MERRILL LYNCH
MUNICIPAL BOND
FUND, INC.
FUND LOGO
Annual Report
June 30, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Municipal Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
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
Walter C. O'Connor, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
DEAR SHAREHOLDER
The Municipal Market Environment
During the three months ended June 30, 1998, long-term tax-exempt
revenue bond yields were little changed. Throughout the June
quarter, the near absence of inflationary pressures continued to
support low interest rates. However, consistently strong domestic
economic growth has caused some investors to fear that the Federal
Reserve Board will be forced eventually to raise short-term interest
rates. Such action would be taken to ensure that the US economy's
present rate of growth would decelerate before any inflationary
pressures could develop. These concerns pushed bond yields modestly
higher by late April.
However, the weakening financial conditions in many Asian countries
subsequently calmed investor fears of Federal Reserve Board
intervention, and fixed-income prices again moved higher. Long-term
uninsured municipal bond yields, as measured by the Bond Buyer
Revenue Bond Index, fell approximately 10 basis points (0.10%) to
end the June quarter at 5.34%. As in late 1997 and early 1998, US
Treasury bond yields benefited from a "flight to quality" as foreign
investors were drawn to the relative safe haven of US Government
securities. Long-term US Treasury bond yields declined approximately
30 basis points to end the June quarter at 5.62%.
Thus far in 1998, the municipal bond market has experienced
unexpectedly strong supply pressures. These supply pressures have
prevented tax-exempt bond yields from declining as much as US
Treasury bond yields. During the first six months of 1998, more than
$145 billion in new tax-exempt bonds were underwritten, an increase
of over 50% compared to the same period a year ago. During the
quarter ended June 30, 1998, municipalities issued over $75 billion
in new securities, an increase of more than 35% compared to the same
three-month period in 1997. Additionally, corporate issuers have
also viewed current interest rate levels as an opportunity to issue
significant amounts of taxable securities. Thus far in 1998, over
$500 billion in investment-grade corporate bonds have been
underwritten, an increase of more than 70% compared to the same
period a year ago. This sizeable corporate bond issuance has tended
to both support generally higher fixed-income yields and reduce the
demand for tax-exempt bonds.
However, the recent pace of new municipal bond issuance is unlikely
to be maintained. Continued increases in bond issuance will require
lower and lower tax-exempt bond yields to generate the economic
savings necessary for additional municipal bond refinancings.
Preliminary estimates for 1998 total municipal bond issuance are
presently in the $200 billion--$225 billion range. These estimates
suggest that recent supply pressures are likely to abate later in
the year. Earlier this year, municipal bond investors received
approximately $30 billion in coupon payments, bond maturities and
proceeds from early redemptions. The demand generated by these
assets has helped to offset the increase in supply seen thus far in
1998. Historically, the month of July tends to be a period of strong
investor demand as seasonal factors generate strong income flows.
It is also possible that at least some of the recent economic
strength seen in the United States will be reversed in the coming
months. A particularly mild winter has been partially responsible
for a strong housing sector, as well as other construction
industries. This past winter's economic strength may have borrowed
from future quarters' growth. This recent strong trend may not be
sustained and may lead to weaker construction growth later this
year. Additionally, strong economic growth in 1997 and the increased
use of electronic tax filings have resulted in larger and earlier
Federal and state income tax refunds to many individuals. These
refunds appear to have supported strong consumer spending in recent
months, but may be borrowing against weaker spending later this
year.
The continued impact of the Asian financial crisis on the US
domestic economy's future growth remains unclear. Current Asian
economic conditions continue to reflect ongoing weakness. Recent
trade data indicated that reduced US exports to these countries may
have lowered US economic growth by as much as 2% in the first
quarter of 1998. Since further trade deterioration is possible in
the coming months, we do not believe that the Federal Reserve Board
will be willing to raise interest rates, barring a dramatic and
unexpected resurgence of domestic inflation.
These factors suggest that over the near term, interest rates in
general are unlikely to rise by any appreciable amount. Recent
supply pressures have caused municipal bond yield ratios to rise
relative to US Treasury bond yields. At June 30, 1998, long-term tax-
exempt bond yields were at attractive yield ratios relative to US
Treasury securities of comparable maturities (over 90%), well in
excess of their expected range of 85%-88%. Tax-exempt bond yield
ratios rarely exceeded 90% in the 1980s and 1990s. Previous
instances have usually been associated with potential changes in
Federal tax codes that would have adversely affected the tax-favored
status of municipal bonds. The present situation has developed
largely because of a temporary supply imbalance. These imbalances
should soon be corrected as tax-exempt bond issuance slows from its
current rapid pace later this year. Any further pressure on the
municipal market may well represent a very attractive investment
opportunity.
Fiscal Year in Review
Insured Portfolio and
National Portfolio
During the fiscal year ended June 30, 1998, the municipal market was
characterized by restricted price movements within defined trading
ranges. Overall, the trend in bond yields declined, yet activity at
lower yield levels became stalled as "rate shock" settled in. The
municipal market experienced trouble keeping up with the US Treasury
market rally this year, resulting in municipal bond yields reaching
historically attractive levels (near the 92% level) relative to
their Treasury counterparts.
We consistently strove to maintain an above-industry average level
of tax-exempt income to shareholders during the fiscal year ended
June 30, 1998. In the Insured Portfolio, we maintained our fully
invested strategy which enabled us to provide an attractive yield
during this year's trend toward lower interest rates. In the
National Portfolio, we were able to invest in higher-yielding
municipal securities that delivered high current returns. Our
primary investment strategy employed over the past fiscal year for
both Portfolios was to remain invested and use any dips in market
price to restructure the Portfolios more aggressively. Our challenge
over the last 12 months was to identify market retracements and to
concentrate our buying power when they occurred, either through the
ample 1997-1998 new issuance calendar or through the secondary
marketplace.
The Insured and National Portfolios' total returns benefited from
the overall decline in interest rates since our investments were
focused in the long end of the municipal yield curve. At current
interest rate levels, where long-term municipal bond yields are near
5%, we began to sell some of the Portfolios' more aggressively
structured discount securities. Proceeds from these sales have been
concentrated in cash reserves, or in less interest rate-sensitive,
income-oriented holdings. Although the fundamental economic backdrop
for the municipal market is still quite supportive, we expect
municipal bonds to participate only marginally in any further price
gains.
Looking ahead, we are likely to follow a slightly less aggressive
strategy, since future price gains would be possible only if there
is a drastic change in investor expectations regarding the
performance of fixed-income securities in the present low interest
rate environment. We anticipate keeping the Insured and National
Portfolios focused toward delivering a high level of current income
without sacrificing credit quality.
Limited Maturity Portfolio
The fiscal year ended June 30, 1998 was a favorable one for interest
rates in general as low inflation and fears of the impact from the
Asian financial crisis kept Federal Reserve Board policy on hold.
During the fourth fiscal quarter ended June 30, 1998, the Limited
Maturity Portfolio continued to be aggressively positioned, as it
had for most of the recent fiscal year. We maintained cash reserves
at approximately 2% of net assets, and the average portfolio
maturity was kept at approximately 1.8 years, close to its allowable
maximum of 2.0 years. Our aggressive investment strategy over the
past 12 months benefited the total returns of the Portfolio and
helped it to outperform the average total return of similar limited
maturity municipal bond funds.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Municipal Bond
Fund, Inc., and we look forward to serving your investment needs in
the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Kenneth A. Jacob)
Kenneth A. Jacob
Vice President and Portfolio Manager
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and Portfolio Manager
(Peter J. Hayes)
Peter J. Hayes
Vice President and Portfolio Manager
July 30, 1998
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Insured Portfolio's
Class A and
Class B Shares
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index.
Beginning and ending values are:
6/88 6/98
Insured Portfolio++--
Class A Shares* $ 9,600 $20,507
Lehman Brothers Municipal
Bond Index++++ $10,000 $22,193
A line graph depicting the growth of an investment in the
Portfolio's Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index.
Beginning and ending values are:
10/21/88** 6/98
Insured Portfolio++--
Class B Shares* $10,000 $19,094
Lehman Brothers Municipal
Bond Index++++ $10,000 $21,263
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Insured Portfolio invests primarily in long-term, investment-
grade municipal bonds (bonds rated Baa or better) covered by
portfolio insurance guaranteeing the timely payment of principal at
maturity and interest.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years. The starting date for the Index is from
10/31/88.
Insured Portfolio's
Class A and
Class B Shares
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/98 +8.05% +3.72%
Five Years Ended 6/30/98 +5.70 +4.84
Ten Years Ended 6/30/98 +7.89 +7.45
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/98 +7.24% +3.24%
Five Years Ended 6/30/98 +4.90 +4.90
Inception (10/21/88) through 6/30/98 +6.90 +6.90
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Insured Portfolio's
Class C and
Class D Shares
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the
Portfolio's Class C and Class D Shares compared to growth
of an investment in the Lehman Brothers Municipal Bond Index.
Beginning and ending values are:
10/21/94** 6/98
Insured Portfolio++--
Class C Shares* $10,000 $13,029
Insured Portfolio++--
Class D Shares* $ 9,600 $12,768
Lehman Brothers Municipal
Bond Index++++ $10,000 $13,802
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Insured Portfolio invests primarily in long-term, investment-
grade municipal bonds (bonds rated Baa or better) covered by
portfolio insurance guaranteeing the timely payment of principal at
maturity and interest.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years.
The starting date for the Index is from 10/31/94.
Insured Portfolio's
Class C and
Class D Shares
Average Annual
Total Return
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/98 +7.05% +6.05%
Inception (10/21/94) through 6/30/98 +7.43 +7.43
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 6/30/98 +7.65% +3.34%
Inception (10/21/94) through 6/30/98 +8.03 +6.84
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
PERFORMANCE DATA (continued)
National Portfolio's
Class A and
Class B Shares
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index.
Beginning and ending values are:
6/88 6/98
National Portfolio++--
Class A Shares* $ 9,600 $21,033
Lehman Brothers Municipal
Bond Index++++ $10,000 $22,193
A line graph depicting the growth of an investment in the
Portfolio's Class B Shares compared to growth of an investment
in the Lehman Brothers Municipal Bond Index.
Beginning and ending values are:
10/21/88** 6/98
National Portfolio++--
Class B Shares* $10,000 $19,486
Lehman Brothers Municipal
Bond Index++++ $10,000 $21,263
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The National Portfolio invests primarily in long-term, medium- to
lower-grade municipal bonds (bonds rated Baa, bonds rated below Baa
and bonds unrated of comparable quality) offering higher yields but
subject to greater risks than investment-grade municipal bonds.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years. The starting date for the Index is from
10/31/88.
Past performance is not predictive of future performance.
National Portfolio's
Class A and
Class B Shares
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/98 +8.36% +4.03%
Five Years Ended 6/30/98 +6.26 +5.40
Ten Years Ended 6/30/98 +8.16 +7.72
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/98 +7.55% +3.55%
Five Years Ended 6/30/98 +5.45 +5.45
Inception (10/21/88) through 6/30/98 +7.13 +7.13
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payments of applicable contingent deferred sales charge.
National Portfolio's
Class C and
Class D Shares
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the
Portfolio's Class C and Class D Shares compared to growth
of an investment in the Lehman Brothers Municipal Bond Index.
Beginning and ending values are:
10/21/94** 6/98
National Portfolio++--
Class C Shares* $10,000 $13,284
National Portfolio++--
Class D Shares* $ 9,600 $13,016
Lehman Brothers Municipal
Bond Index++++ $10,000 $13,802
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The National Portfolio invests primarily in long-term, medium- to
lower-grade municipal bonds (bonds rated Baa, bonds rated below Baa
and bonds unrated of comparable quality) offering higher yields but
subject to greater risks than investment-grade municipal bonds.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years. The starting date for the Index is from
10/31/94.
Past performance is not predictive of future performance.
National Portfolio's
Class C and
Class D Shares
Average Annual
Total Return
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/98 +7.49% +6.49%
Inception (10/21/94) through 6/30/98 +8.00 +8.00
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 6/30/98 +7.99% +3.67%
Inception (10/21/94) through 6/30/98 +8.60 +7.40
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Limited Maturity
Portfolio's
Class A and
Class B Shares
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the
Portfolio's Class A Shares compared to growth of an investment
in the Lehman Brothers Municipal Bond Index and the
Lehman Brothers 3-Year General Obligation Bond Index.
Beginning and ending values are:
6/88 6/98
Limited Maturity Portfolio++--
Class A Shares* $9,900 $16,116
Lehman Brothers Municipal
Bond Index++++ $10,000 $22,193
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $17,975
A line graph depicting the growth of an investment in the
Portfolio's Class B Shares compared to growth of an
investment in the Lehman Brothers Municipal Bond Index and
theLehman Brothers 3-Year General Obligation Bond Index.
Beginning and ending values are:
11/02/92** 6/98
Limited Maturity Portfolio++--
Class B Shares* $10,000 $12,264
Lehman Brothers Municipal
Bond Index++++ $10,000 $15,060
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $13,293
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Limited Maturity Portfolio invests primarily in investment-
grade municipal bonds (bonds rated Baa or better) with a maximum
maturity not to exceed 4 years.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years. The starting date for the Index is from
10/31/92.
++++++This unmanaged Index consists of state and local government
obligation bonds that mature in 3 years--4 years, rated Baa or
better. The starting date for the Index is from 10/31/92.
Past performance is not predictive of future performance.
Limited Maturity
Portfolio's
Class A and
Class B Shares
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/98 +4.26% +3.22%
Five Years Ended 6/30/98 +3.84 +3.63
Ten Years Ended 6/30/98 +4.99 +4.89
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/98 +3.89% +2.89%
Five Years Ended 6/30/98 +3.50 +3.50
Inception (11/2/92) through 6/30/98 +3.67 +3.67
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
PERFORMANCE DATA (concluded)
Limited Maturity
Portfolio's
Class C and
Class D Shares
Total Return
Based on a $10,000
Investment
A line graph depicting the growth of an investment in the
Portfolio's Class C Shares and Class D Shares compared to
growth of an investment in the Lehman Brothers Municipal Bond
Index and the Lehman Brothers 3-Year General Obligation Bond
Index. Beginning and ending values are:
10/21/94** 6/98
Limited Maturity Portfolio++--
Class C Shares* $10,000 $11,527
Limited Maturity Portfolio++--
Class D Shares* $ 9,900 $11,564
Lehman Brothers Municipal
Bond Index++++ $10,000 $13,802
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $12,281
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Limited Maturity Portfolio invests primarily in investment-
grade municipal bonds (bonds rated Baa or better) with a maximum
maturity not to exceed 4 years.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years. The starting date for the Index is from
10/31/94.
++++++This unmanaged Index consists of state and local government
obligation bonds that mature in 3 years--4 years, rated Baa or
better. The starting date for the Index is from 10/31/94.
Past performance is not predictive of future performance.
Limited Maturity
Portfolio's
Class C and
Class D Shares
Average Annual
Total Return
% Return % Return
Class C Shares* Without CDSC With CDSC**
Year Ended 6/30/98 +3.88% +2.88%
Inception (10/21/94) through 6/30/98 +3.93 +3.93
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Class D Shares* Sales Charge Sales Charge**
Year Ended 6/30/98 +4.16% +3.12%
Inception (10/21/94) through 6/30/98 +4.30 +4.01
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
Ten Years/
Since Standardized
12 Month 3 Month Inception 30-Day Yield
Total Return Total Return Total Return As of 6/30/98
<S> <C> <C> <C> <C>
ML Municipal Bond Fund, Inc. Insured Portfolio Class A Shares** +8.05% +1.29% +113.64% 4.50%
ML Municipal Bond Fund, Inc. Insured Portfolio Class B Shares** +7.24 +0.98 + 90.94 3.93
ML Municipal Bond Fund, Inc. Insured Portfolio Class C Shares** +7.05 +0.97 + 30.29 3.88
ML Municipal Bond Fund, Inc. Insured Portfolio Class D Shares** +7.65 +1.11 + 32.99 4.26
ML Municipal Bond Fund, Inc. National Portfolio Class A Shares*** +8.36 +1.47 +119.11 4.55
ML Municipal Bond Fund, Inc. National Portfolio Class B Shares*** +7.55 +1.28 + 94.86 3.98
ML Municipal Bond Fund, Inc. National Portfolio Class C Shares*** +7.49 +1.27 + 32.84 3.93
ML Municipal Bond Fund, Inc. National Portfolio Class D Shares*** +7.99 +1.41 + 35.59 4.31
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class A Shares**** +4.26 +0.97 + 62.76 3.55
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class B Shares**** +3.89 +0.88 + 22.64 3.23
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class C Shares**** +3.88 +0.97 + 15.27 3.20
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class D Shares**** +4.16 +0.94 + 16.79 3.45
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date.
