MUNIBOND INCOME FUND, INC.
Semi-Annual Report November 30, 1993
This report, including the financial information herein, is
transmitted to the shareholders of MuniBond Income Fund, Inc.
for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of
the Fund or any securities mentioned in the report. Past
performance results shown in this report should not be
considered a representation of future performance.
MuniBond Income Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MUNIBOND INCOME FUND, INC.
Officers and Directors
Arthur Zeikel, President and Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
The Bank of New York
101 Barclay Street
New York, New York 10286
NYSE Symbol
MBD
<PAGE>
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report
for MuniBond Income Fund, Inc. In this and future shareholder
reports, we will highlight the Fund's performance, describe
recent investment activities, and examine some of the important
market developments that helped shape our investment strategy
during the period under review.
MuniBond Income Fund, Inc. seeks to provide shareholders with as
high a level of current income exempt from Federal income taxes
as is consistent with its investment policies and prudent investment
management. The Fund also seeks to achieve its investment objective
by investing primarily in a portfolio of medium- to lower-grade or
unrated municipal obligations, the interest on which is exempt from
Federal income taxes.
Since inception (October 29, 1993) through November 30, 1993,
MuniBond Income Fund, Inc.'s total investment return was -0.56%,
based on a change in per share net asset value from $14.18 to
$14.10.
The Environment
The US economy began to show some signs of improvement during the
November quarter with little evidence of an appreciable increase
in the rate of inflation. The industrial sector is demonstrating
growing strength, yet capacity utilization is still well below
the levels associated with rising inflation. Consumer spending
has improved, but the labor market remains soft. Despite the areas
of economic weakness that persist, concerns arose during the quarter
that the rate of business activity might increase inflationary
pressures.
Other developments during the November quarter had significant
long-term implications for the US financial markets. Although
Boris Yeltsin's swift and apparently decisive victory over his
hard-line opponents in Russia created little immediate disruption
in the world financial markets, the future of political and economic
reform in the former Soviet Union is far from certain. Evidence of
greater progress toward a free-market economy and democratic government
in Russia would have more positive implications for the US financial
markets over the longer term. The outline for proposed healthcare
reform is also very important for the US economy. As the various
healthcare reform proposals are debated, investors will focus on
their potential effects on the Federal budget, the US economy and
the quality of healthcare delivery in the United States. Finally,
the ratification of the North American Free Trade Agreement by the
US Congress was important not only for the prospect of expanding
trade with Canada and Mexico, but also as a positive influence on
the recently concluded round of negotiations on the General Agreement
on Tariffs and Trade. Further economic integration and growth through
trade liberalization would be positive for the capital markets in the
United States and around the world.
<PAGE>
The Municipal Market
The municipal bond market exhibited considerable volatility
during the quarter ended November 30, 1993. From September through
mid-October, municipal bond yields continued their earlier decline.
By mid-October, yields on tax-exempt revenue bonds maturing in
30 years, as reflected by the Bond Buyer Revenue Bond Index, had
declined an additional 15 basis points (0.15%) to another record
low of 5.41%. However, the municipal bond market then reacted
sympathetically to a nervous US Treasury bond market during the
remainder of the quarter, and tax-exempt bond yields rose to
end the quarter at 5.47%. Despite the increase in bond yields
late in the quarter, it is important to note that tax-exempt
bond yields have declined approximately 70 basis points since
the beginning of 1993.
The pace of new municipal bond issuance slowed during the November
quarter. More than $62 billion in tax-exempt securities were issued
over the last three months, an increase of more than 5% versus the
November 1992 quarter's issuance. In recent quarters, however,
new bond issuance had been increasing at a rate of approximately
25%. Even this relative decline in supply was unable to provide
any technical support for the municipal bond market as investors
became extremely concerned that economic growth would dramatically
accelerate during the last calendar quarter of 1993 and continue
into early 1994. This projected growth and expected associated
inflationary pressures combined to cause yields to rise
significantly in late October and November.
A number of additional factors have been involved in the recent
increase in tax-exempt bond yields. Individual investors have
demonstrated only limited interest in the municipal bond market
over the last month. This probably has been related to a combina-
tion of seasonal factors and the desire to avoid the tax liability
resulting from the large capital gains expected to be declared by
most bond funds this year. Also, many larger institutional inves-
tors have been reluctant participants in the markets in order not
to jeopardize their already strong year-to-date performances.
Consequently, recent interest rate volatility has been inten-
sified by this decline in demand.
By early 1994, however, it is likely that demand will increase
significantly. The proceeds from bond maturities, bond calls and
coupon payments beginning in January will all need to be reinvested.
The new higher marginal Federal tax rates will also go into effect
in January. Given the ongoing attractive after-tax benefits municipal
bonds provide, it is likely that both individual and institutional
investors will return to the tax-exempt bond market. This increased
demand should serve to stabilize the market in early 1994.
