MERRILL LYNCH
MUNICIPAL BOND
FUND, INC.
FUND LOGO
Annual Report
June 30, 2000
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
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Robert A. DiMella, Vice President
Peter J. Hayes, Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
DEAR SHAREHOLDER
The Municipal Market Environment
At the start of the year, fixed-income bond yields were initially
pushed higher as US economic growth remained robust. After growing
at a 7.3% rate during the fourth quarter of 1999 and a 4.2% annual
rate for all of 1999, first quarter of 2000 gross domestic product
growth was 5.5%. However, despite these significant growth rates,
few price measures showed any meaningful signs of future price
pressures at the consumer level, despite the lowest unemployment
rates since January 1970 and rising energy prices. With few signs of
any economic slowdown, the Federal Reserve Board continued to raise
short-term interest rates in February, March and May 2000. The
Federal Reserve Board cited both the continued growth of US
employment and the continued strength of US equity markets as
reasons for attempting to moderate US economic growth before
inflationary price increases can be realized. By late January 2000,
US Treasury bond yields rose over 25 basis points (0.25%) to 6.75%.
Similarly, as measured by the Bond Buyer Revenue Bond Index, long-
term, tax-exempt bond yields rose approximately 15 basis points to
6.35%.
Since then, however, fixed-income markets have largely ignored
strong economic fundamentals and concentrated upon very positive
technical supply factors. Declining bond issuance - both current,
and more importantly, expected future issuance - helped push bond
yields lower from late-January to mid-April 2000. In late January
and early February 2000, the US Treasury announced its intention to
reduce the amounts to be auctioned in quarterly Treasury note and
bond auctions. Furthermore, budgetary surpluses allowed the US
Treasury to repurchase outstanding, higher-couponed Treasury issues,
primarily in the 15-year and longer maturity sector. Both of these
actions resulted in a significant reduction in the outstanding
supply of longer-dated maturity US Treasury debt. Domestic and
international investors quickly began to accumulate what was
expected to become a scarce commodity and bond prices quickly rose.
By mid-April 2000, US Treasury bond yields had declined over 100
basis points to 5.67%. However, bond yields rose somewhat during the
remainder of the period as economic statistics were released
indicating that the economic strength seen in late 1999 was
continuing into early 2000. The domestic decline in long-term US
Treasury yields resulted in an inverted yield curve as short-term
and intermediate-term interest rates did not fall proportionately to
long-term interest rates as the Federal Reserve Board was expected
to continue to raise short-term interest rates. The current
inversion has had much more to do with debt reduction and Treasury
buy-backs than with market expectations of slower economic growth.
Over the last six months, long-term US Treasury bond yields have
fallen almost 60 basis points to end the period at 5.90%.
Tax-exempt bond yields also have declined in recent months. The
decline has largely been in response to the rally in US Treasury
securities, as well as a continued positive technical supply
environment. States such as California and Maryland have announced
that their large current and anticipated future budget surpluses
will permit the cancellation or postponement of expected bond
issuance. Additionally, some issuers have initiated tenders to
repurchase existing debt, reducing the supply of tax-exempt bonds in
the secondary market as well. Since their recent peak in January
2000, long-term municipal bond yields have declined over 30 basis
points to finish the six-month period ended June 30, 2000 at 5.90%.
The relative underperformance of the municipal bond market in recent
months has been especially disappointing given the strong technical
position the tax-exempt bond market has enjoyed. The issuance of
long-term, tax-exempt securities has dramatically declined. Over the
last year, $199 billion in new long-term municipal securities was
issued, a decline of almost 20% versus the same period a year
earlier. For the six months ended June 30, 2000, approximately $90
billion in new tax-exempt bonds was underwritten, a decline of over
20% compared to the same period in 1999.
Although investors received over $30 billion in coupon payments,
bond maturities and the proceeds from early bond redemptions during
January and February, and expect to receive a similar amount on June
1 and July 1, 2000, along with the highest municipal bond yields in
three years, overall investor demand has diminished. Long-term
municipal bond mutual funds have seen consistent outflows in recent
months as the yields of individual securities have risen faster than
those larger, more diverse mutual funds. Thus far this year, tax-
exempt mutual funds have had net redemptions of more than $12
billion. Also, the demand from property and casualty insurance
companies has weakened as a result of the losses incurred from a
series of damaging storms across much of the eastern United States.
Additionally, many institutional investors who have in recent years
been drawn to the municipal bond market by historically attractive
tax-exempt bond yield ratios of over 90% have found other asset
classes even more compelling. Even with a favorable supply position,
tax-exempt municipal bond yields have underperformed their taxable
counterparts.
Significantly lower municipal bond yields are still likely to
require weaker US employment growth and consumer spending. The
actions taken in recent months by the Federal Reserve Board, as well
as the expected action in August 2000, will eventually slow US
economic growth. Recent declines in US new home sales are perhaps
among the first signs that consumer spending is being slowed by
higher interest rates. Until further signs develop, it is likely
that the municipal bond market's current favorable technical
position will dampen significant tax-exempt interest rate volatility
and provide a stable environment for eventual improvement in
municipal bond prices.
Fiscal Year in Review
Insured Portfolio
In managing the Insured Portfolio, we seek to provide a balanced
performance, focusing on achieving a high current yield with a
competitive total return. While remaining fully invested for most of
the past year, we concentrated on selling discount bonds with longer
maturities and purchasing premium coupons in the 10-year - 20-year
range. This strategy enabled the Portfolio to maintain a very
competitive yield with a more neutral interest rate posture.
Historically, the 15-year area of the municipal yield curve has
provided above-average, risk-adjusted returns in the municipal
market. In addition, we have concentrated on increasing call
protection whenever the new-issue market became active.
Insured Portfolio started the fiscal year slightly aggressive with
regard to its interest rate exposure. The increase in tax-exempt
yields during the second half of 1999 caused the Portfolio to suffer
on a total return basis. We utilized the increase in interest rates
to realize capital losses and to increase current income, while at
the same time purchasing more attractively structured bonds that
have not been seen in the municipal bond market since April 1997.
This strategy helped the Portfolio perform well in the first half of
2000, as municipal bond interest rates staged a significant rally.
Going forward, we believe the Portfolio is structured well with a
high current income, low volatility position. We expect to maintain
this strategy until there is a clear sign that the economy is
slowing and the Federal Reserve Board has contained inflation.
National Portfolio
In managing the National Municipal Portfolio of Merrill Lynch
Municipal Bond Fund, Inc., we seek to provide a balanced
performance, focusing our strategy on achieving a high current yield
along with a competitive total return. We usually maintain a fully
invested position, concentrating the majority of the Portfolio's
assets in high-quality municipal securities. At June 30, 2000, 75%
of total assets were invested in securities rated AA or higher, with
57% rated AAA because of bond insurance or US Treasury escrows.
Concentrating on higher-quality securities helped performance over
the past year as credit quality spreads have widened. The municipal
marketplace has been characterized by abnormally long periods of
price volatility as reduced issuance and lack of mutual fund cash
flow has left the secondary marketplace in a state of illiquidity.
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
Our strategy has been aimed at positioning the Portfolio to be less
sensitive to price volatility. Rallies in municipal bond prices have
been used to sell longer duration, discount securities that react
more drastically to market movements. Inverse floater positions were
reduced, and in some cases restructured to provide a higher degree
of current return, but with less market sensitivity. Overall, the
Portfolio was positioned to be more market neutral with a slight
lean toward the aggressive side in order to take advantage of
municipal market technicals. As a result, the Portfolio delivered
superior returns, while maintaining an extremely high-quality
security mix.
National Portfolio's performance suffered in the first half of the
fiscal year primarily because of two factors. First, the Portfolio's
exposure to long duration, aggressively structured securities caused
it to be more sensitive to negative price movements as rates rose
into year-end. Additionally, municipal bonds underperformed other
taxable, fixed-income securities; an unusual event, particularly in
a rising interest rate environment. The Portfolio is typically fully
invested, so this underperformance of municipal bonds negatively
impacted total returns. Furthermore, although the Portfolio is
concentrated in higher-quality issues, widening credit spreads did
affect the small portion of Portfolio assets in lower-quality
holdings. We basically stayed the course through the first half of
2000, and the Portfolio's performance improved. As of June 30, 2000,
we did not experience any credit concerns, and falling interest
rates have allowed the Portfolio to enjoy a good degree of price
appreciation. We are currently locking in some of these gains by
restructuring in an effort to temper some of the Portfolio's
volatility. Maturities on new purchases have been shorter, taking
advantage of a relatively flat yield curve, and average couponing
has been increased. Going forward, we believe these two structural
changes should leave the Portfolio in a position to continue to
produce a generous level of tax-exempt income with less sensitivity
to market fluctuations.
Limited Maturity Portfolio
For much of the fiscal year, Limited Maturity Portfolio was
positioned with the belief that a tight Federal Reserve Board
monetary policy would maintain an upward bias with respect to short-
term interest rates. Although the average portfolio maturity was
maintained in the 1.4-year - 1.7-year range, cash reserves
fluctuated between 5% and 15% for much of the period. This provided
the Portfolio with both a measure of protection against rising short-
term interest rates, as well as a mechanism to meet continued
shareholder redemptions. Over the 12 months ended June 30, 2000,
this strategy allowed Limited Maturity Portfolio to outperform the
average of its peers, as measured by Lipper Analytical Services,
Inc.
Over the last several months, cash reserves in Limited Maturity
Portfolio have been reduced to between 0% and 5% of net assets. The
primary focus continues to be higher-quality securities that
generally maintain their value better than lower-rated issues in
periods of volatility. Additionally, we purchased some securities
trading at deeper discounts to their par value with the belief that
these securities had become undervalued during the extreme
volatility that occurred in the first several months of 2000. This
was done because of our belief that the Federal Reserve Board may be
reaching the end of its tightening cycle. Should the economy begin
to slow, the Portfolio would be well positioned to take advantage of
a fall in interest rates.
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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Robert A. DiMella)
Robert A. DiMella
Vice President and
Portfolio Manager
(Peter J. Hayes)
Peter J. Hayes
Vice President and
Portfolio Manager
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and
Portfolio Manager
August 7, 2000
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
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 for all three Portfolios 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 illustrating the total return based on a $10,000 investment
of Class A and Class B Shares in comparison to the Lehman Brothers Municipal
Bond Index++++. Beginning and ending values are:
6/90 6/00
Insured Portfolio++-
Class A Shares* $ 9,600 $17,856
Insured Portfolio++-
Class B Shares* $10,000 $17,249
Lehman Brothers Municipal
Bond Index++++ $10,000 $19,792
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
++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.
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 6/30/00 +1.21% -2.84%
Five Years Ended 6/30/00 +4.77 +3.92
Ten Years Ended 6/30/00 +6.40 +5.97
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/00 +0.57% -3.21%
Five Years Ended 6/30/00 +3.98 +3.98
Ten Years Ended 6/30/00 +5.60 +5.60
*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 illustrating the total return based on a $10,000 investment
of Class C and Class D Shares in comparison to the Lehman Brothers Municipal
Bond Index++++. Beginning and ending values are:
10/21/94** 6/00
Insured Portfolio++-
Class C Shares* $10,000 $13,193
Insured Portfolio++-
Class D Shares* $ 9,600 $13,075
Lehman Brothers Municipal
Bond Index++++ $10,000 $14,645
*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 6/30/00 +0.52% -0.42%
Five Years Ended 6/30/00 +3.92 +3.92
Inception (10/21/94) through 6/30/00 +4.99 +4.99
*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 6/30/00 +0.96% -3.08%
Five Years Ended 6/30/00 +4.51 +3.66
Inception (10/21/94) through 6/30/00 +5.58 +4.82
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
PERFORMANCE DATA (continued)
National Portfolio's
Class A and
Class B Shares
Total Return
Based on a $10,000
Investment
A line graph illustrating the total return based on a $10,000 investment
of Class A and Class B Shares in comparison to the Lehman Brothers Municipal
Bond Index++++. Beginning and ending values are:
6/90 6/00
National Portfolio++-
Class A Shares* $ 9,600 $18,145
National Portfolio++-
Class B Shares* $10,000 $17,546
Lehman Brothers Municipal
Bond Index++++ $10,000 $19,792
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
++The National Portfolio invests primarily in long-term municipal
bonds rated in any rating category.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years.
Past performance is not predictive of future performance.
National Portfolio's
Class A and
Class B Shares
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
Year Ended 6/30/00 +0.58% -3.45%
Five Years Ended 6/30/00 +5.15 +4.29
Ten Years Ended 6/30/00 +6.57 +6.14
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/00 -0.09% -3.89%
Five Years Ended 6/30/00 +4.35 +4.35
Ten Years Ended 6/30/00 +5.78 +5.78
*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 illustrating the total return based on a $10,000 investment
of Class C and Class D Shares in comparison to the Lehman Brothers Municipal
Bond Index++++. Beginning and ending values are:
10/21/94** 6/00
National Portfolio++-
Class C Shares* $10,000 $13,329
National Portfolio++-
Class D Shares* $ 9,600 $13,207
Lehman Brothers Municipal
Bond Index++++ $10,000 $14,645
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The National Portfolio invests primarily in long-term municipal
bonds rated in any rating category.
++++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 6/30/00 -0.13% -1.08%
Five Years Ended 6/30/00 +4.30 +4.30
Inception (10/21/94) through 6/30/00 +5.18 +5.18
*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 6/30/00 +0.43% -3.59%
Five Years Ended 6/30/00 +4.89 +4.03
Inception (10/21/94) through 6/30/00 +5.76 +5.01
*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 illustrating the total return based on a $10,000 investment
of Class A and Class B Shares in comparison to the Lehman Brothers Municipal
Bond Index++++ and Lehman Brothers 3-Year General Obligation Bond Index++++++.