**The Fund's ten-year/inception dates are: Class A Shares, ten years
ended 6/30/98; Class B Shares, 10/21/88; and Class C and Class D
Shares, 10/21/94.
***The Fund's ten-year/inception dates are: Class A Shares, ten
years ended 6/30/98; Class B Shares, 10/21/88; and Class C and Class
D Shares, 10/21/94.
****The Fund's ten-year/inception dates are: Class A Shares, ten
years ended 6/30/98; Class B Shares, 11/2/92; and Class C and Class
D Shares, 10/21/94.
</TABLE>
Portfolio
Abbreviations
To simplify the listings of
Merrill Lynch Municipal
Bond Fund, Inc.'s portfolio
holdings in the Schedule of
Investments, we have
abbreviated the names of
many of the securities
according to the list at right.
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
EDA Economic Development Authority
GAN Grant Anticipation Notes
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
IRS Inverse Rate Securities
LEVRRS Leveraged Reverse Rate Securities
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.2% AAA Aaa $ 1,585 Alabama Water Pollution Control Authority, Revolving Fund
Loan, Series A, 6.75% due 8/15/2017 (b) $ 1,776
AAA Aaa 1,250 Mobile, Alabama, GO, Refunding and Capital Improvement Bonds,
10.875% due 11/01/2007 (c) 1,743
Arizona--1.1% AAA Aaa 6,750 Arizona State Municipal Financing Program, COP, Series 34,
7.25% due 8/01/2009 (g) 8,316
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) 4,118
Pima County, Arizona, Sewer Revenue Refunding and
Improvement Bonds (h):
AAA Aaa 2,000 5.50% due 7/01/2007 2,157
AAA Aaa 2,200 5.25% due 7/01/2008 2,335
AAA Aaa 3,725 Pima County, Arizona, Unified School District No. 1
(Tucson), Refunding, UT, 5% due 7/01/2008 (h) 3,883
California AAA Aaa 5,000 Los Angeles, California, Wastewater System Revenue Bonds,
- --1.6% Series A, 5% due 6/01/2012 (h) 5,072
AAA Aaa 8,800 Northern California Power Agency, Multiple Capital Facilities
Revenue Bonds, RIB, AMT, 8.959% due 8/01/2025 (d)(e) 10,527
AAA Aaa 5,900 Oakland, California, Redevelopment Agency, Refunding,
INFLOS, 8.118% due 9/01/2019 (d)(e) 6,711
AAA Aaa 2,300 San Jose, California, Redevelopment Agency, Refunding
(Tax Allocation Merged Area Redevelopment Project),
6% due 8/01/2008 (e) 2,587
AAA Aaa 5,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2002 (a)(e) 5,534
Colorado--4.0% Denver, Colorado, City and County Airport, Revenue Bonds (e):
AAA Aaa 20,000 RITR, Series 13, 6.47% due 11/15/2023 (d) 20,300
AAA Aaa 1,500 Refunding, Series D, 5.50% due 11/15/2025 1,553
AAA Aaa 38,325 Series A, 5.70% due 11/15/2025 40,458
Municipal Subdistrict Northern Colorado, Water
Conservancy District, Revenue Refunding Bonds, Series F (b):
Aaa Aaa 4,470 6.15% due 12/01/2005 4,971
Aaa Aaa 4,250 6.25% due 12/01/2006 4,792
Aaa Aaa 5,055 6.35% due 12/01/2007 5,779
Florida--3.8% AAA Aaa 2,500 Dade County, Florida, Water and Sewer System Revenue Bonds,
VRDN, 3.40% due 10/05/2022 (f)(h) 2,500
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) 841
AAA Aaa 10,000 Lee County, Florida, Hospital Board of Directors,
Hospital Revenue Bonds, INFLOS, 9.276% due 4/01/2001 (a)(d)(e) 11,738
AAA Aaa 3,950 Orange County, Florida, HFA, Mortgage Revenue Refunding
Bonds, Series A, 7.60% due 1/01/2024 (h)(j) 4,205
AAA Aaa 5,790 Orange County, Florida, Health Facilities Authority Revenue
Bonds (Hospital--Orlando Regional Healthcare),
Series A, 6.25% due 10/01/2006 (e) 6,528
AAA Aaa 2,850 South Broward Hospital District, Florida, Hospital
Revenue Bonds, RIB, Series C, 9.136% due 5/01/2001 (a)(b)(d) 3,359
Tampa, Florida, Health System Revenue Bonds (Catholic Health)(e):
AAA Aaa 17,210 Series A-1 (East), 4.875% due 11/15/2018 16,574
AAA Aaa 4,200 Series A-3, 4.75% due 11/15/2018 3,979
AAA Aaa 22,375 Series A-3, 4.75% due 11/15/2028 20,845
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) 3,275
Georgia--2.1% AAA Aaa 4,000 Chatham County, Georgia, School District, UT, 6.75%
due 8/01/2003 (a)(e) 4,537
Georgia Municipal Electric Authority, Power Revenue Bonds (b):
AAA Aaa 20,000 Series EE, 7% due 1/01/2025 25,698
AAA Aaa 9,000 Series Y, 6.40% due 1/01/2013 10,441
Hawaii--3.1% AAA Aaa 10,000 Hawaii State Airport System Revenue Refunding Bonds,
Series 1993, 6.45% due 7/01/2013 (e) 11,020
Hawaii State, GO, Refunding, Series CS (e):
AAA Aaa 2,000 5.25% due 4/01/2006 2,104
AAA Aaa 10,000 5% due 4/01/2009 10,353
Hawaii State, GO, Series CR (e):
AAA Aaa 14,005 5.75% due 4/01/2008 15,304
AAA Aaa 15,425 5.75% due 4/01/2009 16,943
AAA Aaa 3,465 Maui County, Hawaii, Refunding, Series F & G, UT, 6%
due 12/15/2008 (h) 3,879
Illinois--8.9% Chicago, Illinois, Board of Education (Chicago School
Reform), UT, Series A (b):
AAA Aaa 2,965 5.25% due 12/01/2018 2,958
AAA Aaa 30,000 5.25% due 12/01/2027 29,909
AAA Aaa 10,000 Chicago, Illinois, Board of Education, RITR, UT, Series 3,
6.47% due 12/01/2027 (b)(d) 9,925
AAA Aaa 2,000 Chicago, Illinois, O'Hare International Airport Revenue
Bonds (Passenger Facilities Charge), Series A, 5.625%
due 1/01/2015 (b) 2,092
AAA Aaa 5,590 Chicago, Illinois, O'Hare International Airport Revenue
Refunding Bonds, Second Lien, Series C-1, 5% due 1/01/2011 (e) 5,726
AAA Aaa 7,500 Chicago, Illinois, Project and Refunding Bonds, UT,
5.25% due 1/01/2028 (h) 7,478
AAA Aaa 3,000 Chicago, Illinois, Water Revenue Bonds, 5% due 11/01/2015 (h) 2,962
AAA Aaa 2,800 Cook County, Illinois, Refunding, UT, Series B, 5%
due 11/15/2012 (e) 2,802
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,250 (Elmhurst Memorial Hospital), 6.625% due 1/01/2022 (h) 3,521
AAA Aaa 4,000 (Methodist Health Project), RIB, 6.761% due 5/18/2001 (a)(b)(d) 4,377
AAA Aaa 3,740 Refunding (Methodist Medical Center), 5.50% due 11/15/2011 (e) 3,927
AAA Aaa 28,900 Refunding (Sinai Health System), 6% due 2/15/2024 (b)(l) 31,199
AAA Aaa 10,000 (Rush Presbyterian-Saint Luke's Medical Center),
INFLOS, 9.66% due 10/01/2024 (d)(e) 11,838
AAA Aaa 3,000 Illinois State, GO, 5.75% due 5/01/2021 (e) 3,149
Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds (McCormick Place
Expansion Project):
AAA Aaa 6,070 Refunding, Series A, 6% due 12/15/2006 (b) 6,736
AAA Aaa 10,000 Refunding, Series A, 6.10% due 12/15/2015 (e)(k) 4,095
AAA Aaa 8,330 Refunding, Series A, 6.10% due 12/15/2016 (e)(k) 3,212
AAA Aaa 6,600 Series A, 6.50% due 6/15/2003 (a)(b) 7,396
AAA Aaa 26,000 Regional Transportation Authority, Illinois, Series A, 6.25%
due 6/01/2024 (b) 28,540
Indiana--2.1% AAA Aaa 15,000 Indiana Health Facilities Financing Authority, Hospital
Revenue Refunding Bonds (Sisters of St. Francis
Health), Series A, 5.375% due 11/01/2027 (e) 15,119
AAA Aaa 4,040 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Series A, 7.90% due 2/01/2002 (a)(g) 4,547
AAA Aaa 4,340 Jasper County, Indiana, PCR, Refunding (Northern Indiana
Public Service), 7.10% due 7/01/2017 (e) 4,728
AAA Aaa 4,510 Munster, Indiana, School Building Corp. (First Mortgage),
5.75% due 1/15/2021 (e) 4,732
AAA Aaa 5,000 Penn, Indiana, High School Building Corp. (First Mortgage),
6.125% due 7/15/2005 (a)(e) 5,593
AAA Aaa 5,800 Rockport, Indiana, PCR, Refunding (Indiana-Michigan
Power), Series B, 7.60% due 3/01/2016 (h) 6,348
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<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>
Maryland--0.3% AAA Aaa $ 4,400 Maryland State Health and Higher Educational Facilities
Authority Revenue Bonds (University of Maryland
Medical Systems), Series B, 7% due 7/01/2022 (h) $ 5,586
Massachusetts Massachusetts Bay Transportation Authority, Massachusetts
- --5.2% General Transportation Systems, Series A (e):
AAA Aaa 11,445 4.75% due 3/01/2016 10,981
AAA Aaa 11,000 4.75% due 3/01/2017 10,514
AAA Aaa 4,385 Massachusetts Educational Loan Authority, Education
Loan Revenue Bonds, AMT, Issue D, Series A, 7.25%
due 1/01/2009 (e) 4,687
Massachusetts State Consolidated Loan, Series B (e):
AAA Aaa 9,160 4.75% due 4/01/2017 8,764
AAA Aaa 9,595 4.75% due 4/01/2018 9,145
AAA Aaa 5,350 Massachusetts State, GO, Refunding, Series A, 5.75%
due 8/01/2009 (b) 5,924
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (d):
AAA Aaa 10,000 (Beth Israel), INFLOS, 8.268% due 7/01/2025 (b) 11,438
AAA Aaa 3,100 (Saint Elizabeth's Hospital), LEVRRS, Series E, 9.68%
due 8/12/2021 (i) 3,635
Massachusetts State Health and Educational Facilities
Authority, Revenue Refunding Bonds (Care Group Issue),
Series A (e):
AAA Aaa 4,300 4.50% due 7/01/2014 3,989
AAA Aaa 2,500 4.75% due 7/01/2020 2,354
AAA Aaa 12,300 Massachusetts State Industrial Finance Agency Revenue
Bonds (Tufts University), Series H, 4.75% due 2/15/2028 (e) 11,538
AAA Aaa 4,020 Massachusetts State Insured Revenue Refunding Bonds,
Series B, 5.40% due 11/01/2007 (e) 4,315
AAA Aaa 3,250 Massachusetts State Port Authority Revenue Bonds,
13% due 7/01/2013 (c) 5,555
Massachusetts State Water Resources Authority:
AAA Aaa 5,985 Refunding, Series B, 4.50% due 8/01/2022 (i) 5,444
AAA Aaa 2,500 Series A, 5.50% due 11/01/2014 (h) 2,620
Michigan--1.0% Aaa Aaa 6,915 Michigan State, HDA, Rental Housing Revenue Bonds, Series B,
6.15% due 10/01/2015 (e) 7,313
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) 11,206
AAA Aaa 1,000 Rockford, Michigan, Public Schools, UT, Series Q, 6%
due 5/01/2007 (h) 1,112
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) 1,817
Nevada--2.9% AAA Aaa 6,820 Clark County, Nevada, Airport Revenue Bonds, Sub-Lien,
Series A, 5.50% due 7/01/2006 (e) 7,288
AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power), AMT, 6.65% due 6/01/2017 (e) 49,310
New Jersey AAA Aaa 3,350 Cape May County, New Jersey, Industrial Pollution Control
- --6.0% Financing Authority, Revenue Refunding Bonds
(Atlantic City Electric Company Project), Series A, 6.80%
due 3/01/2021 (e) 4,142
AAA Aaa 28,750 New Jersey EDA, Natural Gas Facilities, Revenue Refunding
Bonds (NUI Corporation), Series A, 6.35% due 10/01/2022 (b) 31,904
New Jersey EDA, Revenue Refunding Bonds (Trenton Office
Complex)(i):
AAA Aaa 5,125 5% due 6/15/2005 5,332
AAA Aaa 2,105 5% due 6/15/2006 2,192
AAA Aaa 2,010 5.25% due 6/15/2009 2,132
AAA Aaa 6,980 5.25% due 6/15/2010 7,387
AAA Aaa 5,400 5.25% due 6/15/2011 5,702
AAA Aaa 3,590 5.25% due 6/15/2012 3,772
New Jersey State Housing and Mortgage Finance Agency
Revenue Bonds (Home Buyer), AMT (e):
AAA Aaa 7,740 Series D, 7.70% due 10/01/2029 8,063
AAA Aaa 23,225 Series M, 7% due 10/01/2026 25,234
AAA Aaa 15,000 New Jersey State Transit Corp. Capital, GAN, Series A,
5% due 9/01/2000 (i) 15,256
AAA Aaa 4,215 New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds, Series C, 6.50% due 1/01/2008 (b) 4,850
New York--18.5% Long Island Power Authority, New York, Electric System
Revenue Bonds, Series A:
AAA Aaa 10,960 6% due 12/01/2007 (b) 12,264
AAA Aaa 26,850 5.50% due 12/01/2010 (b) 28,984
AAA Aaa 5,270 5.50% due 12/01/2011 (b) 5,680
AAA Aaa 4,220 5.50% due 12/01/2012 (i) 4,543
AAA Aaa 3,000 Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Bonds, Series A, 5%
due 7/01/2023 (i) 2,925
AAA Aaa 10,000 Metropolitan Transportation Authority, New York, Dedicated
Tax Fund, Series A, 4.50% due 4/01/2018 (h) 9,211
Metropolitan Transportation Authority, New York,
Transportation Facilities Revenue Refunding Bonds,
Series B-1 (b):
AAA Aaa 3,000 5% due 7/01/2010 3,053
AAA Aaa 6,630 5% due 7/01/2017 6,503
AAA Aaa 2,750 New York City, New York, City Transitional Finance
Authority Revenue Bonds (Future Tax Secured),
Series B, 4.75% due 11/15/2018 (h) 2,615
