series A, 5.50% due 1/01/2021 (e) 30,327
AAA Aaa 3,085 New York State Medical Care Facilities Finance Agency Revenue
Bonds (Mental Health Services Improvement), Series C, 7.375%
due 8/15/2019 (e) 3,355
New York State Thruway Authority, General Revenue Bonds:
AAA Aaa 6,400 Series B, 5% due 1/01/2020 (e) 5,702
AAA VMIG1++ 5,900 VRDN, 3.55% due 1/01/2024 (f)(h) 5,900
Niagara Falls, New York, Public Improvement Bonds, UT (e):
AAA Aaa 2,975 6.90% due 3/01/2023 3,237
AAA Aaa 3,190 6.90% due 3/01/2024 3,471
AAA Aaa 1,235 Suffolk County, New York, Water Authority, Waterworks Revenue
Refunding Bonds, 7.375% due 6/01/2012 (b) 1,331
North Carolina-- AAA Aaa 3,000 Charlotte, North Carolina, COP (Convention Facility Project),
0.5% 6.75% due 12/01/2001 (a)(b) 3,335
A2 VMIG1++ 9,500 North Carolina Medical Care Commission, Hospital Revenue Bonds
(Pooled Equipment Financing Project), ACES, 3.70% due
12/01/2025 (e)(f) 9,500
Ohio--1.4% AAA Aaa 2,710 Clermont County, Ohio, Hospital Facilities Revenue Refunding
Bonds (Mercy Health Systems--Province of Cincinnati),
Series A, 7.50% due 9/01/2001 (a)(b) 3,043
AAA Aaa 5,400 Clermont County, Ohio, Sewer System Revenue Bonds, 7.10%
due 12/01/2001 (a) 6,079
AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds, First
Mortgage, Series A, 7% due 11/15/2024 (e) 13,253
AAA Aaa 5,915 Fairfield County, Ohio, Hospital Improvement Revenue Bonds
(Lancaster-Fairfield Community Hospital), Series A, 7.10%
due 6/15/2001 (a)(e) 6,611
AAA Aaa 3,495 Ohio State Water Development Authority, Revenue Refunding
Bonds (Cincinnati Gas), Series A, 5.45% due 1/01/2024 (e) 3,305
<PAGE>
Oklahoma--1.4% AAA Aaa 7,500 Oklahoma State Industrial Authority, Hospital Revenue Bonds
(Baptist Medical Center of Oklahoma), Series A, 7% due
8/15/2000 (a)(b) 8,261
AAA Aaa 21,560 Tulsa, Oklahoma, Industrial Authority, Hospital Revenue
Bonds (Saint John's Medical Center, Inc.), 7.25% due
12/01/1999 (a)(e) 23,755
Oregon--0.2% AAA Aaa 4,000 Port Portland International Airport Revenue Bonds (Portland
International Airport), AMT, Series 7-B, 7.10% due 7/01/2021 (e) 4,326
Pennsylvania-- Allegheny County, Pennsylvania, Hospital Development
7.2% Authority Revenue Bonds:
AAA Aaa 1,750 (Mercy Hospital of Pittsburgh), 6.75% due 4/01/2021 (b) 1,853
A1+ VMIG1++ 1,195 (Presbyterian Health Center), VRDN, Series B, 3.55%
due 3/01/2020 (e)(f) 1,195
AAA Aaa 6,900 Beaver County, Pennsylvania, Hospital Authority Revenue
Bonds (Medical Center of Beaver, Pennsylvania Inc.),
Series A, 6.25% due 7/01/2022 (b) 6,969
AAA Aaa 3,365 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio
Edison Company/Mansfield), Series A, 7% due 6/01/2021 (h) 3,673
AAA Aaa 5,300 Lehigh County, Pennsylvania, General Purpose Authority Revenue
Bonds (Lehigh Valley Hospital), Series B, 5.625% due 7/01/2025 (e) 5,070
Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue Bonds, AMT, RIB (d):
AAA Aaa 15,000 9.622% due 9/03/2026 (b) 16,406
AAA Aaa 8,000 Series B, 11.033% due 3/01/2020 (e) 9,090
AAA Aaa 18,600 Series B, 8.329% due 3/01/2022 (b) 18,205
Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds:
AAA Aaa 1,500 (Bryn Mawr College), 6.50% due 12/01/2009 (h) 1,579
AAA Aaa 4,250 (Temple University), First Series, 6.50% due 4/01/2021 (e) 4,424
AAA Aaa 1,150 Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds,
Series H, 7.10% due 12/01/2000 (a)(h) 1,279
Philadelphia, Pennsylvania, Airport Revenue Bonds, AMT (e):
AAA Aaa 8,150 7.75% due 6/15/2015 8,750
AAA Aaa 24,000 7.375% due 6/15/2018 25,601
Philadelphia, Pennsylvania, Gas Works Revenue Bonds:
AAA Aaa 5,000 12th Series B, 7% due 5/15/2020 (c)(e) 5,760
AAA Aaa 2,600 15th Series 3, 5.25% due 8/01/2024 (i) 2,369
AAA Aaa 5,750 Philadelphia, Pennsylvania, Parking Authority, Airport Parking
Revenue Bonds, 7.375% due 9/01/2018 (b) 6,185
AAA Aaa 30,150 Philadelphia, Pennsylvania, School District, Series B, 5.50%
due 9/01/2025 (b) 28,398
AAA Aaa 4,610 Philadelphia, Pennsylvania, Water and Wastewater Revenue
Bonds, 5.50% due 8/01/2014 (e) 4,491
AAA Aaa 2,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water
and Sewer System Revenue Refunding Bonds, Series A, 6%
due 9/01/2001 (a)(h) 2,114
AAA Aaa 15,870 Somerset County, Pennsylvania, General Authority Commonwealth,
Lease Revenue Bonds, 6.25% due 10/15/2001 (a)(h) 16,980
<PAGE>
Rhode Island AAA Aaa 6,100 Rhode Island Depositors Economic Protection Corporation,
- --0.9% Special Obligation Bonds, Series A, 6.625% due 8/01/2002 (a)(i) 6,729
AAA Aaa 12,800 Rhode Island State Health and Educational Building Corporation
Revenue Bonds (Rhode Island Hospital), INFLOS, 9.715%
due 8/15/2021 (d)(h) 14,384
South Carolina AAA Aaa 5,000 Florence County, South Carolina, Hospital Revenue Bonds
- --1.8% (McLeod Regional Medical Center Project), 6.75% due 11/01/2020 (h) 5,293
AAA Aaa 3,500 Pickens and Richland Counties, South Carolina, Hospital
Facilities Revenue Bonds (South Carolina Baptist Hospital),
Series A, 7% due 8/01/2001 (a)(b) 3,889
AAA Aaa 4,000 Piedmont, Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, 6.30% due 1/01/2022 (e) 4,114
South Carolina State Public Service Authority, Revenue
Refunding Bonds, Series A:
AAA Aaa 13,155 5.50% due 7/01/2021 (e) 12,554
AAA Aaa 17,090 6.375% due 7/01/2021 (b) 17,635
Tennessee-- AAA Aaa 1,905 Jackson, Tennessee, Water and Sewer Revenue Bonds,
0.1% 10.375% due 7/01/2012 (b) 2,232
Texas--17.1% Austin, Texas, Utility System, Combined Revenue Bonds (e):
AAA Aaa 11,190 Prior Lien, 9.25% due 5/15/2004 (a) 14,218
AAA Aaa 30,000 Refunding, 5.60% due 5/15/2025 28,918
Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company Project), AMT:
AAA Aaa 6,000 Refunding, 6.50% due 12/01/2027 (b) 6,192
AAA Aaa 12,000 Series B, 6.625% due 6/01/2022 (h) 12,582
AAA Aaa 13,900 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power Co.), Series B, 7.20% due 12/01/2018 (h) 15,159
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Texas AAA Aaa $20,000 Brownsville, Texas, Utility System Revenue Refunding Bonds,
(concluded) 6.25% due 9/01/2014 (e) $ 21,303
AAA Aaa 5,000 Harris County, Texas, Hospital District Mortgage, Revenue
Refunding Bonds, 7.40% due 2/15/2010 (b) 5,881
Harris County, Texas, Toll Road Revenue Bonds, Senior Lien:
AAA Aaa 13,045 Refunding, 5.30% due 8/15/2013 (b) 12,465
AAA Aaa 2,250 Refunding, 5% due 8/15/2016 (h) 2,038
AAA Aaa 42,870 Refunding, 5.375% due 8/15/2020 (h) 40,146
AAA Aaa 1,000 Refunding, Series A, 6.40% due 8/15/2002 (a)(h) 1,097
AAA Aaa 20,430 Refunding, Series A, 6.50% due 8/15/2002 (a)(b) 22,514
AAA Aaa 10,305 Refunding, Series A, 6.50% due 8/15/2002 (a)(h) 11,356
AAA Aaa 2,750 Series A, 6.50% due 8/15/2017 (b) 2,880
AAA Aaa 11,100 Series A, 6.375% due 8/15/2024 (e) 11,497
AAA Aaa 1,695 Harris County, Texas, Toll Road Revenue Bonds, Series A,
6.50% due 8/15/2011 (h) 1,790
Houston, Texas, Water and Sewer System Revenue Bonds,
Junior Lien, Series A:
AAA Aaa 9,375 6.375% due 12/01/2022 (e) 9,667
AAA Aaa 35,180 Refunding, 5.375% due 12/01/2018 (h) 33,274
AAA Aaa 8,000 Refunding, 6.20% due 12/01/2023 (e) 8,165
AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract, COP,
Series J, 6.25% due 12/15/2013 (b) 3,743
AAA Aaa 650 Lower Colorado River Authority, Texas, Revenue Refunding
Bonds, Series B, 7% due 1/01/2001 (a)(b) 720
Matagorda County, Texas, Navigation District No. 1 (Houston
Light and Power Co.):
AAA Aaa 8,250 AMT, PCR, Series D, 7.60% due 10/01/2019 (h) 9,030
AAA Aaa 11,800 Refunding, Series A, 6.70% due 3/01/2027 (b) 12,601
AAA Aaa 26,305 Refunding, Series C, 7.125% due 7/01/2019 (h) 28,378
AAA Aaa 5,000 Matagorda County, Texas, Navigation District No. 1, PCR (Central
Power and Light Company Project), AMT, 7.50% due 3/01/2020 (b) 5,427
A1 VMIG1++ 8,850 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Project), VRDN, Series A, 3.65% due 3/01/2026 (b)(f) 8,850
AAA Aaa 3,000 San Antonio, Texas, Electric and Gas Revenue Bonds, Series 95,
5.375% due 2/01/2016 (e) 2,852
AAA Aaa 15,000 Southwest Higher Education Authority Incorporated, Texas,
Revenue Refunding Bonds (Southern Methodist University),
Series B, 6.25% due 10/01/2022 (h) 15,289
Texas State Municipal Power Agency, Revenue Refunding Bonds:
AAA Aaa 4,775 5.75% due 9/01/2002 (a)(e) 5,004
AAA Aaa 3,150 Series A, 6.75% due 9/01/2012 (b) 3,384
AAA Aaa 53,750 Texas State Turnpike Authority Revenue Bonds (Dallas North
Thruway--President George Bush Turnpike), 5.25% due 1/01/2023 (h) 49,230
<PAGE>
Utah--1.9% A1+ VMIG1++ 11,600 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN,
3.60% due 11/01/2024 (b)(f) 11,600
AAA Aaa 15,800 Murray City, Utah, Hospital Revenue Bonds (IHC Health Services
Inc.), 5% due 5/15/2022 (e) 13,736
AAA Aaa 14,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds (IHC
Hospitals, Inc.), INFLOS, 9.566% due 5/15/2020 (b)(d) 15,523
AA- Aaa 1,000 Uinta County, Utah, PCR (National Rural Utilities--Deseret),
Series 1984 F-2, 10.50% due 6/15/2001 (a) 1,245
AAA Aaa 2,650 Utah State Board of Regents, Student Loan Revenue Bonds, AMT,
Series F, 7.45% due 11/01/2008 (b) 2,750
Vermont--0.8% AAA Aaa 18,950 Vermont, HFA, Home Mortgage Purchase Bonds, AMT, Series B,
7.60% due 12/01/2024 (e) 19,896
Virginia--2.8% AAA Aaa 5,000 Danville, Virginia, IDA, Hospital Revenue Refunding Bonds
(Danville Regional Medical Center), 6.50% due 10/01/2019 (h) 5,244
AAA Aaa 5,000 Prince William County, Virginia, Service Authority, Water
and Sewer System Revenue Bonds, 6.50% due 7/01/2001 (a)(h) 5,460
Upper Occoquan Sewer Authority, Virginia, Regional Sewer
Revenue Bonds (e):
AAA Aaa 11,000 6% due 7/01/2001 (a) 11,596
AAA Aaa 10,000 Series A, 5% due 7/01/2025 8,732
Virginia State, HDA, Commonwealth Mortgage, AMT, Series A,
Sub-Series A-4 (e):
AAA Aaa 5,000 6.30% due 7/01/2014 5,065
AAA Aaa 11,215 6.35% due 7/01/2018 11,361
AAA Aaa 19,000 6.45% due 7/01/2028 19,246
Washington-- Seattle, Washington, Metropolitan Seattle Municipality,
2.7% Sewer Revenue Bonds, Series W (e):
AAA Aaa 2,465 6.25% due 1/01/2022 2,489
AAA Aaa 4,485 6.25% due 1/01/2023 4,529
AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power Revenue Bonds,
6.625% due 7/01/2020 (h) 35,744
AAA Aaa 10,000 Seattle, Washington, Solid Waste Utility, Revenue Refunding
Bonds, Series A, 6.875% due 5/01/2009 (g) 10,672
University of Washington, University Revenue Bonds (Housing
and Dining)(e):
AAA Aaa 2,600 7% due 12/01/2001 (a) 2,909
AAA Aaa 650 7% due 12/01/2021 708
AAA Aaa 7,000 Washington State, Health Care Facilities Authority Revenue
Bonds (Southwest Washington Hospital--Vancouver), 7.125%
due 10/01/2019 (g) 7,565
<PAGE>
West Virginia AAA Aaa 29,250 Marshall County, West Virginia, PCR, Refunding (Ohio
- --2.6% Power Company--Kammer Plant Project), Series B, 5.45% due
7/01/2014 (e) 28,337
AAA Aaa 11,465 Mason County, West Virginia, PCR, Refunding (Appalachian
Power Co.), Series I, 6.85% due 6/01/2022 (e) 12,284
Pleasants County, West Virginia, PCR, Series 95-C (b):
AAA Aaa 4,500 (Monogahela Power Co.), 6.15% due 5/01/2015 4,581
AAA Aaa 12,250 (Potomac Pleasants), 6.15% due 5/01/2015 12,472
AAA Aaa 1,000 Putnam County, West Virginia, PCR, Refunding (Appalachian
Power Company Project), Series D, 5.45% due 6/01/2019 (b) 941
AAA Aaa 3,900 West Virginia State, Hospital Finance Authority Revenue
Bonds (VH Mid-Atlantic/Capital), VRDN, Series G, 3.35%
due 12/01/2025 (f) 3,900
Wisconsin--3.2% AAA Aaa 7,000 Superior, Wisconsin, Limited Obligation Revenue Refunding
Bonds (Midwest Energy Resources), Series E, 6.90% due 8/01/2021 (h) 7,990
Wisconsin Public Power System Incorporated, Power Supply
System Revenue Bonds, Series A (b):
AAA Aaa 2,000 7.40% due 7/01/2000 (a) 2,227
AAA Aaa 6,500 6.875% due 7/01/2001 (a) 7,206
AAA Aaa 8,360 Refunding, 5.25% due 7/01/2021 7,464
Wisconsin State Health and Educational Facilities Authority
Revenue Bonds:
AAA Aaa 17,490 (Aurora Medical Group, Inc.), 5.75% due 11/15/2025 (i) 16,726
AAA Aaa 1,500 (Saint Luke's Medical Center Project), 7.10% due 8/15/2019 (e) 1,634
AAA Aaa 5,655 (Waukesha Memorial), Series B, 7.25% due 8/15/2000 (a) 6,281
Wisconsin State Veterans Housing Loans, AMT, Series B (e):
AAA Aaa 7,920 6.50% due 5/01/2020 8,193
AAA Aaa 17,130 6.50% due 5/01/2025 17,757
Total Investments (Cost--$2,271,078)--100.5% 2,378,216
Liabilities in Excess of Other Assets--(0.5%) (11,583)
----------
Net Assets--100.0% $2,366,633
==========
<FN>
(a)Prerefunded.
(b)AMBAC Insured.
(c)Escrowed to maturity.
(d)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 June 30, 1996.
(e)MBIA Insured.
(f)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at June 30, 1996.
(g)BIG Insured.
(h)FGIC Insured.
(i)FSA Insured.
(j)GNMA Collateralized.
++Highest short-term rating issued by Moody's Investors Service, Inc.
Rating of issues shown have not been audited by Deloitte & Touche LLP.
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.4% AAA Aaa $ 5,000 Alabama Agricultural and Mechanical University
Revenue Bonds, 6.50% due 11/01/2025 (f) $ 5,275
Alaska--2.5% Valdez, Alaska, Marine Terminal Revenue Refunding Bonds:
AA- Aa3 6,000 (British Petroleum Pipeline), Series B, 7% due 12/01/2025 6,500
AA- Aa3 27,150 (Sohio Pipeline), 7.125% due 12/01/2025 29,722
California-- NR* NR* 6,000 Antioch, California, Improvement Bond Act of 1915 (Assessment
4.2% District No. 27--Lone Tree), Series E, 7.125% due 9/02/2016 6,182
A- A 10,350 California State Public Works Board, Lease Revenue Bonds
(Department of Corrections--Monterey County, Soledad II),
Series A, 7% due 11/01/2019 11,398
AAA Aaa 11,850 East Bay, California, Municipal Utilities District,
Water System Revenue Refunding Bonds, 5% due 6/01/2021 (f) 10,410
NR* NR* 4,000 Long Beach, California, Special Tax Community Facilities
(District No. 3--Pine Avenue), 6.375% due 9/01/2023 3,734
AAA Aaa 10,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds (Proposition A),
Series A, 5% due 7/01/2021 (e) 8,772
AAA Aaa 10,000 Los Angeles County, California, Sanitation Districts,
Financing Authority Revenue Bonds (Capital Projects),
Series A, 5.25% due 10/01/2019 (f) 9,112
A NR* 10,725 Palmdale, California, Civic Authority, Revenue Refunding
Bonds (Merged Redevelopment Project), Series A, 6.60%
due 9/01/2034 11,290
Colorado--3.3% Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BBB Baa 3,000 Series A, 7.50% due 11/15/2023 3,300
BBB Baa 8,570 Series A, 8% due 11/15/2025 9,578
BBB Baa 13,000 Series B, 7.25% due 11/15/2023 13,716
BBB Baa 5,650 Series C, 6.75% due 11/15/2022 5,769
BBB Baa 13,150 Series D, 7.75% due 11/15/2021 14,487
<PAGE>
Connecticut-- AA- Baa1 4,550 Connecticut State Resource Recovery Authority, Resource
0.3% Recovery Revenue Bonds (American Refunding Fuel), AMT, Series A,
8% due 11/15/2015 4,924
Delaware--0.6% AAA NR* 7,500 Delaware State Health Facilities Authority, Revenue Refunding
Bonds (Beebe Medical Center Project), 8.50% due 6/01/2000 (j) 8,621
District of A+ A1 3,750 District of Columbia Revenue Bonds (Georgetown University),
Columbia--0.3% RIB, 8.866% due 4/01/2022 (k) 4,013
Florida--3.5% AAA Aaa 10,000 Dade County, Florida, Special Obligation, Refunding Capital
Appreciation Bonds, Series B, 6.50% due 10/01/2030 (c)(n) 1,140
AAA Aaa 6,330 Florida, HFA (Antigua Club Apartments), AMT, Series A-1,
7% due 2/01/2035 (c) 6,673
NR* Aaa 8,860 Florida, HFA, Home Ownership Revenue Bonds, AMT, Series
G-1, 7.90% due 3/01/2022 (m) 9,358
AA Aa3 5,000 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa
Electric Company Project), Series 91, 7.875% due 8/01/2021 5,758
AAA NR* 2,700 Leesburg, Florida, Hospital Revenue Capital Improvement
Bonds (Leesburg Regional Medical Center Project), Series
91-A, 7.50% due 7/01/2002 (j) 3,122
AAA NR* 4,765 Orange County, Florida, HFA, Mortgage Revenue Bonds, AMT,
Series A, 8.375% due 3/01/2021 (m) 5,078
A1 VMIG1++ 1,300 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 3.70% due
12/01/2015 (a) 1,300
South Broward, Florida, Hospital District:
AAA Aaa 11,500 Refunding, 5.25% due 5/01/2021 (f) 10,517
AAA Aaa 5,850 RIB, Series C, 9.237% due 5/01/2001 (c)(j)(k) 6,910
Georgia--3.5% AAA Aaa 25,000 Atlanta, Georgia, Water and Sewer Revenue Refunding Bonds,
4.75% due 1/01/2023 (e) 20,994
Metropolitan Atlanta, Georgia, Rapid Transit Authority,
Sales Tax Revenue Bonds:
AAA Aaa 20,000 Second Indenture, Series A, 6.90% due 7/01/2020 (f) 21,808
AA- A1 7,500 Series O, 6.55% due 7/01/2020 7,873
