MERRILL LYNCH
MUNICIPAL BOND
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Municipal Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
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
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
The Municipal Market Environment
Long-term tax-exempt bond yields moved slightly lower during the
three-month period ended December 31, 1996. As measured by the Bond
Buyer Revenue Bond Index, yields on A-rated uninsured municipal
revenue bonds declined an additional 8 basis points (0.08%) to end
the 1996 calendar year at 5.92%. Tax-exempt bond yields initially
had declined to approximately 5.80% by late November. However,
Federal Reserve Board Chairman Alan Greenspan's comments regarding
possible excesses in the US equity market and an "uncertain"
inflationary outlook rekindled investors' earlier concerns and fixed-
income interest rates rose for the remainder of the three-month
period. US Treasury bond yields exhibited a more significant decline
during the December quarter, falling approximately 35 basis points
to 6.54% at December 31, 1996.
Much of the tax-exempt bond market's strong technical position--one
of the primary reasons for the improvement in municipal bond yields
in 1996--remained intact. Over the last year, approximately $180
billion in long-term municipal securities was issued, an increase of
approximately 15% versus the same period a year ago. Much of this
increase was the result of issuers seeking to refinance their
existing higher-couponed debt as interest rates declined in 1995 and
early 1996. As interest rates rose, these financings became
increasingly economically impractical and issuance declined. Over
the last six months, approximately $90 billion in long-term tax-
exempt securities was underwritten, essentially unchanged versus the
comparable period a year earlier. Over the last three months, $53
billion in tax-exempt securities was issued, also unchanged versus
the December 31, 1995 quarter. The municipal bond market's recent
underperformance relative to Treasury issues was the result of a
number of factors. Among other things, as tax-exempt bond yields
declined below 6% this past quarter, as in the past, some investors
temporarily have lost interest in the municipal bond market. As
interest rates continue to decline, as they did at the end of 1994
and throughout 1995, investors quickly adjust to the new levels.
<PAGE>
In addition, the Presidential and Congressional elections this past
November resurrected some investor concerns regarding continued
Federal deficit reduction and potential legislative restrictions
upon the municipal bond market. This situation is similar to that at
the beginning of 1996 when tax-exempt bond yields were negatively
impacted by speculation that legislation reducing the tax advantages
of municipal bonds would be introduced to aid further deficit
reductions. Also, earlier fears that the Democratic party could
regain control of both houses of Congress, as well as maintain the
White House, may have caused some investors to wait until after the
election before allocating investment funds into the municipal bond
market.
However, the US Treasury bond market's recent relatively strong
performance resulted in municipal bonds becoming a particularly
attractive investment alternative. At current levels, long-term tax-
exempt revenue bonds yield over 90% of comparable US Treasury bond
yields. Current levels make tax-advantaged products more attractive
than they were mid-year when yield ratios had declined to
approximately 85%. For example, to an investor in the maximum
Federal income tax bracket, current tax-exempt bond yields represent
a taxable equivalent yield of approximately 9.75%.
Looking forward, the supply of new bond issuance for 1997 is
expected to be very similar to that of 1996, with most annual
estimates falling in the $170 billion--$175 billion range. Investor
demand is also expected to remain strong, with 1997 total municipal
redemptions (refundings, maturities and coupon payments) in the $175
billion--$185 billion range. This overall balance suggests that the
positive technical backdrop the municipal bond market enjoyed in
1996 could continue in 1997. However, it is likely that seasonal
factors will temporally distort this overall balanced technical
scenario. During periods of reduced bond issuance, such as January
and July on a historical basis, the ease and ability to purchase tax-
advantaged products at their current attractive levels may be
greatly restricted.
Portfolio Strategy
Insured Portfolio and National Portfolio
The Insured Portfolio and National Portfolio remain committed to
portfolio strategies aimed at seeking to achieve high current income
and price appreciation. During the December quarter, we witnessed a
volatile fixed-income arena where weekly market swings emerged based
on the most recent economic data releases. However, the volatility
created opportunity in the form of a fairly well-defined trading
range. Long-term municipal bonds traded in a range that yielded
between 5.50%--6.00%. Therefore, our strategy was to capitalize on
trading on these price swings until economic news leads us to
believe that we may break out one way or the other. We expect a
short-term resolution in which interest rates may move slightly
higher. As the high-yield end of the range approaches, we have spent
some cash reserves to position the Portfolios slightly more
aggressively. Previous purchases were concentrated on more defensive
issues. However, should the market regain its positive momentum, we
look to continue to trade on price swings to seek to enhance the
Portfolios' net asset valuations.
<PAGE>
Limited Maturity Portfolio
During the December quarter, the Limited Maturity Portfolio remained
close to fully invested on the belief that Federal Reserve Board
policy would remain unchanged. The Portfolio closed the three-month
period ended December 31, 1996 with cash reserves of just over 5% of
net assets and an average portfolio maturity of 22 months. Purchases
of new securities were concentrated in the three-year--four-year
sector in order to seek to enhance price appreciation and total
return. Although the long-term marketplace experienced considerable
volatility during the December quarter, the short end of the yield
curve actually performed quite well. In fact, for the month of
December short-term municipal bonds outperformed their taxable
counterparts as lack of supply forced investors to pay relatively
expensive prices for securities. Thus, our moderately aggressive
strategy served to enhance the Fund's performance during the
December quarter.
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
<PAGE>
January 31, 1997
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for Insured and National Portfolios. Limited Maturity Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears no ongoing distribution or account maintenance fees.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Insured and National
Portfolios. Limited Maturity Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Insured and National Portfolios are
subject to a distribution fee of 0.50% and an account maintenance
fee of 0.25%. Limited Maturity Portfolio is subject to a
distribution fee of 0.20% and an account maintenance fee of 0.15%.
All three classes of shares automatically convert to Class D Shares
after approximately 10 years. (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).
<PAGE>
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
PERFORMANCE DATA (continued)
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Standardized
12/31/96 9/30/96 12/31/95 % Change % Change 30-Day Yield
<S> <C> <C> <C> <C> <C>
Insured Portfolio Class A Shares $ 8.07 $ 8.00 $ 8.25 -2.18% +0.88% 4.84%
Insured Portfolio Class B Shares 8.07 7.99 8.24 -2.06 +1.00 4.28
Insured Portfolio Class C Shares 8.07 8.00 8.25 -2.18 +0.88 4.22
Insured Portfolio Class D Shares 8.07 8.00 8.25 -2.18 +0.88 4.60
National Portfolio Class A Shares 10.33 10.24 10.44 -1.05 +0.88 4.96
National Portfolio Class B Shares 10.33 10.24 10.44 -1.05 +0.88 4.40
National Portfolio Class C Shares 10.33 10.24 10.44 -1.05 +0.88 4.36
National Portfolio Class D Shares 10.34 10.25 10.45 -1.05 +0.88 4.72
Limited Maturity Portfolio Class A Shares 9.94 9.93 9.98 -0.40 +0.10 3.69
Limited Maturity Portfolio Class B Shares 9.94 9.93 9.98 -0.40 +0.10 3.37
Limited Maturity Portfolio Class C Shares 9.91 9.90 10.00 -0.90 +0.10 3.36
Limited Maturity Portfolio Class D Shares 9.94 9.93 9.98 -0.40 +0.10 3.59
Insured Portfolio Class A Shares--Total Return +3.43(1) +2.32(2)
Insured Portfolio Class B Shares--Total Return +2.77(3) +2.25(4)
Insured Portfolio Class C Shares--Total Return +2.59(5) +2.10(6)
Insured Portfolio Class D Shares--Total Return +3.17(7) +2.25(8)
National Portfolio Class A Shares--Total Return +4.93(9) +2.38(10)
National Portfolio Class B Shares--Total Return +4.14(11) +2.18(12)
National Portfolio Class C Shares--Total Return +4.09(13) +2.17(14)
National Portfolio Class D Shares--Total Return +4.67(15) +2.31(16)
Limited Maturity Portfolio Class A Shares--Total Return +3.72(17) +1.28(18)
Limited Maturity Portfolio Class B Shares--Total Return +3.35(19) +1.18(20)
Limited Maturity Portfolio Class C Shares--Total Return +2.80(21) +1.18(22)
Limited Maturity Portfolio Class D Shares--Total Return +3.62(23) +1.25(24)
<PAGE>
<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 $0.448 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.123 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.387 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.106 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.383 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.105 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.428 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.118 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.602 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.164 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.524 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.143 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.519 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.142 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.577 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.157 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.404 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.124 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.368 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.114 per share
ordinary income dividends.
(21)Percent change includes reinvestment of $0.364 per share
ordinary income dividends.
(22)Percent change includes reinvestment of $0.113 per share
ordinary income dividends.
(23)Percent change includes reinvestment of $0.394 per share
ordinary income dividends.
(24)Percent change includes reinvestment of $0.121 per share
ordinary income dividends.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity Insured National Maturity Insured National Maturity
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/77-12/31/77 $9.80/9.80 -- -- $ 0.09 -- -- + 0.94% -- --
1978 9.80/8.97 -- -- 0.48 -- -- - 3.69 -- --
1979++ 8.97/8.39 $ 9.60/9.60 $ 9.90/9.88 0.53 $ 0.11 $0.10 - 0.77 + 1.17% +0.86%
1980 8.39/6.86 9.60/8.54 9.88/9.74 0.60 0.79 0.64 -11.46 - 3.00 +5.14
1981 6.86/5.66 8.54/7.34 9.74/9.78 0.65 0.90 0.77 - 8.49 - 3.82 +8.64
1982 5.66/6.81 7.34/8.71 9.78/9.89 0.67 0.93 0.80 +33.96 +33.16 +9.67
1983 6.81/6.97 8.71/9.01 9.89/9.76 0.65 0.89 0.67 +12.20 +14.04 +5.57
1984 6.97/6.88 9.01/8.96 9.76/9.74 0.65 0.90 0.67 + 8.49 +10.00 +6.91
1985 6.88/7.53 8.96/9.86 9.74/9.75 0.64 0.88 0.63 +19.56 +20.76 +6.71
1986 7.53/8.18 9.86/10.67 9.75/9.90 0.61(1) 1.01(1) 0.56 +17.24 +19.08 +7.47
1987 8.18/7.56 10.67/9.76 9.90/9.68 0.68(2) 0.86(2) 0.53(2) + 0.86 - 0.40 +3.18
1988 7.56/7.79 9.76/10.11 9.68/9.68 0.57 0.76 0.56 +10.92 +11.71 +5.90
1989 7.79/7.94 10.11/10.25 9.68/9.74 0.57 0.75 0.59 + 9.49 + 9.11 +6.93
1990 7.94/7.86 10.25/10.09 9.74/9.72 0.61(3) 0.73 0.60 + 7.07 + 5.85 +6.11
1991 7.86/8.18 10.09/10.49 9.72/9.88 0.60(4) 0.82(4) 0.54 +12.07 +12.58 +7.39
1992 8.18/8.27 10.49/10.55 9.88/9.97 0.63(5) 0.89(5) 0.45 + 9.04 + 9.35 +5.62
1993 8.27/8.60 10.55/10.91 9.97/10.01 0.71(6) 0.94(6) 0.38 +12.85 +12.59 +4.30
1994 8.60/7.43 10.91/9.40 10.01/9.77 0.60(7) 0.81(7) 0.37 - 6.76 - 6.55 +1.35
1995 7.43/8.25 9.40/10.44 9.77/9.98 0.45 0.60 0.38 +17.43 +17.83 +6.13
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
------ ------ -----
Total $11.44 $14.17 $9.64
Cumulative total return as of 12/31/96: +265.92%** +366.54%** +167.60%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charges; results would be lower if sales charge was
included.
++For National and Limited Maturity Portfolios, period covered is
from 11/02/79 to 12/31/79.
(1)Includes capital gains of $0.011 and $0.178 for the Insured and
National Portfolios, respectively.
(2)Includes capital gains of $0.098, $0.073 and $0.012 for the
Insured, National and Limited Maturity Portfolios, respectively.
(3)Includes capital gains of $0.064 for the Insured Portfolio.
(4)Includes capital gains of $0.058 and $0.060 for the Insured and
National Portfolios, respectively.
(5)Includes capital gains of $0.084 and $0.130 for the Insured and
National Portfolios, respectively.
(6)Includes capital gains of $0.181 and $0.157 for the Insured and
National Portfolios, respectively.
(7)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity*** Insured National Maturity*** Insured National Maturity***
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $7.81/7.78 $10.14/10.11 -- $0.11 $0.14 -- + 0.97% + 1.08% --
1989 7.78/7.94 10.11/10.25 -- 0.51 0.67 -- + 8.81 + 8.29 --
1990 7.94/7.86 10.25/10.09 -- 0.55(1) 0.66 -- + 6.28 + 5.05 --
1991 7.86/8.17 10.09/10.49 -- 0.54(2) 0.75(2) -- +11.10 +11.74 --
1992 8.17/8.27 10.49/10.55 $ 9.93/9.97 0.56(3) 0.81(3) $0.06 + 8.35 + 8.53 +1.05%
1993 8.27/8.59 10.55/10.90 9.97/10.01 0.64(4) 0.85(4) 0.35 +11.88 +11.65 +3.93
1994 8.59/7.43 10.90/9.39 10.01/9.77 0.53(5) 0.73(5) 0.34 - 7.36 - 7.27 +1.03
1995 7.43/8.24 9.39/10.44 9.77/9.98 0.39 0.52 0.34 +16.41 +17.07 +5.75
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
----- ----- -----
Total $4.22 $5.65 $1.46
Cumulative total return as of 12/31/96: +74.31%** +76.03%** +15.96%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charges; results would be lower if
sales charge was deducted.
***Limited Maturity Portfolio commenced operations on 11/02/92.
(1)Includes capital gains of $0.064 for the Insured Portfolio.
(2)Includes capital gains of $0.058 and $0.060 for the Insured and
National Portfolios, respectively.
(3)Includes capital gains of $0.084 and $0.130 for the Insured and
National Portfolios, respectively.
(4)Includes capital gains of $0.181 and $0.157 for the Insured and
National Portfolios, respectively.
(5)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity Insured National Maturity Insured National Maturity
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $7.68/7.43 $ 9.85/9.40 $ 9.83/9.77 $0.22(1) $0.31(1) $0.07 - 0.41% - 1.39% +0.11%
1995 7.43/8.25 9.40/10.44 9.77/10.00 0.38 0.52 0.34 +16.50 +16.89 +5.92
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
----- ----- -----
Total $0.98 $1.35 $0.77
Cumulative total return as of 12/31/96: +19.03%** +19.98%** +9.01%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charges; results would be lower if
sales charge was deducted.
(1)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
1/1-12/31 Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Limited Limited Limited
Covered Insured National Maturity Insured National Maturity Insured National Maturity
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $7.68/7.43 $ 9.85/9.40 $9.83/9.77 $0.23(1) $0.32(1) $0.07 - 0.30% - 1.29% +0.13%
1995 7.43/8.25 9.40/10.45 9.77/9.98 0.43 0.57 0.37 +17.14 +17.65 +6.03
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
----- ----- -----
Total $1.09 $1.47 $0.83
Cumulative total return as of 12/31/96: +20.49%** +21.56%** +10.00%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charges;results would be lower if sales charge was
included.
(1)Includes capital gains of $0.141 and $0.209 for the Insured and
National Portfolios, respectively.
