MERRILL LYNCH
MUNICIPAL BOND
FUND, INC.
FUND LOGO
Annual Report
June 30, 1997
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.
Merrill Lynch
Municipal Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
Printed on post-consumer recycled paper
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
Barbara G. Fraser, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Important Tax
Information
(unaudited)
<PAGE>
All of the net investment income distributions declared daily by
Merrill Lynch Municipal Bond Fund, Inc. during its taxable year
ended June 30, 1997 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the taxable ordinary
income distributions declared by the Limited Maturity Portfolio's
Class A, Class B, Class C and Class D Shares during the year.
Record Payable Ordinary
Date Date Income
Limited Maturity
Portfolio 12/18/96 12/31/96 $.016908
There were no capital gains distributions declared during
the year.
Please retain this information for your records.
DEAR SHAREHOLDER
The Municipal Market
Environment
The combination of continued, if not diminishing, low inflation and
economic growth that was clearly slowing from the rapid first
quarter 1997 growth allowed long-term, fixed-income yields to
gradually decline during the three months ended June 30, 1997.
Yields slowly fell during April and early May as investor concerns
regarding additional Federal Reserve Board (FRB) action in late May
constrained significant price appreciation. However, with no FRB
move in late May and weak employment growth in early June, bond
yields fell sharply throughout most of June. US Treasury bond yields
declined 35 basis points (0.35%) to 6.75% during the June 1997
quarter. As measured by the Bond Buyer Revenue Bond Index, yields on
long-term uninsured municipal revenue bonds declined to their lowest
level in a year by mid-June. They rose somewhat to end the June
quarter at 5.82%, a decline of over 25 basis points.
During the quarter ended June 30, 1997, the municipal bond market
was outperformed by its taxable counterpart for the first time in
more than a year. This was for the most part the result of a
deterioration in the strong technical position that had supported
the tax-exempt bond market's performance in recent quarters. During
the three months ended June 30, 1997, approximately $55 billion long-
term, tax-exempt securities were issued, an increase of almost 10%
compared to the June 1996 quarter's supply. In recent past quarters,
municipal supply volume was essentially stable or moderately
declining. Even with the significant increase in volume recorded
during the June 1997 quarter, new-issue volume thus far in 1997 has
totaled approximately $95 billion, an increase of 2% compared to the
same period in 1996. The decline in bond yields during the June
quarter has led many issuers to accelerate financing plans to take
advantage of current low rates. Over $21 billion long-term tax-
exempt bonds were issued in June, 1997 alone, an increase of over
15% compared to June 1996 issuance. Additionally, the State of New
Jersey issued $2.8 billion in taxable municipal debt during June
which further added to an already heavy supply position.
<PAGE>
Investor demand remained strong during the June quarter. Property
and casualty insurance companies continued to be very active
investors in the municipal bond market, particularly in the
15-year--20-year maturity range. Additionally, during June and July,
municipal bond market investors are expected to receive over $50
billion in payment from tax-exempt bond maturities, coupon payments
and the proceeds from advanced and current refundings. It is
expected that, despite the continued allure of the US equity market,
much of the assets will be reinvested in tax-advantage products
suggesting that investor demand will remain strong in the coming
months.
Additionally, in recent months, much of the new bond issuance was
dominated by a number of larger issues. These included $350 million
in New York Municipal Assistance Corp. issues, $1 billion in New
York City general obligation bonds, $930 million in Port Authority
of New York and New Jersey issues, $565 million in Puerto Rico
Building Authority issues, $600 million in State of California
bonds, $256 million in Los Angeles Metropolitan Transportation
Authority issues, $350 million in Orange County, Florida sales tax
revenue bonds, and $300 million in State of Florida bonds. These and
other bond issues were usually underwritten in states with high
state income taxes and consequently were able to be issued at yields
that were relatively unattractive to residents in other states. This
tended to ameliorate the recent increase in supply as general market
investors tended to ignore much of this specialty-state supply in
favor of higher-yielding issues.
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, sign of a
resurgence in inflation. Recent economic growth generated
considerable unexpected tax revenues for the Federal government.
Forecasts for the 1997 Federal fiscal deficit were reduced to under
$100 billion, a level not seen since the early 1980s. Such a reduced
Federal deficit enhances the prospect for balanced Federal budget.
All of these factors support a scenario of steady, or even falling,
interest rates in the coming years. Present annual estimates of
future municipal bond issuance remain centered around $175 billion
indicating that the recent increase in supply should return to the
levels seen earlier this year. This should ensure that tax-exempt
products remain an attractive investment alternative throughout
1997.
Fiscal Year in Review
Insured Portfolio and
National Portfolio
<PAGE>
During the 12 months ended June 30, 1997, the municipal market was
characterized by enormous volatility within a tight trading range.
Therefore, our investment strategy for the Insured and National
Portfolios focused on capturing this range by purchasing long-term
municipal securities as Treasury bond yields approached 7%, and
selling these securities in rallies toward 6.50%. For the past 12
months, this formula served the Portfolios well on several
occasions. The beginning of 1996 was a period of low interest rates
with long-term Treasury yields at the 6% level. The Portfolios were
defensively postured with a focus on yield, and this structure
served the Fund well as interest rates rose into the middle of the
fiscal year. From that time, quality municipal bonds backed up to
yield of 6%, a point where strong retail demand has historically
entered the market. The result was a subsequent market rally
stemming from a picture of a slowing economy and reduced national
budget deficit. The Portfolios were more aggressively positioned in
anticipation of a stronger technical outlook for the municipal
market.
The beginning of 1997 saw another rise in long-term Treasury yields
to just under 7%, and the process of buying long-term municipal
bonds began again, although at relatively richer levels. The tighter
technical position of the municipal market created a significant
outperformance of municipal bonds over the US Treasury market. As we
approach the second half of 1997, the municipal market is back down
to levels where it normally loses retail support. Professional
traders and arbitrageurs normally account for most activity at these
prices. We intend to reduce the Fund's duration, as we focus on
protecting net asset valuation until the FRB finishes its tightening
phase and a more sustained drop in yields can be forecast.
Limited Maturity Portfolio
The Limited Maturity Portfolio's fiscal year ended June 30, 1997 was
marked by investor confusion over the direction of FRB policy, thus
creating considerable volatility in the market place. In view of
this, our strategy consisted of a series of shifts in response to
market volatility and economic data. We used periods of rising
interest rates as a buying opportunity to lock in attractive yields.
Conversely, we used periods of falling interest rates to take
advantage of market strength and book capital gains by increasing
cash reserves and reducing average portfolio maturity. We took the
opposite investment stance in periods of rising interest rates. In
addition, quality spreads narrowed so much, especially in the last
six months, that we concentrated purchases on higher-rated
securities, since there was little yield advantage to purchasing
lower-rated issues. This strategy served to enhance the performance
of the Fund by maintaining an alternative yield while at the same
time keeping the net asset values as stable as possible, especially
when compared to longer-term bond funds.
<PAGE>
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Municipal Bond
Fund, Inc., and we look forward to serving your investment needs in
the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Kenneth A. Jacob)
Kenneth A. Jacob
Vice President and Portfolio Manager
(Peter J. Hayes)
Peter J. Hayes
Vice President and Portfolio Manager
August 15, 1997
PERFORMANCE DATA
About Fund
Performance
<PAGE>
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. (There is no initial sales charge for
automatic share conversions.)
* 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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. 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.
<PAGE>
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 Fund's Class A
and Class B Shares compared to the growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
6/87 6/97
Insured Portfolio++--
Class A Shares $ 9,600 $20,450
Lehman Brothers Municipal
Bond Index++++ $10,000 $21,940
10/21/88** 6/97
Insured Portfolio++--
Class B Shares $10,000 $17,806
Lehman Brothers Municipal
Bond Index++++ $10,000 $19,568
[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, investment-
grade municipal bonds (bonds rated Baa or better) covered by
portfolio insurance guaranteeing the timely payment of principal at
maturity and interest.
++++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 A and
Class B Shares
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/97 +7.72% +3.41%
Five Years Ended 6/30/97 +6.54 +5.67
Ten Years Ended 6/30/97 +7.86 +7.42
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +6.78% +2.78%
Five Years Ended 6/30/97 +5.71 +5.71
Inception (10/21/88) through 6/30/97 +6.86 +6.86
[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 Fund's Class C
and Class D Shares compared to the growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
10/21/94 6/97
<PAGE>
Insured Portfolio++--
Class C Shares* $10,000 $12,171
Insured Portfolio++--
Class D Shares* $ 9,600 $11,861
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,702
[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, investment-
grade municipal bonds (bonds rated Baa or better) covered by
portfolio insurance guaranteeing the timely payment of principal at
maturity and interest.
++++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 C and
Class D Shares
Average Annual
Total Return
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +6.86% +5.86%
Inception (10/21/94) through 6/30/97 +7.57 +7.57
[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 6/30/97 +7.46% +3.16%
Inception (10/21/94) through 6/30/97 +8.18 +6.55
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
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 Fund's Class A
and Class B Shares compared to the growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
6/87 6/97
National Portfolio++--
Class A Shares* $ 9,600 $20,747
Lehman Brothers Municipal
Bond Index++++ $10,000 $21,940
10/21/88** 6/97
National Portfolio++--
Class B Shares* $10,000 $18,119
Lehman Brothers Municipal
Bond Index++++ $10,000 $19,568
[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.
<PAGE>
National 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 6/30/97 +8.84% +4.49%
Five Years Ended 6/30/97 +7.00 +6.13
Ten Years Ended 6/30/97 +8.01 +7.57
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +7.92% +3.92%
Five Years Ended 6/30/97 +6.20 +6.20
Inception (10/21/88) through 6/30/97 +7.08 +7.08
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payments of applicable contingent deferred sales charge.
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 Fund's Class C
and Class D Shares compared to the growth of an investment in the
Lehman Brothers Municipal Bond Index. Beginning and ending values are:
10/21/94 6/97
<PAGE>
National Portfolio++--
Class C Shares* $10,000 $12,358
National Portfolio++--
Class D Shares* $ 9,600 $12,053
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,702
[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 C and
Class D Shares
Average Annual
Total Return
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +7.97% +6.97%
Inception (10/21/94) through 6/30/97 +8.19 +8.19
[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 6/30/97 +8.57% +4.23%
Inception (10/21/94) through 6/30/97 +8.83 +7.19
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
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 Fund's Class A
and Class B Shares compared to the 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:
6/87 6/97
Limited Maturity Portfolio++--
Class A Shares* $ 9,900 $16,204
Lehman Brothers Municipal
Bond Index++++ $10,000 $21,940
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $17,871
11/02/92** 6/97
Limited Maturity Portfolio++--
Class B Shares* $10,000 $11,805
Lehman Brothers Municipal
Bond Index++++ $10,000 $13,589
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $12,615
[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.
<PAGE>
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 6/30/97 +4.40% +3.35%
Five Years Ended 6/30/97 +4.04 +3.84
Ten Years Ended 6/30/97 +5.05 +4.94
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +4.13% +3.13%
Inception (11/2/92) through 6/30/97 +3.63 +3.63
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (continued)
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 Fund's Class C
and Class D Shares compared to the 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:
<PAGE>
10/21/94 6/97
Limited Maturity Portfolio++--
Class C Shares* $10,000 $11,097
Limited Maturity Portfolio++--
Class D Shares* $ 9,900 $11,102
Lehman Brothers Municipal
Bond Index++++ $10,000 $12,702
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $11,655
[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 rate 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
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/97 +4.11% +3.11%
Inception (10/21/94) through 6/30/97 +3.95 +3.95
<PAGE>
[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 6/30/97 +4.40% +3.35%
Inception (10/21/94) through 6/30/97 +4.35 +3.96
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Standardized
6/30/97 3/31/97 6/30/96 % Change % Change 30-Day Yield
<S> <C> <C> <C> <C> <C>
Insured Portfolio Class A Shares $ 8.06 $ 7.88 $ 7.91 +1.90% +2.28% 4.91%
Insured Portfolio Class B Shares 8.05 7.87 7.91 +1.77 +2.29 4.36
Insured Portfolio Class C Shares 8.06 7.88 7.91 +1.90 +2.28 4.30
Insured Portfolio Class D Shares 8.06 7.88 7.91 +1.90 +2.28 4.66
National Portfolio Class A Shares 10.38 10.16 10.11 +2.67 +2.17 4.92
National Portfolio Class B Shares 10.37 10.16 10.11 +2.57 +2.07 4.37
National Portfolio Class C Shares 10.38 10.16 10.11 +2.67 +2.17 4.32
National Portfolio Class D Shares 10.39 10.17 10.12 +2.67 +2.16 4.68
Limited Maturity Portfolio Class A Shares 9.93 9.90 9.91 +0.20 +0.30 3.90
Limited Maturity Portfolio Class B Shares 9.94 9.90 9.91 +0.30 +0.40 3.58
Limited Maturity Portfolio Class C Shares 9.91 9.87 9.88 +0.30 +0.41 3.56
Limited Maturity Portfolio Class D Shares 9.94 9.90 9.91 +0.30 +0.40 3.80
Insured Portfolio Class A Shares--Total Return +7.72(1) +3.71(2)
Insured Portfolio Class B Shares--Total Return +6.78(3) +3.52(4)
Insured Portfolio Class C Shares--Total Return +6.86(5) +3.50(6)
Insured Portfolio Class D Shares--Total Return +7.46(7) +3.64(8)
National Portfolio Class A Shares--Total Return +8.84(9) +3.65(10)
National Portfolio Class B Shares--Total Return +7.92(11) +3.36(12)
National Portfolio Class C Shares--Total Return +7.97(13) +3.45(14)
National Portfolio Class D Shares--Total Return +8.57(15) +3.59(16)
Limited Maturity Portfolio Class A Shares--Total Return +4.40(17) +1.30(18)
Limited Maturity Portfolio Class B Shares--Total Return +4.13(19) +1.31(20)
Limited Maturity Portfolio Class C Shares--Total Return +4.11(21) +1.31(22)
Limited Maturity Portfolio Class D Shares--Total Return +4.40(23) +1.38(4)
<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.
<PAGE>
(9)Percent change includes reinvestment of $0.599 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.149 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.521 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.130 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.516 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.129 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.574 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.143 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.407 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.098 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.371 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.090 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.369 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.089 per share
ordinary income dividends.
(23)Percent change includes reinvestment of $0.397 per share
ordinary income dividends.
