UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-2688
Merrill Lynch Municipal Bond Fund, Inc.
Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch Municipal Bond Fund, Inc., 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 06/30/03
Date of reporting period: 07/01/02 - 12/31/02
Item 1 - Is shareholder report attached? - Y
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (not answered until
July 15, 2003 and only annually for funds)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. -N/A (not answered until July 15, 2003 and only annually
for funds)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A.
Item 8--Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal
executive officer or officers and principal financial officer or
officers, or persons performing similar functions, about the
effectiveness of the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c)))
based on their evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph. N/A.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302
and 906 for CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Merrill Lynch Municipal Bond Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch Municipal Bond Fund, Inc.
Date: February 18, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
Merrill Lynch Municipal Bond Fund, Inc.
Date: February 18, 2003
By: _/s/ Donald C. Burke
Donald C. Burke
Chief Financial Officer of
Merrill Lynch Municipal Bond Fund, Inc.
Date: February 18, 2003
<ITEM 1>
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
December 31, 2002
Merrill Lynch
Municipal Bond
Fund, Inc.
www.mlim.ml.com
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
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Robert A. DiMella, Vice President
Peter J. Hayes, Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
Brian D. Stewart, 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., December 31, 2002
DEAR SHAREHOLDER
The Municipal Market Environment
During the six-month period ended December 31, 2002, long-term fixed
income interest rates continued to move lower. As they had earlier
in 2002, declining U.S. equity markets and worldwide political
tensions easily overshadowed the incipient U.S. economic recovery
allowing bond yields to fall to recent historic low levels. In late
July, second quarter 2002 gross domestic product activity was
reported at 1.1%, a significant decline from the first quarter rate
of 5%. This rate suggested that continued declines in U.S. equity
prices were negatively affecting not only consumer and business
confidence but undermining much of the economic growth seen earlier
this year. Some analysts extrapolated that recent weakness would
continue, if not accelerate. This brought about forecasts that the
Federal Reserve Board would soon be obliged to lower short-term
interest rates both to offset equity market declines and boost
consumer and business spending. The possibility of lower short-term
interest rates helped push longer-term bond yields lower still
during July and August. The dramatic decline in U.S. equity prices
in late August and September triggered a significant fixed income
rally as investors sought the safe-haven status of U.S. Treasury
securities. By the end of September, U.S. Treasury bond yields had
fallen to 4.66%.
Bolstered by an unexpected decline in the national unemployment rate
to 5.6% in early October, U.S. equity markets staged a strong rally
throughout much of the month. The Standard & Poor's 500 (S&P 500)
Index rose over 8% for the month, triggered by stronger-than-
expected earnings reports from a large number of companies, such as
General Electric Company, International Business Machines
Corporation and Microsoft Corporation. As they have throughout most
of the period, bond prices traded in an inverse relationship to
equity prices. Consequently, as stocks rallied, bond yields rose in
October, despite generally weak economic releases. During October,
the U.S. housing sector remained quite robust, but retail sales and
industrial production slowed. Fixed income bond yields remained
under pressure in November as U.S. equity markets continued to
strengthen. During November, the S&P 500 Index rose an additional
5.5%. Equity prices were supported by signs of further U.S. economic
recovery, especially improving labor market activity. By the end of
November, third quarter U.S. gross domestic product (GDP) growth was
revised to 4%. Financial conditions were also strengthened by a
larger-than-expected reduction in short-term interest rates by the
Federal Reserve Board in early November. The Federal Funds target
rate was lowered 50 basis points (.50%) to 1.25%, its lowest level
since the 1960s. Recent action by the Federal Reserve Board was
largely viewed as being taken to bolster the sputtering U.S.
economic recovery. Rebounding U.S. equity markets and the prospects
for a more substantial U.S. economic recovery pushed long-term U.S.
Treasury yield levels to 5.10% by late November.
In December, softer equity prices and renewed investor concerns
about potential U.S. military action against Iraq again combined to
push long-term interest rates lower. The S&P 500 Index declined more
than 5% in December on disappointing earnings reports and
anticipated weak holiday sales. During December 2002, as both
national and international investors sought the safe-haven sanctuary
of U.S. Treasury issues, long-term U.S. Treasury yields declined
over 25 basis points to end the period at 4.75%. During the last six
months, long-term U.S. Treasury bond yields declined 75 basis
points.
For the six-month period ended December 31, 2002, tax-exempt bond
prices also generally rose. In recent months, municipal bond yields
have declined in response to the positive fixed income environment
engendered by falling equity valuations. Price advances in tax-
exempt issues have not been able to keep pace with the U.S. Treasury
bond price improvement as municipal bonds cannot offer foreign
investors the safe-haven status U.S. Treasury obligations enjoy in
periods of economic and political instability. Additionally, tax-
exempt bond issuance increased dramatically in the last half of 2002
removing some of the positive technical support the municipal bond
market enjoyed earlier this year. By the end of 2002, long-term
municipal bond yields, as measured by the Bond Buyer Revenue Bond
Index, stood at 5.16%, a decline of 25 basis points during the last
six months.
Investor demand for tax-exempt products remained positive throughout
the period. In addition to the approximately $75 billion investors
received from June to August 2002 from bond maturities, coupon
income and proceeds from early redemptions, investors are expected
to receive approximately $30 billion from these sources in January
2003. The Investment Company Institute reported that in 2002
municipal bond funds net cash flows continued to be very positive at
nearly $16 billion, an increase of more than 25% compared to 2001.
However, these positive demand factors have not been able to offset
the increase in tax-exempt new-issue supply that has resulted in the
underperformance seen in recent months. This price underperformance
served to make municipal bonds a particularly attractive purchase
relative to their taxable counterparts. Throughout most of the yield
curve, municipal bonds have been available for purchase at yields
near or exceeding those of comparable U.S. Treasury issues. Compared
to their recent historical averages of 82%--88% of U.S. Treasury
yields, municipal bond yields ratios at their current 95%--105%
range are likely to prove attractive to long-term investors.
Continued uncertainty regarding the pace of the current U.S.
economic recovery as well as the resolution of the U.N./Iraq
confrontation are likely to keep interest rates near their present
levels for the immediate future. Equity market declines over the
past three years have helped push interest rates lower than economic
fundamentals alone would support. When U.S. business conditions
improve and equity markets stabilize, however, any associated
interest rate increases should not be extreme. Inflationary
pressures are negligible and any move by the Federal Reserve Board
to raise short-term interest rates is unlikely before late 2003. As
equity valuations are likely to only gradually recover, U.S.
economic recovery is also likely to be a moderate process. This
suggests that the pace of any interest rate increases will be
gradual. As the municipal bond market's strong technical position
can be expected to remain supportive in the coming months, future
tax-exempt interest rate increases should be more restrained than
their taxable counterparts.
Portfolio Strategy
Insured Portfolio
For the six months ended December 31, 2002, the Insured Portfolio
realized competitive performance by generating one of the highest
yields in its sector. This was partly accomplished by enhancing the
Portfolio's exposure to inverse floater derivatives. As the
borrowing rate on derivatives fell with all short-term interest
rates, the distribution yield these securities provided to the
Portfolio proved extremely beneficial. At the same time, we
maintained a neutral position regarding interest rate risk in an
effort to mute net asset value movement. We focused on maintaining
superior couponing structure in the 15-year--20-year maturity range.
This strategy enabled the Portfolio to capture the majority of the
steep yield curve, while avoiding the significant interest rate risk
associated with longer maturity callable bonds. After keeping
limited cash reserves for the past six months, we recently increased
the Portfolio's reserves to approximately 3%, anticipating an
increase in issuance early in 2003. This added liquidity should
allow the Portfolio to take advantage of opportunities when they
arise.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
National Portfolio
For the six-month period ended December 31, 2002, National Portfolio
maintained a competitive relative performance by generating a higher
current yield than the industry average. We have not taken an
aggressive stance with respect to long duration holdings and
discount securities aimed at price appreciation in a falling
interest rate environment. The past six months was a positive
environment for bond prices, whereby we relied on the Portfolio's
superior level of couponing to deliver the bulk of its performance
in the absence of a more aggressive position. As interest rates
reached levels not seen in 40 years, we took steps to seek to
protect net asset value and mute future price volatility. The
Portfolio currently emphasizes an overall structure that enhances
couponing leading to a high current return. We focused on the 10-
year - 20-year maturity sector for concentration of the majority of
the Portfolio's assets. It is our belief that the bulk of the yield
provided along the yield curve can be realized in these maturities
without exposing the Portfolio to the net asset value volatility
associated with longer maturing assets. Part of our strategy in the
past has been to enhance the Portfolio's exposure to inverse floater
product. The combination of aggressive Federal Reserve Board
interest rate cuts and extremely positive short-term technicals in
the tax-exempt market led to a favorable execution in our borrowing
costs for these derivative securities. These derivatives allowed us
to generate a superior current return without compromising credit
quality. At the end of 2002, we moved to pare back our derivative
exposure, and we reduced these positions from 15% of total assets to
9%. This reduction in the Portfolio's leverage position will further
provide a level of protection from net asset value declines should
interest rates rise later next year. We also increased cash
equivalent reserves to 3% to give the Portfolio additional
liquidity.
Finally, we believe it is time to commit some assets to lower-rated
credits. Some sectors of the municipal marketplace have reached
attractive spreads to higher-grade issues and could represent an
opportunity to enhance the Portfolio's dividend stream. We are
working closely with our Municipal Research Group to approve
securities that meet the dual criteria of providing an attractive
yield, yet remain within the credit quality outlined in the National
Portfolio's prospectus.
Limited Maturity Portfolio
Although the trend for interest rates was lower for the six-months
ended December 31, 2002, there were considerable periods of
volatility, especially in the last three months. The two-year
Treasury note began the period at a yield of 2.86% and ended the
period at 1.60%, driven by economic and geopolitical risks. This
kept the demand for short-term fixed income securities strong
throughout most of the period. However, at times, these risks would
appear to abate, causing a temporary spike in yields. This
volatility drove most of our portfolio strategy.
The Portfolio was more aggressively positioned at the outset of the
period with an average portfolio maturity in the 1.4-year--1.7-year
range with low cash reserves since we believed that interest rates
would fall as a result of the sluggish economic environment.
However, by October 2002, the Portfolio was positioned at a below-
neutral stance since it appeared that the economy might begin to
rebound and the Federal Reserve Board might be at or near the end of
its accommodative position. This relatively defensive position is
important in attempting to limit the net asset value volatility
during periods of rising interest rates. The Portfolio was able to
outperform its peer group of Lipper Short Municipal Debt Funds over
the last several months, as interest rates, especially for short-
term municipal bonds, remained volatile. The average credit quality
continues to be AA, as rated by one of the major bond rating
agencies, since higher-quality issues tend to hold their value
better and provide easier liquidity in a rising interest rate
environment than lower-rated securities.
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
(Kenneth A. Jacob)
Kenneth A. Jacob
Senior Vice President
(John M. Loffredo)
John M. Loffredo
Senior Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and
Portfolio Manager
(Robert A. DiMella)
Robert A. DiMella
Vice President and
Portfolio Manager
(Peter Hayes)
Peter Hayes
Vice President and
Portfolio Manager
January 31, 2003
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
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.
* Effective December 1, 2002, Class B Shares are subject to a
maximum contingent deferred sales charge of 4%, declining to 0%
after six years for Insured and National Portfolios. Limited
Maturity Portfolio is subject to a maximum contingent deferred sales
charge of 1% if redeemed within three years of purchase. All Class B
Shares purchased prior to December 1, 2002 will maintain the four-
year schedule and one-year schedule, respectively. 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 ten 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. Performance results do not reflect the
deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in
each of the following 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
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
One Year Ended 12/31/02 +9.97% +5.57%
Five Years Ended 12/31/02 +5.35 +4.50
Ten Years Ended 12/31/02 +6.08 +5.65
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
One Year Ended 12/31/02 +9.14% +5.14%
Five Years Ended 12/31/02 +4.56 +4.24
Ten Years Ended 12/31/02 +5.28 +5.28
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
One Year Ended 12/31/02 +9.09% +8.09%
Five Years Ended 12/31/02 +4.51 +4.51
Inception (10/21/94) through 12/31/02 +5.91 +5.91
*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**
One Year Ended 12/31/02 +9.70% +5.31%
Five Years Ended 12/31/02 +5.09 +4.24
Inception (10/21/94) through 12/31/02 +6.50 +5.97
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
National Portfolio
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
One Year Ended 12/31/02 +9.42% +5.04%
Five Years Ended 12/31/02 +5.17 +4.31
Ten Years Ended 12/31/02 +6.23 +5.80
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
One Year Ended 12/31/02 +8.50% +4.50%
Five Years Ended 12/31/02 +4.36 +4.02
Ten Years Ended 12/31/02 +5.42 +5.42
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payments of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
One Year Ended 12/31/02 +8.55% +7.55%
Five Years Ended 12/31/02 +4.33 +4.33
Inception (10/21/94) through 12/31/02 +5.97 +5.97
*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**
One Year Ended 12/31/02 +9.04% +4.68%
Five Years Ended 12/31/02 +4.91 +4.05
Inception (10/21/94) through 12/31/02 +6.56 +6.03
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Limited Maturity Portfolio
Average Annual
Total Return
% Return Without % Return With
Class A Shares* Sales Charge Sales Charge**
One Year Ended 12/31/02 +3.80% +2.76%
Five Years Ended 12/31/02 +4.13 +3.92
Ten Years Ended 12/31/02 +4.03 +3.93
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Class B Shares* Without CDSC With CDSC**
One Year Ended 12/31/02 +3.43% +0.43%
Five Years Ended 12/31/02 +3.74 +3.74
Ten Years Ended 12/31/02 +3.67 +3.67
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after three years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Class C Shares* Without CDSC With CDSC**
One Year Ended 12/31/02 +3.43% +2.43%
Five Years Ended 12/31/02 +3.74 +3.74
Inception (10/21/94) through 12/31/02 +3.82 +3.82
*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**
One Year Ended 12/31/02 +3.69% +2.65%
Five Years Ended 12/31/02 +4.03 +3.82
Inception (10/21/94) through 12/31/02 +4.16 +4.03
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
PERFORMANCE DATA (concluded)
Recent
Performance
Results*
Ten-Year/
Since
6-Month 12-Month Inception Standardized
As of December 31, 2002 Total Return Total Return Total Return 30-Day Yield
ML Municipal Bond Fund, Inc. Insured Portfolio Class A Shares** +5.16% +9.97% +80.39% 4.16%
ML Municipal Bond Fund, Inc. Insured Portfolio Class B Shares** +4.89 +9.14 +67.29 3.58
ML Municipal Bond Fund, Inc. Insured Portfolio Class C Shares** +4.86 +9.09 +60.10 3.53
ML Municipal Bond Fund, Inc. Insured Portfolio Class D Shares** +5.16 +9.70 +67.58 3.92
ML Municipal Bond Fund, Inc. National Portfolio Class A Shares** +4.43 +9.42 +83.01 4.37
ML Municipal Bond Fund, Inc. National Portfolio Class B Shares** +3.93 +8.50 +69.55 3.80
ML Municipal Bond Fund, Inc. National Portfolio Class C Shares** +4.01 +8.55 +60.84 3.75
ML Municipal Bond Fund, Inc. National Portfolio Class D Shares** +4.20 +9.04 +68.33 4.13
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class A Shares*** +1.88 +3.80 +48.48 1.57
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class B Shares*** +1.69 +3.43 +43.33 1.23
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class C Shares*** +1.70 +3.43 +35.97 1.23
ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class D Shares*** +1.82 +3.69 +39.67 1.47
Lehman Brothers 3-Year General Obligation Bond Index++ +3.03 +6.65 +73.44/+55.06 --
Lehman Brothers Municipal Bond Index++++ +4.57 +9.60 +91.39/+80.38 --
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge were 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 & Class B Shares and from 10/21/94 for Class C & Class D
Shares.
++This unmanaged Index consists of state and local government
obligation bonds that mature in 3 - 4 years, rated Baa or better.
Ten-year/since inception total returns are for ten years and from
10/31/94, respectively.
++++This unmanaged Index consists of revenue bonds, prerefunded
bonds, general obligation bonds and insured bonds, all of which
mature within 30 years. Ten-year/since inception total returns are
for ten years and from 10/31/94, respectively.