</TABLE>
<PAGE>
Average Annual
Total Returns
Insured Portfolio
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/96 +3.43% -0.71%
Five Years Ended 12/31/96 +6.86 +5.99
Ten Years Ended 12/31/96 +7.43 +7.00
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/96 +2.77% -1.15%
Five Years Ended 12/31/96 +6.08 +6.08
Inception (10/21/88) through 12/31/96 +7.02 +7.02
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 12/31/96 +2.59% +1.61%
Inception (10/21/94) through 12/31/96 +8.26 +8.26
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 12/31/96 +3.17% -0.96%
Inception (10/21/94) through 12/31/96 +8.87 +6.86
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
Average Annual
Total Returns
(concluded)
National Portfolio
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/96 +4.93% +0.73%
Five Years Ended 12/31/96 +7.30 +6.43
Ten Years Ended 12/31/96 +7.48 +7.04
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 12/31/96 +4.14% +0.18%
Five Years Ended 12/31/96 +6.50 +6.50
Inception (10/21/88) through 12/31/96 +7.14 +7.14
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payments of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 12/31/96 +4.09% +3.10%
Inception (10/21/94) through 12/31/96 +8.65 +8.65
[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 12/31/96 +4.67% +0.48%
Inception (10/21/94) through 12/31/96 +9.30 +7.29
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Limited Maturity Portfolio
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 12/31/96 +3.72% +2.68%
Five Years Ended 12/31/96 +4.21 +4.00
Ten Years Ended 12/31/96 +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 12/31/96 +3.35% +2.35%
Inception (11/2/92) through 12/31/96 +3.62 +3.62
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 12/31/96 +2.80% +1.81%
Inception (10/21/94) through 12/31/96 +4.01 +4.01
[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 12/31/96 +3.62% +2.58%
Inception (10/21/94) through 12/31/96 +4.44 +3.96
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
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.
<PAGE>
AMT Alternative Minimum Tax (Subject to)
BAN Bond Anticipation Notes
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
LEVRRS Leveraged Reverse Rate Securities
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
UPDATES Unit Priced Demand Adjustable
Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<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--0.6% AAA Aaa $ 4,735 Alabama Housing Finance Authority, S/F Home
Mortgage Revenue Bonds, Series A, AMT, 6.80% due
4/01/2025 (b) $ 4,952
AAA Aaa 1,625 Alabama Water Pollution Control Authority, Revolving
Fund Loan, Series A, 6.75% due 8/15/2017 (b) 1,803
AAA Aaa 1,250 Mobile, Alabama, GO, Refunding and Capital Improvement
Bonds, 10.875% due 11/01/2007 (c) 1,706
AAA Aaa 6,000 Montgomery, Alabama, Special Care Facilities Financing
Authority Revenue Bonds (Baptist Medical Center),
Series A, 5.75% due 1/01/2022 (h) 6,026
Alaska--0.7% Kenai Peninsula Borough, Alaska, GO (b):
AAA Aaa 6,450 8.40% due 1/01/2000 7,177
AAA Aaa 8,460 8.40% due 1/01/2001 9,658
<PAGE>
Arizona--1.3% AAA Aaa 6,750 Arizona State Municipal Financing Program, COP,
Series 34, 7.25% due 8/01/2009 (g) 8,044
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) 4,237
AAA Aaa 4,000 Maricopa County, Arizona, IDA, Hospital Facility Revenue
Refunding Bonds (Samaritan Health Services), Series A, 7% due
12/01/2013 (e) 4,395
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) 8,271
AAA Aaa 5,000 Pima County, Arizona, Unified School Distric No. 1
(Tucson), UT, Series C, 6.875% due 7/01/2001 (a) (e) 5,544
California--1.9% AAA Aaa 12,200 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds, Proposition A
(Second Tier), 6% due 7/01/2026 (e) 12,683
AAA Aaa 10,500 Metropolitan Water District, Southern California, Waterworks
Revenue Refunding Bonds, Series B, 4.75% due 7/01/2021 (e) 9,331
AAA Aaa 8,800 Northern California Power Agency, Multiple Capital Facilities
Revenue Bonds, RIB, 9.045% due 9/02/2025 (d) (e) 10,296
AAA Aaa 5,900 Oakland, California, Redevelopment Agency, Refunding Bonds,
INFLOS, 8.219% due 9/01/2019 (d) (e) 6,084
AAA Aaa 5,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2024 (e) 5,352
Colorado--1.3% AAA Aaa 10,000 Denver, Colorado, City and County Airport Revenue Refunding
Bonds, Series D, 5.50% due 11/15/2025 (e) 9,745
Louisiana Plata County, Colorado, School District No. 9 &
R Durango, UT (h):
AAA Aaa 3,410 6.60% due 11/01/2002 (a) 3,792
AAA Aaa 590 6.60% due 11/01/2017 644
Municipal Subdistrict Northern Colorado, Water Conservancy
District, Revenue Refunding Bonds, Series F (b):
AAA Aaa 4,470 6.15% due 12/01/2005 4,924
AAA Aaa 4,250 6.25% due 12/01/2006 4,721
AAA Aaa 5,055 6.35% due 12/01/2007 5,655
</TABLE>
<PAGE>
<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>
Connecticut--1.0% AAA Aaa $ 20,000 Connecticut State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Yale-New Haven Hospital Issue),
Series H, 5.70% due 7/01/2025 (e) $ 19,944
AAA Aaa 2,470 Connecticut State Special Tax Obligation Revenue Bonds,
Series B, 6% due 10/01/2005 (e) 2,681
Delaware--0.5% AAA Aaa 6,000 Delaware State, EDA, PCR, Refunding (Delmarva Power and
Light Company), Series B, 7.30% due 3/01/2014 (e) 6,565
AAA Aaa 3,750 Delaware State Health Facilities Authority, Crossover Revenue
Refunding Bonds (Medical Center of Delaware), 7% due
10/01/2015 (e) 4,048
Florida--2.9% A1+ VMIG1++ 1,000 Dade County, Florida, Water and Sewer System Revenue Bonds,
VRDN, 1% due 10/05/2022 (f) (h) 1,000
AAA Aaa 5,000 Florida State Division, Board of Finance, Department of
General Services Revenue Bonds (Department of Natural Resource
Preservation), Series 2000-A, 6.75% due 7/01/2013 (b) 5,486
AAA Aaa 11,000 Florida State Turnpike Authority, Turnpike Revenue Refunding
Bonds, Series A, 5% due 7/01/2015 (h) 10,270
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) 822
AAA Aaa 10,000 Lee County, Florida, Hospital Board of Directors, Hospital
Revenue INFLOS, 9.418% due 4/01/2020 (d) (e) 11,413
AAA Aaa 16,700 Martin County, Florida, PCR, Refunding (Florida Power and
Light Company Project), 7.30% due 7/01/2020 (e) 18,393
AAA Aaa 5,790 Orange County, Florida, Health Facilities Authority Revenue
Hospital (Orlando Regional Healthcare), Series A, 6.25% due
10/01/2006 (e) 6,366
AAA Aaa 3,950 Orange County, Florida, HFA, Mortgage Revenue Refunding
Bonds, Series A, 7.60% due 1/01/2024 (h) (j) 4,192
AAA Aaa 2,850 South Broward Hospital District, Florida, Hospital Revenue
Bonds, RIB, Series C, 9.592% due 5/01/2001 (a) (b) (d) 3,431
AAA Aaa 2,000 Tampa, Florida, Water and Sewer Revenue Refunding Bonds,
Sub-Lien, Series A, 7.25% due 10/01/2016 (b) 2,098
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) 3,181
<PAGE>
Georgia--3.9% Atlanta, Georgia, Airport Facilities Revenue Refunding
Bonds (b):
AAA Aaa 17,220 6.25% due 1/01/2005 18,839
AAA Aaa 7,805 6.50% due 1/01/2006 8,699
AAA Aaa 5,000 6.50% due 1/01/2007 5,589
AAA Aaa 13,750 Atlanta, Georgia, Water and Sewer Revenue Refunding Bonds,
4.75% due 1/01/2023 (e) 12,108
A1+ VMIG1++ 2,500 Burke County, Georgia, Development Authority, PCR
(Oglethorpe Power Corporation), VRDN, Series A,
4% due 1/01/2016 (f) (h) 2,500
AAA Aaa 5,500 Chatam County, Georgia, School District, UT, 6.75%
due 8/01/2003 (a) (e) 6,273
AAA Aaa 20,000 Georgia Municipal Electric Authority, Power Revenue
Bonds, Series EE, 7% due 1/01/2025 (b) 24,195
AAA Aaa 9,000 Municipal Electric Authority, Georgia, Special
Obligation Bonds (Fifth Crossover Series, Project One),
6.40% due 1/01/2013 (b) 9,915
Hawaii--3.1% Hawaii State Airport System Revenue Bonds:
AAA Aaa 21,795 AMT, 7.30% due 7/01/2020 (b) 23,967
AAA Aaa 23,200 AMT, Second Series, 7.50% due 7/01/2020 (h) 25,526
AAA Aaa 10,000 Refunding, Series 1993, 6.45% due 7/01/2013 (e) 10,796
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) 5,522
AAA Aaa 4,500 Hawaii State Harbor Capital Improvement Revenue Bonds,
AMT, 7% due 7/01/2017 (e) 4,880
Illinois--13.4% AAA Aaa 5,000 Chicago, Illinois, Board of Education, (Chicago School
Reform), UT, 6% due 12/01/2026 (e) 5,124
AAA Aaa 28,200 Chicago, Illinois, GO, Series A-1, 5.125% due 1/01/2025 (b) 25,982
AAA Aaa 8,845 Chicago, Illinois, Park District, UT, 5.60% due 1/01/2021 (e) 8,685
AAA Aaa 19,000 Chicago, Illinois, Public Building Commission Revenue
Bonds, Series A, 7.125% due 1/01/2015 (c) (e) 20,758
AAA Aaa 38,835 Chicago, Illinois, Refunding Bonds, Series B, 5.125%
due 1/01/2025 (h) 35,780
AAA Aaa 26,650 Chicago, Illinois, Wastewater Transmission Revenue
Refunding Bonds, 5.125% due 1/01/2025 (h) 24,554
Chicago, Illinois, Water Revenue Bonds (h):
AAA Aaa 3,000 5% due 11/01/2015 2,795
AAA Aaa 18,000 5% due 11/01/2020 16,389
AAA Aaa 10,000 5% due 11/01/2025 9,027
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,250 (Elmhurst Memorial Hospital), 6.625% due 1/01/2022 (h) 3,484
AAA Aaa 2,000 (Methodist Health Project), RIB, 9.831% due
5/01/2021 (b) (d) 2,325
AAA Aaa 10,000 (Rush Presbyterian-Saint Luke's Medical Center),
INFLOS, 9.797% due 10/01/2024 (d) (e) 11,650
<PAGE> AAA Aaa 23,000 (Sinai Health System), Refunding 6% due 2/15/2024 23,447
Illinois State, GO, Refunding Bonds, UT (h):
AAA Aaa 5,000 5.125% due 12/01/2013 4,805
AAA Aaa 5,750 5.125% due 12/01/2016 5,464
AAA Aaa 1,500 5.125% due 12/01/2017 1,422
AAA Aaa 5,875 5.25% due 12/01/2020 5,532
Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds (McCormick Place
Expansion Project):
AAA Aaa 16,660 Refunding, Series A, 6.10% due 12/15/2015 (e) (k) 5,678
AAA Aaa 8,330 Refunding, Series A, 6.10% due 12/15/2016 (e) (k) 2,662
AAA Aaa 49,575 Refunding, Series A, 6.09% due 12/15/2023 (e) (k) 10,461
AAA Aaa 14,305 Refunding, Series A, 6.24% due 6/15/2024 (e) (k) 2,932
AAA Aaa 38,450 Refunding, Series A, 5.25% due 6/15/2027 (b) 36,067
AAA Aaa 5,000 Refunding, Series B, 5.867% due 6/15/2018 (e) (k) 1,451
AAA Aaa 3,000 Series A, 5.87% due 6/15/2020 (h) (k) 776
AAA Aaa 6,600 Series A, 6.50% due 6/15/2003 (a) (b) 7,412
AAA Aaa 26,000 Regional Transportation Authority, Illinois, Series A,
6.25% due 6/01/2024 (b) 27,339
AAA Aaa 4,000 University of Illinois, University Revenue Bonds
(Auxiliary Facility Systems), 5.60% due 10/01/2022 (e) 3,904
Indiana--1.9% 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) 2,715
AAA Aaa 4,000 Indiana State Municipal Power Agency, Power Supply System
Revenue Bonds, Series A, 6.125% due 1/01/2019 (e) 4,121
AAA Aaa 5,000 Indiana State Office Building, Community Correctional
Facilities Program Revenue Bonds, Series A, 5.50% due
7/01/2020 (b) 4,859
AAA Aaa 4,040 Indianapolis, Indiana, Local Public Improvement Bond
Bank, Series A, 7.90% due 2/01/2002 (a) (g) 4,654
AAA Aaa 4,340 Jasper County, Indiana, PCR, Refunding (Northern Indiana
Public Service), 7.10% due 7/01/2017 (e) 4,823
AAA Aaa 5,510 Munster, Indiana, School Building Corp., 5.75%
due 1/15/2021 (e) 5,481
AAA Aaa 5,000 Penn, Indiana, High School Building Corp., (First
Mortgage) 6.125% due 1/15/2016 (e) 5,207
Rockport, Indiana, PCR, Refunding:
A1 Aaa 4,200 (AEP Generating Co. Project), VRDN, Series A,
4.20% due 7/01/2025 (b) (f) 4,200
AAA Aaa 5,800 (Indiana--Michigan Power), Series B, 7.60% due
3/01/2016 (h) 6,506
Iowa--0.2% AAA Aaa 5,000 Des Moines, Iowa, Parking Facilities Revenue Bonds,
Series A, 7.25% due 7/01/2015 (h) 5,404
<PAGE>
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) 13,320
Louisiana--0.9% A1 VMIG1++ 19,400 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Willis-Knighton Medical Center Project), VRDN, 4.20%
due 9/01/2025 (b) (f) 19,400
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) 2,518
AAA Aaa 4,400 Series B, 7% due 7/01/2022 5,313
</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>
Massachusetts-- AAA Aaa $ 13,000 Massachusetts Bay Transportation Authority, COP,
4.3% Series A, 7.65% due 8/01/2000 (a) (i) $ 14,664
Massachusetts Bay Transportation Authority
(Massachusetts General Transportation), Series B:
AAA Aaa 10,000 5.375% due 3/01/2025 (b) 9,641
AAA Aaa 5,000 5.25% due 3/01/2026 (i) 4,777
AAA Aaa 4,780 Massachusetts Educational Loan Authority, Education
Loan Revenue Bonds, AMT, Issue D, Series A, 7.25% due
1/01/2009 (e) 5,085
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (d):
AAA Aaa 10,000 (Beth Israel), INFLOS, 8.471% due 7/01/2025 (b) 10,325
AAA Aaa 3,100 (Saint Elizabeth's Hospital), LEVRRS, Series E,
9.541% due 8/12/2021 (i) 3,573
AAA Aaa 19,755 Massachusetts State, HFA, Housing Revenue Refunding
Bonds (Insured Rental), AMT, Series A, 6.75% due
7/01/2028 (b) 20,512
AAA Aaa 12,250 Massachusetts State, HFA, M/F Housing Refunding Bonds,
Series A, 6.15% due 7/01/2018 (e) 12,497
AAA Aaa 5,500 Massachusetts State Industrial Finance Agency Revenue
Bonds (Brandeis University), Series C, 6.80% due
10/01/2019 (e) 5,912
AAA Aaa 3,250 Massachusetts State Port Authority Revenue Bonds, 13%
due 7/01/2013 (c) 5,467
AAA Aaa 5,000 Massachusetts State Water Resources, General Authority,
Series A, 5.60% due 11/01/2026 (h) 4,928
<PAGE>
Michigan--3.4% AAA Aaa 10,900 Detroit, Michigan, Water Supply System Revenue Bonds,
INFLOS, 8.769% due 7/01/2002 (a) (d) (h) 12,985
AAA Aaa 2,000 Kalamazoo, Michigan, Hospital Finance Authority, Hospital
Facility Revenue Refunding and Improvement Bonds