PERFORMANCE DATA (concluded)
<PAGE>
</TABLE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
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
1996 8.25/8.07 10.44/10.33 9.98/9.94 0.45 0.60 0.40 + 3.43 + 4.93 +3.72
1/1/97-6/30/97 8.07/8.06 10.33/10.38 9.94/9.93 0.21 0.28 0.19 + 2.66 + 3.41 +1.88
------ ------ -----
Total $11.65 $14.45 $9.83
Cumulative total return as of 6/30/97: +275.65%** +382.46%** +172.64%**
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
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(3) 0.66 -- + 6.28 + 5.05 --
1991 7.86/8.17 10.09/10.49 -- 0.54(4) 0.75(4) -- +11.10 +11.74 --
1992 8.17/8.27 10.49/10.55 $ 9.93/9.97 0.56(5) 0.81(5) $0.06 + 8.35 + 8.53 +1.05%
1993 8.27/8.59 10.55/10.90 9.97/10.01 0.64(6) 0.85(6) 0.35 +11.88 +11.65 +3.93
1994 8.59/7.43 10.90/9.39 10.01/9.77 0.53(7) 0.73(7) 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
1996 8.24/8.07 10.44/10.33 9.98/9.94 0.39 0.52 0.37 + 2.77 + 4.14 +3.35
1/1/97-6/30/97 8.07/8.05 10.33/10.37 9.94/9.94 0.18 0.25 0.17 + 2.15 + 2.93 +1.81
----- ----- -----
Total $4.40 $5.90 $1.63
Cumulative total return as of 6/30/97: +78.06%*** +81.19%*** +18.05%***
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
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(7) $0.31(7) $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
1996 8.25/8.07 10.44/10.33 10.00/9.91 0.38 0.52 0.36 + 2.59 + 4.09 +2.80
1/1/97-6/30/97 8.07/8.06 10.33/10.38 9.91/9.91 0.18 0.25 0.17 + 2.25 + 3.00 +1.80
----- ----- -----
Total $1.16 $1.60 $0.94
Cumulative total return as of 6/30/97: +21.71%*** +23.58%*** +10.97%***
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
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(7) $0.32(7) $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
1996 8.25/8.07 10.45/10.34 9.98/9.94 0.43 0.58 0.39 + 3.17 + 4.67 +3.62
1/1/97-6/30/97 8.07/8.06 10.34/10.39 9.94/9.94 0.20 0.27 0.18 + 2.53 + 3.29 +1.93
----- ----- -----
Total $1.29 $1.74 $1.01
Cumulative total return as of 6/30/97: +23.55%** +25.56%** +12.13%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charges; results would be lower if
sales charge was included.
***Figures do not reflect deduction of any sales charges; results
would be lower if sales charge was deducted.
****Limited Maturity Portfolio commenced operations on 11/02/92.
++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>
<PAGE>
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.
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
COP Certificates of Participation
EDA Economic Development Authority
GAN Grant Anticipation Notes
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
IRS Inverse Rate Securities
LEVRRS Leveraged Reverse Rate Securities
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Tax Receipts
S/F Single-Family
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
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--0.2% AAA Aaa $ 1,625 Alabama Water Pollution Control Authority, Revolving
Fund Loan, Series A, 6.75% due 8/15/2017 (b) $ 1,789
AAA Aaa 1,250 Mobile, Alabama, GO, Refunding and Capital Improvement
Bonds, 10.875% due 11/01/2007 (c) 1,697
Alaska--0.8% Kenai Peninsula Borough, Alaska, GO (b):
AAA Aaa 6,450 8.40% due 1/01/2000 7,059
AAA Aaa 8,460 8.40% due 1/01/2001 9,526
Arizona--1.5% AAA Aaa 6,750 Arizona State Municipal Financing Program, COP,
Series 34, 7.25% due 8/01/2009 (g) 8,091
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) 4,170
AAA Aaa 4,000 Maricopa County, Arizona, IDA, Hospital Facility Revenue
Refunding Bonds (Samaritan Health Services), Series A, 7% due
12/01/2013 (e) 4,336
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) 8,109
AAA Aaa 6,000 Mesa, Arizona, Utility System Revenue Bonds, 5.375%
due 7/01/2017 (h) 5,975
California--1.6% AAA Aaa 5,245 Los Angeles, California, Metropolitan Transportation
Authority, Revenue Refunding Bonds (General Union Station),
Series A, 5.25% due 7/01/2013 (i) 5,217
AAA Aaa 5,000 Los Angeles County, California, Public Works Finance
Authority (Lease Revenue Multiple Capital Facility
Project), Series V-B, 5.125% due 12/01/2017 (b) 4,754
AAA Aaa 8,800 Northern California Power Agency, Multiple Capital Facilities
Revenue Bonds, RIB, 8.837% due 9/02/2025 (d) (e) 10,296
AAA Aaa 5,900 Oakland, California, Redevelopment Agency, Refunding Bonds,
INFLOS, 7.966% due 9/01/2019 (d) (e) 6,114
AAA Aaa 5,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2024 (e) 5,399
Colorado--0.9% AAA Aaa 590 La Plata County, Colorado, School District Number 9, GO
(R Durango), UT, 6.60% due 11/01/2017 (h) 643
A1+ VMIG1++ 2,000 Moffat County, Colorado, PCR, Refunding (Pacificorp
Projects), VRDN, 5.50% due 5/01/2013 (b) (f) 2,000
Municipal Subdistrict Northern Colorado, Water Conservancy
District, Revenue Refunding Bonds, Series F (b):
Aaa Aaa 4,470 6.15% due 12/01/2005 4,893
Aaa Aaa 4,250 6.25% due 12/01/2006 4,706
Aaa Aaa 5,055 6.35% due 12/01/2007 5,660
<PAGE>
Delaware--0.2% AAA Aaa 3,750 Delaware State Health Facilities Authority, Crossover
Revenue Refunding Bonds (Medical Center of Delaware),
7% due 10/01/2015 (e) 4,004
Florida--3.9% Florida State Division, Board of Finance, Department of
General Services Revenue Bonds, Series 2000-A (b):
AAA Aaa 23,490 (Department of Enviromental Preservation),
5% due 7/01/2012 22,743
AAA Aaa 14,630 (Department of Enviromental Preservation),
5% due 7/01/2013 14,069
AAA Aaa 5,000 (Department of Natural Resource Preservation),
6.75% due 7/01/2013 5,423
AAA Aaa 1,000 Florida State Turnpike Authority, Turnpike Revenue Bonds,
Series A, 7.125% due 7/01/2001 (a) (b) 1,118
AAA Aaa 500 Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Refunding and Improvement Bonds
(Baptist Medical Center Project), 11.50% due 10/01/2012 (c) 819
AAA Aaa 10,000 Lee County, Florida, Hospital Board of Directors,
Hospital Revenue, INFLOS, 9.063% due 4/01/2020 (d) (e) 11,400
AAA Aaa 3,950 Orange County, Florida, HFA, Mortgage Revenue Refunding
Bonds, Series A, 7.60% due 1/01/2024 (h) (j) 4,191
AAA Aaa 5,790 Orange County, Florida, Health Facilities Authority
Revenue Bonds (Hospital--Orlando Regional Healthcare),
Series A, 6.25% due 10/01/2006 (e) 6,379
AAA Aaa 2,000 Port Saint Lucie, Florida, Special Assessment Revenue Bonds,
Assessment District No. 1, Phase II, 5.40% due 10/01/2016 (e) 1,979
AAA Aaa 4,900 Saint John's River, Florida, Water Management District,
Revenue Refunding Bonds (Land Acquisition), 5.125% due
7/01/2016 (i) 4,685
AAA Aaa 2,850 South Broward Hospital District, Florida, Hospital
Revenue Bonds, RIB, Series C, 9.034% due 5/01/2001 (a) (b) (d) 3,384
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) 3,185
Georgia--2.2% A1+ VMIG1++ 6,200 Burke County, Georgia, Development Authority, PCR
(Oglethorpe Power Corporation), VRDN, Series A,
4.15% due 1/01/2016 (f) (h) 6,200
AAA Aaa 4,000 Chatam County, Georgia, School District, UT, 6.75%
due 8/01/2003 (a) (e) 4,526
AAA Aaa 20,000 Georgia Municipal Electric Authority, Power Revenue
Bonds, Series EE, 7% due 1/01/2025 (b) 24,293
AAA Aaa 9,000 Georgia Municipal Electric Authority, Special Obligation
Bonds (Fifth Crossover Series, Project One), 6.40% due
1/01/2013 (b) 10,007
Hawaii--3.7% Hawaii State Airport System Revenue Bonds:
AAA Aaa 21,795 AMT, 7.30% due 7/01/2020 (b) 23,591
AAA Aaa 23,200 AMT, Second Series, 7.50% due 7/01/2020 (h) 25,240
AAA Aaa 10,000 Refunding, Series 1993, 6.45% due 7/01/2013 (e) 10,909
AAA Aaa 5,000 Hawaii State Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Hawaiian Electric Company,
AMT, Series C, 7.375% due 12/01/2020 (e) 5,463
Hawaii State, GO (h):
AAA Aaa 2,920 Series CH, UT, 6% due 11/01/2005 3,146
AAA Aaa 2,000 Series CN, 5.25% due 3/01/2017 1,938
AAA Aaa 4,500 Hawaii State Harbor Capital Improvement Revenue
Bonds, AMT, 7% due 7/01/2017 (e) 4,833
<PAGE>
Illinois--11.6% AAA Aaa 28,200 Chicago, Illinois, GO, Series A-1, 5.125% due
1/01/2025 (b) 26,257
AAA Aaa 48,835 Chicago, Illinois, Refunding, Series B, 5.125%
due 1/01/2025 (h) 45,406
AAA Aaa 24,000 Chicago, Illinois, Wastewater Transmission Revenue
Refunding Bonds, 5.125% due 1/01/2025 (h) 22,315
AAA Aaa 3,000 Chicago, Illinois, Water Revenue Bonds, 5% due 11/01/2015 (h) 2,818
AAA Aaa 7,000 Cleveland, Ohio, Public Power System, Revenue Refunding
Bonds (First Mortgage, Series 1), 5.25% due 11/15/2016 (e) 6,825
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,250 (Elmhurst Memorial Hospital), 6.625% due 1/01/2022 (h) 3,498
AAA Aaa 2,000 (Methodist Health Project), RIB, 9.628% due 5/01/2021 (b) (d) 2,303
AAA Aaa 28,900 Refunding (Sinai Health System), 6% due 2/15/2024 (b) 29,397
AAA Aaa 10,000 (Rush Presbyterian-Saint Luke's Medical Center),
INFLOS, 9.615% due 10/01/2024 (d) (e) 11,550
Illinois State, GO, Refunding Bonds, UT (h):
AAA Aaa 5,000 5.125% due 12/01/2013 4,862
AAA Aaa 5,750 5.125% due 12/01/2016 5,461
AAA Aaa 4,520 Illinois State Sales Tax Revenue Bonds, Series W,
5% due 6/15/2016 (h) 4,266
</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>
Illinois Metropolitan Pier and Exposition Authority, Illinois,
(concluded) Dedicated State Tax Revenue Bonds (McCormick Place
Expansion Project):
AAA Aaa $ 6,070 Refunding, Series A, 6% due 12/15/2006 (b) $ 6,556
AAA Aaa 16,660 Refunding, Series A, 6.10% due 12/15/2015 (e) (k) 5,851
AAA Aaa 8,330 Refunding, Series A, 6.10% due 12/15/2016 (e) (k) 2,764
AAA Aaa 9,400 Refunding, Series A, 6.05% due 12/15/2018 (e) (k) 2,756
AAA Aaa 13,550 Refunding, Series A, 6.03% due 12/15/2022 (e) (k) 3,120
AAA Aaa 49,575 Refunding, Series A, 6.09% due 12/15/2023 (e) (k) 10,740
AAA Aaa 14,305 Refunding, Series A, 6.24% due 6/15/2024 (e) (k) 3,006
AAA Aaa 6,260 Refunding, Series A, 6.02% due 6/15/2025 (e) (k) 1,238
AAA Aaa 5,000 Refunding, Series B, 5.867% due 6/15/2018 (e) (k) 1,509
AAA Aaa 6,600 Series A, 6.50% due 6/15/2003 (a) (b) 7,366
AAA Aaa 3,000 Series A, 5.87% due 6/15/2020 (h) (k) 802
AAA Aaa 26,000 Regional Transportation Authority, Illinois,
Series A, 6.25% due 6/01/2024 (b) 27,565
<PAGE>
Indiana--1.6% 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) 2,671
AAA Aaa 4,040 Indianapolis, Indiana, Local Public Improvement
Bond Bank, Series A, 7.90% due 2/01/2002 (a) (g) 4,607
AAA Aaa 4,340 Jasper County, Indiana, PCR, Refunding (Northern
Indiana Public Service), 7.10% due 7/01/2017 (e) 4,758
AAA Aaa 4,510 Munster, Indiana, School Building Corp. (First
Mortgage), 5.75% due 1/15/2021 (e) 4,516
AAA Aaa 5,000 Penn, Indiana, High School Building Corp. (First
Mortgage), 6.125% due 1/15/2016 (e) 5,223
Rockport, Indiana, PCR, Refunding:
A1 Aaa 4,200 (AEP Generating Co. Project), VRDN, Series A,
5.50% due 7/01/2025 (b) (f) 4,200
AAA Aaa 5,800 (Indiana--Michigan Power), Series B, 7.60%
due 3/01/2016 (h) 6,421
Iowa--0.3% AAA Aaa 5,000 Des Moines, Iowa, Parking Facilities Revenue
Refunding Bonds, Series A, 7.25% due 7/01/2015 (h) 5,361
Kentucky--0.6% 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) 13,101
Louisiana--0.4% A1 VMIG1++ 10,000 Louisiana Public Facilities Authority, Hospital
Revenue Bonds (Willis-Knighton Medical Center Project),
VRDN, 4.15% due 9/01/2025 (b) (f) 10,000
Maryland--0.4% 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) 2,504
AAA Aaa 4,400 Series B, 7% due 7/01/2022 5,284
Massachusetts AAA Aaa 13,000 Massachusetts Bay Transportation Authority, COP,
- --5.3% Series A, 7.65% due 8/01/2000 (a) (i) 14,477
Massachusetts Bay Transportation Authority (Massachusetts
General Transportation), Series A (h):
AAA Aaa 4,325 6% due 3/01/2006 4,670
AAA Aaa 4,610 6% due 3/01/2007 4,993
AAA Aaa 4,690 Massachusetts Educational Loan Authority, Education
Loan Revenue Bonds, AMT, Issue D, Series A,
7.25% due 1/01/2009 (e) 5,027