Idaho--0.1% AA NR* 1,970 Idaho Housing Agency, S/F Mortgage, AMT, Series E, 7.875%
due 7/01/2024 (b) 2,077
<PAGE>
Illinois--5.3% AA- Aa3 8,000 Chicago, Illinois, Gas Supply Revenue Bonds (Peoples Gas,
Light & Coke Company Project), AMT, Series A, 8.10% due 5/01/2020 8,840
Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (United Airlines, Inc.):
BB Baa2 4,760 AMT, Series B, 8.95% due 5/01/2018 5,340
BB Baa2 13,835 Series 84-B, 8.85% due 5/01/2018 15,555
AAA Aaa 5,015 Chicago, Illinois, Public Building Commission, Building
Revenue Bonds (Community College District No. 508),
Series B, 8.75% due 1/01/2007 (d)(i) 5,325
A+ Aa 5,250 Illinois, HDA, Residential Mortgage Revenue Bonds, RIB, AMT,
Series C-2, 9.562% due 2/01/2018 (k) 5,427
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 1,500 (Methodist Health Project), RIB, 9.618% due 5/01/2021 (c)(k) 1,667
BBB NR* 2,625 Refunding (Saint Elizabeth's Hospital--Chicago), 7.75%
due 7/01/2016 2,822
AAA Aaa 11,000 (Rush Presbyterian--Saint Luke's Medical Center), INFLOS,
9.494% due 10/01/2024 (f)(k) 12,155
AAA Aaa 8,500 Illinois State, GO, Refunding, UT, 5.25% due 12/01/2020 (e) 7,698
AAA Aaa 5,950 Regional Transportation Authority, Illinois, UT, Series D,
6.75% due 6/01/2025 (e) 6,688
NR* A1 4,400 Southwestern Illinois Development Authority, Sewer Facilities
Revenue Bonds (Monsanto Company Project), AMT, 7.30% due 7/15/2015 4,729
Indiana--2.9% NR* Aaa 9,500 Indiana State Educational Facilities Authority Revenue Bonds
(University of Notre Dame Project), 6.70% due 3/01/2025 10,355
BBB Baa2 2,900 Indianapolis, Indiana, Airport Facility Revenue Refunding Bonds
(Federal Express Corporation Project), 6.80% due 4/01/2017 3,012
Indianapolis, Indiana, Local Public Improvement Bond Bank:
A+ NR* 9,100 Refunding, Series D, 6.75% due 2/01/2020 9,801
NR* Aaa 11,160 Series C, 6.70% due 1/01/2002 (j) 12,302
AA- Aa2 5,950 Petersburg, Indiana, PCR, Refunding (Indianapolis Power & Light
Company Project), 6.625% due 12/01/2024 6,269
Iowa--0.7% NR* NR* 9,000 Iowa Finance Authority, Health Care Facilities Revenue Refunding
Bonds (Care Initiatives Project), 9.25% due 7/01/2025 10,107
Kansas--1.6% AAA Aaa 10,000 Kansas City, Kansas, Utility System Revenue Refunding and
Improvement Bonds, 6.375% due 9/01/2023 (e) 10,436
AAA Aaa 12,000 Wichita, Kansas, Hospital Revenue Bonds, RIB, Series III-A,
8.956% due 10/01/2017 (f)(k) 12,885
Kentucky--1.4% NR* VMIG1++ 9,000 Perry County, Kentucky, Healthcare System Revenue Bonds
(Appalachian Regional Hospital), VRDN, 3.55% due 8/01/2014 (a) 9,000
NR* NR* 4,500 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds
(TJ International Project), AMT, 7% due 6/01/2024 4,571
AA Aa2 6,345 Trimble County, Kentucky, PCR (Louisville Gas and Electric
Company), AMT, Series A, 7.625% due 11/01/2020 6,945
<PAGE>
Louisiana--3.2% NR* Baa2 37,850 Lake Charles, Louisiana, Harbor and Terminal District Port
Facilities, Revenue Refunding Bonds (Trunkline LNG Company
Project), 7.75% due 8/15/2022 42,158
BB- NR* 3,000 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 7.50% due 7/01/2013 3,106
BBB Baa2 1,100 Saint Charles Parish, Louisiana, PCR (Union Carbide Project),
AMT, 7.35% due 11/01/2022 1,147
Maine--0.3% AA- A1 3,815 Maine State Housing Authority, Mortgage Purchase, AMT,
Series B-4, 6.90% due 11/15/2026 3,927
Maryland--0.5% AA- Aa 7,000 Maryland State Stadium Authority, Sports Facilities Lease
Revenue Bonds, AMT, Series D, 7.60% due 12/15/2019 7,667
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Massachusetts AAA Aaa $ 6,000 Massachusetts Bay Transportation Authority, Series B,
- --5.0% 7.875% due 3/01/2001 (j) $ 6,893
Massachusetts State, Health and Educational Facilities
Authority Revenue Bonds:
NR* NR* 2,000 (Endicott College), VRDN, Series A, 3.40% due
10/01/2011 (a) 2,000
NR* NR* 9,320 (North Adams Regional Hospital), Series A, 9.625%
due 7/01/1999 (j) 10,791
NR* B 12,350 Refunding (New England Memorial Hospital), Series B,
6.25% due 7/01/2023 9,478
Massachusetts State, HFA (Residential Development),
Series C (l):
AAA Aaa 5,000 6.875% due 11/15/2011 5,255
AAA Aaa 7,500 6.90% due 11/15/2021 7,823
NR* VMIG1++ 1,000 Massachusetts State Industrial Finance Agency, PCR, Refunding
(North East Power Company), VRDN, 3.35% due 10/01/2022 (a) 1,000
NR* NR* 2,018 Massachusetts State, Industrial Finance Agency Revenue Bonds
(Lower Mills Association II L.P.), VRDN, 3.40% due 12/01/2020 (a) 2,018
AAA Aaa 30,000 Massachusetts State Water Resource Authority, Series B, 5%
due 12/01/2025 (f) 26,325
<PAGE>
Michigan--3.5% AAA Aaa 9,250 Detroit, Michigan, Sewage Disposal Revenue Bonds
(Water Supply System), Series A, 5% due 7/01/2025 (f) 8,054
AAA Aaa 2,000 Detroit, Michigan, Water Supply Systems, Revenue Refunding
Bonds, 5% due 7/01/2023 (e) 1,751
Michigan State Hospital Finance Authority, Hospital
Revenue Bonds (Detroit Medical Center), Series A:
A A 3,500 7.50% due 8/15/2011 3,806
A A 6,500 Refunding (Obligation Group), 6.50% due 8/15/2018 6,616
AAA Aaa 15,000 Michigan State Hospital Finance Authority (Sisters of
Mercy), INFLOS, 8.676% due 2/15/2022 (h)(k) 15,300
BBB Baa1 9,350 Monroe County, Michigan, PCR (Detroit Edison Company Project),
AMT, Series A, 7.75% due 12/01/2019 10,106
AA Aa 5,000 Royal Oak, Michigan, Hospital Finance Authority Revenue
Bonds (William Beaumont Hospital), Series D, 6.75% due 1/01/2020 5,254
Minnesota-- Minnesota State, HFA, S/F Mortgage:
1.4% AA+ Aa 6,090 AMT, Series A, 7.45% due 7/01/2022 (b) 6,350
AA+ Aa 4,250 Series F, 6.30% due 7/01/2025 4,283
AAA NR* 8,555 Saint Paul, Minnesota, Housing and Redevelopment Authority,
S/F Mortgage Revenue Refunding Bonds, Series C, 6.95%
due 12/01/2031 (l) 8,833
Mississippi-- BBB Baa 5,950 Lowndes County, Mississippi, Hospital Revenue Refunding
0.7% Bonds (Golden Triangle Medical Center), 8.50% due 2/01/2010 6,420
NR* Aaa 4,195 Mississippi Home Corporation, S/F Mortgage Revenue Bonds
(Access Program), AMT, Final Tranche, Series A, 6.90% due
6/01/2024 (m) 4,350
Missouri & BBB+ NR* 11,400 Bi-State Development Agency, Missouri and Illinois,
Illinois--0.9% Metropolitan No. 5, Refunding (American Commercial Lines,
Inc.), 7.75% due 6/01/2010 12,482
Nebraska--0.9% Nebraska Investment Finance Authority, S/F Mortgage Revenue
Bonds, AMT, Series 2 (m):
AAA Aaa 100 7.631% due 9/10/2030 106
AAA Aaa 4,100 RIB, 11.278% due 9/10/2030 (k) 4,556
A+ A1 10,000 Nebraska Public Power District, Revenue Refunding Bonds
(Power Supply System), Series C, 5% due 1/01/2017 8,829
Nevada--0.3% AAA Aaa 3,500 Washoe County, Nevada, Gas and Water Facilities Revenue
Refunding Bonds (Sierra Pacific), 6.30% due 12/01/2014 (c) 3,706
<PAGE>
New Hampshire-- A+ Aa 2,910 New Hampshire State, HFA, S/F Residential Mortgage, AMT,
0.2% 7.90% due 7/01/2022 3,066
New Jersey--% AA- Aa 10,000 New Jersey Building Authority, State Building Revenue
1.9 Refunding Bonds, 5% due 6/15/2018 8,866
NR* NR* 6,595 New Jersey Health Care Facilities Financing Authority Revenue
Bonds (Riverwood Center), Series A, 9.90% due 7/01/2021 7,346
AA A 9,500 University of Medicine and Dentistry of New Jersey, Series C,
7.20% due 12/01/1999 (j) 10,424
New York--12.5% Metropolitan Transportation Authority, New York, Service
Contract Refunding Bonds (Commuter Facilities), Series 5:
BBB Baa1 2,145 6.90% due 7/01/2006 2,309
BBB Baa1 5,000 7% due 7/01/2012 5,348
New York City, New York, GO, UT:
AAA Aaa 4,570 Series A, 7.75% due 8/15/2001 (j) 5,248
BBB+ Baa1 1,685 Series A, 7.75% due 8/15/2016 1,879
BBB+ Baa1 1,410 Series A, 7.75% due 8/15/2017 1,570
BBB+ Baa1 5,375 Series B, 8.25% due 6/01/2006 6,407
BBB+ Baa1 2,700 Series B, 8.25% due 6/01/2007 3,201
BBB+ Baa1 10,000 Series B, Fiscal 92, 7.75% due 2/01/2011 11,063
BBB+ Baa1 4,500 Series B, Fiscal 92, 7.75% due 2/01/2012 4,979
BBB+ Baa1 2,875 Series B, Fiscal 92, 7.75% due 2/01/2013 3,181
BBB+ Baa1 1,650 Series B, Fiscal 92, 7.75% due 2/01/2014 1,825
AAA Aaa 1,865 Series D, 7.70% due 2/01/2002 (j) 2,136
BBB+ AAA 3,495 Series D, Group C, 8% due 8/01/2001 (j) 4,050
BBB+ Aaa 5,495 Series F, 8.25% due 11/15/2001 (j) 6,471
NR* NR* 5,000 New York City, New York, IDA, Revenue Bonds (Visy Paer Inc.