<PAGE>
Portfolio Strategy
MuniBond Income Fund, Inc. began operations on October 29, 1993.
The Fund initially focused on securities rated BBB and A by the
rating agencies in order to quickly generate a tax-exempt income
stream. We will add to the Fund higher-yielding municipal bond
issues as they become available. Looking forward to 1994, we are
constructive on the tax-exempt bond market given the fundamental
attractiveness of municipal bonds. Consequently, we have viewed
periods of interest rate volatility as opportunities to add
attractively priced issues to the Fund.
We appreciate your investment in MuniBond Income Fund, Inc., and we
look forward to assisting you with your financial needs in the months
and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
December 30, 1993
Portfolio
Abbreviations
To simplify the listings of MuniBond Income Fund, Inc.'s,
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of some of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alaska--4.7% A+ Aa1 $ 4,500 Alaska State Housing Finance Corporation Revenue Bonds
(Insured Mortgage Program), First Series, 5.75% due 12/01/2023 $ 4,412
Arizona--9.0% NR Aa 4,500 Arizona Educational Loan Marketing Corporation, Educational Loan
Revenue Bonds, VRDN, Senior Series B, 2.65% due 12/01/2002 (a) 4,500
BBB Baa2 4,000 Navajo County, Arizona, Pollution Control Corporation, Revenue
Refunding Bonds (Arizona Public Service Company), Series A, 5.875% due
8/15/2028 3,956
<PAGE>
California--25.6% California Health Facilities Financing Authority Revenue Bonds,
VRDN, Series B (a):
A1+ VMG1 3,600 (Saint Joseph Health System), 1.80% due 7/01/2009 3,600
A1+ VMG1 4,500 (Sutter Health), 1.90% due 3/01/2020 4,500
A A1 4,000 California Pollution Control Financing Authority, PCR (Pacific Gas
and Electric Company), AMT, Series B, 5.85% due 12/01/2023 3,955
SP-1 MIGI++ 7,500 California State, Revenue Anticipation Warrants, 2.20% due 12/23/1993 7,498
AAA VMG1 4,500 Los Angeles County, California, Transportation Commission, Sales Tax
Revenue Refunding Bonds, VRDN, Series A, 2.20% due 7/01/2012 (a) (b) 4,500
Colorado--5.2% BBB Baa1 5,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series C,
6.125% due 11/15/2025 4,887
Illinois--25.8% AAA NR 2,000 Illinois Development Financing Authority, Environmental Facilities Revenue
Bonds (Citizens Utilities Company Project), AMT, 5.90% due 11/15/2028 2,003
Illinois Development Financing Authority, PCR (Illinois Power
Company), VRDN, AMT (a):
A1+ NR 1,000 Series B, 2.35% due 3/01/2017 1,000
A1+ NR 6,000 Series C, 2.35% due 3/01/2017 6,000
Illinois Educational Facilities Authority Revenue Bonds (Wesleyan
University):
A A1 1,000 5.625% due 9/01/2018 976
A A1 4,000 5.70% due 9/01/2023 3,901
Illinois Health Facilities Authority, Revenue Refunding Bonds:
A A 1,730 (Edward Hospital), Series A, 6% due 2/15/2019 1,708
A- A 4,500 (Illinois Masonic Medical Center), 5.50% due 10/01/2019 4,080
A+ A1 2,000 Illinois Housing Development Authority, Housing Development Revenue
Bonds, Series A, 6% due 7/01/2018 2,001
A+ Aa 2,500 Illinois Housing Development Authority, Residential Mortgage Revenue
Refunding Bonds, AMT, Series A, 5.90% due 2/01/2024 2,500
Iowa--7.5% B+ NR 1,000 Des Moines County, Iowa, Industrial Development, Revenue Refunding Bonds
(U.S. Gypsum Company Project), 7.20% due 11/01/2007 1,000
A- NR 3,595 Iowa Financing Authority, Hospital Facility, Revenue Refunding Bonds
(Allen Memorial Hospital), Series B, 5.875% due 2/15/2013 3,564
BBB+ NR 2,500 Ottumwa, Iowa, Hospital Facility Revenue Refunding and Improvement Bonds
(Ottumwa Regional Health), 6% due 10/01/2010 2,438
Massachusetts-- A-1 VMG1 4,500 Massachusetts State Industrial Finance Agency Revenue Bonds (New England
4.8% Deaconess Project), VRDN, Series B, 2.25% due 4/01/2023 (a) 4,500
<PAGE>
Michigan--4.2% BBB Baa1 4,000 Dickinson County, Michigan, Economic Development Corporation, PCR, Refunding
(Champion International Corporation Project), 5.85% due 10/01/2018 3,933
Mississippi--2.9% NR P1 2,700 Jackson County, Mississippi, PCR, Refunding (Chevron U.S.A. Incorporated
Project), VRDN, 1.80% due 12/01/2016 (a) 2,700
New Jersey--4.9% NR VMG1 4,600 New Jersey State Turnpike Authority, Turnpike Revenue Refunding Bonds,
VRDN, Series D, 2.20% due 1/01/2018 (a) (b) 4,600
New York--5.1% A- Baa1 4,250 New York City, New York, GO, Refunding, Series D, UT, 5.75% due 8/15/2009 4,151
A1+ VMG1 500 New York City, New York, GO, VRDN, Series D, 1.90% due 2/01/2021 (a) 500
A1+ NR 100 New York City, New York, Industrial Development Agency, Civic Facility
Revenue Bonds (Various National Audubon Society), VRDN, 1.85% due
12/01/2014 (a) 100
Ohio--4.8% BBB Baa2 4,500 Ohio State Air Quality Development Authority, PCR, Refunding (Ohio-Edison),
Series A, 5.95% due 5/15/2029 4,500