Massachusetts State Consolidated Loan (b):
AAA Aaa 5,110 Series A, 5% due 3/01/2010 5,002
AAA Aaa 5,420 Series D, 5% due 11/01/2016 5,093
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 10,000 (Beth Israel), INFLOS, 8.319% due 7/01/2025 (b) (d) 10,400
<PAGE> A1+ VMIG1++ 500 (Capital Assets Program), VRDN, Series D, 5.35%
due 1/01/2035 (e) (f) 500
AAA Aaa 3,100 (Saint Elizabeth's Hospital), LEVRRS, Series E,
9.37% due 8/12/2021 (d) (i) 3,565
AAA Aaa 19,755 Massachusetts State, HFA, Housing Revenue Refunding
Bonds (Insured Rental), AMT, Series A, 6.75% due
7/01/2028 (b) 20,648
AAA Aaa 12,250 Massachusetts State, HFA, M/F Housing Refunding Bonds,
Series A, 6.15% due 7/01/2018 (e) 12,591
AAA Aaa 4,020 Massachusetts State Insured Revenue Refunding Bonds,
Series B, 5.40% due 11/01/2007 (e) 4,184
AAA Aaa 3,250 Massachusetts State Port Authority Revenue Bonds, 13%
due 7/01/2013 (c) 5,448
Massachusetts State Water Resources Authority
Revenue Bonds, Series B (e):
AAA Aaa 2,730 5% due 12/01/2016 2,574
AAA Aaa 10,000 5% due 12/01/2025 9,112
Michigan--2.5% AAA Aaa 5,000 Michigan State Building Authority, Revenue Refunding
Bonds, Series I, 6.25% due 10/01/2020 (e) 5,351
Aaa Aaa 6,915 Michigan State, HDA, Rental Housing Revenue Bonds,
Series B, 6.15% due 10/01/2015 (e) 7,090
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) 10,757
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) 18,078
AAA Aaa 9,745 Series I-B, 7.50% due 9/01/2019 (b) 10,556
Mississippi--0.1% AAA Aaa 1,320 Harrison County, Mississippi, Wastewater Management
District, Revenue Refunding Bonds (Wastewater
Treatment Facilities), Series A, 8.50% due 2/01/2013 (h) 1,751
Missouri--0.2% AAA Aaa 3,500 Sikeston, Missouri, Electric Revenue Refunding Bonds,
6.25% due 6/01/2002 (a) (e) 3,830
Nebraska--0.4% AAA Aaa 9,000 Nebraska Public Power District Revenue Refunding Bonds,
6.125% due 1/01/2015 (e) 9,387
Nevada--2.5% AAA Aaa 3,450 Clark County, Nevada, Airport Revenue Bonds, 6.90%
due 6/01/2001 (a) (h) 3,757
AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power), AMT, 6.65% due 6/01/2017 (e) 48,527
<PAGE>
New Jersey--7.1% AAA Aaa 3,350 Cape May County, New Jersey, Industrial Pollution Control
Financing Authority, Revenue Refunding Bonds
(Atlantic City Electric Company Project), Series A,
6.80% due 3/01/2021 (e) 3,957
Casino Reinvestment Development Authority, New Jersey,
Parking Fee Revenue Bonds, Series A (i):
AAA Aaa 3,730 6% due 10/01/2005 4,013
AAA Aaa 3,955 6% due 10/01/2006 4,263
AAA Aaa 4,190 6% due 10/01/2007 4,519
AAA Aaa 28,750 New Jersey EDA, Natural Gas Facilities, Revenue
Refunding Bonds (NUI Corp.), Series A, 6.35% due
10/01/2022 (b) 31,029
A1+ VMIG1++ 1,100 New Jersey Sports and Exposition Authority Revenue
Bonds (State Contract), VRDN, Series C, 3.95% due
9/01/2024 (e) (f) 1,100
New Jersey State Housing and Mortgage Finance Agency
Revenue Bonds (Home Buyer), AMT (e):
AAA Aaa 8,790 Series D, 7.70% due 10/01/2029 9,204
AAA Aaa 23,890 Series M, 7% due 10/01/2026 25,442
New Jersey State Transit Corp., Capital, GAN, Series A (i):
AAA Aaa 15,000 5% due 9/01/2000 15,265
AAA Aaa 35,000 5.25% due 9/01/2001 36,008
New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds:
AAA Aaa 4,215 Series C, 6.50% due 1/01/2008 (b) 4,738
AAA VMIG1++ 6,100 VRDN, Series D, 3.80% due 1/01/2018 (f) (h) 6,100
</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 York--10.7% Nassau County, New York, General Improvement,
UT, Series V (b):
AAA Aaa $ 5,305 5.25% due 3/01/2015 $ 5,197
AAA Aaa 2,845 5.25% due 3/01/2016 2,769
New York City, New York, GO, UT:
AAA Aaa 15,000 Series B, 6.25% due 8/15/2008 (b) 16,376
AAA Aaa 8,175 Series E, 6% due 8/01/2007 (h) 8,809
AAA Aaa 13,770 Series G, 6% due 10/15/2007 (b) 14,855
AAA Aaa 31,000 Series I, 6% due 4/15/2012 (i) 32,509
AAA Aaa 2,500 Series L, 5.20% due 8/01/2008 (e) 2,515
AAA Aaa 10,095 Series M, 5.30% due 6/01/2012 (b) 10,006
AAA Aaa 15,000 Series M, 5.50% due 6/01/2017 (b) 14,874
New York City, New York, GO, UT, Series I (b):
AAA Aaa 2,825 7.25% due 8/15/1999 (a) 3,043
<PAGE> AAA Aaa 7,150 7.25% due 8/15/2013 7,636
AAA Aaa 4,385 7.25% due 8/15/2016 4,693
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 28,510 RITR, 6.945% due 6/15/2026 (d) (e) 29,294
AAA Aaa 5,010 Series C, 6.20% due 6/15/2021 (b) 5,282
A1+ VMIG1++ 1,000 Series C, VRDN, 5.50% due 6/15/2023 (f) (h) 1,000
AAA Aaa 1,500 New York City, New York, Refunding, UT, Series E, 6.20%
due 8/01/2008 (e) 1,637
AAA Aaa 2,500 New York State Dormitory Authority Revenue Bonds
(City University), Third Generation Reserves,
Series 2, 6.25% due 7/01/2019 (e) 2,639
AAA Aaa 1,650 New York State Environmental Facilities Corporation,
Special Obligation Revenue Refunding Bonds
(Riverbank State Park), 5.50% due 4/01/2016 (b) 1,647
AAA Aaa 2,015 New York State Medical Care Facilities Finance Agency,
Revenue Improvement Bonds (Mental Health
Services), Series C, 7.375% due 8/15/2019 (e) 2,161
Aaa Aaa 9,125 New York State Medical Care Facilities Financial Agency
Revenue Bonds (Mental Health Services), Series E, 6.25%
due 8/15/2019 (h) 9,650
AAA VMIG1++ 13,700 New York State Thruway Authority, General Revenue Bonds,
VRDN, 5.45% due 1/01/2024 (f) (h) 13,700
AAA Aaa 12,000 New York State Thruway Authority, Highway and Bridge
Trust Fund, Series B, 5.125% due 4/01/2015 (e) 11,585
Niagara Falls, New York, Public Improvement Bonds, UT (e):
AAA Aaa 2,975 6.90% due 3/01/2023 3,313
AAA Aaa 3,190 6.90% due 3/01/2024 3,553
AAA Aaa 11,940 Suffolk County, New York, Water Authority, Water Works
Revenue Bonds, 5% due 6/01/2011 (e) 11,613
Ohio--1.1% AAA Aaa 2,710 Clermont County, Ohio, Hospital Facilities Revenue
Refunding Bonds (Mercy Health Systems), Series A,
7.50% due 9/01/2001 (a) (b) 3,028
AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds,
First Mortgage, Series A, 7% due 11/15/2004 (a) (e) 13,930
AAA Aaa 1,550 Cleveland, Ohio, Water Works Revenue Bonds (First Mortgage),
Series F-92 A, 6.50% due 1/01/2002 (a) (b) 1,704
AAA Aaa 3,500 Ohio State Building Authority, State Facilities (Adult
Correctional), Series A, 6% due 4/01/2004 (b) 3,762
Oklahoma--1.3% AAA Aaa 10,500 Central Oklahoma, Transportation and Packaging Authority,
Packaging Systems Revenue Refunding, 5.25% due 7/01/2016 (i) 10,169
AAA Aaa 9,280 Grand River Dam Authority, Oklahoma, Revenue Refunding
Bonds, 5.50% due 6/01/2009 (b) 9,718
AAA Aaa 7,500 Oklahoma State Industrial Authority, Hospital Revenue
Bonds (Baptist Medical Center), Series A, 7% due 8/15/2000
(a) (b) 8,212
<PAGE>
Oregon--0.2% Port Portland, Oregon, International Airport Revenue
Bonds (Portland International Airport), Series Seven-B,
AMT (e):
AAA Aaa 3,865 7.10% due 1/01/2012 (a) 4,511
AAA Aaa 135 7.10% due 7/01/2021 146
Pennsylvania AAA Aaa 2,000 Allegheny County, Pennsylvania, Higher Education Building
- --5.4% Authority Revenue Bonds (Duquesne University Project),
5% due 3/01/2016 (b) 1,882
AAA Aaa 1,750 Allegheny County, Pennsylvania, Hospital Development Authority
Revenue Bonds (Mercy Hospital of Pittsburgh), 6.75% due
4/01/2001 (a) (b) 1,922
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) 7,218
AAA Aaa 3,365 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio Edison
Company/Mansfield), Series A, 7% due 6/01/2021 (h) 3,675
AAA Aaa 7,590 Erie County, Pennsylvania, Prison Authority, Lease Revenue
Bonds, 6.25% due 11/01/2001 (a) (e) 8,144
AAA Aaa 1,155 Exeter Township Pennsylvania School District, UT, 6.65%
due 5/15/2002 (a) (h) 1,265
Pennsylvania State Higher Educational Assistance Agency,
Student Loan Revenue Bonds, AMT, RIB (d):
AAA Aaa 15,000 9.317% due 9/03/2026 (b) 16,856
AAA Aaa 8,000 Series B, 10.749% due 3/01/2020 (e) 9,160
AAA Aaa 18,600 Series B, 7.955% due 3/01/2022 (b) 19,321
Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds:
AAA Aaa 1,500 (Bryn Mawr College), 6.50% due 12/01/1999 (a) (h) 1,607
AAA Aaa 4,250 (Temple University), First Series, 6.50% due 4/01/2021 (e) 4,566
AAA Aaa 10,000 Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue Refunding (Allegheny Delaware Valley),
Series A, 5.875% due 11/15/2016 (e) 10,228
Pennsylvania State Second Series, GO, UT (b):
AAA Aaa 8,875 5% due 11/15/2014 8,468
AAA Aaa 1,000 5% due 11/15/2015 950
AAA Aaa 6,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
12th Series B, 7% due 5/15/2020 (c) (e) 7,013
AAA Aaa 5,000 Philadelphia, Pennsylvania, School District, Series B,
5.50% due 9/01/2015 (b) 4,977
AAA Aaa 4,020 Philadelphia, Pennsylvania, Water and Sewer Authority,
Water and Wastewater Revenue Bonds, 5.60% due 8/01/2018 (e) 3,976
Rhode Island AAA Aaa 6,100 Rhode Island Depositors Economic Protection Corporation,
- --1.4% Special Obligation Bonds, Series A, 6.625% due 8/01/2002
(a) (i) 6,792
AAA Aaa 3,775 Rhode Island State Consolidated Capital Development Loan,
Series A, 6% due 8/01/2007 (e) 4,096
Rhode Island State Health and Educational Building
Corporation Revenue Bonds:
AAA Aaa 1,500 Higher Education Facility, Refunding (Rhode Island
School Design), 5.625% due 6/01/2026 (e) 1,472
AAA Aaa 12,800 (Rhode Island Hospital), INFLOS, 9.487% due
8/15/2021 (d) (h) 15,568
<PAGE>
South AAA Aaa 5,000 Florence County, South Carolina, Hospital Revenue
Carolina--1.6% Bonds (McLeod Regional Medical Center Project),
6.75% due 11/01/2020 (h) 5,374
AAA Aaa 4,000 Piedmont, South Carolina, Municipal Power Agency,
Electric Revenue Refunding Bonds, 6.30% due 1/01/2022 (e) 4,263
South Carolina State Public Service Authority, Revenue
Refunding Bonds, Series A (b):
AAA Aaa 17,090 6.375% due 7/01/2021 18,425
AAA Aaa 4,200 6.25% due 1/01/2022 4,452
Texas--14.3% Austin, Texas, Utility System, Combined Revenue Bonds,
Prior Lien (e):
AAA Aaa 11,190 9.25% due 5/15/2004 (a) 14,160
AAA Aaa 5,000 6.25% due 11/15/2019 5,273
AAA Aaa 20,000 Austin, Texas, Utility System, Combined Revenue
Refunding Bonds, Series A, 5.25% due 5/15/2016 (i) 19,348
Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT:
AAA Aaa 6,000 Refunding, 6.50% due 12/01/2027 (b) 6,422
AAA Aaa 12,000 Series B, 6.625% due 6/01/2022 (h) 12,882
AAA Aaa 12,400 Brazos River Authority, Texas, Revenue Refunding
Bonds (Houston Light and Power Co.), Series B,
7.20% due 12/01/2018 (h) 13,387
Brownsville, Texas, Utility System, Revenue
Refunding Bonds:
AAA Aaa 20,000 6.25% due 9/01/2014 (e) 21,862
AAA Aaa 2,000 5.25% due 9/01/2015 (b) 1,952
</TABLE>
<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 $ 5,000 Harris County, Texas, Hospital District Mortgage,
(concluded) Revenue Refunding Bonds, 7.40% due 2/15/2010 (b) $ 5,974
Harris County, Texas, Toll Road Revenue Bonds,
Senior Lien:
AAA Aaa 11,455 Senior Lien, Refunding, 5% due 8/15/2016 (h) 10,756
AAA Aaa 20,430 Senior Lien, Refunding, Series A, 6.50% due
8/15/2002 (a) (b) 22,645
AAA Aaa 10,305 Senior Lien, Refunding, Series A, 6.50% due
8/15/2002 (a) (h) 11,422
AAA Aaa 1,000 Senior Lien, Series A, 6.25% due 8/15/2015 (e) 1,069
<PAGE> AAA Aaa 2,750 Senior Lien, Series A, 6.50% due 8/15/2017 (b) 2,994
AAA Aaa 11,100 Senior Lien, Series A, 6.375% due 8/15/2024 (e) 11,953
AAA Aaa 1,695 Series A, 6.50% due 8/15/2011 (h) 1,845
Houston, Texas, Water and Sewer System Revenue Bonds,
Junior Lien, Series A (e):
AAA Aaa 7,615 6.375% due 12/01/2022 8,242
AAA Aaa 19,770 Refunding, 6.125% due 12/01/2015 20,708
AAA Aaa 8,000 Refunding, 6.20% due 12/01/2023 8,400
AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract,
COP, Series J, 6.25% due 12/15/2013 (b) 3,854
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) 5,404
AAA Aaa 11,800 Matagorda County, Texas, Navigation District No. 1,
Revenue Refunding Bonds (Houston Light and
Power Co.), Series A, 6.70% due 3/01/2027 (b) 12,838
A1 Aaa 15,400 North Central, Texas, Health Facility Development Corp.