(Bronson Methodist), 5.875% due 5/15/2026 (e) 2,037
AAA Aaa 5,000 Kent, Michigan, Finance Authority, Health Care Revenue
Bonds (Butterworth Health Systems), Series A, 5.625% due
1/15/2026 (e) 4,905
AAA Aaa 6,915 Michigan State, HDA, Rental Housing Revenue Bonds,
Series B, 6.15% due 10/01/2015 (e) 7,069
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) 10,868
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) 18,292
AAA Aaa 9,745 Series I-B, 7.50% due 9/01/2019 (b) 10,702
Oxford, Michigan, Area Community School District (Building
and Site), UT (h):
AAA Aaa 6,300 5.50% due 5/01/2021 6,192
AAA Aaa 5,000 5.40% due 5/01/2025 4,845
Mississippi-- AAA Aaa 1,320 Harrison County, Mississippi, Wastewater Management
0.1% District, Revenue Refunding Bonds (Wastewater Treatment
Facilities), Series A, 8.50% due 2/01/2013 (h) 1,748
Missouri--0.2% AAA Aaa 3,500 Sikeston, Missouri, Electric Revenue Refunding Bonds,
6.25% due 6/01/2002 (a) (e) 3,845
Nebraska--0.6% Nebraska Public Power District Revenue Bonds (Consumer),
Series A (e):
AAA Aaa 4,000 5.25% due 1/01/2022 3,813
AAA Aaa 9,000 Refunding, 6.125% due 1/01/2015 9,408
Nevada--2.4% A1+ VMIG1++ 2,000 Clark County, Nevada, Airport Improvement Revenue
Refunding Bonds, VRDN, Series A, 1% due 7/01/2012 (e) (f) 2,000
AAA Aaa 5,000 Washoe County, Nevada, Airport Authority, System
Improvement Revenue Bonds, Series A, 5.70% due
7/01/2026 (e) 5,013
AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power), AMT, 6.65% due 6/01/2017 (e) 48,661
<PAGE>
New Jersey--4.4% AAA Aaa 3,350 Cape May County, New Jersey, Industrial Pollution
Control Financing Authority Revenue Bonds (Atlantic City
Electric Company), Series A, Refunding, 6.80% due 3/01/2021 (e) 3,958
AAA Aaa 28,750 New Jersey EDA, Natural Gas Facilities Revenue Refunding
Bonds, Series A (NUI Corp.), 6.35% due 10/01/2022 (b) 30,955
New Jersey EDA, Water Facilities Revenue Refunding Bonds:
A1 Aaa 6,000 3.75% due 11/01/2025 6,000
A1 Aaa 10,000 3.40% due 11/01/2026 10,000
A1+ VMIG1++ 1,900 New Jersey Sports and Exposition Authority Revenue
Bonds (State Contract), VRDN, Series C, 3.90% due
9/01/2024 (e) (f) 1,900
AAA Aaa 23,890 New Jersey State Housing and Mortgage Finance Agency,
Home Buyer Revenue Bonds, AMT, Series M, 7% due
10/01/2026 (e) 25,450
New Jersey State Housing and Mortgage Finance Agency
Revenue Bonds (Home Buyer), AMT (e):
AAA Aaa 5,640 Series B, 7.90% due 10/01/2022 5,929
AAA Aaa 10,270 Series D, 7.70% due 10/01/2029 10,703
AAA VMIG1++ 6,400 New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds, VRDN, Series D, 3.75% due 1/01/2018 (f) (h) 6,400
New York--9.1% AAA Aaa 9,650 Metropolitan Transportation Authority, New York,
Service Contract Refunding Bonds (Transportation
Facilities), Series L, 7.50% due 7/01/2017 (b) 10,272
New York City, New York, GO, UT:
AAA Aaa 15,000 Series B, 6.25% due 8/15/2008 (b) 16,305
AAA Aaa 1,550 Series C, Subseries C-1, 6.625% due 8/01/2002 (a) (e) 1,733
AAA Aaa 8,175 Series E, 6% due 8/01/2027 (h) 8,750
AAA Aaa 13,770 Series G, 6% due 10/15/2007 (b) 14,752
New York City, New York, GO, UT, Series I (b):
AAA Aaa 4,505 7.25% due 8/15/2013 4,851
AAA Aaa 2,645 7.25% due 8/15/2013 2,862
AAA Aaa 10,130 7.25% due 8/15/2016 10,962
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds:
AAA Aaa 1,090 Series A, 6.75% due 6/15/1999 (a) (h) 1,171
AAA Aaa 17,500 Series B, 5.75% due 6/15/2026 (e) 17,609
AAA Aaa 5,010 Series C, 6.20% due 6/15/2021 (b) 5,258
New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds,
VRDN (f) (h):
A1+ VMIG1++ 9,700 Series C, 4.25% due 6/15/2022 9,700
A1+ VMIG1++ 18,200 Series C, 4.25% due 6/15/2023 18,200
A1+ VMIG1++ 3,800 Series G, 4.20% due 6/15/2024 3,800
AAA Aaa 1,500 New York City, New York, Refunding, UT, Series E,
<PAGE> 6.20% due 8/01/2008 (e) 1,651
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 15,705 (City University Systems Consolidation), Third
Generation, Series 1, 5.375% due 7/01/2025 (b) 15,140
AAA Aaa 2,500 (City University), Third Generation Reserves,
Series 2, 6.25% due 7/01/2019 (e) 2,634
AAA Aaa 31,650 New York State Energy Research and Development Authority,
Gas Facilities Revenue Refunding Bonds (Brooklyn Union Gas
Company), Series A, 5.50% due 1/01/2021 (e) 31,112
AAA Aaa 3,085 New York State Medical Care Facilities Finance Agency,
Revenue Improvement Bonds (Mental Health Services),
Series C, 7.375% due 8/15/2019 (e) 3,350
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) 9,686
AAA Aaa 11,000 New York State Thruway Authority, Highway and Bridge
Trust Fund, Series B, 5.125% due 4/01/2015 (e) 10,552
Niagara Falls, New York, Public Improvement Bonds, UT (e):
AAA Aaa 2,975 6.90% due 3/01/2023 3,352
AAA Aaa 3,190 6.90% due 3/01/2024 3,594
Ohio--0.9% 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) 3,056
AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds,
First Mortgage, Series A, 7% due 11/15/2004 (a) (e) 14,034
AAA Aaa 3,495 Ohio State Water Development Authority, Revenue
Refunding Bonds (Cincinnati Gas), Series A, 5.45% due
1/01/2024 (e) 3,413
Oklahoma--1.8% AAA Aaa 5,500 Central Oklahoma, Transportation and Packaging Authority,
Revenue Refunding Packaging Systems, 5.25% due 7/01/2016 (i) 5,299
AAA Aaa 7,500 Oklahoma State Industrial Authority, Hospital
Revenue Bonds (Baptist Medical Center), Series A,
7% due 8/15/2000 (a) (b) 8,287
AAA Aaa 4,750 Oklahoma State Industries Authority Revenue Refunding
Bonds, Health Services (Integris Baptist), 5% due
8/15/2014 (b) 4,413
AAA Aaa 21,560 Tulsa, Oklahoma, Industrial Authority, Hospital
Revenue Bonds (Saint John's Medical Center, Inc.),
7.25% due 12/01/1999 (a) (e) 23,710
</TABLE>
<PAGE>
<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>
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) $ 4,491
AAA Aaa 135 7.10% due 7/01/2021 148
Pennsylvania-- Allegheny County, Pennsylvania, Hospital Development
6.7% Authority Revenue Bonds (b):
AAA Aaa 1,750 (Mercy Hospital of Pittsburgh), 6.75% due 4/01/2001 (a) 1,928
AAA Aaa 11,065 Refunding (Pittsburgh Mercy Health System), 5.625%
due 8/15/2026 10,868
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) 7,258
AAA Aaa 3,365 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio
Edison Company/Mansfield), Series A, 7% due 6/01/2021 (h) 3,693
AAA Aaa 5,300 Lehigh County, Pennsylvania, General Purpose Authority
Revenue Bonds (Lehigh Valley Hospital), Series B, 5.625%
due 7/01/2025 (e) 5,193
Pennsylvania State Higher Educational Assistance Agency,
Student Loan Revenue Bonds, AMT, RIB (d):
AAA Aaa 15,000 9.54% due 9/03/2026 (b) 17,212
AAA Aaa 8,000 Series B, 10.99% due 3/01/2020 (e) 9,330
AAA Aaa 18,600 Series B, 8.209% due 3/01/2022 (b) 19,181
Pennsylvania State Higher Educational Facilities
Authority, College and University Revenue Bonds:
AAA Aaa 1,500 (Bryn Mawr College), 6.50% due 12/01/2009 (h) 1,606
AAA Aaa 4,250 (Temple University), First Series, 6.50% due 4/01/2021 (e) 4,585
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) 10,279
AAA Aaa 6,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
12th Series B, 7% due 5/15/2020 (c) (e) 6,951
AAA Aaa 5,750 Philadelphia, Pennsylvania, Parking Authority, Airport
Parking Revenue Bonds, 7.375% due 9/01/2018 (b) 6,136
Philadelphia, Pennsylvania, School District, Series B (b):
AAA Aaa 5,000 5.50% due 9/01/2015 4,948
AAA Aaa 20,000 5.50% due 9/01/2025 19,631
AAA Aaa 4,020 Philadelphia, Pennsylvania, Water and Wastewater Revenue
Bonds, 5.60% due 8/01/2018 (e) 3,970
AAA Aaa 2,000 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water
and Sewer System Revenue Refunding Bonds, Series A, 6% due
9/01/2001 (a) (h) 2,130
AAA Aaa 15,870 Somerset County, Pennsylvania, General Authority, Commonwealth
Lease Revenue Bonds, 6.25% due 10/15/2001 (a) (h) 17,103
<PAGE>
Rhode Island-- AAA Aaa 6,100 Rhode Island Depositors Economic Protection Corporation,
1.0% Special Obligation Bonds, Series A, 6.625% due 8/01/2002 (a) (i) 6,813
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) 1,467
AAA Aaa 12,800 (Rhode Island Hospital), INFLOS, 9.968% due 8/15/2001
(a) (d) (h) 15,088
South AAA Aaa 5,000 Florence County, South Carolina, Hospital Revenue Bonds
Carolina--1.2% (McLeod Regional Medical Center Project), 6.75% due
11/01/2020 (h) 5,443
AAA Aaa 4,000 Piedmont, South Carolina, Municipal Power Agency,
Electric Revenue Refunding Bonds, 6.30% due 1/01/2022 (e) 4,247
AAA Aaa 17,090 South Carolina State Public Service Authority Revenue
Refunding Bonds, Series A, 6.375% due 7/01/2021 (b) 18,128
Tennessee--0.1% AAA Aaa 1,905 Jackson, Tennessee, Water and Sewer System Revenue
Bonds, 10.375% due 7/01/2012 (b) 2,198
Texas--12.7% AAA Aaa 11,190 Austin, Texas, Utility System, Combined Revenue Bonds,
Prior Lien, 9.25% due 5/15/2004 (a) (e) 14,349
Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT:
AAA Aaa 6,000 Refunding, 6.50% due 12/01/2027 (b) 6,456
AAA Aaa 12,000 Series B, 6.625% due 6/01/2022 (h) 12,867
AAA Aaa 13,900 Brazos River Authority, Texas, Revenue Refunding
Bonds (Houston Light and Power Co.), Series B,
7.20% due 12/01/2018 (h) 15,135
AAA Aaa 20,000 Brownsville, Texas, Utility System, Revenue Refunding
Bonds, 6.25% due 9/01/2014 (e) 21,822
AAA Aaa 5,000 Harris County, Texas, Hospital District Mortgage,
Revenue Refunding Bonds, 7.40% due 2/15/2010 (b) 6,017
Harris County, Texas, Refunding Bonds (e) (k):
AAA Aaa 9,630 (Permanent Improvement), 6% due 10/01/2015 3,321
AAA Aaa 17,545 UT, 6% due 10/01/2015 6,050
Harris County, Texas, Toll Road Revenue Bonds, Senior Lien:
AAA Aaa 11,955 Refunding, 5% due 8/15/2016 (h) 11,080
AAA Aaa 10,305 Refunding, Series A, 6.50% due 8/15/2011 (a) (h) 11,488
AAA Aaa 20,430 Refunding, Series A, 6.50% due 8/15/2017 (a) (b) 22,776
AAA Aaa 2,750 Series A, 6.50% due 8/15/2017 (b) 3,004
AAA Aaa 11,100 Series A, 6.375% due 8/15/2024 (e) 12,032
AAA Aaa 1,695 Harris County, Texas, Toll Road Bonds, Series A, 6.50%
<PAGE> due 8/15/2011 (h) 1,852
Houston, Texas, Water and Sewer System Revenue Bonds,
Junior Lien, Series A:
AAA Aaa 9,375 6.375% due 12/01/2022 (e) 10,038
AAA Aaa 19,770 Refunding, 6.125% due 12/01/2015 (e) 20,673
AAA Aaa 18,000 Refunding, 5.375% due 12/01/2018 (h) 17,469
AAA Aaa 8,000 Refunding, 6.20% due 12/01/2023 (e) 8,430
AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract,
COP, Series J, 6.25% due 12/15/2013 (b) 3,811
AAA Aaa 650 Lower Colorado River Authority, Texas, Revenue
Refunding Bonds, Series B, 7% due 1/01/2001 (a) (b) 722
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) 5,492
Matagorda County, Texas, Navigation District No. 1,
Revenue Refunding Bonds (Houston Light and Power Co.):
AAA Aaa 11,800 Series A, 6.70% due 3/01/2027 (b) 12,936
AAA Aaa 26,305 Series C, 7.125% due 7/01/2019 (h) 28,352
A1 Aaa 5,700 North Central, Texas, Health Facility Development Corp.,
Revenue Bonds (Methodist Hospital, Dallas), VRDN, Series B,
4.25% due 10/01/2015 (f) (g) 5,700
AAA Aaa 4,950 Potter County, Texas, Industrial Development Corp.,
PCR Refunding (Southwestern Public Service Co. Project),
5.75% due 9/01/2016 (b) 5,013
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) 15,826
AAA Aaa 3,150 Texas State Municipal Power Agency, Revenue Refunding
Bonds, Series A, 6.75% due 9/01/2012 (b) 3,464
AAA Aaa 5,000 Texas State Turnpike Authority, Dallas North Thruway
Revenue Bonds (President George Bush Turnpike), 5.25% due
1/01/2023 (h) 4,775
Utah--2.3% A1+ VMIG1++ 2,500 Emery County, Utah, PCR, Refunding (Pacificorp Projects),
VRDN, 4.20% due 11/01/2024 (b) (f) 2,500
AAA Aaa 20,000 Intermountain Power Agency, Utah, Power Supply Revenue
(Special Obligation Sixth), Series B, 6% due 7/01/2016 (b) 20,654
AAA Aaa 10,300 Murray City, Utah, Hospital Revenue Bonds (IHC Health
Services Inc.), 5% due 5/15/2022 (e) 9,377
AAA Aaa 14,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 9.515% due 5/15/2020 (b) (d) 16,292
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) 1,238
AAA Aaa 2,650 Utah State Board of Regents, Student Loan Revenue Bonds,
AMT, Series F, 7.45% due 11/01/2008 (b) 2,801
<PAGE>
Vermont--0.9% AAA Aaa 18,950 Vermont HFA, Home Mortgage Purchase Bonds, AMT, Series B,
7.60% due 12/01/2024 (e) 19,896
Virginia--3.0% AAA Aaa 5,000 Danville, Virginia, IDA, Hospital Revenue Refunding Bonds
(Danville Regional Medical Center), 6.50% due 10/01/2019 (h) 5,377
AAA Aaa 5,000 Prince William County, Virginia, Service Authority, Water
and Sewer System Revenue Bonds, 6.50% due 7/01/2001 (a) (h) 5,500
AAA Aaa 25,000 Upper Occoquan, Virginia, Sewer Authority Regional Sewer
Revenue Bonds, Series A, 4.75% due 7/01/2029 (e) 21,802
Virginia State, HDA, Commonwealth Mortgage, AMT,
Series A, Sub-Series A-4 (e):
AAA Aaa 5,000 6.30% due 7/01/2014 5,168
AAA Aaa 11,215 6.35% due 7/01/2018 11,446
AAA Aaa 19,000 6.45% due 7/01/2028 19,512
</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>
Washington--3.7% AAA Aaa $ 13,720 Port Seattle, Washington, Revenue Bonds, Series A,
5.50% due 9/01/2021 (h) $ 13,340
Seattle, Washington, Metropolitan Seattle Municipality,
Sewer Revenue Bonds, Series W (e):
AAA Aaa 3,730 6.25% due 1/01/2020 3,921
AAA Aaa 2,465 6.25% due 1/01/2022 2,591
AAA Aaa 4,485 6.25% due 1/01/2023 4,715
AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power Revenue
Bonds, 6.625% due 7/01/2020 (h) 37,149