Beginning and ending values are:
6/90 6/00
Class A Shares
Limited Maturity Portfolio++-
Class A Shares* $10,000 $15,300
Lehman Brothers Municipal
Bond Index++++ $10,000 $19,792
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $17,170
Class B Shares 11/02/92** 6/00
Limited Maturity Portfolio++-
Class B Shares* $10,000 $13,004
Lehman Brothers Municipal
Bond Index++++ $10,000 $15,980
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $14,286
*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 in the Class B Shares'
graph 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 6/30/00 +3.31% +2.27%
Five Years Ended 6/30/00 +3.82 +3.61
Ten Years Ended 6/30/00 +4.45 +4.34
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
Year Ended 6/30/00 +2.94% +1.94%
Five Years Ended 6/30/00 +3.47 +3.47
Inception (11/2/92) through 6/30/00 +3.49 +3.49
*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, 2000
PERFORMANCE DATA (concluded)
Limited Maturity
Portfolio's
Class C and
Class D Shares
Total Return
Based on a $10,000
Investment
A line graph illustrating the total return based on a $10,000 investment
of Class C and Class D Shares in comparison to the Lehman Brothers Municipal
Bond Index++++ and Lehman Brothers 3-Year General Obligation Bond Index++++++.
Beginning and ending values are:
10/21/94** 6/00
Limited Maturity Portfolio++-
Class C Shares* $10,000 $12,208
Limited Maturity Portfolio++-
Class D Shares* $10,000 $12,324
Lehman Brothers Municipal
Bond Index++++ $10,000 $14,645
Lehman Brothers 3-Year General
Obligation Bond Index++++++ $10,000 $13,199
*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 6/30/00 +2.93% +1.94%
Five Years Ended 6/30/00 +3.35 +3.35
Inception (10/21/94) through 6/30/00 +3.57 +3.57
*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 6/30/00 +3.20% +2.17%
Five Years Ended 6/30/00 +3.71 +3.51
Inception (10/21/94) through 6/30/00 +3.92 +3.74
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
Ten Years/
Since
6 Month 12 Month Inception Standardized
As of June 30, 2000 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C> <C>
ML Municipal Bond Fund, Inc. Insured Portfolio Class A Shares** +4.59% +1.21% +86.01% 5.15%
ML Municipal Bond Fund, Inc. Insured Portfolio Class B Shares** +4.34 +0.57 +72.50 4.61
ML Municipal Bond Fund, Inc. Insured Portfolio Class C Shares** +4.32 +0.52 +31.93 4.56
ML Municipal Bond Fund, Inc. Insured Portfolio Class D Shares** +4.60 +0.96 +36.19 4.91
ML Municipal Bond Fund, Inc. National Portfolio Class A Shares** +4.79 +0.58 +89.03 5.43
ML Municipal Bond Fund, Inc. National Portfolio Class B Shares** +4.39 -0.09 +75.47 4.89
ML Municipal Bond Fund, Inc. National Portfolio Class C Shares** +4.48 -0.13 +33.29 4.84
ML Municipal Bond Fund, Inc. National Portfolio Class D Shares** +4.66 +0.43 +37.57 5.18
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class A Shares*** +1.96 +3.31 +54.53 4.35
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class B Shares*** +1.88 +2.94 +30.04 4.03
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class C Shares*** +1.88 +2.93 +22.08 4.03
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class D Shares*** +2.01 +3.20 +24.48 4.23
*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/since inception periods are ten years for
Class A & Class B Shares and from 10/21/94 for Class C & Class D
Shares.
***The Fund's ten-year/since inception periods are ten years for
Class A Shares; from 11/2/92 for Class B Shares; and from 10/21/94
for Class C& Class D Shares.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Alabama--1.6% AAA Aaa $12,500 Alabama State Docks Department, Docks Facilities Revenue
Refunding Bonds, 5.50% due 10/01/2022 (e) $ 12,064
AAA Aaa 1,585 Alabama Water Pollution Control Authority Revenue Bonds,
Revolving Fund Loan, Series A, 6.75% due 8/15/2017 (b) 1,690
AAA NR* 1,250 Mobile, Alabama, GO, Refunding, 10.875% due 11/01/2007 (c) 1,594
AAA Aaa 7,000 University of Alabama, University Revenue Bonds
(Birmingham), 6% due 10/01/2020 (h) 7,169
Arizona--0.6% AAA Aaa 6,750 Arizona State Municipal Financing Program, COP, Series 34,
7.25% due 8/01/2009 (g) 7,784
California--1.2% AAA Aaa 3,000 California Statewide Communities Development Authority,
COP (Kaiser Permanente), 5.30% due 12/01/2015 (i) 2,989
AAA Aaa 5,800 Oakland, California, Redevelopment Agency, Tax Allocation
Refunding Bonds, INFLOS, 7.611% due 9/01/2019 (d)(e) 5,901
Rialto, California, Unified School District, GO, Series A (h):
AAA Aaa 13,985 6.12%** due 6/01/2019 4,706
AAA Aaa 11,685 6.24%** due 6/01/2025 2,698
Colorado--2.3% Denver, Colorado, City and County Airport Revenue
Refunding Bonds (e):
AAA Aaa 31,160 RIB, Series 153, 6.251% due 11/15/2025 (d) 30,089
AAA Aaa 1,500 Series D, 5.50% due 11/15/2025 1,435
District of AAA Aaa 7,500 District of Columbia, GO, Refunding, Series B, 5.50%
Columbia--0.6% due 6/01/2014 (i) 7,485
Florida--4.8% Dade County, Florida, Water and Sewer System
Revenue Bonds (h):
AAA Aaa 10,000 5.25% due 10/01/2026 9,377
A1+ VMIG1++ 2,500 VRDN, 4.70% due 10/05/2022 (f) 2,500
Florida State Board of Education, Lottery Revenue
Bonds, Series B (h):
AAA Aaa 4,400 5.75% due 7/01/2009 4,640
AAA Aaa 8,900 6% due 7/01/2013 9,491
AAA Aaa 9,435 6% due 7/01/2014 10,004
AAA Aaa 9,645 6% due 7/01/2015 10,178
AAA Aaa 14,800 Florida State Department of Environmental Protection,
Preservation Revenue Bonds, Series A, 5.75% due
7/01/2008 (h) 15,574
AAA Aaa 500 Jacksonville, Florida, Health Facilities Authority,
Hospital Revenue Refunding Bonds, 11.50% due
10/01/2012 (a)(c) 780
AAA Aaa 2,240 West Coast Regional Water Supply Authority, Florida,
Capital Improvement Revenue Bonds, 10% due
10/01/2010 (a)(b) 3,030
Georgia--3.1% Georgia Municipal Electric Authority, Power Revenue
Refunding Bonds:
AAA Aaa 20,000 Series EE, 7% due 1/01/2025 (b) 23,293
AAA Aaa 9,000 Series Y, 6.40% due 1/01/2013 (b) 9,914
AAA Aaa 10,000 Series Z, 5.50% due 1/01/2020 (e) 9,906
Hawaii--0.9% AAA Aaa 10,000 Hawaii State Airport System, Revenue Refunding Bonds,
6.45% due 7/01/2013 (e) 10,549
AAA Aaa 2,000 Honolulu, Hawaii, City and County Wastewater System
Revenue Refunding Bonds, Second Bond Resolution
(Junior Series), 5.25% due 7/01/2017 (h) 1,909
Illinois--13.4% Chicago, Illinois, Board of Education, GO (Chicago School
Reform Project):
AAA Aaa 12,650 Series A, 5.25% due 12/01/2022 (b) 11,708
AAA Aaa 49,000 Series B-1, 6.334%** due 12/01/2027 (h) 9,151
AAA Aaa 20,880 Chicago, Illinois, GO, Project and Refunding Bonds,
5.25% due 1/01/2020 (h) 19,549
AAA Aaa 2,000 Chicago, Illinois, O'Hare International Airport Revenue Bonds
(Passenger Facility Charge), Series A, 5.625% due 1/01/2015(b) 2,009
AAA Aaa 11,250 Chicago, Illinois, O'Hare International Airport Revenue
Refunding Bonds, Senior Lien, Series A, 5% due 1/01/2013 (e) 10,678
AAA Aaa 12,000 Illinois Development Finance Authority, PCR, Refunding
(Illinois Power Company Project), Series A, 5.40%
due 3/01/2028 (e) 11,159
AAA Aaa 3,250 Illinois Health Facilities Authority Revenue Bonds
(Elmhurst Memorial Hospital), 6.625% due 1/01/2022 (h) 3,383
Illinois Health Facilities Authority, Revenue Refunding Bonds:
AAA Aaa 3,740 (Methodist Medical Center), 5.50% due 11/15/2011 (e) 3,775
A1 VMIG1++ 3,300 (Resurrection Health), VRDN, Series A, 4.65% due
5/15/2029 (f)(i) 3,300
A1 VMIG1++ 20,900 (University of Chicago Hospitals), VRDN, 4.60% due
8/01/2026 (e)(f) 20,900
AAA NR* 14,450 Illinois Health Facilities Authority, Revenue Refunding
Bonds, RIB, Series 166, 6.85% due 2/15/2024 (b)(d)(j) 14,339
Illinois Regional Transportation Authority Revenue Bonds:
AAA Aaa 20,615 6.50% due 7/01/2026 (e) 22,807
AAA Aaa 26,000 Series A, 6.25% due 6/01/2004 (a)(e) 27,773
AAA Aaa 3,000 Illinois State, GO, 5.75% due 5/01/2004 (a)(b) 2,989
AAA Aaa 3,000 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Refunding Bonds (McCormick Plant
Expansion Project), 5.50% due 12/15/2024 (h) 2,872
NR* Aaa 9,000 Northern Illinois University, Auxiliary Facilities System,
Revenue Refunding Bonds, 5.75% due 4/01/2022 (h) 8,900
AAA Aaa 6,905 Will and Kendall Counties, Illinois, Community Consolidated
School District Number 202, GO, 5.75% due 12/30/2011 (i) 7,208
Indiana--3.0% AAA Aaa 15,000 Indiana Health Facilities Financing Authority, Hospital
Revenue Refunding Bonds (Sisters of Saint Francis
Health), Series A, 5.375% due 11/01/2027 (e) 13,694
AAA Aaa 5,555 Indiana State Office Building Commission, Facilities
Revenue Bonds (Miami Correctional Facility-Phase 1),
Series A, 5.50% due 7/01/2015 (b) 5,555
AAA Aaa 4,040 Indianapolis, Indiana, Local Public Improvement Revenue
Bonds, 7.90% due 2/01/2002 (a)(g) 4,051
AAA Aaa 2,500 Penn, Indiana, High School Building Corporation Revenue
Bonds, First Mortgage, 6.125% due 1/15/2005 (a)(e) 2,663
A1+ Aaa 5,300 Rockport, Indiana, PCR, Refunding (AEP Generating Company
Project), VRDN, Series A, 4.60% due 7/01/2025 (b)(f) 5,300
AAA Aaa 10,370 Wayne Township, Indiana, Marion County School Building
Corporation Revenue Bonds, First Mortgage, 5.50%
due 1/15/2022 (e) 9,892
Kansas--0.9% AAA Aaa 11,000 Kansas City, Kansas, Utility System Revenue Refunding and
Improvement Bonds, 6.25% due 9/01/2014 (h) 11,681
Kentucky--0.2% A1 VMIG1++ 2,300 Kentucky Economic Development Finance Authority, Hospital
Facilities Revenue Refunding Bonds (Baptist
Healthcare), VRDN, Series C, 4.60% due 8/15/2031 (e)(f) 2,300
Maryland--0.4% AAA Aaa 4,400 Maryland State Health and Higher Educational Facilities
Authority Revenue Bonds (University of Maryland
Medical System), Series B, 7% due 7/01/2022 (h) 5,100
</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)
BAN Bond Anticipation Notes
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
INFLOS SM Inverse Floating Rate Municipal Bonds
IRS Inverse Rate Securities
LEVRRS Leveraged Reverse Rate Securities
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
VRDN Variable Rate Demand Notes
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Massachusetts AAA Aaa $ 3,145 Massachusetts Educational Loan Authority, Education
--2.2% Loan Revenue Bonds, AMT, Issue D, Series A, 7.25% due
1/01/2009 (e) $ 3,235
AAA Aaa 10,000 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Beth Israel Deaconess Medical Center),
INFLOS, Series G-4, 7.255% due 7/01/2025 (b)(d) 9,887
AAA Aaa 3,100 Massachusetts State Health and Educational Facilities
Authority, Revenue Refunding Bonds (Saint Elizabeth's
Hospital), LEVRRS, Series E, 8.75% due 8/12/2021 (d)(i) 3,317
AAA Aaa 5,000 Massachusetts State Housing Finance Agency, Rental Housing,