New York City, New York, GO, UT:
AAA Aaa 5,000 Refunding, Series F, 5.50% due 8/01/2007 (e) 5,365
AAA Aaa 15,000 Series B, 6.25% due 8/15/2008 (b) 16,849
AAA Aaa 24,500 Series D, 6% due 8/01/2008 (h) 27,305
AAA Aaa 8,175 Series E, 6% due 8/01/2007 (h) 9,075
AAA Aaa 18,530 Series F, 5.25% due 8/01/2012 (h) 19,031
AAA Aaa 2,585 Series G, 5.75% due 2/01/2007 (e) 2,811
AAA Aaa 13,770 Series G, 6% due 10/15/2007 (b) 15,312
AAA Aaa 3,405 Series H, 5.125% due 8/01/2018 (e) 3,369
AAA Aaa 31,000 Series I, 6% due 4/15/2012 (i) 33,798
AAA Aaa 6,000 Series L, 5.20% due 8/01/2008 (e) 6,303
AAA Aaa 10,095 Series M, 5.30% due 6/01/2012 (b) 10,435
AAA Aaa 15,000 Series M, 5.50% due 6/01/2017 (b) 15,612
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 28,510 RITR, Series RI-97-6, 7.445% due 6/15/2026 (d)(e) 31,646
AAA Aaa 10,000 Refunding, Series C, 5% due 6/15/2021 (h) 9,760
AAA Aaa 5,010 Series C, 6.20% due 6/15/2002 (a)(b) 5,468
AAA Aaa 15,000 Series D, 4.75% due 6/15/2025 (e) 14,110
AAA Aaa 1,500 New York City, New York, Refunding, UT, Series E, 6.20%
due 8/01/2008 (e) 1,696
AAA Aaa 8,250 New York State Dormitory Authority, Hospital Revenue
Refunding Bonds (New York & Presbyterian), 4.75%
due 8/01/2016 (b)(l) 7,874
AAA Aaa 2,500 New York State Dormitory Authority Revenue Bonds
(City University), Third Generation Reserves, Series 2,
6.25% due 7/01/2019 (e) 2,729
AAA Aaa 1,650 New York State Environmental Facilities Corporation,
Special Obligation Revenue Refunding Bonds
(Riverbank State Park), 5.50% due 4/01/2016 (b) 1,719
New York State Local Government Assistance Corp.,
Refunding, Series B (e):
AAA Aaa 9,320 4.75% due 4/01/2014 9,057
AAA Aaa 3,000 4.875% due 4/01/2020 2,896
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) 10,038
AAA Aaa 400 New York State Thruway Authority, General Revenue
Bonds, VRDN, 4.05% due 1/01/2024 (f)(h) 400
New York State Thruway Authority, Highway and Bridge
Trust Fund, Series B (i):
AAA Aaa 5,820 5% due 4/01/2013 5,824
AAA Aaa 6,760 5% due 4/01/2017 6,654
Niagara Falls, New York, Public Improvement Bonds, UT (e):
AAA Aaa 2,975 6.90% due 3/01/2023 3,376
AAA Aaa 3,190 6.90% due 3/01/2024 3,620
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<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>
Ohio--2.4% Cleveland, Ohio, COP (Cleveland Stadium Project)(b):
AAA Aaa $ 3,175 5.25% due 11/15/2010 $ 3,316
AAA Aaa 8,530 5.25% due 11/15/2011 8,855
AAA Aaa 4,945 5.25% due 11/15/2012 5,094
AAA Aaa 7,130 5.25% due 11/15/2013 7,308
AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds,
First Mortgage, Series A, 7% due 11/15/2004 (a)(e) 14,009
AAA Aaa 3,500 Cleveland, Ohio, Refunding, GO, 5.30% due 9/01/2007 (b) 3,722
AAA Aaa 3,500 Ohio State Building Authority, State Facilities (Adult
Correctional), Series A, 6% due 4/01/2004 (b) 3,804
Oregon--0.3% 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) 4,713
AAA Aaa 135 7.10% due 7/01/2021 146
Pennsylvania AAA Aaa 6,900 Beaver County, Pennsylvania, Hospital Authority
- --7.3% Revenue Bonds (Medical Center of Beaver, Pennsylvania Inc.),
Series A, 6.25% due 7/01/2022 (b) 7,464
AAA Aaa 14,860 Delaware County, Pennsylvania, Health System Authority
Revenue Bonds (Catholic Health East), Series A,
4.875% due 11/15/2018 (b) 14,311
AAA Aaa 19,400 Montgomery County, Pennsylvania, Higher Education and
Health Authority, Hospital Revenue Refunding Bonds
(Abington Memorial Hospital), Series A, 4.875% due 6/01/2018 (b) 18,623
Pennsylvania State Higher Educational Assistance Agency,
Student Loan Revenue Bonds, AMT, RIB (d):
AAA Aaa 15,000 9.752% due 9/03/2026 (b) 17,438
AAA Aaa 8,000 Series B, 10.99% due 3/01/2020 (e) 9,050
AAA Aaa 18,600 Series B, 8.209% due 3/01/2022 (b) 20,972
AAA Aaa 4,250 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Bonds (Temple
University), First Series, 6.50% due 4/01/2001 (a)(e) 4,601
AAA Aaa 10,000 Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue Refunding Bonds (Allegheny Delaware Valley),
Series A, 5.875% due 11/15/2016 (e) 10,544
AAA Aaa 6,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
12th Series B, 7% due 5/15/2020 (c)(e) 7,302
AAA Aaa 6,950 Philadelphia, Pennsylvania, Hospitals and Higher Educational
Facilities Authority, Health System Revenue Bonds (Jefferson
Health System), Series A, 5.125% due 5/15/2018 (b) 6,826
Philadelphia, Pennsylvania, Water and Wastewater Revenue Bonds:
AAA Aaa 4,020 5.60% due 8/01/2018 (e) 4,160
AAA Aaa 4,000 Series A, 5% due 8/01/2016 (b) 3,930
AAA Aaa 3,595 Pittsburgh, Pennsylvania, Series B, 5% due 9/01/2010 (b) 3,653
AAA Aaa 5,280 Pittsburgh, Pennsylvania, Water and Sewer Authority, Water
and Sewer System Revenue Bonds (First Lien), Series A,
5% due 9/01/2018 (h) 5,181
Stroudsburg, Pennsylvania, Area School District
Refunding Bonds, UT (h):
AAA Aaa 2,335 5% due 10/01/2006 2,428
AAA Aaa 2,450 5% due 10/01/2007 2,547
AAA Aaa 2,575 5% due 10/01/2008 2,673
Puerto Rico Puerto Rico, Electric Power Authority, Power Revenue
- --1.8% Refunding Bonds:
AAA Aaa 3,250 Series CC, 5.50% due 7/01/2008 (i) 3,531
AAA Aaa 8,000 Series CC, 5.25% due 7/01/2009 (i) 8,509
AAA Aaa 25,000 Series EE, 4.50% due 7/01/2018 (e) 23,133
Rhode Island AAA Aaa 6,100 Rhode Island Depositors Economic Protection
- --2.0% Corporation, Special Obligation Bonds, Series A, 6.625%
due 8/01/2002 (a)(i) 6,780
AAA Aaa 3,775 Rhode Island State Consolidated Capital Development
Loan, Series A, 6% due 8/01/2007 (e) 4,202
AAA Aaa 12,800 Rhode Island State Health and Educational Building
Corporation Revenue Bonds (Rhode Island Hospital),
INFLOS, 9.766% due 8/15/2021 (c)(d)(h) 15,360
Rhode Island, State Public Projects, Revenue Refunding
Bonds, Series A (b):
AAA Aaa 8,335 5.25% due 2/01/2009 8,699
AAA Aaa 3,975 5.25% due 2/01/2010 4,115
South AAA Aaa 4,000 Piedmont, South Carolina, Municipal Power Agency,
Carolina--1.4% Electric Revenue Refunding Bonds, 6.30% due
1/01/2003 (a)(e) 4,420
South Carolina State Public Service Authority, Revenue
Refunding Bonds, Series A (b):
AAA Aaa 17,090 6.375% due 7/01/2021 18,630
AAA Aaa 4,200 6.25% due 1/01/2022 4,664
Texas--11.8% AAA Aaa 11,190 Austin, Texas, Utility System, Combined Revenue Bonds,
Prior Lien, 9.25% due 5/15/2004 (a)(e) 14,064
Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT:
AAA Aaa 6,000 Refunding, 6.50% due 12/01/2027 (b) 6,559
AAA Aaa 12,000 Series B, 6.625% due 6/01/2022 (h) 13,081
AAA Aaa 20,000 Brownsville, Texas, Utility System, Revenue Refunding
Bonds, 6.25% due 9/01/2014 (e) 22,869
AAA Aaa 5,000 Harris County, Texas, Hospital District, Mortgage
Revenue Refunding Bonds, 7.40% due 2/15/2010 (b) 6,028
Harris County, Texas, Toll Road Revenue Bonds, Series A:
AAA Aaa 20,430 Refunding, Senior Lien, 6.50% due 8/15/2002 (a)(b) 22,626
AAA Aaa 10,305 Refunding, Senior Lien, 6.50% due 8/15/2002 (a)(h) 11,413
AAA Aaa 11,100 Senior Lien, 6.375% due 8/15/2004 (a)(e) 12,544
AAA Aaa 2,750 Senior Lien, 6.50% due 8/15/2017 (b) 3,016
Houston, Texas, Water and Sewer System Revenue Bonds:
AAA Aaa 11,230 RITR, Series 5, 6.72% due 12/01/2027 (d)(h) 11,777
AAA Aaa 14,770 Refunding, Junior Lien, Series A, 6.125% due 12/01/2005 (a)(e) 16,486
AAA Aaa 8,000 Refunding, Junior Lien, Series A, 6.20% due 12/01/2005 (a)(e) 8,967
AAA Aaa 7,615 Refunding, Junior Lien, Series A, 6.375% due 12/01/2022 (e) 8,351
AAA Aaa 4,210 Refunding, Junior Lien, Series B, 5% due 12/01/2007 (i) 4,354
AAA Aaa 3,725 Refunding, Junior Lien, Series B, 5% due 12/01/2014 (i) 3,684
AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract, COP,
Series J, 6.25% due 12/15/2013 (b) 4,045
AAA Aaa 11,800 Matagorda County, Texas, Navigation District No. 1,
Revenue Refunding Bonds (Houston Light and Power Co.),
Series A, 6.70% due 3/01/2027 (b) 12,864
North Central Texas, Health Facilities Development Corp.
Revenue Bonds:
A1 Aaa 3,200 (Methodist Hospital, Dallas), VRDN, Series B, 4.10%
due 10/01/2015 (f)(g) 3,200
AAA Aaa 5,300 (Texas Health Resources Systems), Series B, 5%
due 2/15/2017 (e) 5,193
A1+ VMIG1++ 6,400 Sabine River Authority, Texas, PCR, Refunding (Texas
Utilities Project), VRDN, Series A, 4% due 3/01/2026 (b)(f) 6,400
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) 16,338
Texas State Municipal Power Agency, Revenue Refunding Bonds:
AAA Aaa 3,520 5.25% due 9/01/2007 (e) 3,727
AAA Aaa 5,000 5.25% due 9/01/2008 (e) 5,311
AAA Aaa 3,000 5.25% due 9/01/2009 (e) 3,185
AAA Aaa 3,150 Series A, 6.75% due 9/01/2012 (b) 3,435
Utah--1.1% A1+ VMIG1++ 1,700 Carbon County, Utah, PCR, Refunding (PacifiCorp Projects),
VRDN, 4% due 11/01/2024 (b)(f) 1,700
AAA Aaa 14,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 9.566% due 5/15/2020 (b)(c)(d) 16,538
AAA Aaa 2,650 Utah State Board of Regents, Student Loan Revenue
Bonds, AMT, Series F, 7.45% due 11/01/2008 (b) 2,830
Virginia--2.2% AAA Aaa 5,000 Danville, Virginia, IDA, Hospital Revenue Refunding Bonds
(Danville Regional Medical Center), 6.50% due 10/01/2004 (a)(h) 5,644
Virginia State, HDA, Commonwealth Mortgage, AMT, Series A,
Sub-Series A-4 (e):
AAA Aaa 5,000 6.30% due 7/01/2014 5,350
AAA Aaa 11,215 6.35% due 7/01/2018 11,999
AAA Aaa 19,000 6.45% due 7/01/2028 20,188
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<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 Seattle, Washington, Metropolitan Seattle Municipality,
- --3.1% Sewer Revenue Bonds, Series W (e):
AAA Aaa $ 3,730 6.25% due 1/01/2020 $ 4,045
AAA Aaa 2,465 6.25% due 1/01/2022 2,673
AAA Aaa 4,485 6.25% due 1/01/2023 4,864
AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power Revenue
Bonds, 6.625% due 7/01/2004 (a)(h) 38,276
University of Washington, University Revenue Bonds
(Housing and Dining)(e):
AAA Aaa 2,600 7% due 12/01/2001 (a) 2,891
AAA Aaa 185 7% due 12/01/2001 (a) 206
AAA Aaa 465 7% due 12/01/2021 511
AAA Aaa 7,000 Washington State Health Care Facilities Authority Revenue Bonds
(Southwest Washington Hospital--Vancouver), 7.125% due
10/01/2019 (g) 7,376
West AAA Aaa 11,465 Mason County, West Virginia, PCR, Refunding
Virginia--1.3% (Appalachian Power Co.), Series I, 6.85% due 6/01/2022 (e) 12,589
AAA Aaa 12,250 Pleasants County, West Virginia, PCR (Potomac Pleasants),
Series 95-C, 6.15% due 5/01/2015 (b) 13,343
Wisconsin--3.3% AAA Aaa 9,000 Superior, Wisconsin, Limited Obligation Revenue Refunding
Bonds (Midwest Energy Resources),
Series E, 6.90% due 8/01/2021 (h) 11,142
Wisconsin Public Power System Inc., Power Supply System
Revenue Bonds, Series A:
AAA Aaa 6,500 6.875% due 7/01/2001 (a)(b) 7,137
AAA Aaa 4,650 5.75% due 7/01/2023 (e) 4,922
Wisconsin State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 6,520 Refunding (Sister's Sorrowful Mother), Series A,
6.125% due 8/15/2022 (e) 7,052
AAA Aaa 5,655 (Waukesha Memorial Hospital), Series B, 7.25%
due 8/15/2000 (a)(b) 6,137
Wisconsin State Veterans Housing Loans, AMT, Series B (e):
AAA Aaa 7,920 6.50% due 5/01/2020 8,595
AAA Aaa 17,130 6.50% due 5/01/2025 18,591
Total Investments (Cost--$1,799,028)--98.9% 1,916,884
Other Assets Less Liabilities--1.1% 22,094
-----------
Net Assets--100.0% $ 1,938,978
===========
<FN>
(a)Prerefunded.
(b)AMBAC Insured.
(c)Escrowed to maturity.
(d)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at June 30, 1998.
(e)MBIA Insured.
(f)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at June 30, 1998.
(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.
(l)FHA Insured.
++Highest short-term rating issued by Moody's Investors Service,
Inc.