AAA Aaa 10,000 Seattle, Washington, Solid Waste Utility, Revenue Refunding
Bonds, Series A, 6.875% due 5/01/2009 (g) 10,686
University of Washington, University Revenue Bonds
(Housing and Dining ):
A A2 185 7% due 12/01/2001 (a) 208
AAA Aaa 2,600 7% due 12/01/2001 (a) (e) 2,933
AAA Aaa 465 7% due 12/01/2021 (e) 518
AAA Aaa 7,000 Washington State, Health Care Facilities Authority
Revenue Bonds (Southwest Washington Hospital--Vancouver),
7.125% due 10/01/2019 (g) 7,578
<PAGE>
West AAA Aaa 27,250 Marshall County, West Virginia, PCR, Refunding
Virginia--2.3% (Ohio Power Company--Kammer Plant Project), Series B,
5.45% due 7/01/2014 (e) 27,189
AAA Aaa 11,465 Mason County, West Virginia, PCR, Refunding (Appalachian
Power Co.), Series I, 6.85% due 6/01/2022 (e) 12,687
AAA Aaa 12,250 Pleasants County, West Virginia, PCR (Potomac Pleasants),
Series 95-C, 6.15% due 5/01/2015 (b) 12,772
Wisconsin--3.4% AAA Aaa 9,000 Superior, Wisconsin, Limited Obligation Revenue Refunding
Bonds (Midwest Energy Resources), Series E, 6.90% due
8/01/2021 (h) 10,646
AAA Aaa 6,500 Wisconsin Public Power System Inc., Power Supply System
Revenue Bonds, Series A, 6.875% due 7/01/2001 (a) (b) 7,246
Wisconsin State Health and Educational Facilities Authority
Revenue Bonds:
AAA Aaa 17,490 (Aurora Medical Group, Inc.), 5.75% due 11/15/2025 (i) 17,576
AAA Aaa 1,500 (Saint Luke's Medical Center Project), 7.10% due 8/15/2019 (e) 1,672
AAA Aaa 8,350 (Sinai Samaritan Medical Center Inc. Project), 5.875%
due 8/15/2026 (e) 8,479
AAA Aaa 5,655 (Waukesha Memorial), Series B, 7.25% due 8/15/2000 (a) (b) 6,296
Wisconsin State Veterans Housing Loans, AMT, Series B (e):
AAA Aaa 7,920 6.50% due 5/01/2020 8,536
AAA Aaa 17,130 6.50% due 5/01/2025 17,900
Wyoming--0.1% A1 VMIG1++ 3,000 Lincoln County, Wyoming, PCR, Refunding
(Pacificorp Projects), VRDN, 4.25% due 11/01/2024 (b) (f) 3,000
Total Investments (Cost--$2,134,880)--99.4% 2,268,908
Other Assets Less Liabilities--0.6% 14,480
-----------
Net Assets--100.0% $ 2,283,388
===========
<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 December 31, 1996.
(e)MBIA Insured.
(f)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at December 31, 1996.
(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.
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> <S> <S> <C>
Alabama--0.4% AAA Aaa $ 5,000 Alabama Agricultural and Mechanical University
Revenue Bonds, 6.50% due 11/01/2025 (f) $ 5,519
Alaska--2.5% Valdez, Alaska, Marine Terminal Revenue Refunding Bonds:
AA Aa2 6,000 (British Petroleum Pipeline), Series B, 7%
due 12/01/2025 6,589
AA Aa3 27,150 (Sohio Pipeline--British Petroleum Oil), 7.125%
due 12/01/2025 30,142
California--5.7% 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 6,185
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) 12,210
AAA Aaa 20,000 Central Coast Water Authority, California, Revenue
Bonds (State Water Project Regional Facilities),
6.60% due 10/01/2002 (c) (j) 22,590
NR* NR* 4,000 Long Beach, California, Special Tax Community
Facilities (District No. 3--Pine Avenue), 6.375%
due 9/01/2023 3,907
A NR* 8,975 Palmdale, California, Civic Authority, Revenue
Refunding Bonds (Merged Redevelopment Project), Series A,
6.60% due 9/01/2034 9,775
AAA Aaa 20,000 San Diego, California, Public Facilities Financing
Authority, Sewer Revenue Bonds, 5% due 5/15/2020 (e) 18,543
AAA Aaa 10,000 San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, 5.50% due 7/01/2020 (e) 9,832
Colorado--3.3% Denver, Colorado, City and County Airport Revenue
Bonds, AMT:
BBB Baa 3,000 Series A, 7.50% due 11/15/2023 3,323
BBB Baa 8,570 Series A, 8% due 11/15/2025 9,567
BBB Baa 13,000 Series B, 7.25% due 11/15/2023 14,031
BBB Baa 5,650 Series C, 6.75% due 11/15/2022 5,923
BBB Baa 13,150 Series D, 7.75% due 11/15/2021 14,588
<PAGE>
Connecticut-- AA- Baa1 4,550 Connecticut State Resource Recovery Authority,
0.3% Resource Recovery Revenue Bonds (American Refunding Fuel),
AMT, Series A, 8% due 11/15/2015 4,914
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) 8,597
District of A+ A1 3,750 District of Columbia Revenue Bonds (Georgetown University),
Columbia--0.3% RIB, 9.076% due 4/01/2022 (k) 4,209
Florida--3.5% AAA Aaa 6,330 Florida HFA (Antigua Club Apartments), AMT, Series A-1,
7% due 2/01/2035 (c) 6,725
NR* Aaa 8,860 Florida HFA, Home Ownership Revenue Bonds, AMT,
Series G1, 7.90% due 3/01/2022 (i) 9,347
AAA Aaa 7,725 Florida State Board of Education, Capital Outlay
(Public Education), Refunding, Series A, 7.25% due
6/01/2000 (j) 8,580
AAA Aaa 5,000 Florida State Municipal Power Agency Revenue Bonds
(Stanton II Project), 6.50% due 10/01/2002 (c) (j) 5,583
AA Aa3 5,000 Hillsborough County, Florida, IDA, PCR, Refunding
(Tampa Electric Company Project), Series 91, 7.875%
due 8/01/2021 5,723
AAA NR* 2,700 Leesburg, Florida, Hospital Revenue Capital Improvement
Bonds (Leesburg Regional Medical Center Project),
Series 91-A, 7.50% due 7/01/2002 (j) 3,129
AAA NR* 4,610 Orange County, Florida, HFA, Mortgage Revenue Bonds,
AMT, Series A, 8.375% due 3/01/2021 (i) 4,913
AAA Aaa 5,850 South Broward, Florida, Hospital District, RIB,
Series C, 9.592% due 5/01/2001 (c) (j) (k) 7,042
</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> <S> <S> <C>
Georgia--4.1% AAA Aaa $ 20,000 Atlanta, Georgia, Water and Sewer Revenue Refunding
Bonds, 4.75% due 1/01/2023 (e) $ 17,612
Metropolitan Atlanta, Georgia, Rapid Transit Authority,
Sales Tax Revenue Bonds:
AAA Aaa 10,000 Refunding, Second Indenture, Series A, 5.50% due
7/01/2018 (f) 9,839
AAA Aaa 20,000 Second Indenture, Series A, 6.90% due 7/01/2004 (f) (j) 23,147
AA- A1 7,500 Series O, 6.55% due 7/01/2001 (j) 8,262
Idaho--0.1% AA NR* 1,970 Idaho Housing Agency, S/F Mortgage, AMT, Series E,
7.875% due 7/01/2024 (b) 2,074
Illinois--6.3% AA- Aa3 8,000 Chicago, Illinois, Gas Supply Revenue Bonds (Peoples Gas,
Light & Coke Company Project), AMT, Series A, 8.10%
due 5/01/2020 8,843
Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (United Airlines, Inc.):
BB Baa2 4,760 AMT, Series B, 8.95% due 5/01/2018 5,416
BB Baa2 13,835 Series 84-B, 8.85% due 5/01/2018 15,724
AAA Aaa 5,015 Chicago, Illinois, Public Building Commission, Building
Revenue Bonds (Community College District No. 508),
Series B, 8.75% due 1/01/1997 (d) (j) 5,115
A+ Aa 5,250 Illinois HDA, Residential Mortgage Revenue Bonds, RIB, AMT,
Series C-2, 9.613% due 2/01/2018 (k) 5,644
Illinois Health Facilities Authority Revenue Bonds:
NR* VMIG1++ 1,600 (Central Dupage Healthcorp, Project), VRDN, 4.25% due
11/01/2020 (a) 1,600
AAA Aaa 1,500 (Methodist Health Project), RIB, 9.831% due 5/01/2021 (c) (k) 1,744
BBB NR* 2,625 Refunding (Saint Elizabeth's Hospital--Chicago), 7.75%
due 7/01/2016 2,897
AAA Aaa 11,000 (Rush Presbyterian--Saint Luke's Medical Center),
INFLOS, 9.88% due 10/01/2024 (f) (k) 12,815
Regional Transportation Authority, Illinois:
AAA Aaa 19,695 Series A, 6.125% due 6/01/2022 (c) 20,079
AAA Aaa 5,950 UT, Series D, 6.75% due 6/01/2004 (e) (j) 6,811
NR* A1 4,400 Southwestern Illinois Development Authority, Sewer
Facilities Revenue Bonds (Monsanto Company Project),
AMT, 7.30% due 7/15/2015 4,801
<PAGE>
Indiana--2.9% NR* Aaa 9,500 Indiana State Educational Facilities Authority Revenue
Bonds (University of Notre Dame Project), 6.70% due 3/01/2025 10,498
BBB Baa2 2,900 Indianapolis, Indiana, Airport Facility Revenue Refunding
Bonds (Federal Express Corporation Project), 6.80% due 4/01/2017 3,077
Indianapolis, Indiana, Local Public Improvement Bond Bank:
A+ NR* 9,100 Refunding, Series D, 6.75% due 2/01/2020 9,871
NR* Aaa 11,160 Series C, 6.70% due 1/01/2002 (j) 12,428
AA- Aa2 5,950 Petersburg, Indiana, PCR, Refunding (Indianapolis Power &
Light Company Project), 6.625% due 12/01/2024 6,410
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 10,564
Kansas--2.5% AAA Aaa 10,000 Kansas City, Kansas, Utility System Revenue Refunding
and Improvement Bonds, 6.375% due 9/01/2023 (e) 10,773
Wichita, Kansas, Hospital Revenue Bonds, RIB (f) (k):
AAA Aaa 12,000 Series III-A, 8.894% due 10/01/2017 13,785
AAA Aaa 10,000 Series III-B, 9.026% due 10/21/2022 11,488
Kentucky--1.4% NR* VMIG1++ 8,900 Perry County, Kentucky, Healthcare System Revenue Bonds
(Appalachian Regional Hospital), VRDN, 4.25% due 8/01/2014 (a) 8,900
NR* NR* 4,500 Perry County, Kentucky, Solid Waste Disposal Revenue
Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,668
AA Aa2 6,345 Trimble County, Kentucky, PCR (Louisville Gas and
Electric Company), AMT, Series A, 7.625% due 11/01/2020 6,971
Louisiana--4.0% 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 43,071
Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project):
BB NR* 3,000 7.50% due 7/01/2013 3,221
BB NR* 10,000 6.50% due 1/01/2017 10,067
BBB Baa2 1,100 Saint Charles Parish, Louisiana, PCR (Union Carbide
Project), AMT, 7.35% due 11/01/2022 1,167
Maine--0.3% AA- Aa 3,815 Maine State Housing Authority, Mortgage Purchase, AMT,
Series B-4, 6.90% due 11/15/2026 3,968
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 7,684
<PAGE>
Massachusetts-- AAA Aaa 8,000 Massachusetts Bay Transportation Authority,
5.9% Series B, 7.875% due 3/01/2001 (j) 9,179
Massachusetts State, HFA, Revenue Bonds (Residential
Development), Series C (l):
AAA Aaa 5,000 6.875% due 11/15/2011 5,315
AAA Aaa 7,500 6.90% due 11/15/2021 7,942
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
NR* NR* 2,000 (Endicott College), VRDN, Series A, 3.95% due
10/01/2011 (a) 2,000
AAA NR* 9,320 (North Adams Regional Hospital), Series A, 9.625%
due 7/01/1999 (j) 10,670
NR* B 12,350 Refunding (New England Memorial Hospital), Series B,
6.25% due 7/01/2023 9,724
NR* NR* 1,953 Massachusetts State Industrial Finance Agency Revenue
Bonds (Lower Mills Association II L.P.), VRDN,
3.95% due 12/01/2020 (a) 1,953
Massachusetts State Water Resource Authority:
AAA Aaa 6,250 Series A, 6.75% due 7/15/2002 (j) 7,036
AAA Aaa 35,000 Series B, 5% due 12/01/2025 (f) 31,914
Michigan--2.9% Michigan State Finance Authority, Hospital Revenue
Bonds (Detroit Medical Center), Series A:
A A 3,500 7.50% due 8/15/2011 3,844
A A 6,500 Refunding (Obligation Group), 6.50% due 8/15/2018 6,800
AAA Aaa 15,000 Michigan State Hospital Finance Authority (Sisters of
Mercy), INFLOS, 8.767% due 2/15/2022 (h) (k) 16,313
BBB Baa1 9,350 Monroe County, Michigan, PCR (Detroit Edison Company
Project), AMT, Series A, 7.75% due 12/01/2019 10,125
AA Aaa 5,000 Royal Oak, Michigan, Hospital Finance Authority
Revenue Bonds (William Beaumont Hospital), Series D,
6.75% due 1/01/2001 (j) 5,499
Minnesota--1.3% Minnesota State, HFA, S/F Mortgage:
AA+ Aa 6,090 AMT, Series A, 7.45% due 7/01/2022 (b) 6,386
AA+ Aa 4,250 Series F, 6.30% due 7/01/2025 4,373
AAA NR* 8,280 Saint Paul, Minnesota, Housing and Redevelopment Authority,
S/F Mortgage Revenue Refunding Bonds, Series C, 6.95%
due 12/01/2031 (l) 8,621
Mississippi--0.9% BBB Baa 5,950 Lowndes County, Mississippi, Hospital Revenue Refunding
Bonds (Golden Triangle Medical Center), 8.50% due 2/01/2010 6,613
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) 4,396
<PAGE>
Missouri & BBB+ NR* 11,400 Bi-State Development Agency, Missouri and Illinois,
Illinois--0.9% Metropolitan No. 5, Refunding (American Commonwealth
Lines, Inc.), 7.75% due 6/01/2010 12,515
Nebraska--0.3% Nebraska Investment Finance Authority, S/F Mortgage Revenue
Bonds, AMT, Series 2, RIB (i) (k):
AAA Aaa 100 7.631% due 9/10/2030 106
AAA Aaa 3,700 11.429% due 9/10/2030 4,130
Nevada--0.9% AAA Aaa 8,980 Clark County, Nevada, GO, Public Safety, 5.25% due 6/01/2017 (e) 8,653
AAA Aaa 3,500 Washoe County, Nevada, Gas and Water Facilities Revenue
Refunding Bonds (Sierra Pacific), 6.30% due 12/01/2014 (c) 3,705
New Hampshire-- A+ Aa 2,790 New Hampshire State, HFA, S/F Residential Mortgage, AMT,
0.2% 7.90% due 7/01/2022 2,935
New Jersey--1.7% NR* NR* 6,595 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (Riverwood Center), Series A, 9.90%
due 7/01/2021 7,364
AAA Aaa 8,300 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 104th Series, 3rd Installment,
4.75% due 1/15/2026 (c) 7,293
AA A3 9,500 University of Medicine and Dentistry of New Jersey,
Series C, 7.20% due 12/01/1999 (j) 10,434
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <S> <S> <C>
New York--12.5% Metropolitan Transportation Authority, New York, Service
Contract Refunding Bonds (Commuter Facilities),
Series 5:
BBB Baa1 $ 2,145 6.90% due 7/01/2006 $ 2,335
BBB Baa1 5,000 7% due 7/01/2012 5,415
New York City, New York, GO, UT:
AAA Aaa 4,570 Series A, 7.75% due 8/15/2001 (j) 5,262
BBB+ Baa1 1,685 Series A, 7.75% due 8/15/2016 1,879
BBB+ Baa1 1,410 Series A, 7.75% due 8/15/2017 1,573
BBB+ Baa1 5,375 Series B, 8.25% due 6/01/2006 6,405
BBB+ Baa1 2,700 Series B, 8.25% due 6/01/2007 3,238
<PAGE> BBB+ Baa1 10,000 Series B, Fiscal 92, 7.75% due 2/01/2011 11,198
BBB+ Baa1 4,500 Series B, Fiscal 92, 7.75% due 2/01/2012 5,039
BBB+ Baa1 2,875 Series B, Fiscal 92, 7.75% due 2/01/2013 3,220
BBB+ Baa1 1,650 Series B, Fiscal 92, 7.75% due 2/01/2014 1,848
BBB+ Aaa 3,495 Series D, Group C, 8% due 8/01/2001 (j) 4,052
AAA Aaa 1,865 Series D, 7.70% due 2/01/2002 (j) 2,160
BBB+ Baa1 4,500 Series D, 6.50% due 2/15/2006 4,802
BBB+ Aaa 5,495 Series F, 8.25% due 11/15/2001 (j) 6,473
NR* NR* 5,000 New York City, New York, IDA, Revenue Bonds (Visy Paer Inc.