Revenue Bonds (Methodist Hospital, Dallas), VRDN, Series B,
5.50% due 10/01/2015 (f) (g) 15,400
Nueces River Authority, Texas, Water Supply Facilities
Revenue (Corpus Christi Lake Project) (i):
AAA Aaa 3,705 5.25% due 7/15/2013 3,642
AAA Aaa 3,900 5.25% due 7/15/2014 3,814
A1 VMIG1++ 16,500 Sabine River Authority, Texas, PCR, Refunding (Texas
Utilities Project), VRDN, Series A, 5.50% due
3/01/2026 (b) (f) 16,500
AAA Aaa 3,000 San Antonio, Texas, Electric and Gas Revenue Bonds,
Series 95, 5.375% due 2/01/2016 (e) 2,943
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) 15,931
Texas State Municipal Power Agency, Revenue Refunding Bonds:
AAA Aaa 3,520 5.25% due 9/01/2007 (e) 3,643
AAA Aaa 3,150 Series A, 6.75% due 9/01/2012 (b) 3,424
AAA Aaa 5,095 Texas State Public Finance Authority, Building Revenue
Bonds, Series A, 5% due 8/01/2016 (b) 4,790
Utah--1.7% AAA Aaa 12,855 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series B, 6% due 7/01/2006 (e) 13,836
AAA Aaa 14,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 9.491% due
5/15/2020 (b) (d) 16,327
AA- Aaa 1,000 Uintah County, Utah, PCR (Desert Generation and
Transmission Cooperative--National Rural Utilities
Company), Series 1984 F-2, 10.50% due 6/15/2001 (a) 1,218
AAA Aaa 2,650 Utah State Board of Regents, Student Loan Revenue Bonds,
AMT, Series F, 7.45% due 11/01/2008 (b) 2,773
Vermont--1.0% AAA Aaa 18,950 Vermont, HFA, Home Mortgage Purchase Bonds, AMT,
Series B, 7.60% due 12/01/2024 (e) 19,986
<PAGE>
Virginia--3.1% AAA Aaa 5,000 Danville, Virginia, IDA, Hospital Revenue Refunding
Bonds (Danville Regional Medical Center),
6.50% due 10/01/2019 (h) 5,394
AAA Aaa 4,000 Loudoun County, Virginia, Sanitation Authority,
Water and Sewer Revenue Refunding Bonds, 5.125% due
1/01/2026 (h) 3,769
AAA Aaa 20,000 Upper Occoquan, Virginia, Sewer Authority Regional,
Revenue Bonds, Series A, 4.75% due 7/01/2029 (e) 17,429
Virginia State, HDA, Commonwealth Mortgage, AMT,
Series A, Sub-Series A-4 (e):
AAA Aaa 5,000 6.30% due 7/01/2014 5,195
AAA Aaa 11,215 6.35% due 7/01/2018 11,535
AAA Aaa 19,000 6.45% due 7/01/2028 19,584
Washington--2.9% Seattle, Washington, Metropolitan Seattle Municipality,
Sewer Revenue Bonds, Series W (e):
AAA Aaa 3,730 6.25% due 1/01/2020 3,949
AAA Aaa 2,465 6.25% due 1/01/2022 2,610
AAA Aaa 4,485 6.25% due 1/01/2023 4,749
AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power
Revenue Bonds, 6.625% due 7/01/2020 (h) 36,944
University of Washington, University Revenue Bonds
(Housing and Dining) (e):
AAA Aaa 2,785 7% due 12/01/2001 (a) 3,121
AAA Aaa 465 7% due 12/01/2021 512
AAA Aaa 7,000 Washington State Health Care Facilities Authority
Revenue Bonds (Southwest Washington
Hospital--Vancouver), 7.125% due 10/01/2019 (g) 7,492
West AAA Aaa 23,150 Marshall County, West Virginia, PCR, Refunding
Virginia--2.4% (Ohio Power Company--Kammer Plant Project), Series B,
5.45% due 7/01/2014 (e) 23,197
AAA Aaa 11,465 Mason County, West Virginia, PCR, Refunding (Appalachian
Power Co.), Series I, 6.85% due 6/01/2022 (e) 12,570
AAA Aaa 12,250 Pleasants County, West Virginia, PCR (Potomac
Pleasants), Series 95-C, 6.15% due 5/01/2015 (b) 12,930
Wisconsin--3.5% Milwaukee County, Wisconsin, GO, UT, Series A (e):
AAA Aaa 2,975 5.25% due 10/01/2011 2,969
AAA Aaa 2,975 5.25% due 10/01/2012 2,956
AAA Aaa 9,000 Superior, Wisconsin, Limited Obligation Revenue
Refunding Bonds (Midwest Energy Resources), Series E,
6.90% due 8/01/2021 (h) 10,630
AAA Aaa 6,500 Wisconsin Public Power System Inc., Power Supply
System Revenue Bonds, Series A, 6.875% due
7/01/2001 (a) (b) 7,199
Wisconsin State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 6,520 Refunding (Sister's Sorrowful Mother), Series A,
<PAGE> 6.125% due 8/15/2022 (e) 6,657
AAA Aaa 8,545 Refunding (Waukesha Memorial Horpital), Series A,
5.50% due 8/15/2015 (b) 8,448
AAA Aaa 1,500 (Saint Luke's Medical Center Project), 7.10%
due 8/15/2019 (e) 1,638
AAA Aaa 5,655 (Waukesha Memorial Hospital), Series B, 7.25%
due 8/15/2000 (a) (b) 6,233
Wisconsin State Veteran's Housing Loans, AMT,
Series B (e):
AAA Aaa 7,920 6.50% due 5/01/2020 8,330
AAA Aaa 17,130 6.50% due 5/01/2025 17,908
Wyoming--0.0% A1 VMIG1++ 400 Sweetwater County, Wyoming, PCR, Refunding
(PacificCorp. Projects), VRDN, 5.50% due
11/01/2024 (b) (f) 400
Total Investments (Cost--$1,910,410)--98.6% 2,023,013
Other Assets Less Liabilities--1.4% 29,221
-----------
Net Assets--100.0% $ 2,052,234
===========
<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, 1997.
(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, 1997.
(g)BIG Insured.
(h)FGIC Insured.
(i)FSA Insured.
(j)GNMA Collateralized.
(k)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Portfolio.
++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 National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alaska--2.5% Valdez, Alaska, Marine Terminal Revenue Refunding Bonds:
AA Aa2 $ 6,000 (British Petroleum Pipeline), Series B, 7% due
12/01/2025 $ 6,584
AA Aa3 27,150 (Sohio Pipeline--British Petroleum Oil), 7.125%
due 12/01/2025 30,123
California--3.7% NR* NR* 6,000 Antioch, California, Improvement Bond Act of 1915
(Assessment District No.27--Lone Tree), Series E,
7.125% due 9/02/2016 6,189
A Aaa 10,350 California State Public Works Board, Lease Revenue
Bonds (Department of Corrections--Monterey County,
Soledad II), Series A, 7% due 11/01/2004 (j) 12,143
NR* NR* 4,000 Long Beach, California, Special Tax Community
Facilities (District No.3--Pine Avenue), 6.375% due 9/01/2023 4,001
A NR* 8,975 Palmdale, California, Civic Authority, Revenue Refunding
Bonds (Merged Redevelopment Project), Series A,
6.60% due 9/01/2034 9,800
AAA Aaa 18,755 Riverside County, California, Asset Leasing Corp.,
Leasehold Revenue Bonds (Riverside County Hospital
Project), 6%** due 6/01/2023 (f) 4,151
AAA Aaa 20,000 San Diego, California, Public Facilities Financing
Authority, Sewer Revenue Bonds, 5% due 5/15/2020 (e) 18,510
Colorado--2.8% Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BBB Baa1 3,000 Series A, 7.50% due 11/15/2023 3,410
BBB Baa1 8,570 Series A, 8% due 11/15/2025 9,507
BBB Baa1 13,000 Series B, 7.25% due 11/15/2023 14,335
BBB Baa1 13,150 Series D, 7.75% due 11/15/2021 14,678
Connecticut--0.3% AA- Baa1 4,550 Connecticut State Resource Recovery Authority, Resource
Recovery Revenue Bonds (American Refunding Fuel), AMT,
Series A, 8% due 11/15/2015 4,875
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) 8,481
<PAGE>
District of District of Columbia General Fund Recovery Bonds, VRDN, UT (a):
Columbia--1.3% A1+ VMIG1++ 6,300 Series B-1, 5.25% due 6/01/2003 6,300
A1+ VMIG1++ 8,200 Series B-3, 5.25% due 6/01/2003 8,200
A+ A1 3,750 District of Columbia Revenue Bonds (Georgetown
University), RIB, 8.683% due 4/25/2022 (k) 4,186
Florida--4.3% AAA Aaa 16,070 Dade County, Florida, Refunding, Seaport, UT, 5.125%
due 10/01/2026 (f) 15,130
AAA Aaa 8,140 Dade County, Florida, Special Obligation Refunding Bonds,
Series B, 5% due 10/01/2035 (c) 7,432
AAA Aaa 6,330 Florida HFA (Antigua Club Apartments), AMT, Series A-1,
7% due 2/01/2035 (c) 6,791
NR* Aaa 8,860 Florida HFA, Home Ownership Revenue Bonds, AMT,
Series G1, 7.90% due 3/01/2022 (i) 9,333
NR* NR* 5,000 Grand Haven Community Development District, Florida,
Special Assessment, Series A, 6.30% due 5/01/2002 4,995
AA Aa3 5,000 Hillsborough County, Florida, IDA, PCR, Refunding
(Tampa Electric Company Project), Series 91, 7.875%
due 8/01/2021 5,703
A- 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) 3,109
AAA NR* 4,345 Orange County, Florida, HFA, Mortgage Revenue Bonds, AMT,
Series A, 8.375% due 3/01/2021 (i) 4,587
AAA Aaa 5,850 South Broward, Florida, Hospital District, RIB,
Series C, 9.034% due 5/01/2001 (c) (j) (k) 6,947
Georgia--1.8% A1 VMIG1++ 3,580 Floyd County, Georgia, Development Authority, PCR,
Georgia Power Co. (Plt Hammond Project), VRDN,
5.60% due 9/01/2026 (a) 3,580
AAA Aaa 20,000 Metropolitan Atlanta, Georgia, Rapid Transit Authority,
Sales Tax Revenue Bonds, Second Indenture, Series A,
6.90% due 7/01/2004 (f) (j) 22,966
Idaho--0.1% AA NR* 1,675 Idaho Housing Agency, S/F Mortgage, AMT, Series E,
7.875% due 7/01/2024 (b) 1,803
Illinois--5.1% 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 8,785
Chicago, Illinois, O'Hare International Airport,
Special Facilities Revenue Bonds (United Airlines, Inc.):
BB+ Baa2 4,675 AMT, Series B, 8.95% due 5/01/2018 5,295
BB+ Baa2 13,565 Series 1984-B, 8.85% due 5/01/2018 15,346
AAA Aaa 16,000 Chicago, Illinois, Water Revenue Bonds, 5% due 11/01/2025 (e) 14,580
BBB NR* 3,500 Illinois Development Finance Authority, Revenue
Refunding Bonds (Community Rehabilitation Providers),
Series A, 6% due 7/01/2015 3,477
A+ Aa2 5,100 Illinois HDA, Residential Mortgage Revenue Bonds,
RIB, AMT, Series C-2, 9.471% due 2/01/2018 (k) 5,514
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 1,500 (Methodist Health Project), RIB, 9.628% due
5/01/2021 (c) (k) 1,727
BBB NR* 2,625 Refunding (Saint Elizabeth's Hospital--Chicago),
7.75% due 7/01/2016 2,907
AAA Aaa 11,000 (Rush Presbyterian--Saint Luke's Medical Center),
INFLOS, 9.615% due 10/01/2024 (f) (k) 12,705
NR* A1 4,400 Southwestern Illinois Development Authority, Sewer
Facilities Revenue Bonds (Monsanto Company Project),
AMT, 7.30% due 7/15/2015 4,871
<PAGE>
Indiana--1.8% NR* Aaa 9,500 Indiana State Educational Facilities Authority Revenue
Bonds (University of Notre Dame Project),
6.70% due 3/01/2025 10,519
A+ NR* 9,100 Indianapolis, Indiana, Local Public Improvement Bond
Bank, Refunding, Series D, 6.75% due 2/01/2020 9,931
AA- Aa2 5,700 Petersburg, Indiana, PCR, Refunding (Indianapolis
Power & Light Company Project), 6.625% due 12/01/2024 6,144
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 10,652
Kansas--1.7% Wichita, Kansas, Hospital Revenue Bonds, RIB (f) (k):
AAA Aaa 12,000 Series III-A, 8.702% due 10/01/2017 13,740
AAA Aaa 10,000 Series III-B, 8.691% due 10/21/2022 11,450
Kentucky--2.0% AAA Aaa 18,500 Louisville and Jefferson County, Kentucky, Metropolitan
Sewer District, Sewer and Drain System Revenue
Refunding Bonds, Series A, 5.25% due 5/15/2027 (f) 17,642
NR* NR* 4,500 Perry County, Kentucky, Solid Waste Disposal Revenue
Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,725
AA- Aa2 6,345 Trimble County, Kentucky, PCR (Louisville Gas and
Electric Company), AMT, Series A, 7.625% due 11/01/2020 6,949
Louisiana--4.1% 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 43,018
Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project):
BB NR* 10,000 7.50% due 7/01/2013 10,785
BB NR* 5,000 6.50% due 1/01/2017 5,101
BBB Baa2 1,100 Saint Charles Parish, Louisiana, PCR (Union Carbide
Project), AMT, 7.35% due 11/01/2022 1,183
Maine--0.3% NR* Aa2 3,815 Maine State Housing Authority, Mortgage Purchase, AMT,
Series B-4, 6.90% due 11/15/2026 3,990
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 7,618
Massachusetts AAA Aaa 6,000 Massachusetts Bay Transportation Authority,
- --5.0% Series B, 7.875% due 3/01/2001 (j) 6,811
AAA Aaa 7,500 Massachusetts State, HFA, Revenue Bonds (Residential
Development) Series C, 6.90% due 11/15/2021 (d) 8,015
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AAA NR* 6,900 (North Adams Regional Hospital), Series A, 9.625%
due 7/01/1999 (j) 7,736