Project), AMT, 7.95% due 1/01/2028 5,152
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
A- A 1,290 Series A, 6.75% due 6/15/2017 1,353
AAA Aaa 10,000 Series B, 5.375% due 6/15/2019 (c) 9,356
New York State Dormitory Authority Revenue Bonds (State
University Educational Facilities):
BBB+ Baa1 6,735 Refunding, Series B, 7.375% due 5/15/2014 7,324
BBB+ Baa1 2,000 Refunding, Series B, 7% due 5/15/2016 2,114
BBB+ Baa1 6,500 Series A, 7.50% due 5/15/2013 7,586
A Aa 21,500 New York State Environmental Facilities Corporation,
PCR (State Water Revolving Fund), Series E, 6.50% due 6/15/2014 22,778
New York State Local Government Assistance Corporation:
A A 6,000 Series A, 7% due 4/01/2012 6,642
A A 10,000 Series C, 6.25% due 4/01/2018 10,164
New York State Medical Care Facilities, Finance Agency Revenue
Bonds (New York Hospital Mortgage), Series A (b)(c):
AAA Aaa 8,400 6.75% due 8/15/2014 9,040
AAA Aaa 9,100 6.80% due 8/15/2024 9,829
AA- Aa 5,000 New York State Power Authority, Revenue and General Purpose
Refunding Bonds, Series Z, 6.50% due 1/01/2019 5,270
New York State Urban Development Corporation Revenue Bonds
(Correctional Capital Facilities):
BBB Baa1 4,000 Series 4, 5.375% due 1/01/2023 3,535
BBB Baa1 21,615 Series 6, 5.375% due 1/01/2025 19,034
A+ Aa 1,000 Triborough Bridge and Tunnel Authority, New York, General
Purpose Revenue Bonds, Series X, 6.50% due 1/01/2019 1,055
<PAGE>
North Carolina A1+ NR* 1,300 Raleigh-Durham, North Carolina, Airport Authority, Special
- --0.1% Facilities Revenue Refunding Bonds (American Airlines), VRDN,
Series A, 3.60% due 11/01/2005 (a) 1,300
Ohio--3.0% NR* NR* 4,000 Ashtabula County, Ohio, Hospital Facilities Revenue Bonds
(Ashtabula County Medical Center Project), VRDN, 3.40% due
12/01/2007 (a) 4,000
AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds, First
Mortgage, Series A, 7% due 11/15/2024 (f) 13,253
Cuyahoga County, Ohio, Hospital Revenue Improvement Bonds:
AAA Aaa 6,640 Refunding (University Hospitals Health System Project),
Series B, 5.50% due 1/15/2018 (f) 6,357
NR* VMIG1++ 500 (University Hospital of Cleveland), VRDN, 3.70% due
1/01/2016 (a) 500
Ohio HFA, S/F Mortgage Revenue Bonds, AMT (m):
AAA Aaa 9,850 RIB, Series B-4, 9.72% due 3/31/2031 (k) 10,281
AAA NR* 2,225 Series B, 8.25% due 12/15/2019 2,353
AAA NR* 4,295 Series C, 7.85% due 9/01/2021 4,523
BB Ba2 1,300 Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Cleveland Electric Illuminating Company),
7.70% due 8/01/2025 1,317
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Pennsylvania BB Ba2 $ 6,800 Beaver County, Pennsylvania, IDA, PCR, Refunding
- --4.5% (Cleveland Electric Company Project), 7.625% due 5/01/2025 $ 6,877
BBB- Baa 12,500 Pennsylvania Convention Center Authority, Revenue Refunding
Bonds, Series A, 6.75% due 9/01/2019 13,293
Pennsylvania HFA, Refunding:
AAA Aaa 7,850 (Rental Housing), 6.50% due 7/01/2023 (l) 8,057
AA Aa 8,800 RIB, AMT, Series 1991-31C, 9.884% due 10/01/2023 (k) 9,273
AAA Aaa 10,000 Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue Bonds, RIB, AMT, 9.622% due 9/03/2026 (c)(k) 10,937
NR* NR* 5,970 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds (Eastern College),
Series B, 8% due 10/15/2025 5,989
AAA Aaa 2,350 Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
15th Series 3, 5.25% due 8/01/2024 (h) 2,142
AAA Aaa 4,800 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water
and Sewer System Revenue Refunding Bonds, Series A, 6.75%
due 9/01/2001 (e)(j) 5,313
AAA Aaa 2,500 York County, Pennsylvania, Hospital Authority Revenue
Bonds (York Hospital), 7% due 1/01/2001 (c)(j) 2,772
<PAGE>
Rhode Island AAA Aaa 5,250 Rhode Island Depositors Economic Protection Corporation,
- --0.4% Special Obligation Bonds, Series A, 6.95% due 8/01/2002 (j) 5,880
South Carolina-- BBB Baa1 8,355 South Carolina Jobs, EDA, Economic Development Revenue
0.6% Bonds (Saint Francis Hospital--Franciscan Sisters), 7%
due 7/01/2015 8,716
South Dakota-- AAA Aa1 9,085 South Dakota, HDA, Homeownership Mortgage, Series A,
0.7% 7.15% due 5/01/2027 9,498
Tennessee--0.7% NR* NR* 10,000 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds
(Baptist Health System of East Tennessee), 8.60% due 4/15/2016 10,563
Texas--14.0% Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT, Series A:
BBB+ Baa2 2,095 8.25% due 1/01/2019 2,259
BBB+ Baa2 18,150 7.875% due 3/01/2021 19,917
A A2 12,350 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series 1989-A, 7.625% due 5/01/2019 13,415
BBB Baa1 7,250 Gulf Coast Waste Disposal Authority, Texas, Revenue Bonds
(Champion International Corporation), AMT, 7.45% due 5/01/2026 7,738
AA Aa 19,000 Harris County, Texas, Health Facilities Development
Corporation, Health Care System Revenue Bonds (Sisters of
Charity), 7.10% due 7/01/2021 20,567
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds:
AAA Aaa 20,000 (Hermann Hospital Project), 6.375% due 10/01/2024 (f) 20,674
AA Aa 12,470 (Saint Luke's Episcopal Hospital Project), Series A,
6.75% due 2/15/2021 13,148
Harris County, Texas, Toll Road Revenue Bonds:
AAA Aaa 10,000 Refunding, Senior Lien, 5.375% due 8/15/2020 (e) 9,365
AAA Aaa 8,000 Refunding, Senior Lien, 5.50% due 8/15/2021 (e) 7,623
AAA Aaa 11,100 Senior Lien, Series A, 6.375% due 8/15/2024 (f) 11,497
AAA Aaa 10,000 Houston, Texas, Water and Sewer System Revenue Refunding
Bonds, Junior Lien, Series A, 6.20% due 12/01/2023 (f) 10,207
BB Ba1 8,095 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare
Systems Project), 8.875% due 6/01/2021 8,480
AA Aa 12,000 North Central Texas, Health Facilities Development Corporation
Revenue Bonds (Baylor University Medical Center), INFLOS,
Series A, 9.735% due 5/15/2001 (j)(k) 14,325
BB Ba 6,500 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 6,880
A1 VMIG1++ 100 Sabine River Authority, Texas, PCR, Refunding (Texas
<PAGE> Utilities Project), VRDN, Series A, 3.65% due 3/01/2026 (a)(c) 100
AAA Aaa 14,500 San Antonio, Texas, Hotel Occupancy Revenue Bonds
(Henry B. Gonzalez Convention Center Project), 5.70% due
8/15/2026 (e) 14,152
NR* VMIG1++ 100 Southwest Texas, Higher Education Authority Incorporated,
Crossover Revenue Refunding Bonds (Southern Methodist University),
VRDN, 3.55% due 7/01/2015 (a) 100
A+ Aa 6,325 Texas Housing Agency, Residential Development Mortgage
Revenue Bonds, Series A, 7.50% due 7/01/2015 (m) 6,695
AAA Aaa 4,900 Texas Municipal Power Agency Revenue Refunding Bonds, 6.17%
due 9/01/2015 (f)(n) 1,554
AAA Aaa 10,000 Texas State Turnpike Authority, Dallas North Thruway Revenue
Bonds (President George Bush Turnpike), 5% due 1/01/2025 (e) 8,790
AA Aa 4,440 Texas State Veterans Housing Assistance (Fund II), AMT, UT,
Series A, 7% due 12/01/2025 4,616
Utah--2.6% AA- Aa 26,500 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 5% due 7/01/2021 22,873
AA NR* 13,250 Weber County, Utah, Municipal Building Authority, Lease
Revenue Bonds, 7.50% due 12/15/2019 14,780
Virginia--2.4% AAA Aaa 26,800 Prince William County, Virginia, Service Authority, Water
and Sewer System, Revenue Refunding Bonds, 5% due 7/01/2021 (e) 23,635
AAA Aaa 8,000 Upper Occoquan Sewage Authority, Virginia, Regional Sewage
Revenue Bonds, Series A, 5.15% due 7/01/2020 (f) 7,321
AA+ Aa1 4,000 Virginia State HDA, Commonwealth Mortgage, Series A, 7.15%
due 1/01/2033 4,208
Washington--3.2% AAA NR* 18,070 Washington State Housing Finance Commission, S/F Mortgage
Revenue Refunding Bonds, AMT, Series E, 7.10% due 7/01/2022 (g) 18,686
Washington State Public Power Supply System, Revenue Refunding
Bonds (Nuclear Project No. 1), Series A:
AA- Aa 15,500 6.50% due 7/01/2015 15,810
AA- Aa 11,000 6.875% due 7/01/2017 11,525
West Virginia NR* NR* 4,000 Upshur County, West Virginia, Solid Waste Disposal
- --1.0% Revenue Bonds (TJ International Project), AMT,
7% due 7/15/2025 4,068
A1+ Aaa 1,500 West Virginia State, Hospital Finance Authority, Hospital
Revenue Bonds (VHA Mid-Atlantic/Capital), VRDN, Series G,
3.35% due 12/01/2025 (a)(c) 1,500
AA+ Aa1 8,400 West Virginia State, Housing Development Fund, Housing Finance,
Series D, 7.05% due 11/01/2024 8,805
<PAGE>
Wisconsin--2.4% AA Aa 4,925 Wisconsin Housing and EDA Home Ownership Revenue Bonds,
Series A, 7.10% due 3/01/2023 5,170
Wisconsin Housing and EDA Housing Revenue Bonds:
A A1 5,400 Series B, 7.05% due 11/01/2022 5,663
A A1 5,105 Series C, 7% due 5/01/2015 5,347
Wisconsin State Health and Educational Facilities Authority
Revenue Bonds, Series B:
AAA Aaa 5,500 (Novus Health Group), 6.75% due 12/15/2020 (f) 5,803
AAA Aaa 11,400 (Wausau Hospitals Inc.), 6.70% due 8/15/2020 (c) 11,938
Total Investments (Cost--$1,331,510)--97.5% 1,403,759
Other Assets Less Liabilities--2.5% 36,307
----------
Net Assets--100.0% $1,440,066
==========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in effect
at June 30, 1996.
(b)FHA Insured.
(c)AMBAC Insured.
(d)BIG Insured.
(e)FGIC Insured.
(f)MBIA Insured.
(g)GNMA/FNMA Collateralized.
(h)FSA Insured.
(i)Escrowed to Maturity.
(j)Prerefunded.
(k)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 June 30, 1996.
(l)FNMA Collateralized.
(m)GNMA Collateralized.
(n)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Portfolio.
*Not Rated.
++Highest short-term rating issued by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Arizona--0.5% A1+ P1 $ 2,500 Maricopa County, Arizona, Pollution Control Corporation,
PCR, Refunding (Arizona Public Service Co.), VRDN, Series C,
3.60% due 5/01/2029 (b) $ 2,500
Arkansas--0.8% NR* Aa 4,000 Arkansas State Student Loan Authority Revenue Bonds, AMT,
Senior Series A-1, 5.50% due 12/01/1998 4,083
Colorado--0.8% AA Baa1 3,810 Jefferson County, Colorado, School District No. R-001,
Refunding, Series A, 3.65% due 12/15/1996 3,808
Connecticut-- AAA Aaa 2,160 Bridgeport, Connecticut, Refunding, GO, UT, Series A,
1.8% 4.40% due 9/01/1998 (c) 2,161
NR* Aa3 3,890 Connecticut State Housing Mortgage Revenue Bonds
(Chestnut Hill Apartments), 4.60% due 4/01/1997 3,881
NR* NR* 3,250 Waterbury, Connecticut, BAN, 4.65% due 2/19/1997 3,258
Florida--1.1% AA Aa1 5,000 Jacksonville, Florida, Electric Authority Revenue Bonds
(Electric Systems), Series 3-B, 4% due 10/01/1998 4,971