SCHEDULE OF INVESTMENTS (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Alabama--1.9% Alabama Water Pollution Control Authority Revenue Bonds (b):
AAA Aaa $ 3,020 5.75% due 8/15/2018 $ 3,377
AAA Aaa 1,585 Revolving Fund Loan, Series A, 6.75% due 8/15/2017 1,783
AAA Aaa 10,000 Lauderdale County and Florence, Alabama, Health Care Authority,
Revenue Refunding Bonds (Coffee Health Group), Series A, 6% due
7/01/2029 (e) 11,055
AAA Aaa 7,000 University of Alabama, University Revenue Bonds (Birmingham), 6% due
10/01/2020 (g) 7,971
Arizona-- AAA Aaa 6,750 Arizona State Municipal Financing Program, COP, Series 34, 7.25% due
0.7% 8/01/2009 (f) 8,419
Arkansas-- NR* Aaa 6,060 University of Arkansas, University Revenue Bonds (Various Facility,
0.5% Fayetteville Campus), 5.50% due 12/01/2021 (g) 6,601
California AAA Aaa 19,000 California Pollution Control Financing Authority, PCR, Refunding
- --8.9% (Pacific Gas & Electric), AMT, Series A, 5.35% due 12/01/2016 (e) 20,717
California State Department of Water Resources, Power Supply
Revenue Bonds, Series A:
AAA Aaa 12,000 5.375% due 5/01/2017 (j) 13,160
AAA Aaa 12,000 5.375% due 5/01/2018 (b) 13,131
AAA Aaa 5,000 California State, Veterans, GO, Refunding, AMT, Series BZ, 5.35%
due 12/01/2021 (e) 5,108
AAA Aaa 26,085 Los Angeles, California, Community College District, GO, Series A,
5.50% due 8/01/2019 (e) 28,665
AAA Aaa 5,800 Oakland, California, Redevelopment Agency, Tax Allocation Refunding
Bonds, INFLOS, 10.429% due 9/01/2019 (d)(e) 6,068
Pasadena, California, Electric Revenue Bonds (e):
AAA Aaa 2,500 5.25% due 6/01/2020 2,678
AAA Aaa 2,630 5.25% due 6/01/2021 2,794
AAA Aaa 11,685 Rialto, California, Unified School District, GO, Series A, 6.24%**
due 6/01/2025 (g) 3,633
AAA Aaa 15,000 San Jose, California, Redevelopment Agency, Tax Allocation Refunding
Bonds, DRIVERS, Series 158, 9.038% due 8/01/2014 (d)(e) 16,709
Colorado AAA Aaa 19,250 Aurora, Colorado, COP, 6% due 12/01/2025 (b) 22,050
- --5.6% Denver, Colorado, City and County Airport Revenue Refunding Bonds:
AAA Aaa 2,000 AMT, Series D, 5.50% due 11/15/2015 (i) 2,168
AAA Aaa 4,850 AMT, Series D, 5.50% due 11/15/2017 (i) 5,198
AAA Aaa 2,500 AMT, Series D, 5.50% due 11/15/2018 (i) 2,660
NR* Aaa 31,160 RIB, Series 153, 9.271% due 11/15/2025 (d)(e) 35,258
AAA Aaa 4,000 Logan County, Colorado, Justice Center Finance Corporation, COP,
5.50% due 12/01/2020 (e) 4,349
Portfolio
Abbreviations
To simplify the listings of Merrill Lynch Municipal Bond Fund,
Inc.'s portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
BAN Bond Anticipation Notes
CARS Complementary Auction Rate Securities
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
EDA Economic Development Authority
EDR Economic Development Revenue Bonds
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
STRIPES Short-Term Inverse Payment Exempt Securities
TAN Tax Anticipation Notes
VRDN Variable Rate Demand Notes
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Connecticut AAA NR* $ 2,840 Connecticut State, HFA, Housing Mortgage Finance Revenue Bonds,
- --0.2% AMT, Sub-Series B-2, 5.35% due 11/15/2032 (e) $ 2,912
Florida--3.7% AAA Aaa 5,500 Dade County, Florida, Water and Sewer System Revenue Bonds, 5.25%
due 10/01/2026 (g) 5,673
NR* Aaa 15,000 Escambia County, Florida, Health Facilities Authority, Health Facility
Revenue Bonds (Florida Health Care Facility Loan), 5.95% due
7/01/2020 (b) 16,513
Florida State Board of Education, Lottery Revenue Bonds, Series B (g):
AAA Aaa 9,435 6% due 7/01/2014 10,997
AAA Aaa 9,645 6% due 7/01/2015 11,208
AAA Aaa 2,240 West Coast Regional Water Supply Authority, Florida, Capital Improvement
Revenue Bonds, 10.40% due 10/01/2010 (a)(b)(d) 3,165
Georgia--2.9% Georgia Municipal Electric Authority, Power Revenue Bonds,
Series Y (b):
AAA Aaa 490 6.40% due 1/01/2013 (c) 596
AAA Aaa 8,510 6.40% due 1/01/2013 10,263
AAA Aaa 20,000 Georgia Municipal Electric Authority, Power Revenue Refunding Bonds,
Series EE, 7% due 1/01/2025 (b) 26,232
Hawaii--0.8% AAA Aaa 10,000 Hawaii State Airport System, Revenue Refunding Bonds, 6.45% due
7/01/2013 (e) 10,430
Illinois AAA Aaa 2,000 Chicago, Illinois, O'Hare International Airport Revenue Bonds
- --4.3% (Passenger Facility Charge), Series A, 5.625% due 1/01/2015 (b) 2,153
AAA NR* 14,450 Illinois Health Facilities Authority, Revenue Refunding Bonds, RIB,
Series 166, 10.07% due 2/15/2024 (b)(d)(h) 17,123
AAA Aaa 26,000 Illinois Regional Transportation Authority Revenue Bonds, Series A,
6.25% due 6/01/2004 (a)(b) 28,325
AAA Aaa 6,800 Illinois State, GO, 5.75% due 5/01/2021 (e) 7,380
Indiana AAA Aaa 5,555 Indiana State Office Building Commission, Facilities Revenue Bonds
- --0.5% (Miami Correctional Facility--Phase 1), Series A, 5.50% due 7/01/2015 (b) 6,182
Kansas--1.4% AAA Aaa 11,000 Kansas City, Kansas, Utility System Revenue Refunding and
Improvement Bonds, 6.25% due 9/01/2014 (g) 12,046
AAA Aaa 5,145 Manhattan, Kansas, Hospital Revenue Bonds (Mercy Health Center), 5.50%
due 8/15/2020 (i) 5,494
Maryland AAA Aaa 4,400 Maryland State Health and Higher Educational Facilities Authority
- --0.4% Revenue Bonds (University of Maryland Medical System), Series B, 7% due
7/01/2022 (g) 5,617
Massachusetts NR* Aaa 1,920 Massachusetts Educational Loan Authority, Education Loan Revenue
- --1.0% Bonds, AMT, Issue D, Series A, 7.25% due 1/01/2009 (e) 1,956
AAA Aaa 10,000 Massachusetts State Health and Educational Facilities Authority Revenue
Bonds (Beth Israel Deaconess Medical Center), INFLOS, Series G-4,
10.245% due 7/01/2025 (b)(d) 10,432
Michigan AAA Aaa 6,915 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series B,
- --1.5% 6.15% due 10/01/2015 (e) 7,263
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) 11,325
Minnesota NR* Aaa 5,860 Delano, Minnesota, Independent School District Number 879, GO,
- --1.2% Series A, 5.875% due 2/01/2025 (i) 6,442
Sauk Rapids, Minnesota, Independent School District Number 047, GO,
Series A (e):
NR* Aaa 3,735 5.65% due 2/01/2020 4,090
NR* Aaa 4,440 5.70% due 2/01/2021 4,864
Mississippi AAA Aaa 1,320 Harrison County, Mississippi, Wastewater Management District,
- --1.0% Revenue Refunding Bonds (Wastewater Treatment Facilities),
Series A, 8.50% due 2/01/2013 (g) 1,825
NR* Aaa 10,000 Mississippi Hospital Equipment and Facilities Authority Revenue Bonds
(Forrest County General Hospital Project), 6% due 1/01/2030 (i) 11,012
Missouri--2.0% Kansas City, Missouri, Airport Revenue Refunding and Improvement Bonds,
Series A (e):
AAA Aaa 12,990 5.50% due 9/01/2013 14,691
AAA Aaa 9,000 5.50% due 9/01/2014 10,107
Nevada--4.5% AAA Aaa 10,000 Clark County, Nevada, IDR (Power Company Project), AMT, Series A, 6.70%
due 6/01/2022 (g) 10,335
AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra Pacific
Power Company), AMT, 6.65% due 6/01/2017 (e) 46,773
New AAA Aaa 6,810 Cape May County, New Jersey, Industrial Pollution Control Financing
Jersey--6.5% Authority, Revenue Refunding Bonds (Atlantic City Electric Company
Project), Series A, 6.80% due 3/01/2021 (e) 8,715
NR* Aaa 12,500 New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds (NUI
Corporation), RIB, Series 371, 10.77% due 10/01/2022 (b)(d) 14,958
AAA Aaa 10,000 New Jersey EDA, New Jersey Water Facilities Revenue Refunding Bonds
(American Water), AMT, Series B, 5.125% due 4/01/2022 (b) 10,211
AAA Aaa 10,160 New Jersey State Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, AMT, Series M, 7% due 10/01/2026 (e) 10,624
AAA Aaa 10,070 New Jersey State Transportation Trust Fund Authority, Transportation
System Revenue Refunding Bonds, Series B, 6% due 12/15/2018 (e) 11,680
Salem County, New Jersey, Industrial Pollution Control Financing
Authority, Revenue Refunding Bonds (Public Service Electric & Gas),
RIB (d)(e):
AAA Aaa 10,000 Series 380, 10.74% due 6/01/2031 11,644
AAA Aaa 12,500 Series 381, 10.47% due 8/01/2030 14,716
New AAA Aaa 17,405 Metropolitan Transportation Authority, New York, Dedicated Tax Fund
York--15.4% Revenue Refunding Bonds, Series A, 5.25% due 11/15/2024 (i) 18,223
Metropolitan Transportation Authority, New York, Revenue Refunding
Bonds, Series A (b):
AAA Aaa 7,100 5.50% due 11/15/2018 7,882
AAA Aaa 25,000 5.50% due 11/15/2019 27,582
Metropolitan Transportation Authority, New York, Service Contract
Revenue Bonds (e):
NR* Aaa 7,620 RIB, Series 697X, 9.222% due 7/01/2024 (d) 8,735
AAA Aaa 7,025 Series B, 5.50% due 7/01/2019 7,729
AAA Aaa 12,500 Metropolitan Transportation Authority, New York, Service Contract
Revenue Refunding Bonds, Series A, 5.50% due 7/01/2020 (e) 13,660
NR* Aaa 12,075 New York City, New York, City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds,
RIB, Series 158, 9.727% due 6/15/2026 (d)(e) 14,917
New York City, New York, GO:
AAA NR* 11,500 Series C, 5.625% due 3/15/2018 (j) 12,611
AAA Aaa 21,000 Series I, 6% due 4/15/2012 (i) 23,783
New York City, New York, GO, Refunding, Series G:
AAA Aaa 7,655 5.75% due 2/01/2014 (e) 8,505
AAA Aaa 5,155 5.75% due 2/01/2017 (i) 5,643
AAA Aaa 7,210 New York State Dormitory Authority Revenue Bonds (School Districts
Financing Program), Series D, 5.25% due 10/01/2023 (e) 7,569
AAA Aaa 10,000 New York State Dormitory Authority, Revenue Refunding Bonds (Mental
Health Services), Series A, 5.75% due 8/15/2022 (e) 10,933
NR* Aaa 20,000 New York State Local Government Assistance Corporation, Revenue
Refunding Bonds, RIB, Series 468X, 9.12% due 4/01/2021 (d)(g) 20,895
AAA Aaa 160 New York State Medical Care Facilities Finance Agency Revenue Bonds,
Series E, 6.25% due 8/15/2019 (g) 173
Niagara Falls, New York, GO, Public Improvement (e):
AAA Aaa 2,975 6.90% due 3/01/2023 3,215
AAA Aaa 3,190 6.90% due 3/01/2024 3,447
North AAA Aaa 3,500 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 14-A,
Carolina 5.35% due 1/01/2022 (b) 3,604
- --0.3%
North AAA NR* 4,845 North Dakota State, HFA, Revenue Bonds (Housing Finance Program),
Dakota--0.4% Series C, 5.30% due 7/01/2022 (b) 4,950
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Municipal Bonds Insured Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Ohio--0.5% AAA Aaa $ 6,000 Ohio State Water Development Authority, Pollution Control Facilities
Revenue Bonds (Water Control Loan Fund--Water Quality Series), 5.50%
due 6/01/2014 (e) $ 6,744
Oklahoma AAA Aaa 6,385 Oklahoma State, IDR, Refunding (Health System), Series A, 6.25%
- --2.5% due 8/15/2016 (e) 7,207
Oklahoma Transportation Authority, Oklahoma, Turnpike System Revenue
Refunding Bonds (b):
AAA Aaa 18,835 Second Senior Series A, 5.25% due 1/01/2017 20,674
AAA Aaa 3,825 Second Senior Series B, 5.25% due 1/01/2017 4,199
Oregon--1.2% AAA Aaa 8,700 Oregon State Department, Administrative Services, COP, Series A, 6.25%
due 5/01/2010 (a)(b) 10,521
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) 4,833
Pennsylvania AAA NR* 5,000 Pennsylvania HFA, S/F Revenue Bonds, AMT, Series 72A, 5.25% due
- --1.4% 4/01/2021 (e) 5,121
AAA Aaa 6,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 12th Series B,
7% due 5/15/2020 (c)(e) 7,625
AAA Aaa 4,420 Philadelphia, Pennsylvania, Redevelopment Authority Revenue Bonds
(Neighborhood Transformation), Series A, 5.50% due 4/15/2020 (g) 4,815
Puerto AAA Aaa 16,705 Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Rico--1.4% Revenue Bonds, Series A, 5.375% due 8/01/2023 (e) 17,846
Rhode AAA Aaa 6,815 Rhode Island State Economic Development Corporation, Airport Revenue
Island--0.6% Bonds, Series B, 6% due 7/01/2028 (g) 7,765
South AAA Aaa 5,800 South Carolina Jobs, EDA, Industrial Revenue Refunding Bonds
Carolina (South Carolina Electric and Gas Company Project), Series A, 5.20%
- --0.8% due 11/01/2027 (i) 5,985
AAA Aaa 4,200 South Carolina State Public Service Authority Revenue Refunding Bonds,
Series A, 6.25% due 1/01/2022 (b) 4,719
Texas--6.6% AAA Aaa 11,190 Austin, Texas, Utility System Revenue Bonds, Combined, 9.25% due
11/15/2008 (e) 12,394
AAA NR* 17,975 Dallas-Fort Worth, Texas, International Airport Revenue Bonds,
DRIVERS, AMT, Series 202, 10.12% due 11/01/2028 (d)(g) 21,692
El Paso, Texas, Water and Sewer Revenue Refunding and Improvement Bonds,
Series A (i):
AAA Aaa 4,375 6% due 3/01/2018 5,030
AAA Aaa 4,645 6% due 3/01/2019 5,321
AAA Aaa 11,150 Harris County, Texas, Toll Road Revenue Refunding Bonds, Senior Lien,
5.375% due 8/15/2021 (i) 11,941
AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract, COP, Series J, 6.25%
due 12/15/2013 (b) 4,204
NR* NR* 11,800 Matagorda County, Texas, Navigation District Number 1, Revenue Refunding
Bonds (Houston Light and Power Company), Series A, 6.70% due
3/01/2027 (b) 12,084
AAA Aaa 6,000 San Antonio, Texas, Electric and Gas Revenue Bonds, 5.375% due
2/01/2018 (e) 6,435
Texas State Department of Housing and Community Affairs, S/F Mortgage
Revenue Bonds, AMT, Series A (e):
AAA Aaa 2,180 5.45% due 9/01/2023 2,241
AAA Aaa 2,800 5.50% due 3/01/2026 2,879
Utah--1.3% 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) 9,965
Utah Water Finance Agency Revenue Bonds (Pooled Loan Financing Program),
Series A (b):
NR* Aaa 2,515 5.75% due 10/01/2015 2,876
NR* Aaa 3,770 6% due 10/01/2020 4,281
Virginia AAA Aaa 19,755 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding
- --3.8% Bonds, AMT, Series A, 6.10% due 2/01/2011 (b) 22,860
Virginia State, HDA, Commonwealth Mortgage Revenue Bonds:
AAA Aa1 2,285 AMT, Series A, Sub-Series A-4, 5.40% due 1/01/2011 2,442
AAA Aaa 2,270 AMT, Series A, Sub-Series A-4, 5.50% due 1/01/2012 (e) 2,422
AAA Aaa 19,965 Series J, Sub-Series J-1, 5.20% due 7/01/2019 (e) 20,734
Washington AAA Aaa 4,960 Chelan County, Washington, Public Utility District Number 001,
- --4.9% Consolidated Revenue Bonds (Chelan Hydro System), AMT, Series A,
5.45% due 7/01/2037 (b) 5,086
AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6.625%
due 7/01/2004 (a)(g) 36,853
AAA Aaa 18,000 Tacoma, Washington, Electric System Revenue Refunding Bonds, Series A,
5.75% due 1/01/2019 (i) 20,060
West NR* Aaa 11,465 Mason County, West Virginia, PCR, Refunding (Appalachian Power Company),
Virginia 6.85% due 6/01/2022 (e) 11,744
- --2.0% AAA Aaa 12,250 Pleasants County, West Virginia, PCR, Refunding (Potomac-Pleasants),
Series C, 6.15% due 5/01/2015 (b) 13,624
Wisconsin AAA Aaa 9,000 Superior, Wisconsin, Limited Obligation Revenue Refunding Bonds
- --3.9% (Midwest Energy Resources), Series E, 6.90% due 8/01/2021 (g) 11,551
AAA Aaa 4,650 Wisconsin Public Power Inc., Power Supply System Revenue Bonds,
Series A, 5.75% due 7/01/2023 (e) 5,044
Wisconsin State, GO:
AAA Aaa 5,370 AMT, Series B, 6.50% due 5/01/2020 (e) 5,910
AAA Aaa 11,620 AMT, Series B, 6.50% due 5/01/2025 (e) 12,747
AAA Aaa 13,570 Series F, 5.50% due 5/01/2019 (i) 14,909
Total Municipal Bonds (Cost--$1,130,567)--96.5% 1,228,963
Shares
Held Common Stock
23,717 Merrill Lynch Institutional Tax-Exempt Fund++ 23,717
Total Common Stock (Cost--$23,717)--1.9% 23,717
Total Investments (Cost--$1,154,284)--98.4% 1,252,680
Other Assets Less Liabilities--1.6% 21,014
----------
Net Assets--100.0% $1,273,694
==========
(a)Prerefunded.
(b)AMBAC Insured.
(c)Escrowed to maturity.
(d)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at December 31, 2002.
(e)MBIA Insured.
(f)BIG Insured.
(g)FGIC Insured.
(h)FHA Insured.
(i)FSA Insured.
(j)XLCA 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.