NR* B2 12,350 Refunding (New England Memorial Hospital), Series B,
6.25% due 7/01/2023 9,880
Massachusetts State Water Resources Authority:
AAA Aaa 12,500 Series A, 6.50% due 12/01/2001 (j) 13,766
AAA Aaa 30,000 Series B, 5% due 12/01/2025 (f) 27,335
</TABLE>
<PAGE>
<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>
Michigan--2.1% A A $ 3,500 Michigan State Hospital Finance Authority, Hospital
Revenue Bonds (Detroit Medical Center), Series A,
7.50% due 8/15/2011 $ 3,848
AAA Aaa 15,000 Michigan State Hospital Finance Authority
(Sisters of Mercy), INFLOS, 8.514% due 2/15/2022 (h) (k) 16,275
BBB Baa1 9,350 Monroe County, Michigan, PCR (Detroit Edison
Company Project), AMT, Series A, 7.75% due 12/01/2019 10,100
Minnesota--1.5% Minnesota State, HFA, S/F Mortgage:
AA+ Aa 6,080 AMT, Series A, 7.45% due 7/01/2022 (b) 6,402
AA+ Aa2 4,250 Series F, 6.30% due 7/01/2025 4,397
AA+ NR* 3,000 Rochester, Minnesota, Health Care Facilities Revenue
Bonds (Mayo Foundation), IRS, Series H, 7.875% due
11/15/2015 (k) 3,229
AAA NR* 8,070 Saint Paul, Minnesota, Housing and Redevelopment
Authority, S/F Mortgage Revenue Refunding Bonds,
Series C, 6.95% due 12/01/2031 8,403
Mississippi--0.7% BBB Baa 5,950 Lowndes County, Mississippi, Hospital Revenue
Refunding Bonds (Golden Triangle Medical Center),
8.50% due 2/01/2010 6,552
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 (i) 4,423
Missouri & BBB NR* 11,400 Bi-State Development Agency, Missouri and Illinois,
Illinois-- Metropolitan No. 5, Refunding (American Commonwealth
0.8% Lines, Inc.), 7.75% due 6/01/2010 12,457
Nebraska--0.3% AAA Aaa 3,400 Nebraska Investment Finance Authority, S/F Mortgage
Revenue Bonds, AMT, Series 2, RIB, 11.177% due
9/10/2030 (i) (k) 3,787
New Hampshire-- A+ Aa 2,685 New Hampshire State, HFA, S/F Residential Mortgage,
0.2% AMT, 7.90% due 7/01/2022 2,840
New Jersey--1.2% NR* NR* 6,495 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (Riverwood Center), Series A,
9.90% due 7/01/2001 (j) 7,852
AA- A3 9,500 University of Medicine and Dentistry of New Jersey,
Series C, 7.20% due 12/01/1999 (j) 10,332
<PAGE>
New York--14.6% Metropolitan Transportation Authority, New York,
Service Contract Refunding Bonds (Commuter Facilities),
Series 5:
BBB Baa1 2,145 6.90% due 7/01/2006 2,330
BBB Baa1 5,000 7% due 7/01/2012 5,399
New York City, New York, GO, UT:
AAA Aaa 7,240 Series A, 7.75% due 8/15/2001 (j) 8,254
BBB+ Aaa 9,385 Series A, 7.75% due 8/15/2001 (j) 10,699
BBB+ Baa1 280 Series A, 7.75% due 8/15/2017 311
BBB+ Baa1 4,000 Series B, 8.25% due 6/01/2006 4,803
BBB+ Baa1 10,000 Series B, Fiscal 92, 7.75% due 2/01/2011 11,177
BBB+ Baa1 4,500 Series B, Fiscal 92, 7.75% due 2/01/2012 5,030
BBB+ Baa1 2,875 Series B, Fiscal 92, 7.75% due 2/01/2013 3,213
BBB+ Baa1 1,650 Series B, Fiscal 92, 7.75% due 2/01/2014 1,844
AAA Aaa 1,865 Series D, 7.70% due 2/01/2002 (j) 2,140
BBB+ Aaa 3,495 Series D, Group C, 8% due 8/01/2001 (j) 4,009
AAA Aaa 5,495 Series F, 8.25% due 11/15/2001 (j) 6,402
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds:
A- Aaa 11,685 Series 93-B, 6.50% due 6/15/2002 (j) 12,856
A- Aaa 10,000 Series A, 6.75% due 6/15/2001 (j) 10,952
AAA Aaa 10,000 Series B, 5.875% due 6/15/2026 (h) 10,185
A1 VMIG1++ 3,000 Series RI-2, RITR, 7.025% due 6/15/2025 (k) 3,150
New York State Dormitory Authority Revenue Bonds (State
University Educational Facilities):
BBB+ Baa1 6,735 Refunding, Series B, 7.375% due 5/15/2014 7,318
BBB+ Baa1 2,000 Refunding, Series B, 7% due 5/15/2016 2,135
BBB+ Baa1 5,000 Series A, 7.50% due 5/15/2013 5,978
New York State Local Government Assistance Corporation:
A Aaa 6,000 Series A, 7% due 4/01/2002 (j) 6,757
A Aaa 10,000 Series B, 7.25% due 4/01/2001 (j) 11,182
A A3 10,000 Series C, 6.25% due 4/01/2018 10,475
A A3 18,810 Series D, 5% due 4/01/2023 17,065
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 9,223
AAA Aaa 9,100 6.80% due 8/15/2024 10,020
BBB Aaa 10,000 New York State Urban Development Corporation Revenue
Bonds (State Facilities), 7.50% due 4/01/2001 (j) 11,268
AAA Aaa 4,000 Niagara Falls, New York, Commission Toll Bridge, Revenue
Refunding Bonds, Series B, 5.25% due 10/01/2021 (e) 3,775
AAA Aaa 6,800 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 104th Series, 3rd Installment,
4.75% due 1/15/2026 6,007
A+ Aa 12,750 Triborough Bridge and Tunnel Authority, New York,
General Purpose Revenue Bonds, Series B, 5.20% due
1/01/2027 12,035
<PAGE>
North A1+ NR* 5,000 Raleigh-Durham, North Carolina, Airport Authority,
Carolina--0.3% Special Facilities Revenue Refunding Bonds (American Airlines),
VRDN, Series B, 5.50% due 11/01/2015 (a) 5,000
Ohio--2.7% AAA Aaa 20,300 Cleveland, Ohio, Public Power System Revenue Bonds
(First Mortgage), Series A, 7% due 11/15/2004 (f) (j) 23,565
Ohio, HFA, S/F Mortgage Revenue Bonds, AMT (i):
AAA Aaa 9,100 RIB, Series B-4, 9.578% due 3/31/2031 (k) 9,942
AAA NR* 1,895 Series B, 8.25% due 12/15/2019 2,003
AAA NR* 4,295 Series C, 7.85% due 9/01/2021 4,565
Pennsylvania BBB Baa 10,000 Pennsylvania Convention Center Authority, Revenue
- --3.8% Refunding Bonds, Series A, 6.75% due 9/01/2019 10,787
Pennsylvania HFA, Refunding:
AA Aa2 8,800 RIB, AMT, Series 1991-31C, 9.68% due 10/01/2023 (k) 9,647
AAA Aaa 7,850 (Rental Housing), 6.50% due 7/01/2023 (d) 8,122
AAA A1 5,000 Pennsylvania State, 3rd Series A, UT, 6.50% due 11/15/2001 (j) 5,473
AAA Aaa 10,000 Pennsylvania State Higher Educational Assistance Agency,
Student Loan Revenue Bonds, RIB, AMT, 9.317%
due 9/03/2026 (c) (k) 11,238
NR* NR* 2,000 Pennsylvania State Higher Educational Facilities
Authority, College and University Revenue Bonds
(Eastern College), Series B, 8% due 10/15/2025 2,139
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) 5,309
AAA Aaa 2,500 York County, Pennsylvania, Hospital Authority Revenue
Bonds (York Hospital), 7% due 1/01/2001 (c) (j) 2,754
Rhode AAA Aaa 5,250 Rhode Island Depositors Economic Protection Corporation,
Island--0.4% Special Obligation Bonds, Series A, 6.95% due 8/01/2002 (j) 5,923
South AAA Aaa 2,500 Spartanburg County, South Carolina, Hospital Revenue
Carolina--0.2% Bonds (Health Services District Inc.), Series A,
5.50% due 4/15/2027 (f) 2,439
</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>
South AAA Aa1 $ 9,085 South Dakota HDA, Homeownership Mortgage, Series A,
Dakota--0.7% 7.15% due 5/01/2027 $ 9,551
<PAGE>
Tennessee--1.9% NR* Aaa 10,000 Knox County, Tennessee, Health, Educational and
Housing Facilities Board, Hospital Facilities Revenue
Bonds (Baptist Health System of East Tennessee),
8.60% due 4/15/1999 (j) 10,916
AAA Aaa 14,750 Metropolitan Government, Nashville and Davidson County,
Tennessee (Meharry Medical College Project), 6.875% due
12/01/2004 (j) 16,999
Texas--16.8% AAA Aaa 10,000 Bexar County, Texas, Health Facilities Development
Corporation, Revenue Refunding Bonds (Baptist Health
Systems), Series A, 5.25% due 11/15/2027 (f) 9,326
Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT, Series A:
BBB+ Baa1 2,095 8.25% due 1/01/2019 2,230
BBB+ Baa1 18,150 7.875% due 3/01/2021 19,958
A- A2 12,350 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series 1989-A, 7.625% due 5/01/2019 13,175
BBB Baa1 7,250 Gulf Coast Waste Disposal Authority, Texas, Revenue Bonds
(Champion International Corporation), AMT, 7.45% due 5/01/2026 7,890
AA Aa3 19,000 Harris County, Texas, Health Facilities Development
Corporation, Health Care System Revenue Bonds
(Sisters of Charity), 7.10% due 7/01/2001 (j) 21,183
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds:
A1+ NR* 200 (Methodist Hospital), 5.50% due 12/01/2025 (a) 200
AAA Aaa 10,150 RITR, Series 12, 8.07% due 10/01/2024 (k) 11,317
AAA Aaa 10,000 Refunding (Memorial Hospital System Project), Series A,
5.50% due 6/01/2024 (f) 9,766
AAA Aa3 12,470 (Saint Luke's Episcopal Hospital Project), Series A,
6.75% due 2/15/2001 (j) 13,667
AAA Aaa 11,100 Harris County, Texas, Toll Road Revenue Bonds, Senior Lien,
Series A, 6.375% due 8/15/2024 (f) 11,953
Houston, Texas, Water and Sewer System, Revenue Refunding
Bonds, Junior Lien, Series A:
AAA Aaa 10,000 6.20% due 12/01/2023 (f) 10,501
AAA Aaa 10,000 5.25% due 12/01/2025 (e) 9,518
BB Ba1 8,095 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist
Healthcare System Project), 8.875% due 6/01/2021 8,523
AA Aa 12,000 North Central Texas, Health Facilities Development
Corporation Revenue Bonds (Baylor University
Medical Center), INFLOS, Series A, 9.715% due
5/15/2001 (j) (k) 14,415
BB Ba 3,000 Odessa, Texas, Junior College District, Revenue
Refunding Bonds, Series A, 8.125% due 12/01/2018 3,258
A+ Aa 5,195 Texas Housing Agency, Residential Development Mortgage
Revenue Bonds, Series A, 7.50% due 7/01/2015 (i) 5,538
Texas State Turnpike Authority, Dallas North Thruway
Revenue Bonds (President George Bush Turnpike) (e):
AAA Aaa 15,000 5.25% due 1/01/2023 14,311
AAA Aaa 30,000 5% due 1/01/2025 27,608
AA Aa 4,440 Texas State Veteran's Housing Assistance (Fund II),
AMT, UT, Series A, 7% due 12/01/2025 4,713
AA Aa 16,000 Texas State Water Development, Series A, B, and C,
5.25% due 8/01/2028 15,338
AAA Aa1 15,000 Texas Water Development Revenue Board, State Revolving
Fund, Senior-Lien, Series B, 5.125% due 7/15/2018 14,321
<PAGE>
Utah--3.6% A1+ VMIG1++ 10,300 Emery County, Utah, PCR, Refunding (Pacificorp Projects),
VRDN, 4.10% due 11/01/2024 (a) (c) 10,300
A+ A1 20,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 5% due 7/01/2021 18,254
AAA Aaa 5,000 Murray City, Utah, Hospital Revenue Bonds (IHC Health
Services Inc.), 4.75% due 5/15/2020 (f) 4,351
AAA Aaa 5,500 Utah County, Utah, Hospital Revenue Bonds (IHC Health
Services, Inc.), 5.25% due 8/15/2026 5,120
AAA Aaa 13,250 Weber County, Utah, Municipal Building Authority,
Lease Revenue Bonds, 7.50% due 12/15/2004 (j) 15,795
Virginia--1.5% AAA Aaa 20,000 Prince William County, Virginia, Service Authority,
Water and Sewer System, Revenue Refunding Bonds,
5% due 7/01/2021 (e) 18,328
AA+ Aa1 4,000 Virginia State, HDA, Commonwealth Mortgage, Series A,
7.15% due 1/01/2033 4,183
Washington--3.3% AA Aaa 10,000 Washington State, GO, Series B, UT, 6.75% due 6/01/2001 (j) 10,845
AAA Aaa 13,860 Washington State, GO, Series C, 5% due 1/01/2022 (e) 12,863
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) 18,878
AA- Aaa 5,000 Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 1), Series A,
6.875% due 7/01/2001 (j) 5,538
West NR* NR* 4,000 Upshur County, West Virginia, Solid Waste Disposal
Virginia--0.9% Revenue Bonds (TJ International Project), AMT,
7% due 7/15/2025 4,218
AAA Aaa 8,400 West Virginia State, Housing Development Fund,
Housing Finance, Series D, 7.05% due 11/01/2024 8,854
Wisconsin--1.9% AA Aa 4,925 Wisconsin Housing and EDA, Home Ownership Revenue Bonds,
Series A, 7.10% due 3/01/2023 5,186
Wisconsin Housing and EDA, Housing Revenue Bonds:
A A1 5,400 Series B, 7.05% due 11/01/2022 5,716
A A1 5,105 Series C, 7% due 5/01/2015 5,405
AAA Aaa 11,400 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Wausau Hospitals Inc.), Series B,
6.70% due 8/15/2020 (c) 12,205
Total Investments (Cost--$1,357,588)--98.0% 1,448,055
Other Assets Less Liabilities--2.0% 29,832
----------
Net Assets--100.0% $1,477,887
==========
<PAGE>
<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, 1997.