A1+ VMIG1++ 600 Saint Lucie County, Florida, PCR, Refunding (Florida Power
and Light Company Project), VRDN, 3.70% due 1/01/2026 (b) 600
Georgia--7.0% Burke County, Georgia, Development Authority, PCR (Plant
Vogtle Project):
A1 VMIG1++ 1,500 (Georgia Power Company), VRDN, 2nd Series, 3.70% due
4/01/2025 (b) 1,500
A+ NR* 6,410 Refunding (Oglethorpe Power Company), Series B, 3.95%
due 1/01/1999 6,291
Georgia State, GO:
AA+ Aaa 5,000 Series C, 6.50% due 7/01/1999 5,291
AA+ Aaa 9,650 UT, Series B, 7.20% due 3/01/1999 10,326
AA+ Aaa 7,500 UT, Series D, 7% due 11/01/1999 8,087
AA Aa1 4,000 Gwinnett County, Georgia, School District, Refunding, GO,
UT, 4.40% due 2/01/1998 4,015
<PAGE>
Illinois--11.5% AA- NR* 10,000 Chicago, Illinois, Board of Education, COP (School Reform
Equipment Acquisition), 4.60% due 12/01/1999 9,925
AAA Aaa 4,120 Chicago, Illinois, Public Commerce Building Revenue Bonds
(Chicago Board of Education), Series A, 7.75% due 1/01/1999 (a)(f) 4,515
Chicago, Illinois, School Financing Authority:
AA- Baa1 5,000 7.25% due 6/01/1998 5,142
AAA Aaa 4,500 Refunding, Series A, 5.80% due 6/01/1999 (f) 4,646
AAA Aaa 3,000 Cook County, Illinois, High School District No. 205,
Refunding (Thorton Township), UT, 5.60% due 6/01/1998 (f)(g) 3,078
AA Aa1 11,425 Cook County, Illinois, Township High School District No. 211
(Palatine & Schaumb), 4.25% due 12/01/1998 11,414
NR* VMIG1++ 1,000 Illinois Health Facilities Authority Revenue Bonds (Resurrection
Health Care System), VRDN, 3.85% due 5/01/2011 (b) 1,000
Illinois State, Refunding, GO, UT:
AA- A1 4,600 3.90% due 12/01/1998 4,537
AAA Aaa 3,500 5.125% due 12/01/1999 (f) 3,563
A A1 10,000 Illinois State Toll Highway Authority, Toll Highway Priority,
Revenue Refunding Bonds, Series A, 4.10% due 1/01/1998 9,961
Kentucky--2.6% A+ A 13,000 Kentucky State Property and Buildings Commission, Revenue
Refunding Bonds (Project No. 55), 3.60% due 9/01/1996 12,997
Louisiana--4.6% Louisiana Public Facilities Authority Revenue Bonds (Tulane
University), Series B:
A A1 3,140 6.80% due 8/15/1996 3,152
A A1 470 6.80% due 8/15/1996 (g) 472
AAA Aaa 19,230 Louisiana State, GO, Refunding, Series A, 5.50% due 8/01/1998 (f) 19,698
Massachusetts-- BBB+ NR* 543 Massachusetts State, COP, GO, 5.10% due 7/01/1996 543
5.4% A+ A1 5,000 Massachusetts State, GO, Refunding, Series A, 5.50% due 7/01/1999 5,129
AAA Aaa 2,005 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (New England Medical Center Hospitals),
Series G, 3.80% due 7/01/1997 (d) 2,005
NR* NR* 3,465 Massachusetts State, Industrial Finance Agency, Industrial
Revenue Refunding Bonds (New England Biolabs), VRDN, AMT, 3.50%
due 3/01/2016 (b) 3,465
SP1 VMIG1++ 5,000 Massachusetts State Turnpike Authority, BAN, Series A, 5%
due 6/01/1999 5,074
A- A1 10,160 New England Education Loan Marketing Corporation Refunding
Bonds (Massachusetts Student Loan), Series D, 4.75% due 7/01/1998 10,220
NR* NR* 995 South Hadley, Massachusetts, Industrial Revenue Bonds
(South Hadley Health Care), AMT, Series A, 5% due 12/01/1996 993
<PAGE>
Michigan--5.6% AAA Aaa 10,000 Detroit, Michigan, Distributable State Aid, 7.20% due
5/01/1999 (a)(c) 10,897
Michigan State Building Authority, Revenue Refunding Bonds,
Series I:
AA- A 10,145 3.90% due 10/01/1997 10,137
AA- A1 6,000 5.80% due 10/01/1998 6,186
NR* VMIG1++ 800 Michigan State Strategic Fund, Solid Waste Disposal
Revenue Bonds (Grayling Generating Project), VRDN, AMT, 3.55%
due 1/01/2014 (b) 800
Minnesota--0.6% AAA Aaa 3,085 Minnesota State, HFA, Refunding (Rental Housing), Series D,
4.50% due 8/01/1999 (d) 3,084
Mississippi-- NR* Aaa 10,000 Mississippi Higher Education Assistance Corporation, Student
2.0% Loan Revenue Bonds, AMT, Series B, 4.80% due 9/01/1998 10,063
NR* P1 100 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
Project), VRDN, 3.60% due 3/01/2002 (b) 100
Nebraska--1.2% A+ A1 6,250 Nebraska Public Power District Revenue Bonds, 4.90% due 7/01/1998 6,321
New Jersey-- A- A1 2,000 Camden County, New Jersey, Improvement Authority, Solid Waste
1.6% Disposal Revenue Refunding Bonds (Landfill Project), 4%
due 7/01/1997 2,003
AAA Aaa 5,715 New Jersey State Educational Facilities Authority Revenue
Bonds (Higher Educational Facilities Trust Fund), Series A,
5.125% due 9/01/1999 (c) 5,823
New Mexico-- A1+ P1 1,400 Farmington, New Mexico, PCR, Refunding (Arizona Public
0.3% Service Co.), VRDN, Series B, 3.60% due 9/01/2024 (b) 1,400
New York--6.1% A+ Aa 10,000 Municipal Assistance Corporation, New York City, New York, GO,
Refunding, Series E, 4.30% due 7/01/1999 9,933
New York State Dormitory Authority Revenue Bonds (Consolidated
City University System), Series A:
BBB Baa1 6,675 4.50% due 7/01/1998 6,684
BBB Baa1 10,885 4.75% due 7/01/1999 10,864
AAA Aaa 3,000 New York State Dormitory Authority Revenue Bonds (State
University Education), Series A, 7.125% due 5/15/1999 (a) 3,275
North Carolina AAA Aaa 6,500 North Carolina State, Public Improvement Refunding Bonds,
- --1.5% 3.70% due 8/01/1998 6,456
A1+ NR* 1,100 Raleigh-Durham, North Carolina Airport Authority, Special
Facility Revenue Refunding Bonds (American Airlines),
VRDN, Series B, 3.60% due 11/01/2015 (b) 1,100
<PAGE>
North Dakota NR* Aa 5,000 North Dakota Student Loan Revenue Refunding Bonds,
- --1.9% Series A, 5.40% due 7/01/1996 5,001
A2 Baa2 4,500 Oliver County, North Dakota, PCR (Minnesota Power and Light,
Square Butte Electric), Series B, 4.50% due 9/01/2007 4,504
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Ohio--9.9% NR* VMIG1++ $ 3,500 Miami Valley Regional Transport Authority, Ohio
(Capital Facilities), BAN, 4.75% due 4/15/1997 $ 3,524
Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Ohio Edison Project), Series A:
A+ VMIG1++ 10,500 4.25% due 8/01/1996 10,505
A+ VMIG1++ 7,500 3.95% due 2/01/2015 7,484
NR* Aaa 6,700 Ohio State Building Authority, Correctional Facilities,
Series A, 7.35% due 8/01/1999 (a) 7,360
Ohio State Public Facilities Commission, Higher Education
Capital Facilities, Series II-A:
A+ A1 3,300 5.30% due 12/01/1996 3,321
AAA Aaa 3,500 4.375% due 11/01/1999 (d) 3,487
AAA Aaa 8,000 Ohio State Public Facilities Commission, Refunding (Mental
Health Facilities), Series II-B, 4.25% due 6/01/1998 (e) 8,009
NR* Aaa 6,000 Student Loan Funding Corporation, Cincinnati, Ohio, Student
Loan Revenue Refunding Bonds, AMT, Series C, 5.70% due 7/01/1999 6,136
Oklahoma--0.5% AA Aa 2,400 Tulsa, Oklahoma, GO, UT, 5.125% due 5/01/1999 2,440
Pennsylvania A1+ P1 4,000 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio
- --4.4% Edison Company), Series A, 4.30% due 10/01/2032 4,018
AAA Aaa 8,675 Pennsylvania State, Refunding, GO, UT, 5.25% due 11/15/1998 (f) 8,871
A1+ VMIG1++ 6,300 Philadelphia, Pennsylvania, Hospitals and Higher Education
Facilities Authority, Hospital Revenue Bonds (Children's Hospital
of Philadelphia Project), VRDN, 3.70% due 3/01/2027 (b) 6,300
AAA Aaa 3,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water
and Sewer System Revenue Refunding Bonds, Series A, 3.50%
due 9/01/1996 (f) 2,999
<PAGE>
Rhode Island NR* A 6,000 Rhode Island State, Student Loan Authority, Student Loan
- --1.2% Revenue Refunding Bonds, Series A, 5.70% due 12/01/1996 6,031
South Carolina AA- Aa 4,000 South Carolina State Public Service Authority, Revenue Refunding
- --0.8% Bonds (Electric Revenue and Electric Systems Expansion), Series A,
7.50% due 7/01/1996 4,001
Tennessee--2.2% AA NR* 6,885 Clarksville, Tennessee, Public Building Authority, Revenue
Refunding Bonds (Pooled Loan Program), 4.40% due 12/01/1998 6,876
AA+ Aa 4,000 Shelby County, Tennessee, Refunding, Series A, 6.40%
due 8/01/1996 (a) 4,030
Texas--6.9% Brazos, Texas, Higher Education Authority Incorporated,
Student Loan Revenue Refunding Bonds, AMT:
NR* Aaa 2,200 Senior Lien, Series A-2, 5.45% due 6/01/1998 2,241
NR* Aaa 5,000 Series C-1, 4.75% due 6/01/1997 5,036
NR* Aa 5,215 Series C-1, 5.60% due 11/01/1997 5,308
Fort Bend County, Texas, Industrial Development Corporation,
Refunding (Frito Lay Inc. Project):
NR* A1 950 IDR, 4% due 10/01/2011 951
NR* A1 3,650 PCR, 4% due 10/01/2011 3,652
A1+ NR* 6,100 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Methodist Hospital),
VRDN, 3.70% due 12/01/2025 (b) 6,100
AA- Aa 4,520 Houston, Texas, GO, Refunding, Series C, 5.50% due 4/01/1999 4,633
Panhandle-Plains, Texas, Higher Education Authority
Incorporated, Student Loan Revenue Refunding Bonds, Series C:
NR* Aaa 2,000 3.95% due 9/01/1996 2,001
NR* Aaa 2,675 4.15% due 9/01/1997 2,679
A+ A1 2,000 Texas Municipal Power Agency, Revenue Refunding Bonds,
Series A, 4.25% due 9/01/1997 2,006
Utah--9.8% NR* NR* 26,518 Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds (East Carbon Landfill Project), AMT, 6.04% due 5/01/1997 26,783
AA Aa 1,250 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series A, 3.90% due 7/01/1996 1,250
AAA Aaa 21,600 Utah State, Building and Highway, UT, 4.40% due 7/01/1999 21,606
Virginia--0.5% AAA Aa2 2,400 Peninsula Ports Authority, Virginia, Revenue Refunding
Bonds (Port Facility--Shell Oil Company Project), UPDATES,
Series A, 3.60% due 12/01/2005 (b) 2,400
Washington--1.7% AA Aa 1,800 Washington State, GO, Refunding, Series R-93B, 4.40%
due 10/01/1998 1,803
Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 2), Series A:
AA- Aa 2,000 3.50% due 7/01/1996 2,000
AA- Aa 4,890 3.75% due 7/01/1997 4,876
<PAGE>
Wisconsin--3.6% NR* NR* 4,500 Ashland County, Wisconsin, Promissory Notes, 4.25%
due 9/01/1997 4,517
A A1 2,795 Wisconsin Housing and EDA, Housing Revenue Refunding
Bonds, Series C, 4.30% due 11/01/1997 2,802
AA Aa 11,000 Wisconsin State, Refunding, GO, UT, Series 3, 4.25%
due 11/01/1999 10,918
Wyoming--0.3% A1+ Aaa 200 Lincoln County, Wyoming, PCR (Exxon Project), AMT, VRDN,
Series C, 3.70% due 7/01/2017 (b) 200
NR* P1 1,425 Uinta County, Wyoming, PCR, Refunding (Chevron USA
Incorporated Project), VRDN, 3.55% due 8/15/2020 (b) 1,425
Total Investments (Cost--$496,214)--98.7% 497,511
Other Assets Less Liabilities--1.3% 6,641
--------
Net Assets--100.0% $504,152
========
<FN>
(a)Prerefunded.
(b)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at June 30, 1996.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FGIC Insured.