Mortgage Revenue Bonds, AMT, Series B, 5.55% due 7/01/2040 (b) 4,488
AAA Aaa 9,500 Massachusetts State Turnpike Authority, Metropolitan
Highway System Revenue Refunding Bonds, Sub-Series B, 5.25%
due 1/01/2017 (e) 9,135
Michigan--1.3% AAA Aaa 6,915 Michigan State, HDA, Rental Housing Revenue Refunding
Bonds, Series B, 6.15% due 10/01/2015 (e) 7,016
AAA Aaa 10,000 Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Company), Series AA, 6.40%
due 9/01/2025 (e) 10,425
Minnesota--1.5% NR* Aaa 5,860 Delano, Minnesota, Independent School District Number
879, GO, Series A, 5.875% due 2/01/2025 (i) 5,926
AAA Aaa 5,910 Minneapolis and Saint Paul, Minnesota, Metropolitan
Airports Commission, Airport Revenue Bonds, AMT,
Series B, 6.20% due 1/01/2017 (h) 6,161
Sauk Rapids, Minnesota, Independent School District
Number 047, GO, Series A (e):
NR* Aaa 3,735 5.65% due 2/01/2020 3,709
NR* Aaa 4,440 5.70% due 2/01/2021 4,429
Mississippi--0.1% AAA Aaa 1,320 Harrison County, Mississippi, Wastewater Management
District, Revenue Refunding Bonds (Wastewater
Treatment Facilities), Series A, 8.50% due 2/01/2013 (h) 1,698
Missouri--1.6% Kansas City, Missouri, Airport Revenue Refunding and
Improvement Bonds, Series A (e):
AAA Aaa 12,990 5.50% due 9/01/2013 13,191
AAA Aaa 9,000 5.50% due 9/01/2014 9,090
Nevada--3.5% AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power Company), AMT, 6.65% due
6/01/2017 (e) 47,342
New Jersey--12.0% AAA Aaa 6,810 Cape May County, New Jersey, Industrial Pollution
Control Financing Authority Revenue Refunding Bonds
(Atlantic City Electric Company Project), Series A,
6.80% due 3/01/2021 (e) 7,793
AAA Aaa 28,750 New Jersey EDA, Natural Gas Facilities Revenue Refunding
Bonds (NUI Corporation Project), Series A, 6.35%
due 10/01/2022 (b) 30,047
AAA Aaa 5,000 New Jersey EDA, Water Facilities Revenue Bonds
(American Water Company Inc.), AMT, Series B, 5.375% due
5/01/2032 (h) 4,643
AAA Aaa 4,460 New Jersey Sports and Exposition Authority, State
Contract Revenue Refunding Bonds, Series A, 5.50% due
3/01/2016 (e) 4,511
AAA Aaa 15,505 New Jersey State Housing and Mortgage Finance Agency,
Home Buyer Revenue Bonds, AMT, Series M, 7% due
10/01/2026 (e) 16,269
New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds:
AAA Aaa 14,000 Series A, 5.25% due 1/01/2005 (e) 14,269
AAA Aaa 30,000 Series A, 5.50% due 1/01/2006 (e) 30,976
AAA Aaa 4,215 Series C, 6.50% due 1/01/2008 (b) 4,609
Salem County, New Jersey, Industrial Pollution Control
Financing Authority, Revenue Refunding Bonds
(Public Service Electric and Gas Company Project) (e):
AAA Aaa 28,850 Series B, 6.25% due 6/01/2031 29,835
AAA Aaa 20,000 Series C, 6.20% due 8/01/2030 20,565
New York--13.9% AAA Aaa 15,560 Long Island Power Authority, New York, Electric System
Revenue Bonds, 5.47%** due 6/01/2010 (i) 9,342
AAA Aaa 27,225 Long Island Power Authority, New York, Electric System
Revenue Refunding Bonds, Series A, 5.50% due
12/01/2029 (e) 25,747
AAA Aaa 5,000 Nassau Health Care Corporation, New York, Health System
Revenue Bonds (Nassau County), 6% due 8/01/2011 (i) 5,329
A1 Aaa 28,510 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds,
RITR, Series FR-6, 6.295% due 6/15/2026 (d)(e) 28,204
New York City, New York, GO:
AAA Aaa 15,000 Series B, 6.25% due 8/15/2008 (b) 16,152
AAA Aaa 4,225 Series E, 6% due 8/01/2007 (h) 4,495
AAA Aaa 31,000 Series I, 6% due 4/15/2012 (i) 32,620
AAA Aaa 5,385 Series I, 5.25% due 4/15/2016 (e) 5,189
AAA Aaa 15,000 Series M, 5.50% due 6/01/2017 (b) 14,804
New York City, New York, GO, Refunding:
AAA Aaa 11,460 Series A, 5.25% due 8/01/2011 (h) 11,513
AAA Aaa 7,655 Series G, 5.75% due 2/01/2014 (e) 7,815
AAA NR* 7,655 Series G, 5.75% due 2/01/2017 (i) 7,715
AAA NR* 2,000 New York State Dormitory Authority, Lease Revenue Bonds
(State University Dormitory Facilities), 5.375% due
7/01/2021 (i) 1,902
AAA Aaa 3,400 New York State Dormitory Authority, Revenue Refunding
Bonds (Saint Charles Hospital and Rehabilitation
Center), Series A, 5.625% due 7/01/2012 (e) 3,486
AAA Aaa 5,950 New York State Energy Research and Development Authority,
Gas Facilities Revenue Bonds (Brooklyn Union
Gas Company Project), Series A, 5.50% due 1/01/2021 (e) 5,738
AAA Aaa 1,650 New York State Enviromental Facilities Corporation,
Special Obligation Revenue Refunding Bonds (Riverbank
State Park), 5.50% due 4/01/2016 (b) 1,640
AAA Aaa 160 New York State Medical Care Facilities Finance Agency
Revenue Bonds, Series E, 6.25% due 8/15/2004 (h) 165
Niagara Falls, New York, GO, Public Improvement (e):
AAA Aaa 2,975 6.90% due 3/01/2023 3,201
AAA Aaa 3,190 6.90% due 3/01/2024 3,433
Ohio--1.6% Ohio State Water Development Authority, Pollution
Control Facilities Revenue Bonds (Water Control Loan
Fund-Water Quality Series) (e):
AAA Aaa 3,575 5.50% due 12/01/2010 3,692
AAA Aaa 3,175 5.50% due 6/01/2012 3,243
AAA Aaa 3,420 5.50% due 6/01/2013 3,470
AAA Aaa 6,000 5.50% due 6/01/2014 6,057
AAA Aaa 5,260 Ohio State Water Development Authority Revenue Bonds
(Water Development--Community Assistance), 5.375%
due 12/01/2024 (b) 5,009
Oklahoma--0.5% AAA Aaa 6,385 Oklahoma State, IDR, Refunding (Health System),
Series A, 6.25% due 8/15/2016 (e) 6,688
Oregon--1.0% AAA Aaa 8,700 Oregon State Department, Administrative Services, COP,
Series A, 6.25% due 5/01/2021 (b) 9,168
AAA Aaa 3,865 Port of Portland, Oregon, Airport Revenue Refunding
Bonds (Portland International Airport), AMT, Series 7-B,
7.10% due 1/01/2012 (a)(e) 4,419
Pennsylvania--2.7% AAA Aaa 20,610 Delaware River Port Authority of Pennsylvania and
New Jersey, Revenue Refunding Bonds, Series B, 5.25% due
1/01/2007 (b) 20,996
NR* Aaa 4,860 Erie, Pennsylvania, Sewer Authority, Sewer Revenue
Bonds, Series B, 5.125% due 6/01/2020 (b) 4,493
AAA Aaa 6,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds,
12th Series B, 7% due 5/15/2020 (c)(e) 6,862
AAA Aaa 5,000 Southeastern Pennsylvania Transportation Authority,
Special Revenue Bonds, 5.375% due 3/01/2022 (h) 4,757
Rhode Island--0.5% AAA Aaa 6,815 Rhode Island State Economic Development Corporation,
Airport Revenue Bonds, Series B, 6% due 7/01/2028 (h) 6,890
South Carolina South Carolina State Public Service Authority,
--1.6% Revenue Refunding Bonds, Series A (b):
AAA Aaa 17,090 6.375% due 7/01/2021 17,544
AAA Aaa 4,200 6.25% due 1/01/2022 4,345
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds Insured Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Tennessee--0.9% Putnam County, Tennessee, School GO (h):
NR* Aaa $ 4,450 5.375% due 4/01/2018 $ 4,353
NR* Aaa 3,750 5.50% due 4/01/2019 3,702
NR* Aaa 4,000 5.50% due 4/01/2020 3,929
Texas--9.3% AAA Aaa 11,190 Austin, Texas, Utility System Revenue Bonds,
Combined, 9.25% due 11/15/2008 (e) 12,934
AAA Aaa 12,000 Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT, Series B, 6.625% due
6/01/2022 (h) 12,521
AAA Aaa 6,000 Brazos River Authority, Texas, PCR, Refunding (Texas
Utilities Electric Company Project), AMT, 6.50% due
12/01/2027 (b) 6,138
AAA Aaa 2,750 Harris County, Texas, Toll Road Revenue Refunding Bonds,
Series A, 6.50% due 8/15/2017 (b) 2,885
AAA Aaa 4,250 Houston, Texas, Water and Sewer System, Revenue Refunding
Bonds, Junior Lien, Series A, 5.25% due 12/01/2022 (h) 3,949
AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract, COP,
Series J, 6.25% due 12/15/2013 (b) 3,778
Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (b):
AAA Aaa 11,800 (Houston Light and Power Company), Series A, 6.70%
due 3/01/2027 12,310
AAA Aaa 37,300 (Reliant Energy Inc.), Series A, 5.25% due 6/01/2026 34,284
A1+ NR* 19,800 North Central Texas, Health Facility Development
Corporation Revenue Bonds (Methodist Hospitals-Dallas),
VRDN, Series B, 4.60% due 10/01/2015 (e)(f) 19,800
AAA Aaa 5,300 North Central Texas, Health Facility Development
Corporation, Revenue Refunding Bonds (Texas Health
Resources System), Series B, 5% due 2/15/2017 (e) 4,641
AAA Aaa 6,000 San Antonio, Texas, Electric and Gas Revenue Bonds,
5.375% due 2/01/2018 (e) 5,817
AAA Aaa 7,430 Southwest Higher Education Authority Incorporated, Revenue
Refunding Bonds, Series B, 6.25% due 10/01/2022 (h) 7,587
Utah--1.6% Utah State Building Ownership Authority, Lease Revenue
Refunding Bonds (State Facilities Master Lease
Program), Series C (i):
AAA Aaa 2,995 5.50% due 5/15/2012 3,068
AAA Aaa 3,000 5.50% due 5/15/2013 3,058
AAA NR* 9,535 Utah Transit Authority, Sales Tax and Transportation
Revenue Bonds (Salt Lake County Light Rail Transit
Project), 5.375% due 12/15/2022 (i) 9,058
Utah Water Finance Agency Revenue Bonds (Pooled Loan
Financing Program), Series A (b):
NR* Aaa 2,515 5.75% due 10/01/2015 2,577
NR* Aaa 3,770 6% due 10/01/2020 3,871
Virginia--1.9% AAA Aaa 19,755 Fairfax County, Virginia, EDA, Resource Recovery
Revenue Refunding Bonds, AMT, Series A, 6.10% due
2/01/2011 (b) 21,187
AAA Aaa 5,000 Virginia State, HDA, Commonwealth Mortgage Revenue
Bonds, AMT, Series A, Sub-Series A-4, 6.30% due
7/01/2014 (e) 5,072
Washington--2.7% AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power
Revenue Bonds, 6.625% due 7/01/2004 (a)(h) 36,320
West Virginia AAA Aaa 11,465 Mason County, West Virginia, PCR, Refunding
--1.8% (Appalachian Power Company), 6.85% due 6/01/2022 (e) 12,040
AAA Aaa 12,250 Pleasants County, West Virginia, PCR, Refunding
(Potomac-Pleasants), Series C, 6.15% due 5/01/2015 (b) 12,768
Wisconsin--4.1% Milwaukee County, Wisconsin, Airport Revenue Bonds,
AMT, Series A (h):
NR* Aaa 2,625 6% due 12/01/2012 2,762
NR* Aaa 3,675 6% due 12/01/2013 3,840
NR* Aaa 3,675 6% due 12/01/2014 3,816
NR* Aaa 3,675 6% due 12/01/2015 3,796
AAA Aaa 9,000 Superior, Wisconsin, Limited Obligation Revenue
Refunding Bonds (Midwest Energy Resources), Series E,
6.90% due 8/01/2021 (h) 10,267
AAA Aaa 4,650 Wisconsin Public Power Inc., Power Supply System
Revenue Bonds, Series A, 5.75% due 7/01/2023 (e) 4,580
Wisconsin State, GO, AMT, Series B (e):
AAA Aaa 7,920 6.50% due 5/01/2020 8,248
AAA Aaa 17,130 6.50% due 5/01/2025 17,840
Total Investments (Cost--$1,312,722)--99.3% 1,350,970
Other Assets Less Liabilities--0.7% 9,786
----------
Net Assets--100.0% $1,360,756
==========
(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, 2000.
(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, 2000.
(g)BIG Insured.
(h)FGIC Insured.
(i)FSA Insured.
(j)FHA Insured.
*Not rated.
**Represents a zero coupon or step bond; the interest rate shown
reflects the effective yield at the time of purchase by the Fund.
++Highest short-term rating issued by Moody's Investors Service,
Inc.