(b)FHA Insured.
(c)AMBAC Insured.
(d)FNMA Collateralized.
(e)FGIC Insured.
(f)MBIA Insured.
(g)GNMA/FNMA Collateralized.
(h)FSA Insured.
(i)GNMA Collateralized.
(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, 1997.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Portfolio.
++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>
<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>
Alabama--1.0% A1+ NR* $ 4,100 Birmingham, Alabama, Medical Clinic Board Revenue
Bonds (U.A.H.S.F.), VRDN, 5.50% due 12/01/2026 (b) $ 4,100
Arizona--1.2% AAA Aaa 5,000 Phoenix, Arizona, Airport Revenue Refunding Bonds,
Series A, 5.55% due 7/01/2000 (d) 5,174
Arkansas--0.1% NR* Aa 460 Arkansas State Student Loan Authority Revenue Bonds,
AMT, Senior Series A-1, 5.50% due 12/01/1998 467
California--2.4% SP1+ VMIG1++ 5,000 Los Angeles County, California, Local Educational
Agencies, COP, TRAN, Series B, 4.50% due 9/30/1998 (e) 5,026
SP1+ NR* 5,000 Santa Barbara County, California, TRAN, Series A, 4.50%
due 10/01/1998 5,029
<PAGE>
Connecticut--2.7% AAA Aaa 2,160 Bridgeport, Connecticut, Refunding, GO, UT, Series A,
4.40% due 9/01/1998 (c) 2,171
AAA Aaa 8,900 Connecticut State Special Assessment (Unemployment
Compensation Advance Fund), Revenue Refunding Bonds,
Series A, 5.50% due 5/15/2001 (c) 9,255
District of A1+ VMIG1++ 10,000 District of Columbia, General Fund Recovery
Columbia-- Bonds, VRDN, UT, Series B-2, 5.25% due 6/01/2003 (b) 10,000
2.4%
Florida--1.4% AAA Aaa 4,000 Florida School Boards Association Incorporated,
Lease Revenue Bonds (Orange County School Board
Project), 6.80% due 7/01/1998 (c) 4,116
A1+ VMIG1++ 1,500 Hillsborough County, Florida, IDA, PCR, Refunding
(Tampa Electric Company Project), VRDN, 4% due
5/15/2018 (b) 1,500
Georgia--2.5% A NR* 6,410 Burke County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Corporation) (Plant
Vogtle Project), Series B, 3.95% due 1/01/1999 6,375
AAA Aaa 4,000 Georgia Municipal Electric Authority, General Power
Revenue Refunding Bonds, Series D, 6% due
1/01/2000 (c) 4,157
Hawaii--2.1% AAA Aaa 3,200 Hawaii State, GO, Refunding, Series CO, 6% due 3/01/2001 (f) 3,366
A+ Aa3 5,250 Hawaii State, GO, UT, Series CH, 4.75% due 11/01/1999 5,311
Illinois--7.8% AA- NR* 10,000 Chicago, Illinois, Board of Education, COP (School
Reform Equipment Acquisition), 4.60% due 12/01/1999 10,038
AA- Baa1 5,000 Chicago, Illinois, School Finance Authority, 7.25%
due 6/01/1998 5,116
AAA Aaa 3,000 Cook County, Illinois, High School District No. 205,
Revenue Refunding Bonds (Thorton Township), UT, 5.60%
due 6/01/1998 (f) (g) 3,048
AA Aa1 6,425 Cook County, Illinois, Township High School District
No. 211 (Palatine and Schaumb), 4.25% due 12/01/1998 6,444
Illinois State Refunding, GO, UT:
AA- Aa3 4,600 3.90% due 12/01/1998 4,587
AAA Aaa 3,500 5.125% due 12/01/1999 (f) 3,576
Kentucky--2.2% Kentucky State Property and Buildings Commission,
Revenue Refunding Bonds:
A+ A 5,000 (Project No. 55), 4.10% due 9/01/1998 5,004
A+ A 4,000 (Project No. 59), 5% due 11/01/1998 4,048
Louisiana--5.9% A1+ VMIG1++ 5,000 Louisiana State Recovery District, Sales Tax
Revenue Bonds, 4.25% due 7/01/1998 (d) (g) 5,021
AAA Aaa 19,230 Louisiana State Refunding, GO, Series A, 5.50%
due 8/01/1998 (f) 19,546
<PAGE>
Massachusetts AAA Aaa 2,005 Massachusetts State Health and Educational
- --2.9% Facilities Authority Revenue Bonds (New England Medical
Center Hospitals), Series G, 3.80% due 7/01/1997 (d) 2,005
A- A1 10,160 New England Education Loan Marketing Corporation
Refunding Bonds (Massachusetts Student Loan),
Series D, 4.75% due 7/01/1998 10,231
Michigan--3.8% AAA Aaa 8,000 Detroit, Michigan, Distributable State Aid, 7.20%
due 5/01/1999 (a) (c) 8,576
AA- A1 6,000 Michigan State Building Authority, Revenue Refunding
Bonds, Series I, 5.80% due 10/01/1998 6,127
NR* VMIG1++ 800 Michigan State Strategic Fund, Solid Waste Disposal
Revenue Bonds (Grayling Generating Project),
VRDN, AMT, 4.25% due 1/01/2014 (b) 800
Minnesota--1.3% AAA Aaa 2,385 Metropolitan Council, Minnesota, St. Paul Metropolitan
Area Transit, UT, Series C, 4.75% due 2/01/2000 2,414
AAA Aaa 2,965 Minnesota State, HFA (Rental Housing), Refunding,
Series D, 4.50% due 8/01/1999 (d) 2,983
Mississippi--2.4% NR* Aaa 10,000 Mississippi Higher Education Assistance Corporation,
Student Loan Revenue Bonds, AMT, Series B, 4.80%
due 9/01/1998 10,061
Nebraska--1.5% A+ A1 6,250 Nebraska Public Power District Revenue Bonds (Consumer
Public Power District), 4.90% due 7/01/1998 6,309
New Jersey--3.6% A A1 2,000 Camden County, New Jersey, Improvement Authority, Solid
Waste Disposal, Revenue Refunding Bonds (Landfill Project),
4% due 7/01/1997 2,000
NR* NR* 3,000 New Jersey State, EDA, Economic Growth Revenue Bonds
(Greater Mercer County), VRDN, Series C, 4.25% due
11/01/2011 (b) 3,000
AAA Aaa 5,715 New Jersey State Educational Facilities Authority
Revenue Bonds (Higher Education Facilities Trust Fund),
Series A, 5.125% due 9/01/1999 (c) 5,829
AA+ Aa1 4,250 New Jersey State Refunding, UT, Series O, 5.10% due 2/15/2000 4,341
New York--10.4% AA- Aa2 4,550 Municipal Assistance Corporation, Refunding, Series E,
5.50% due 7/01/2000 4,700
A1+ VMIG1++ 100 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN, Series G, 5.50%
due 6/15/2024 (b) (f) 100
New York State Dormitory Authority Revenue Bonds
(Consolidated City University System), Series A:
BBB Baa1 6,675 4.50% due 7/01/1998 6,711
BBB Baa1 10,885 4.75% due 7/01/1999 10,945
AAA Aaa 3,000 New York State Dormitory Authority Revenue Bonds
(State University Educational), Series A, 7.125% due
5/15/1999 (a) 3,218
A- A2 11,820 New York State GO, Refunding, 7.80% due 11/15/1998 12,397
BBB Aaa 5,000 New York State Urban Development Corporation Revenue
Bonds (State Facilities), 7.50% due 4/01/2001 (a) 5,634
<PAGE>
Ohio--12.4% AAA Aaa 2,000 Cincinnati, Ohio, City School District, TAN, Series B,
5% due 12/01/1998 (c) 2,026
NR* Aa1 6,000 Franklin County, Ohio, Hospital Revenue Refunding
Bonds (US Health Corp.), Series B, 4.50% due 6/01/2000 6,005
Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Ohio Edison Project), Series A:
A1+ VMIG1++ 7,500 3.95% due 2/01/1998 7,502
A1+ VMIG1++ 7,000 4.35% due 8/01/1998 7,003
NR* Aaa 6,700 Ohio State Buillding Authority, Correctional Facilities,
Series A, 7.35% due 8/01/1999 (a) 7,251
AAA Aa1 12,400 Ohio State Highway, GO, Series V, 4.70% due 5/15/2000 12,556
AAA Aaa 3,500 Ohio State Public Facilities Commission, Higher
Education Capital Facilities, Series II-A, 4.375% due
11/01/1999 (d) 3,516
NR* Aaa 6,000 Student Loan Funding Corporation, Cincinnati, Ohio,
Student Loan Revenue Refunding Bonds, AMT, Series C,
5.70% due 7/01/1999 6,123
Oklahoma--0.6% AA Aa 2,400 Tulsa, Oklahoma, GO, UT, 5.125% due 5/01/1999 2,443
</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>
Oregon--0.7% A1+ VMIG1++ $ 3,000 Port Saint Helens, Oregon, PCR (Portland General Electric
Company Project), VRDN, Series A, 5.40% due 4/01/2010 (b) $ 3,000
Pennsylvania A1+ P1 4,000 Beaver County, Pennsylvania, IDA, PCR, Refunding
- --4.1% (Ohio Edison Co.), Series A, 4.30% due 10/01/1997 4,006
AAA Aaa 8,675 Pennsylvania State Refunding Bonds, GO, UT, 5.25%
due 11/15/1998 (f) 8,818
AAA Aaa 4,145 Pittsburgh, Pennsylvania, Refunding, UT, Series A,
5% due 3/01/2000 (d) 4,214
South Carolina-- AA- A1 8,250 Greenville County, South Carolina, School District,
2.0% UT, 4% due 3/01/1999 8,235
Tennessee--2.9% AA NR* 11,885 Clarksville, Tennessee, Public Building Authority,
Revenue Refunding Bonds (Pooled Loan Program),
4.40% due 12/01/1998 11,926
<PAGE>
Texas--6.6% 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 2,228
NR* Aa 5,135 Series C-1, 5.60% due 11/01/1997 5,163
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds, VRDN (b):
A1+ NR* 5,900 (Methodist Hospital), 5.50% due 12/01/2025 5,900
AAA NR* 1,000 (Saint Luke's Episcopal Hospital), Series B, 5.50%
due 9/15/1997 (a) 1,000
AAA NR* 100 (Saint Luke's Episcopal Hospital), Series D, 5.50%
due 9/15/1997 (a) 100
AA+ Aa3 6,700 Houston, Texas, Independent School District, Public
Property Financial Contractual Obligation, 5% due
7/15/1999 6,816
AAA Aaa 2,600 Houston, Texas, Water and Sewer Systems, Revenue
Refunding Bonds, Junior Lien, Series C, 5.90% due
12/01/1999 (c) 2,701
NR* Aaa 2,455 Panhandle-Plains, Texas, Higher Education Authority
Incorporated, Student Loan Revenue Refunding Bonds,
Series C, 4.15% due 9/01/1997 2,456
A+ A2 2,000 Texas Municipal Power Agency, Revenue Refunding Bonds,
GO, Series A, 4.25% due 9/01/1997 2,001
Utah--1.1% AAA Aaa 4,700 Utah State Building and Highway, GO, UT, 4.40% due 7/01/1999 4,730
Virginia--0.6% AA Aa 2,555 Virginia State Transportation Board, Transportation
Contract Revenue Bonds (US Route 58 Corridor),
Series B, 5% due 5/15/2000 2,604
Washington--4.7% AAA Aaa 5,000 Seattle, Washington, Municipality Metropolitan Seattle
Sewer Revenue Bonds, Series U, 6.60% due 1/01/2001 (a) (f) 5,448
AA- Aa1 4,890 Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 2), Series A,
3.75% due 7/01/1997 4,890
AA Aa1 4,655 Washington State Refunding Bonds, GO, Series R-96B,
5% due 7/01/1998 4,705
Washington State Refunding Bonds, Motor Vehicle Fuel Tax:
AA Aa1 2,000 Series R-94B, 4.20% due 9/01/1998 2,005
AA Aa1 2,285 Series R-96A, 5% due 7/01/1998 2,310
Wisconsin--8.0% NR* NR* 4,500 Ashland County, Wisconsin, Promissary Notes, GO,
4.25% due 9/01/1997 4,502
NR* VMIG1++ 4,000 Mequon, Wisconsin, BAN, 4.10% due 11/01/1998 3,999
A A1 2,795 Wisconsin Housing and Economic Development Authority,
Housing Revenue Refunding Bonds, Series C, 4.30% due 11/01/1997 2,801
AA Aa2 11,000 Wisconsin State, GO, Refunding, UT, Series 3, 4.25%
due 11/01/1999 11,026
AA Aa2 4,385 Wisconsin State, GO, Series C, 5.50% due 5/01/2000 4,527
AAA NR* 5,720 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Medical College of Wisconsin),
Series D, 7.35% due 12/01/2000 (a) 6,339
<PAGE>
Wyoming--0.1% NR* P1 500 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc.
Project), VRDN, 5.50% due 8/15/2020 (b) 500
Total Investments (Cost--$422,830)--101.4% 424,231
Liabilities in Excess of Other Assets--(1.4%) (5,824)
----------
Net Assets--100.0% $ 418,407
==========
<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, 1997.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FGIC Insured.
(g)Escrowed to maturity.