(g)Escrowed to maturity.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Rating of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Limited
Insured National Maturity
As of June 30, 1996 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $2,378,216,369 $1,403,759,064 $ 497,510,898
Cash 27,802,116 621,582 78,675
Receivables:
Interest 43,608,418 25,652,906 6,517,139
Securities sold 130,000 15,051,045 --
Capital shares sold 586,263 791,669 2,280,457
Prepaid registration fees and other
assets (Note 1e) 850,390 50,170 44,693
-------------- -------------- --------------
Total assets 2,451,193,556 1,445,926,436 506,431,862
-------------- -------------- --------------
Liabilities: Payables:
Securities purchased 77,126,436 1,118,400 --
Capital shares redeemed 3,873,814 2,302,326 1,565,546
Dividends to shareholders (Note 1f) 2,071,759 1,373,891 322,805
Investment adviser (Note 2) 648,243 519,485 128,520
Distributor (Note 2) 433,526 242,592 20,581
Accrued expenses and other liabilities 406,858 304,057 242,796
-------------- -------------- --------------
Total liabilities 84,560,636 5,860,751 2,280,248
-------------- -------------- --------------
Net Assets: Net assets $2,366,632,920 $1,440,065,685 $ 504,151,614
============== ============== ==============
Net Assets Class A Common Stock, $0.10 par value++ $ 19,880,142 $ 9,726,134 $ 4,208,985
Consist of: Class B Common Stock, $0.10 par value++++ 9,146,309 3,950,194 717,064
Class C Common Stock, $0.10 par value++++++ 239,405 131,415 952
Class D Common Stock, $0.10 par value++++++++ 654,425 433,709 160,220
Paid-in capital in excess of par 2,271,557,246 1,430,841,435 503,400,012
Accumulated realized capital losses on
investments--net (Note 5) (41,982,490) (77,266,638) (5,632,124)
Unrealized appreciation on
investments--net 107,137,883 72,249,436 1,296,505
-------------- -------------- --------------
Net assets $2,366,632,920 $1,440,065,685 $ 504,151,614
-------------- -------------- --------------
<PAGE>
Net Asset Class A:
Value: Net assets $1,572,834,522 $ 983,550,131 $ 417,097,299
============== ============== ==============
Shares outstanding 198,801,419 97,261,338 42,089,848
============== ============== ==============
Net asset value and redemption
price per share $ 7.91 $ 10.11 $ 9.91
============== ============== ==============
Class B:
Net assets $ 723,089,463 $ 399,340,242 $ 71,074,729
============== ============== ==============
Shares outstanding 91,463,092 39,501,944 7,170,644
============== ============== ==============
Net asset value and redemption
price per share $ 7.91 $ 10.11 $ 9.91
============== ============== ==============
Class C:
Net assets $ 18,936,443 $ 13,291,171 $ 94,043
============== ============== ==============
Shares outstanding 2,394,049 1,314,145 9,519
============== ============== ==============
Net asset value and redemption
price per share $ 7.91 $ 10.11 $ 9.88
============== ============== ==============
Class D:
Net assets $ 51,772,492 $ 43,884,141 $ 15,885,543
============== ============== ==============
Shares outstanding 6,544,245 4,337,089 1,602,198
============== ============== ==============
Net asset value and redemption
price per share $ 7.91 $ 10.12 $ 9.91
============== ============== ==============
<FN>
*Identified cost $2,271,078,486 $1,331,509,628 $ 496,214,393
============== ============== ==============
++Authorized shares--Class A 500,000,000 375,000,000 150,000,000
============== ============== ==============
++++Authorized shares--Class B 375,000,000 375,000,000 150,000,000
============== ============== ==============
++++++Authorized shares--Class C 375,000,000 375,000,000 150,000,000
============== ============== ==============
++++++++Authorized shares--Class D 500,000,000 375,000,000 150,000,000
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
Limited
Insured National Maturity
For the Year Ended June 30, 1996 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and amortization of premium and
Income discount earned $ 147,630,923 $ 95,242,010 $ 24,596,058
(Note 1d): -------------- -------------- --------------
Expenses: Investment advisory fees (Note 2) 8,850,984 7,014,416 1,899,352
Account maintenance and distribution
fees--Class B (Note 2) 5,668,976 3,059,804 307,014
Transfer agent fees--Class A (Note 2) 592,796 412,428 163,675
Transfer agent fees--Class B (Note 2) 340,996 203,687 42,090
Accounting services (Note 2) 206,637 180,650 83,408
Custodian fees. 202,640 134,639 57,176
Printing and shareholder reports 169,528 96,387 37,345
Registration fees (Note 1e) 79,301 112,300 103,718
Professional fees 105,724 91,956 27,581
Account maintenance fees--
Class D (Note 2) 93,721 77,432 16,263
Account maintenance and distribution
fees--Class C (Note 2) 105,361 72,516 2,182
Pricing services 44,555 27,627 16,527
Directors' fees and expenses 25,641 15,082 8,836
Transfer agent fees--Class D (Note 2) 13,353 12,328 5,697
Transfer agent fees--Class C (Note 2) 6,639 4,422 827
Other 38,298 28,926 113,235
-------------- -------------- --------------
Total expenses 16,545,150 11,544,600 2,884,926
-------------- -------------- --------------
Investment income--net 131,085,773 83,697,410 21,711,132
-------------- -------------- --------------
Realized & Realized gain (loss) on investments--net (3,897,219) 3,774,748 1,322,566
Unrealized Gain Change in unrealized appreciation/
(Loss) on depreciation on investments--net 3,149,618 10,373,235 (1,526,762)
Investments--Net -------------- -------------- --------------
(Notes 1b, 1d Net Increase in Net Assets
& 3): Resulting from Operations $ 130,338,172 $ 97,845,393 $ 21,506,936
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Insured Portfolio National Portfolio
For the Year Ended June 30, For the Year Ended June 30,
Increase (Decrease) in Net Assets: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Operations: Investment income--net $ 131,085,773 $ 145,464,480 $ 83,697,410 $ 90,299,833
Realized gain (loss) on
investments--net (3,897,219) (38,085,273) 3,774,748 (77,312,475)
Change in unrealized appreciation/
depreciation on investments--net 3,149,618 91,672,331 10,373,235 98,337,487
-------------- -------------- -------------- --------------
Net increase in net assets
resulting from operations 130,338,172 199,051,538 97,845,393 111,324,845
-------------- -------------- -------------- --------------
Dividends & Investment income--net:
Distributions to Class A (92,116,281) (104,032,884) (60,489,070) (67,078,481)
Shareholders Class B (36,347,050) (40,656,294) (20,995,504) (22,561,653)
(Note 1f): Class C (626,972) (120,450) (462,078) (90,229)
Class D (1,995,470) (654,852) (1,750,758) (569,470)
Realized gain on investments--net:
Class A -- (31,614,511) -- (20,402,246)
Class B -- (14,155,831) -- (7,752,072)
Class C -- (23,608) -- (26,597)
Class D -- (104,611) -- (171,804)
In excess of realized gain on
investments--net:
Class A -- -- -- (2,695,572)
Class B -- -- -- (1,024,214)
Class C -- -- -- (3,514)
Class D -- -- -- (22,699)
-------------- -------------- -------------- --------------
Net decrease in net assets
resulting from dividends and
distributions to shareholders. (131,085,773) (191,363,041) (83,697,410) (122,398,551)
-------------- -------------- -------------- --------------
Capital Share Net decrease in net assets derived
Transactions from capital share transactions (155,203,186) (293,039,051) (78,305,357) (147,053,135)
(Note 4): -------------- -------------- -------------- --------------
<PAGE>
Net Assets: Total decrease in net assets (155,950,787) (285,350,554) (64,157,374) (158,126,841)
Beginning of year. 2,522,583,707 2,807,934,261 1,504,223,059 1,662,349,900
-------------- -------------- -------------- --------------
End of year $2,366,632,920 $2,522,583,707 $1,440,065,685 $1,504,223,059
============== ============== ============== ==============
See Notes to Financial Statements.
<CAPTION>
Limited Maturity Portfolio
For the Year Ended June 30,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 21,711,132 $ 31,100,101
Realized gain (loss) on investments--net 1,322,566 (1,760,975)
Change in unrealized appreciation/ depreciation on investments--net (1,526,762) 4,210,861
-------------- --------------
Net increase in net assets resulting from operations 21,506,936 33,549,987
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (18,019,083) (25,771,957)
Shareholders Class B (3,055,609) (5,094,228)
(Note 1f): Class C (25,939) (45,930)
Class D (610,501) (187,986)
Realized gain on investments--net:
Class A -- --
Class B -- --
Class C -- --
Class D -- --
In excess of realized gain on
investments--net:
Class A -- --
Class B -- --
Class C -- --
Class D -- --
Net decrease in net assets resulting from dividends and
distributions to shareholders. (21,711,132) (31,100,101)
-------------- --------------
Capital Share Net decrease in net assets derived from capital share transactions (176,922,554) (256,848,291)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (177,126,750) (254,398,405)
Beginning of year. 681,278,364 935,676,769
-------------- --------------
End of year $ 504,151,614 $ 681,278,364
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data Insured Portfolio
and ratios have been derived
from information provided Class A
in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in
Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.92 $ 7.88 $ 8.64 $ 8.26 $ 7.92
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .44 .46 .47 .50 .52
Realized and unrealized
gain (loss) on
investments--net (.01) .18 (.53) .49 .41
------------ ------------ ------------ ------------ ------------
Total from investment
operations .43 .64 (.06) .99 .93
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.44) (.46) (.47) (.50) (.52)
Realized gain on
investments--net -- (.14) (.23) (.11) (.07)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.44) (.60) (.70) (.61) (.59)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 7.91 $ 7.92 $ 7.88 $ 8.64 $ 8.26
============ ============ ============ ============ ============
Total Investment Based on net asset value
Return:* per share 5.51% 8.60% (1.08%) 12.41% 12.11%
============ ============ ============ ============ ============
Ratios to Average Expenses .43% .43% .42% .42% .44%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.55% 5.78% 5.53% 5.94% 6.44%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 1,572,835 $ 1,706,064 $ 1,941,741 $ 2,225,188 $ 2,062,591
============ ============ ============ ============ ============
Portfolio turnover 78.49% 35.61% 28.34% 43.86% 22.50%
============ ============ ============ ============ ============
<PAGE>
<CAPTION>
The following per share data Insured Portfolio
and ratios have been derived
from information provided Class B
in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in
Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.92 $ 7.87 $ 8.63 $ 8.26 $ 7.92
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .38 .40 .40 .44 .46
Realized and unrealized
gain(loss) on
investments--net (.01) .19 (.53) .48 .41
------------ ------------ ------------ ------------ ------------
Total from investment
operations .37 .59 (.13) .92 .87
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.38) (.40) (.40) (.44) (.46)
Realized gain on
investments--net -- (.14) (.23) (.11) (.07)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.38) (.54) (.63) (.55) (.53)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 7.91 $ 7.92 $ 7.87 $ 8.63 $ 8.26
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:* value per share 4.71% 7.91% (1.81%) 11.44% 11.27%
============ ============ ============ ============ ============
Ratios to Average Expenses 1.19% 1.19% 1.17% 1.18% 1.19%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 4.80% 5.03% 4.78% 5.17% 5.69%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 723,090 $ 782,748 $ 866,193 $ 911,307 $ 706,016
============ ============ ============ ============ ============
Portfolio turnover 78.49% 35.61% 28.34% 43.86% 22.50%
============ ============ ============ ============ ============
<PAGE>
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Insured Portfolio
The following per share data and
ratios have been derived from
information provided in Class C Class D
the financial statements.