Ratings of issues shown have not been audited by
Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alaska--2.5% Valdez, Alaska, Marine Terminal Revenue
Refunding Bonds:
AA Aa2 $ 6,000 (British Petroleum Pipeline), Series B, 7%
due 12/01/2025 $ 6,604
AA Aa3 27,150 (Sohio Pipeline--British Petroleum Oil), 7.125%
due 12/01/2025 30,231
Arizona--0.5% A1+ VMIG1++ 2,500 Maricopa County, Arizona, IDA, Hospital Facilities
Revenue Bonds (Samaritan Health Service Hospital),
VRDN, Series B-2, 4% due 12/01/2008 (a)(f) 2,500
NR* B1 5,000 Phoenix, Arizona, IDA, Airport Facilities Revenue
Refunding Bonds (America West Airlines, Inc.), AMT, 6.30%
due 4/01/2023 5,221
California--3.5% NR* NR* 5,975 Antioch, California, Improvement Bond Act of 1915
(Assessment District No.27--Lone Tree), Series E, 7.125%
due 9/02/2016 6,171
AAA Aaa 11,040 California State Department of Water Resources, Water
System Revenue Bonds (Central Valley Project),
Series O, 4.75% due 12/01/2029 (f) 10,323
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) 12,112
AAA Aaa 20,000 East Bay, California, Municipal Utility District,
Water System Revenue Bonds, Sub-Series, 4.75%
due 6/01/2028 (f) 18,756
NR* NR* 4,000 Long Beach, California, Special Tax Community Facilities
(District No.3--Pine Avenue Public Improvement),
6.375% due 9/01/2023 4,270
Colorado--7.2% AA Aa2 12,600 Colorado Springs, Colorado, Utilities Revenue Bonds,
RITR, Series 19, 6.645% due 11/15/2026 (g) 13,057
Denver Colorado, City and County Airport Revenue Bonds:
AAA Aaa 23,280 Series A, 5.75% due 11/15/2016 (f) 24,780
AAA Aaa 24,000 Series A, 5.70% due 11/15/2025 (f) 25,336
BBB Aaa 425 Series A, AMT, 7.50% due 11/15/2004 (j) 506
BBB Baa1 2,575 Series A, AMT, 7.50% due 11/15/2023 2,983
BBB Baa1 7,910 Series A, AMT, 8% due 11/15/2025 8,627
BBB Aaa 3,290 Series B, AMT, 7.25% due 11/15/2002 (j) 3,752
BBB Baa1 9,710 Series B, AMT, 7.25% due 11/15/2023 10,796
BBB Aaa 2,870 Series D, AMT, 7.75% due 11/15/2001 (j) 3,250
BBB Baa1 10,280 Series D, AMT, 7.75% due 11/15/2021 11,423
A1+ VMIG1++ 2,600 Moffat County, Colorado, PCR, Refunding (Pacificorp
Projects), VRDN, 4% due 5/01/2013 (a)(c) 2,600
Connecticut NR* Aa 4,550 Connecticut State Resource Recovery Authority,
- --0.3% Resource Recovery Revenue Bonds (American Refunding Fuel),
AMT, Series A, 8% due 11/15/2015 4,735
District of A1+ VMIG1++ 500 District of Columbia General Fund Recovery Bonds, VRDN,
Columbia--0.3% UT, Series B-2, 4.05% due 6/01/2003 (a) 500
A+ A1 3,750 District of Columbia Revenue Bonds (Georgetown University),
RIB, 8.936% due 4/01/2022 (g) 4,387
Florida--8.7% A1+ NR* 6,740 Broward County, Florida, HFA, M/F Housing Revenue Refunding
Bonds (Waters Edge Project), VRDN, 3.55% due 5/15/2027 (a) 6,740
AAA Aaa 10,000 Dade County, Florida, Water and Sewer System Revenue Bonds,
5.25% due 10/01/2026 (e) 10,041
AAA Aaa 6,330 Florida HFA (Antigua Club Apartments), AMT, Series A-1,
7% due 2/01/2035 (c) 6,963
NR* Aaa 7,765 Florida HFA, Home Ownership Revenue Bonds, AMT, Series G1,
7.90% due 3/01/2022 (d) 8,200
AA+ Aa2 31,000 Florida State Board of Education, Capital Outlay Public
Education, Series B, 4.50% due 6/01/2027 27,942
AAA Aaa 20,000 Florida State Turnpike Authority, Turnpike Revenue Bonds
(Department of Transportation), Series A, 4.50%
due 7/01/2027 (e) 18,081
AA Aa3 5,000 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa
Electric Company Project), Series 91, 7.875% due 8/01/2021 5,651
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Florida A- NR* $ 2,700 Leesburg, Florida, Hospital Revenue Capital Improvement
(concluded) Revenue Bonds (Leesburg Regional Medical Center
Project), Series 91-A, 7.50% due 7/01/2002 (j) $ 3,077
AAA Aaa 6,400 Miami--Dade County, Florida, Professional Sports Franchise
Facilties, Tax Revenue Refunding Bonds, 4.75% due 10/01/2030 (f) 5,970
AAA NR* 3,755 Orange County, Florida, HFA, Mortgage Revenue Bonds,
AMT, Series A, 8.375% due 3/01/2021 (d) 3,883
AAA Aaa 5,850 South Broward, Florida, Hospital District Revenue Bonds,
RIB, Series C, 9.136% due 5/01/2001 (c)(g)(j) 6,896
AAA Aaa 22,875 Sunrise, Florida, Utility System Revenue Bonds, Series A,
5.75% due 10/01/2006 (c)(j) 25,301
Georgia--1.6% AAA Aaa 20,000 Metropolitan Atlanta, Georgia, Rapid Transit Authority,
Sales Tax Revenue Bonds, Second Indenture, Series A, 6.90%
due 7/01/2004 (f)(j) 23,102
Hawaii--0.7% A+ Aaa 10,000 Hawaii State, GO, UT, Series CJ, 5.90% due 1/01/2005 (j) 10,881
Idaho--0.1% AA NR* 1,360 Idaho Housing Agency, S/F Mortgage, AMT, Series E,
7.875% due 7/01/2024 (b) 1,453
Illinois--3.9% 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 8,695
Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (United Airlines, Inc.):
BB+ Baa2 4,580 AMT, Series B, 8.95% due 5/01/2018 5,124
BB+ Baa2 13,300 Series 1984-B, 8.85% due 5/01/2018 14,869
A+ Aa2 3,700 Illinois HDA, Residential Mortgage Revenue Bonds, RIB,
AMT, Series C-2, 9.613% due 2/01/2018 (g) 4,181
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 3,000 (Methodist Health Project), 6.761% due 5/08/2001 (c)(j) 3,283
NR* NR* 2,625 Refunding (Saint Elizabeth's Hospital--Chicago),
7.75% due 7/01/2004 (j) 3,133
AAA Aaa 11,000 (Rush Presbyterian--Saint Luke's Medical Center),
INFLOS, 9.666% due 10/01/2024 (f)(g) 13,021
NR* A1 4,400 Southwestern Illinois Development Authority, Sewer
Facilities Revenue Bonds (Monsanto Company Project),
AMT, 7.30% due 7/15/2015 4,949
Indiana--1.0% AA NR* 9,100 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D, 6.75% due 2/01/2020 10,072
A1 VMIG1++ 5,000 Jasper County, Indiana, PCR, Refunding (Northern Indiana
Public Service Co.), VRDN, Series C, 4% due 4/01/2019 (a) 5,000
Iowa--0.8% NR* NR* 9,000 Iowa Finance Authority, Health Care Facilities, Revenue
Refunding Bonds (Care Initiatives Project), 9.25%
due 7/01/2025 12,127
Kansas--1.8% Wichita, Kansas, Hospital Revenue Bonds, RIB (f)(g):
AAA Aaa 12,000 Series III-A, 8.823% due 10/01/2017 14,250
AAA Aaa 10,000 Series III-B, 8.864% due 10/21/2022 11,875
Kentucky--0.8% NR* NR* 4,500 Perry County, Kentucky, Solid Waste Disposal Revenue
Bonds (TJ International Project), AMT, 7% due 6/01/2024 4,979
AA- Aa2 6,345 Trimble County, Kentucky, PCR (Louisville Gas and
Electric Company), AMT, Series A, 7.625% due 11/01/2020 6,914
Louisiana--3.8% NR* A3 37,850 Lake Charles, Louisiana, Harbor and Terminal District
Port Facilities, Revenue Refunding Bonds (Trunkline LNG
Company Project), 7.75% due 8/15/2022 43,283
BB NR* 10,000 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 7.50% due 7/01/2013 11,267
BBB Baa2 1,100 Saint Charles Parish, Louisiana, PCR (Union Carbide
Project), AMT, 7.35% due 11/01/2022 1,218
Maine--0.3% AA Aa2 3,815 Maine State Housing Authority, Mortgage Purchase, AMT,
Series B-4, 6.90% due 11/15/2026 4,053
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 7,463
Massachusetts AAA Aaa 36,920 Massachusetts Bay Transportation Authority, General
- --5.9% Transportation System, Refunding, Series A, 4.50%
due 3/01/2026 (f) 33,349
NR* Caa 12,350 Massachusetts State Health and Educational Facilities
Authority, Revenue Refunding Bonds (New England
Memorial Hospital), Series B, 6.25% due 7/01/2023 11,853
AAA Aaa 10,000 Massachusetts State Industrial Finance Agency Revenue
Bonds (Tufts University), Series H, 4.75% due 2/15/2028 (f) 9,380
AAA Aaa 36,000 Massachusetts State Water Resources Authority, General
Refunding Bonds, Series B, 4.50% due 8/01/2022 (h) 32,744
Michigan--1.8% AAA Aaa 15,000 Michigan State Hospital Finance Authority Revenue Bonds
(Sisters of Mercy), INFLOS, 8.666% due 2/15/2022 (g)(h) 17,381
BBB Baa1 9,350 Monroe County, Michigan, PCR (Detroit Edison Company
Project), AMT, Series A, 7.75% due 12/01/2019 10,027
Minnesota Minnesota State GO, Refunding, UT:
- --3.5% AAA Aaa 22,470 5% due 6/01/2004 23,415
AAA Aaa 17,285 5% due 6/01/2005 18,065
AA+ Aa 5,910 Minnesota State, HFA, S/F Mortgage, AMT, Series A, 7.45%
due 7/01/2022 (b) 6,235
AA+ NR* 3,000 Rochester, Minnesota, Health Care Facilities Revenue Bonds
(Mayo Foundation), IRS, Series H, 7.915% due 11/15/2015 (g) 3,472
Mississippi BBB Baa2 5,950 Lowndes County, Mississippi, Hospital Revenue Refunding
- --0.7% Bonds (Golden Triangle Medical Center), 8.50% due 2/01/2010 6,422
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 (d) 4,510
Missouri--0.8% BBB NR* 11,400 Bi-State Development Agency, Missouri and Illinois,
Metropolitan No. 5, Refunding (American Commercial
Lines, Inc.), 7.75% due 6/01/2010 12,363
Nebraska--0.2% AAA Aaa 3,000 Nebraska Investment Finance Authority, S/F Mortgage Revenue
Bonds, AMT, Series 2, RIB, 11.50% due 9/10/2030 (d)(g) 3,364
Nevada--1.3% AAA Aaa 20,000 Clark County, Neveda, Passenger Facility Charge Revenue
Bonds, 4.75% due 7/01/2022 (f) 18,879
New Jersey NR* NR* 4,960 New Jersey Health Care Facilities Financing Authority
- --1.1% Revenue Bonds (Riverwood Center), Series A, 9.90%
due 7/01/2001 (j) 5,835
AA- A3 9,500 University of Medicine and Dentistry of New Jersey,
Series C, 7.20% due 12/01/1999 (j) 10,132
New York--16.2% A- Baa1 15,040 Long Island Power Authority, New York, Electric System
Revenue Bonds, Series A, 5.50% due 12/01/2029 15,239
Metropolitan Transportation Authority, New York, Service
Contract Refunding Bonds (Commuter Facilities),
Series 5:
BBB+ Baa1 2,145 6.90% due 7/01/2006 2,333
BBB+ Baa1 5,000 7% due 7/01/2012 5,445
New York City, New York, GO, UT:
AAA Aaa 7,240 Series A, 7.75% due 8/15/2001 (j) 8,133
BBB+ A3 14,315 Series B, 7.75% due 2/01/2002 (j) 16,223
BBB+ A3 4,000 Series B, 8.25% due 6/01/2006 4,938
BBB+ A3 3,060 Series B, 7.75% due 2/01/2011 3,413
BBB+ A3 1,650 Series B, Fiscal 92, 7.75% due 2/01/2014 1,840
BBB+ Aaa 3,495 Series D, Group C, 8% due 8/01/2001 (j) 3,947
AAA Aaa 5,495 Series F, 8.25% due 11/15/2001 (j) 6,303
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 10,000 Series B, 5.75% due 6/15/2026 (f) 10,551
AAA Aaa 10,000 Series B, 5.875% due 6/15/2026 (h) 10,662
AA Aa3 41,815 New York City, New York, Transitional Finance Authority
Revenue Bonds (Future Tax Secured), Series B, 4.50%
due 11/15/2027 37,488
AAA Aaa 4,585 New York City, New York, UT, RITR, Series 33, 6.64%
due 8/01/2027 (f)(g) 4,700
AAA Aaa 30,000 New York State Dormitory Authority, Hospital Revenue
Refunding Bonds (New York and Presbyterian
Hospitals), 4.75% due 8/01/2027 (b)(c) 28,028
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New York New York State Dormitory Authority Revenue Bonds
(concluded) (State University Educational Facilities):
A- A3 $ 11,515 5.50% due 5/15/2026 $ 11,734
A- A3 6,735 Refunding, Series B, 7.375% due 5/15/2014 7,217
A- A3 5,000 Series A, 7.50% due 5/15/2013 6,361
AAA Aaa 30,000 Series A, 4.75% due 5/15/2025 (f) 28,221
A+ Aaa 6,000 New York State Local Government Assistance Corporation,
Series A, 7% due 4/01/2002 (j) 6,713
New York State Medical Care Facilities, Finance Agency
Revenue Bonds (New York Hospital Mortgage),
Series A (b)(c)(j):
AAA Aaa 8,400 6.75% due 2/15/2005 9,723
AAA Aaa 9,100 6.80% due 2/15/2005 10,557
North A1+ VMIG1++ 10,500 North Carolina Medical Care Commission, Hospital
Carolina--0.7% Revenue Bonds (Pooled Equipment Financing Project),
ACES, 3.60% due 12/01/2025 (a)(f) 10,500
Ohio--1.9% AAA Aaa 12,000 Cleveland, Ohio, Public Power System Revenue Bonds
(First Mortgage), Series A, 7% due 11/15/2004 (f)(j) 14,009
Ohio, HFA, S/F Mortgage Revenue Bonds, AMT (d):
AAA Aaa 7,725 RIB, Series B-4, 9.74% due 3/31/2031 (g) 8,671
AA+ NR* 1,485 Series B, 8.25% due 12/15/2019 1,554
AAA NR* 3,815 Series C, 7.85% due 9/01/2021 4,033
Pennsylvania AAA Aaa 11,500 Allegheny County, Pennsylvania, Sanitary
- --3.2% Authority, Sewer Revenue Bonds, RITR, Series 20, 6.82%
due 12/01/2024 (f)(g) 11,989
BBB Baa 10,000 Pennsylvania Convention Center Authority, Revenue
Refunding Bonds, Series A, 6.75% due 9/01/2019 11,190
AA Aa2 8,800 Pennsylvania HFA, Refunding, RIB, AMT, Series 1991-31C,
9.853% due 10/01/2023 (g) 10,010
AAA Aaa 10,000 Pennsylvania State Higher Educational Assistance
Agency, Student Loan Revenue Bonds, RIB, AMT, 9.52%
due 9/03/2026 (c)(g) 11,625
NR* NR* 2,000 Pennsylvania State Higher Educational Facilities
Authority, College and University Revenue Bonds
(Eastern College), Series B, 8% due 10/15/2025 2,359
Rhode AAA Aaa 5,250 Rhode Island Depositors Economic Protection
Island--1.0% Corporation, Special Obligation Bonds, Series A, 6.95%
due 8/01/2002 (j) 5,895
NR* Aa2 7,975 Rhode Island Housing and Mortgage Finance Corporation,
RITR, Series 30, AMT, 7.77% due 4/01/2029 (g) 8,653
South AAA Aa1 9,085 South Dakota HDA, Homeownership Mortgage, Series A,
Dakota--0.6% 7.15% due 5/01/2027 9,601
Tennessee NR* Aaa 10,000 Knox County, Tennessee, Health, Educational and
- --0.7% Housing Facilities Board, Hospital Facilities Revenue Bonds
(Baptist Health System of East Tennessee), 8.60% due 4/15/1999 (j) 10,574
Texas--18.4% Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT, Series A:
BBB+ Baa1 2,095 8.25% due 1/01/2019 2,176
BBB+ Baa1 18,150 7.875% due 3/01/2021 19,905
A- A2 12,350 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series 1989-A, 7.625%
due 5/01/2019 13,002
AAA Aaa 5,570 Dallas, Texas, Special Tax Revenue Bonds, Series A, 4.75%
due 8/15/2027 (c) 5,204
BBB Baa1 7,250 Gulf Coast Waste Disposal Authority, Texas, Revenue Bonds
(Champion International Corporation), AMT, 7.45% due 5/01/2026 8,031
Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds:
A1+ NR* 34,600 (Methodist Hospital), VRDN, 4% due 12/01/2025 (a) 34,600
AAA Aaa 10,150 RITR, Series 12, 8.72% due 10/01/2004 (f)(g)(j) 12,649
AAA Aaa 10,000 RITR, Series 23, 6.47% due 6/01/2027 (g) 9,950
A1+ NR* 7,150 Refunding (Methodist Hospital), VRDN, 4% due 12/01/2026 (a) 7,150
AAA Aa3 12,470 (Saint Luke's Episcopal Hospital Project), Series A,
6.75% due 2/15/2021 (i) 13,566
AAA Aaa 11,100 Harris County, Texas, Toll Road Revenue Bonds, Senior Lien,
Series A, 6.375% due 8/15/2004 (f)(j) 12,544
Houston, Texas, Water and Sewer System Revenue Bonds, RITR (e)(g):
AAA Aaa 15,750 Series 5, 6.72% due 12/01/2027 16,518
AAA Aaa 10,620 Series 32, 6.746% due 12/01/2027 11,032
BB Ba1 8,005 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare System
Project), 8.875% due 6/01/2021 8,376
AAA Aaa 14,000 Lower Colorado River Authority, Texas, Revenue Bonds,
Junior Lien, 7th Supplied Series, 4.75% due 1/01/2028 (h) 13,135
BBB Baa3 3,000 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 6/01/2005 (j) 3,677
NR* VMIG1++ 1,900 Port of Arthur, Texas, Navigational District, PCR, Refunding
(Texaco Incorporated Project), VRDN, 4.10% due 10/01/2024 (a) 1,900
A1+ VMIG1++ 2,600 Sabine River Authority, Texas, PCR, Refunding (Texas
Utilities Project), VRDN, Series A, 3.80% due 3/01/2026 (a)(c) 2,600
A+ Aa 3,940 Texas Housing Agency, Residential Development Mortgage
Revenue Bonds, Series A, 7.50% due 7/01/2015 (d) 4,218
Texas State Turnpike Authority, Dallas North Thruway Revenue
Bonds (President George Bush Turnpike)(e):
AAA Aaa 15,000 5.25% due 1/01/2023 15,022
AAA Aaa 25,000 5% due 1/01/2025 24,285
AA Aa2 4,440 Texas State Veterans' Housing Assistance (Fund II), AMT,
UT, Series A, 7% due 12/01/2025 4,793
AA Aa2 16,000 Texas State Water Development, Series A, B and C, 5.25%
due 8/01/2028 16,057
University of Texas, University Revenue Bonds
(Financing Systems), Series B:
AAA Aa1 7,240 4.50% due 8/15/2015 6,787
AAA Aa1 5,560 4.50% due 8/15/2016 5,172
Utah--1.2% NR* NR* 2,000 Tooele County, Utah, PCR, Refunding (Laidlaw Environmental),
AMT, Series A, 7.55% due 7/01/2027 2,219
AAA Aaa 13,250 Weber County, Utah, Municipal Building Authority,
Lease Revenue Bonds, 7.50% due 12/15/2004 (j) 15,861
Virginia NR* NR* 4,030 Dulles Town Center Community Development Authority, Virginia,
- --0.6% Special Assessment Tax Bonds (Dulles Town Center Project),
6.25% due 3/01/2026 4,081
AA+ Aa1 4,000 Virginia State, HDA, Commonwealth Mortgage, Series A, 7.15%
due 1/01/2033 4,196
West NR* NR* 4,000 Upshur County, West Virginia, Solid Waste Disposal
Virginia--0.3% Revenue Bonds (TJ International Project), AMT, 7%
due 7/15/2025 4,481
Wisconsin Wisconsin Housing and EDA, Home Ownership Revenue Bonds:
- --2.7% A1+ MIGI++ 21,150 RITR, Series 18, AMT, 7.862% due 9/01/2028 (g) 23,001
AA Aa 4,860 Series A, 7.10% due 3/01/2023 5,176
Wisconsin Housing and EDA, Housing Revenue Bonds:
A A1 5,400 Series B, 7.05% due 11/01/2022 5,794
A A1 5,105 Series C, 7% due 5/01/2015 5,478
Total Investments (Cost--$1,409,192)--101.1% 1,497,351
Liabilities in Excess of Other Assets--(1.1%) (16,364)
-----------
Net Assets--100.0% $ 1,480,987
===========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at June 30, 1998.
