N-CSR 1 ml6968.txt ML MUNICIPAL BOND FUND 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 (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.