++Investments in companies considered to be an affiliate of the Fund
(such companies are defined as "Affiliated Companies" in Section
2(a)(3) of the Investment Company Act of 1940) are as follows:
(in Thousands)
Net Share Net Dividend
Affiliate Activity Cost Income
Merrill Lynch
Institutional
Tax-Exempt Fund 23,717 $23,717 $54
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Alabama--0.3% AAA Aaa $ 3,820 Alabama Incentives Financing Authority, Special Obligation Revenue
Refunding Bonds, Series A, 6% due 10/01/2029 (c) $ 4,307
Alaska--2.9% AAA Aaa 3,000 Alaska State Housing Financial Corporation, General Mortgage Revenue
Refunding, Series A, 6% due 6/01/2027 (f) 3,087
Anchorage, Alaska, School, GO, Series B (e):
AAA Aaa 1,760 5.875% due 12/01/2016 2,030
AAA Aaa 2,100 5.875% due 12/01/2017 2,416
AA+ NR* 27,150 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Sohio
Pipeline--British Petroleum Oil), 7.125% due 12/01/2025 28,335
Arizona--3.7% NR* Aaa 875 Arizona Health Facilities Authority, Hospital System Revenue Refunding
Bonds (Saint Luke's Health Systems), 7.25% due 11/01/2003 (j) 927
BBB Baa2 2,000 Arizona Health Facilities Authority, Revenue Bonds (Catholic Healthcare
West), Series A, 6.625% due 7/01/2020 2,116
NR* Aa1 2,000 Arizona Student Loan Acquisition Authority, Student Loan Revenue Refunding
Bonds, AMT, Senior Series B, 6.60% due 5/01/2010 2,157
AAA Aaa 2,000 Gilbert, Arizona, Water and Sewer Revenue Refunding Bonds, 6.50% due
7/01/2022 (e) 2,160
AAA NR* 1,000 Glendale, Arizona, Development Authority, Educational Facilities Revenue
Refunding Bonds (American Graduate School International), 7.125% due
7/01/2005 (j)(q) 1,147
Maricopa County, Arizona, Alhambra Elementary School District 068, GO,
Series A (c):
AAA Aaa 1,000 6.75% due 7/01/2004 (j) 1,101
AAA Aaa 525 6.75% due 7/01/2014 576
AAA Aaa 1,000 Maricopa County, Arizona, Gilbert Unified School District Number 41, GO,
6.25% due 7/01/2015 (h) 1,166
BBB Baa1 1,000 Maricopa County, Arizona, Hospital Revenue Refunding Bonds (Sun Health
Corporation), 6.125% due 4/01/2018 1,027
BBB Baa2 2,500 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds (Catholic
Healthcare West Project), Series A, 5% due 7/01/2021 2,190
AAA Aaa 1,000 Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Metro Gardens--
Mesa Ridge Project), Series A, 5.65% due 7/01/2019 (f) 1,077
Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding,
Series A:
BB+ Ba1 1,200 (El Paso Electric Company Project), 6.25% due 5/01/2037 1,213
BBB- Baa3 1,000 (Public Service Company of New Mexico Project), 6.30% due 12/01/2026 1,021
NR* A1 2,000 Mohave County, Arizona, IDA, IDR (North Star Steel Company Project),
AMT, 6.70% due 3/01/2020 2,085
Peoria, Arizona, Improvement District No. 8401, Special Assessment Bonds
No. 8802:
BBB+ NR* 430 7.20% due 1/01/2010 446
BBB+ NR* 510 7.20% due 1/01/2013 529
Peoria, Arizona, Improvement District, Special Assessment Bonds No. 8801:
BBB+ NR* 190 7.30% due 1/01/2009 197
BBB+ NR* 395 7.30% due 1/01/2011 410
AAA Aaa 2,330 Phoenix, Arizona, Civic Improvement Corporation, Municipal Facilities,
Excise Tax Revenue Bonds, 5.75% due 7/01/2016 (e) 2,665
NR* Caa2 5,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America
West Airlines Inc. Project), AMT, 6.30% due 4/01/2023 1,815
NR* Aaa 2,720 Phoenix, Arizona, IDA Revenue Bonds (Camelback Crossing), 6.20% due
9/20/2020 (d) 3,012
B+ Ba3 1,000 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson
Electric Power Company Project), Series B, 6% due 9/01/2029 934
BBB- NR* 750 Prescott Valley, Arizona, Improvement District, Special Assessment
Bonds (Sewer Collection System Roadway Repair), 7.90% due 1/01/2012 765
A NR* 1,600 Sedona, Arizona, Sewer Revenue Refunding Bonds, 7% due 7/01/2012 1,729
AAA Aaa 2,000 Tucson, Arizona, Airport Authority Incorporated Revenue Refunding
Bonds, 5.70% due 6/01/2013 (f) 2,076
AA NR* 3,515 Tucson, Arizona, IDA, Senior Living Facilities Revenue Bonds (Christian
Care Tucson Inc. Project), Series A, 6.125% due 7/01/2024 3,884
AAA Aaa 3,180 Univeristy of Arizona, COP, Refunding, Series A, 5.50% due 6/01/2018 (c) 3,517
AAA Aaa 1,000 University of Arizona, COP (University of Arizona Parking and Student
Housing), 5.75% due 6/01/2019 (c) 1,114
NR* NR* 3,000 Vistancia, Arizona, Community Facilities District, GO, 6.75% due
7/15/2022 3,006
Arkansas AAA NR* 185 Arkansas State Development Finance Authority, S/F Mortgage Revenue
- --0.2% Bonds (Mortgage-Backed Securities Program), Series H, 6.15% due
7/01/2016 (d)(l) 197
NR* A2 250 Arkansas State Student Loan Authority Revenue Bonds, AMT, Sub-Series
B, 7.25% due 6/01/2009 288
BBB Baa2 625 Camden, Arkansas, Environmental Improvement Revenue Bonds
(International Paper Co. Project), AMT, Series A, 7.625% due
11/01/2018 665
AAA Aaa 250 Fort Smith, Arkansas, Water, Sewer and Construction Revenue
Refunding Bonds, 6% due 4/01/2004 (f)(j) 267
AAA Aaa 200 Jonesboro, Arkansas, Residential Housing and Health Care Facilities
Board, Hospital Revenue Refunding Bonds (Saint Bernard's Regional Medical
Center), Series B, 5.90% due 7/01/2016 (c) 218
AAA Aaa 300 North Little Rock, Arkansas, Electric Revenue Refunding Bonds, Series A,
6.50% due 7/01/2015 (f) 373
AAA Aaa 250 University of Central Arkansas, Housing System Revenue Bonds, 6.50% due
1/01/2031 (h) 286
California AAA Aaa 9,770 Alameda County, California, COP (Financing Project), 6% due
- --5.7% 9/01/2006 (f)(j) 11,473
BBB+ A3 7,500 California State, Department of Water Resources, Power Supply Revenue
Bonds, Series A, 5.75% due 5/01/2017 8,251
NR* NR* 2,880 Capistrano, California, Unified School District, Community Facility
District, Special Tax Bonds (No. 90-2 Talega), 6% due 9/01/2032 2,902
Chula Vista, California, Community Facilities District, Special Tax
Bonds (No. 06-1, Eastlake Woods Area), Series A:
NR* NR* 1,080 6.05% due 9/01/2020 1,090
NR* NR* 2,000 6.15% due 9/01/2026 2,016
Contra Costa County, California, Special Tax Bonds (Community Facilities
District Number 2001-01):
NR* NR* 1,585 6% due 9/01/2026 1,615
NR* NR* 1,200 6.10% due 9/01/2031 1,229
NR* NR* 4,000 Long Beach, California, Special Tax Bonds (Community Facilities District
No. 3-Pine Ave.), 6.375% due 9/01/2023 4,184
Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Refunding Bonds:
AA- Aaa 7,000 6% due 2/15/2005 (j) 7,765
NR* Aa3 5,160 RIB, Series 370, 10.20% due 2/15/2024 (g) 6,173
NR* NR* 1,100 Poway, California, Unified School District, Special Tax Bonds (Community
District No. 6), Series A, 6.05% due 9/01/2025 1,104
NR* NR* 2,695 Riverside, California, Improvement Bond Act of 1915, Special Assessment
(Riverwalk Assessment District), 6.375% due 9/02/2026 2,779
Roseville, California, Special Tax (Stoneridge Community Facilties
Number 1):
NR* NR* 1,250 6.20% due 9/01/2021 1,286
NR* NR* 1,125 6% due 9/01/2025 1,148
NR* NR* 2,500 6.30% due 9/01/2031 2,562
San Francisco, California, City and County Redevelopment Agency Revenue
Bonds (Community Facilities District Number 6--Mission):
NR* NR* 5,000 6% due 8/01/2021 5,050
NR* NR* 2,500 GO, Series A, 6% due 8/01/2025 2,491
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
California NR* Aaa $ 1,075 San Francisco, California, Uptown Parking Corporation, Parking Revenue
(concluded) Bonds (Union Square), 6% due 7/01/2020 (f) $ 1,214
Santa Margarita, California, Water District, Special Tax Refunding
Bonds (Community Facilities District No. 99), Series 1:
NR* NR* 3,680 6.20% due 9/01/2020 3,775
NR* NR* 3,000 6.25% due 9/01/2029 3,060
Colorado AA NR* 500 Boulder County, Colorado, Hospital Development Revenue Bonds (Longmont
- --2.1% United Hospital Project), 6% due 12/01/2030 539
AAA NR* 555 Boulder County, Colorado, M/F Mortgage Revenue Bonds (Sinton Apartments
Project), AMT, 6.625% due 7/01/2034 (b) 571
Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT:
AA Aa2 350 Senior Series B-2, 7.25% due 10/01/2031 375
NR* Aa2 365 Senior Series B-3, 6.80% due 11/01/2028 386
AA Aa2 340 Senior Series C-2, 7.25% due 10/01/2031 364
AAA Aaa 550 Colorado Water Resource and Power Development Authority, Small Water
Resource Revenue Bonds, Series A, 5.80% due 11/01/2020 (e) 622
A A2 2,575 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series A,
7.50% due 11/15/2023 2,831
Elk Valley, Colorado, Public Improvement Revenue Bonds (Public
Improvement Fee):
NR* NR* 7,560 Series A, 7.35% due 9/01/2031 7,704
NR* NR* 1,400 Series B, 7% due 9/01/2031 1,426
AAA Aaa 3,685 Larimer County, Colorado, Poudre School District Number R-1, GO, 6%
due 12/15/2016 (e) 4,292
BB+ Ba1 6,170 Northwest Parkway, Colorado, Public Highway Authority Revenue Bonds,
First Tier, Sub-Series D, 7.125% due 6/15/2041 6,450
NR* A1 750 Pitkin County, Colorado, GO, Refunding and Improvement Bonds, 6.875%
due 12/01/2024 837
Connecticut AAA Aaa 2,000 Bridgeport, Connecticut, GO, Refunding, Series A, 5.875% due
- --2.5% 7/15/2010 (e)(j) 2,374
AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue
Bonds, 6.60% due 6/15/2014 (f) 1,092
AA A1 2,000 Connecticut State Development Authority Revenue Bonds (General Fund),
Series A, 6.375% due 10/15/2024 2,205
AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal
Facilities Revenue Bonds (Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,689
AAA NR* 1,250 Connecticut State Development Authority, Water Facility Revenue Bonds
(Bridgeport Hydraulic Company), AMT, 6.15% due 4/01/2035 (c) 1,405
AA Aa2 1,000 Connecticut State, GO, Series B, 5.50% due 11/01/2018 1,108
Connecticut State, HFA, Revenue Refunding Bonds (Housing Mortgage
Finance Program):
AAA Aaa 1,000 AMT, Series B, Sub-Series B-2, 5.70% due 5/15/2017 1,052
AAA Aaa 1,515 Series A-1, 6% due 11/15/2028 1,615
AAA Aaa 1,200 Series C-1, 6.30% due 11/15/2017 1,275
Connecticut State Health and Educational Facilities Authority
Revenue Bonds:
AAA Aaa 1,000 (Bridgeport Hospital), Series A, 6.625% due 7/01/2018 (f) 1,024
AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (f) 1,516
AA NR* 1,500 (Waterbury Hospital Issue), Series C, 5.75% due 7/01/2020 1,621
AA NR* 1,000 (Westover School), Series A, 5.70% due 7/01/2030 1,055
AAA Aaa 1,000 (Yale--New Haven Hospital Issue), Series G, 6.50% due 7/01/2012 (f) 1,024
AAA VMIG1++ 200 (Yale University), VRDN, Series U, 1.35% due 7/01/2033 (a) 200
Connecticut State Health and Educational Facilities Authority,
Revenue Refunding Bonds:
AA NR* 2,000 (Eastern Connecticut Health Network), Series A, 6.50% due 7/01/2030 2,289
AA NR* 640 (Sacred Heart University), 6.625% due 7/01/2026 697
AAA Aaa 1,000 (Yale--New Haven Hospital Issue), Series H, 5.70% due 7/01/2025 (f) 1,054
Connecticut State Higher Education, Supplemental Loan Authority
Revenue Bonds (Family Education Loan Program), AMT, Series A:
NR* Aa3 445 6.40% due 11/15/2014 465
NR* Aaa 1,250 5.50% due 11/15/2020 1,316
NR* NR* 1,000 Connecticut State Regional Learning Educational Service Center
Revenue Bonds (Office/Education Center Facility), 7.75% due 2/01/2015 1,040
NR* NR* 1,370 Eastern Connecticut, State Regional Educational Service Center
Revenue Bonds, 6.50% due 5/15/2009 1,389
AAA Aaa 2,000 University of Connecticut, GO, Series A, 5.625% due 3/01/2020 (e) 2,203
AA Baa2 860 Waterbury, Connecticut, GO, 6% due 2/01/2017 (m) 938
Florida NR* NR* 2,200 Bonnet Creek Resort, Florida, Community Development District,
- --5.1% Special Assessment Revenue Bonds, 7.50% due 5/01/2034 2,242
NR* NR* 980 Brooks of Bonita Springs II, Florida, Community Development District,
Capital Improvement Revenue Bonds, Series B, 6.60% due 5/01/2007 996
NR* Aaa 2,725 Duval County, Florida, School Board, COP, 5.75% due 7/01/2017 (h) 3,072
AAA Aaa 6,330 Florida HFA, Revenue Bonds (Antigua Club Apartments), AMT,
Series A-1, 7% due 2/01/2035 (c) 6,668
NR* NR* 2,500 Heritage Isles Community Development District, Florida, Special
Assessment Revenue Refunding Bonds, 5.90% due 11/01/2006 2,503
A+ Aa3 9,500 Jacksonville, Florida, Electric Authority, Water and Sewer Revenue
Bonds, Series A, 6% due 10/01/2024 10,451
NR* NR* 1,435 Lakewood Ranch Community, Florida, Development District Number 5,
Special Assessment Revenue Refunding Bonds, Series B, 6% due 5/01/2011 1,434
AAA NR* 7,000 Lee County, Florida, Airport Revenue Bonds, RIB, AMT, Series 580X,
10.10% due 10/01/2029 (g)(h) 8,498
AAA Aaa 4,500 Lee County, Florida, Transportation Facilities Revenue Bonds, 5.75%
due 10/01/2022 (f) 4,889
Mediterra, Florida, South Community Development District, Capital
Improvement Revenue Bonds:
NR* NR* 1,100 6.85% due 5/01/2031 1,129
NR* NR* 45 Series B, 6.25% due 5/01/2004 45
AAA NR* 970 Orange County, Florida, HFA, Mortgage Revenue Bonds, AMT, Series A,
8.375% due 3/01/2021 (b)(d) 972
AAA Aaa 5,000 Orange County, Florida, Tourist Development, Tax Revenue Bonds,
5.50% due 10/01/2020 (c) 5,514
NR* NR* 890 Panther Trace, Florida, Community Development District, Special
Assessment Revenue Bonds, Series B, 6.50% due 5/01/2009 894
NR* NR* 1,000 Park Place Community Development District, Florida, Special
Assessment Revenue Bonds, 6.75% due 5/01/2032 1,001
NR* NR* 1,615 Preserve at Wilderness Lake, Florida, Community Development District,
Capital Improvement Revenue Bonds, Series B-1, 5.90% due 11/01/2006 1,614
AAA Aaa 2,000 Saint Lucie, Florida, West Services District, Utility Revenue
Refunding Bonds, Senior Lien, 6% due 10/01/2022 (f) 2,256
NR* NR* 3,505 Stoneybrook West, Florida, Community Development District, Special
Assessment Revenue Bonds, Series B, 6.45% due 5/01/2010 3,558
NR* NR* 5,300 Vista Lakes Community, Florida, Development District, Capital
Improvement Revenue Bonds, Series B, 5.80% due 5/01/2008 5,341
Georgia NR* NR* 5,000 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station
- --1.2% Project), 7.90% due 12/01/2024 5,177
AAA Aaa 5,210 College Park, Georgia, Business and IDA, Revenue Bonds (Civic Center
Project), 5.75% due 9/01/2026 (c) 5,723
AAA Aaa 3,450 Fulton County, Georgia, Development Authority Revenue Bonds (Morehouse
College Project), 5.875% due 12/01/2030 (c) 3,804
Hawaii--0.1% BBB Baa1 1,410 Kuakini, Hawaii, Health System, Special Purpose Revenue Bonds, Series A,
6.30% due 7/01/2022 1,404
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Illinois AAA NR* $10,620 Chicago, Illinois, Board of Education, GO, DRIVERS, Series 199, 9.64%
- --5.9% due 12/01/2020 (c)(g) $ 12,693
AAA Aaa 1,400 Chicago, Illinois, GO (Neighborhoods Alive 21 Program), 5.875% due
1/01/2019 (e) 1,571
BB- B2 3,000 Chicago, Illinois, O'Hare International Airport, Special Facility
Revenue Refunding Bonds (American Airlines Inc. Project), 8.20% due
12/01/2024 1,307
AAA Aaa 2,265 Chicago, Illinois, Park District, GO, Refunding, Series B, 5.75% due
1/01/2015 (e) 2,556
AAA Aaa 1,500 Chicago, Illinois, Park District, GO, Series A, 5.75% due 1/01/2016 (e) 1,685
NR* NR* 2,000 Chicago, Illinois, Special Assessment Bonds (Lake Shore East), 6.75%
due 12/01/2032 2,002
AAA Aaa 3,210 Cicero, Illinois, GO, Refunding (Corporate Purpose), 6% due 12/01/2028 (f) 3,615
NR* Aaa 7,000 Decatur, Illinois, GO, Refunding, 6% due 3/01/2025 (e) 7,817
BBB A1 10,000 Hodgkins, Illinois, Environmental Improvement Revenue Bonds (Metro
Biosolids Management LLC Project), AMT, 6% due 11/01/2023 10,311
Illinois State, GO, 1st Series (f):
AAA Aaa 8,890 5.75% due 12/01/2015 10,157
AAA Aaa 3,745 5.75% due 12/01/2016 4,265
AAA Aaa 4,000 5.75% due 12/01/2017 4,555
AAA Aa2 3,000 Illinois State, Sales Tax Revenue Bonds, 6% due 6/15/2020 3,415
AAA Aa1 2,000 Lake County, Illinois, Forest Preservation District, GO (Land
Acquisition and Development), 5.75% due 12/15/2016 2,286
NR* A1 4,400 Southwestern Illinois Development Authority, Sewer Facilities Revenue
Bonds (Monsanto Company Project), AMT, 7.30% due 7/15/2015 4,759
Indiana--1.0% NR* NR* 2,595 Indiana State Educational Facilities Authority, Revenue Refunding
Bonds (Saint Joseph's College Project), 7% due 10/01/2029 2,739
AA NR* 9,100 Indianapolis, Indiana, Local Public Improvement Bond Bank, Revenue
Refunding Bonds, Series D, 6.75% due 2/01/2020 9,324
Iowa--0.8% AAA Aaa 1,000 Iowa City, Iowa, Sewer Revenue Bonds, 5.75% due 7/01/2021 (f) 1,105
NR* NR* 7,000 Iowa Finance Authority, Health Care Facilities Revenue Refunding
Bonds (Care Initiatives Project), 9.25% due 7/01/2025 8,301
Kansas--1.5% AAA Aaa 12,000 Wichita, Kansas, Hospital Revenue Refunding Bonds, RIB, Series III-A,
11.328% due 10/01/2017 (f)(g) 12,566
BBB A3 6,350 Wyandotte County, Kansas, Kansas City Unified Government Revenue
Refunding Bonds (General Motors Corporation Project), 6% due 6/01/2025 6,478
Kentucky--1.3% Kenton County, Kentucky, Airport Board Special Facilities, Airport