Pennsylvania--4.8% A1+ AAA 4,500 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds
(Veterans Hospital Administration, Pennsylvania Capital Financing Project),
VRDN, Series J, 2.20% due 12/01/2020 (a) (c) 4,500
Texas--13.8% A1+ P1 4,500 Gulf Coast Waste Disposal Authority, Texas, PCR, Refunding (Exxon Project),
AMT, VRDN, 1.85% due 10/01/2024 (a) 4,500
A1+ NR 4,500 Houston, Texas, Health Facilities Development Corporation, Hospital
Revenue Bonds (Methodist Hospital Project), VRDN, 1.90% due 12/01/2014 (a) 4,500
BBB Baa2 4,000 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities Electric
Company Project), 5.85% due 5/01/2022 3,929
Vermont--1.0% BBB NR 1,000 Swanton Village, Vermont, Electric System Revenue Bonds, 6.70% due
12/01/2023 995
Total Investments (Cost--$116,941)--124.1% 116,387
Liabilities in Excess of Other Assets--(24.1%) (22,574)
-------
Net Assets--100.0% $93,813
=======
<FN>
(a)The interest rate is subject to change periodically based upon the prevailing
market rate. The interest rate shown is the rate in effect at November 30, 1993.
(b)FGIC Insured.
(c)AMBAC Insured.
++ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of November 30, 1993
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$116,941,179) (Note 1a) $116,386,702
Cash 53,157
Receivables:
Interest $ 676,285
Investment advisor (Note 2) 20,658 696,943
Deferred organization expenses (Note 1e) --------- 73,051
Prepaid expenses and other assets 9,749
------------
Total assets 117,219,602
------------
Liabilities: Payables for securities purchased 23,144,677
Accrued expenses and other liabilities 262,395
------------
Total liabilities 23,407,072
Net Assets: Net assets $ 93,812,530
============
Capital: Common Stock, par value $.10 per share; 200,000,000 shares authorized;
6,654,055 shares issued and outstanding $ 665,406
Paid-in capital in excess of par 93,448,624
Undistributed investment income--net 252,977
Unrealized depreciation on investments--net (554,477)
Total capital--Equivalent to $14.10 net asset value per share of Common Stock ------------
(market price--$14.75) (Note 4) $ 93,812,530
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period October 29, 1993++ to November 30, 1993
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount $ 252,977
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 45,977
Accounting services (Note 2) 4,183
Professional fees 3,836
Directors' fees and expenses 2,582
Printing and shareholder reports 2,332
Transfer agent fees (Note 2) 1,674
Amortization of organization expenses (Note 1e) 1,496
Listing fees 1,405
Custodian fees 1,105
Insurance 768
Other 1,277
---------
Total expenses before reimbursement 66,635
Reimbursement of expenses (Note 2) (66,635)
---------
Total expenses after reimbursement --
------------
Investment income--net 252,977
------------
Unrealized Loss on Unrealized depreciation on investments--net (554,477)
Investments--Net Net Decrease in Net Assets Resulting from Operations ------------
(Notes 1d & 3): $ (301,500)
============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
October 29, 1993++
Increase (Decrease) in Net Assets: to November 30, 1993
<S> <S> <C>
Operations: Investment income--net $ 252,977
Unrealized depreciation on investments--net (554,477)
------------
Net decrease in net assets resulting from operations (301,500)
------------
Common Stock Net increase in net assets derived from Common Stock transactions 94,014,025
Transactions ------------
(Note 4):
Net Assets: Total increase in net assets 93,712,525
Beginning of period 100,005
------------
End of period* $ 93,812,530
============
<FN>
*Undistributed investment income--net $ 252,977
============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the Period
The following per share data and ratios have been derived October 29, 1993++
from information provided in the financial statements. to November 30, 1993
Increase (Decrease) in Net Asset Value:
<S> <S> <C>
Per Share Net asset value, beginning of period $ 14.18
Operating ------------
Performance: Investment income--net .04
Realized and unrealized loss on investments--net (.09)
------------
Total from investment operations (.05)
------------
Capital charge resulting from issuance of Common Stock (.03)
------------
Net asset value, end of period $ 14.10
============
Market price per share, end of period $ 14.75
============
Total Investment Based on net asset value per share (0.56%)+++
Return:** Based on market price per share ============
(1.67%)+++
============
Ratios to Average Expenses, net of reimbursement --
Net Assets: ============
Expenses .80%*
============
Investment income--net 3.05%*
============
Supplemental Data: Net assets, end of period (in thousands) $ 93,813
============
Portfolio turnover --
============
<FN>
++ Commencement of Operations.