Ratings of shares shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Alabama--0.4% AAA Aaa $ 3,820 Alabama Incentives Financing Authority, Special
Obligation Revenue Refunding Bonds, Series A, 6% due
10/01/2029 (c) $ 3,873
Alaska--2.7% AA+ NR* 27,150 Valdez, Alaska, Marine Terminal Revenue Refunding
Bonds (Sohio Pipeline-British Petroleum Oil), 7.125%
due 12/01/2025 28,662
Arizona--0.4% NR* B1 5,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding
Bonds (America West Airlines Inc. Project), AMT,
6.30% due 4/01/2023 4,418
California--13.1% Alameda Corridor Transportation Authority, California,
Revenue Bonds, Senior Lien, Series A (f):
AAA Aaa 10,000 4.75% due 10/01/2025 8,664
AAA Aaa 10,000 5% due 10/01/2029 8,982
AAA Aaa 12,000 Alameda County, California, COP (Financing Project),
6% due 9/01/2021 (f) 12,414
AAA Aaa 30,000 California State, GO, Refunding, 4.25% due 10/01/2026 (f) 23,632
NR* NR* 4,000 Long Beach, California, Special Tax Bonds (Community
Facilities District No. 3-Pine Ave.), 6.375% due
9/01/2023 3,952
Los Angeles, California, Department of Water and Power,
Electric Plant Revenue Refunding Bonds:
A+ Aa3 20,000 6% due 2/15/2024 20,341
A+ Aa3 10,000 6% due 2/15/2028 10,152
AA Aa2 14,270 Metropolitan Water District of Southern California,
Waterworks Revenue Bonds, Series A, 5% due 7/01/2026 12,906
AAA Aaa 20,000 Northern California Power Agency, Public Power Revenue
Refunding Bonds (Hydroelectric Project Number
One), Series A, 5.125% due 7/01/2023 (f) 18,536
AAA Aaa 20,000 Santa Clara County, California, Financing Authority,
Lease Revenue Refunding Bonds, Series A, 5% due
11/15/2022 (c) 18,288
Colorado--5.4% Denver, Colorado, City and County Airport Revenue Bonds, AMT:
A A2 2,575 Series A, 7.50% due 11/15/2023 2,796
A A2 7,910 Series A, 8% due 11/15/2025 8,144
A A2 9,710 Series B, 7.25% due 11/15/2023 10,249
AAA Aaa 12,205 Denver, Colorado, City and County Airport Revenue
Refunding Bonds, Series A, 5.75% due 11/15/2016 (f) 12,399
AAA Aaa 25,750 E-470 Public Highway Authority, Colorado, Revenue
Refunding Bonds, Senior Series A, 5% due 9/01/2026 (f) 22,865
Connecticut--0.4% BB+ Ba1 5,000 Connecticut State Development Authority, PCR, Refunding
(Connecticut Light and Power Company), Series A,
5.85% due 9/01/2028 4,430
Florida--3.0% NR* NR* 3,500 Brooks of Bonita Springs II, Florida, Community
Development District, Capital Improvement Revenue Bonds,
Series B, 6.60% due 5/01/2007 3,483
NR* Aaa 4,505 Florida HFA, Home Ownership Revenue Refunding Bonds,
AMT, Series G1, 7.90% due 3/01/2022 (d) 4,607
AAA Aaa 6,330 Florida HFA Revenue Bonds (Antigua Club Apartments),
AMT, Series A-1, 7% due 2/01/2035 (c) 6,694
AA- Aa3 7,000 Jacksonville, Florida, Electric Authority, Water and
Sewer Revenue Bonds, Series A, 6% due 10/01/2024 7,104
AAA Aaa 4,500 Lee County, Florida, Transportation Facilities Revenue
Bonds, 5.75% due 10/01/2022 (f) 4,521
NR* NR* 3,350 Mediterra, Florida, South Community Development
District, Capital Improvement Revenue Bonds, Series B,
6.25% due 5/01/2004 3,338
AAA NR* 2,070 Orange County, Florida, HFA, Mortgage Revenue Bonds,
AMT, Series A, 8.375% due 3/01/2021 (b)(d) 2,114
Georgia--1.2% AAA Aaa 15,000 Fulton County, Georgia, Water and Sewer Revenue
Bonds, 4.75% due 1/01/2028 (e) 12,703
Illinois--5.1% AAA Aaa 2,000 Chicago, Illinois, GO, Series A, 6.125% due 1/01/2015 (e) 2,114
Chicago, Illinois, O'Hare International Airport,
Special Facilities Revenue Bonds (United Airlines, Inc.):
BB+ Baa2 4,375 AMT, Series B, 8.95% due 5/01/2018 4,536
BB+ Baa2 12,615 Series 84-B, 8.85% due 5/01/2018 13,082
NR* Aaa 7,000 Decatur, Illinois, GO, Refunding, 6% due 3/01/2025 (e) 7,089
AAA Aaa 14,000 Illinois Educational Facilities Authority, Revenue
Refunding Bonds (Illinois Institue of Technology), 5.25%
due 12/01/2025 (c) 12,809
AA Aa1 250 Illinois HDA, Residential Mortgage Revenue Bonds, RIB,
AMT, 8.903% due 2/01/2018 (g) 263
Illinois Health Facilities Authority, Revenue
Refunding Bonds, VRDN (a):
A1 VMIG1++ 6,300 (Resurrection Health), Series A, 4.65% due 5/01/2029 (h) 6,300
A1 VMIG1++ 400 (University of Chicago Hospitals), 4.60% due 8/01/2026 (f) 400
AAA Aa2 3,000 Illinois State, Sales Tax Revenue Bonds, 6% due 6/15/2020 3,074
NR* A2 4,400 Southwestern Illinois Development Authority, Sewer
Facilities Revenue Bonds (Monsanto Company Project),
AMT, 7.30% due 7/15/2015 4,705
Indiana--2.1% NR* NR* 2,595 Indiana State Educational Facilities Authority, Revenue
Refunding Bonds (Saint Joseph's College Project),
7% due 10/01/2029 2,599
AAA Aaa 10,000 Indianapolis, Indiana, Economic Development Revenue
Bonds (Archdiocese of Indianapolis), 5.50% due
7/01/2026 (f) 9,459
AA NR* 9,100 Indianapolis, Indiana, Local Public Improvement Bond
Bank Revenue Refunding Bonds, Series D, 6.75% due
2/01/2020 9,589
Iowa--1.0% NR* NR* 9,000 Iowa Finance Authority, Health Care Facilities Revenue
Refunding Bonds (Care Initiatives Project), 9.25%
due 7/01/2025 10,724
Kansas--2.2% Wichita, Kansas, Hospital Revenue Refunding Bonds,
RIB (f)(g):
AAA Aaa 12,000 Series III-A, 8.255% due 10/01/2017 12,870
AAA Aaa 10,000 Series III-B, 8.235% due 10/21/2022 10,675
Kentucky--1.2% AAA Aaa 2,380 Louisville and Jefferson County, Kentucky, Metropolitan
Sewer District, Sewer and Drain System Revenue
Refunding Bonds, Series A, 5% due 5/15/2022 (e) 2,143
NR* NR* 4,500 Perry County, Kentucky, Solid Waste Disposal Revenue
Bonds (TJ International Project), AMT, 7% due
6/01/2024 4,571
A+ A1 6,345 Trimble County, Kentucky, PCR, AMT, Series A, 7.625%
due 11/01/2020 6,515
Louisiana--4.7% NR* A3 34,000 Lake Charles, Louisiana, Harbor and Terminal District,
Port Facilities Revenue Refunding Bonds (Trunkline
Long Company Project), 7.75% due 8/15/2022 36,385
CC NR* 13,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project), 7.50% due 7/01/2013 13,195
Massachusetts AA- Aa2 9,000 Massachusetts State, GO, Consolidated Loan, Series A,
--2.2% 6% due 2/01/2016 9,408
NR* Ca 11,302 Massachusetts State Health and Educational Facilities
Authority, Revenue Refunding Bonds (New England
Memorial Hospital), Series B, 6.25% due 7/01/2023 (j) 2,260
AAA Aaa 13,000 Massachusetts State Water Resource Authority,
Revenue Refunding Bonds, Series D, 5% due 8/01/2024 (f) 11,566
Michigan--1.5% AAA Aaa 15,000 Michigan State Hospital Finance Authority, Revenue
Refunding Bonds, INFLOS, 7.855% due 2/15/2022 (g)(h) 15,431
Minnesota--0.6% A1+ NR* 1,300 Beltrami County, Minnesota, Environmental Control
Revenue Refunding Bonds (Northwood Panelboard Co.
Project), VRDN, 4.50% due 12/01/2021 (a) 1,300
AA+ Aa1 1,645 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT,
Series A, 7.45% due 7/01/2022 (b) 1,678
AA+ NR* 3,000 Rochester, Minnesota, Health Care Facilities Revenue
Bonds, IRS, Series H, 7.408% due 11/15/2015 (g) 3,113
Mississippi--0.9% NR* Baa2 5,360 Lowndes County, Mississippi, Hospital Revenue
Refunding Bonds (Golden Triangle Medical Center), 8.50%
due 2/01/2010 5,477
NR* Aaa 3,685 Mississippi Home Corporation, S/F Mortgage Revenue
Bonds (Access Program), AMT, Series A, 6.90% due
6/01/2024 (d) 3,770
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Nebraska--0.2% AAA Aaa $ 1,700 Nebraska Investment Finance Authority, S/F Mortgage
Revenue Bonds, RIB, AMT, Series 2, 10.415% due
9/10/2030 (d)(g) $ 1,777
Nevada--1.5% AAA Aaa 8,000 Clark County, Nevada, Airport Revenue Bonds, Sub-Lien,
Series A, 6% due 7/01/2029 (f) 8,116
BBB+ Baa1 10,000 Henderson, Nevada, Health Care Facility Revenue
Bonds (Catholic Healthcare West-Saint Rose Dominican
Hospital), 5.375% due 7/01/2026 7,805
New Jersey--7.0% BB Ba2 15,000 New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project), AMT, 6.25% due
9/15/2019 13,731
NR* Aaa 5,000 New Jersey State Transit Corporation, COP, RIB,
Series 245, 7.35% due 9/15/2014 (c)(g) 5,612
NR* Aa2 14,690 New Jersey State Transportation Trust Fund Authority,
Revenue Refunding Bonds, RIB, Series 204, 7.35% due
6/15/2015 (g) 16,406
AA Aa2 3,000 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series A, 6%
due 6/15/2019 3,093
New Jersey State Turnpike Authority, Turnpike Revenue
Refunding Bonds (f):
NR* Aaa 5,000 RIB, Series 315, 6.60% due 1/01/2018 (g) 5,146
AAA Aaa 20,000 Series A, 5.75% due 1/01/2018 20,292
Union County, New Jersey, Utilities Authority,
Senior Lease Revenue Refunding Bonds (Ogden Martin System
of Union), AMT, Series A (c):
AAA Aaa 1,805 5.375% due 6/01/2017 1,740
AAA Aaa 2,430 5.375% due 6/01/2018 2,326
AAA Aaa 2,565 5.375% due 6/01/2019 2,438
AAA Aaa 2,700 5.375% due 6/01/2020 2,556
New York--20.6% AAA Aaa 17,500 Metropolitan Transportation Authority, New York,
Commuter Facilities Revenue Refunding Bonds, Series B,
5% due 7/01/2020 (c) 15,798
AAA NR* 11,000 Metropolitan Transportation Authority, New York,
Commuter Facilities, Service Contract Revenue Refunding
Bonds, Series 8, 5.50% due 7/01/2021 (h) 10,628
Metropolitan Transportation Authority, New York,
Dedicated Tax Fund Revenue Bonds, Series A (h):
AAA Aaa 5,000 5.25% due 4/01/2023 4,666
AAA Aaa 5,000 5% due 4/01/2029 4,399
AAA Aaa 10,000 Metropolitan Transportation Authority, New York,
Transit Facilities Revenue Bonds, Series A, 5.625% due
7/01/2025 (f) 9,732
NR* Aaa 10,000 New York City, New York, City Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds,
RIB, Series 158, 6.675% due 6/15/2026 (g) 9,975
New York City, New York, City Transitional Finance
Authority Revenue Bonds, Future Tax Secured:
AA Aa3 10,915 Series A, 6% due 8/15/2029 11,118
AA Aa3 12,000 Series B, 6% due 11/15/2024 12,265
AA Aa3 5,000 Series B, 6% due 11/15/2029 5,098
AA Aa3 8,000 New York City, New York, City Transitional Finance
Authority, Revenue Refunding Bonds, Future Tax Secured,
Series C, 5.875% due 11/01/2017 8,188
New York City, New York, GO:
AAA A3 4,000 Series B, 8.25% due 6/01/2006 4,649
A- Aaa 5,495 Series F, 8.25% due 11/15/2001 (i) 5,849
New York City, New York, GO, Refunding:
A- A3 6,600 Series A, 6% due 5/15/2021 6,678
A- A3 10,000 Series A, 6.25% due 5/15/2026 10,295
A- A3 10,000 Series B, 7.75% due 2/01/2002 (i) 10,619
A- A3 4,500 Series B, 7.75% due 2/01/2002 (i) 4,778
AAA Aaa 4,000 Series C, 5.875% due 2/01/2016 (e) 4,084
AAA Aaa 15,000 Series G, 5.75% due 2/01/2014 (f) 15,313
New York State Dormitory Authority, Revenue Refunding Bonds:
AAA Aaa 10,000 (Saint Charles Hospital and Rehabilitation Center),
Series A, 5.50% due 7/01/2022 (f) 9,558
AAA Aaa 18,750 (Saint John's University), 5.25% due 7/01/2025 (f) 17,421
A A3 5,000 (State University Educational Facilities),
Series A, 7.50% due 5/15/2013 5,960
AAA Aaa 7,560 New York State Energy Research and Development
Authority, Gas Facilities Revenue Bonds (Brooklyn Union
Gas Company Project), Series A, 5.50% due 1/01/2021 (f) 7,290
AAA Aaa 5,000 New York State Local Government Assistance Corporation,