Revenue Bonds (Delta Airlines Project), AMT, Series A:
BB Ba3 1,500 7.50% due 2/01/2012 1,323
BB Ba3 4,950 7.50% due 2/01/2020 4,128
BB Ba3 3,635 7.125% due 2/01/2021 2,946
BBB Baa2 8,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ
International Project), AMT, 7% due 6/01/2024 8,329
Louisiana NR* Baa2 34,000 Lake Charles, Louisiana, Harbor and Terminal District, Port Facilities
- --3.9% Revenue Refunding Bonds (Trunkline Long Company Project), 7.75% due
8/15/2022 35,550
BB- NR* 13,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 13,221
Maine--0.8% BBB- Ba1 3,445 Maine Finance Authority, Solid Waste Recycling Facilities Revenue
Bonds (Great Northern Paper Project--Bowater), AMT, 7.75% due 10/01/2022 3,448
AA+ Aa1 6,045 Maine State Housing Authority, Mortgage Purpose Revenue Bonds,
DRIVERS, AMT, Series 170, 10.11% due 11/15/2028 (g) 6,616
Maryland NR* NR* 500 Anne Arundel County, Maryland, Special Obligation Revenue Bonds (Arundel
- --1.3% Mills Project), 7.10% due 7/01/2029 546
NR* VMIG1++ 200 Baltimore County, Maryland, EDR, Refunding (Garrison Forest School
Project), VRDN, 1.65% due 6/01/2026 (a) 200
AA Aa2 600 Carroll County, Maryland, GO (County Commissioners--Consolidated Public
Improvement), 6.50% due 10/01/2004 (j) 662
NR* Aa2 1,000 Maryland State Community Development Administration, Department of
Housing and Community Development, Housing Revenue Bonds, AMT,
Series B, 6.15% due 1/01/2021 1,072
NR* Aa2 1,185 Maryland State Community Development Administration, Department of
Housing and Community Development, Residential Revenue Refunding Bonds,
Series A, 5.60% due 3/01/2017 (b) 1,249
NR* Aaa 1,000 Maryland State Community Development Administration, Department of
Housing and Community Development Revenue Bonds (Waters Landing
II Apartments), AMT, Series A, 5.875% due 8/01/2033 1,062
Maryland State Community Development Administration, Department of
Housing and Community Development Revenue Refunding Bonds, S/F Program:
NR* Aa2 500 4th Series, 6.45% due 4/01/2014 520
NR* Aa2 250 6th Series, 7.05% due 4/01/2017 258
NR* NR* 445 Maryland State Economic Development Corporation Revenue Bonds (Health
and Mental Hygiene Program), Series A, 7.125% due 3/01/2006 476
A- NR* 1,000 Maryland State Energy Financing Administration, Solid Waste Disposal
Revenue Bonds, Limited Obligation (Wheelabrator Water Projects), AMT,
6.45% due 12/01/2016 1,073
AAA Aaa 625 Maryland State Health and Higher Educational Facilities Authority
Revenue Bonds (University of Maryland Medical System), Series B, 7%
due 7/01/2022 (e) 798
Maryland State Health and Higher Educational Facilities Authority,
Revenue Refunding Bonds:
AAA Aaa 1,470 (Maryland General Hospital), 6.125% due 7/01/2019 (f) 1,591
NR* NR* 900 (Memorial Hospital of Cumberland), 6.50% due 7/01/2004 (j) 966
Maryland Water Quality Financing Administration, Revolving Loan Fund
Revenue Bonds, Series A:
AA Aa2 300 6.375% due 9/01/2010 324
AA Aa2 500 6.55% due 9/01/2014 507
NR* Aa2 400 Montgomery County, Maryland, Housing Opportunities Commission, S/F
Mortgage Revenue Refunding Bonds, Series A, 5.75% due 7/01/2013 428
NR* Baa3 1,000 Montgomery County, Maryland, Revenue Authority, Golf Course System
Revenue Bonds, Series A, 6.125% due 10/01/2006 (j) 1,051
NR* A2 1,500 Northeast Maryland, Waste Disposal Authority, Solid Waste Revenue
Bonds (Montgomery County Resource Recovery Project), AMT, Series A,
6.30% due 7/01/2016 1,555
AAA NR* 500 Prince George's County, Maryland, Housing Authority, Mortgage Revenue
Refunding Bonds (Parker Apartments Project), Series A, 7.25% due
11/20/2016 (d) 511
AA+ Aa3 1,000 University of Maryland, System Auxiliary Facility and Tuition
Revenue Bonds, Series A, 5.75% due 10/01/2019 1,133
Massachusetts AA Aa2 1,000 Massachusetts Bay Transportation Authority Revenue Bonds (General
- --1.5% Transportation System), Series A, 7% due 3/01/2021 1,294
AAA Aaa 520 Massachusetts Education Loan Authority, Education Loan Revenue Bonds,
AMT, Issue E, Series A, 7.375% due 1/01/2012 (c) 545
AAA Aaa 710 Massachusetts Educational Financing Authority, Education Loan Revenue
Refunding Bonds, AMT, Issue E, 5.85% due 7/01/2014 (c) 773
AAA Aaa 2,500 Massachusetts State, HFA, Housing Revenue Refunding Bonds, Series B,
6.05% due 12/01/2009 (f) 2,653
AAA Aaa 1,170 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT, Series 48,
6.35% due 6/01/2026 (f) 1,230
AA Aa2 1,340 Massachusetts State, HFA, S/F Housing Revenue Refunding Bonds, AMT,
Series 40, 6.65% due 12/01/2027 1,403
AAA Aaa 2,575 Massachusetts State Health and Educational Facilities Authority
Revenue Bonds (Medical Center of Central Massachusetts), CARS,
Series B, 11.52% due 6/23/2022 (c)(g) 3,154
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Massachusetts Massachusetts State Health and Educational Facilities Authority,
(concluded) Revenue Refunding Bonds:
NR* Ba2 $ 350 (Bay Cove Human Services Issue), Series A, 5.85% due 4/01/2004 $ 358
AAA Aaa 85 (Boston College), Series J, 6.625% due 7/01/2021 (e) 86
AAA Aaa 1,900 (Massachusetts General Hospital), Series F, 6.25% due 7/01/2012 (c) 2,254
NR* Ca 758 (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 (k) 61
NR* Ca 9,359 (New England Memorial Hospital), Series B, 6.25% due 7/01/2023 (k) 749
AAA Aaa 550 (Stonehill College), Series E, 6.60% due 7/01/2020 (f) 563
Massachusetts State Water Pollution Abatement Trust, Water Abatement
Revenue Bonds, Series A:
AA+ Aaa 1,550 6.375% due 2/01/2004 (j) 1,667
AA+ Aaa 130 6.375% due 2/01/2015 139
NR* Aaa 1,600 Montachusett, Massachusetts, Regional Vocational Technical School
District, GO, 5.95% due 1/15/2020 (f) 1,820
AAA Aaa 90 Southern Berkshire, Massachusetts, Regional School District, GO, 7%
due 4/15/2011 (f) 92
Michigan AAA Aaa 1,075 Crawford Ausable, Michigan, School District, School Building and
- --2.0% Site, GO, 5.625% due 5/01/2016 1,203
BBB Baa2 5,000 Delta County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (Mead Westvaco--
Escanaba), Series A, 6.25% due 4/15/2027 4,969
AAA Aaa 2,900 Detroit, Michigan, Water Supply System Revenue Refunding Bonds, INFLOS,
11.26% due 7/01/2022 (e)(g) 3,034
BBB Baa2 500 Dickinson County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (International Paper
Company Project), Series A, 5.75% due 6/01/2016 507
AAA Aaa 1,000 Eastern Michigan University Revenue Refunding Bonds, 6% due 6/01/2024 (c) 1,145
AAA Aaa 2,000 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility
Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series A, 6.375% due 5/15/2017 (f)(j) 2,076
AA+ NR* 175 Michigan State, HDA, Revenue Refunding Bonds, AMT, Series B, 6.20%
due 6/01/2027 (b) 183
Michigan State Hospital Finance Authority Revenue Refunding Bonds,
Series A:
AA Aa2 2,000 (Ascension Health Credit), 6.125% due 11/15/2026 2,169
AAA Aaa 1,500 (Mercy Mount Clemens), 6% due 5/15/2014 (f) 1,679
Michigan State Strategic Fund, Limited Obligation Revenue Refunding
Bonds:
AAA Aaa 1,060 (Detroit Edison Company), Series AA, 6.40% due 9/01/2025 (f) 1,200
A- A3 7,300 (Detroit Edison Pollution Control), Series C, 5.45% due 9/01/2029 7,385
Minnesota A A1 1,400 Anoka County, Minnesota, Solid Waste Disposal Revenue Bonds (Natural
- --1.4% Rural Utilities), AMT, Series A, 6.95% due 12/01/2008 1,436
AAA NR* 3,530 Coon Rapids, Minnesota, M/F Housing Revenue Refunding Bonds (Browns
Meadow), AMT, 6.85% due 8/01/2033 (b) 3,611
NR* Aa2 1,000 Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling Hills
Project), Series A, 6.15% due 8/20/2031 (d) 1,109
AAA NR* 1,500 Minneapolis and St. Paul, Minnesota, Metropolitan Airports Commission,
Airport Revenue Bonds, DRIVERS, AMT, Series 203, 9.61% due 1/01/2012 (e)(g) 1,845
A- NR* 485 Minneapolis, Minnesota, Community Development Agency, M/F Housing
Revenue Bonds (Riverside Homes Project), AMT, 6.20% due 9/01/2029 494
A- NR* 750 Minneapolis, Minnesota, Community Development Agency, Supported
Development Revenue Bonds (Common Bond Fund), AMT, Series 2, 6.20%
due 6/01/2017 794
NR* A3 1,500 Minneapolis, Minnesota, Health Care System Revenue Bonds (Allina
Health System), Series A, 5.70% due 11/15/2022 1,538
AA+ Aa1 550 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, Series L,
6.70% due 7/01/2020 569
NR* Aa2 1,110 Ramsey County, Minnesota, Housing and Redevelopment Authority, M/F
Housing Revenue Bonds (Hanover Townhouses Project), AMT, 6% due 7/01/2031 1,147
NR* Aaa 1,000 Saint Cloud, Minnesota, Health Care Revenue Refunding Bonds (Saint
Cloud Hospital Obligation Group), Series A, 6.25% due 5/01/2020 (h) 1,133
AAA Aaa 1,000 Saint Francis, Minnesota, Independent School District No. 015, GO,
Series A, 6.35% due 2/01/2013 (h) 1,132
BBB Baa2 990 Sartell, Minnesota, IDR, Refunding (Champion International Corporation),
6.95% due 7/01/2012 1,012
AA NR* 1,500 Waconia, Minnesota, Health Care Facilities Revenue Bonds (Ridgeview
Medical Center Project), Series A, 6.125% due 1/01/2029 (m) 1,633
Mississippi NR* Aaa 2,255 Mississippi Home Corporation, S/F Mortgage Revenue Bonds (Access
- --0.2% Program), AMT, Series A, 6.90% due 6/01/2024 (d) 2,372
Missouri--0.5% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement
Bonds (Gravois Bluffs):
NR* NR* 2,060 6.75% due 10/01/2015 2,125
NR* NR* 4,000 7% due 10/01/2021 4,213
Nevada--2.1% AAA Aaa 8,125 Clark County, Nevada, Airport Revenue Bonds, Sub-Lien, Series A, 6%
due 7/01/2010 (f)(j) 9,695
Las Vegas, Nevada, Local Improvement Bonds, Special Assessment,
Special Improvement District Number 808, Summerlin:
NR* NR* 1,775 5.875% due 6/01/2009 1,833
NR* NR* 2,050 6.125% due 6/01/2012 2,115
NR* NR* 2,285 6.25% due 6/01/2013 2,358
Sparks, Nevada, Redevelopment Agency, Tax Allocation Revenue Refunding
Bonds, Series A:
AA NR* 3,110 6% due 1/15/2015 3,435
AA NR* 6,315 6% due 1/15/2023 6,868
New CCC B2 825 Camden County, New Jersey, Pollution Control Financing Authority,
Jersey--2.2% Solid Waste Resource Recovery Revenue Refunding Bonds, AMT, Series B,
7.50% due 12/01/2009 818
NR* NR* 3,300 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest
Village Inc. Facility), Series A, 7.25% due 11/15/2031 3,285
B+ B3 5,025 New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines
Inc. Project), 6.40% due 9/15/2023 3,576
New Jersey State Turnpike Authority, Turnpike Revenue Refunding
Bonds (f)(g):
NR* Aaa 10,000 DRIVERS, Series 155, 9.722% due 1/01/2018 12,273
NR* Aaa 5,000 RIB, Series 315, 9.74% due 1/01/2018 6,137
A A1 1,730 Tobacco Settlement Financing Corporation, New Jersey, Asset-Backed
Revenue Refunding Bonds, 6% due 6/01/2037 1,683
New AAA Aaa 300 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds
Mexico--0.1% (Evangelical Lutheran Project), 6.45% due 12/01/2017 (h) 307
AAA NR* 250 New Mexico Mortgage Finance Authority, Revenue Refunding Bonds,
Mortgage-Backed Securities, Series F, 7% due 1/01/2026 (d)(l) 285
AAA Aaa 250 Santa Fe County, New Mexico, Correctional System Revenue Bonds, 6%
due 2/01/2027 (h) 299
New York AAA Aaa 9,500 Metropolitan Transportation Authority, New York, Commuter
- --15.3% Facilities, Service Contract Revenue Refunding Bonds, Series 8,
5.50% due 7/01/2013 (h)(j) 11,017
AAA Aaa 3,000 Metropolitan Transportation Authority, New York, Service Contract
Revenue Refunding Bonds, Series A, 5.50% due 7/01/2020 (f) 3,278
AAA Aaa 10,000 Metropolitan Transportation Authority, New York, Transit Facilities
Revenue Bonds, Series A, 5.625% due 7/01/2007 (f)(j) 11,591
NR* NR* 3,230 New York City, New York, City IDA, Civic Facility Revenue Bonds
(Special Needs Facilities Pooled Program), Series C-1, 6% due 7/01/2012 3,230
BBB- Ba2 4,050 New York City, New York, City IDA, Special Facility Revenue Bonds
(British Airways PLC Project), AMT, 7.625% due 12/01/2032 3,457
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
New York NR* Aaa $10,000 New York City, New York, City Municipal Water Finance Authority,
(concluded) Water and Sewer System Revenue Bonds, RIB, Series 158, 9.727% due
6/15/2026 (f)(g) $ 12,353
AAA Aaa 3,000 New York City, New York, City Transit Authority, Triborough
Metropolitan Transportation Authority, COP, 5.75% due 1/01/2020 (c) 3,329
New York City, New York, City Transitional Finance Authority
Revenue Bonds, Future Tax Secured (j):
AA+ Aa2 8,000 Series A, 6% due 8/15/2009 9,571
AA+ Aa2 12,000 Series B, 6% due 5/15/2010 14,367
AA+ Aa2 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 9,153
New York City, New York, GO, Refunding:
AAA Aaa 6,600 Series A, 6% due 5/15/2021 (n) 7,435
AAA Aaa 10,000 Series A, 6.25% due 5/15/2026 (n) 11,478
AAA Aaa 4,000 Series B, 8.25% due 6/01/2006 (n) 4,772
AAA Aaa 4,000 Series C, 5.875% due 2/01/2016 (e) 4,500
AAA Aaa 15,000 Series G, 5.75% due 2/01/2014 (f) 16,665
AAA Aaa 1,000 Series H, 6% due 8/01/2017 (n) 1,101
AAA Aaa 10,000 New York City, New York, GO, Series B, 5.875% due 8/01/2015 (f) 11,410
AA+ Aa2 12,015 New York City, New York, Transitional Finance Authority Revenue Refunding
Bonds, Series C, 5.875% due 11/01/2015 13,830
BBB- Baa3 3,110 New York State Dormitory Authority Revenue Bonds (Mount Sinai New York
University Health Obligation), Series B, 6.25% due 7/01/2022 3,170
New York State Dormitory Authority, Revenue Refunding Bonds:
AA- A3 21,720 Series B, 5.25% due 11/15/2023 23,815
AA- A3 5,000 (State University Educational Facilities), Series A, 7.50% due
5/15/2013 6,534
AAA Aaa 3,400 New York State Environmental Facilities Corporation, State Clean Water
and Drinking, Revolving Funds Revenue Bonds (Pooled Loan Program),
Series B, 5.875% due 1/15/2019 3,845
NR* NR* 95 Suffolk County, New York, IDA, Civic Facility Revenue Bonds (Special
Needs Facilities Pooled Program), Series D-1, 6% due 7/01/2012 95
NR* NR* 705 Westchester County, New York, IDA, Civic Facilities Revenue Bonds
(Special Needs Facilities Pooled Program), Series E-1, 6% due 7/01/2012 704
North AAA Aaa 1,195 Bladen County, North Carolina, GO, 5.60% due 5/01/2018 (h) 1,345
Carolina AAA Aaa 920 Brunswick County, North Carolina, COP, 6% due 6/01/2016 (h) 1,064
- --2.2% BBB+ A3 500 Chatham County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue
Bonds (Carolina Power and Light Company), 6.30% due 6/15/2014 512
AAA Aaa 1,000 Cumberland County, North Carolina, COP (Civic Center Project), Series A,
6.40% due 12/01/2004 (c)(j) 1,115
NR* Baa2 1,500 Haywood County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Champion International
Corporation Project), AMT, 6.25% due 9/01/2025 1,525
NR* Aaa 750 Iredell County, North Carolina, Public Facilities, Corporate Installment
Payment Revenue Bonds (School Projects), 6% due 6/01/2017 (c) 869
BBB Baa2 2,000 Martin County, North Carolina, Industrial Facilities and Pollution
Control Financing Authority Revenue Bonds (Solid Waste Disposal--
Weyerhaeuser Company), AMT, 6.80% due 5/01/2024 2,080
AA- Aa2 500 New Hanover County, North Carolina, Public Improvement, GO, 5.75%
due 11/01/2015 584
North Carolina Eastern Municipal Power Agency, Power System
Revenue Bonds:
AAA Aaa 1,500 Series B, 5.875% due 1/01/2021 (f) 1,651
BBB Baa3 4,000 Series D, 6.75% due 1/01/2026 4,327
North Carolina HFA, S/F Revenue Bonds:
AA Aa2 980 AMT, Series X, 6.70% due 9/01/2026 1,013
AA Aa2 1,130 Series W, 6.50% due 3/01/2018 1,167
NR* NR* 2,500 North Carolina Medical Care Commission, Health Care Facilities,
First Mortgage Revenue Bonds (Presbyterian Homes Project), 6.875%
due 10/01/2021 2,671
NR* NR* 1,625 North Carolina Medical Care Commission, Retirement Facilities,
First Mortgage Revenue Bonds (Forest at Duke Project), 6.375%
due 9/01/2032 1,636
North Carolina Municipal Power Agency Number 1, Catawba Electric
Revenue Refunding Bonds, Series B:
BBB+ Baa1 500 6.375% due 1/01/2013 554
A NR* 1,080 6.375% due 1/01/2013 1,214
NR* A2 1,175 North Carolina State Educational Assistance Authority Revenue Bonds
(Guaranteed Student Loan), AMT, Sub-Lien, Series C, 6.35% due 7/01/2016 1,240
Piedmont, North Carolina, Triad Airport Authority, Airport Revenue
Refunding Bonds, Series A (h):
AAA Aaa 1,000 6.375% due 7/01/2016 1,185
AAA Aaa 1,000 6% due 7/01/2024 1,142
AAA Aaa 1,000 Randolph County, North Carolina, COP, 5.75% due 6/01/2022 (h) 1,088
Ohio--3.8% AAA Aaa 8,950 Butler County, Ohio, Transportation Improvement District, Series A,
5.125% due 4/01/2017 (h) 9,625
NR* NR* 1,000 Cuyahoga County, Ohio, Health Care Facilities Revenue Refunding Bonds
(Benjamin Rose Institute Project), 5.50% due 12/01/2028 887
AAA Aaa 1,200 Huron County, Ohio, GO, Human Services Building, 7.25% due 12/01/2013 (f) 1,402
NR* NR* 2,000 Lucas County, Ohio, Hospital Revenue Bonds (Flower Hospital), 6.125%
due 12/01/2004 (j) 2,183
BBB A3 2,000 Moraine, Ohio, Solid Waste Disposal Revenue Bonds (General Motors Corp.