*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>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Limited
Insured National Maturity
As of June 30, 1997 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $2,023,013,288 $1,448,054,588 $ 424,230,840
Cash 341,447 27,022 8,214
Receivables:
Interest 33,075,339 24,381,071 5,787,339
Securities sold 790,557 32,781,265 --
Capital shares sold 495,726 2,646,269 150,322
Prepaid registration fees and
other assets (Note 1e) 62,244 45,650 35,641
-------------- -------------- --------------
Total assets 2,057,778,601 1,507,935,865 430,212,356
-------------- -------------- --------------
<PAGE>
Liabilities: Payables:
Securities purchased -- 25,674,754 10,052,250
Capital shares redeemed 2,061,664 1,683,390 1,193,090
Dividends to shareholders (Note 1f) 2,087,176 1,569,055 319,585
Investment adviser (Note 2) 594,019 563,269 113,098
Distributor (Note 2) 352,997 276,962 17,801
Accrued expenses and other liabilities 448,645 281,479 109,734
-------------- -------------- --------------
Total liabilities 5,544,501 30,048,909 11,805,558
-------------- -------------- --------------
Net Assets: Net assets $2,052,234,100 $1,477,886,956 $ 418,406,798
============== ============== ==============
Net Assets Class A Common Stock, $0.10
Consist of: par value++ $ 17,887,640 $ 9,478,498 $ 3,459,447
Class B Common Stock, $0.10
par value++++ 6,953,748 4,001,411 546,268
Class C Common Stock, $0.10
par value++++++ 147,978 270,686 1,085
Class D Common Stock, $0.10
par value++++++++ 476,701 491,440 205,079
Paid-in capital in excess of par 1,918,211,598 1,431,757,690 417,358,735
Accumulated realized capital losses
on investments--net (Note 5) (4,046,911) (58,579,321) (4,564,588)
Unrealized appreciation on
investments--net 112,603,346 90,466,552 1,400,772
-------------- -------------- --------------
Net assets $2,052,234,100 $1,477,886,956 $ 418,406,798
============== ============== ==============
Net Asset Class A:
Value: Net assets $1,441,784,905 $ 983,649,868 $ 343,640,605
============== ============== ==============
Shares outstanding 178,876,402 94,784,980 34,594,470
============== ============== ==============
Net asset value and redemption
price per share $ 8.06 $ 10.38 $ 9.93
============== ============== ==============
Class B:
Net assets $ 560,105,263 $ 415,103,109 $ 54,275,249
============== ============== ==============
Shares outstanding 69,537,481 40,014,114 5,462,680
============== ============== ==============
Net asset value and redemption
price per share $ 8.05 $ 10.37 $ 9.94
============== ============== ==============
Class C:
Net assets $ 11,922,182 $ 28,095,834 $ 107,551
============== ============== ==============
<PAGE> Shares outstanding 1,479,783 2,706,856 10,849
============== ============== ==============
Net asset value and redemption
price per share $ 8.06 $ 10.38 $ 9.91
============== ============== ==============
Class D:
Net assets $ 38,421,750 $ 51,038,145 $ 20,383,393
============== ============== ==============
Shares outstanding 4,767,006 4,914,399 2,050,790
============== ============== ==============
Net asset value and redemption
price per share $ 8.06 $ 10.39 $ 9.94
============== ============== ==============
<FN>
*Identified cost $1,910,409,942 $1,357,588,036 $ 422,830,068
============== ============== ==============
++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>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
Limited
Insured National Maturity
For the Year Ended June 30, 1997 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and amortization of premium
Income (Note 1d): and discount earned $ 134,133,814 $ 93,607,495 $ 20,199,235
-------------- -------------- --------------
Expenses: Investment advisory fees (Note 2) 8,042,098 6,961,453 1,552,369
Account maintenance and
distribution fees--Class B (Note 2) 4,901,030 3,073,016 222,614
Transfer agent fees--Class A (Note 2) 497,705 353,478 82,086
Transfer agent fees--Class B (Note 2) 275,141 186,850 18,726
Accounting services (Note 2) 249,511 142,298 41,718
Custodian fees 186,028 130,167 43,968
Account maintenance and distribution
fees--Class C (Note 2) 134,437 162,696 634
<PAGE> Registration fees (Note 1e) 184,229 94,978 1,102
Account maintenance fees--Class D (Note 2) 116,523 126,564 17,810
Printing and shareholder reports 115,250 66,878 28,907
Professional fees 93,805 67,598 21,232
Pricing services 30,251 27,987 11,936
Directors' fees and expenses 25,803 21,508 5,615
Transfer agent fees--Class D (Note 2) 15,283 18,048 3,561
Transfer agent fees--Class C (Note 2) 7,771 9,161 69
Other 51,012 22,915 5,612
-------------- -------------- --------------
Total expenses 14,925,877 11,465,595 2,057,959
-------------- -------------- --------------
Investment income--net 119,207,937 82,141,900 18,141,276
-------------- -------------- --------------
Realized & Realized gain on investments--net 37,935,579 18,687,317 1,870,059
Unrealized Gain on Change in unrealized appreciation on
Investments--Net investments--net 5,465,463 18,217,116 104,267
(Notes 1b, 1d -------------- -------------- --------------
& 3): Net Increase in Net Assets Resulting
from Operations $ 162,608,979 $ 119,046,333 $ 20,115,602
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Insured Portfolio National Portfolio
For the Year For the Year
Ended June 30, Ended June 30,
Increase (Decrease) in Net Assets: 1997 1996 1997 1996
<S> <S> <C> <C> <C> <C>
Operations: Investment income--net $ 119,207,937 $ 131,085,773 $ 82,141,900 $ 83,697,410
Realized gain (loss)
on investments--net 37,935,579 (3,897,219) 18,687,317 3,774,748
Change in unrealized
appreciation/depreciation
on investments--net 5,465,463 3,149,618 18,217,116 10,373,235
-------------- -------------- -------------- --------------
Net increase in net assets
resulting from operations 162,608,979 130,338,172 119,046,333 97,845,393
-------------- -------------- -------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (84,438,105) (92,116,281) (57,401,862) (60,489,070)
Shareholders Class B (31,486,251) (36,347,050) (20,879,493) (20,995,504)
(Note 1f): Class C (800,743) (626,972) (1,024,766) (462,078)
Class D (2,482,838) (1,995,470) (2,835,779) (1,750,758)
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. (119,207,937) (131,085,773) (82,141,900) (83,697,410)
-------------- -------------- -------------- --------------
Capital Share Net increase (decrease) in net
Transactions assets derived from capital
(Note 4): share transactions (357,799,862) (155,203,186) 916,838 (78,305,357)
-------------- -------------- -------------- --------------
Net Assets: Total increase (decrease)
in net assets (314,398,820) (155,950,787) 37,821,271 (64,157,374)
Beginning of year 2,366,632,920 2,522,583,707 1,440,065,685 1,504,223,059
-------------- -------------- -------------- --------------
End of year $2,052,234,100 $2,366,632,920 $1,477,886,956 $1,440,065,685
============== ============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Limited Maturity Portfolio
For the Year
Ended June 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S>
Operations: Investment income--net $ 18,141,276 $ 21,711,132
Realized gain (loss)
on investments--net 1,870,059 1,322,566
Change in unrealized
appreciation/depreciation
on investments--net 104,267 (1,526,762)
-------------- --------------
Net increase in net assets
resulting from operations 20,115,602 21,506,936
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (15,176,552) (18,019,083)
Shareholders Class B (2,274,531) (3,055,609)
(Note 1f): Class C (6,456) (25,939)
Class D (683,737) (610,501)
Realized gain on investments--net:
Class A (666,000) --
Class B (108,061) --
Class C (293) --
Class D (28,170) --
-------------- --------------
Net decrease in net assets resulting
from dividends and distributions
to shareholders. (18,943,800) (21,711,132)
-------------- --------------
Capital Share Net increase (decrease) in net
Transactions assets derived from capital
(Note 4): share transactions (86,916,618) (176,922,554)
-------------- --------------
Net Assets: Total increase (decrease)
in net assets (85,744,816) (177,126,750)
Beginning of year 504,151,614 681,278,364
-------------- --------------
End of year $ 418,406,798 $ 504,151,614
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios
have been derived from information Insured Portfolio
provided in the financial statements. Class A
For the Year Ended June 30,
Increase (Decrease)
in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.91 $ 7.92 $ 7.88 $ 8.64 $ 8.26
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .45 .44 .46 .47 .50
<PAGE> Realized and unrealized
gain (loss) on
investments--net .15 (.01) .18 (.53) .49
------------ ------------ ------------ ------------ ------------
Total from investment
operations .60 .43 .64 (.06) .99
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.45) (.44) (.46) (.47) (.50)
Realized gain on
investments--net -- -- (.14) (.23) (.11)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.45) (.44) (.60) (.70) (.61)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 8.06 $ 7.91 $ 7.92 $ 7.88 $ 8.64
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:* value per share 7.72% 5.51% 8.60% (1.08%) 12.41%
============ ============ ============ ============ ============
Ratios to Average Expenses .44% .43% .43% .42% .42%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.58% 5.55% 5.78% 5.53% 5.94%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 1,441,785 $ 1,572,835 $ 1,706,064 $ 1,941,741 $ 2,225,188
============ ============ ============ ============ ============
Portfolio turnover 74.40% 78.49% 35.61% 28.34% 43.86%
============ ============ ============ ============ ============
<CAPTION>
The following per share data and ratios
have been derived from information Insured Portfolio
provided in the financial statements. Class B
For the Year Ended June 30,
Increase (Decrease)
in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.91 $ 7.92 $ 7.87 $ 8.63 $ 8.26
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .39 .38 .40 .40 .44
Realized and unrealized
gain (loss) on
<PAGE> investments--net .14 (.01) .19 (.53) .48
------------ ------------ ------------ ------------ ------------
Total from investment
operations .53 .37 .59 (.13) .92
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.39) (.38) (.40) (.40) (.44)
Realized gain on
investments--net -- -- (.14) (.23) (.11)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.39) (.38) (.54) (.63) (.55)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 8.05 $ 7.91 $ 7.92 $ 7.87 $ 8.63
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:* value per share 6.78% 4.71% 7.91% (1.81%) 11.44%
============ ============ ============ ============ ============
Ratios to Average Expenses 1.19% 1.19% 1.19% 1.17% 1.18%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 4.82% 4.80% 5.03% 4.78% 5.17%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 560,105 $ 723,090 $ 782,748 $ 866,193 $ 911,307
============ ============ ============ ============ ============
Portfolio turnover 74.40% 78.49% 35.61% 28.34% 43.86%
============ ============ ============ ============ ============
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
The following per share
data and ratios have been Insured Portfolio
derived from information Class C Class D
provided in the financial For the Period For the Period
statements. For the Year Oct 21, 1994++ For the Year Oct 21, 1994++
Ended June 30, to June 30, Ended June 30, to June 30,
Increase (Decrease) in -------------------------------- ---------------------------------
Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.91 $ 7.92 $ 7.68 $ 7.91 $ 7.92 $ 7.68
Performance: ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net .38 .38 .27 .43 .42 .29
Realized and unrealized
gain (loss) on
investments--net .15 (.01) .38 .15 (.01) .38
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .53 .37 .65 .58 .41 .67
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.38) (.38) (.27) (.43) (.42) (.29)
Realized gain on
investments--net -- -- (.14) -- -- (.14)
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.38) (.38) (.41) (.43) (.42) (.43)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 8.06 $ 7.91 $ 7.92 $ 8.06 $ 7.91 $ 7.92
========== ========== ========== ========== ========== ==========
Total Investment Based on net asset
Return:** value per share 6.86% 4.65% 8.83%+++ 7.46% 5.25% 9.24%+++
========== ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.25% 1.24% 1.23%* .69% .68% .68%*
Net Assets: ========== ========== ========== ========== ========== ==========
Investment income--net 4.77% 4.75% 4.93%* 5.33% 5.31% 5.50%*
========== ========== ========== ========== ========== ==========
Supplemental Net assets, end of
Data: period (in thousands) $ 11,922 $ 18,936 $ 7,756 $ 38,422 $ 51,772 $ 26,015
========== ========== ========== ========== ========== ==========
Portfolio turnover 74.40% 78.49% 35.61% 74.40% 78.49% 35.61%
========== ========== ========== ========== ========== ==========
<CAPTION>
The following per share data and ratios
have been derived from information National Portfolio
provided in the financial statements. Class A
For the Year Ended June 30,
Increase (Decrease)
in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.11 $ 10.02 $ 10.08 $ 11.02 $ 10.64
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .60 .60 .60 .62 .67
Realized and unrealized
gain (loss) on
investments--net .27 .09 .15 (.64) .57
------------ ------------ ------------ ------------ ------------
Total from investment
operations .87 .69 .75 (.02) 1.24
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.60) (.60) (.60) (.62) (.67)
Realized gain on
investments--net -- -- (.19) (.30) (.19)
In excess of realized
gain on investments--net -- -- (.02) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.60) (.60) (.81) (.92) (.86)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 10.38 $ 10.11 $ 10.02 $ 10.08 $ 11.02
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 8.84% 6.98% 7.89% (.47%) 12.19%
============ ============ ============ ============ ============
Ratios to Average Expenses .55% .56% .56% .55% .55%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.86% 5.89% 6.01% 5.72% 6.23%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 983,650 $ 983,550 $ 1,059,440 $ 1,203,181 $ 1,353,805
============ ============ ============ ============ ============
Portfolio turnover 99.52% 95.09% 103.65% 73.33% 65.43%
============ ============ ============ ============ ============
<CAPTION>
The following per share data and ratios
have been derived from information Insured Portfolio
provided in the financial statements. Class B
<PAGE> For the Year Ended June 30,
Increase (Decrease)
in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.11 $ 10.02 $ 10.07 $ 11.02 $ 10.63
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .52 .52 .52 .54 .59
Realized and unrealized
gain (loss) on
investments--net .26 .09 .16 (.65) .58
------------ ------------ ------------ ------------ ------------
Total from investment
operations .78 .61 .68 (.11) 1.17
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.52) (.52) (.52) (.54) (.59)
Realized gain on
investments--net -- -- (.19) (.30) (.19)
In excess of realized
gain on investments--net -- -- (.02) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.52) (.52) (.73) (.84) (.78)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 10.37 $ 0.11 $ 10.02 $ 10.07 $ 11.02
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 7.92% 6.17% 7.28% (1.39%) 11.45%
============ ============ ============ ============ ============
Ratios to Average Expenses 1.31% 1.32% 1.32% 1.30% 1.31%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.10% 5.13% 5.25% 4.97% 5.46%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 415,103 $ 399,341 $ 419,933 $ 459,169 $ 424,071
============ ============ ============ ============ ============
Portfolio turnover 99.52% 95.09% 103.65% 73.33% 65.43%
============ ============ ============ ============ ============
<PAGE>
<CAPTION>
The following per share
data and ratios have been National Portfolio
derived from information Class C Class D
provided in the financial For the Period For the Period
statements. For the Year Oct 21, 1994++ For the Year Oct 21, 1994++
Ended June 30, to June 30, Ended June 30, to June 30,
Increase (Decrease) in -------------------------------- ---------------------------------
Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 10.11 $ 10.03 $ 9.85 $ 10.12 $ 10.03 $ 9.85
Performance: ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net .52 .52 .36 .58 .57 .40
Realized and unrealized