Revenue Refunding Bonds, Series B, 5% due
4/01/2021 (f) 4,504
AAA Aaa 2,700 New York State Thruway Authority, Highway and Bridge
Trust Fund Revenue Bonds, Series A, 5.875% due
4/01/2019 (h) 2,747
AAA Aaa 20,000 Port Authority of New York and New Jersey, Consolidated
Revenue Bonds, 116th Series, 4.25% due
10/01/2026 (e) 15,598
North Carolina BBB Baa3 4,000 North Carolina Eastern Municipal Power Agency, Power
--0.4% System Revenue Bonds, Series D, 6.75% due
1/01/2026 4,054
A1 VMIG1++ 100 North Carolina Medical Care Commission, Hospital
Revenue Bonds (Pooled Equipment Financing Project),
ACES, 5% due 12/01/2025 (a)(f) 100
Ohio--1.3% AAA Aaa 5,500 Ohio HFA, S/F Mortgage Revenue Bonds, AMT, RIB,
Series B, 9.01% due 3/31/2031 (d)(g) 5,761
AAA Aaa 8,000 Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Dayton Power & Light Company),
Series B, 6.40% due 8/15/2027 (f) 8,221
Pennsylvania AAA Aaa 7,000 Allegheny County, Pennsylvania, Port Authority,
--4.8% Special Transportation Revenue Bonds, 6.125% due
3/01/2029 (f) 7,182
AAA Aaa 33,000 Allegheny County, Pennsylvania, Sanitation Authority,
Sewer Revenue Bonds, 5.375% due 12/01/2024 (f) 31,220
AA+ Aa2 8,800 Pennsylvania HFA Revenue Refunding Bonds, RIB, AMT,
9.255% due 10/01/2023 (g) 9,361
AAA NR* 2,000 Pennsylvania State Higher Educational Facilities
Authority, College and University Revenue Bonds (Eastern
College), Series B, 8% due 10/15/2006 (i) 2,366
Puerto Rico--0.4% AAA Aaa 4,300 Puerto Rico Commonweath, GO, Refunding, RITR, Class R,
Series 3, 6.98% due 7/01/2016 (f)(g) 4,440
Rhode Island NR* Aa2 7,975 Rhode Island Housing and Mortgage Finance Corporation
--1.4% Revenue Bonds, RITR, AMT, Series 30, 6.47% due
4/01/2029 (g) 7,791
AAA Aaa 6,815 Rhode Island State Economic Development Corporation,
Airport Revenue Bonds, Series B, 6% due 7/01/2028 (e) 6,890
Tennessee--0.2% NR* Aaa 2,500 Robertson and Sumner Counties, Tennessee, White House
Utility District, Water Revenue Bonds, 6% due
1/01/2026 (h) 2,547
Texas--5.9% AAA Aaa 5,300 Austin, Texas, Revenue Bonds (Town Lake Community
Events Center Venue), 6.20% due 11/15/2029 (e) 5,467
BBB+ A3 18,150 Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company Project), AMT, Series A, 7.875% due
3/01/2021 18,743
BBB+ Baa1 7,250 Gulf Coast Waste Disposal Authority, Texas, Revenue
Bonds (Champion International Corporation), AMT,
7.45% due 5/01/2026 7,495
AAA Aaa 10,000 Harris County, Texas, Houston Sports Authority, Special
Revenue Bonds, Senior Lien, Series A, 5% due
11/15/2028 (f) 8,782
AAA Aaa 3,700 Houston, Texas, Water and Sewer System Revenue Bonds,
Junior Lien, Series C, 5.375% due 12/01/2027 (e) 3,455
AAA Aaa 11,440 Houston, Texas, Water and Sewer System Revenue
Refunding Bonds, Junior Lien, Series D, 5.40% due
12/01/2023 (e) 10,871
AAA Aaa 2,100 Texas State Public Finance Authority, Building
Revenue Bonds (General Services Commission Project),
Series A, 6% due 2/01/2020 (h) 2,149
AAA Aaa 4,930 Upper Trinity Regional Water District, Texas,
Water Revenue Bonds (Regional Treated Water Supply System),
Series A, 6% due 8/01/2020 (e) 5,031
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Utah--1.4% NR* NR* $ 2,000 Tooele County, Utah, PCR, Refunding (Laidlaw
Environmental), AMT, Series A, 7.55% due 7/01/2027 (j) $ 80
AAA Aaa 13,250 Weber County, Utah, Municipal Building Authority,
Lease Revenue Bonds, 7.50% due 12/15/2004 (i) 14,885
Virginia--0.7% NR* NR* 4,030 Dulles Town Center, Virginia, Community Development
Authority, Special Assessment Tax (Dulles Town
Center Project), 6.25% due 3/01/2026 3,746
NR* NR* 5,000 Peninsula Ports Authority, Virginia, Revenue
Refunding Bonds (Port Facility--Zeigler Coal), 6.90% due
5/02/2022 3,997
West Virginia NR* NR* 4,000 Upshur County, West Virginia, Solid Waste Disposal
--0.4% Revenue Bonds (TJ International Project), AMT, 7% due
7/15/2025 4,057
Wisconsin--2.1% Wisconsin Housing and EDA, Home Ownership Revenue
Refunding Bonds:
NR* Aa2 21,150 RITR, AMT, Series 18, 6.562% due 9/01/2028 (g) 20,524
AA Aaa 2,020 Series A, 7.10% due 3/01/2023 2,071
Wyoming--0.8% AAA Aaa 8,400 Sweetwater County, Wyoming, PCR, Refunding (Idaho
Power Company Project), Series A, 6.05% due
7/15/2026 (f) 8,501
Total Investments (Cost--$1,012,368)--97.2% 1,025,402
Other Assets Less Liabilities--2.8% 29,015
----------
Net Assets--100.0% $1,054,417
==========
(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, 2000.
(b)FHA Insured.
(c)AMBAC Insured.
(d)GNMA Collateralized.
(e)FGIC Insured.
(f)MBIA Insured.
(g)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, 2000.
(h)FSA Insured.
(i)Prerefunded.
(j)Non-income producing security.
*Not Rated.
++Highest short-term rating issued by Moody's Investors Service,
Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Alabama--2.7% AA Aa3 $ 7,675 Alabama State Public School and College Authority,
Capital Improvement Revenue Bonds, Series D, 5% due
8/01/2003 $ 7,736
Arizona--3.4% AA- A1 200 Central Arizona Water Conservation District, Contract
Revenue Bonds, Series B, 6.0% due 5/01/2001 (a) 207
AAA NR* 4,720 Phoenix, Arizona, Civic Improvement Corporation,
Wastewater System, Lease Revenue Bonds, 6.125% due
7/01/2003 (a) 4,984
AAA NR* 4,285 Pima County, Arizona, Unified School District Number 6,
Marana, GO, Series A, 5.75% due 7/01/2003 (a)(f) 4,443
California--3.2% SP1+ MIG1++ 5,000 Sacramento County, California, TRAN, 5% due 10/04/2001 5,037
SP1+ MIG1++ 4,000 San Diego, California, Unified School District,
TRAN, Series A, 5.25% due 10/04/2001 4,039
Connecticut Connecticut State Resource Recovery Authority, Resource
--4.0% Recovery Revenue Refunding Bonds (Bridgeport
Resco Company LP Project):
A+ A2 2,500 5.25% due 1/01/2002 2,511
A+ A2 4,000 5% due 1/01/2003 3,994
AAA Aaa 5,000 Connecticut State Special Assesment Unemployment
Compensation Advanced Fund, Refunding (Connecticut
Unemployment), Series A, 5.50% due 5/15/2001 (c) 5,046
Delaware--1.9% AAA Aaa 5,500 Delaware State, GO, Series A, 5% due 4/01/2002 5,539
Florida--2.2% AAA Aaa 6,200 Dade County, Florida, GO, Seaport Bonds, 6.50%
due 10/01/2001 (a)(c) 6,418
Hawaii--2.4% AAA Aaa 3,200 Hawaii State, GO, Refunding, Series CO, 6% due 3/01/2001 (f) 3,233
AAA Aaa 3,585 Hawaii State, GO, Series CT, 5.25% due 9/01/2003 (e) 3,636
Illinois--13.8% AAA Aaa 1,790 Chicago, Illinois, GO, Series C, 6.25% due 10/31/2001 (d) 1,829
AAA Aaa 5,000 Chicago, Illinois, Public Building, Commerce Building
Revenue Bonds, Series C, 5.125% due 2/01/2003 (f) 5,041
AAA Aaa 5,000 Chicago, Illinois, Public Building Commission, Building
Revenue Bonds, Series C, 5.125% due 2/01/2004 (f) 5,049
AAA Aaa 12,000 Cook County, Illinois, GO, Series A, 6.60% due
11/15/2002 (a)(d) 12,726
BBB Ba1 4,625 Illinois Development Finance Authority, Solid Waste
Disposal Revenue Bonds (Waste Management Inc.
Project), AMT, 7.125% due 1/01/2001 4,637
Illinois State, GO:
AA Aa2 3,500 4% due 3/01/2002 3,439
AA Aa2 7,100 4% due 3/01/2003 6,876
Indiana--3.0% AAA Aaa 3,000 Indianapolis, Indiana, Airport Authority, Revenue
Refunding Bonds, AMT, Series A, 4.50% due 7/01/2001 (f) 2,999
AA NR* 5,790 Richmond, Indiana, Hospital Authority, Revenue
Refunding Bonds (Reid Hospital and Health Care), VRDN,
4.35% due 1/01/2002 (b) 5,665
Kansas--3.8% A1 VMIG1++ 3,500 Burlington, Kansas, Environmental Improvement Revenue
Refunding Bonds (Kansas City Power and Light
Company Project), VRDN, Series D, 4.35% due 9/01/2001 (b) 3,447
Kansas State Development Finance Authority Revenue
Bonds, Board of Regents (Rehabilitation Center),
Series G-2:
AAA Aaa 4,000 5% due 10/01/2001 (c) 4,027
AAA Aaa 3,250 5.50% due 10/01/2002 (c) 3,310
Kentucky--3.7% AAA Aaa 5,000 Carrollton and Henderson, Kentucky, Public Energy
Authority, Gas Revenue Bonds (Kentucky Trust), Series A,
4.50% due 1/01/2002 (e) 4,904
Kentucky Asset/Liability Commission, General Fund
Revenue Bonds, Project Notes, First Series:
AA- Aa3 2,900 4% due 3/01/2001 2,888
AA- Aa3 3,000 4% due 3/01/2002 2,947
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Maryland--0.7% NR* Aa2 $ 2,000 Maryland State Community Development Administration,
Department of Housing and Community
Development Revenue Refunding Bonds, S/F Program, First
Series, 4.45% due 4/01/2001 (h) $ 2,000
Massachusetts NR* A1 255 Boston, Massachusetts, Economic Development and
--3.4% Industrial Corporation Revenue Bonds, Series A, 5% due
7/01/2000 255
AAA Aaa 170 Massachusetts Education Loan Authority, Education Loan
Revenue Refunding Bonds, AMT, Issue E, Series B,
5.50% due 7/01/2001 (c) 171
AA- Aa2 750 Massachusetts State, GO, Refunding, Series B, 6.25%
due 8/01/2001 764
AAA Aaa 3,500 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Newton-Wellesley Hospital),
Series D, 6.90% due 7/01/2001 (a)(d) 3,652
Massachusetts State Industrial Finance Agency,
Resource Recovery Revenue Refunding Bonds (Ogden
Haverhill Associates), Series A:
BBB NR* 1,750 4.35% due 12/01/2000 1,746
BBB NR* 2,925 4.50% due 12/01/2001 2,894
AA Aa2 300 Massachusetts State Special Obligation Revenue Bonds,
Series A, 5.90% due 6/01/2001 (c) 304
AA Aa1 100 Peabody, Massachusetts, GO, Series A, 4.50% due 8/01/2000 100
Michigan--2.7% AAA Aaa 105 Chelsea, Michigan, School District, GO, 6.75% due 5/01/2002 (f) 109
AAA Aaa 250 Dearborn, Michigan, Economic Development Corporation,
Hospital Revenue Bonds (Oakwood Obligated Group),
Series A, 6.95% due 8/15/2001 (a)(d) 262
Detroit, Michigan, GO, Refunding, Distributable State Aid:
AAA Aaa 200 5.70% due 5/01/2001 (c) 202
A- Baa1 6,585 Series B, 6.25% due 4/01/2001 6,659
AA+ Aa2 450 Michigan Municipal Bond Authority, Revenue Refunding
Bonds (Local Government-Qualified School), Series A,
6% due 5/01/2001 456
NR* Aaa 100 Michigan State Hospital Finance Authority Revenue Bonds
(McLaren Obligated Group), Series A, 7.50% due
9/15/2001 (a) 105
Minnesota--2.5% AAA Aaa 2,025 Metropolitan Council, Minnesota, Minneapolis-Saint Paul
Metropolitan Area Transit, GO, Series A, 5% due
2/01/2003 2,041
A1+ VMIG1++ 5,000 Minnesota State HFA, S/F Mortgage Revenue Bonds,
Series I, 3.90% due 8/29/2000 4,993
Mississippi--2.5% NR* Baa2 7,200 Lawrence County, Mississippi, PCR (Georgia-Pacific
Corporation Project), 4.30% due 12/01/2000 7,185
Nebraska--0.9% AAA Aaa 2,575 American Public Energy Agency, Nebraska, Gas Supply
Revenue Bonds (Nebraska Public Gas Agency Project),
Series A, 4.50% due 6/01/2002 (c) 2,544
New Hampshire BBB+ A3 7,500 New Hampshire State Business Finance Authority, PCR,
--2.6% Refunding (UTD Illuminating), VRDN, AMT, Series A,
4.35% due 2/01/2002 (b) 7,330
New Jersey--3.2% AAA Aaa 300 New Jersey State Educational Facilities Authority
Revenue Bonds (Princeton University), Series E, 4.05% due
7/01/2000 300
AA+ Aa1 4,900 New Jersey State, GO, Refunding, Series D, 5.40% due 2/15/2003 4,984
AA Aa2 3,900 New Jersey State Transportation Trust Fund Authority,