(b)FHA Insured.
(c)AMBAC Insured.
(d)GNMA Collateralized.
(e)FGIC Insured.
(f)MBIA Insured.
(g)The interest rate is subject to change periodcially and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at June 30, 1998.
(h)FSA Insured.
(i)Escrowed to maturity.
(j)Prerefunded.
*Not Rated.
++Highest short-term rating issued by Moody's Investors Service,
Inc.
Ratings of issues shown have not been audited by
Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Arizona--1.2% AA- A1 $ 200 Central Arizona Water Conservation District,
Contract Revenue Bonds (Central Arizona Project),
Series B, 6.50% due 5/01/2001 (a) $ 217
AA+ Aa1 250 Phoenix, Arizona, Refunding, UT, 5.70% due 7/01/1999 255
A+ A1 200 Pima County, Arizona, Refunding, Series A, 5.60% due 7/01/1999 204
AAA Aaa 4,000 University of Arizona, University Revenue Refunding Bonds,
4.625% due 6/01/2002 (e) 4,072
AAA Aaa 200 Yuma County, Arizona, Jail District Revenue Bonds, 4.30%
due 7/01/1999 (c) 201
California SP1+ MIG1++ 5,000 Riverside County, California, TRAN, 4.50% due 9/30/1999 5,045
- --3.7% SP1+ MIG1++ 10,000 San Diego, California, TRAN, Series A, 4.50% due 9/30/1999 10,096
Connecticut AAA Aaa 2,160 Bridgeport, Connecticut, Refunding, UT, Series A, 4.40%
- --3.6% due 9/01/1998 (c) 2,163
AAA Aaa 12,100 Connecticut State Special Assessment (Unemployment
Compensation Advance Fund), Revenue Refunding
Bonds, Series A, 5.50% due 5/15/2001 (c) 12,598
Florida--2.3% AAA Aaa 5,000 Dade County, Florida, GO, UT, 6.50% due 10/01/2001 (a)(c) 5,423
AAA Aaa 4,000 Florida School Boards Association Incorporated,
Lease Revenue Bonds (Orange County School Board Project),
6.80% due 7/01/1998 (c) 4,000
Georgia--2.6% 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 6,419
AAA Aaa 4,000 Georgia Muncipal Electric Authority, General Power Revenue
Refunding Bonds, Series D, 6% due 1/01/2000 (c) 4,121
Hawaii--2.1% AAA Aaa 3,200 Hawaii State, GO, Refunding, Series CO, 6% due 3/01/2001 (f) 3,353
A+ A1 5,250 Hawaii State, GO, UT, Series CH, 4.75% due 11/01/1999 5,314
Illinois--4.5% AA- NR* 10,000 Chicago, Illinois, Board of Education, COP (School Reform
Equipment Acquisition), 4.60% due 12/01/1999 10,104
BBB Baa1 4,625 Illinois Development Finance Authority, Solid Waste Disposal
Revenue Bonds (Waste Management Inc. Project), AMT, 7.125%
due 1/01/2001 4,909
AAA Aaa 3,500 Illinois State Refunding, GO, UT, 5.125% due 12/01/1999 (f) 3,566
Indiana--2.2% AAA Aaa 3,000 Indianapolis, Indiana, Airport Authority, Revenue
Refunding Bonds, AMT, Series A, 4.50% due 7/01/2001 (f) 3,029
AA NR* 5,790 Richmond, Indiana, Hospital Authority, Revenue Refunding
Bonds (Reid Hospital & Health Care), 4.35% due 1/01/2002 5,792
Kansas--1.0% AAA Aaa 4,000 Kansas State Development Finance Authority Revenue Bonds
(Regents Rehab), Series G-2, 5% due 10/01/2001 (c) 4,121
Kentucky--2.2% Kentucky State Property and Buildings Commission, Revenue
Refunding Bonds:
A+ A2 5,000 (Project No. 55), 4.10% due 9/01/1998 5,004
A+ A2 4,000 (Project No. 59), 5% due 11/01/1998 4,019
Louisiana A1+ VMIG1++ 5,000 Louisiana State Recovery District, Sales Tax Revenue Bonds,
- --1.2% 4.25% due 7/01/1998 (d)(g) 5,000
Maryland--0.5% NR* Aa2 2,000 Maryland State Community Development Administration
Department, Housing and Community Development Refunding Bonds
(S/F Program--First Series), 4.45% due 4/01/2001 2,010
Massachusetts NR* A1 275 Boston, Massachusetts, Economic Development and
- --3.9% Industrial Corporation, Public Parking Facility,
Series 1990, 5% due 7/01/2000 279
AAA Aaa 205 Massachusetts Education Loan Authority, Educational Loan
Revenue Refunding Bonds, AMT, Issue E, Series B, 5.50%
due 7/01/2001 (c) 212
AA- Aa1 750 Massachusetts State, GO, Refunding, Series B, 6.25% due 8/01/2001 798
AAA Aaa 3,500 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Newtown Wellesley Hospital), Series D,
6.90% due 7/01/2001 (a)(f) 3,843
AA Aa3 300 Massachusetts State Special Obligation Revenue Bonds
(Highway Improvement Loan), Series A, 5.90%
due 6/01/2001 315
A- A1 10,160 New England Education Loan Marketing Corporation
Refunding Bonds (Massachusetts Student Loan),
Series D, 4.75% due 7/01/1998 10,160
AA Aa1 100 Peabody, Massachusetts, GO, Series A, 4.50% due 8/01/2000 101
Michigan--3.9% AA+ Aa2 110 Ann Arbor, Michigan, School District, Public School
Refunding Bonds, UT, 4.75% due 5/01/2000 112
AAA Aaa 105 Chelsea, Michigan, School District, UT, 6.75% due 5/01/2002 (f) 115
AAA Aaa 250 Dearborn, Michigan, Economic Development Corporation,
Hospital Revenue Bonds (Oakwood Obligated
Group), Series A, 6.95% due 8/15/2001 (a)(d) 276
AAA Aaa 8,000 Detroit, Michigan, Distributable State Aid, UT, 7.20%
due 5/01/1999 (a)(c) 8,390
AAA Aaa 200 Detroit, Michigan, Refunding, Distributable State Aid,
UT, 5.70% due 5/01/2001 (c) 209
A1 VMIG1++ 100 Michigan, Higher Education Student Loan Authority,
Revenue Bonds, VRDN, AMT, Series XII-D, 3.55% due
7/01/1998 (b)(c) 100
AA+ Aa2 450 Michigan Municipal Bond Authority, Revenue Refunding
Bonds (Local Government--Qualified School), Series A,
6% due 5/01/2001 473
AA Aa3 6,000 Michigan State Building Authority, Revenue Refunding
Bonds, Series I, 5.80% due 10/01/1998 6,033
NR* Aaa 100 Michigan State Hospital Finance Authority Revenue Bonds
(McLaren Obligated Group), Series A, 7.50%
due 9/15/2001 (a)(f) 112
Minnesota AAA Aaa 2,385 Metropolitan Council, Minneapolis, St. Paul Metropolitan
- --1.3% Area Transit, UT, Series C, 4.75% due 2/01/2000 2,418
AAA Aaa 2,740 Minnesota State, HFA, Refunding (Rental Housing),
Series D, 4.50% due 8/01/1999(d) 2,758
Mississippi NR* Baa2 7,200 Lawrence County, Mississippi, PCR (Georgia-Pacific
- --4.2% Corporation Project), 4.30% due 12/01/2000 7,221
NR* Aaa 10,000 Mississippi Higher Education Assistance Corporation,
Student Loan Revenue Bonds, AMT, Series B, 4.80%
due 9/01/1998 10,018
Nebraska--1.5% A+ A1 6,250 Nebraska Public Power District Revenue Bonds (Consumer
Public Power District), 4.90% due 7/01/1998 6,250
Nevada--1.2% AAA Aaa 4,600 Clark County, Nevada, School District, Series A, 7%
due 6/01/2001 (a) 5,014
New Jersey NR* Aaa 300 Bergen County, New Jersey, General Improvement Bonds,
- --2.9% UT, 5.20% due 10/01/1999 306
AA+ Aaa 400 Monmouth County, New Jersey, General Improvement Bonds,
GO, UT, 6.625% due 8/01/2000 409
AAA Aaa 5,715 New Jersey State Educational Facilities Authority
Revenue Bonds (Higher Educational Facilities Trust Fund),
Series A, 5.125% due 9/01/1999 (c) 5,810
AAA Aaa 300 New Jersey State Educational Facilities Authority Revenue
Bonds (Princeton University), Series E, 4.05%
due 7/01/2000 301
AA+ Aa1 4,250 New Jersey State, Refunding, UT, Series D, 5.10% due 2/15/2000 4,334
AAA Aaa 125 Somerset County, New Jersey, GO, UT, 5.875% due 12/01/2001 133
AA+ Aaa 340 Union County, New Jersey, Refunding, GO, UT, 5.875% due 3/01/1999 345
New York BBB+ Aaa 10,255 Metropolitan Transportation Authority of New York, Service
- --18.4% Contract Commuter Facilities, Series 6, 6%
due 7/01/2001 (a) 10,821
Municipal Assistance Corporation:
AA Aa2 4,550 Refunding, Series E, 5.50% due 7/01/2000 4,687
NR* Aa2 800 Series 68, 7.10% due 7/01/1999 (a) 842
New York City, New York, GO:
BBB+ A3 2,020 Refunding, Series G, 3.90% due 8/01/1999 2,022
BBB+ A3 60 UT, Series A, 6% due 8/01/2000 (g) 62
New York State Dormitory Authority Revenue Bonds
(Consolidated City University System), Series A:
BBB+ Baa1 6,675 4.50% due 7/01/1998 6,675
BBB+ Baa1 10,885 4.75% due 7/01/1999 10,984
AAA Aaa 3,000 New York State Dormitory Authority Revenue Bonds
(State University Educational), Series A, 7.125%
due 5/15/1999 (a) 3,148
A+ Aa2 400 New York State Environmental Facilities Corporation, PCR,
State Water Revolving Fund (New York City Municipal Water
Finance Authority Project), Series E, 5.60% due 6/15/1999 407
New York State Local Government Assistance Corporation (a):
A+ Aaa 625 Series A, 7% due 4/01/2001 685
A+ Aaa 5,000 Series B, 6.25% due 4/01/2002 5,469
AAA Aaa 600 Series D, 7% due 4/01/2002 671
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<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>
New York AAA Aaa $ 725 New York State Medical Care Facilities Finance Agency,
(concluded) Revenue Bonds (Mental Health Services Facilities),
Series A, 7.75% due 2/15/2001 (a) $ 805
New York State Power Authority, Revenue and General Purpose:
AA- Aa3 5,305 Series A, 5% due 2/15/2002 5,459
AAA Aaa 3,570 Series Z, 6.50% due 1/01/2002 (a) 3,920
New York State Urban Development Corporation Revenue Bonds:
BBB+ Baa1 4,525 (Correctional Capital Facilities), Series 4, 4.90%
due 1/01/2001 4,598
BBB+ Aaa 5,000 (State Facilities), 7.50% due 4/01/2001 (a) 5,545
AA- A1 7,970 Port Authority of New York & New Jersey, Refunding,
Consolidated 113th (1st Installment), 4% due 12/01/2001 7,970
A+ Aa3 340 Triborough Bridge and Tunnel Authority, New York,
Revenue Bonds, Series R, 6.90% due 1/01/2000 355
A1+ VMIG1++ 100 Triborough Bridge and Tunnel Authority, New York, Special
Obligation, VRDN, 3.20% due 1/01/2024 (b)(f) 100
Ohio--11.1% AAA Aaa 2,000 Cincinnati, Ohio, City School District, TAN, Series B, 5%
due 12/01/1998 (c) 2,012
NR* Aa1 6,000 Franklin County, Ohio, Hospital Revenue Refunding Bonds
(US Health Corp.), Series B, 4.50% due 6/01/2000 6,056
AAA Aaa 3,135 Kent State University, Ohio, University Revenue Bonds
(General Receipts), Series B, 4.15% due 5/01/2000 (c) 3,136
A+ VMIG1++ 7,000 Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Ohio Edison Project), Series A, 4.35%
due 2/01/2014 7,004
AAA Aa1 12,400 Ohio State Highway, GO, Series V, 4.70% due 5/15/2000 12,588
A1+ P1 8,500 Ohio State Water Development Authority, Pollution
Control Facilities Revenue Bonds (Ohio Edison Company),
Series A, 4.20% due 5/01/2000 (b) 8,505
NR* Aaa 6,000 Student Loan Funding Corporation, Cincinnati, Ohio,
Student Loan Revenue Refunding Bonds, AMT,
Series C, 5.70% due 7/01/1999 6,108
Oklahoma--0.6% AA Aa2 2,400 Tulsa, Oklahoma, GO, UT, 5.125% due 5/01/1999 2,431
Pennsylvania AAA Aaa 300 Beaver County, Pennsylvania, Hospital Authority,
- --3.1% Revenue Refunding Bonds (Medical Center of Beaver
County, Inc.), 5.70% due 7/01/1999 (c) 306
AA Aa2 1,000 Bucks County, Pennsylvania, UT, Series A, 5.95%
due 3/01/2000 1,034
NR* Aa3 155 Central Bucks, Pennsylvania, School District, UT,
4.50% due 5/15/1999 156
AA- Aa3 6,500 Pennsylvania State, First Series, UT, 4.50% due 3/01/2002 6,585
AAA Aaa 4,145 Pittsburgh, Pennsylvania, Refunding, UT, Series A, 5%
due 3/01/2000 (d) 4,215
AAA Aaa 325 Washington County, Pennsylvania, Lease Authority
Revenue Bonds (Municipal Facility Pooled Capital--
Shadyside Hospital Project), Series C, Sub-Series
C1-A, 7.45% due 6/15/2000 (a)(c) 355
Rhode AAA Aaa 4,100 Rhode Island State Refunding Bonds (Consolidated
Island--1.1% Capital Development Loan), 5.50% due 8/01/2001 (d) 4,271
South AAA Aaa 5,000 Florence County, South Carolina, Hospital Revenue Bonds
Carolina--1.3% (McLeod Regional Medical Center Project), 6.75%
due 11/01/2000 (a)(f) 5,406
Tennessee AA NR* 11,885 Clarksville, Tennessee, Public Building Authority,
- --2.9% Revenue Refunding Bonds (Pooled Loan Program), 4.40%
due 12/01/1998 11,924
Texas--6.2% A1+ NR* 2,000 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Methodist
Hospital), VRDN, 4% due 12/01/2025 (b) 2,000
AAA Aaa 3,925 Houston, Texas, Independent School District, 6.375%
due 8/15/2001 4,189
AAA Aaa 2,600 Houston, Texas, Water and Sewer Systems, Revenue
Refunding Bonds, Junior Lien, Series C, 5.90%
due 12/01/1999 (c) 2,675
AA Aa1 3,000 San Antonio, Texas, Electric and Gas Revenue
Refunding Bonds, 5.25% due 2/01/2000 3,063