Project), AMT, 6.75% due 7/01/2014 2,213
AAA Aaa 3,000 North Canton, Ohio, City School District GO, 6.70% due 12/01/2004 (c)(j) 3,362
Ohio HFA, Mortgage Revenue Bonds, AMT (d):
NR* Aaa 1,160 Series A-1, 6.15% due 3/01/2029 1,225
AAA Aaa 445 Series B-2, 6.70% due 3/01/2025 463
NR* Aaa 8,615 Ohio HFA, Residential Mortgage Revenue Bonds, Series A-1, 6.35% due
9/01/2031 (d) 9,180
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) 8,188
AA Aa2 1,000 Ohio State Higher Educational Facility, Commission Revenue Refunding
Bonds (Case Western Reserve University), Series D, 6.25% due 7/01/2014 1,218
AAA Aaa 1,000 Ohio State Water Development Authority, Pollution Control Facilities
Revenue Refunding Bonds (Pennsylvania Power Co. Project), 6.15% due
8/01/2023 (c) 1,084
AAA Aaa 3,005 Toledo-Lucas County, Ohio, Lodging Tax Revenue Refunding Bonds
(Convention Center Project), 5.70% due 10/01/2015 (f) 3,405
NR* Aa3 1,000 Toledo-Lucas County, Ohio, Port Authority Revenue Refunding Bonds
(Cargill Inc. Project), 5.90% due 12/01/2015 1,032
AAA Aaa 2,000 Westerville, Ohio, Minerva Park and Blendon Township, Joint Hospital
District, Revenue Refunding Bonds (Saint Ann's Hospital), Series B,
7% due 9/15/2003 (c)(i)(j) 2,049
Oregon--0.8% Forest Grove, Oregon, Campus Improvement Revenue Refunding Bonds
(Pacific University)(r):
AA NR* 250 6% due 5/01/2015 279
AA NR* 250 6.20% due 5/01/2020 279
AAA Aaa 2,485 Jackson County, Oregon, Central Point School District Number 006, GO,
5.75% due 6/15/2017 (e) 2,812
Oregon State Housing and Community Services Department, Mortgage
Revenue Refunding Bonds (S/F Mortgage Program):
NR* Aa2 265 6.40% due 7/01/2018 277
NR* Aa2 115 AMT, 6.20% due 7/01/2027 121
NR* Aaa 500 Portland, Oregon, M/F Housing Authority Revenue Bonds (Lovejoy
Station Apartments Project), AMT, 5.90% due 7/01/2023 (f) 527
NR* Aaa 500 Portland, Oregon, Sewer System Revenue Bonds, RIB, Series 386, 9.60%
due 8/01/2020 (e)(g) 687
NR* Aaa 3,190 Portland, Oregon, Urban Renewal and Redevelopment Revenue Bonds
(South Park Blocks), Series A, 5.75% due 6/15/2018 (c) 3,590
NR* Aaa 1,000 Portland, Oregon, Urban Renewal and Redevelopment Revenue Refunding
Bonds (Downtown Waterfront), Series A, 5.75% due 6/15/2018 (c) 1,125
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Pennsylvania AAA Aaa $ 7,000 Allegheny County, Pennsylvania, Port Authority, Special Transportation
- --1.4% Revenue Bonds, 6.125% due 3/01/2009 (f)(j) $ 8,335
AAA Aaa 2,220 Allegheny County, Pennsylvania, Sanitation Authority, Sewer Revenue
Bonds, 5.75% due 12/01/2017 (f) 2,498
NR* NR* 1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial
Development, AMT, 7.75% due 12/01/2017 1,300
A- NR* 5,000 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds
(Guthrie Health), Series A, 5.875% due 12/01/2031 5,071
Rhode NR* NR* 4,685 Cranston, Rhode Island, GO, BAN, Refunding, 8.25% due 2/12/2003 4,699
Island--1.8% AA+ Aa2 8,075 Rhode Island Housing and Mortgage Finance Corporation Revenue Bonds,
DRIVERS, AMT, Series 156, 10.008% due 4/01/2029 (g) 8,756
AAA Aaa 6,815 Rhode Island State Economic Development Corporation, Airport Revenue Bonds,
Series B, 6% due 7/01/2028 (e) 7,765
AA NR* 1,000 Rhode Island State Economic Development Corporation Revenue Bonds
(Providence Place Mall), 6.125% due 7/01/2020 (m) 1,118
South BBB+ Baa2 5,400 Medical University, South Carolina, Hospital Authority, Hospital
Carolina--0.4% Facilities Revenue Refunding Bonds, Series A, 6.375% due 8/15/2027 5,550
South NR* Aaa 3,750 Pierre, South Dakota, School District Number 32-2, GO, 5.75%
Dakota--0.3% due 8/01/2020 (h) 4,137
Tennessee--2.3% Chattanooga, Tennessee, Industrial Development Board, Lease Rent
Revenue Bonds (Southside Redevelopment Corporation) (c):
AAA Aaa 4,485 5.75% due 10/01/2017 5,096
AAA Aaa 3,740 5.75% due 10/01/2018 4,223
BBB- Ba1 4,950 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling
Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 4,809
AA Aa2 5,000 Metropolitan Government of Nashville and Davidson County, Tennessee,
GO, 5.875% due 5/15/2026 5,452
NR* NR* 2,000 Metropolitan Knoxville, Tennessee, Airport Authority, Special Purpose
Revenue Bonds (Northwest Airlines Inc. Project), AMT, 8% due 4/01/2032 1,612
NR* Aaa 2,500 Robertson and Sumner Counties, Tennessee, White House Utility District,
Water Revenue Bonds, 6% due 1/01/2010 (h)(j) 2,950
BBB+ Baa1 3,800 Shelby County, Tennessee, Health, Educational and Housing Facility
Board, Hospital Revenue Refunding Bonds (Methodist Healthcare), 6.50%
due 9/01/2026 3,991
Texas--8.8% Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.), First Tier, Series A:
BBB- Baa3 4,300 6.60% due 1/01/2021 4,392
BBB- Baa3 2,300 6.70% due 1/01/2028 2,356
AAA Aaa 5,300 Austin, Texas, Revenue Bonds (Town Lake Community Events Center
Venue), 6.20% due 11/15/2029 (e) 6,136
Bexar County, Texas, Health Facilities Development Corporation
Revenue Refunding Bonds (Army Retirement Residence Project):
BBB- NR* 600 6.125% due 7/01/2022 602
BBB- NR* 1,750 6.30% due 7/01/2032 1,757
AAA NR* 1,415 Cameron County, Texas, Housing Finance Corporation, S/F Mortgage
Revenue Refunding Bonds, Series B-1, 6.75% due 9/01/2025 (d)(l) 1,481
AAA NR* 10,125 Dallas-Fort Worth, Texas, International Airport Revenue Bonds,
DRIVERS, AMT, Series 201, 10.12% due 11/01/2024 (e)(g) 12,282
AA NR* 1,260 Fort Bend County, Texas, Municipal Utility District Number 23, GO,
6.625% due 9/01/2024 1,446
AA+ Aa1 1,400 Fort Worth, Texas, Certificates of Obligation, GO, 6.25% due
3/01/2021 1,518
AA Baa2 1,000 Gregg County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Good Shepherd Medical Center Project),
6.875% due 10/01/2020 (r) 1,167
NR* Ba2 1,465 Gulf Coast, Texas, IDA, Solid Waste Disposal Revenue Bonds
(Citgo Petroleum Corporation Project), AMT, 7.50% due 5/01/2025 1,448
NR* Aa3 1,000 Harris County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds, RITR, Series 6, 9.195% due 12/01/2027 (g)(i) 1,291
A- Baa1 1,000 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.95% due 4/01/2030 1,070
AAA Aaa 1,000 Pflugerville, Texas, Independent School District, GO, 5.75%
due 8/15/2020 1,102
BBB Baa2 2,495 Red River Authority, Texas, PCR, Refunding (Celanese Project),
Series A, 6.45% due 11/01/2030 2,546
AA NR* 1,000 Red River, Texas, Education Finance Revenue Bonds (Saint Mark's
School--Texas Project), 6% due 8/15/2019 1,099
NR* Aaa 890 South Plains, Texas, Housing Finance Corporation, S/F Mortgage
Revenue Bonds, AMT, Series A, 7.30% due 9/01/2031 1,016
Southeast Texas, Housing Finance Corporation Revenue Bonds, AMT
(d)(o):
NR* Aaa 1,100 Series A, 8% due 11/01/2025 1,214
NR* Aaa 475 Series B, 8.50% due 11/01/2025 509
AA Aa1 800 Texas State, GO, Veterans' Housing Assistance Fund II, AMT,
Series A, 7% due 12/01/2025 835
AA NR* 805 Texas State, GO, Water Development Board, 7% due 8/01/2004 (j) 877
Texas State Public Finance Authority, Building Revenue Bonds
(General Services Commission Project)(h):
AAA Aaa 2,100 Series A, 6% due 2/01/2020 2,357
AAA Aaa 1,000 Series B, 6% due 8/01/2015 1,157
NR* Baa3 1,750 Texas State Student Housing Corporation, Student Housing Revenue
Bonds (Midwestern State University Project), 6.50% due 9/01/2034 1,675
AAA Aaa 48,000 Texas State Turnpike Authority, Central Texas Turnpike System
Revenue Bonds, First Tier, Series A, 5.75% due 8/15/2038 (c) 52,445
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) 5,569
Utah--1.1% NR* NR* 2,000 Tooele County, Utah, PCR, Refunding (Laidlaw Environmental), AMT,
Series A, 7.55% due 7/01/2027 (k) 0
AAA Aaa 12,000 Weber County, Utah, Municipal Building Authority, Lease Revenue Bonds,
7.50% due 12/15/2004 (j) 13,655
Virginia BBB+ A3 2,425 Chesterfield County, Virginia, IDA, PCR (Virginia Electric and Power
- --0.6% Company), Series B, 5.875% due 6/01/2017 2,525
BBB- Baa3 4,900 Mecklenburg County, Virginia, IDA, Exempt Facility Revenue Refunding
Bonds (UAE LP Project), 6.50% due 10/15/2017 4,910
Washington AAA Aaa 2,065 Kitsap County, Washington, GO, 5.875% due 7/01/2020 (c) 2,291
- --1.0% AAA Aaa 2,500 Port Seattle, Washington, Special Facilities Revenue Bonds, Series A,
6% due 9/01/2029 (f) 2,836
AAA Aaa 3,010 Seattle, Washington, Drain and Wastewater Utility Revenue Bonds,
5.75% due 11/01/2022 (f) 3,305
NR* NR* 2,500 Seattle, Washington, Housing Authority, Housing Revenue Bonds
(Replacement Housing Project), 6.125% due 12/01/2032 2,507
AAA Aaa 1,625 University of Washington, University Revenue Bonds (Student
Facilities Fee), 5.875% due 6/01/2017 (h) 1,824
West BBB Baa2 7,500 Upshur County, West Virginia, Solid Waste Disposal Revenue
Virginia Bonds (TJ International Project), AMT, 7% due 7/15/2025 7,826
- --0.6%
Wisconsin NR* Aaa 2,050 Waterford, Wisconsin, Graded Joint School District Number 1,
- --2.1% GO, Refunding, 5.75% due 4/01/2018 (e) 2,300
NR* Aa2 14,760 Wisconsin Housing and EDA, Home Ownership Revenue Refunding Bonds,
RITR, AMT, Series 18, 9.912% due 9/01/2028 (g) 16,016
AAA Aaa 7,265 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (f) 8,182
Wyoming--1.1% AAA Aaa 8,400 Sweetwater County, Wyoming, PCR, Refunding (Idaho Power Company
Project), Series A, 6.05% due 7/15/2026 (f) 9,568
BB+ Ba3 4,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC
Corporation Project), AMT, Series A, 7% due 6/01/2024 3,708
Guam--0.0% AAA NR* 115 Guam Housing Corporation, S/F Mortgage Revenue Bonds, AMT, Series A,
5.75% due 9/01/2031 (o) 123
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Municipal Bonds National Portfolio
S&P Moody's Face
Ratings Ratings Amount Issue Value
Puerto AAAr Aaa $ 3,500 Puerto Rico Commonwealth, GO, Refunding, RITR, Class R, Series 3,
Rico--1.2% 10.97% due 7/01/2016 (f)(g) $ 4,608
Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B:
AAA Aaa 2,000 5.875% due 7/01/2021 (f) 2,259
A Baa1 1,000 6% due 7/01/2026 1,102
AAA Aaa 800 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES,
Series T, 5.80% due 7/01/2004 (g)(h)(j) 940
NR* Aa2 2,000 Puerto Rico Industrial Tourist Educational, Medical and Environmental
Control Facilities Revenue Bonds (Ascension Health), RIB, Series 377,
10.45% due 11/15/2030 (g) 2,411
Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds, Series E:
BBB+ Baa3 2,750 5.70% due 8/01/2025 2,937
BBB+ Baa3 1,000 5.75% due 8/01/2030 1,081
Virgin BBB- Baa3 8,000 Virgin Islands Government Refinery Facilities Revenue Bonds
Islands--0.7% (Hovensa Coker Project), AMT, 6.50% due 7/01/2021 8,070
Total Municipal Bonds (Cost--$1,127,892)--95.8% 1,195,085
Shares
Held Common Stock
107 Horizon Natural Resources Company (k)(p) 1
38,223 Merrill Lynch Institutional Tax-Exempt Fund** 38,223
Total Common Stock (Cost--$39,406)--3.1% 38,224
Total Investments (Cost--$1,167,298)--98.9% 1,233,309
Other Assets Less Liabilities--1.1% 13,852
----------
Net Assets--100.0% $1,247,161
==========
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at December 31, 2002.
(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 December 31, 2002.
(h)FSA Insured.
(i)Escrowed to maturity.
(j)Prerefunded.
(k)Non-income producing security.
(l)FNMA Collateralized.
(m)Radian Assurance.
(n)XLCA Insurance.
(o)FHLMC Collateralized.
(p)Represents entitlement received from a bankruptcy exchange for
Peninsula Ports, 6.90% due 5/22/2022.
(q)Connie Lee Insured.
(r)Radian Insured.
*Not Rated.
**Investments in companies considered to be an affiliate of the Fund
(such companies are defined as "Affiliated Companies" in Section
2(a)(3) of the Investment Company Act of 1940) are as follows:
(in Thousands)
Net Share Net Dividend
Affiliate Activity Cost Income
Merrill Lynch Institutional
Tax-Exempt Fund 38,223 $38,223 $13,151
++Highest short-term rating issued by Moody's Investors Service,
Inc.