Project), AMT, 7.95% due 1/01/2028 5,321
A1+ VMIG1++ 1,300 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN, Series C,
4.25% due 6/15/2023 (a) (e) 1,300
New York State Dormitory Authority Revenue Bonds (State
University Educational Facilities):
BBB+ Baa1 5,500 5.50% due 5/15/2026 5,165
BBB+ Baa1 6,735 Refunding, Series B, 7.375% due 5/15/2014 7,363
BBB+ Baa1 2,000 Refunding, Series B, 7% due 5/15/2016 2,142
BBB+ Baa1 6,500 Series A, 7.50% due 5/15/2013 7,835
A Aa 21,500 New York State Environmental Facilities Corporation,
PCR (State Water Revolving Fund), Series E, 6.50% due 6/15/2014 23,078
New York State Local Government Assistance Corporation:
A A 6,000 Series A, 7% due 4/01/2002 (j) 6,784
AAA Aaa 10,150 Series B, 7.50% due 4/01/2001 (j) 11,538
A A 10,000 Series C, 6.25% due 4/01/2018 10,479
AAA Aaa 5,000 Series D, 7% due 4/01/2002 (j) 5,671
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 9,275
AAA Aaa 9,100 6.80% due 8/15/2024 10,123
BBB Baa1 10,000 New York State Urban Development Corporation Revenue
Bonds (Correctional Capital Facilities), Series 6,
5.375% due 1/01/2025 9,234
A+ Aa 1,000 Triborough Bridge and Tunnel Authority, New York,
General Purpose Revenue Bonds, Series X, 6.50% due
1/01/2019 1,079
North A1+ NR* 1,000 Raleigh-Durham, North Carolina, Airport Authority,
Carolina--0.1% Special Facilities Revenue Refunding Bonds
(American Airlines), VRDN, Series B, 4.25% due 11/01/2015 (a) 1,000
North Dakota-- AAA Aaa 4,000 Fargo, North Dakota, Health System Revenue Refunding
0.3% Bonds (Meritcare Obligated Group), Series A,
5.375% due 6/01/2027 (f) 3,758
<PAGE>
Ohio--2.3% AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds,
First Mortgage, Series A, 7% due 11/15/2004 (f) (j) 14,034
NR* VMIG1++ 500 Cuyahoga County, Ohio, Hospital Revenue Improvement Bonds
(Cleveland University Hospital), VRDN, 4.20% due 1/01/2016 (a) 500
Ohio HFA, S/F Mortgage Revenue Bonds, AMT (i):
AAA Aaa 9,550 RIB, Series B-4, 9.849% due 3/31/2031 (k) 10,469
AAA NR* 2,055 Series B, 8.25% due 12/15/2019 2,172
AAA NR* 4,295 Series C, 7.85% due 9/01/2021 4,550
BB Ba2 1,300 Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Cleveland Electric Illuminating
Company), 7.70% due 8/01/2025 1,408
Pennsylvania-- A1 VMIG1++ 1,620 Allegheny County, Pennsylvania, Hospital Development
4.7% Authority Revenue Bonds (Presbyterian Health
Center), VRDN, Series B, 3.90% due 3/01/2020 (a) (f) 1,620
A1 NR* 8,000 Emmaus, Pennsylvania, General Authority Revenue Bonds,
VRDN, Sub-Series C-8, 4.20% due 3/01/2024 (a) 8,000
BBB- Baa 12,500 Pennsylvania Convention Center Authority, Revenue
Refunding Bonds, Series A, 6.75% due 9/01/2019 13,483
Pennsylvania HFA, Refunding:
AAA Aaa 7,850 (Rental Housing), 6.50% due 7/01/2023 (l) 8,108
AA Aa 8,800 RIB, AMT, Series 1991-31C, 9.964% due 10/01/2023 (k) 9,746
AAA Aaa 10,000 Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue Bonds, RIB, AMT, 9.54% due
9/03/2026 (c) (k) 11,475
NR* NR* 5,970 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds (Eastern College), Series B,
8% due 10/15/2025 6,341
A1+ NR* 1,200 Pennsylvania State Higher Educational Facilities Authority,
Revenue Refunding Bonds (Carnegie Mellon University),
VRDN, Series C, 4.25% due 11/01/2029 (a) 1,200
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) 5,341
AAA Aaa 2,500 York County, Pennsylvania, Hospital Authority Revenue Bonds
(York Hospital), 7% due 1/01/2001 (c) (j) 2,772
Rhode Island-- AAA Aaa 5,250 Rhode Island Depositors Economic Protection Corporation,
0.4% Special Obligation Bonds, Series A, 6.95% due 8/01/2002 (j) 5,946
South Dakota-- AAA Aa1 9,085 South Dakota HDA, Homeownership Mortgage, Series A,
0.7% 7.15% due 5/01/2027 9,545
Tennessee--0.8% NR* NR* 10,000 Knox County, Tennessee, Health, Educational and
Housing Facilities Board, Hospital Facilities Revenue
Bonds (Baptist Health System of East Tennessee),
8.60% due 4/15/1999 (j) 11,093
<PAGE>
Texas--12.6% Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT, Series A:
BBB+ Baa2 2,095 8.25% due 1/01/2019 2,254
BBB+ Baa2 18,150 7.875% due 3/01/2021 19,923
A- A2 12,350 Brazos River Authority, Texas, Revenue Refunding
Bonds (Houston Light and Power), Series 1989-A,
7.625% due 5/01/2019 13,335
BBB Baa1 7,250 Gulf Coast Waste Disposal Authority, Texas, Revenue
Bonds (Champion International Corporation), AMT,
7.45% due 5/01/2026 7,822
AA Aa 19,000 Harris County, Texas, Health Facilities Development
Corporation, Health Care System Revenue Bonds
(Sisters of Charity), 7.10% due 7/01/2021 20,638
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds:
AAA Aaa 20,000 (Herman Hospital Project), 6.375% due 10/01/2024 (f) 21,326
A1+ NR* 6,000 (Methodist Hospital), VRDN, 4.25% due 12/01/2025 (a) 6,000
AA Aa 12,470 (Saint Luke's Episcopal Hospital Project), Series A,
6.75% due 2/15/2021 13,275
AAA Aaa 11,100 Harris County, Texas, Toll Road Revenue Bonds, Senior
Lein, Series A, 6.375% due 8/15/2024 (f) 12,032
AAA Aaa 10,000 Houston, Texas, Water and Sewer System Revenue Refunding
Bonds, Junior Lien, Series A, 6.20% due 12/01/2023 (f) 10,538
BB Ba1 8,095 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare System
Project), 8.875% due 6/01/2021 8,563
North Central Texas, Health Facilities Development Corporation
Revenue Bonds:
AA Aa 12,000 (Baylor University Medical Center), INFLOS, Series A,
9.949% due 5/15/2001 (j) (k) 14,505
AAA Aaa 5,000 Refunding (Presbyterian Healthcare), Series B, 5.50%
due 6/01/2021 (f) 4,856
BB Ba 6,500 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 7,010
A1 VMIG1++ 100 Sabine River Authority, Texas, PCR, Refunding (Texas
Utilities Project), VRDN, Series A, 4.25% due
3/01/2026 (a) (c) 100
A+ Aa 5,545 Texas Housing Agency, Residential Development Mortgage
Revenue Bonds, Series A, 7.50% due 7/01/2015 (i) 5,901
AA Aa 4,440 Texas State Veterans Housing Assistance (Fund II), AMT,
UT, Series A, 7% due 12/01/2025 4,680
AAA Aa1 9,500 Texas Water Development Board Revenue, State Revolving
Fund, Senior-Lien, Series B, 5.125% due 7/15/2018 9,018
</TABLE>
<PAGE>
<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> <S> <S> <C>
Utah--1.1% AA NR* $13,250 Weber County, Utah, Municipal Building Authority, Lease
Revenue Bonds, 7.50% due 12/15/2019 $ 15,495
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) 18,164
AA+ Aa1 4,000 Virginia State HDA, Commonwealth Mortgage, Series A, 7.15%
due 1/01/2033 4,148
Washington--3.3% 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) 18,875
Washington State Public Power Supply System, Revenue Refunding
Bonds (Nuclear Project No. 1):
AA- Aaa 11,000 Series A, 6.875% due 7/01/2001 (j) 12,215
AA- Aa1 15,500 Series A, 6.50% due 7/01/2015 16,219
West Virginia-- NR* NR* 4,000 Upshur County, West Virginia, Solid Waste Disposal
0.9% Revenue Bonds (TJ International Project), AMT,
7% due 7/15/2025 4,162
AA+ Aa1 8,400 West Virginia State, Housing Development Fund, Housing
Finance, Series D, 7.05% due 11/01/2024 8,860
Wisconsin--2.4% AA Aa 4,925 Wisconsin Housing and EDA, Home Ownership Revenue Bonds,
Series A, 7.10% due 3/01/2023 5,190
Wisconsin Housing and EDA, Housing Revenue Bonds:
A A1 5,400 Series B, 7.05% due 11/01/2022 5,703
A A1 5,105 Series C, 7% due 5/01/2015 5,392
Wisconsin State Health and Educational Facilities Authority
Revenue Bonds, Series B:
AAA Aaa 5,500 (Novus Health Group), 6.75% due 12/15/2020 (f) 6,037
AAA Aaa 11,400 (Wausau Hospitals Inc.), 6.70% due 8/15/2020 (c) 12,246
Total Investments (Cost--$1,321,899)--98.0% 1,416,687
Variation Margin on Financial Futures Contracts--0.0%++++ (750)
Other Assets Less Liabilities--2.0% 28,970
-----------
Net Assets--100.0% $ 1,444,907
===========
<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 December 31, 1996.
(b)FHA Insured.
(c)AMBAC Insured.
(d)BIG Insured.
(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 December 31, 1996.
(l)FNMA Collateralized.
*Not Rated.
++Highest short-term rating issued by Moody's Investors Service, Inc.