Transportation System Revenue Bonds, Series B, 4.75%
due 6/15/2002 3,909
AAA Aaa 125 Somerset County, New Jersey, GO, 5.875% due 12/01/2001 127
New Mexico--0.7% AA Aa3 2,000 Albuquerque, New Mexico, Joint Water and Sewer System
Revenue Refunding Bonds, Series A, 4.40% due
7/01/2003 1,973
New York--8.8% New York City, New York, GO, Refunding:
A- Aaa 60 Series A, 6% due 8/01/2000 (g) 60
A- A3 3,200 Series G, 4.30% due 8/01/2002 3,168
A- Aaa 4,615 New York City, New York, GO, Series C, Sub-Series C-1,
7.5% due 8/01/2002 (a) 4,946
New York State Local Government Assistance Corporation
Revenue Bonds (a):
AA- Aaa 625 Series A, 7% due 4/01/2001 650
AAA Aaa 600 Series D, 7% due 4/01/2002 636
NR* Aaa 725 New York State Medical Care Facilities Finance
Agency Revenue Bonds, 7.75% due 2/15/2001 (a) 754
AA- Aa3 5,305 New York State Power Authority Revenue and General
Purpose Refunding Bonds, Series A, 5% due 2/15/2002 5,338
New York State Urban Development Corporation Revenue Bonds:
A Aaa 5,000 7.50% due 4/01/2001 (a) 5,214
A Baa1 4,525 (Correctional Capital Facilities), Series 4, 4.90%
due 1/01/2001 4,531
Ohio--6.0% AAA Aaa 2,500 Cincinnati, Ohio, City School District, GO, TAN, 5.50%
due 12/01/2003 (c) 2,553
SP1+ NR* 4,650 Cleveland, Ohio, State University, General Receipt
Revenue Notes, BAN, Series B, 3.85% due 1/16/2001 4,638
AAA Aaa 6,990 Columbus, Ohio, GO, Series 2, 5% due 6/15/2002 7,044
AAA Aaa 3,135 Kent State University, Ohio, University Revenue Bonds,
VRDN, Series B, 4.15% due 5/01/2001 (b)(c) 3,109
Oregon--1.6% AA+ Aa2 4,815 Tri-County, Oregon, Metropolitan Transportation
District, GO, Refunding (Light Rail Extension), Series A, 4%
due 7/01/2003 4,677
Pennsylvania--1.4% NR* MIG1++ 4,000 North Wales, Pennsylvania, Water Authority Revenue
Bonds (Rural Water Projects), 5.125% due 9/01/2001 4,012
South Carolina AA+ Aa1 5,855 Charleston County, South Carolina, School District,
--3.2% GO, Refunding, 4% due 2/01/2003 5,709
AAA Aaa 3,435 South Carolina State Public Service Authority Revenue
Refunding Bonds, Series B, 7% due 7/01/2001 (a) 3,589
Texas--6.0% A1+ NR* 2,500 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Refunding Bonds
(Methodist Hospital), VRDN, 4.60% due 12/01/2025 (b) 2,500
AA- Aa3 7,000 Houston, Texas, GO, Refunding, Series C, 5.80%
due 3/01/2002 7,128
AAA Aaa 3,925 Houston, Texas Independent School District, GO,
6.375% due 8/15/2001 (g) 4,010
AA Aa1 3,600 Texas State University System Revenue Bonds
(Constitutional Appropriation), 4.75% due 8/15/2001 3,613
Virginia--1.1% AA A1 3,330 Richmond, Virginia, GO, Equipment Notes, 4.25% due 5/15/2002 3,298
Washington--2.6% AAA Aaa 5,000 Seattle, Washington, Municipality of Metropolitan Seattle
Sewer Revenue Bonds, Series U, 6.60% due
1/01/2001 (a)(f) 5,153
AA- Aa1 2,275 Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project Number 3),
Series A, 5% due 7/01/2003 2,284
Wisconsin--2.0% AAA NR* 5,720 Wisconsin State Health and Educational Facilities
Authority Revenue Bonds (Medical College of Wisconsin
Inc. Project), Series D, 7.35% due 12/01/2000 (a) 5,875
Total Investments (Cost--$277,796)--96.0% 276,161
Other Assets Less Liabilities--4.0% 11,400
----------
Net Assets--100.0% $ 287,561
==========
(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, 2000.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FGIC Insured.
(g)Escrowed to maturity.
(h)FHA Insured.
*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, 2000
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Limited
Insured National Maturity
As of June 30, 2000 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Assets: Investments, at value* $1,350,970,423 $1,025,401,901 $ 276,161,366
Cash 9,022 81,147 18,875
Receivables:
Interest 20,005,951 18,196,678 4,553,241
Securities sold 2,020,408 13,253,942 16,594,539
Capital shares sold 451,855 359,932 230,007
Prepaid registration fees and other assets 787,564 107,260 61,249
-------------- -------------- --------------
Total assets 1,374,245,223 1,057,400,860 297,619,277
-------------- -------------- --------------
Liabilities: Payables:
Securities purchased 8,128,234 -- 9,062,540
Capital shares redeemed 3,304,916 1,182,219 654,413
Dividends to shareholders 1,143,567 948,908 179,392
Investment adviser 383,110 386,347 76,489
Distributor 214,172 208,582 14,486
Accrued expenses and other liabilities 314,828 257,375 70,774
-------------- -------------- --------------
Total liabilities 13,488,827 2,983,431 10,058,094
-------------- -------------- --------------
Net Assets: Net assets $1,360,756,396 $1,054,417,429 $ 287,561,183
============== ============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 13,206,324 $ 7,033,574 $ 2,185,931
Consist of: Class B Common Stock, $.10 par value++++ 3,752,967 2,627,205 332,181
Class C Common Stock, $.10 par value++++++ 174,672 312,207 3,140
Class D Common Stock, $.10 par value++++++++ 1,349,227 893,081 396,454
Paid-in capital in excess of par 1,382,834,154 1,103,341,153 288,531,042
Accumulated realized capital losses on
investments--net (56,788,346) (72,227,639) (1,948,422)
Accumulated distributions in excess of
realized capital gains on investments--net (22,021,059) (596,027) (304,677)
Unrealized appreciation (depreciation)
on investments--net 38,248,457 13,033,875 (1,634,466)
-------------- -------------- --------------
Net assets $1,360,756,396 $1,054,417,429 $ 287,561,183
============== ============== ==============
Net Asset Class A:
Value: Net assets $ 972,420,120 $ 682,552,989 $ 215,420,997
============== ============== ==============
Shares outstanding 132,063,243 70,335,737 21,859,312
============== ============== ==============
Net asset value and redemption price
per share $ 7.36 $ 9.70 $ 9.85
============== ============== ==============
Class B:
Net assets $ 276,154,551 $ 254,859,798 $ 32,741,774
============== ============== ==============
Shares outstanding 37,529,673 26,272,045 3,321,807
============== ============== ==============
Net asset value and redemption price
per share $ 7.36 $ 9.70 $ 9.86
============== ============== ==============
Class C:
Net assets $ 12,855,886 $ 30,303,121 $ 308,337
============== ============== ==============
Shares outstanding 1,746,718 3,122,069 31,399
============== ============== ==============
Net asset value and redemption price
per share $ 7.36 $ 9.71 $ 9.82
============== ============== ==============
Class D:
Net assets $ 99,325,839 $ 86,701,521 $ 39,090,075
============== ============== ==============
Shares outstanding 13,492,271 8,930,814 3,964,538
============== ============== ==============
Net asset value and redemption
price per share $ 7.36 $ 9.71 $ 9.86
============== ============== ==============
*Identified cost $1,312,721,966 $1,012,368,026 $ 277,795,832
============== ============== ==============
++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.
<CAPTION>
STATEMENTS OF OPERATIONS
Limited
Insured National Maturity
For the Year Ended June 30, 2000 Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C>
Investment Interest and amortization of premium
Income: and discount earned $ 87,267,065 $ 75,343,042 $ 14,514,093
-------------- -------------- --------------
Expenses: Investment advisory fees 5,507,883 5,692,201 1,145,746
Account maintenance and distribution
fees--Class B 2,511,198 2,293,643 140,192
Transfer agent fees--Class A 293,769 269,416 48,877
Account maintenance fees--Class D 231,832 227,525 64,944
Account maintenance and distribution
fees--Class C 114,185 308,907 1,777
Accounting services 222,800 173,375 20,681
Custodian fees 134,548 111,068 35,547
Transfer agent fees--Class B 121,645 137,745 11,368
Professional fees 65,071 119,903 8,505
Printing and shareholder reports 52,109 51,464 44,441
Registration fees 39,596 52,689 33,487
Transfer agent fees--Class D 25,237 32,217 13,246
Pricing services 25,268 16,422 11,859
Directors' fees and expenses 20,517 16,098 7,638
Transfer agent fees--Class C 5,109 16,964 166
Other 52,648 42,645 5,692
-------------- -------------- --------------
Total expenses 9,423,415 9,562,282 1,594,166
-------------- -------------- --------------
Investment income--net 77,843,650 65,780,760 12,919,927
-------------- -------------- --------------
Realized & Realized loss on investments--net (78,541,901) (62,192,724) (385,160)
Unrealized Gain Change in unrealized appreciation/
(Loss) on depreciation on investments--net 7,805,843 (8,162,695) (1,879,787)
Investments--Net: -------------- -------------- --------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 7,107,592 $ (4,574,659) $ 10,654,980
============== ============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<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: 2000 1999 2000 1999
<S> <S> <C> <C> <C> <C>
Operations: Investment income--net $ 77,843,650 $ 90,946,268 $ 65,780,760 $ 74,353,391
Realized gain (loss) on
investments--net (78,541,901) 27,181,029 (62,192,724) 9,433,376
Change in unrealized
appreciation/depreciation on
investments--net 7,805,843 (87,414,180) (8,162,695) (66,961,746)
-------------- -------------- -------------- --------------
Net increase (decrease) in net
assets resulting from
operations 7,107,592 30,713,117 (4,574,659) 16,825,021
-------------- -------------- -------------- --------------
Dividends & Investment income--net:
Distributions to Class A (57,133,564) (66,779,244) (43,599,153) (49,579,905)
Shareholders: Class B (15,325,442) (20,438,753) (15,259,347) (18,305,554)
Class C (646,631) (699,230) (1,906,874) (2,146,172)
Class D (4,738,013) (3,029,041) (5,015,386) (4,321,760)
Realized gain on investments--net:
Class A -- (30,333,680) -- --
Class B -- (11,021,698) -- --
Class C -- (405,758) -- --
Class D -- (1,454,294) -- --
In excess of realized gain on
investments--net:
Class A (15,607,942) -- -- (375,628)
Class B (4,878,687) -- -- (165,207)
Class C (207,962) -- -- (19,432)
Class D (1,326,468) -- -- (35,760)
-------------- -------------- -------------- --------------
Net decrease in net assets
resulting from dividends and
distributions to shareholders (99,864,709) (134,161,698) (65,780,760) (74,949,418)
-------------- -------------- -------------- --------------
Capital Share Net decrease in net assets
Transactions: derived from capital share
transactions (275,055,198) (106,960,336) (268,812,275) (29,277,945)
-------------- -------------- -------------- --------------
Net Assets: Total decrease in net assets (367,812,315) (210,408,917) (339,167,694) (87,402,342)
Beginning of year 1,728,568,711 1,938,977,628 1,393,585,123 1,480,987,465
-------------- -------------- -------------- --------------
End of year $1,360,756,396 $1,728,568,711 $1,054,417,429 $1,393,585,123
============== ============== ============== ==============
See Notes to Financial Statements.