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Alabama--1.7% AA Aa3 $ 7,675 Alabama State Public School and College Authority, Capital Improvement
Revenue Bonds, Series D, 5% due 8/01/2003 $ 7,848
AAA Aaa 2,400 Birmingham, Alabama, GO, Refunding and Improvement, Series B, 4% due
12/01/2004 (c) 2,520
Alaska--0.0% A1+ VMIG1++ 300 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Exxon Pipeline
Company Project), VRDN, Series A, 1.55% due 12/01/2033 (b) 300
Arizona--4.4% AA Aa2 2,345 Arizona, Agriculture Improvement and Power District, Electric System
Revenue Refunding Bonds (Salt River Project), Series B, 7% due 1/01/2005 2,602
Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Arizona Public Service Company):
BBB Baa1 10,000 Series D, 3.75% due 4/08/2003 10,035
BBB Baa1 4,000 Series E, 3.75% due 4/08/2003 4,014
AAA NR* 4,720 Phoenix, Arizona, Civic Improvement Corporation, Wastewater System,
Lease Revenue Bonds, 6.125% due 7/01/2003 (a) 4,930
AAA Aaa 4,285 Pima County, Arizona, Unified School District Number 6, Marana, GO,
Series A, 5.75% due 7/01/2003 (a)(f) 4,425
California A1+ NR* 7,300 California Pollution Control Financing Authority, PCR, Refunding
- --6.2% (Pacific Gas and Electric), VRDN, AMT, Series B, 1.65% due 11/01/2026 (b) 7,300
SP2 MIG1++ 10,000 California State, RAN, 1.42% due 6/20/2003 (b) 9,965
A1 VMIG2 10,000 California Statewide Communities Development Authority Revenue Bonds
(Kaiser Permanente), VRDN, Series C, 3.70% due 5/31/2005 (b) 10,308
A A2 4,000 Chula Vista, California, IDR, Refunding (San Diego Gas & Electric Co.),
AMT, Series A, 6.75% due 3/01/2004 4,066
AAA Aaa 5,000 Long Beach, California, Harbor Revenue Bonds, AMT, Series A, 4% due
5/14/2004 (b)(d) 5,174
Colorado AAA Aaa 3,175 Denver, Colorado, City and County Airport Revenue Refunding Bonds,
- --0.6% AMT, Series A, 5.50% due 11/15/2004 (c) 3,394
Connecticut AA Aa2 2,700 Connecticut State, GO, Refunding, Series C, 4% due 12/15/2005 2,880
- --1.2% A+ A2 4,000 Connecticut State Resource Recovery Authority, Resource Recovery Revenue
Refunding Bonds (Bridgeport Resco Company LP Project), 5% due 1/01/2003 4,000
Delaware AAA Aaa 4,125 Delaware State, GO, Series A, 5% due 1/01/2006 4,516
- --0.8%
District of AAA Aaa 3,350 District of Columbia, GO, Refunding, Series B-1, 5.40% due 6/01/2006 (c) 3,725
Columbia-- A1+ VMIG1++ 3,500 District of Columbia, Multi-Modal Revenue Bonds (Medlantic), VRDN,
1.2% Series B, 1.65% due 8/15/2038 (b)(e) 3,500
Florida--4.7% AA+ Aa1 3,000 Broward County, Florida, GO, Refunding, 4.625% due 1/01/2005 3,121
AAA Aaa 500 Charlotte County, Florida, Utility Revenue Bonds, 6.75% due
10/01/2003 (a)(f) 531
AAA Aaa 6,555 Dade County, Florida, Aviation Revenue Bonds, AMT, Series W, 5.90%
due 10/01/2005 (c) 6,712
AAA Aaa 1,000 Dade County, Florida, GO, Series I, 6.90% due 7/01/2003 (c) 1,028
AA+ Aa2 1,000 Florida State Board of Education, Capital Outlay, GO (Public
Education), Series B, 5.625% due 6/01/2005 1,095
AAA Aaa 2,500 Florida State Board of Education, Lottery Revenue Bonds, Series B,
5.25% due 7/01/2005 (f) 2,722
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Florida AAA Aaa $ 400 Hillsborough County, Florida, Aviation Authority, Revenue Refunding
(concluded) Bonds (Tampa International Airport), AMT, Series A, 5% due
10/01/2005 (c) $ 431
Jacksonville, Florida, Electric Authority, Electric System Revenue
Bonds, VRDN (b):
A1+ VMIG1++ 900 Sub-Series A, 1.45% due 10/01/2010 900
A1+ VMIG1++ 300 Sub-Series F, 1.45% due 10/01/2030 300
AAA Aaa 9,685 Orlando, Florida, Greater Orlando Aviation Authority, Airport
Facilities Revenue Refunding Bonds, Series C, 5% due 10/01/2004 (d) 10,295
AAA Aaa 300 Port Orange, Florida, Water and Sewer Revenue Refunding Bonds, 5% due
10/01/2003 (c) 309
AAA Aaa 500 Tallahassee, Florida, Energy System Revenue Bonds, Series B, 4% due
10/01/2004 (e) 523
Georgia AA- Aa2 3,500 Cherokee County, Georgia, GO, 4.25% due 8/01/2003 3,564
- --4.9% A2 VMIG1++ 10,000 Clayton County, Georgia, Development Authority, Special Facilities
Revenue Bonds (Delta Airlines), VRDN, AMT, Series C, 3.30% due
5/01/2035 (b) 10,000
NR* Aa2 5,000 Coweta County, Georgia, School District, GO, Sales Tax, 4.50% due
8/01/2005 5,363
A+ Aa3 2,050 Dalton, Georgia, Building Authority Revenue Bonds, 5% due 7/01/2004 2,162
AAA Aaa 2,550 Georgia State, GO, Refunding, Series A, 6.25% due 3/01/2006 2,895
Gwinnett County, Georgia, School District, GO, Refunding:
AA+ Aaa 4,000 4% due 2/01/2005 4,208
AA+ Aaa 1,000 4.50% due 2/01/2006 1,080
Hawaii--0.6% AAA Aaa 3,585 Hawaii State, GO, Series CT, 5.25% due 9/01/2003 (e)(g) 3,682
Illinois--3.8% Chicago, Illinois, Public Building Commission, Building Revenue Bonds,
Series C (f):
AAA Aaa 5,000 5.125% due 2/01/2003 5,016
AAA Aaa 5,000 5.125% due 2/01/2004 5,209
AAA NR* 5,000 Chicago, Illinois, Skyway Toll Bridge Revenue Refunding Bonds, 6.75%
due 1/01/2004 (a) 5,375
Illinois Health Facilities Authority Revenue Refunding Bonds VRDN (b):
A1+ VMIG1++ 3,100 (Northwestern Memorial Hospital), Series A, 1.65% due 8/15/2009 3,100
A1 VMIG1++ 515 (University of Chicago Hospitals), 1.65% due 8/01/2026 (d) 515
AAA Aaa 3,000 Illinois Regional Transportation Authority Revenue Bonds, Series A,
6.25% due 6/01/2004 (a)(c) 3,268
Indiana--1.9% AAA Aaa 10,040 Indiana Transportation Finance Authority, Airport Facilities, Lease
Revenue Refunding Bonds, Series A, 6% due 11/01/2006 (c) 11,481
Kentucky NR* MIG1++ 5,500 Newport, Kentucky, GO, BAN, 2.41% due 12/01/2004 5,519
- --0.9%
Maryland AAA Aaa 4,050 Washington Suburban Sanitation District, Maryland, Water Supply, GO,
- --0.7% Refunding, 4.125% due 6/01/2004 4,217
Massachusetts AA MIG1++ 10,000 Massachusetts State HFA, Housing Revenue Refunding Bonds (S/F Housing),
- --1.7% AMT, Series I, 3.25% due 6/01/2004 10,254
Michigan AA+ Aa1 3,000 Michigan State Building Authority, Revenue Refunding Bonds (Facilities
- --0.5% Program), Series III, 5% due 10/15/2004 3,194
Minnesota AAA Aaa 2,025 Metropolitan Council, Minnesota, Minneapolis-Saint Paul Metropolitan
- --0.3% Area Transit, GO, Series A, 5% due 2/01/2003 2,032
Missouri NR* Aaa 4,000 Kansas City, Missouri, School District, Building Revenue Refunding Bonds,
- --1.5% Series A, 5% due 2/01/2006 (f) 4,378
A1+ VMIG1++ 3,525 Missouri Development Finance Board, Cultural Facilities Revenue Bonds
(Nelson Gallery Foundation), VRDN, Series B, 1.65% due 12/01/2031 (b)(d) 3,525
AA+ NR* 1,175 Saint Louis County, Missouri, Rockwood School District Number R-6, GO,
Refunding, 3.50% due 2/01/2004 1,205
Nebraska--1.5% Nebraska Public Power District Revenue Refunding Bonds:
AAA Aaa 2,000 (Power Supply System), Series C, 4.50% due 1/01/2004 (g) 2,066
AAA Aaa 6,750 Series A, 5.25% due 1/01/2004 (d) 7,022
New NR* A3 8,000 New Hampshire State Business Finance Authority, PCR, Refunding
Hampshire-- (United Illuminating Company), AMT, Series A, 3.75% due
1.4% 2/01/2004 8,058
New AA Aa2 4,900 New Jersey State, GO, Refunding, Series D, 5.40% due
Jersey--0.9% 2/15/2003 4,926
A1+ VMIG1++ 600 Port Authority of New York and New Jersey, Special Obligation Revenue
Refunding Bonds (Versatile Structure Obligation), VRDN, Series 5, 1.60%
due 8/01/2024(b) 600
New AA Aa3 2,000 Albuquerque, New Mexico, Joint Water and Sewer System Revenue
Mexico--0.9% Refunding Bonds, Series A, 4.40% due 7/01/2003 2,032
AA+ Aa1 3,100 New Mexico State, GO, Refunding, Series A, 5% due 9/01/2003 3,179
New NR* NR* 13,000 Little Falls, New York, City School District, GO, BAN, 2.50% due
York--7.2% 8/28/2003 13,071
A1+ Aa2 5,800 New York City, New York, City Transitional Finance Authority Revenue
Bonds, VRDN, Sub-Series 2D, 1.55% due 11/01/2022 (b) 5,800
New York City, New York, GO, Refunding:
A A2 3,000 Series C, 5% due 8/01/2006 3,216
A A2 7,000 Series G, 5% due 8/01/2005 7,447
BBB NR* 4,500 New York State Environmental Facilities Corporation, Solid Waste Disposal
Revenue Bonds (Waste Management Project), AMT, Series A, 4% due
5/01/2004 (b) 4,510
NR* MIG2 8,500 Roosevelt, New York, Union Free School District, GO, RAN, 2.50% due
6/26/2003 8,541
North North Carolina State, Public School Building, GO:
Carolina AAA Aa1 4,500 4.60% due 4/01/2004 4,693
- --1.7% AAA Aa1 5,000 4.60% due 4/01/2006 5,443
Ohio--5.8% AAA Aaa 1,580 Cincinnati, Ohio, City School District, GO, TAN, 5.50% due 12/01/2003 (c) 1,634
NR* Aaa 740 Mason, Ohio, COP (Municipal Facilities Project), 3.50% due 12/01/2004 (d) 770
AAA Aaa 5,000 Ohio State Building Authority, Adult Correctional Facilities Revenue
Bonds, 6% due 10/01/2004 (a)(d) 5,502
Ohio State, Highway Capital Improvement, GO:
AAA Aa1 5,375 Series C, 4.75% due 5/01/2005 5,772
AAA Aa1 4,850 Series F, 5% due 5/01/2005 5,236
BBB- Baa2 2,000 Ohio State Water Development Authority, Pollution Control Facilities
Revenue Refunding Bonds (Ohio Edison Company), AMT, Series B, 4.40%
due 12/01/2003 (b) 2,034
NR* Aa3 13,000 Rickenbacker, Ohio, Port Authority, Capital Funding Revenue Bonds
(Oasbo Expanded Asset Pooled), Series A, 3.90% due 5/01/2004 13,414
Oklahoma NR* Aaa 1,815 Midwest City, Oklahoma, Municipal Authority, Capital Improvement Revenue
- --2.9% Bonds, 4.55% due 6/01/2005 (e) 1,942
Oklahoma City, Oklahoma, Airport Trust Revenue Refunding Bonds, Junior
Lien, AMT, 28th Series (d):
AAA Aaa 1,000 4% due 7/01/2004 1,034
AAA Aaa 3,040 4% due 7/01/2005 3,181
A2 VMIG2 2,500 Oklahoma Development Finance Authority Revenue Bonds (Conoco Project),
VRDN, AMT, Series B, 2.05% due 8/01/2037 (b) 2,500
A1+ VMIG1++ 8,500 Oklahoma State Industries Authority, Revenue Refunding Bonds (Integris
Baptist), VRDN, Series B, 1.65% due 8/15/2029 (b)(d) 8,500
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Municipal Bonds Limited Maturity Portfolio
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Oregon--3.1% NR* Aa2 $10,770 Portland, Oregon, Limited Tax, GO, Refunding, Series B, 3% due
12/15/2004 $ 11,110
AA+ Aa1 4,815 Tri-County, Oregon, Metropolitan Transportation District, GO,
Refunding (Light Rail Extension), Series A, 4% due 7/01/2003 4,885
AA+ Aa3 2,385 Tri-County, Oregon, Metropolitan Transportation District Revenue
Bonds, Series A, 5.25% due 8/01/2005 2,604
Puerto Puerto Rico Commonwealth, GO, Refunding:
Rico--0.2% A- Baa1 50 5.30% due 7/01/2004 (c)(g) 53
A- Baa1 850 5.30% due 7/01/2004 898
Rhode AA+ Aa2 2,500 Rhode Island Housing and Mortgage Finance Corporation, Homeowner
Island--0.4% Opportunity Revenue Bonds, AMT, Series 41-C, 3.375% due 11/01/2005 2,584
South AAA Aaa 500 South Carolina State Highway, GO, Series B, 5.25% due
Carolina 4/01/2005 542
- --0.1%
Tennessee NR* VMIG1++ 2,900 Clarksville, Tennessee, Public Building Authority Revenue Bonds,
- --4.2% Pooled Financing (Tennessee Municipal Bond Fund), VRDN, 1.65%
due 7/01/2031 (b) 2,900
NR* Aaa 3,815 Hamilton County, Tennessee, GO, Refunding, 4% due 10/01/2005 (f) 4,053
Nashville, Tennessee, Metropolitan Nashville Airport Authority,
Airport Revenue Refunding and Improvement Bonds, Series A (f):
AAA Aaa 5,070 6.625% due 7/01/2005 5,675
AAA Aaa 5,410 6.625% due 7/01/2006 6,238
AA Aa2 5,605 Tennessee State, GO, Refunding, Series B, 5.50% due 5/01/2004 5,920
Texas--14.0% Bell County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Scott & White Memorial Hospital), VRDN (b)(d):
A1+ VMIG1++ 5,450 Series 2001-1, 1.65% due 8/15/2031 5,450
A1+ VMIG1++ 750 Series 2001-2, 1.65% due 8/15/2031 750
BBB Baa2 15,000 Brazos River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), AMT, Series D, 4.25% due 11/01/2003 14,783
AA+ Aa1 2,000 Fort Worth, Texas, GO, Refunding, Series A, 4% due 3/01/2004 2,065
AA Aa2 6,075 Fort Worth, Texas, Water and Sewer Revenue Refunding and Improvement
Bonds, 5.50% due 2/15/2004 6,366
A1+ NR* 200 Harris County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds (Methodist Hospital), VRDN, 1.65% due
12/01/2032 (b) 200
AAA Aaa 3,870 Harris County, Texas, Toll Road Revenue Bonds, Senior Lien, Series A,
6.25% due 8/15/2004 (a)(d) 4,253
AAA Aaa 3,590 Houston, Texas, Hotel Occupancy Tax and Special Revenue Refunding
Bonds (Convention and Entertainment), Series A, 5% due 9/01/2006 (c) 3,971
A1+ VMIG1++ 16,000 Northside, Texas, Independent School District, GO, Series A, 2.25%
due 8/01/2004 16,007
BBB Baa2 2,580 Sabine River Authority, Texas, PCR, Refunding (TXU Electric Company
Project), Series C, 4% due 11/01/2003 2,543
AA Aa1 5,750 Texas State, Texas Public Finance Authority, GO, Refunding, Series B,
6% due 10/01/2004 (c) 6,211
AAA Aaa 5,000 Texas State Turnpike Authority, Dallas North Thruway Revenue Refunding
Bonds, 4.80% due 1/01/2006 5,262
Trinity River Authority, Texas, Regional Wastewater System Revenue
Refunding Bonds (d):
AAA Aaa 1,845 5% due 8/01/2003 1,857
AAA Aaa 3,000 5% due 8/01/2004 3,154
A1 VMIG1++ 10,000 Weatherford, Texas, Independent School District, GO, Series A, 2.50%
due 8/01/2005 10,104
Utah--1.5% A1+ VMIG1++ 3,000 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN, 1.65%
due 11/01/2024 (b)(c) 3,000
A+ A1 2,725 Intermountain Power Agency, Utah, Power Supply, Revenue Refunding Bonds,
Series C, 4.80% due 7/01/2003 2,771
AAA Aaa 3,200 Utah State, GO, Refunding, Series A, 5% due 7/01/2004 3,376
Virginia BBB NR* 7,000 Amelia County, Virginia, IDA, Solid Waste Disposal, Revenue Refunding
- --2.3% Bonds (Waste Management Project), AMT, 4.90% due 4/01/2005 7,137
BBB+ A3 2,400 Louisa, Virginia, IDA, Solid Waste and Sewer Disposal Revenue Bonds
(Virginia Electric and Power Company Project), AMT, Series A, 3.15%
due 4/01/2003 2,408
AA+ Aa1 3,900 Virginia State Public School Authority, School Financing, GO, Series B,
4% due 8/01/2005 4,136
Washington AA+ Aa1 3,345 King County, Washington, GO, Refunding, 5% due 12/01/2005 3,656
- --5.8% AAA Aaa 2,180 Seattle, Washington, GO, Refunding, Series A, 5.25% due 3/01/2005 2,352
AAA Aaa 4,200 Snohomish County, Washington, Everett School District Number 002, GO,
Refunding, 6.20% due 12/01/2003 (a)(d) 4,475
AAA Aaa 1,650 Snohomish County, Washington, Public Utility District Number 001, Electric
Revenue Refunding Bonds, 5% due 12/01/2003 (e) 1,707
AA+ Aa1 7,195 Washington State, GO, Series B and AT-7, 6.10% due 6/01/2006 8,175
Washington State Public Power Supply System, Revenue Refunding Bonds,
Series A:
AAA Aaa 5,000 (Nuclear Project Number 1), 6% due 7/01/2005 (c) 5,527
AA- Aa1 4,000 (Nuclear Project Number 2), 5% due 7/01/2003 4,075
AA- Aa1 2,275 (Nuclear Project Number 3), 5% due 7/01/2003 2,317
AAA Aaa 2,000 Washington State, Various Purpose, GO, Refunding, Series R-03-A, 3.50%
due 1/01/2006 (d) 2,096
Wisconsin NR* MIG1++ 7,105 Menomonee Falls, Wisconsin, BAN, Refunding, 3.20% due
- --2.2% 6/01/2004 7,219
AA- Aa3 5,605 Wisconsin State, GO, Series A, 5.50% due 5/01/2004 5,920
Total Municipal Bonds (Cost--$549,332)--93.7% 557,619
Shares
Held Common Stock
28,414 Merrill Lynch Institutional Tax-Exempt Fund (h) 28,414
Total Common Stock (Cost--$28,414)--4.8% 28,414
Total Investments (Cost--$577,746)--98.5% 586,033
Other Assets Less Liabilitiess--1.5% 8,753
----------
Net Assets--100.0% $ 594,786
==========
(a)Prerefunded.
(b)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at December 31, 2002.
(c)AMBAC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)FGIC Insured.
(g)Escrowed to maturity.
(h)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
(in Thousands)
Net Share Net Dividend
Affiliate Activity Cost Income
Merrill Lynch Institutional
Tax-Exempt Fund 28,414 $28,414 $131
*Not Rated.
++Highest short-term rating issued by Moody's Investors Service,
Inc.
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
STATEMENTS OF ASSETS AND LIABILITIES
Limited
Insured National Maturity
As of December 31, 2002 Portfolio Portfolio Portfolio
Assets: Investments, at value* $1,252,679,598 $1,233,308,984 $ 586,032,837
Cash 111,250 56,206 249,577
Receivables:
Interest 20,634,221 20,948,210 6,438,071
Securities sold 3,594,462 3,648,493 4,565,250
Capital shares sold 713,363 766,227 6,009,703
Dividends 903 1,456 1,082
Prepaid registration fees and other assets 795,651 88,779 140,270
-------------- -------------- --------------
Total assets 1,278,529,448 1,258,818,355 603,436,790
-------------- -------------- --------------
Liabilities: Payables:
Securities purchased -- 6,041,792 7,026,422
Dividends to shareholders 3,618,561 3,242,843 468,164
Capital shares redeemed 550,430 1,514,838 924,837
Distributor 180,737 312,075 65,779
Investment adviser 385,992 494,451 165,628
Accrued expenses and other liabilities 100,045 51,319 --
-------------- -------------- --------------
Total liabilities 4,835,765 11,657,318 8,650,830
-------------- -------------- --------------
Net Assets: Net assets $1,273,693,683 $1,247,161,037 $ 594,785,960
============== ============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 10,911,976 $ 6,132,881 $ 2,226,013
Consist of: Class B Common Stock, $.10 par value++++ 2,145,339 3,444,200 937,821
Class C Common Stock, $.10 par value++++++ 697,050 678,217 724,746
Class D Common Stock, $.10 par value++++++++ 2,180,927 1,704,447 1,954,381
Paid-in capital in excess of par 1,189,150,859 1,217,266,926 582,531,711
-------------- -------------- --------------
Undistributed investment income--net 1,113,690 704,699 429,226
Accumulated realized capital losses on
investments--net (30,901,523) (48,781,692) (2,304,628)
Unrealized appreciation on investments--net 98,395,365 66,011,359 8,286,690
-------------- -------------- --------------
Total accumulated earnings--net 68,607,532 17,934,366 6,411,288
-------------- -------------- --------------
Net assets $1,273,693,683 $1,247,161,037 $ 594,785,960
============== ============== ==============
Net Asset Class A:
Value: Net assets $ 872,327,473 $ 639,558,395 $ 226,645,536
============== ============== ==============
Shares outstanding 109,119,760 61,328,814 22,260,134
============== ============== ==============
Net asset value and redemption price per
share $ 7.99 $ 10.43 $ 10.18
============== ============== ==============
Class B:
Net assets $ 171,380,910 $ 359,042,771 $ 95,497,604
============== ============== ==============
Shares outstanding 21,453,392 34,442,004 9,378,212
============== ============== ==============
Net asset value and redemption price per share $ 7.99 $ 10.42 $ 10.18
============== ============== ==============
Class C:
Net assets $ 55,697,641 $ 70,738,764 $ 73,482,535
============== ============== ==============
Shares outstanding 6,970,496 6,782,170 7,247,463
============== ============== ==============
Net asset value and redemption price
per share $ 7.99 $ 10.43 $ 10.14
============== ============== ==============
Class D:
Net assets $ 174,287,659 $ 177,821,107 $ 199,160,285
============== ============== ==============
Shares outstanding 21,809,273 17,044,473 19,543,811
============== ============== ==============
Net asset value and redemption price per share $ 7.99 $ 10.43 $ 10.19
============== ============== ==============
*Identified cost $1,154,284,233 $1,167,297,625 $ 577,746,147
============== ============== ==============
++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.