gain on investments--net .27 .08 .39 .27 .09 .39
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .79 .60 .75 .85 .66 .79
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment
income--net (.52) (.52) (.36) (.58) (.57) (.40)
Realized gain on
investments--net -- -- (.19) -- -- (.19)
In excess of
realized gain on
investments--net -- -- (.02) -- -- (.02)
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.52) (.52) (.57) (.58) (.57) (.61)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 10.38 $ 10.11 $ 10.03 $ 10.39 $ 10.12 $ 10.03
========== ========== ========== ========== ========== ==========
Total Investment Based on net asset
Return:** value per share 7.97% 6.01% 7.97%+++ 8.57% 6.71% 8.37%+++
========== ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.36% 1.37% 1.37%* .80% .81% .81%*
Net Assets: ========== ========== ========== ========== ========== ==========
Investment income--net 5.04% 5.08% 5.21%* 5.60% 5.64% 5.78%*
========== ========== ========== ========== ========== ==========
Supplemental Net assets, end of
Data: period (in thousands) $ 28,096 $ 13,291 $ 5,195 $ 51,038 $ 43,884 $ 19,656
========== ========== ========== ========== ========== ==========
Portfolio turnover 99.52% 95.09% 103.65% 99.52% 95.09% 103.65%
========== ========== ========== ========== ========== ==========
<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>
The following per share data and ratios
have been derived from information Limited Maturity Portfolio
provided in the financial statements. Class A
For the Year Ended June 30,
Increase (Decrease)
in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.91 $ 9.92 $ 9.87 $ 10.01 $ 9.91
Performance: ------------ ----------- ------------ ------------ ------------
Investment income--net .39 .38 .38 .37 .41
Realized and unrealized
gain (loss) on
investments--net .04 (.01) .05 (.14) .10
------------ ----------- ------------ ------------ ------------
Total from investment
operations .43 .37 .43 .23 .51
------------ ----------- ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.39) (.38) (.38) (.37) (.41)
Realized gain on
investments--net (.02) -- -- -- --
------------ ----------- ------------ ------------ ------------
Total dividends and
distributions (.41) (.38) (.38) (.37) (.41)
------------ ----------- ------------ ------------ ------------
Net asset value,
end of year $ 9.93 $ 9.91 $ 9.92 $ 9.87 $ 10.01
============ =========== ============ ============ ============
<PAGE>
Total Investment Based on net asset
Return:** value per share 4.40% 3.75% 4.53% 2.30% 5.28%
============ =========== ============ ============ ============
Ratios to Average Expenses .39% .44% .41% .40% .41%
Net Assets: ============ =========== ============ ============ ============
Investment income--net 3.93% 3.83% 3.86% 3.68% 4.13%
============ =========== ============ ============ ============
Supplemental Net assets, end of
Data: year (in thousands) $ 343,641 $ 417,097 $ 536,474 $ 790,142 $ 846,736
============ =========== ============ ============ ============
Portfolio turnover 61.90% 88.32% 37.33% 45.67% 65.43%
============ =========== ============ ============ ============
<CAPTION>
The following per share data and ratios
have been derived from information Limited Maturity Portfolio
provided in the financial statements. Class B
For the Year Ended June 30,
Increase (Decrease)
in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 9.91 $ 9.92 $ 9.87 $ 10.01 $ 9.93
Performance: ------------ ----------- ------------ ------------- ------------
Investment income--net .36 .35 .35 .33 .24
Realized and unrealized
gain (loss) on
investments--net .05 (.01) .05 (.14) .08
------------ ----------- ------------ ------------- ------------
Total from investment
operations .41 .34 .40 .19 .32
------------ ----------- ------------ ------------- ------------
Less dividends and
distributions:
Investment income--net (.36) (.35) (.35) (.33) (.24)
Realized gain on
investments--net (.02) -- -- -- --
------------ ----------- ------------ ------------- ------------
Total dividends and
distributions (.38) (.35) (.35) (.33) (.24)
------------ ----------- ------------ ------------- ------------
Net asset value,
end of period $ 9.94 $ 9.91 $ 9.92 $ 9.87 $ 10.01
============ =========== ============ ============ ============
<PAGE>
Total Investment Based on net asset
Return:** value per share 4.13% 3.37% 4.14% 1.98% 3.26%+++
============ =========== ============ ============ ============
Ratios to Average Expenses .75% .80% .78% .76% .76%*
Net Assets: ============ =========== ============ ============ ============
Investment income--net 3.58% 3.46% 3.50% 3.33% 3.60%*
============ =========== ============ ============ ============
Supplemental Net assets, end of
Data: period (in thousands) $ 54,275 $ 71,075 $ 129,581 $ 145,534 $ 95,179
============ =========== ============ ============ ============
Portfolio turnover 61.90% 88.32% 37.33% 45.67% 65.43%
============ =========== ============ ============ ============
<CAPTION>
The following per share
data and ratios have been Limited Maturity Portfolio
derived from information Class C Class D
provided in the financial For the Period For the Period
statements. For the Year Oct 21, 1994++ For the Year Oct 21, 1994++
Ended June 30, to June 30, Ended June 30, to June 30,
Increase (Decrease) in -------------------------------- ---------------------------------
Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 9.88 $ 9.92 $ 9.83 $ 9.91 $ 9.93 $ 9.83
Performance: ---------- ---------- ---------- ---------- ---------- ----------
Investment income--net .35 .34 .25 .38 .37 .26
Realized and unrealized
gain (loss) on
investments--net .05 (.04) .09 .05 (.02) .10
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .40 .30 .34 .43 .35 .36
---------- ---------- ---------- ---------- ---------- ----------
Less dividends
and distributions:
Investment income--net (.35) (.34) (.25) (.38) (.37) (.26)
Realized gain on
investments--net (.02) -- -- (.02) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.37) (.34) (.25) (.40) (.37) (.26)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 9.91 $ 9.88 $ 9.92 $ 9.94 $ 9.91 $ 9.93
========== ========== ========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset
Return:** value per share 4.11% 2.97% 3.52%+++ 4.40% 3.55% 3.73%+++
========== ========== ========== ========== ========== ==========
Ratios to Average Expenses .75% .80% .70%* .48% .54% .53%*
Net Assets: ========== ========== ========== ========== ========== ==========
Investment income--net 3.57% 3.41% 3.61%* 3.84% 3.71% 3.78%*
========== ========== ========== ========== ========== ==========
Supplemental Net assets, end of
Data: period (in thousands) $ 108 $ 94 $ 3,965 $ 20,383 $ 15,886 $ 11,258
========== ========== ========== ========== ========== ==========
Portfolio turnover 61.90% 88.32% 37.33% 61.90% 88.32% 37.33%
========== ========== ========== ========== ========== ==========
<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.
<PAGE>
(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.
(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.
<PAGE>
(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.
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>
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, 1997, 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
follows:
Limited
Insured National Maturity
Portfolio Portfolio Portfolio
Class A Shares:
MLFD $ 24,532 $ 16,659 $ 1,139
MLPF&S 168,171 149,402 11,295
Class D Shares:
MLFD 7,722 11,866 1,634
MLPF&S 69,053 98,975 20,019
<PAGE>
For the year ended June 30, 1997, MLPF&S received contingent
deferred sales charges of $1,906,615 relating to transactions in
Class B Shares, amounting to $979,435, $868,705 and $58,475 in the
Insured, National and Limited Maturity Portfolios, respectively, and
$17,583, relating to transactions in Class C Shares, amounting to
$6,915, $10,273 and $395 in the Insured, National and Limited
Maturity Portfolios, respectively, and $358,940 relating to
transactions in Class D Shares, amounting to $180,983 and $177,957
in the Insured and National 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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1997 were as follows:
Purchases Sales
Insured Portfolio $1,539,869,960 $1,795,948,640
National Portfolio 1,385,982,904 1,395,027,690
Limited Maturity Portfolio 259,616,429 327,912,199
Net realized and unrealized gains (losses) as of June 30, 1997 were
as follows:
Realized Unrealized
Insured Portfolio Gains Gains
Long-term investments $ 37,935,579 $ 112,603,346
-------------- --------------
Total $ 37,935,579 $ 112,603,346
============== ==============
Realized Unrealized
National Portfolio Gains (Losses) Gains
Long-term investments $ 22,647,030 $ 90,466,552
Financial futures contracts (3,959,713) --
-------------- --------------
Total $ 18,687,317 $ 90,466,552
============== ==============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Realized Unrealized
Limited Maturity Portfolio Gains Gains
Long-term investments $ 1,870,059 $ 1,388,965
Short-term investments -- 11,807
-------------- --------------
Total $ 1,870,059 $ 1,400,772
============== ==============
As of June 30, 1997 net unrealized appreciation/depreciation for
Federal income tax purposes were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
Insured Portfolio $114,126,818 $ (1,772,618) $112,354,200
National Portfolio 92,758,314 (2,333,380) 90,424,934
Limited Maturity
Portfolio 1,811,320 (410,548) 1,400,772
The aggregate cost of investments at June 30, 1997 for Federal
income tax purposes was $1,910,659,088 for the Insured Portfolio,
$1,357,629,654 for the National Portfolio, and $422,830,068 for the
Limited Maturity Portfolio.
4. Capital Share Transactions:
Net increase (decrease) on net assets derived from capital share
transactions for years ended June 30, 1997 and June 30, 1996 were
$(357,799,862) and $(155,203,186), respectively, for the Insured
Portfolio; $916,838 and $(78,305,357), respectively for the National
Portfolio and $(86,916,618) and $(176,922,554), respectively, for
the Limited Maturity Portfolio.
Transactions in capital shares for each class were as follows:
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 4,575,281 $ 36,693,201
Shares issued to shareholders
in reinvestment of dividends 4,476,285 35,809,346
-------------- --------------
Total issued 9,051,566 72,502,547
Shares redeemed (28,976,583) (232,180,607)
-------------- --------------
Net decrease (19,925,017) $ (159,678,060)
============== ==============
<PAGE>
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 B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 5,729,555 $ 45,791,612
Shares issued to shareholders
in reinvestment of dividends 2,004,591 16,028,058
-------------- --------------
Total issued 7,734,146 61,819,670
Automatic conversion of shares (654,971) (5,237,060)
Shares redeemed (29,004,786) (232,763,104)
-------------- --------------
Net decrease (21,925,611) $ (176,180,494)
============== ==============
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 C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 742,610 $ 5,954,624
Shares issued to shareholders
in reinvestment of dividends 65,517 524,081
-------------- --------------
Total issued 808,127 6,478,705
Shares redeemed (1,722,393) (13,923,454)
-------------- --------------
Net decrease (914,266) $ (7,444,749)
============== ==============
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 D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 12,779,520 $ 101,973,172
Automatic conversion of shares 654,971 5,237,060
Shares issued to shareholders
in reinvestment of dividends 147,570 1,180,790
-------------- --------------
Total issued 13,582,061 108,391,022
Shares redeemed (15,359,300) (122,887,581)
-------------- --------------
Net decrease (1,777,239) $ (14,496,559)
============== ==============
<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
============== ==============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 7,233,788 $ 74,396,433
Shares issued to shareholders
in reinvestment of dividends 2,685,525 27,558,310
-------------- --------------
Total issued 9,919,313 101,954,743
Shares redeemed (12,395,672) (127,128,438)
-------------- --------------
Net decrease (2,476,359) $ (25,173,695)
============== ==============
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)
============== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
<PAGE>
Shares sold 11,777,487 $ 121,489,230
Shares issued to shareholders
in reinvestment of dividends 975,743 10,006,225
-------------- --------------
Total issued 12,753,230 131,495,455
Automatic conversion of shares (495,542) (5,075,762)
Shares redeemed (11,745,518) (120,476,972)
-------------- --------------
Net increase 512,170 $ 5,942,721
============== ==============
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 C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 2,182,254 $ 22,508,694
Shares issued to shareholders
in reinvestment of dividends 56,394 579,121
-------------- --------------
Total issued 2,238,648 23,087,815
Shares redeemed (845,937) (8,691,227)
-------------- --------------
Net increase 1,392,711 $ 14,396,588
============== ==============
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
============== ==============
<PAGE>
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 10,536,060 $ 108,053,333
Automatic conversion of shares 495,032 5,075,762
Shares issued to shareholders
in reinvestment of dividends 114,893 1,179,969
-------------- --------------
Total issued 11,145,985 114,309,064
Shares redeemed (10,568,675) (108,557,840)
-------------- --------------
Net increase 577,310 $ 5,751,224
============== ==============
NOTES TO FINANCIAL STATEMENTS (concluded)
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
============== ==============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 2,507,909 $ 24,924,435
Shares issued to shareholders
in reinvestment of dividends and
distributions 920,017 9,134,741
-------------- --------------
Total issued 3,427,926 34,059,176
Shares redeemed (10,923,304) (108,467,108)
-------------- --------------
Net decrease (7,495,378) $ (74,407,932)
============== ==============
<PAGE>
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 B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 1,746,766 $ 17,337,114
Shares issued to shareholders
in reinvestment of dividends and
distributions 156,709 1,556,287
-------------- --------------
Total issued 1,903,475 18,893,401
Automatic conversion of shares (11,559) (114,986)
Shares redeemed (3,599,880) (35,740,926)
-------------- --------------
Net decrease (1,707,964) $ (16,962,511)
============== ==============
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)
============== ==============
<PAGE>
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 125,730 $ 1,243,007
Shares issued to shareholders
in reinvestment of dividends and
distributions 526 5,211
-------------- --------------
Total issued 126,256 1,248,218
Shares redeemed (124,926) (1,236,530)
-------------- --------------
Net increase 1,330 $ 11,688
============== ==============
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)
============== ==============
Limited Maturity Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 3,468,693 $ 34,441,741
Automatic conversion of shares 11,555 114,986
Shares issued to shareholders
in reinvestment of dividends and
distributions 40,524 402,564
-------------- --------------
Total issued 3,520,772 34,959,291
Shares redeemed (3,072,180) (30,517,154)
-------------- --------------
Net increase 448,592 $ 4,442,137
============== ==============
<PAGE>
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
============== ==============
5. Capital Loss Carryforward:
At June 30, 1997, the Fund had a net capital loss carryforward as
follows: Approximately $4,620,000 in the Insured Portfolio, of which
$1,981,000 expires in 2003 and $2,639,000 expires in 2004;
approximately $48,141,000 in the National Portfolio, of which
$19,665,000 expires in 2003 and $28,476,000 expires in 2004; and
approximately $4,658,000 in the Limited Maturity Portfolio, of which
$2,590,000 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, 1997, 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.
<PAGE>
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,
1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Insured, National and Limited Maturity Portfolios of Merrill
Lynch Municipal Bond Fund, Inc. as of June 30, 1997, 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, 1997
</AUDIT-REPORT>