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Limited Maturity Portfolio
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 12,919,927 $ 14,976,944
Realized gain (loss) on
investments--net (385,160) 507,908
Change in unrealized
appreciation/depreciation on
investments--net (1,879,787) (2,207,796)
-------------- --------------
Net increase (decrease) in net
assets resulting from
operations 10,654,980 13,277,056
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (9,083,280) (10,528,513)
Shareholders: Class B (1,394,083) (1,537,329)
Class C (17,620) (10,535)
Class D (2,424,944) (2,900,567)
Realized gain on investments--net:
Class A -- --
Class B -- --
Class C -- --
Class D -- --
In excess of realized gain on
investments--net:
Class A -- (211,240)
Class B -- (35,110)
Class C -- (281)
Class D -- (58,046)
-------------- --------------
Net decrease in net assets
resulting from dividends and
distributions to shareholders (12,919,927) (15,281,621)
-------------- --------------
Capital Share Net decrease in net assets
Transactions: derived from capital share
transactions (98,688,194) (18,483,783)
-------------- --------------
Net Assets: Total decrease in net assets (100,953,141) (20,488,348)
Beginning of year 388,514,324 409,002,672
-------------- --------------
End of year $ 287,561,183 $ 388,514,324
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Insured Portfolio
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.79 $ 8.25 $ 8.06 $ 7.91 $ 7.92
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .40 .41 .43 .45 .44
Realized and unrealized
gain (loss) on
investments--net (.32) (.27) .20 .15 (.01)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .08 .14 .63 .60 .43
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.40) (.41) (.43) (.45) (.44)
Realized gain on
investments--net -- (.19) (.01) -- --
In excess of realized
gain in investments--net (.11) -- -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.51) (.60) (.44) (.45) (.44)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 7.36 $ 7.79 $ 8.25 $ 8.06 $ 7.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share 1.21% 1.56% 8.05% 7.72% 5.51%
============= ============= ============= ============= =============
Ratios to Average Expenses .43% .42% .42% .44% .43%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 5.33% 5.02% 5.29% 5.58% 5.55%
============= ============= ============= ============= =============
Supplemental Net assets,
Data: end of year
(in thousands) $ 972,420 $ 1,216,346 $ 1,377,025 $ 1,441,785 $ 1,572,835
============= ============= ============= ============= =============
Portfolio turnover 94.08% 86.35% 102.89% 74.40% 78.49%
============= ============= ============= ============= =============
<CAPTION>
Insured Portfolio
The following per share data and ratios have been derived Class B
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.78 $ 8.24 $ 8.05 $ 7.91 $ 7.92
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .34 .35 .37 .39 .38
Realized and unrealized
gain (loss) on
investments--net (.31) (.27) .20 .14 (.01)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .03 .08 .57 .53 .37
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.34) (.35) (.37) (.39) (.38)
Realized gain on
investments--net -- (.19) (.01) -- --
In excess of realized
gain in investments--net (.11) -- -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.45) (.54) (.38) (.39) (.38)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 7.36 $ 7.78 $ 8.24 $ 8.05 $ 7.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share .57% .79% 7.24% 6.78% 4.71%
============= ============= ============= ============= =============
Ratios to Average Expenses 1.19% 1.18% 1.18% 1.19% 1.19%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 4.56% 4.26% 4.53% 4.82% 4.80%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 276,154 $ 414,135 $ 498,624 $ 560,105 $ 723,090
============= ============= ============= ============= =============
Portfolio turnover 94.08% 86.35% 102.89% 74.40% 78.49%
============= ============= ============= ============= =============
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
Insured Portfolio
The following per share data and ratios have been derived Class C
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.78 $ 8.24 $ 8.06 $ 7.91 $ 7.92
Performance: ------------- ------------- ------------- ------------- ------------
Investment income--net .34 .34 .37 .38 .38
Realized and unrealized
gain (loss) on
investments--net (.31) (.27) .19 .15 (.01)
------------- ------------- ------------- ------------- ------------
Total from investment
operations .03 .07 .56 .53 .37
------------- ------------- ------------- ------------- ------------
Less dividends and
distributions:
Investment income--net (.34) (.34) (.37) (.38) (.38)
Realized gain on
investments--net -- (.19) (.01) -- --
In excess of realized
gain in investments--net (.11) -- -- -- --
------------- ------------- ------------- ------------- ------------
Total dividends and
distributions (.45) (.53) (.38) (.38) (.38)
------------- ------------- ------------- ------------- ------------
Net asset value,
end of year $ 7.36 $ 7.78 $ 8.24 $ 8.06 $ 7.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share .52% .74% 7.05% 6.86% 4.65%
============= ============= ============= ============= =============
Ratios to Average Expenses 1.24% 1.23% 1.23% 1.25% 1.24%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 4.52% 4.21% 4.48% 4.77% 4.75%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 12,856 $ 16,850 $ 14,623 $ 11,922 $ 18,936
============= ============= ============= ============= =============
Portfolio turnover 94.08% 86.35% 102.89% 74.40% 78.49%
============= ============= ============= ============= =============
<CAPTION>
Insured Portfolio
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.79 $ 8.24 $ 8.06 $ 7.91 $ 7.92
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .38 .39 .41 .43 .42
Realized and unrealized
gain (loss) on
investments--net (.32) (.26) .19 .15 (.01)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .06 .13 .60 .58 .41
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.38) (.39) (.41) (.43) (.42)
Realized gain on
investments--net -- (.19) (.01) -- --
In excess of realized
gain in investments--net (.11) -- -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.49) (.58) (.42) (.43) (.42)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 7.36 $ 7.79 $ 8.24 $ 8.06 $ 7.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share .96% 1.43% 7.65% 7.46% 5.25%
============= ============= ============= ============= =============
Ratios to Average Expenses .68% .67% .67% .69% .68%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 5.10% 4.77% 5.03% 5.33% 5.31%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 99,326 $ 81,238 $ 48,706 $ 38,422 $ 51,772
============= ============= ============= ============= =============
Portfolio turnover 94.08% 86.35% 102.89% 74.40% 78.49%
============= ============= ============= ============= =============
<CAPTION>
National Portfolio
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.22 $ 10.64 $ 10.38 $ 10.11 $ 10.02
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .56 .56 .59 .60 .60
Realized and unrealized
gain (loss) on
investments--net (.52) (.42) .26 .27 .09
------------- ------------- ------------- ------------- -------------
Total from investment
operations .04 .14 .85 .87 .69
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.56) (.56) (.59) (.60) (.60)
In excess of realized
gain on investments--net -- --++ -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.56) (.56) (.59) (.60) (.60)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.70 $ 10.22 $ 10.64 $ 10.38 $ 10.11
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share .58% 1.28% 8.36% 8.84% 6.98%
============= ============= ============= ============= =============
Ratios to Average Expenses .56% .55% .55% .55% .56%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 5.74% 5.26% 5.58% 5.86% 5.89%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 682,553 $ 877,841 $ 964,940 $ 983,650 $ 983,550
============= ============= ============= ============= =============
Portfolio turnover 108.43% 125.75% 142.02% 99.52% 95.09%
============= ============= ============= ============= =============
<CAPTION>
National Portfolio
The following per share data and ratios have been derived Class B
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.21 $ 10.63 $ 10.37 $ 10.11 $ 10.02
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .49 .48 .51 .52 .52
Realized and unrealized
gain (loss) on
investments--net (.51) (.42) .26 .26 .09
------------- ------------- ------------- ------------- -------------
Total from investment
operations (.02) .06 .77 .78 .61
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.49) (.48) (.51) (.52) (.52)
In excess of realized
gain on investments--net -- --++ -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.49) (.48) (.51) (.52) (.52)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.70 $ 10.21 $ 10.63 $ 10.37 $ 10.11
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share (.09%) .51% 7.55% 7.92% 6.17%
============= ============= ============= ============= =============
Ratios to Average Expenses 1.32% 1.31% 1.31% 1.31% 1.32%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 4.98% 4.50% 4.82% 5.10% 5.13%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 254,860 $ 374,642 $ 406,798 $ 415,103 $ 399,341
============= ============= ============= ============= =============
Portfolio turnover 108.43% 125.75% 142.02% 99.52% 95.09%
============= ============= ============= ============= =============
*Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
<CAPTION>
National Portfolio
The following per share data and ratios have been derived Class C
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.22 $ 10.64 $ 10.38 $ 10.11 $ 10.03
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .48 .47 .50 .52 .52
Realized and unrealized
gain (loss) on
investments--net (.51) (.42) .26 .27 .08
------------- ------------- ------------- ------------- -------------
Total from investment
operations (.03) .05 .76 .79 .60
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.48) (.47) (.50) (.52) (.52)
In excess of realized
gain on investments--net -- --++ -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.48) (.47) (.50) (.52) (.52)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.71 $ 10.22 $ 10.64 $ 10.38 $ 10.11
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share (.13%) .47% 7.49% 7.97% 6.01%
============= ============= ============= ============= =============
Ratios to Average Expenses 1.37% 1.36% 1.36% 1.36% 1.37%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 4.92% 4.45% 4.76% 5.04% 5.08%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 30,303 $ 47,901 $ 41,087 $ 28,096 $ 13,291
============= ============= ============= ============= =============
Portfolio turnover 108.43% 125.75% 142.02% 99.52% 95.09%
============= ============= ============= ============= =============
<CAPTION>
National Portfolio
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 10.22 $ 10.64 $ 10.39 $ 10.12 $ 10.03
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .54 .53 .56 .58 .57
Realized and unrealized
gain (loss) on
investments--net (.51) (.42) .25 .27 .09
------------- ------------- ------------- ------------- -------------
Total from investment
operations .03 .11 .81 .85 .66
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.54) (.53) (.56) (.58) (.57)
In excess of realized
gain on investments--net -- --++ -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.54) (.53) (.56) (.58) (.57)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.71 $ 10.22 $ 10.64 $ 10.39 $ 10.12
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share .43% 1.03% 7.99% 8.57% 6.71%
============= ============= ============= ============= =============
Ratios to Average Expenses .81% .81% .80% .80% .81%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 5.50% 5.01% 5.32% 5.60% 5.64%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 86,701 $ 93,201 $ 68,162 $ 51,038 $ 43,884
============= ============= ============= ============= =============
Portfolio turnover 108.43% 125.75% 142.02% 99.52% 95.09%
============= ============= ============= ============= =============
<CAPTION>
Limited Maturity Portfolio
Class A
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.91 $ 9.96 $ 9.93 $ 9.91 $ 9.92
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .38 .37 .39 .39 .38
Realized and unrealized
gain (loss) on
investments--net (.06) (.04) .03 .04 (.01)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .32 .33 .42 .43 .37
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.38) (.37) (.39) (.39) (.38)
Realized gain on
investments--net -- -- -- (.02) --
In excess of realized
gain on investments--net -- (.01) -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.38) (.38) (.39) (.41) (.38)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.85 $ 9.91 $ 9.96 $ 9.93 $ 9.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share 3.31% 3.37% 4.26% 4.40% 3.75%
============= ============= ============= ============= =============
Ratios to Average Expenses .40% .43% .43% .39% .44%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 3.83% 3.75% 3.88% 3.93% 3.83%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 215,421 $ 261,970 $ 295,641 $ 343,641 $ 417,097
============= ============= ============= ============= =============
Portfolio turnover 51.42% 40.28% 72.69% 61.90% 88.32%
============= ============= ============= ============= =============
*Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Limited Maturity Portfolio
Class B
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.92 $ 9.97 $ 9.94 $ 9.91 $ 9.92
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .35 .34 .35 .36 .35
Realized and unrealized
gain (loss) on
investments--net (.06) (.04) .03 .05 (.01)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .29 .30 .38 .41 .34
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.35) (.34) (.35) (.36) (.35)
Realized gain on
investments--net -- -- -- (.02) --
In excess of realized
gain on investments--net -- (.01) -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.35) (.35) (.35) (.38) (.35)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.86 $ 9.92 $ 9.97 $ 9.94 $ 9.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return:* value per share 2.94% 3.01% 3.89% 4.13% 3.37%
============= ============= ============= ============= =============
Ratios to Average Expenses .76% .78% .78% .75% .80%
Net Assets: ============= ============= ============= ============= =============
Investment
income--net 3.47% 3.39% 3.43% 3.58% 3.46%
============= ============= ============= ============= =============
Supplemental Net assets, end
Data: of year
(in thousands) $ 32,742 $ 42,930 $ 44,714 $ 54,275 $ 71,075
============= ============= ============= ============= =============
Portfolio
turnover 51.42% 40.28% 72.69% 61.90% 88.32%
============= ============= ============= ============= =============
<CAPTION>
Limited Maturity Portfolio
Class C
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.88 $ 9.94 $ 9.91 $ 9.88 $ 9.92
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .34 .34 .35 .35 .34
Realized and
unrealized gain (loss)
on investments--net (.06) (.05) .03 .05 (.04)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .28 .29 .38 .40 .30
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.34) (.34) (.35) (.35) (.34)
Realized gain on
investments--net -- -- -- (.02) --
In excess of realized
gain on investments--net -- (.01) -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.34) (.35) (.35) (.37) (.34)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.82 $ 9.88 $ 9.94 $ 9.91 $ 9.88
============= ============= ============= ============= =============
Total Investment Based on net asset
Return*: value per share 2.93% 2.89% 3.88% 4.11% 2.97%
============= ============= ============= ============= =============
Ratios to Average Expenses .76% .79% .79% .75% .80%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 3.46% 3.37% 4.27% 3.57% 3.41%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 308 $ 437 $ 86 $ 108 $ 94
============= ============= ============= ============= =============
Portfolio turnover 51.42% 40.28% 72.69% 61.90% 88.32%
============= ============= ============= ============= =============
<CAPTION>
Limited Maturity Portfolio
Class D
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.92 $ 9.97 $ 9.94 $ 9.91 $ 9.93
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .37 .37 .38 .38 .37
Realized and unrealized
gain (loss) on
investments--net (.06) (.04) .03 .05 (.02)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .31 .33 .41 .43 .35
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.37) (.37) (.38) (.38) (.37)
Realized gain on
investments--net -- -- -- (.02) --
In excess of realized
gain on investments--net -- (.01) -- -- --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.37) (.38) (.38) (.40) (.37)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of year $ 9.86 $ 9.92 $ 9.97 $ 9.94 $ 9.91
============= ============= ============= ============= =============
Total Investment Based on net asset
Return*: value per share 3.20% 3.27% 4.16% 4.40% 3.55%
============= ============= ============= ============= =============
Ratios to Average Expenses .50% .53% .54% .48% .54%
Net Assets: ============= ============= ============= ============= =============
Investment income--net 3.72% 3.65% 3.89% 3.84% 3.71%
============= ============= ============= ============= =============
Supplemental Net assets, end of
Data: year (in thousands) $ 39,090 $ 83,177 $ 68,562 $ 20,383 $ 15,886
============= ============= ============= ============= =============
Portfolio turnover 51.42% 40.28% 72.69% 61.90% 88.32%
============= ============= ============= ============= =============
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
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 financial statements are
prepared in accordance with accounting principles generally accepted
in the United States of America, which may require the use of
management accruals and estimates. 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
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 FAM Distributors, Inc. ("FAMD"
or the "Distributor"), 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 Incorporated ("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, 2000, FAMD 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:
FAMD $10,183 $ 6,460 $ 862
MLPF&S 74,788 50,441 5,650
Class D Shares:
FAMD $ 3,188 $ 3,415 $ 343
MLPF&S 28,397 32,454 5,383
For the year ended June 30, 2000, MLPF&S received contingent
deferred sales charges of $966,992 relating to transactions in Class
B Shares, amounting to $403,468, $540,744 and $22,780 in the
Insured, National and Limited Maturity Portfolios, respectively, and
$28,148 relating to transactions in Class C Shares, amounting to
$2,183, $24,262 and $1,703 in the Insured, National and Limited
Maturity Portfolios, respectively. Furthermore, MLPF&S received
contingent deferred sales charges of $843 relating to transactions
subject to front-end sales charge waivers in Class A Shares in the
Limited Maturity Portfolio and $1,439 relating to transactions
subject to front-end sales charge waivers in Class D Shares,
amounting to $1,009 and $430 in the National and Limited Maturity
Portfolios, respectively.