STATEMENTS OF OPERATIONS
Limited
Insured National Maturity
For the Six Months Ended December 31, 2002 Portfolio Portfolio Portfolio
Investment Interest $ 36,284,597 $ 37,132,741 $ 8,066,343
Income: Dividends 54,442 150,542 130,935
-------------- -------------- --------------
Total investment income 36,339,039 37,283,283 8,197,278
-------------- -------------- --------------
Expenses: Investment advisory fees 2,346,585 3,004,140 885,846
Account maintenance and distribution fees--Class B 669,905 1,375,825 161,104
Account maintenance fees--Class D 213,934 216,041 92,422
Account maintenance and distribution fees--Class C 185,948 268,183 55,439
Accounting services 191,358 193,325 71,037
Transfer agent fees--Class A 160,974 153,435 21,118
Transfer agent fees--Class B 39,810 101,551 11,234
Professional fees 39,513 61,755 10,452
Registration fees 27,910 31,004 49,195
Custodian fees 34,367 44,048 16,132
Transfer agent fees--Class D 30,899 40,554 17,514
Printing and shareholder reports 26,615 34,958 14,770
Pricing services 20,017 30,728 7,879
Transfer agent fees--Class C 10,212 18,462 3,499
Directors' fees and expenses 12,836 10,543 3,761
Other 23,105 19,653 15,028
-------------- -------------- --------------
Total expenses before reimbursement 4,033,988 5,604,205 1,436,430
Reimbursement of expenses (8,503) (23,737) (20,123)
-------------- -------------- --------------
Total expenses net of reimbursement 4,025,485 5,580,468 1,416,307
-------------- -------------- --------------
Investment income--net 32,313,554 31,702,815 6,780,971
-------------- -------------- --------------
Realized & Realized gain on investments--net 9,140,091 15,427,572 174,485
Unrealized Gain on Change in unrealized appreciation/depreciation
Investments--Net: on investments--net 22,422,423 3,357,944 2,201,671
-------------- -------------- --------------
Total realized and unrealized gains on
investments--net 31,562,514 18,785,516 2,376,156
-------------- -------------- --------------
Net Increase in Net Assets Resulting from
Operations $ 63,876,068 $ 50,488,331 $ 9,157,127
============== ============== ==============
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
STATEMENTS OF CHANGES IN NET ASSETS
Insured Portfolio National Portfolio Limited Maturity Portfolio
For the Six For the For the Six For the For the Six For the
Months Ended Year Ended Months Ended Year Ended Months Ended Year Ended
Increase (Decrease) in Net Assets: Dec. 31, 2002 June 30, 2002 Dec. 31, 2002 June 30, 2002 Dec. 31, 2002 June 30, 2002
Operations:
Investment income--net $ 32,313,554 $ 66,349,214 $ 31,702,815 $ 54,128,954 $ 6,780,971 $ 10,600,072
Realized gain on
investments--net 9,140,091 10,407,929 15,427,572 3,056,161 174,485 333,062
Change in unrealized
appreciation/depreciation on
investments--net 22,422,423 8,385,315 3,357,944 9,583,130 2,201,671 2,009,531
-------------- -------------- -------------- -------------- ------------- -------------
Net increase in net assets
resulting from operations 63,876,068 85,142,458 50,488,331 66,768,245 9,157,127 12,942,665
-------------- -------------- -------------- -------------- ------------- -------------
Dividends &
Distributions to
Shareholders:
Investment income--net:
Class A (23,107,027) (48,114,588) (17,364,655) (35,234,862) (2,965,290) (6,189,098)
Class B (3,953,030) (9,358,143) (8,363,614) (11,045,083) (1,074,069) (1,406,735)
Class C (1,016,312) (999,113) (1,511,913) (1,756,295) (346,010) (34,601)
Class D (4,221,574) (7,841,632) (4,379,947) (6,106,400) (2,364,428) (2,724,180)
Realized gain on
investments--net:
Class A -- (467,684) -- (227,631) -- --
Class B -- (106,680) -- (82,921) -- --
Class C -- (10,641) -- (12,681) -- --
Class D -- (77,773) -- (38,236) -- --
-------------- -------------- -------------- -------------- ------------- -------------
Net decrease in net assets
resulting from dividends and
distributions to shareholders (32,297,943) (66,976,254) (31,620,129) (54,504,109) (6,749,797) (10,354,614)
-------------- -------------- -------------- -------------- ------------- -------------
Capital Share
Transactions:
Net increase (decrease) in net
assets derived from capital
share transactions (13,794,903) (66,642,942) 115,484,398 63,305,521 163,135,972 160,472,985
-------------- -------------- -------------- -------------- ------------- -------------
Net Assets:
Total increase (decrease) in
net assets 17,783,222 (48,476,738) 134,352,600 75,569,657 165,543,302 163,061,036
Beginning of period 1,255,910,461 1,304,387,199 1,112,808,437 1,037,238,780 429,242,658 266,181,622
-------------- -------------- -------------- -------------- ------------- -------------
End of period* $1,273,693,683 $1,255,910,461 $1,247,161,037 $1,112,808,437 $ 594,785,960 $ 429,242,658
============== ============== ============== ============== ============= =============
*Undistributed investment
income--net $ 1,113,690 $ 1,098,079 $ 704,699 $ 622,013 $ 429,226 $ 398,052
============== ============== ============== ============== ============= =============
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
Insured Portfolio
Class A
The following per share data and ratios
have been derived from information provided For the Six
in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 7.80 $ 7.69 $ 7.36 $ 7.79 $ 8.25
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .21++++ .41 .39 .40 .41
Realized and unrealized
gain (loss) on
investments--net .19 .11 .33 (.32) (.27)
------------- ------------- ------------- ------------- -------------
Total from investment operations .40 .52 .72 .08 .14
------------- ------------- ------------- ------------- -------------
Less dividends and distributions:
Investment income--net (.21) (.41) (.39) (.40) (.41)
Realized gain on
investments--net -- --++ -- -- (.19)
In excess of realized gain
on investments--net -- -- -- (.11) --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.21) (.41) (.39) (.51) (.60)
------------- ------------- ------------- ------------- -------------
Net asset value,
end of period $ 7.99 $ 7.80 $ 7.69 $ 7.36 $ 7.79
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 5.16%+++ 7.03% 10.01% 1.21% 1.56%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement .46%* .47% .45% .43% .42%
Net Assets: ============= ============= ============= ============= =============
Expenses .46%* .47% .45% .43% .42%
============= ============= ============= ============= =============
Investment
income--net 5.19%* 5.35% 5.19% 5.33% 5.02%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 872,327 $ 878,018 $ 920,597 $ 972,420 $ 1,216,346
============= ============= ============= ============= =============
Portfolio turnover 16.57% 32.78% 64.39% 94.08% 86.35%
============= ============= ============= ============= =============
Insured Portfolio
Class B
The following per share data and
ratios have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 7.79 $ 7.68 $ 7.36 $ 7.78 $ 8.24
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .18++++ .36 .34 .34 .35
Realized and unrealized
gain (loss) on
investments--net .20 .11 .32 (.31) (.27)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .38 .47 .66 .03 .08
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.18) (.36) (.34) (.34) (.35)
Realized gain on
investments--net -- --++ -- -- (.19)
In excess of realized
gain on investments--net -- -- -- (.11) --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.18) (.36) (.34) (.45) (.54)
------------- ------------- ------------- ------------- -------------
Net asset value, end
of period $ 7.99 $ 7.79 $ 7.68 $ 7.36 $ 7.78
============= ============= ============= ============= =============
Total Based on net asset
Investment value per share 4.89%+++ 6.23% 9.04% .57% .79%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement 1.22%* 1.23% 1.21% 1.19% 1.18%
Net Assets: ============= ============= ============= ============= =============
Expenses 1.22%* 1.23% 1.21% 1.19% 1.18%
============= ============= ============= ============= =============
Investment income--net 4.43%* 4.58% 4.43% 4.56% 4.26%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 171,381 $ 182,241 $ 223,710 $ 276,154 $ 414,135
============= ============= ============= ============= =============
Portfolio turnover 16.57% 32.78% 64.39% 94.08% 86.35%
============= ============= ============= ============= =============
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS (continued)
Insured Portfolio
Class C
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 7.79 $ 7.68 $ 7.36 $ 7.78 $ 8.24
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .18++++ .35 .33 .34 .34
Realized and unrealized
gain (loss) on
investments--net .20 .11 .32 (.31) (.27)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .38 .46 .65 .03 .07
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.18) (.35) (.33) (.34) (.34)
Realized gain on
investments--net -- --++ -- -- (.19)
In excess of realized
gain on investments--net -- -- -- (.11) --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.18) (.35) (.33) (.45) (.53)
------------- ------------- ------------- ------------- -------------
Net asset value, end
of period $ 7.99 $ 7.79 $ 7.68 $ 7.36 $ 7.78
============= ============= ============= ============= =============
Total Based on net asset
Investment value per share 4.86%+++ 6.18% 8.99% .52% .74%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement 1.27%* 1.28% 1.26% 1.24% 1.23%
Net Assets: ============= ============= ============= ============= =============
Expenses 1.27%* 1.28% 1.26% 1.24% 1.23%
============= ============= ============= ============= =============
Investment income--net 4.37%* 4.56% 4.38% 4.52% 4.21%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 55,698 $ 34,541 $ 14,392 $ 12,856 $ 16,850
============= ============= ============= ============= =============
Portfolio turnover 16.57% 32.78% 64.39% 94.08% 86.35%
============= ============= ============= ============= =============
Insured Portfolio
Class D
The following per share data and
ratios have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 7.79 $ 7.69 $ 7.36 $ 7.79 $ 8.24
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .20++++ .39 .37 .38 .39
Realized and unrealized
gain (loss) on
investments--net .20 .10 .33 (.32) (.26)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .40 .49 .70 .06 .13
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.20) (.39) (.37) (.38) (.39)
Realized gain on
investments--net -- --++ -- -- (.19)
In excess of realized
gain on investments--net -- -- -- (.11) --
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.20) (.39) (.37) (.49) (.58)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 7.99 $ 7.79 $ 7.69 $ 7.36 $ 7.79
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 5.16%+++ 6.63% 9.74% .96% 1.43%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement .71%* .72% .70% .68% .67%
Net Assets: ============= ============= ============= ============= =============
Expenses .71%* .72% .70% .68% .67%
============= ============= ============= ============= =============
Investment income--net 4.94%* 5.10% 4.94% 5.10% 4.77%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 174,288 $ 161,110 $ 145,688 $ 99,326 $ 81,238
============= ============= ============= ============= =============
Portfolio turnover 16.57% 32.78% 64.39% 94.08% 86.35%
============= ============= ============= ============= =============
National Portfolio
Class A
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.26 $ 10.14 $ 9.70 $ 10.22 $ 10.64
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .28++++ .62 .54 .56 .56
Realized and unrealized
gain (loss) on
investments--net .17 .12 .44 (.52) (.42)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .45 .74 .98 .04 .14
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.28) (.62) (.54) (.56) (.56)
Realized gain on
investments--net -- --++ -- -- --
In excess of realized gain on
investments--net -- -- -- -- --++
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.28) (.62) (.54) (.56) (.56)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.43 $ 10.26 $ 10.14 $ 9.70 $ 10.22
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 4.43%+++ 6.98% 10.32% .58% 1.28%
Return:** ============= ============= ============= ============= =============
Ratios Expenses, net of
to Average reimbursement .59%* .62% .58% .56% .55%
Net Assets: ============= ============= ============= ============= =============
Expenses .59%* .62% .58% .56% .55%
============= ============= ============= ============= =============
Investment income--net 5.33%* 5.55% 5.42% 5.74% 5.26%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 639,558 $ 626,935 $ 653,685 $ 682,553 $ 877,841
============= ============= ============= ============= =============
Portfolio turnover 21.46% 35.75% 80.88% 108.43% 125.75%
============= ============= ============= ============= =============
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
FINANCIAL HIGHLIGHTS (continued)
National Portfolio
Class B
The following per share data and
ratios have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.26 $ 10.14 $ 9.70 $ 10.21 $ 10.63
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .24++++ .53 .46 .49 .48
Realized and unrealized
gain (loss) on investments
--net .16 .12 .44 (.51) (.42)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .40 .65 .90 (.02) .06
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.24) (.53) (.46) (.49) (.48)
Realized gain on
investments--net -- --++ -- -- --
In excess of realized
gain on investments--net -- -- -- -- --++
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.24) (.53) (.46) (.49) (.48)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.42 $ 10.26 $ 10.14 $ 9.70 $ 10.21
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 3.93%+++ 6.18% 9.49% (.09%) .51%
Return:** ============= ============= ============= ============= =============
Ratios Expenses, net of
to Average reimbursement 1.35%* 1.38% 1.34% 1.32% 1.31%
Net Assets: ============= ============= ============= ============= =============
Expenses 1.35%* 1.38% 1.34% 1.32% 1.31%
============= ============= ============= ============= =============
Investment income--net 4.57%* 4.80% 4.67% 4.98% 4.50%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 359,043 $ 295,827 $ 227,592 $ 254,860 $ 374,642
============= ============= ============= ============= =============
Portfolio turnover 21.46% 35.75% 80.88% 108.43% 125.75%
============= ============= ============= ============= =============
National Portfolio
Class C
The following per share data and
ratios have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.26 $ 10.14 $ 9.71 $ 10.22 $ 10.64
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .24++++ .53 .46 .48 .47
Realized and unrealized
gain (loss) on
investments--net .17 .12 .43 (.51) (.42)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .41 .65 .89 (.03) .05
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.24) (.53) (.46) (.48) (.47)
Realized gain on
investments--net -- --++ -- -- --
In excess of realized gain
on investments--net -- -- -- -- --++
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.24) (.53) (.46) (.48) (.47)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.43 $ 10.26 $ 10.14 $ 9.71 $ 10.22
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 4.01%+++ 6.13% 9.33% (.13%) .47%
Return:** ============= ============= ============= ============= =============
Ratios Expenses, net of
to Average reimbursement 1.40%* 1.43% 1.39% 1.37% 1.36%
Net Assets: ============= ============= ============= ============= =============
Expenses 1.40%* 1.43% 1.39% 1.37% 1.36%
============= ============= ============= ============= =============
Investment income--net 4.52%* 4.76% 4.61% 4.92% 4.45%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 70,739 $ 52,822 $ 31,880 $ 30,303 $ 47,901
============= ============= ============= ============= =============
Portfolio turnover 21.46% 35.75% 80.88% 108.43% 125.75%
============= ============= ============= ============= =============
National Portfolio
Class D
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.27 $ 10.15 $ 9.71 $ 10.22 $ 10.64
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .27++++ .53 .52 .54 .53
Realized and unrealized
gain (loss) on invest-
ments--net .16 .12 .44 (.51) (.42)
------------- ------------- ------------- ------------- -------------
Total from investment operations .43 .65 .96 .03 .11
------------- ------------- ------------- ------------- -------------
Less dividends and distributions:
Investment income--net (.27) (.53) (.52) (.54) (.53)
Realized gain on investments--net -- --++ -- -- --
In excess of realized gain
on investments--net -- -- -- -- --++
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.27) (.53) (.52) (.54) (.53)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.43 $ 10.27 $ 10.15 $ 9.71 $ 10.22
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 4.20%+++ 6.72% 10.04% .43% 1.03%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement .84%* .87% .83% .81% .81%
Net Assets: ============= ============= ============= ============= =============
Expenses .84%* .87% .83% .81% .81%
============= ============= ============= ============= =============
Investment income--net 5.08%* 5.30% 5.16% 5.50% 5.01%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 177,821 $ 137,225 $ 124,082 $ 86,701 $ 93,201
============= ============= ============= ============= =============
Portfolio turnover 21.46% 35.75% 80.88% 108.43% 125.75%
============= ============= ============= ============= =============
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
FINANCIAL HIGHLIGHTS (continued)
Limited Maturity Portfolio
Class A
The following per share data and
ratios have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value, beginning
Operating of period $ 10.13 $ 10.05 $ 9.85 $ 9.91 $ 9.96
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .14++ .34 .39 .38 .37
Realized and unrealized gain
(loss) on investments--net .05 .08 .20 (.06) (.04)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .19 .42 .59 .32 .33
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.14) (.34) (.39) (.38) (.37)
In excess of realized gain on
investments--net -- -- -- -- (.01)
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.14) (.34) (.39) (.38) (.38)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.18 $ 10.13 $ 10.05 $ 9.85 $ 9.91
============= ============= ============= ============= =============
Total Based on net asset
Investment value per share 1.88%+++ 4.10% 6.07% 3.31% 3.37%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement .42%* .46% .44% .40% .43%
Net Assets: ============= ============= ============= ============= =============
Expenses .43%* .46% .44% .40% .43%
============= ============= ============= ============= =============
Investment income--net 2.70%* 3.30% 3.91% 3.83% 3.75%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 226,645 $ 204,936 $ 191,481 $ 215,421 $ 261,970
============= ============= ============= ============= =============
Portfolio turnover 25.30% 74.74% 51.94% 51.42% 40.28%
============= ============= ============= ============= =============
Limited Maturity Portfolio
Class B
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.13 $ 10.06 $ 9.86 $ 9.92 $ 9.97
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .12++ .29 .35 .35 .34
Realized and unrealized
gain (loss) on investments
--net .05 .07 .20 (.06) (.04)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .17 .36 .55 .29 .30
------------- ------------- ------------- ------------- -------------
Less dividends and
distributions:
Investment income--net (.12) (.29) (.35) (.35) (.34)
In excess of realized gain
on investments--net -- -- -- -- (.01)
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.12) (.29) (.35) (.35) (.35)
------------- ------------- ------------- ------------- -------------
Net asset value, end
of period $ 10.18 $ 10.13 $ 10.06 $ 9.86 $ 9.92
============= ============= ============= ============= =============
Total Based on net asset
Investment value per share 1.69%+++ 3.62% 5.69% 2.94% 3.01%
Return:** ============= ============= ============= ============= =============
Ratios Expenses, net of
to Average reimbursement .77%* .82% .80% .76% .78%
Net Assets: ============= ============= ============= ============= =============
Expenses .78%* .82% .80% .76% .78%
============= ============= ============= ============= =============
Investment income--net 2.35%* 2.87% 3.55% 3.47% 3.39%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 95,498 $ 81,967 $ 31,480 $ 32,742 $ 42,930
============= ============= ============= ============= =============
Portfolio turnover 25.30% 74.74% 51.94% 51.42% 40.28%
============= ============= ============= ============= =============
Limited Maturity Portfolio
Class C
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.09 $ 10.01 $ 9.82 $ 9.88 $ 9.94
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .11++ .29 .35 .34 .34
Realized and unrealized gain
(loss) on investments--net .06 .08 .19 (.06) (.05)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .17 .37 .54 .28 .29
------------- ------------- ------------- ------------- -------------
Less dividends and distributions:
Investment income--net (.12) (.29) (.35) (.34) (.34)
In excess of realized gain
on investments--net -- -- -- -- (.01)
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.12) (.29) (.35) (.34) (.35)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.14 $ 10.09 $ 10.01 $ 9.82 $ 9.88
============= ============= ============= ============= =============
Total Based on net asset
Investment value per share 1.70%+++ 3.72% 5.59% 2.93% 2.89%
Return:** ============= ============= ============= ============= =============
Ratios Expenses, net of
to Average reimbursement .77%* .82% .81% .76% .79%
Net Assets: ============= ============= ============= ============= =============
Expenses .78%* .82% .81% .76% .79%
============= ============= ============= ============= =============
Investment income--net 2.20%* 2.91% 3.53% 3.46% 3.37%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 73,483 $ 1,596 $ 602 $ 308 $ 437
============= ============= ============= ============= =============
Portfolio turnover 25.30% 74.74% 51.94% 51.42% 40.28%
============= ============= ============= ============= =============
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
FINANCIAL HIGHLIGHTS (concluded)
Limited Maturity Portfolio
Class D
The following per share data and
ratios have been derived from information For the Six
provided in the financial statements. Months Ended For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: Dec. 31, 2002 2002 2001 2000 1999
Per Share Net asset value,
Operating beginning of period $ 10.14 $ 10.06 $ 9.86 $ 9.92 $ 9.97
Performance: ------------- ------------- ------------- ------------- -------------
Investment income--net .13++ .32 .38 .37 .37
Realized and unrealized
gain (loss) on investments
--net .05 .08 .20 (.06) (.04)
------------- ------------- ------------- ------------- -------------
Total from investment
operations .18 .40 .58 .31 .33
------------- ------------- ------------- ------------- -------------
Less dividends and dis-
tributions:
Investment income--net (.13) (.32) (.38) (.37) (.37)
In excess of realized gain
on investments--net -- -- -- -- (.01)
------------- ------------- ------------- ------------- -------------
Total dividends and
distributions (.13) (.32) (.38) (.37) (.38)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period $ 10.19 $ 10.14 $ 10.06 $ 9.86 $ 9.92
============= ============= ============= ============= =============
Total Based on net asset value
Investment per share 1.82%+++ 3.99% 5.96% 3.20% 3.27%
Return:** ============= ============= ============= ============= =============
Ratios to Expenses, net of
Average reimbursement .52%* .56% .54% .50% .53%
Net Assets: ============= ============= ============= ============= =============
Expenses .52%* .56% .54% .50% .53%
============= ============= ============= ============= =============
Investment income--net 2.57%* 3.13% 3.80% 3.72% 3.65%
============= ============= ============= ============= =============
Supplemental Net assets, end of period
Data: (in thousands) $ 199,160 $ 140,744 $ 42,619 $ 39,090 $ 83,177
============= ============= ============= ============= =============
Portfolio turnover 25.30% 74.74% 51.94% 51.42% 40.28%
============= ============= ============= ============= =============
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
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 conformity with accounting principles generally accepted
in the United States of America, which may require the use of
management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal,
recurring nature. The Fund's Portfolios offer four classes of shares
under the Merrill Lynch Select PricingSM 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. Income, expenses (other than expenses attributable to
a specific class) and realized and unrealized gains and losses on
investments and foreign currency transactions are allocated daily to
each class based on its relative net assets. 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 deter-mined 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.