AAA Aaa 8,825 Texas National Research Laboratory Commission
Financing Corporation, Lease Revenue Bonds
(Superconducting Super Collider Project), 7.10%
due 12/01/2001 (a) 9,839
AA Aa2 3,600 Texas State University System, GO, 4.75% due 8/15/2001 3,676
Virginia--2.7% AA A1 3,330 Richmond, Virginia, Equipment Notes, 4.25% due 5/15/2002 3,342
AA Aa2 5,000 Virginia College Building Authority, Educational
Facilities Revenue Bonds (Equipment Leasing
Program), 4.75% due 2/01/2002 5,101
AA Aa2 2,555 Virginia State Transportation Board, Transportation
Contract Revenue Bonds (US Route 58 Corridor),
Series B, 5% due 5/15/2000 2,603
Washington AAA NR* 5,000 King County, Washington, School District No. 414
- --8.2% (Lake Washington), UT, 7% due 12/01/2000 (a) 5,352
AAA Aaa 5,000 Seattle, Washington, Seattle Metropolitan Municipality,
Sewer Revenue Bonds, Series U, 6.60% due 1/01/2001 (a)(f) 5,398
AA Aa2 6,750 South Columbia, Washington, Hydroelectric Crossover
Revenue Refunding Bonds (Basin Irrigation District),
5.75% due 6/01/2000 6,973
Washington State Refunding Bonds, Motor Vehicle Fuel Tax:
AA+ Aa1 2,000 Series R-94B, 4.20% due 9/01/1998 2,002
AA+ Aa1 2,285 Series R-96A, 5% due 7/01/1998 2,285
AA+ Aa1 3,000 Washington State, Refunding, Series R-92B, 6.80% due 8/01/2000 (a) 3,172
AA+ Aa1 8,000 Washington State Variable Purpose, Series B, 6.20% due 9/01/2001 8,512
Wisconsin AA+ Aa1 6,510 Milwaukee, Wisconsin, Metropolitan Sewer District,
- --4.2% Refunding Bonds, Series A, 4.25% due 10/01/2000 6,557
AA Aa2 4,385 Wisconsin State, GO, Series C, 5.50% due 5/01/2000 4,512
AAA NR* 5,720 Wisconsin State Health and Educational Facilities Authority
Revenue Bonds (Medical College of Wisconsin), Series D,
7.35% due 12/01/2000 (a) 6,243
Wyoming--0.0% NR* P1 100 Uinta County, Wyoming, PCR, Refunding (Chevron USA Inc.
Project), VRDN, 3.75% due 8/15/2020 (b) 100
Total Investments (Cost--$430,338)--105.8% 432,791
Liabilities in Excess of Other Assets--(5.8%) (23,788)
-----------
Net Assets--100.0% $ 409,003
===========
<FN>
(a)Prerefunded.
(b)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at June 30, 1998. The bonds are payable prior to maturity at
the interest reset date.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FGIC Insured.
(g)Escrowed to maturity.
*Not Rated.
++Highest short-term rating issued by Moody's Investors
Service, Inc.
Ratings of issues shown have not been audited by
Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Limited
Insured National Maturity
As of June 30, 1998 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* (Note 1a) $1,916,884,364 $1,497,350,555 $ 432,791,445
Cash 97,272 276,759 81,192
Receivables:
Interest 26,336,546 22,011,409 5,957,067
Capital shares sold 509,030 1,134,500 1,103
Securities sold 135,000 485,309 320,026
Prepaid registration fees and other
assets (Note 1e) 795,407 41,452 41,589
-------------- -------------- --------------
Total assets 1,944,757,619 1,521,299,984 439,192,422
-------------- -------------- --------------
Liabilities: Payables:
Securities purchased -- 34,751,868 25,000,847
Capital shares redeemed 2,362,933 2,748,546 4,533,393
Dividends to shareholders (Note 1f) 2,100,965 1,688,678 340,755
Investment adviser (Note 2) 580,211 581,388 111,172
Distributor (Note 2) 330,266 290,454 19,067
Accrued expenses and other liabilities 405,616 251,585 184,516
-------------- -------------- --------------
Total liabilities 5,779,991 40,312,519 30,189,750
-------------- -------------- --------------
Net Assets: Net assets $1,938,977,628 $1,480,987,465 $ 409,002,672
============== ============== ==============
Net Assets Class A Common Stock, $0.10 par value++ $ 16,699,135 $ 9,072,449 $ 2,966,928
Consist of: Class B Common Stock, $0.10 par value++++ 6,050,933 3,826,108 448,644
Class C Common Stock, $0.10 par value++++++ 177,408 386,238 866
Class D Common Stock, $0.10 par value++++++++ 590,971 640,618 687,858
Paid-in capital in excess of par 1,759,814,431 1,398,372,027 404,510,518
Undistributed (accumulated) realized
capital gains (losses)--net (Note 5) 37,787,956 (19,468,291) (2,065,259)
Unrealized appreciation on investments--net 117,856,794 88,158,316 2,453,117
-------------- -------------- --------------
Net assets $1,938,977,628 $1,480,987,465 $ 409,002,672
============== ============== ==============
Net Asset Class A:
Value: Net assets $1,377,025,019 $ 964,940,007 $ 295,640,497
============== ============== ==============
Shares outstanding 166,991,356 90,724,493 29,669,282
============== ============== ==============
Net asset value and redemption
price per share $ 8.25 $ 10.64 $ 9.96
============== ============== ==============
Class B:
Net assets $ 498,623,414 $ 406,797,899 $ 44,713,800
============== ============== ==============
Shares outstanding 60,509,332 38,261,083 4,486,438
============== ============== ==============
Net asset value and redemption
price per share $ 8.24 $ 10.63 $ 9.97
============== ============== ==============
Class C:
Net assets $ 14,623,383 $ 41,087,135 $ 86,039
============== ============== ==============
Shares outstanding 1,774,077 3,862,380 8,659
============== ============== ==============
Net asset value and redemption
price per share $ 8.24 $ 10.64 $ 9.94
============== ============== ==============
Class D:
Net assets $ 48,705,812 $ 68,162,424 $ 68,562,336
============== ============== ==============
Shares outstanding 5,909,708 6,406,178 6,878,580
============== ============== ==============
Net asset value and redemption
price per share $ 8.24 $ 10.64 $ 9.97
============== ============== ==============
<FN>
*Identified cost $1,799,027,570 $1,409,192,239 $ 430,338,328
============== ============== ==============
++Authorized shares--Class A 500,000,000 375,000,000 150,000,000
============== ============== ==============
++++Authorized shares--Class B 375,000,000 375,000,000 150,000,000
============== ============== ==============
++++++Authorized shares--Class C 375,000,000 375,000,000 150,000,000
============== ============== ==============
++++++++Authorized shares--Class D 500,000,000 375,000,000 150,000,000
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTTION>
Limited
Insured National Maturity
For the Year Ended June 30, 1998 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and amortization of premium
Income (Note 1d): and discount earned $ 115,438,056 $ 91,583,829 $ 17,512,313
-------------- -------------- --------------
Expenses: Investment advisory fees (Note 2) 7,298,381 7,125,632 1,353,388
Account maintenance and distribution
fees--Class B (Note 2) 3,988,230 3,075,384 171,526
Transfer agent fees--Class A (Note 2) 428,891 349,597 75,319
Accounting services (Note 2) 221,591 170,810 30,003
Transfer agent fees--Class B (Note 2) 204,359 184,777 15,708
Account maintenance and distribution
fees--Class C (Note 2) 108,808 266,883 566
Custodian fees 169,542 138,556 41,323
Account maintenance fees--Class D (Note 2) 131,950 175,476 39,089
Registration fees (Note 1e) 22,812 107,393 156,401
Printing and shareholder reports 127,113 72,116 334
Professional fees 64,822 20,092 41,885
Pricing services 38,695 22,891 11,445
Transfer agent fees--Class D (Note 2) 15,751 24,661 10,629
Directors' fees and expenses 20,117 14,991 5,979
Transfer agent fees--Class C (Note 2) 5,119 14,789 67
Other -- 23,645 --
-------------- -------------- --------------
Total expenses 12,846,181 11,787,693 1,953,662
-------------- -------------- --------------
Investment income--net 102,591,875 79,796,136 15,558,651
-------------- -------------- --------------
Realized & Realized gain on investments--net 44,682,184 39,111,030 395,414
Unrealized Gain Change in unrealized appreciation on
(Loss) on investments--net 5,253,448 (2,308,236) 789,704
Investments--Net -------------- -------------- --------------
(Notes 1b, 1d Net Increase in Net Assets Resulting
& 3): from Operations $ 152,527,507 $ 116,598,930 $ 16,743,769
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Insured Portfolio National Portfolio
For the Year For the Year
Ended June 30, Ended June 30,
Increase (Decrease) in Net Assets: 1998 1997 1998 1997
<S> <S> <C> <C> <C> <C>
Operations: Investment income--net $ 102,591,875 $ 119,207,937 $ 79,796,136 $ 82,141,900
Realized gain on
investments--net 44,682,184 37,935,579 39,111,030 18,687,317
Change in unrealized
appreciation/depreciation
on investments--net 5,253,448 5,465,463 (2,308,236) 18,217,116
-------------- -------------- -------------- --------------
Net increase in net
assets resulting
from operations 152,527,507 162,608,979 116,598,930 119,046,333
-------------- -------------- -------------- --------------
Dividends & Investment income--net:
Distributions to Class A (75,235,351) (84,438,105) (54,724,558) (57,401,862)
Shareholders Class B (24,092,878) (31,486,251) (19,749,158) (20,879,493)
(Note 1f): Class C (608,829) (800,743) (1,588,802) (1,024,766)
Class D (2,654,817) (2,482,838) (3,733,618) (2,835,779)
Realized gain on
investments--net:
Class A (2,005,059) -- -- --
Class B (747,289) -- -- --
Class C (18,784) -- -- --
Class D (76,185) -- -- --
-------------- -------------- -------------- --------------
Net decrease in net assets
resulting from dividends
and distributions to
shareholders. (105,439,192) (119,207,937) (79,796,136) (82,141,900)
-------------- -------------- -------------- --------------
Capital Share Net proceeds from issuance of
Transactions capital shares -- -- -- --
(Note 4): Net proceeds from issuance of
capital shares resulting from
reorganization -- -- -- --
-------------- -------------- -------------- --------------
Net increase (decrease) in
net assets derived from capital
share transactions (160,344,787) (357,799,862) (33,702,285) 916,838
-------------- -------------- -------------- --------------
Net Assets: Total increase (decrease)
in net assets (113,256,472) (314,398,820) 3,100,509 37,821,271
Beginning of year 2,052,234,100 2,366,632,920 1,477,886,956 1,440,065,685
-------------- -------------- -------------- --------------
End of year $1,938,977,628 $2,052,234,100 $1,480,987,465 $1,477,886,956
============== ============== ============== ==============
<CAPTION>
Limited Maturity Portfolio
For the Year
Ended June 30,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 15,558,651 $ 18,141,276
Realized gain on investments--net 395,414 1,870,059
Change in unrealized
appreciation/depreciation on investments--net 789,704 104,267
-------------- --------------
Net increase in net assets resulting
from operations 16,743,769 20,115,602
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (12,354,558) (15,176,552)
Shareholders Class B (1,724,528) (2,274,531)
(Note 1f): Class C (5,682) (6,456)
Class D (1,473,883) (683,737)
Realized gain on investments--net:
Class A -- (666,000)
Class B -- (108,061)
Class C -- (293)
Class D -- (28,170)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (15,558,651) (18,943,800)
-------------- --------------
Capital Share Net proceeds from issuance of capital shares (42,037,027) --
Transactions Net proceeds from issuance of capital shares resulting from
(Note 4): reorganization 31,447,783 --
-------------- --------------
Net increase (decrease) in net assets derived from
capital share transactions (10,589,244) (86,916,618)
============== ==============
Net Assets: Total increase (decrease) in net assets (9,404,126) (85,744,816)
Beginning of year 418,406,798 504,151,614
-------------- --------------
End of year $ 409,002,672 $ 418,406,798
============== ==============
See Notes to Financial Statements.