Financial Data Services, Inc. ("FDS"), 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, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 2000 were as follows:
Purchases Sales
Insured Portfolio $1,332,360,477 $1,522,057,134
National Portfolio 1,222,380,547 1,427,945,566
Limited Maturity Portfolio 156,513,327 253,537,057
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
Net realized gains (losses) for the year ended June 30, 2000 and net
unrealized gains (losses) as of June 30, 2000 were as follows:
Realized Unrealized
Insured Portfolio Losses Gains
Long-term investments $ (74,296,651) $ 38,248,457
Financial futures contracts (4,245,250) --
-------------- --------------
Total $ (78,541,901) $ 38,248,457
============== ==============
Realized Unrealized
National Portfolio Gains (Losses) Gains
Long-term investments $ (62,235,037) $ 13,033,875
Financial futures contracts 42,313 --
-------------- --------------
Total $ (62,192,724) $ 13,033,875
============== ==============
Realized Unrealized
Limited Maturity Portfolio Losses Losses
Long-term investments $ (385,160) $ (1,634,466)
-------------- --------------
Total $ (385,160) $ (1,634,466)
============== ==============
As of June 30, 2000 net unrealized appreciation/depreciation for
Federal income tax purposes were as follows:
Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
Insured Portfolio $42,444,441 $ (4,195,984) $38,248,457
National Portfolio 35,716,606 (22,682,731) 13,033,875
Limited Maturity
Portfolio 250,611 (1,885,077) (1,634,466)
The aggregate cost of investments at June 30, 2000 for Federal
income tax purposes was $1,312,721,966 for the Insured Portfolio,
$1,012,368,026 for the National Portfolio, and $277,795,832 for the
Limited Maturity Portfolio.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
for the years ended June 30, 2000 and June 30, 1999 were
$(275,055,198) and $(106,960,336), respectively, for the Insured
Portfolio; $(268,812,275) and $(29,277,945), respectively, for the
National Portfolio, and $(98,688,194) and $(18,483,783),
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, 2000 Shares Amount
Shares sold 2,189,238 $ 16,064,750
Shares issued to shareholders in reinvest-
ment of dividends and distributions 4,168,354 30,616,793
-------------- --------------
Total issued 6,357,592 46,681,543
Shares redeemed (30,464,525) (225,027,241)
-------------- --------------
Net decrease (24,106,933) $ (178,345,698)
============== ==============
Insured Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 2,523,386 $ 20,682,133
Shares issued to shareholders in reinvest-
ment of dividends and distributions 5,070,798 41,426,673
-------------- --------------
Total issued 7,594,184 62,108,806
Shares redeemed (18,415,364) (150,312,025)
-------------- --------------
Net decrease (10,821,180) $ (88,203,219)
============== ==============
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 3,270,666 $ 24,137,115
Shares issued to shareholders in reinvest-
ment of dividends and distributions 1,345,927 9,877,799
-------------- --------------
Total issued 4,616,593 34,014,914
Automatic conversion of shares (5,976,596) (44,419,700)
Shares redeemed (14,317,769) (105,647,752)
-------------- --------------
Net decrease (15,677,772) $ (116,052,538)
============== ==============
Insured Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 5,641,000 $ 46,434,676
Shares issued to shareholders in reinvest-
ment of dividends and distributions 1,938,622 15,832,867
-------------- --------------
Total issued 7,579,622 62,267,543
Automatic conversion of shares (4,030,189) (32,518,388)
Shares redeemed (10,851,320) (88,606,396)
-------------- --------------
Net decrease (7,301,887) $ (58,857,241)
============== ==============
Insured Portfolio
Class C Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 460,085 $ 3,400,275
Shares issued to shareholders in reinvest-
ment of dividends and distributions 58,936 432,490
-------------- --------------
Total issued 519,021 3,832,765
Shares redeemed (936,770) (6,943,556)
-------------- --------------
Net decrease (417,749) $ (3,110,791)
============== ==============
Insured Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 1,057,672 $ 8,728,474
Shares issued to shareholders in reinvest-
ment of dividends and distributions 78,764 642,933
-------------- --------------
Total issued 1,136,436 9,371,407
Shares redeemed (746,046) (6,101,279)
-------------- --------------
Net increase 390,390 $ 3,270,128
============== ==============
Insured Portfolio
Class D Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 5,635,273 $ 41,646,584
Automatic conversion of shares 5,974,043 44,419,700
Shares issued to shareholders in reinvest-
ment of dividends and distributions 401,383 2,941,244
-------------- --------------
Total issued 12,010,699 89,007,528
Shares redeemed (8,952,192) (66,553,699)
-------------- --------------
Net increase 3,058,507 $ 22,453,829
============== ==============
Insured Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 6,472,195 $ 53,073,631
Automatic conversion of shares 4,027,297 32,518,388
Shares issued to shareholders in reinvest-
ment of dividends and distributions 284,865 2,322,184
-------------- --------------
Total issued 10,784,357 87,914,203
Shares redeemed (6,260,301) (51,084,207)
-------------- --------------
Net increase 4,524,056 $ 36,829,996
============== ==============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 2,501,422 $ 24,056,825
Shares issued to shareholders in
reinvestment of dividends 2,217,109 21,483,144
-------------- --------------
Total issued 4,718,531 45,539,969
Shares redeemed (20,297,630) (196,458,002)
-------------- --------------
Net decrease (15,579,099) $ (150,918,033)
============== ==============
National Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 5,156,566 $ 54,885,021
Shares issued to shareholders in reinvest-
ment of dividends and distributions 2,320,546 24,626,470
-------------- --------------
Total issued 7,477,112 79,511,491
Shares redeemed (12,286,769) (130,243,238)
-------------- --------------
Net decrease (4,809,657) $ (50,731,747)
============== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 3,230,018 $ 31,342,736
Shares issued to shareholders in
reinvestment of dividends 723,846 7,016,462
-------------- --------------
Total issued 3,953,864 38,359,198
Automatic conversion of shares (1,771,855) (17,264,191)
Shares redeemed (12,589,149) (121,755,396)
-------------- --------------
Net decrease (10,407,140) $ (100,660,389)
============== ==============
National Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 7,103,091 $ 75,637,764
Shares issued to shareholders in reinvest-
ment of dividends and distributions 842,039 8,936,016
-------------- --------------
Total issued 7,945,130 84,573,780
Automatic conversion of shares (1,680,490) (17,743,676)
Shares redeemed (7,846,538) (83,194,847)
-------------- --------------
Net decrease (1,581,898) $ (16,364,743)
============== ==============
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
National Portfolio
Class C Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 592,010 $ 5,777,103
Shares issued to shareholders in
reinvestment of dividends 110,217 1,068,763
-------------- --------------
Total issued 702,227 6,845,866
Shares redeemed (2,267,391) (21,908,932)
-------------- --------------
Net decrease (1,565,164) $ (15,063,066)
============== ==============
National Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 2,059,325 $ 21,920,588
Shares issued to shareholders in reinvest-
ment of dividends and distributions 114,406 1,213,929
-------------- --------------
Total issued 2,173,731 23,134,517
Shares redeemed (1,348,878) (14,247,726)
-------------- --------------
Net increase 824,853 $ 8,886,791
============== ==============
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 4,890,948 $ 47,366,022
Automatic conversion of shares 1,770,615 17,264,191
Shares issued to shareholders in
reinvestment of dividends 236,352 2,290,783
-------------- --------------
Total issued 6,897,915 66,920,996
Shares redeemed (7,085,726) (69,091,783)
-------------- --------------
Net decrease (187,811) $ (2,170,787)
============== ==============
National Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 5,435,500 $ 57,997,735
Automatic conversion of shares 1,679,382 17,743,676
Shares issued to shareholders in reinvest-
ment of dividends and distributions 200,319 2,125,076
-------------- --------------
Total issued 7,315,201 77,866,487
Shares redeemed (4,602,754) (48,934,733)
-------------- --------------
Net increase 2,712,447 $ 28,931,754
============== ==============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 1,536,138 $ 15,117,350
Shares issued to shareholders in
reinvestment of dividends 512,562 5,053,751
-------------- --------------
Total issued 2,048,700 20,171,101
Shares redeemed (6,612,955) (65,210,325)
-------------- --------------
Net decrease (4,564,255) $ (45,039,224)
============== ==============
Limited Maturity Portfolio
Class A Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 1,531,619 $ 15,316,774
Shares issued to shareholders in reinvest-
ment of dividends and distributions 600,760 6,003,286
-------------- --------------
Total issued 2,132,379 21,320,060
Shares redeemed (5,378,094) (53,754,851)
-------------- --------------
Net decrease (3,245,715) $ (32,434,791)
============== ==============
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 890,806 $ 8,796,176
Shares issued to shareholders in
resinvestment of dividends 90,275 890,200
-------------- --------------
Total issued 981,081 9,686,376
Automatic conversion of shares (20,095) (198,201)
Shares redeemed (1,968,527) (19,397,167)
-------------- --------------
Net decrease (1,007,541) $ (9,908,992)
============== ==============
Limited Maturity Portfolio
Class B Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 1,338,974 $ 13,393,753
Shares issued to shareholders in resinvest-
ment of dividends and distributions 102,051 1,019,989
-------------- --------------
Total issued 1,441,025 14,413,742
Automatic conversion of shares (4,824) (48,169)
Shares redeemed (1,593,291) (15,930,886)
-------------- --------------
Net decrease (157,090) $ (1,565,313)
=============== ==============
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 71,755 $ 707,095
Shares issued to shareholders in
reinvestment of dividends 1,301 12,780
-------------- --------------
Total issued 73,056 719,875
Shares redeemed (85,885) (844,221)
-------------- --------------
Net decrease (12,829) $ (124,346)
============== ==============
Limited Maturity Portfolio
Class C Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 63,750 $ 635,910
Shares issued to shareholders in reinvest-
ment of dividends and distributions 804 8,012
-------------- --------------
Total issued 64,554 643,922
Shares redeemed (28,985) (289,370)
-------------- --------------
Net increase 35,569 $ 354,552
============== ==============
Limited Maturity Portfolio
Class D Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 1,521,072 $ 15,017,187
Automatic conversion of shares 20,088 198,201
Shares issued to shareholders in
reinvestment of dividends 131,400 1,296,203
-------------- --------------
Total issued 1,672,560 16,511,591
Shares redeemed (6,094,726) (60,127,223)
-------------- --------------
Net decrease (4,422,166) $ (43,615,632)
============== ==============
Limited Maturity Portfolio
Class D Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 7,562,021 $ 75,656,488
Automatic conversion of shares 4,820 48,169
Shares issued to shareholders in reinvest-
ment of dividends and distributions 137,748 1,377,161
-------------- --------------
Total issued 7,704,589 77,081,818
Shares redeemed (6,196,465) (61,920,049)
-------------- --------------
Net increase 1,508,124 $ 15,161,769
============== ==============
5. Short-Term Borrowings:
On December 3, 1999, the Insured and National Portfolios, along with
certain other funds managed by FAM, entered into a one-year,
unsecured $1,000,000,000 credit agreement with The Bank of New York
and certain other institutions party thereto. The funds may borrow
money for temporary or emergency purposes to fund shareholder
redemptions. The agreement bears interest at the Federal Funds rate
plus .50%. The Insured and National Portfolios did not borrow from
the facility during the year ended June 30, 2000.
6. Capital Loss Carryforward:
At June 30, 2000, the Insured Portfolio had a net capital loss
carryforward of approximately $17,630,000, all of which expires in
2008; the National Portfolio had a net capital loss carryforward of
approximately $25,616,000, all of which expires in 2008; and the
Limited Maturity Portfolio had a net capital loss carryforward of
approximately $2,048,000, of which $1,928,000 expires in 2003 and
$120,000 expires in 2008. These amounts will be available to offset
like amounts of any future taxable gains.
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2000
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 Merrill
Lynch Municipal Bond Fund, Inc. (comprising, respectively, the
Insured, National and Limited Maturity Portfolios) as of June 30,
2000, 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 auditing standards
generally accepted in the United States of America. 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, 2000 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
each of the respective portfolios constituting the Merrill Lynch
Municipal Bond Fund, Inc. as of June 30, 2000, the results of their
operations, the changes in their net assets, and their financial
highlights for the respective stated periods in accordance with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
August 18, 2000
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, 2000 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the per share taxable
distributions paid by the Fund during the year.
Record Payable Ordinary Long-Term
Date Date Income Capital Gains
Insured Portfolio 12/21/99 12/31/99 $.000089 $.109295*
*The entire distribution is subject to the 20% tax rate.
There were no taxable distributions declared by the National or
Limited Maturity Portfolios during the year.
Please retain this information for your records.