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
(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). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual 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.
(g) Expenses--Certain expenses have been allocated to the individual
Portfolios in the Fund on a pro rata basis based upon the respective
aggregate net asset value of each Portfolio included in the Fund.
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 Distribution
Fees 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 six months ended December 31, 2002, FAM earned fees of
$2,346,585, $3,004,140 and $855,846 of which $8,503, $23,737 and
$20,123 were waived for the Insured Portfolio, National Portfolio
and Limited Maturity Portfolio, respectively.
For the six months ended December 31, 2002, 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
follows:
Limited
Insured National Maturity
Portfolio Portfolio Portfolio
Class A Shares:
FAMD $10,131 $ 4,570 $ 139
MLPF&S $69,639 $ 39,335 $ 1,525
Class D Shares:
FAMD $ 8,613 $ 7,395 $ 4,339
MLPF&S $71,502 $ 61,025 $ 57,419
For the six months ended December 31, 2002, MLPF&S received
contingent deferred sales charges of $317,332 relating to
transactions in Class B Shares, amounting to $78,422, $206,884 and
$32,026 in the Insured, National and Limited Maturity Portfolios,
respectively, and $27,950 relating to transactions in Class C
Shares, amounting to $12,149, $14,234 and $1,567 in the Insured,
National and Limited Maturity Portfolios, respectively. Furthermore,
MLPF&S received contingent deferred sales charges of $5,348 relating
to transactions subject to front-end sales charge waivers in Class A
Shares in the National Portfolio and relating to transactions
subject to front-end sales charge waivers in Class D Shares in the
Insured and National Portfolios, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the six months ended December 31, 2002, the Fund reimbursed FAM
$13,954, $19,571 and $5,988 for the Insured, National and Limited
Maturity Portfolios, respectively, for certain accounting services.
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 six months ended December 31, 2002 were as follows:
Purchases Sales
Insured Portfolio $ 204,401,159 $ 225,204,366
National Portfolio 255,248,003 292,767,029
Limited Maturity Portfolio 176,373,849 101,326,468
Net realized gains for the six months ended December 31, 2002 and
net unrealized gains as of December 31, 2002 were as follows:
Realized Unrealized
Insured Portfolio Gains Gains
Long-term investments $ 9,140,091 $ 98,395,365
-------------- --------------
Total $ 9,140,091 $ 98,395,365
============== ==============
Realized Unrealized
National Portfolio Gains Gains
Long-term investments $ 15,427,572 $ 66,011,359
-------------- --------------
Total $ 15,427,572 $ 66,011,359
============== ==============
Realized Unrealized
Limited Maturity Portfolio Gains Gains
Long-term investments $ 174,485 $ 8,286,690
-------------- --------------
Total $ 174,485 $ 8,286,690
============== ==============
As of December 31, 2002 net unrealized appreciation for Federal
income tax purposes were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
Insured Portfolio $98,493,899 $ 10,765 $98,483,134
National Portfolio 85,596,161 19,470,502 66,125,659
Limited Maturity Portfolio 8,821,164 323,459 8,497,705
The aggregate cost of investments at December 31, 2002 for Federal
income tax purposes was $1,154,196,465 for the Insured Portfolio,
$1,167,183,325 for the National Portfolio, and $577,535,132 for the
Limited Maturity Portfolio.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions for the six months ended December 31, 2002 and the year
ended June 30, 2002 were $(13,794,903) and $(66,642,942),
respectively, for the Insured Portfolio; $115,484,398 and
$63,305,521, respectively, for the National Portfolio, and
$163,135,972 and $160,472,985, respectively, for the Limited
Maturity Portfolio.
Transactions in capital shares for each class were as follows:
Insured Portfolio
Class A Shares for the Six Months Dollar
Ended December 31, 2002 Shares Amount
Shares sold 1,320,444 $ 10,443,814
Shares issued to shareholders in
reinvestment of dividends 1,263,796 10,010,572
-------------- --------------
Total issued 2,584,240 20,454,386
Shares redeemed (6,087,618) (48,165,792)
-------------- --------------
Net decrease (3,503,378) $ (27,711,406)
============== ==============
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
Insured Portfolio
Class A Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 2,320,584 $ 18,020,634
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,571,873 19,947,907
-------------- --------------
Total issued 4,892,457 37,968,541
Shares redeemed (12,019,217) (93,339,087)
-------------- --------------
Net decrease (7,126,760) $ (55,370,546)
============== ==============
Insured Portfolio
Class B Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 2,165,042 $ 17,179,805
Shares issued to shareholders in
reinvestment of dividends 236,621 1,873,393
-------------- --------------
Total issued 2,401,663 19,053,198
Automatic conversion of shares (2,018,221) (15,983,800)
Shares redeemed (2,322,535) (18,376,160)
-------------- --------------
Net decrease (1,939,093) $ (15,306,762)
============== ==============
Insured Portfolio
Class B Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 3,649,035 $ 28,346,728
Shares issued to shareholders
in reinvestment of dividends
and distributions 567,358 4,397,918
-------------- --------------
Total issued 4,216,393 32,744,646
Automatic conversion of shares (4,883,029) (38,016,053)
Shares redeemed (5,060,709) (39,224,864)
-------------- --------------
Net decrease (5,727,345) $ (44,496,271)
============== ==============
Insured Portfolio
Class C Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 2,888,229 $ 22,920,710
Shares issued to shareholders in
reinvestment of dividends 71,353 565,213
-------------- --------------
Total issued 2,959,582 23,485,923
Shares redeemed (421,698) (3,347,448)
-------------- --------------
Net increase 2,537,884 $ 20,138,475
============== ==============
Insured Portfolio
Class C Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 2,976,028 $ 23,077,017
Shares issued to shareholders
in reinvestment of dividends
and distributions 64,543 499,764
-------------- --------------
Total issued 3,040,571 23,576,781
Shares redeemed (480,905) (3,714,964)
-------------- --------------
Net increase 2,559,666 $ 19,861,817
============== ==============
Insured Portfolio
Class D Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 1,031,147 $ 8,215,283
Automatic conversion of shares 2,017,834 15,983,800
Shares issued to shareholders in
reinvestment of dividends 252,662 2,001,049
-------------- --------------
Total issued 3,301,643 26,200,132
Shares redeemed (2,165,316) (17,115,342)
-------------- --------------
Net increase 1,136,327 $ 9,084,790
============== ==============
Insured Portfolio
Class D Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 6,055,943 $ 46,995,907
Automatic conversion of shares 4,882,208 38,016,053
Shares issued to shareholders
in reinvestment of dividends
and distributions 477,297 3,701,393
-------------- --------------
Total issued 11,415,448 88,713,353
Shares redeemed (9,696,623) (75,351,295)
-------------- --------------
Net increase 1,718,825 $ 13,362,058
============== ==============
National Portfolio
Class A Shares for the
Six Months Ended Dollar
December, 2002 Shares Amount
Shares sold 873,738 $ 9,052,886
Shares issued resulting from
reorganization 2,488,551 25,766,020
Shares issued to shareholders in
reinvestment of dividends 863,890 8,947,715
-------------- --------------
Total issued 4,226,179 43,766,621
Shares redeemed (3,990,534) (41,288,032)
-------------- --------------
Net increase 235,645 $ 2,478,589
============== ==============
National Portfolio
Class A Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 3,043,608 $ 31,010,958
Shares issued resulting from
reorganization 1,301,134 13,232,801
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,726,140 17,595,062
-------------- --------------
Total issued 6,070,882 61,838,821
Shares redeemed (9,423,833) (96,041,268)
-------------- --------------
Net decrease (3,352,951) $ (34,202,447)
============== ==============
National Portfolio
Class B Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 2,298,175 $ 23,837,617
Shares issued resulting from
reorganization 9,719,653 100,571,771
Shares issued to shareholders in
reinvestment of dividends 359,879 3,726,043
-------------- --------------
Total issued 12,377,707 128,135,431
Automatic conversion of shares (1,749,916) (18,169,716)
Shares redeemed (5,023,539) (52,070,318)
-------------- --------------
Net increase 5,604,252 $ 57,895,397
============== ==============
National Portfolio
Class B Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 3,676,484 $ 37,543,749
Shares issued resulting from
reorganization 9,384,729 96,103,787
Shares issued to shareholders
in reinvestment of dividends
and distributions 468,620 4,775,158
-------------- --------------
Total issued 13,529,833 138,422,694
Automatic conversion of shares (1,780,117) (18,179,899)
Shares redeemed (5,357,988) (54,642,530)
-------------- --------------
Net increase 6,391,728 $ 65,600,265
============== ==============
National Portfolio
Class C Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 1,329,022 $ 13,809,469
Shares issued resulting from
reorganization 1,042,309 10,790,909
Shares issued to shareholders in
reinvestment of dividends 85,885 889,623
-------------- --------------
Total issued 2,457,216 25,490,001
Shares redeemed (821,548) (8,518,580)
-------------- --------------
Net increase 1,635,668 $ 16,971,421
============== ==============
National Portfolio
Class C Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 1,799,413 $ 18,345,216
Shares issued resulting from
reorganization 1,169,289 11,983,010
Shares issued to shareholders
in reinvestment of dividends
and distributions 94,251 960,479
-------------- --------------
Total issued 3,062,953 31,288,705
Shares redeemed (1,058,915) (10,800,701)
-------------- --------------
Net increase 2,004,038 $ 20,488,004
============== ==============
Merrill Lynch Municipal Bond Fund, Inc., December 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
National Portfolio
Class D Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 936,437 $ 9,732,443
Automatic conversion of shares 1,748,692 18,169,716
Shares issued resulting from
reorganization 2,781,396 28,790,872
Shares issued to shareholders in
reinvestment of dividends 207,770 2,152,483
-------------- --------------
Total issued 5,674,295 58,845,514
Shares redeemed (1,996,396) (20,706,523)
-------------- --------------
Net increase 3,677,899 $ 38,138,991
============== ==============
National Portfolio
Class D Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 3,183,206 $ 32,463,888
Automatic conversion of shares 1,778,632 18,179,899
Shares issued resulting from
reorganization 2,179,582 22,315,418
Shares issued to shareholders
in reinvestment of dividends
and distributions 282,267 2,879,585
-------------- --------------
Total issued 7,423,687 75,838,790
Shares redeemed (6,285,733) (64,419,091)
-------------- --------------
Net increase 1,137,954 $ 11,419,699
============== ==============
Limited Maturity Portfolio
Class A Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 4,250,759 $ 43,187,917
Shares issued to shareholders in
reinvestment of dividends 183,006 1,858,332
-------------- --------------
Total issued 4,433,765 45,046,249
Shares redeemed (2,399,185) (24,348,559)
-------------- --------------
Net increase 2,034,580 $ 20,697,690
============== ==============
Limited Maturity Portfolio
Class A Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 5,749,190 $ 58,120,711
Shares issued resulting from
reorganization 311,601 3,136,967
Shares issued to shareholders in
reinvestment of dividends 356,333 3,599,846
-------------- --------------
Total issued 6,417,124 64,857,524
Shares redeemed (5,238,491) (52,951,744)
-------------- --------------
Net increase 1,178,633 $ 11,905,780
============== ==============
Limited Maturity Portfolio
Class B Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 2,335,654 $ 23,712,976
Shares issued to shareholders in
reinvestment of dividends 70,762 718,659
-------------- --------------
Total issued 2,406,416 24,431,635
Automatic conversion of shares (179,863) (1,824,555)
Shares redeemed (936,838) (9,510,386)
-------------- --------------
Net increase 1,289,715 $ 13,096,694
============== ==============
Limited Maturity Portfolio
Class B Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 5,321,851 $ 53,814,253
Shares issued resulting from
reorganization 495,945 4,993,534
Shares issued to shareholders in
reinvestment of dividends 92,198 931,515
-------------- --------------
Total issued 5,909,994 59,739,302
Automatic conversion of shares (127,189) (1,285,514)
Shares redeemed (825,076) (8,337,739)
-------------- --------------
Net increase 4,957,729 $ 50,116,049
============== ==============
Limited Maturity Portfolio
Class C Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 7,192,773 $ 72,746,832
Shares issued to shareholders in
reinvestment of dividends 22,850 230,999
-------------- --------------
Total issued 7,215,623 72,977,831
Shares redeemed (126,300) (1,278,317)
-------------- --------------
Net increase 7,089,323 $ 71,699,514
============== ==============
Limited Maturity Portfolio
Class C Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 171,993 $ 1,732,235
Shares issued resulting from
reorganization 1,955 19,640
Shares issued to shareholders in
reinvestment of dividends 2,122 21,363
-------------- --------------
Total issued 176,070 1,773,238
Shares redeemed (78,047) (786,643)
-------------- --------------
Net increase 98,023 $ 986,595
============== ==============
Limited Maturity Portfolio
Class D Shares for the
Six Months Ended Dollar
December 31, 2002 Shares Amount
Shares sold 10,529,766 $ 107,130,672
Automatic conversion of shares 179,692 1,824,555
Shares issued to shareholders in
reinvestment of dividends 173,606 1,764,392
-------------- --------------
Total issued 10,883,064 110,719,619
Shares redeemed (5,218,477) (53,077,545)
-------------- --------------
Net increase 5,664,587 $ 57,642,074
============== ==============
Limited Maturity Portfolio
Class D Shares for the
Year Ended Dollar
June 30, 2002 Shares Amount
Shares sold 10,883,750 $ 110,020,751
Automatic conversion of shares 127,076 1,285,514
Shares issued resulting from
reorganization 242,194 2,440,143
Shares issued to shareholders in
reinvestment of dividends 185,912 1,879,870
-------------- --------------
Total issued 11,438,932 115,626,278
Shares redeemed (1,796,663) (18,161,717)
-------------- --------------
Net increase 9,642,269 $ 97,464,561
============== ==============
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its
affiliates, is a party to a credit agreement with Bank One, N.A. and
certain other lenders. Effective November 29, 2002, in conjunction
with the renewal for one year at the same terms, the total
commitment was reduced from $1,000,000,000 to $500,000,000. The Fund
may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage.
The Fund may borrow up to the maximum amount allowable under the
Fund's current prospectus and statement of additional information,
subject to various other legal, regulatory or contractual limits.
The Fund pays a commitment fee of .09% per annum based on the Fund's
pro rata share of the unused portion of the credit agreement.
Amounts borrowed under the credit agreement bear interest at a rate
equal to, at each fund's election, the Federal Funds rate plus .50%
or a base rate as determined by Bank One, N.A. The Fund did not
borrow under the credit agreement during the six months ended
December 31, 2002.
6. Capital Loss Carryforward:
On June 30, 2002, the Insured Portfolio had a net capital loss
carryforward of approximately $38,691,783, of which $6,597,555
expires in 2008; and $32,094,228 expires in 2009; the National
Portfolio had a net capital loss carryforward of approximately
$48,541,938, of which $1,599,614 expires in 2003, $125,863 expires
in 2004, $1,631,438 expires in 2007, $25,778,411 expires in 2008 and
$19,406,612 expires in 2009; and the Limited Maturity Portfolio had
a net capital loss carryforward of approximately $2,420,642, of
which $1,875,135 expires in 2003; $119,413 expires in 2008 and
$426,094 expires in 2009. These amounts will be available to offset
like amounts of any future taxable gains.
7. Acquisition of Other FAM-Managed Investment Companies:
On July 29, 2002, the National Portfolio acquired all of the net
assets of Merrill Lynch Arizona Municipal Bond Fund, Merrill Lynch
Massachusetts Municipal Bond Fund, Merrill Lynch Michigan Municipal
Bond Fund, Merrill Lynch North Carolina Municipal Bond Fund and
Merrill Lynch Ohio Municipal Bond Fund pursuant to a plan of
reorganization. The acquisition was accomplished by a tax-free
exchange of the following capital shares:
Shares of Beneficial
Interest Exchanged
Merrill Lynch Arizona Municipal Bond Fund 4,158,928
Merrill Lynch Massachusetts Municipal Bond Fund 2,762,613
Merrill Lynch Michigan Municipal Bond Fund 3,725,979
Merrill Lynch North Carolina Municipal Bond Fund 2,403,019
Merrill Lynch Ohio Municipal Bond Fund 2,849,592
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2001
NOTES TO FINANCIAL STATEMENTS (concluded)
In exchange for these shares, the National Portfolio issued
16,031,909 shares of common stock. As of that date, net assets of
the acquired funds, including unrealized appreciation and
accumulated net realized capital losses, were as follows:
Accumulated
Net Realized
Net Unrealized Capital
Assets Appreciation Losses
Merrill Lynch Arizona
Municipal Bond Fund $44,700,234 $3,548,238 $ (388,083)
Merrill Lynch Massachusetts
Municipal Bond Fund $28,939,506 $1,499,190 $(1,792,656)
Merrill Lynch Michigan
Municipal Bond Fund $37,458,772 $1,809,968 $(4,449,915)
Merrill Lynch North Carolina
Municipal Bond Fund $25,709,770 $1,764,087 $(1,106,873)
Merrill Lynch Ohio
Municipal Bond Fund $29,111,290 $2,254,522 $(3,817,967)
The aggregate net assets of the National Portfolio immediately after
the acquisition amounted to $1,284,207,941.
</ITEM 1>