++++Financial futures contracts purchased as of December 31, 1996
were as follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Date (Note 1a)
<C> <S> <S> <C>
600 US Treasury Bonds March 1997 $67,575,000
Total Financial Futures Contracts Purchased
(Total Contract Price--$69,303,750) $67,575,000
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.2% A1+ NR* $ 1,000 Birmingham, Alabama, Medical Clinic Board Revenue
Bonds (U.A.H.S.F.), VRDN, 4.35% due 12/01/2026 (b) $ 1,000
Arizona--1.6% A1+ VMIG1++ 2,200 Maricopa County, Arizona, IDA, Hospital Facility Revenue
Bonds (Samaritan Health Service Hospital), VRDN, Series B-2,
4.20% due 12/01/2008 (b) (d) 2,200
AAA Aaa 5,000 Phoenix, Arizona, Airport Revenue Refunding Bonds,
Series A, 5.55% due 7/01/2000 (d) 5,198
Arkansas--0.9% NR* Aa 4,000 Arkansas State, Student Loan Authority Revenue Bonds,
AMT, Senior Series A-1, 5.50% due 12/01/1998 4,080
California--3.1% NR* Aa3 3,500 California Pollution Control Financing Authority,
Resource Recovery Revenue Bonds (Honey Lake Power
Project), VRDN, AMT, 4.20% due 9/01/2018 (b) 3,500
NR* VMIG1++ 11,125 San Joaquin County, California, TRAN, GO, 4.50% due 1/15/1998 11,208
Connecticut-- AAA Aaa 2,160 Bridgeport, Connecticut, Refunding, GO, UT, Series A,
2.6% 4.40% due 9/01/1998 (c) 2,174
AA- Aa 2,860 Connecticut State, GO, Series B, 4.50% due 8/15/1999 2,888
NR* Aa3 3,890 Connecticut State Housing Mortgage Revenue Bonds
(Chestnut Hill Apartments), 4.60% due 4/01/1997 3,894
NR* NR* 3,250 Waterbury, Connecticut, UT, BAN, 4.65% due 2/19/1997 3,253
Florida--0.5% NR* VMIG1++ 2,200 Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Refunding Bonds (Genesis Rehabilitation
Hospital), VRDN, 4.25% due 5/01/2021 (b) 2,200
Georgia--5.1% 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 6,363
AAA Aaa 4,000 Georgia Muncipal Electric Authority, General Power Revenue
Refunding Bonds, Series D, 6% due 1/01/2000 (c) 4,188
Georgia State, GO:
AA+ Aaa 5,000 Series C, 6.50% due 7/01/1999 5,295
AA+ Aaa 7,500 UT, Series D, 7% due 11/01/1999 8,084
<PAGE>
Illinois--10.9% AA- NR* 10,000 Chicago, Illinois, Board of Education, COP (School Reform
Equipment Acquisition), 4.60% due 12/01/1999 10,051
AAA Aaa 4,120 Chicago, Illinois, Public Commerce Building Revenue Bonds
(Chicago Board of Education), Series A, 7.75% due 1/01/1999
(a) (e) 4,484
Chicago, Illinois, School Financing Authority:
AA- Baa1 5,000 7.25% due 6/01/1998 5,121
AAA Aaa 4,500 Refunding, Series A, 5.80% due 6/01/1999 (e) 4,656
AAA Aaa 3,000 Cook County, Illinois, High School District No. 205,
Revenue Refunding Bonds (Thorton Township), UT, 5.60% due
6/01/1998 (e) (f) 3,073
AA Aa1 11,425 Cook County, Illinois, Township High School District No. 211
(Palatine & Schaumb), 4.25% due 12/01/1998 11,485
NR* VMIG1++ 1,000 Illinois Health Facilities Authority Revenue Bonds (Resurrection
Health Care System), 4.20% due 5/01/2011 1,000
Illinois State Refunding, GO, UT:
AA- A1 4,600 3.90% due 12/01/1998 4,585
AAA Aaa 3,500 5.125% due 12/01/1999 (e) 3,590
A1+ VMIG1++ 3,100 Southwestern Illinois Development Authority, Solid Waste
Disposal Revenue Bonds (Shell Oil Co.--Wood River Project),
VRDN, AMT, 4.35% due 4/01/2022 (b) 3,100
Iowa--0.3% A1+ NR* 1,400 Iowa Finance Authority, Solid Waste Disposal Revenue Bonds
(Cedar River Paper Company Project), VRDN, AMT, Series A,
4.30% due 6/01/2024 (b) 1,400
Louisiana--5.3% A1+ VMIG1++ 5,000 Louisiana State Recovery District, Sales Tax Revenue Bonds,
4.25% due 7/01/1998 (d) (f) 5,027
AAA Aaa 19,230 Louisiana State Refunding, GO, Series A, 5.50% due 8/01/1998 (e) 19,691
Massachusetts-- AAA Aaa 2,005 Massachusetts State Health and Educational Facilities
4.4% Authority Revenue Bonds (New England Medical
Center Hospitals), Series G, 3.80% due 7/01/1997 (d) 2,008
NR* NR* 3,465 Massachusetts State Industrial Finance Agency, Industrial
Revenue Refunding Bonds (New England Biolabs), VRDN, AMT,
4.15% due 3/01/2016 (b) 3,465
A+ A1 5,000 Massachusetts State Refunding, GO, Series A, 5.50% due 7/01/1999 5,156
A- A1 10,160 New England Education Loan Marketing Corporation Refunding
Bonds (Massachusetts Student Loan), Series D, 4.75% due 7/01/1998 10,227
</TABLE>
<PAGE>
<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>
Michigan--4.7% AA Aa $ 4,410 Ann Arbor, Michigan, School District, Public Schools
Refunding Bonds, UT, 4.75% due 5/01/2000 $ 4,476
NR* P1 1,700 Delta County, Michigan, Economic Development Corp.,
Environmental Improvement Revenue Bonds
(Mead Escambia Paper), DATES, Series F, 4.15% due
12/01/2013 (b) 1,700
AAA Aaa 8,000 Detroit, Michigan, Distributable State Aid, 7.20% due
5/01/1999 (a) (c) 8,686
AA- A1 6,000 Michigan State Building Authority, Revenue Refunding Bonds,
Series I, 5.80% due 10/01/1998 6,185
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--0.7% AAA Aaa 3,085 Minnesota State, HFA (Rental Housing), Refunding, Series D,
4.50% due 8/01/1999 (d) 3,103
Mississippi-- NR* Aaa 10,000 Mississippi Higher Education Assistance Corporation, Student
2.4% Loan Revenue Bonds, AMT, Series B, 4.80% due 9/01/1998 10,081
NR* P1 1,000 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
Project), VRDN, 4.20% due 3/01/2002 (b) 1,000
Nebraska--1.3% A+ A1 6,250 Nebraska Public Power District Revenue Bonds (Consumer Public
Power District), 4.90% due 7/01/1998 6,335
New Jersey--2.3% A A1 2,000 Camden County, New Jersey, Improvement Authority, Solid
Waste Disposal, Revenue Refunding Bonds (Landfill Project),
4% due 7/01/1997 2,005
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) 5,854
<PAGE>
New Mexico--1.1% A1+ P1 4,930 Farmington, New Mexico, PCR, Refunding (Arizona
Public Service Co.), VRDN, Series B, 4.20% due 9/01/2024 (b) 4,930
New York--5.5% A+ Aa 4,550 Municipal Assistance Corporation, Refunding, Series E,
5.50% due 7/01/2000 4,721
New York State Dormitory Authority Revenue Bonds
(Consolidated City University System), Series A:
BBB Baa1 6,675 4.50% due 7/01/1998 6,693
BBB Baa1 10,885 4.75% due 7/01/1999 10,931
AAA Aaa 3,000 New York State Dormitory Authority Revenue Bonds
(State University Educational), Series A, 7.125% due
5/15/1999 (a) 3,259
North A1+ NR* 1,100 Raleigh--Durham, North Carolina, Airport Authority,
Carolina--0.2% Special Facility Revenue Refunding Bonds (American
Airlines), VRDN, Series B, 4.25% due 11/01/2015 (b) 1,100
Ohio--11.9% AAA Aaa 2,000 Cincinnati, Ohio, City School District, TAN, Series B,
5% due 12/01/1998 (c) 2,038
NR* Aaa 6,000 Cincinnati, Ohio, Student Loan Funding Corporation,
Student Loan Revenue Refunding Bonds, AMT, Series C,
5.70% due 7/01/1999 6,160
NR* Aa1 6,000 Franklin County, Ohio, Hospital Revenue Refunding Bonds
(US Health Corp.), Series B, 4.50% due 6/01/2000 5,996
NR* VMIG1++ 3,500 Miami Valley, Ohio, Regional Transport Authority, (Capital
Facilities), BAN, 4.75% due 4/15/1997 3,513
Ohio State Air Quality Development Authority, Revenue Refunding
Bonds (Ohio Edison Project), Series A:
A1+ VMIG1++ 7,500 3.95% due 2/01/1997 7,500
A1+ VMIG1++ 7,000 4.35% due 8/01/1997 7,002
NR* Aaa 6,700 Ohio State Building Authority, Correctional Facilities,
Series A, 7.35% due 8/01/1999 (a) 7,346
AAA Aa1 12,400 Ohio State Highway, GO, Series V, 4.70% due 5/15/2000 12,581
AAA Aaa 3,500 Ohio State Public Facilities Commission, Higher Education
Capital Facilities, Series II-A, 4.375% due 11/01/1999 (d) 3,519
Oklahoma--0.5% AA Aa 2,400 Tulsa, Oklahoma, GO, UT, 5.125% due 5/01/1999 2,456
Pennsylvania-- A1+ P1 4,000 Beaver County, Pennsylvania, IDA, PCR, Refunding (Ohio
3.0% Edison Co.), Series A, 4.30% due 10/01/1997 (a) 4,025
A1+ NR* 1,100 Geisinger Authority, Pennsylvania, Health Systems Revenue
Bonds, VRDN, Series B, 4.25% due 7/01/2022 (b) 1,100
AAA Aaa 8,675 Pennsylvania State Refunding Bonds, GO, UT, 5.25% due
11/15/1998 (e) 8,883
<PAGE>
South NR* VMIG1++ 3,000 Orangeburg County, South Carolina, Solid Waste
Carolina--2.7% Disposal Facilities Revenue Bonds (South Carolina
Electric & Gas), VRDN, AMT, 4.30% due 11/01/2024 (b) 3,000
AAA Aaa 9,570 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Series B, 5% due 1/01/2000 (d) 9,732
Tennessee--2.6% AA NR* 11,885 Clarksville, Tennessee, Public Building Authority, Revenue
Refunding Bonds (Pooled Loan Program), 4.40% due 12/01/1998 11,945
Texas--7.3% AAA Aaa 5,140 Beaumont, Texas, Refunding, GO, Series A, 5% due 3/01/2000 (e) 5,242
Brazo, 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 2,233
NR* Aaa 5,000 Series C-1, 4.75% due 6/01/1997 5,017
NR* Aa 5,135 Series C-1, 5.60% due 11/01/1997 5,202
A1+ NR* 2,600 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Saint Luke's Episcopal
Hospital), VRDN, Series C, 4.25% due 2/15/2016 (b) 2,600
AA+ Aa 6,700 Houston, Texas, Independent School District, Public Property
Financial Contractual Obligation, 5% due 7/15/1999 6,844
AAA Aaa 2,600 Houston, Texas, Water and Sewer Systems Revenue Refunding
Bonds, Junior Lien, Series C, 5.90% due 12/01/1999 (c) 2,724
NR* Aaa 2,455 Panhandle-Plains, Texas, Higher Education Authority
Incorporated, Student Loan Revenue Refunding Bonds,
Series C, 4.15% due 9/01/1997 2,462
A+ A1 2,000 Texas Municipal Power Agency, Revenue Refunding Bonds, GO,
Series A, 4.25% due 9/01/1997 2,008
Utah--8.2% NR* NR* 26,518 Carbon County, Utah, Solid Waste Disposal, Revenue Refunding
Bonds (East Carbon Landfill Project), AMT, 6.04% due 5/01/1997 26,653
AAA Aaa 11,600 Utah State Building and Highway, GO, UT, 4.40% due 7/01/1999 11,715
Virginia--0.8% AAA Aa2 1,300 Peninsula Ports Authority, Virginia, Revenue Refunding
Bonds (Port Facility--Shell Oil Company Project), VRDN,
Series A, 4.20% due 12/01/2005 (b) 1,300
AA Aa 2,555 Virginia State Transportation Board, Transportation
Contract Revenue Bonds (US Route 58 Corridor), Series B,
5% due 5/15/2000 2,608
Washington--2.6% 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 4,892
AA Aa 4,655 Washington State Refunding Bonds, GO, Series R-96B, 5%
due 7/01/1998 4,729
AA Aa 2,285 Washington State Refunding Bonds, Motor Vehicle Fuel Tax,
Series R-96A, 5% due 7/01/1998 2,321
<PAGE>
Wisconsin--6.6% NR* NR* 4,500 Ashland County, Wisconsin, Promissary Notes, GO, 4.25%
due 9/01/1997 4,522
NR* VMIG1++ 6,000 Mequon, Wisconsin, BAN, 4.10% due 11/01/1998 6,001
AA+ Aa1 2,085 Milwaukee, Wisconsin, GO, UT, Series F, 5% due 11/15/2000 2,137
AA Aa 11,000 Wisconsin State, GO, Refunding, UT, Series 3, 4.25% due
11/01/1999 11,037
AA Aa 4,385 Wisconsin State, GO, Series C, 5.50% due 5/01/2000 4,549
A A1 2,795 Wisconsin State Housing and EDA, Housing Revenue Refunding
Bonds, Series C, 4.30% due 11/01/1997 2,807
Wyoming--0.2% Uinta County, Wyoming PCR, Refunding (Chevron USA Inc.
Project), VRDN (b):
NR* P1 220 4.15% due 8/15/2020 220
NR* P1 500 4.15% due 12/01/2022 500
Total Investments (Cost--$463,803)--99.5% 465,622
Other Assets Less Liabilities--0.5% 2,142
----------
Net Assets--100.0% $ 467,764
==========
<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 December 31, 1996.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FGIC Insured.