For the For the Period For the For the Period
Increase (Decrease) in Year Ended Oct. 21, 1994++ to Year Ended to Oct. 21, 1994++
Net Asset Value: June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.92 $ 7.68 $ 7.92 $ 7.68
Performance: ------------ ------------ ------------ -----------
Investment income--net .38 .27 .42 .29
Realized and unrealized gain
loss) on investments--net (.01) .38 (.01) .38
------------ ------------ ------------ -----------
Total from investment operations .37 .65 .41 .67
------------ ------------ ------------ -----------
Less dividends and
distributions:
Investment income--net (.38) (.27) (.42) (.29)
Realized gain on
investments--net -- (.14) -- (.14)
------------ ------------ ------------ -----------
Total dividends and distributions (.38) (.41) (.42) (.43)
------------ ------------ ------------ -----------
Net asset value, end of period $ 7.91 $ 7.92 $ 7.91 $ 7.92
============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 4.65% 8.83%+++ 5.25% 9.24%+++
============ ============ ============ ============
<PAGE>
Ratios to Average Expenses 1.24% 1.23%* .68% .68%*
Net Assets: ============ ============ ============ ============
Investment income--net 4.75% 4.93%* 5.31% 5.50%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 18,936 $ 7,756 $ 51,772 $ 26,015
============ ============ ============ ============
Portfolio turnover 78.49% 35.61% 78.49% 35.61%
============ ============ ============ ============
<CAPTION>
The following per share data National Portfolio
and ratios have been derived
from information provided Class A
in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in
Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.02 $ 10.08 $ 11.02 $ 10.64 $ 10.17
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .60 .60 .62 .67 .71
Realized and unrealized
gain (loss) on
investments--net .09 .15 (.64) .57 .58
------------ ------------ ------------ ------------ ------------
Total from investment
operations .69 .75 (.02) 1.24 1.29
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.60) (.60) (.62) (.67) (.71)
Realized gain on
investments--net -- (.19) (.30) (.19) (.11)
In excess of realized
gain on investments--net -- (.02) -- -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.60) (.81) (.92) (.86) (.82)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 10.11 $ 10.02 $ 10.08 $ 11.02 $ 10.64
============ ============ ============ ============ ============
<PAGE>
Total Investment Based on net asset
Return:** value per share 6.98% 7.89% (.47%) 12.19% 13.09%
============ ============ ============ ============ ============
Ratios to Average Expenses .56% .56% .55% .55% .55%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.89% 6.01% 5.72% 6.23% 6.80%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 983,550 $ 1,059,440 $ 1,203,181 $ 1,353,805 $ 1,278,055
============ ============ ============ ============ ============
Portfolio turnover 95.09% 103.65% 73.33% 65.43% 50.94%
============ ============ ============ ============ ============
<CAPTION>
The following per share data National Portfolio
and ratios have been derived
from information provided Class B
in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in
Net Asset Value: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.02 $ 10.07 $ 11.02 $ 10.63 $ 10.16
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .52 .52 .54 .59 .63
Realized and unrealized
gain (loss) on
investments--net .09 .16 (.65) .58 .58
------------ ------------ ------------ ------------ ------------
Total from investment
operations .61 .68 (.11) 1.17 1.21
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.52) (.52) (.54) (.59) (.63)
Realized gain on
investments--net -- (.19) (.30) (.19) (.11)
In excess of realized
gain on investments--net -- (.02) -- -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.52) (.73) (.84) (.78) (.74)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 10.11 $ 10.02 $ 10.07 $ 11.02 $ 10.63
============ ============ ============ ============ ============
<PAGE>
Total Investment Based on net asset
Return:** value per share 6.17% 7.28% (1.39%) 11.45% 12.25%
============ ============ ============ ============ ============
Ratios to Expenses 1.32% 1.32% 1.30% 1.31% 1.31%
Average Net ============ ============ ============ ============ ============
Assets: Investment income--net 5.13% 5.25% 4.97% 5.46% 6.03%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 399,341 $ 419,933 $ 459,169 $ 424,071 $ 286,375
============ ============ ============ ============ ============
Portfolio turnover 95.09% 103.65% 73.33% 65.43% 50.94%
============ ============ ============ ============ ============
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
National Portfolio
The following per share data and
ratios have been derived from
information provided in Class C Class D
the financial statements.
For the For the Period For the For the Period
Increase (Decrease) in Year Ended Oct. 21, 1994++ to Year Ended to Oct. 21, 1994++
Net Asset Value: June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 10.03 $ 9.85 $ 10.03 $ 9.85
Performance: ------------ ------------ ------------ ------------
Investment income--net .52 .36 .57 .40
Realized and unrealized gain on
investments--net .08 .39 .09 .39
------------ ------------ ------------ ------------
Total from investment operations .60 .75 .66 .79
------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.52) (.36) (.57) (.40)
Realized gain on investments--net -- (.19) -- (.19)
In excess of realized gain on
investments--net -- (.02) -- (.02)
------------ ------------ ------------ ------------
Total dividends and distributions (.52) (.57) (.57) (.61)
------------ ------------ ------------ ------------
Net asset value, end of period $ 10.11 $ 10.03 $ 10.12 $ 10.03
<PAGE> ============ ============ ============ ============
Total Investment Based on net asset value per share 6.01% 7.97%+++ 6.71% 8.37%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses 1.37% 1.37%* .81% .81%*
Net Assets: ============ ============ ============ ============
Investment income--net 5.08% 5.21%* 5.64% 5.78%*
============ ============ ============ ============
Supplemental Net assets, end of
Data: period (in thousands) $ 13,291 $ 5,195 $ 43,884 $ 19,656
============ ============ ============ ============
Portfolio turnover 95.09% 103.65% 95.09% 103.65%
============ ============ ============ ============
<CAPTION>
The following per share data Limited Maturity Portfolio
and ratios have been derived
from information provided Class A
in the financial statements.
For the Year Ended June 30,
Increase (Decrease) in
Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.92 $ 9.87 $ 10.01 $ 9.91 $ 9.75
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .38 .38 .37 .41 .50
Realized and unrealized
gain (loss) on
investments--net (.01) .05 (.14) .10 .16
------------ ------------ ------------ ------------ ------------
Total from investment
operations .37 .43 .23 .51 .66
------------ ------------ ------------ ------------ ------------
Less dividends from
investment income--net (.38) (.38) (.37) (.41) (.50)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 9.91 $ 9.92 $ 9.87 $ 10.01 $ 9.91
============ ============ ============ ============ ============
Total Investment Based on net asset value
Return:** per share 3.75% 4.53% 2.30% 5.28% 6.93%
============ ============ ============ ============ ============
<PAGE>
Ratios to Average Expenses .44% .41% .40% .41% .40%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 3.83% 3.86% 3.68% 4.13% 5.02%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 417,097 $ 536,474 $ 790,142 $ 846,736 $ 613,407
============ ============ ============ ============ ============
Portfolio turnover 88.32% 37.33% 45.67% 65.43% 96.32%
============ ============ ============ ============ ============
<CAPTION>
Limited Maturity Portfolio
The following per share data
ratios have been derived Class B
from information provided
in the financial statements. For the Period
For the Year Ended June 30, Nov. 2, 1992++ to
Increase (Decrease) in Net Asset Value: 1996 1995 1994 June 30, 1993
<S> <S> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 9.92 $ 9.87 $ 10.01 $ 9.93
Performance: ------------ ------------ ------------ ------------
Investment income--net .35 .35 .33 .24
Realized and unrealized gain
(loss) on investments--net (.01) .05 (.14) .08
------------ ------------ ------------ ------------
Total from investment operations .34 .40 .19 .32
------------ ------------ ------------ ------------
Less dividends from investment
income--net (.35) (.35) (.33) (.24)
------------ ------------ ------------ ------------
Net asset value, end of period $ 9.91 $ 9.92 $ 9.87 $ 10.01
============ ============ ============ ============
Total Investment Based on net asset value per share 3.37% 4.14% 1.98% 3.26%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses .80% .78% .76% .76%*
Net Assets: ============ ============ ============ ============
Investment income--net 3.46% 3.50% 3.33% 3.60%*
============ ============ ============ ============
<PAGE>
Supplemental Net assets, end of period
Data: (in thousands) $ 71,075 $ 29,581 $ 145,534 $ 95,179
============ ============ ============ ============
Portfolio turnover 88.32% 37.33% 45.67% 65.43%
============ ============ ============ ============
<CAPTION>
Limited Maturity Portfolio
The following per share data and
ratios have been derived from
information provided in Class C Class D
the financial statements.
For the For the Period For the For the Period
Increase (Decrease) in Year Ended Oct. 21, 1994++ to Year Ended to Oct. 21, 1994++
Net Asset Value: June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 9.92 $ 9.83 $ 9.93 $ 9.83
Performance: ------------ ------------ ------------ ------------
Investment income--net .34 .25 .37 .26
Realized and unrealized gain
(loss) on investments--net (.04) .09 (.02) .10
------------ ------------ ------------ ------------
Total from investment operations .30 .34 .35 .36
------------ ------------ ------------ ------------
Less dividends from investment
income--net (.34) (.25) (.37) (.26)
------------ ------------ ------------ ------------
Net asset value, end of period $ 9.88 $ 9.92 $ 9.91 $ 9.93
============ ============ ============ ============
Total Investment Based on net asset value per share 2.97% 3.52%+++ 3.55% 3.73%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses .80% .70%* .54% .53%*
Net Assets: ============ ============ ============ ============
Investment income--net 3.41% 3.61%* 3.71% 3.78%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 94 $ 3,965 $ 15,886 $ 11,258
============ ============ ============ ============
Portfolio turnover 88.32% 37.33% 88.32% 37.33%
============ ============ ============ ============
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund's Portfolios offer four
classes of shares under the Merrill Lynch Select Pricing SM System.
Shares of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance
and distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Insured Portfolio: Where bonds in the
Portfolio have not been insured pursuant to policies obtained by the
issuer, the Fund has obtained insurance with respect to the payment
of interest and principal of each bond. Such insurance is valid as
long as the bonds are held by the Fund.
All Portfolios: Municipal bonds and money market securities are
traded primarily in the over-the-counter markets and are valued at
the most recent bid price or yield equivalent as obtained from
dealers that make markets in such securities. Positions in futures
contracts and options thereon, which are traded on exchanges, are
valued at closing prices as of the close of such exchanges. Assets
for which market quotations are not readily available are valued at
fair value on a consistent basis using methods determined in good
faith by the Fund's Board of Directors, 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.
<PAGE>
(b) Derivative financial instruments--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.
* Financial futures contracts--The National and Limited Maturity
Portfolios (the "Portfolios") may purchase or sell interest rate
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
Portfolios deposit and maintain as collateral such initial margin as
required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolios agree 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 Portfolios as unrealized
gains or losses. When the contract is closed, the Portfolios record
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.
(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) Prepaid registration fees--Prepaid registration fees are charged
to expenses as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
<PAGE>
(g) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $463, $17,087, and $54 have been reclassified from paid-in
capital in excess of par to accumulated net realized capital losses
in the Insured, National, and Limited Maturity Portfolios,
respectively. These reclassifications have no effect on net assets
or net asset values per share.
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. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operation of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the average daily value of the Fund's net assets.
Rate of Advisory Fee
Aggregate of Average Daily Limited
Net Assets of the Three Insured National Maturity
Combined Portfolios Portfolio Portfolio Portfolio
Not exceeding $250 million .40 % .50 % .40 %
In excess of $250 million
but not exceeding $400 million .375 .475 .375
In excess of $400 million
but not exceeding $550 million .375 .475 .35
In excess of $550 million
but not exceeding $1.5 billion .375 .475 .325
In excess of $1.5 billion .35 .475 .325
<PAGE>
The Investment Advisory Agreement obligates FAM to reimburse the
Fund to the extent that the Fund's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions and
extraordinary items) exceed 2.5% of the Fund's first $30 million of
average daily net assets, 2.0% of the Fund's next $70 million of
average daily net assets, and 1.5% of the average daily net assets
in excess thereof. No fee payment will be made to FAM with respect
to any Portfolio during any fiscal year which will cause the
expenses of such Portfolio to exceed the pro rata expense limitation
applicable to such Portfolio at the time of such payment.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account Maintenance Fees Distribution Fees
Limited Limited
Insured National Maturity Insured National Maturity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Class B .25% .25% .15% .50% .50% .20%
Class C .25% .25% .15% .55% .55% .20%
Class D .25% .25% .10% -- -- --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended June 30, 1996, MLFD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales
of the Fund's Class A and Class D Shares as follows:
Limited
Insured National Maturity
Portfolio Portfolio Portfolio
Class A Shares:
MLFD $ 38,116 $ 20,524 $ 2,032
MLPF&S 274,069 177,142 19,981
Class D Shares:
MLFD 13,179 12,764 3,167
MLPF&S 97,008 115,279 30,565
<PAGE>
For the year ended June 30, 1996, MLPF&S received contingent
deferred sales charges of $1,911,883 relating to transactions in
Class B Shares, amounting to $1,033,602, $771,851 and $106,430 in
the Insured, National and Limited Maturity Portfolios, respectively,
and $15,842 relating to transactions in Class C Shares, amounting to
$7,257, $6,455 and $2,130 in the Insured, National and Limited
Maturity Portfolios, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
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, MLFD, MLFDS, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1996, were as follows:
Purchases Sales
Insured Portfolio $1,795,967,814 $2,251,996,964
National Portfolio 1,329,268,746 1,387,520,156
Limited Maturity Portfolio 454,092,780 613,329,200
Net realized and unrealized gains (losses) as of June 30, 1996 were
as follows:
Realized Unrealized
Insured Portfolio Gains (Losses) Gains
Long-term investments $ (3,980,157) $ 107,137,883
Short-term investments 82,938 --
------------- -------------
Total $ (3,897,219) $ 107,137,883
============= =============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Realized Unrealized
National Portfolio Gains (Losses) Gains
Long-term investments $ 4,887,206 $ 72,249,436
Short-term investments 1,948 --
Financial future contracts (1,114,406) --
------------- -------------
Total $ 3,774,748 $ 72,249,436
============= =============
Realized Unrealized
Limited Maturity Portfolio Gains Gains
Long-term investments $ 1,203,114 $ 1,287,751
Short-term investments 119,452 8,754
------------- -------------
Total $ 1,322,566 $ 1,296,505
============= =============
As of June 30, 1996 net unrealized appreciation for Federal income
tax purposes were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
Insured Portfolio $109,707,302 $(4,286,066) $105,421,236
National Portfolio 75,776,361 (3,781,171) 71,995,190
Limited Maturity
Portfolio 2,375,833 (1,079,328) 1,296,505
The aggregate cost of investments at June 30, 1996 for Federal
income tax purposes was $2,272,795,133 for the Insured Portfolio,
$1,331,763,874 for the National Portfolio, and $496,214,393 for the
Limited Maturity Portfolio.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
for the years ended June 30, 1996 and June 30, 1995 were
$155,203,186 and $293,039,051, respectively, for the Insured
Portfolio; $78,305,357 and $147,053,135, respectively, for the
National Portfolio and $176,922,554 and $256,848,291, respectively,
for the Limited Maturity Portfolio.