+++ Aggregate total investment return.
* Annualized.
** Total investment returns based on market value, which can be significantly greater or lesser than
the net asset value, result in substantially different returns. Total investment returns exclude the
effects of sales loads.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniBond Income Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified closed-end,
investment management company. Prior to commencement of operations
on October 29, 1993, the Fund had no operations other than those re-
lating to organizational matters and the sale of 7,055 shares of
Common Stock on October 15, 1993 to Fund Asset Management, Inc.
("FAMI") for $100,005. The Fund determines and makes available for
publication the net asset value of its Common Stock on a weekly
basis. The Fund's Common Stock is listed on the New York Stock
Exchange under the symbol MBD. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded
primarily in the over-the-counter markets and are valued at
the last available bid price in the over-the-counter market or
on the basis of yield equivalents as obtained by the Fund's pricing
service from one or more dealers that make markets in the securities.
Financial futures contracts, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges.
Options, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges or, lacking any sales
at the last available bid price. Short-term investments with a
remaining maturity of sixty days or less are valued at amortized
cost, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures con-
tracts 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 Fund deposits and maintains as
collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the
Fund agrees 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 Fund as unrealized gains or losses. When the
contract is closed, the Fund records 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.
<PAGE>
(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. Original issue discounts and market premiums
are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Deferred organization and offering expenses and prepaid
registration fees--Deferred organization expenses are charged to
expense on a straight-line basis over a five-year period beginning
with the commencement of operations of the Fund. Direct expenses
relating to the public offering of the Fund's shares of Common
Stock were charged to capital at the time of issuance of the shares.
(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.
(g) Non-income producing investments--Written and purchased options
are non-income producing investments.
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management ("MLAM"). MLAM is the name under
which Merrill Lynch Investment Management, Inc. ("MLIM") does
business. MLIM is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee of 0.55% based
upon the average daily value of the Fund's net assets. From
October 29, 1993 to November 30, 1993, FAMI earned fees of
$45,977, all of which was voluntarily waived. In addition, FAMI
voluntarily elected to reimburse the Fund $20,658 in additional
expenses.
<PAGE>
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc., is the Fund's transfer
agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, MLFD, FDS, MLPF&S, and/or Merrill Lynch & Co.,
Inc.
3. Investments:
Purchases of investments, excluding short-term securities, for
the period October 29, 1993 to November 30, 1993 were $60,446,222.
Net unrealized gains (losses) as of November 30, 1993 were
as follows:
Unrealized Gains
(Losses)
Long-term investments $ (558,002)
Short-term investments 3,525
--------------
Total $ (554,477)
==============
As of November 30, 1993, net unrealized depreciation for Federal
income tax purposes aggregated $554,477, of which $16,442 related
to appreciated securities and $570,919 related to depreciated
securities. The aggregate cost of investments at November 30,
1993 for Federal income tax purposes was $116,941,179.
4. Common Stock Transactions:
At November 30, 1993, the Fund had one class of shares of Common
Stock, par value $.10 per share, of which 200,000,000 shares were
authorized. For the period October 29, 1993 to November 30, 1993,
6,647,000 shares were sold. At November 30, 1993, total paid-in
capital amounted to $94,114,030.
<PAGE>
<TABLE>
PER SHARE INFORMATION
<CAPTION>
Per Share Selected
Quarterly
Financial Data*
Net Realized Dividends/Distributions
Investment Gains Unrealized Net Investment Capital
For the Period Income (Losses) Losses Income Gains
<S> <C> <C> <C> <C> <C>
October 29, 1993++ to November 30, 1993 $ 0.04 $ -- $ (.09) $ -- $ --
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
October 29, 1993++ to November 30, 1993 $14.18 $14.05 $14.875 $14.75 161
<FN>
++Commencement of Operations.
*Calculations are based upon shares of Common Stock outstanding at the end of the period.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