(f)Escrowed to maturity.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Limited
Insured National Maturity
As of December 31, 1996 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $2,268,907,675 $1,416,686,830 $ 465,622,490
Cash 144,163 172,021 43,342
Receivables:
Interest 42,629,066 24,313,204 6,198,774
Securities sold 26,200,557 25,078,803 --
Capital shares sold 578,770 3,041,568 254,487
Prepaid registration fees and other
assets (Note 1e) 81,654 50,570 44,693
-------------- -------------- --------------
Total assets 2,338,541,885 1,469,342,996 472,163,786
-------------- -------------- --------------
Liabilities: Payables:
Securities purchased 39,512,923 14,653,624 --
Capital shares redeemed 7,173,110 3,503,189 2,980,155
Dividends to shareholders (Note 1f) 6,828,869 4,309,908 1,063,185
Investment adviser (Note 2) 703,268 582,543 133,892
Distributor (Note 2) 462,345 276,658 20,372
Variation margin (Note 1b) -- 750,000 --
Accrued expenses and other liabilities 472,947 360,241 201,919
-------------- -------------- --------------
Total liabilities 55,153,462 24,436,163 4,399,523
-------------- -------------- --------------
Net Assets: Net assets $2,283,388,423 $1,444,906,833 $ 467,764,263
============== ============== ==============
Net Assets Class A Common Stock, $0.10 par value++ $ 18,994,780 $ 9,462,524 $ 3,911,333
Consist of: Class B Common Stock, $0.10 par value++++ 8,434,865 3,849,763 632,324
Class C Common Stock, $0.10 par
value++++++ 252,857 182,829 2,263
Class D Common Stock, $0.10 par
value++++++++ 614,544 491,459 160,781
Paid-in capital in excess of par 2,143,235,853 1,405,052,469 465,987,769
Accumulated realized capital losses on
investments--net (Note 5) (22,171,908) (67,191,087) (4,749,951)
Unrealized appreciation on
investments--net 134,027,432 93,058,876 1,819,744
-------------- -------------- --------------
Net assets $2,283,388,423 $1,444,906,833 $ 467,764,263
============== ============== ==============
<PAGE>
Net Asset Class A:
Value: Net assets $1,533,085,839 $ 977,602,420 $ 388,697,701
============== ============== ==============
Shares outstanding 189,947,796 94,625,244 39,113,326
============== ============== ==============
Net asset value and redemption
price per share $ 8.07 $ 10.33 $ 9.94
============== ============== ==============
Class B:
Net assets $ 680,291,230 $ 397,608,975 $ 62,853,560
============== ============== ==============
Shares outstanding 84,348,645 38,497,625 6,323,238
============== ============== ==============
Net asset value and redemption
price per share $ 8.07 $ 10.33 $ 9.94
============== ============== ==============
Class C:
Net assets $ 20,403,152 $ 18,891,781 $ 224,294
============== ============== ==============
Shares outstanding 2,528,566 1,828,287 22,634
============== ============== ==============
Net asset value and redemption
price per share $ 8.07 $ 10.33 $ 9.91
============== ============== ==============
Class D:
Net assets $ 49,608,202 $ 50,803,657 $ 15,988,708
============== ============== ==============
Shares outstanding 6,145,439 4,914,592 1,607,813
============== ============== ==============
Net asset value and redemption
price per share $ 8.07 $ 10.34 $ 9.94
============== ============== ==============
<FN>
*Identified cost $2,134,880,243 $1,321,899,204 $ 463,802,746
============== ============== ==============
++Authorized shares--Class A 500,000,000 375,000,000 150,000,000
============== ============== ==============
++++Authorized shares--Class B 375,000,000 375,000,000 150,000,000
============== ============== ==============
++++++Authorized shares--Class C 375,000,000 375,000,000 150,000,000
============== ============== ==============
++++++++Authorized shares--Class D 500,000,000 375,000,000 150,000,000
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
Limited
Insured National Maturity
For the Six Months Ended December 31, 1996 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and amortization of premium and
Income discount earned $ 70,946,928 $ 46,915,487 $ 10,587,310
(Note 1d):
Expenses: Investment advisory fees (Note 2) 4,257,876 3,479,545 820,561
Account maintenance and distribution
fees--Class B (Note 2) 2,685,641 1,518,866 118,813
Transfer agent fees--Class A (Note 2) 263,651 182,639 62,950
Transfer agent fees--Class B (Note 2) 153,296 93,667 13,227
Accounting services (Note 2) 138,403 76,404 19,943
Custodian fees 100,680 67,413 25,970
Account maintenance and distribution
fees--Class C (Note 2) 80,925 64,823 281
Printing and shareholder reports 75,225 43,372 16,075
Account maintenance fees--Class D (Note 2) 60,166 58,613 8,434
Registration fees (Note 1e) 59,761 62,545 37
Professional fees 48,379 36,405 15,927
Pricing services 17,366 14,693 7,258
Directors' fees and expenses 12,978 10,596 3,373
Transfer agent fees--Class D (Note 2) 8,038 8,629 2,590
Transfer agent fees--Class C (Note 2) 4,835 3,711 42
Other 33,371 11,187 1,515
-------------- -------------- --------------
Total expenses 8,000,591 5,733,108 1,116,996
-------------- -------------- --------------
Investment income--net 62,946,337 41,182,379 9,470,314
-------------- -------------- --------------
Realized & Realized gain on investments--net 19,810,583 10,075,551 1,684,697
Unrealized Gain Change in unrealized appreciation/
(Loss) on depreciation on investments--net 26,889,548 20,809,440 523,240
Investments--Net -------------- -------------- --------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting
from Operations $ 109,646,468 $ 72,067,370 $ 11,678,251
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Insured Portfolio National Portfolio
For the Six For the For the Six For the
Increase (Decrease) in Months Ended Year Ended Months Ended Year Ended
Net Assets: Dec. 31, 1996 June 30, 1996 Dec. 31, 1996 June 30, 1996
<S> <S> <C> <C> <C> <C>
Operations: Investment income--net $ 62,946,337 $ 131,085,773 $ 41,182,379 $ 83,697,410
Realized gain (loss)
on investments--net 19,810,583 (3,897,219) 10,075,551 3,774,748
Change in unrealized
appreciation/depreciation
on investments--net 26,889,548 3,149,618 20,809,440 10,373,235
-------------- -------------- -------------- --------------
Net increase in net assets
resulting from operations 109,646,468 130,338,172 72,067,370 97,845,393
-------------- -------------- -------------- --------------
Dividends & Investment income--net:
Distributions to Class A (43,966,193) (92,116,281) (29,113,389) (60,489,070)
Shareholders Class B (17,219,221) (36,347,050) (10,343,570) (20,995,504)
(Note 1f): Class C (480,979) (626,972) (409,391) (462,078)
Class D (1,279,944) (1,995,470) (1,316,029) (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. (62,946,337) (131,085,773) (41,182,379) (83,697,410)
-------------- -------------- -------------- --------------
Capital Share Net decrease in net assets
Transactions derived from capital
(Note 4): share transactions (129,944,628) (155,203,186) (26,043,843) (78,305,357)
-------------- -------------- -------------- --------------
Net Assets: Total increase (decrease)
in net assets (83,244,497) (155,950,787) 4,841,148 (64,157,374)
Beginning of period 2,366,632,920 2,522,583,707 1,440,065,685 1,504,223,059
-------------- -------------- -------------- --------------
End of period $2,283,388,423 $2,366,632,920 $1,444,906,833 $1,440,065,685
============== ============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Limited Maturity Portfolio
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Dec. 31, 1996 June 30, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 9,470,314 $ 21,711,132
Realized gain (loss) on investments--net 1,684,697 1,322,566
Change in unrealized appreciation/depreciation
on investments--net 523,240 (1,526,762)
-------------- --------------
Net increase in net assets resulting from operations 11,678,251 21,506,936
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (7,951,247) (18,019,083)
Shareholders Class B (1,197,025) (3,055,609)
(Note 1f): Class C (2,815) (25,939)
Class D (319,227) (610,501)
Realized gain on investments--net:
Class A (665,999) --
Class B (108,062) --
Class C (293) --
Class D (28,170) --
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders. (10,272,838) (21,711,132)
-------------- --------------
Capital Share Net decrease in net assets derived from capital
Transactions share transactions (37,792,764) (176,922,554)
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (36,387,351) (177,126,750)
Beginning of period 504,151,614 681,278,364
-------------- --------------
End of period $ 467,764,263 $ 504,151,614
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data
and ratios have been derived Insured Portfolio
from information provided in
the financial statements. Class A
For the Six
Increase (Decrease) in Months Ended For the Year Ended June 30,
Net Asset Value: Dec. 31, 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 7.91 $ 7.92 $ 7.88 $ 8.64 $ 8.26
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .23 .44 .46 .47 .50
Realized and unrealized
gain (loss) on
investments--net .16 (.01) .18 (.53) .49
------------ ------------ ------------ ------------ ------------
Total from investment
operations .39 .43 .64 (.06) .99
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.23) (.44) (.46) (.47) (.50)
Realized gain on
investments--net -- -- (.14) (.23) (.11)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.23) (.44) (.60) (.70) (.61)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of period $ 8.07 $ 7.91 $ 7.92 $ 7.88 $ 8.64
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 4.93%+++ 5.51% 8.60% (1.08%) 12.41%
============ ============ ============ ============ ============
Ratios to Average Expenses .43%* .43% .43% .42% .42%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.57%* 5.55% 5.78% 5.53% 5.94%
============ ============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 1,533,086 $ 1,572,835 $ 1,706,064 $ 1,941,741 $ 2,225,188
============ ============ ============ ============ ============
Portfolio turnover 40.21% 78.49% 35.61% 28.34% 43.86%
============ ============ ============ ============ ============
<PAGE>
<CAPTION>
The following per share data
and ratios have been derived Insured Portfolio
from information provided in
the financial statements. Class B
For the Six
Increase (Decrease) in Months Ended For the Year Ended June 30,
Net Asset Value: Dec. 31, 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.91 $ 7.92 $ 7.87 $ 8.63 $ 8.26
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .19 .38 .40 .40 .44
Realized and unrealized
gain(loss) on
investments--net .16 (.01) .19 (.53) .48
------------ ------------ ------------ ------------ ------------
Total from investment
operations .35 .37 .59 (.13) .92
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.19) (.38) (.40) (.40) (.44)
Realized gain on
investments--net -- -- (.14) (.23) (.11)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.19) (.38) (.54) (.63) (.55)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of period $ 8.07 $ 7.91 $ 7.92 $ 7.87 $ 8.63
============ ============ ============ ============ ============
Total Investment Based on net asset value
Return:** per share 4.53%+++ 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 4.81%* 4.80% 5.03% 4.78% 5.17%
============ ============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 680,291 $ 723,090 $ 782,748 $ 866,193 $ 911,307
============ ============ ============ ============ ============
Portfolio turnover 40.21% 78.49% 35.61% 28.34% 43.86%
============ ============ ============ ============ ============
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Insured Portfolio
Class C Class D
The following per share
data and ratios have been
derived from information
provided in the
financial statements. For the For the For the Period For the For the For the Period
Six Months Year Ended Oct 21, 1994++ Six Months Year Ended Oct 21, 1994++
Increase (Decrease) Ended Dec. 31, June 30, to June 30, Ended Dec. 31, June 30, to June 30,
in Net Asset Value: 1996 1996 1995 1996 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 .19 .38 .27 .22 .42 .29
Realized and unrealized
gain (loss) on
investments--net .16 (.01) .38 .16 (.01) .38
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .35 .37 .65 .38 .41 .67
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.19) (.38) (.27) (.22) (.42) (.29)
Realized gain on
investments--net -- -- (.14) -- -- (.14)
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.19) (.38) (.41) (.22) (.42) (.43)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 8.07 $ 7.91 $ 7.92 $ 8.07 $ 7.91 $ 7.92
========== ========== ========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset
Return:** value per share 4.50%+++ 4.65% 8.83%+++ 4.80%+++ 5.25% 9.24%+++
========== ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.25%* 1.24% 1.23%* .68%* .68% .68%*
Net Assets: ========== ========== ========== ========== ========== ==========
Investment income--net 4.75%* 4.75% 4.93%* 5.32%* 5.31% 5.50%*
========== ========== ========== ========== ========== ==========
Supplemental Net assets, end of
Data: period (in thousands) $ 20,403 $ 18,936 $ 7,756 $ 49,608 $ 51,772 $ 26,015
========== ========== ========== ========== ========== ==========
Portfolio turnover 40.21% 78.49% 35.61% 40.21% 78.49% 35.61%
========== ========== ========== ========== ========== ==========
<CAPTION>
The following per share data
and ratios have been derived National Portfolio
from information provided in
the financial statements. Class A
For the Six
Increase (Decrease) in Months Ended For the Year Ended June 30,
Net Asset Value: Dec. 31, 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 10.11 $ 10.02 $ 10.08 $ 11.02 $ 10.64
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .30 .60 .60 .62 .67
Realized and unrealized
(gain loss) on
investments--net .22 .09 .15 (.64) .57
------------ ------------ ------------ ------------ ------------
Total from investment
operations .52 .69 .75 (.02) 1.24
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.30) (.60) (.60) (.62) (.67)
Realized gain on
investments--net -- -- (.19) (.30) (.19)
In excess of realized
<PAGE> gain on investments--net -- -- (.02) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.30) (.60) (.81) (.92) (.86)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of period $ 10.33 $ 10.11 $ 10.02 $ 10.08 $ 11.02
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 5.25%+++ 6.98% 7.89% (.47%) 12.19%
============ ============ ============ ============ ============
Ratios to Average Expenses .56%* .56% .56% .55% .55%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.87%* 5.89% 6.01% 5.72% 6.23%
============ ============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 977,602 $ 983,550 $ 1,059,440 $ 1,203,181 $ 1,353,805
============ ============ ============ ============ ============
Portfolio turnover 38.80% 95.09% 103.65% 73.33% 65.43%
============ ============ ============ ============ ============
<CAPTION>
The following per share data
and ratios have been derived National Portfolio
from information provided in
the financial statements. Class B
For the Six
Increase (Decrease) in Months Ended For the Year Ended June 30,
Net Asset Value: Dec. 31, 1996 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 10.11 $ 10.02 $ 10.07 $ 11.02 $ 10.63
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .26 .52 .52 .54 .59
Realized and unrealized
gain (loss) on
investments--net .22 .09 .16 (.65) .58
------------ ------------ ------------ ------------ ------------
Total from investment
operations .48 .61 .68 (.11) 1.17
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
<PAGE> Investment income--net (.26) (.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 (.26) (.52) (.73) (.84) (.78)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of period $ 10.33 $ 10.11 $ 10.02 $ 10.07 $ 11.02
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 4.85%+++ 6.17% 7.28% (1.39%) 11.45%
============ ============ ============ ============ ============
Ratios to Average Expenses 1.32%* 1.32% 1.32% 1.30% 1.31%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.11%* 5.13% 5.25% 4.97% 5.46%
============ ============ ============ ============ ============
Supplemental Net assets, end of
Data: period (in thousands) $ 397,609 $ 399,341 $ 419,933 $ 459,169 $ 424,071
============ ============ ============ ============ ============
Portfolio turnover 38.80% 95.09% 103.65% 73.33% 65.43%
============ ============ ============ ============ ============
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
National Portfolio
Class C Class D
The following per share
data and ratios have been
derived from information
provided in the
financial statements. For the For the For the Period For the For the For the Period
Six Months Year Ended Oct 21, 1994++ Six Months Year Ended Oct 21, 1994++
Increase (Decrease) Ended Dec. 31, June 30, to June 30, Ended Dec. 31, June 30, to June 30,
in Net Asset Value: 1996 1996 1995 1996 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 .26 .52 .36 .29 .57 .40
Realized and unrealized
gain on investments--net .22 .08 .39 .22 .09 .39
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .48 .60 .75 .51 .66 .79
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.26) (.52) (.36) (.29) (.57) (.40)
Realized gain on
investments--net -- -- (.19) -- -- (.19)
In excess of
realized gain on
investments--net -- -- (.02) -- -- (.02)
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.26) (.52) (.57) (.29) (.57) (.61)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 10.33 $ 10.11 $ 10.03 $ 10.34 $ 10.12 $ 10.03
========== ========== ========== ========== ========== ==========
Total Investment Based on net asset
Return:** value per share 4.82%+++ 6.01% 7.97%+++ 5.11%+++ 6.71% 8.37%+++
========== ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.37%* 1.37% 1.37%* .81%* .81% .81%*
Net Assets: ========== ========== ========== ========== ========== ==========
Investment income--net 5.05%* 5.08% 5.21%* 5.61%* 5.64% 5.78%*
========== ========== ========== ========== ========== ==========
<PAGE>
Supplemental Net assets, end of
Data: period (in thousands) $ 18,892 $ 13,291 $ 5,195 $ 50,804 $ 43,884 $ 19,656
========== ========== ========== ========== ========== ==========
Portfolio turnover 38.80% 95.09% 103.65% 38.80% 95.09% 103.65%
========== ========== ========== ========== ========== ==========