</TABLE>
<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 Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 8.06 $ 7.91 $ 7.92 $ 7.88 $ 8.64
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .43 .45 .44 .46 .47
Realized and unrealized gain
(loss) on investments--net .20 .15 (.01) .18 (.53)
------------ ------------ ------------ ------------ ------------
Total from investment
operations .63 .60 .43 .64 (.06)
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.43) (.45) (.44) (.46) (.47)
Realized gain on
investments--net (.01) -- -- (.14) (.23)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.44) (.45) (.44) (.60) (.70)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 8.25 $ 8.06 $ 7.91 $ 7.92 $ 7.88
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:* value per share 8.05% 7.72% 5.51% 8.60% (1.08%)
============ ============ ============ ============ ============
Ratios to Average Expenses .42% .44% .43% .43% .42%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.29% 5.58% 5.55% 5.78% 5.53%
============ ============ ============ ============ ============
Supplemental Net assets, end of year
Data: (in thousands) $ 1,377,025 $ 1,441,785 $ 1,572,835 $ 1,706,064 $ 1,941,741
============ ============ ============ ============ ============
Portfolio turnover 102.89% 74.40% 78.49% 35.61% 28.34%
============ ============ ============ ============ ============
<CAPTION>
The following per share data and ratios have been derived Insured Portfolio
from information provided in the financial statements. Class B
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 8.05 $ 7.91 $ 7.92 $ 7.87 $ 8.63
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .37 .39 .38 .40 .40
Realized and unrealized
gain (loss) on
investments--net .20 .14 (.01) .19 (.53)
------------ ------------ ------------ ------------ ------------
Total from investment
operations .57 .53 .37 .59 (.13)
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.37) (.39) (.38) (.40) (.40)
Realized gain on
investments--net (.01) -- -- (.14) (.23)
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.38) (.39) (.38) (.54) (.63)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 8.24 $ 8.05 $ 7.91 $ 7.92 $ 7.87
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:* value per share 7.24% 6.78% 4.71% 7.91% (1.81%)
============ ============ ============ ============ ============
Ratios to Average Expenses 1.18% 1.19% 1.19% 1.19% 1.17%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 4.53% 4.82% 4.80% 5.03% 4.78%
============ ============ ============ ============ ============
Supplemental Net assets, end of year
Data: (in thousands) $ 498,624 $ 560,105 $ 723,090 $ 782,748 $ 866,193
============ ============ ============ ============ ============
Portfolio turnover 102.89% 74.40% 78.49% 35.61% 28.34%
============ ============ ============ ============ ============
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Insured Portfolio
Class C
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.06 $ 7.91 $ 7.92 $ 7.68
Operating ------------ ------------- ------------ ------------
Performance: Investment income--net .37 .38 .38 .27
Realized and unrealized gain
(loss) on investments--net .19 .15 (.01) .38
------------ ------------- ------------ ------------
Total from investment operations .56 .53 .37 .65
------------ ------------- ------------ ------------
Less dividends and distributions:
Investment income--net (.37) (.38) (.38) (.27)
Realized gain on investments--net (.01) -- -- (.14)
------------ ------------- ------------ ------------
Total dividends and distributions (.38) (.38) (.38) (.41)
------------ ------------- ------------ ------------
Net asset value, end of period $ 8.24 $ 8.06 $ 7.91 $ 7.92
============ ============ ============ ============
Total Investment Based on net asset value per share 7.05% 6.86% 4.65% 8.83%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses 1.23% 1.25% 1.24% 1.23%*
Net Assets: ============ ============ ============ ============
Investment income--net 4.48% 4.77% 4.75% 4.93%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 14,623 $ 11,922 $ 18,936 $ 7,756
============ ============ ============ ============
Portfolio turnover 102.89% 74.40% 78.49% 35.61%
============ ============ ============ ============
<CAPTION>
Insured Portfolio
Class D
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 8.06 $ 7.91 $ 7.92 $ 7.68
Performance: ------------ ------------ ------------ ------------
Investment income--net .41 .43 .42 .29
Realized and unrealized gain
(loss) on investments--net .19 .15 (.01) .38
------------ ------------ ------------ ------------
Total from investment operations .60 .58 .41 .67
------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.41) (.43) (.42) (.29)
Realized gain on investments--net (.01) -- -- (.14)
------------ ------------ ------------ ------------
Total dividends and distributions (.42) (.43) (.42) (.43)
------------ ------------ ------------ ------------
Net asset value, end of period $ 8.24 $ 8.06 $ 7.91 $ 7.92
============ ============ ============ ============
Total Investment Based on net asset value per share 7.65% 7.46% 5.25% 9.24%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses .67% .69% .68% .68%*
Net Assets: ============ ============ ============ ============
Investment income--net 5.03% 5.33% 5.31% 5.50%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 48,706 $ 38,422 $ 51,772 $ 26,015
============ ============ ============ ============
Portfolio turnover 102.89% 74.40% 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 Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.38 $ 10.11 $ 10.02 $ 10.08 $ 11.02
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .59 .60 .60 .60 .62
Realized and unrealized
gain (loss) on
investments--net .26 .27 .09 .15 (.64)
------------ ------------ ------------ ------------ ------------
Total from investment
operations .85 .87 .69 .75 (.02)
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.59) (.60) (.60) (.60) (.62)
Realized gain on
investments--net -- -- -- (.19) (.30)
In excess of realized
gain on investments--net -- -- -- (.02) --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.59) (.60) (.60) (.81) (.92)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 10.64 $ 10.38 $ 10.11 $ 10.02 $ 10.08
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 8.36% 8.84% 6.98% 7.89% (.47%)
============ ============ ============ ============ ============
Ratios to Average Expenses .55% .55% .56% .56% .55%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 5.58% 5.86% 5.89% 6.01% 5.72%
============ ============ ============ ============ ============
Supplemental Net assets, end of year
Data: (in thousands) $ 964,940 $ 983,650 $ 983,550 $ 1,059,440 $ 1,203,181
============ ============ ============ ============ ============
Portfolio turnover 142.02% 99.52% 95.09% 103.65% 73.33%
============ ============ ============ ============ ============
<CAPTION>
The following per share data and ratios have been derived National Portfolio
from information provided in the financial statements. Class B
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.37 $ 10.11 $ 10.02 $ 10.07 $ 11.02
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .51 .52 .52 .52 .54
Realized and unrealized
gain (loss) on
investments--net .26 .26 .09 .16 (.65)
------------ ------------ ------------ ------------ ------------
Total from investment
operations .77 .78 .61 .68 (.11)
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.51) (.52) (.52) (.52) (.54)
Realized gain on
investments--net -- -- -- (.19) (.30)
In excess of realized
gain on investments--net -- -- -- (.02) --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.51) (.52) (.52) (.73) (.84)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 10.63 $ 10.37 $ 10.11 $ 10.02 $ 10.07
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 7.55% 7.92% 6.17% 7.28% (1.39%)
============ ============ ============ ============ ============
Ratios to Average Expenses 1.31% 1.31% 1.32% 1.32% 1.30%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 4.82% 5.10% 5.13% 5.25% 4.97%
============ ============ ============ ============ ============
Supplemental Net assets, end of year
Data: (in thousands) $ 406,798 $ 415,103 $ 399,341 $ 419,933 $ 459,169
============ ============ ============ ============ ============
Portfolio turnover 142.02% 99.52% 95.09% 103.65% 73.33%
============ ============ ============ ============ ============
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
National Portfolio
Class C
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.38 $ 10.11 $ 10.03 $ 9.85
Operating ------------ ------------- ------------ ------------
Performance: Investment income--net .50 .52 .52 .36
Realized and unrealized gain
on investments--net .26 .27 .08 .39
------------ ------------- ------------ ------------
Total from investment operations .76 .79 .60 .75
------------ ------------- ------------ ------------
Less dividends and distributions:
Investment income--net (.50) (.52) (.52) (.36)
Realized gain on investments--net -- -- -- (.19)
In excess of realized gain on
investments--net -- -- -- (.02)
------------ ------------- ------------ ------------
Total dividends and distributions (.50) (.52) (.52) (.57)
------------ ------------- ------------ ------------
Net asset value, end of period $ 10.64 $ 10.38 $ 10.11 $ 10.03
============ ============ ============ ============
Total Investment Based on net asset value per share 7.49% 7.97% 6.01% 7.97%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses 1.36% 1.36% 1.37% 1.37%*
Net Assets: ============ ============ ============ ============
Investment income--net 4.76% 5.04% 5.08% 5.21%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 41,087 $ 28,096 $ 13,291 $ 5,195
============ ============ ============ ============
Portfolio turnover 142.02% 99.52% 95.09% 103.65%
============ ============ ============ ============
<CAPTION>
National Portfolio
Class D
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.39 $ 10.12 $ 10.03 $ 9.85
Operating ------------ ------------- ------------ ------------
Performance: Investment income--net .56 .58 .57 .40
Realized and unrealized gain
on investments--net .25 .27 .09 .39
------------ ------------- ------------ ------------
Total from investment operations .81 .85 .66 .79
------------ ------------- ------------ ------------
Less dividends and distributions:
Investment income--net (.56) (.58) (.57) (.40)
Realized gain on investments--net -- -- -- (.19)
In excess of realized gain on
investments--net -- -- -- (.02)
------------ ------------- ------------ ------------
Total dividends and distributions (.56) (.58) (.57) (.61)
------------ ------------- ------------ ------------
Net asset value, end of period $ 10.64 $ 10.39 $ 10.12 $ 10.03
============ ============ ============ ============
Total Investment Based on net asset value per share 7.99% 8.57% 6.71% 8.37%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses .80% .80% .81% .81%*
Net Assets: ============ ============ ============ ============
Investment income--net 5.32% 5.60% 5.64% 5.78%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 68,162 $ 51,038 $ 43,884 $ 19,656
============ ============ ============ ============
Portfolio turnover 142.02% 99.52% 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 Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.93 $ 9.91 $ 9.92 $ 9.87 $ 10.01
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .39 .39 .38 .38 .37
Realized and unrealized
gain (loss) on
investments--net .03 .04 (.01) .05 (.14)
------------ ------------ ------------ ------------ ------------
Total from investment
operations .42 .43 .37 .43 .23
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.39) (.39) (.38) (.38) (.37)
Realized gain on
investments--net -- (.02) -- -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.39) (.41) (.38) (.38) (.37)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 9.96 $ 9.93 $ 9.91 $ 9.92 $ 9.87
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 4.26% 4.40% 3.75% 4.53% 2.30%
============ ============ ============ ============ ============
Ratios to Average Expenses .43% .39% .44% .41% .40%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 3.88% 3.93% 3.83% 3.86% 3.68%
============ ============ ============ ============ ============
Supplemental Net assets, end of year
Data: (in thousands) $ 295,641 $ 343,641 $ 417,097 $ 536,474 $ 790,142
============ ============ ============ ============ ============
Portfolio turnover 72.69% 61.90% 88.32% 37.33% 45.67%
============ ============ ============ ============ ============
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<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 Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.94 $ 9.91 $ 9.92 $ 9.87 $ 10.01
Performance: ------------ ------------ ------------ ------------ ------------
Investment income--net .35 .36 .35 .35 .33
Realized and unrealized
gain (loss) on
investments--net .03 .05 (.01) .05 (.14)
------------ ------------ ------------ ------------ ------------
Total from investment
operations .38 .41 .34 .40 .19
------------ ------------ ------------ ------------ ------------
Less dividends and
distributions:
Investment income--net (.35) (.36) (.35) (.35) (.33)
Realized gain on
investments--net -- (.02) -- -- --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions (.35) (.38) (.35) (.35) (.33)
------------ ------------ ------------ ------------ ------------
Net asset value,
end of year $ 9.97 $ 9.94 $ 9.91 $ 9.92 $ 9.87
============ ============ ============ ============ ============
Total Investment Based on net asset
Return:** value per share 3.89% 4.13% 3.37% 4.14% 1.98%
============ ============ ============ ============ ============
Ratios to Average Expenses .78% .75% .80% .78% .76%
Net Assets: ============ ============ ============ ============ ============
Investment income--net 3.43% 3.58% 3.46% 3.50% 3.33%
============ ============ ============ ============ ============
Supplemental Net assets, end of year
Data: (in thousands) $ 44,714 $ 54,275 $ 71,075 $ 129,581 $ 145,534
============ ============ ============ ============ ============
Portfolio turnover 72.69% 61.90% 88.32% 37.33% 45.67%
============ ============ ============ ============ ============
<CAPTION>
Limited Maturity Portfolio
Class C
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.91 $ 9.88 $ 9.92 $ 9.83
Operating ------------ ------------- ------------ ------------
Performance: Investment income--net .35 .35 .34 .25
Realized and unrealized gain (loss)
on investments--net .03 .05 (.04) .09
------------ ------------- ------------ ------------
Total from investment operations .38 .40 .30 .34
------------ ------------- ------------ ------------
Less dividends and distributions:
Investment income--net (.35) (.35) (.34) (.25)
Realized gain on investments--net -- (.02) -- --
------------ ------------- ------------ ------------
Total dividends and distributions (.35) (.37) (.34) (.25)
------------ ------------- ------------ ------------
Net asset value, end of period $ 9.94 $ 9.91 $ 9.88 $ 9.92
============ ============ ============ ============
Total Investment Based on net asset value per share 3.88% 4.11% 2.97% 3.52%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses .79% .75% .80% .70%*
Net Assets: ============ ============ ============ ============
Investment income--net 4.27% 3.57% 3.41% 3.61%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 86 $ 108 $ 94 $ 3,965
============ ============ ============ ============
Portfolio turnover 72.69% 61.90% 88.32% 37.33%
============ ============ ============ ============
<CAPTION>
Limited Maturity Portfolio
Class D
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Oct. 21, 1994++
For the Year Ended June 30, to June 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.94 $ 9.91 $ 9.93 $ 9.83
Operating ------------ ------------- ------------ ------------
Performance: Investment income--net .38 .38 .37 .26
Realized and unrealized gain
(loss) on investments--net .03 .05 (.02) .10
------------ ------------- ------------ ------------
Total from investment operations .41 .43 .35 .36
------------ ------------- ------------ ------------
Less dividends and distributions:
Investment income--net (.38) (.38) (.37) (.26)
Realized gain on investments--net -- (.02) -- --
------------ ------------- ------------ ------------
Total dividends and distributions (.38) (.40) (.37) (.26)
------------ ------------- ------------ ------------
Net asset value, end of period $ 9.97 $ 9.94 $ 9.91 $ 9.93
============ ============ ============ ============
Total Investment Based on net asset value per share 4.16% 4.40% 3.55% 3.73%+++
Return:** ============ ============ ============ ============
Ratios to Average Expenses .54% .48% .54% .53%*
Net Assets: ============ ============ ============ ============
Investment income--net 3.89% 3.84% 3.71% 3.78%*
============ ============ ============ ============
Supplemental Net assets, end of period
Data: (in thousands) $ 68,562 $ 20,383 $ 15,886 $ 11,258
============ ============ ============ ============
Portfolio turnover 72.69% 61.90% 88.32% 37.33%
============ ============ ============ ============
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Municipal Bond Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund's Portfolios offer four
classes of shares under the Merrill Lynch Select Pricing SM System.
Shares of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance
and distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Insured Portfolio: Where bonds in the
Portfolio have not been insured pursuant to policies obtained by the
issuer, the Fund has obtained insurance with respect to the payment
of interest and principal of each bond. Such insurance is valid as
long as the bonds are held by the Fund.
All Portfolios: Municipal bonds and money market securities are
traded primarily in the over-the-counter markets and are valued at
the most recent bid price or yield equivalent as obtained from
dealers that make markets in such securities. Positions in futures
contracts and options thereon, which are traded on exchanges, are
valued at closing prices as of the close of such exchanges. Assets
for which market quotations are not readily available are valued at
fair value on a consistent basis using methods determined in good
faith by the Fund's Board of Directors, including valuations
furnished by a pricing service retained by the Fund, which may
utilize a matrix system for valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of
the Fund under the general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund's Portfolios may purchase or
sell financial futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the 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 ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operation of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the average daily value of the Fund's net assets.