<PAGE>
Transactions in capital shares for each class were as follows:
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 5,469,354 $ 44,001,252
Shares issued to shareholders
in reinvestment of dividends 4,986,858 40,042,330
------------- -------------
Total issued 10,456,212 84,043,582
Shares redeemed (27,028,706) (217,178,396)
------------- -------------
Net decrease (16,572,494) $(133,134,814)
============= =============
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 17,244,995 $ 133,588,440
Shares issued to shareholders
in reinvestment of dividends &
distributions 5,993,847 46,501,518
------------- -------------
Total issued 23,238,842 180,089,958
Shares redeemed (54,299,693) (419,430,676)
------------- -------------
Net decrease (31,060,851) $(239,340,718)
============= =============
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 13,419,351 $ 107,963,983
Shares issued to shareholders
in reinvestment of dividends 2,346,122 18,823,418
------------- -------------
Total issued 15,765,473 126,787,401
Automatic conversion of shares (355,991) (2,835,885)
Shares redeemed (22,831,309) (183,110,029)
------------- -------------
Net decrease (7,421,827) $ (59,158,513)
============= =============
<PAGE>
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 16,066,095 $ 123,787,819
Shares issued to shareholders
in reinvestment of dividends &
distributions 2,730,539 21,164,361
------------- -------------
Total issued 18,796,634 144,952,180
Automatic conversion of shares (8,999) (69,008)
Shares redeemed (29,913,866) (230,944,682)
------------- -------------
Net decrease (11,126,231) $ (86,061,510)
============= =============
Insured Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,893,607 $ 15,225,385
Shares issued to shareholders
in reinvestment of dividends 53,775 431,720
------------- -------------
Total issued 1,947,382 15,657,105
Shares redeemed (532,614) (4,266,135)
------------- -------------
Net increase 1,414,768 $ 11,390,970
============= =============
Insured Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
June 30, 1995 Shares Amount
Shares sold 1,136,288 $ 8,839,400
Shares issued to shareholders
in reinvestment of dividends &
distributions 10,357 81,730
------------- -------------
Total issued 1,146,645 8,921,130
Shares redeemed (167,364) (1,318,478)
------------- -------------
Net increase 979,281 $ 7,602,652
============= =============
[FN]
++Commencement of Operations.
<PAGE>
Insured Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 14,968,451 $ 120,849,832
Automatic conversion of shares 355,872 2,835,885
Shares issued to shareholders
in reinvestment of dividends 118,797 953,911
------------- -------------
Total issued 15,443,120 124,639,628
Shares redeemed (12,181,923) (98,940,457)
------------- -------------
Net increase 3,261,197 $ 25,699,171
============= =============
Insured Portfolio
Class D Shares for the Period
October 21, 1994++ to Dollar
June 30, 1995 Shares Amount
Shares sold 5,713,054 $ 43,851,761
Automatic conversion of shares 8,988 69,008
Shares issued to shareholders
in reinvestment of dividends &
distributions 41,138 324,130
------------- -------------
Total issued 5,763,180 44,244,899
Shares redeemed (2,480,132) (19,484,374)
------------- -------------
Net increase 3,283,048 $ 24,760,525
============= =============
[FN]
++Commencement of Operations.
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,874,548 $ 19,100,358
Shares issued to shareholders
in reinvestment of dividends 2,851,242 29,021,298
------------- -------------
Total issued 4,725,790 48,121,656
Shares redeemed (13,151,450) (133,904,005)
------------- -------------
Net decrease (8,425,660) $ (85,782,349)
============= =============
<PAGE>
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 3,950,018 $ 38,999,667
Shares issued to shareholders
in reinvestment of dividends &
distributions 4,615,676 44,866,990
------------- -------------
Total issued 8,565,694 83,866,657
Shares redeemed (22,289,533) (218,456,423)
------------- -------------
Net decrease (13,723,839) $(134,589,766)
============= =============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 6,798,097 $ 69,266,670
Shares issued to shareholders
in reinvestment of dividends 964,834 9,817,408
------------- -------------
Total issued 7,762,931 79,084,078
Automatic conversion of shares (175,462) (1,776,371)
Shares redeemed (9,989,397) (101,634,492)
------------- -------------
Net decrease (2,401,928) $ (24,326,785)
============= =============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 8,878,807 $ 87,072,076
Shares issued to shareholders
in reinvestment of dividends &
distributions 1,612,526 15,637,171
------------- -------------
Total issued 10,491,333 102,709,247
Automatic conversion of shares (2,817) (44,533)
Shares redeemed (14,168,055) (139,040,527)
------------- -------------
Net decrease (3,679,539) $ (36,375,813)
============= =============
<PAGE>
National Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,026,234 $ 10,483,940
Shares issued to shareholders
in reinvestment of dividends 22,712 231,247
------------- -------------
Total issued 1,048,946 10,715,187
Shares redeemed (252,941) (2,580,645)
------------- -------------
Net increase 796,005 $ 8,134,542
============= =============
NOTES TO FINANCIAL STATEMENTS (concluded)
National Portfolio
Class C Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 658,356 $ 6,451,126
Shares issued to shareholders
in reinvestment of dividends &
distributions 5,456 53,279
------------- -------------
Total issued 663,812 6,504,405
Shares redeemed (145,672) (1,433,070)
------------- -------------
Net increase 518,140 $ 5,071,335
============= =============
[FN]
++Commencement of Operations.
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 13,624,624 $ 139,439,739
Automatic conversion of shares 175,315 1,776,371
Shares issued to shareholders
in reinvestment of dividends 74,448 759,889
------------- -------------
Total issued 13,874,387 141,975,999
Shares redeemed (11,497,765) (118,306,764)
------------- -------------
Net increase 2,376,622 $ 23,669,235
============= =============
<PAGE>
National Portfolio
Class D Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 5,900,638 $ 57,599,450
Automatic conversion of shares 2,818 44,533
Shares issued to shareholders
in reinvestment of dividends &
distributions 32,362 314,401
------------- -------------
Total issued 5,935,818 57,958,384
Shares redeemed (3,975,351) (39,117,275)
------------- -------------
Net increase 1,960,467 $ 18,841,109
============= =============
[FN]
++Commencement of Operations.
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 2,286,543 $ 22,746,544
Shares issued to shareholders
in reinvestment of dividends 1,098,806 10,929,822
------------- -------------
Total issued 3,385,349 33,676,366
Shares redeemed (15,364,211) (152,811,221)
------------- -------------
Net decrease (11,978,862) $(119,134,855)
============= =============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 5,989,549 $ 58,950,508
Shares issued to shareholders
in reinvestment of dividends 1,619,597 15,934,105
------------- -------------
Total issued 7,609,146 74,884,613
Shares redeemed (33,605,286) (330,320,109)
------------- -------------
Net decrease (25,996,140) $(255,435,496)
============= =============
<PAGE>
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,855,378 $ 18,448,441
Shares issued to shareholders
in reinvestment of dividends 196,945 1,959,129
------------- -------------
Total issued 2,052,323 20,407,570
Automatic conversion of shares (1,991) (19,792)
Shares redeemed (7,937,046) (78,947,865)
------------- -------------
Net decrease (5,886,714) $ (58,560,087)
============= =============
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 8,960,577 $ 88,112,911
Shares issued to shareholders
in reinvestment of dividends 364,664 3,587,539
------------- -------------
Total issued 9,325,241 91,700,450
Automatic conversion of shares (447) (4,387)
Shares redeemed (11,012,352) (108,188,416)
------------- -------------
Net decrease (1,687,558) $ (16,492,353)
============= =============
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,035,202 $ 10,296,541
Shares issued to shareholders
in reinvestment of dividends 1,535 15,247
------------- -------------
Total issued 1,036,737 10,311,788
Shares redeemed (1,426,909) (14,189,010)
------------- -------------
Net decrease (390,172) $ (3,877,222)
============= =============
<PAGE>
Limited Maturity Portfolio
Class C Shares for the Period
October 21, 1994++ to Dollar
June 30, 1995 Shares Amount
Shares sold 1,018,221 $ 10,034,099
Shares issued to shareholders
in reinvestment of dividends 3,599 35,474
------------- -------------
Total issued 1,021,820 10,069,573
Shares redeemed (622,129) (6,135,873)
------------- -------------
Net increase 399,691 $ 3,933,700
============= =============
[FN]
++Commencement of Operations.
Limited Maturity Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 5,319,786 $ 52,931,793
Automatic conversion of shares 1,989 19,792
Shares issued to shareholders
in reinvestment of dividends 32,445 322,874
------------- -------------
Total issued 5,354,220 53,274,459
Shares redeemed (4,886,241) (48,624,849)
------------- -------------
Net increase 467,979 $ 4,649,610
============= =============
Limited Maturity Portfolio
Class D Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 2,889,627 $ 28,392,515
Automatic conversion of shares 447 4,387
Shares issued to shareholders
in reinvestment of dividends 12,056 118,733
------------- -------------
Total issued 2,902,130 28,515,635
Shares redeemed (1,767,911) (17,369,777)
------------- -------------
Net increase 1,134,219 $ 11,145,858
============= =============
[FN]
++Commencement of Operations.
<PAGE>
5. Capital Loss Carryforward:
At June 30, 1996, the Fund had a net capital loss carryforward as
follows: Approximately $40,724,000 in the Insured Portfolio, of
which $38,085,000 expires in 2003 and $2,639,000 expires in 2004;
approximately $66,385,000 in the National Portfolio, of which
$37,909,000 expires in 2003 and $28,476,000 expires in 2004; and
approximately $5,891,000 in the Limited Maturity Portfolio, of which
$1,036,000 expires in 1997, $2,787,000 expires in 1998, $22,000
expires in 1999, $25,000 expires in 2002 and $2,021,000 expires in
2003. These amounts will be available to offset like amounts of any
future taxable gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Municipal Bond Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of the Insured,
National and Limited Maturity Portfolios of Merrill Lynch Municipal
Bond Fund, Inc. as of June 30, 1996, 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 June 30,
1996 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.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Insured, National and Limited Maturity Portfolios of Merrill
Lynch Municipal Bond Fund, Inc. as of June 30, 1996, the results of
their operations, the changes in their net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 15, 1996
</AUDIT-REPORT>