<CAPTION>
The following per share data
and ratios have been derived Limited Maturity Portfolio
from information provided in
the financial statements. Class A
For the Six
Increase (Decrease) in Months Ended For the Year Ended June 30,
Net Asset Value: Dec. 31, 1996 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 $ 9.91
Performance: ------------ ------------ ------------ ------------- ------------
Investment income--net .20 .38 .38 .37 .41
Realized and unrealized
gain (loss) on
investments--net .05 (.01) .05 (.14) .10
------------ ------------ ------------ ------------- ------------
Total from investment
operations .25 .37 .43 .23 .51
------------ ------------ ------------ ------------- ------------
Less dividends and
distributions:
Investment income--net (.20) (.38) (.38) (.37) (.41)
Realized gain on
investments--net (.02) -- -- -- --
------------ ------------ ------------ ------------- ------------
Total dividends and
distributions (.22) (.38) (.38) (.37) (.41)
------------ ------------ ------------ ------------- ------------
Net asset value,
end of period $ 9.94 $ 9.91 $ 9.92 $ 9.87 $ 10.01
============ ============ ============ ============ ============
Total Investment Based on net asset value
Return:** per share 2.47%+++ 3.75% 4.53% 2.30% 5.28%
============ ============ ============ ============ ============
Ratios to Average Expenses .40%* .44% .41% .40% .41%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 3.88%* 3.83% 3.86% 3.68% 4.13%
============ ============ ============ ============ ============
<PAGE>
Supplemental Net assets, end of period
Data: (in thousands) $ 388,698 $ 417,097 $ 536,474 $ 790,142 $ 846,736
============ ============ ============ ============ ============
Portfolio turnover 34.75% 88.32% 37.33% 45.67% 65.43%
============ ============ ============ ============ ============
<CAPTION>
The following per share data
and ratios have been derived Limited Maturity Portfolio
from information provided in
the financial statements. Class B
For the Six For the Period
Increase (Decrease) in Months Ended For the Year Ended June 30, Nov. 2, 1992++ to
Net Asset Value: Dec. 31, 1996 1996 1995 1994 June 30, 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 .18 .35 .35 .33 .24
Realized and unrealized
gain (loss) on
investments--net .05 (.01) .05 (.14) .08
------------ ------------ ------------ ------------- ------------
Total from investment
operations .23 .34 .40 .19 .32
------------ ------------ ------------ ------------- ------------
Less dividends and
distributions:
Investment income--net (.18) (.35) (.35) (.33) (.24)
Realized gain on
investments--net (.02) -- -- -- --
------------ ------------ ------------ ------------- ------------
Total dividends and
distributions (.20) (.35) (.35) (.33) (.24)
------------ ------------ ------------ ------------- ------------
Net asset value,
end of period $ 9.94 $ 9.91 $ 9.92 $ 9.87 $ 10.01
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 2.28%+++ 3.37% 4.14% 1.98% 3.26%+++
============ ============ ============ ============ ============
Ratios to Average Expenses .76%* .80% .78% .76% .76%*
Net Assets: ============ ============ ============ ============ ============
Investment income--net 3.53%* 3.46% 3.50% 3.33% 3.60%*
============ ============ ============ ============ ============
<PAGE>
Supplemental Net assets, end of period
Data: (in thousands) $ 62,853 $ 71,075 $ 129,581 $ 145,534 $ 95,179
============ ============ ============ ============ ============
Portfolio turnover 34.75% 88.32% 37.33% 45.67% 65.43%
============ ============ ============ ============ ============
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Limited Maturity Portfolio
Class C Class D
The following per share
data and ratios have been
derived from information
provided in the
financial statements. For the For the For the Period For the For the For the Period
Six Months Year Ended Oct 21, 1994++ Six Months Year Ended Oct 21, 1994++
Increase (Decrease) Ended Dec. 31, June 30, to June 30, Ended Dec. 31, June 30, to June 30,
in Net Asset Value: 1996 1996 1995 1996 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 .18 .34 .25 .19 .37 .26
Realized and unrealized
gain (loss) on
investments--net .05 (.04) .09 .05 (.02) .10
---------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations .23 .30 .34 .24 .35 .36
---------- ---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.18) (.34) (.25) (.19) (.37) (.26)
Realized gain on
investments--net (.02) -- -- (.02) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total dividends and
<PAGE> distributions (.20) (.34) (.25) (.21) (.37) (.26)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $ 9.91 $ 9.88 $ 9.92 $ 9.94 $ 9.91 $ 9.93
========== ========== ========== ========== ========== ==========
Total Investment Based on net asset
Return:** value per share 2.28%+++ 2.97% 3.52%+++ 2.42%+++ 3.55% 3.73%+++
========== ========== ========== ========== ========== ==========
Ratios to Average Expenses .77%* .80% .70%* .50%* .54% .53%*
Net Assets: ========== ========== ========== ========== ========== ==========
Investment income--net 3.51%* 3.41% 3.61%* 3.79%* 3.71% 3.78%*
========== ========== ========== ========== ========== ==========
Supplemental Net assets, end of
Data: period (in thousands) $ 224 $ 94 $ 3,965 $ 15,989 $ 15,886 $ 11,258
========== ========== ========== ========== ========== ==========
Portfolio turnover 34.75% 88.32% 37.33% 34.75% 88.32% 37.33%
========== ========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund's Portfolios offer four classes of shares under the Merrill
Lynch Select Pricing SM System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C
may be subject to a contingent deferred sales charge. All classes of
shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Insured Portfolio: Where bonds in the
Portfolio have not been insured pursuant to policies obtained by the
issuer, the Fund has obtained insurance with respect to the payment
of interest and principal of each bond. Such insurance is valid as
long as the bonds are held by the Fund.
All Portfolios: Municipal bonds and money market securities are
traded primarily in the over-the-counter markets and are valued at
the most recent bid price or yield equivalent as obtained from
dealers that make markets in such securities. Positions in futures
contracts and options thereon, which are traded on exchanges, are
valued at closing prices as of the close of such exchanges. Assets
for which market quotations are not readily available are valued at
fair value on a consistent basis using methods determined in good
faith by the Fund's Board of Directors, including valuations
furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of
the Fund under the general supervision of the Board of Directors.
(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.
<PAGE>
* Financial futures contracts--The National and Limited Maturity
Portfolios (the "Portfolios") may purchase or sell interest rate
futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the
Portfolios deposit and maintain as collateral such initial margin as
required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolios agree to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolios as unrealized
gains or losses. When the contract is closed, the Portfolios record
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expenses as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
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.
<PAGE>
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
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% -- -- --
NOTES TO FINANCIAL STATEMENTS (continued)
<PAGE>
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 six months ended December 31, 1996, MLFD earned underwriting
discounts and commissions and MLPF&S earned dealer concessions on
sales of the Fund's Class A and Class D Shares as follows:
Limited
Insured National Maturity
Portfolio Portfolio Portfolio
Class A Shares:
MLFD $11,989 $ 7,734 $ 608
MLPF&S 84,562 75,350 6,959
Class D Shares:
MLFD 4,977 5,568 662
MLPF&S 39,013 47,094 7,759
For the six months ended December 31, 1996, MLPF&S received
contingent deferred sales charges of $839,671 relating to
transactions in Class B Shares, amounting to $499,400, $305,112 and
$35,159 in the Insured, National and Limited Maturity Portfolios,
respectively, and $7,376 relating to transactions in Class C Shares,
amounting to $2,919, $4,062 and $395 in the Insured, National and
Limited Maturity Portfolios, respectively. Furthermore, MLPF&S
received contingent deferred sales charges of $358,940 relating to
transactions subject to front-end sales charge waivers 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, MLPF&S, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1996 were as follows:
Purchases Sales
Insured Portfolio $865,477,861 $868,397,740
National Portfolio 532,656,395 565,016,900
Limited Maturity Portfolio 147,628,031 188,345,920
Net realized and unrealized gains (losses) as of December 31, 1996
were as follows:
Realized Unrealized
Insured Portfolio Gains Gains
Long-term investments $ 19,810,583 $ 134,027,432
------------- --------------
Total $ 19,810,583 $ 134,027,432
============= ==============
Realized Unrealized
National Portfolio Gains (Losses) Gains (Losses)
Long-term investments $ 11,992,364 $ 94,787,626
Financial futures contracts (1,916,813) (1,728,750)
------------- --------------
Total $ 10,075,551 $ 93,058,876
============= ==============
Realized Unrealized
Limited Maturity Portfolio Gains Gains
Long-term investments $ 1,684,697 $ 1,798,877
Short-term investments -- 20,867
------------- --------------
Total $ 1,684,697 $ 1,819,744
============= ==============
<PAGE>
As of December 31, 1996 net unrealized appreciation/depreciation for
Federal income tax purposes were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
Insured Portfolio $135,212,827 $(1,185,395) $134,027,432
National Portfolio 97,153,466 (2,365,840) 94,787,626
Limited Maturity
Portfolio 2,169,949 (350,205) 1,819,744
The aggregate cost of investments at December 31, 1996 for Federal
income tax purposes was $2,134,880,243 for the Insured Portfolio,
$1,321,899,204 for the National Portfolio, and $463,802,746 for the
Limited Maturity Portfolio.
4. Capital Share Transactions:
Net decrease on net assets derived from capital share transactions
for the six months ended December 31, 1996 and for the year ended
June 30, 1996 were $129,944,628 and $155,203,186, respectively, for
the Insured Portfolio; $26,043,843 and $78,305,357, respectively for
the National Portfolio and $37,792,764 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 Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 2,457,335 $ 19,730,449
Shares issued to shareholders
in reinvestment of dividends 2,440,870 19,550,550
------------- -------------
Total issued 4,898,205 39,280,999
Shares redeemed (13,751,828) (110,210,523)
------------- -------------
Net decrease (8,853,623) $ (70,929,524)
============= =============
<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 Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 3,173,222 $ 25,379,254
Shares issued to shareholders
in reinvestment of dividends 1,165,245 9,328,649
------------- -------------
Total issued 4,338,467 34,707,903
Automatic conversion of shares (301,113) (2,415,646)
Shares redeemed (11,151,801) (89,266,671)
------------- -------------
Net decrease (7,114,447) $ (56,974,414)
============= =============
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 Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 420,142 $ 3,367,416
Shares issued to shareholders
in reinvestment of dividends 44,749 358,340
------------- -------------
Total issued 464,891 3,725,756
Shares redeemed (330,374) (2,653,334)
------------- -------------
Net increase 134,517 $ 1,072,422
============= =============
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 Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 4,917,743 $ 39,313,101
Automatic conversion of shares 301,113 2,415,646
Shares issued to shareholders
in reinvestment of dividends 79,837 639,773
------------- -------------
Total issued 5,298,693 42,368,520
Shares redeemed (5,697,499) (45,481,632)
------------- -------------
Net decrease (398,806) $ (3,113,112)
============= =============
<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
============= =============
NOTES TO FINANCIAL STATEMENTS (concluded)
National Portfolio
Class A Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 1,486,925 $ 15,284,927
Shares issued to shareholders
in reinvestment of dividends 1,401,718 14,364,889
------------- -------------
Total issued 2,888,643 29,649,816
Shares redeemed (5,524,737) (56,582,228)
------------- -------------
Net decrease (2,636,094) $ (26,932,412)
============= =============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,874,548 $ 19,100,358
Shares issued to shareholders
in reinvestment of dividends 2,851,242 29,021,298
------------- -------------
Total issued 4,725,790 48,121,656
Shares redeemed (13,151,450) (133,904,005)
------------- -------------
Net decrease (8,425,660) $ (85,782,349)
============= =============
<PAGE>
National Portfolio
Class B Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 3,021,648 $ 30,949,235
Shares issued to shareholders
in reinvestment of dividends 489,813 5,016,590
------------- -------------
Total issued 3,511,461 35,965,825
Automatic conversion of shares (187,752) (1,923,604)
Shares redeemed (4,328,028) (44,324,502)
------------- -------------
Net decrease (1,004,319) $ (10,282,281)
============= =============
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 Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 612,530 $ 6,280,266
Shares issued to shareholders
in reinvestment of dividends 23,162 237,609
------------- -------------
Total issued 635,692 6,517,875
Shares redeemed (121,550) (1,247,820)
------------- -------------
Net increase 514,142 $ 5,270,055
============= =============
<PAGE>
National Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,026,234 $ 10,483,940
Shares issued to shareholders
in reinvestment of dividends 22,712 231,247
------------- -------------
Total issued 1,048,946 10,715,187
Shares redeemed (252,941) (2,580,645)
------------- -------------
Net increase 796,005 $ 8,134,542
============= =============
National Portfolio
Class D Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 3,685,164 $ 37,686,148
Automatic conversion of shares 187,569 1,923,604
Shares issued to shareholders
in reinvestment of dividends 53,944 553,278
------------- -------------
Total issued 3,926,677 40,163,030
Shares redeemed (3,349,174) (34,262,235)
------------- -------------
Net increase 577,503 $ 5,900,795
============= =============
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 13,624,624 $ 139,439,739
Automatic conversion of shares 175,315 1,776,371
Shares issued to shareholders
in reinvestment of dividends 74,448 759,889
------------- -------------
Total issued 13,874,387 141,975,999
Shares redeemed (11,497,765) (118,306,764)
------------- -------------
Net increase 2,376,622 $ 23,669,235
============= =============
<PAGE>
Limited Maturity Portfolio
Class A Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 1,313,166 $ 13,061,767
Shares issued to shareholders
in reinvestment of dividends and
distributions 523,239 5,197,563
------------- -------------
Total issued 1,836,405 18,259,330
Shares redeemed (4,812,927) (47,818,995)
------------- -------------
Net decrease (2,976,522) $ (29,559,665)
============= =============
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 Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 646,930 $ 6,429,113
Shares issued to shareholders
in reinvestment of dividends and
distributions 88,066 875,177
------------- -------------
Total issued 734,996 7,304,290
Automatic conversion of shares (5,121) (50,800)
Shares redeemed (1,577,281) (15,670,621)
------------- -------------
Net decrease (847,406) $ (8,417,131)
============= =============
<PAGE>
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,855,378 $ 18,448,441
Shares issued to shareholders
in reinvestment of dividends 196,945 1,959,129
------------- -------------
Total issued 2,052,323 20,407,570
Automatic conversion of shares (1,991) (19,792)
Shares redeemed (7,937,046) (78,947,865)
------------- -------------
Net decrease (5,886,714) $ (58,560,087)
============= =============
Limited Maturity Portfolio
Class C Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 17,368 $ 171,902
Shares issued to shareholders
in reinvestment of dividends and
distributions 297 2,943
------------- -------------
Total issued 17,665 174,845
Shares redeemed (4,550) (44,929)
------------- -------------
Net increase 13,115 $ 129,916
============= =============
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,035,202 $ 10,296,541
Shares issued to shareholders
in reinvestment of dividends 1,535 15,247
------------- -------------
Total issued 1,036,737 10,311,788
Shares redeemed (1,426,909) (14,189,010)
------------- -------------
Net decrease (390,172) $ (3,877,222)
============= =============
<PAGE>
Limited Maturity Portfolio
Class D Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 1,560,782 $ 15,510,327
Shares issued to shareholders
in reinvestment of dividends and
distributions 21,126 209,959
Automatic conversion of shares 5,117 50,800
------------- -------------
Total issued 1,587,025 15,771,086
Shares redeemed (1,581,410) (15,716,970)
------------- -------------
Net increase 5,615 $ 54,116
------------- -------------
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
============= =============
<PAGE>
5. Capital Loss Carryforwards:
At June 30, 1996, the Fund had net capital loss carryforwards as
follows: Approximately $40,724,000 in the Insured Portfolio, of
which $38,085,000 expires in 2003 and $2,639,000 expires in 2004;
approximately $66,385,000 in the National Portfolio, of which
$37,909,000 expires in 2003 and $28,476,000 expires in 2004; and
approximately $5,891,000 in the Limited Maturity Portfolio, of which
$1,036,000 expires in 1997, $2,787,000 expires in 1998, $22,000
expires in 1999, $25,000 expires in 2002 and $2,021,000 expires in
2003. These amounts will be available to offset like amounts of any
future taxable gains.