Rate of Advisory Fee
Aggregate of Average Daily Limited
Net Assets of the Three Insured National Maturity
Combined Portfolios Portfolio Portfolio Portfolio
Not exceeding $250 million .40 % .50 % .40 %
In excess of $250 million
but not exceeding $400 million .375 .475 .375
In excess of $400 million
but not exceeding $550 million .375 .475 .35
In excess of $550 million
but not exceeding $1.5 billion .375 .475 .325
In excess of $1.5 billion .35 .475 .325
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Maintenance Fees Distribution Fees
Limited Limited
Insured National Maturity Insured National Maturity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Class B .25% .25% .15% .50% .50% .20%
Class C .25% .25% .15% .55% .55% .20%
Class D .25% .25% .10% -- -- --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended June 30, 1998, MLFD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales
of the Fund's Class A and Class D Shares as follows:
Limited
Insured National Maturity
Portfolio Portfolio Portfolio
Class A Shares:
MLFD $ 23,596 $ 15,549 $ 875
MLPF&S 181,328 128,510 6,977
Class D Shares:
MLFD 7,738 13,622 1,509
MLPF&S 69,238 109,861 13,480
For the year ended June 30, 1998, MLPF&S received contingent
deferred sales charges of $930,762 relating to transactions in Class
B Shares, amounting to $351,356, $554,547 and $24,859 in the
Insured, National and Limited Maturity Portfolios, respectively, and
$11,942 relating to transactions in Class C Shares, amounting to
$2,099, $8,715 and $1,128 in the Insured, National and Limited
Maturity Portfolios, respectively. Furthermore, MLPF&S received
contingent deferred sales charges of $3,330 relating to transactions
subject to front-end sales charge waivers in Class A in the National
Portfolio and $37,656 relating to transactions subject to front-end
sales charge waivers in Class D in the Limited Maturity Portfolio.
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, PFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1998 were as follows:
Purchases Sales
Insured Portfolio $1,969,063,579 $2,062,234,332
National Portfolio 2,033,619,686 2,061,926,106
Limited Maturity Portfolio 278,133,287 275,712,391
Net realized gains (losses) for the year ended June 30, 1998 and net
unrealized gains as of June 30, 1998 were as follows:
Realized Unrealized
Insured Portfolio Gains (Losses) Gains
Long-term investments $ 44,945,184 $ 117,856,794
Financial futures contracts (263,000) --
-------------- --------------
Total $ 44,682,184 $ 117,856,794
============== ==============
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
Realized Unrealized
National Portfolio Gains (Losses) Gains
Long-term investments $ 40,503,705 $ 88,158,316
Financial futures contracts (1,392,675) --
-------------- --------------
Total $ 39,111,030 $ 88,158,316
============== ==============
Realized Unrealized
Limited Maturity Portfolio Gains Gains
Long-term investments $ 385,950 $ 2,409,291
Short-term investments 9,464 43,826
-------------- --------------
Total $ 395,414 $ 2,453,117
============== ==============
As of June 30, 1998 net unrealized appreciation for Federal
income tax purposes were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
Insured Portfolio $119,356,368 $(1,662,428) $117,693,940
National Portfolio 88,614,665 (752,961) 87,861,704
Limited Maturity
Portfolio 2,547,651 (94,534) 2,453,117
The aggregate cost of investments at June 30, 1998 for Federal
income tax purposes was $1,799,190,424 for the Insured Portfolio,
$1,409,488,851 for the National Portfolio, and $430,338,328 for the
Limited Maturity Portfolio.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions for the years ended June 30, 1998 and June 30, 1997
were $(160,344,787) and $(357,799,862), respectively, for the
Insured Portfolio; $(33,702,285) and $916,838, respectively, for the
National Portfolio; and $(10,589,244) and $(86,916,618),
respectively, for the Limited Maturity Portfolio.
Transactions in capital shares for each class were as follows:
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 2,602,916 $ 21,473,195
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,893,110 32,056,227
-------------- --------------
Total issued 6,496,026 53,529,422
Shares redeemed (18,381,072) (151,209,859)
-------------- --------------
Net decrease (11,885,046) $ (97,680,437)
============== ==============
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 4,575,281 $ 36,693,201
Shares issued to shareholders
in reinvestment of dividends 4,476,285 35,809,346
-------------- --------------
Total issued 9,051,566 72,502,547
Shares redeemed (28,976,583) (232,180,607)
-------------- --------------
Net decrease (19,925,017) $ (159,678,060)
============== ==============
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 4,428,347 $ 36,455,981
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,474,207 12,130,689
-------------- --------------
Total issued 5,902,554 48,586,670
Automatic conversion of shares (286,423) (2,350,040)
Shares redeemed (14,644,280) (120,322,635)
-------------- --------------
Net decrease (9,028,149) $ (74,086,005)
============== ==============
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 5,729,555 $ 45,791,612
Shares issued to shareholders
in reinvestment of dividends 2,004,591 16,028,058
-------------- --------------
Total issued 7,734,146 61,819,670
Automatic conversion of shares (654,971) (5,237,060)
Shares redeemed (29,004,786) (232,763,104)
-------------- --------------
Net decrease (21,925,611) $ (176,180,494)
============== ==============
Insured Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 600,875 $ 4,950,738
Shares issued to shareholders -
in reinvestment of dividends
and distributions 42,007 345,869
-------------- --------------
Total issued 642,882 5,296,607
Shares redeemed (348,588) (2,863,946)
-------------- --------------
Net increase 294,294 $ 2,432,661
============== ==============
Insured Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 742,610 $ 5,954,624
Shares issued to shareholders
in reinvestment of dividends 65,517 524,081
-------------- --------------
Total issued 808,127 6,478,705
Shares redeemed (1,722,393) (13,923,454)
-------------- --------------
Net decrease (914,266) $ (7,444,749)
============== ==============
Insured Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 23,577,522 $ 193,830,379
Automatic conversion of shares 286,423 2,350,040
Shares issued to shareholders
in reinvestment of dividends
and distributions 140,376 1,155,893
-------------- --------------
Total issued 24,004,321 197,336,312
Shares redeemed (22,861,619) (188,347,318)
-------------- --------------
Net increase 1,142,702 $ 8,988,994
============== ==============
Insured Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 12,779,520 $ 101,973,172
Automatic conversion of shares 654,971 5,237,060
Shares issued to shareholders
in reinvestment of dividends 147,570 1,180,790
-------------- --------------
Total issued 13,582,061 108,391,022
Shares redeemed (15,359,300) (122,887,581)
-------------- --------------
Net decrease (1,777,239) $ (14,496,559)
============== ==============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 4,266,519 $ 45,187,344
Shares issued to shareholders
in reinvestment of dividends 2,527,972 26,788,694
-------------- --------------
Total issued 6,794,491 71,976,038
Shares redeemed (10,854,978) (114,962,452)
-------------- --------------
Net decrease (4,060,487) $ (42,986,414)
============== ==============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 7,233,788 $ 74,396,433
Shares issued to shareholders
in reinvestment of dividends 2,685,525 27,558,310
-------------- --------------
Total issued 9,919,313 101,954,743
Shares redeemed (12,395,672) (127,128,438)
-------------- --------------
Net decrease (2,476,359) $ (25,173,695)
============== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 6,485,604 $ 68,758,999
Shares issued to shareholders
in reinvestment of dividends 914,162 9,684,295
-------------- --------------
Total issued 7,399,766 78,443,294
Automatic conversion of shares (244,397) (2,584,813)
Shares redeemed (8,908,400) (94,243,672)
-------------- --------------
Net decrease (1,753,031) $ (18,385,191)
============== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 11,777,487 $ 121,489,230
Shares issued to shareholders
in reinvestment of dividends 975,743 10,006,225
-------------- --------------
Total issued 12,753,230 131,495,455
Automatic conversion of shares (495,542) (5,075,762)
Shares redeemed (11,745,518) (120,476,972)
-------------- --------------
Net increase 512,170 $ 5,942,721
============== ==============
National Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 2,076,332 $ 21,976,496
Shares issued to shareholders
in reinvestment of dividends 81,934 868,569
-------------- --------------
Total issued 2,158,266 22,845,065
Shares redeemed (1,002,742) (10,604,512)
-------------- --------------
Net increase 1,155,524 $ 12,240,553
============== ==============
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
National Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 2,182,254 $ 22,508,694
Shares issued to shareholders
in reinvestment of dividends 56,394 579,121
-------------- --------------
Total issued 2,238,648 23,087,815
Shares redeemed (845,937) (8,691,227)
-------------- --------------
Net increase 1,392,711 $ 14,396,588
============== ==============
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 24,013,327 $ 254,654,607
Automatic conversion of shares 244,216 2,584,813
Shares issued to shareholders
in reinvestment of dividends 157,029 1,665,789
-------------- --------------
Total issued 24,414,572 258,905,209
Shares redeemed (22,922,793) (243,476,442)
-------------- --------------
Net increase 1,491,779 $ 15,428,767
============== ==============
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 10,536,060 $ 108,053,333
Automatic conversion of shares 495,032 5,075,762
Shares issued to shareholders
in reinvestment of dividends 114,893 1,179,969
-------------- --------------
Total issued 11,145,985 114,309,064
Shares redeemed (10,568,675) (108,557,840)
-------------- --------------
Net increase 577,310 $ 5,751,224
============== ==============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 1,637,467 $ 16,313,195
Shares issued to shareholders
in reinvestment of dividends 689,267 6,863,420
Shares issued resulting from
reorganization 610,766 6,117,207
-------------- --------------
Total issued 2,937,500 29,293,822
Shares redeemed (7,862,688) (78,301,847)
-------------- --------------
Net decrease (4,925,188) $ (49,008,025)
============== ==============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 2,507,909 $ 24,924,435
Shares issued to shareholders
in reinvestment of dividends
and distributions 920,017 9,134,741
-------------- --------------
Total issued 3,427,926 34,059,176
Shares redeemed (10,923,304) (108,467,108)
-------------- --------------
Net decrease (7,495,378) $ (74,407,932)
============== ==============
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 2,835,507 $ 28,244,737
Shares issued to shareholders
in reinvestment of dividends 110,626 1,101,933
-------------- --------------
Total issued 2,946,133 29,346,670
Automatic conversion of shares (17,299) (172,475)
Shares redeemed (3,905,076) (38,899,023)
-------------- --------------
Net decrease (976,242) $ (9,724,828)
============== ==============
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 1,746,766 $ 17,337,114
Shares issued to shareholders
in reinvestment of dividends
and distributions 156,709 1,556,287
-------------- --------------
Total issued 1,903,475 18,893,401
Automatic conversion of shares (11,559) (114,986)
Shares redeemed (3,599,880) (35,740,926)
-------------- --------------
Net decrease (1,707,964) $ (16,962,511)
============== ==============
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 212,120 $ 2,106,982
Shares issued to shareholders
in reinvestment of dividends 265 2,632
-------------- --------------
Total issued 212,385 2,109,614
Shares redeemed (214,575) (2,131,347)
-------------- --------------
Net decrease (2,190) $ (21,733)
============== ==============
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 125,730 $ 1,243,007
Shares issued to shareholders
in reinvestment of dividends
and distributions 526 5,211
-------------- --------------
Total issued 126,256 1,248,218
Shares redeemed (124,926) (1,236,530)
-------------- --------------
Net increase 1,330 $ 11,688
============== ==============
Limited Maturity Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 6,883,210 $ 68,670,633
Automatic conversion of shares 17,300 172,475
Shares issued to shareholders
in reinvestment of dividends 70,267 700,217
Shares issued resulting from
reorganization 2,546,189 25,330,576
-------------- --------------
Total issued 9,516,966 94,873,901
Shares redeemed (4,689,176) (46,708,559)
-------------- --------------
Net increase 4,827,790 $ 48,165,342
============== ==============
Limited Maturity Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 3,468,693 $ 34,441,741
Automatic conversion of shares 11,555 114,986
Shares issued to shareholders
in reinvestment of dividends
and distributions 40,524 402,564
-------------- --------------
Total issued 3,520,772 34,959,291
Shares redeemed (3,072,180) (30,517,154)
-------------- --------------
Net increase 448,592 $ 4,442,137
============== ==============
5. Capital Loss Carryforward:
At June 30, 1998, the Fund had a net capital loss carryforward as
follows: Approximately $10,677,000 in the National Portfolio, all
of which expires in 2004; and approximately $2,327,000 in the
Limited Maturity Portfolio, of which $22,000 expires in 1999,
$25,000 expires in 2002, and $2,280,000 expires in 2003. These
amounts will be available to offset like amounts of any future
taxable gains. Expired capital loss carryforward in the amount of
$2,413,650 has been reclassified to paid-in capital in excess of
par.
6. Acquisition of Certain Funds Within Merrill Lynch
Multi-State Limited Maturity Municipal Series Trust:
On March 23, 1998, the Limited Maturity Portfolio acquired all of
the net assets of the Massachusetts Limited Maturity, New Jersey
Limited Maturity and Pennsylvania Limited Maturity Municipal Bond
Funds of Merrill Lynch Multi-State Limited Maturity Municipal Series
Trust pursuant to a plan of reorganization. The acquisition was
accomplished by a tax-free exchange of the following shares of
beneficial interest:
Shares Exchanged
Massachusetts Limited Maturity Fund 404,924
New Jersey Limited Maturity Fund 478,759
Pennsylvania Limited Maturity Fund 387,051
In exchange for these shares, the Limited Maturity Portfolio issued
1,279,370 Common Stock shares. As of that date, net assets,
including unrealized appreciation and accumulated net realized
capital losses, of the acquired funds were as follows:
Accumulated
Net Unrealized Net Realized
Assets Appreciation Capital Losses
Massachusetts Limited
Maturity Fund $ 4,063,274 $ 62,583 $(207,449)
New Jersey Limited
Maturity Fund 4,793,799 10,214 --
Pennsylvania Limited
Maturity Fund 3,901,721 32,443 --
The aggregate net assets of the Limited Maturity Portfolio
immediately after the acquisition amounted to $431,044,793.
On May 18, 1998, the Limited Maturity Portfolio acquired all of the
net assets of the Arizona Limited Maturity, Michigan Limited
Maturity and New York Limited Maturity Municipal Bond Funds of
Merrill Lynch Multi-State Limited Maturity Municipal Series Trust
pursuant to a plan of reorganization. The acquisition was
accomplished by a tax free exchange of the following shares of
beneficial interest:
Shares Exchanged
Arizona Limited Maturity Fund 249,140
Michigan Limited Maturity Fund 370,699
New York Limited Maturity Fund 1,239,759
Merrill Lynch Municipal Bond Fund, Inc., June 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
In exchange for these shares, the Limited Maturity Portfolio issued
1,877,585 Common Stock shares. As of that date, net assets,
including unrealized appreciation and accumulated net realized
capital losses, of the acquired funds were as follows:
Accumulated
Net Unrealized Net Realized
Assets Appreciation Capital Losses
Arizona Limited
Maturity Fund $ 2,475,303 $ 14,779 --
Michigan Limited
Maturity Fund 3,706,888 40,101 $ (67,538)
New York Limited
Maturity Fund 12,506,798 102,520 (34,748)
The aggregate net assets of the Limited Maturity Portfolio
immediately after the acquisition amounted to $417,572,109.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Municipal Bond Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of the Insured,
National and Limited Maturity Portfolios of Merrill Lynch Municipal
Bond Fund, Inc. as of June 30, 1998, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at June 30,
1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Insured, National and Limited Maturity Portfolios of Merrill
Lynch Municipal Bond Fund, Inc. as of June 30, 1998, the results of
their operations, the changes in their net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 14, 1998
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions declared daily by
Merrill Lynch Municipal Bond Fund, Inc. during its taxable year
ended June 30, 1998 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the taxable income and
capital gains distributions for each class of shares declared by the
Insured Portfolio during the year.
<TABLE>
Record Payable Ordinary Short-Term Long-Term
Date Date Income Capital Gains Capital Gains
<S> <C> <C> <C> <C> <C>
Insured Portfolio 12/22/97 12/31/97 $.000328 $.010741 $.000534*
<FN>
*Of this long-term capital gain distribution, 25.43% is subject to
the 20% tax rate and 74.57% is subject to the 28% tax rate.
</TABLE>
Additionally, there were no ordinary income or capital gains
distributions declared by the Limited Maturity or National
Portfolios during the year.
Please retain this information for your records.
